Morocco has adopted a more flexible exchange rate regime, where the dirham is allowed to fluctuate within a wider range of ± 2.5%. The move is expected to lead to greater risk awareness and the use of credit insurance.
The dirham exchange rate is set on the basis of a basket representative of the euro and the US dollar, at the rate of 60% and 40%, respectively. Fluctuations were previously limited to ±0.3%.
This reform of the exchange rate regime is aimed at strengthening the resilience of the Moroccan economy to exogenous shocks, to support its competitiveness and to improve its level of growth. It should accompany the structural changes that the Moroccan economy has undergone in recent years, particularly in terms of diversification, openness and integration into the global economy, reported The Morning.
In an analysis of the latest liberalisation, international credit insurer Euler Hermes said: “In effective terms, by looking at the average evolution of the dirham in relation to its trading partners, the Moroccan currency has appreciated by 6% since 2012, which is the opposite of what happened for many currencies of the main competitors of Morocco, for example, Tunisia.
“From now on, the dirham will be able to depreciate when the euro and the dollar appreciate, giving greater freedom to the monetary and exchange rate policy of Morocco.”
The credit insurer added that the previous system gave the wrong impression of the absence of currency risk in the dirham, and hence there was an underutilisation of hedging solutions against the risk of foreign exchange movements.
However, the depreciation of third currencies against the dollar and euro (the naira, for example) shows that currency risk does exist.
Following the adoption of a wider fluctuation band, there will be a stronger incentive to use currency-hedging instruments, including credit insurance, said Euler Hermes. M