Kingdom ofMorocco WT/TPR/S/8
Page 1
I. ECONOMIC ENVIRONMENT
1. TheKingdom ofMorocco currently hasapopulation of27million, ofwhom almost 60per
centareyoung people under theageof25(Table I.1). Theregional distribution ofthepopulation
islargely areflection ofthedistribution ofarable landwhich isconcentrated intheplains andthecoastal
regions ofthenorth-west. Itisinthese regions thatalmost allthecountry 'sagricultural andindustrial
activities takeplace. ThelongAtlantic andMediterranean shorelines offerexcellent opportunities for
fishing, which isoneoftheprincipal branches oftheprimary sector. Theurban population, which
hasbeensteadily expanding since thebeginning oftheeighties, nowconstitutes slightly more than
halfthetotal.1Theregions ofCasablanca, Rabat, Tangier, Kenitra, FezandMeknès aretheareas
ofhighpopulation density. Unemployment isatthecentre ofthecountry 'seconomic andsocial
concerns:nationally,about16percentofthelabourforceisunemployedandinthecitiesunemployment
stands atmore than20percent.
Table I.1
Social indicators
Population (1993) 26.7million
Fertility rate(1993) 4.3percent
Population growth (1990-94) 2.1percent
Lifeexpectancy atbirth(1994) 64years
Adult literacy rate(1990) 51percent
Urban population (1993) 50.4percent
Percapita GDP (1993) 1,027 US$
Source: Government ofMorocco; World Bank (STARS).
(1) Major features oftheeconomy
2. With agross domestic product (GDP) percapita ofUS$1,027 in1993, Morocco ranks 56th
from thetopoftheworld tablebased onvalues ofthatindicator arranged inincreasing order.2Itis
oneofthe15most indebted developing countries.3Agriculture provides employment forabout
40percentofthelabour force, cancontribute more than14percent(depending ontheyear) toGDP
andsupplies inputs forseveral industries. Thegrowth ofrealGDP anditssectoral distribution have
beenstrongly influenced bytheyears ofdrought, more especially 1992 and1993 (Chart I.1). Apart
fromrainfall, Morocco 'sannual economic performance isalsohighly sensitive tophosphate andcrude
oilprices.
1Since theeighties, thefrequent droughts have accelerated internal migration, more particularly theexodus
from thecountryside.
2World Bank (1995).
3IMF (1995a).WT/TPR/S/8 Trade Policy Review
Page 2
3. Theeffects ofthedrought arefeltfirstinagriculture, including animal husbandry, andthen
inthose industries which useagricultural products asrawmaterials. Power andwater services are
alsoaffected asaresult oftheshrinkage ofhydro-electric resources andtheadditional costs involved
insupplying water bytanker. Theproduction ofelectricity-based industries iscurtailed bythemore
frequent power cutsduetofalling reservoir levels. Themaintenance ofindustrial activity atarelatively
stable levelislargely attributable tophosphate processing andmanufacturing (including textiles and
clothing).
4. Morocco 'seconomic performance isalsoinfluenced bythepolicies oftheEuropean Union
(EU), itsprincipal trading partner: onaverage, 73percentofMoroccan citrus fruitexports, 93percent
oftomato exports, about 90percentoftextile andclothing exports, and25percentofexports of
phosphate andphosphate derivatives havetheEUastheirdestination. Services, mainly tourism, are
asubstantial source ofrevenue: tourists from theEUrepresent about 60percentoftotalarrivals.
Funds remitted byMoroccan workers living abroad areanother important source offoreign currency.
