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Morocco: Third Review Under the Two-Year Precautionary and Liquidity Line

Author(s):
International Monetary Fund. Middle East and Central Asia Dept.
Published Date:
March 2014
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Recent Developments

1. The Executive Board approved in August 2012 a two-year PLL arrangement in the amount of SDR 4.1 billion (700 percent of quota, about US$6.2 billion). The PLL provides insurance against external risks while supporting the authorities’ program. The authorities continue to treat it as precautionary. The second review was completed on July 31, 2013. Directors commended the significant measures taken in a difficult context to reduce external and fiscal vulnerabilities, and encouraged the authorities to use the space provided by the PLL to move forward with important structural reforms, to continue reducing vulnerabilities, and to promote stronger and more inclusive growth.

2. After a difficult 2012, macroeconomic performance improved overall in 2013. Morocco has a track record of strong performance, but vulnerabilities in recent years increased as the economy was hit by a series of exogenous shocks, including the European recession, a rise in oil prices, and the transition in Arab countries. As a result, the external and fiscal deficits widened significantly to 10 percent of GDP (excluding grants) and 7.3 percent of GDP, respectively in 2012 while growth suffered from low agricultural production. A return to a more favorable environment, higher grants from partner countries, and policy action helped reduce imbalances in 2013 to an estimated current account deficit excluding grants of 8 percent of GDP and a fiscal deficit of 5.5 percent of GDP. Growth also picked up, boosted by a strong rebound in the primary sector.1

3. The authorities have taken steps to reduce vulnerabilities in a difficult sociopolitical context; however, some reforms have progressed more slowly than expected. While some reforms, such as the adoption of a new organic budget law, and the design of a broader subsidy reform, did not progress at the expected pace, vulnerabilities were reduced overall. In response to the 2012 fiscal slippage, the authorities implemented a series of measures to reduce the deficit, lower fiscal risks, and strengthen public financial management (PFM). In particular, the measures taken in September 2013 and January 2014 to partially index the price of some subsidized petroleum products to international prices and reduce or eliminate subsidies on a number of products were significant steps in those directions.

4. The formation of a new coalition government ended a period of uncertainty that delayed policymaking. The previous government coalition, headed by the Justice and Development Party (JDP), a moderate Islamist party, ended in the summer of 2013 when the junior party Istiqlal withdrew from it. Following protracted negotiations, a new coalition government, now including the National Rally of Independents (NRI), a center-right party, was announced on October 10, 2013. The hope is that efforts to build consensus on difficult reforms (e.g., subsidies, pensions) can be brought to closure so that faster progress can be made. In the current difficult regional context, the risk remains that social pressures may undermine implementation, nonetheless adequate communication on the reforms, and appropriate measures to protect the most vulnerable would help mitigate these risks.

5. In an environment that remains risky, the outlook continues to hinge on sustained delivery of the reforms. Growth in 2014 could reach about 4 percent, as activity in the nonagricultural sectors accelerate and assuming a return to normal cereal production, however, the economy remains vulnerable to international conditions. Although the global outlook is improving, the international economic environment remains uncertain and the regional context volatile.2 In this context, continued improvement in economic conditions depends heavily on the sustained implementation of reforms to rebalance the fiscal and external accounts, strengthen competitiveness, ensure stronger and more job-rich growth, and improve social protection, particularly for the most vulnerable segments of the population.

Pll Qualification Criteria

6. The program remains broadly on track and Morocco continues to meet the PLL qualification criteria. Both the fiscal and external deficits were reduced from their 2012 highs. The NIR indicative target at end-October was met with a comfortable margin. However, the fiscal deficit indicative target at end-October was missed, mostly because of higher-than-programmed investment spending. All standard performance criteria were met. Morocco continues to perform strongly in three out of the five areas in which PLL qualification is assessed (financial sector and supervision, monetary policy, and data adequacy) while not substantially underperforming in the two other areas (fiscal policy, and external position and market access), as further explained below.

7. Morocco remains committed to a sustainable fiscal path, and has a record of sound public finances, despite the challenges of 2012. The authorities have taken commendable actions to strengthen Morocco’s fiscal position and reduce vulnerabilities in this area. Staff’s assessment remains that Morocco does not substantially underperform in the fiscal area, based on the following considerations.

  • The authorities achieved their fiscal deficit objective in 2013. The deficit, including grants, was reduced by almost 2 percent of GDP to 5.5 percent of GDP as programmed at the time of the second PLL review. This reduction was achieved, as expected, in part due to higher external grants (although the amount received was less than programmed, implying a stronger structural adjustment) and lower global oil prices, but also thanks to policy action to limit the subsidy bill and wage expenditures and to rationalize capital spending. Indeed, the authorities overcame the missed end-October 2013 fiscal deficit target, which was due to investment overruns, via measures to control public investment expenditures during the last quarter of the year (notably the cancelation of all appropriations that had not been committed by October 31).

  • The 2014 budget targets a continued prudent reduction in the deficit through structural fiscal reforms. The further reduction to 4.9 percent of GDP is to be achieved mainly through a continued reduction in the cost of energy subsidies. Further important steps were taken in that direction in January 2014 with the elimination of subsidies on super and industrial fuel and the reduction in the per-unit subsidy of diesel (see attached written communication (W-COM. -¶¶7, 8). The reduction in the diesel subsidy will be implemented through quarterly adjustments, starting February 2014. The introduction in September 2013 of a mechanism to index the price of some subsidized petroleum products to international prices was a significant step toward reducing fiscal vulnerabilities. The 2014 budget also includes a reduction by 0.2 percent of GDP of food subsidies. Social protection for the most vulnerable is being expanded through dedicated programs (W-COM.-¶9). Furthermore, the 2014 budget introduces welcome steps toward a broad tax reform (W-COM.-¶6) and pledges for this year a much-needed parametric reform of the main public pension fund (W-COM.-¶12).

