RESTRICTED

Report No. EMA-14

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

RECENT ECONOMIC

DEVELOPMENT S

IN

MOROCCO

August 29, 1969

Europe, Middle East andNorth Africa Department

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CURRENCY EQUIVALENTS

1 Drbamn- (DH) = $ 0.197h

1 k1lillion DH $ 197,T0O

$1.00 = DH 5.o6

$1 million D 5,0o60,ooo

ABBREVIATIONS

BNDE - Banque Nationale pour le D6veloppement EconomiqueCIH - Cr6dit Immobilier et H6telierCNCA - Cai ase Nationale de Credit AgricoleCNSS - Caisse Nationale de Securite SocialeCT - Centre des TravauxOCE - Office de Commercialisation et dtExportationOCP - Office Cberifien des PhosphatesONCF - Office National des Chemins de FerONE - Office National d'ElectriciteONTS - Office National du The et du SucreORIVA - Offices Regionaux de I1ise en Valeur AgricoleREI - R6gie des EXploitations IndustriellesSUtAB - Sucrerie Nationale du BehtSUNAG - Sucrerie Nationale du GharbSUTA - Sucrerie du TadlaTPIA - Taxe sur les produits et taxe sur les services

n.i.e. - not included elsewhere

TABLE OF CONTENTS

Page No.

BASIC DATA ............. ..............................

SUMMARY AND CONCLUSIONS .. ................. .... ... . . i - ii

I. INTRODUCTION ................... .......1

II. RECENT ECONOMIC PERFORMANCE .......................... 3

Output ............................... ...... ........... .0 3Savings .............. . . ............ . 4Investment . ........................................... 5Population and Employment .............................. 6Prices, Money and Credit .... ......................... 8Balance of Payments ... ................... .. ........... . 9Major Sectors ............ ........................... . 10

Agriculture ... .................................. . 10Industry and Mining ....... ......................... .... 12Tourism ............ 00..........* .......................... 13

III. THE PUBLIC SECTOR: PERFORMANCE AND POLICIES ......... 15

Financing Government Operations . ...................... 15Public Sector Savings ...... .... .. ......................... 15Public Sector Investments ............................ 19Outlook for 1969 ..................................... 20

IV. EXTERNAL TRADE AND FINANCE ............. .. ........... 23

External Trade and Services .......................... 23The E.E.C. Association .................. ............. 26Current Transfers, Capital Movements and Reserves .... 27Foreign Capital Requirements ........................ 28External Debt and Creditworthiness .............. ..... 29

STATISTICAL APPENDIX ................................. 31

This report was prepared by a mission which visited Morocco from April 27 toMay 10, 1969. The mission was composed of Giovanni Torelli, Chief; RobertArmstrong and Edmond Asfour, Economists; James Hendry, Agricultural Economist.The general purpose of the mission was to update the findings of the Bank'smission of February/March 1968.

BASIC DATA

Area : 172,000 sq. miles

Population (1968) : 14.6 million

Rate of growth (1960-1968), total : 2.9% per annummoslem : 3.3% per annum

Political Status : Independent Kingdom since 1956

Gross Domestic Productat market prices (1968) : DH 15.3 billion or $3 billion

Rate of growth, in real terms (per annum)1963-1966 : 1.0%

1967-1968 : 9.5%

1963-1968 : 3.0%

Per capita (1968) : DH 1,047 or $207

Structure of GDP (% of total) 1963 1967 1968

Agriculture 29 27 31Electricity 2 2 2Mining 5 5 5

Industry and handicrafts 12 13 12Construction and public works 4 5 4

Commerce 21 20 20Transport and other services 16 17 16Government 10 11 11

Total 100 100 100

Financing of Gross Capital Formation

1965 1968DH millin of GD DH million % of GDP

Gross domestic savings 1,630 12.4 2,400 15.7

Deficit (+) or surplus (-)in goods and non-factorservices -190 -1.4 270 1.8

Gross Capital Formation 1,L440 11.0 2,670 17.5

Resource Gap (as % of investment in 1968) : 10.1

Central Goveriment Budget (Cash basis)(in millions of DH) 1966 1967 1968

Total current revenues 1,970 2,130 2,56oTotal current expenditure 2,030 2,100 2,450Surplus (+) or deficit (-) -60 30 110

Government development expenditureand debt repayment -620 -920 -1,030Total deficit -680 -890 -920financed from:

foreign loans 260 290 220Central Bank 10 290 230extraordinary revenue 80 150 120other sources (incl. grants) 330 160 350

Money and Credit 1966 1967 1968

Money supply (end of period, million DH)

Total money supply 14,108 4,468 5,172of which: Credit tote Government 1,541 1,868 2,102

Credit to private sector 1,976 2,118 2,629

Prices (1965-68)

Cost of living index : No change

Balance of Payments

Conversion : $1 = 5.o6 DH

Relationship to large customs areas : Preferential tariff andmarketing arrangementswith France. Associa-tion with EEC effectiveas of September 1, 1969.

(DH million) 1966 1967 1968

Exports 2,168 2,146 2,278Imports 2,21a 2,431 2,587

Trade Balance (goods) -73 -285 -309

Tourism (net) 215 211 243Other Services -230 -266 -200Interest, Dividends and Transfers -334 -146 -178

Current Account Balance -422 2

Export Concentration (% of total)

Phosphates 25 25 24Citrus 15 16 18

External Public Debt (in U.S. $ at end of 1968)Total debt outstanding, including undisbursed 701 millionTotal debt outstanding, disbursed only 566 millionDebt service in 1968 75 millionRatio of debt service to exports of goods and

services in 1968 12%

Gross Foreign Exchange Reserves 1966 1967 1963(in millions of U.S. T-136 llb 131

Equivalent at end of 1968 to about 2 months' imports.

IMF Position (end of 1968)

Quota : $83 millionDrawings Outstanding : $55 million

SUMMARY AND CONCLUSIONS

1. Following a decade in which it increased at an annual average rateof about 2 percent, Morocco's gross domestic product in real terms rose by7 percent in 1967 and by 12 percent in 1968, reaching a per capita level ofover $200. These rates compare with a rate of total population growth ofabout 3 percent per annum. In 1968, the exceptional harvest accounted forabout two thirds of the rise in output. Manufacturing output grew by 4 per-cent and that of electricity by 10 percent. Growth also occurred in othersectors except mining.

2. With the large accumullation of cereals stocks, private savings rosesubstantially. Private investments may have dropped slightly but probablyexceeded the target. Public investments, both by Government and public enter-prises, rose at a fast rate from DH 920 million in 1966 to DH 1150 million in1967 and DH 1400 million in 1968. Public savings grew more modestly and in1968 financed 36 percent of public investment.

3. Although investment expenditure in 1967 and 1968 were close to plan-ned targets, they had a small impact in alleviating the problems of growingunemployment. The emigration of some 12,000 Moroccan workers in 1968 presentedsmall relief when compared with an estimated addition of 150,000 to the laborforce. The long run problems arising from the fast population growth requireintensified efforts in family planning. A program in this field has beenstarted but is behind schedule.

4. Tne higher income and irnvestment levels in 1967 and 1968 do not seemto have upset general price stability. The Government's restrictive fiscaland credit policies and price fixing of some consumer goods contributed tothis achievement. However, Government net borrowing from the Central Bank tofinance, in part, higher investment expenditures, and pent up demand arisingfrom the 1968 good harvest, may result in higher prices in 1969. Restrictivefiscal and credit policies should therefore continue.

5. The indications for 1969 point, on the output side, to a normalagricultural year, a probably better tourist season, and at best the samelevel of total output as in 1968. Central government investment expendituresare planned to increase from DH 920 million in 1968 to DH 1,200 million. Therise in central government savings, as a result of a rise in several taxes andfees, is expected to cover about half of the increase in investments. TotalGovernment savings should cover about 32 percent of planned Government invest-ments.

6. While the 1969 targets of planned investment expenditures and ofhigher savings by the central government seem feasible, the net receipt ofDH 414 million in foreign loans compared with an actual DH 220 million in 1968seems more problematic. Even if this target is achieved, a gap of aboutDH 500 million would remain. It is expected that nearly half this sum wouldbe forthcoming in the form of net lending by the private sector, a targetwhich is feasible, given the exceptional rise in private savings, followingthe good harvest of 1968, and the control exercised by the Central Bank overcommercial banks. The remaining gap is expected to be bridged by borrowingfrom the Central Bank and from other domestic and unspecified foreign sources.

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7. In order to bridge the financial gap and maintain price stability,a greater share of private savings should be mobilized by the government andpublic savings should be increased as planned. Substantial additional bor-rowing from the Central Bank would create additional pressure on the balanceof payments, which is already in a difficult position. If the investmenttarget is to be achieved, while at the same time the balance of payments po-sition is not to deteriorate, it would seem that foreign resources beyondthose expected by the Government in 1969 would have to be sought, and thatpart of such aid should not be tied to financing specific projects. Alter-natively some cuts in the investment program may be unavoidable.

8. In the context of accelerated development expenditures and mainte-nance of price stability, the balance of payments position remains a cause ofconcern. In 1968, imports and exports rose by 6 percent. The rise in importsoccurred largely in capital and intermediate goods. Exports of phosphatesremained stable and citrus made the best edvance. Revenue from tourism alsorose by about 6 percent. The gap in the current account widened. In addi-tion net capital inflow dropped, mainly as a result of higher loan amortiza-tion (particularly of short term wheat loans). Official gross foreign re-serves fell to a low of $72 million in early 1968 and $50 million were drawnon the IMF during the year. A further $10 million were drawn early in 1969under a new $27 million standby agreement.

9. The balance of payments outlook for 1969 does not promise much re-lief. Although there would be no need to import wheat as in previous years,imports of capital and intermediate goods should continue to rise. Exportsof phosphates have not shown a large increase so far this year but the touristyear seems promising. The agreements with EEC, effective in September, willprobably help to expand exports of citrus and light manufactures to communitymembers besides France, but the effects during 1969 will probably be small.On the capital side, foreign grants are expected to decrease, and, as men-tioned above, net loan receipts are expected by the Government to rise sub-stantially. The net outflow of private capital is expected to remain at the1968 level. If these expectations are realized, the overall balance of pay-ments deficit would drop to DH 70 million compared with DH 130 million in1968.

10. Morocco's external public debt (excluding undisbursed) had risen toaround $570 million or DH 3 billion by the end of 1968. External debt serv-icing, exceptionally high in 1968, represented about 12 percent of the exportsof goods and services. In 1969 the ratio is expected to be about 10 percent.In the long run the most critical determinant of Morocco's debt-servicingability will be the growth of its exports, which in its turn partly reflectschanges in productivity and the domestic savings effort. Provided that thesavings effort does not deteriorate, and investment proceeds as planned,Morocco would be able to service existing debt as well as substantial addi-tional loans on conventional terms. However, given the balance of payment'svulnerability, particularly to unfavorable weather or to a fall in exportprices, there is also a case for moderate amounts of foreign aid on conces-sionary terms.

RECENT ECONOMIC DEVELOPMENTS IN MOROCCO

CHAPTER I

INTRODUCTION

1. Since independence in 1956, the econony of Morocco has passed

through several phases. In the late 1950's private investment declined andoutput and employment stagnated, although foreign exchange resexrves rose,

mainly on account of large foreign military payments. The early 1960's were

characterized by large increases in government current and capital spendingwhich contributed to rising output, although concommitant budgetary deficits

contributed to price rises, severe balance of payments pressures and rapidlydeclining foreign exchange reserves. The mid-1960's were years of improved

financial and price stability, but the slowdown in public investment contrib-

uted to renewed stagnation in economic development, while the severe drought

of 1966 and mediocre harvest of 1967 gave rise to large wheat imports whichagain put pressure on the balance of payments. The last two years have shown

improved output gains stimulated largely by increased public investment out-lays and by improved weather in 1968. However, rising import needs and fal-

ling net foreign aid receipts have contributed to declining foreign exchange

reserves during this period.

2. Over the entire period 1956-1968, several major problems hampered

the country's economic development. The transition to independence resulted

in the departure of large numbers of foreign settlers, the loss of entrepre-

neurial skills and substantial flight of private capital. Problems have also

been compounded by a high and accelerating rate of population growth. Migra-

tion to the cities raised urban unemployment without tangibly reducing under-

employment in rural areas. The educational system was unsuited and slow to

react to the needs of development. The long-standing technical and institu-

tional shortcomings of the traditional agriculture sector, added to the de-parture of skilled foreign farmers and the take-over of the "lots de coloni-sation" created ?heavy demands and pressures on an unprepared agricultural

administration. Development in the rest of the private sector was hesitantand had to be supported by heavy government participation as well as financial

and tax incentives.

3. Many of these problems by their nature can be solved only gradually.

In particular growing unemployment, which is related to the high rate of pop-

ulation growth and which aggravates the social problems of fast urbanization,

is one of the more difficult problems facing Morocco, demanding both shortterm relief as well as long term planning. However, substantial progress in

dealing with the problems of economic development has been made in several

respects. Various administrative and organizational improvements were intro-

duced, although much remains to be done in this field. There are indications

that the flight of capital had dropped to a lower rate. Some private foreign

investment is coming in, but only at a low rate. Stability was restored

through strict budgetary and credit restraints. Substantial progress was made

in economic planning. The first Three-Year Plan, for 1965-67, was realizedonly in part. The new Five-Year Plan, for 1968-72, includes several realistic

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improvements. 1/ The Plan, which gives highest priorities to irrigation,tourism and training, also gives new attention to the population and employ-ment problems. It aims at the investment of an average DH 1.65 billion ($330million) per year by the public sector alone. The Plan has had a good startin 1968 with actual expenditures close to targets. In the area of agrarianreform, the most important measure has been the enactment in July 1969 of theAgricultural Investment Code, which will provide a comprehensive frameworkfor land reform. This will provide for farm consolidation and redistributionof land (including foreign owned land) in irrigated areas. It also seeks toreduce fallow in rainfed areas. The spread of the effect of these reforms,as well as of other projects and programs which aim at raising farm produc-tivity and output, is bound to be slow but their cumulative effect should beconsiderable in the long run.

4. rThe present report does not attempt to deal with all of these is-sues. It is concerned only with reporting the principal developments of themost recent years, particularly 1968, and in several instances appraises thepresent outlook for 1969 and following years. Its main focus is on the fiscaland balance of payments performance and problems, and it also deals brieflywith selected developments in some major sectors.

l/ See Chapter III of the previous IBRD country report, Report No. MA-5bdated October 15, 1968, for a detailed discussion.

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CHAPTER II

RECENT ECONOMIC PERFORMANCE

Output

5. During the past two years, economice growth in Morocco acceleratedmarkedly. In the decade which followed its Lndependence in 1956, output inreal terms had risen at an average 2.1 percent per annum, thus lagging behindboth the growth rate of total population (2.8 percent) and the natural growthrate of the indigenous population (about 3.2 percent). The emigration ofabout half a million people (compared with a total population of 14.6 millionin 1968) had its strongest impact on the modern sector, while several droughtsduring this period had hit the traditional agricultural sector. However, in1967 and 1968 a high rate of investment expenditures by the public sector co-incided with relatively large improvements in output in the agricultural sec-tor, particularly of citrus in 1967 and cereals in 1968. The gross domesticproduct rose by 7 percent and 12 percent, respectively in the two years.

