Monetary policy in Morocco is conducted by the Bank Al-Maghrib (BAM). With the entering into force of new central bank statutes in February 2006, the autonomy of the BAM was greatly strengthened. While the 2006 Oxford Analytica report on Monetary Policy in Morocco maintained its "Enacted" rating, the score improved from the 2005 assessment. In addition to strengthening the BAM's independence, the new statutes changed the composition of the council, the monetary policy making body of the BAM, making it less susceptible to influence by other government bodies. The new statutes also established price stability as the main objective of monetary policy. In this context, the 2006 Article IV consultations with the International Monetary Fund noted that the Moroccan authorities are continuously strengthening the monetary policy framework, and are considering a move towards adopting inflation targeting in the medium term. With respect to exchange rate policy, the new statutes clarified the responsibilities between the BAM and the Ministry of Finance.

General Overview

In its 2006 report on Monetary Transparency, Oxford Analytica rates Morocco's compliance with this standard as "Enacted," and notes an improvement in its score from the 2005 assessment. The main development in 2006 was the implementation of the amended Banking Law and new statutes of the central bank in February 2006, giving the central bank, the Bank Al-Maghrib (BAM), much greater independence than before. Importantly, the statutes altered the composition of the council, the monetary policy making body of the BAM. The council is no longer composed of government officials, but instead of the BAM governor, the vice governor or the director general of BAM, the director of the Treasury at the Ministry of Finance (MoF), and six members to be appointed by the Prime Minister, of whom three are proposed by the BAM governor. The statutes prevent BAM from lending to the government or to state-owned enterprises. The new Statute also established price stability as the main objective of monetary policy. Lastly, the responsibilities between the BAM and the MoF have been clarified with respect to exchange rate policy. The Banking Law expanded the supervisory mandate of the BAM to include non-bank financial institutions and according to the 2006 OA report gave BAM "full supervisory autonomy" (p. 242).

In the 2006 report on the Article IV consultations report between the International Monetary Fund (IMF) and Morocco, IMF staff noted that the existing exchange rate policy, pegging the dirham to a basket of currencies has "served the Moroccan economy well, and remains appropriate. Going forward, a gradual move toward a flexible exchange rate could help ensure the success of Morocco's integration in the world economy" (p. 16). The consultations further noted that the Moroccan authorities are already taking steps which would facilitate a move to greater exchange rate policy, such as the continuous strengthening of the BAM of its monetary policy framework, with a potential move towards adopting inflation targeting in the medium term.

Regarding the availability of information on monetary policy, Morocco has prepared monetary and financial statistics in accordance with international standards since it became the 62nd subscriber to the International Monetary Fund's Special Data Dissemination Standard (SDDS) in December 2005. The new statutes of the BAM also give the central bank the responsibility to publish monetary and financial statistics. OA notes in its 2006 report that neither the voting ratio nor the voting records of the BAM council meetings are published. However, immediately after each meeting, a press communiqué is issued that describes the decisions by the Council. Further, OA reports, the BAM governor explains its monetary policy policies for the year at a press conference held at the beginning of each year. To enhance transparency, the BAM began publishing annual reports on its supervisory activity at the end of 2005. The statutory monetary council of the Moroccan parliament can invite the BAM governor to report on monetary policy, and OA states that an amendment to the central bank statute would give the governor the opportunity to address the parliament on his own initiative.

With respect to Morocco's recent monetary policy performance, the Concluding Statement to the 2007 Article IV consultations noted that BAM's "prudent monetary stance helped contain consumer price inflation in spite of the strong pickup in domestic demand and abundant liquidity" (p. 2) The statement further noted that the main objective of BAM in 2007 is to continue to keep inflation under control as domestic demand remains strong. Inflation reached 3.3 percent, year-on-year, at end-2006, up from 1 percent in 2005. Moreover, with respect to Morocco's current pegged exchange rate regime, keeping inflation in check would help limit real appreciation pressures on the dirham, which in turn would help the external sector. Both Moroccan authorities and IMF staff agreed that the current dirham's real exchange rate seems in line with its equilibrium value.

The Principles

Clarity of roles, responsibilities and objectives of central banks.