  • The budget framework is being strengthened. The council of ministers adopted in mid-January a new draft organic budget law (OBL). The draft OBL includes welcome enhancements to the existing 1998 law, such as multiyear budgeting, program budgeting, performance management, and fiscal transparency. Ahead of its adoption in 2014, four ministries are scheduled to start operating as pilot cases in program budgeting. The draft OBL also addresses weaknesses in the budgetary framework that came to the fore in 2012 by making wage expenditures appropriations binding ceilings and limiting the carryover of investment appropriations, although the related provisions would only be effective before 2016 and 2017 respectively. Staff welcomed the authorities’ efforts to strengthen and modernize their budget framework, but urged them to incorporate best practices into the final version as recommended by a recent IMF technical assistance mission, in particular to reduce potential sources of fiscal risks, notably in the areas of fiscal coverage (by covering autonomous agencies and public enterprises), fiscal policy formulation and fiscal discipline (e.g., ensuring that the cost of any new initiative is always fully reflected in the budget, and by adopting an escape clause supportive of the new golden rule). Additional limitations on special accounts were also included in the draft OBL, but tighter restrictions would be more appropriate. Although the initial intention was to have the OBL adopted by Parliament in its fall session (which ends in February 2014), the goal is now to have it adopted as early as possible in the spring of 2014 so the 2015 budget law can be prepared under the new framework. The mission underscored that the provisions addressing the issues that came into play in 2012 needed to become effective upon adoption of the law. In the meantime, technical measures to better control the wage bill and investment spending, including limiting the carryover of unspent investment appropriations across fiscal years should remain in place. These measures were reconfirmed in the 2014 budget.

  • The public sector debt remains sustainable.3 The public debt is slightly over 60 percent of GDP and is resilient to shocks to real GDP, the primary fiscal balance, the real exchange rate, and the real interest rate. After peaking at 63 percent of GDP in 2014, it is projected to progressively fall below 60 percent in the medium term as a result of fiscal adjustment. There are moderate risks linked to gross financing needs under a real growth shock or a shock to the primary balance.

8. Morocco’s moderate underperformance on the external position is reflected in a large, but decreasing, current account deficit, while other indicators lend reassurance.

  • The current account, excluding grants, improved by an estimated 2 percent of GDP in 2013 to about 8 percent of GDP. The exchange rate assessment continues to show some evidence of moderate overvaluation of the dirham, though less than a year ago.4

  • Although external pressures and uncertainties continue to be a concern, reserves have been broadly stable for more than a year. Considering existing controls on capital outflows that partially insulate them from capital account vulnerabilities, they remain adequate at 88 percent of the Fund’s reserve metric for emerging markets. The NIR indicative target for end-October 2013 was met with a comfortable margin. The stabilization of reserves owed in part to the improvement in the current account deficit, but mostly to strong FDI inflows, substantial development partners’ assistance, and external sovereign borrowing. Reserves are expected to remain stable above four months of imports over the medium term.

  • Morocco’s market access was reconfirmed when it raised US$750 million at favorable terms in May. Morocco was not significantly affected by the recent emerging markets sell-off. Although the external debt increased over the past few years because of a combination of increasing financing needs and low spreads of international bonds, it remains sustainable.5

  • The authorities’ intention to gradually allowing more flexibility to the exchange rate, combined with progress on fiscal adjustment and structural reforms to remove impediments to growth and boost competitiveness, are expected to help underpin external sustainability.

9. Morocco has a strong record of maintaining low and stable inflation. Bank-al-Maghrib (BAM) has effectively anchored inflation expectations in the context of the exchange rate peg. Inflation has averaged 1.7 percent over the past 10 years and never exceeded 4 percent. Although liquidity remains tight, staff considers that the current monetary policy stance is appropriate within the existing monetary and exchange rate framework. The nonprimary output gap is moderately negative and risks to growth are tilted to the downside, but monetary policy should remain cautious about the possible effects on inflation of price increases related to the subsidy reform. BAM has solid policy analysis capacity, which is currently being strengthened through technical assistance from the IMF in preparation for an eventual move towards the adoption of a nominal anchor for monetary policy. As discussed in previous staff reports, the monetary framework will need to evolve in line with a move toward a more flexible exchange rate.

10. The financial sector has remained sound overall. As of June 2013, the Tier 1 capital ratio amounted to 10.6 percent, while regulatory capital to risk-weighted assets reached 13.1 percent, both up from December 2012 (when they amounted to 10.2 percent and 12.3 percent respectively). Banks’ reliance on lending activities is likely to weigh on their profitability, although so far it has been resilient, supported by their international activities. Nonperforming loans (NPLs) have increased to 5.8 percent of total loans as of November 2013, reflecting the slowdown in activity. BAM is further strengthening banking supervision in line with new Basel III standards. The capital adequacy ratio was increased in June 2013, and BAM is incorporating the new definition of prudential capital and short-term liquidity in its regulations. A Financial Sector Assessment (FSAP) update is planned for the fall of 2014. Moroccan banks fund themselves mainly through domestic deposits, but have started expanding their sources of funding to include the issuance of international bonds. BAM is closely monitoring these activities and reinforcing coordination and exchange of information with supervisory and regulatory agencies in host countries, including on-site visits.

11. Morocco meets the PLL requirement on data transparency and integrity. Morocco subscribes to the Special Data Dissemination Standard and its data are adequate for surveillance and program monitoring. As noted in previous reports, the fiscal overruns in 2012 revealed issues related to fiscal projections and monitoring, now being addressed, but the reporting of fiscal data has not come into question.6

Other Program Issues

12. Should Morocco draw on the entire amount available, it would have adequate capacity to repay the Fund (Table 8). The authorities intend to continue to treat the PLL as precautionary; however, were they to withdraw the entire amount, the Fund credit would represent a modest share of Morocco’s low external debt, and the reserve coverage ratio would be comfortable. External debt service would increase moderately over the medium term but would be manageable under staff’s medium-term macroeconomic projections.7 In addition, the impact of the PLL arrangement on the Fund’s liquidity and potential exposure continues to be moderate. The commitment to Morocco is modest and the PLL arrangement reduces the Fund’s forward commitment capacity only marginally, as discussed in the staff report for the PLL request.8

