Chapter

7 Adjustment and Development: The Case of Morocco

Editor(s):
Saíd El-Naggar
Published Date:
September 1987
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Since the summer of 1983, Morocco has been engaged in implementing a structural adjustment program with assistance from the International Monetary Fund and the World Bank. Justification for the adjustment program stems from the magnitude of the disequilibria, both internal and external, in the Moroccan economy.

On the domestic front, public finance imbalances had become considerable. The government treasury deficit had risen to DH 12.8 billion in 1981 and DH 10.5 billion in 1982,1 namely, 71.4 percent and 51.2 percent, respectively, of treasury resources, or 16.7 percent and 11.6 percent, respectively, of gross domestic product (GDP).2

The external imbalances were no less significant. In fact, the emergency was induced by those disequilibria and their effects on the country’s debt. The balance of payments deficit on current account had increased to nearly $1.9 billion in 1981 and 1982, representing 12.5 percent and 12.7 percent of GDP, respectively. It was financed by capital inflows and recourse to the Fund’s resources under the enlarged access policy. External indebtedness had consequently reached a critical point: $8.3 billion in 1981 and $9.6 billion in 1982—equal to 54 percent and 60 percent of GDP, respectively. In the same years, debt service accounted for 31 percent and 35 percent, respectively, of the proceeds of exports of goods and services. Finally, international reserves barely sufficed for one month of imports.3

The purpose of this paper is to analyze Morocco’s adjustment policy. The task is not easy, for the issue is vast and complex and the perspective is short. How can an adjustment policy be assessed after three years, when the program is at best midway? However, despite the difficulties, and particularly the lack of a long-term perspective, we shall attempt to analyze the early results and the problems before proceeding to the prospects.

Before describing the adjustment program, however, it would be useful to devote a few lines to the origins of Morocco’s economic disequilibria and the attempts that were made to relieve them. Although these efforts did not involve official agreements with international financial institutions, they were undertaken in consultation with such institutions and with their support.

Disequilibria and Adjustment “Without” the Fund

Origins of the Disequilibria

Morocco’s most recent bout with internal and external macroeconomic disequilibria did not begin in the early 1980s. These imbalances arose in the mid-1970s and increased rapidly, reaching intolerable levels by the end of the decade.4 The reasons can be traced to external shocks and the country’s economic policies.

The external shocks consisted mainly of the disturbances and the crisis to which the international monetary and financial system has been subjected. These included the abrupt rise in the prices of petroleum and industrial products, which raised the cost of Morocco’s imports; depressed raw material prices; slackening economic activity in the industrial countries; and limitations on access to industrial country markets (protectionism), which affected outlets for Moroccan exports and resulted in a deterioration of the terms of trade. There was also another factor, namely, the expenditure incurred when fighting broke out in Morocco’s Saharan provinces.

Morocco’s economic policies in those years magnified the external economic disturbances instead of diminishing them. In the wake of a phosphate price flare-up that lasted little over a year, euphoria set in, and government investments soared. The 1973–77 development plan was revised and expanded in the summer of 1975, although prices on the world phosphate market had been declining for some months. Government investment expenditures, which were to have totaled DH 12 billion during the plan period, were thus increased to DH 26 billion, rising from 4.7 percent of GDP in 1973 to 20.8 percent in 1977. Then, with income from phosphates no longer commensurate with the aspirations of the revised plan, the budgetary deficit expanded and the authorities turned resolutely to external financing.

The result was a remarkable growth rate, the most rapid undergone by Morocco since independence, with GDP rising on annual average by 7.4 percent between 1973 and 1977.5 In terms of imbalances, however, the cost was enormous. In that same period, the trade deficit rose from DH 938 million to DH 8,542 million. The balance of payments on current account was reversed, from a surplus of DH 431 million in 1973 to a deficit of DH 8,824 million ($2,045 million), equivalent to 17.7 percent of GDP in 1977. The external debt increased from $999 million to $4,085 million. The government treasury deficit was galvanized, multiplying tenfold from DH 689 million (3.2 percent of GDP) to DH 7,588 million (15.2 percent of GDP).6

Thus, it took only a few years of relatively rapid economic expansion in the context of the international crisis to lay bare the rigidities of the productive structure, the structural disequilibria of the underdeveloped economy, and the consequences for the extroverted model of accumulation. The result has been not the reversal of a sound situation but the accelerated onset of disequilibria that would only have taken longer to grow and reach an alarming stage. It also reveals the lags of economic policy and its failure to adjust to realities.

Since 1978, Morocco has taken action to deal with these disequilibria.

Attempts at Stabilization

The Plan of 1978–80

The first attempt to remedy this situation consisted of the 1978—80 Three-Year Plan, readily presented as a stabilization plan, a pause, “a period of transition and deliberation” in which “adjustment measures” and “corrective measures” were to be implemented in order to relieve “strains in the basic equilibria” and “current economic” difficulties “without deflecting us from our long-term development targets.”7

In the official view of the time, Morocco’s economic situation was thus basically sound. It was merely a matter of adopting measures (not policies), limited in time, in order to “correct the financial and monetary situation” (the economic situation being regarded as sound) with a view to the “implementation of economic and social development.”8

The projected measures were designed to achieve two objectives. The first was to reduce the balance of payments deficit on current account by limiting imports and stimulating exports, tourism, and remittances from Moroccans employed abroad. The other was to “maintain an investment volume likely to assure a level of economic growth compatible with the concern to combat unemployment” through incentives for the private sector, reform of the public sector, and the encouragement of private and public saving (restrictive budgetary policies).9

The annual growth rate projected by the Three-Year Plan was 4.9 percent in volume. This was admittedly less than in the previous five-year period, but still relatively high for a stabilization program. The actual growth rate, at 4.1 percent, was somewhat lower. The decline from the 7.4 percent rate recorded under the 1973—77 plan was due to a decrease in overall investments, particularly in government investment, which fell both in absolute terms and in relation to GDP. Thus gross fixed capital formation declined from DH 15,349 million in current terms in 1977 to DH 13,776 million in 1980, namely, from 32.8 percent of GDP to 20 percent. Expenditures in respect of the government capital budget declined from DH 10,360 million in 1977 to DH 7,843 million in 1980, but the total over the Three-Year Plan period was still high and exceeded the amount spent in the last three years of the 1973–77 plan (DH 23.5 billion as against DH 22.9 billion).10

An improvement did take place in the “basic equilibria.” The government treasury deficit rose slightly in absolute terms (from DH 7,588 million in current terms in 1977 to DH 8,502 million in 1980), falling in relative terms from 15.2 percent of GDP to 12.1 percent. The export/import ratio increased from 40.7 percent to 57.3 percent owing to the restriction of imports (particularly capital goods) and the increase in exports. The balance of payments on current account also improved, the deficit declining from DH 8,224 million in 1977 to DH 5,500 million in 1980, namely, from 17.7 percent to 7.8 percent of GDP. But the balance of payments deficit on current account over the three-year period as a whole totaled DH 17,423 million, that is, $4,413 million. It was financed by capital inflows. As a result, the external debt increased to $7,109 million in 1980, with debt service rising from 10.7 percent to 27.3 percent of exports of goods and services.11

Early Planning in 1981–85

The situation in 1980 had improved in terms of restoration of the basic equilibria but aroused concern as far as the external debt was concerned. This mixed situation explains the oscillations of economic policy, between more adjustment and more growth, at the turn of the decade: both tendencies were manifest in the development plan and the adjustment program drawn up at the time.