6. It is of course difficult to determine exactly the extent to whichthe improvement in output over a short period of two years was due to favor-able climatic conditions and similar temporary factors, or to more determinedefforts by the public and private sectors, or to a change in the economicstructure which resulted from past development expenditures and economic pol-icies. In 1967, one-third of the rise in GDP was accounted for by the in-crease in agricultural output above the level of the poor harvest year 1966,and in 1968, an exceptionally good harvest year, as much as two-thirds ofthe rise was contributed by the agricultural sector. The rise in investmentexpenditures itself contributed about 15 percent to the rise in GDP in 1967and its level was maintained in 1968. Industrial and electricity output alsoincreased, but the mining sector, dominated by phosphates, showed little over-all change. Tourism showed a substar,tial gain during the year, following asmaller decline in the number of visitors in 1967. In 1969 total output isnot expected to surpass the exceptionally high level of 1968, although publicinvestment expenditures are expected to rise further, and tourism is expectedto continue its growth. Agricultural output will probably be back to a normallevel, substantially below the 1968 record.

7. The structural changes in the economy in recent years are not re-flected in a discernible change in the pattern of output, whether among sectorsor between private and government sectors. However, the unchanged pattern ofoutput hides the continuing shifts in ownership of assets, as weli as in in-vestment and employment, from the emigrating European population to both thegovernment and indigenous population (as well as to some new foreign inves-tors). The traditional econony, in other words, has been changing with thesupport of government to fill the place which was occupied by the emigratingEuropeans. Indications of these shifts are the recorded outflow of funds inthe form of authorized emigrant capital and repatriated investment income(totalling about $30 million a year), the large volume of unrecorded privatecapital outflow, and the drop in the non-Moslem population (from 558,000 in1960 to 238,000 in 1968).

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Savings

8. Although the national accounts of Morocco cannot claim a high levelof accuracy, the available figures indicate a substantial increase in grossdomestic savings between 1965 and 1968. The particularly large rise in dom-estic savings in 1968 is very largely attributed to the accumulation of cer-eals stocks from the bumper harvest, though it represents also some increasein savings efforts.

Gross Investments and Savings

1965 1966 1967 1968 /1(in millions of dirhams)

Gross Fixed Capital Formation 1,44o 1,530 1,890 1,970

Changes in stocks - - 150 30 700

Foreign balance (goods andnon-factor services) 190 - 90 - 340 - 270

Gross Domestic Savings 1,630 1,290 1,580 2,4ooof which

Public .. 410 510 500Central Government /2 (-50) (20) (180) (230)Local Government (30) (30) (30) (30)Public enterprises n.i.e. t (360) (300) (240)

(1,670Private ( 880 1,070 1,900

(excluding changes instocks) (1,030) (1,040) (1,200)

/1 Preliminary/2 Includes surplus or deficit in the ordinary and annexed budgets, receipts

starting in 1966 from thezsugar levy (which is not transferred to thebudget) and PmT revenue allocated to investment (not included in budgetrevenue).

As a proportion of the Gross Domestic Product, gross domestic savings rosefrom 12.4 percent in 1965 and 11.6 percent in 1967 to 15.7 percent in 1968.The rise is much more modest if the effect of the large increase in stocks ofcereals is excluded.

9. The bulk (two-thirds or more) of domestic savings was contributedby the private sector in recent years, bu; its volume, particularly in thetraditional sector, was strongly affected by the changing fortunes of the

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agricultural season. The estimate of private savings should be considered as

only a rough approximation and is of limited significance as an exact measure

of the private savings effort. The estimates of public sector savings, di-vided among central government, local government and public enterprises, aremore reliable; they show that the public sector as a whole increased its sav-ings from DIH 410 million in 1966 to DH 510 million in 1967 and DH 500 millionin 1968. The larger part was contributed by public enterprises, particularlythe phosphate, tobacco and export monopolies, as well as by the social secur-ity fund. Central and local government achieved savings of DH 210 millionand DH 260 million in 1967 and 1968, respectively, compared with DH 50 mil-

lion in 1966 and a net dissaving of DH 20 million in 1965. The rise ingovernment savings in 1968 was partly due, however, to larger transfersfrom the public enterprises.

Investment

10. Gross fixed capital formation rose steadily between 1965 and 1968at an average compound rate of over 8 percent per year, reaching almost DH 2billion ($400 million) in the last year, surpassing thereby the Five YearPlan target of DH 1.9 billion. As a proportion of GDP, investment rose from11.2 percent in 1965 and 12.2 percent in 1966 to 13.9 percent in 1967 and12.9 percent, of the much larger total, in 1968. A substantial rise in publicinvestment was partly offset by a drop in private investment in 1968.

11. While detailed data on investment by the public sector have been

collected by the Mission, no similar data were available on private invest-ment. The global figures of fixed capital formation, given below, show thatpublic investment accounted for the bulk of investment in recent years, andtnat it nas risen substantially both in absolute as well as in relative terms.

Fixed Capital Formation

1965 1966 1967 1968 /1(in millions of dirhams)

Public n.a. 920 1,150 1,400

Central Government 480 520 860 920

Local Government n.a. 120 130 140

Public enterprises n.i.e. 310 260 160 340

Private n.a. 610 740 570

Total 1,440 1,530 1,890 1,970

/1 Preliminary

The substantial rise in total public investment to DH 1.4 billion in 1968was accounted for largely by the rise in development expenditures of the cen-tral government, which almost doubled between 1965 and 1968. Investment bypublic enterprises also picked up considerably in 1968, following reductionsin the previous two years. Central government investments under the ThreeYear Plan (1965-1967) and in the first year of the current Five Year Plan(1968-1972) went largely into irrigation and other agricultural projects,transport and electricity projects. Local government investments went largelyinto construction of roads, schools, urban development and welfare projects.

12. Investments by public enterprises were largely made by the phosphatemnonopoly (OCP), the Electricity Office (ONE), the railways (ONCF) and sugarmills (SUTA, SUNAB and SUNAG). While the greater part of the investments bythe Railways and a substantial part of those by the Electricity Office werefinanced by the central government and appear in the investment budget, thePhosphate Monopoly financed its investments largely from internal savings,whereas the Electricity Office and sugar mills drew mainly on external loansand to a smaller extent on internal sources. Capital expenditures by the"Centres de Travaux" and Regional Agricultural Development Offices (ORMV),Tourism Office (ONiMT) and Mining Bureau (BRPM), which together were substan-tial, particularly in 1968, appear in the investment budget of the centralgovernment.

13. The level of private investment remained far below that of privatesavings and has shown no upward trend in recent years. Private investment,in fact, seems to have dropped considerably in 1968. It must be noted, how-ever, that the available estimates are very approximate, and that no reliabledata exist on the distribution of private investments in the various sectors.

Population and Employment

14. M4orocco's total population in 1968 was estimated at about 14.6 mil-lion. Tnis was about 3 million above the 1960 level, even though between1960 and 1968 emigration totalled 320,000. Thus, while the total populationrose from 1960-68 at an average rate of 2.9 percent per annum, the Moslem pop-ulation (comprising over 98 percent of the total) increased by 3.3 percentyearly. It has been estimated that Morocco currently has to invest over 10percent of its GNP in order just to keep per capita incomes at a constantlevel. The consequences of rapid past and present population growth are re-flected in Aorocco's difficulty in raising per capita incomes, in the steadilyrising levels of unemployment and underemployment, and in the growing urbanproblems. In the short run, the problems of creating new jobs and of copingwith the effects of a 5 percent annual increase in urban population requiredirect solutions. Over the long run, however, the only realistic solution to.lorocco's demographic problem would appear to be an effective program of birthcontrol.

15. A pilot program for national family planning was initiated in 1966.The 1968-1972 Plan aims at reducing the crude birth rate from 50 per thousandto 45 per thousand by 1972, mainly through the insertion of a half millionintra-uterine devices (IUD's) at a rate rising from 25,000 in 1968 to 150,000

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by 1972. In addition, it is intended to reach an additional 100,000 personsin this period with other means of contraception. Through 1968, foreignassistance has come from the Ford Foundation (through the Population Council),

the Swedish International Development Authority and the International PlannedParenthood Federation. United States aid now appears likely to be forthcom-

ing at the rate of about one million dollars for the years 1969 and 1970.

16. Morocco is presently running well behind its Five Year Plan targetsfor both IUD insertions and the training of nurses and educators. In 1968,insertions were less than 10,000 while only 35 workers were trained, againsttargets of 25,003 and 120, respectively. The major operational constraintsseem to be shortages of trained administrators for the projects and inadequatemass media information programs. Although there has been some internal re-

sistance to population control efiorts, attitudinal surveys have indicatedthat the majority of urban Moroccans (both men and women) are receptive to

family planning even in advance of an educational campaign. In view of theimportance of this problem for the long-run prospects of Moroccan development,present efforts to deal with it will have to be intensified.

17. Statistics on employment and unemployment remain incomplete andunreliable, pending the ccmpletion of a population census in 1970. Currentestimates place urban unemployment at between 30 and 50 percent of the urbanlabor force of about 1.7 million. The problem of growing urban unemploymentis reflected in increasing pressures on already inadequate urban housing,sanitation, educational and other facilities. The urban population in 1968has been estimated at some 4.6 million, with the rural population constitutingthe remaining 10 million. No statistics are available on rural underemploy-ment, which is believed to be substantial.

18. The near-term prospects for employment are not encouraging. Despite

the departure of about 12,000 Moroccan emigrants (to work mostly in the E.E.C.countries) in 1968, unemployment continued to rise during the year. At pres-

ent, about 150,000 new jobs each year have to be created to cope with thegrowing labor force, and this figure will rise steadily in time. Over thePlan period, the labor force is expected to increase by at least 225,000 morethan the employment opportunities to be created. Agricultural employment,which now accounts for just over 70 percent of total employment, is expectedto increase by less than 2 percent. Jobs in mining, industry and handicrafts,now about 11 percent of the total, are expected to grow by only about 1 per-cent. The most rapid growth in employment (about 4-1/2 percent) is projectedin other non-agricultural employment (transport, commerce, services, adminis-tration). Altogether, the outlook over the next several years is for thelabor force to increase by more than 3 percent annually while employment op-portunities rise by only about 2 percent.

19. The principal new measures announced by the Government for dealingwith the increasingly serious unemployment situation are the extension of the

"Promotion Nationale" (a work relief program) to the urban sector and thestepping-up of activities to encourage and facilitate emigration.

Prices, Money and Credit

20. The price level (as measured by the index of the cost of living in

Casablanca) has remained remarkably stable since 1965. Overall, the price

index at the end of 1968 was 1.8 percent higher than at the end of 1967, orat about the same level as at the end of 1966. The fixing of prices of cer-tain basic consumer goods such as wheat and sugar has helped to maintain thestability of the price index. However, general price stability has beenachieved as a result of a general balance between the supply of and demandfor resources. Restrictive fiscal and credit policies and two crop failuressince 1965 have served to restrain private demand and contributed in fact toa slight drop in the price index in 1966. A rise in public savings and innet capital inflow in 1967, and a large rise in output in 1968 also helpedto maintain a balance between aggregate demand ane supply, despite substantialrises in public investment expenditure in the two years. The rise in privatedemand which occurred in the second half of 1968 as a result of the bumpercereal harvest could have led to higher prices, but conservative credit andbank reserve policies 1/ and the suspension in May of government purchasesof cereals at the relatively high fixed prices, checked the expansion ofliquidity and led to a drop in the market price of cereals.

21. Total money supply increased in 1967 and 1968 at a somewhat higherrate than real output. During 1967 the money supply rose by 8.8 percentagainst a 7.1 percent rise in GDP, and in 1968 the money supply rose by 15.7percent against a 12.1 percent rise in GDP. The following table indicatesthat while government borrowing represented the main factor behind the risein money supply in 1967, it was the rise in credit to the private sector thatmainly led to the rise in 1968. Net government borrowings, which had reachedDH 327 million dirhams in 1967, were followed by additional net borrowings ofDH 234 million in 1968.

Factors Affecting the Money Supply

(in millions of dirhams) 1966 1967 1968

Currency +43 +185 +245Demand Deposits -65 +175 +459

Money Supply -22 +360 +704

Foreign Assets (net) -63 -100 +35Claims on Government -2 +327 +234Claims on Private Sector -2 +142 +511Quasi money & other (net) +45 -9 -76

-22 +360 + 704

1/ Under the standby agreement with the IMF, Morocco undertook to imposeceilings on the total volume of central bank domestic credit and on itscredit to the government.

_ 9 _

22. Total credit to the private sector increased by 7 percent in 1967and by 24 percent in 1968. In absolute terms, outstanding credit increasedby DH 142 million in 1967 and DH 511 million in 1968. Out of the latteramount, DH 150 million was extended by commercial banks to finance largercereals operations and to agricultural cooperatives, and DH 180 million wasrediscounted by the Central Bank. 1/

23. In November 1968, measures were taken to slow down the expansion ofbank credit. The bank reserve ratio on new deposits (above the level of July1) was brought to the general level of 25 percent and the base was enlargedto include all time deposits and liabilities in foreign exchange as well asdemand deposits. The effect of this measure on restricting credit to theprivate sector was followed in March 1969 by the requirement that banks shouldhold a proportion of their current dirham deposits equal to 25 percent oftheir current dirham deposits equal to 25 percent (rising to 30 percent bymid-May) in the form of Treasury bonds.

24. Specialized banks also increased their credits in 1968. Net dis-bursements by the National Economic Development Bank (BNDE) increased by DH 63million. During 1968 commitments reached DH 108 million in direct long andmedium term loans, of which DH 39 million were discounted with the CentralBank. Major approved loans went to finance a number of hotels (DH 35 million)and two sugar mills, one at Doukkela (DH 14 million) and one at Beni Mellal(DH 25 million).

Balance of Payments

25. Despite a slight widening of the merchandise trade deficit duringthe past year, there was a reduct..on in the current account deficit from someDH 490 million ($97 million) in 1967 to about DH 450 million ($89 million) in1968. This improvement was attributable to gains in the services account.Both exports and imports rose by some 6 percent, to DH 3.08 billion andDH 3.57 billion, respectively. The most notable export gain was the DH 75million rise in citrus earnings, which comprised some 18 percent of totalgoods exports in 1968. Phosphate exports (which constitute one quarter oftotal exports and remain the largest single export) stayed at about the levelof the preceding several years. Imports of food and consumption goods remainedat about 1967 levels, virtually all of the increase in imports being a-countedfor by rising demand for intermediate and investment goods. Imports of wheat,coming before the large domestic harvest, exceeded DH 200 million - more thandouble the level of the early 1960's. Gross receipts from tourism increasedby about 6-1/2 percent to DH 426 million - somewhat less than had been expec-ted. The surplus in the balance on current transfers in 1968 remained closeto the 1967 level of DH 40 million.

