Morocco is set to receive a disbursement of $415 million from the International Monetary Fund (IMF) under the Resilience and Sustainability Facility (RSF). This funding, approved following the IMF Executive Board’s completion of the second review of Morocco’s RSF program, brings the total amount disbursed under the program to $747 million. Aimed at enhancing climate resilience and supporting Morocco’s decarbonization agenda, the financing arrives at a critical time as the country grapples with the impacts of a challenging drought year that has affected its agricultural sector.
Climate and Economic Challenges
Agriculture plays a central role in Morocco’s economy, contributing significantly to employment and export revenue. However, the severe drought experienced this year has led to declines in agricultural output, posing challenges for both the economy and rural livelihoods. With many Moroccans employed in agriculture, job losses in the sector have elevated the country’s unemployment rate, which remains above pre-pandemic levels. The IMF noted that while non-agricultural sectors have shown resilience and domestic demand is strengthening, the agricultural downturn is hampering broader economic stability.
In light of these challenges, the IMF’s RSF support is expected to help Morocco build resilience against climate shocks while also reducing its reliance on carbon-intensive practices. This initiative aligns with Morocco’s broader environmental goals, including its commitment to a green transition, which will focus on decarbonization efforts that aim to reduce greenhouse gas emissions and build long-term sustainability.
Focus on Decarbonization
The IMF has recognized Morocco’s focus on decarbonization as part of its RSF objectives, emphasizing measures to balance environmental goals with social welfare. Kenji Okamura, IMF Deputy Managing Director, highlighted that in the current socioeconomic environment, with elevated food prices and persistent unemployment, Morocco’s strategy to limit the impact of decarbonization on vulnerable communities is essential.
To achieve this, Morocco’s approach includes raising excises on coal and other polluting products instead of increasing the value-added tax (VAT) on fossil fuels. This strategy seeks to maintain a socially acceptable path to environmental sustainability, minimizing the economic burden on citizens. By focusing on excise taxes, Morocco can steer its energy policies in a greener direction without imposing additional hardship on consumers already facing high costs for essentials.
Positive Economic Indicators
Despite challenges in agriculture, Morocco’s economy has shown resilience in other areas, helping to maintain its financial stability. The IMF noted that Morocco’s inflationary pressures have recently eased, and the fiscal deficit is on track to meet the 2024 budget target. This stability has been achieved through increased government spending that is offset by stronger-than-anticipated revenues from tourism, exports, and remittances.
Tourism has been a bright spot in Morocco’s economic recovery post-pandemic, with visitor numbers bolstering revenue flows and contributing to a low current account deficit. Similarly, exports, particularly in industries such as textiles, phosphates, and electronics, have continued to perform well, providing the economy with a steady stream of income. Remittances from Moroccans abroad also remain strong, providing further economic stability and cushioning the current account.
RSF’s Role in Morocco’s Green Transition
The RSF facility is a critical component of Morocco’s green transition strategy. By supporting decarbonization initiatives, the facility helps Morocco reduce its dependence on fossil fuels and high-carbon industries. This aligns with global climate goals and Morocco’s commitment to the Paris Agreement, which seeks to limit global warming by reducing carbon emissions. The RSF funding will also allow Morocco to pursue sustainable practices that can create new economic opportunities, such as in renewable energy sectors like solar and wind, which Morocco has been investing in over recent years.
Looking Ahead
As Morocco continues its journey towards a greener economy, the IMF’s financial support will help the country address the dual challenges of climate resilience and social equity. The focus on decarbonization without disproportionately impacting the most vulnerable provides a model for balancing economic, social, and environmental needs. With continued resilience in non-agricultural sectors, solid tourism revenues, and increased fiscal stability, Morocco is well-positioned to strengthen its economy and build a sustainable future.
This new funding will not only help address current challenges but also supports Morocco’s long-term ambitions of a green and resilient economy, showcasing the role of multilateral support in achieving sustainability on a national and global scale.