Table 1.Morocco: Selected Economic Indicators, 2011–18
PLL 1/Rev. 2/Proj.
20112012201320142015201620172018
(Annual percentage change)
Output and Prices
Real GDP5.02.75.14.53.94.95.25.45.6
Real primary GDP5.1−7.213.617.0−1.04.54.55.05.0
Real non-primary GDP5.04.63.72.44.85.05.35.55.7
Consumer prices (end of period)0.92.62.30.42.52.52.52.52.5
Consumer prices (period average)0.91.32.31.92.52.52.52.52.5
(In percent of GDP)
Investment and Saving
Gross capital formation36.035.334.334.735.335.335.435.535.7
Of which: Nongovernment30.629.730.029.530.729.929.930.130.2
Gross national savings27.825.627.127.228.829.730.631.331.1
Of which: Nongovernment27.525.926.825.927.626.826.927.026.9
(In percent of GDP)
Public Finances
Revenue27.828.727.527.927.428.128.128.227.6
Expenditure34.536.133.033.432.432.431.731.230.7
Budget balance−6.7−7.3−5.5−5.5−4.9−4.3−3.6−3.0−3.0
Primary balance (excluding grants)−4.6−5.0−4.0−3.6−2.8−2.7−1.9−1.4−0.6
Cyclically-adjusted primary balance (excl. grants)−4.4−4.7−3.4−3.3−2.6−1.9−1.4−0.6
Total government debt54.460.261.861.762.562.461.560.158.6
(Annual percentage change; unless otherwise indicated)
Monetary Sector
Credit to the private sector 3/9.84.86.13.65.66.26.96.96.9
Broad money6.44.55.53.94.65.56.56.06.0
Velocity of broad money0.80.80.80.90.90.90.90.90.9
Three-month treasury bill rate (period average, in percent)3.53.2
(In percent of GDP; unless otherwise indicated)
External Sector
Exports of goods (in U.S. dollars, percentage change)21.7−0.83.31.89.17.37.06.37.6
Imports of goods (in U.S. dollars, percentage change)25.31.60.70.76.85.25.15.25.9
Merchandise trade balance−19.4−20.9−18.7−19.0−18.1−17.1−16.2−15.6−15.0
Current account excluding official transfers−8.4−10.0−8.2−8.0−7.5−6.7−5.7−5.2−4.7
Current account including official transfers−8.1−9.7−7.2−7.4−6.5−5.7−4.8−4.2−4.5
Foreign direct investment2.42.43.22.92.93.03.13.13.2
Total external debt25.129.831.330.931.531.630.629.228.2
Gross reserves (in billions of U.S. dollars)20.617.518.719.320.021.122.423.725.1
In months of next year imports of goods and services5.04.24.34.34.34.34.34.3
In percent of short-term external debt (on remaining maturity basis)1473.61251.81332.01374.51427.11508.71601.21691.21794.5
Memorandum Items:
Nominal GDP (in billions of U.S. dollars)99.296.1104.8105.5115.1125.1136.0146.7158.4
Unemployment rate (in percent)8.99.08.98.9
Population (millions)32.232.532.932.933.233.533.834.234.5
Net imports of energy products (in billions of U.S. dollars)−11.2−12.4−11.6−12.2−13.0−12.9−12.9−12.9−13.0
Local currency per U.S. dollar (period average)8.18.68.4
Real effective exchange rate (annual average, percentage change)−1.7−1.00.1
Sources: Moroccan authorities; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework.

Includes credit to public enterprises.

Sources: Moroccan authorities; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework.

Includes credit to public enterprises.

Table 2.Morocco: Budgetary Central Government Finance, 2011–18(Billions of dirhams)
PLL 1/Rev. 2/Proj.
20112012201320142015201620172018
Revenue223.3237.7244.6246.9258.4283.6305.4329.6349.5
Taxes189.0202.7200.7199.5211.3232.5252.7272.4298.5
Taxes on income, profits, and capital gains69.277.474.275.177.287.495.6103.2112.7
Taxes on property9.311.612.511.614.113.614.715.817.1
Taxes on goods and services94.699.0101.699.8106.9117.8127.9139.0152.3
Taxes on international trade and transactions10.79.48.08.08.18.48.79.19.6
Other taxes5.35.44.44.95.05.35.75.36.8
Grants1.30.58.76.010.610.710.712.12.2
Other revenue33.034.635.241.436.540.442.045.148.8
Expense234.2252.5255.4249.3262.0272.3284.9300.9318.4
Compensation of employees 3/99.8108.9114.0112.4118.8119.6124.9130.0137.8
Use of goods and services and grants53.556.665.059.067.973.779.286.092.9
Interest18.220.122.422.524.827.029.131.032.7
Subsidies 4/48.854.941.441.635.034.332.532.432.2
Other expense 5/13.812.112.613.915.417.819.221.522.8
Net acquisition of nonfinancial assets43.046.138.145.943.054.659.764.269.5
Net lending / borrowing (overall balance)−53.9−60.9−48.9−48.3−46.5−43.3−39.2−35.5−38.5
Net lending / borrowing (excluding grants)−55.2−61.3−57.6−54.3−57.1−54.1−49.9−47.6−40.7
Change in net financial worth−53.9−60.9−48.9−48.3−46.5−43.3−39.2−35.5−38.5
Net acquisition of financial assets−5.7−3.30.00.00.00.00.00.00.0
Domestic−5.7−3.30.00.00.00.00.00.00.0
Shares and other equity−5.6−3.30.00.00.00.00.00.00.0
Foreign Loans0.00.00.00.00.00.00.00.00.0
Net incurrence of liabilities48.257.648.948.346.543.339.235.538.5
Domestic40.942.330.737.131.130.631.033.030.9
Currency and Deposits−6.3−6.30.00.00.00.00.00.00.0
Securities other than shares37.437.449.637.131.130.631.033.030.9
Other accounts payable9.99.9−4.80.00.00.00.00.00.0
Foreign Loans7.37.315.111.215.412.88.22.57.6
Memorandum Item:
Total investment (including capital transfers)56.858.150.759.758.472.478.985.792.3
GDP802.6828.2888.5883.5941.51,009.21,085.91,170.81,264.5
Sources: Ministry of Economy and Finance; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework. More disaggregated data which were not available at the time of the 1st review have allowed for an enhanced classification of goods and services and grants as per GFSM 2001 guidelines.

Some expenditure previously included in goods and services was correctly reclassified into the “social contribution” part of wages in the “Rev.” column in 2013

In projections, includes social safety nets related to the subsidy reform.

Includes capital transfers to public entities.

Sources: Ministry of Economy and Finance; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework. More disaggregated data which were not available at the time of the 1st review have allowed for an enhanced classification of goods and services and grants as per GFSM 2001 guidelines.

Some expenditure previously included in goods and services was correctly reclassified into the “social contribution” part of wages in the “Rev.” column in 2013

In projections, includes social safety nets related to the subsidy reform.

Includes capital transfers to public entities.