1/ To help finance the bumper crop the fixed ceiling on rediscounts ofeach bank with the Central Bank was raised at the end of July 1968 by6 percent. In addition, bank reserves requirements on new demanddeposits were reduced from 25 percent t9,Q percent.

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26. On the capital account, net grants (largely from France and theUnitejd States) rose by nearly DH 50 million in 1968 to reach DH 180 millionwhile the public sector's gross receipts of foreign exchange loans remainedat about DH 450 million ($89 million); the major lenders were West Germany,the United States and France. More than offsetting this gain, however, wasthe substantial rise in loan amortization payments. Capital flight, whilediminishing steadily over the years, was still thought to be substantial.Consequently, the overall balance of payments deficit rose to some DH 131million, as compared with deficits of DH 92 million in 1967 and DH 56 millionin 1966. With foreign exchange reserves falling to low levels, a $50 millionIMF standby arrangement was drawn upon in 1968. Another standby of $27 mil-lion came into effect in October 1968, and $10 million of this drawn in thespring of 1969.

27. The outlook for 1969 points to a further narrowing of the currentaccount deficit as exports are expected to grow at about 5 percent while im-ports should grow at a lower rate - the decline in wheat imports accountingfor a considerable proportion of the immediate import decline. Nevertheless,a deficit is still expected in the overall balance of payments for 1969. Al-though the new partial association with the Common Market should help futureexport prospects, increasing import demands fir capital goods will be substan-tial, and Morocco's external payments position is likely to remain difficultfor some time. It remains particularly vulnerable to possible crop failureswhich would again create severe balance of payments strains as have occurredin the past few years.

Major Sectors

Agriculture

28. The agricultural sector made a major contribution to Morocco'soverall economic performance in 1968, particularly through the exceptionallylarge cereal harvest for 1967/68 crop year. Wheat production of about 2.4million tons was roughly twice the average produiction of recent years, largelyas a result of improved yields. The very favorable rainfall in 1967/68 per-mitted some increase in areas sown, and the good distribution of the rainfallthroughout the growing season was ideal for cereal growth. In parts of theareas sown to wheat, there was also some carry-over effect of fertility fromfertilizer applications made during the previous two drought years. Barleyoutput also doubled (reaching 2.2 million tons) as did output of sugarbeet.Citrus crops (with the exception of grapefruit) registered increased produc-tion, but vegetable output dropped due to winter :?rost, and exports decreased.Livestock constitutes a most important part of the agriculture sector, butthe unreliability of livestock data makes it difficult to assess productionperformance.

29. The prospects for the current harvest year (1968/69) seem lessfavorable. Agricultural production in general was expected to return to lev-els approximating those of an average harvest year for Morocco, and this wouldagain be due primarily to the impact of weather. Whereas the bumper wheatcrop of last year exceeded Morocco's storage capacity and eased the need toimport wheat, this situation was not exp tted to be repeated in 1969/70.

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Rainfall has been extremely heavy in most areas, resulting in difficult pre-

planting conditions which have reduced the area in cereals, possibly by as

much as 25 to 30 percent. Fertility levels should also be somewhat reducedas a result of last year's bumper crop, and the heavy rains will make fertil-

izer use somewhat more difficult. Citrus and vegetable production are also

reported to be affected by the unfavorable weather, and sugarbeet productionin the Rharb area will be down for the same reason.

30. Fertilizer use has expanded in recent years, and demonstration of

its impact on production should further spread its use. However, average

rates of application are still low. A program started in 1966 for the im-

provement of cereal production through use of fertilizer and improved farming

practices, "Operation Engrais", was in effect to some degree on 345,000 hec-

tares by 196T/68. It was scheduled to proceed at a rate of increase of 50,000

hectares per year up to a target of 500,000 hectares by 1971/72. The heavyrains of 1968/69 have cut back on the coverage in the current year (to 330,000

hectares). There has reportedly been continuing improvement, however, inland preparation activities under the "Centres de Travaux", in the extension

services and in the logistics of providing fertilizers to farmers.

31. Agrarian reform within the framework of a set of codes known as the

"Charte Agricole" (formally called the "Code des Investissements Agricoles")came into effect in July 1969. While it is mainly concerned with irrigated

lands, its provisions cover both irrigated and rainfed areas. It specifies

the obligations of landholders and government in achieving the objectives of

the reform program and outlines ways in which lands are to be used more ef-

ficiently. In this latter respect, the "Charte Agricole" provides obligatory

guides by which irrigated lands are to be brought into an agreed cropping

pattern in each project area, and in rainfed areas it seeks to reduce theareas of unproductive fallow. An important part of the program is the consol-idation of land holdings, but it also provides conditions under which unpro-

ductively used lands may be confiscated. The impact in practice of this

reform effort cannot yet be assessed, but the promulgation of the law itself

represents an important first step, offering evidence of serious intent to

restructure the agricultural sector in ways which will permit efficient and

more technologically advanced agrieultural practices.

32. Livestock is raised mostly in semi-arid, badly over-grazed parts of

the country, and animal production is, therefore, highly vulnerable to weatherconditions which affect forage availability. Socio-political and other prob-lems associated with controlling grazing render improvement difficult, but astart is now being made through range management in selected areas totallingabout 210,000 hectares. This program will introduce controlled grazing under

a system of established rights, water development, animal shelters, forage

centers for reserve feed stocks, animal health control and new range grasses.

However, no measurable results should be expected for some years, even underfavorable conditions. A related development is the foreign livestock invest-

ment being made by the US King Ranch, which will be raising cattle for both ex-

port and domestic consumption. A large area has been leased for this purpose,and production will be carried out under a single management using modernmethods which will involve crossing imported cattle (Santa Gertrudis) withselected Moroccan stock.

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33. Citrus production in 1968/69 is expected to be around 537,000 tons,down from 787,000 tons in the previous year. This will be due to this year'sadverse weather conditions. Despite this reduction, and a subsequent dropin export volume, the earnings from citrus exports are expected to rise be-cause of favorable prices. The area under orange production is expected toreach about 60,000 hectares in 1975, compared to approximately 55,000 hec-tares in the 1967/68 season. The F.A.0. has projected Morocco's total orangeand tangerine production at 1.18 million tons by 1975, approximately doublethe 1963/64 to 1966/67 average. Despite larger supply and growing competitionin the European market, Moroccan citrus may maintain the relatively favorablepositicn which it appears to have gained, both in price and in the share ofWest and East European markets, due to the careful quality controls.

34. Investment in irrigation remains a major part of Morocco's totaldevelopmental expenditure for agriculture. The expected adoption of the"Charte Agricole" should make it somewhat easier to organize project areasfor effective irrigation, but implementation difficulties should not be under-estimated. Shortages of trained personnel for operating the projects andperforming extension activities will persist despite efforts to increase thenumbers of staff at all technical levels, but, as in the case of the "Centresde Travaux," technical staff capabilities in irrigation projects reportedlyare beginning to show improvement. The area actually brought under irriga-tion in 1968 reached 12,000 hectares (60 percent of planned target) comparedwith about 6,000 hectares in 1967.

Industry and Mining

35. While power production increased by about 10 percent in 1968, miningoutput did not change from the 1967 level and manufacturing increased its out-put by about 4 percent. Manufacturing industry presently accounts for about12 percent of GDP and employs some 160,000 workers. It is made up of a fewmodern, largely government-financed firms alongside a large number of smallindustries and handicrafts. Modern industry includes four sugar mills, threesugar refineries, two oil refineries, a chemical complex, cement, tobacco,paper and glass factories, car and tractor assembly factories, a tire factory,and a number of textile mills, grain mills, sardine canneries and vegetableand fruit canneries. The slow growth of income and the departure of rela-tively higher-income Europeans in receuit years have slowed the growth of de-mand for manufactured products.

36. Net private investment in manufacturing industry has been small,and largely financed by banks and with government participation. The maininvestments in 1968 were in electric power and sugar refining and were madeeither by the public sector or with its participation. No data were availableon private investment in industry in 1968 although there are indications thatexpansion was underway in several industries in the fields of textiles, bitu-men, pharmaceuticals, cellulose, vegetable oil refining, aluminum productsetc. Few additional employment opportunities were created by new industriesin 1968.

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37. Output of manufacturing industry increased by 4.2 percent in 1968,or at about the same rate as in 1967. However, sales probably increased ata faster rate, allowing many industries to reduce stocks. The growth ratein output was highest for textiles, particularly for woolens and rayon, dueto higher sales to farmers and exports to Algeria, and for cement and build-ing materials, which benefited from higher government construction expendi-tures. Production of leather, shoes, plastics and pulp also rose substanti-ally. In the chemical industry, most branches increased output, but fertil-izer production fell below the high level of 1967 despite higher exports.Production of sulphates and of synthetic rubber tyres made good advances.Car and tractor assembly also expanded (to 14,000 cars and 1,800 tractorscompared with 9,000 and 900 respectively in 1967), as did other metal manu-facturing industries and production of batteries. On the other hand, foodindustries showed an overall decline in output, despite rises in most enter-prises, owing to a large drop in the output of the modern milling industryfollowing the decline in imports of cereals and the shift of activita to _traditional mills. Other food, tobacco and beverage industries showeid sub-stantial expansion, particularly the sugar mills, which almost doubled outputfrom 55,000 in 1967 to 107,000 tons in 1968.

38. The index of production of mining has shown no significant trendsince 1964 and remained in 1968 at the same overall level as in 1967. EmRploy-ment in the mining industry reportedly dropped in 1968 by about 900 workers(out of a total of some 30,000), partly as a result of reduction of output insome mines but largely because of the introduction of labor-saving technologyin the large phosphate mining industry. Labor strikes in the coal mines inDecember 1968 also affected output.

39. Phosphate production increased in 1968 from 9.9 to 10.5 milliontons, or by 6 percent. This was substantially below the planned target of 11million tons. Output of pyrrhotine (which is used locally in the productionof sulphuric acid) increased both in 1967 and in 1968, as did the local salesof phosphates to the local chemical industry. Exports of phosphates increasedby 8 percent in volume but showed practically no change in value as comparedwith 1967 (DH 544 against 546 million) due to lower prices. Exports of leadand cobalt registered some increases.

40. Other minerals generally registered reduced levels of output andexports. Manganese ore showed a 44 percent drop in output and a 33 percentdrop in exports. Along with iron ore, manganese ore apparently suffered fromdeclining quality of reserves as well as from low productivity. Output ofcobalt, coal, zinc, copper and iron ores all registered declines ranging be-tween 7 percent and 18 percent as compared with 1967.

Tourism

41. Tourism has been accorded high priority in the Five Year Plan. TheGovernment has strongly supported private investment in hotel construction andother tourist enterprises with various incentives including capital partici-pation, the provision or guaranteeing of credit at subsidized interest ratesand over long repayment periods, grants towards purchase of equipment, varioustax exemptions or reductions or guarantees of future tax levels, and throughaccelerated depreciation allowances.

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42. The number of tourists visiting Morocco has not developed as pro-jected. A high rate of growth until 1964.was followed by slower growth until1967, when an absolute fall was recorded.

Visitors Transients Total

(Number in thousands)

1962 202 53 2551963 299 74 3931964 383 79 4621965 378 103 4811966 420 99 5191967 400 104 5041968 481 100 581

This drop was due largely to a big decline in the number of Algerian visitorsbut has been also attributed to the tense international situation in the sum-mer and to the currency devaluation of the U.K. and Spain late in the year.The year 1968 seems to have witnessed a revival of tourism with a jump ofabout 20 percent in the number of visitors and 15 percent rise in the totalnumber of visitors and transients. French visitors, who represent about aquarter of the total, increased in number, despite the social troubles inMay-June of that year. The number of American and West German visitors alsoincreased substantially. However, the total of 581,000 visitors lagged behindthe plan target of 660,000. Total exchange receipts from travel in 1968 wereestimated at DH 426 million compared with DH 400 million in 1967. Reports inthe first part of 1969 indicate a continuation of the upward trend.

43. Capital investment in tourist facilities has been substantial, par-ticularly in the construction of hotels. Hotel rooms increased from about12,000 in 1965 to 20,000 in 1967 abd 22,000 in 1968. In addition, an esti-mated 7,000 rooms were under construction in 1968, largely in luxury hotels.While the planned expenditure target of DH 67 million for 1968 was probablyexceeded, the target of hotel rooms (about 3,000) was not reached. In 1968,the BNDE approved hotel and tourist loans totalling DH 35 million and theCredit Immobilier et Hotelier (CIH) opened hotel credits totalling DH 45 mil-lion. Total outstanding hotel credit of the two organizations exceeded DH 160million at the end of 1968. In addition, the Government spent directly DH 16million on hotel construction during 1968.

44. While the recent development of physical facilities such as hotels,airports and roads seems adequate to meet the current demand of tourist traf-fic, it would seem that greater efforts must be made if the Five Year Plantarget of one million visitors in 1972 is to be approached. If the Moroccantourist industry -is to expand adequately, costs and prices will have to belowered to become more competitive with other Mediterranean countries. Inaddition, there is a need for accelerated training of management and person-nel, greater sales and promotion efforts abroad (especially to charter groups),better internal transport connections, and a larger supply of medium-pricedaccommodations and services.

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CHAPTER III

THE PUBLIC SECTOR: PERFORMANCE AND POLICIES

Financing Government Operations

45. The growth of current expenditures of the public sector (which in-cludes the central government, local governments and public enterprises) wasrestrained in recent years, while investment expenditures rose at a rapidrate. Public sector investment expenditures increased from about DH 900 mil-lion in 1966 to about DH 1,400 million in 1968. During the same period, pub-lic savings (i.e. the excess of current revenues over current expenditures)increased at a much slower rate, from DH 410 million in 1966 to DH 500 millionin 1968. Thus, the proportion of public investments financed from publicsavings fell from 45 percent to 36 percent in this period.

46. Foreign loans and grants have contributed substantially, though ata decreasing rate, towards financing public investments. Gross receipts offoreign aid (including grants) by the whole public sector dropped from DR 660million in 1966 to DH 600 million in 1968. Similarly foreign aid receipts,net of capital repayments, fell from DH 380 million to DH 300 minlion. Thus,their net share in financing total public investments fell from 41 percent in1966 to 21 percent in 1968.

47. Part of private savings (which doubled between 1966 and 1968, reach-ing DH 1.9 billion) has also gone towards financing public investments, throughthe increase in private deposits with government agencies and through addi-tional lending to the government. The net contribution of private sectorlending reached DH 100 million in 1966 and rose to 240 million in 1968, thusraising its share from about 10 percent of public investment in 1966 to about17 percent in 1968.

48. Thus, while no financial gap appeared in 1966, the higher publicinvestments in 1967 and 1968 exceeded the total financial resources suppliedby public savings, private sector lending and net foreign aid. The financialgap in both years was largely met by government borrowing from the CentralBank, to the extent of DH 290 million in 1967 and DH 230 million in 1968.

