Everything was falling into place. After seven years of drought, the return of the rains promised an exceptional harvest, with a 14.4% rebound in agricultural value added according to Bank Al-Maghrib’s projections. Growth was expected to reach 5.6% in 2026, driven by public investment and the recovery of the rural economy. Morocco was poised to reap the rewards of a finally favorable economic cycle. Then war broke out in the Middle East. And with it came a threat that positive economic figures alone cannot ward off: that of a barrel of oil whose price, if it skyrockets, could derail the entire trajectory.
On March 17, during the press briefing following the Bank Al-Maghrib council meeting, Governor Abdellatif Jouahri lifted a corner of the veil: the Central Bank conducted a stress test on the economy, developing scenarios based on the oil price per barrel. It established a joint monitoring unit with the Ministry of Finance. And it has reserved the right to convene an extraordinary council meeting if the situation requires it. All these signals point to a very explicit stance of vigilance behind the apparent calm of the status quo.
What if BAM were to raise its rate?
“A sustained rise in oil prices toward $100–120 would exert significant inflationary pressure on the Moroccan economy”
At $80 a barrel, Morocco is holding steady. Jouahri has said so: six months of foreign exchange reserves provide a comfortable margin. At $100 or $120, it’s a different story. The governor noted that the IMF’s $5 billion flexible credit line could be activated “immediately.” But between these two thresholds, one question remains: at what point would BAM stop maintaining its rate and start raising it?
“A sustained rise in oil prices toward $100–$120 would exert significant inflationary pressure on the economy’ said Houda Zouirchi, a professor at HEC Rabat and researcher at the Center for Research in Economics and Management Sciences (CReSC). « As a net energy importer, Morocco is particularly sensitive to fluctuations in international prices: a rise in the price per barrel quickly leads to higher production and transportation costs, rising consumer prices, and a worsening trade balance,” she explains.
However, the BAM’s response would not be “automatic:” “The central bank generally adopts a measured approach, distinguishing between temporary shocks and more persistent pressures that could undermine price stability,” the economist notes. A rate hike “remains a possibility, but will depend primarily on the sustainability of inflation and its entrenchment in the economy, rather than solely on the level of oil prices.”
In other words, a temporary spike is not enough to prompt the central bank to act. But if imported inflation takes hold, the cycle could reverse: we would shift from expectations of rate cuts to monetary tightening.
The debt-compensation trap
“An increase in energy compensation-related spending would boost the government’s financing needs”
Houda Zouirchi sees the margins narrowing. “Morocco has managed to maintain relatively favorable access to financing markets, thanks to overall macroeconomic credibility, prudent debt management, and a satisfactory level of investor confidence, ” she acknowledges. But the tipping point is clear: “An increase in energy compensation spending would boost the government’s financing needs, in a context already characterized by relatively high public debt and significant investment requirements.”
And that is where the trap closes. “A rise in interest rates or a widening of budget deficits could reduce fiscal maneuvering room and heighten the risk of crowding out private investment, ” warns the economist. On the one hand, high oil prices force the government to borrow more. On the other, if inflation forces the BAM to raise its rate, the cost of that debt increases. “The question is no longer simply whether the government can take on more debt, but under what conditions and to finance which priorities, ” she summarizes.
Jouahri touched on this dilemma by noting that “macroeconomic balances fall under the state’s sovereignty, especially in the current context.” A way of shifting responsibility to the government, while signaling that the Central Bank is keeping a close eye on things.
The Challenge of Monetary Transition
Behind this crisis management, a fundamental transformation is underway. BAM is continuing its transition to an inflation-targeting regime, with a pilot phase scheduled to begin in 2026.“This monetary policy framework involves explicitly setting an inflation target and using monetary instruments to keep prices within that target,” explains Houda Zouirchi.
In concrete terms, BAM would announce a target inflation rate—for example, 2%—and adjust its key interest rate to keep it within that range. Today, the Central Bank adjusts its policy on the fly, without a stated target. With targeting, the markets would know exactly what BAM is aiming for, which would anchor expectations. This shift, the economist notes, “is accompanied by a gradual liberalization of the dirham’s exchange rate regime, which began in 2018, ” since in this type of regime, the interest rate becomes the primary stabilization tool, rather than the exchange rate.
The paradox: the current crisis can both hinder and legitimize this shift. Hinder, because an external shock is not the ideal time to change the rules of the game. Legitimize, because a targeting framework would make BAM’s actions more transparent amid the storm and, according to Zouirchi, would “improve the Moroccan economy’s ability to absorb external shocks.”
On the front of financing the economy, Jouahri cited a figure: the lines of credit available from banks could reach 400 to 450 billion dirhams, compared to the 150 to 160 billion currently utilized. The margin is considerable, but it requires favorable financing conditions and more bankable SME projects. This entire framework rests on a balance between contained interest rates, controlled inflation, and investor confidence. If a single link fails, the entire structure could falter.
Written in French by Safae Hadri; edited in English by AngloMedia Group.