Table 3.Morocco: Budgetary Central Government Finance, 2011–18(Percent of GDP)
PLL 1/Rev. 2/Proj.
20112012201320142015201620172018
Revenue27.828.727.527.927.428.128.128.227.6
Taxes23.524.522.622.622.423.023.323.323.6
Taxes on income, profits, and capital gains8.69.38.48.58.28.78.88.88.9
Taxes on property1.21.41.41.31.51.41.41.41.4
Taxes on goods and services11.812.011.411.311.411.711.811.912.0
Taxes on international trade and transactions1.31.10.90.90.90.80.80.80.8
Other taxes0.70.60.50.60.50.50.50.50.5
Grants0.20.11.00.71.11.11.01.00.2
Other revenue4.14.24.04.73.94.03.93.93.9
Expense29.230.528.728.227.827.026.225.725.2
Compensation of employees 3/12.413.112.812.712.611.911.511.110.9
Use of goods and services and grants6.76.87.36.77.27.37.37.37.3
Interest2.32.42.52.52.62.72.72.62.6
Subsidies 4/6.16.64.74.73.73.43.02.82.6
Other expense 5/1.71.51.41.61.61.81.81.81.8
Net acquisition of nonfinancial assets5.45.64.35.24.65.45.55.55.5
Net lending / borrowing (overall balance)−6.7−7.3−5.5−5.5−4.9−4.3−3.6−3.0−3.0
Net lending / borrowing (excluding grants)−6.9−7.4−6.5−6.1−6.1−5.4−4.6−4.1−3.2
Change in net financial worth−6.7−7.3−5.5−5.5−4.9−4.3−3.6−3.0−3.0
Net acquisition of financial assets−0.7−0.40.00.00.00.00.00.00.0
Domestic−0.7−0.40.00.00.00.00.00.00.0
Shares and other equity−0.7−0.40.00.00.00.00.00.00.0
Foreign Loans0.00.00.00.00.00.00.00.00.0
Net incurrence of liabilities6.07.05.55.54.94.33.63.03.0
Domestic5.15.13.54.23.33.02.92.82.4
Currency and Deposits−0.8−0.80.00.00.00.00.00.00.0
Securities other than shares4.74.55.64.23.33.02.92.82.4
Other accounts payable1.21.2−0.50.00.00.00.00.00.0
Foreign Loans0.90.91.71.31.61.30.80.20.6
Memorandum items:
Total investment (including capital transfers)7.17.05.76.86.27.27.37.37.3
Sources: Ministry of Economy and Finance; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework. More disaggregated data which were not available at the time of the 1st review have allowed for an enhanced classification of goods and services and grants as per GFSM 2001 guidelines.

Some expenditure previously included in goods and services was correctly reclassified into the “social contribution” part of wages in the “Rev.” column in 2013.

In projections, includes social safety nets related to the subsidy reform.

Includes capital transfers to public entities.

Sources: Ministry of Economy and Finance; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework. More disaggregated data which were not available at the time of the 1st review have allowed for an enhanced classification of goods and services and grants as per GFSM 2001 guidelines.

Some expenditure previously included in goods and services was correctly reclassified into the “social contribution” part of wages in the “Rev.” column in 2013.

In projections, includes social safety nets related to the subsidy reform.

Includes capital transfers to public entities.

Table 4.Morocco: Budgetary Central Government Balance Sheet, 2011–18(Billions of dirhams)
PLL 1/Rev. 2/Proj.
20112012201320142015201620172018
Net financial worth−428.9−428.9−481.9−481.9−581.9−622.9−660.9−696.9−734.5
Financial assets2.02.02.02.02.02.02.02.02.0
Domestic2.02.02.02.02.02.02.02.02.0
Currency and deposits 3/2.02.02.02.02.02.02.02.02.0
Foreign0.00.00.00.00.00.00.00.00.0
Liabilities430.9493.3544.6540.4583.9624.8662.8698.9736.5
Domestic331.3378.4411.6414.4442.5470.6500.5533.9564.0
Securities other than shares 3/331.3378.4411.6415.6446.7477.2508.2541.2572.1
Foreign99.6114.8133.0126.0141.4154.2162.4164.9172.5
Loans 3/99.6114.2133.0126.0141.4154.2162.4164.9172.5
Memorandum Item:
GDP802.6828.2888.5883.5941.51,009.21,085.91,170.81,264.5
Sources: Moroccan authorities; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework.

Data for the remaining instruments are currently not available.

Sources: Moroccan authorities; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework.

Data for the remaining instruments are currently not available.

