Non-transactional cash in Morocco fluctuates between 60% and 80%, reveals study

High denomination banknotes – MAD 200 and MAD 100 – are more prone to hoarding, reveals a recent economic analysis published by Bank Al-Maghrib.

The analysis, entitled “Estimation of non-transactional cash in Morocco”, looks at the problem of hoarding in Morocco. The study, conducted by researchers Shimi Linah, Saidi Abdessamad and Seitz Franz, is based on three empirical approaches widely recognized in the academic literature, namely the ratio method, the lifetime method and the seasonality method.

It is based on the central assumption that high-denomination banknotes (200 MAD and 100 MAD) are more likely to be hoarded than other denominations in the Moroccan monetary system.

Indeed, the results obtained by these different methods converge to indicate an upward trend in non-transactional cash, revealing particularly high amounts potentially hoarded. The proportion of MAD 100 and MAD 200 banknotes held for non-transactional purposes is said to have increased significantly since the beginning of the millennium, fluctuating between 60% and 80% of their value in 2021, depending on the assumptions made.

These results demonstrate their robustness in the face of a wide range of reference assumptions, and are in line with the orders of magnitude estimated in similar empirical work carried out in other countries.

Admittedly, the estimated figures must be interpreted with caution, given the technical limitations intrinsic to each estimation method employed and their “rationality”, the analysts point out.

In addition, they consider it conceivable that banknotes transiting through the informal or underground economy present characteristics and a life cycle distinct from those circulating exclusively in formal circuits. Consequently, the lifespan of “non-formal” banknotes could be longer than that of banknotes used in current formal transactions, without these banknotes necessarily being hoarded.

In this context, the estimates made include a share of the demand for non-hoarded cash used in non-formal spheres. Furthermore, these estimates do not take into account the savings of unbanked households who practice “forced hoarding”. However, the scale of non-transactional cash in Morocco is striking, since these amounts would represent almost 13% of GDP in 2019. The COVID-19 health crisis would increase these amounts to almost 20% of GDP in 2020 and 2021.

According to the authors, this raises important questions about the use and role of cash in our economies, noting that cash is essential as the most inclusive and resilient means of payment available.

Moreover, its psychological dimension as a “store of value” gives it a stabilizing role in times of crisis, improving the resilience of economies faced with large-scale shocks, such as the cash rush during the COVID-19 crisis.

However, hoarded cash also represents potentially productive investments pushed out of the economy, which could stimulate the real cycle and boost growth prospects. This is of particular importance in the current post-pandemic recovery context, also contributing to efforts to promote more sustainable economies.