IMF Policies and Their Impact on Morocco's Development Paths – Majida Damou
IMF Policies and Their Impact on Morocco's Development Paths – Majida Damou
Introduction
The International Monetary Fund (IMF) is one of the foremost global financial institutions that influences the economic policies of states, including Morocco. Since joining the IMF in 1958, Morocco has worked to elevate its relationship to the level of a strategic partnership. Over the past decades, the IMF has provided recommendations and economic reforms to achieve financial stability and promote economic growth. IMF policies have been key to Morocco's major economic and social trends for decades. However, they have often sparked widespread controversy among civil society and human rights organizations, who believe these policies, while contributing to economic growth, significantly lead to deepening crises and exacerbating social and economic disparities between different social segments and classes.
How have Morocco's relations with the IMF evolved? What solutions are provided by the IMF's policies to support Morocco's economic growth and enhance its financial stability? How does civil society view the Fund's recommendations and directions regarding the Moroccan economy and Western sovereignty over its resources?
1. A Historical Overview of Morocco's Relationship with the IMF
Morocco's relationship with the IMF spans more than six decades. Since joining this financial institution in 1958, the relationship has witnessed remarkable development at all levels, beginning with periods of normal cooperation, followed by periods of close coordination, especially during times of economic crisis. Finally, the partnership reached the strategic stage, focusing on structural reforms and supporting trends and levels of economic growth.
In this context, the trajectories of Morocco's relationship with the IMF and its financial policy can be identified through the following stages:
The Founding Stage (1958-1980)
This stage accompanied Morocco's independence and the consequent need to manage the economic challenges of the post-colonial era and build a modern state. Therefore, the focus during this stage was on providing technical advice and limited assistance, during which Morocco benefited from some limited credit facilities within the framework of the so-called "Stand-By Arrangement."
The Debt Crisis and Structural Adjustment Programs (1980-1990)
In the 1980s, as the external debt crisis worsened due to the implemented economic policies, Morocco turned to the IMF for financial support to improve its economic situation. It entered into a financial stabilization and structural adjustment program in 1980, followed by several other programs focusing on price liberalization, reducing the fiscal deficit, reforming the tax system, liberalizing foreign trade, reducing public spending, and privatizing the public sector. These reform programs led to relative macroeconomic stability. Nonetheless, their social cost was heavy at the socioeconomic level, contributing to the erosion of the middle class and increasing poverty and unemployment rates. Morocco experienced major social upheavals and tensions at the time.
Stabilization and Structural Reforms (1990-2010)
Morocco continued to cooperate with the IMF during this phase, albeit less intensively than before. The various proposed programs focused on deepening structural reforms in general, focusing on the financial and monetary sectors. Thus, the Kingdom adopted a "managed flexible exchange rate" system in the early 1990s and worked to strengthen the independence of the Central Bank and reposition it within the country's fiscal policy.
This phase also saw a significant development in the bilateral relationship, from a regular to a strategic partnership focused primarily on supporting and enhancing economic growth.
The proposed reforms will focus on improving the business climate, enhancing financial inclusion, and reforming the subsidy system, while working to develop infrastructure, within the framework of what is known as the "Poverty Reduction and Growth Facility (PRGF)."
Current Cooperation and Accommodative Policies (2011-2025)
In the context of the significant social events and tensions in 2011, both globally and in the Arab and Maghreb regions, Morocco strengthened its cooperation with the IMF within the framework of what is known as the Fund's "accommodative policies" through the Precautionary and Liquidity Line (PLL) (2012-2016) and the Flexible Credit Line (FCL) (2019), through which it approved financial facilities worth $3 billion for Morocco.
Cooperation during this phase focused on the following reforms:
● Strengthening economic resilience and improving the business climate to attract foreign investment
● Structural reforms and mobilizing tax revenues
● Supporting digitization and the green economy
● Strengthening social protection and transforming subsidies into a system of direct social assistance.
Cooperation with the IMF began to take on a more pronounced institutional character following the 2008 global financial crisis. In 2012, Morocco signed a Precautionary and Liquidity Line (PLL) arrangement as a precautionary measure to bolster its external reserves and mitigate potential economic shocks. This arrangement proved effective during the COVID-19 pandemic, when Morocco used $3 billion to maintain adequate reserve levels and reduce the negative impact of the crisis on the economic and social fabric. However, while contributing to relative economic stability and controlling inflation, these structural reforms and austerity policies did not achieve the desired growth. The growth rate remained below 4 percent, while unemployment rates continued to rise, especially among young people. Furthermore, these reforms had a limited impact on education and the labor market sectors.
2. Development Paths and the Impact of IMF Policies
Over the past decades, the IMF has offered economic recommendations and reforms to support the economy and achieve financial stability in Morocco. However, these policies have often sparked widespread controversy among civil society organizations and economic experts, who believe they could exacerbate social and economic disparities.
The IMF's policies in Morocco have contributed to achieving a degree of economic stability by maintaining price stability and foreign exchange reserves, in addition to improving levels of financial governance through reforms that have included liberalizing the economy and diversifying the production base (such as the automotive industry), reforming the tax system, and enhancing financial transparency.
