Morocco - Recent economic developments in Morocco

RESTRICTED Report No. EMA-14 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION RECENT ECONOMIC DEVELOPMENT S IN MOROCCO August 29, 1969 Europe, Middle East and North Africa Department  CURRENCY EQUIVALENTS 1 Drbamn- (DH) = $ 0.197h 1 k1lillion DH $ 197,T0O $1.00 = DH 5.o6 $1 million D 5,0o60,ooo ABBREVIATIONS BNDE - Banque Nationale pour le D6veloppement Economique CIH - Cr6dit Immobilier et H6telier CNCA - Cai ase Nationale de Credit Agricole CNSS - Caisse Nationale de Securite Sociale CT - Centre des Travaux OCE - Office de Commercialisation et dtExportation OCP - Office Cberifien des Phosphates ONCF - Office National des Chemins de Fer ONE - Office National d'Electricite ONTS - Office National du The et du Sucre ORIVA - Offices Regionaux de I1ise en Valeur Agricole REI - R6gie des EXploitations Industrielles SUtAB - Sucrerie Nationale du Beht SUNAG - Sucrerie Nationale du Gharb SUTA - Sucrerie du Tadla TPIA - Taxe sur les produits et taxe sur les services n.i.e. - not included elsewhere  TABLE OF CONTENTS Page No. BASIC DATA ............. .............................. SUMMARY AND CONCLUSIONS .. ................. .... . .. . . i - ii I. INTRODUCTION ................... .......1 II. RECENT ECONOMIC PERFORMANCE .......................... 3 Output ............................... ...... ........... .0 3 Savings .............. . . ............ . 4 Investment . ........................................... 5 Population and Employment .............................. 6 Prices, Money and Credit .... ......................... 8 Balance of Payments ... ................... .. ........... . 9 Major Sectors ............ ........................... . 10 Agriculture ... .................................. . 10 Industry and Mining ....... ......................... .... 12 Tourism ............ 00..........* .......................... 13 III. THE PUBLIC SECTOR: PERFORMANCE AND POLICIES ......... 15 Financing Government Operations . ...................... 15 Public Sector Savings ...... .... .. ......................... 15 Public Sector Investments ............................ 19 Outlook for 1969 ..................................... 20 IV. EXTERNAL TRADE AND FINANCE ............. .. ........... 23 External Trade and Services .......................... 23 The E.E.C. Association .................. ............. 26 Current Transfers, Capital Movements and Reserves .... 27 Foreign Capital Requirements ........................ 28 External Debt and Creditworthiness .............. ..... 29 STATISTICAL APPENDIX ................................. 31 This report was prepared by a mission which visited Morocco from April 27 to May 10, 1969. The mission was composed of Giovanni Torelli, Chief; Robert Armstrong and Edmond Asfour, Economists; James Hendry, Agricultural Economist. The general purpose of the mission was to update the findings of the Bank's mission of February/March 1968.   BASIC DATA Area : 172,000 sq. miles Population (1968) : 14.6 million Rate of growth (1960-1968), total : 2.9% per annum moslem : 3.3% per annum Political Status : Independent Kingdom since 1956 Gross Domestic Product at market prices (1968) : DH 15.3 billion or $3 billion Rate of growth, in real terms (per annum) 1963-1966 : 1.0% 1967-1968 : 9.5% 1963-1968 : 3.0% Per capita (1968) : DH 1,047 or $207 Structure of GDP (% of total) 1963 1967 1968 Agriculture 29 27 31 Electricity 2 2 2 Mining 5 5 5 Industry and handicrafts 12 13 12 Construction and public works 4 5 4 Commerce 21 20 20 Transport and other services 16 17 16 Government 10 11 11 Total 100 100 100 Financing of Gross Capital Formation 1965 1968 DH millin of GD DH million % of GDP Gross domestic savings 1,630 12.4 2,400 15.7 Deficit (+) or surplus (-) in goods and non-factor services -190 -1.4 270 1.8 Gross Capital Formation 1,L440 11.0 2,670 17.5 Resource Gap (as % of investment in 1968) : 10.1   Central Goveriment Budget (Cash basis) (in millions of DH) 1966 1967 1968 Total current revenues 1,970 2,130 2,56o Total current expenditure 2,030 2,100 2,450 Surplus (+) or deficit (-) -60 30 110 Government development expenditure and debt repayment -620 -920 -1,030 Total deficit -680 -890 -920 financed from: foreign loans 260 290 220 Central Bank 10 290 230 extraordinary revenue 80 150 120 other sources (incl. grants) 330 160 350 Money and Credit 1966 1967 1968 Money supply (end of period, million DH) Total money supply 14,108 4,468 5,172 of which: Credit tote Government 1,541 1,868 2,102 Credit to private sector 1,976 2,118 2,629 Prices (1965-68) Cost of living index : No change Balance of Payments Conversion : $1 = 5.o6 DH Relationship to large customs areas : Preferential tariff and marketing arrangements with France. Associa- tion with EEC effective as of September 1, 1969. (DH million) 1966 1967 1968 Exports 2,168 2,146 2,278 Imports 2,21a 2,431 2,587 Trade Balance (goods) -73 -285 -309 Tourism (net) 215 211 243 Other Services -230 -266 -200 Interest, Dividends and Transfers -334 -146 -178 Current Account Balance -422 2 Export Concentration (% of total) Phosphates 25 25 24 Citrus 15 16 18   External Public Debt (in U.S. $ at end of 1968) Total debt outstanding, including undisbursed 701 million Total debt outstanding, disbursed only 566 million Debt service in 1968 75 million Ratio of debt service to exports of goods and services in 1968 12% Gross Foreign Exchange Reserves 1966 1967 1963 (in millions of U.S. T- 136 llb 131 Equivalent at end of 1968 to about 2 months' imports. IMF Position (end of 1968) Quota : $83 million Drawings Outstanding : $55 million   SUMMARY AND CONCLUSIONS 1. Following a decade in which it increased at an annual average rate of about 2 percent, Morocco's gross domestic product in real terms rose by 7 percent in 1967 and by 12 percent in 1968, reaching a per capita level of over $200. These rates compare with a rate of total population growth of about 3 percent per annum. In 1968, the exceptional harvest accounted for about two thirds of the rise in output. Manufacturing output grew by 4 per- cent and that of electricity by 10 percent. Growth also occurred in other sectors except mining. 2. With the large accumullation of cereals stocks, private savings rose substantially. Private investments may have dropped slightly but probably exceeded the target. Public investments, both by Government and public enter- prises, rose at a fast rate from DH 920 million in 1966 to DH 1150 million in 1967 and DH 1400 million in 1968. Public savings grew more modestly and in 1968 financed 36 percent of public investment. 3. Although investment expenditure in 1967 and 1968 were close to plan- ned targets, they had a small impact in alleviating the problems of growing unemployment. The emigration of some 12,000 Moroccan workers in 1968 presented small relief when compared with an estimated addition of 150,000 to the labor force. The long run problems arising from the fast population growth require intensified efforts in family planning. A program in this field has been started but is behind schedule. 4. Tne higher income and irnvestment levels in 1967 and 1968 do not seem to have upset general price stability. The Government's restrictive fiscal and credit policies and price fixing of some consumer goods contributed to this achievement. However, Government net borrowing from the Central Bank to finance, in part, higher investment expenditures, and pent up demand arising from the 1968 good harvest, may result in higher prices in 1969. Restrictive fiscal and credit policies should therefore continue. 5. The indications for 1969 point, on the output side, to a normal agricultural year, a probably better tourist season, and at best the same level of total output as in 1968. Central government investment expenditures are planned to increase from DH 920 million in 1968 to DH 1,200 million. The rise in central government savings, as a result of a rise in several taxes and fees, is expected to cover about half of the increase in investments. Total Government savings should cover about 32 percent of planned Government invest- ments. 6. While the 1969 targets of planned investment expenditures and of higher savings by the central government seem feasible, the net receipt of DH 414 million in foreign loans compared with an actual DH 220 million in 1968 seems more problematic. Even if this target is achieved, a gap of about DH 500 million would remain. It is expected that nearly half this sum would be forthcoming in the form of net lending by the private sector, a target which is feasible, given the exceptional rise in private savings, following the good harvest of 1968, and the control exercised by the Central Bank over commercial banks. The remaining gap is expected to be bridged by borrowing from the Central Bank and from other domestic and unspecified foreign sources.  - ii - 7. In order to bridge the financial gap and maintain price stability, a greater share of private savings should be mobilized by the government and public savings should be increased as planned. Substantial additional bor- rowing from the Central Bank would create additional pressure on the balance of payments, which is already in a difficult position. If the investment target is to be achieved, while at the same time the balance of payments po- sition is not to deteriorate, it would seem that foreign resources beyond those expected by the Government in 1969 would have to be sought, and that part of such aid should not be tied to financing specific projects. Alter- natively some cuts in the investment program may be unavoidable. 8. In the context of accelerated development expenditures and mainte- nance of price stability, the balance of payments position remains a cause of concern. In 1968, imports and exports rose by 6 percent. The rise in imports occurred largely in capital and intermediate goods. Exports of phosphates remained stable and citrus made the best edvance. Revenue from tourism also rose by about 6 percent. The gap in the current account widened. In addi- tion net capital inflow dropped, mainly as a result of higher loan amortiza- tion (particularly of short term wheat loans). Official gross foreign re- serves fell to a low of $72 million in early 1968 and $50 million were drawn on the IMF during the year. A further $10 million were drawn early in 1969 under a new $27 million standby agreement. 9. The balance of payments outlook for 1969 does not promise much re- lief. Although there would be no need to import wheat as in previous years, imports of capital and intermediate goods should continue to rise. Exports of phosphates have not shown a large increase so far this year but the tourist year seems promising. The agreements with EEC, effective in September, will probably help to expand exports of citrus and light manufactures to community members besides France, but the effects during 1969 will probably be small. On the capital side, foreign grants are expected to decrease, and, as men- tioned above, net loan receipts are expected by the Government to rise sub- stantially. The net outflow of private capital is expected to remain at the 1968 level. If these expectations are realized, the overall balance of pay- ments deficit would drop to DH 70 million compared with DH 130 million in 1968. 10. Morocco's external public debt (excluding undisbursed) had risen to around $570 million or DH 3 billion by the end of 1968. External debt serv- icing, exceptionally high in 1968, represented about 12 percent of the exports of goods and services. In 1969 the ratio is expected to be about 10 percent. In the long run the most critical determinant of Morocco's debt-servicing ability will be the growth of its exports, which in its turn partly reflects changes in productivity and the domestic savings effort. Provided that the savings effort does not deteriorate, and investment proceeds as planned, Morocco would be able to service existing debt as well as substantial addi- tional loans on conventional terms. However, given the balance of payment's vulnerability, particularly to unfavorable weather or to a fall in export prices, there is also a case for moderate amounts of foreign aid on conces- sionary terms.  RECENT ECONOMIC DEVELOPMENTS IN MOROCCO CHAPTER I INTRODUCTION 1. Since independence in 1956, the econony of Morocco has passed through several phases. In the late 1950's private investment declined and output and employment stagnated, although foreign exchange resexrves rose, mainly on account of large foreign military payments. The early 1960's were characterized by large increases in government current and capital spending which contributed to rising output, although concommitant budgetary deficits contributed to price rises, severe balance of payments pressures and rapidly declining foreign exchange reserves. The mid-1960's were years of improved financial and price stability, but the slowdown in public investment contrib- uted to renewed stagnation in economic development, while the severe drought of 1966 and mediocre harvest of 1967 gave rise to large wheat imports which again put pressure on the balance of payments. The last two years have shown improved output gains stimulated largely by increased public investment out- lays and by improved weather in 1968. However, rising import needs and fal- ling net foreign aid receipts have contributed to declining foreign exchange reserves during this period. 2. Over the entire period 1956-1968, several major problems hampered the country's economic development. The transition to independence resulted in the departure of large numbers of foreign settlers, the loss of entrepre- neurial skills and substantial flight of private capital. Problems have also been compounded by a high and accelerating rate of population growth. Migra- tion to the cities raised urban unemployment without tangibly reducing under- employment in rural areas. The educational system was unsuited and slow to react to the needs of development. The long-standing technical and institu- tional shortcomings of the traditional agriculture sector, added to the de- parture of skilled foreign farmers and the take-over of the "lots de coloni- sation" created ?heavy demands and pressures on an unprepared agricultural administration. Development in the rest of the private sector was hesitant and had to be supported by heavy government participation as well as financial and tax incentives. 3. Many of these problems by their nature can be solved only gradually. In particular growing unemployment, which is related to the high rate of pop- ulation growth and which aggravates the social problems of fast urbanization, is one of the more difficult problems facing Morocco, demanding both short term relief as well as long term planning. However, substantial progress in dealing with the problems of economic development has been made in several respects. Various administrative and organizational improvements were intro- duced, although much remains to be done in this field. There are indications that the flight of capital had dropped to a lower rate. Some private foreign investment is coming in, but only at a low rate. Stability was restored through strict budgetary and credit restraints. Substantial progress was made in economic planning. The first Three-Year Plan, for 1965-67, was realized only in part. The new Five-Year Plan, for 1968-72, includes several realistic  -2- improvements. 