According to Bank Al-Maghrib forecasts and based on the expected evolution of the bank’s foreign exchange reserves and the moderate increase in fiduciary money, the bank liquidity deficit should stand at 78.2 billion dirhams at the end of 2022 and 91.9 billion dirhams at the end of 2023.
Based on the expected trend in foreign exchange reserves and the moderate increase in fiduciary money, banks’ liquidity needs should widen to 78.2 billion dirhams (MMDH) at the end of 2022, then to 91.9 MMDH at the end of 2023, according to forecasts by Bank Al-Maghrib (BAM), whose Board held its second session of the year last Tuesday.
It appears from the BAM report on monetary policy that this widening will be mainly driven by the expected increase in fiduciary circulation which has already reached in 2020 the equivalent of 319 billion dirhams, growing by nearly 20%, i.e. the fastest pace high observed over the last thirty years.
As for bank credit to the non-financial sector, it increased by 3.2% at the end of April instead of 3.1% on average during the first quarter of 2022, with an acceleration in the growth of credit to private non-financial companies, a slowdown in that of loans to households and an accentuation of the fall in loans to public companies.
In terms of outlook, and taking into account the expected development of economic activity and expectations of the banking system, it would evolve, according to BAM, at a rate around 4% on average in 2022 and 2023. Under these conditions, and taking into account the expected evolution of the other counterparts of the money supply, the growth of the M3 money aggregate should stand at 5.7% at the end of 2022 and at 4.7% at the end of 2023. For its part , the budget deficit should stand at 6.3% of GDP in 2022, before easing to 5.6% in 2023, a reduction of 0.3 points compared to the edition in March.
Monetary conditions: the need for liquidity down to 64.6 billion dirhams
Regarding monetary conditions, they were also characterized by a drop in lending rates by 16 basis points to 4.28%, a depreciation of the real effective exchange rate and a decline in lending rates. Data for the first quarter of 2022 show an easing in banks’ need for liquidity.
During the first quarter of 2022, banks’ liquidity needs eased to 64.6 billion dirhams on average weekly, against 69.9 billion dirhams a quarter earlier, reflecting the increase in foreign exchange reserves of Bank Al-Maghrib. As for Treasury investments on the money market, they amounted to 6.9 billion dirhams on average, after 7 billion dirhams and were carried out mainly on the repo market delivered at an average rate of 1.41%.
Under these conditions, the Bank reduced the amount of its injections from 83.4 billion dirhams to 75.5 billion dirhams on a weekly average, including 33.2 billion dirhams in the form of 7-day advances, 22.2 billion dirhams through repurchase transactions delivered and 20.1 billion dirhams under guaranteed loan operations granted as part of support programs for the financing of VSMEs.
In this context, the average residual duration of the bank’s interventions fell from 41.1 days to 46.9 days and the interbank rate remained aligned with the key rate maintained at 1.50%. According to Bank Al-Maghrib, the latest available data indicate an increase in the need for bank liquidity to 77 billion dirhams on average during the months of April and May 2022.
At the level of the Treasury bills market, the rates generally increased in the first quarter, a trend which was accentuated during the months of April and May on both the primary and secondary markets.
Bank credit to non-financial sector: moderate growth
Regarding bank credit to the non-financial sector, it should maintain a moderate growth rate of around 4% in 2022 and 2023. It recorded an increase of 3.1%, after that of 3.7% in the fourth quarter of 2021, with a deceleration in the growth of loans granted to households and an accentuation of the decline in those granted to public enterprises.
In terms of public finances, the budget exercise for the first five months of 2022 ended with a deficit of 14 billion dirhams, a reduction of 11 billion dirhams compared to the same period in 2021. This change is mainly due to a 25.5% improvement in ordinary revenue, reflecting increases of 19.8% in tax revenue and 126.6% in non-tax revenue.
On the other hand, ordinary expenses increased by 16.5%, mainly reflecting increases of 117.9% in compensation expenses and 149.3% in goods and services expenses. The ordinary balance thus showed a deficit of 2.1 billion dirhams, instead of -9.9 billion dirhams at the end of May 2021. For their part, investment expenditure increased by 16.7% to 32.8 billion dirhams.
Thus, the outstanding direct public debt would have increased by 1.5% compared to its level at the end of December 2021. All in all, the growth of the national economy should, according to Bank Al-Maghrib projections, slow down to 1% this year, then accelerate to 4% in 2023. For its part, inflation should reach, according to the bank’s projections, 5.3% over the whole of this year before decelerating to 2% in 2023. Its underlying component would reach 5.2% in 2022, then fall back to 2.5% next year.
Yassine Saber / ECO Inspirations