Morocco - Financial Sector Development Project

Document of THE WORLD BANK FOR OFFICIAL USE ONLY Report No: 19417 IMPLEMENTATION COMPLETION REPORT KINGDOM OF MOROCCO FINANCIAL SECTOR DEVELOPMENT PROJECT Loan Nos. 3365-MOR through 3373-MOR June 30, 1999 Private Sector and Finance Development Department Middle East and North Africa Region This document is for limited distribution. Recipients may only use it in performance of their official duties, and its contents may not be released without authorization by the World Bank.  CURRENCY EQUIVALENTS as of May 31, 1999 Currency Unit = Dirham (DH) DH 1.00 = US$0.1006 US$1.00 = DH 9.9422 ABBREVIATIONS AND ACRONYMS BAM Banque Al-Maghrib (Central Bank of the Kingdom of Morocco) BCM Banque Commerciale du Maroc BCP Banque Centrale Populaire BMCE Banque Marocaine du Commerce Exterieur BMCI Banque Marocaine pour le Commerce et / 'Industrie BNDE Banque Nationale pour le Developpement Economique CAS Country Assistance Strategy cM Credit du Maroc CSDL Contractual Savings Development Loan FMDL Financial Markets Development Loan FY fiscal year ICR Implementation Completion Report IEFP Industrial Export Finance Project IFP Industrial Finance Project MoF Ministry of the Economy and Finance of the Kingdom of Morocco PEP Plancher d'Effets Publics (mandatory placements in Treasury bonds) SBVC Societd des Bourses de Valeurs de Casablanca SGMB Societe Gen&rale Marocaine de Banques SME small and medium enterprises MOROCCAN FISCAL YEAR July 1 - June 30 Vice President: Kemal Dervis Country Director: Christian Delvoie Sector Director: Wafik Grais Task Team Leader: Stephanie Gober  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT KINGDOM OF MOROCCO FINANCIAL SECTOR DEVELOPMENT PROJECT Loan Nos. 3365-MOR through 3373-MOR TABLE OF CONTENTS PREFACE ............................................ii EVALUATION SUMMARY iii IMPLEMENTATION COMPLETION REPORT .I PART I: PROJECT IMPLEMENTATION ASSESSMENT .1 A. Statement/Evaluation Of Objectives ......................... I B. Achievement of Objectives ......................... 3 C. Major Factors Affecting the Project ......................... 6 D. Project Sustainability. ................... - ... 9 E. Bank Performance ......................... 9 F. Borrower Performance ......................... 9 G. Assessment of Outcome ......................... 10 H. Key Lessons Learned ......................... 10 PART II: STATISTICAL TABLEs 1.. A. Standard tables.12 B. Sector-Specific Data .24 Appendices: Borrowers' Contributions to the ICR A- Ministry of Finance: Direction du Tresor et des Finances Exterieures B- BMCE: Banque Marocaine pour le Commerce Exterieur C- BMCI: Banque Marocaine pour le Commerce et l'Industrie D- CM: Credit du Maroc E- BCP: Banque Centrale Populaire F- Wafabank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   - ii - IMPLEMENTATION COMPLETION REPORT KINGDOM OF MOROCCO FINANCIAL SECTOR DEVELOPMENT PROJECT Loan Nos. 3365-MOR through 3373-MOR PREFACE This is the Implementation Completion Report (ICR) for the Kingdom of Morocco's Financial Sector Development Project. This project consisted of nine loans: a structural adjustment loan to the Kingdom of Morocco and eight investment loans to seven commercial banks and one state-owned development bank. The structural adjustment component (Loan No. 3365-MOR) in the amount of US$125 million equivalent was approved on June 25, 1991 and made effective on November 14, 1991. The investment component (Loan Nos. 3366-MOR to 3373-MOR) in the amount of US$110 million equivalent was approved on June 25, 1991 and made effective April 10, 1992 through May 7, 1992, as the individual borrowers fulfilled their obligations. The adjustment loan was closed on June 30, 1993, six months after the original closing date of December 31, 1992. The first tranche, released upon effectiveness, was disbursed by January 6, 1992; the second tranche was released on June 17, 1993, and the loan was fully disbursed by July 1, 1993. Seven of the eight loans in the investment component of the project were closed on December 31, 1997, as planned. Loan No. 3366-MOR to Banque Nationale pour le Developpement Economique was closed on December 31, 1998, one year after the original closing date. Disbursements for the investment component totaled US$76.7 million equivalent, and the remaining US$33.3 million was cancelled. The ICR was prepared by Stephanie Gober and Leila El Hafi and reviewed by Lorenzo Savorelli of the Private Sector Development and Finance Department of the Middle East and North Africa Region. Some borrowers provided completion reports that are included as appendices to the ICR. Preparation of this ICR was begun during the Bank's final supervision/completion mission, November 30 through December 11, 1998. It is based on materials in the project file. The borrowers contributed to the ICR by commenting on the text and, in some cases, by submitting their own evaluation reports.   - iii - IMPLEMENTATION COMPLETION REPORT KINGDOM OF MOROCCO FINANCIAL SECTOR DEVELOPMENT PROJECT Loan Nos. 3365-MOR through 3373-MOR EVALUATION SUMMARY Introduction The Financial Sector Development Project (FSDP, or "the project") was the follow-up to two previous World Bank lines of credit, the Industrial Export Finance Project (IEFP) and the Industrial Finance Project (IFP). The new project was a hybrid of eight lines of credit to Moroccan banks and an adjustment loan targeted at financial sector reforms. The adjustment component built on reforms which were begun by the Moroccan government in the 1980s and which have continued under current World Bank operations. Project objectives The FSDP was designed to support financial sector reforms while simultaneously providing medium- and long-term financing for the private sector. The project's structural adjustment component was to promote indirect instruments of monetary management, the development of financial markets, the liberalization of most interest rates and the elimination of directed credit policies, and the strengthening of bank supervision and regulations. The project's investment component was to encourage the broad participation of Moroccan financial institutions operating on a sound commercial basis by making available a package of lines of credit to be on-lent to a large and diversified base of private firms. In total there were nine loans totaling US$235 million equivalent. The adjustment component was a loan to the Kingdom of Morocco in the amount of US$125 million equivalent. The investment component comprised eight loans, guaranteed by the Kingdom of Morocco, totaling US$110 million equivalent. The borrowers were: Banque Nationale pour le Developpement Economique (BNDE, a state-owned development bank), Banque Marocaine du Commerce Exterieur (BMCE), Banque Commerciale du Maroc (BCM), Wafabank, Banque Marocaine pour le Commerce et l'Industrie (BMCI), Banque Centrale Populaire (BCP), Societe Generale Marocaine de Banques (SGMB), and Credit du Maroc (CM). The objectives of the project were directly related to the Bank's country assistance strategy for Morocco, which included completing the remaining phases of macroeconomic reforrns and developing the private sector. Tranche releases were tied not only to the completion of specific financial sector reforms, but also to continued satisfactory overall macroeconomic performance. The investment component was expected to cover about 18% of the projected demand for industrial investment credit during the commitment period of the Bank loans.  - iv - Implementation Experience and Results The release of the adjustment loan tranches was predicated on well-defined criteria. The first tranche of $75 million was released at effectiveness. The second tranche for US$50 million was originally expected to be released in early 1992, dependant on (a) fulfillment of six conditions specified in the Loan Agreement, (b) satisfactory progress on the overall financial sector reform program as set out in the policy matrix, and (c) continued satisfactory overall macroeconomic performance. The second tranche was actually disbursed in June 1993, when the majority of the conditions had been met. It was noted that although not all of the macroeconomic indicators were on target, the shortfalls could be attributed to exogenous factors rather than to policy slippages. The macroeconomic framework was therefore deemed satisfactory for the tranche release. The objectives of the investment component were broadly defined as encouraging the participation of Moroccan financial institutions which operate on a sound, commercial basis, and supporting investment financing by a large and diversified base of private firms. With the exception of BNDE, the participating Moroccan financial institutions generally achieved the objective of operating on a sound commercial basis. BNDE's audit reports have been qualified due to non-compliance with regulatory standards (which has since been corrected) and non- consolidation of accounts. BNDE did not complete the technical assistance program for which US$200,000 of its loan had been designated. It is difficult to assess the overall impact of the credit lines on the Moroccan economy. Only 70O of the US$110 million investment component was used. Sub-loans under the US$2 million free limit were expected to represent about two-thirds of the World Bank funds. In the end, more than 80% of the disbursed amount was for sub-loans less than US$2 million, with the average sub-loan amount estimated to be about US$780,000. About 80% of the Bank loans were expected to finance industrial investment; this was very close to the actual result of approximately 81% of sub-loans in industrial sectors. A total of 98 projects were funded under the FSDP, and the overall portfolio was diversified, reaching eight different economic sectors. With the cancellation of 30% of the credit lines, the investment component seems to have only partially achieved the objective of reaching a large and diversified base of private firms. When the FSDP became effective, banks participating in the investment component were facing a shortage of medium- and long-term resources. Since 1994-95, the Moroccan banking system has had surplus liquidity, with deposits significantly exceeding loans. Moreover, the gradual suppression of the Plancher d'Effets Publics (PEP--mandatory placements in Treasury bonds) during the life of the project made more funding resources available for medium- and long-term lending. Other donors also provided funds to Moroccan banks, and some of these funds were denominated in local currency, reducing the cost of funds by eliminating foreign exchange risks. In addition, implicit costs such as administrative follow-up and delays caused by World Bank approval procedures made the credit lines less attractive than other sources of funds. Because less expensive resources were readily available in the Moroccan market, it was financially rational for most of the participating banks to cancel the undisbursed amounts of their World Bank credit lines. For banks such as BNDE who maintained their loans as an additional source of potential liquidity, the expectation that they would eventually use the funds led to  - v - disbursement delays. The original disbursement estimates and project design are therefore judged to have been realistic, given the market conditions at the time of appraisal. The reforms undertaken under the project's adjustment component are likely to be sustainable. The financial sector reforms achieved under the FSDP provided a solid base for follow-on projects. The sustainability of the investment component is uncertain. Although the borrowers have indicated that the World Bank lines of credit provided long-term resources at a time when they were needed and that the system now has sufficient liquidity, they did not provide numeric data to show the actual impact of the credit lines in the private sector. The effect of the investment component and its potential sustainability are therefore unclear. Overall Bank performance on this project is rated as satisfactory. The identification and preparation of the project were satisfactory, as was appraisal. Bank supervision of the project is rated as deficient, with 15 months passing between supervision missions on three different occasions. More regular supervision might have allowed significant issues such as the slow disbursements for some of the banks to be handled more proactively. The performance of the Borrower on the adjustment loan is rated satisfactory. Both sets of tranche release conditions were achieved with only minor delays, and macroeconomic policies upheld the framework set at project appraisal. The Guarantor for the investment component failed to comply with the covenant of the Guarantee Agreements for the Foreign Exchange Risk Coverage Scheme: in the case of BNDE, the Guarantor accumulated substantial arrears on foreign exchange losses, creating financial problems for BNDE and affecting its utilization of the credit line. The overall performance of the banks participating in the investment component was satisfactory. The lines of credit were on-lent to a diversified group of private firms, and the banks generally operated on a sound commercial basis. BNDE's compliance with covenants is rated as deficient, due to its non-completion of the technical assistance program and to continued deficiencies in its audit reports. The outcome of the adjustment component is satisfactory. The adjustment loan achieved its major reform objectives, paving the way for future financial reforms under other Bank projects. The outcome of the investment component is satisfactory. The funds were used to finance a variety of private investment projects, and when market conditions changed and the funds were no longer needed, most of the banks cancelled their credit lines in a timely manner. Summary of Findings and Key Lessons Learned Using successive projects to build sectoral reforms can be an effective development strategy. The investment component of the FSDP was a continuation of the IEFP and the IFP, and the adjustment component supported a series of financial sector reforms which have been added to by successive operations such as the Financial Markets Development Loan and the Contractual Savings Development Loan I. The cancellation of 30% of the investment loans was due in part to the inflexibility of past Bank lending products to changing market conditions, and also possibly to the lack of regular and proactive supervision when favorable conditions for disbursement were existing. New LIBOR-based products should allow clients to use Bank funds more effectively in a changing rate environment.   - 1 - IMPLEMENTATION COMPLETION REPORT KINGDOM OF MOROCCO FINANCIAL SECTOR DEVELOPMENT PROJECT Loan Nos. 3365-MOR through 3373-MOR PART I: PROJECT IMPLEMENTATION ASSESSMENT A. Statement/Evaluation Of Objectives Project Objectives and Design 1. The Financial Sector Development Project (FSDP, or "the project") was designed to support financial sector reforms while simultaneously providing medium- and long-term financing for the private sector. Its central objective was to increase the supply of long-term capital to private entrepreneurs, while supporting financial sector reforms to encourage efficient allocation of investment and broader participation by the various segments of the private sector. Specifically, the project's structural adjustment component was to promote: (i) the transition towards indirect instruments of monetary management; (ii) the development of financial markets, in particular for Government securities; (iii) the liberalization of most interest rates and the elimination of directed credit policies; and (iv) the strengthening of bank supervision and regulations. The objective of the project's investment component was to encourage the broad participation of Moroccan financial institutions operating on a sound commercial basis by making available to them a package of lines of credit to be on-lent to a large and diversified base of private firms. 2. The project consisted of two components: a financial sector adjustment component and an investment component. In total there were nine loans totaling US$235 million equivalent. The adjustment component was a loan to the Kingdom of Morocco in the amount of US$125 million equivalent. As of January 1, 1998, US$117.89 million equivalent of this loan was converted to a single currency pool loan in US$ (Loan No. 3365S-MOR), while US$7.11 million equivalent remains a currency pool loan (Loan No. 33650-MOR). The investment component comprised eight loans, guaranteed by the Kingdom of Morocco, totaling US$110 million equivalent. The borrowers were: Banque Nationale pour le Developpement Economique (BNDE, a state-owned development bank), Banque Marocaine du Commerce Exterieur (BMCE), Banque Commerciale du Maroc (BCM), Wafabank, Banque Marocaine pour le Commerce et l'Industrie (BMCI), Banque Centrale Populaire (BCP), Societe Generale Marocaine de Banques (SGMB), and Credit du Maroc (CM). The amounts of these loans were as follows:  - 2 - Loan No. Borrower Loan Amount (us$ equivalent) Approved Effective 3366-MOR BNDE 29,500,000 June 25, 1991 May 7, 1992 3367-MOR BMCE 19,500,000 June 25, 1991 April 10, 1992 3368-MOR BCM 13,500,000 June 25, 1991 April 10, 1992 3369-MOR Wafabank 8,500,000 June 25, 1991 April 10, 1992 3370-MOR BMCI 9,500,000 June 25, 1991 April 10, 1992 3371-MOR BCP 9,500,000 June 25, 1991 April 10, 1992 3372-MOR SGMB 11,500,000 June 25, 1991 April 10, 1992 3373-MOR CM 8,500,000 June 25, 1991 April 10, 1992 The loan to BNDE included a technical assistance component of US$200,000 for the preparation of a program to insure the institution's long-tenn viability in a market-determined environment. Table 4 shows the borrowers' performance in terms of loan disbursements. Evaluation 3. At the inception of the project, the Bank's country assistance strategy (CAS) for Morocco was: i) to complete the remaining phases of macroeconomic adjustment reforms with steady and high rates of growth, a sustainable budget deficit, and balance of payments viability; ii) to develop the private sector and its role in the economy as the driving force; and iii) to strengthen the social dimension of growth. The objectives of the FSDP were directly related to points i and ii, above. 4. In the mid-1980s, the Moroccan authorities undertook a program of progressive elimination of direct monetary controls, with a view to increasing the efficiency and responsiveness of financial intermediation. By the end of that decade, improved macroeconomic stability and the projected decline in the needs for domestic financing of the budget deficit encouraged the authorities to move to a second phase of reforms. This second phase of liberalization was supported by FSDP's adjustment component, with tranche releases tied not only to the completion of specific financial sector reforms, but also upon continued satisfactory overall macroeconomic performance (Table 5, Part II). Although the use of macroeconomic indicators provided an important link between the FSDP and the CAS, the measurement of the project's impact could have been improved by including some financial sector indicators in the project design. 5. The investment component followed two similar Bank projects, the 1987 Industrial Export Finance Project (EEFP, Loan Nos. 28060-MOR to 28067-MOR) and the 1990 Industrial Finance Project (IFP, Loan Nos. 31360-MOR to 31367-MOR). Both projects comprised eight lines of credit to the same eight banks as the FSDP investment component. According to the President's Report, this investment component was estimated to cover about 18% of the projected demand for industrial investment credit during the commitment period of the Bank loans. Such a significant contribution to support the private sector's role in the Moroccan economy was a good fit with the CAS; however, the central objective of the investment component was rather broadly defined ("to increase the supply of long-term capital to private entrepreneurs"), making it difficult to evaluate the component's actual impact.  -3 - B. Achievement of Objectives Adjustment Component 6. The release of the adjustment loan tranches was predicated on the achievement of well- defined criteria. The first tranche of $75 million was released at effectiveness. The second tranche for US$50 million was originally expected to be released in early 1992, dependant on (a) achievement of the six conditions specified in Schedule 4 of the Loan Agreement, (b) satisfactory progress in terms of the overall financial sector reform program as set out in the policy matrix attached to the Government's Letter of Development Policy, and (c) continued satisfactory overall macroeconomic performance. The second tranche was actually disbursed in June 1993, when the original implementation plan had been substantially complied with in terms of the transition toward indirect monetary control, the development of domestic financial markets (in particular for government securities), the elimination of directed credit policies, and the strengthening of the regulatory and supervision framework for the banking system. The following specific measures were taken: * credit ceilings were removed; * the reserve requirement instrument was strengthened; * the central bank's automatic preferential refinancing rate was reduced by limiting the eligibility of small-scale enterprises for medium-term loans and export credit; * the ratio of mandatory placements of sight deposits in Treasury bonds at below-market rates was reduced; * the ratio of mandatory placements of bank deposits in rediscountable medium- and long-term housing loans was reduced; * the treasury bill auction market was opened to insurance companies and enterprises; * a legal framework for capital market operations was adopted; * a new banking law was enacted; * the legal, regulatory, and supervisory framework for banking operations was strengthened; and * capital adequacy standards were raised to international levels. 