1/ The Plan, which gives highest priorities to irrigation, tourism and training, also gives new attention to the population and employ- ment problems. It aims at the investment of an average DH 1.65 billion ($330 million) per year by the public sector alone. The Plan has had a good start in 1968 with actual expenditures close to targets. In the area of agrarian reform, the most important measure has been the enactment in July 1969 of the Agricultural Investment Code, which will provide a comprehensive framework for land reform. This will provide for farm consolidation and redistribution of land (including foreign owned land) in irrigated areas. It also seeks to reduce fallow in rainfed areas. The spread of the effect of these reforms, as well as of other projects and programs which aim at raising farm produc- tivity and output, is bound to be slow but their cumulative effect should be considerable in the long run. 4. rThe present report does not attempt to deal with all of these is- sues. It is concerned only with reporting the principal developments of the most recent years, particularly 1968, and in several instances appraises the present outlook for 1969 and following years. Its main focus is on the fiscal and balance of payments performance and problems, and it also deals briefly with selected developments in some major sectors. l/ See Chapter III of the previous IBRD country report, Report No. MA-5b dated October 15, 1968, for a detailed discussion.  - 3- CHAPTER II RECENT ECONOMIC PERFORMANCE Output 5. During the past two years, economice growth in Morocco accelerated markedly. In the decade which followed its Lndependence in 1956, output in real terms had risen at an average 2.1 percent per annum, thus lagging behind both the growth rate of total population (2.8 percent) and the natural growth rate of the indigenous population (about 3.2 percent). The emigration of about half a million people (compared with a total population of 14.6 million in 1968) had its strongest impact on the modern sector, while several droughts during this period had hit the traditional agricultural sector. However, in 1967 and 1968 a high rate of investment expenditures by the public sector co- incided with relatively large improvements in output in the agricultural sec- tor, particularly of citrus in 1967 and cereals in 1968. The gross domestic product rose by 7 percent and 12 percent, respectively in the two years. 6. It is of course difficult to determine exactly the extent to which the improvement in output over a short period of two years was due to favor- able climatic conditions and similar temporary factors, or to more determined efforts by the public and private sectors, or to a change in the economic structure which resulted from past development expenditures and economic pol- icies. In 1967, one-third of the rise in GDP was accounted for by the in- crease in agricultural output above the level of the poor harvest year 1966, and in 1968, an exceptionally good harvest year, as much as two-thirds of the rise was contributed by the agricultural sector. The rise in investment expenditures itself contributed about 15 percent to the rise in GDP in 1967 and its level was maintained in 1968. Industrial and electricity output also increased, but the mining sector, dominated by phosphates, showed little over- all change. Tourism showed a substar,tial gain during the year, following a smaller decline in the number of visitors in 1967. In 1969 total output is not expected to surpass the exceptionally high level of 1968, although public investment expenditures are expected to rise further, and tourism is expected to continue its growth. Agricultural output will probably be back to a normal level, substantially below the 1968 record. 7. The structural changes in the economy in recent years are not re- flected in a discernible change in the pattern of output, whether among sectors or between private and government sectors. However, the unchanged pattern of output hides the continuing shifts in ownership of assets, as weli as in in- vestment and employment, from the emigrating European population to both the government and indigenous population (as well as to some new foreign inves- tors). The traditional econony, in other words, has been changing with the support of government to fill the place which was occupied by the emigrating Europeans. Indications of these shifts are the recorded outflow of funds in the form of authorized emigrant capital and repatriated investment income (totalling about $30 million a year), the large volume of unrecorded private capital outflow, and the drop in the non-Moslem population (from 558,000 in 1960 to 238,000 in 1968).  -4- Savings 8. Although the national accounts of Morocco cannot claim a high level of accuracy, the available figures indicate a substantial increase in gross domestic savings between 1965 and 1968. The particularly large rise in dom- estic savings in 1968 is very largely attributed to the accumulation of cer- eals stocks from the bumper harvest, though it represents also some increase in savings efforts. Gross Investments and Savings 1965 1966 1967 1968 /1 (in millions of dirhams) Gross Fixed Capital Formation 1,44o 1,530 1,890 1,970 Changes in stocks - - 150 30 700 Foreign balance (goods and non-factor services) 190 - 90 - 340 - 270 Gross Domestic Savings 1,630 1,290 1,580 2,4oo of which Public .. 410 510 500 Central Government /2 (-50) (20) (180) (230) Local Government (30) (30) (30) (30) Public enterprises n.i.e. t (360) (300) (240) (1,670 Private ( 880 1,070 1,900 (excluding changes in stocks) (1,030) (1,040) (1,200) /1 Preliminary /2 Includes surplus or deficit in the ordinary and annexed budgets, receipts starting in 1966 from thezsugar levy (which is not transferred to the budget) and PmT revenue allocated to investment (not included in budget revenue). As a proportion of the Gross Domestic Product, gross domestic savings rose from 12.4 percent in 1965 and 11.6 percent in 1967 to 15.7 percent in 1968. The rise is much more modest if the effect of the large increase in stocks of cereals is excluded. 9. The bulk (two-thirds or more) of domestic savings was contributed by the private sector in recent years, bu; its volume, particularly in the traditional sector, was strongly affected by the changing fortunes of the  -5- agricultural season. The estimate of private savings should be considered as only a rough approximation and is of limited significance as an exact measure of the private savings effort. The estimates of public sector savings, di- vided among central government, local government and public enterprises, are more reliable; they show that the public sector as a whole increased its sav- ings from DIH 410 million in 1966 to DH 510 million in 1967 and DH 500 million in 1968. The larger part was contributed by public enterprises, particularly the phosphate, tobacco and export monopolies, as well as by the social secur- ity fund. Central and local government achieved savings of DH 210 million and DH 260 million in 1967 and 1968, respectively, compared with DH 50 mil- lion in 1966 and a net dissaving of DH 20 million in 1965. The rise in government savings in 1968 was partly due, however, to larger transfers from the public enterprises. Investment 10. Gross fixed capital formation rose steadily between 1965 and 1968 at an average compound rate of over 8 percent per year, reaching almost DH 2 billion ($400 million) in the last year, surpassing thereby the Five Year Plan target of DH 1.9 billion. As a proportion of GDP, investment rose from 11.2 percent in 1965 and 12.2 percent in 1966 to 13.9 percent in 1967 and 12.9 percent, of the much larger total, in 1968. A substantial rise in public investment was partly offset by a drop in private investment in 1968. 11. While detailed data on investment by the public sector have been collected by the Mission, no similar data were available on private invest- ment. The global figures of fixed capital formation, given below, show that public investment accounted for the bulk of investment in recent years, and tnat it nas risen substantially both in absolute as well as in relative terms. Fixed Capital Formation 1965 1966 1967 1968 /1 (in millions of dirhams) Public n.a. 920 1,150 1,400 Central Government 480 520 860 920 Local Government n.a. 120 130 140 Public enterprises n.i.e. 310 260 160 340 Private n.a. 610 740 570 Total 1,440 1,530 1,890 1,970 /1 Preliminary  The substantial rise in total public investment to DH 1.4 billion in 1968 was accounted for largely by the rise in development expenditures of the cen- tral government, which almost doubled between 1965 and 1968. Investment by public enterprises also picked up considerably in 1968, following reductions in the previous two years. Central government investments under the Three Year Plan (1965-1967) and in the first year of the current Five Year Plan (1968-1972) went largely into irrigation and other agricultural projects, transport and electricity projects. Local government investments went largely into construction of roads, schools, urban development and welfare projects. 12. Investments by public enterprises were largely made by the phosphate mnonopoly (OCP), the Electricity Office (ONE), the railways (ONCF) and sugar mills (SUTA, SUNAB and SUNAG). While the greater part of the investments by the Railways and a substantial part of those by the Electricity Office were financed by the central government and appear in the investment budget, the Phosphate Monopoly financed its investments largely from internal savings, whereas the Electricity Office and sugar mills drew mainly on external loans and to a smaller extent on internal sources. Capital expenditures by the "Centres de Travaux" and Regional Agricultural Development Offices (ORMV), Tourism Office (ONiMT) and Mining Bureau (BRPM), which together were substan- tial, particularly in 1968, appear in the investment budget of the central government. 13. The level of private investment remained far below that of private savings and has shown no upward trend in recent years. Private investment, in fact, seems to have dropped considerably in 1968. It must be noted, how- ever, that the available estimates are very approximate, and that no reliable data exist on the distribution of private investments in the various sectors. Population and Employment 14. M4orocco's total population in 1968 was estimated at about 14.6 mil- lion. Tnis was about 3 million above the 1960 level, even though between 1960 and 1968 emigration totalled 320,000. Thus, while the total population rose from 1960-68 at an average rate of 2.9 percent per annum, the Moslem pop- ulation (comprising over 98 percent of the total) increased by 3.3 percent yearly. It has been estimated that Morocco currently has to invest over 10 percent of its GNP in order just to keep per capita incomes at a constant level. The consequences of rapid past and present population growth are re- flected in Aorocco's difficulty in raising per capita incomes, in the steadily rising levels of unemployment and underemployment, and in the growing urban problems. In the short run, the problems of creating new jobs and of coping with the effects of a 5 percent annual increase in urban population require direct solutions. Over the long run, however, the only realistic solution to .lorocco's demographic problem would appear to be an effective program of birth control. 15. A pilot program for national family planning was initiated in 1966. The 1968-1972 Plan aims at reducing the crude birth rate from 50 per thousand to 45 per thousand by 1972, mainly through the insertion of a half million intra-uterine devices (IUD's) at a rate rising from 25,000 in 1968 to 150,000  - 7 - by 1972. In addition, it is intended to reach an additional 100,000 persons in this period with other means of contraception. Through 1968, foreign assistance has come from the Ford Foundation (through the Population Council), the Swedish International Development Authority and the International Planned Parenthood Federation. United States aid now appears likely to be forthcom- ing at the rate of about one million dollars for the years 1969 and 1970. 16. Morocco is presently running well behind its Five Year Plan targets for both IUD insertions and the training of nurses and educators. In 1968, insertions were less than 10,000 while only 35 workers were trained, against targets of 25,003 and 120, respectively. The major operational constraints seem to be shortages of trained administrators for the projects and inadequate mass media information programs. Although there has been some internal re- sistance to population control efiorts, attitudinal surveys have indicated that the majority of urban Moroccans (both men and women) are receptive to family planning even in advance of an educational campaign. In view of the importance of this problem for the long-run prospects of Moroccan development, present efforts to deal with it will have to be intensified. 17. Statistics on employment and unemployment remain incomplete and unreliable, pending the ccmpletion of a population census in 1970. Current estimates place urban unemployment at between 30 and 50 percent of the urban labor force of about 1.7 million. The problem of growing urban unemployment is reflected in increasing pressures on already inadequate urban housing, sanitation, educational and other facilities. The urban population in 1968 has been estimated at some 4.6 million, with the rural population constituting the remaining 10 million. No statistics are available on rural underemploy- ment, which is believed to be substantial. 18. The near-term prospects for employment are not encouraging. Despite the departure of about 12,000 Moroccan emigrants (to work mostly in the E.E.C. countries) in 1968, unemployment continued to rise during the year. At pres- ent, about 150,000 new jobs each year have to be created to cope with the growing labor force, and this figure will rise steadily in time. Over the Plan period, the labor force is expected to increase by at least 225,000 more than the employment opportunities to be created. Agricultural employment, which now accounts for just over 70 percent of total employment, is expected to increase by less than 2 percent. Jobs in mining, industry and handicrafts, now about 11 percent of the total, are expected to grow by only about 1 per- cent. The most rapid growth in employment (about 4-1/2 percent) is projected in other non-agricultural employment (transport, commerce, services, adminis- tration). Altogether, the outlook over the next several years is for the labor force to increase by more than 3 percent annually while employment op- portunities rise by only about 2 percent. 19. The principal new measures announced by the Government for dealing with the increasingly serious unemployment situation are the extension of the "Promotion Nationale" (a work relief program) to the urban sector and the stepping-up of activities to encourage and facilitate emigration.  Prices, Money and Credit 20. The price level (as measured by the index of the cost of living in Casablanca) has remained remarkably stable since 1965. Overall, the price index at the end of 1968 was 1.8 percent higher than at the end of 1967, or at about the same level as at the end of 1966. The fixing of prices of cer- tain basic consumer goods such as wheat and sugar has helped to maintain the stability of the price index. However, general price stability has been achieved as a result of a general balance between the supply of and demand for resources. Restrictive fiscal and credit policies and two crop failures since 1965 have served to restrain private demand and contributed in fact to a slight drop in the price index in 1966. A rise in public savings and in net capital inflow in 1967, and a large rise in output in 1968 also helped to maintain a balance between aggregate demand ane supply, despite substantial rises in public investment expenditure in the two years. The rise in private demand which occurred in the second half of 1968 as a result of the bumper cereal harvest could have led to higher prices, but conservative credit and bank reserve policies 1/ and the suspension in May of government purchases of cereals at the relatively high fixed prices, checked the expansion of liquidity and led to a drop in the market price of cereals. 