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Business Notes: Electricity Coverage Reaches to Cover All of Morocco; EU Fisheries Agreement Moves Ahead; SEMED Gives Morocco High Marks for Economic Growth; and IMF Releases Details of New PLL – Jean R. AbiNader

Jean R. AbiNader
December 20, 2018

Jean R. AbiNader, Moroccan American Center

Morocco continues to light up its future, according to the Office of National Electricity (ONE), which noted in a recent report that in 20 years it has increased access to electricity for rural areas from 18% to more than 99%. This has resulted in nearly 40,000 villages linked to the national grid and over 70,000 low-income households with domestic photovoltaic kits for in-home electricity.

To enable almost complete local coverage, the government requires that households pay 25% of the going rate for electricity, which will result in another 2100 villages connected to the grid by the end of 2019. This combined with Morocco’s growing solar and wind renewables programs will both meet the country’s growing needs and, in line with its declaration in COP 22, greatly reduce greenhouse emissions.

European Council includes Western Sahara in upcoming fisheries agreement, which marks a critical step in eliminating this contentious issue from the bilateral agenda, according to Morocco World News. In its decision, the Council noted that the upcoming negotiations “should be defined so as to include the waters adjacent to the territory of Western Sahara” in southern Morocco. It authorized the EU Commission to start “negotiations with the Kingdom of Morocco with a view to amending the Agreement agreeing on a new Implementation protocol.”

This decision once again reaffirms Morocco’s stewardship of the Western Sahara over the natural resources in the area since the local populations draw extensive benefits from the agreement and are consulted in its implementation. “The council said that the agreement aims to enable the two partners ‘to work together more closely on promoting a sustainable fisheries policy,’ and includes provisions to promote the fisheries sector and its impact on the economy.”

Regarding its local impact, “The Council added that the fisheries deal should benefit the people concerned, ‘owing to the positive-economic impacts on those people, particularly in terms of employment and investment,’” according to the article. It based its decision on its negotiations with Moroccan authorities as well as “extensive consultations” in the South, which concluded that those surveyed were “clearly in favor of concluding the Fisheries Agreement.”

Morocco highlighted in SEMED interview, as an example of economic dynamics of the Mediterranean countries. In an interview with Janet Heckman, managing director of the Southern and Eastern Mediterranean region (SEMED) of the European Bank for Reconstruction and Development (EBRD), she pointed out that SEMED is the largest portfolio of the EBRD and that Morocco has made great strides in value chain development. She noted that Morocco has become one of the major centers globally for automotive and aerospace components.  “The country put in the place the necessary infrastructure: the roads, the high-speed train, the Tangier-Med port and introduced proper incentives to attract multinationals to produce.” SEMED has played a role in working both with the international companies that are investment and local companies to identify what sourcing is available locally and how local companies can participate. “We call it value chain financing, which is absolutely critical, because if a company can produce to the standard of global major companies like Ikea or Renault, then they are capable of producing under their own names in the local market,” according to Heckman.

Other programs recently launched in Morocco, support women-owned SMEs, both by encouraging banks to finance them and providing technical support to the women enterprise owners, and setting up offices in Tangier and another coming to Agadir to work on agribusiness and regional connectivity. Heckman also noted Morocco’s growing presence in Africa is an asset, as its companies are following the lead of Moroccan banks in Francophone Africa where there are huge opportunities for growth and so the EBRD is extending its reach into Sub-Saharan Africa.

IMF extends PLL in light of Moroccan reforms, according to Mitsuhiro Furusawa, Deputy Managing Director. He noted that “Morocco has made significant progress in reducing national vulnerabilities in recent years. Growth remained robust in 2018 and is expected to accelerate gradually in the medium term, subject to improved external conditions and the implementation of reforms.”

Despite fluctuations in energy prices, as Morocco depends on imports for 95% of its energy needs, the IMF “found that Morocco has significantly reduced its external imbalances, made progress in fiscal consolidation, and strengthened its political and institutional frameworks.” This included the implementation of the recent Organic Finance Law, which strengthens financial sector control; saw the launch of a more flexible exchange rate regime; and an improving business environment.

According to the IMF, challenges remain ranging from increased geopolitical risks, the slowing growth of its trading partners, and volatility in global financial markets. The Precautionary and Liquidity Line (PLL) of $2.97 billion provides Morocco with insurance against external risks and “support[s] the authorities’ policies to further reduce fiscal and external vulnerabilities and to promote stronger and more inclusive growth. Building on progress under previous arrangements, further fiscal consolidation will help reduce the government debt-to-GDP ratio over the medium term while securing priority investments and social spending,” according to the IMF.

Among the measures recommended are “tax and civil service reforms, sound fiscal decentralization, strengthened control of public enterprises, and better targeting of social spending. Greater exchange rate flexibility will further strengthen the economy’s ability to absorb shocks and preserve its competitiveness.” These steps and the “adoption of the new Central Bank Statute and the continued implementation of the 2015 Financial Sector Assessment Program recommendations will further strengthen the financial sector’s policy framework.”

The two-year arrangement will help lower the ratio of public debt to GDP over the medium term while securing priority investment and social spending, the IMF said on its website.

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