CP

The 2006 OA report on monetary policy transparency rates Morocco's compliance with this principle as "Compliance in Progress." As mentioned before, the institutional framework underpinning monetary policy in Morocco is set out in the statutes of the BAM and the 1993 Law on Credit Institutions. The revised Banking Act and the new statutes of the BAM entered into force in 2006, and both strengthened the autonomy of the BAM and clarified its roles, especially with regard to cooperation with the MoF in the area of exchange rate policy. Among other issues, the new statutes also establish price stability as the fundamental objective of the BAM in cooperation with the MoF. Specifically, the statutes set out the functions of the BAM as follows: to issue currency, guard currency stability and convertibility, develop the money market and ensure its regulation, manage the public exchange reserves, supervise banks, act as financial agent of the Treasury, and produce financial and monetary statistics.

The BAM is legally independent and financially autonomous. The 2006 OA report notes that the new statutes give the BAM Council "the ability to fix quantitative objectives and monetary policy instruments, and [clarify] the respective roles of the BAM and the MoF in the conduct of monetary policy" (p. 244). The governor, appointed by royal decree and accountable to the king, heads the BAM council. However, OA reports that, even the new statutes do not specify the terms, conditions, and causes for a dismissal of the governor. The system has worked well to date, but OA cautions that this depends highly on the personal qualities of the governor.

Open process for formulating and reporting monetary policy decisions.

CP

The 2006 OA report on monetary policy transparency rates Morocco's compliance with this principle as "Compliance in Progress." The new statutes, OA notes, give the BAM sufficient independence to implement its main objective of price stability. The IMF's 2006 Article IV consultations stated that the Moroccan authorities are taking steps which would facilitate a move to greater exchange rate policy, such as the BAM's continued strengthening of its monetary policy framework, with a potential move towards adopting inflation targeting in the medium term. As mentioned before, the statutes altered the composition of the council, the monetary policy making body of the BAM, which is no longer composed of government officials. Instead, it is made up of the BAM governor, the vice governor or the director general of BAM, the director of the Treasury at the MoF, and six members to be appointed by the Prime Minister, of whom three are proposed by the BAM governor . The new statutes also obligate the BAM to make its monetary policy decisions available in a timely manner. According to the 2006 OA report, "the BAM announces monetary policy decisions and changes in its principal monetary instruments through regular public information services. It is legally obliged to publish the Annual Report and present it to the king before the 30th of June" (p. 247). Various financial data is provided on the BAM website.

Public availability of information on monetary policy.

EN

The 2006 OA report on monetary policy transparency rates Morocco's compliance with this principle as "Enacted." Morocco has prepared monetary and financial statistics in accordance with international standards since it became the 62nd subscriber to the International Monetary Fund's Special Data Dissemination Standard (SDDS) in December 2005. The new statutes of the BAM also give the Central Bank the responsibility to publish monetary and financial statistics. OA also reports that the BAM's "monthly Monetary Statistics and the Quarterly Bulletin, publishes summary balance sheets of assets and liabilities. A detailed balance sheet is also published in the Annual Report. Monetary Statistics gives detailed information on the financial position of the BAM" (p. 249). In the 2006 Article IV consultations, the IMF criticized the insufficient degree of detail provided in the breakdown of financial assets and liabilities by resident institutional sector, specifying that some monetary aggregates, including credit indicators, are currently lacking precision. OA notes considerable improvement in the Bam public information services.

Accountability and assurances of integrity by the central bank.

ID

The 2006 OA report on monetary policy transparency rates Morocco's compliance with this principle as "Intent Declared." The governor of BAM is accountable to the king. The statutory monetary council of the Moroccan parliament can invite the BAM governor to report on monetary policy and OA states that an amendment to the Central Bank statute would give the governor the opportunity to address the parliament on his own initiative. Currently, annual discussion on the operations of the central bank is held when the Finance Law is presented to parliament. The BAM's annual report clearly discloses BAM's operating expenses, revenues, and net profit, according to the 2006 OA report. Auditing regulations for the BAM are spelled out clearly in the BAM statutes and relevant regulations. OA states that "independent data users are generally satisfied with the quality, integrity, and timeliness of the BAM's data. In January 2005, the BAM adopted a new accounting code in line with international standards for the purpose of presenting its financial statements, which now have to be certified by an auditor" (p. 251). Lastly, OA notes that the code of conduct guidelines for staff of the BAM are set out in a limited manner in the statutes.