Public Sector Savings

49. As summarized in Chapter II, savings of the public sector as awhole rose from DH 410 million in 1966 to DH 500 million in 1968. Centralgovernment accounts, which, when including extrabudgetary revenue from thelevy on sugar and from the PTT, showed a DH 20 million saving in 1966, re-ported savings of DH 180 million in 1967 and DH 230 million in 1968. Thisrise in central government savings was largely offset by a decline in thesavings of public enterprises, which fell from DH 360 million in 1966 toDH 300 million in 1967 and DH 240 million in 1968. However, the decline in1968 was largely due to a transfer of funds from the phosphate monopoly tothe government budget. Available data on local government indicate annualsavings of approximately DH 30 million through the three years.

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Central Government Budgetary and Extra-BudgetaryTransactions (Treasury Cash Basis)

(in millions of dirhams) a/ Estimate1965 1966 1967 - 1968 1969

1. Ordinary revenue 1,889 1 975 2 132 2 557 2 697Direct taxes 471 680Customs duties 375 453 475 454 490Indirect taxes 526 574 604 693b/ 845b/Registration and stamp duties 110 119 126 137 178Government properties 48 41 50 _49 53_t tf- ".ooopolics 142 172 192t/ 387 323of which: OCP (-.) (-) (-)c7 (120) (60)

Tobacco Monopoly (127) (134) (M4M) (168) (189)Others, n.i.e. 217 96 138 167 128

2. Ordinary expenditure 1.971 2,031 2 102 2 449 2,471d/ Public debt service:interest 129 148 134

Personnel 1,185 1,247 1,340 1,438 1,573Materials and supplies 480 464 488 536b/ 546b/Mainten nce 39 37 37 41 417Subsidies and others 92 78 61 171 86Royal Court 46 57 38 76 41

3. Ordinary budget surplusor deficit -82 -56 +30 +108 +225

4. Capital repayments d/ 3 -97 m-111 -905. Capital expenditures e/ -Z3 -721 -7-2f/ - -1,1976. Over-all budget surplus

or deficit -769 -674 -886 -921 -1,0617. Extra budgetary ac-

counts (net) h/ +15 +89 +84 -63 +678. Over-all cash deficit -m - -TO- -2 : __99

9. Financing 7__ ___ __9 994Treasury and postal checkingdeposits (increase) 93 156 54 308 -30Internal borrowing (net) 179 95 96 238 256of which: Long term (50) (64) (76) (107) (80)

Medium term (120) (-30) (,15) (22) (62)Short term (9) (61) (35) (109) (114)

Foreign loans 527 259 291 220 414of which: Long term (435) (264) (186) (305) (448)

Medium term (25) (11) (2) (5) (16)Short term (netWi/(67) (-16) (103) (-90) (-50)

Central Bank Credit -46 -7 294 234 181Treasury account withCentral Bank 54 21 -1 -

Others, incl. errors -53 +61 +68 -16 +173

a/ Preliminary figures

b/ Excluding DH 160 million representing the share of local government in thetax on products and services (TPS). Beginning in 1968, this share was dis-bursed by the Ministry of Interior (instead of being transferred directly bythe Treasury) and recorded in its budget as part of its expenditures.

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/ Excluding DH 160 million which are recorded as a receipt from thePhosphate monopoly (OCP) in the ordinary budget and an governmentparticipation in OCP1s capital increase in the investment budgetsof 1967 and 1968 (DH 100 million in 1967 and DH 60 million in 1968).

d/ Includes payments on internal debt and long term external debt only,i.e. excluding short term debt receipts and payments, which aregiven net under foreign aid.

e/ Actual payments during the fiscal year under the investment budget.The total does not correspond exactly to authorized expenditures oncompleted work during the year due to the time lag between authori-zations and payments.

fl Excluding LE 100 million representing government participation inOQPts capital increase (see c).

g/ Excluding DE 60 million representing government participation inOCPts capital increase (see c).

h/ Net surplus or deficit in the accounts of the "Promotion Nationale"(public works project), forestry projects, "Op6ration Engrais" (agri-cultural project) and others.

i/ Including net receipts from or repayments of short term credits (main-ly U.S. and French wheat loans).

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50. The Central government improved its savings performance in 1967mainly by restraining the growth of current expenditures. In 1968 savingsincreased, despite a substantial rise in ordinary expenditures. This wasmainly a result of better collection of direct taxes and of a transfer ofDH 120 million from the phosphate monopoly profits to the budget. The risein direct tax revenue in 1968 was the result of a drive by the government tocollect tax arrears as well as a stricter tax assessment and collection.This applied particularly to taxes on business profits (which rose fromDH 339 million in 1967 to DH 406 million in 1968), to taxes on salaries, andto the agricultural tax (which rose from DI 34 million to DH 62 million).Import duties fell slightly in 1968, due to higher imports of equipment andlower imports of consumer goods, and export taxes also fell slightly. Otherindirect taxes, particularly the turnover tax and profits of the tobaccomonopoly, increased substantially due to higher consumption.

51. On the expenditure side, the government strictly restrained thegrowth of current expenditures during the years 1965 to 1967. This policywas also generally applied in 1968 with few exceptions. Major rises occurredin defense expenditures (of DE 134 million, of which DH 54 million were insettlement of previous expenditures), in expenditures on education (DH 46million) and in settlement of other past expenditures (DH 32 million).

52. Savings of the public enterprises which do not appear in theaccounts of the central government dropped from DH 360 million in 1966 toDH 300 million in 1967 and to DH 240 million in 1968. The drop in 1968, how-ever, is completely accounted for by the transfer of DH 120 million from thephosphate monopoly (OCP) profits to the central government. Besides the OCP,other main contributors to public enterprise savings were the Social SecurityFund (CNSS), the Tobacco Monopoly and the Export Office.

Gross Savings of Public Enterprises, n.i.e.(in millions of dirhams)

Estimate1966 1967 1968 1969

Phosphates monopoly (OCP) 220 170 100/1 80/2Railways (ONCF) - 5 5 10Tea & Sugar (ONTS) 45 10 -5 25Social Security Fund (CNSS) 35 40 40 40Tobacco monopoly 35 25 25 20Sugar (SUNAB, SUTA, SUNAG) 10 15 5 15Export Office (OCE) .. 30 20 25Electricity Office (ONE) 5 5 5 10Agricultural Bank (CNCA) 5 5 10Industrial Office (REI) 5 5 10 10Others (net) - -10 25 5

Total 360 300 240/1 240/2

/1 Excluding DH 120 million transferred to the government budget./2 Excluding DH 60 million to be transferred to the government budget.

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Public Sector Investments

53. As summarized in Chapter II, investment expenditures of the publicsector as a whole rose from DH 920 million in 1966 to DH 1,150 million in1967 and DH 1,400 million in 1968. The bulk of this rise was accounted forby the increase in expenditures by th' central government, included in itsinvestment budget. The public enterprises also increased their total grosscapital formation, particularly in 1568, following a large drop in the previ-ous year.

54. Central government investment expenditures in 1968 totalled DH 918million, which was about 92 percent of planned expenditures for the firstyear of the 1968-1972 Five Year Plan. This compared with expenditure ofDH 862 million in 1967 and DH 521 million in 1966. The principal divergencesfrom the plan in 1968 were the excess of expenditures on irrigation whichwas offset by a shortfall in expenditures on barrages and other agriculturalprojects. Compared with 1967 the largest increases were in the expenditureon barrages, irrigation, dry farming and equipment grants, which more thanoffset decreases in other expenditures.

Central Government Investment Expenditures in 1968(millions of dirhams)

1966 1967 1968Actual Planned

Agriculture, barrages & forestry 170 347 421 427

Barrages (10) (84) (123) (141)Irrigation (81) (136) (164) (122)Dry farming & livestock (33) (64) (81) (96)Forestry & others (46) (63) (53) (68)

Transport and communications 115 156 140 164

Housing, welfare, education & health 84 76 97 91(incl. Agadir)

Tourism 15 37 28 27

Equipment for tourism & industry 6 5 20

Industry, mining and power 83 163 131 144

Industry and handicrafts (53) (90) (69) (73)Mining (13) (14) (15) (31)Electricity (17) (59) (47) (40)

Land purchase 26 53 53 56

Public works (Promotion Nationale) included above 46

Defense 22 25 27 6

521 862 918 1,003

20 -

55. The main projects undertaken or continued in 1968 were barrage con-struction, irrigation, a fertilizer and selected seed project ("OperationEngrais"), afforestation, and the expansion of electric power and sugar pro-duction capacity. Other smaller projects included port, road, airport, PTTand railway improvements; school, hospital and hotel construction; housingand water supply; and expansion of the chemical (fertilizer) industry.

56. Central government investment expenditures in electricity, miningand manufacturing industry represented the smaller part of total investmentsby the public sector in these fields. The public enterprises, particularlythe Electricity Office (ONE), the phosphate monopoly (OCP) and the sugarmills (SUNAB, SUTA and SUNAG) supplemented financial aid from the central gov-ernment with their own savings and with external borrowing to finance a sub-stantial investment program. Total investment of the public enterprisesreached DH 340 million, largely accounted for by the above projects. Thiswas more than double the total of the previous year, but fell short of thePlan target, particularly in the mining field.

Gross Investments of Public Enterprises, n.i.e.(in millions of dirhams)

Estimate1966 1967 1968 1969

Phosphates Monopoly (OCP) 125 55 90 470Railways (ONCF) - 10 5 80Electricity Office (ONE) 30 65 50 50Sugar 85 - 155 -Export Office - 10 10 10Industry Office (REI) 5 5 5 10Others 15 15 25 35

Total 260 160 340 655

Outlook for 1969

57. Morocco's ordinary budget revenues increased by DH 425 million, or20 percent, in 1968, mainly as a result of stricter collection of taxes andtax arrears, and of a large transfer from OCP. They are expected to risefurther by DH 140 million or 5.5 percent in 1969. This latter rise is thenet result of an expected 10.6 percent rise due to higher taxes and a 5.1 per-cent fall due to a net decrease of other revenues including a smaller transferfrom OCP. Collection of tax arrears will contribvute much less in 1969 thanin 1968.

58. An estimated rise of DH 270 million in tax revenue in 1969 will re-sult from raising of tax rates and widening the taxable base of several ex-isting taxes and fees. In particular, the tax schedule on business profitswas raised (from 44 to 48 percent on profits above DH 2 million), and the taxschedule on salaries was made more progressive (raised from 30 to 36 percenton taxable income exceeding DH 60,000). Although the government expects thatthese changes in the direct tax rates will raise yields by some DH 35 million

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in 1969, actual revenue is not expected to change from 1968 because of thearrears included in that year's revenue. The bulk of additional revenues isexpected to come from higher indirect taxes and fees. In particular, morethan half the additional tax revenues - some DH 150 million - is expectedto result from generally higher rates of the turnover and sales tax (TPS) andadditions to the list of taxable items. However, the changes do not affectfoodstuffs, house rent, water, electricity and gas and fuel oil. Taxes onother refined petroleum products as well as the price of tobacco productswere raised by about 10 percent, raising expected yields by over DaI 40 mil-lion. Other changes include raises in registration taxes and fees on vehicles,and in registration and stamp duties on transfer of title of real estate andcommercial assets (but not on industry). On the other hand, the tax on in-heritance and donations, which had been instituted in April 1968 (and whichwas expected to yield DH 8 million in that year) was repealed beginning 1969.

59. On the expenditure side, the government budget for 1969 aims atmaintaining ordinary expenditures at practically the same level as in 1968,with rises for education and agriculture being offset by reductions for de-fense. With ordinary revenue expected to rise in 1969 by DH 140 millionagainst a rise in ordinary expenditures of only DH 22 million, central govern-ment savings are expected to rise by DH 118 million. Thus, central govern-ment savings, at an anticipated level of DH 225 million would be more thandouble those of 1968 and would be expected to finance about 19 percent ofplanned development expenditures for 1969. This compares with an actual 12percent in 1968.

60. Planned investment by the central government (i.e. excluding localgovernment and public enterprises) in 1969, at DH 1.2 billion, is DH 280 mil-lion or 30 percent above 1968 actual expenditures. The central governmentexpects to finance this development expenditure and repay DH 90 million indebt amortization, partly from its expected savings of DH 377 million (in-cluding DH 225 million surplus in the ordinary budget, DH 120 million fromthe levy on sugar and DH 32 million in extraordinary revenue of the PTT) andpartly from internal borrowing of DH 256 million, but largely from net foreignloans (i.e. after repayment of short-term loans) of DH 414 million. The bal-ance of the deficit (DH 240 million) is expected to be met by borrowing fromthe Central Bank (DH 181 million) and from other unspecified sources.

61. While the 1969 targets of planned investment expenditures of DH 1.2billion and of higher savings by the central government of DH 377 millionseem feasible, the net receipt of DH 414 million in foreign loans comparedwith an actual DH 220 million in 1968 seems more problematic. Even if thistarget is achieved, a gap of about DH 500 million (%aking account of debtrepayment) would remain. As indicated, it is expected that nearly half thissum (DH 256 million) would be forthcoming in the form of net lending by theprivate sector, a target which is feasible, given the exceptional rise inprivate savings, following the good harvest of 1968, and the control exer-cised by the Central Bank over commercial banks. The remaining gap is ex-pected to be bridged by borrowing from the Central Bank and from other do-mestic and unspecified foreign sources.

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62. In order to bridge the financial gap and maintain price stability,a greater share of private savings should be mobilized by the government andpublic savings should be increased as planned. Substantial additional bor-rowing from the Central Bank would create additional pressure on the balanceof payments, which is already in a difficult position. If the investmenttarget is to be achieved, while at the same time the balance of payments po-sition is not to deteriorate, it would seem that foreign resources beyondthose expected by the Government in 1969 would have to be sought, and thatpart of such aid should not be tied to financing specific projects. Alter-natively, some cuts in the investment program may be unavoidable.

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CHAPTER IV

EXTERNAL TRADE AND FINANCE

63. As was briefly indicated in Chapter II, despite some improvement inexports, the balance of payments remained under considerable pressure in 1968and the external payments position remains strained in 1969. In this chapterthe main components of Morocco's external trade and finance are consideredwith respect to both recent developments and near-term prospects. Particularattention is given in this regard to the significance of the new associationbetween Morocco and the E.E.C.

External Trade and Services

64. The balance of payments deficit on goods and services (excludingtransfers) fell by about DH 35 million ($7 million) in 1968 to below DH 490million ($98 million). With exports stagnating through 196T while importsof wheat, raw materials and investment goods increased rapidly, the tradebalance moved from a surplus of about DH 200 million in 1965 to progressivelylarger deficits of about DH 70 million in 1966, DH 285 million in 1967 andDHI 310 million in 1968; the trade deficit in 1969 is expected to remain atabout the 1967-68 level. The services account has also deteriorated markedlyin recent years, the deficit mounting from below DH 100 million before 1966to reach DH 230 million and DH 240 million in both 1966 and 1967, respec-tively. This deficit on invisibles declined in 1968 by some DH 60 millionand a further improvement of perhaps another DH 50 million is anticipated in1969.

65. The volume and value of merchandise exports remained virtually un-changed from 1964 through 1967. In 1968, despite a 4 percent decline inprices, goods exports rose by some 6 percent. Citrus exports alone accountedfor over DH 75 million of the total DH 132 million increase during the year,thereby raising their share of total goods exports to over 18 percent (ascompared with 13 percent five years earlier). In the light of Morocco's suc-cess in controlling citrus quality, its gains in Eastern European marketsand the expected benefits of EEC association, there is reason to believe thatcitrus exports will continue to rise over the next several years.

