Leadership Insights: Morocco Central Bank Governor Abdellatif Jouahri

Abdellatif Jouahri, Governor of Central Bank of Morocco, speaks about post-Covid plans and economic reform with Global Finance.

Global Finance: How is Morocco coming out of the pandemic?

Abdellatif Jouahri: Back in July 2020, His Majesty the king launched an ambitious economic stimulus plan worth $13.4 billion (120 billion dirhams) which included several aspects such as the promotion of public-private partnerships along with other measures to guarantee companies the necessary funds to continue their operations throughout the crisis.

In January 2021, Morocco was one of the first countries in the world to launch Covid-19 vaccination campaigns, which was a great help for us. Today, despite persisting uncertainties and risks associated with the resurgence of contaminations, the Moroccan economy is experiencing rapid recovery. We expect GDP growth to reach 6% in 2021 after a contraction of 6.3% in 2020.

GF: What was the action of the Central Bank on interest rates between 2020 and 2021?

Jouahri: As a Central Bank, we activated all conventional and unconventional instruments of monetary policy and banking regulation. In terms of monetary policy, we lowered the key interest rate by a total of 75 basis points, bringing it to a historical low of 1.5%.

The Central Bank also temporarily relaxed prudential rules to strengthen all banks’ credit supply capacity. Under these conditions, interest rates trended downward in all markets.

GF: Morocco seems to have seized the opportunity to carry out sweeping economic reforms, can you tell us about that?

Jouahri: It started long before the pandemic with structural policy changes in the education sector, advanced regionalization, modifications in the subsidy system, and changes to improve the overall business environment. During the crisis, the authorities stepped up the reform agenda and launched new projects to help Morocco transition towards the post-Covid era.

One of our flagship reforms is undoubtedly the social protection program and the introduction of a universal health insurance system announced in July 2020. This reform should enable our country to achieve a giant leap, not only in terms of quality of life and human development but also in competitiveness and growth.

Another sector where we see notable change is taxation. A new law was adopted last July which should serve as a benchmark for the state’s tax reform policy.

In May, the government also implemented a national business environment policy for 2021-2025. The idea is to fluidify the ecosystem for companies and investors by targeting the specific hurdles they currently face.

Finally, regarding the exchange rate policy, the process of transitioning to a more flexible regime is underway. On the long and medium term, this will strengthen the economy against external shocks and boost competitivity.

GF: How is the Moroccan banking sector doing?

Jouahri: Despite an increase in non-performing loans to 8.2%, the solvency ratio and Tier 1 capital ratio remained around 15.7% and 11.4% respectively by the end of 2020. In terms of profitability, after a decrease of 43% in 2020, the net income of Moroccan banks recovered during the first quarter of 2021, with an increase of 78%. The resilience of the sector was confirmed by several stress tests carried out in 2020 and in June 2021.

GF: How are Moroccan banks positioned in sub-Saharan Africa?

Jouahri: Casablanca strives to consolidate its position as a regional financial hub focused on Africa. For Moroccan banks, being present in sub-Saharan Africa is a way to boost external growth and help diversify the banking offer over the continent. Three Moroccan banking groups currently have operations in 24 countries in sub-Saharan Africa: 10 countries in West Africa, six countries in Central Africa, six in East Africa and two countries in Southern Africa. These operations have been relatively unaffected by the pandemic. Banking activities carried out in Africa, excluding Morocco, only recorded a limited drop in their cumulative income and a slight increase in non-performing loans. Yet, with the appearance of the Delta variant, the outlook remains uncertain.

GF: You have launched a committee on Central Bank Digital Currency and Crypto assets, how is Morocco positioned on this subject?

Jouahri: Early 2021, Bank Al-Maghrib created a special committee to weigh the benefits and risks associated with digital currencies. We are now considering the legal and regulatory changes associated with those crypto-assets. We are studying the feasibility of issuing a digital currency, in the middle or long term. This is part of our work to reduce the use of cash, promote financial inclusion and develop new innovative lower cost payment technologies.