Press Release No. 05/47

Press Release: IMF Managing Director Rodrigo de Rato's Statement at the Conclusion of his Visit to Morocco

February 28, 2005

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), issued the following statement today in Rabat:

"I have had very fruitful meetings with Prince Moulay Rachid, Prime Minister Driss Jettou, Minister of Finance and Privatization Fathallah Oualalou, Central Bank Governor Abdellatif Jouahri, chairmen of the finance committees of the chambers of parliament, Mr. Mustapha Hanine and Mr. Moulay Ahmed Laamarti, and members of civil society. I would like to thank the Moroccan authorities for their warm welcome.

"I congratulated Prince Moulay Rachid and Prime Minister Jettou for Morocco's continued efforts to reinforce social cohesion, a prerequisite to economic development. The new family code, the new labor code, and efforts to reduce social and regional disparities through targeted social and infrastructure spending are all important in this regard.

"In my discussions with the authorities, we agreed that Morocco has maintained the macroeconomic stability it has achieved since the early 1990s, but economic growth remains insufficient to reduce unemployment and poverty. In this regard, I have been greatly encouraged by the authorities' efforts to further integrate Morocco into the world economy and by their commitment to undertake structural reforms to make the economy more competitive.

"We discussed the exports and investment opportunities that the Association Agreement with the European Union and the free trade agreements with the United States and regional partners provide for Morocco's growth objective. The authorities recognize that trade liberalization must continue with further reductions of multilateral tariffs and a simplification and harmonization of the trade regime in order to better exploit Morocco's growth potential. Integration among Maghreb countries would also help establish a large regional market and attract private investment.

"I encouraged the authorities to accelerate structural reforms to increase productivity and private investment, and maximize the benefits of trade integration. Priority areas to promote private sector activity include reforms of the judicial system, the public administration, and the financial sector, and the implementation of the new labor code.

"Our discussions also focused on remaining macroeconomic imbalances that should be removed to support the higher growth objective of the authorities. We discussed the importance of maintaining a prudent fiscal policy to reduce the fiscal deficit and the public debt-to-GDP ratios. We shared the belief that strengthening public finances is needed to enhance private sector confidence, alleviate tax burdens, and foster investment. Fiscal consolidation is also necessary to provide the fiscal flexibility needed to direct more resources to fight poverty and increase productive government expenditures. The authorities indicated that they intend to achieve fiscal consolidation through tax and civil service reforms which they have already started implementing. I noted that there was significant scope to widen the tax base and reduce the number and level of tax rates by streamlining tax exemptions and rendering the tax administration more efficient. The Fund remains committed to working with the Government on these issues.

"I welcomed the authorities' efforts to modernize Bank Al-Maghrib and enhance its autonomy. In this regard, I encouraged the authorities to promulgate the new central bank and banking laws and continue their efforts to strengthen the financial system.

"We discussed the impact of the expiration of the Multifiber Agreement on Morocco's textile industry and balance of payments. We agreed that Morocco's strong balance of payments position allows it to sustain a possible shock to textile exports. The authorities reassured me that structural reforms are ongoing in the textile sector and that the Free Trade Agreements are attracting textile companies into Morocco. The authorities expect foreign investment to accelerate structural reforms in the sector and increase its value added."