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AFRICAN DEVELOPMENT BANK
MOROCCO
MOROCCO: FINANCIAL STABILITY AND INCLUSION STRENGTHENING SUPPORT
PROGRAMME (PARSIF)
APPRAISAL REPORT
OFSD DEPARTMENT
June 2016
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TABLE OF CONTENTS
ACRONYMS AND ABBREVIATIONS ......................................................................................... i PROGRAMME INFORMATION .................................................................................................. iii LOAN INFORMATION ................................................................................................................ iii EXECUTIVE SUMMARY ............................................................................................................ iv OUTPUTS FRAMEWORK............................................................................................................. v
I. INTRODUCTION: THE PROPOSAL .................................................................................... 1
II. COUNTRY CONTEXT.......................................................................................................... 1 2.1. Political Situation and Governance Context ........................................................................... 1 2.2. Recent Economic Trends, Macro-economic and Fiscal Analysis ............................................ 2 2.3. Economic Competitiveness .................................................................................................. 3 2.4. Public Finance Management ................................................................................................ 3 2.5. Inclusive Growth, Poverty Situation and Social Context ......................................................... 3 2.6. Financial System, Constraints and Challenges ....................................................................... 4
III. GOVERNMENT’S DEVELOPMENT PROGRAMME .......................................................... 5 3.1. Government’s Medium-Term Development Strategy and Reform Priorities ............................ 5 3.2 Obstacles to Implementation of the National Development Programme .................................. 5 3.3. Consultation and Participation .......................................................................................... 6
IV. SUPPORT FOR GOVERNMENT STRATEGY ..................................................................... 6
4.1. Linkages with the Bank’s Strategy ........................................................................................ 6 4.2. Compliance with Eligibility Criteria ...................................................................................... 7 4.3. Collaboration and Coordination with Other Partners ........................................................ 7
4.4. Linkages with Other Bank Operations ................................................................................... 7 4.5. Analytical Work Underpinning the Operation ........................................................................ 9
V. THE PROGRAMME .............................................................................................................. 9 5.1. Programme Aim and Objective ............................................................................................ 9 5.2. Programme Components ................................................................................................... 9
5.3. Policy Dialogue ................................................................................................................. 15 5.4. Loan Conditions .............................................................................................................. 15
5.5. Financing Needs and Mechanisms .................................................................................. 15
VI. IMPLEMENTATION ........................................................................................................... 16 6.1. Programme Beneficiaries ................................................................................................... 16 6.2. Expected Impact on Gender, the Poor and Vulnerable Groups .............................................. 16 6.3. Impact on the Environment and Climate Change ................................................................. 17 6.4. Impact on Other Areas ....................................................................................................... 17 6.5. Implementation, Monitoring and Evaluation ........................................................................ 17 6.6. Financial Management, Disbursement and Procurement ...................................................... 17
VII. LEGAL INSTRUMENTS AND AUTHORITY..................................................................... 19 7.1. Legal Instruments .............................................................................................................. 19 7.2. Conditions Associated with the Bank’s Intervention............................................................. 19 7.3. Compliance with Bank Group Policies ................................................................................ 19
VIII. RISK MANAGEMENT........................................................................................................ 19
IX. RECOMMENDATION ........................................................................................................ 19
CURRENCY EQUIVALENTS
May 2016
UA 1 = 13.63 Moroccan Dirham (MAD)
UA 1 = 1.24 Euro (EUR)
UA 1 = 1.42 US Dollars (USD)
FISCAL YEAR
1 January – 31 December
i
ACRONYMS AND ABBREVIATIONS
ACAPS
AEO
AMMC
AMDI
Insurance and Social Welfare Control Authority
African Economic Outlook
Morocco Capital Market Authority
Morocco Investment Development Agency
ANPME National Small- and Medium-Sized Enterprises Development Agency
AfDB African Development Bank
BAM Bank Al-Maghrib (Central Bank of Morocco)
BRVM
CAM
CCG
CDVM
WAMU Regional Stock Exchange
Crédit Agricole du Maroc
Central Guarantee Fund
Council for the Code of Ethics in Securities
CFAA
CFRA
CGEM
Country Financial Accountability and Assessment
Country Financial Risk Assessment
General Confederation of Moroccan Enterprises
CIMR
CMR
CNCP
Moroccan Inter-professional Pension Fund
Moroccan Pension Fund
National Public Procurement Commission
CNEA National Business Environment Committee
CNRA
CNSS
CPAR
CPIA
CSP
DAPS
DB
National Pension and Insurance Fund
National Social Security Fund
Country Procurement Assessment Report
Country Policy and Institutional Assessment
Country Strategy Paper
Directorate of Insurance and Social Welfare
Budget Directorate
DGEPP General Directorate of Public Enterprises and Privatization
DGI General Directorate of Taxes
DS Data Source
DTFE Directorate of Treasury and External Finance
EBRD
ECOWAS
EEP
European Bank for Reconstruction and Development
Economic Community of West African States
Public Establishments and Enterprises
EU
FDI
European Union
Foreign Direct Investment
FSAP
FSP
GDP
Financial Sector Assessment Program
Prudential Stabilization Fund
Gross Domestic Product
GFCF Gross Fixed Capital Formation
IMF International Monetary Fund
IGF General Inspectorate of Finance
IOSCO International Organization of Securities Commissions
IR Institutions Responsible
KSI Key Sector Indicator
LOLF
MAD/Dh
Organic Law on the Budget Act
Moroccan Dirham
ii
MAFO
MCC
AfDB Field Office in Morocco
Millennium Challenge Corporation
MEF Ministry of Economy and Finance
MENA Middle East and North Africa
MICIEN Ministry of Industry, Commerce, Investment and Digital Economy
OPCC
PACEM
Collective Capital Investment Agencies
Economic Competitiveness Support Programme
PADESFI Financial Sector Development Support Programme
PAGPS
PAPMV
PARAP
Social Protection Governance Support Programme
Green Morocco Plan Support Programme
Public Administration Reform Support Programme
PARGEF Economic and Financial Governance Revitalization Support Programme
PARSIF Financial Stability and Inclusion Strengthening Support Programme
PASFI
PBO
Financial Sector Structural Adjustment Programme
Programme-based Operation
PEFA Public Expenditure and Financial Accountability
PMV Green Morocco Plan
PPP Public-Private Partnership
RCAR
SDR
SFDA
SGG
SNIF
TAF/MIC
TEF
TGR
Collective Retirement Benefits Scheme
Special Drawing Rights
Société de Financement du Développement Agricole (Agricultural Development
Financing Company)
General Government Secretariat
Société Nationale d’Inclusion Financière (National Financial Inclusion Company)
Technical Assistance Fund for Middle Income Countries
Tamwil El Fellah
General Treasury of the Kingdom
TMIC
TPF
UA
USD
VAT
Maximum Conventional Interest Rate
Technical and Financial Partner
Unit of Account
United States Dollar
Value Added Tax
MSME Micro-, Small- and Medium-Sized Enterprise
WACMIC
WAMU
WB
WEF
West African Capital Markets Integration Council
West Africa Monetary Union
World Bank
World Economic Forum
iii
PROGRAMME INFORMATION
INSTRUMENT: Sector Budget Support
PBO DESIGN MODEL: Stand-alone Programme-based Support Operation
LOAN INFORMATION
Client Information
BORROWER: Kingdom of Morocco
EXECUTING AGENCY: Ministry of Economy and Finance
Directorate of Treasury and External Financing (DTFE)
Financing Plan
Source Amount (UA) Amount (USD) Instrument
AfDB
110.6 million
157 million
Loan
TOTAL COST 110.6 million 157 million
Key AfDB Financing Information
Loan currency US dollar
Type of interest * Floating base rate with a free fixing option
Base rate (floating) 6-month LIBOR Contractual margin 60 basis points (bps) Funding margin: The Bank’s borrowing cost relative to 6-month LIBOR.
This margin is reviewed every 1st February and 1st
August. Commitment fee In case of slippage on the initial disbursement schedule
indicated in the loan agreement, a commission of 25
bps per year shall be applied to undisbursed amounts.
Such commission shall be increased by 25 bps every
six months, up to a maximum of 75 bps per year. Other fees None Tenor 20 years
Grace period 5 years
Average maturity 12.75 years
Maturity premium 0%
Implementation Schedule – Main Milestones (expected)
Appraisal April 2016
Programme approval July 2016
Effectiveness July 2016
Disbursement August 2016
First supervision January 2017
Second supervision July 2017
Completion December 2017
Closing date December 2017
iv
EXECUTIVE SUMMARY
Programme Overview
Programme Title: Financial Stability and Inclusion Strengthening Support Programme (PARSIF).
Overall Implementation Schedule: Sector Budget Support – Stand-alone Programme-based Support Operation – 2016/2017
Programme Cost: UA 110.6 million (USD 157 million)
Programme Outputs
The expected programme outputs include: (i) strengthening resilience and inclusion in the insurance and pension sectors; and (ii) strengthening the stability of the banking sector and capital
markets, while deepening their inclusive role. The main programme beneficiaries are: (i) current and future pensioners who not only will benefit from sustainable and solvent pension schemes
that will enable them to regularly collect their pension, but will also enjoy a minimum adjusted income and easier access to pension services; (ii) self-employed persons who henceforth will have
a pension scheme and, generally, economic agents with the possibility of selling or accessing insurance products more easily; (iii) the private sector through facilitation of access to financing,
thanks to the diversification of financial products and revitalization of institutional investors (insurance companies and pension funds), thus improving the availability of long-term resources on
the financial market; (iv) smallholders and young agricultural entrepreneurs in innovative MSMEs, whose access to financing will be facilitated, thanks to the institution of innovative financing
mechanisms; and (v) households, whose access to financial services will be further improved through consolidation of public action in terms of financial inclusion.
Alignment on Bank Priorities
PARSIF is aligned to the Bank’s CSP 2012-2016 for Morocco. It also takes into account two priorities defined by the Bank in the Ten-Year Strategy (2013-2022), namely governance and private
sector development. Furthermore, it contributes to the implementation of the Bank’s High 5s, especially four of the five: (i) support agricultural development (smallholder financing); (ii) impetus
for industrialization (deepening of capital markets to mobilize long-term resources and financing of innovative MSMEs); (iii) improve the people’s quality of life (financial inclusion of the
population, in general, and of pensioner, in particular, better social security for the self-employed through access to a pension system and financing of young entrepreneurs); (iv) strengthen regional
integration (integration of the Casablanca Stock Exchange with ECOWAS stock exchanges). The programme also plugs into the Bank’s Financial Sector Development Strategy (2014-2019),
which seeks to improve access to targeted and reliable financial services, with specific attention to the most underprivileged, and to strengthen the financial markets in order to foster an enabling
environment for the deployment of a broad range of products and services. Through this strategy, the Bank also aims to preserve the stability of the country’s financial system by strengthening
institutional supervision to ensure financial stability and compliance with national and international regulations.
Needs Assessment and
Justification
The programme is necessary to: (i) pursue and accelerate reforms undertaken since the early nineties, especially through the previous PADESFI programmes initiated in 2009; (ii) strengthen
the role of the insurance and pension sectors in improving the people’s quality of life and financing the economy, in their capacity as institutional investors; (iii) reinforce banking sector and
capital market stability; and (iv) consolidate inclusion in the banking sector, especially for MSMEs, young entrepreneurs and farmers.
Harmonization
Collaboration and coordination with the Technical and Financial Partners (TFPs) are in line with the guidelines of the Paris Declaration on Aid Effectiveness through joint missions and
preparation of joint matrices of measures for co-financed budget support operations. Given the separate programming of interventions by different partners, it has become necessary to adopt
a parallel programme approach for other programmes, such as PARSIF. In this regard, sustained dialogue with the World Bank allowed for the harmonization of reform measures in common
areas of intervention, notably the financial sector stability component and particularly the viability of pension schemes.
