Value of the dirham: why the Google bug is just an impossible scenario

Value of the dirham: why the Google bug is just an impossible scenario

The false information disseminated by Google on the parity of the dirham continues to create concern. Beyond the average citizen, who speaks of a “scenario of lebanization of Morocco”, advancing the famous argument of “there is no fire without smoke”, or “Google cannot be wrong”, the panic seized professionals beyond the borders, as revealed to us by a source within Bank Al-Maghrib. According to our interlocutor, the services of the Central Bank are receiving calls from all over the world to ensure that the situation is under control.

“This is where you realize the power of the internet and social networks,” he said.

This bug, Bank Al-Maghrib continues to investigate its reasons. “We discovered that it was a whole chain that crashed. Google just took over the quotes displayed by the Boursorama site, which also obtains data from other platforms. We are going up the chain to find out how this kind of error could have occurred”, confides our source. Everything indicates that it is a bug in the main API which provides different platforms.

A euro at 18.54 dirhams is indeed a big mistake. At this level, the dirham would have depreciated against the euro by more than 69%. What is factually impossible, because the national currency varies today in a fluctuation band from -5% to +5%. And assuming that the monetary authorities would have widened the band without warning, the interval would not go to this level of 69%.

Band widening is not for tomorrow

However, Morocco has no reason to widen the fluctuation band of the dirham, because the national currency is aligned with the economic and financial fundamentals of the country and there is no no currency pressure. Which makes the scenario that we lived through for half an hour, this Wednesday at the end of the afternoon, impossible, unimaginable. Because Morocco is not Egypt, and even less Lebanon, figures in support.

First important element, the metric ARA (Assessing Reserve Adequacy), which provides information on the level of a country’s foreign exchange reserves. For the IMF, a country that has comfortable foreign exchange reserves must have an ARA of between 100% and 150%. In Morocco, it is 120%. In Egypt, it is 60%. And the figure is worse in Lebanon.

Despite the various shocks that have followed one another on the world and Moroccan economy, the country’s foreign exchange reserves still cover between six and seven months of imports. A sufficiently comfortable level to keep the parity of the dirham stable against other currencies, mainly the dollar and the euro.

And a lot of data continues to support these foreign exchange reserves. Morocco certainly has a chronic trade deficit (foreign currency outflows for imports are greater than inflows via exports), but the balance of the balance of payments is in surplus, thanks mainly to tourism, transfers of MREs which exceeded 100 billion dirhams in 2022, a record. The FDI that Morocco receives on a regular and constant basis are also an important source of foreign exchange. Not to mention the possibility that the country still has, unlike others, to raise debt in foreign currencies on international markets.

“The spreads applied in Morocco are close to countries that have Investment Grade, unlike comparable countries, many of which are in distress, as they say in market parlance. Morocco’s signature is respected in international markets, and we are very far from a scenario where we would display a risk of default”, explains our source.

No misalignment of the dirham is noticed

Another argument put forward by specialists to judge the value of a currency: its alignment with the fundamentals of the country. Again, the easiest way to find out if a currency is out of alignment with its true value is to take a look at the parallel market, or in the bazaars. If in Algeria, Egypt or Lebanon, the currencies cost up to three times more expensive than in the official circuit, in Morocco, the difference between the quotation of the banks and those of foreign exchange traders working on the black market is minimal; it does not exceed a few cents and reflects more the intermediary’s margin than a discrepancy between the official quotation of the dirham and the reality of the situation.

And last argument: the floating of the dirham in its band at 5% upwards and downwards. Since the widening of this band, the dirham has always remained within this range and has rarely reached the extremes. The Central Bank has never intervened in the market to defend the dirham in order to keep it in the band. The only intervention recorded so far dates from 2021, and it was done in the opposite direction to absorb excess liquidity in the market.

Data that all informs about the stability of the national currency, the impossibility of its slippageand especially the huge bug relayed by Google last Wednesday.

Unjustified panic after a bug in some international platforms on the value of the dirham

Mehdi Michbal

January 22, 2023 at 4:54 p.m.

Modified January 22, 2023 at 5:12 p.m.