5. Informal activities areespecially welldeveloped inmanufacturing, transport, construction and
small trading, including eventrading infoodstuffs which havepassed theirsell-by date.4These
4According toastudy made byagroup ofMoroccan andFrench consultants, inrural areas 28percentof
transport activity isinformal.Kingdom ofMorocco WT/TPR/S/8
Page 3
activities involve small-scale enterprises, represent about 20percentofprivate sector activity and
contribute around 15percenttoGDP.5
(2) Evolution oftheeconomy
6. Themacroeconomic difficulties which Morocco hasbeenendeavouring toovercome formore
thanadecade mainly result from theincreased public expenditure thatfollowed theriseinworld
phosphate prices inthemid-seventies, thisexpenditure having beenmaintained atahighleveldespite
thesubsequent fallinprices.6Theefforts made asfrom1978torestore thesituation byreducing imports
andlimiting theexpansion ofdomestic credit didnotsucceed inbringing theeconomy backintobalance.
7. Thecurrent account deficit grewfrom9.6percentin1979to12.4percentin1981. External
public debtrosefromabout 26percentofGDP in1979toabout 40percentin1981andinthelatter
yearcurrency reserves represented only24daysofimports ascompared with2months in1979. In
thefaceofthissituation, since 1983 Morocco hasembarked upon aseries ofstructural adjustment
programmes aimed atreorganizing itsfinances andatliberalizing andopening uptheeconomy.
(i) Adecade ofadjustment programmes
8. Themainobjective ofthefirstphase ofadjustment (1983 to1985), considered asbeing primarily
aphase ofmacroeconomic stabilization, wastoimprove theexternal current account. Thisphase was
marked bytheinstitution ofstructural reforms involving, inparticular, theliberalization offoreign
trade. Monetary andbudgetary policies werebased oncompressing Stateexpenditure, especially on
wages, thelargest component. Capital expenditure wasalsoreduced. Monetary measures included
credit restrictions andexchange rateadjustments. Thus, thegeneral aimwastoreduce domestic demand
andimprove thecompetitiveness oflocally-produced goods.
9. During thesecond phase theinitial structural reforms were carried further. Themeasures
introducedafter1986weredesignedtoencouragedomesticsavingsandprofitableinvestment,toimprove
theallocation ofresources andtoredirect them towards exporting activities. During thisperiod the
advantages accorded toinvestment were adjusted, butwithout thisleading toacomplete revision of
thecodes. Astartwasmade onrevising thesystem ofpriceregulation, especially asregards commodity
prices. Thedirham waspegged toabasket ofcurrencies.
10. Thisprogramme began toshowresults starting in1988. Despite theinfluence ofexternal factors
(frequent droughts, continued deterioration intheterms oftrade, etc.), between 1986and1992 GDP
grewby,onaverage, 3.5percent(Chart I.2),asmeasured bytheconsumer priceindex, andtheannual
inflation ratewasonaverage about 5percent. Thebudget deficit fellfrom 8.6percentofGDP in
1986toabout 2percentin1992. Currency reserves improved andattheendof1992wereapproaching
fivemonthsofimportsofgoodsandnon-factorservices.Apartfromtheperformancedirectlyattributable
tothese programmes, thefinancial assistance which Morocco received from official multilateral and
bilateral institutions andtherescheduling ofdebtbytheParisandLondon clubs alsoplayed animportant
5These statistics donottakeintoaccount street trading, home working andclandestine activities. They relate
onlytonon-agricultural enterprises withtheir ownpermanent premises which donotkeep trading accounts.
6Thesituation waslater aggravated byother external factors suchastheoilshock of1979 andtherisein
interest rates intheindustrialized countries, Morocco 'screditors.WT/TPR/S/8 Trade Policy Review
Page 4
part.7According totheauthorities, since1993therestoration oftheviability ofthebalance ofpayments
hasmade itpossible tostoprescheduling andavoid recourse toexceptional financing.
(ii) Recent economic developments
11. Since 1993, theaccent hasbeenplaced onconsolidating macroeconomic stability, promoting
theprivate sector andextending itsfieldofaction, anddeveloping thesocial sector andtheprivate
sector 'ssupporting infrastructure.