Bank’s Value Added
In terms of value added, the Bank supports targeted operations in strategic areas such as the financial sector (PARSIF), competitiveness (PACEM), agriculture (PAPMV), social security
(PAGPS currently scheduled for Board presentation), or infrastructure (energy, drinking water and sanitation, transport). PARSIF and these operations are mutually complementary, thus
helping to amplify their respective impacts notably on competitiveness, agricultural financing and social welfare. This constitutes a vector of support for the activities of other ongoing or
future (PAGPS) Bank operations in Morocco. The Bank’s value added is enhanced through a holistic approach, leading to reforms support operations backed in parallel by targeted and
complementary sector investment projects.
Contributions to Gender
Equality and Women’s
Empowerment
PARSIF targets crosscutting reforms that will concern both women and men. However, two key levers supported under this programme will contribute to reduce gender inequalities, while
backing women’s economic empowerment, namely: gender mainstreaming in financial sector governance to promote women’s participation in the Boards of Directors of enterprises in the sector,
and enhancement of smallholders’ access to credit. Moreover, the financial inclusion strategy being prepared will devote a major component to women’s access to financial services.
Policy Dialogue and Related
Technical Assistance
This operation is crucial to consolidate dialogue (already of top quality) with the authorities on the diagnostic of constraints to growth and reforms supported under the three PADESFI phases,
particularly in terms of improving the financing of the Moroccan economy to address the challenges of competitiveness and emergence. Dialogue will be backed by technical assistance operations,
particularly by supporting the preparation of a financial inclusion strategy and consolidating the macro-prudential supervision framework that brings together authorities in charge of controlling
banks, insurance companies and capital markets, to ensure the stability of the financial sector. Dialogue should be sustained in terms of facilitating access to credit for smallholders, in conjunction
with the Green Morocco Plan Support Programme, and improving the people’s quality of life, in conjunction with PAGPS. Policy dialogue is also conducted within the framework of enhanced
coordination mechanisms with other development partners.
v
OUTPUTS FRAMEWORK
Country and Programme Title: Financial Stability and Inclusion Strengthening Support Programme (PARSIF)
Programme Objective: Contribute to create conditions for strong and inclusive economic growth by strengthening financial sector stability and inclusion
PERFORMANCE INDICATORS MEANS OF
VERIFICATION
RISKS/MITIGATION
MEASURES Indicators (including
KSI) Baseline Situation Target
IMP
AC
T
Enhanced
contribution of the
financial sector to
private sector
development and the
people’s enhancement
Share of credit to the
private sector
Bank penetration rate
91% in 2015
64% in 2015
93% in 2018
70% in 2018
MEF and Bank Al-
Maghrib data
OU
TP
UT
S
Improved stability
and inclusion in the
insurance and
pension sectors
Insurance sector claims rate 72.5% in 2015 70% in 2017 ACAPS data Risk
Effects of exogenous
shocks due to an
unfavourable international
economic environment
Mitigation measures
Gradual opening beyond
the European Union
(main partner), on
economic zones with greater growth potential
(Africa, Russia, China,
India, etc.).
Financial Stability
Committee (BAM, AMMC, ACAPS) to
prevent systemic risks in
the financial sector.
Precautionary and
Liquidity Line (PLL) for an amount equivalent to
SDR 3.2351 billion, to
give the country fiscal
space and external
flexibility, and which
should be renewed for 2 years from 30 July 2016
following ongoing
discussions with the IMF
Insurance sector penetration rate
3.1% in 2015 (premiums compared to
GDP)
3.3% in 2017 ACAPS data
CMR technical deficit MAD 3 billion Maximum MAD 3.14
billion (instead of
MAD 9.13 billion
without parametric
reform)
ACAPS data
CMR reserves MAD 85.20 billion At least MAD 81.15
billion (instead of
MAD 74.38 billion without parametric
reform)
ACAPS data
Pension sector coverage
rate
36% in 2015
(subscribers compared
to the active population)
40% in 2017 ACAPS data
Enhanced stability
and inclusion in the
banking sector and
the capital markets
Share of credit to MSMEs 36% in 2015 40% in 2017 Bank Al-Maghrib
data
Number of MSMEs with access to the Start-up Fund
to be established
0 in 2015 At least 50 MSMEs in 2017
CCG/DTFE data
Market capitalization to
GDP
52% in 2015 55% in 2017 DTFE/ Casablanca
Stock Exchange
data
Volume of SFDA credit to
smallholders
MAD 640 million Doubling: MAD 1.2
billion in 2017
DTFE/CAM data
Number of smallholders
with access to credit
through the SFDA
52 000 in 2015, of
which 1 500 women
(2.9%)
80 000 in 2017 (i.e. a
54% increase), of
which at least 3 000
women (3.75%)
DTFE/CAM data
Volume of card payments MAD 16.3 billion MAD 19.5 billion in
2017
BAM data
OU
TC
OM
ES
Component I – Strengthening of the stability and role of the insurance and pension sectors in private sector development,
and the improvement of the people’s quality of life
Risks
Weakening political will
to implement programme measures due to other
political priorities.
Unforeseen changes in climatic conditions,
which dictate
agricultural sector performance, and hence
GDP growth.
Mitigation measures
High level commitment
to implement the reforms, since the
outcomes expected of
PARSIF are at the very heart of the
Government’s
Programme. Moreover, the reforms were the
subject of serious
dialogue with various
stakeholders.
Strong commitment of
the Moroccan authorities to diversify the economy
Sub-Component I.1 – Strengthen the stability of the insurance and pension sectors
Strengthen the
governance,
transparency and prudential rules of
the framework
governing the
insurance sector
Amendment of Law No. 17-
99 on the Insurance Code to
strengthen the governance, transparency and
compliance with prudential
rules in the insurance sector,
and integration of Takaful
insurance (Islamic
insurance)
The framework
governing the insurance
sector does not sufficiently reflect
trends in international
prudential norms, nor
does it integrate Islamic
financing
The draft law
amending Law No.
17-99 on the Insurance Code is
adopted by the
Council of
Government before
end-June 2016
Minutes of the
Council of
Government’s meeting
Strengthen the
viability of the civil
servants pension scheme
Amendment of Law No.
011.71 to strengthen the
viability of the civil servants pension scheme
through integration of
parametric reform
(contribution, annuity,
base)
Current parameters do
not guarantee the
sustainability of the scheme
The draft law
amending Law No.
011.71 of 30 December 1971 is
adopted by the
Council of
Government before
end-June 2016
Minutes of the
Council of
Government’s meeting
Amendment of Law No.
012.71 to strengthen the
civil servants pension
scheme by increasing the age limit for departure on
retirement
The 60-year retirement
age does not guarantee
the viability of the
scheme
The draft law
amending Law No.
012.71 of 30
December 1971 is adopted by the
Council of
Government before
end-June 2016
Minutes of the
Council of
Government’s
meeting
Sub-Component I.2 – Strengthening of inclusion in the insurance and pension sectors
Broaden access to the
pension scheme and
Adoption by the Council of
Government of draft Law
Non-existence of a
special pension scheme
The draft law
establishing a special
Minutes of the
Council of
vi
insurance services No. 99-15 establishing a pension scheme for
professional categories, the
self-employed and non-
salaried individuals who are
self-employed
for the self-employed pension scheme for the self-employed is
adopted by the
Council of
Government before
end-2016
Government’s meeting
so as not only to reduce dependence on the
agricultural sector but
also to modernize agriculture with a view to
limiting its dependence
on rainfall through the implementation of the
Green Morocco Plan
backed by the Bank.
Adoption by the Council of Government of draft Law
No. 17-99 on the Insurance
Code (Vol. IV) extending
the distribution of insurance
products to remote online
sale by financing
companies, and extension
of the list of insurance products marketed by banks
Limited distribution The draft law amending Law No.
17-99 on the
Insurance Code is
adopted by the
Council of
Government before
end-2016
Minutes of the Council of
Government’s
meeting
Improve the quality
of life of pensioners
Adoption by the Council of
Government of the draft law
modifying and
supplementing the Dahir
(Royal Decree) on Law No.
1.77.216 of 4 October 1977
establishing a Collective
Pension Allocation Scheme to increase the minimum
pension threshold from
MAD 1 000 to 1 500 (*)
MAD 1 000 minimum
pension
The draft law
amending Law No.
1.77. 216 of 4
October 1977
establishing the
Collective Pension
Allocation Scheme is
adopted by the Council of
Government before
end-2016
Minutes of the
Council of
Government’s
meeting
Broadening of the CMR
geographic coverage to
include regions of the Kingdom and introduction
of e-CMR online services to
CMR affiliates.
Limited coverage
network
The coverage network
is broadened
MEF’s letter
Adoption by the CMR
Board of Directors of a
resolution supporting the
extension of banking
facilities to the remaining “un-banked” section of
pensioners under the civil
servants pension scheme
An "un-banked"
segment of CMR
pensioners
The resolution
supporting the
extension of banking
facilities to the
remaining “un-banked” segment of
pensioners is taken by
the CMR Board of
Directors before end-
2016
Copy of the CMR
Board’s resolution
Component II – Strengthening of the stability and role of the banking sector and capital markets in private sector
development, and improvement of the people’s quality of life
Sub-Component II.1 – Strengthen the stability of the banking sector and capital markets
Strengthen the
capital market
supervision
mechanism
Adoption of an Order of
the Minister of Economy
and Finance on the General
Regulations of the AMMC
Past regulations of the
CDVM
Order of the Minister
of Economy and
Finance on the
General Regulations of the AMMC issued
before end-2016
MEF Order
Appointment of members
of the AMMC Sanctions
Board
Members of the
Sanctions Board not
appointed
Members of the
Sanctions Board are
appointed before end-
2016
Minutes of the
AMMC Board of
Directors
AMMC concludes its
appraisal with regard to the
principles and objectives of
the IOSCO
Previous appraisal The AMMC appraisal
based on IOSCO
principles and
objectives is conducted before end-
2016
AMMC report
Improve gender
mainstreaming in the
financial sector
governance
mechanism
Issuance of an AMMC
Circular to integrate the
gender component in the
annual reports of listed
companies
No mainstreaming of the
gender component in the
annual reports of listed
companies
The AMMC circular
on the annual reports
of companies listed is
issued before end-
2016
AMMC circular
Issuance of a BAM Circular
on independent directors, which includes respect of
gender parity by
independent directors of
banking and financial
establishments
No parity The BAM circular on
independent directors of banking
establishments is
issued before end-
2016
BAM circular
Strengthen financial
sector stability
Issuance by BAM of a
Directive on information
required by credit
establishments when processing group-based
counterpart credit dossiers
No Directive The BAM Directive
on information
required by credit
establishments when processing group-
based counterpart
credit dossiers is
BAM Directive
vii
issued before end-2016
Adoption by the Council of
Government of the draft law
modifying the Law on the
Status of Bank Al-Maghrib,
with a view to strengthening
BAM’s prerogatives to
ensure financial stability
through the provision of emergency liquidity
Need to strengthen the
financial stability
prerogatives with regard
to the provision of
emergency liquidity by
BAM
The law on BAM’s
Status is adopted
before end-2016
Minutes of the
Council of
Government’s
meeting adopting
the draft law on
BAM’s Status
Adoption of the draft law on
stock security
No specific framework
on stock security
The draft law on
reform of the stock
security system is
adopted by the
Council of
Government before
end-2016
Minutes of the
Council of
Government’s
meeting adopting
the draft law on
stock security
Diversify financial
instruments
Adoption of a Decree
enforcing Law No. 18-14 on Collective Capital
Investment Agencies
(OPCC) to allow for
investments in small and
nascent businesses
Narrow framework The Decree enforcing
Law No.18-14 on Collective Capital
Investment Agencies
(OPCC) is adopted by
the Council of
Government before
end-2016
MEF report
Issuance by BAM of a
circular on establishment of
a framework governing participatory finance
products
No specific framework Issuance of the BAM
Circular on
participatory finance products
BAM circular
Revitalize the capital
markets
Construction of a yield
curve based on the e-listing
of Treasury Bills on the
Bloomberg platform of the
Treasury.
