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EBRD ups climate risk mitigation efforts in drought-hit Morocco

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Regional development bank hopes to encourage new commitments from Moroccan banks on sustainable finance.

As North African countries find themselves on the frontline of the battle against climate change, the EBRD is teaming up with the Moroccan central bank and banking sector to support climate and environmental risk management in the country’s financial sector and promote green finance.

The EBRD on Monday signed a memorandum of understanding with Morocco’s central bank Bank Al-Maghrib and the Association of Banking Professionals (GPBM) to co-operate on the implementation of a central bank directive issued last year.

This directive is designed to encourage Morocco’s financial sector to address and manage risks related to climate change and the environment. It also hopes to encourage new commitments from Moroccan banks on sustainable finance.

EBRD president Odile Renaud-Basso believes that the agreement will help Morocco’s financial institutions to “take climate action” and will “contribute to the country’s green transition” — a transition that is becoming ever more pressing as the country’s economy is suffering from the direct impact of more frequent droughts.

The agriculture sector employs more people than any other sector in Morocco, and accounted for 17% of the economy in 2021, but continues to be affected by extreme drought, and wheat and barley harvests are expected to be sharply down this year.

According to the US Department of Agriculture’s April update, wheat production in 2022/2023 is expected to be 70% lower than in 2021/2022, while barley will be down 78%. And drought was one of the main drivers — alongside higher energy prices, as Morocco is an oil importer — behind the IMF slashing its 2022 growth forecast for the country from 3.1% to 1.1% in April.

Morocco lost its investment-grade status with Standard & Poor’s last year. Upon downgrading the sovereign from BBB- to BB+, the rating agency noted that consecutive years of drought had “cramped Morocco’s agricultural sector output”.

In its latest Article IV report on the country, the IMF argued in favour of “drought-resistant infrastructure” that could “help shield Morocco from more frequent and intense events generated by climate change”.

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