21. Total money supply increased in 1967 and 1968 at a somewhat higher rate than real output. During 1967 the money supply rose by 8.8 percent against a 7.1 percent rise in GDP, and in 1968 the money supply rose by 15.7 percent against a 12.1 percent rise in GDP. The following table indicates that while government borrowing represented the main factor behind the rise in money supply in 1967, it was the rise in credit to the private sector that mainly led to the rise in 1968. Net government borrowings, which had reached DH 327 million dirhams in 1967, were followed by additional net borrowings of DH 234 million in 1968. Factors Affecting the Money Supply (in millions of dirhams) 1966 1967 1968 Currency +43 +185 +245 Demand Deposits -65 +175 +459 Money Supply -22 +360 +704 Foreign Assets (net) -63 -100 +35 Claims on Government -2 +327 +234 Claims on Private Sector -2 +142 +511 Quasi money & other (net) +45 -9 -76 -22 +360 + 704 1/ Under the standby agreement with the IMF, Morocco undertook to impose ceilings on the total volume of central bank domestic credit and on its credit to the government.  _ 9 _ 22. Total credit to the private sector increased by 7 percent in 1967 and by 24 percent in 1968. In absolute terms, outstanding credit increased by DH 142 million in 1967 and DH 511 million in 1968. Out of the latter amount, DH 150 million was extended by commercial banks to finance larger cereals operations and to agricultural cooperatives, and DH 180 million was rediscounted by the Central Bank. 1/ 23. In November 1968, measures were taken to slow down the expansion of bank credit. The bank reserve ratio on new deposits (above the level of July 1) was brought to the general level of 25 percent and the base was enlarged to include all time deposits and liabilities in foreign exchange as well as demand deposits. The effect of this measure on restricting credit to the private sector was followed in March 1969 by the requirement that banks should hold a proportion of their current dirham deposits equal to 25 percent of their current dirham deposits equal to 25 percent (rising to 30 percent by mid-May) in the form of Treasury bonds. 24. Specialized banks also increased their credits in 1968. Net dis- bursements by the National Economic Development Bank (BNDE) increased by DH 63 million. During 1968 commitments reached DH 108 million in direct long and medium term loans, of which DH 39 million were discounted with the Central Bank. Major approved loans went to finance a number of hotels (DH 35 million) and two sugar mills, one at Doukkela (DH 14 million) and one at Beni Mellal (DH 25 million). Balance of Payments 25. Despite a slight widening of the merchandise trade deficit during the past year, there was a reduct..on in the current account deficit from some DH 490 million ($97 million) in 1967 to about DH 450 million ($89 million) in 1968. This improvement was attributable to gains in the services account. Both exports and imports rose by some 6 percent, to DH 3.08 billion and DH 3.57 billion, respectively. The most notable export gain was the DH 75 million rise in citrus earnings, which comprised some 18 percent of total goods exports in 1968. Phosphate exports (which constitute one quarter of total exports and remain the largest single export) stayed at about the level of the preceding several years. Imports of food and consumption goods remained at about 1967 levels, virtually all of the increase in imports being a-counted for by rising demand for intermediate and investment goods. Imports of wheat, coming before the large domestic harvest, exceeded DH 200 million - more than double the level of the early 1960's. Gross receipts from tourism increased by about 6-1/2 percent to DH 426 million - somewhat less than had been expec- ted. The surplus in the balance on current transfers in 1968 remained close to the 1967 level of DH 40 million. 1/ To help finance the bumper crop the fixed ceiling on rediscounts of each bank with the Central Bank was raised at the end of July 1968 by 6 percent. In addition, bank reserves requirements on new demand deposits were reduced from 25 percent t9,Q percent.  - 10 - 26. On the capital account, net grants (largely from France and the Unitejd States) rose by nearly DH 50 million in 1968 to reach DH 180 million while the public sector's gross receipts of foreign exchange loans remained at about DH 450 million ($89 million); the major lenders were West Germany, the United States and France. More than offsetting this gain, however, was the substantial rise in loan amortization payments. Capital flight, while diminishing steadily over the years, was still thought to be substantial. Consequently, the overall balance of payments deficit rose to some DH 131 million, as compared with deficits of DH 92 million in 1967 and DH 56 million in 1966. With foreign exchange reserves falling to low levels, a $50 million IMF standby arrangement was drawn upon in 1968. Another standby of $27 mil- lion came into effect in October 1968, and $10 million of this drawn in the spring of 1969. 27. The outlook for 1969 points to a further narrowing of the current account deficit as exports are expected to grow at about 5 percent while im- ports should grow at a lower rate - the decline in wheat imports accounting for a considerable proportion of the immediate import decline. Nevertheless, a deficit is still expected in the overall balance of payments for 1969. Al- though the new partial association with the Common Market should help future export prospects, increasing import demands fir capital goods will be substan- tial, and Morocco's external payments position is likely to remain difficult for some time. It remains particularly vulnerable to possible crop failures which would again create severe balance of payments strains as have occurred in the past few years. Major Sectors Agriculture 28. The agricultural sector made a major contribution to Morocco's overall economic performance in 1968, particularly through the exceptionally large cereal harvest for 1967/68 crop year. Wheat production of about 2.4 million tons was roughly twice the average produiction of recent years, largely as a result of improved yields. The very favorable rainfall in 1967/68 per- mitted some increase in areas sown, and the good distribution of the rainfall throughout the growing season was ideal for cereal growth. In parts of the areas sown to wheat, there was also some carry-over effect of fertility from fertilizer applications made during the previous two drought years. Barley output also doubled (reaching 2.2 million tons) as did output of sugarbeet. Citrus crops (with the exception of grapefruit) registered increased produc- tion, but vegetable output dropped due to winter :?rost, and exports decreased. Livestock constitutes a most important part of the agriculture sector, but the unreliability of livestock data makes it difficult to assess production performance. 29. The prospects for the current harvest year (1968/69) seem less favorable. Agricultural production in general was expected to return to lev- els approximating those of an average harvest year for Morocco, and this would again be due primarily to the impact of weather. Whereas the bumper wheat crop of last year exceeded Morocco's storage capacity and eased the need to import wheat, this situation was not exp tted to be repeated in 1969/70.  - 11 - Rainfall has been extremely heavy in most areas, resulting in difficult pre- planting conditions which have reduced the area in cereals, possibly by as much as 25 to 30 percent. Fertility levels should also be somewhat reduced as a result of last year's bumper crop, and the heavy rains will make fertil- izer use somewhat more difficult. Citrus and vegetable production are also reported to be affected by the unfavorable weather, and sugarbeet production in the Rharb area will be down for the same reason. 30. Fertilizer use has expanded in recent years, and demonstration of its impact on production should further spread its use. However, average rates of application are still low. A program started in 1966 for the im- provement of cereal production through use of fertilizer and improved farming practices, "Operation Engrais", was in effect to some degree on 345,000 hec- tares by 196T/68. It was scheduled to proceed at a rate of increase of 50,000 hectares per year up to a target of 500,000 hectares by 1971/72. The heavy rains of 1968/69 have cut back on the coverage in the current year (to 330,000 hectares). There has reportedly been continuing improvement, however, in land preparation activities under the "Centres de Travaux", in the extension services and in the logistics of providing fertilizers to farmers. 31. Agrarian reform within the framework of a set of codes known as the "Charte Agricole" (formally called the "Code des Investissements Agricoles") came into effect in July 1969. While it is mainly concerned with irrigated lands, its provisions cover both irrigated and rainfed areas. It specifies the obligations of landholders and government in achieving the objectives of the reform program and outlines ways in which lands are to be used more ef- ficiently. In this latter respect, the "Charte Agricole" provides obligatory guides by which irrigated lands are to be brought into an agreed cropping pattern in each project area, and in rainfed areas it seeks to reduce the areas of unproductive fallow. An important part of the program is the consol- idation of land holdings, but it also provides conditions under which unpro- ductively used lands may be confiscated. The impact in practice of this reform effort cannot yet be assessed, but the promulgation of the law itself represents an important first step, offering evidence of serious intent to restructure the agricultural sector in ways which will permit efficient and more technologically advanced agrieultural practices. 32. Livestock is raised mostly in semi-arid, badly over-grazed parts of the country, and animal production is, therefore, highly vulnerable to weather conditions which affect forage availability. Socio-political and other prob- lems associated with controlling grazing render improvement difficult, but a start is now being made through range management in selected areas totalling about 210,000 hectares. This program will introduce controlled grazing under a system of established rights, water development, animal shelters, forage centers for reserve feed stocks, animal health control and new range grasses. However, no measurable results should be expected for some years, even under favorable conditions. A related development is the foreign livestock invest- ment being made by the US King Ranch, which will be raising cattle for both ex- port and domestic consumption. A large area has been leased for this purpose, and production will be carried out under a single management using modern methods which will involve crossing imported cattle (Santa Gertrudis) with selected Moroccan stock.  - 12 - 33. Citrus production in 1968/69 is expected to be around 537,000 tons, down from 787,000 tons in the previous year. This will be due to this year's adverse weather conditions. Despite this reduction, and a subsequent drop in export volume, the earnings from citrus exports are expected to rise be- cause of favorable prices. The area under orange production is expected to reach about 60,000 hectares in 1975, compared to approximately 55,000 hec- tares in the 1967/68 season. The F.A.0. has projected Morocco's total orange and tangerine production at 1.18 million tons by 1975, approximately double the 1963/64 to 1966/67 average. Despite larger supply and growing competition in the European market, Moroccan citrus may maintain the relatively favorable positicn which it appears to have gained, both in price and in the share of West and East European markets, due to the careful quality controls. 34. Investment in irrigation remains a major part of Morocco's total developmental expenditure for agriculture. The expected adoption of the "Charte Agricole" should make it somewhat easier to organize project areas for effective irrigation, but implementation difficulties should not be under- estimated. Shortages of trained personnel for operating the projects and performing extension activities will persist despite efforts to increase the numbers of staff at all technical levels, but, as in the case of the "Centres de Travaux," technical staff capabilities in irrigation projects reportedly are beginning to show improvement. The area actually brought under irriga- tion in 1968 reached 12,000 hectares (60 percent of planned target) compared with about 6,000 hectares in 1967. Industry and Mining 35. While power production increased by about 10 percent in 1968, mining output did not change from the 1967 level and manufacturing increased its out- put by about 4 percent. Manufacturing industry presently accounts for about 12 percent of GDP and employs some 160,000 workers. It is made up of a few modern, largely government-financed firms alongside a large number of small industries and handicrafts. Modern industry includes four sugar mills, three sugar refineries, two oil refineries, a chemical complex, cement, tobacco, paper and glass factories, car and tractor assembly factories, a tire factory, and a number of textile mills, grain mills, sardine canneries and vegetable and fruit canneries. The slow growth of income and the departure of rela- tively higher-income Europeans in receuit years have slowed the growth of de- mand for manufactured products. 36. Net private investment in manufacturing industry has been small, and largely financed by banks and with government participation. The main investments in 1968 were in electric power and sugar refining and were made either by the public sector or with its participation. No data were available on private investment in industry in 1968 although there are indications that expansion was underway in several industries in the fields of textiles, bitu- men, pharmaceuticals, cellulose, vegetable oil refining, aluminum products etc. Few additional employment opportunities were created by new industries in 1968.  - 13 - 37. Output of manufacturing industry increased by 4.2 percent in 1968, or at about the same rate as in 1967. However, sales probably increased at a faster rate, allowing many industries to reduce stocks. The growth rate in output was highest for textiles, particularly for woolens and rayon, due to higher sales to farmers and exports to Algeria, and for cement and build- ing materials, which benefited from higher government construction expendi- tures. Production of leather, shoes, plastics and pulp also rose substanti- ally. In the chemical industry, most branches increased output, but fertil- izer production fell below the high level of 1967 despite higher exports. Production of sulphates and of synthetic rubber tyres made good advances. Car and tractor assembly also expanded (to 14,000 cars and 1,800 tractors compared with 9,000 and 900 respectively in 1967), as did other metal manu- facturing industries and production of batteries. On the other hand, food industries showed an overall decline in output, despite rises in most enter- prises, owing to a large drop in the output of the modern milling industry following the decline in imports of cereals and the shift of activita to _ traditional mills. Other food, tobacco and beverage industries showeid sub- stantial expansion, particularly the sugar mills, which almost doubled output from 55,000 in 1967 to 107,000 tons in 1968. 