Table 5.Morocco: Balance of Payments, 2011–18(In billions of U.S. dollars, unless otherwise indicated)
PLL 1/Rev. 2/Proj.
20112012201320142015201620172018
Current account−8.1−9.4−7.6−7.8−7.4−7.1−6.6−6.2−7.2
Trade balance−19.3−20.1−19.6−20.0−20.9−21.4−22.0−22.9−23.7
Exports, f.o.b.21.621.522.121.823.825.627.429.131.3
Agriculture3.53.53.63.84.04.24.44.64.9
Phosphates and derived products6.05.55.44.75.05.45.96.46.9
Imports, f.o.b.−40.9−41.5−41.7−41.9−44.7−47.0−49.4−52.0−55.0
Energy−11.2−12.4−11.6−12.2−13.0−12.9−12.9−12.9−13.0
Capital goods−8.4−8.5−9.3−9.2−9.9−10.5−11.1−11.6−12.4
Food products−4.8−4.8−4.4−4.2−4.5−4.7−4.9−5.1−5.2
Services5.35.35.75.76.47.07.88.59.2
Tourism receipts7.36.76.96.97.47.88.48.89.3
Income−2.1−2.2−2.1−1.9−2.2−2.3−2.5−2.6−2.6
Transfers8.07.78.58.49.39.710.210.810.0
Private transfers (net)7.77.57.47.88.08.58.99.39.8
Workers’ remittances7.16.76.66.97.17.57.98.38.8
Official grants (net)0.30.21.00.61.21.21.31.40.2
Capital account0.00.00.00.00.00.00.00.00.0
Financial account5.76.28.89.27.88.07.87.58.6
Direct investment2.42.33.33.03.43.74.24.65.1
Privatization0.70.40.00.00.00.00.00.00.0
Portfolio investment−0.20.10.10.20.20.20.30.30.3
Other3.53.75.45.94.34.03.42.53.2
Private1.81.00.03.41.41.51.51.51.6
Public medium-and long-term loans (net)1.72.83.42.62.92.51.81.01.6
Disbursements3.24.45.14.34.84.53.73.63.6
Amortization−1.5−1.6−1.7−1.7−1.9−1.9−1.9−2.6−2.0
Reserve asset accumulation (-increase)2.63.4−1.2−1.4−0.4−0.9−1.2−1.3−1.5
Errors and omissions−0.2−0.20.00.00.00.00.00.00.0
(Percent of GDP)
Current account−8.1−9.7−7.2−7.4−6.5−5.7−4.8−4.2−4.5
Trade balance−19.4−20.9−18.7−19.0−18.1−17.1−16.2−15.6−15.0
Exports, f.o.b.21.822.321.120.720.720.420.119.819.7
Agriculture3.63.73.43.63.53.33.23.13.1
Phosphates and derived products6.05.75.24.44.44.34.34.34.3
Imports, f.o.b.−41.2−43.2−39.8−39.7−38.8−37.6−36.3−35.4−34.7
Petroleum−11.3−12.9−11.0−11.5−11.3−10.3−9.5−8.8−8.2
Capital goods−8.5−8.8−8.9−8.7−8.6−8.4−8.2−7.9−7.8
Food products−4.8−5.0−4.2−4.0−3.9−3.8−3.6−3.5−3.3
Services5.35.55.45.45.55.65.85.85.8
Tourism receipts7.47.06.66.56.46.26.26.05.9
Income−2.1−2.3−2.0−1.8−1.9−1.9−1.9−1.7−1.7
Transfers8.18.08.18.08.07.87.57.36.3
Private transfers (net)7.87.87.17.47.06.86.56.46.2
Workers’ remittances7.27.06.36.66.26.05.85.75.6
Official grants (net)0.30.21.00.61.11.00.91.00.1
Capital account0.00.00.00.00.00.00.00.00.0
Financial account5.76.48.48.76.86.45.75.15.5
Direct investment2.42.43.22.92.93.03.13.13.2
Privatization0.70.40.00.00.00.00.00.00.0
Portfolio investment−0.20.10.10.20.20.20.20.20.2
Other3.53.95.15.63.73.22.51.72.0
Private 3/1.81.00.03.21.21.21.11.11.0
Public medium-and long-term loans (net)1.72.93.22.42.52.01.30.71.0
Disbursements3.24.54.94.14.13.62.72.42.3
Amortization−1.5−1.7−1.7−1.6−1.6−1.5−1.4−1.8−1.3
Memorandum items:
Current account balance excluding official grants (percent of GDP)−8.4−10.0−8.2−8.0−7.5−6.7−5.7−5.2−4.7
Terms of trade (percentage change)2.3−11.90.3−2.80.7−0.50.50.50.2
Gross official reserves 3/20.617.518.719.320.021.122.423.725.1
In months of prospective imports of GNFS5.04.24.34.34.34.34.34.34.3
Debt service (percent of export of GNFS and remittances) 4/5.35.86.66.66.76.76.47.46.0
External public and publicly guaranteed debt (percent of GDP)23.625.727.226.527.427.627.025.724.8
DHs per US$, period average8.18.68.58.4
GDP (US$)99.296.1104.8105.5115.1125.1136.0146.7158.4
Oil price (US$/barrel; Brent)111.0112.0104.5108.9109.5103.998.493.790.6
Sources: Ministry of Finance; Office des Changes; and IMF staff estimates and projections.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework.

Excluding the reserve position in the Fund.

Public and publicly guaranteed debt.

Sources: Ministry of Finance; Office des Changes; and IMF staff estimates and projections.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework.

Excluding the reserve position in the Fund.

Public and publicly guaranteed debt.

Table 6.Morocco: Monetary Survey, 2011–14
PLL 1/Rev. 2/
2011201220132014
(Billions of dirhams)
Net foreign assets173.6148.1160.8159.6162.7
Monetary authorities171.9145.4157.9156.8159.9
Of which: Gross reserves177.1147.9157.9159.3162.4
Of which: Net Fund position0.00.00.00.00.0
Deposit money banks1.72.72.92.82.8
Net domestic assets775.6844.1886.0871.2915.6
Domestic credit798.3855.0899.6881.3930.0
Net credit to the government102.1115.6125.5125.6131.9
Banking system102.1115.6125.5125.6131.9
Bank Al-Maghrib2.20.50.10.2−0.2
Of which: deposits−3.4−4.5−4.8−4.7−5.1
Deposit money banks99.9124.9125.4125.4132.0
Credit to the economy696.2729.6774.1755.6798.1
Other liabilities, net22.710.913.610.014.4
Broad money949.3992.21,046.71,030.91,078.3
Money586.8612.2658.2645.5680.5
Currency outside banks158.3163.6175.6174.6186.0
Demand deposits428.5448.5482.6470.9494.5
Quasi money340.9354.7368.9368.9383.7
Foreign deposits21.625.319.716.414.1
(Annual percentage change)
Net foreign assets−11.8−14.76.87.81.9
Net domestic assets11.68.85.33.25.1
Domestic credit11.67.15.23.15.5
Net credit to the government25.813.27.98.75.0
Credit to the economy9.84.86.13.65.6
Broad money6.44.55.53.94.6
(Change in percent of broad money)
Net foreign assets−2.6−2.71.01.20.3
Domestic credit9.36.04.52.64.7
Net credit to the government2.31.40.91.00.6
Credit to the economy6.93.54.52.64.1
Other assets net−0.31.20.00.1−0.4
Memorandum items:
Velocity (GDP/M3)0.850.830.850.860.87
Velocity (non-agr. GDP/M3)0.720.720.730.730.75
Credit to economy/GDP (in percent)86.788.187.185.584.8
Credit to economy/nonagricultural GDP (in percent)101.2101.7101.8100.598.8
Sources: Bank Al-Maghrib; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework.

Sources: Bank Al-Maghrib; and IMF staff estimates.

Refers to the macro framework for the 2nd review in CR/13/302.

Revised macro framework.