66. There was no increase in 1968 in the export earnings from Morocco'sleading export, phosphate rock, which continues to account for about one-fourth of total goods exports. Despite an 8 percent increase in the volumeof phosphates exported, earnings remained virtually unchanged from the levelof the preceding several years, i.e. at about DH 550 million. Possessingover 40 percent of the world's estimated reserves of phosphate rock, Moroccois proceeding with an ambitious expansion program aimed at nearly doublingphosphate sales between 1967 and 1972. Government forecasts for 1969 and1970 anticipate rises in the tonnages of phosphate exports of 12 and 30 per-cent, respectively. While there is good reason to expect that the next fewyears will witness a substantial rise in phosphate earnings, it seems unlikely,in view of the world market situation, that Morocco will be able to achievethese goals.

- 24 -

SUMMARY BALANCE OF PAYMENTS 1966-1969

(in millions of dirhams)

1966 1967 1968 1969(projectionby govt.)

Goods (f.o.b.)Exports 2,168 2,146 2,278 2,393Imports -2,241 -2,431 -2,587 2,687

Balance -73 -285 -309 -294

Services (net)Travel 215 211 243 270Private Investment Income -128 -113 -110 -125Interest on Public Debt -83 -70 -110 -80Other -230 -266 -200 -197

Balance -226 -238 -177 -132

Current Transfers (net)Worker Remittances -108 -5 -25 -25Pensions 85 81 84 84Other -100 -39 -17 -22

Balance -123 37 42 37

Balance on Goods, Servicesand Current Transfers -422 -486 -444 -389

Capital Movements (net)Grants (public & private) 153 136 181 76Private Capital -14 -40 -17 -19Public Capital 227 298 149 261

Balance 366 394 313 318

Overall Deficit on Currentand Capital Account 56 92 131 71

Changes in Reserves (increase = -)Bank of Morocco

Net Assets 52 104 123Net IMF position (-5) (-5) (236)

Other (incl. errors & omissions) 4 -12 8

Source: Exchange Office and Ministry of Finance

- 25 -

67. Phosphates and citrus will continue to dominate Morocco's goodsexports for the foreseeable future, though gains are also expected from minorexports such as iron ore, tomatoes, potatoes, cotton and processed foods suchas canned fish and fruit juices and preserves. As noted below, exports pros-pects for some of these products as well as for various industrial goods willbe enhanced by the EEC association recently concluded.

68. Morocco's merchandise imports (on the basis of trade statistics)rose by some DH 170 million in 1968 to a level of DH 2,790 million despite adrop of over DH 100 million in food imports, the largest category. The larg-est increases were in fuel and raw materials and semi-finished products, withlesser rises in finished intermediate goods and in consumer goods. Althoughthe continuing large wheat imports necessitated by the 1966-67 drought weresome DH 100 million less than in 1967, they were still equivalent to some 40percent of the trade deficit. In the light of the bumper harvest in the cur-rent season, wheat imports for 1969 should be virtually nil. Food importswill also be cut by the rapid import substitution proceeding in sugar, whichhad been the largest food import until the poor general harvest in 1966.Notwithstanding these considerations, the Government expects a 4 percent risein merchandise imports during 1969 and higher rises in succeeding years. Themain factors accounting for this anticipated growth include liberalizationmeasures now augmented by the EEC agreement, a substantial rise in raw mate-rial and capital goods imports implied by the Plan's investment targets, andthe rising demand for intermediate and consumer goods, a concommitant ofgrowing population and income.

69. On the services account, tourism is continuing to assume growingimportance, reflecting the high priority given by the Government to develop-ment of this sector. Gross earnings from tourism (which have passed citrusexports to become the country's second leading source of foreign exchange)rose in 1968 oy some 6-1/2 percent above the 1967 level of DH 400 million.This was less than had been forecast, for reasons indicated in Chapter II.Given the heavy investments in tourist facilities now proceeding and assumingalso that greater efforts are made both towards stimulating tourist demand andimproving allocation within the sector, a projected 8-9 percent annual growthin tourism earnings over the coming years does not seem overly optimistic.Receipts from invisibles other than tourism (mainly transport, investment in-come and foreign government expenditures) rose in 1968 by DH 100 million toreach a level of DH 381 million. This latter rise was exceptional, however,and much smaller increases in earnings from non-tourist services are expectedin coming years.

70. Principal components accounting for the large outflows in the invis-ible account include private interest and dividend payments (recently averag-ing around Dh 140 million annually), freight and insurance expenditures (whichhave risen in line with imports to a current level of DH 200 million), touristexpenditures abroad by Moroccan residents (running around DH 185 millionyearly), and interest payments on the public debt. These interest paymentsof DH 125 million in 1968 were exceptionally high, partly because some pay-ments were carried forward from the end of the previous year. Public interestpayments in 1969 are expected to fall to DH 100 million, though these willrise again in succeeding years more or less in line with the growing externaldebt.

- 26 -

71. In sum, an average annual growth in total goods and services exportsof 5 percent as projected in the Plan for the period 1968-1973 still appearsa reasonable forecast. If investment and overall growth also occur as indi-cated by the Plan, outlays on invisibles as well as goods imports will riseso that total imports may be expected to rise somewhat faster than GDP. Thus,if MAorocco is to achieve its Plan targets, it seems probable that the deficiton goods and services will again widen after 1969.

The E.E.C. Association

72. Concluding several years of interrupted negotiations, the MoroccanGovernment signed an agreement of association with the European Economic Com-munity (EEC) on March 31, 1969. Although this agreement is limited to traderelations covering a period of five years, it allows for exploring new arrange-ments after three years including provisions on various presently excludedgoods as well as on direct financial aid and measures affecting capital andlabor movements. The new agreement will come into effect in September 1969.

73. The underlying rationale of the above agreement was to compensateMorocco for losses which otherwise would have resulted from EEC provisionsrequiring France to end preferences to Morocco on various products (most not-ably citrus fruit, olive oil and certain processed agricultural products)after mid-1969. French preferences may continue for the time being for prod-ucts not specified in the accord between Morocco and the E.E.C. The most im-portant of these goods are wine, tomatoes, fish products, cork and cork prod-ucts, products regulated by the European Coal and Steel Community, potatoes,fruit juices and fruit preserves. An important immediate benefit of associ-ation for Morocco will be the 80 percent reduction in the EEC's common exter-nal tariff on citrus fruits. Since one aim of the agreement concerningagricultural products was to avoid disrupting markets as now organized underthe Community's agricultural policy, the sale prices of Moroccan citrus willnot be permitted to fall below a minimum based on the EEC's reference price,thereby preserving some competitive advantage for EEC producers. This pro-cedure is in keeping with the accord's general principle whereby financialrather than competitive benefits were conferred; these benefits consist ofrebates on both the common external tariff and the compensatory levies, butare generally not to be reflected in the supply prices on the EEC market.However, with tariff cuts of only 40 percent being made on Israeli and Spanishcitrus, Morocco will retain its relative competitive advantage in France andimprove it in the other EEC countries already receiving some 40 percent ofMoroccan citrus exports to EEC. A variety of other agricultural products willalso receive varied benefits, though the concessions on fish and fish productswill soon oe revised when a common EEC policy on these products becomes effec-tive. Duties on M4oroccan imports into EEC countries are currently about DH 42million; with the new accord, this is expected to fall to DH 23 million.

74. Under the agreement, the EEC will grant full intracommunity treat-ment (i.e. duty-free and quota-free entry) to Moroccan industrial goods. Im-mediate advantage of these provisions may be taken by Moroccan exporters ofleather goods, textiles, light machinery and clothing. Given Morocco's politi-cal stability, the tax and other incentives it extends to foreign investors,its geographical proximity to Europe and the availability of low cost labor,

- 27 -

the free entry of industrial goods to the Common Market could provide a sub-stantial stimulus to increased foreign and domestic investment in Moroccanindustry. Whether the potential significance of these measures will be real-ized, of course, will depend largely on the Government's actions and policiesto encourage this development.

75. Concessions were granted by Morocco with respect to both tariffsand quotas. The tariff concessions 1/ will reduce by an average of 12.5 per-cent the duties on the imports from the EEC. The effect on Moroccan-customsrevenues, however, is expected to be a loss of only about DH 5 million. Theexisting structure of liberalized imports (affecting 44 percent of importsfrom the EEC) has been consolidated and provisions were made requiring thatfuture quantitative restrictions be offset by equivalent liberalization ofgoods now subject to quota restrictions. The import quotas and subquotasgranted under the accord do not constitute purchasing obligations but are de-signed to protect the share of EEC exports to Morocco. In 1968, the EEC ac-.counted for 50 percent of Morocco's imports and bought 60 percent of Moroccanexports.

Current Transfers, Capital Movements, and Reserves

76. The balance of current transfer payments (not including grants)remained in surplus in 1968 at about the 1967 level of DH 40 million; no sub-stantial change is expected in 1969. Recorded migrants' transfers had fallenby 1968 to relatively inconsequential proportions while net pension receiptshave remained stable for some years at around DH 85 million. After risingsteadily for some years, the inflow of remittances from Moroccans workingabroad levelled off in 1967 and 1968 at around DH 200 million in each year.Conversely, after a substantial drop in 1967 in salary transfers abroad byforeigners, these outflows levelled off in 1968 at DH 225 million. Conse-quently, there was a DH 83 million improvement in the balance of workers'remittances between 1966 and 1968. Whether further improvements are to beexpected in coming years vill depend in large part upon the extent to whichthe Government acts to promote emigration. No major changes are anticipatedin other current transfers in the next few years.

77. Private sector capital movements continue to constitute a net drainon foreign exchange resources. Net suppliers' credits held by the privatesector rose substantially in 1968 (by DH 80 million against DH 5 million in1967), but there was a slight decline in direct investment by foreigners(from DH 60 million to DH 50 million). There were indications, however, ofincreasing interest on the part of potential foreign investors which may betranslated into larger future capital inflows. While the Government has

1/ The benefits of these concessions will also be received by many othernations in accordance with a most-favored nation treaty prohibitingMorocco from applying discriminatory tariffs. In fact, EEC countrieswill benefit most from the tariff reductions because the main conces-sions were made with respect to products now largely supplied from EEC.

- 28 -

taken various steps to reduce unauthorized outflows of private capital, theseremain substantial. It would appear that the current level of this capitalflight is presently about DH 200 million. Projections of private capitalmovements are always extremely tenuous, and this is particularly true of theMoroccan case where the available data are so incomplete. However, withprospects fair for both rising direct investment and further reductions incapital flight, it seems likely that the private sector will begin to recorda net inflow of foreign exchange resources in the coming years.

78. The gross capital inflow (including official grants) to the publicsector in 1968 was about DH 610 million, about DH 50 million above the 1967level. Of this total, official grants rose to about DH 150 million, largelyin the form of food support. Despite these increases, the net capital re-ceipts of Morocco's public sector for the year were substantially below thelevels of previous years as loan repayments were more than double the 1967repayment level. A major share of this burden was attributable to heavyamortizations of past loans for wheat imports; these alone amounted to aboutDH 130 million in 1968. In 1969 wheat imports will fall to near zero andrepayments on wheat loans will decline to DH 50 million, leaving more loanreceipts available to finance developmental expenditures as less are requiredfor financing food imports. Current Government forecasts for 1969 anticipatea gross inflow to the public sector somewhat below 1968 levels, with grantssubstantially lower and disbursements on public borrowings somewhat higher.

79. With foreign capital inflows insufficient to cover the deficit ongoods, services and transfers plus amortization obligations, foreign exchangereserves have declined steadily since 1965. By the end of that year, netreserves were $121 million. Net reserves fell by $13 million in 1966, $19million in 1967, and by another $24 million in 1968 to a level of $65 millionby the end of December 1968 - equivalent to barely more than one month'stotal imports at the 1968 rate. Gross reserves, which fell from $136 millionin 1966 to $114 million in 1967, rose to $131 million (two month's imports)at the end of 1968; the rise in 1968 reflected full drawing on a $50 millionstandby arrangement with the I.M.F. In response to the continuing balanceof payments pressure in 1968, another $27 million standby arrangement was con-cluded in October 1968, thereby bringing Morocco's total outstanding drawingsto $55 million - compared with an IMF quota of $83 million.

Foreign Capital Requirements

80. Since receipts of public grants plus net borrowings do not nowappear to be adequate to cover the combined deficits on the current accountand on private capital account, Morocco expects another (albeit smaller) over-all deficit in the balance of payments in 1969. With reserves again underpressure, therefore, the April drawing of $10 million 1/ on the $27 million1968 standby arrangement may be expected to be followed by an additional draw-ing, and probably by negotiation of another standby tcwards the end of the

1/ At the end of May 1969, drawings outstanding stood at $62 million com-pared with a quota of $86 million.

- 29 -

year. Looking further ahead, Morocco s need for foreign public capital overthe next five years might be put at s)me DH 4 billion - (equivalent to anannual average of $150-160 million) - assuming that trade and transferaccounts evolve approximately as forecast above, that some improvement isrecorded by way of higher private investment and lower capital flight, thatthe structure and terms of new debt will not be very different from those onrecently contracted debt, and that some allowance is made for a measure ofrecovery in reserve levels.

81. At the end of 1968, Morocco's public capital "pipeline" was aboutDH 700 million. While the disbursement on some loans has lagged behind theintended rate (e.g. on Russian and West German loans), the pipeline on Frenchloans had about run dry until new agreements over the last year greatly im-proved the outlook for substantial French assistance. In addition to thelarge participation expected from official U.S. sources (including AID, PL 480,Ex-Im Bank and CCC credits), other donors expected to continue their assis-tance include Belgium, Denmark, Iran, Italy, Kuwait, the Soviet Union and WestGermany.

82. In view of Morocco's presently tight balance of payments situation,assistance which is not tied to the financing of specific projects would behelpful in order to insure the realization of the proposed investment program.Since a considerable proportion of Morocco's investment program is devoted tosectors having low import components (e.g. agriculture, education, "PromotionNationale" projects), the relatively large indirect foreign exchange require-ments of this investment program could offer a Justification for local financ-ing of such projects. In view of the uncertainty of this kind of financing,however, the need is underlined for Morocco both to intensify its local sav-ings efforts as well as to weigh carefully the advantages it sees in variousprojects, including some with low direct foreign exchange costs. Moreoverthe undertaking of projects with low economic returns will also bear adverselyon future creditworthiness, and make it more difficult for Morocco to securefinance from its foreign partners.

External Debt and Creditworthiness

83. Morocco's outstanding external public debt, excluding undisbursed,has climbed rapidly in recent years, rising from a level of $256 million(DH 1.3 billion) at the end of 1963 to reach $566 million in December 1968.The scheduled service payments on this debt have grown apace, rising from $17million in 1964 to nearly $66 million as projected for 1969; in 1968 the heavypayments on wheat loans brought the service payment close to $75 million. Theoutflow of investment income from the private sector, meanwhile, has averagedaround $25 million. Of the public debt outstanding at mid-1968, 75 percentconsisted of loans from Governments and 11 percent was in the form of suppli-ers' credits, the remainder consisting of publicly-issued bonds and IBRD/IDAloans.