No Bloomberg-based
yield curve
The yield curve is
established
MEF
Transmission to SGG of the
draft law amending Law
No. 45-12 on stock lending to improve the rules
governing stock lending
activity, especially by
opening it to non-residents
Narrow stock lending
framework
The draft law
amending Law No.
45-12 on stock lending is prepared and
forwarded to the SGG
before end-2016
MEF report
Accession of the
Casablanca Stock Exchange
as associate member of the
West African Capital
Markets Integration Council (WACMIC) to
strengthen the integration of
African capital markets
Low integration between
the Casablanca Stock
Exchange and
ECOWAS stock
exchanges
The accession of the
Casablanca Stock
Exchange as associate
member of the West
African Capital Markets Integration
Council (WACMIC)
is effective before
end-2016
Casablanca Stock
Exchange report
Sub-Component II.2 – Strengthening of inclusion in the banking sector and the capital markets
Establish a strategic
framework on
financial inclusion
Establishment of a
governance structure to
prepare and monitor the implementation of the
national financial inclusion
strategy
No governance structure The governance
structure is set up
before end-2016
DS: Letter of the
Ministry of
Economy and Finance
IR: MEF
Validation of the national
financial inclusion strategy
No strategy The national financial
inclusion strategy is
validated before end-2017
MEF and BAM
report
Improve the supply
of financing to
innovative MSMEs,
youths and farmers
Establishment of a start-up
fund for young
entrepreneurs and
innovative start-ups under
CCG management
Absence of a dedicated
vehicle backed by the
State
The start-up fund
management
agreement is signed
between the State and
CCG before end-June
2016
MEF report
Addendum amending the
agreement between the
State/CAM concerning the Prudential Stabilization
Fund (FSP) to improve
access to farmers’ financing
by lifting constraint on the
required ratio between
investment credit and
operating credit, within the
"Tamwil El Fellah" framework
Limited farm financing
product
Signature of the
addendum amending
the agreement between the
State/CAM in
connection with the
Prudential
Stabilization Fund
(FSP) before end-June
2016
MEF report
Issuance of an Order of the
Ministry of Economy and
Finance on the revision of
Limited flexibility The Order revising the
framework for
calculating the
MEF Order
viii
I.
the framework for calculating the maximum
conventional interest rate
(TMIC) to introduce more
flexibility
maximum conventional interest
rate (TMIC) is issued
Facilitate access to
mobile financial
services
Issuance by BAM of the
circular on payment
services in application of
Banking Law 103.12
No specific frameworks
compliant with the new
Banking Law
Circulars on payment
establishments and
payment services are
issued by BAM before
end-2016
BAM circulars
Launching of the national mobile payments solution
No national solution The national mobile payments solution is
launched before end-
2017
BAM report
Key activities:
- Signature of the loan agreement and fulfilment of conditions agreed during the appraisal
- Implementation of reforms
Financing:
ADB loan (USD 157 million)
Single tranche in 2016
1
I. INTRODUCTION: THE PROPOSAL
1.1. Management hereby submits the following proposal to grant a loan of USD 157 million,
equivalent to 110.6 million Units of Account, to the Kingdom of Morocco, to finance the Financial
Stability and Inclusion Strengthening Support Programme (PARSIF). PARSIF is a sector budget
operation to back the implementation of reforms to support stability and inclusion in Morocco’s
financial sector. Scheduled for implementation over the 2016-2017 period, the programme follows on
the heels of three previous PADESFI phases successfully implemented in 2009, 2011 and 2014,
respectively, the achievements of which it plans to consolidate and deepen. PARSIF is based on the
strategic orientations of the Government’s medium-term development programme (2012-2016) and the
Bank’s CSP for Morocco (2012-2016), currently in the completion phase. Its design incorporates
lessons drawn from previous budget support operations, the principles of the Paris Declaration on Aid
Effectiveness and good practice principles for the application of conditionality.
1.2. PARSIF’s final objective is to create enabling conditions for strengthening financial
sector stability and inclusion, with a view to improving the people’s quality of life by consolidating
and deepening PADESFI achievements. More specifically, the new programme aims to: (i) strengthen
the resilience of the insurance and pension sectors, and to deepen their inclusion; and (ii) consolidate
stability while deepening the inclusive role of the banking sector and the capital markets. Various
measures backed by the programme are described in the Matrix of Reforms (Annex 2).
1.3. The choice of a sector budget support disbursable in one tranche is doubly justified in the
national context. PARSIF will help to provide the Government with the financial resources needed to
enforce its policy and continue its reform efforts, in a budget deficit context. Moreover, in light of the
strong ownership by the Moroccan authorities and their capacity to implement financial sector reforms
as demonstrated by the quality of execution of the three previous PADESFIs, disbursement in one single
tranche will reduce the cost of transaction for both the Government and the Bank, while guaranteeing
Government’s strong commitment to implement reforms. The proposed operation will help to maintain
dialogue with the authorities on reforms scheduled for 2016-2017. Immediately following the adoption
of the new Strategic Development Plan by the Government that will emanate from the October 2016
elections and the preparation of a new Bank strategy for Morocco, a medium-term programme-based
approach could be pursued with the authorities.
II. COUNTRY CONTEXT
2.1. Political Situation and Governance Context
2.1.1. On the political front: Stable over several decades, the Moroccan political landscape was
not affected by the Arab Spring. The adoption of the new Constitution in 2011 opened the path to a
more open and democratic society, increased decentralization and modern institutions. Put briefly, it
consolidated the rule of law. The current coalition government headed by the Justice and Development
Party (PJD) continues to pursue the implementation of constitutional reforms, and strives to reduce the
budget deficit especially by making a conscious effort to end subsidies to energy products and pilot
structuring and sensitive reforms (for instance the reform of pension funds).
2.1.2. On the governance improvement front: Morocco initiated a series of comprehensive
reforms, simultaneously touching public sector management, access to information, overhaul of
the legal system and corruption control. In this regard, Morocco has made a headway in good
governance and corruption control (rated 88th in 2015 out of 175 countries, according to Transparency
International, and 16th out of 54 African countries according to the Mo Ibrahim Index).
2
2.2. Recent Economic Trends, Macro-economic and Fiscal Analysis
2.2.1. On the economic front, the Moroccan economy was marked by the pursuit and deepening of
structural and sector reforms undertaken since the early nineties. This helped to consolidate
achievements without compromising the stability of the fundamental balances. The macro-economic
reforms undertaken enabled the country to achieve strong and inclusive growth averaging 4.5% over
the 2004-2014 period, after recording 3.2% over the 1990-1999 period. In 2015, growth is estimated at
4.5% and partly reflects efforts made through the Green Morocco Plan. The agricultural sector accounts
for 12% of GDP and employs 40% of the active population (75% in the rural area). The sector’s good
performance in 2015 generated a strong knock-on effect on the rest of the economy. For its part, the
secondary sector, which represents an average 29.3% of VAT, continues its consolidation thanks to the
dynamism of Morocco’s new trade industries, especially automobile and aeronautics, despite the weaker
performance of the refinery sector following the suspension of SAMIR’s production from August 2015.
Lastly, the expansion of the tertiary sector continues, with it accounting for an increasingly large portion
of VAT (average 56.3%). The structural transformation of the productive fabric has led to the
emergence of new trades, thus contributing to job creation and export promotion, principally in
conjunction with the sustained consolidation of the financial sector, telecommunications and an
accelerated development of offshoring activities.
Table 1
Macro-economic Development
2014 2015(e) 2016(p) 2017(p)
GDP growth 2.4 4.5 1.8 (2.1*) 3.5 (5.2*)
Real GDP per capita growth rate 1.0 3.2 0.5 2.3
Inflation 0.4 1.6* 1.4 1.6 (2*)
Budget balance (GDP %) -4.9 -4.3 -3.5 (-3.6*) -3.0
Current account (GDP %) -5.7 -2* -0.7 (-1*) -0.9 (-0.8*)
Source: AEO 2016 – February 2016 (See Technical Annex 8); *DTFE data June 2016, if estimates differ
2.2.2. The Treasury debt stabilized at 63.4% of GDP in 2015, and is projected to fall gradually
to below 60% of GDP in the medium term. The debt structure remains favourable due to the fact that
three quarters of the debt stock is domestic and increased by 2.6% to stand at 47.9% of GDP. According
to their respective reports of August 2015 and February 2016, Bank Al-Maghrib and the IMF concluded
that the public debt is sustainable in the medium term. Furthermore, Standard & Poor’s maintained
Morocco’s sovereign note prospect at “stable” in April and October 2015; it also confirmed its long-
and short-term foreign exchange and local currency notes at "BBB-/A-3".
2.2.3. On the domestic front, after a steady deterioration between 2009 and 2012, the
commercial deficit reduced in 2013 and 2014 before falling to below 3% of GDP in 2015. This is
attributable to the expansion of exports from emerging industrial branches like automobile and
aeronautics, and the fall in oil prices. FDI increased by 8.6% in 2014, bringing their GFCF contribution
to 10.9% and the FDI stock to 47.3% of GDP. Thus, Morocco ranked 6th among FDI-recipient countries
in 2014.
2.2.4. Concerning monetary policy, Bank Al-Maghrib (BAM) reduced the prime rate in 2016
from 2.5% to 2.25%, the lowest ever. Furthermore, it reduced the minimum reserve ratio to 2%. Also,
the money supply growth rate rose from 3.1% in 2013 to 6.2% in 2014, but slowed slightly to 5.7% in
2015, reflecting a consolidation of net international reserves. Year-on-year, these reserves rose by
23.5% in 2015 to cover the equivalent of 6 months 24 days of import, thanks to the combined effect of
reducing commercial deficit, inflow of grants to the State and loans to public establishments. Lastly,
inflation remained low throughout 2015 at 1.6%, basically reflecting the fall in the prices of volatility-
prone food products.
3
2.2.5. The growth outlook is contingent on consolidating the bases of balanced economic
development, gradually restoring the macro-economic balances, accelerating the pace of structural
reforms, implementing regionalization and operationalizing the LOLF. On this basis, the real GDP
should rise by about 2% in 2016, due principally to the nearly 9% decline in the agricultural value added
after a 14% bound in 2015, and consolidation of the non-agricultural GDP growth at 3.5%, compared
to 3.4% in 2015.
2.3. Economic Competitiveness
2.3.1 The State plays a predominant role in supporting competitiveness and improving the
general conditions for exercising economic activity. The 2016 Doing Business report ranks Morocco
71st (87th in 2014), thus demonstrating the country’s dynamism in terms of facilitating business, and the
competitiveness of its economy. In the 2014 Index of Economic Freedom annual report, Morocco scored
76.2 on 100 under "Business Freedom", and is ranked 44th out of 185 countries.
2.4. Public Finance Management
2.4.1. As regards public finance, the Government in 2015 continued to pursue the restrictive budgetary
policy that it initiated in 2011, putting in place structural reforms to restore the macroeconomic balances.
Published in June 2015, the new Organic Law on the Budget Act (LOLF) will help to support regionalization
and administrative devolution, as well as strengthen legislative oversight on public finances through budget
control and public policy assessment. The target to attain a deficit of 4.3% of GDP by end-2015 was reached. At
the time of preparing the Budget Act in October 2015, the authorities announced the deficit target of 3.5% of
GDP for 2016. This downward trajectory is in line with the commitments made by Morocco within the context
of the second Precautionary and Liquidity Line extended by the IMF in 2014 (Annex 3), and remains within the
deficit target of 3% by 2017. The 2015 contraction of the budget deficit is mostly the result of the reduction in
overall expenditure, particularly following the abolition of subsidies on hydrocarbon products, excluding butane
gas. In 2015, the budget allocated to subsidies (principally some oil products) declined by 57.4%. Lastly, the
fiscal reform initiated in 2014 should be pursued in 2016, with a view to broadening the fiscal base.