38. The index of production of mining has shown no significant trend since 1964 and remained in 1968 at the same overall level as in 1967. EmRploy- ment in the mining industry reportedly dropped in 1968 by about 900 workers (out of a total of some 30,000), partly as a result of reduction of output in some mines but largely because of the introduction of labor-saving technology in the large phosphate mining industry. Labor strikes in the coal mines in December 1968 also affected output. 39. Phosphate production increased in 1968 from 9.9 to 10.5 million tons, or by 6 percent. This was substantially below the planned target of 11 million tons. Output of pyrrhotine (which is used locally in the production of sulphuric acid) increased both in 1967 and in 1968, as did the local sales of phosphates to the local chemical industry. Exports of phosphates increased by 8 percent in volume but showed practically no change in value as compared with 1967 (DH 544 against 546 million) due to lower prices. Exports of lead and cobalt registered some increases. 40. Other minerals generally registered reduced levels of output and exports. Manganese ore showed a 44 percent drop in output and a 33 percent drop in exports. Along with iron ore, manganese ore apparently suffered from declining quality of reserves as well as from low productivity. Output of cobalt, coal, zinc, copper and iron ores all registered declines ranging be- tween 7 percent and 18 percent as compared with 1967. Tourism 41. Tourism has been accorded high priority in the Five Year Plan. The Government has strongly supported private investment in hotel construction and other tourist enterprises with various incentives including capital partici- pation, the provision or guaranteeing of credit at subsidized interest rates and over long repayment periods, grants towards purchase of equipment, various tax exemptions or reductions or guarantees of future tax levels, and through accelerated depreciation allowances.  - 14 - 42. The number of tourists visiting Morocco has not developed as pro- jected. A high rate of growth until 1964.was followed by slower growth until 1967, when an absolute fall was recorded. Visitors Transients Total (Number in thousands) 1962 202 53 255 1963 299 74 393 1964 383 79 462 1965 378 103 481 1966 420 99 519 1967 400 104 504 1968 481 100 581 This drop was due largely to a big decline in the number of Algerian visitors but has been also attributed to the tense international situation in the sum- mer and to the currency devaluation of the U.K. and Spain late in the year. The year 1968 seems to have witnessed a revival of tourism with a jump of about 20 percent in the number of visitors and 15 percent rise in the total number of visitors and transients. French visitors, who represent about a quarter of the total, increased in number, despite the social troubles in May-June of that year. The number of American and West German visitors also increased substantially. However, the total of 581,000 visitors lagged behind the plan target of 660,000. Total exchange receipts from travel in 1968 were estimated at DH 426 million compared with DH 400 million in 1967. Reports in the first part of 1969 indicate a continuation of the upward trend. 43. Capital investment in tourist facilities has been substantial, par- ticularly in the construction of hotels. Hotel rooms increased from about 12,000 in 1965 to 20,000 in 1967 abd 22,000 in 1968. In addition, an esti- mated 7,000 rooms were under construction in 1968, largely in luxury hotels. While the planned expenditure target of DH 67 million for 1968 was probably exceeded, the target of hotel rooms (about 3,000) was not reached. In 1968, the BNDE approved hotel and tourist loans totalling DH 35 million and the Credit Immobilier et Hotelier (CIH) opened hotel credits totalling DH 45 mil- lion. Total outstanding hotel credit of the two organizations exceeded DH 160 million at the end of 1968. In addition, the Government spent directly DH 16 million on hotel construction during 1968. 44. While the recent development of physical facilities such as hotels, airports and roads seems adequate to meet the current demand of tourist traf- fic, it would seem that greater efforts must be made if the Five Year Plan target of one million visitors in 1972 is to be approached. If the Moroccan tourist industry -is to expand adequately, costs and prices will have to be lowered to become more competitive with other Mediterranean countries. In addition, there is a need for accelerated training of management and person- nel, greater sales and promotion efforts abroad (especially to charter groups), better internal transport connections, and a larger supply of medium-priced accommodations and services.  - 15 - CHAPTER III THE PUBLIC SECTOR: PERFORMANCE AND POLICIES Financing Government Operations 45. The growth of current expenditures of the public sector (which in- cludes the central government, local governments and public enterprises) was restrained in recent years, while investment expenditures rose at a rapid rate. Public sector investment expenditures increased from about DH 900 mil- lion in 1966 to about DH 1,400 million in 1968. During the same period, pub- lic savings (i.e. the excess of current revenues over current expenditures) increased at a much slower rate, from DH 410 million in 1966 to DH 500 million in 1968. Thus, the proportion of public investments financed from public savings fell from 45 percent to 36 percent in this period. 46. Foreign loans and grants have contributed substantially, though at a decreasing rate, towards financing public investments. Gross receipts of foreign aid (including grants) by the whole public sector dropped from DR 660 million in 1966 to DH 600 million in 1968. Similarly foreign aid receipts, net of capital repayments, fell from DH 380 million to DH 300 minlion. Thus, their net share in financing total public investments fell from 41 percent in 1966 to 21 percent in 1968. 47. Part of private savings (which doubled between 1966 and 1968, reach- ing DH 1.9 billion) has also gone towards financing public investments, through the increase in private deposits with government agencies and through addi- tional lending to the government. The net contribution of private sector lending reached DH 100 million in 1966 and rose to 240 million in 1968, thus raising its share from about 10 percent of public investment in 1966 to about 17 percent in 1968. 48. Thus, while no financial gap appeared in 1966, the higher public investments in 1967 and 1968 exceeded the total financial resources supplied by public savings, private sector lending and net foreign aid. The financial gap in both years was largely met by government borrowing from the Central Bank, to the extent of DH 290 million in 1967 and DH 230 million in 1968. Public Sector Savings 49. As summarized in Chapter II, savings of the public sector as a whole rose from DH 410 million in 1966 to DH 500 million in 1968. Central government accounts, which, when including extrabudgetary revenue from the levy on sugar and from the PTT, showed a DH 20 million saving in 1966, re- ported savings of DH 180 million in 1967 and DH 230 million in 1968. This rise in central government savings was largely offset by a decline in the savings of public enterprises, which fell from DH 360 million in 1966 to DH 300 million in 1967 and DH 240 million in 1968. However, the decline in 1968 was largely due to a transfer of funds from the phosphate monopoly to the government budget. Available data on local government indicate annual savings of approximately DH 30 million through the three years.  - 16 - Central Government Budgetary and Extra-Budgetary Transactions (Treasury Cash Basis) (in millions of dirhams) a/ Estimate 1965 1966 1967 - 1968 1969 1. Ordinary revenue 1,889 1 975 2 132 2 557 2 697 Direct taxes 471 680 Customs duties 375 453 475 454 490 Indirect taxes 526 574 604 693b/ 845b/ Registration and stamp duties 110 119 126 137 178 Government properties 48 41 50 _49 53 _t tf- ".ooopolics 142 172 192t/ 387 323 of which: OCP (-.) (-) (-)c7 (120) (60) Tobacco Monopoly (127) (134) (M4M) (168) (189) Others, n.i.e. 217 96 138 167 128 2. Ordinary expenditure 1.971 2,031 2 102 2 449 2,471 d/ Public debt service:interest 129 148 134 Personnel 1,185 1,247 1,340 1,438 1,573 Materials and supplies 480 464 488 536b/ 546b/ Mainten nce 39 37 37 41 417 Subsidies and others 92 78 61 171 86 Royal Court 46 57 38 76 41 3. Ordinary budget surplus or deficit -82 -56 +30 +108 +225 4. Capital repayments d/ 3 -97 m-111 -90 5. Capital expenditures e/ -Z3 -721 -7-2f/ - -1,197 6. Over-all budget surplus or deficit -769 -674 -886 -921 -1,061 7. Extra budgetary ac- counts (net) h/ +15 +89 +84 -63 +67 8. Over-all cash deficit -m - -TO- -2 : __99 9. Financing 7__ ___ __9 994 Treasury and postal checking deposits (increase) 93 156 54 308 -30 Internal borrowing (net) 179 95 96 238 256 of which: Long term (50) (64) (76) (107) (80) Medium term (120) (-30) (,15) (22) (62) Short term (9) (61) (35) (109) (114) Foreign loans 527 259 291 220 414 of which: Long term (435) (264) (186) (305) (448) Medium term (25) (11) (2) (5) (16) Short term (netWi/(67) (-16) (103) (-90) (-50) Central Bank Credit -46 -7 294 234 181 Treasury account with Central Bank 54 21 -1 - Others, incl. errors -53 +61 +68 -16 +173 a/ Preliminary figures b/ Excluding DH 160 million representing the share of local government in the tax on products and services (TPS). Beginning in 1968, this share was dis- bursed by the Ministry of Interior (instead of being transferred directly by the Treasury) and recorded in its budget as part of its expenditures.  - 17 - / Excluding DH 160 million which are recorded as a receipt from the Phosphate monopoly (OCP) in the ordinary budget and an government participation in OCP1s capital increase in the investment budgets of 1967 and 1968 (DH 100 million in 1967 and DH 60 million in 1968). d/ Includes payments on internal debt and long term external debt only, i.e. excluding short term debt receipts and payments, which are given net under foreign aid. e/ Actual payments during the fiscal year under the investment budget. The total does not correspond exactly to authorized expenditures on completed work during the year due to the time lag between authori- zations and payments. fl Excluding LE 100 million representing government participation in OQPts capital increase (see c). g/ Excluding DE 60 million representing government participation in OCPts capital increase (see c). h/ Net surplus or deficit in the accounts of the "Promotion Nationale" (public works project), forestry projects, "Op6ration Engrais" (agri- cultural project) and others. i/ Including net receipts from or repayments of short term credits (main- ly U.S. and French wheat loans).  - 18 - 50. The Central government improved its savings performance in 1967 mainly by restraining the growth of current expenditures. In 1968 savings increased, despite a substantial rise in ordinary expenditures. This was mainly a result of better collection of direct taxes and of a transfer of DH 120 million from the phosphate monopoly profits to the budget. The rise in direct tax revenue in 1968 was the result of a drive by the government to collect tax arrears as well as a stricter tax assessment and collection. This applied particularly to taxes on business profits (which rose from DH 339 million in 1967 to DH 406 million in 1968), to taxes on salaries, and to the agricultural tax (which rose from DI 34 million to DH 62 million). Import duties fell slightly in 1968, due to higher imports of equipment and lower imports of consumer goods, and export taxes also fell slightly. Other indirect taxes, particularly the turnover tax and profits of the tobacco monopoly, increased substantially due to higher consumption. 51. On the expenditure side, the government strictly restrained the growth of current expenditures during the years 1965 to 1967. This policy was also generally applied in 1968 with few exceptions. Major rises occurred in defense expenditures (of DE 134 million, of which DH 54 million were in settlement of previous expenditures), in expenditures on education (DH 46 million) and in settlement of other past expenditures (DH 32 million). 52. Savings of the public enterprises which do not appear in the accounts of the central government dropped from DH 360 million in 1966 to DH 300 million in 1967 and to DH 240 million in 1968. The drop in 1968, how- ever, is completely accounted for by the transfer of DH 120 million from the phosphate monopoly (OCP) profits to the central government. Besides the OCP, other main contributors to public enterprise savings were the Social Security Fund (CNSS), the Tobacco Monopoly and the Export Office. Gross Savings of Public Enterprises, n.i.e. (in millions of dirhams) Estimate 1966 1967 1968 1969 Phosphates monopoly (OCP) 220 170 100/1 80/2 Railways (ONCF) - 5 5 10 Tea & Sugar (ONTS) 45 10 -5 25 Social Security Fund (CNSS) 35 40 40 40 Tobacco monopoly 35 25 25 20 Sugar (SUNAB, SUTA, SUNAG) 10 15 5 15 Export Office (OCE) .. 30 20 25 Electricity Office (ONE) 5 5 5 10 Agricultural Bank (CNCA) 5 5 10 Industrial Office (REI) 5 5 10 10 Others (net) - -10 25 5 Total 360 300 240/1 240/2 /1 Excluding DH 120 million transferred to the government budget. /2 Excluding DH 60 million to be transferred to the government budget.  - 19 - Public Sector Investments 53. As summarized in Chapter II, investment expenditures of the public sector as a whole rose from DH 920 million in 1966 to DH 1,150 million in 1967 and DH 1,400 million in 1968. The bulk of this rise was accounted for by the increase in expenditures by th' central government, included in its investment budget. The public enterprises also increased their total gross capital formation, particularly in 1568, following a large drop in the previ- ous year. 54. Central government investment expenditures in 1968 totalled DH 918 million, which was about 92 percent of planned expenditures for the first year of the 1968-1972 Five Year Plan. This compared with expenditure of DH 862 million in 1967 and DH 521 million in 1966. The principal divergences from the plan in 1968 were the excess of expenditures on irrigation which was offset by a shortfall in expenditures on barrages and other agricultural projects. Compared with 1967 the largest increases were in the expenditure on barrages, irrigation, dry farming and equipment grants, which more than offset decreases in other expenditures. Central Government Investment Expenditures in 1968 (millions of dirhams) 1966 1967 1968 Actual Planned Agriculture, barrages & forestry 170 347 421 427 Barrages (10) (84) (123) (141) Irrigation (81) (136) (164) (122) Dry farming & livestock (33) (64) (81) (96) Forestry & others (46) (63) (53) (68) Transport and communications 115 156 140 164 Housing, welfare, education & health 84 76 97 91 (incl. Agadir) Tourism 15 37 28 27 Equipment for tourism & industry 6 5 20 Industry, mining and power 83 163 131 144 Industry and handicrafts (53) (90) (69) (73) Mining (13) (14) (15) (31) Electricity (17) (59) (47) (40) Land purchase 26 53 53 56 Public works (Promotion Nationale) included above 46 Defense 22 25 27 6 521 862 918 1,003  20 - 55. The main projects undertaken or continued in 1968 were barrage con- struction, irrigation, a fertilizer and selected seed project ("Operation Engrais"), afforestation, and the expansion of electric power and sugar pro- duction capacity. Other smaller projects included port, road, airport, PTT and railway improvements; school, hospital and hotel construction; housing and water supply; and expansion of the chemical (fertilizer) industry. 