São Paulo – Last Friday (3rd), the International Monetary Fund (IMF) announced that it has made loans available to Morocco and Jordan. A Precautionary Liquidity Line (PLL) worth US$ 6.21 billion has been made available to the former. The goal is to “insure” the Moroccans against exogenous shocks, according to a press statement issued by the Fund.
The 24-month agreement will offer US$ 3.55 billion in its first year. According to the statement, the Moroccan government will use it as a “precaution,” as the name states, and does not intend to draw the funds unless the country is forced to finance its balance of payments due to eventual deterioration of the international economic scenario.
The Fund informs that Morocco has adopted strong economic policies and structural reforms which contribute to a solid macroeconomic performance, with robust growth, low inflation, and a resilient banking system.
The IMF director general Christine Lagarde stated, however, that high oil prices have contributed to a build-up of fiscal and external pressures, and therefore the country is exposed to risk from the Eurozone and new increases in the pricing of the commodity. Morocco is an oil importing country and Europe is a key partner in trade, investment and tourism.
“[The agreement] will provide Morocco with a useful insurance policy for meeting immediate financing needs if these risks materialize, strengthening market confidence and facilitating better access to private capital markets,” said Lagarde.
Jordan
In the case of Jordan, the IMF approved a stand-by agreement to finance the country’s balance of payments. The total amount of the 36-month facility is US$ 2.06 billion, of which US$ 385.35 million are available immediately. The objective, according to the Fund, is to back the country’s economic program for the 2012-2015 period.
According to the IMF, Jordan has faced a series of exogenous shocks since the beginning of last year. Main issues include repeated interruptions of gas supply from Egypt via the Arab Gas Pipeline, targeted by terrorist attacks. This led the Jordanians to step up their fuel imports from other producing countries in order to generate electric power.
Furthermore, the Arab Spring affected the region as a whole, causing a decline in tourism, foreign direct investment and remittances from Arabs who live and work away from their countries of origin.
As a consequence, the country’s current account deficit increased and stunted the country’s growth. To counter it, according to the Fund, the government cushioned the social impact by increasing subsidies and wages, which led to an even greater need for financing to the public sector.
The Jordanian program provides for targets such as a 6% reduction in the primary deficit and a 3% reduction in losses incurred by the government-owned electric power company, affected by an excessive increase in spending on fuel imports.
“The Jordanian authorities have developed an economic program focused on achieving fiscal and external sustainability in a socially acceptable manner, while strengthening growth prospects,” said Lagarde, according to the press statement.
*Translated by Gabriel Pomerancblum
