Cash in circulation: Worrisome increase
The money market continues to operate in equilibrium, against a backdrop of a widening bank liquidity deficit and accelerating circulation of cash at the end of 2023. Circulation of cash reached 393.5 billion dirhams (USD 39 billion) in December 2023, its highest level ever.
«Against this backdrop, the Central Bank continues to supply the money market with central liquidity. Indeed, 7-day advances rose this week to 51.9 billion dirhams (USD 5.1 billion), compared with 47.5 billion dirhams (USD 4.7 billion) a week earlier», explain analysts at Attijari Global Research (AGR) in the latest issue of Weekly Hebdo Taux.
In 2024, the banking system is expected to face a record liquidity requirement estimated by AGR at nearly 138 billion dirhams (USD 13 billion). This situation is unprecedented since the Covid-19 crisis, despite record forecasts for foreign currency holdings, which are expected to exceed 360 billion dirhams (USD 36 billion).
In its latest Monetary Policy Report, the central bank (Bank Al-Maghrib) indicates that the banking liquidity deficit should continue to widen, reaching 92.6 billion dirhams (USD 9 billion) by the end of 2023, 121.3 billion dirhams (USD 12 billion) in 2024 and 137.7 billion dirhams (USD 13 billion) in 2025. These astronomical figures have their origins in the soaring value of banknotes and coins. The steady increase in cash in circulation is accentuating the banking system’s demand for liquidity.
This rise in cash is becoming a cause for concern in the economic sphere. It represents a shortfall in deposits for banks, all the more so as they are suffering from a lack of liquidity. Abdellatif Jouahri, Governor of Bank Al-Maghrib, had stated in a speech at the end of the BAM Board meeting that the weight of the informal sector accounts for 30% of the country’s activity, and is driving up cash. He also pointed out that, since Covid, cash in circulation has risen sharply. «Circulation of cash increased by 20% in 2020, whereas the long-term trend has always been 6% or 7% a year. We returned to that rate in 2021, then it went back up to double digits in 2022, and the increase continues this year,» he explained. Indeed, the pandemic has turned Moroccans’ consumption and savings habits upside down, as they have turned to cash. Transfers from Moroccans living abroad (MREs), which have seen an unprecedented boom since 2020, and the fall in interest rates on savings have largely accentuated this trend.
Fédoua Tounassi