56. Central government investment expenditures in electricity, mining and manufacturing industry represented the smaller part of total investments by the public sector in these fields. The public enterprises, particularly the Electricity Office (ONE), the phosphate monopoly (OCP) and the sugar mills (SUNAB, SUTA and SUNAG) supplemented financial aid from the central gov- ernment with their own savings and with external borrowing to finance a sub- stantial investment program. Total investment of the public enterprises reached DH 340 million, largely accounted for by the above projects. This was more than double the total of the previous year, but fell short of the Plan target, particularly in the mining field. Gross Investments of Public Enterprises, n.i.e. (in millions of dirhams) Estimate 1966 1967 1968 1969 Phosphates Monopoly (OCP) 125 55 90 470 Railways (ONCF) - 10 5 80 Electricity Office (ONE) 30 65 50 50 Sugar 85 - 155 - Export Office - 10 10 10 Industry Office (REI) 5 5 5 10 Others 15 15 25 35 Total 260 160 340 655 Outlook for 1969 57. Morocco's ordinary budget revenues increased by DH 425 million, or 20 percent, in 1968, mainly as a result of stricter collection of taxes and tax arrears, and of a large transfer from OCP. They are expected to rise further by DH 140 million or 5.5 percent in 1969. This latter rise is the net result of an expected 10.6 percent rise due to higher taxes and a 5.1 per- cent fall due to a net decrease of other revenues including a smaller transfer from OCP. Collection of tax arrears will contribvute much less in 1969 than in 1968. 58. An estimated rise of DH 270 million in tax revenue in 1969 will re- sult from raising of tax rates and widening the taxable base of several ex- isting taxes and fees. In particular, the tax schedule on business profits was raised (from 44 to 48 percent on profits above DH 2 million), and the tax schedule on salaries was made more progressive (raised from 30 to 36 percent on taxable income exceeding DH 60,000). Although the government expects that these changes in the direct tax rates will raise yields by some DH 35 million  - 21 - in 1969, actual revenue is not expected to change from 1968 because of the arrears included in that year's revenue. The bulk of additional revenues is expected to come from higher indirect taxes and fees. In particular, more than half the additional tax revenues - some DH 150 million - is expected to result from generally higher rates of the turnover and sales tax (TPS) and additions to the list of taxable items. However, the changes do not affect foodstuffs, house rent, water, electricity and gas and fuel oil. Taxes on other refined petroleum products as well as the price of tobacco products were raised by about 10 percent, raising expected yields by over DaI 40 mil- lion. Other changes include raises in registration taxes and fees on vehicles, and in registration and stamp duties on transfer of title of real estate and commercial assets (but not on industry). On the other hand, the tax on in- heritance and donations, which had been instituted in April 1968 (and which was expected to yield DH 8 million in that year) was repealed beginning 1969. 59. On the expenditure side, the government budget for 1969 aims at maintaining ordinary expenditures at practically the same level as in 1968, with rises for education and agriculture being offset by reductions for de- fense. With ordinary revenue expected to rise in 1969 by DH 140 million against a rise in ordinary expenditures of only DH 22 million, central govern- ment savings are expected to rise by DH 118 million. Thus, central govern- ment savings, at an anticipated level of DH 225 million would be more than double those of 1968 and would be expected to finance about 19 percent of planned development expenditures for 1969. This compares with an actual 12 percent in 1968. 60. Planned investment by the central government (i.e. excluding local government and public enterprises) in 1969, at DH 1.2 billion, is DH 280 mil- lion or 30 percent above 1968 actual expenditures. The central government expects to finance this development expenditure and repay DH 90 million in debt amortization, partly from its expected savings of DH 377 million (in- cluding DH 225 million surplus in the ordinary budget, DH 120 million from the levy on sugar and DH 32 million in extraordinary revenue of the PTT) and partly from internal borrowing of DH 256 million, but largely from net foreign loans (i.e. after repayment of short-term loans) of DH 414 million. The bal- ance of the deficit (DH 240 million) is expected to be met by borrowing from the Central Bank (DH 181 million) and from other unspecified sources. 61. While the 1969 targets of planned investment expenditures of DH 1.2 billion and of higher savings by the central government of DH 377 million seem feasible, the net receipt of DH 414 million in foreign loans compared with an actual DH 220 million in 1968 seems more problematic. Even if this target is achieved, a gap of about DH 500 million (%aking account of debt repayment) would remain. As indicated, it is expected that nearly half this sum (DH 256 million) would be forthcoming in the form of net lending by the private sector, a target which is feasible, given the exceptional rise in private savings, following the good harvest of 1968, and the control exer- cised by the Central Bank over commercial banks. The remaining gap is ex- pected to be bridged by borrowing from the Central Bank and from other do- mestic and unspecified foreign sources.  - 22 - 62. In order to bridge the financial gap and maintain price stability, a greater share of private savings should be mobilized by the government and public savings should be increased as planned. Substantial additional bor- rowing from the Central Bank would create additional pressure on the balance of payments, which is already in a difficult position. If the investment target is to be achieved, while at the same time the balance of payments po- sition is not to deteriorate, it would seem that foreign resources beyond those expected by the Government in 1969 would have to be sought, and that part of such aid should not be tied to financing specific projects. Alter- natively, some cuts in the investment program may be unavoidable.  - 23 - CHAPTER IV EXTERNAL TRADE AND FINANCE 63. As was briefly indicated in Chapter II, despite some improvement in exports, the balance of payments remained under considerable pressure in 1968 and the external payments position remains strained in 1969. In this chapter the main components of Morocco's external trade and finance are considered with respect to both recent developments and near-term prospects. Particular attention is given in this regard to the significance of the new association between Morocco and the E.E.C. External Trade and Services 64. The balance of payments deficit on goods and services (excluding transfers) fell by about DH 35 million ($7 million) in 1968 to below DH 490 million ($98 million). With exports stagnating through 196T while imports of wheat, raw materials and investment goods increased rapidly, the trade balance moved from a surplus of about DH 200 million in 1965 to progressively larger deficits of about DH 70 million in 1966, DH 285 million in 1967 and DHI 310 million in 1968; the trade deficit in 1969 is expected to remain at about the 1967-68 level. The services account has also deteriorated markedly in recent years, the deficit mounting from below DH 100 million before 1966 to reach DH 230 million and DH 240 million in both 1966 and 1967, respec- tively. This deficit on invisibles declined in 1968 by some DH 60 million and a further improvement of perhaps another DH 50 million is anticipated in 1969. 65. The volume and value of merchandise exports remained virtually un- changed from 1964 through 1967. In 1968, despite a 4 percent decline in prices, goods exports rose by some 6 percent. Citrus exports alone accounted for over DH 75 million of the total DH 132 million increase during the year, thereby raising their share of total goods exports to over 18 percent (as compared with 13 percent five years earlier). In the light of Morocco's suc- cess in controlling citrus quality, its gains in Eastern European markets and the expected benefits of EEC association, there is reason to believe that citrus exports will continue to rise over the next several years. 66. There was no increase in 1968 in the export earnings from Morocco's leading export, phosphate rock, which continues to account for about one- fourth of total goods exports. Despite an 8 percent increase in the volume of phosphates exported, earnings remained virtually unchanged from the level of the preceding several years, i.e. at about DH 550 million. Possessing over 40 percent of the world's estimated reserves of phosphate rock, Morocco is proceeding with an ambitious expansion program aimed at nearly doubling phosphate sales between 1967 and 1972. Government forecasts for 1969 and 1970 anticipate rises in the tonnages of phosphate exports of 12 and 30 per- cent, respectively. While there is good reason to expect that the next few years will witness a substantial rise in phosphate earnings, it seems unlikely, in view of the world market situation, that Morocco will be able to achieve these goals.  - 24 - SUMMARY BALANCE OF PAYMENTS 1966-1969 (in millions of dirhams) 1966 1967 1968 1969 (projection by govt.) Goods (f.o.b.) Exports 2,168 2,146 2,278 2,393 Imports -2,241 -2,431 -2,587 2,687 Balance -73 -285 -309 -294 Services (net) Travel 215 211 243 270 Private Investment Income -128 -113 -110 -125 Interest on Public Debt -83 -70 -110 -80 Other -230 -266 -200 -197 Balance -226 -238 -177 -132 Current Transfers (net) Worker Remittances -108 -5 -25 -25 Pensions 85 81 84 84 Other -100 -39 -17 -22 Balance -123 37 42 37 Balance on Goods, Services and Current Transfers -422 -486 -444 -389 Capital Movements (net) Grants (public & private) 153 136 181 76 Private Capital -14 -40 -17 -19 Public Capital 227 298 149 261 Balance 366 394 313 318 Overall Deficit on Current and Capital Account 56 92 131 71 Changes in Reserves (increase = -) Bank of Morocco Net Assets 52 104 123 Net IMF position (-5) (-5) (236) Other (incl. errors & omissions) 4 -12 8 Source: Exchange Office and Ministry of Finance  - 25 - 67. Phosphates and citrus will continue to dominate Morocco's goods exports for the foreseeable future, though gains are also expected from minor exports such as iron ore, tomatoes, potatoes, cotton and processed foods such as canned fish and fruit juices and preserves. As noted below, exports pros- pects for some of these products as well as for various industrial goods will be enhanced by the EEC association recently concluded. 68. Morocco's merchandise imports (on the basis of trade statistics) rose by some DH 170 million in 1968 to a level of DH 2,790 million despite a drop of over DH 100 million in food imports, the largest category. The larg- est increases were in fuel and raw materials and semi-finished products, with lesser rises in finished intermediate goods and in consumer goods. Although the continuing large wheat imports necessitated by the 1966-67 drought were some DH 100 million less than in 1967, they were still equivalent to some 40 percent of the trade deficit. In the light of the bumper harvest in the cur- rent season, wheat imports for 1969 should be virtually nil. Food imports will also be cut by the rapid import substitution proceeding in sugar, which had been the largest food import until the poor general harvest in 1966. Notwithstanding these considerations, the Government expects a 4 percent rise in merchandise imports during 1969 and higher rises in succeeding years. The main factors accounting for this anticipated growth include liberalization measures now augmented by the EEC agreement, a substantial rise in raw mate- rial and capital goods imports implied by the Plan's investment targets, and the rising demand for intermediate and consumer goods, a concommitant of growing population and income. 69. On the services account, tourism is continuing to assume growing importance, reflecting the high priority given by the Government to develop- ment of this sector. Gross earnings from tourism (which have passed citrus exports to become the country's second leading source of foreign exchange) rose in 1968 oy some 6-1/2 percent above the 1967 level of DH 400 million. This was less than had been forecast, for reasons indicated in Chapter II. Given the heavy investments in tourist facilities now proceeding and assuming also that greater efforts are made both towards stimulating tourist demand and improving allocation within the sector, a projected 8-9 percent annual growth in tourism earnings over the coming years does not seem overly optimistic. Receipts from invisibles other than tourism (mainly transport, investment in- come and foreign government expenditures) rose in 1968 by DH 100 million to reach a level of DH 381 million. This latter rise was exceptional, however, and much smaller increases in earnings from non-tourist services are expected in coming years. 70. Principal components accounting for the large outflows in the invis- ible account include private interest and dividend payments (recently averag- ing around Dh 140 million annually), freight and insurance expenditures (which have risen in line with imports to a current level of DH 200 million), tourist expenditures abroad by Moroccan residents (running around DH 185 million yearly), and interest payments on the public debt. These interest payments of DH 125 million in 1968 were exceptionally high, partly because some pay- ments were carried forward from the end of the previous year. Public interest payments in 1969 are expected to fall to DH 100 million, though these will rise again in succeeding years more or less in line with the growing external debt.  - 26 - 71. In sum, an average annual growth in total goods and services exports of 5 percent as projected in the Plan for the period 1968-1973 still appears a reasonable forecast. If investment and overall growth also occur as indi- cated by the Plan, outlays on invisibles as well as goods imports will rise so that total imports may be expected to rise somewhat faster than GDP. Thus, if MAorocco is to achieve its Plan targets, it seems probable that the deficit on goods and services will again widen after 1969. The E.E.C. Association 72. Concluding several years of interrupted negotiations, the Moroccan Government signed an agreement of association with the European Economic Com- munity (EEC) on March 31, 1969. Although this agreement is limited to trade relations covering a period of five years, it allows for exploring new arrange- ments after three years including provisions on various presently excluded goods as well as on direct financial aid and measures affecting capital and labor movements. The new agreement will come into effect in September 1969. 