(a) Budgetary reform
12. Taxreformhasbeenprogressivelyintroduced,withintheframeworkoftheeconomicadjustment
programmes, withtheimposition ofvalue-added tax(VAT) in1986, corporation tax(IS)in1988and
thegeneral income tax(IGR) in1990. Aimed atincreasing revenue bybroadening thetaxbaseand
improving theyield, these reforms made itpossible tobegin lowering taxrates. Thetaxoncompany
profits wasreduced from45to40percentwhen corporation taxwasintroduced in1988andto36per
centin1994. Themaximum VAT rateof30percentwasabolished andreplaced byarateof19per
centandthenumber ofbands wasreduced fromfivein1986tothreeatpresent. Theincome taxscales
7IMF (1995b).Kingdom ofMorocco WT/TPR/S/8
Page 5
havebeenmodified: themaximum ratewasreduced from52percentto48percentin1993andthen
to46percentin1994, andthetaxthreshold wasraised. The1995Finance Actintroduced anumber
ofmeasures intended tomake thetaxregime more flexible, including thereduction ofcorporation
taxby10percentofanycapital increase (where thelatter takes theform ofacontribution incash
orfrom shareholders 'current accounts) andthereduction ofthetaxontheproceeds ofshares and
similar income to10percentfrom 15percent(seeSections IV.2(v) and3(ii)formore details).
13. Asregards government expenditure, theemphasis hasbeen onrationalizing investment
expenditure andselecting theprojects tobefinanced onthebasisofviability andprofitability criteria.
Thecurrent privatization programme, while aimed atextending thesphere ofactivity oftheprivate
sector, isalsohelping toraiserevenue. Atpresent, public investment expenditure ismainly being
channelled intosocial projects suchasthepromotion ofemployment inrural areas. Thelegaltexts
governing thetransfer ofpreviously public activities totheprivate sector datebackto1989, butthe
privatization programme didnotactually begin tobeimplemented untilearly 1993.
14. TheGovernment hasmade itclearthat,where private enterprise isconcerned, itsfuture role
willbethatofanarbitrator andregulator andnolonger thatofacompetitor.8Itintends toreassure
investors, especially foreign investors, andtocomplete themodernization ofthelegalandinstitutional
investment environment (including unification ofthevarious investment codes). Oneoftheprincipal
objectives ofprivatization istorevitalize theCasablanca Stock Exchange.
(b) Monetary andfinancial reform
15. Sincecreditceilings("encadrementducrédit")wereabolishedinJanuary1991,monetarycontrol
hasmainly beenexercised byindirectly influencing bank liquidity. These measures haveinvolved
theuseofthebanks 'legal reserve ratiobyBank Al-Maghrib (theMoroccan Central Bank) andthe
fixing bythelatter ofitsmoney market intervention rates. InMay1995, theCentral Bank modified
itsrefinancing procedures byintroducing tender-based mechanisms which willhenceforth enable it
toinfluence interest ratessoastoadjust liquidity inaccordance withmonetary policy objectives.
16. AnewBanking Actwasadopted in1993. Itisaimed atdecompartmentalizing thebanking
sector andgiving itacommon legalframework, improving protection forsavers andborrowers and
extending coordination between monetary authorities andcredit institutions. Similarly, precautionary
measures havebeentaken tostrengthen thebanking system andtobring ituptointernational standards.
Atthebeginning of1995, themoney market wasremodelled withthecreation ofnewnegotiable
instruments suchascertificates ofdeposit, finance company bonds andcommercial paper.
17. Thebond auction market wasreorganized early in1995. Access tothemarket wasextended
toallpotential investors, resident andnon-resident. Forthelatter, therepatriation ofprincipal and
interest isguaranteed. Furthermore, anoffshore financial centre hasbeenestablished inTangier.
Aprogramme forconverting about US$50 million ofdebtintoequity hasalsobeensetup.Aninitial
auction involving US$20 million wasarranged forDecember 1993 and,forlackofbids, extended
toMarch 1994. Theconversion programme remains ineffect.