The 1981–85 Development Plan. This was presented frankly as a plan for the revival of economic growth, adjustment being regarded therein as a precondition for growth: “. . . improvement of these (internal and external) equilibria will be sought so that they do not hinder economic revival, which remains the essential prerequisite for consolidation of our gains and attainment of our social objectives. Economic and financial policy will thus be aimed at providing the conditions for a new impetus to economic activity.”12

The plan projected an average annual GDP growth rate of 6.5 percent in volume through an annual increase in investment of 7.7 percent, so that gross fixed capital formation could represent on average 25 percent of GDP, as against 20 percent in 1980.13

In the conditions for growth, stress was laid on the following:

  • Mobilization of private saving.
  • Improvement of fiscal equilibrium through “the reinforcement of austerity policies,” the rationalization of expenditure and public enterprises, reform of the tax system, and a national compulsory loan.
  • Improvement of the balance of payments on current account through pursuit of a policy of selective import reduction, the promotion of exports—particularly industrial—and of tourism, and encouragement for remittances from Moroccans employed abroad.
  • Improved price regulation, with cost price being taken into account, and the rehabilitation of distribution channels.

The sectoral priorities were agriculture, with a view to self-sufficiency in food and the development of exports; marine fisheries; energy; and professional and managerial training.

Special attention was devoted to selecting projects on the basis of their contribution to production, balance of payments equilibrium, and employment. 14

The Adjustment Program. As indicated by its name, the adjustment program negotiated with the Fund in 1980 focused on adjustment rather than growth.15 The negotiations did not end in an official agreement committing Morocco’s economic policy for the period from July 1980 through June 1983. But the adjustment program that was discussed exerted a powerful effect on the actions of the Moroccan authorities. What were its major features?

Overall, the program projected an annual GDP growth rate of 4.5 percent, less ambitious than the 6.5 percent of the 1981–85 plan. This presupposed an investment ratio of 21 percent, a higher domestic saving ratio, and restrictions on private and public consumption.

In the fiscal area, the treasury deficit was to be reduced, the increase in operating expenses to be brought down to 1 percent a year, and revenue to be stimulated through reform of the tax system. All these were to generate a surplus for capital expenditure (the annual amount of which was to be DH 7 billion).

As regards external equilibrium, the balance of payments deficit from current account was not to exceed 5 percent of GDP in 1983. To that end, the program provided for the liberalization of foreign trade and depreciation of the exchange rate of the dirham.

Four sectoral objectives were envisaged:

  • The restructuring of agriculture with a view to the increased production of export goods and also to higher output on subsistence farms.
  • The encouragement of export industries.
  • Profitability for public enterprises, mainly through a revision of the rates and fees charged for government services and utilities.
  • The reduction of energy dependence through higher domestic production and the limitation of consumption through cost pricing (prices to be raised to eliminate consumer subsidies on petroleum products).

In the period covered by this “unofficial” adjustment program, Morocco not only had recourse in 1980 and 1981 to resources under the Fund’s enlarged access policy in the amount of DH 781 million and DH 821 million, respectively, and in 1982 to the compensatory financing facility, but also, in the latter year Morocco was granted a stand-by arrangement in the amount of SDR 281.5 million, of which SDR 197.5 million was drawn that year and the remainder in early 1983. Fund assistance in 1982 thus totaled DH 2,885 million.

The results were mediocre at best. GDP growth over the period was often slow and irregular, at 3.6 percent in 1980; 1.3 percent in 1981; 6.8 percent in 1982; and 2.2 percent in 1983. Admittedly, these results reflect the drought experienced by Morocco in those years, during which agriculture was damaged. But neither were the results brilliant in the secondary sector: minus 2.5 percent in 1980, minus 0.1 percent in 1981, 2.2 percent in 1982, and 3.1 percent in 1983. What was more, as stated at the beginning of this paper, there was a deterioration in the fundamental equilibria—public finance and foreign trade—and the debt and its servicing reached an alarming level. Pressure on external asset reserves became such that the authorities had to suspend importation of many products in March 1983 and to institute an import deposit requirement in May of that year.

The need for re-examining the situation had become urgent. This was done in consultation with the Fund and resulted in the adjustment plan for July 1983–88.

Adjustment with the Fund and the World Bank

This is a structural adjustment program with two components—general and sectoral—adopted officially by Morocco in agreement with the International Monetary Fund as regards the first component, and the World Bank as regards the second, in both cases with the stated dual concern of equilibrium and growth.

The general adjustment program went into effect immediately under the supplementary budget law of July 1983. Each sectoral adjustment program also went into effect immediately after it had been drafted and adopted, a process that was staggered over time.

General Adjustment Program

Three short comments are required before discussing the rationale and the features of the general adjustment program.

The first concerns the relationship between the general adjustment program and the sectoral adjustment programs. The former outlines each sectoral program, gives the substance of the decisions to be taken, and refers to the sectoral program for detailed information about the measures and their timing.

The second comment is that the general adjustment program is a medium-term program—five years in duration—which signifies both a longer period of Fund surveillance than the usual few years, and a broader range of Fund action, going beyond monetary measures to take in the whole of economic policy.

The third comment is that the program is divided into stages whose length coincides with those of the stand-by arrangements (generally 18 months), whose credits in support of implementation of the program are released as it progresses. Each stage was to be followed by an evaluation and an adjustment of the program, if necessary. This made for some flexibility in implementation.

In the case of Morocco, the first stage began in July 1983 (standby arrangement in the amount of SDR 300 million, September 1983) and the second in 1985 (stand-by arrangement in the amount of SDR 200 million, September 1985, plus SDR 115 million under the compensatory financing facility); the third will probably start at the beginning of 1987.