73. The underlying rationale of the above agreement was to compensate Morocco for losses which otherwise would have resulted from EEC provisions requiring France to end preferences to Morocco on various products (most not- ably citrus fruit, olive oil and certain processed agricultural products) after mid-1969. French preferences may continue for the time being for prod- ucts not specified in the accord between Morocco and the E.E.C. The most im- portant of these goods are wine, tomatoes, fish products, cork and cork prod- ucts, products regulated by the European Coal and Steel Community, potatoes, fruit juices and fruit preserves. An important immediate benefit of associ- ation for Morocco will be the 80 percent reduction in the EEC's common exter- nal tariff on citrus fruits. Since one aim of the agreement concerning agricultural products was to avoid disrupting markets as now organized under the Community's agricultural policy, the sale prices of Moroccan citrus will not be permitted to fall below a minimum based on the EEC's reference price, thereby preserving some competitive advantage for EEC producers. This pro- cedure is in keeping with the accord's general principle whereby financial rather than competitive benefits were conferred; these benefits consist of rebates on both the common external tariff and the compensatory levies, but are generally not to be reflected in the supply prices on the EEC market. However, with tariff cuts of only 40 percent being made on Israeli and Spanish citrus, Morocco will retain its relative competitive advantage in France and improve it in the other EEC countries already receiving some 40 percent of Moroccan citrus exports to EEC. A variety of other agricultural products will also receive varied benefits, though the concessions on fish and fish products will soon oe revised when a common EEC policy on these products becomes effec- tive. Duties on M4oroccan imports into EEC countries are currently about DH 42 million; with the new accord, this is expected to fall to DH 23 million. 74. Under the agreement, the EEC will grant full intracommunity treat- ment (i.e. duty-free and quota-free entry) to Moroccan industrial goods. Im- mediate advantage of these provisions may be taken by Moroccan exporters of leather goods, textiles, light machinery and clothing. Given Morocco's politi- cal stability, the tax and other incentives it extends to foreign investors, its geographical proximity to Europe and the availability of low cost labor,  - 27 - the free entry of industrial goods to the Common Market could provide a sub- stantial stimulus to increased foreign and domestic investment in Moroccan industry. Whether the potential significance of these measures will be real- ized, of course, will depend largely on the Government's actions and policies to encourage this development. 75. Concessions were granted by Morocco with respect to both tariffs and quotas. The tariff concessions 1/ will reduce by an average of 12.5 per- cent the duties on the imports from the EEC. The effect on Moroccan-customs revenues, however, is expected to be a loss of only about DH 5 million. The existing structure of liberalized imports (affecting 44 percent of imports from the EEC) has been consolidated and provisions were made requiring that future quantitative restrictions be offset by equivalent liberalization of goods now subject to quota restrictions. The import quotas and subquotas granted under the accord do not constitute purchasing obligations but are de- signed to protect the share of EEC exports to Morocco. In 1968, the EEC ac-. counted for 50 percent of Morocco's imports and bought 60 percent of Moroccan exports. Current Transfers, Capital Movements, and Reserves 76. The balance of current transfer payments (not including grants) remained in surplus in 1968 at about the 1967 level of DH 40 million; no sub- stantial change is expected in 1969. Recorded migrants' transfers had fallen by 1968 to relatively inconsequential proportions while net pension receipts have remained stable for some years at around DH 85 million. After rising steadily for some years, the inflow of remittances from Moroccans working abroad levelled off in 1967 and 1968 at around DH 200 million in each year. Conversely, after a substantial drop in 1967 in salary transfers abroad by foreigners, these outflows levelled off in 1968 at DH 225 million. Conse- quently, there was a DH 83 million improvement in the balance of workers' remittances between 1966 and 1968. Whether further improvements are to be expected in coming years vill depend in large part upon the extent to which the Government acts to promote emigration. No major changes are anticipated in other current transfers in the next few years. 77. Private sector capital movements continue to constitute a net drain on foreign exchange resources. Net suppliers' credits held by the private sector rose substantially in 1968 (by DH 80 million against DH 5 million in 1967), but there was a slight decline in direct investment by foreigners (from DH 60 million to DH 50 million). There were indications, however, of increasing interest on the part of potential foreign investors which may be translated into larger future capital inflows. While the Government has 1/ The benefits of these concessions will also be received by many other nations in accordance with a most-favored nation treaty prohibiting Morocco from applying discriminatory tariffs. In fact, EEC countries will benefit most from the tariff reductions because the main conces- sions were made with respect to products now largely supplied from EEC.  - 28 - taken various steps to reduce unauthorized outflows of private capital, these remain substantial. It would appear that the current level of this capital flight is presently about DH 200 million. Projections of private capital movements are always extremely tenuous, and this is particularly true of the Moroccan case where the available data are so incomplete. However, with prospects fair for both rising direct investment and further reductions in capital flight, it seems likely that the private sector will begin to record a net inflow of foreign exchange resources in the coming years. 78. The gross capital inflow (including official grants) to the public sector in 1968 was about DH 610 million, about DH 50 million above the 1967 level. Of this total, official grants rose to about DH 150 million, largely in the form of food support. Despite these increases, the net capital re- ceipts of Morocco's public sector for the year were substantially below the levels of previous years as loan repayments were more than double the 1967 repayment level. A major share of this burden was attributable to heavy amortizations of past loans for wheat imports; these alone amounted to about DH 130 million in 1968. In 1969 wheat imports will fall to near zero and repayments on wheat loans will decline to DH 50 million, leaving more loan receipts available to finance developmental expenditures as less are required for financing food imports. Current Government forecasts for 1969 anticipate a gross inflow to the public sector somewhat below 1968 levels, with grants substantially lower and disbursements on public borrowings somewhat higher. 79. With foreign capital inflows insufficient to cover the deficit on goods, services and transfers plus amortization obligations, foreign exchange reserves have declined steadily since 1965. By the end of that year, net reserves were $121 million. Net reserves fell by $13 million in 1966, $19 million in 1967, and by another $24 million in 1968 to a level of $65 million by the end of December 1968 - equivalent to barely more than one month's total imports at the 1968 rate. Gross reserves, which fell from $136 million in 1966 to $114 million in 1967, rose to $131 million (two month's imports) at the end of 1968; the rise in 1968 reflected full drawing on a $50 million standby arrangement with the I.M.F. In response to the continuing balance of payments pressure in 1968, another $27 million standby arrangement was con- cluded in October 1968, thereby bringing Morocco's total outstanding drawings to $55 million - compared with an IMF quota of $83 million. Foreign Capital Requirements 80. Since receipts of public grants plus net borrowings do not now appear to be adequate to cover the combined deficits on the current account and on private capital account, Morocco expects another (albeit smaller) over- all deficit in the balance of payments in 1969. With reserves again under pressure, therefore, the April drawing of $10 million 1/ on the $27 million 1968 standby arrangement may be expected to be followed by an additional draw- ing, and probably by negotiation of another standby tcwards the end of the 1/ At the end of May 1969, drawings outstanding stood at $62 million com- pared with a quota of $86 million.  - 29 - year. Looking further ahead, Morocco s need for foreign public capital over the next five years might be put at s)me DH 4 billion - (equivalent to an annual average of $150-160 million) - assuming that trade and transfer accounts evolve approximately as forecast above, that some improvement is recorded by way of higher private investment and lower capital flight, that the structure and terms of new debt will not be very different from those on recently contracted debt, and that some allowance is made for a measure of recovery in reserve levels. 81. At the end of 1968, Morocco's public capital "pipeline" was about DH 700 million. While the disbursement on some loans has lagged behind the intended rate (e.g. on Russian and West German loans), the pipeline on French loans had about run dry until new agreements over the last year greatly im- proved the outlook for substantial French assistance. In addition to the large participation expected from official U.S. sources (including AID, PL 480, Ex-Im Bank and CCC credits), other donors expected to continue their assis- tance include Belgium, Denmark, Iran, Italy, Kuwait, the Soviet Union and West Germany. 82. In view of Morocco's presently tight balance of payments situation, assistance which is not tied to the financing of specific projects would be helpful in order to insure the realization of the proposed investment program. Since a considerable proportion of Morocco's investment program is devoted to sectors having low import components (e.g. agriculture, education, "Promotion Nationale" projects), the relatively large indirect foreign exchange require- ments of this investment program could offer a Justification for local financ- ing of such projects. In view of the uncertainty of this kind of financing, however, the need is underlined for Morocco both to intensify its local sav- ings efforts as well as to weigh carefully the advantages it sees in various projects, including some with low direct foreign exchange costs. Moreover the undertaking of projects with low economic returns will also bear adversely on future creditworthiness, and make it more difficult for Morocco to secure finance from its foreign partners. External Debt and Creditworthiness 83. Morocco's outstanding external public debt, excluding undisbursed, has climbed rapidly in recent years, rising from a level of $256 million (DH 1.3 billion) at the end of 1963 to reach $566 million in December 1968. The scheduled service payments on this debt have grown apace, rising from $17 million in 1964 to nearly $66 million as projected for 1969; in 1968 the heavy payments on wheat loans brought the service payment close to $75 million. The outflow of investment income from the private sector, meanwhile, has averaged around $25 million. Of the public debt outstanding at mid-1968, 75 percent consisted of loans from Governments and 11 percent was in the form of suppli- ers' credits, the remainder consisting of publicly-issued bonds and IBRD/IDA loans. 84. The average terms on which Morocco's borrowing has been contracted in recent years have been significantly concessionary. For example, on the new loans contracted and reported to IBRD over the period 1965-67 (excepting some short-term wheat credits), the grant element has averaged about 40 percent  - 30 - (at a 10 percent discount rate); if grants are included, the grant element on the total reported capital inflow was 66 percent. The relatively favor- able terms on which capital has been provided have held the service payments in recent years to an average of about 8 percent of the disbursed debt out- standing. Except in 1968, when it rose to some 12 percent on account of ex- ceptional circumstances already noted, the debt service ratio has averaged well below 10 percent; it will most probably fall to 10 percent in 1969. 85. For the future a less comfortable position should be expected. This is partly because of the already-cited situation of short-term vulnera- bility wherein either another prolonged drought period or a shortfall of pub- lic foreign assistance could create severe difficulties. Assuming that Morocco were successful in realizing both the Plan targets and the concommi- tant capital inflow as projected above 1/, its outstanding debt would more than double by 1975 and the debt service would exceed $100 million. This would mean a debt service ratio (at a 5 percent export growth rate) of some 12-13 percent. Also implied by these projected trends over the period 1969- 19T5 would be a gross capital inflow averaging about 30 percent of investment, and debt servicing rising from approximately 15 percent to 18-19 percent of national savings and from around 1.6 to 2.6 percent of GDP. While these in- dicators point to a manageable debt situation over the next several years, it should be emphasized that they rest upon assumption of better savings, invest- ment, and export performance than was realized in the early and mid-1960's. The debt burden would be heavier if this projected performance is not realized. In the longer run, moreover, as growing service payments on newly-contracted debt w4.ll be added to the substantial cumulative obligations on already out- standing debt, the burden will in any case become progressively greater. 86. Over the long run, a key determinant of Morocco's debt-servicing ability will be its export performance; this will itself partly reflect both domestic savings efforts and internal capital productivity. Altogether, future prospects suggest that Morocco may be considered as creditworthy for substantial borrowing on conventional terms provided that there is no deteri- oration in current savings efforts or in the pattern of resource allocation - areas in which there is clearly considerable room for improvement. However, especially in light of the expected continuing vulnerability of Morocco's balance of payments position to external factors such as unfavorable weather or falling export prices, there is also a case for making available a moderate amount of assistance on concessionary terms. 1/ In the projection of both capital requirements and the various indicators of debt servicing burden which are noted in this section, the parameters used were generally those indicated or implicit in the current Plan. The most significant of these were: export growth rate, 5%; import elastic- ioy (with respect to GDP), 1.2; GDP growth rate, 4.5%; investment rate rising steadily to 19% by 1975, with an average capital output ratio of 3.6.  - 31 - STATISTICAL APPENDIX 1. Morocco - External Public Debt Outstanding as of December 31, 1968 2. Morocco - Estimated Future Service Payments on External Public Debt Outstanding Including Undisbursed as of December 31, 1968 3. Population 4. Gross Domestic Product by Principal Sector at 1960 Market Prices 1963-1968 and Forecast for 1969. 