Moroccan central bank holds key rate at 2.25%

By Ahmed Eljechtimi

RABAT, Dec 16 (Reuters) - Morocco's central bank held its benchmark interest rate at 2.25% for a third consecutive meeting on Tuesday, saying current borrowing costs were appropriate given easing inflation domestically and global economic uncertainty.

Due to a drop in food and fuel prices, inflation will average 0.8% this year, before picking up to "levels in line with the goal of price stability" at 1.3% in 2026 and 1.9% in 2027, the central bank said after its quarterly board meeting.

The North African country's economy will grow by 5% this year, the bank said, citing a surge in investments. It expects growth to slow to 4.5% next year and in 2027, assuming an average grains harvest at 5 million tonnes.

The bank said the current account deficit will shrink to 1.8% of GDP this year and remain below 2% of GDP in 2026 and 2027, thanks to a drop in energy imports and a surge in exports of phosphates, fertilizers and cars, in addition to increased tourism revenue and remittances by Moroccans abroad.

Morocco's foreign exchange reserves are expected to grow to 448 billion dirhams ($49 billion) by 2027, enough to cover 5.5 months of import needs.

The fiscal deficit is projected to narrow to 3.4% of GDP in 2026 from 3.9% this year, as rising tax revenues help offset increased public investment spending, the bank said.

Government debt is projected to fall to 46% of GDP by 2027, down from 50.8% in 2024, central bank governor Abdellatif Jouahri told reporters on Tuesday.

However, the share of external debt is expected to rise to 18.5% of GDP, or 352.8 billion dirhams ($38.5 billion), from 16.9% in 2024, he said.

Jouahri also said the central bank had been informed of preliminary talks for a potential sale of a majority stake in BMCI, the Moroccan subsidiary of BNP Paribas BNPP.PA, to local conglomerate Holmarcom Group.

He said Moroccan companies are "not yet ready" for the next phase of the dirham's gradual liberalisation, a reform supported by the IMF.

The currency is currently pegged to a basket of 60% euro and 40% U.S. dollar, and has been allowed to fluctuate within a 5% band on either side since 2020.

While maintaining a "cautious approach" to the dirham float, Morocco plans to launch a trial phase of inflation targeting in 2026, before formally adopting the framework in 2027, Jouahri said.