The average weekly liquidity needs of Moroccan banks reached a high of MAD 131.4 billion during the third quarter of 2024, a notable increase from MAD 113.8 billion in the previous quarter, as reported by Morocco’s Directorate of Financial Studies and Forecasts (DEPF). This surge is largely attributed to the rise in cash circulation, creating a greater demand for liquidity in the banking sector.
Bank Al-Maghrib’s expanded interventions
To address this heightened demand, Morocco’s central bank, Bank Al-Maghrib (BAM), has intensified its liquidity interventions, increasing the average volume of its liquidity injections to MAD 145.4 billion in Q3, compared to MAD 128.2 billion in Q2. These injections have played a crucial role in supporting the banking sector’s operational stability amid rising cash needs.
The central bank primarily used seven-day advances, which rose significantly to MAD 61.2 billion, up from MAD 44.6 billion in the second quarter. Additionally, BAM provided repos with one- and three-month maturities totaling MAD 50.2 billion, while guaranteed loans supporting financing for small and medium enterprises (SMEs) also increased to MAD 34.1 billion, up from MAD 32.2 billion the previous quarter. These measures underscore BAM’s active role in maintaining liquidity and supporting economic activity, particularly for small and medium enterprises.
Interbank market dynamics and interest rate trends
The interbank market also saw increased activity, with the average transaction volume rising by 5.4% to MAD 2.6 billion in Q3 compared to the previous quarter. Despite this growth in interbank transactions, the weighted average overnight interbank rate (TIMPJJ) remained stable at 2.75%, aligning with the central bank’s policy rate set on June 26, 2024. This rate marked a slight decrease of 24 basis points from the Q2 average of 2.99%, reflecting BAM’s strategic rate adjustment.
Central bank’s monetary policy stance
At its latest meeting on September 24, 2024, the Central Bank’s board opted to keep the policy rate unchanged at 2.75%, viewing the current monetary stance as suitable for the prevailing economic conditions. The stability of the rate aims to support financial activity and ensure a balance between controlling inflation and fostering economic growth.
Lending rate adjustments
While the central bank rate has remained steady, borrowing costs have seen a slight upward adjustment. In Q2 2024, the weighted average lending rate rose by 3 basis points to 5.43%, driven mainly by increases in mortgage and treasury loan rates. This modest rise suggests a slight tightening in lending conditions, particularly for property and working capital loans, as banks adjust to changing liquidity conditions and risk assessments.
Outlook for Morocco’s banking and financial sector
The increased liquidity demand and the central bank’s response reflect a robust economic activity level, coupled with heightened cash circulation that has driven up liquidity needs in the banking sector. By keeping the policy rate stable, Bank Al-Maghrib is signaling its commitment to ensuring banking stability and supporting economic recovery. The recent rise in interbank transaction volumes further illustrates the active role of banks in maintaining a steady flow of funds, even as individual lending costs experience a slight increase.
The growth in liquidity demand and Bank Al-Maghrib’s reinforced interventions demonstrate Morocco’s resilience in its financial sector, with continued support aimed at promoting stability and accommodating the evolving needs of banks and businesses alike. This dynamic underscores the central bank’s balanced approach to managing liquidity and interest rates in line with Morocco’s broader economic goals.