8Euromoney, (Supplement), May 1994: interview withtheMoroccan Minister ofFinance.WT/TPR/S/8 Trade Policy Review
Page 6
18. Since June1993, theexternal credit linesopened byMoroccan banks withforeign institutions
withaviewtofinancing imports ofgoods andservices andthesuppliers 'credits arranged byMoroccan
importershavebeenliberalized.CreditsarrangedbyMoroccanswithaviewtofinancingorprefinancing
exportoperationsandloanscontractedforthepurposeforcarryingoutinvestmentoperationsinMorocco
havealsobeenliberalized.
19. Thecomprehensive reform ofthecapital markets begun attheendof1993hadthree aspects:
thereorganization ofthestock market bothasregards itsmanagement, entrusted toaprivate company
inAugust 1995, andatmarket intermediation level, afunction performed byspecialized stock market
companies since 1995; theestablishment, in1994, ofaSecurities Market Ethics Council (CDVM),
responsible fortheprotection ofsavings invested intransferable securities andfortheproper operation
ofthesecurities markets; andthecreation ofalegal andregulatory framework governing the
establishmentandoperationofcollectiveportfoliomanagementinstitutions(investmentfundsandmutual
funds).9
(c) Exchange rateandexternal situation
20. On2May1990, Morocco devalued thedirham by9.25percentand,atthesametime, adopted
anewcurrency basket centred onthecurrencies which make uptheEcu.10Thecontinuation ofthe
monetary andbudgetary policies adopted inthecontext ofthestructural adjustment programmes, the
progressive abolition ofexchange controls (Annex I.1)andtheimprovement inMorocco 'sexternal
situation havehelped tostabilize thedirham; between 1990 and1994 itsrealeffective exchange rate
relative totheAmerican dollar appreciated byabout 7percent(Table I.2).
9Since thecreation ofthislegal framework, 13investment funds andmutual funds havebeen approved and
others arecurrently inlineforapproval.
10TheWTO Secretariat hasnodetails concerning theweightings used.Kingdom ofMorocco WT/TPR/S/8
Page 7
Table I.2
Economic performance, 1990-94
1990 1991 1992 1993 1994
GDP atcurrent prices
Inmillions ofUS$ 25,963 27,753 28,253 26,635 31,414
Annual variation
RealGDP atmarket prices 3.8 5.8 -3.6 0.2 11.5
Private consumption 1.2 10.9 -2.7 -4.1 ...
Gross fixed investment 9.4 -1.3 0.2 4.3 ...
Exports ofgoods andnon-factor services 19.7 -2.8 0.9 -0.9 ...
Imports ofgoods andnon-factor services 12.6 1.6 7.7 -6.0 ...
Index: 1987=100
Terms oftrade 92.2 90.7 100.1 ... ...
Realeffective exchange rate 93.4 94.1 95.5 97.1 99.7
Percent
Inflation 7.0 8.0 5.7 5.2 5.1
Percentage ofGDP
Government deficit (-)orsurplus (payments basis) -3.5 -2.9 -1.9 -2.3 -3.1
Current account -0.8 -1.4 -1.5 -1.6 -2.0
Trade balance -9.8 -9.7 -10.4 -10.2
Private unrequited transfers 7.8 7.3 7.7 8.3 ...
Official unrequited transfers 1.2 1.0 1.3 0.3 ...
Total official transfers 4.0 4.4 3.4 2.7 ...
External debt: total 77.7 71.2 79.4 80.6 68.3
Domestic savings 24.8 21.6 22.1 20.5 19.1
Domestic investment 24.0 22.2 22.3 22.3 20.0
Percentage ofexports
Debt service 33.3 41.9 44.5 52.5 45.6
Memorandum:
International reserves (inmillions ofUSdollars) 2,337.5 3,349.1 3,818.6 3,929.9 ...
