Moroccan central bank keeps benchmark rate at 3%

By Ahmed Eljechtimi

RABAT (Reuters) -Morocco’s central bank left its benchmark interest rate unchanged at 3% on Tuesday, judging the rate was appropriate to keep prices stable.

Inflation, driven by food prices, would stand on average at 6.1% this year, down from 6.6% last year, the bank said in a statement following its quarterly board meeting.

In 2024, inflation would further drop to 2.4%, on the back of an expected fall in prices of imported goods and stability of food prices, it added.

Assuming an average cereals harvest, the bank forecast growth would improve to 3.2% next year and 3.4 in 2025, after 2.7% expected this year.

Despite a rise in welfare spending, the bank expects the fiscal deficit to narrow to 4.5% of GDP next year, and 3.9% in 2025, from 4.8% this year.

Government debt would narrow to 69.9% in 2024 and 68.9% in 2025, it said.

An increase in car exports, tourism receipts and remittances of Moroccans abroad would keep foreign exchange reserves at $35.8 bln in 2024 and $36.8 bln in 2025, enough to cover five months of import needs, it said.

“We want to allocate 8% of our foreign exchange reserves to green investments,” central bank governor Abdellatif Jouahri told reporters after the meeting.

He said it was still “early” to move to the next phase in the dirham float, citing the need to prepare the market for the reform.

Morocco began gradual currency market reforms in 2018 but has not made any significant changes since 2020 when it increased how much the dirham was allowed to fluctuate from a centrally set reference level to 5% from 2.5%.

The bank is also working on inflation targeting, Jouahri said, though he gave no timeframe.

(Reporting by Ahmed Eljechtimi; Editing by Andrew Heavens, Ed Osmond and Christina Fincher)