IMF approves funding to Morocco, Jordan

(Add comments by Moroccan agency, IMF conference call)

WASHINGTON/RABAT, Aug 3 (Reuters) - The International Monetary Fund on Friday approved loans to Morocco and Jordan been hit by costlier energy bills, strains from regional uncertainty and an escalating euro zone crisis.

The IMF approved a ${esc.dollar}6.2 billion precautionary line of credit for Morocco, which it said the government would treat as "insurance" in case economic conditions deteriorate and it faced sudden financing needs.

IMF Managing Director Christine Lagarde said Morocco's economic policies have contributed to strong growth, low inflation and a resilient banking sector. But the country has been hard-hit by a decline in trade from the euro zone.

"High oil prices have contributed to a build-up of fiscal and external pressures," Lagarde said. "The authorities have already taken action to address these vulnerabilities, and are committed to maintaining sound policies."

The IMF board also approved a ${esc.dollar}2 billion loan to Jordan announced last month. Jordan's finances have been affected by regional protests and forced to switch from gas to more expensive oil for electricity because of supply disruptions from Egypt.

"Jordan is facing external and fiscal challenges stemming largely from exogenous shocks to its energy sector," Lagarde said. "These shocks have put pressure on the external accounts, pushed up the deficits of the central government and the public electricity company, and exposed structural weaknesses in fiscal and energy policies."

Jordan's economic growth slowed to 3 percent year-on-year in the first quarter this year due to sluggish private sector growth. Turmoil of the Arab Spring in neighboring countries such as Syria and Egypt have also cast a shadow over investment, while ramped up social spending to quell unrest has further strained public finances.

In Rabat, Morocco said the IMF credit should give comfort to foreign lenders, investors and rating agencies, and allow it to tap international capital markets at favorable borrowing terms.

In a statement carried by the state-run MAP news agency, the finance ministry said the economy "remains vulnerable to external shocks mostly linked to a worsening recession in the euro zone and a new surge" in commodity prices.

After bad weather hit its agricultural sector, the North African country is bracing for higher food imports after drought flashed its farming output.

But IMF mission chief to Morocco, Dominique Guillaume, said the country's international reserves were still at a "comfortable level" and their decline was due to seasonal factors. He said tourism revenues and migrant remittances usually pick up in the second half of the year, when several bilateral loans also come due to the government.

"We really don't see there is a balance of payment need for Morocco at this stage," Guillaume added.

The Washington-based IMF said Morocco had already taken steps in June to reform the country's costly subsidy program, which will lead to higher fuel prices.

"We are quite confident that they have a broad set of measures on both the revenue and spending side to reduce the deficit to 3 percent over the next few years and strengthen fiscal sustainability," Guillaume added. (Reporting by Lesley Wroughton)