International reserves (months ofimports) 3.2 4.5 4.8 5.2 ...
...Notavailable.
Source: World Bank; Government ofMorocco; OECD; IMF, IFS.
21. On21January 1993, Morocco formally accepted theprovisions ofSections 2,3and4of
Article VIIIoftheArticles oftheInternational Monetary Fund (IMF) which callfortheavoidance
ofrestrictions oncurrent payments andofdiscriminatory currency practices. Annex I.1describes the
exchange rateregime currently inforce inMorocco.
(d) Trade liberalization andderegulation
22. Important trade liberalization andderegulation measures havebeentaken within thecontext
oftheadjustment programmes. By1993thelevelofcustoms duties hadfallen significantly. However,
there havelately beensigns ofareversal ofthistrend. Thereforms aimed atdismantling quantitative
restrictions havefollowed asimilar pattern (Table IV.1andsections IV.2(ii)(a) and(b)).WT/TPR/S/8 Trade Policy Review
Page 8
23. Nevertheless, since themid-80s, economic liberalization seems tohavesustained amodest
increase intrade/GDP ratios (Chart I.3).11
(e) Recent economic performance
24. After stagnating in1993, in1994 GDP grew strongly byaround 11.5percent, mainly asa
result ofgoodharvests. While theprimary sector grewby63percent,therewasalsoadistinct upturn
inother activities. Private investment (domestic andforeign) mayhaveincreased, butitremains
relatively limited: investment asapercentage ofGDPhasbeenfalling since1990(Table I.2).Exports
cover about 55percentofimports; andsince1990theannual tradebalance hasamounted, onaverage,
to8.3percentofGDP.
25. Meanwhile, thetotalbudget deficit hasdeteriorated, rising from2.3percentofGDP in1993
to3.1percentin1994. Thisparadoxical situation ispartly attributable tothefactthattheagricultural
sector, which wastheengine ofgrowth in1994, hasbeen exempt from income taxsince 1986.
Moreover, agricultural imports, which aresubject torelatively highratesofcustoms duty, fellsharply
because ofthegood harvests in1994. Unemployment remains oneofthemost serious problems.
11Asmentioned intheWTO (1995), these ratios should beinterpreted cautiously. InthecaseofMorocco,
theycould reflect situations associated withthevagaries oftheclimate, theconditions prevailing ontheworld
markets forexports suchasphosphate andimports suchascrude oil,ormass tourism. However, overtheperiod
inquestion, conditions ontheworld phosphate markets were notgenerally very favourable.Kingdom ofMorocco WT/TPR/S/8
Page 9
(3) Trade performance
26. Thecontrast between thetrend inthecoverage ofimports byexports andthetrend incurrent
account balance reflects theimportance ofnettransfers which aretraditionally infavour oftheMoroccan
economy. Since 1990, transfer account surpluses haveamounted tomorethanhalfmerchandise exports.
Privateunrequitedtransfers,moreespeciallythoserelatingtotheincomesofMoroccansworkingabroad,
account formost ofthese balances (Chart I.4).
WT/TPR/S/8 Trade Policy Review
Page 10
(i) Merchandise trade
27. Morocco imports capital equipment, food, petroleum products andtherawmaterials needed
byitschemical andmanufacturing industries. Despite thefrequency ofdroughts since theearly 80's,
theshare ofimports represented byfoodandenergy products hasbeensteadily falling (Table AI.1).
Apolicy ofencouraging boththeproduction andconsumption oflocalfoodstuffs hasbeenadopted.
Itissupported bymeasures torestrict imports, inparticular licences andcustoms duties.
28. Morocco 'sprincipal exports include phosphates andtheirderivatives, agricultural products
including seafood, agro-industrial products, andtextiles. Since thebeginning ofthe80's,theshare
ofrawmaterials intotalexports hasbeensteadily falling infavour ofmanufactures, especially chemicals
andclothing, whereas theshare offoodstuffs hasremained almost stable (Chart I.5andTable AI.2).
