Financial Sector Reforms and Prospects for Financial Integration in Maghreb Countries

This paper provides an overview of the financial systems, the reform efforts, the challenges ahead, and prospects for financial integration in the five Maghreb countries of Algeria, Libya, Mauritania, Morocco, and Tunisia. The paper states that in the Maghreb region:

• A healthy and dynamic financial sector is essential to achieving high and sustainable economic growth;
• Financial integration will help deepen financial markets, increase efficiency, and enhance the resilience of economies to shocks;
• Although the financial systems have developed substantially in the last decade, the financial sectors need further modernization and regional and global integration.
• The main characteristics of the financial systems include:
  • Bank dominance;
  • Heavy public sector presence;
  • Limited financial sector openness;
  • Inefficient public banks burdened with nonperforming loans.

The paper suggests the following steps to facilitate financial integration:

• Strengthen the soundness of, and increase competition in, the banking system;
• Deepen financial markets;
• Upgrade financial sector infrastructure.

The paper also recommends that the countries in the Maghreb region learn lessons in integration from the European Union (EU) and the Gulf Cooperation Council (GCC). These lessons would include:

• Adopting a gradual approach;
• Consolidating macroeconomic stability in all the countries;
• Strengthening financial markets;
• Harmonizing rules and regulations;
• Improving regional coordination;
• Lifting restrictions on cross border flows of goods and services.