84. The average terms on which Morocco's borrowing has been contractedin recent years have been significantly concessionary. For example, on thenew loans contracted and reported to IBRD over the period 1965-67 (exceptingsome short-term wheat credits), the grant element has averaged about 40 percent

- 30 -

(at a 10 percent discount rate); if grants are included, the grant elementon the total reported capital inflow was 66 percent. The relatively favor-able terms on which capital has been provided have held the service paymentsin recent years to an average of about 8 percent of the disbursed debt out-standing. Except in 1968, when it rose to some 12 percent on account of ex-ceptional circumstances already noted, the debt service ratio has averagedwell below 10 percent; it will most probably fall to 10 percent in 1969.

85. For the future a less comfortable position should be expected.This is partly because of the already-cited situation of short-term vulnera-bility wherein either another prolonged drought period or a shortfall of pub-lic foreign assistance could create severe difficulties. Assuming thatMorocco were successful in realizing both the Plan targets and the concommi-tant capital inflow as projected above 1/, its outstanding debt would morethan double by 1975 and the debt service would exceed $100 million. Thiswould mean a debt service ratio (at a 5 percent export growth rate) of some12-13 percent. Also implied by these projected trends over the period 1969-19T5 would be a gross capital inflow averaging about 30 percent of investment,and debt servicing rising from approximately 15 percent to 18-19 percent ofnational savings and from around 1.6 to 2.6 percent of GDP. While these in-dicators point to a manageable debt situation over the next several years, itshould be emphasized that they rest upon assumption of better savings, invest-ment, and export performance than was realized in the early and mid-1960's.The debt burden would be heavier if this projected performance is not realized.In the longer run, moreover, as growing service payments on newly-contracteddebt w4.ll be added to the substantial cumulative obligations on already out-standing debt, the burden will in any case become progressively greater.

86. Over the long run, a key determinant of Morocco's debt-servicingability will be its export performance; this will itself partly reflect bothdomestic savings efforts and internal capital productivity. Altogether,future prospects suggest that Morocco may be considered as creditworthy forsubstantial borrowing on conventional terms provided that there is no deteri-oration in current savings efforts or in the pattern of resource allocation- areas in which there is clearly considerable room for improvement. However,especially in light of the expected continuing vulnerability of Morocco'sbalance of payments position to external factors such as unfavorable weatheror falling export prices, there is also a case for making available a moderateamount of assistance on concessionary terms.

1/ In the projection of both capital requirements and the various indicatorsof debt servicing burden which are noted in this section, the parametersused were generally those indicated or implicit in the current Plan. Themost significant of these were: export growth rate, 5%; import elastic-ioy (with respect to GDP), 1.2; GDP growth rate, 4.5%; investment raterising steadily to 19% by 1975, with an average capital output ratio of3.6.

- 31 -

STATISTICAL APPENDIX

1. Morocco - External Public Debt Outstanding as of December 31, 1968

2. Morocco - Estimated Future Service Payments on External PublicDebt Outstanding Including Undisbursed as of December 31, 1968

3. Population

4. Gross Domestic Product by Principal Sector at 1960 Market Prices1963-1968 and Forecast for 1969.

5. Gross Product at Market Prices 1963-1968

6. Crop Production, 1961/62-1967/68

7. Cultivated Area - Cereals and Pulses 1964/65-1967/68

8. Cereal Yields Modern Sector, Traditional Sector and NationalAverage

9. Fertilizer Uses 1962-1968

10. Expenditures on Agricultural Development - 1968

U1. Land Tenure - Estimated Cultivated Area, by Category of Holding

12. Index of Industrial Production by Sector and Branch 1963-1968

13. Production of Minerals 1963-1968

14. Central Govermnent Current Revenue (1964-1969)

15. Central Govermnent Current- Expenditure (1965-1968)

16. Central Goverrment Investment Expenditures (1965-1969)

17. Monetary Survey (1964-1968)

18. Herchandise Imports Valuation at Customs, 1963-1968

19. Merchandise Exports Valuation at Customs, 1963-1968

20. Geographic Distribution of Foreign Trade

21. Balance of Payments (1966-1969)

22. Foreign Loans Receipts 1965-1969

23. Foreign Exchange Reserves, 196h-1968

2ts. Cost of Living Index (Casablanca)

Table 1: MOROCCO - EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEMBER 31, 1968 A

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

Debt outstanding

Source December 31,1968Disbursed Includingonly undisbursed

TOTAL EXTERNAL PUBLIC DEBT 566A66 701,283

Privately-held debt 110,357 110,407

Publicly-issued bonds 37,964 37 96 4-Suppliers 72,393 72___44Belgium 13,213 13,213France 38,751 38,801Germany 17,920 17,920Italy 426 426Netherlands l,h43 1,443Switzerland 640 640

Loans from international organization 40,056 82,006IBMD 38t,956 71,006IDA 1,098 11,000

Loans from governments 416,053 508,870

Czechoslovakia 91 91Denmark 3,333 3,333France 193,548 196,165Germany 55,323 67,534Iran 293 13,800Kuwait 28, 858 52,140Poland 3.t438 3,l438

USSR 20,917 20,917United States 110,252 151,452

/1 Debt with an original or extended maturity of one year or more.

Statistical Services DivisionEconomics Department

August 11, 1969

Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNL PUBLIC DEBTOUTSTANDING INCLUDING UNDISEURSED AS OF DECEMBER 31, 1968

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

Page 1DEBT OUTST

(BEGIN OF PERIOD) PAYmlENTS DURING PERIODINCLUDING AUORTI

YEAR UNDISBURSED ZATION INTEREST TOTAL

TOTAL EXTERNAL PUBLIC DEBT

1969 667P427 46#555 19*140 65,6951970 620P872 32,930 20,155 53J0861971 587J942 37*136 20,925 58,0611972 550,806 38,018 19,506 57J5241973 512#787 38'541 18.160 56.701.1974 *74,246 38,728 17,059 55.7861975 435.519 38,309 15,260 53J5701976 397,209 38,165 13,625 51,7911977 359.O44 35.531 12.029 .47J5601978 323P513 33,428 10,619 44,0471979 290,085 27.571 9,407 36,9781980 262P513 27,366 8,435 35,8011981 235.147 25,635 7,461 . 33.0961982 209,512 24#455 6,575 ;31,0301983 1BS.057 23P694 5,760 29J454

Note: Includes service on all debt listed in Table 1 preparedAugust ll, 1969 with the exception of the following:

a) Publicly issued bonds redeemableon demand of bearer $ 2,263,000

b) Loans for which repayment termsare not availableSuppliers $ 14,933,000Loans from governments

France $ n,878,000Germany 379,000United States 4,2402,00O

Total $ 33,855,0oo

Table 2: MIOROCCO - ESTflATED FUTURE SERVICE PAYMENTS ON EXTERANAL PUBLIC DEBTOUTSTANNDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (coNT.)

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

Page 2

DEBT OUTST(BEGIN OF PERI0D) PAYMENTS DURING PERIOD

INCLUDING AMORTI'YEAR UNDISBURSED ZATION INTEREST TOTAL

PRIVATELY-HELD DEBT

1969 93.211 12P025 5,399 17,4241970 81.186 9,813 4,916 14.7301971 71J373 90061 4,273 13J3341972 62.312 8J789 3,680 12.4691973 53.523 8.141 3,O93 11.2341974 45J382 7J227 2,559 9.J7861975 38,155 6,774 2,075 8,8491976 31J381 6,028 1,624 7,6531977 25P353 4J267 1J238 5,5051978 21J086 5,018 950 5J9681979 16.069 940 690 1J6301980 15.128 929 641 1.5701981 14,199 440 594 1J0331982 13.760 409 575 9831983 13.351 427 556 984

PUBLICLY-ISSUED BONDS

1969 35,701 3J985 1,f669 5J6541970 31.716 1.636 1,483 3.1191971 30J080 1.642 1,401 3JO431972 28P438 2.048 1J319 3P3661973 26 ,391 1J569 1,211 2*7801974 24,822 1,J560 1*134 2J.6941975 23J261 1,403 1.057 2,4601976 21.859 1,340 985 2J3251977 20,519 1.230 916 2.1461978 19.290 3P221 853 4.0741979 16.069 940 690 1.6301980 15J128 929 641 1.5701981 14,199 440 594 1.0331982 13P760 409 575 9831983 13,351 427 556 984

Table 2: MOROCCO - ESTIKATE) FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTOUTSTANDING INCLUDING UNDISBURSBZ AS OF DECEMBER 31, 1968 (CONT.)

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

Page 3DEBT OUTST

CBEGIN OF PERIOD) PAYMENTS DURING PERIODINCLUDING AMORTI-

YEAR UNDISBURSEO ZATION INTEREST TOTAL

PRIVATELY-HELD DEBT

SUPPL IERS

1969 57.510 8,040 3)?29 11.7691970 49#410 8,177 3,434 11,6111971 41J293 7,'419 2,872 10,2911972 33J874 6.742 2,361 9,1031973 27*132 6,572 1,683 8.4541974 20*561 5,667 1r425 7JO921915 140894 5.372 1,018 6J3901976 9P522 4.689 639 5P328197T 4J834 3,037 322 3P3591978 1.0797 1.797 97 1,894

LOANS FROM I NTL ORGANIZATIONS

1969 82.006 2,O67 2,808 4,8751970 79,939 3,656 3,373 7,0291971 76*283 5*236 3,488 8,7241972 710047 5J709 3,464 9,1731973 65o338 5,806 3,189 8*9951974 59,532 5)385 2,853 8J2381975 54*147 5*030 2,461 7J4911976 49J9117 5.101 2*215 7,3161977 44P016 4,269 1#931 6,2001978 39J747 4*182 1,687 5,8691979 35P565 3.689 1,459 5.1481980 31,876 3,526 1.259 4.7851981 28.350 3,387 1,064 4,4511982' 24*963 2.838 873 3,7111983 22#125 2J245 727 2,972

Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMEN4TS ON EXTERNAL PUBLIC DEBTOUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (CONT.)

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

Page 4

DEBT OUTSTCBEGIN OF PERIOD) PAYMENTS OURING PERIOD

INCLUDING AMORTI-YEAR UNDISBURSED ZATION INTEREST TOTAL

LOANS FROM INT' L ORGANIZATIONS

IGRD

1969 T1,006 2,067 2,808 4,8751970 68,939 3J656 3,373 7,0291971 65o283 5,236 3P420 8,6561972 60,047 5,7O9 3J382 9,0911973 54,338 5,806 3,106 8,9121974 48,532 5J385 2J771 8J1561975 43,147 5,030 2,379 7#4091;976 38;117 4,991 2s133 7,I241977 33#126 4,159 1,850 6,0091978 28,967 4,072 1s606 5P6781979 24J895 3,579 1J379 4,9581980 21J316 3J416 1,180 4P5961981 17,900 3,277 985 4J2621982 14,623 29728 796 3,5241983 11,895 2.135 650 2,785

IDA

1969 110000 -

1970 11OOO.1971 211OOO * 68 681972 11-0000 83 831973 1lAOQO * 83 831974 11,000 - 83 83.1975 11,000 0 83 831976 11000 110 . 83 1931977 10,890 110 82 1921978 10J780 110 81 1911979 10670 110 80 1901980 10s560 110 79 1891981 10,450 110 l8 1881982 10J340 110 78 1881983 10*230 110 77 187

Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTOUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (cONT.)

Debt Repayable in Foreign Currency

- (In thousands of U.S. dollars)

Page 5

DEBT OUTST(BEGIN OF PERIOD) PAYMENTS DURING PERIOD

INCLUDING AMORTI'YEAR UNDISBURSED ZATION INTEREST TOTAL

LOANS FROM GUVERNMENTS

1969 492.209 32,463 10,934 43#3971970 459P746 19P461 11.866 31.3271971 440.285 22,839 13.164 36.0031972 417P446 23J,520 12,362 35,8821973 393,926 24J594 11,878 36,4731974 369,332 26,115 11,646 37o.621975 343.217 26o505 10s724 37,.2291976 .316.711 27.036 9,786 36,8221977 289o675 26,996 8,860 35,8551978 262P679 24.228 7,982 32,2111979 238,451 22.o942 7,259 .30,2011980 215J509 22.911 6,534 '29t4451981 192.598 21.808 5,804 27.6121982 170.790 21.209 5,l27 26*3361983 149'581 21.022 4,477 25.499

CZECHOSLOVAKIA

1969 91 61 2 63'1970 30 30 . 31

Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTOUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (coNT.)

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)Page 6

DEBT OUTST(BEGIN OF PERIOD) PAYMENTS DURING PERIOD

INCLUDING AMORTI YEAR UNDISBURSED ZATION INTEREST TOTAL-

LOANS FROM GOVERNMENTS

DENMARK

1969 3,F333 68 a 681970 3,265 136 a 1361971 3*129 136 * 136'1972 2*993 136 1 1361973 2,857 136 - 1361974 2*721 136 * 1361975 2,#585 136 U 1361976 2,449 136 1 136.1977 2*312 136 - 1361978 2*176 136 U 1361979 2*040 136 * 1361980 1,904 136 - 1361981 1J768 136 1361982 1,632 136 1361983 1J496 136 - 136

FRANCE

1969 184,285 21*084 6,089 27*174.1970 163*201 9J,359 5J207 14,5661971 153*842 9,621 4,883 14*5041972 144P221 9,698 4P549 14,2471973 134*523 9J782 4,217 13*9991974 124*741 90911 3,879 13P7901975 114,831 10*103 3,539 .3#6411976 104#728 10*288 3*193 13*4811977 94*439 1O*408 2,843 13J2521978 84*031 1O*222 2,504 12*7261979 73*809 1O0078 2,173 12*2511980 63*731 1O0293 1,857 12*1501981 53*438 10,429 1*537 11*9661982 43*009 10*750 1#216 11*9651983 32*259 10*l370 884 11*253

Table 2: MOROCCO - ESTMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTOUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (OONT.)

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)Page 7

DEBT OUTST(BEGIN OF PERIOD) PAYMENTS DURING PERIOD

INCLUDING AMORTI'YEAR UNDISBURSED ZATION INTEREST TOTAL

LOANS FROIi GOVERNMENTS

GERMANY

.1969 67,155 6,244 1,448 r,6931970 60,910 2#589 1.579 4:1681971 58,322 2,614 1,479 4J0931972 55,707 2,641 1J378 4#0191973 53#066 3:010 1:343 4*3531974 50*056 3:780 1,597 5,3771975 46J276 3,809 1,457 5,2661976 42:467 3:460 1,315 407761977 39,007 3,113 :2O07 4:3191978 35,694 3J145 1,109 402531979 32:750 3:177 1:010 4,1871980 29J572 3:211 910 4J1211981 26:361 3:246 809 4P0551982 23:I15 3,282 707 3:9891983 19,832 3,319 604 3J923

IRAN

1969 13#8001970 . 13,8OO81971 13,800 '1972 13:8001973 13o800 460 276 7361974 13#340 920 524 1:44419T5 12,420 920 488 1:4081976 11:500 920 451 1#3711977 10,580 920 414 1:3341978 9: 660 920 377 1J2971979 aJ740 920 -340 1S2601980 7,820 920 304 1,2241981 6,900 920 267 101871982 5J980 920 230 1,15019B3 5060 920 193 1,113

Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTOUTSTANDING INCLUDING UNDISBURSED AS OF DECEKBER 31, 1968 (cONT.)