Table 7.Morocco: Financial Soundness Indicators, 2008–13(Percent, unless otherwise indicated)
20082009201020112012Jun-13
Regulatory capital 1/
Regulatory capital to risk-weighted assets11.211.712.311.712.313.1
Tier 1 capital to risk weighted assets9.69.29.79.610.210.6
Capital to assets6.97.28.38.18.58.9
Asset quality
Sectoral distribution of loans to total loans
Industry18.718.318.418.418.118.9
Agriculture4.13.44.14.14.14.1
Commerce6.57.06.76.67.06.0
Construction15.914.113.313.912.612.7
Tourism2.63.22.92.82.92.7
Finance13.112.512.111.911.011.1
Public administration3.74.35.04.85.04.6
Transportation and communication4.54.24.04.14.04.0
Households26.527.628.127.628.929.9
Other4.45.45.45.86.46.0
FX-loans to total loans2.42.52.53.52.92.9
Credit to the private sector to total loans93.391.091.092.091.091.0
Nonperforming Loans (NPLs) to total loans6.05.54.84.85.05.4
Specific provisions to NPLs75.374.170.168.767.866.0
NPLs, net of provisions, to Tier 1 capital13.912.712.212.913.614.5
Large exposures to Tier 1 capital314.0376.0336.0354.0347.0326.0
Loans to subsidiaries to total loans6.46.76.16.35.44.1
Loans to shareholders to total loans2.01.00.81.21.01.0
Specific provisions to total loans4.54.03.43.53.33.6
General provisions to total loans0.20.10.20.30.70.8
Profitability
Return on assets (ROA)1.21.21.21.11.01.2
Return on equity (ROE)16.715.214.213.411.812.6
Interest rate average spread (b/w loans and deposits)3.23.13.33.33.23.5
Interest return on credit5.85.85.75.75.65.5
Cost of risk as a percent of credit0.40.50.50.50.80.9
Net interest margin to net banking product (NPB) 2/78.176.776.375.876.576.5
Operating expenses to NPB47.847.546.447.947.544.6
Operating expenses to total assets1.71.71.81.91.81.8
Personnel expenses to noninterest expenses51.949.749.149.449.249.1
Trading and other noninterest income to NPB21.923.323.724.223.523.5
Liquidity
Liquid assets to total assets24.417.312.011.710.511.0
Liquid assets to short-term liabilities24.723.016.016.114.714.9
Deposits to loans113.0108.0104.099.096.197.3
Deposits of state-owned enterprises to total deposits5.14.85.24.84.54.6
Sensitivity to market risk
FX net open position to Tier 1 Capital6.513.510.37.37.42.1
Source: Bank Al-Maghrib.

Financial Soundness Indicators (FSIs) are calculated according to guidelines of the IMF FSIs compilation guide, 2004.

Net Banking Product (NPB)=net interest margin-commissions paid+commissions received.

Source: Bank Al-Maghrib.

Financial Soundness Indicators (FSIs) are calculated according to guidelines of the IMF FSIs compilation guide, 2004.

Net Banking Product (NPB)=net interest margin-commissions paid+commissions received.

Table 8.Morocco: Capacity to Repay Indicators, 2011–18 1/
Proj.
2012201320142015201620172018
Exposure and repayments (in SDR million)
GRA credit to Morocco0.00.04117.44117.44117.42573.4514.7
(In percent of quota)0.00.0700.0700.0700.0437.587.5
Charges due on GRA credit0.00.046.146.141.720.11.4
Debt service due on GRA credit0.00.046.146.141.71564.12060.1
Debt and debt service ratios
In percent of GDP
Total external debt25.927.133.834.133.731.127.5
Public external debt22.923.930.130.530.227.724.3
GRA credit to Morocco0.00.05.55.14.62.70.5
Total external debt service2.32.32.52.52.54.04.6
Public external debt service2.32.22.12.12.13.74.0
Debt service due on GRA credit0.00.00.10.10.01.62.0
In percent of gross international reserves
Total external debt142.2148.7194.9201.6204.4192.6173.6
Public external debt125.7131.1173.3180.3183.2171.7153.2
GRA credit to Morocco0.00.031.629.928.216.73.1
In percent of exports of goods and services
Total external debt69.780.1108.9119.2128.2127.6122.0
Public external debt61.770.696.9106.5114.9113.7107.7
GRA credit to Morocco0.00.017.717.717.711.02.2
In percent of total external debt
GRA credit to Morocco0.00.016.214.813.88.71.8
In percent of public external debt
GRA credit to Morocco0.00.018.216.615.49.72.1
Memorandum items:
Nominal GDP (in billions of U.S. dollars)96.1105.5115.1125.1136.0146.7158.4
Gross international reserves (in billions of U.S. dollars)17.519.320.021.122.423.725.1
Exports of goods and services (in billions of U.S. dollars)34.635.838.941.744.847.650.9
Quota (in billions of SDRs)588.2588.2588.2588.2588.2588.2588.2
Source: IMF staff estimates and projections.

Assumes full drawings of available financing at the third review under the PLL. The Moroccan authorities have expressed their intention to treat the arrangement as precautionary.

Source: IMF staff estimates and projections.

Assumes full drawings of available financing at the third review under the PLL. The Moroccan authorities have expressed their intention to treat the arrangement as precautionary.

13. Morocco continues to meet the four exceptional access criteria. First, staff is of the view that the realization of a stress scenario related to risks of increases in oil prices and to the crisis in Europe could give rise to financing needs beyond normal access limits (criterion 1). Second, debt ratios would remain sustainable over the medium term with a high probability under the standard stress shocks (criterion 2). Third, Morocco has reconfirmed market access when it raised US$750 million at very favorable terms in May 2013, and such access is expected to continue within the timeframe when Fund resources would be outstanding if Morocco were to make purchases under the arrangement (criterion 3). Fourth, staff considers that the authorities’ program has a reasonably strong prospect of success, including with respect to the institutional and political capacity to deliver on the program. The new government has reiterated its commitment to the program, and adequate communication on the reforms and appropriate measures to protect the most vulnerable should help contain the risk that social pressures would undermine program implementation (criterion 4).

14. The safeguards assessment of BAM, completed in February 2013, found a robust safeguards framework with strong control mechanisms. BAM has made good progress in implementing safeguards recommendations from the assessment, including publication of audited annual financial statements. Existing good governance practices and key safeguards will need to be formally enshrined in the central bank law. The authorities are in the process of drafting amendments to the central bank law to address these aspects and to strengthen the autonomy of the central bank. The preparation of a new central bank law offers an opportunity to incorporate features that reflect current best international practices and assure central bank independence.

Staff Appraisal

15. The program remains broadly on track. Although the fiscal deficit indicative target at end-October was missed, the authorities’ end-year objective was met. The NIR indicative target at end-October was met with a comfortable margin. Overall, both the fiscal and external deficits have been reduced from their 2012 highs. The authorities took significant measures to strengthen their fiscal policy framework, including through measures to reduce the costs and fiscal risks associated with the subsidy system.

