Study warns Morocco’s interest-rate cuts are failing to stimulate economy

Morocco’s recent interest-rate cuts are failing to reach households and businesses, highlighting structural weaknesses that limit the effectiveness of monetary policy, according to a study by two researchers from Ibn Tofail University in Kenitra, published by the Moroccan Center for Research and Policy Analysis.

The study finds that reductions in the central bank’s key rate have had only limited effects on investment, consumption, job creation, and business financing. The authors attribute the problem not to the technical design of monetary tools but to entrenched constraints in the banking system and the broader economic and social environment.

“Morocco’s banking market still functions as an oligopoly, giving banks strong control over lending conditions,” the study notes. “Banks react quickly when rates rise but barely adjust when rates fall, maintaining wide profit margins and blunting stimulus efforts.”

The report stresses that monetary policy alone cannot drive economic growth. It calls for complementary reforms, including social policies, easier access to finance, simpler legal and tax frameworks, and expanded financial inclusion to ensure that rate cuts benefit households and small businesses.

Financial literacy, the researchers say, is a major gap. Many Moroccans who rarely use banking services or distrust banks are less likely to respond to lower rates. The study recommends strengthening financial education from school age to create a population capable of understanding and leveraging credit conditions.

Alternative financing channels are also urged, including participatory finance, green finance, and digital lending tools, which could reduce reliance on traditional banks and provide more flexible options for entrepreneurs and innovative projects.

The report further calls on Bank al-Maghrib to improve transparency and communication so that businesses and households better understand monetary-policy objectives and adjust expectations accordingly. It also recommends closer coordination between monetary and fiscal policy, noting that rate cuts lose impact when government budgets are constrained by austerity or low public investment.

Other proposals include revising banking laws to strengthen competition and ensure that rate changes are passed through to borrowers, and creating indicators to track how effectively monetary decisions reach the market.

The study concludes that Morocco must prepare for global financial shifts by gradually adopting flexible inflation targeting and adapting to the growing influence of digitalization, artificial intelligence, and digital currencies on financial supervision.