Underlying Logic

The major constraint in Morocco is the external disequilibrium, with its corollary: indebtedness. It is therefore to establish as an imperative the restoration, by stages, of “sustainable” equilibrium in the balance of payments on current account by 1988. For this purpose it is necessary to control the growth of overall demand by moderating the rate of increase of private and public consumption (wage and staff freezes, high tax rates, etc.), which rate must remain below that of GDP—which itself is reduced—and by curtailing the investment ratio. This will facilitate restoration of fiscal equilibrium and stimulate domestic saving, both of which must be supported by appropriate measures and policies. At the same time, a limitation of domestic absorption levels, accompanied by supply-side measures, will free up and encourage production, for export in particular, tying in with a promotion policy that also includes tourism and remittances from Moroccans employed abroad.

Targets

One of the program’s main objectives was the gradual reduction of the balance of payments deficit on current account from 9 percent of GDP in 1983 to 7.5 percent in 1984, followed by 6.5 percent in 1985, and 4 percent in 1986. Another target was reduction of the government treasury deficit (not including payments of arrears) from 7 percent of GDP in 1983 to 6 percent in 1984, 6.3 percent in 1985, and 4 percent in 1986. Furthermore, the program aimed at generating an annual GDP growth rate of 3 percent and reducing the investment ratio from 20 percent in 1983 to 16 percent in 1988.

Instruments

The instruments consist of measures affecting the various branches of economic policy and of structural reforms generally conducted under special sectoral adjustment programs undertaken in cooperation with the World Bank. They comprise four fields of action. These are external payments, public finance, monetary policy, and structural reforms.

External Payments. The first two measures are designed to reduce excessive protection of industry and to orient industry into exports. They are the subject of a sectoral adjustment program with the World Bank, called industrial and trade policy adjustment (ITPA).

As regards the debt, the program seeks to consolidate and stabilize it, avoiding excessive recourse to external borrowing, particularly in the short term. The rescheduling of debt installments due since 1983 was intended to prevent excessive pressure on the balance of payments and the Treasury, whose deficit financing plan had to be drawn up in agreement with the Fund. It is also aimed, in association with other measures, at raising the level of net official external assets (reserves). The target for end-1985 was to be equivalent to about two weeks’ imports.

Public Finance. The ordinary state budget was to move back into surplus in 1986 in order to provide partial financing for a reduced level of capital expenditure (DH 6 billion in 1983 and DH 7 billion in 1984) and to limit the overall government treasury deficit to 4 percent of GDP.

The budget was to be balanced, and then brought into surplus, by action affecting both ordinary revenue and ordinary expenditure, the former being projected to rise more rapidly than the latter.

The authorities took a number of steps in the area of revenue. First, tax revenue was to be maximized by improved collections (control of evasion), followed by such tax reforms as the institution of a value-added tax, a general individual income tax, and a company profits tax, making it possible to sustain tax pressure or even to increase it. Second, the principle of free public services, such as education and health for the affluent, and of the mass availability of certain benefits, such as scholarships, was to be re-examined. Third, investment expenditure in irrigated areas was to be recovered through a levy on the higher-income agricultural landowners involved.

With respect to ordinary expenditure, restrictions were to be placed on civil service hiring and the wage freeze policy was to be continued.

Price Stabilization Fund expenditure was to be reduced gradually through higher prices for subsidized products (cost pricing), beginning with petroleum products. Rates for public services and utilities (water, electricity, and railroads) were to be increased with a view to a reduction in treasury subsidies to the public sector institutions concerned. To improve profitability, public enterprises were to be audited, reorganized, and more closely supervised. Education policies were to be overhauled, with a view to limiting expenditure.

Notwithstanding all these measures, the bulk of the fiscal adjustment effort was to focus on the capital budget. The targets of the 1981–85 plan were considered excessive in relation to the Government’s resources, particularly since an enormous amount of appropriations, totaling DH 75 billion (DH 27 billion in available appropriations and DH 48 billion in commitment authorizations) had remained unexpended in the first four years of the plan and had accumulated for use in the final year. The adjustment program restricted the volume of appropriations committable in 1985 to 20 percent of that amount, namely, to DH 15 billion, and decided that the investments should be programmed on the basis of compatibility with the foreseeable resources and with the principle that their financing should not aggravate the debt profile.

The World Bank proposed, among other things, two criteria for improving government investment effectiveness and identifying the projects meeting them:16 low capital intensity, immediate profitability, and a positive net impact on the balance of payments. It was also specified that procedures for rationalizing the planning, budgeting, and monitoring of investment expenditures would have to be devised when the next development plan was prepared.17

Monetary Policy. The objective that monetary policy was designed to achieve was reduced pressure on the balance of payments—and exchange reserves—through the regulation of overall demand. An important measure taken to that end was the limitation of money creation, through credit control, and the limitation of monetary financing of the Government Treasury. The rate of growth of the money supply was to be 10 percent in 1984 and 13 percent in 1985, as against 16 percent in 1983. Also, interest rates on term deposits were increased to encourage saving. This was part of a program for reform of the financial system prepared in cooperation with the World Bank.

Another important step was development of the money market and increased intervention therein by the Bank of Morocco.

Structural Reforms. Except for a few reforms taking place without a special program agreed with the World Bank, such as the reform of the tax system discussed above, all the sectoral reforms are being undertaken as part of programs prepared in cooperation with that agency, which monitors their implementation and supports them with special loans granted for the purpose.

Sectoral Adjustment Programs

These are numerous, and are aimed at covering most of the economic sectors, and even some noneconomic sectors such as the national education system.18 They are also aimed at agriculture, industry, foreign trade, public enterprises and, through these, energy, drinking water, rail transportation, and the financial system.

Clearly, some of these programs, such as in agriculture, industry, and foreign trade, are more important than others. However, the agricultural program is new and cannot be expected to produce real results in the short term. On the other hand, the ITPA program affords an excellent basis for evaluating results because implementation is well advanced and the program covers a broad field including not only industry and foreign trade but also reform of the financial sector and the public enterprises. Meanwhile, the public enterprise rationalization loan (PERL), which is still being negotiated with the World Bank, has been devised for the latter.19

Cost Pricing and Market Pricing

The object of price policy under the adjustment program is to eliminate the artificiality of prices subsidized or controlled by the Government. This liberalization of prices has been programmed as a staggered process over time. The prices of about 45 products were decontrolled between 1983 and 1985.20 Expenditures of funds from the Price Equalization Fund were limited by the increase in staple food prices, and subsidies to public enterprises likewise, by higher utility fees (water, electricity, and transportation).

Price-controlled products are now in the minority and consist of the following:

  • Subsidized products, namely, three consumer articles (oil, flour, and sugar) and fertilizer.
  • Petroleum and petroleum products, the prices of which have been maintained at high levels despite the decrease on the international market and the decline of the U.S. dollar, replenishing the Price Equalization Fund and the Government Treasury (subsidies in reverse).
  • Public services and utilities, the prices of which could be partially liberalized (for example, transportation) or less rigidly fixed. The same applies to a few sensitive products such as pharmaceuticals.
  • Certain services provided under monopolistic conditions (for example, pilotage and lighterage).