7. The release of the second tranche was also predicated upon continued satisfactory macroeconomic performance (see Table 5, Part II). In the President's Second Tranche Release Memorandum, it was noted that although not all of the indicators were on target during 1991-92, and some were expected to continue to fall short of target in 1993-94, the shortfalls could be attributed to exogenous factors rather than to policy slippages. The primary exogenous factors cited were the 1992 drought, which caused an agricultural downturn, and the economic slowdown in Europe, Morocco's main export market. The macroeconomic framework was therefore deemed satisfactory for the tranche release. 8. In view of the compliance by the Moroccan government with the six specific conditions for second tranche release and the Bank's satisfaction with the overall progress in carrying out the financial sector reform program, the Bank approved the release of the second tranche of $50 million of the adjustment component of the FSDP. Measures that were included in the  - 4 - Government's policy matrix but that were not part of the Loan Agreement were all completed except for the following, which were delayed: * The elimination of the government guarantee on CIH's loan to the tourism sector was delayed at the time because of the negative impact of the Gulf War on the sector. This measure has not yet been completed; * The action plan to harmonize the fiscal treatment of financial instruments was initiated in 1994 with the taxation of treasury bonds; * The harmonization of accounting procedures between banks and SFIs (BNDE, CIH, and CNCA) was only effective in January 1993 for CIH and July 1993 for BNDE, instead of June 1992; * The replacement of a priori administrative controls on CNCA by a posteriori control by the Ministry of Finance was delayed; its control on CNCA has been made more flexible over the last several years and should now disappear with the current changes in CNCA's by-laws. Investment Component 9. The objectives of the investment component were broadly defined as follows: i) to encourage the broad participation of Moroccan financial institutions which operate on a sound, commercial basis, and ii) to support investment financing by a large and diversified base of private firms. For the most part, the participating Moroccan financial institutions achieved the objective of operating on a sound commercial basis. Supervision missions noted that the quality of audit reports improved significantly over the life of the project. Furthermore, although the cancellation of 30% of the credit lines (Table 4, Part II) limited the project's outreach to private firms in Morocco, given that less expensive resources had become available, the decision of most participating banks to cancel the undisbursed amounts of their World Bank lines was financially rational. 10. BNDE's decision to continue paying commitment fees on US$16.5 million (56% of its loan) for almost two years, only to cancel that amount at loan closing, seems somewhat less logical, although it did allow the bank to maintain a potential source of liquidity. After 1995-96 supervision missions, a letter was sent to BNDE management and the Moroccan authorities requesting a substantial revision of BNDE audits to bring them into compliance with standards for loan classifications, interest accrual on non-performing loans, and the treatment of equity participation in other companies. By March 1997, BNDE had complied with prudential regulations on loan classification and provisioning. However, BNDE's 1997 audit report was still qualified due to the non-consolidation of its accounts with those of a majority-owned bank. BNDE did hire an international consulting firm to assist it in a restructuring project, but the US$200,000 technical assistance component of BNDE's loan was never used, and the specific strategic study for which it was designated was never completed. 11. The borrowers did not provide statistical information on the effect of the credit lines on the Moroccan economy, and it is difficult to assess the impact of the investment component. Only 70% of the US$110 million investment loans were used. The pace of disbursements varied among the participating banks, and those banks which disbursed most quickly were able to use their lines more fully. For example, only three banks (BMCE, BCM, and CM) had disbursed  - 5 - more than 50% of their credit lines by the end of FY 1993, and in the end, they were also the only banks to use more than 90% of their lines. The banks which disbursed more slowly at the beginning of the project canceled larger portions of their loans. 12. The maximum size of an individual sub-loan was limited to US$6 million, and the free limit for sub-loan approvals was US$2 million. According to the FSDP President's Report, sub- loans under the free limit were expected to represent about two-thirds of the World Bank funds. In the end, more than 80% of the disbursed amount was for sub-loans less than US$2 million, with the average sub-loan amount estimated to be about US$780 thousand. 13. At the time of appraisal, about 80% of the Bank loans were expected to finance industrial investrnent, and the rest for tourism and other projects. This estimate was very close to the actual result: about 81% of sub-loans financed were estimated to be in various industrial sectors. A total of 98 projects were funded under the FSDP, and the overall portfolio was diversified, reaching about eight different economic sectors (Figures 1 and 2). It should be noted that in several instances, more than one participating bank funded the same sub-project. For example, Nestle Maroc received sub-loans totaling US$5.5 million from three participating banks, Polymedic received sub-loans totaling US$4.6 million from 5 participating banks, and ICOZ received sub-loans totaling US$2.4 million from 3 different banks. Although this type of loan syndication presumably allowed the participating banks to diversify their credit risk, it also reduced the number of final borrowers which received World Bank funds. With the cancellation of 30% of the credit lines, the investment component seems to have only partially achieved the objective