16. The authorities’ 2014 program should continue to reduce external and fiscal vulnerabilities. The budget appropriately targets a further reduction in the deficit, backed by a continued reduction in subsidies with increased protections for the most vulnerable. The new organic budget law, which is critical to preserving strong fiscal institutions, is planned to come into effect in time to govern the preparation of the 2015 budget. Staff underscores the need to strengthen the draft law to address issues of fiscal discipline, coverage and expenditure control, and to make key provisions effective upon approval of the law. Staff welcomes the authorities’ intention to continue their preparations towards introducing a more flexible exchange rate regime, while implementing structural measures to improve competitiveness and the business environment.

17. Morocco continues to meet the PLL qualification criteria. Morocco continues to perform strongly in three out of the five areas in which PLL qualification is assessed (financial sector and supervision, monetary policy, and data adequacy) while not substantially underperforming in the two other areas (fiscal policy, and external position and market access). Staff therefore recommends the completion of the third review under the PLL.

Appendix. Written Communication

Rabat, Morocco

January 23, 2014

Madame Christine Lagarde

Managing Director

International Monetary Fund

Washington, D.C. 20431

U.S.A.

Dear Madame Managing Director:

1. In a persistently unfavorable and uncertain international environment, the Moroccan economy performed creditably in 2013, after a difficult year in 2012. This performance reflects the economy’s strong fundamentals and its resilience to exogenous shocks, resulting from the continued implementation of sound macroeconomic policies and the significant progress in implementing structural reforms. We remain determined to continue implementing the economic policies described in this letter and in our previous communications, with a view to attaining our short- and medium-term macroeconomic objectives.

2. The government’s economic strategy is aimed at strengthening growth and employment in a stable macroeconomic framework, while reducing vulnerabilities and restoring fiscal and external buffers. However, the persistence of a difficult and uncertain external environment is likely to continue to exert pressure on our external accounts. In this context, the PLL continues to serve our country’s needs well, even though there is no immediate balance of payments need that requires using the resources of the PLL, which we will continue to treat as precautionary.

3. The objective of our PLL-supported program is to continue reducing the fiscal deficit and contain the current account deficit to ensure fiscal and external sustainability. Active labor market and emerging sector development policies, improving the education and training system, and continuing efforts to improve the business environment will help support competitiveness and job creation. The ongoing geographic and sectoral diversification of exports, especially in the agrobusiness, automobile, aeronautics, and electronics sectors, attest to the success of those efforts.

4. Morocco’s economic growth is expected to reach about 4.8 percent in 2013 as a result of a bumper cereal harvest, even if some sectors have slowed mainly because of the lagged effect of the recession in the euro area. The current account should improve by more than two percentage points of GDP, to settle at about 7.5 percent as a result of a decline in imports and positive trends in exports related to the emerging sectors, tourism revenue, and remittances from Moroccans residing abroad. The sharp increase in FDI inflows, grants, and sovereign borrowing contributed to stabilizing reserves above four months of imports throughout 2013. Assuming an average cereal harvest in 2014, overall growth should remain robust at about 4 percent, given the expected acceleration of nonagricultural growth, whereas inflation will remain low at about 2.5 percent.

5. The fiscal deficit narrowed considerably in 2013, down to 5.4 percent of GDP compared with 7.3 percent of GDP in 2012, consistent with our medium-term target of 3 percent of GDP. The stagnation of tax revenue, related particularly to the slowdown of some nonagricultural activities, was offset by the upturn in nontax revenue. On the expenditure side, wages, subsidies, other goods and services, and transfers were well contained, which helped maintain capital expenditures at their 2012 level.

6. The 2014 finance law targets to narrow the fiscal deficit further, to 4.9 percent of GDP. The law initiates the implementation of some of the recommendations of the 2013 National Tax Conference (Assises fiscales) so as to make the tax system more equitable and improve the competitiveness of enterprises. The new measures concern, in particular, reducing tax expenditures through the gradual taxation of the agricultural sector, and the VAT reform, aimed at simplifying the regime, avoiding the accumulation of credits, and reducing distortions. On the expenditure side, the government has taken important measures to control nonpriority spending to the benefit of social and pro-growth sectors. The government is committed to implement the necessary measures to ensure that the envisaged in the above-mentioned deficit 2014 budget is met.

7. In this context, the government has sharply reduced the vulnerabilities related to the subsidy system by introducing, last September, a mechanism for the partial indexation of gasoline, diesel, and industrial fuel prices. This mechanism has been accompanied by a hedging system for diesel. The annual subsidy bill was thus cut by almost 2 percent of GDP in 2013 (from 6.6 percent of GDP to 4.7 percent of GDP), reflecting, notably, the full year impact of the June 2012 increases, the fall in the consumption of some oil products and in world energy prices, and the entry into force of the indexation mechanism.

8. In accordance with the objective of reducing untargeted subsidies to 3 percent of GDP by 2016, the 2014 budget seeks to reduce this budgetary envelope to 3.7 percent of GDP, through the full-year impact of the price indexation system and the new measures introduced at the beginning of the year. In this context, the gasoline and industrial fuel subsidies have been eliminated. Furthermore, a ministerial order was published on January 16, 2014, establishing the timetable for adjusting diesel prices with a view to reducing the per-unit subsidy to the level provided in the 2014 budget law.

9. The government is gradually strengthening the social safety net and its targeting to vulnerable groups. Along with the continuous improvement of actions taken in the context of the National Initiative for Human Development to reduce poverty and social exclusion, the coverage of the TAYSSIR education program and of the RAMED health insurance program has been expanded under the 2014 finance law, while the resources of the social cohesion fund were increased, in particular to finance a program of assistance for widows in precarious situations and handicapped persons. Also, measures were taken in support of public transport, to ease the impact of fuel price hikes.

10. Regarding the wage bill, the 2014 finance law significantly reduces the net creation of new posts compared with previous years. The envisaged increased mobility of civil servants, which will be part of the public sector modernization plan, will help control the wage bill in the medium term. In addition, the government has decided to postpone to 2015 the implementation of decisions related to any revision of civil servant statutes passed during the year, apart from what was programmed in the finance law; and to no longer allow the use of budgeted positions that became vacant during the year for new recruitments.

11. The strengthening of the budget management framework represents a major priority for the government. Measures aimed at limiting the carryover of appropriations related to capital spending and at controlling the wage bill (set out in our letter of July 17, 2013) have helped to reduce considerably the vulnerabilities related to such spending in 2013, and will be carried forward until the entry into force of the new organic budget law (OBL). The draft OBL was approved by the Council of Ministers on January 20, 2014 and will be submitted to Parliament with a view to its adoption and implementation from the 2015 finance law onwards. Four ministries are already experimenting with the principles of the new organic law in 2014.