The Financial Sector

Reform of the financial sector, like that of the prices sector, is provided for by the general adjustment program referred to earlier, and also by the ITPA, a sectoral adjustment program, which is in an advanced stage of implementation. The reform consists of a large number of measures, including a flexible interest rate policy that provides for periodic reviews, positive real interest rates in order to encourage saving, the liberalization of certain rates (deposits for periods of over one year), and the setting of minimum and maximum rates only on lending and borrowing, respectively. Another measure is the development of the money and financial market through central bank intervention and the issue of treasury loans at rates attractive to the public.

Competition between commercial banks and specialized financial institutions was encouraged, and an exchange risk cover fund was created.

Agriculture

The adjustment program for agriculture is designed to improve the efficiency and allocation of resources in the sector through a set of progressive short- and medium-term measures. One of the main features is elimination of the distortions within the agricultural sector that penalize dryland farming—the fallow system—which produces the grain and oilseed crops in which Morocco is deficient. Ways of accomplishing this include gradually eliminating subsidies on inputs (fertilizers) and the setting of target prices (world prices plus a 25 percent protection margin). Another important element of the program is gradual liberalization of foreign trade in foodstuffs through the elimination of monopolies and quotas and the deregulation of agricultural and agro-industrial product marketing. A final aspect of the adjustment program is the phasing out of generalized consumer subsidies—hence price increases—offset by assistance programs for targeted low-income population groups. Implementation of the agricultural adjustment program has barely begun.

Public Enterprises

Action with regard to the public sector has been in three stages. The first, mainly a study phase, took place in the late 1970s. The ministry in charge of public enterprises numbered over 600 in 1979. The Government had a controlling interest of over 33 percent in more than two thirds of these.21

The second stage (1983–86) was pursued under the general adjustment program and was provided for specifically by the ITPA program. The main measures involved were a reduction of government transfers to public enterprises and a corresponding increase in their prices and rate schedules; the preparation of an inventory and settlement plan for public sector payment arrears; privatization of the capital or the management of certain public enterprises (in the fishery, sugar, and tourism sectors); the institution of restructuring operations in other sectors (transportation and mines); and preparation with the World Bank of the PERL structuring program for the public sector as a whole.

The third stage, now beginning, consists of implementation of the medium-term program, comprising two lines of action. The first of these is rationalization—of management (improved financial performance), of relations between the Government and the public enterprises (greater economy), and of the Government’s sectoral activity (restructuring).

The second line of action can be described as disengagement, which signifies privatization and sometimes even simply the closing of enterprises.

Industry and Foreign Trade

The policies on industry and foreign trade are both presented in one program, the ITPA,22 which went into effect at the beginning of 1984 and is progressing well.23

Morocco’s protection system favors import-substitution industries and penalizes export industries where profitability is higher and Morocco enjoys a comparative advantage. This is economically irrational since it misallocates resources and has a negative effect on the trade balance.

The program envisages a set of measures to be implemented gradually on short- and medium-term bases. One main measure is depreciation of the dirham—which is regarded as overvalued. This will be offset by the repeal of the special 16.5 percent tax on imports. Another step is the progressive reduction of tariff and nontariff protection. The maximum tariff rates are to be cut back to 100 percent at first and to 25 percent in the medium term. Last, restructuring programs are to be organized for unprofitable industries that could be harmed by lowered protection.

Implementation of the program is fairly well advanced. The dirham has been heavily devalued in terms of the major currencies (50 percent in relation to the French franc and the deutsche mark and 30 percent in relation to the U.S. dollar and the pound sterling).24 The special import tax has been cut in half (to 7.5 percent, with a further reduction to 5 percent under the 1987 budget law). The maximum customs duty rate is 45 percent. Finally, nearly 90 percent of all imports (Schedule A) are uncontrolled. The remainder (Schedule B) requires authorization. Since the beginning of 1986, the General Import Program has no longer provided for prohibited imports (Schedule C).

Since the structural adjustment program has been in effect from the summer of 1983, a number of questions suggest themselves. Has it achieved its intended purposes? What problems has it encountered? What are its prospects for the future?

Problems and Prospects

The first problem relates to the results. Others are deeper and relate to the design and effectiveness of the adjustment policy. Results can be assessed either in terms of the targets or in relation to the situation on the eve of the adjustment program. After two full calendar years of adjustment program implementation—1984 and 1985—the results by either criterion are hardly convincing (Table 1). Data from 1983 cannot be taken into account in assessing the results, partly because the new adjustment program only came into operation in July, and partly because imports of a number of products were suspended—as noted earlier—in March, and were subsequently only gradually liberalized. The 1983 external accounts were thus artificially improved.

Table 1.Economic Indicators

(in billions of dirhms)1
Indicators1980198119821983219841985319864
Trade balance–7.2–10.4–13.5–10.9–15.3–16.912.5
Export/import ratio (percent)57.453.447.957.555.656.263.0
Balance of payments on current account–5.6–9.6–11.4–6.4–8.8–7.2
Balance of payments on current account (percent of GDP)8.012.512.76.88.46.02.0
External debt, year-end (in billions of U.S. dollars)7.18.09.09.4512.8514.0
External debt, year-end (percent of GDP)40.054.060.071.05109.05
External debt service as a percentage of exports of goods and services627.330.634.728.6531.95
Same, before rescheduling of external debt60.071.0
Government treasury deficit–8.5–12.8–10.5–8.0–7.5–10.7–9.0
Government Treasury (percent of GDP)12.116.711.68.57.18.96.6
Money supply year-on-year Increase December to December10.915.511.018.09.017.715.9
GDP growth rate3.6–1.36.82.32. 14.35.7
Investment (percent of GDP)22.622.423.320.921.721.717.8
Gross domestic saving (percent of GDP)12.58.710.112.511.113.415.0
Cost of living, annual average increase9.412.510.56.212.57.78.8
Sources: Bank of Morocco; the World Bank; and Fund staff estimates. ‘Unless otherwise specified.

Unless otherwise specified

1983 was a year of overlap, with the adjustment program with the Fund beginning in July. The years 1980—82, years of the adjustment policy “without” the Fund, are shown for the record and to afford a longer statistical series.

Provisional data.

“‘Estimate (see footnote 26).

After rescheduling of external debt.

Including remittances from Moroccans employed abroad.

Sources: Bank of Morocco; the World Bank; and Fund staff estimates. ‘Unless otherwise specified.