of reaching a large and diversified base of private firms. It is difficult to evaluate the actual impact of this component, however, due to the absence of defined development indicators in the project and the scarcity of information received from the borrowers. By using defined statistics such as sectoral growth in relation to sub-loans granted by sector, it might have been possible to gain a better picture of the achievement of the investment component's objectives. Construction Material and Equipment Chemical Industries 7% 3% Pharmaceutical FishernesnV Hotels Servires 7% 4 2% 9% Paper and Wood 1% Clothing-Textiles & Leather Unknown 15% W 27% Food Industry Figure 1: Sectoral Distribution 21% by Number of Sub-Loans  - 6 - Figure 2: Sectoral Distribution by Amount Disbursed (in millions of US $) 14 1 0~~~~~ C. Major Factors Affecting the Project 14. When the FSDP became effective, banks participating in the investment component were facing a shortage of medium- and long-term resources. Some banks were covering as much as 75% of their investment loans through short-term deposits and borrowings. At the time, banks had to choose between following sound asset-liability management policies while losing important customers, or defending their market share while taking on increased liquidity risk. Hence, at the outset of the project, the participating banks were very interested in using the World Bank lines of credit. Changes in the Moroccan financial market over the life of the project caused this interest to wane, however. The World Bank funds were relatively expensive, and the market developed excess liquidity, making cheaper resources available. This resulted in the cancellation of about US$33.3 million equivalent, or 30% of the credit lines. According to the participating banks, the following factors contributed to this significant cancellation: Compression of Interest Margins: The banks' profit margins on the World Bank credit lines declined due to the decrease in lending rates (Figure 3). In 1994, the Moroccan government changed the calculation for the lending rate ceiling. In compliance with the first tranche release conditions for the adjustment loan, the maximum lending rate had been set at one and one-third times the weighted average rate on banks' six-and 12-month deposits for the preceding six months. This ceiling was adjusted every semester and ensured a steady, positive interest margin for banks. In 1994, the method for calculating the ceiling lending rate was set at a fixed margin above the deposit rates. The banks perceived this new method as having reduced interest margins.  - 7 - Figure 3: Evolution of Mrmccan Pim hxning Rates 15 -94 13 11 9 7 5 _ _ I I 1993 1994 1995 1996 1997 Availability of Cheaper Resources: Since 1994-95, the Moroccan banking system has had surplus liquidity, with deposits significantly exceeding loans. Moreover, the gradual suppression of the Plancher d'Effets Publics (PEP--mandatory placements in Treasury bonds) during the life of the project made more funding resources available for medium- and long- term lending. Other donors such as the European Investment Bank and Proparco also provided funds to Moroccan banks, notably for the financing of SME projects. Some of these funds were denominated in local currency, reducing the cost of funds by eliminating foreign exchange risk. Between 1991 and 1994, the interest rates applied by participating banks to sub-loans on this project were as high as 14% to 17%. The on-lending rates were based on the following elements: a) The cost of World Bank funds to the participating banks averaged 7.37% between 1991 and 1994 (Figure 4). b) Participating banks pay the MoF a fee for the Foreign Exchange Risk Coverage Scheme. This fee is equal to the difference between a reference rate and the cost of World Bank funds mentioned above. The reference rate is the weighted average of the six-and 12- month deposit rates, plus 0.75%. By requiring banks to pay the difference between these two rates, the Foreign Exchange Risk Coverage Scheme theoretically made banks and final borrowers indifferent to whether funds were domestically or externally borrowed. When deposit rates were highest due to the liquidity shortage early in the life of the project, the difference between the reference rate and the World Bank rate was more than 6%. c) Participating banks pay the MoF a flat fee of 1% for on-lent amounts.  - 8 - Figure 4: World Bank Interest Rates on FSDP Credit Lines 1991-1997 Interest Rate (%) 8.00 7.50 7.00 6.50 6.00 - l l l l----- - -l- 1991 1992 1993 1994 1995 1996 1997 15. These three elements added together reached a peak of about 14.5%, creating final on- lending rates of close to 17% after participating banks added their profit margin. Early in the project's life, these rates were roughly equivalent to prevailing market rates. The situation changed in 1995, when the banking system became more liquid. As six-and 12-month deposit rates fell, the cost of the Foreign Exchange Risk Coverage Scheme decreased. Eventually, however, deposit rates fell below the cost of World Bank funds, making domestic resources less expensive than external financing. In addition, other costs such as the flat fee mentioned above and implicit costs such as administrative follow-up and delays caused by World Bank approval procedures, made the credit lines less attractive than other sources of funds. 16. Because less expensive resources were readily available in the Moroccan market, it was fimancially rational for most of the participating banks to cancel the undisbursed amounts of their World Bank credit lines. For banks such as BNDE who maintained their loans as an additional source of potential liquidity, the expectation that they would eventually use the funds led to disbursement delays. During the first two years after the effectiveness of the investment component, the actual pace of disbursements exceeded appraisal estimates; disbursements did not begin to lag until FY 1995, when the market became more liquid. The original disbursement estimates and project design are therefore judged to have been realistic, given the market conditions at the time of appraisal. 17. Because cheaper sources of funds are now available, many of the participating banks have expressed an interest in prepaying their World Bank loans. To date, only Wafabank and CM have prepaid. Several other banks have requested permission from the Ministry of Finance (MoF) to prepay their loans, but the MoF has asked them to wait until exchange rates are more favorable, to avoid too great a foreign exchange loss for the Treasury. Some participating banks have also recently been deterred from prepayment due to the World Bank's prepayment penalties.  -9 - D. Project Sustainability 18. The project's adjustment component is likely to be sustainable. The financial sector reforms achieved under the FSDP provided a solid base for follow-on projects, the Financial Markets Development Loan (FMDL, Loan Nos. 39280-MOR and 39281-MOR), and the Contractual Savings Development Loan I (CSDL I, Loan Nos. 43400-MOR and 43401-MOR). These projects aimed, respectively, at deepening the financial markets and improving long-term savings mobilization. The sustainability of the investment component is uncertain. Although borrowers have stated that the World Bank lines of credit provided long-term resources at a time when they were needed and that the system now has sufficient liquidity, without statistical information to support these statements, the actual impact of the credit lines in the private sector and the potential sustainability of any such impact are unclear. E. Bank Performance 19. Overall Bank performance on this project is rated as satisfactory. The identification and preparation of the project were satisfactory, as was appraisal. The hybrid adjustment/investment product was well matched to the objectives of the CAS for the financial sector, although performance indicators for the investment component could have been better defined. In retrospect, given that the large cancellation of the credit lines was due to the relative cost of the World Bank funds, some of the Bank's new LIBOR-based products would have been well suited to the FSDP; however, these products were not available during the preparation of this project. 20. Bank supervision of the project is rated as deficient. Including the completion mission, seven supervision missions were conducted during this project's six year life span. On three occasions, there was a 15-month gap between supervision missions. With more regular supervision, significant issues such as the slow disbursements for several banks, especially BNDE, might have been handled more proactively. It is important to note, however, that the Bank's December 1995 mission did uncover a significant project problem: the Government's arrears in foreign exchange loss payments to BNDE. These arrears represented a default on a covenant of the Guarantee agreement, and through the Bank's action, the problem was resolved. F. Borrower Performance 21. The performance of the Kingdom of Morocco as Borrower on the adjustment loan is rated as satisfactory. Both sets of tranche release conditions were substantially achieved with only minor delays, and macroeconomic policies upheld the framework set at project appraisal. It should be mentioned, however, that the Kingdom of Morocco, acting as Guarantor for the investment component, failed to comply with the covenant of the Guarantee Agreement stipulating that the Gurantor shall at all times maintain the Foreign Exchange Risk Coverage Scheme in respect of the Loans. Under this Scheme, the participating banks paid a fee to the MoF, allowing it to accumulate funds to reimburse the banks for any foreign exchange losses incurred on World Bank lines of credit. In the case of BNDE, the MoF accumulated substantial arrears on foreign exchange losses, creating financial problems for BNDE and affecting its utilization of the credit line. The net arrears, related to several different credit lines for BNDE,  - 10- amounted to $532 million. In 1996, thanks to the Bank's intervention, the MoF consolidated these arrears in 7-year Treasury bonds with a negotiated annual yield of 7%. 22. The overall performance of the banks participating in the investment component was satisfactory. The lines of credit were on-lent to a diversified group of private firms, and the banks generally operated on a sound commercial basis. A highly satisfactory rating is not given since 30% of the credit lines were unused, although the banks' decision to cancel was financially rational and demonstrated their ability to adapt to new market conditions to prevent the erosion of profit margins. BNDE's compliance with loan covenants is rated as deficient, due to its non- completion of the World Bank technical assistance program and to continued deficiencies in its audit reports. G. Assessment of Outcome 23. The outcome of the adjustment component is rated as satisfactory. The adjustment loan achieved its major reform objectives, paving the way for future financial sector reforms under other Bank projects. A highly satisfactory rating is not given because some of the policy measures that were enhancing the set of reforms were not completed or were delayed. The outcome of the investment component is satisfactory. The funds were used to finance a variety of private investment projects, and when market conditions changed and the funds were no longer needed, most of the banks cancelled their credit lines in a timely manner. A highly satisfactory rating is not given because, due to the lack of information received from borrowers, the precise impact of the investment component on the Moroccan market can not be measured. H. Key Lessons Learned 24. Using successive projects to build sectoral reforms is effective. The investment component of the FSDP was a continuation of the credit lines financed under the IEFP and the IFP. At the inception of the FSDP, there was a shortage of long-term investment resources in Morocco, the project's credit lines helped meet that need. As market conditions changed during the life of the project, alternative resources became available, and the borrowers made financially rational decisions. The adjustment component achieved a series of financial sector reforms which has been added to by successive operations such as the FMDL and the CSDL I. A second CSDL is currently being considered. This kind of long-term partnership between the Bank and a client is a successful means of building long-term sectoral reform. 25. The FSDP also demonstrates the potential importance of the Bank's new financial products. The major reason for the cancellation of 30% of the investment loans was the high cost of World Bank funds in relation to decreasing Moroccan interest rates. It was also possibly due to the lack of regular and proactive supervision when favorable conditions for disbursement were existing. The investment loans were the standard lending instrument at the project's inception and were based on the Bank's own cost of funds, which tends to lag in a falling rate environment. If the Bank's new LIBOR-based products had been available and were used in this project, the Bank's funds might have remained competitive, allowing the participating banks to use the funds fully.  - 11 - IMPLEMENTATION COMPLETION REPORT KINGDOM OF MOROCCO FINANCIAL SECTOR DEVELOPMENT PROJECT Loan Nos. 3365-MOR through 3373-MOR PART II: STATISTICAL TABLES A. Standard tables Table 1: Summary of Assessment Table 2: Related Bank Loans/Credits Table 3: Project Timetable Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual Table 5: Key Indicators for Project Implementation Table 6: Key Indicators for Project Operation Table 7: Studies Included in Project Table 8A: Project Costs (N/A) Table 8B: Project Financing (N/A) Table 9: Economic Costs and Benefits (N/A)) Table 10: Status of Legal Covenants Table 11: Compliance with Operational Manual Statements (N/A) Table 12: Bank Resources: Staff Inputs Table 13: Bank Resources: Missions B. Sector-specific data Table 1: Evolution of the Moroccan Dirham against the French Franc and the U.S. Dollar  - 12 - A. Standard tables Table 1: Summary of Assessments A. Achievement of Objectives Substantial Partial Negligible Not applicable Macro Policies E 1/ E a Sector Policies E E El Financial Objectives E E El Institutional Development E I E El Physical Objectives E E El Poverty Reduction D E El Gender Issues I E El Other Social Objectives E E Cl Environmental Objectives a E E 1 Public Sector Management E E El Private Sector Development E E E Other (specify) E E E E B. Project Sustainabilitv Likely Unlikelv Uncertain Adjustment Component E El Investment Component E E (Continued)  - 13 - Hiilly C. Bank Performance satisfactory Satisfactory Deficient Identification i a Preparation Assistance I Li Appraisal L El Supervision ] [ D. Borrower Performance satisfactorv Satisfactorv Deficient (/) (0) (/) Preparation (All) / L L Iniplementation (Adjustment) L / L Implementation (Investment) I El Covenant Compliance (Adjustment) L Covenant Compliance [] El (Investment-Guarantor) Covenant Compliance Li 0 (Investment-BNDE) Covenant Compliance a (Investment-Commercial Banks) L Highly Hiy E. Assessment of Outcome satisfactory Satisfactorv Unsatisfactorv unsatisfactorv (/) (/) ~~~~(I,) (V) Adjustment Component L L Lia Investment Comnponent Li i  Table 2: Related Bank Loans/Credits Loan/credit title Purpose Approval Date Status Preceding operations 1. Loan Nos. 28060-28067 Increase exports through intermediation loans, 05/05/87 Closed on 12/31/95 Industrial Export Finance Project and improve export promotion and appraisal US$170 million capacities of the borrowing banks. 2. Loan No. 30010 Further structural adjustment through tax 12/01/88 Closed on 12/31/89 Structural Adjustment Loan I reform, strengthened public investment, trade US$200 million liberalization, and improved debt management. 3. Loan Nos. 31360-31367 Support private sector economic diversification 12/05/89 Closed on 06/30/96 Industrial Finance Project and exports through intermediation loans US$170 million Following operations 4. Loan No. 34630 Consolidate structural reforms through public 04/30/92 Closed on 12/31/93 Structural Adjustment Loan II expenditure switching, external trade reform, US$275 million and the development of social sector strategies 5. Loan Nos. 39280-39281 Deepen financial markets and establish market- 07/25/95 Closed on 06/30/98 Financial Markets Development based financial system. Loan l US$250 million 6. Loans 4340043401 Improve the mechanism of long-term savings 06/09/98 Closed on 12/31/98 Contractual Savings Development mobilization and allocation through the reform Loan I of contractual savings institutions. US$100 million  - 15 - Table 3: Project Timetable Steps in Project Cycle Date Actual Identification October 25, 1990 Pre-appraisal February 19, 1991 Appraisal and negotiations May 13-17, 1991 Letter of Development Policy June 3, 1991 Board Presentation June 25, 1991 Signing August 16, 1991 (Loan 3365) November 11, 1991 (Loans 3366-3373) Effectiveness November 14, 1991 (Loan 3365) April 10, 1992 (Loans 3367-3373) May 7, 1992 (Loan 3366) First Tranche Release (if applicable) November 14, 1991 Second Tranche Release June 17,1993 Loan Closing June 30, 1993 (Loan 3365) December 31, 1997 (Loans 3367-3373) December 31, 1998 (Loans 3366)  - 16 - Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (in millions US$) FY92 1 FY93 I FY94 FY95 I FY96 FY97 FY98 I FY99 | Total Disbursements ____________ ~ ~ jADJTMENT COMPpNENT _____ 3365 Kingdom of Morocco: Loan Amount 125.0 Estimated [125.0 125.0 125.0 125.0 125.0 125.0 125.0 125.0 125.0 Actual j 75.0 125.0 125.0 125.0 125.0 125.0 125.0 125.0 125.0 Percent Disbursed 60.0% 100.0% 100.0% 100.0% 1000% 100.0% . 100.0% 100.0% 100.0% UINV SIENTgOMPONZN_ _ _ 3366 l BNDE: Loan Amount 29.5 Actual 0.0 0 03.1 4.3 7.3 9.4 13.0 13.0 13.0 13.0 Percent Disbursed 0.0% 10.5% 14.6% 24.7% 31.9% 44.1% 44.1% 44.1% 44.1% 3367 BMCE: Loan Amount 19.5 Actual 1.2 10.8 13.2 1 15.8 1 16.8 18.3 18.3 18.3 18.3 Percent Disbursed 6.2% 55.4% 67.7% 81.0% 86.2% 93.8% 93.8% 93.8% 93.8% 3368 BCM: Loan Amount 13.5 Actual 0.6 11.7 13.1 13.1 13.1 13.1 13.1 13.1 13.1 Percent Disbursed 4.4% 86.7% 97.0% 97.0% 97.0% 97.0% 97.0% 97.0% 97.0% 3369 Wafabank: Loan Amount 8.5 Actual 0.0 3.0 | 43.8 3.9 3.9 3.9 | 3.9 3.9 3.9 Percent Disbursed 0.0% 35.3% 44.7% 45.9% 45.9% 1 45.9% 45.9% 45.90/o 45.9% 3370 BMCI: Loan Amount 9.5 _ Actual 0.0 5.4 5.9 5.9 5.9 5.9 5.9 59 5.9 Percent Disbursed 00 56.8% 62.1% 1 62. 621% 62.15 62.1% 3371 BCP: Loan Amount 9.5 Actual 2. 5.1 6.8 6.8 6.8 6.8 6.8 6.8 Percent Disbursed 0.0 7% 716% 71.6 761 ~~~~~~~~~0( 1 _ 37.6 16 3372 SGMB: Loan Amount 11.51 | Actual l 0.0 | 4.8 7.0 7.7 7.7 7.7 7.7 7.7 7.7 Percent Disbursed 0.0% 41.7% 60.9% L 669% 66.95 66.9% . 66.9% 66.9% 66.9% 1 3373 _ CM: Loan Amount 8.5 1 | PercentDisbursed [ 0.0% 1 65.9% 894% 94.1% 94.1% 94.1% 94.1% 94.1% 94.1% AEe ct Dsuale 0.0 65. 7.94180 8080 . .0 Subtotal Estimated 1 7.0 27.0 52.0 74.0 0 1 .0 0 10.0 1110.0 1 110.0 110.0 Subtotal Actual 1.8 42.2 60.2 68.5 71.6 76.7 76.7 76.7 76.7 Percent Disbursed 1.6% 38.4% 54.7% 62.3% 65.1% 69.7% 69.7% 69.7% | 69.7% | TOTAL T ESTIMATED 132.0 152.0 177.0 199.0 216.0 235.0 235.0 235.0 235.0 TOTAL ACTUAL | 76.8 171.4 | 185.2 193.5 196.6 201.7 201.7 201.7 201.7 PERCENT I I I I I I I DISBURSED 32.7% j 72.9% [ 78.8% J 82.3% 83.7% j 85.8% j 85.8% 85.8% J 85.8%  Table 5: Key Indicators for Project lmplententation Key Implementation Indicators in President's Report 1991]92* 1993-94* 1995'96* (Adjustment Component) Est. Actual Est. Actual Est. Actual 1. Real GDP Growth 4.4 1.4 4.7 4.7 5.3 2.8 2. Current Account/GDP -1.9 -1.5 -0.6 -2.3 0.9 -1.5 3. Budget Deficit/GDP -2.4 -2.7 -1.7 -2.8 -1.4 -3.6 4. Total Gross Fixed Capital Forrnation/GDP 22.6 22.3 23.5 21.8 24.0 20.4 5. Debt Outstanding/GDP 82.0 75.5 75.0 75.4 65.0 63.2 6. Debt Outstanding/XGS 252.0 222.5 220.0 222.0 185.0 183.7 7. Debt Service/XGS 27.0 25.7 28.9 32.5 25.9 28.2 8. Reserves (months of imports) 3.4 4.8 4.1 6.2 4.5 4.8 9. Real Manuf. Export Growth (excludes phosphates and 9.0 5.8 10.0 7.1 10.0 9.3 phosphate derivatives, includes re-exports) I *Estimatedfigures are from the President 's Report, specified only for 2 year periods. Actualfigures are for the end of those periods, i.e. 1992, 1994, and 1996. l4  Table 6: Key Indicators for Project Operation Key Operating Indicators in President's Report (Investment Component) 1. "Sub-loans under $2 million will represent Estimated Amount of Sub-loans Actual Amount of Sub-loans about two-thirds of Bank funds." under $2 million under $2 million BNDE 66.7% 71.5% BMCE 66.7% 65.0% BCM 66.7% 62.3% Wafabank 66.7% 100.0% BMCI 66.7% 100.0% BCP 66.7% 100.0% SGMB 66.7% 100.0% CM 66.7% 100.0% Total 66.7% 80.4% 2. "About 80% of the Bank loans are expected to Estimated Amount of Sub-loans Actual Amount of Sub-loans finance industrial development, and the rest Financing Industrial Investment Financing Industrial for tourism and other projects." Investment' BNDE 80% 86% BMCE 80% 70% BCM 80% 87% Wafabank 80% 100% BMCI 80% 71% BCP 80% 79% SGMB 80% 84% CM 80% 100% Total 80% 81% Given the absence of data on sectors related to some subprojects, the percentage does not take into account the "Unknown" category.  