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 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 on the basis of currencies basket , composed of the euro (EUR) and the US dollar (USD) up to 60 percent and 40 percent respectively.
Within the framework of this first phase implementation, numerous measures were adopted to improve the market price-setting mechanism and to boost the activity in the interbank foreign exchange market.
In this respect, Bank Al-Maghrib has implemented measures to boost the interbank foreign exchange market and improve its liquidity. The Bank has thereby set the status of market maker, giving banks the exclusive access to foreign exchange auctions in return for their firm quote commitments in the interbank exchange market. These firm quotes are also used by the Bank to determine the reference exchange rates of currencies against the Dirham in accordance with international standards.
In addition, Bank Al-Maghrib has also reorganized the framework of its interventions in the exchange market aiming at reducing them progressively. Thus, the Bank has adopted foreign exchange auctions as a main intervention instrument. The purpose is to allow the interbank market to further develop and thus achieve a better price setting according to the law of supply and demand, as banks should refer to Bank Al-Maghrib as a last resort.
The Central Bank has implemented other measures to boost the interbank foreign exchange market and improve its liquidity. Indeed, Bank Al-Maghrib has made available to banks with the status of market-makers an electronic platform for currency trading. The Bank also decided to trade foreign banknotes with banks currency against currency exclusively.
On March 9, 2020, the monetary authorities decided to continue the process of the exchange rate regime reform, initiated in January 2018, by proceeding to a second widening of the dirham’s fluctuation band from ±2.5 percent to ±5 percent in relation to a central rate set by Bank Al-Maghrib on the basis of currencies basket composed of the euro (EUR) and the US dollar (USD) up to 60 percent and 40 percent respectively. As for the quotation band of foreign banknotes, it has increased from ±5 percent to ±7.5 percent.
The transition to the second phase comes after achieving all the objectives of the first one, namely the increase in foreign currency liquidity on the domestic foreign exchange market and the appropriation of the concept of foreign exchange risk by economic operators.