Unless otherwise specified

1983 was a year of overlap, with the adjustment program with the Fund beginning in July. The years 1980—82, years of the adjustment policy “without” the Fund, are shown for the record and to afford a longer statistical series.

Provisional data.

“‘Estimate (see footnote 26).

After rescheduling of external debt.

Including remittances from Moroccans employed abroad.

The balance of trade has continued to deteriorate, notwithstanding a sharp depreciation of the dirham. The export/import ratio has not improved; it has remained very low at about 55 percent. There was a slight improvement in the balance of payments on current account in 1985, but the deficit remains substantial at over $750 million. This has resulted in a deterioration of the external debt indicators, notwithstanding the reschedulings obtained since 1983.

There has also been a deterioration on the domestic front. The government treasury deficit has worsened in absolute terms and in relation to GDP (see Table 1). Money creation slowed in 1984 but accelerated again in 1985, rising above the ceiling set. The economy’s liquidity ratio has increased,25 heightening fears—by reason of the deferred impact of money creation—regarding the macroeconomic equilibria in 1986. In fact, after a slowdown in 1985, the official cost of living index resumed its rise early in 1986. (It was 7.7 percent in 1985, and 8.8 percent in 1986.)

At the same time, the rate of GDP growth decreased sharply. It was 2.3 percent and 2.1 percent in 1983 and 1984, respectively, falling below the rate of increase of the population (2.6 percent) and the GDP growth target of 3 percent. Furthermore, it has undergone sharp annual fluctuations, ranging from 2.1 percent in 1984 to 4.3 percent in 1985 (Table 1).

On the sectoral level, the structural adjustment programs are too recent and their results can only be evaluated in the medium or long term. Agriculture has suffered from several years of drought causing the volume of farm production in constant dirhams to decline by 3.7 percent in 1983 and by 0.3 percent in 1984, with an increase of 12.1 percent in 1985. Manufacturing also fell off in 1984 (by 1.7 percent), but rose slightly in 1985 (by 0.9 percent).

Finally, the investment rate remains high (higher than 20 percent and above the target), and the domestic saving rate continues low.

The outcome in 1986 will certainly be better than in 1985, owing to exceptional circumstances which are independent of the adjustment program. According to the latest estimates (Table 1), GDP will rise by 5.5–6 percent in the wake of a record agricultural crop; the cost of living will rise by 8.8 percent; the treasury deficit will be DH 9 billion (6.6 percent of GDP); and the balance of trade will improve (deficit of DH 12.5 billion, import cover rate of approximately 63 percent) under the double impact of the fall in the cost of imported oil (minus DH 5 billion) and cereals, and increased exports of manufactured products (by over 24 percent). This, taken together with higher remittances from Moroccans working abroad and increased income from tourism, will reduce the balance of payments deficit on current account to about 2 percent of GDP—an improvement on the target figure.26

The only dark spot in the picture is the budget slippage, where the deficit remains above the target level, despite the increase in proceeds from the levy on petroleum products, as a result of the level of public investment—although this is falling—and higher Compensation Fund expenditure (the price to be paid for the excellent cereal harvest). In this connection it is worth noting the smaller gap between domestic investment, which is falling, and domestic saving, which is rising (17.8 percent and 15 percent of GDP, respectively).

Money creation also reflects the still sizable fiscal deficit. Although the rate of increase in the money supply slowed somewhat compared with 1985 (15.9 percent against 17.7 percent), more than two thirds of the new money issued ended up in the Treasury (the rate of increase in claims on the Treasury was 22.2 percent, whereas that for credit to the private sector was only 8.6 percent).27

So 1986 will be better, particularly as far as the external balance is concerned, but when all is said and done this is due less to the adjustment program than to independent, “exogenous” factors such as an excellent grain harvest, lower petroleum prices, the decline in the dollar, and reduced interest rates. The total value of this advantageous “countershock” can be estimated at about $1.5 billion.28

Consequently, although short-term prospects are favorable, the problem of the design and effectiveness of the adjustment program remains.

Design of the Adjustment Program

The second section of this paper described the general and sectoral components of Morocco’s adjustment program since the summer of 1983. The design of the program raises two interrelated problems. These are the role of equilibrium and the relationship between adjustment and development.

The adjustment program is an excellent illustration of the excessive importance attached to the concept of equilibrium in economic analysis and policy.29 This is apparent both in diagnosis and in treatment. It is disequilibrium in the balance of payments on current account that is the reason for adjustment. And this is effected mainly through currency depreciation—to attain the equilibrium exchange rate—the restoration of equilibrium in the public finances, and a restrictive monetary policy—to assure equilibrium in the market for goods and services. The objective is achievement of a “sustainable” balance of payments equilibrium in the medium term.

However, although equilibrium remains generally accepted as an analytical tool, it is being questioned as a norm. In the contemporary economic policies of developed and developing countries, disequilibrium—maintained within certain limits—is “desirable” to the extent it makes it possible to achieve essential targets (for example, full employment at the cost of a budgetary deficit in Keynesian-inspired policies or growth stimulated by moderate inflation).30 Certain writers, such as A.O. Hirschman, have even formulated a strategy for unbalanced growth in which disequilibrium is the motor.31 The problem is to determine in practical terms the limits within which the disequilibrium is “tolerable” and favorable, and the thresholds that must not be crossed.32

Equilibrium also takes on importance in the relationship between adjustment and development—it swings the balance in favor of adjustment. But in developing countries such as Morocco, the basic objective of economic policy is development. Adjustment may be no more than a means, subordinated to achievement of this prime objective, which requires growth, not recession or stagnation. This is self-evident.

The underlying idea of structural adjustment programs is to achieve adjustment and growth at one and the same time. Hence adjustment and growth are not contradictory. Quite the opposite: adjustment makes sound growth possible. There is thus no dilemma, and no need to choose between adjustment and growth.

Yet the 1983 adjustment program opted for adjustment, as its name shows. It chose to restore the major macroeconomic equilibria in the medium term at the cost of a reduction in growth (the target is 3 percent per year). Growth and development are thus deferred, put off until later. The choice can be summed up in the words “adjustment first, then growth and development” or, in other words, “adjustment for growth,” the adjustment program being called on to re-establish the conditions for growth. Morocco’s adjustment program is thus an example of the notorious “stop-and-go” policy.