2.5. Inclusive Growth, Poverty Situation and Social Context
2.5.1. At the social level, as at end-2014, more than 54% of government financing went to the
social sectors. Close attention is given to the targeting of vulnerable and underprivileged social
categories through the implementation of a number of programmes aimed at improving their living
conditions and reducing social inequalities. Moreover, the authorities continued to pursue efforts to
strengthen financial inclusion through the Moroccan Foundation for Financial Education, promoted by
PADESFI and hosted by Bank Al-Maghrib.
2.5.2. Poverty declined from 15.3% in 2001 to 6.2% in 2007, and remains predominantly rural
(8.95% compared to 1.1% in the urban area in 2014), the same as vulnerability (18.4% compared to
6.9% in 2014).
2.5.3. From the gender equality and women’s empowerment promotion viewpoint, the 2011
Constitution bestows full equality to men and women. This has led to the establishment of the "IKRAM"
Programme and the creation of several institutions devoted to gender issues. Lastly, since 2005, a
mandatory annex called “Gender-sensitive Budgeting” accompanies all draft Budget Acts.
2.5.4. Concerning the fight against unemployment, 1.37 million jobs were created in the past decade,
i.e. 137 000 job opportunities yearly. The services sector remains the main provider of employment in
Morocco, with an average annual share of 80%, in other words approximately one million jobs created
between 2004 and 2014. Consequently, the unemployment rate fell from 10.8% in 2004 to 9.9% in 2014
and 9.7% in 2015.
4
2.6. Financial System, Constraints and Challenges
2.6.1. With the Bank’s support, especially through the three phases of the Financial Sector
Development Support Programme (PADESFI) begun in 2009 (see TA2), Morocco’s financial sector
has successfully consolidated its rehabilitation, resilience and deepening. In this regard, the Moroccan
financial sector has made considerable progress on the path to reform and modernization. The legal and
institutional framework governing the Moroccan financial environment has significantly evolved
towards greater liberalisation, generating performance indicators deemed highly positive by the TFPs,
especially the IMF in the latest financial sector stability diagnostic (Financial Sector Stability
Programme – FSAP 2015).
2.6.2. The banking sector recorded a total balance of MAD 1.103 billion in 2015, i.e. 119% of
GDP and approximately 2/3 of the financial system (see TA3). The sector is dominated by five banks
which, on an unconsolidated basis, account for 79.5% of all assets in the sector.
2.6.3. The financial base of banks continued to be consolidated in 2015, with an average
solvency ratio of 13.9% and a core-capital ratio of 11.5%, calculated for the first time using Basel-
3 rules. These levels give banks a safety margin, thus enhancing their resilience. Furthermore, the new
short-term liquidity ratio derived from Basel-3 standards, averaged 130%, while bank liquid and current
assets were further consolidated at 13.3% of commitments. Despite the challenging environment, the
consolidation of the fundamentals of the banking system reflects efforts made to strengthen banking
practices in terms of risk management, and to constantly enhance the regulatory and supervision
framework, in line with international standards. After stagnating in 2013, the banks have recorded a 1%
net profit. Return on equity stood at 10.2%, and return on assets at 1%. Due to the decline in economic
activity linked to the international economic gloom especially in some sectors (real estate, for instance),
bad debt continued to increase to stand at 6.9% end-December 2014. However, provisions remained
adequate.
2.6.5. The insurance sector represents 9% of the financial sector and comprises 21 companies,
two of which are devoted to reinsurance. The sector’s consolidated capital has remained stable at
around MAD 5.5 billion (see TA5). The financial situation of the sector is comfortable, with improved
consolidated equity to written premium (107% of total written premium in 2014 compared to 112% in
2013). Net investments allocated to cover technical commitments represent 102% of technical
provisions. The insurance penetration rate rose from 3.14% in 2014 to 3.18% in 2015, thus placing
Morocco in second position in the Arab world. The sector’s activity remains profitable, with a net
income of MAD 2.9 billion in 2015.
2.6.6. The physiognomy of the Casablanca Stock Exchange remained practically unchanged
between 2014 and 2015 (see TA6). Seventy-five (75) companies are listed, for a market capitalization
of MAD 453 billion in 2015 compared to MAD 484 billion in 2014, i.e. a 6.43% decline. Two (2)
companies joined the Stock Exchange in 2015 and 1 in 2014; at the same time, 2 companies were
delisted in 2014 and another 2 in 2015. In 2015, activities in the secondary market picked up slightly
with a 0.45% increase in stock transactions (MAD 44.9 billion in 2015); 90% of these transactions were
on shares. The Casablanca Stock Exchange was the subject of major reforms (demutualization, foreign
currency listing, etc.), pending the implementation of the operational plan. Through the “Elite”
Programme launched recently, the Exchange plans to facilitate SME access to listing by having them
benefit from pre-float preparation, which is currently the most common approach at the international
level. The project to revamp the law governing the Stock Exchange pursues the same objective since it
aims to create an alternative exchange dedicated to SMEs and a chamber responsible for establishing
funds.
5
2.6.7. The Moroccan pension system is characterized by the co-existence of several pension
schemes, each different from the others in terms of legal status, management method, resources
and service modalities (see TA4). Principally, the system comprises three mandatory public schemes
(the CMR, the CNSS and the RCAR) and a voluntary supplementary scheme (CIMR) managed by the
private sector. The analysis of the trend of each scheme reveals contrasting tendencies. The
demographic ratio for the CNSS remains relatively high, at around 8.3 contributors to one beneficiary,
compared to 2.7 contributors for the CMR and 2.1 contributors for the RCAR. The deteriorating
demographic ratio has generated an imbalance between the expenditure and resources of the different
schemes. Whereas the contributions of the different schemes is on steady decline, the expenditure level
has gradually increased. Consequently, the financial surplus of all the schemes has contracted since
2005. It is projected that for the CMR, this will turn to a deficit from 2022.
2.6.8. Therefore, the main challenge is to ensure that the population would be able to effectively draw
pension sustainably. In this regard, the key challenge concerns the viability of the different schemes and, in the
short term, the sustainability of the civil servants pension scheme which began to record a technical deficit in
2014 and whose reserves will be depleted from 2022, if no action is taken. PARSIF supports the parametric
reform being adopted, while also improving inclusion in the pension sector.
2.6.9. Concerning financial inclusion and despite the progress made, challenges remain in terms
of the financing of certain segments, especially micro enterprises, as well as access to financing and
basic banking services to persons with low or irregular income, youths, farmers and rural households.
To consolidate the achievements of previous Bank interventions in the financial sector, PARSIF
included in its Matrix of Measures actions aimed at strengthening financial sector resilience and
stability, and consolidating inclusion in the banking, microfinance and capital market sector.
2.6.10. Regarding governance, the main challenges generally concern the operationalization of
legislative texts enshrining the major reforms and continuous effort to adapt to evolving international
standards.
III. GOVERNMENT’S DEVELOPMENT PROGRAMME
3.1. Government’s Medium-Term Development Strategy and Reform Priorities
3.1.1. The Government’s Economic and Social Programme for the 2012-2016 period seeks to
consolidate the building of a balanced, cohesive, stable, united and prosperous society. At the
economic level, the Government’s programme aims, through its third pillar, to continue building a
strong, multi-sector, regionally diversified, and competitive national economy that generates wealth
and employment, as well as to adopt an economic policy that ensures equitable distribution of growth.
3.1.2. As regards the financial sector, the main objectives of the Government’s programme are to:
(i) improve financial inclusion, particularly by facilitating MSME access to financing and boosting the
capital market; and (ii) strengthen the supervision system and financial stability of the financial sector.
By supporting these same priorities, PARSIF, through its objectives and components, meets
Government’s concerns and addresses other centres of interests, especially the overhaul of pension plans
and revision of the insurance system, while mainstreaming the "gender" dimension, youths and
agricultural SME development. The Letter of Development Policy (Annex 1) provides further details
on Government priorities.
3.2 Obstacles to Implementation of the National Development Programme
3.2.1. Morocco needs to meet a major challenge – that of using its political stability, its
proximity to Europe, its investment attractiveness, and consolidation of its promising African
orientation - as growth drivers. These are strategic areas for firmly embarking on sustainable and
inclusive growth. The Moroccan economy has reached a turning point in strengthening its
6
competitiveness in high value-added export sectors. Thus, as regards industrialization of the country,
public support for improving mobilization of financing for the productive sectors has been reinforced
over the past few years through targeted and structural reforms. This effort needs to be further enhanced
to achieve the goal of providing financial instruments that meet the needs of the various economic
operators, while ensuring the stability of the financial sector. Furthermore, the agricultural sector in
Morocco contributes significantly to GDP and employment. Through the Green Morocco Plan,
Government policies are designed to encourage innovation and development of agricultural value
chains, as well as greater private sector involvement. To that end, a key strategic area concerns support
for investment in the sector and access to financing for farmers. The proactive Government policy in
this area will need to be further consolidated to meet the challenge of agricultural transformation. To
ensure a better quality of life for the population, the public authorities consider the inclusive aspect of
the financial sector as one of its priorities. Emphasis has been laid on support for sustainability of the
pension system, access to insurance, as well as financial inclusion for smallholders and all segments of
the population through structural reforms and budget allocations. Such efforts need donor support, as
reflected in this programme.
3.3. Consultation and Participation
3.3.1. To enhance ownership of reforms, it is necessary to establish dialogue and participation
frameworks for all citizens. During the PARSIF appraisal, there was wide consultation with
stakeholders, with emphasis on a participatory approach and the involvement of stakeholders and
beneficiaries throughout the process. These various actions in high-quality dialogue with the
Government helped to raise the Bank to the status of partner of choice in Morocco. The Bank’s Office
in Morocco and the Sector Department played a key role in conducting the dialogue.
IV. SUPPORT FOR GOVERNMENT STRATEGY
4.1. Linkages with the Bank’s Strategy
4.1.1. PARSIF complies with the guidelines of the Bank’s CSP for Morocco (2012-2016). It is
also included in the said CSP and is consistent with the guidelines of the Bank’s Ten-Year Strategy
(2013-2022), particularly those relating to private sector development and enhancement of governance
in the financial sector. Furthermore, the programme complies with the guidelines of the Bank’s
Financial Sector Development Strategy (2014-2019), which is anchored on financial inclusion and
deepening of capital markets. The programme will also contribute to the implementation of the Bank’s
five priorities, particularly support for agricultural development by improving farmers' access to
finance, promotion of industrialization by deepening the capital market to provide long-term financing
solutions, initiation of innovation, improvement of the quality of life of the population through better
financial inclusion and raising the minimum pension for retirees, facilitating access to financing for
young entrepreneurs, and strengthening the regional integration of ECOWAS and Moroccan capital
markets.
7
Table 2
Linkages with the PND, CSP and PARSIF
4.2. Compliance with Eligibility Criteria
4.2.1. Morocco fulfils the preconditions for the use of the budget support instrument (TA 1 and 8). The
country enjoys political and economic stability, and the Government’s commitment to conduct reforms has
consistently been demonstrated. At the economic level, Morocco's performance is satisfactory, thereby reflecting
efforts made to consolidate the macroeconomic framework and implement reforms aimed at strengthening
competitiveness and diversifying the productive base of the economy, social inclusion and regional development.
