3rd LD-Writethru: Morocco to start floating its currency on Monday after months of hesitation

RABAT, Jan. 12 (Xinhua) -- After months of hesitation, Morocco decided on Friday to start the gradual floating of its currency dirham on next Monday.

The decision was announced by the government spokesperson Mustapha El Khalfi during a press briefing following the cabinet weekly meeting that is normally held on Thursday.

The announcement comes after an earlier one by the country's central bank was delayed by the government.

The bank had announced that the first step to float the currency would start in July, 2017. However, the Moroccan government decided to delay the move, saying studies were being carried out to ensure enough time for the decision to take effect and to better understand "its impact on the economy and, in particular, on the purchasing power of citizens."

On Friday, the government finally decided to float dirham within a fluctuation range of 5 percent instead of the current 0.6 percent.

In a statement highlighting the move, the Moroccan Economy and Finance Ministry stressed the readiness of the country to move to a more flexible exchange rate regime, underlining that the move is marked by favourable conditions, especially thanks to a solid financial sector, sound macroeconomic foundations, an appropriate level of foreign exchange reserves and controlled inflation.

This reform will also be supported by the continuation of structural and sectoral reforms, the statement added.

According to Morocco's official high planning committee, the country's economy grew by 4 percent in 2017, compared with 1.2 percent a year earlier. Inflation rate remained around 0.7 percent in 2017, lower from 1.6 percent in 2016, while the budget deficit rate dipped to 3.5 percent in 2017 from 4.1 percent in 2016.

Morocco's foreign exchange reserves stood at 25.81 billion U.S. dollars by the end of 2017, shrinking by 3.3 percent year on year, according to Morocco's Central Bank.

International Monetary Fund (IMF) has backed Morocco's move to gradually float its currency. IMF head of mission in Morocco Nicolas Blancher said during a press conference in the country last November that this move "should support the economy's ability to absorb external shocks, and raise competitiveness."

Currently, the dirham is fixed via a peg that is 60 percent weighted to the euro and 40 percent to the U.S. dollar.

The first stage will ease that peg to allow the currency to trade in a narrow range, which will expand gradually over a few years. Enditem