Through a foreign exchange rate anchor and well-managed monetary policy, Morocco has held inflation rates to industrial country levels over the past decade. Inflation in 2004 was 1.5%. Despite criticism among exporters that the dirham has become badly overvalued, the country maintains a current account surplus. Foreign exchange reserves are strong, with over $15 billion in reserves, the equivalent of 11 months of imports at the end of 2004. The combination of strong foreign exchange reserves and active external debt management gives Morocco ample capacity to service its debt. Current external debt stands at about $13 billion or about 26.1% of GDP.

Economic growth has been hampered by an over-reliance on the agriculture sector. Agriculture production is extremely susceptible to rainfall levels and ranges from 15% to 20% of GDP. Given that almost 50% of Morocco's population depends directly on agriculture production, droughts have a severe knock-on effect to the economy. Over the long term, Morocco will have to diversify its economy away from agriculture to develop a more stable economic basis for growth.

The current government is continuing a series of structural reforms begun in recent years. The most promising reforms have been in labor market and financial sectors, and privatization has accelerated the sale of Global System for Mobile Communications (GSM) licenses in the last few years. Morocco also has liberalized rules for oil and gas exploration and has granted concessions for many public services in major cities. The tender process in Morocco is becoming increasingly transparent. Many believe, however, that the process of economic reform must be accelerated in order to reduce urban unemployment below the current rate of 18%.

In June 2004, the United States and Morocco signed a bilateral Free Trade Agreement (FTA). The FTA was ratified by the U.S. Congress in July 2004 and signed by President Bush in August 2004. The Moroccan Government ratified the FTA in January 2005, and King Mohammed signed the agreement in June 2005. The U.S.-Morocco FTA is the second in the Arab world, the first in Africa, and the first under President Bush's Middle East Free Trade Area. The U.S.-Morocco FTA will immediately eliminate tariffs on 95% of bilateral trade in consumer and industrial products with all remaining tariffs to be eliminated within nine years. The negotiations produced a comprehensive agreement covering not only market access but also intellectual property rights protection, transparency in government procurement, investments, services, and e-commerce. The FTA provides new trade and investment opportunities for both countries and will encourage economic reforms and liberalization already under way.