On the Bank’s internal rating scale, Morocco is ranked "Very Low Risk" with a "Stable Outlook". At the technical
level, Morocco also meets the fundamental prerequisites relating to the existence of a medium-term programme,
the public finance management system, and institutional capacity.
4.3. Collaboration and Coordination with Other Partners
4.3.1. Collaboration and coordination with TFPs meet the guidelines of the Paris Declaration on Aid
Effectiveness in jointly undertaking missions and developing a joint matrix of measures for budget support in
co-financing. Given the different schedules and slippages due to the different fiscal years of interventions of the
various partners, the parallel programme approach has been adopted for other programmes, such as PARSIF. In
the latter case, sustained dialogue, particularly with the World Bank has, in the absence of a joint matrix of
measures, helped to harmonize reform measures in common intervention areas, particularly the financial sector
stability component and sustainability of pension plans. The Bank’s Field Office in Morocco (MAFO) plays a
key role in strengthening dialogue with the Government and other TFPs.
4.4. Linkages with Other Bank Operations
4.4.1. The Bank is a leading development partner in Morocco. Its active portfolio in the country comprises
thirty-seven (37) ongoing operations for net commitments of about UA 1.71 billion. The loans amount to UA
1.61 billion (99.7%) for fourteen (14) projects and programmes with an average amount of approximately UA
142 million per operation. The portfolio covers seven (7) intervention sectors, with energy accounting for 45.5%
of the commitments and a strong concentration of interventions in infrastructure (96%). The other sectors are:
transport (21%), water and sanitation (13.1%), agriculture (8.1%), industry (9.2%), multi-sector operations
(4.1%), and the social sector (0.1%). The portfolio also includes two (2) non-sovereign operations (a loan to the
CSP 2012-2016 & 2015 Growth
Diagnostic
Government’s Economic and Social Programme
2012-2016
PARSIF’s Intervention Thrusts
Pillar I: Strengthen the unified
national identity
Pillar II: Consolidate the rule of
law, advanced regionalisation and
good governance
Pillar III: Put a competitive and
diversified economy in place
Pillar IV: Develop and implement
social programmes
Pillar V: Consolidate Morocco’s
international position
CSP Pillar I: Governance
=> Improve the
competitiveness of the economy
and create jobs; improve
efficient public resource
utilization
CSP Pillar II: Infrastructure
=> Essential factors of
production: water, energy and
transport.
Diagnostic :
Constraints :
=> Youth financing
=> Agricultural financing
=> Start-up funding
=> Financial inclusion
I. Pension and insurance
II. Banking sector and the
capital market
I.1. Viability of the pension
scheme and stability of
insurance
I.2. Extension of insurance
and pension coverage
I.3. Improvement of service
quality
II.1. Financial sector stability
II.2. Financial sector
inclusion
II.3. Agriculture, youth and
innovative business financing
Access to financing
8
Moroccan Phosphates Authority and equity participation in Argan Fund for Infrastructure Development) for a
total UA 177 million. The overall performance of the Bank's portfolio remains generally satisfactory, with an
average overall score of 2.46 on 3 in 2015. This score has been stable since 2012. Furthermore, the Bank closely
monitors the portfolio so as to anticipate implementation problems and take appropriate actions to ensure
compliance with the current guidelines. It should also be noted that, in addition to the Bank, Morocco's main
financial partners are: the World Bank (WB), the European Union (EU), the European Investment Bank (EIB)
and France, which all have an equivalent commitment level (about UA 1.5 to 1.8 billion).
4.4.2. PARSIF is a support vector for other Bank operations in Morocco. As such, its impact will
consolidate the gains achieved, particularly from previous phases of PADESFI which have improved the
financial inclusion of households and micro-businesses, as well as enhanced the governance framework of the
financial sector (TA2). In particular, compared to PADESFI, PARSIF seeks to boost institutional investors such
as insurance companies and pension funds so that they can play a greater role in financing the economy and
improving its inclusiveness. Furthermore, PARSIF supplements and increases the impact of other ongoing Bank
operations, particularly pension coverage for micro-entrepreneurs (or self-employed workers) whose status was
included in PACEM, and funding for smallholders – which also complements the two phases of the PMV support
programme. The same applies to PAGPS under preparation for 2016, particularly through the strengthening of
ACAPS which has supervisory authority over the Mandatory Health Insurance (AMO), and through
complementarity between pension schemes and AMO to improve the people’s quality of life. In general,
PARSIF’s impact on the business environment, particularly as regards funding, constitutes a support vector for
other Bank operations, as well as for reform and investment projects. Through these operations, the Bank seeks
greater complementarity and synergy. Lastly, at regional level, PARSIF and PAMSFI (Tunisia), prepared
simultaneously, contribute to strengthening and harmonizing Bank operations in financial sector development in
the North Region (ORNA).
4.4.3. Linkages with technical assistance projects: Like the PADESFI, PARSIF will benefit from
significant leverage effect through institutional support financed by TSF/MIC grants, by: (i) strengthening
financial market supervision and control; (ii) improving the national guarantee system information and risk
management framework; (iii) giving greater visibility to the regulatory and legislative framework of the sector
through preparation of the Moroccan Monetary and Financial Code; and (iv) enhancing the effectiveness of the
Treasury debt management institutional framework. As regards regional integration, PARSIF will also benefit
from the Bank's initiative to network African stock exchanges. These different actions for high-quality dialogue
with the Government helped to raise the Bank to the status of partner of choice in the financial sector in Morocco.
4.4.4. With respect to lessons learned from previous operations, the Bank has financed several budget
support programmes in Morocco, including the PADESFIs in which the country scored high in terms of good
implementation performance and strong ownership of agreed measures by the authorities. However, the reforms
are somewhat uncoordinated and should be included in a strategic framework that would give more visibility and
generate more impact, hence the PARSIF measure on developing a financial inclusion strategy. The importance
of a programme-based approach and the need for technical assistance and inter-sector approach for better synergy
of Bank operations should be retained as lessons. Lastly, mention should be made of the long delays attributable
to the political will to conduct the reforms within a participatory framework with all stakeholders. PARSIF’s
design took these lessons into account, retaining only structural measures that have reached an appropriate level
of maturity, and maintaining dialogue on all agreed reforms to ensure effective implementation.
9
Table 3
Lessons from Previous Bank Operations
Use the programme-based approach to consolidate reforms that
take time to implement, and allow policy makers to have good
visibility on the financial resources of Bank and TFP support.
PARSIF is carrying out some PADESFI flagship activities to consolidate
and deepen achievements, and ensure full implementation of the reforms.
Furthermore, in 2017, another programme could be designed using the
same approach.
Support the implementation of reforms through technical assistance
which, in particular, will allow for better understanding and
definition of some instruments or acceleration of reforms
implementation.
PARSIF will benefit from technical assistance through PADESFI, as
well as new technical assistance projects, particularly support for
financial stability and financial inclusion.
Importance of an inter-sector approach for complementarity and
synergy in Bank operations.
PARSIF includes financing support for farmers, and thus complements
PAPMV. This also applies to pension and improving the people’s quality
of life with PAGPS.
4.5. Analytical Work Underpinning the Operation
4.5.1 PARSIF’s appraisal benefited from the results of analytical work undertaken by the Bank and
the country itself, as well as other external agencies and partners. This mainly includes the Morocco Growth
Diagnostic/2014 undertaken by the Bank and the Report on the Financial Sector Stability Assessment
Programme (FSAP 2015). The table in TA 9 includes a list of the main analytical works.
V. THE PROGRAMME
5.1. Programme Aim and Objectives
5.1.1. PARSIF aims to help create conditions for strong economic and inclusive growth by
strengthening financial sector stability and inclusion. As part of the structural reforms undertaken for the past
twenty years and supported by several Bank programmes (PASFI and PADESFI), PARSIF seeks to consolidate
and deepen the key achievements of the programmes by integrating new priorities, particularly ensuring
sustainability of the pension sector and improving pensioners’ living conditions, as well as enhancing access to
financing for some farmers. In this regard, PARSIF’s specific objective is to strengthen the resilience and role of
the entire financial sector in private sector development and improvement of the people’s quality of life.
5.2. Programme Components
5.2.1. The programme is designed around two main pillars: (i) strengthen the capacity and role of
traditional institutional investors (pension funds and insurance companies) in financing the economy by
improving the sustainability of pension plans, and upgrade the insurance sector while improving inclusion in both
sectors, (ii) operationalize the reforms adopted over the past few years and strengthen banking and financial
market stability and inclusion, in line with the 2015 FSAP recommendations. Consequently, the programme
is divided into two components. The first component seeks to build the resilience and role of the insurance and
pension sectors in improving the quality of life of the population. For its part, the second component aims to
strengthen the stability and role of the banking and capital markets sector in improving the people’s quality of
life. The measures supported by the programme are outlined in the reforms matrix (Annex 2).
COMPONENT I: STRENGTHENING OF THE STABILITY AND ROLE OF THE INSURANCE
AND PENSION SECTORS IN PRIVATE SECTOR DEVELOPMENT AND THE IMPROVEMENT
OF THE PEOPLE’S QUALITY OF LIFE
5.2.2.0. The reforms under this component mainly seek to: (i) provide the population and private sector with
a more transparent and more open institutional and regulatory framework for insurance activities and
pension plans capable of providing sustainable coverage for their pensions; and (ii) improve the population’s
access to insurance products and the quality of pension services.
10
Sub-component 1.1: Strengthening the Stability of the Insurance and Pension Sectors
Problems and Constraints
5.2.2.1. The insurance sector is governed by a legal and institutional framework that is about fifteen years
old, and is therefore not fully aligned on current international standards as well as new products and distribution
mechanisms. Hence, there is need to overhaul the 2002 Insurance Code so as to strengthen sector governance,
and promote diversification and access to insurance products.
5.2.2.2. The pension sector shows a gradual deterioration of demographic ratios, which are the source of
persistent medium-term financial imbalance: insufficient contributions compared to steady increase in benefits.
The financial situation of the civilian pension scheme managed by CMR has recorded technical deficit since
2014, according to the actuarial study1 conducted by the Government; apart from CMR, the situation of other
pension funds will worsen further if the Government does not urgently take decisions and implement major
reforms to ensure sustainability and viability of pension plans, to enable them to continue providing pension
benefits to their retirees.
Recent Measures Taken by the Government
5.2.2.3. As regards the insurance sector, the Government has upgraded the legal and institutional
framework by strengthening prudential and governance rules, and introducing new products. To that end, the
Insurance Code will be revised. Similarly, the supervision and control of the sector was recently entrusted to an
independent authority with extensive powers, in line with international standards. Thus, the Insurance and Social
Welfare Control Authority (ACAPS) has been established, and its Chair appointed recently. In addition, the
ACAPS Board has held its first meeting to mark the effective start of the Authority’s activities.
5.2.2.4. With respect to the pension sector, a National Tripartite Commission (Government-Trade
Unions-Employers), chaired by the Head of Government, was established to reflect on a comprehensive
reform of the sector. The Commission approved a reform plan based on two pillars: (i) urgent parametric reform
of the civil servants pension plan governed by CMR to ensure its viability; and (ii) a two-pole pension system:
one public, comprising CMR and RCAR, and the other private comprising mainly the CNSS; each system will
have a mandatory basic plan and a supplementary plan.
Programme Activities
5.2.2.5. In the insurance sector, measures will be taken to strengthen the supervisory mechanism and the
framework governing the sector through the Council of Government’s adoption of the Bill amending and
supplementing Law No. 17-99 on the Insurance Code (condition precedent to Board presentation) to strengthen
governance, transparency and compliance with prudential rules in the insurance sector, as well as introduce
Islamic insurance.
