Morocco's government and Al-Maghrib Bank are taking the necessary painstaking steps to curb inflation and preserve fiscal and economic sovereignty, following recommendations in a new development model for a strong economy , emphasizing that the solution should be comprehensive. A sector that works for the benefit of the country and circumvents profit logic from the point of view of capitalists.
The pace of inflation in Morocco is still accelerating, fueled by external pressures, which extend to non-tradable goods and services, which prompted analysts and observers of the national economic situation to expect a new rise, which, if approved, would be the third in a row.
A financial and economic expert said that raising the reference interest rate by the central bank is intended, in theory, to “rein in inflation”; However, its practical effects directly affect “reducing household consumption and investment expenditures for companies.” He added, expressing that “the analysis of reality showed that the current inflation in Morocco remains, in its entirety, governed by two factors, one of which accompanies the other. The first factor is imported inflation, especially the prices of fuel, raw materials and food . While the second factor is represented by a monopoly that governs the system of a number of basic sectors, as speculators took advantage of the circumstantial increase, thus creating price inflation.
With regard to raising the interest rate," it becomes effective when inflation is the result of an inflated monetary mass in the country, but the steadfastness and flexibility of the national economy and its dynamism made Morocco not suffer from this problem",says the same financial expert. The decision of raising the interest rate is taken specifically to reduce bank lending, whether directed to individuals or companies. But, in reality, some analysts pointed out that this raising will not have an effect against inflation in Morocco.
On the other hand, there are several disadvantages to raising the reference rate of interest successively and repeatedly in a short period of time, because it leads to a reduction in consumption and investment together, in addition to reducing commercial activity in the country. This could push national companies into a consumption crisis as a result of a significant drop in demand. The same thing may also cause investment to be postponed in a way that leads to the non-creation of permanent job opportunities, which makes the problem of unemployment acutely prominent.
In order to limit the entry into an inflationary spiral that threatens with intertwined economic and social problems, experts emphasized the tightening monetary policy restrictions in Morocco, amid a group of international banks falling into the trap of bankruptcy, which means that confidence in the financial and banking system has been shaken.
A professor of Economy, considered that “the high inflation rate was confronted to reduce it, which prompted the public authorities to take a package of budgetary measures, and others within the framework of monetary policy.” In his statement, the economist recalled that "Morocco's first economic partner, the European Union, through its central bank has raised the main interest rate by 50 points mainly, as well as the US Federal Reserve, during the past few days." He continued, saying, "However, the difference between Morocco and its partners should not be large, given the dependence of foreign transactions on the euro by 60 percent and the dollar by 40 percent."
The inflation rate, according to the figures of the Planning Delegates, is still recording high numbers, according to the monthly bulletin for January 2023 compared to the same month of the previous year. structurally.
It is noteworthy that interest rates on bank loans increased at the end of the last year, as their general rate reached 4.5 percent, an annual increase of about 26 points, according to data issued by Bank Al-Maghrib. This seems to be because the base interest rate, meaning the interest rate that banks borrow from Almaghrip Bank, was raised for the first time in September, raised to 2% in September last year, and then raised again to 2.5% in December. However, the impact of the recent rate hike will become evident towards the end of the first quarter of this current year.
Thanks for taking time to read