However, the measures introduced to achieve these goals have devastated the social fabric and the future of broad segments of society. Reducing social spending through adopting austerity policies has directly impacted the quality of public services (health, education).
The economic growth measures and procedures adopted have also contributed to inefficient and unequal economic growth, with wealth concentrated in limited and specific sectors (agriculture, tourism, and export industries).
Another issue is the rising indebtedness due to the country's continued reliance on external debt, which threatens financial dependency, reduces opportunities for economic independence, and threatens the fate and future of future generations.
In this context, Morocco launched the "New Development Model" as a strategic framework to achieve comprehensive and sustainable development, focusing on social justice and reducing economic disparities. However, the interaction between IMF policies and the requirements of the new development model still raises many questions and challenges that must be addressed, such as:
The relationship between austerity policies and their impact on the decline in social services
IMF policies often address the question of fiscal austerity in relation to social services. It typically recommends reducing government spending to control the fiscal deficit, directly leading to "reducing budgets for social sectors" such as health and education. It makes destroying the social budget a condition for achieving fiscal balance. This approach contradicts the goals of the new development model, which seeks to promote investment in human capital and achieve comprehensive development. The Relationship between Increased Debt and Its Impact on Sovereign Economic Decision-Making
Like other "Third World" countries, Morocco relies on international loans to finance its development projects. However, these loans typically come with stringent and harsh conditions. In one way or another, they undermine the country's economic sovereignty and contribute to limiting the state's ability to implement independent economic policies consistent with the priorities of the new development model. They mortgage the country's economy and reinforce its absolute dependence on IMF policies.
The Relationship between Economic Liberalization and the Interests of Large Corporations
IMF policies are based on a trend toward market liberalization, which strengthens the dominance of multinational corporations over the Moroccan economy, as an emerging economy that lacks competitiveness or resilience in the face of these transnational economic machines. This trend inevitably leads to a decline in the state's role in supporting local productive sectors. It contradicts the objectives of the new development model, which seeks to promote local manufacturing and entrepreneurship.
3. Challenges of the New Development Model Under IMF Policies
Morocco launched its New Development Model in 2021 as a strategic framework for development, aiming to:
● Achieve higher economic growth (6 percent annually)
● Create job opportunities (especially for youth and women)
● Reduce social and regional disparities
● Strengthen human capital through education and health reform.
However, implementing and implementing this model on the ground faces several obstacles, such as:
● High public debt, which absorbs nearly 70 percent of GDP, reduces the country's margin of maneuver and increases external dependency.
● Despite an improved business climate, weak productivity in informal sectors leaves them with no tangible impact on economic revenues, which impacts economic competitiveness and limits their effectiveness.
● Strict financial constraints resulting from fiscal deficit control policies limit the ability to increase social investment and hinder any possibility of implementing social justice mechanisms.
Today, more than ever, Morocco is called upon to find economic solutions commensurate with its economic situation. On the one hand, they must take into account the uniqueness and specificity of its emerging economy and achieve the required balance in the equation of financial stability and social development. It is necessary to avoid the standard prescriptions used by the IMF, which Moroccans, in all their civic expressions, reject due to their negative impact on lives and the fate and future resources of future generations.
Therefore, civil society organizations in Morocco, in all their forms, agree on the importance of finding a compromise between the IMF's recommendations and the requirements of the new development model to ensure economic stability without sacrificing social services. This is achieved by working to:
● Strengthen economic sovereignty and reduce dependence on foreign loans by diversifying funding sources, promoting local investment, and developing regional economic partnerships.
● Involve civil society in formulating economic policies by strengthening dialogue with the government and establishing mechanisms to ensure that economic policies serve all segments of society.
● Reorient fiscal policies by increasing investment in human capital and social infrastructure.
● Promote tax justice by imposing direct progressive taxes on large and wealthy companies.
● Transition to a productive economy instead of overreliance on traditional sectors.
Conclusion
While the IMF believes its policies aim to achieve economic stability in Morocco, Morocco's new development model seeks comprehensive and sustainable development. The most significant challenge between the two is how to strike an acceptable balance between financial and social obligations and ensure economic policies that achieve genuine social development for all segments of society, not just the state's financial interests.
In conclusion, it has become clear that IMF policies do not achieve the goals they proclaim in addressing the economic problems facing many countries and societies. Instead, these policies and prescriptions often hinder the development of countries' economies and limit their productive capacities and developmental aspirations. Therefore, the IMF must review its economic policies and adapt them to complement and reinforce a purely local development vision, not the other way around. Thus, Morocco could avoid repeating the austerity measures it has experienced before, which have deepened disparities rather than resolving them.
References
International Monetary Fund (IMF). (2023). Article IV Consultation Reports in Morocco.
High Commission for Planning (2022). Report on the New Development Model.
World Bank (2021). Assessment of Economic Reforms in Morocco.
2024 IMF Executive Board Report
Analytical Study of the World Bank-IMF Annual Meetings in Marrakech and Their Impact on Moroccan Economic Policies
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