Morocco deepens financial markets with interbank forward market launch

Bank Al-Maghrib (BAM), Morocco’s central bank, has officially launched an interbank forward market for foreign exchange swaps and overnight index swaps (OIS) tied to the Moroccan Overnight Index Average (MONIA). This initiative, which began operations on February 19, marks a significant step in the modernization of Morocco’s financial systems and the gradual liberalization of the dirham.

The forward market is part of BAM’s broader strategy to deepen the foreign exchange market, an effort that has been ongoing since 2018. In a statement, the central bank emphasized that the new market provides economic operators with “a transparent and reliable reference for their hedging operations against interest rate and exchange rate risks.”

Introducing new financial instruments

The market introduces two key financial instruments. The first is the foreign exchange swap, which BAM describes as “a transaction whereby two parties agree to exchange one currency for another, followed by an opposite exchange at a later date.” This tool combines a spot foreign exchange transaction with a forward transaction, offering market participants flexibility and cost predictability while helping them manage foreign exchange risk exposure.

The second instrument, the OIS tied to MONIA, is designed to hedge against short-term interest rate fluctuations. This transaction involves exchanging a fixed interest rate for a variable rate indexed to MONIA over an agreed notional amount and period. It also provides insights into market expectations regarding future short-term interest rates.

Collaboration and objectives

This development was made possible through close collaboration between market-making banks and the European Bank for Reconstruction and Development (EBRD). It reflects Morocco’s commitment to fostering a more sophisticated financial ecosystem by encouraging the creation of derivative products and enhancing the depth of the national capital market.

The launch of the interbank forward market aligns with Morocco’s broader objectives for economic reform, positioning the nation as a more competitive player in the global financial landscape.