Such a policy has, in fact, been in effect in Morocco since the 1960s and characterized its development plans, which alternate between five-year growth plans (1960–64, 1968–72, 1973–77, and 1981–85) and three-year stabilization plans (1965–67 and 1978–80).33 But although the alternation continues, there has been a gradual shift toward adjustment since the late 1970s. Not only has Morocco had successive adjustment programs since 1978, but the role of growth and development in them has been increasingly reduced. We may generalize by saying that there has been a shift from adjustment without sacrificing growth and development to adjustment for growth and development. Admittedly, the shift has not been continuous; there have been moments of hesitation and regression. At the end of the 1970s, for instance, a five-year expansion plan (1978–82) had been completely finalized when it was replaced by a three-year stabilization plan (1978–80); and the 1981–85 Five-Year Plan for “revived economic growth” was hobbled by the 1980 and 1983 adjustment programs. These hesitations, and the lack of determination of economic policy, affected the results. Nor were these the only instances.

Effectiveness of the Adjustment Program

The structural adjustment program promises advantages for Morocco, but it also has its limitations.

Strong Points. Morocco’s adjustment policy gave the opportunity to assess its development policy, the situation of the various economic sectors, and the many measures taken in different areas.

The Moroccan Government has carried out many studies since the late 1970s on such subjects as the public sector, industry and foreign trade, agriculture, and taxation.34 These studies have revealed inconsistencies in policy and in action. There is, for instance, a contradiction between protectionism and incentives for industry on the one hand and, on the other, the promotion of exports of manufactured products, which is handicapped by protectionism; and between the Government’s price policy and the needs of food farming, particularly grain farming, which must be developed if the objective of self-sufficiency in food is to be met.

To remedy this situation, medium-term sectoral programs have been drawn up in cooperation with the World Bank.

However, it is not enough to undertake studies or to design adjustment programs. They must also be implemented. This is where the support and the financial assistance of the Fund and the Bank have been decisive in overcoming resistance within the Government and the reluctance, or even the opposition, of interest groups, or in clearing the decks for dealing with legitimate social demands.

Limitations. These stem primarily from the economic and social cost of the adjustment program. Once population growth and the slowdown of economic growth are taken into account, since 1983 (and even since 1980) adjustment policy has coincided with zero development, which means that there has been hardly any progression in the average standard of living. This means that the lowest-income groups have suffered in particular from the policies of cost pricing, wage freezes, and increases in unemployment.

The second limitation, which flows partly from the first, relates to the difficulties and lags in the implementation of the adjustment program. The data in Table 1 indicate the extent of these lags in the general adjustment program, the slippages of macroeconomic policy.

The situation of the sectoral adjustment programs varies, because they were started at different times and are being implemented at different rates: the program for industry and foreign trade (ITPA) is well advanced, the one for agriculture started up recently, and the one for the public sector (PERL) is just beginning.

These irregularities in advancement are associated with a third limitation, namely, inadequate coordination between the general adjustment program and the sectoral adjustment programs and also among the latter.35 Granted, a minimum amount of consistency is ensured by the fact that the Fund’s general adjustment program refers to the sectoral adjustment programs and that the latter have all been drawn up in cooperation with the same agency—the World Bank—which oversees their implementation and encourages them through special loans. However, the various programs do not form part of one overall program, even less a medium- and long-term development strategy which, in addition to assuring coordination and consistency, could provide linkage between adjustment, growth, and development. The plan would be an ideal framework for such a purpose. Unfortunately—by an irony of fate or as a result of this crisis—it has been put on the back burner since the late 1970s. Since then, matters of monetary and financial management—under the aegis of the Ministry of Finance—have consistently occupied center stage. It is significant, and symptomatic, that 1986 was a year without a plan.

Another contradiction, or at least an inconsistency, stems from the perverse consequences of the policy of massive depreciation of the dirham. On the one hand, it has increased public expenditure—Price Equalization Fund and external debt service—thus contributing to the budgetary “slippages.” On the other hand, it has raised production costs (through higher prices for imported inputs), particularly in the export industries it is supposedly encouraging; this, in turn, reduces the impact of incentives.

The last limitation—analogous to the previous one but actually different in nature—relates to the allocation, hierarchic organization, and relationship in time of the various policies that constitute adjustment policy instruments, for example, budgetary, monetary, and exchange policies.

This is one of the most difficult problems of economic policy. Certain principles have been suggested as contributions to a solution. For example, J. Tinbergen says that economic policy must have at least as many instruments as it has targets. R.A. Mundell contends that every instrument must be used for the objective on which it exercises the most direct relative influence and the greatest impact. He also proposes a means of determining the order in which the various instruments of mixed policy will be used. For instance, in the presence of a double disequilibrium, one should start by manipulating the instrument that will correct both, though to a different extent.36

In Morocco, implementation of the adjustment program seems to have observed the principles of Tinbergen and Mundell, using exchange policy to restore external equilibrium and budgetary and monetary policy to restore equilibrium in the budgetary area and in the market for goods and services. The Convergence Rule, on the other hand, has not been respected.

In fact, on the one hand dual operations were carried out on the external front through depreciation of the dirham and the liberalization of foreign trade, in the fall of 1983 and throughout 1984, but at a time when the economy was overheated and external reserves were low (less than one month of imports). As a result, the trade deficit widened, and pressure on the exchange reserves was such that a system of priorities and waiting lists was instituted. At this time, applicants for foreign exchange must wait two and a half months to purchase it. Budgetary and monetary instruments should probably have been used in a coordinated fashion in order to affect absorption before the devaluation of the currency and the liberalization of foreign trade.

On the other hand, the authorities sought to make up for the lags of domestic macroeconomic policy (specifically budgetary and monetary policy)—particularly in 1985—by devaluing the dirham to a much greater extent than the program provided for (30–50 per-cenr, over half of which took place in 1985 alone, as against an initial target of 16.5 percent). The results, as we have seen, were not impressive. It was the wrong policy. In addition, the appropriateness of exchange rate devaluation, as a solution for crisis in an underdeveloped country within the context of an international economic crisis, certainly should have been weighed with greater care and caution. Finally, the devaluation process itself—a slow creep between September 1980 and August 1983 and between August 1983 to the end of 1984, followed by a sharp drop until the spring of 1986 and then no appreciable change—was perhaps not the most advisable course.37

Prospects for Improvement

As we have seen, 1986 is a good year. What about 1987? It is difficult to make forecasts, with so many variables and imponderables, particularly as regards the international economy and the rainfall. But our purpose here is to outline some perspectives for adjustment and development in Morocco in the short and medium term.

If the favorable trends of 1986 continue—as assumed in drawing up the 1987 budget law—the end of the tunnel will be reached in 1987 without much effort. The current account of the balance of payments will be in equilibrium, commercial arrears will have been settled, the ordinary government budget will be in equilibrium (or even slightly in surplus), the overall treasury deficit will be down to DH 8.5 billion (5.6 percent of GDP), and the inflation rate will be less than 8 percent. Debt rescheduling will still be necessary, particularly as payments postponed since 1983 pile up.

