Moroccan dirham appreciates against the euro and the US dollar
According to Bank Al-Maghrib (BAM), Morocco's central bank, the Moroccan dirham appreciated by 1.4% against the euro and 0.6% against the US dollar during the first week of 2025, confirming the stability of the country's economy at the start of the new year.
The Central Bank of Morocco did not report any foreign currency auctions in the market during this period, which mainly helped to maintain stability in its interventions. Moreover, as of 3 January, Morocco's foreign exchange reserves reached 373.2 billion dirhams, equivalent to 36.2 billion dollars.
Although this figure represents a 0.6% drop compared to the previous week, reserves grew by 4.9% compared to the same period last year. Bank Al-Maghrib's operations averaged 144.2 billion dirhams (14 billion dollars) daily through various monetary operations.
In addition, BAM provided 60.2 billion dirhams (5.8 billion dollars) in seven-day advances; 49.6 billion dirhams (4.8 billion dollars) through repurchase agreements (repos); and 34.3 billion dirhams (3.3 billion dollars) in collateralised loans.
On the interbank market, the daily volume of transactions averaged 2.6 billion dirhams (252 million dollars), while the exchange rate was stable at 2.5%.
As a method of supporting liquidity, the BAM injected 53.4 billion dirhams (5.2 billion dollars) in seven-day advances during its tender on 8 January.
Stock market rises
The Casablanca Stock Exchange also started the year with a strong performance: the Moroccan All Shares Index (MASI) rose 6.4% in the first week of 2025.
Gains in key sectors drove this growth: banks advanced by 6%, construction materials by 7.2%, transport services by 13.8% and real estate by 16.2%.
On the stock market, trading activity slowed slightly and total transactions declined from 7.3 billion dirhams (708 million dollars) to 4.2 billion dirhams (407 million dollars). In addition, most of the transactions took place in the central securities market, demonstrating cautious but positive investor sentiment.
Exchange rate transition
It is worth noting that Morocco is in an exchange rate transition, as it intends to move away from the current system of pegging the dirham to the euro and the dollar (fixed exchange rate) to a floating exchange rate by 2026.
The floating exchange rate is a system where the value of the currency is determined by supply and demand in the foreign exchange market, with no direct intervention by the government or the central bank to fix it.
Thus, if investors have confidence in a country's economy, demand increases and the value of the currency rises; whereas, if investor confidence decreases, the value of the currency may also decrease.
In relation to this transition, Badr Bouarich, a financial expert and former academic, identifies three key issues: inflation, external debt and currency volatility, each of which has long-term consequences for the country's economy.
In 2023, Morocco imported approximately 12 billion dollars worth of energy-related products and approximately 8.9 billion dollars worth of food products, indicating its dependence on external markets.
In relation to this and inflation, if the dirham weakens, it could significantly increase the cost of these imports, driving up consumer prices and affecting purchasing power. As a consequence, Bouarich warns that without specific safety nets, social inequalities would increase.
Moreover, if the dirham were to depreciate, external debt, which at the end of 2023 amounted to 69.2 billion dollars (around 50% of Morocco's GDP), could increase costs, strain public finances and divert resources from vital development programmes, according to the financial expert.
And on currency volatility, such episodes could deter foreign direct investment and disrupt trade in the short term. The inflow of such investments into Morocco in 2023 amounted to 2.5 billion dollars, so financial institutions must be prepared to counter possible speculative attacks on the dirham.
Transition challenges
In order to meet these challenges, Morocco must adopt strategic measures to ensure economic stability while reaping the benefits of a floating exchange rate.
For its part, the BAM will play an important role in managing foreign exchange markets and intervene when necessary, while addressing structural issues to avoid excessive fluctuations.
Bouarich also stresses the importance of encouraging companies, especially in the energy or commodity sectors, to adopt hedging strategies because these tools can protect companies from the adverse effects of volatilities of underlying assets and exchange rates.
In addition, implementing rules limiting dealer profits in key sectors such as energy and food can help stabilise domestic markets and protect consumers from inflationary shocks.
So far, the beginning of 2025 is showing strong market activity and solid financial indicators for Morocco, which is a very positive outlook for the coming months.