5. Gross Product at Market Prices 1963-1968 6. Crop Production, 1961/62-1967/68 7. Cultivated Area - Cereals and Pulses 1964/65-1967/68 8. Cereal Yields Modern Sector, Traditional Sector and National Average 9. Fertilizer Uses 1962-1968 10. Expenditures on Agricultural Development - 1968 U1. Land Tenure - Estimated Cultivated Area, by Category of Holding 12. Index of Industrial Production by Sector and Branch 1963-1968 13. Production of Minerals 1963-1968 14. Central Govermnent Current Revenue (1964-1969) 15. Central Govermnent Current- Expenditure (1965-1968) 16. Central Goverrment Investment Expenditures (1965-1969) 17. Monetary Survey (1964-1968) 18. Herchandise Imports Valuation at Customs, 1963-1968 19. Merchandise Exports Valuation at Customs, 1963-1968 20. Geographic Distribution of Foreign Trade 21. Balance of Payments (1966-1969) 22. Foreign Loans Receipts 1965-1969 23. Foreign Exchange Reserves, 196h-1968 2ts. Cost of Living Index (Casablanca)   Table 1: MOROCCO - EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEMBER 31, 1968 A Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Debt outstanding Source December 31,1968 Disbursed Including only undisbursed TOTAL EXTERNAL PUBLIC DEBT 566A66 701,283 Privately-held debt 110,357 110,407 Publicly-issued bonds 37,964 37 964- Suppliers 72,393 72___44 Belgium 13,213 13,213 France 38,751 38,801 Germany 17,920 17,920 Italy 426 426 Netherlands l,h43 1,443 Switzerland 640 640 Loans from international organization 40,056 82,006 IBMD 38t,956 71,006 IDA 1,098 11,000 Loans from governments 416,053 508,870 Czechoslovakia 91 91 Denmark 3,333 3,333 France 193,548 196,165 Germany 55,323 67,534 Iran 293 13,800 Kuwait 28, 858 52,140 Poland 3.t438 3,l438 USSR 20,917 20,917 United States 110,252 151,452 /1 Debt with an original or extended maturity of one year or more. Statistical Services Division Economics Department August 11, 1969   Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNL PUBLIC DEBT OUTSTANDING INCLUDING UNDISEURSED AS OF DECEMBER 31, 1968 Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Page 1 DEBT OUTST (BEGIN OF PERIOD) PAYmlENTS DURING PERIOD INCLUDING AUORTI YEAR UNDISBURSED ZATION INTEREST TOTAL TOTAL EXTERNAL PUBLIC DEBT 1969 667P427 46#555 19*140 65,695 1970 620P872 32,930 20,155 53J086 1971 587J942 37*136 20,925 58,061 1972 550,806 38,018 19,506 57J524 1973 512#787 38'541 18.160 56.701 .1974 *74,246 38,728 17,059 55.786 1975 435.519 38,309 15,260 53J570 1976 397,209 38,165 13,625 51,791 1977 359.O44 35.531 12.029 .47J560 1978 323P513 33,428 10,619 44,047 1979 290,085 27.571 9,407 36,978 1980 262P513 27,366 8,435 35,801 1981 235.147 25,635 7,461 . 33.096 1982 209,512 24#455 6,575 ;31,030 1983 1BS.057 23P694 5,760 29J454 Note: Includes service on all debt listed in Table 1 prepared August ll, 1969 with the exception of the following: a) Publicly issued bonds redeemable on demand of bearer $ 2,263,000 b) Loans for which repayment terms are not available Suppliers $ 14,933,000 Loans from governments France $ n,878,000 Germany 379,000 United States 4,2402,00O Total $ 33,855,0oo  Table 2: MIOROCCO - ESTflATED FUTURE SERVICE PAYMENTS ON EXTERANAL PUBLIC DEBT OUTSTANNDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (coNT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Page 2 DEBT OUTST (BEGIN OF PERI0D) PAYMENTS DURING PERIOD INCLUDING AMORTI' YEAR UNDISBURSED ZATION INTEREST TOTAL PRIVATELY-HELD DEBT 1969 93.211 12P025 5,399 17,424 1970 81.186 9,813 4,916 14.730 1971 71J373 90061 4,273 13J334 1972 62.312 8J789 3,680 12.469 1973 53.523 8.141 3,O93 11.234 1974 45J382 7J227 2,559 9.J786 1975 38,155 6,774 2,075 8,849 1976 31J381 6,028 1,624 7,653 1977 25P353 4J267 1J238 5,505 1978 21J086 5,018 950 5J968 1979 16.069 940 690 1J630 1980 15.128 929 641 1.570 1981 14,199 440 594 1J033 1982 13.760 409 575 983 1983 13.351 427 556 984 PUBLICLY-ISSUED BONDS 1969 35,701 3J985 1,f669 5J654 1970 31.716 1.636 1,483 3.119 1971 30J080 1.642 1,401 3JO43 1972 28P438 2.048 1J319 3P366 1973 26 ,391 1J569 1,211 2*780 1974 24,822 1,J560 1*134 2J.694 1975 23J261 1,403 1.057 2,460 1976 21.859 1,340 985 2J325 1977 20,519 1.230 916 2.146 1978 19.290 3P221 853 4.074 1979 16.069 940 690 1.630 1980 15J128 929 641 1.570 1981 14,199 440 594 1.033 1982 13P760 409 575 983 1983 13,351 427 556 984  Table 2: MOROCCO - ESTIKATE) FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSBZ AS OF DECEMBER 31, 1968 (CONT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Page 3 DEBT OUTST CBEGIN OF PERIOD) PAYMENTS DURING PERIOD INCLUDING AMORTI- YEAR UNDISBURSEO ZATION INTEREST TOTAL PRIVATELY-HELD DEBT SUPPL IERS 1969 57.510 8,040 3)?29 11.769 1970 49#410 8,177 3,434 11,611 1971 41J293 7,'419 2,872 10,291 1972 33J874 6.742 2,361 9,103 1973 27*132 6,572 1,683 8.454 1974 20*561 5,667 1r425 7JO92 1915 140894 5.372 1,018 6J390 1976 9P522 4.689 639 5P328 197T 4J834 3,037 322 3P359 1978 1.0797 1.797 97 1,894 LOANS FROM I NTL ORGANIZATIONS 1969 82.006 2,O67 2,808 4,875 1970 79,939 3,656 3,373 7,029 1971 76*283 5*236 3,488 8,724 1972 710047 5J709 3,464 9,173 1973 65o338 5,806 3,189 8*995 1974 59,532 5)385 2,853 8J238 1975 54*147 5*030 2,461 7J491 1976 49J9117 5.101 2*215 7,316 1977 44P016 4,269 1#931 6,200 1978 39J747 4*182 1,687 5,869 1979 35P565 3.689 1,459 5.148 1980 31,876 3,526 1.259 4.785 1981 28.350 3,387 1,064 4,451 1982' 24*963 2.838 873 3,711 1983 22#125 2J245 727 2,972  Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMEN4TS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (CONT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Page 4 DEBT OUTST CBEGIN OF PERIOD) PAYMENTS OURING PERIOD INCLUDING AMORTI- YEAR UNDISBURSED ZATION INTEREST TOTAL LOANS FROM INT' L ORGANIZATIONS IGRD 1969 T1,006 2,067 2,808 4,875 1970 68,939 3J656 3,373 7,029 1971 65o283 5,236 3P420 8,656 1972 60,047 5,7O9 3J382 9,091 1973 54,338 5,806 3,106 8,912 1974 48,532 5J385 2J771 8J156 1975 43,147 5,030 2,379 7#409 1;976 38;117 4,991 2s133 7,I24 1977 33#126 4,159 1,850 6,009 1978 28,967 4,072 1s606 5P678 1979 24J895 3,579 1J379 4,958 1980 21J316 3J416 1,180 4P596 1981 17,900 3,277 985 4J262 1982 14,623 29728 796 3,524 1983 11,895 2.135 650 2,785 IDA 1969 110000 - 1970 11OOO .1971 211OOO * 68 68 1972 11-0000 83 83 1973 1lAOQO * 83 83 1974 11,000 - 83 83 .1975 11,000 0 83 83 1976 11000 110 . 83 193 1977 10,890 110 82 192 1978 10J780 110 81 191 1979 10670 110 80 190 1980 10s560 110 79 189 1981 10,450 110 l8 188 1982 10J340 110 78 188 1983 10*230 110 77 187  Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (cONT.) Debt Repayable in Foreign Currency - (In thousands of U.S. dollars) Page 5 DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERIOD INCLUDING AMORTI' YEAR UNDISBURSED ZATION INTEREST TOTAL LOANS FROM GUVERNMENTS 1969 492.209 32,463 10,934 43#397 1970 459P746 19P461 11.866 31.327 1971 440.285 22,839 13.164 36.003 1972 417P446 23J,520 12,362 35,882 1973 393,926 24J594 11,878 36,473 1974 369,332 26,115 11,646 37o.62 1975 343.217 26o505 10s724 37,.229 1976 .316.711 27.036 9,786 36,822 1977 289o675 26,996 8,860 35,855 1978 262P679 24.228 7,982 32,211 1979 238,451 22.o942 7,259 .30,201 1980 215J509 22.911 6,534 '29t445 1981 192.598 21.808 5,804 27.612 1982 170.790 21.209 5,l27 26*336 1983 149'581 21.022 4,477 25.499 CZECHOSLOVAKIA 1969 91 61 2 63 '1970 30 30 . 31  Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (coNT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Page 6 DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERIOD INCLUDING AMORTI YEAR UNDISBURSED ZATION INTEREST TOTAL- LOANS FROM GOVERNMENTS DENMARK 1969 3,F333 68 a 68 1970 3,265 136 a 136 1971 3*129 136 * 136 '1972 2*993 136 1 136 1973 2,857 136 - 136 1974 2*721 136 * 136 1975 2,#585 136 U 136 1976 2,449 136 1 136 .1977 2*312 136 - 136 1978 2*176 136 U 136 1979 2*040 136 * 136 1980 1,904 136 - 136 1981 1J768 136 136 1982 1,632 136 136 1983 1J496 136 - 136 FRANCE 1969 184,285 21*084 6,089 27*174 .1970 163*201 9J,359 5J207 14,566 1971 153*842 9,621 4,883 14*504 1972 144P221 9,698 4P549 14,247 1973 134*523 9J782 4,217 13*999 1974 124*741 90911 3,879 13P790 1975 114,831 10*103 3,539 .3#641 1976 104#728 10*288 3*193 13*481 1977 94*439 1O*408 2,843 13J252 1978 84*031 1O*222 2,504 12*726 1979 73*809 1O0078 2,173 12*251 1980 63*731 1O0293 1,857 12*150 1981 53*438 10,429 1*537 11*966 1982 43*009 10*750 1#216 11*965 1983 32*259 10*l370 884 11*253  Table 2: MOROCCO - ESTMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (OONT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Page 7 DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERIOD INCLUDING AMORTI' YEAR UNDISBURSED ZATION INTEREST TOTAL LOANS FROIi GOVERNMENTS GERMANY .1969 67,155 6,244 1,448 r,693 1970 60,910 2#589 1.579 4:168 1971 58,322 2,614 1,479 4J093 1972 55,707 2,641 1J378 4#019 1973 53#066 3:010 1:343 4*353 1974 50*056 3:780 1,597 5,377 1975 46J276 3,809 1,457 5,266 1976 42:467 3:460 1,315 40776 1977 39,007 3,113 :2O07 4:319 1978 35,694 3J145 1,109 40253 1979 32:750 3:177 1:010 4,187 1980 29J572 3:211 910 4J121 1981 26:361 3:246 809 4P055 1982 23:I15 3,282 707 3:989 1983 19,832 3,319 604 3J923 IRAN 1969 13#800 1970 . 13,8OO8 1971 13,800 ' 1972 13:800 1973 13o800 460 276 736 1974 13#340 920 524 1:444 19T5 12,420 920 488 1:408 1976 11:500 920 451 1#371 1977 10,580 920 414 1:334 1978 9: 660 920 377 1J297 1979 aJ740 920 -340 1S260 1980 7,820 920 304 1,224 1981 6,900 920 267 10187 1982 5J980 920 230 1,150 19B3 5060 920 193 1,113  Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEKBER 31, 1968 (cONT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Page 8 DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERIOD INCLUDING AMORTI YEAR UNDISBURSED ZATION INTEREST TOTAL LOANS FROM GOVERNMENTS KUWAIT 1969 52,140 - - 1970 -52.140 576 576 .1971 52o140 2,947 1*796 4*744 1972 49#193 3.024 1i689 4#713 1973 46.169 3.103 1.578 4#681 1974 43.066 3.186 1.465 4.650 1975 39.880 3.272 1,347 4.619 1976 36.608 3,798 1.224 5.022 1977 32,0810 3#891 1.086 4P978 1978 28.919 3,988 946 4,933 1979 24,931 4.088 801 4.889 1980 20.843 4,193 652 4.845 1981 16,650 2J823 497 3J320 1982 13*826 1.770 402 2.171 1983 12.057 1.826 348 2.174 POLAND 1969 3.438 1.851 105 1.956 1970 1.587 1.258 41 I.299 1971 329 47 a 55 1972 282 47 7 -54 1973 235 47 6 53 1974 188 47 5 52 1975 14.1 47 4 S1 1976 94 47 2 49 1977 47 47 1 48  Table 2: MOROCCO - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UJNDISBURSED AS OF DECEBER 31, 1968 (CONT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Page 9 DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERIOD INCLUDING AMORTI" -YEAR UNDISBURSED ZATION INTEREST TOTAL LOANS FROM GOVERNMENTS USSR .1969 20*917 ' 1970 20*917 885 314 1,199 1971 20.032 2.193 588 2,781 1972 17*839 2*616 516 3J132 1973 15*223 2J616 437 3JO53 1974 12,607 2*616 359 2J975 1975 9J991 2.616 280 2J896 1976 7,375 2,616 202 2.818 1977 4J759 2P616 .123 2,739 1978 2*143 1,731 45 1#776 1979 412 412 6 418 UNITED STATES 1969 147.050 3.,155 3,289 6J443 1970 143.895 5,204 4J147 9J352 -1971 138*691 5o280 4j410 9,690 1972 133,411 5J356 4,224 9,582 1973 128*O53 5,440 4,022 9*461 :1974 122*613 5J520 3>817 9*337 1975 117,093 5J603 3#610 9*212 1976 111#490 5J770 3,399 '9J169 1977 105P720 5,865 3.185 9x049 1978 99,855 4*086 3*002 7,089 1979 95*769 4J130 . 2J928 7.058 1980 91*J639 4*157 2J812 6.969 1981 87,482 4J254 2,694 6.948 1982 83,228 4*351 2,573 6,924 1983 78J877 4o451 2J448 60899 Statistical Services Division Economics Department August 11, 1969   Table 3: POPULATION (thousands in mid year) 1960 1962 1964 1966 1967 1968 Moroccan Moslem 11,068 11,870 12,630 13,450 13,880 14,342 Jewish 162 155 110 100 90 78 Total 11,230 12,025 12,740 13,550 13,970 14,420 Foreign French 175 90 Spanish 93 30 Algerian 93 25 Other 35 30 Total 396 335 220 175 170 160 All nationalities 11,626 12,360 12,960 13,725 14,140 14,580 Source: Ministry of Planning  Table 4: GROSS DOMESTIC PRODUCT BY PRINCIPAL SECTOR AT 1960 MARKET PRICES 1963-1968 AND FORECAST FOR 1969 (Millions of Dirhams) 1963 1964 1965 1966 1967 19687 1969 (Forecast) Agriculture 3,060 2,990 3,150 2,780 3,070 3,980 3,500 main exports and industrial crops 2/( 620) ( 750) ( 800) other agriculture (2,440)( 2,240)( 2,350) Energy 230 250 260 280 280 310 330 Mining 530 590 590 580 580 580 620 Industry and handicraft 1,250 1,330 1,320 1,370 1,420 1,470 1,530 Construction, public works 460 440 460 500 580 570 650 Commerce 2,180 2,150 2,130 2,140 2,290 2,500 2,550 Transport and other non-government services 1,660 1,720 1,780 1,820 1,890 1,990 2,030 Government Wages & Salaries 1,090 1,140 1,120 1,190 1,250 1,370 1,490 3/ Total 10,500 10,610 10,810 10,660 11,360 12,770 12,700 Adjustment -20 -30 -20 -70 -20 -60 -20 Gross Domestic Product 10,480 10,580 10,790 10,590 11,340 12,710 12,680 1/ Provisional 2/ Consists of wine, citrus fruit, vegetables, sugar, beets, cotton, tobacco. 3/ Corresponds to the "Production Interieure Brutet? plus Government wages and salaries 1/ Adjustment is made to make data conform with the standard concept of GDP and to reconcile import and export figures given in the two sources below. Source: 3ased on National Accounts, Ministry of Planning,and Balance of Payments estimates of the Exchange Office  TABLE 5: GROSS PRODUCT AT MARKET PRICES 1963-1968 (Mi] lions of Dirhams) 1963 1964 1965 1966 1967 ]968 Private Comsumption 8,950 9,210 9,710 5,620 10,090 10,740 Domestic (8,760) (9,040) (9,550) (9,460) (9,900) (10,560) Abroad (190) (170) (160) (160) (19.0) (180) Public Consumption 1,710 1,850 1.790 1,850 1,920 2,120 Goods & Services (480) (510) (030) (420) (420) (470) Wages & salaries (1,230) (1,340) (1-360) (1,430) (1,500) (1,650) Fixed investment 1,410 1,370 .,4ho 1,530 1,890 L,970 Changes in stocks 60 -20 - -150 30 700 !xports of goods & non-factor services 2,410 2,760 2,710 2,780 2,800 3,AOb Less Imports of goods & non-factor services -2,700 -2,710 -2,520 -2,870 -3,1b0 -3,310 Gross Domestic Product 11.,340 12,460 13.130 12,760 13,590 15,260 Net factor income from 2broad -220 -230 -270 -320 -190 -2h0 Gross National Product 11,620 12,230 12,860 12,hb0 13L00 15,020 Source: Based on the National Accounts of the Ministry of P' anning. From 3966, the estimates of imports and exports of the Exchange Office have been used.  Table 6: CROP PRODUCTION, 1961/62-1967/68 1/ 1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68_ (in '000 quintals) Cereals: Herd Wheat 9,321 8,905 8,894 10,085 6,150 8.500 17,750 Soft Vheat 3,237 3,050 3,064 3,059 1,986 2,4O0 6,359 Barley 11,850 14,630 11,684 11,894 5,057 11,000 22,238 Corn 3,291 3,967 3,197 2,721 1,544 2,550 2,440 Other Cereals 1,394 1,579 1,292 1,165 890 1,141 1,690 Sub-total 29,093 32,131 28,131 28,924 15,627 25,591 50,437 2/ PlseE 1,L07 1,472 2,149 .2,465 1,403 1,720 2,546 Citrus 4,550 4,890 6,300 5,300 6,211 6,965 7,874 Olives 1,400 1,450 2,000 1,770 2,670 1,550 1,580 Potr^toes 2,250 1,880 2,710 2,750 2,050 1,900 Tomatoes 1,760 2,530 3,260 3,000 2,770 2,100 uran e s 3,290 4,170 4,200 5,200 3,420 2,180 3,100 Sunflocjer Seed 19 93 101 39 25 27 37 Flas. 129 57 155 105 76 36 26 Seed Cotton 95 147 170 242 301 150 196 S3u'arbepts - 719 1,808 1,739 3,820 3,759 5,538 I/ Provisional D, ta ?. Includes 3road Beans, Chick Peas, Green Peas, Lentils, and Green Beans rce: T-, Situation Economigue du Maroc  Table 7: CULTIVATED AREA - CEREALS AND PULSES 1964/65 - 1967/68. (in 1000 hectares) 1964/65 1965/66 1966/67 1967/68 Cereals: Hard Wheat 1,267 1,234 1,268 1,502 Soft Wheat 390 401 408 475 Barley 1,645 1,774 1,807 1,896 Corn 434 438 461 452 Other Cereals 157 153 143 152 .Sub-total 3.893 4,o0o 4,188 4,1477 Pulses 298 345 297 282 Total 4s19l 4,345 4,485 4,759 2-!