Morocco to Loosen Dirham Peg in 2026 in Currency Reforms

AFRICAN BUSINESS AND ECONOMYOctober 28, 2024 at 4:51 PM UTC

TLDR

Morocco to shift to flexible exchange rate regime by 2026, moving dirham from peg to euros and US dollars.
Central Bank Governor emphasizes careful management during transition, particularly for small firms.
Delays in reforms due to economic challenges like slower growth, droughts, and rising energy costs.

Morocco plans to shift toward a flexible exchange rate regime by 2026, resuming gradual reforms interrupted by the pandemic, Central Bank Governor Abdellatif Jouahri told Bloomberg in Washington.

This change will involve moving the dirham away from its peg to a basket of euros and US dollars. “The central bank is technically ready,” Jouahri said, adding that regulators and banks are preparing for the transition.

The move follows Morocco’s 2018 steps toward a free float, which were delayed by economic challenges including slower growth, droughts, and rising energy costs. Jouahri indicated the currency would eventually be market-determined, but emphasized the need for careful management, especially for small firms that dominate the economy.

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Key Takeaways

Morocco’s phased approach to a free-floating dirham reflects a cautious move to enhance economic resilience amid external pressures. Governor Jouahri’s 2026 timeline gives regulators time to prepare market participants, as the government plans a $1 billion Eurobond issuance in early 2025. With a currency swap market and derivatives trading also in development, Morocco aims to modernize its financial landscape, balancing domestic stability with increased exposure to global markets. The timing aligns with global uncertainties, including the US presidential election, signaling Morocco’s calculated entry into currency liberalization.

Morocco

Currency Peg

Economy

Foreign Exchange

Eurobond

Foreign Currency