5.2.2.6. As regards the pension sector, the programme seeks to reinforce the sustainability of pension
plans by implementing the following measures: (i) Council of Government’s adoption of the Bill amending and
supplementing Law No. 011.71 of 12 Kaâda 1391 (30 December 1971) (condition precedent to Board
presentation) to reinforce sustainability of the civil servants pension plan by implementing the parametric reform
(contributions, annuities, basis); (ii) Council of Government’s adoption of the Bill amending and supplementing
law No. 012.71 of 12 Kaâda 1391 (30 December 1971) (condition precedent to Board presentation) to reinforce
sustainability of the civil servants pension plan by raising the retirement age limit.
1 Reports of the Court of Auditors.
11
5.2.2.7. Expected outcomes: Implementation of the programme measures is expected to achieve the following
outcomes: (i) reduction in the loss ratio of the insurance sector from 72.5% in 2015 to 70% in 2017; (ii) technical
deficit of the CMR scheme limited to MAD 3.14 billion in 2017; and (iii) reserves of at least MAD 81.15 billion
in 2017.
Sub-component 1.2: Strengthening of Inclusion in the Insurance and Pension Sectors
Problems and Constraints
5.2.2.8. In the insurance sector, a Programme Contract prepared by all the stakeholders (Government
and private sector) was signed in 2011 mainly to expand coverage of the population and workers. In this regard,
special emphasis was laid on the importance of the insurance product diversification and distribution
components. The objective is to offer a greater variety of products and facilitate the population’s access to such
products. However, the diversification of insurance products and distribution channels can be efficient and
transparent only if conducted within a regulated framework. Therefore, one of the major challenges is to establish
a framework for new products and new distribution niches.
5.2.2.9. In the pension sector, all pension plans combined cover only 36% of the workforce. Consequently,
one of the major challenges is to significantly increase this proportion so as to improve the people’s quality of
life. For public sector retirees, the minimum pension does not exceed MAD 1 000. Furthermore, since retirees
constitute one of the most vulnerable segments of the population (fragile physical condition under the weight of
age and greater exposure to disease, income lower compared to that of workers, etc.), it is necessary to make
more efforts to improve their living conditions. In particular, everything should always be done reduce their
movement by ensuring their proximity to pension services (issuance of administrative documents, such as life
certificates, access to their pension, etc.).
Recent Measures Taken by the Government
5.2.2.10. The Government recently adopted the new status of “auto-entrepreneur”. This decision gives a
large part of the population, particularly self-employed persons, a legal status with greater access to the financial
system, including pension and other social benefits. Furthermore, as regards services provided to pensioners, the
various pension funds have taken action to improve the quality of their services, particularly by providing retirees
with access to banking services, offering consultation online or by telephone, and opening bank branches in the
interior. As part of the move to revise the Insurance Code, the Government also intends to open new windows
for the distribution of insurance products.
Programme Activities
5.2.2.11. To expand access to the pension system and insurance services, the programme provides for
implementation of the following actions: (i) Council of Government’s adoption of the Bill establishing a pension
plan for professional categories, as well as self-employed and non-employed persons engaged in a liberal activity,
(ii) Council of Government’s adoption of the Bill amending Law No. 17-99 on the Insurance Code (Book IV) to
expand the distribution of insurance products to the distance selling system by finance companies, and extend
the list of products sold by banks.
5.2.2.12. To improve the living conditions of pensioners, the programme provides for the implementation of
the following measures: (i) Council of Government’s adoption of the Bill amending and supplementing Dahir
No. 1.77.216 of 4 October 1977 to create a group pension benefit plan so as to increase the minimum pension
threshold from MAD 1,000 to MAD 1,500; (ii) expansion of the CMR geographic coverage network and
introduction of e-CMR online services for members; (iii) CMR Board’s adoption of a resolution to support the
provision of banking services to civil servants pensioners without access to such services.
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5.2.2.13. Expected outcomes: Activities proposed are expected to achieve the following outcomes: (i) increase
in the insurance penetration rate from 3.1% in 2015 to 3.3% in 2017; and (ii) improvement in the pension
coverage rate from 36% in 2015 to 40% in 2017.
COMPONENT II: STRENGTHENING THE STABILITY AND ROLE OF THE BANKING
SECTOR AND CAPITAL MARKETS IN PRIVATE SECTOR DEVELOPMENT AND THE
IMPROVEMENT OF THE PEOPLE’S QUALITY OF LIFE
5.2.3.0. The reforms under this component mainly seek to: (i) provide the population and the private sector with
an institutional and regulatory framework for banking activities, as well as more transparent and more open
capital markets; and (ii) improve access by the population and companies to financial services offered by the
banking sector and capital markets.
Sub-component 2.1: Strengthening the Stability of Banking Sector and Capital Markets
Problems and Constraints
5.2.3.1. Given the multiplicity and volume of reforms over the past few years, all backed by the Bank,
many laws have been adopted. However, their operationalization (decrees, orders) is not fully effective, hence it
is impossible to implement them. Furthermore, in light of the conclusions of the 2015 FSAP and the need to
adapt to constantly evolving international standards, particularly as regards risk management and prevention, as
well as respond to new needs at the national level to improve financing of the economy within a more conducive
business environment, it is necessary that further reforms be undertaken. Lastly, some new challenges -
particularly in the area of gender and regional integration - must be appropriately addressed. With respect to
gender, a study conducted by the Bank has demonstrated the importance of women's representation on the boards
of directors of companies. Therefore, it is important to take this into account in financial sector reforms.
Recent Measures Taken by the Government
introduced major provisions, particularly with regard to the supervision of financial conglomerates, participatory
finance, as well as coordination and monitoring of systemic risks with the establishment of a committee (a
federating collegial body) for that purpose, in addition to financial system regulators and the Ministry of Economy
and Finance, which is responsible mainly for detecting systemic risks and coordinating crisis resolution measures.
Operationalization of this law is underway. The reform of the status of the Bank of Morocco (BAM), which is
being adopted, should give the Central Bank the primary responsibility for macro-prudential supervision. In light
of the FSAP recommendations, it also became necessary to increase BAM’s financial stability prerogatives with
respect to the provision of emergency liquidity. To enhance the quality of banking and financial institution
governance, BAM has introduced the obligation for institutions to have two independent members on their
boards of directors. This marks a major progress in terms of compliance with gender equality for such boards.
Lastly, to improve the efficiency of credit activity, reflection has been initiated by the National Business
Environment Committee (CNEA), with support from the IFC, EBRD and FMA, to reform the chattel securities
system by improving the transparency of its legal framework and creditors’ visibility, and setting up a share
pledge register based on a computerized platform.
5.2.3.3. As concerns the capital market, the law establishing the Morocco Capital Market Authority
(AMMC) was published in the Official Gazette, and its Chair recently appointed. However, full
operationalization of the Authority’s new prerogatives as stipulated in the law in particular requires the adoption
of the Order approving the general regulations of the Authority. The new law on capital investment has been
adopted, but its implementing decree must be issued before it becomes operational. Currently, the securities
lending activity is still limited to residents. It should be opened to non-residents in line with international practice,
hence the need to amend the relevant Bill. Although the Treasury actively manages its debt, the yield curve is
based on fairly staggered transactions, which reduces its reliability. Now that the Treasury has a trading room
with an e-listing system, the quality of the yield curve is expected to improve.
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5.2.3.4. With respect to regional integration, Morocco has achieved a breakthrough into the financial
sector in Sub-Saharan Africa. Regarding capital markets, a Cooperation Memorandum was signed recently
between the Casablanca Stock Exchange and the WAMU Regional Stock Exchange (BRVM). A working group
bringing together the key players of the two stock exchanges (regulators, stock exchanges, central securities
depositories, securities companies) was also set up. However, this measure can be truly effective only if it is part
of a more formal institutional framework. In this regard and at a higher level, the Casablanca Stock Exchange
plans to join the West African Capital Markets Integration Council (WACMIC), which brings together all
ECOWAS stock exchanges and seeks to create a regional financial market in ECOWAS.
Programme Activities
5.2.3.5. To strengthen the capital market supervision system, the programme provides for implementation
of the following actions: (i) adoption of a decree by the Minister of Economy and Finance on AMMC General
Regulations; (ii) appointment of members of the AMMC Sanctions Board; and (iii) AMMC concludes its
assessment in line with IOSCO principles and objectives.
5.2.3.6. To improve gender mainstreaming in the financial sector governance system, the programme
envisages the following measures: (i) issue an AMMC Circular to mainstream gender in the annual reports of
listed companies; and (ii) issue a BAM Circular on independent executive directors, which includes compliance
with gender parity for independent board members of banks and financial institutions.
5.2.3.7. To enhance the stability of the banking sector, the programme provides for the following actions: (i)
BAM’s issuance of a Directive on information to be required by credit institutions for consideration of group-
based counterpart credit dossiers; (ii) Council of Government’s adoption of the Bill amending the law on the
status of Bank Al-Maghrib, to strengthen the financial stability prerogatives for BAM’s provision of emergency
liquidity; and (iii) Council of Government’s adoption of the Bill on chattel securities.
5.2.3.8. To diversify the financial instruments, the programme envisages the following measures: (i)
adoption of the decree implementing Law No. 18-14 on OPCC to modernize the investment capital and venture
capital framework so as to facilitate investments in small and new businesses; (ii) issuance, by the BAM, of a
Circular on the specifications of participatory finance products and arrangements for their presentation to
customers.
5.2.3.9. To boost the capital market, the programme intends to implement the following actions: (i) build a
yield curve based on e-listing of treasury bills on the Treasury’s Bloomberg platform; (ii) forward to the SGG
the Bill amending Law No. 45-12 on securities lending so as to improve the rules governing such activities,
mainly by opening it to non-residents; (iii) the Casablanca Stock Exchange’s associate membership in
WACMIC, to strengthen the integration of African capital markets.
5.2.3.10. Expected outcomes: (i) increase in the proportion of credit to micro-businesses from 36% in 2015 to
40% in 2017; and (ii) increase in the market capitalization/GDP ratio from 52% in 2015 to 55% in 2017.
Sub-component 2.2: Strengthening of Inclusion in the Banking Sector and Capital Markets
Problems and Constraints
5.2.3.11. Morocco has made significant progress in financial inclusion, thanks to reforms that led to the creation
of the Postal Bank and the Central Guarantee Fund. The Bank has supported these reforms through the three
PADESFI phases. The bank penetration rate recorded a sharp increase from 35% in 2009 to 64% in 2014, and
the number of MSMEs benefiting from GCC guarantee rose significantly by 518% from 328 in 2010 to 2,027 in
2014. Specific guarantee products for MSMEs have been put in place, including MSMEs run by women. Special
efforts have also been made towards financial education with the creation of the Financial Education Foundation,
which rolled out an induction programme for financial services.
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5.2.3.12. However, challenges persist, particularly as regards the financing of companies that are being
established and of some sectors, such as agriculture, especially smallholdings. Similarly, the rigidity of the
maximum conventional interest rate limits access to credit for some small businesses. The flow of a significant
amount of cash amounting to MAD 400 billion in the economy is also a burden with a fairly high cost, hence the
need for modernization of payment systems to encourage the use of mobile financial services. Lastly, although
Morocco has achieved significant results in terms of financial inclusion, the initiatives behind these good results
remain uncoordinated and require consolidation, hence the need for a real national financial inclusion strategy.
Recent Measures Taken by the Government
5.2.3.13. The Government and BAM are fully aware of these issues, and have launched initiatives to address
them. As regards agricultural financing, the Government has established a Prudential Stabilization Fund (FSP)
to guarantee up to MAD 100,000 SFDA loans (see TA7) to farmers who have no access to micro-credit (amount
too high) or conventional bank financing (amount too small) with a 80/20 ratio between investment loans and
operating loans. However, this allocation ratio has proved to be disadvantageous for smallholders who rather
need operating credit, hence the need to remove the allocation ratio and leave a 100% open mechanism for
investment and operation. With respect to the financing of business start-ups, the Government is currently
preparing a project to create a start-up fund that will be managed by CCG. Regarding payment systems, BAM
intends to operationalize the provisions of the recent Banking Law on payment institutions and payment services,
as soon as possible. Similarly, it has also initiated reflection on the development of a national mobile payments
solution. To have an overall and more coherent view of financial inclusion, the Government, in collaboration
with BAM, has initiated reflection on the preparation of a National Financial Inclusion Strategy (SNIF), thereby
also meeting one of the 2015 FSAP recommendations.