The draft budget law for 1987 is in the tradition of the previous budgets and expects to “continue in the same path . . . of adjustment and rehabilitation.” In the fiscal area, it describes the 1987 budget as “a decisive step toward re-establishment of the equilibria.” In order to restore the basic equilibria, the budget law envisages a reduction in the volume of absorption in order to bring overall demand in line with supply. In the words of the Minister of Finance, “It has become necessary to reduce public and private domestic demand by cutting public expenditure on operations and investment and through credit and income policies.”38

Like its predecessors, the draft budget continues to assign priority to adjustment as against growth and development. At the most, it proposes some deferred middle path. “It [the draft budget law] is an attempt to reconcile the necessity for strict management of the Government budget with the need to create a suitable environment for the economic recovery to which we aspire.” It also continues to refer—obliquely—to the stop-and-go policy: “In the not too distant future, when the current disequilibria have been definitively controlled, we will be able to resume our normal development programs on solid foundations....”

Another important objective of the 1987 budget law is to limit the part played by the Government in development and to appeal to the private sector: “. . . in these circumstances, it is up to all the active forces in the country to take up their responsibilities in the development effort instead of leaving it entirely to the State.”

All this agrees with the Government’s program of action, presented to Parliament in November 1986. The program’s objective is to “ensure social justice . . . to bring about a better equilibrium between the town and the countryside . . . to raise the standard of living of Moroccan citizens, increasing the population’s income by bringing together the two factors of the complex equation linking our economic development to our population increase.”39 To that end, the program, “relying on private initiative and economic liberalism,” intends to continue the overall and sectoral adjustment policies, laying special stress on agricultute—with a view to achieving self-sufficiency in food in the coming decade—on educational reform, and on the reform of public and semipublic enterprises (anticipating their ultimate privatization). It will even seek to make up the delays in certain sectors (employment, the establishment of a single agency dealing with investors, reform of the civil service, health, and justice). The Government’s plan of action will be set forth in detail at the sectoral level in a development plan, to begin in 1988, that will probably range over five years (1988–92). Planning is thus to resume, but the planning itself has been revamped in order to square better with economic liberalism. It will be a reformed type of planning, a force for efficiency and consistency that will coordinate various short-term sectoral policies and measures and also harmonize adjustment policies and measures with the development strategy.40

The new style of plan is supposed to be “more pragmaric,” to “offer greater incentive,” and to encourage greater participation, yet at the same time to be more flexible, more adaptable in that the targets will be updated each year to take account of the changing economic situation. Producing economic budgets will allow better monitoring and control of the execution of the plan, and will also enable the plan and the national budget to be more closely linked.41

The next development plan will attempt to reconcile two objectives: to bring the structural adjustment program to a successful conclusion and to achieve a higher economic growth rate (4—4.5 percent per year) than the population growth rate, so as to meet the basic needs of the people and to help create jobs.

Its main options are rural development, the promotion of small-and medium-sized enterprises, manpower development, and regional planning.

Reactivation of the plan will certainly make for economic rationalization, the necessity for which is urgent in time of crisis. But it comes late in the day, whereas the adjustment program has taken up the entire stage for over three years. On the other hand, while the development plan is being prepared, it seems that the connection between the objectives of the government program (raising the standard of living and social justice) and the instruments that are to bring it about—economic liberalism and the adjustment policy—is very loose, different from the linkage in what Hirschman calls a “compulsive sequence,” i.e., one whose achievement is highly likely.42 This means that the success of the government program will depend on the international economy, entrepreneurial dynamism, and, last but not least, the Government’s own actions, particularly under its development plan.

The central Government’s course of action, its economic policy—at least for the short term—is set out in the adjustment program, the latest installment of which runs from autumn 1986 to spring 1988, coinciding with the new Fund stand-by arrangement, but for the most part it is not covered by the next development plan (which takes effect in 1988).43

In other words, it is to be feared that adjustment will continue to take precedence over growth, and that the promises of restoring the balance in favor of the latter, and of integrating adjustment into a medium- and long-term global development strategy and perspective, will at least be deferred. This view seems particularly valid because Morocco’s external debt reschedulings at the beginning of 1987 are partial and merely offer a breathing space of $2.7 billion against a debt of $14—15 billion,44 and because the new money promised at the March 1987 meeting of the Consultative Group in Paris was only $126 million—much less than Morocco had hoped.45

Conclusion

Two related comments come to mind at the end of this summary of Morocco’s adjustment policy, its problems, and prospects. The first of these concerns the fragility of the medium-term prospects. The achievements are so tenuous and the uncertainties so great that the perspectives change constantly. From the end of 1984 until the fall of 1985, the adjustment horizon, which had originally been projected for 1988, receded continually—mainly as a result of the lags and slippages of economic policy—until the least favorable scenarios put it at 1991. Then suddenly, only a few months later, the clouds cleared and in the second half of 1986 the planners glimpsed a horizon in the near future—a balance of payments equilibrium on current account in 1987. These changing perspectives—not to mention the problem of the external debt, constantly looming in the background with an outstanding indebtedness of about $14 billion that is far from settled—should suggest caution and humility and restrain the bouts of optimism to which some of Morocco’s economic policymakers are given.46 At this point, the success of the adjustment program is at stake.

The second comment concerns the timeliness of the adjustment program. The 1983 adjustment program was launched just in time—even a little late. It was necessary and salutary to survey the situation, to reorganize, and to rationalize, overall and at the sectoral level. What warrants re-examination is the design of the adjustment program and the manner in which it was implemented. What warrants discussion is its economic and social cost. Is it rational these days to continue stop-and-go policies, particularly in an underdeveloped country? Is it appropriate to encourage “zero development” in an underdeveloped country?