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)Page 8

DEBT OUTST(BEGIN OF PERIOD) PAYMENTS DURING PERIOD

INCLUDING AMORTIYEAR UNDISBURSED ZATION INTEREST TOTAL

LOANS FROM GOVERNMENTS

KUWAIT

1969 52,140 - -1970 -52.140 576 576.1971 52o140 2,947 1*796 4*7441972 49#193 3.024 1i689 4#7131973 46.169 3.103 1.578 4#6811974 43.066 3.186 1.465 4.6501975 39.880 3.272 1,347 4.6191976 36.608 3,798 1.224 5.0221977 32,0810 3#891 1.086 4P9781978 28.919 3,988 946 4,9331979 24,931 4.088 801 4.8891980 20.843 4,193 652 4.8451981 16,650 2J823 497 3J3201982 13*826 1.770 402 2.1711983 12.057 1.826 348 2.174

POLAND

1969 3.438 1.851 105 1.9561970 1.587 1.258 41 I.2991971 329 47 a 551972 282 47 7 -541973 235 47 6 531974 188 47 5 521975 14.1 47 4 S11976 94 47 2 491977 47 47 1 48

Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTOUTSTANDING INCLUDING UJNDISBURSED AS OF DECEBER 31, 1968 (CONT.)

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

Page 9DEBT OUTST

(BEGIN OF PERIOD) PAYMENTS DURING PERIODINCLUDING AMORTI"

-YEAR UNDISBURSED ZATION INTEREST TOTAL

LOANS FROM GOVERNMENTS

USSR

.1969 20*917 '1970 20*917 885 314 1,1991971 20.032 2.193 588 2,7811972 17*839 2*616 516 3J1321973 15*223 2J616 437 3JO531974 12,607 2*616 359 2J9751975 9J991 2.616 280 2J8961976 7,375 2,616 202 2.8181977 4J759 2P616 .123 2,7391978 2*143 1,731 45 1#7761979 412 412 6 418

UNITED STATES

1969 147.050 3.,155 3,289 6J4431970 143.895 5,204 4J147 9J352

-1971 138*691 5o280 4j410 9,6901972 133,411 5J356 4,224 9,5821973 128*O53 5,440 4,022 9*461

:1974 122*613 5J520 3>817 9*3371975 117,093 5J603 3#610 9*2121976 111#490 5J770 3,399 '9J1691977 105P720 5,865 3.185 9x0491978 99,855 4*086 3*002 7,0891979 95*769 4J130 . 2J928 7.0581980 91*J639 4*157 2J812 6.9691981 87,482 4J254 2,694 6.9481982 83,228 4*351 2,573 6,9241983 78J877 4o451 2J448 60899

Statistical Services DivisionEconomics Department

August 11, 1969

Table 3: POPULATION

(thousands in mid year)

1960 1962 1964 1966 1967 1968

Moroccan

Moslem 11,068 11,870 12,630 13,450 13,880 14,342

Jewish 162 155 110 100 90 78

Total 11,230 12,025 12,740 13,550 13,970 14,420

Foreign

French 175 90Spanish 93 30Algerian 93 25Other 35 30

Total 396 335 220 175 170 160

All nationalities 11,626 12,360 12,960 13,725 14,140 14,580

Source: Ministry of Planning

Table 4: GROSS DOMESTIC PRODUCT BY PRINCIPAL SECTORAT 1960 MARKET PRICES

1963-1968 AND FORECAST FOR 1969

(Millions of Dirhams)

1963 1964 1965 1966 1967 19687 1969(Forecast)

Agriculture 3,060 2,990 3,150 2,780 3,070 3,980 3,500main exports andindustrial crops 2/( 620) ( 750) ( 800)other agriculture (2,440)( 2,240)( 2,350)

Energy 230 250 260 280 280 310 330

Mining 530 590 590 580 580 580 620

Industry and handicraft 1,250 1,330 1,320 1,370 1,420 1,470 1,530

Construction, public works 460 440 460 500 580 570 650

Commerce 2,180 2,150 2,130 2,140 2,290 2,500 2,550

Transport and othernon-government services 1,660 1,720 1,780 1,820 1,890 1,990 2,030

Government Wages & Salaries 1,090 1,140 1,120 1,190 1,250 1,370 1,4903/

Total 10,500 10,610 10,810 10,660 11,360 12,770 12,700

Adjustment -20 -30 -20 -70 -20 -60 -20

Gross Domestic Product 10,480 10,580 10,790 10,590 11,340 12,710 12,680

1/ Provisional

2/ Consists of wine, citrus fruit, vegetables, sugar, beets, cotton, tobacco.

3/ Corresponds to the "Production Interieure Brutet? plus Government wages and salaries

1/ Adjustment is made to make data conform with the standard concept of GDP and toreconcile import and export figures given in the two sources below.

Source: 3ased on National Accounts, Ministry of Planning,and Balance of Paymentsestimates of the Exchange Office

TABLE 5: GROSS PRODUCT AT MARKET PRICES 1963-1968

(Mi] lions of Dirhams)

1963 1964 1965 1966 1967 ]968

Private Comsumption 8,950 9,210 9,710 5,620 10,090 10,740Domestic (8,760) (9,040) (9,550) (9,460) (9,900) (10,560)Abroad (190) (170) (160) (160) (19.0) (180)

Public Consumption 1,710 1,850 1.790 1,850 1,920 2,120Goods & Services (480) (510) (030) (420) (420) (470)Wages & salaries (1,230) (1,340) (1-360) (1,430) (1,500) (1,650)

Fixed investment 1,410 1,370 .,4ho 1,530 1,890 L,970

Changes in stocks 60 -20 - -150 30 700

!xports of goods &non-factor services 2,410 2,760 2,710 2,780 2,800 3,AOb

Less Imports of goods& non-factor services -2,700 -2,710 -2,520 -2,870 -3,1b0 -3,310

Gross Domestic Product 11.,340 12,460 13.130 12,760 13,590 15,260Net factor income from2broad -220 -230 -270 -320 -190 -2h0

Gross National Product 11,620 12,230 12,860 12,hb0 13L00 15,020

Source: Based on the National Accounts of the Ministry of P' anning. From 3966,the estimates of imports and exports of the Exchange Office have been used.

Table 6: CROP PRODUCTION, 1961/62-1967/68

1/1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68_

(in '000 quintals)

Cereals:

Herd Wheat 9,321 8,905 8,894 10,085 6,150 8.500 17,750Soft Vheat 3,237 3,050 3,064 3,059 1,986 2,4O0 6,359Barley 11,850 14,630 11,684 11,894 5,057 11,000 22,238Corn 3,291 3,967 3,197 2,721 1,544 2,550 2,440Other Cereals 1,394 1,579 1,292 1,165 890 1,141 1,690

Sub-total 29,093 32,131 28,131 28,924 15,627 25,591 50,4372/

PlseE 1,L07 1,472 2,149 .2,465 1,403 1,720 2,546

Citrus 4,550 4,890 6,300 5,300 6,211 6,965 7,874

Olives 1,400 1,450 2,000 1,770 2,670 1,550 1,580

Potr^toes 2,250 1,880 2,710 2,750 2,050 1,900

Tomatoes 1,760 2,530 3,260 3,000 2,770 2,100

uran e s 3,290 4,170 4,200 5,200 3,420 2,180 3,100

Sunflocjer Seed 19 93 101 39 25 27 37

Flas. 129 57 155 105 76 36 26

Seed Cotton 95 147 170 242 301 150 196

S3u'arbepts - 719 1,808 1,739 3,820 3,759 5,538

I/ Provisional D, ta

?. Includes 3road Beans, Chick Peas, Green Peas, Lentils, and Green Beans

rce: T-, Situation Economigue du Maroc

Table 7: CULTIVATED AREA - CEREALS AND PULSES

1964/65 - 1967/68.

(in 1000 hectares)

1964/65 1965/66 1966/67 1967/68

Cereals:

Hard Wheat 1,267 1,234 1,268 1,502

Soft Wheat 390 401 408 475

Barley 1,645 1,774 1,807 1,896

Corn 434 438 461 452

Other Cereals 157 153 143 152

.Sub-total 3.893 4,o0o 4,188 4,1477

Pulses 298 345 297 282

Total 4s19l 4,345 4,485 4,759

2-!~~~~~~~~~~~

fl/Provisional Data

2/Includes Broad Beans, Chick Peas, Green Peas, Lentils, Green Beans

Source: La Situation Economigue du Maroc

Table 8: CEREAL YIEI)DSMODERN SECTOR, TRADITIONAL SECTOR AND NATIONAL AVERAGE

(Quintals per hectars)

1/1964/65 1965/66 1966/67 1967/68-Tradi- Tradi- Tradi- Tradi-

Modern tional Average Modern tional Average Modern tional Average Modern tional Average

Hard Wheat 11.7 7.3 7.8 8.4 3.5 5.0 10.0 5.5 6.2 17.7 10.2 11.8

Soft Wheat 13.7 5.9 7.9 9.3 3.6 4.9 8.4 5.0 5.8 16.3 10.2 13.4

Barley 12.1 7.1 7.2 6.6 2.7 2.8 8.6 5.9 6.1 17.1 11.5 11.7

Corn 8.1 6.2 6.2 6.2 3.4 3.5 8.0 5.4 5.5 7.8 5.2 5.3

iJ Provisional Data

Source: La Situation Ec6nomigue du Maroc

TABLE 9: FERTILIZER USES 1962-1968

t in tons of nutrient)

N P205 K20 Total

1962 13,900 23,700 8,600 46,200

1963 14,600 22,200 8,500 45,300

1964 15,700 24,400 8,300 48,boo

1965 19,600 26,5oo lo,0I o 56,500

1966 25,ooo 33,400 9,200 67,600

1967 28,000 36,500 15,400 79,900

1968 33,000 39,000 18,400 90,400

Source: Governnent of Morocco

1/Table 10: EXPENDITURES ON AGRICULTURAL DEVELOPMENT - 1968

Actuals Percentage of

Operations Credits . Credits RealizedCommitted Disbursed Committed Disbursed

- - - - (in million DH) - - - (percent) - - -

Agriculturnl development

(.R.M.V.A.) 197.1 166.5 112.7 84 57

Provincial Services 59.0 46. 4 28.8 79 49(nV)

Air. Extension - 14.8 11.8 11.0 80 74CT's)

Livestock 20.4 12.2 8.4 59 41

Construction and 20.1 19.8 16.1 97 80Materials -(CT's)

TOTAL 311.4 256.7 177.0 82 57

1/ by the Agricultural Development Department ("Directionde la Mise en Valeur")

Source: Ministry of Agriculture, Direction de la Mise enValeur

Table 11: LAND TENURE - ESTIMATED CULTIVATED AREA,BY CATEGORY OF HOLDING

(in Hectares)

1/Modern Sector

Private holdings - Moroccan 250,000Private holdings - Foreign 340,000State-owned land - (ex Foreign-leased) 200,000

Sub-total 790,000

Traditional Sector

Private holdings - Moroccan:

Below 8 ha. 1,900,0008 ha. to 9.9 ha. 270,00010 ha. to 14.9 ha, 410,QOO15 ha. to 19.9 ha. 170,00020 ha. or more 400, 000

Collective holdings 550,000

Sub-total 3,700,000

Total Cultivated Land 4,490,000

1/Includes an estimated 158,000 hectares of irrigated land(1966) within major irrigation projects.

Sources: Based on data contained in Preparation du Plan deDeveloppement, 1968-72; Service of Rural Statistics; L'ImpotAgricole - les gros Contribuables.

Table 12: INDEX OF INDUSTRIAL PRODUCTIONBYSECTOR AND BRANCH 1963-1968

(1958 : 100)

1/Weight 1963 1964 1965 1966 1967 1968

Power 110 139 147 153 162 165 181

Mining 375 111 125 126 123 124 124

Manufacturing 515 218 130 128 136 142 150

of which:metal transformation 145 102 107 103 102 114 124ceramic & building material 58 137 143 139 145 145 168chemicals 68 111 117 134 152 154 170oils and fats 39 145 121 125 130 136 140food 417 121 127 127 138 144 145textiles 107 183 184 181 190 196 222

leather 49 121 102 100 104 96 112paper and cardboard 29 134 138 133 143 147 157

other 88 138 129 117 125 133 127

Sub total 1,000

General Index 123 130 130 134 138 144

1/Preliminary figures

Source: La Situation Economigue du Maroc

Table 13: PRODUCTION OF MINERALS - 1963-1968

(thousands of metric tons)

1963 1964 1965 1966 1967 1968

Phosphate rock 8,548 10,098 9,824 9,439 9,922 10,512

Iron ore 1,035 887 951 1,017 893 809

Manganese ore 335 341 376 362 286 160

Lead ore 106 104 113 120 116 121

Zinc ore 59 81 95 94 83 68

Cobalt 14 15 17 18 18 15

Coal 404 400 419 451 482 451

Crude oil 150 120 103 103 97 89

Pyrrhotine - - 128 282 353 418

Source: Ministry of Planning; BNDE

Table 14: CENTRAL GOVERNMENT CURRENT REVENUE (1964-1969)(Millions of Dirhams)

1/1964 1965 1966 1967 1968- 1969

(estimate)

Arricultural tax 32.1 43.2 34.5 36.9 62.5 80.0Business tax 30.6 53.1 57.6 54.6 58.8 55.0Tax on business profits 126.7 293.8 317.5 339.3 h06.4 h05.0Tax on salaries 60.9 77.6 101.3 103.7 122.8 125.0Urban tax 3.2 2.4 9.0 13.2 19.3 14.0Liquor license tax 0.5 0.6 0.6 0.7 0.5 0.7

Total direct taxes 254.0 470.7 520.5 548.4 670.3 679.7

Import duties & taxes 416.6 328.1 400.6 40h.2 395.2 420.0Sxport taxes 37.6 43.1 48.2 66.6 54.0 65.0Other customs receipts 3.7 3.9 4.1 4.1 4.2 5.5

Total customs receipts 457.9 375.1 452.9 474.9 453.4 490.5

Excise taxes 300.9 320.9 352.5 379.4 401.5 414.6Turnover tax 210.0 205.0 222.0 224.5 291.2 430.0

Total consumption taxes 510.9 525.9 574.5 603.9 692.7 844.6

Stamp and registration taxes 101.2 110.5 118.9 125.5 137.3 178.2Proceeds of Govt. properties 42.1 48 .0 41.1 49.8 h9.2 52.6State monopolies & State

enterprises 226.3 142.2 171.8 191.3 387.2 322.8Receipts from various other

Government activities 52.3 59.1 49.4 67.9 70.2 73.8Governmental transfer receipts 56.0 157.1 46.6 70.3 96.8 54.5

Total miscellaneous receipts477.9 516.9 427.8 664.8 740.7 681.9

Total Revenue 1700.7 1,888.6 1,975.7 2,132.0 2,557.1 2,696.7

1/Preliminary figures

Note: The official figures for 1968 and 1969 have beenrearranged to make them comparable to previous years.

