Announcement of World Bank Loan Supports Morocco's Economic Reform Program on April 30, 1992

(U4 IMMIIIJ,111 HI LEASE World Bank 1818 H Stret.N.W.. Washinicon.0C. 20433, U.A. *Telephone: (202) 477*1234 Bank News Release No. 92/71 MNA Contact: Fawzi Rihane (202) 473-2675 WORLD BANK LOAN SUPPORTS MOROCCO'S ECONOMIC REFORM PROGRAM WASHINGTON, April 30, 1992 -- The World Bank approved today a $275 million loan to support the last phase of Morocco's stabilization and adjustment program. The loan documents were signed by H.E. Mohammed Berrada, Morocco's Minister of Finance and Mr. Cao Koch-Weser, the World Bank's Vice President for the Middle East and North Africa Region. Morocco's efforts at realizing economic reform started in 1984. Through a gradual but sustained reform program, the government was able to achieve a dramatic reduction in macroeconomic imbalances, while achieving a relatively high GDP growth rate (an average of 4.5 % p.a. in the period 1984-91) with low inflation (an average of 5.5% p.a.). Manufactured exports increased at a rapid rate (an average of over 12 p.a. in real terms), and external reserves are presently at the high level of four months of imports of goods and non- factor services, This success story has allowed the Moroccan Goverinment to focus on three broad objectives, which this Bank loan aims to support. The first objective is development of a more diversified and resilient economy that is less susceptible to exogenous shocks. Last year's Gulf crisis, for example, caused a major drop in tourism. This year, the drought is expected to make necessary an increase in food imports equivalent to about $400 million. The Government hopes that the completion of trade reforms will help the transition to a more diversified economy, convertibility and the openin& to international capital markets. Second, the Moroccan authorities plan to pursue an aggressive poverty alleviation strategy by reallocating an increasing portion of public expenditures in favor of the social sectors, The third objective aims at developing the private sector into a prime engine of sustained growth. In this regard, the Government expects to provide the necessary infrastructure to facilitate the promotion of private investment. Moreover, the Govertnment plans to work to promote private sector involvement in services traditionally provided by the state. With the implementation of economic reforms in this last phase of adjustment and stabilization, Morocco will have laid a solid foundation for a new era in which macroeconomic stability is sustained and voluntary lending is resumed. The success of the new phase of economic development in Morocco will be reinforced by new forms of continued support from the international community, especially the collaboration of the financial authorities in the capital exporting countries, to eiable Morocco to attract private investment, including direct private foreign investment, which registered significant increases during the last three years. The World Bank loan will be released in two installments: $138 million upon loan effectiveness, and the second installment of $137 million after a review of progress in implementing reforms. The World Bank loan is for 20 years, including five years of grace, with a variable interest rate, currently 7.73 percent, linked to the cost of the Bank's borrowings. Note; Money figures are in U.S. dollar equivalents.