Morocco - Policy Reform Support Loan Project (PRSL)

Report No. PID6870 Project Name Morocco-Policy Reform Support Loan (PRSL) Region MNA Sector Multi-Sector (Economic Management/Public Sector Management/ PSD/Poverty Reduction) Project ID MAPE58356 Borrower Kingdom of Morocco Implementing agency Ministere des Affaires Generales du Gouvernement Contact M. Monkid Mestassi, Directeur des Relations Economiques Internationales Ministere des Affaires Generales du Gouvernement Rabat, Royaume du Maroc Tel: 011-212-7-77.20.66 Fax: 011-212-7-77.47.76 Date of Initial PID September 21, 1998 Project appraisal Date October 26, 1998 (tentative) Project Board Date December 12, 1998 (tentative) Background A new Moroccan Government, led by the former opposition, took office in April 1998 following legislative elections late 1997. Its accession to power as Morocco's first-time alternance Government reflects the significant transformation of Morocco's governance that has taken place over the past few years. The new Government's program, first presented to Parliament on April 17, 1998, calls for: (i) prudent macroeconomic management; (ii) reforms to improve public sector performance and foster private sector development; and (iii) broad-based human and social development and poverty reduction. Shortly after taking office, the new Government approached the Bank with a request for an operation to rapidly assist in developing and implementing its program. The proposed Loan is the Bank's response to this request, based on intensive preparation work since May 1998. The Proposed Loan The objective of the PRSL is to support the development and implementation of the new Government's economic and social reform program. Under this program, the Government has given a public commitment to pursue sound macroeconomic management (including the consolidation of fiscal balances), implement public sector reforms (covering budgetary institutions, the civil service, and the judiciary), pursue the agenda for private sector development (covering privatization, private provision of infrastructure, the business environment, and access to finance), and promote human and social development, particularly poverty reduction (notably through measures to increase rural access to basic social and infrastructure services). To bolster the program's credibility and initiate its implementation, the Government is already taking key actions "up front". Together with Bank and other multilateral support, the program sends an important signal to the local and international financial community, and demonstrates that political opening and economic reform are going hand-in-hand in Morocco.  Benefits and Risks The benefits of the reform program supported by the PRSL would be considerable. They would include enhancing Morocco's competitiveness and achieving strong, sustainable growth while advancing on the country's substantial human and social development agenda. In addition, the preparation of the PRSL is promoting an excellent dialogue and developing a strong partnership with the new Government. The reform program supported by the PRSL faces three main categories of risk. First, problems of political acceptance could stem from three sources: coalition partners in the Government with an etatiste tradition; the recently elected Parliament which may not support a program restricting the sphere of influence of the state; and unions and other stakeholders adversely affected by certain aspects of the reform program. Second, technical implementation problems may arise from difficult intra-governmental coordination as well as from scarcity of expertise. Third, social problems may result, in particular, from expenditure constraints, from employment consequences of the privatization program, and/or from poor implementation of social reform measures envisioned under the program. These risks will be mitigated through close monitoring of reform implementation. Cost and Financing The PRSL would assist implementation of the Government's reform program with balance of payments support of US$250 million to be disbursed in one tranche upon effectiveness. Implementation A large number of ministries and agencies across all sectors would be involved in the implementation of the reform program supported by the PRSL. The key counterparts to monitor the implementation of the reform program would be the Ministry of General Government Affairs and the Ministry of Finance. Poverty Category The reform program supported by the PRSL includes a targeted human and social development component, focusing on improved basic education and health care as well as basic infrastructure services in the traditionally underserved rural areas. Environment Category The PRSL has no direct impact on the environment. For the purposes of Operational Directive 4.01, it has been placed in environmental category U, which does not require an environmental assessment. Program Objective Categories Because it is intended to support a broad-based medium-term economic and social reform program and accompanying macroeconomic and public expenditure policies, the proposed PRSL falls principally under the category of Economic Management. However, the proposed Loan would also contribute to other key program objective categories. It would contribute to Public Sector Management through reforms covering budget institutions, the civil service, and the judiciary. It supports Private Sector Development by addressing privatization, private provision of infrastructure, the business environment, and access to finance. And finally, it contributes to Poverty Reduction by establishing key principles of the Government's poverty reduction strategy and supporting concrete actions to increase access to basic social and infrastructure services, particularly among the rural poor. - 2-  Contact Point: The InfoShop The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone No. (202)458 5454 Fax No. (202) 522 1500 Co-Task Team Leaders Ali M. Khadr The World Bank 1818 H Street, NW Washington DC, 20433 Telephone: (202) 458-7860 Fax: (202) 477-0432 Axel Peuker The World Bank 1818 H Street, NW Washington DC, 20433 Telephone: (202) 473-8676 Fax: (202) 522-2151 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending September 25, 1998. - 3 -