Implementation of the reform

On January 15, 2018, Morocco undertook a voluntary and gradual transition from a fixed to a more flexible exchange rate regime. The implementation of the first phase resulted in the widening of the fluctuation band of the dirham from ±0.3 percent to ±2.5 percent in relation to a central rate set by Bank Al-Maghrib, based on a basket of currencies composed of the euro (EUR) and the US dollar (USD), with weights of 60 percent and 40 percent, respectively.

Within the framework of this first phase, numerous measures were adopted to improve the market price-setting mechanism and boost activity in the interbank foreign exchange market.

In this regard, Bank Al-Maghrib implemented measures aimed at invigorating the interbank foreign exchange market and improving its liquidity. To this end, the Bank introduced the status of “market maker,” granting banks exclusive access to foreign exchange auctions in return for their commitment to provide firm quotations in the interbank foreign exchange market. These firm quotations are also used by the Central Bank to determine the official reference exchange rates of foreign currencies against the dirham, in line with international standards.

The Central Bank also redesigned its foreign exchange market intervention framework with the goal of gradually reducing its direct interventions. Thus, Bank Al-Maghrib adopted foreign exchange auctions as its main intervention instrument. The objective is to enable the interbank market to develop further and to achieve better price formation according to the law of supply and demand, with banks resorting to Bank Al-Maghrib only as a last resort.

The Central Bank also implemented additional measures to stimulate the interbank foreign exchange market and enhance its liquidity. In this regard, Bank Al-Maghrib provided market-making banks with an electronic platform for currency trading. Moreover, it decided to conduct, on an exclusive basis, currency-against-currency transactions in foreign banknotes with banks.

On March 9, 2020, the monetary authorities decided to pursue the process of reforming the exchange rate regime, launched in January 2018, by proceeding with a second widening of the dirham’s fluctuation band from ±2.5% to ±5% around a central rate set by Bank Al-Maghrib, based on a currency basket composed of the euro (EUR) and the U.S. dollar (USD) with respective weights of 60% and 40%. The quotation band for foreign banknotes was widened from ±5% to ±7.5%.

The transition to the second phase took place after all the objectives assigned to the first phase had been achieved, namely increasing foreign currency liquidity in the domestic foreign exchange market and ensuring that economic operators fully internalized the concept of exchange rate risk.