Table 7: Studies Included in thie Project Purpose as Defined at Study Appraisal Status Impact of Study 1. BNDE medium-term plan Ensure BNDE's long-term $200K technical assistance N/A. (BNDE did reorganize viability in a market- component of BNDE's loan with the help of consultants, determined financial was never used, and study but a recent attempt to privatize environment through a specified in President's Report the bank failed due to lack of technical assistance program was not completed. buyers.) including i) a study focusing on strategic planning, structure of costs and revenue by banking product, staffing and training requirements; and ii) an assistance program to monitor the effective implementation of the agreed operational strategy.  Table 10: Status of Legal Covenants Original Revised Agreement Section Covenant Present fulfillment fulfillment Description of Comments type Status date date Covenant Guarantee 2.01 5 C Commitment to project objectives as (BNDE) in Loan agreement and to unconditional guarantee of payment by bank 3.01 12 CD The Guarantor shall at all times Guarantor was in arrears in foreign exchange risk coverage (BNDE) maintain the FX Risk Coverage payments to BNDE; arrears have now been cleared. Scheme in respect of the Loan. 2.01 5 C Commitment to project objectives as (Other in Loan agreement and to Banks) unconditional guarantee of payment by Bank. 3.01 12 C The Guarantor shall at all times (Other maintain the FX Risk Coverage Banks) Scheme in respect of the Loan. Loan 3.01 5 C Project execution: general 0 (BNDE) commitment to diligent execution. 3.02 3 & 5 C a) i. sub-loans made according to (BNDE) criteria, procedures, principal terms and conditions of Schedule 5; ii. compliance with loan agreement and project objectives; iii. obligation to supervise and monitor subprojects in ways accepted by Bank b,) sub-loan amount limits 3.03 3 & 5 CP a) obligation for BNDE to submit Consultant was hired for restructuring program, but WB technical (BNDE) long-term strategy for improvement to assistance funds were not used. Bank b) conditions concerning hiring of consultant for the elaboration of a). 4.01 I C Auditing and Accounting of project (BNDE) accounts and Borrower accounts, according to sound practices 4.02 I CP a) Criteria for 4.01: borrower's BNDE's 1997 audit was qualified due to non-consolidation with (BNDE) accounts: time of compliance, need to BMAO. Consolidated financial statements will be required in 2000 satisfy criteria acceptable to the Bank, under BAM's new accounting rules. and to add information as requested  Original Revised Agreement Section Covenant Present fulfillment fulfillment Description of Comments type Status date date Covenant from the Bank at any time b)Criteria for 4.01: SOEs maintenance of records, criteria, Bank's right to obtain such records, obligation to include records in borrower's audit report each year. 4.03 1 C Establishment of separate accounting (BNDE) for Bank related repayments. 4.04 12 C Foreign exchange risk coverage: a) (BNDE) general principle that borrower will do all needed to cover b) obligation to participate to the Foreign Exchange Risk Coverage Scheme indicated in Guarantee Agreement with the Govemment. 3.01 12 & 5 C Project execution: general (Other commitment to diligent execution. l 9 Banks) 3.02 2, 3 &5 C a) i. sub-loans made according to (Other criteria, procedures, principal terms Banks) and conditions of Schedule 5; ii. compliance with loan agreement and project objectives; iii. obligation to supervise and monitor subprojects in ways accepted by Bank b) sub-loan amount limits 3.03 3, 5, & 10 C Obligation to submit a review of the (Other impact of the Program on operations, Banks) especially prudential ratios. 4.01 1 C Auditing and Accounting of project (Other accounts and Borrower accounts, Banks) according to sound practices 4.02 I CP a) Criteria for 4.01; borrower's (Other accounts: time of compliance, need to Banks) satisfy criteria acceptable to the Bank, and to add information as requested from the Bank at any time b) Criteria for 4.01: SOEs maintenance of  Original Revised Agreement Section Covenant Present fulfillment fuifillment Description of Comments type Status date date Covenant records, obligation to include records in borrower's audit report each year. 4.03 I C Establishment of separate accounting (Other for Bank related repayments. Banks) 4.04 2, 12 C Foreign exchange risk coverage: a) (Other general principle that borrower will do Banks) all needed to cover b) obligation to participate to the Foreign Exchange Agreement with the Govemment. Covenant types: Present Status: I . Accounts/audits 8. = Inidigenous people 2. Financial perflormance/revenue generation from 9. = Monitoring, review, and reporting C = covenant complied with beneticiaries 10. Project implenentation not covered by categories 1-9 CD= complied with afterdelay 3. Flow and utilization of project funds 11. = Sectoral or cross-sectoral budgetary or other resource CP = complied with partially 4. = Counterpart fuinidinig allocation NC = not complied with 5. = Management aspects of the project or executing agency 12. = Sectoral or cross-sectoral policy/ 6. Environmental covenants regulatory/institutional action 7. = Involuntary resettlement 13. = Other  - 23 - Table 12: Bank Resources: Staff Inputs (Direct Cost in thousands of US$) Planned Revised Actual Stage of Project Cycle Weeks US$ Weeks US$ Weeks US$ Preparation to Appraisal 97.5 Appraisal-Negotiations 64.1 Negotiations through Board Approval 56.6 Supervision 316.3 Completion 1.6 TOTAL 536.2 Table 13: Bank Resources: Missions Performance Rating Number Specialized Implemen- Develop- Stage of Month/ of Days in Staff Skills tation ment Types of Project Cycle Year Persons Field Represented Status Objectives Problems Through appraisal N/A Appraisal through N/A Board Approval . _1 Supervision: 1' riission 11/92 4 8 B, E 2 1 TR 2'd mission 5/93 1 12 TM I I 3r mission 9/93 1 12 TM I I 40 mission 12/95 3 11 TM, E, P S S OLC 5* mission 2/97 2 12 TM, E HS HS D 6%h mission 9/97 1 5 E _HS HS D Supervision/Completion 12/98 2 14 TM, F S S Legend: Skills represented TM Task Manager E Economist B Banking Specialist F Financial Specialist P Private Sector Development Specialist Types of problems TR Tranche release conditions OLC Other legal covenants D Disbursements  -24 - B. Sector-Specific Data Table 1 Evolution of the Moroccan Dirham against 10US the French Franc and the U.S. Dollar 1 FRF 10.0 1.750 9.5-- 1.700 9.0 - 1.650 8.5 1.600 8.0 1.550 7.5 1.500 7.0 - I I I I I I I 1.450 1/1/91 1/1/92 1/1/93 1/1/94 1/1/95 1/1/96 1/1/97 1/1/98  - 25 - Appendix: Borrowers' Contributions to the ICR  Appendix A Page I of 7 Rloyaume du NiMaroc .. 11 ^A- b-. ...... Miuuis,iNre det I'k.conomie et des Finances DIRECkTION UV TRFSOR F.T l>.S FINANCES FXTFRIEURES DEMRB / SEM LAI' RFAPPORT Q'ACtMYCMH T pM D'AJUSTEMENT DU SECTEUR FINANCIER (PRET N