Source: Ministry of Finance

Table 15 CENTRAL GOVERNMENT CURRENT EXPENDITURE (1965-1968)(Millions of Dirhams)

1/1965 1966 1967 1968-

Actuals Per cent Actuals Per cent Actuals Per cent Actuals Per cent

1. Economic departments 261.2 14.2 265.2 lL.l 281.3 14.3 297.1 13.1Commerce 99.1 9.7Industry & Mines 7.4 8.o 8.1Public Works 101.9 lO.5 105.4 112.0Agriculture 142.0 143.3 158.3 167.3Development 0.7 0.5 0.5 -

2. Social departments 659.2 35.8 691.4 36.7 739.4 37.6 791.8 35.0Educati on 450-5 1X77.1 T11.9 57.7Youth & Sports 17.4 36.4 18.0 19.0Labor 10.3 10.3 10.9 11.9Health 181.0 187.5 198.6 203.2

3. Disciplinary departments 566.1 30.7 595.7 31.6 613.8 31.3 696.3 30.8Defense 28 7.3 29 .d318-.7 71- 3Gendarmerie 32.3 33.3 36.8 ' 38.0Auxiliary forces 94.0 96-4 96.5 99.0Interior 48.6 51.9 49.3 56.6National Security 1014.0 115.3 112.5 121.42/

4. Other_ 355.3 19.3 331.0 17.6 329.4 16.8 477.0 21.12/

5. Total 1100.0 18100.0 00.0 1963 100.0 2,262.2 100.0

1/Preliminary figures

2/2 Excluding public debt service

Source: Ministry of Finance

Table 16: CENTRAL GOVERN1MENT INVESTMENT EXPENDITURES (1965-1969)(in millions of dirhams)

1/

1965 1966 1967 1968- 1969Estimate

Agriculture 159 170 347 421 537

Barrages - 10 84 123 180

Irrigation 96 81 136 164 161

Dry farming and livestock 11 33 64 81 119

Conservation and Forestry 32 39 54 33 36

Research and others 20 7 10 21 41

Transport 72 67 78 72 116

Ports 14 16 13 13 27

Roads 47 39 51 38 43

Air transport 11 12 14 22 46

Community Housing and Welfare 36 21 27 27 37

Social Services 65 44 33 53 91

Education and sports 47 28 23 43 77

Health 18 16 10 10 14

Communications 35 22 33 28 40

Tourism 6 15 37 28 38

Hotels 2 4 24 16 15

Other equipment 4 10 13 12 23

Industry and Handicrafts 36 33 45 23 69

Mining 14 13 14 15 62

Chemical industry at Safi 22 17 23 3 -

Others - 3 8 5 7

Land Purchase 27 26 53 53 79

Military expenditures 14 22 25 27 -

Reconstruction of Agadir 27 19 15 17 2

Transfers 156 82 168 170 187

Railways (ONCF) ;o 19 12 28 34Electricity 23 17 59 47 6

Sugar (SUTA, SUNAB, SUNAG) 30 49 51

Chemicals (Maroc Chimie) 113 3 10 10 107

Equipment grants (BNDE) 6 5 20

Others (excl. OCP) v _ 8 33 13 _

TOTAL 634 521 862 918 1,197

1/ ?reliin-uary{qote: Fi~ures may not add up to totals because of rounding Source: Ministry of Finance

Table 17: MONETARY SURVEY (1964-1968)

(Millions of Dirhams)

1964 1965 1966 1967 1968Dec. Dec. Dec. Dec. Dec.

Currency 1,278 1,386 1,429 1,614 1,859Sight Deposits 2,299 2,472 2,371 2,523 2,864Other Deposits 218 272 308 331 449

Total Money Supply 3,795 4,130 4,108 4,468 5,172

Foreign Assets (net) a! 380 611 548 448 483Credit to Treasury 1,606 1,543 1,541 1,868 2,102of which:Central Bank (492) (456) (449) (880) (939)Bonds held by Banks (623) (667) (673) (536) (715)Private depositswith Treasury (491) (420) (419) (452) (448)

Credit to the Economy 1,932 1,978 1,976 2,118 2,629of which:From Central Bank (433) (424) (454) (486) (695)From Other Banks (1,499) (1,554) (1,522) (1,632) (1,934)

Adjustments -123 -2 43 34 -42

Total Sources 3,795 4,130 4,108 4,468 5,172

a/ Excluding liabilities arising from drawings on the IMF, and includingdiscounted bills in foreign currencies.

Source: Banque du Maroc

Table 18: MERCHANDISE IMPORTSVALUATION AT CUSTOMS,

1963-68(Millions of Dirhams)

1963 1964 1965 1966 1967 1968

TOTAL 2243 2327 2181 2418 2620 2790

Foods (except oil & oilseeds),beverages, tobacco 465 636 578 660 723 619Milk 19 19 23 20 27 -27Butter & cheese 29 28 25 25 32 40Coffee 28 30 30 33 36 35Tea 51 70 56 64 67 82Hard wheat 2 11 * 17 * -

Soft wheat 36 51 79 202 303 216Barley * * * - 2 -Wheat flour 19 16 23 12 15 10Tobacco 20 19 15 18 17 18Sugar 192 327 262 191 149 119All other 69 65 65 78 76 73

Fuel and raw materials 346 398 442 435 418 529Crude oil -37 -7 73 79 -50 107Gasoline 2 3 2 2 3 3Diesel fuel & fuel oil 2 2 2 * 5 4Lubricants 17 17 18 14 14 22Lumber 66 71 64 76 69 80Peanuts & peanut oil 10 18 5 - 3 -Other food oil 81 37 113 94 57 86All other 134 165 165 170 187 227

Semi-finished products 464 469 459 522 553 621Intermediate paper products 27 30 32Fertilizer 24 22 27 27 35 42Other chemical products 38 39 48 50 47 60Cotton & synthetic textile yarn 42 46 56 90 76 86Metal products, non-electrical 139 156 135 141 172 181Industrial gold 7 14 10 6 3 5All other 174 158 156 178 188 213

Finished products for agriculture & industry 370 344 353 385 529 588Agricultural machinery & equipment 27 20 27 27 23 71Industrial machinery & equipment 154 153 165 158 340 347Automotive vehincles & parts 24 25 16 22 12 13All other 165 146 148 178 154 1.77

Consumer goods 598 480 349 416 397 L33Pharmaceuticals "6 6 Textiles 165 131 52 97 71 24Domestic hardware & major appliances 33 32 20 32 35 48Automobile & auto parts 113 71 54 61 87 135All other 226 185 167 164 156 173

* DH .5 million or less

Source: Ministry of Planning.

Table 19: MERCHANDISE EXPORTSVALUATION AT CUSTOMS,

1963-68(Millions of Dirhams)

1963 1964 1965 1966 1967 1968

TOTAL 1943 2186 2176 2168 2146 2278

Food, beverages, tobacco 943 1074 1050 1052 1062 1169Citrus fruit 256 31 311 335 346 420Tomatoes 105 129 137 149 175 144Potatoes 40 31 49 59 47 39Other fresh vegetables 27 28 48 30 40 41Dried fruits 11 24 34 23 30 18Fruit & vegetable juices 11 16 14 22 19 24Fruit & vegetable conserves 38 47 50 51 59 51Dried vegetables 62 65 89 54 50 94Canned fish 102 134 73 122 115 130Salt fish 17 17 13 19 10 9Wine & liqueurs 91 117 93 75 4 5Barley 37 19 2 - - -Corn 27 15 17 5 All other 119 121 120 10 167 194

Agricultural raw materials 131 94 89 129 141 134Vegetable horsehair 31 32 27 -2 21 19Esparto grass 14 6 5 5 4 5Olive oil 35 6 3 44 6 7Wool, fur, hides, skins 15 13 9 9 7 6Cork 18 17 16 16 18 20Cotton 18 20 29 29 40 16All other - - - - 45 61

Fuel and raw materials 731 872 906 829 764 754Phosphate W X m m 7 3CIron 45 40 38 32 35 25Manganese 57 52 51 52 41 34Lead 59 64 126 76 59 66Zinc 15 20 33 26 27 21Cobalt 5 16 4 14 12 15Coal 14 12 9 - 7 6Other mining and quarrying products 25 36 37 40 4 11All other 51 54 55 55 33 32

Manufactures, nonfood 138 146 131 158 179 221Leather 13 11 13 m 17 21Other semi-fabricated cork products 9 7 7 7 6 5Other semi-finished products 55 55 53 89 100 130Finished goods for industry & agriculture 9 9 6 5 2 8Consumer goods 52 64 52 43 54 57

Source: Ministry of Planning.

Table 20: GEOGRAPHIC DISTRIBUTION OFFCREIGN TRADE

(in milliona of DR)

1964 1968Exports (f.o.b.) to: Value Percent Value Percent

France 958 43 876 38West Germany 239 11 189 9Benelux 156 7 158 7Spain 90 4 76 3United Kingdom 104 4 134 6Algeria 36 2 30 1Italy 57 3 134 6Cuba 56 3 27 1United States 29 1 43 2Others 494 22 620 27

Total 2,219 100 2,287

1964 1968Imports (c.i.f.) from: Value Percent Value Percent

France 911 39 880 31United States 231 10 380 14Cuba 243 10 49 2West Germany 132 6 216 8Benelux 102 4 54 2Italy 64 3 139 5United Kingdom 69 3 123 4Others 593 25 949 34

Total 2,345 100 2,790 1

Source: Ministry of Planning.

Table 21: BALANCE OF PAYMENTS* (1966-1969)

(in millions of dirhams)

1966 6 191969 government forecast

Rec'ts. Expend. Rec'ts. Expend. Ree't. sxpend. Rects. Expnd.

A. Goode & Services 23114 2828 3351 305 3571 324 7

Goodes (f.o.b.) 2168 2235 2146 2427 2278 2582 2393 2632Non-monetary gold _ 6 - 4 - 5 5Freight & insurance 61 177 66 191 97 203 112 208Other transport 8 56 10 58 13 70 14 70Travel 379 164 400 189 426 183 456 186IncTae from investlents 3)4 245 29 212 44 264 44 249

.. ,Private (15) (143) (15) (128) (28) (138) (Z8) (153). .Public (interest on public debt) (19) (102) (14) (84) (16) (126) (16) (96)

lovernment transactions 113 137 126 170 187 lh4 175 150Other services 52 94 51 100 4o 120 50 120

B. Current Transfers M 426 352 315 356 4 5 212

Private 159 362 209 247 201 247 206 249... Salaries (vorker remittances) (158) (266) (208) (213) (200) (225) (205) (225)* . .Mlgrants (1) (96) (1) (34) (1) (22) (1) (24)

Public 11 6L 143 68 155 67 150 70Internaticnal organizations (-) (5) (-) (6) (4) (-).. ,Pensions (144) (59) (143) (62) (151) (67)

C. Capital Movements 8492 839 882 569 L5

Grants 173 20 166 -214 33 112 36Private ciapital 182 196 230 270 , 220 237 230 249... Balance of co-nrcial credits (91) (-) 79) (145) (101) (19) (100) (25)... Lotns by foreigners C7) (11) (5) (t1)... InvtIstmnets by foreigners (67) (30) (59) (8) (17) (7) (70) (14).. Loans & investments by Moroccar.s (17) (6) (15) (6).. .Others (24) (166) (98) (200) (52) (20o4) (60) (210)

Public capital 503 276 443 145 4)48 299 513 252... Comnercial credits (227) (41) (269) (55) (129) (140) (150) (61)... Loans in foreign exchange (173) (167) (125) (57) (246) (112) (2B0) (140)...Loans in dirhans (88) (8) (43) (14) (71) (20) (80) (51)*.. Others (15) (60) (6) (19) (2) (27) (3) ()

D. Net Overall Deficit (A+B+C) 56 92 131 71

eThe form of presentation in this table corresponds basically to the new systen of reporting adopted by Morocco for the years from 1966forward. Bocause of the change of form, hovever, these data are not fully comparable with earlier series. Adjustments were made fromthe monetary to the capital account for the years 1966-68 but not for the 1969 forecast whic;i reflects the government's presentation.Adjustmints were made for all years in the form of reporting transfers.

Source: Exchange Office

Table 22: FOREIGN LOANS RECEIPTS 1965 - 1969(in millions of dirhams)

1965 1966 1967 1968 1969I. Government (projected)

A. Long-Term:France 119 108 21 33 32United States 185 82 98 98 166West Germany 53 7 62 127 42IBRD and IDA 19 11 5 22 42Kuwait 84 56 24 47Iran - - _ 1 53Italy _ _ _ - 50Others - - -

Subtotal (A) 460 264 186 305 432B. Medium-Term:

France:Advance of French Treasury 61 - - --

Balance of Payments assistance - - - - 16Wheat credits [4 87 129 13 -Suppliers' credits 3 15 4 16 _

United States:Wheat credits - - 32 8 _Oil credits - - 8 _

Subtotal (B) 108 102' 165 45 16

II. Public EnterprisesFrance 62 62 41 20 20United States - .55 8 11 6IBRD and IDA 20 50 36 39 56Italy - - - 19 -Others 3 1 -

Subtotal (C) 85 168 85 88 82

Grand Total 653 534 436 438 530

So8mrce : Minist,ry of Finance

Table 23: FOREIGN EXCHANGE RESERVES

1964 - 1968

(millions of U.S. $ at end of year)

1964 1965 1966 1967 1,i.

Assets

Bank of MoroccoGold 34 21 21 21IMF gold trancheposition - 11 12 13

Foreign exchange 17 67 54 h2Payments agreements 16 22 25 13 20

Commercial banks 35 26 2h 25 26

Total (gross) 102 147 136 114 131

Liabilities

Bank of Morocco 12 13 15 12 53Commercial banks 15 13 13 13 13

Total liabilities 27 26 28 25 66

Net Reserves 75 121 108 89 65

Source: International Financial;Statistics

Table 24: COST OF LIVING INDEX (CASABLANCA)

(100 - 1958-1959)

1965 1966 1967 1968 196

January 130.2 128.3 129,0 128.2 132February 131.9 127.5 128.8 128.1 131March 131.7 126.5 128.3 128.9 131

Average 131.3 127.4 128.7 128 .4

April 129.2 125.6 126.2 126.2May 127.7 123.9 122.9 124.1June 126.3 124.Q 122.3 124.7

Average 127.7 124.5 123.8 125.0

July 125.2 125.2 122.1 124.8August 125.0 125.8 123.4 125.0September 126.3 127.9 126.0 125.7

Average 125.5 126.3 123.8 125.2

October 127.7 128.7 127.8 125.8November 129.0 130.5 127.6 127.2December 128.9 129.6 127.7 130.0

Average 128.5 129.6 127.7 127.7

Year Average 128.2 126.9 126.0 126.6

Source: Ministry of Planning.