Financial Sector Adjustment and Institutional Savings Development Programmes

Evaluation Team

The report was prepared by Mr. H.RAZAFINDRAMANANA, Principal Evaluation Officer and Mr. Mamadi CAMARA, Consultant, following a mission to Morocco from April 11-28, 2005. For further information, please contact Mr. Mr. H.RAZAFINDRAMANANA ([email protected])

Objective

Based on these fundamental choices, Morocco undertook a series of economic and social reforms, which reached a higher level in 1983, when the country opted for an intensive stabilization and structural adjustment programme. This adjustment process was expected to ensure a sustainable transition from a protected, centrally planned and managed economy to a liberalized economy driven by a strong private sector that would play a dominant role in the production and distribution of goods and services. In this context, the Government would increasingly restrict its responsibilities to its classic sovereignty and economic arbitrage duties. Based on this choice, in 1995, Morocco and the European Union signed a Partnership Agreement whose entry into force in 2012 will help make concrete Morocco’s determination to open up to the vast European market, with a view to capitalizing on its agricultural exports

Main Lessons

• The political commitment of a country’s government and the support of its principal development partners are necessary to ensure the success of large-scale reform programmes such as the FISAPs 

• The performance of a programme is also dependent on the institutional capacity of the country and on its business environment. One of success factors of the FISAPs was the strong institutional capacity and the extensive expertise demonstrated by the implementing agency (the Directorate of the Treasury and of External Finance) and the main beneficiary institution of the reform (Bank Al-Maghrib) during the implementation and monitoring of programmes

• Financial sector reform is necessary, but not adequate, to increase private investment in productive sectors. The Bank’s failure to provide direct support to the private sector constitutes, in this regard, a considerable loss 

• The advantage of co financing a reform programme is that each donor can enrich the matrix with complementary actions. The Bank and the World Bank demonstrated this in financing the FISAPs 

Main Recommendations

Recommendation(s) to the Beneficiary:

• The Government’s political will must not waiver in the implementation of uncompleted programme components, in particular, the privatisation of banks which are still under its portfolio, the adoption by the two houses of Parliament of the banking law implementation guidelines before the completion of FISAP-IV 

• The Government should pursue its divestiture of official banks to allow private operators to be more involved in the financial sector as owners as well as clients of banks

• The Government should speed up the study on pension schemes to prevent more serious difficulties in the future in relation to responsibility for retirees whose number is increasing faster than the number of those contributing 

• With the increasing modernization of economic life, the Government must pursue reform of the insurance sector, in particular, the life insurance sub-sector, which has the advantage of mobilizing long-term resources, with a view to financing investment in productive sectors

• The Government must pursue its efforts to modernize the other sectors of the economy to complement the success of financial sector reforms, in particular by deepening the consolidation of the business environment, reform of the legal framework, land reform

Recommendation(s) to the Bank:

• the Bank must pursue and deepen economic policy dialogue, specifically with regard to the Government’s divestiture of financial banks and institutions, pension scheme reform, development of life insurance

• To be more efficient, the Bank should ensure its presence in Morocco through a representative’s office. This would facilitate policy dialogue with the Moroccan authorities, and the coordination of its operations with those of other donors, in particular, the World Bank and the European Union, who are both present in the field

• The Bank should provide direct support to the private sector through the Private Window, which would complete  its operations in the financial sector