Morocco
1. Morocco is one of the few recent prolonged
users of IMF resources to have “graduated.” It had a
series of nine arrangements between 1980 and
1993,1 but has not had an IMF-supported program
since then and completed repaying its borrowing
from the IMF in 1997.
2. After a temporary sharp increase in phosphate
prices in the early 1970s that led to a boom in expen-
ditures, the Moroccan economy ran into major prob-
lems in the late 1970s, as the global recession and
falling phosphate prices led to sharp declines in ex-
ports and budgetary revenues. At first, the govern-
ment maintained spending and this resulted in very
large current account and budget deficits, financed
mainly through external borrowing on commercial
terms. Consequently, the imbalances Morocco faced
as it entered a series of IMF-supported programs
were very large. In 1981, the external current ac-
count deficit (excluding grants) exceeded 12 percent
of GDP, while the central government budget deficit
reached 14 percent of GDP. Between 1982 and 1984,
the stock of external debt averaged over 100 percent
of GDP, while the external debt-service ratio, before
rescheduling, averaged 50 percent of exports of
goods and services. In addition, Morocco faced
major structural weaknesses, with heavy government
regulation, including on consumer prices and credit
allocation, a strong inward economic orientation,
and considerable vulnerability to exogenous shocks
due to its dependence on the agricultural sector and
on phosphate exports.
3. Programs in the early 1980s had only a moder-
ate impact in reducing these imbalances. Fiscal ad-
justment was achieved mainly through expenditure
reduction, but domestic payments arrears rose. At
first, progress on structural reforms was slower than
planned, in part due to concerns over the social ac-
ceptability of a more rapid pace of reform. For ex-
ample, there were serious riots over increases in the
prices of some heavily subsidized consumer goods.
4. In the second half of the 1980s, as the structural
reforms sta