Government Role in the Economy
The Moroccan government has gradually reduced its role in the economy over the last decade. In particular, it ceased direct credit and foreign exchange allocation, reduced trade barriers, restrained government spending, and embarked on an extensive privatization program, including the telecom sector and concessions in energy and utilities.
Monetary policy: With the inflation rate averaging less than three percent in the 1990's, monetary growth has remained steady in recent years. Foreign exchange reserves have been rebuilt since dipping during the drought of the middle part of the decade. They now stand at about $6 billion, covering almost six months of imports. Broad money grew by about 10.2 percent in 1999.
Fiscal policy: The Moroccan government has made a concerted effort to reduce its budget deficit in recent years, averaging under three percent. The deficit fell to 2.3% of GDP in FY 1998-99 and is slated to remain below 3% of GDP in FY 1999-2000.
Foreign Exchange Regulations: The Moroccan Dirham is convertible for all current transactions (as defined by the IMF's Article VIII) as well as for some capital transactions, notably capital repatriation by foreign investors. Foreign exchange is available through the commercial banks on presentation of appropriate documents.
Foreign Trade: Morocco has gradually reduced barriers to trade over the last decade. The maximum tariff rate is 35 percent, except for a few agricultural products for which quantitative restrictions were replaced by tariffs of up to 290 percent, in line with Morocco's World Trade Organization commitments. In addition to tariffs, there is an import surtax of up to 15 percent on most goods.
Privatization: Morocco launched a privatization program in 1992 and since then 58 out of 114 state enterprises have been sold, raising $1.7 billion. On March 31, 1999 parliament approved an amendment to the privatization law which pared to 28 the remaining enterprises to be sold off. The law also provides a legal framework for other state-owned enterprises to be privatized in the future. Among the entities to be privatized are six sugar plants, nine hotels, three banks (Banque Centrale Populaire, Banque Nationale pour le Development Economique, Credit Immobilier et Hotelier) and the state fertilizer company Fertima. The Ministry of Privatization is preparing for the sale of a strategic stake in the telephone operator Maroc Telecom. The competition is slated to take place during 2000. There are also plans to privatize a share of the national carrier, Royal Air Maroc, through a combination of international tender and placement on the stock market, as well as the privatization of the state-run tobacco marketing company.
European Union Trade Preference: Morocco's Association Agreement with the European Union went into effect on March 1, 2000. The agreement calls for the gradual elimination of tariffs on Morocco-EU trade in industrial goods over the next 12 years. Agricultural products (including Morocco's most important agricultural exports like citrus and tomatoes) are not covered by the agreement. Morocco already enjoys free access to the EU for virtually all non-agricultural products under a 1976 agreement. Thus the major effect of the agreement will be to phase out Moroccan tariffs for EU manufactured goods. The free trade provisions of this agreement do not apply to the exchange of agricultural products between Morocco and the EU.