Programme Activities
5.2.3.14. Regarding the establishment of a financial inclusion strategic framework, the programme provides
for implementation of the following measures: (i) establishment of a governance structure for preparing and
monitoring the implementation of the National Financial Inclusion Strategy (SNIF); and (ii) validation of the
National Financial Inclusion Strategy.
5.2.3.15. To improve financing supply to innovative MSMEs, young entrepreneurs and farmers, the
programme provides for implementation of the following measures: (i) establishment of a start-up fund for young
entrepreneurs and innovative start-ups to be managed by the Central Guarantee Fund (condition precedent to
Board presentation); (ii) amendment of the State/CAM Agreement on the Prudential Stabilization Fund (FSP)
to improve access to financing for farmers by raising the required allocation ratio between the investment credit
and the operating credit under "Tamwil El Fellah" (condition precedent to Board presentation); and (iii) issuance
of an Order by the Minister of Economy and Finance on the revision of the framework for calculating the
maximum conventional interest rate so as to make it more flexible.
5.2.3.16. To facilitate access to mobile financial services, the programme provides for implementation of the
following measures: (i) BAM’s issuance of a Circular on payment institutions and a Circular on payment
services, pursuant to Banking Law No. 103.12 establishing a framework governing payment institutions; and (ii)
launching of a national mobile payments solution.
5.2.3.17. Expected outcomes: Implementation of the programme is expected to achieve the following
outcomes: (i) increase, by at least 54%, in the number of smallholders with access to credit through SFDA (from
52,000 in 2015 to 80,000 in 2017) and doubling of the number of women smallholders (from 1,500 women in
2015 to at least 3,000 women in 2017); (iii) doubling of the volume of SFDA credit to farmers from MAD 640
million in 2015 to MAD 1.2 billion; (iii) at least fifty (50) MSMEs have access to the Start-up Fund resources in
2017; and (iv) increase in the volume of bank card payments from MAD 16.3 billion in 2015 to MAD 19.5
billion in 2017, i.e. by 20%.
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5.3. Policy Dialogue
This operation is crucial to strengthen dialogue with the authorities on the diagnosis of constraints to
growth and reforms supported in the three PADESFI phases, particularly in terms of improving the
financing of the Moroccan economy in order to meet the challenges of competitiveness and transformation.
Dialogue will be supported by technical assistance operations, in particular support for the preparation of a
financial inclusion strategy and strengthening of financial sector stability. Dialogue with the Moroccan authorities
is being conducted in a transparent and consultative manner, in the same manner as the Bank’s other reform
support programmes. Furthermore, dialogue has already led to significant progress in improving access to
financing for all segments of the population, particularly women and young entrepreneurs. Dialogue will help to
facilitate access to credit for farmers, in coordination with the Green Morocco Plan Support Programme. Policy
dialogue is also conducted within the context of enhanced coordination mechanisms with other development
partners, particularly the World Bank.
5.4. Loan Conditions
5.4.1. Measures precedent: The programme appraisal missions and dialogue with the Government identified
measures precedent to submission of PARSIF to the Board. These measures were selected taking into account
their maturity level, the extensive dialogue on them, as well as their potential impact on the programme’s
medium- and long-term outcomes. The table below summarizes the measures.
Table 4
Measures Precedent Component Measures Precedent
Component I - Strengthening the role of the insurance and pension sectors in private sector development and the
improvement of the people’s quality of life
Measure 1 Council of Government’s adoption of the Bill amending and supplementing Law No. 17-99 on the Insurance
Code, to strengthen governance, transparency and compliance with prudential rules in the insurance sector,
and integration of Takaful insurance before end-June 2016
Measure 2 Council of Government’s adoption of the Bill amending and supplementing Law No. 011.71 of 30 December
1971 to strengthen the viability of the civil servants pension plan by carrying out parametric reform
(contributions, annuities, plate) before end of June 2016
Measure 3 Council of Government’s adoption of the Bill amending and supplementing Law No. 012.71 of 30 December
1971 to strengthen the viability of the civil servants pension plan by raising the retirement age limit before
end-June 2016
Component II - Strengthen the role of the banking sector and capital markets in private sector development and the
improvement of the people’s quality of life
Measure 4 Signing of the management agreement between the State and the Central Guarantee Fund on the
establishment of a start-up fund before end-June 2016
Measure 5 Amendment of the State/CAM agreement on the Prudential Stabilization Fund (FSP) to improve access to
financing for farmers by raising the required allocation ratio between investment loans and operating loans
under "Tamwil El Fellah" before end-June 2016
5.4.2. Application of good practice principles for the application of conditionality: In PARSIF’s design and
formulation and in accordance with the Bank's policy for Programme-Based Support Operations (PSO), the five
good practice principles on conditionality were observed: (i) ownership, given the fact that the programme is
designed with the active collaboration of the authorities; (ii) committed coordination between the TFPs; (iii)
alignment of Bank support arrangements on national priorities; (iv) reduced number of conditions precedent to
Board presentation; and lastly (v) alignment of Bank support on the country’s budget cycle, particularly for the
2016 fiscal year.
5.5. Financing Needs and Mechanisms
5.5.1. According to estimates by the authorities, the financing needs of the Treasury of the Kingdom of
Morocco for 2016 stand at approximately MAD 42.6 billion, i.e. about USD 4.4 billion (see table below).
These needs will be covered by Morocco’s own and external resources. The budget support proposed by the
Bank in 2016 (PARSIF and PAGPS, amounting to UA 165.2 million, and the PAPMV II for USD 55 million)
16
account for nearly 12.5% of the planned external financing needs for one fiscal year (6.8% for PARSIF, 3.4%
for PAGPS, and 2.4% for PAPMV II). Budget support also represents 38% of the balance of payments financing
needs for one year (20.6%, 10.2% and 7.2% for PARSIF, PAGPS and PAPMV II, respectively).
Table 5
Estimated Financing Needs and Sources (in million) 2016
Chapters MAD UA USD EUR
Total revenue and grants 222 155.5 16 293.1 23 092.7 20 251.4 comprising:non-tax revenue (incl. CCG grant and
non-budget support) 27 160.5 1 992.0 2 823.3 2 475.9
Total net expenditure and loans 264 773.7 19 418.8 27 522.8 24 136.4 comprising: public debt repayment 28 284.6 2 074.4 2 940.1 2 578.4 comprising: capital expenditure (*) 53 129.9 3 896.6 5 522.8 4 843.2 Total arrears 0.0 0.0 0.0 0.0 Special Treasury Account Balance 6 000.0 440.0 623.7 547.0 Overall Balance -36 618.2 -2 685.6 -3 806.4 -3 338.1 External financing (without AfDB budget support in
2015) 19 427.6 1 424.8 2 019.5 1 771.0
AfDB external financing (PARSIF) 1 508.0 110.6 156.8 137.5 AfDB external financing (PAGPS) 744.6 54.6 77.4 67.9 AfDB external financing (PAPMV II) 529.1 38.8 55.0 48.2 Domestic financing (net) 14 408.8 1 056.8 1 497.8 1 313.5 Financing 36 618.2 2 685.6 3 806.4 3 338.1 Residual financing gap 0.0 0.0 0.0 0.0
Source: 2016 (2016 Budget Act)
VI. IMPLEMENTATION
6.1. Programme Beneficiaries
6.1.1. The ultimate beneficiaries of the programme are the Moroccan population as a whole,
who will benefit from improvement of the quality of life likely to result from employment- and income-
generating inclusive economic growth. The main project beneficiaries will include: (i) current and future
pensioners, who will benefit from sustainable pension schemes allowing them to regularly collect their
pensions; (ii) self-employed workers, including those active in the informal sector, who will now access
coverage for their retirement; (iii) women, through their greater participation in the boards of directors
of banks and financial institutions as well as easier access to credit for women farmers (individuals or
cooperatives); (iv) the private and semi-public sectors, which will have more access to the resources of
sounder and more dynamic institutional investors (insurance companies and pension funds); (v) farmers,
who will have better access to credit - whatever the nature of their needs (operation or investment); and
(vi) young people, who will be able to better concretize their creativity through improved start-up
financing.
6.2. Expected Impact on Gender, the Poor and Vulnerable Groups
6.2.1 PARSIF supports the enhancement of financial sector inclusion to benefit gender, the
poor and vulnerable groups through : (i) better representation of women in the boards of directors of
banks and financial institutions; (ii) access to more targeted credit for farmers, especially women and
women's cooperatives; (iii) easier access of the population to insurance products; (iv) a more sustainable
coverage and more appropriate financial services for pensioners and pre-retirees, especially the self-
employed; (v) better access to financing for youths; and (vi) easier access to financial services through
the strengthening of regional networks and means of payment.
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6.3. Impact on the Environment and Climate Change
6.3.1 In terms of climate change, PARSIF is not subject to the AfDB climate safeguards system. The
programme has no potential environmental and social impacts requiring subsequent safeguards
assessment. Thus, PARSIF has been classified under category 3 in accordance with the Bank's environmental
and social procedures.
6.4. Impact in Other Areas
6.4.1 By focusing on improving MSME access to financing, guarantee scheme/risk management
modernization, and enhanced financial sector governance, PARSIF will contribute to the development
of a private sector-friendly environment. Facilitation of MSME access to financing is all the more
important as sector-based strategies such as the industrial strategy and the business climate improvement
action plan have made it central to their priorities. Furthermore, the development of capital markets and
the strengthening of integration of the Casablanca Finance City with other centres, in particular those
of ECOWAS, will help to attract new investments and strengthen the activity of institutions operating
on a regional and, in particular, African level.
6.5. Implementation, Monitoring and Evaluation
6.5.1 The programme will be implemented by the Ministry of Economy and Finance through
the Directorate of Treasury and External Finance (DTFE). DTFE has satisfactorily implemented
previous programmes. It also has the capacity to mobilise the various parties involved to ensure better
coordination. It will ensure data collection as well as the coordination of monitoring and evaluation, and
will provide information to the Bank particularly through quarterly reports on the programme's
implementation and audit reports. Lastly, DTFE will forward to the Bank, evidence of fulfilment of
measures precedent as well as evidence on the single tranche disbursement. Supervision missions are
planned during programme implementation to assess progress. The Bank's Field Office will
continuously monitor the implementation of programme reforms. The macro-economic monitoring
framework and the measures matrix agreed will constitute PARSIF’s common monitoring and
evaluation frameworks. At the end of the programme, a completion report will be prepared.
6.6. Financial Management, Disbursement and Procurement
6.6.1. Country Fiduciary Risk Assessment (CFRA). The Country Fiduciary Risk Assessment (CFRA) was
updated in March 2016 during review of completion of Morocco's CSP 2012-2016. It concluded that the
country's overall fiduciary risk level is moderate owing, on the whole, to satisfactory public finance management
processes (three-year programming and budget preparation, budget execution control, management accounting
and reporting, internal audit, external review and audit). The outcomes of PEFA 2016, under preparation, are
expected to be validated and approved by the Government by end-June 2016 at the latest. The weaknesses
highlighted have enabled Morocco to fully engage the implementation of reforms of LOLF 130-13 (Organic
Law on the Budget Act) promulgated on 2 June 2015 (enactment and implementation of the principles and rules
concerning the financial equilibrium of the Budget Act and transparency of public finances, increased role of
Parliament in the budget debate and in the control of public finances, etc.). In view of compliance with their
various effectiveness dates, Morocco, by anticipation, has initiated and/or formalized a good number of the
reforms through statutory and implementing instruments, including the establishment of the PFM control
commission within Parliament.