~~~~~~~~~~~ fl/ Provisional Data 2/ Includes Broad Beans, Chick Peas, Green Peas, Lentils, Green Beans Source: La Situation Economigue du Maroc   Table 8: CEREAL YIEI)DS MODERN SECTOR, TRADITIONAL SECTOR AND NATIONAL AVERAGE (Quintals per hectars) 1/ 1964/65 1965/66 1966/67 1967/68- Tradi- Tradi- Tradi- Tradi- Modern tional Average Modern tional Average Modern tional Average Modern tional Average Hard Wheat 11.7 7.3 7.8 8.4 3.5 5.0 10.0 5.5 6.2 17.7 10.2 11.8 Soft Wheat 13.7 5.9 7.9 9.3 3.6 4.9 8.4 5.0 5.8 16.3 10.2 13.4 Barley 12.1 7.1 7.2 6.6 2.7 2.8 8.6 5.9 6.1 17.1 11.5 11.7 Corn 8.1 6.2 6.2 6.2 3.4 3.5 8.0 5.4 5.5 7.8 5.2 5.3 iJ Provisional Data Source: La Situation Ec6nomigue du Maroc   TABLE 9: FERTILIZER USES 1962-1968 t in tons of nutrient) N P205 K20 Total 1962 13,900 23,700 8,600 46,200 1963 14,600 22,200 8,500 45,300 1964 15,700 24,400 8,300 48,boo 1965 19,600 26,5oo lo,0I o 56,500 1966 25,ooo 33,400 9,200 67,600 1967 28,000 36,500 15,400 79,900 1968 33,000 39,000 18,400 90,400 Source: Governnent of Morocco  1/ Table 10: EXPENDITURES ON AGRICULTURAL DEVELOPMENT - 1968 Actuals Percentage of Operations Credits . Credits Realized Committed Disbursed Committed Disbursed - - - - (in million DH) - - - (percent) - - - Agriculturnl development (.R.M.V.A.) 197.1 166.5 112.7 84 57 Provincial Services 59.0 46. 4 28.8 79 49 (nV) Air. Extension - 14.8 11.8 11.0 80 74 CT's) Livestock 20.4 12.2 8.4 59 41 Construction and 20.1 19.8 16.1 97 80 Materials -(CT's) TOTAL 311.4 256.7 177.0 82 57 1/ by the Agricultural Development Department ("Direction de la Mise en Valeur") Source: Ministry of Agriculture, Direction de la Mise en Valeur  Table 11: LAND TENURE - ESTIMATED CULTIVATED AREA, BY CATEGORY OF HOLDING (in Hectares) 1/ Modern Sector Private holdings - Moroccan 250,000 Private holdings - Foreign 340,000 State-owned land - (ex Foreign-leased) 200,000 Sub-total 790,000 Traditional Sector Private holdings - Moroccan: Below 8 ha. 1,900,000 8 ha. to 9.9 ha. 270,000 10 ha. to 14.9 ha, 410,QOO 15 ha. to 19.9 ha. 170,000 20 ha. or more 400, 000 Collective holdings 550,000 Sub-total 3,700,000 Total Cultivated Land 4,490,000 1/ Includes an estimated 158,000 hectares of irrigated land (1966) within major irrigation projects. Sources: Based on data contained in Preparation du Plan de Developpement, 1968-72; Service of Rural Statistics; L'Impot Agricole - les gros Contribuables.  Table 12: INDEX OF INDUSTRIAL PRODUCTION BYSECTOR AND BRANCH 1963-1968 (1958 : 100) 1/ Weight 1963 1964 1965 1966 1967 1968 Power 110 139 147 153 162 165 181 Mining 375 111 125 126 123 124 124 Manufacturing 515 218 130 128 136 142 150 of which: metal transformation 145 102 107 103 102 114 124 ceramic & building material 58 137 143 139 145 145 168 chemicals 68 111 117 134 152 154 170 oils and fats 39 145 121 125 130 136 140 food 417 121 127 127 138 144 145 textiles 107 183 184 181 190 196 222 leather 49 121 102 100 104 96 112 paper and cardboard 29 134 138 133 143 147 157 other 88 138 129 117 125 133 127 Sub total 1,000 General Index 123 130 130 134 138 144 1/ Preliminary figures Source: La Situation Economigue du Maroc  Table 13: PRODUCTION OF MINERALS - 1963-1968 (thousands of metric tons) 1963 1964 1965 1966 1967 1968 Phosphate rock 8,548 10,098 9,824 9,439 9,922 10,512 Iron ore 1,035 887 951 1,017 893 809 Manganese ore 335 341 376 362 286 160 Lead ore 106 104 113 120 116 121 Zinc ore 59 81 95 94 83 68 Cobalt 14 15 17 18 18 15 Coal 404 400 419 451 482 451 Crude oil 150 120 103 103 97 89 Pyrrhotine - - 128 282 353 418 Source: Ministry of Planning; BNDE  Table 14: CENTRAL GOVERNMENT CURRENT REVENUE (1964-1969) (Millions of Dirhams) 1/ 1964 1965 1966 1967 1968- 1969 (estimate) Arricultural tax 32.1 43.2 34.5 36.9 62.5 80.0 Business tax 30.6 53.1 57.6 54.6 58.8 55.0 Tax on business profits 126.7 293.8 317.5 339.3 h06.4 h05.0 Tax on salaries 60.9 77.6 101.3 103.7 122.8 125.0 Urban tax 3.2 2.4 9.0 13.2 19.3 14.0 Liquor license tax 0.5 0.6 0.6 0.7 0.5 0.7 Total direct taxes 254.0 470.7 520.5 548.4 670.3 679.7 Import duties & taxes 416.6 328.1 400.6 40h.2 395.2 420.0 Sxport taxes 37.6 43.1 48.2 66.6 54.0 65.0 Other customs receipts 3.7 3.9 4.1 4.1 4.2 5.5 Total customs receipts 457.9 375.1 452.9 474.9 453.4 490.5 Excise taxes 300.9 320.9 352.5 379.4 401.5 414.6 Turnover tax 210.0 205.0 222.0 224.5 291.2 430.0 Total consumption taxes 510.9 525.9 574.5 603.9 692.7 844.6 Stamp and registration taxes 101.2 110.5 118.9 125.5 137.3 178.2 Proceeds of Govt. properties 42.1 48.0 41.1 49.8 h9.2 52.6 State monopolies & State enterprises 226.3 142.2 171.8 191.3 387.2 322.8 Receipts from various other Government activities 52.3 59.1 49.4 67.9 70.2 73.8 Governmental transfer receipts 56.0 157.1 46.6 70.3 96.8 54.5 Total miscellaneous receipts477.9 516.9 427.8 664.8 740.7 681.9 Total Revenue 1700.7 1,888.6 1,975.7 2,132.0 2,557.1 2,696.7 1/ Preliminary figures Note: The official figures for 1968 and 1969 have been rearranged to make them comparable to previous years. Source: Ministry of Finance  Table 15 CENTRAL GOVERNMENT CURRENT EXPENDITURE (1965-1968) (Millions of Dirhams) 1/ 1965 1966 1967 1968- Actuals Per cent Actuals Per cent Actuals Per cent Actuals Per cent 1. Economic departments 261.2 14.2 265.2 lL.l 281.3 14.3 297.1 13.1 Commerce 99.1 9.7 Industry & Mines 7.4 8.o 8.1 Public Works 101.9 lO.5 105.4 112.0 Agriculture 142.0 143.3 158.3 167.3 Development 0.7 0.5 0.5 - 2. Social departments 659.2 35.8 691.4 36.7 739.4 37.6 791.8 35.0 Educati on 450-5 1X77.1 T11.9 57.7 Youth & Sports 17.4 36.4 18.0 19.0 Labor 10.3 10.3 10.9 11.9 Health 181.0 187.5 198.6 203.2 3. Disciplinary departments 566.1 30.7 595.7 31.6 613.8 31.3 696.3 30.8 Defense 28 7.3 29 . d318-.7 71- 3 Gendarmerie 32.3 33.3 36.8 ' 38.0 Auxiliary forces 94.0 96-4 96.5 99.0 Interior 48.6 51.9 49.3 56.6 National Security 1014.0 115.3 112.5 121.4 2/ 4. Other_ 355.3 19.3 331.0 17.6 329.4 16.8 477.0 21.1 2/ 5. Total 1100.0 18100.0 00.0 1963 100.0 2,262.2 100.0 1/ Preliminary figures 2/ 2 Excluding public debt service Source: Ministry of Finance   Table 16: CENTRAL GOVERN1MENT INVESTMENT EXPENDITURES (1965-1969) (in millions of dirhams) 1/ 1965 1966 1967 1968- 1969 Estimate Agriculture 159 170 347 421 537 Barrages - 10 84 123 180 Irrigation 96 81 136 164 161 Dry farming and livestock 11 33 64 81 119 Conservation and Forestry 32 39 54 33 36 Research and others 20 7 10 21 41 Transport 72 67 78 72 116 Ports 14 16 13 13 27 Roads 47 39 51 38 43 Air transport 11 12 14 22 46 Community Housing and Welfare 36 21 27 27 37 Social Services 65 44 33 53 91 Education and sports 47 28 23 43 77 Health 18 16 10 10 14 Communications 35 22 33 28 40 Tourism 6 15 37 28 38 Hotels 2 4 24 16 15 Other equipment 4 10 13 12 23 Industry and Handicrafts 36 33 45 23 69 Mining 14 13 14 15 62 Chemical industry at Safi 22 17 23 3 - Others - 3 8 5 7 Land Purchase 27 26 53 53 79 Military expenditures 14 22 25 27 - Reconstruction of Agadir 27 19 15 17 2 Transfers 156 82 168 170 187 Railways (ONCF) ;o 19 12 28 34 Electricity 23 17 59 47 6 Sugar (SUTA, SUNAB, SUNAG) 30 49 51 Chemicals (Maroc Chimie) 113 3 10 10 107 Equipment grants (BNDE) 6 5 20 Others (excl. OCP) v _ 8 33 13 _ TOTAL 634 521 862 918 1,197 1/ ?reliin-uary {qote: Fi~ures may not add up to totals because of rounding Source: Ministry of Finance   Table 17: MONETARY SURVEY (1964-1968) (Millions of Dirhams) 1964 1965 1966 1967 1968 Dec. Dec. Dec. Dec. Dec. Currency 1,278 1,386 1,429 1,614 1,859 Sight Deposits 2,299 2,472 2,371 2,523 2,864 Other Deposits 218 272 308 331 449 Total Money Supply 3,795 4,130 4,108 4,468 5,172 Foreign Assets (net) a! 380 611 548 448 483 Credit to Treasury 1,606 1,543 1,541 1,868 2,102 of which: Central Bank (492) (456) (449) (880) (939) Bonds held by Banks (623) (667) (673) (536) (715) Private deposits with Treasury (491) (420) (419) (452) (448) Credit to the Economy 1,932 1,978 1,976 2,118 2,629 of which: From Central Bank (433) (424) (454) (486) (695) From Other Banks (1,499) (1,554) (1,522) (1,632) (1,934) Adjustments -123 -2 43 34 -42 Total Sources 3,795 4,130 4,108 4,468 5,172 a/ Excluding liabilities arising from drawings on the IMF, and including discounted bills in foreign currencies. Source: Banque du Maroc  Table 18: MERCHANDISE IMPORTS VALUATION AT CUSTOMS, 1963-68 (Millions of Dirhams) 1963 1964 1965 1966 1967 1968 TOTAL 2243 2327 2181 2418 2620 2790 Foods (except oil & oilseeds), beverages, tobacco 465 636 578 660 723 619 Milk 19 19 23 20 27 -27 Butter & cheese 29 28 25 25 32 40 Coffee 28 30 30 33 36 35 Tea 51 70 56 64 67 82 Hard wheat 2 11 * 17 * - Soft wheat 36 51 79 202 303 216 Barley * * * - 2 - Wheat flour 19 16 23 12 15 10 Tobacco 20 19 15 18 17 18 Sugar 192 327 262 191 149 119 All other 69 65 65 78 76 73 Fuel and raw materials 346 398 442 435 418 529 Crude oil -37 -7 73 79 -50 107 Gasoline 2 3 2 2 3 3 Diesel fuel & fuel oil 2 2 2 * 5 4 Lubricants 17 17 18 14 14 22 Lumber 66 71 64 76 69 80 Peanuts & peanut oil 10 18 5 - 3 - Other food oil 81 37 113 94 57 86 All other 134 165 165 170 187 227 Semi-finished products 464 469 459 522 553 621 Intermediate paper products 27 30 32 Fertilizer 24 22 27 27 35 42 Other chemical products 38 39 48 50 47 60 Cotton & synthetic textile yarn 42 46 56 90 76 86 Metal products, non-electrical 139 156 135 141 172 181 Industrial gold 7 14 10 6 3 5 All other 174 158 156 178 188 213 Finished products for agriculture & industry 370 344 353 385 529 588 Agricultural machinery & equipment 27 20 27 27 23 71 Industrial machinery & equipment 154 153 165 158 340 347 Automotive vehincles & parts 24 25 16 22 12 13 All other 165 146 148 178 154 1.77 Consumer goods 598 480 349 416 397 L33 Pharmaceuticals "6 6 Textiles 165 131 52 97 71 24 Domestic hardware & major appliances 33 32 20 32 35 48 Automobile & auto parts 113 71 54 61 87 135 All other 226 185 167 164 156 173 * DH .5 million or less Source: Ministry of Planning.  Table 19: MERCHANDISE EXPORTS VALUATION AT CUSTOMS, 1963-68 (Millions of Dirhams) 1963 1964 1965 1966 1967 1968 TOTAL 1943 2186 2176 2168 2146 2278 Food, beverages, tobacco 943 1074 1050 1052 1062 1169 Citrus fruit 256 31 311 335 346 420 Tomatoes 105 129 137 149 175 144 Potatoes 40 31 49 59 47 39 Other fresh vegetables 27 28 48 30 40 41 Dried fruits 11 24 34 23 30 18 Fruit & vegetable juices 11 16 14 22 19 24 Fruit & vegetable conserves 38 47 50 51 59 51 Dried vegetables 62 65 89 54 50 94 Canned fish 102 134 73 122 115 130 Salt fish 17 17 13 19 10 9 Wine & liqueurs 91 117 93 75 4 5 Barley 37 19 2 - - - Corn 27 15 17 5 All other 119 121 120 10 167 194 Agricultural raw materials 131 94 89 129 141 134 Vegetable horsehair 31 32 27 -2 21 19 Esparto grass 14 6 5 5 4 5 Olive oil 35 6 3 44 6 7 Wool, fur, hides, skins 15 13 9 9 7 6 Cork 18 17 16 16 18 20 Cotton 18 20 29 29 40 16 All other - - - - 45 61 Fuel and raw materials 731 872 906 829 764 754 Phosphate W X m m 7 3C Iron 45 40 38 32 35 25 Manganese 57 52 51 52 41 34 Lead 59 64 126 76 59 66 Zinc 15 20 33 26 27 21 Cobalt 5 16 4 14 12 15 Coal 14 12 9 - 7 6 Other mining and quarrying products 25 36 37 40 4 11 All other 51 54 55 55 33 32 Manufactures, nonfood 138 146 131 158 179 221 Leather 13 11 13 m 17 21 Other semi-fabricated cork products 9 7 7 7 6 5 Other semi-finished products 55 55 53 89 100 130 Finished goods for industry & agriculture 9 9 6 5 2 8 Consumer goods 52 64 52 43 54 57 Source: Ministry of Planning.  Table 20: GEOGRAPHIC DISTRIBUTION OF FCREIGN TRADE (in milliona of DR) 1964 1968 Exports (f.o.b.) to: Value Percent Value Percent France 958 43 876 38 West Germany 239 11 189 9 Benelux 156 7 158 7 Spain 90 4 76 3 United Kingdom 104 4 134 6 Algeria 36 2 30 1 Italy 57 3 134 6 Cuba 56 3 27 1 United States 29 1 43 2 Others 494 22 620 27 Total 2,219 100 2,287 1964 1968 Imports (c.i.f.) from: Value Percent Value Percent France 911 39 880 31 United States 231 10 380 14 Cuba 243 10 49 2 West Germany 132 6 216 8 Benelux 102 4 54 2 Italy 64 3 139 5 United Kingdom 69 3 123 4 Others 593 25 949 34 Total 2,345 100 2,790 1 Source: Ministry of Planning.  Table 21: BALANCE OF PAYMENTS* (1966-1969) (in millions of dirhams) 1966 6 191969 government forecast Rec'ts. Expend. Rec'ts. Expend. Ree't. sxpend. Rects. Expnd. A. Goode & Services 23114 2828 3351 305 3571 324 7 Goodes (f.o.b.) 2168 2235 2146 2427 2278 2582 2393 2632 Non-monetary gold _ 6 - 4 - 5 5 Freight & insurance 61 177 66 191 97 203 112 208 Other transport 8 56 10 58 13 70 14 70 Travel 379 164 400 189 426 183 456 186 IncTae from investlents 3)4 245 29 212 44 264 44 249 ..,Private (15) (143) (15) (128) (28) (138) (Z8) (153) . .Public (interest on public debt) (19) (102) (14) (84) (16) (126) (16) (96) lovernment transactions 113 137 126 170 187 lh4 175 150 Other services 52 94 51 100 4o 120 50 120 B. Current Transfers M 426 352 315 356 4 5 212 Private 159 362 209 247 201 247 206 249 ... Salaries (vorker remittances) (158) (266) (208) (213) (200) (225) (205) (225) * . .Mlgrants (1) (96) (1) (34) (1) (22) (1) (24) Public 11 6L 143 68 155 67 150 70 Internaticnal organizations (-) (5) (-) (6) (4) (-) .. ,Pensions (144) (59) (143) (62) (151) (67) C. Capital Movements 8492 839 882 569 L5 Grants 173 20 166 - 214 33 112 36 Private ciapital 182 196 230 270 , 220 237 230 249 ... Balance of co-nrcial credits (91) (-) 79) (145) (101) (19) (100) (25) ... Lotns by foreigners C7) (11) (5) (t1) ... InvtIstmnets by foreigners (67) (30) (59) (8) (17) (7) (70) (14) ..Loans & investments by Moroccar.s (17) (6) (15) (6) .. .Others (24) (166) (98) (200) (52) (20o4) (60) (210) Public capital 503 276 443 145 4)48 299 513 252 ... Comnercial credits (227) (41) (269) (55) (129) (140) (150) (61) ... Loans in foreign exchange (173) (167) (125) (57) (246) (112) (2B0) (140) ...Loans in dirhans (88) (8) (43) (14) (71) (20) (80) (51) *.. Others (15) (60) (6) (19) (2) (27) (3) () D. Net Overall Deficit (A+B+C) 56 92 131 71 eThe form of presentation in this table corresponds basically to the new systen of reporting adopted by Morocco for the years from 1966 forward. Bocause of the change of form, hovever, these data are not fully comparable with earlier series. Adjustments were made from the monetary to the capital account for the years 1966-68 but not for the 1969 forecast whic;i reflects the government's presentation. Adjustmints were made for all years in the form of reporting transfers. Source: Exchange Office   Table 22: FOREIGN LOANS RECEIPTS 1965 - 1969 (in millions of dirhams) 1965 1966 1967 1968 1969 I. Government (projected) A. Long-Term: France 119 108 21 33 32 United States 185 82 98 98 166 West Germany 53 7 62 127 42 IBRD and IDA 19 11 5 22 42 Kuwait 84 56 24 47 Iran - - _ 1 53 Italy _ _ _ - 50 Others - - - Subtotal (A) 460 264 186 305 432 B. Medium-Term: France: Advance of French Treasury 61 - - -- Balance of Payments assistance - - - - 16 Wheat credits [4 87 129 13 - Suppliers' credits 3 15 4 16 _ United States: Wheat credits - - 32 8 _ Oil credits - - 8 _ Subtotal (B) 108 102' 165 45 16 II. Public Enterprises France 62 62 41 20 20 United States - .55 8 11 6 IBRD and IDA 20 50 36 39 56 Italy - - - 19 - Others 3 1 - Subtotal (C) 85 168 85 88 82 Grand Total 653 534 436 438 530 So8mrce : Minist,ry of Finance   Table 23: FOREIGN EXCHANGE RESERVES 1964 - 1968 (millions of U.S. $ at end of year) 1964 1965 1966 1967 1,i. Assets Bank of Morocco Gold 34 21 21 21 IMF gold tranche position - 11 12 13 Foreign exchange 17 67 54 h2 Payments agreements 16 22 25 13 20 Commercial banks 35 26 2h 25 26 Total (gross) 102 147 136 114 131 Liabilities Bank of Morocco 12 13 15 12 53 Commercial banks 15 13 13 13 13 Total liabilities 27 26 28 25 66 Net Reserves 75 121 108 89 65 Source: International Financial;Statistics  Table 24: COST OF LIVING INDEX (CASABLANCA) (100 - 1958-1959) 1965 1966 1967 1968 196 January 130.2 128.3 129,0 128.2 132 February 131.9 127.5 128.8 128.1 131 March 131.7 126.5 128.3 128.9 131 Average 131.3 127.4 128.7 128.4 April 129.2 125.6 126.2 126.2 May 127.7 123.9 122.9 124.1 June 126.3 124.Q 122.3 124.7 Average 127.7 124.5 123.8 125.0 July 125.2 125.2 122.1 124.8 August 125.0 125.8 123.4 125.0 September 126.3 127.9 126.0 125.7 Average 125.5 126.3 123.8 125.2 October 127.7 128.7 127.8 125.8 November 129.0 130.5 127.6 127.2 December 128.9 129.6 127.7 130.0 Average 128.5 129.6 127.7 127.7 Year Average 128.2 126.9 126.0 126.6 Source: Ministry of Planning.