12. As part of the implementation of the pension system reform, a parametric reform of the Caisse marocaine des retraites will be launched in 2014 and should enter into force in 2015. This parametric reform will involve the retirement age, the contribution rates and the way accrued benefits are calculated. It will help lengthen the viability of the system and balance contributions and accrued benefits from the effective start date of the reform. In a second stage, a change in the institutional structure of the pension system toward a two-pillar system (private/public sector) will be implemented.

13. Bank Al-Maghrib (BAM) remains strongly committed to preserving price stability. It will continue to provide the banking sector with the liquidity necessary for the adequate financing of the economy. It places particular importance on facilitating the financing of very small, small, and medium-sized enterprises, and has all the means of control necessary for effective management of the potential risks associated with refinancing operations backed by claims on these enterprises.

14. The banking sector as a whole remains sound. The central bank continues to strengthen banking supervision through gradual introduction of the Basel III standards. The capital adequacy ratio was raised in June 2013, and BAM has adopted the regulations concerning the new definitions of prudential capital and short-term liquidity in its macroprudential framework and is ensuring gradual implementation by the banks. Nonperforming loans have increased slightly to 5.8 percent as of November 2013 (compared with 5 percent at end-2012); BAM is vigilant to ensure their adequate provisioning. In addition, the increased presence of Moroccan banks in sub-Saharan Africa and the potential related risks are closely monitored by BAM in cooperation with host-country regulators, including through joint supervision missions. An updated Financial Sector Assessment Program is planned for fall 2014.

15. The fixed exchange rate regime of the dirham against a euro/dollar basket has served Morocco well by providing an important nominal anchor. We believe, however, that increased flexibility in the exchange rate regime, well coordinated with other macroeconomic policies and the appropriate structural reforms, would give the economy greater scope for dealing with external shocks, strengthen competitiveness, promote trade diversification, and facilitate integration into the world economy. We are currently examining the options for introducing greater exchange rate flexibility while defining a new nominal monetary policy anchor. BAM is also building its analytical capacity as regards inflation forecasting, which is a crucial element for the setting up of a new monetary regime. The technical assistance from the IMF in this area is appreciated.

16. The government is engaged in a process of ambitious structural reforms to improve the competitiveness of the economy and its potential growth. Recent reforms include a revision of the law on public procurement a strengthening of the independence of the Competition Council, and a broadening of the mandate of the Economic, Social and Environmental Council. Furthermore, a full assessment of the Judiciary was conducted, and an in-depth reform of the system has been launched. In addition, several initiatives are under way to expand sector-specific policies and enhance their synergy, promote self-entrepreneurship and reduce the level of informality in the economy, while operationalizing the national strategy for small- and medium-size enterprises.

17. As regards the indicative targets under the PLL at end-October 2013, net international reserves were well above target, whereas the central government deficit target was slightly exceeded mainly because of the acceleration of capital spending during the last days of the month. We have observed, and will continue to observe, the standard criteria related to trade and exchange restrictions, bilateral payments arrangements, multiple exchange rates, and the nonaccumulation of external debt payment arrears, in accordance with PLL requirements.

18. We are committed to preserving macroeconomic stability and to reconstituting buffers for dealing with potential exogenous shocks. We remain confident that the policies described in this communication and in those of July 27, 2012, January 17, 2013, and July 15, 2013 are appropriate to achieve our objectives, in accordance with the PLL-supported program, on the basis of which we are requesting completion of the third review.

/s//s/
Mohamed BoussaïdAbdellatif Jouahri
Minister of Economy and FinanceGovernor of Bank Al-Maghrib
Morocco: Quantitative Indicative Targets
10/31/13
TargetAdj.Act. (Prel.)
Indicative targets 1/
Net international reserves (NIR) of Bank Al-Maghrib (BAM) (end-of-period (eop) stock, in millions of U.S. dollars (US$))17,10016,25517,500
Fiscal deficit (cumulative since beginning of fiscal year, eop in millions of dirham)−41,000−44,195−46,793
Memorandum item:
Adjustor on NIR (in millions of U.S. dollars) 2/2,412−8451,567
Adjustor on the fiscal deficit (in millions of dirham) 3/5,474−3,1952,279
Source: IMF staff estimates.

Evaluated at the program exchange rate (end-April 2012 8.429 MAD/US$).

The adjustors are specified in the Technical Appendix. Accordingly, the floor on NIR of BAM will be adjusted downward in the event of a shortfall of official grants and budget support loans relative to projections. The adjustors for 2013 are cumulative from end-October 2012.

The adjustors are specified in the Technical Appendix. Accordingly, the fiscal deficit ceiling will be adjusted upward in the event of a shortfall of budget support grants relative to projections. The adjustors for 2013 are cumulative from end-December 2012.

Source: IMF staff estimates.

Evaluated at the program exchange rate (end-April 2012 8.429 MAD/US$).

The adjustors are specified in the Technical Appendix. Accordingly, the floor on NIR of BAM will be adjusted downward in the event of a shortfall of official grants and budget support loans relative to projections. The adjustors for 2013 are cumulative from end-October 2012.

The adjustors are specified in the Technical Appendix. Accordingly, the fiscal deficit ceiling will be adjusted upward in the event of a shortfall of budget support grants relative to projections. The adjustors for 2013 are cumulative from end-December 2012.

See the staff report for the 2013 Article IV consultation for a fuller discussion of recent developments, outlook, risks and recent policy action.

See risk assessment matrix in the 2013 Article IV consultation report.

See the debt sustainability analysis (DSA) in the 2013 Article IV consultation.

See the 2013 Article IV consultation.

See DSA annex in the 2013 Article IV report. External debt rose from 25.1 percent of GDP in 2011 to 30.9 percent of GDP in 2013, and is expected to peak at 31.6 percent of GDP in 2015 before declining to 28.2 percent of GDP in 2018.

See the staff report for the Second Review under the PLL (CR/13/96) paragraph 19 for a discussion of measures taken to strengthen the budget framework in addition to the new OBL.

Under the most extreme shocks, the DSA shows that the external debt would remain low and sustainable, reflecting Morocco’s capacity to repay the Fund even under an adverse scenario.

Morocco—Request for an Arrangement under the Precautionary and Liquidity Line (CR/12/239).

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