Announcement of Moroccan Public Enterprise Sector to Undergo Reform With Help of Bank Loan on May 28, 1987

FOR IMMEDIATE RELEASE • World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. BANK NEWS RELEASE NO. 87/72 Contact: Fawzi Rihane (202) 477-5325 MOROCCAN PUBLIC ENTERPRISE SECTOR TO UNDERGO REFORM WITH H~LP OF BANK LOAN WASHINGTON, May 28 -- Morocco will improve the efficiency of its public enterprise (PE) sector with a series of reforms supported by a $240 million World Bank loan. The PE sector in Morocco accounts for about 20 percent of the country's gross domestic product, 30 percent of investment and 50 percent of exports. In addition, PEs rely heavily on government transfer payments, amounting to about a fourth of the country's overall treasury deficit in 1985. Because PEs play such an important role in the Moroccan economy, their reform is a key component in the government's ongoing program of structural adjustment and stabilization. The Bank loan will support the first phase of a program to "rationalize" Moroccan PEs by promoting their financial and managerial autonomy and accountability, and developing strategies, programs and instruments to divest the state of uneconomic enterprises and activities which could be handled more effectively by the private sector. In addition to policy reforms aimed at changing the nature and the extent of government intervention in the economy, the loan will support the implementation of restructuring programs in six major PEs operating in the power, water, railways and petroleum refining and distribution sectors. PE sector reform is expected to ease the financial and administrative demands on the government in the short term and contribute to economic growth by raising the level of enterprise productivity in the medium term. The loan will be disbursed in two tranches: the first ($120 million) upon effectiveness, and the second ($114 million) after a review of the country's progress in implementing reforms in the PE sector. In addition, $6 million will be provided to refinance a project preparation facility for the initiation of key studies included in the project, and technical assistance for the reform process. The loan is for 20 years, including five years of grace, with a variable interest rate, currently 7.92 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on the undisbursed balances. Note: Money figures are expressed in U.S. dollar equivalents.