Thisreflects theefforts made topromote theprocessing ofmining products before export.
29. TheEuropean Union isMorocco 'sprincipal trading partner, accounting formore thanhalf
ofitsimports andmore than60percentofitsexports; France supplies more than20percentof
Moroccan imports andreceives more than30percentofMoroccan exports (Chart I.6andTables AI.3
andAI.4).
Kingdom ofMorocco WT/TPR/S/8
Page 11
(ii) Trade inservices
30. Interest ontheforeign debt, more orlessstable since 1980, isthemain source ofimbalances
intheexternal services account. These deficits haveshrunk inthecourse ofthelastfewyears; they
fellfrom 7billion dirhams in1990 to2.8billions in1994, mainly asaresult ofimprovement inthe
items "other transport" and"other services". Travel, including tourism, hasbeenthesource ofthe
surpluses traditionally recorded byMorocco initsnon-factor service trade.
(4) Outlook
31. Theeconomic outlook for1995 isnotencouraging because ofthedrought. Overall, rainfall
between September 1994andJune1995wasmore than60percentbelow thelevelofayearearlier.12
InMorocco, thisyear'sdrought isregarded asthedrought ofthecentury because ofitsseverity.
12Moroccan periodical L'Economiste, 8June 1995.WT/TPR/S/8 Trade Policy Review
Page 12
32. Generally speaking, the1995cereal harvest ispoorandcould contribute toafallinrealGDP
of4.2percent, according totheMoroccan Business Centre, or6percentaccording tothebanks.
Theinflation ratecould reach 7percent.13Itwillbepossible tolimitthebudget deficit toabout 3.5per
centofGDPonlyifdrastic measures toreduce expenditure aretaken ingoodtime.14In1995, foreign
currency reserves areexpected tofallbyabout 3billion dirhams.
33. TheGovernment isnowtreating thedrought asastructural phenomenon requiring long-term
measures andnolonger asacyclical phenomenon, asithasinthepast. Catchment boards willbe
setuptomanage water resources andtopolice polluters. TheGovernment hasreleased 1.99billion
dirhams tofinance thecorresponding programmes. These funds should make itpossible tofinance
programmes intheareas oflivestock preservation (435million dirhams), drinking water supply
(592million dirhams) andlanduse,including rural employment (966.4 million dirhams).15
13Nachrichten fürAuenhandel, 22August 1995.
14Africa Economic Digest, 31August 1995 (press conference given bytheMoroccan Minister ofTrade and
Industry).
15Moroccan periodical L'Economiste, 15June 1995.Kingdom ofMorocco WT/TPR/S/8
Page 13
Annex I.1
Foreign exchange regime
34. Thedirhamhasgraduallybeenmadeconvertibleforcurrenttransactionsandforeigninvestment.
Thishasencouraged thepursuit oftheprocess ofliberalization offoreign exchange transactions. The
regimecurrentlyinforceenableseconomicoperatorsfreelytosettleaccountsrelatingtoimports,exports,
international transport, insurance andreinsurance, foreign technical assistance andtourism. However,
theexporter isrequired torepatriate theproceeds ofhissaleswithin 150days, although hemaywithhold
some oftheforeign exchange forhiscommercial requirements. Foreign trade ismonitored through
thedocuments made outbytheoperators forgoods which aregenerally commercial innature.
35. Theprincipal foreign exchange restrictions currently inforce concern themovement offunds
byMoroccan residents. Thelatterareauthorized totransfer abroad onlyfunds intended tocover social,
medical orprofessional expenses. These include school fees,thecostoftreatment andhospitalization
inforeign centres, correspondence course fees,thecostofparticipating incultural andscientific events
heldabroad, including registration fees,andsubscriptions toforeign publications. ForaMoroccan
resident, theauthorized tourist foreign currency allowance isequivalent to5,000 dirhams.