Morocco has been undergoing major political and social changes over the past three years. The new government was successful in maintaining political and social stability during the period immediately preceding and following the passing away of King Hassan II and the enthroning of King Mohammed VI in July 1999. Significant progress was also made in opening up the political system, strengthening transparency, governance, the rule of law, and human rights protection. Moreover, at a time when the country was hit by two consecutive catastrophic droughts, the authorities have maintained their good track record in stabilizing and reforming the economy, and have strengthened their fight against poverty and exclusion. My authorities wish to express their appreciation for the hard work and useful analysis and advice of the staff. They highly value the Executive Board’s views and recommendations, and broadly agree with the thrust of the staff appraisal. In what follows, I will comment on recent economic and social developments, monetary and financial policies in 2000 - 2001, and the main challenges for the period ahead.