Finance and Economic Development Committee at House of Representatives Holds Meeting with Wali of Bank Al-Maghrib
The Finance and Economic Development Committee at the House of Representatives held a meeting on Tuesday, November 24th, 2020, chaired by Committee Chairperson Abdellah Bouanou, with the participation of Wali of Bank Al-Maghrib Abdellatif Jouahri. The meeting was devoted to studying several topics related mainly to the exceptional measures of the Central Bank's monetary policy since the emergence of the pandemic to support the national economy in general and the banking system in particular. The meeting also discussed the impacts of the health crisis on the national economy. It should be noted that this meeting comes as an implementation of the provisions of parliamentary hearing following Article 45 of the statute of Bank Al-Maghrib, and at the request of some parliamentary groups as part of the control activities of the Committee.
At the start of his presentation, the Wali of Bank Al-Maghrib expressed his joy with presenting again before the legislative institution to study with the nation's representatives the impacts of the current crisis and the measures taken by Bank Al-Maghrib to confront it. The Wali also recalled the previous meetings that he convened with the Committee members since 2015, lauding the new framework that regulates the relations between the Parliament and Bank Al-Maghrib considering the new statute that regulates the works of the Bank.
Following this opening statement, the Wali of Bank Al-Maghrib gave a detailed presentation before the Committee members. The presentation first tackled the evolution of the health and economic crisis worldwide, culminating in two shocks. The first one concerned demand considering the restrictions imposed on people's movement, while the second one concerned supply due to the strong supply-chain disorder. In this respect, Mr. Jouahri noted that this pandemic's financial expenses would reach $11,000 Billion by late 2021 according to the predictions of the International Monetary Fund, which equals the total of the annual product of Japan, Germany, and France combined. The financial expenses will amount to $28,000 billion by 2025.
Following that, the Wali of Bank Al-Maghrib presented the various measures taken by the Bank to face the economic crisis. In this context, the Bank has activated all the traditional and non-traditional instruments in all its areas of intervention, namely the monetary policy, the precautionary measures, the transition of the monetary policy, the protection of clients, monetary supply, financial inclusion, and exchange reserve management. Mr. Jouahri also recalled the program "Intilaka," which implementation has been pursued despite the economic movement's restrictions due to the pandemic, although with a slower than the expected pace. Up to November 15th, 2020, MAD1,5 billion of loans were allocated to 9,443 beneficiaries.
Regarding the monetary policy, the prime interest rate has been decreased by 25 basis points on March 17th and by 50 basis points on June 16th, to settle at 1.5%. The Bank also fully liberalized the reserve account for banks, which allowed the injection of extra permanent liquidity of MAD12 billion. In anticipation of banks' need for liquidity, the Central Bank has loosened its funding requirements for traditional and participatory banks and microcredit associations. These measures have enabled the Bank to increase its cash market intervention from MAD72 billion on February 29th to MAD105.7 billion on November 5th, hence meeting all refinancing requests by banks and enabling the maintenance of favorable conditions in the monetary market. Bank Al-Maghrib was committed to maintaining the banks’ credit supply capacity by loosening its prudential rules. The Central Bank also asked banks to suspend the distribution of 2019 profits, to which the banks have committed.
The Wali of Bank Al-Maghrib stressed that the Bank requested information from all the banks on clients regarding the postponement of the payment of liabilities and their related expenses while accompanying them with the reasons for rejecting the loan requests. It should be noted that the loan request rejection rate decreased from 17% in 2016 to 10% in 2019, which is the lowest rate recorded within the last five years.
Mr. Jouahri noted a slight upraise in the request for bank loans during the last months, especially those related to treasury facilitations. However, the requests for loans directed at families have heavily decreased due to the lockdown restrictions but increased slightly again in August. He also highlighted the consequences of the crisis on the banking sector indicators. In this respect, the outstanding debts amounted to MAD79 billion in September, leading to an increase in the failure to pay rate to 8.4% against the 7.6% recorded in late 2019. Additionally, the follow-up of loan liabilities that were postponed during the crisis threatens to increase the number of outstanding debts during the next months. The crisis might also have negative impacts on the financial stability indicators.
On another note, the Wali of Bank Al-Maghrib tackled the cash demand increase since the start of the crisis due to the sanitary lockdown, the operation “Solidarity,” and the requirements of Ramadan and Eid Al-Adha. The withdrawn banknotes at the level of Bank Al-Maghrib amounted to MAD15.6 billion in March, MAD12 billion in April, MAD10.6 billion in May, MAD6.4 billion in June, and around MAD21 billion in July. In the same respect, the Wali noted that the expected improvement in the Consolidated Social Register would contribute positively to the system of mobile payment, and hence to including the informal activities.
Mr. Jouahri lauded the efforts to reinforce exchange reserves, which reached around MAD249 billion on October 23rd, which equals around seven months of goods and services imports. Bank Al-Maghrib expects the national economy to shrink by 6.3% by the end of the current year, followed by an expected 4.7% growth in 2021. The inflation rate is expected to remain at 1% in 2020 and 2021.
In the conclusion of his presentation, Mr. Abdellatif Jouahri stressed the importance of drawing lessons from this crisis to address the weak spots, especially the ones in the healthcare system, the economic vulnerability of a huge proportion of the population, the large number of informal activities, the vulnerability of the production fabric, and the dominance of cash transactions.
Following the data presented by the Wali in his presentation, the members of the Finance and Economic Development Committee initiated the discussion by affirming the importance of this meeting and expressing their desire to hold similar meetings regularly. The deputies' questions tackled mainly the relation of the banks to clients, particularly during this health crisis and reviewed hurdles relating to revival loans. The deputies also noted the imperative of constantly following-up the projects that benefit from these loans. In the same respect, many deputies questioned the pace of implementing the integrative plan to assist and fund enterprises “Intilaka.”
Besides, some deputies tackled the importance of extending the powers of Bank Al-Maghrib by including new goals like increasing employment rates instead of limiting its competences to price stability. The deputies also addressed questions on the possibility of direct funding of the treasury by the Bank. Additionally, the deputies' questions tackled the reserve accounts levels, the volume of financial liquidity in circulation, and the banks' funding requirements. The participants also discussed the mobile payment service and its role in achieving financial inclusion, especially for women.
At the end of the meeting, the participants stressed the importance of the awareness of all actors, including the Government, the Parliament, the public institutions, the private sector, and the civil society of the transformations and challenges imposed by the crisis. They also stressed the importance of collective and harmonious effort to consolidate trust, support economic growth, and solidify social cohesion in a way that meets the legitimate aspirations of Moroccans.