1The exchange rate of the dirham (DH) to the U.S. dollar ($) was as follows (buying rate): end-December 1981: $1 = DH 5.32; and end-December 1982: $1 = DH 6.25. (See Bank of Morocco, Annual Report, 1981 and 1982, Table A.57.)
2Data derived from, and calculations based on, information from the Bank of Morocco’s reports cited in footnote 1.
3Ibid.
4The origins and the causes of Morocco’s economic disequilibria are an interesting question that merits discussion at greater length but is extraneous here, as it is not the main purpose or this paper.
5See the 1978–80 Three-Year Plan, Vol. 1, p. 85.
6Derived from, and calculations based on, the Annual Reports of the Bank of Morocco.
71978–80 Three-Year Plan, Vol. I, pp. 135–36; italics, the author’s.
8Ibid.
9Ibid., pp. 136–38.
101978–80 Three-Year Plan, Vol. I, pp. 108–109. Invescments under the government budget in the 1973–77 Five-Year Plan period totaled DH 26.3 billion.
11Ibid.
121981–85 Plan, Vol. I, p. 135.
13Ibid., p. 173.
14For the conditions of growth and the priorities, see the 1981–85 Plan, Vol. I, pp. 135ff.
15These negotiations took place in secret, and as they were unsuccessful, all we have on the question is the article of H. El Malki, “Crise économique et financière—Austérité et FMI: Le cas du Maroc” (Economic and Financial Crisis—Austerity and IMF: The Case of Morocco), Afrique et Dévloppement (Dakar), Vol. 10, Nos. 1–2, 1985.
16World Bank, “Priorités pour I’investissement du secteur public’ (Priorities for Public Sector Investment). See also ITPA.
17The PNAP (National Program for Project Analysis), inaugurated in 1985, meets this concern by training civil service specialists in project analysis.
18This sector is of interest to the Fund and the World Bank because expenditures on the national education system are an important item in the government budget. The objective of the adjustment plan is to stabilize them and to improve the efficiency of the education system through reform.
19This program is supported by a World Bank loan of the same name.
20Price decontrol antedated 1983. It began in 1980, under the adjustment program undertaken “without” the Fund and the World Bank.
21The exact figure was 617, in 435 of which the Government held more than 33 percent.
22The subject of a World Bank publicatioo, Morocco—Industrial Incentives and Export Promotion (Washington: World Bank, May 1984).
23See B. Hamdouch, “La politique des échanges extérieurs au service de la nouvelle politique industrielle au Maroc” (Foreign Trade Policy in the Service of Morocco’s New Industrial Policy), a paper presented at the International Colloquium on Crisis Management Policies and North-South Relations, 1NSEA, Rabat, May 1986.
24See B. Hamdouch, “FMI et politique de change, le cas du Maroc” (The IMF and Exchange Policy: The Case of Morocco), a paper presented at the International Symposium on International Financial Agencies and Third World Development Problems organized by the Association of Moroccan Economists, Rabat, April 1986.
25See Bank of Morocco, Annual Report, 1985, pp. 81—82. In addition to money and quasi-money, liquidity includes liquid assets, consisting of deposits with the National Saving Fund and the National Agricultural Credit Fund, and short-term treasury notes subscribed by individuals and enterprises. Liquidity increased 11.9 percent in 1984 and 18.4 percent in 1985, whereas the GDP at current prices rose by only 10.7 percent and 14.2 percent, respectively.
26Which was to be 3,5—4 percent of GDP. The figures are derived mainly from a speech made by the Finance Minister when presenting the 1987 Finance Bill to Parliament (La Vie Économique (Casablanca), November 7, 1986, p. 5).
27SeeLa Vie Économique (Casablanca), March 20, 1987.
28Ibid.
29Christian de Boissieu, Principes de politique économique (Principles of Economic Policy) (Paris; Economica, 2nd ed., 1979), pp. 276ff. See also Makhrar Diouf, “Les Fondements théotiques des politiques d’ajustement du FM1 dans les pays sous-développés” (The Theoretical Foundations of IMF Adjustment Policies in Underdeveloped Countries), Afrique et Développement (Dakar), Vol. 10, No. 1–2, 1985.
30Ibid.
31Albert O. Hirschman, The Strategy of Economic Development (New Haven: Yale University Press, 1958).
32Similarly, a Fund economist speaks in terms of a “viable balance of payments position,” which she defines as follows: “A viable balance of payments position is normally conceived of as a current account deficit that can be financed by normal capital inflows and that can be sustained without restrictions.” See Wanda Tseng, “The Effects of Adjustment,” Finance & Development (Washington), Vol. 21 (December 1984), pp. 2–5.
33See F. Oualalou, “Propos d’économie marocaine” (Observations on the Moroccan Economy) (Rabat: SMER, 1980), pp. 166 and 170ff; B. Hamdouch, “Mutations de la politique de developpement au Maroc” (Changes in Economic Policy in Morocco), in Le développement économtque: théories et politiques en Afrique (Algiers: OPU, 1984).
34The studies were later taken over and refined by the World Bank to serve as a basis for the sectoral adjustment programs.
35The World Bank is apparency in the process of integraring the various sectoral studies into an overall report on the Moroccan economy.
36Jan Tinbergen, “Techniques modernes de la politique économique” (Modern Economic Policy Techniques) (Paris: Dunod, 1961); R.A. Mundell, “The Appropriate Use of Monetary and Fiscal Policy for Internal and External Stability,” Staff Papers, International Monetary Fund (Washington), Vol. 9(March 1962), pp. 70–79. See also Christian de Boissieu (cired in footnote 29), pp. 3 and 36ff; E. Alphandery, Cours d’ analyst macroéconomique (Course in Macroeconomic Analysis) (Paris: Economica, 1976), pp. 333ff and “Choix entre la politique monétaire et ia manipulation du taux de change pour rétablir le plein emploi et I’équilibre de la balance des paiements” (The Choice Between Monetary Policy and Exchange Rate Manipulation to Restore Full Employment and Balance of Payments Equilibrium), Revue Économique (Paris), Vol, 25 (November 1974); and E. Alphandery and G. Delsupehe, Les politiques de stabilisation (Stabilization Policies) (Paris: P.U.F., 1974), pp. 50ff and 158ff.
37See Hamdouch (cited in footnote 24).
38Statement of the Minister of Finance presenting the 1987 draft budget law. La Vie Économique (Rabat), November 7, 1986, pp. 6–7. Subsequent quotations are from the same source.
39The program implements the Royal Directives given to Parliament in October 1986. See he Matin du Sahara (Casablanca), October 11 and November 4, 1986.
40See interview with the Minister of Planning on behalf of the Prime Minister, Le Matin du Sahara (Casablanca), October 9, 1986; and the report of his lecture to the CGEM (employers), Le Matin du Sahara, October 16, 1986, and L’Opinion (Rabat), October 15, 1986.
41Ibid.
42See Hirschman (cited in footnote 31), pp. lOOff.
43Stand-by arrangement in the amount of SDR 230 million for the adjustment program covering the period October 1986—March 1988.
44$ 1.8 billion by the London Club and $0.9 billion by the Paris Club. See La Vie Économique (Casablanca), March 20, 1987, and L’Opimon (Rabat), March 10, 1987.
45Ibid. See also L’Opinion, March 11, 13, and 18, 1987; Le Matin du Sahara, March 9, 12, 13, 14, and 17, 1987; and La Vie Économique, March 13, 1987.
46Particularly the Ministers of Finance, who asserted vociferously and continually from the mid-1970s until the summer of 1983, when the symptoms of the crisis were evident, that Morocco’s economic situation was sound and that the difficulties were transient and financial, not economic. The same euphoria set in again in the summer of 1986.

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