After years of clinging to a rigid euro-dollar peg like a life raft in choppy seas, Morocco is finally ready to let its dirham breathe. The plan? Shift to a flexible exchange rate regime by 2026. It's ambitious. It's overdue. And it's happening whether small businesses like it or not.
Morocco's dirham is breaking free from its euro-dollar peg by 2026—a long-delayed leap into currency flexibility that won't wait for stragglers.
The country kicked off liberalization back in 2018, widening the fluctuation band from a measly 0.3% to 2.5%. Progress stalled when COVID hit, bringing droughts and energy cost spikes along for the ride. Now the full shift is rescheduled for 2026, giving market participants time to brace themselves. Bank Al-Maghrib claims “technical readiness.” Commercial banks are prepared. Infrastructure is in place.
Why bother loosening the peg at all? Because rigid currency arrangements are terrible at handling global volatility. Morocco wants resilience against external shocks, more competitive exports, and a shot at attracting foreign investment. The reform aligns with broader modernization efforts, including developing derivatives and swap markets. It's textbook IMF and World Bank orthodoxy—though Morocco is moving slower than the Fund would prefer.
The short-term reality will likely sting. Expect dirham depreciation. Expect inflation spikes from pricier imports. Agriculture, manufacturing, and tourism will feel the squeeze first. But long-term? Export competitiveness could improve, trade balances might tighten, and costlier imports could push more local production. That's the bet, anyway.
Authorities are taking a gradual, cautious approach because they know who's vulnerable: small firms make up over 80% of Moroccan companies, and most have zero experience managing exchange rate risk. The central bank is emphasizing guidance, education, and coordination with international institutions to avoid market destabilization. Training programs are underway. Regulatory stewardship is being reinforced. Managing the transition will require adjusting the key interest rate two to three times per year. Central Bank Governor Abdellatif Jouahri announced the timeline during meetings in Washington, signaling official commitment at the highest level. Bank Al-Maghrib's intervention strategies will be crucial for stabilizing the dirham during the initial transition period.
To buttress the reforms, Morocco plans to issue around $1 billion in eurobonds in early 2025. Officials are also closely monitoring global events—US elections, Middle East policy shifts—before locking in implementation details. The U.S. presidential election outcome may influence timing decisions given potential shifts in regional policy.
It's a bold move. It's risky. And after years of delays, Morocco is finally committing to currency reform on its own cautious timeline.