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6.6.2. Financial Sector Fiduciary Risk Assessment. The outcomes of the assessment indicate that overall,
arrangements for the administrative, financial and accounting management of public funds of the financial sector
(DAAG/MEF and EEP, in particular the Central Guarantee Fund and the Caisse Marocaine des Retraites –
Morocco Pension Fund) are in place and operational. In addition, all sector entities are systematically audited by
the IGF and their management controlled by the Court of Auditors. Therefore, the sector fiduciary risk level is
moderate.
6.6.3. Financial Management and Disbursement Arrangements. Owing to the nature of the operation
(sector programme financed with budget support), financial resources will be utilised according to national public
finance management rules. In this regard, the Ministry of Economy and Finance will be responsible for managing
the financial resources of the operation.
6.6.4. Disbursement. Budget support, in the form of a loan, will be disbursed in a single tranche to help cover
the current budget deficit, subject to the Borrower’s fulfilment of the general and specific conditions of the
operation. At the Borrower’s request, the Bank will disburse the amount agreed in foreign currency into an
account of the Central Bank of Morocco (Bank Al Maghrib), which will credit the Single Treasury Account
(CUT) with the equivalent of the funds received in local currency.
6.6.5. Accountability. Yearly, the Government submits the Audited Budget (“Loi de Règlement”) to
Parliament during the first quarter of year n + 2. The Audited Budget is accompanied by a report of the Court of
Auditors on implementation Budget Act and the general statement of compliance between the Kingdom's
management accounts and the general account.
6.6.5. Audit and supervision. PARSIF’s internal audit will be conducted by the IGF, which will carry out a
specific audit on the financial flows of the Bank's support and an audit of PARSIF’s performance. The deadline
for submission of the audit report to the Bank will be six months following the closure of the programme. Given
the moderate sector fiduciary risk level, this programme will be the subject of an annual fiduciary supervision.
6.6.6. Procurement. Since this is a sector budget support operation, the resources will be used to finance
procurements using the national public procurement system. It was necessary to assess the state of the system
and the level of risk associated with its use.
6.6.6.1 Assessment of the risk level for the procurement component of the Country Fiduciary Risk
Assessment (CFRA). When the operation was being prepared, the risk level of the procurement component of
Morocco's fiduciary risk level was updated and re-assessed. As indicated in the CFRA in annex, this risk level of
the procurement component was deemed moderate. The system is characterized by an acceptable level of
transparency and has a functional and reassuring control mechanism with a level of integrity which,
although progressing, requires further improvement.
6.6.6.2 Assessment of procurement practices in the financial sector. It follows from the information
collected from the sample2 of actors in the sector as well as from the various audit reports (including IGF and
Courts of Auditors) that no significant element relating to procurement warrants that the procurement component
of the financial sector fiduciary risk assessment be differentiated from the situation at the national level. However,
public institutions in the financial sector will make the necessary arrangements to fully comply with the regulatory
requirements by publishing the summary procurement audit reports on the public procurement portal. In view
of the foregoing and the details in annex (TA 1), the legal and regulatory public procurement framework,
the institutional framework as well as the fiduciary environment in Morocco, it can be concluded that the
resources of this operation will be used through procedures that are acceptable, clear, transparent and
subject to an effective and reassuring control mechanism.
2 Comprising the Ministry of Economy and Finance, CGC, AMMC (fmr. CDVM) CMR and the Exchange Office, etc.
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VII. LEGAL INSTRUMENTS AND AUTHORITY
7.1. Legal Instruments
7.1.1. The Bank (AfDB) will sign a loan agreement with the Kingdom of Morocco in the amount of UA
110.6 million or USD 157 million, for PARSIF’s implementation.
7.1.2. Conditions precedent to loan effectiveness. Loan effectiveness shall be subject to fulfilment of the
conditions stipulated in Section 12.1 of the General Conditions Applicable to Loan Agreements.
7.2. Conditions Associated with the Bank's Intervention
7.2.1. Conditions precedent to presentation of PARSIF to the Boards. By mutual agreement with the
Government at the time of programme appraisal, it was agreed that the conditions precedent indicated in point
5.3.3 (Table 4) would be fulfilled before presentation of the programme to the Bank's Board of Directors.
7.2.2. Conditions precedent to disbursement: The disbursement of the single tranche of the loan,
amounting to USD 157 million, shall be subject to fulfilment of the following condition:
Forward to the Bank evidence of the existence of a Treasury account opened with Bank Al Maghrib
acceptable to the Bank and intended to receive the loan resources.
7.3. Compliance with Bank Group Policies
7.3.1. PARSIF has been prepared in accordance with current Bank Group guidelines, especially the
Policy on Programme-based Operations.
VIII. RISK MANAGEMENT
8.1 The Government has taken the necessary measures in order to anticipate and respond quickly
and efficiently to the major risks that are likely to affect the achievement of PARSIF outcomes.
Table 6
Risks and Mitigation Measures Risks Mitigation Measures
(i) An unfavourable international
economic environment, particularly the
persistent slow-down in economic growth
in the Euro area, on which the Moroccan
economy greatly depends.
Gradual opening up, beyond the main EU partner, to economic zones with higher
growth potential (Africa, Russia, China, India, etc.)
Financial Stability Committee (BAM, AMMC, ACAPS) to prevent systemic risks in
the financial sector
IMF Precautionary and Liquidity Line (PLL) for an amount equivalent to SDR 3.2351
billion to restore the country's fiscal and external headroom, if necessary, and which
should be renewed for 2 years from 30 July 2016 following ongoing discussions with
the IMF.
(ii) A weakening political will to
implement PARSIF’s measures due to
other policy priorities at their expense.
High-level commitment to implement the reforms, given that PARSIF’s expected
outcomes are fully in sync with the Government's programme. Moreover, reforms
were the subject of serious dialogue with the various stakeholders.
(iii) Unpredictable changes in climatic
conditions, which affect the performance
of the agricultural sector and, therefore,
GDP growth.
Strong commitment by the Moroccan authorities not only to diversify to reduce the
economy’s dependence on agriculture, but also to modernise agriculture to reduce its
dependence on rainfall through implementation of the Bank-supported Green Morocco
Plan.
IX. RECOMMENDATION
In view of the foregoing, it is recommended that the Board of Directors approve a loan of USD 157 million to
the Kingdom of Morocco to finance the implementation of the Financial Stability and Inclusion Strengthening
Support Programme (PARSIF), for the purposes and according to the conditions set out in this report.
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LETTER OF DEVELOPMENT POLICY
v
TO
The President
of the African Development Bank
Subject: Letter of Development Policy on the Financial Stability and Inclusion Strengthening Support Programme (PARSIF).
Mr. President,
During the past two decades, the Kingdom of Morocco has resolutely engaged the process to modernize its financial sector in order to support the country’s economic and social development. The outcomes have mostly included the improvement of financial inclusion and access to financing for small- and medium-sized enterprises (SMEs), strengthening of the role of the capital and financial market in financing the economy, and consolidating the financial sector control and supervision framework to ensure its robustness, durability and stability. These reforms have helped to build a modern financial sector complete with the main financial instruments and institutions of the market, and a solid base of institutional investors.
The Government desires to carry on financial sector modernisation and development efforts, and to reach a new milestone in this process by capitalizing on these achievements. It is our hope that the African Development Bank will again support us in this new phase of reforms as it did successfully during previous financial sector development programmes.
The new government financial sector modernisation programme has the following main objectives:
1- Strengthen the role of the insurance and pension sectors in improving the people’s quality of life;
2- Strengthen the role of the banking sector and capital markets in private sector development, and in improving the people’s quality of life.
These objectives have been reflected in the following two pillars of the development programme proposed for support by the African Development Bank.
KINGDOM OF MOROCCO
MINISTRY OF ECONOMY AND FINANCE
THE MINISTER
كة ل مم ية ال غرب م ال
ر وزي ال
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Pillar 1: Strengthen the role of the insurance and pension sectors in improving the people’s quality
of life
The measures planned in this context are mainly twofold:
Strengthen the resilience of the insurance and pension sectors: this component includes several sub-components, particularly: (i) the operationalisation of the Insurance and Social Security Control Authority (ACAPS) mainly through the appointment of its Chairperson and adoption of its Rules of Procedure; (ii) the amendment of Law No. 17-99 relating to the insurance code, specifically to introduce Takaful insurance and to regulate the marketing aspect of insurance products; and (iii) reform of the civil servants pensions scheme managed by Caisse Marocaine des Retraites (Morocco Pension Fund) (CMR) to introduce a parametric reform of the scheme to strengthen its viability.
Insurance and pension sector inclusion, in particular through: (i) coverage of the self-employed by the National Social Security Fund (CNSS) by including them in the compulsory health insurance (AMO) and pension plan; and (ii) gradual increase in the minimum pension level for public sector retirees (CMR and RCAR) from MAD 1 000 to 1 500.
Pillar 2: Strengthen the role of the banking sector and capital markets in private sector development and in improving the people’s quality of life
Strengthening financial sector governance is one of the objectives of the sector's modernisation process. Achieving this goal requires strengthening the independence and powers of intervention of supervisory authorities. Thus, at the level of the capital market, the Law on the Moroccan Capital Market Authority (AMMC) was enacted in early 2013. This law enshrined the independence of the authority charged with capital market supervision and laid down wide powers, especially with regard to control of all capital market compartments and stakeholders. Operationalisation of the law on the AMMC was initiated with the adoption of the amendment to Organic Law No. 02-12 on the appointment to higher positions, thus elevating AMCC to the rank of strategic organization, just like ACAPS. In addition, full operationalisation of the AMMC Law also presupposes a review of the mode of governance of this Authority, which hinges on the appointment of its chairperson, the appointment of members of its Board of Directors and the adoption of its General Regulations.
In addition, and in order to consolidate the robustness and stability of the financial sector, the draft law on the status of Bank Al Maghrib, which is being finalized, strengthens the independence and governance of BAM and expands its mandate to cover financial stability. On a different level, the establishment of a new system governing chattel securities, aiming to promote a modern and flexible legal system, will allow for better use of the tangible and intangible movable assets of businesses as collateral to access more bank financing.
Cognisant of the role of capital markets in financing the economy and promoting sector policies geared towards the development of key strategic sectors of the economy, the Government has launched a new generation of reforms aiming to diversify financial instruments within a framework that is more efficient, secure and complete with modern market infrastructure.
It is against this backdrop that Law No. 18-14 relating to collective capital investment funds was recently adopted. This law aims to provide solutions for equity and quasi-equity financing for enterprises in general, and SMEs in particular. The main contributions of this law are the broadening of its scope to cover all private equity activities, greater security of the mechanism and enhancement of
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investor protection, improved financial techniques and promotion of foreign investment in private equity. Enforcement of this law requires, primarily, the adoption of the Decree for its implementation.
In the same vein, establishing the framework governing participatory finance products introduced by the new banking law requires for its operationalisation in particular, the issuance by Bank Al Maghrib of a Circular on the specifications of participatory finance products and terms and conditions of their presentation to clients, bearing in mind that the tax provisions for these products were adopted under the 2016 Finance Law.
Also, and to boost the capital market, amending Law No. 45-12 relating to securities lending is necessary to improve the rules governing this activity with the objective specifically to improve the attractiveness of the Moroccan financial sector to foreign investors.
It is our conviction that these new products are likely to stimulate the capital market and give a new impetus to financial sector development.
In addition, financial inclusion, which aims to contribute to inclusive economic growth, has become a priority thrust of public intervention in the financial sector. In this regard, several measures are planned including mainly: (i) the establishment of a national financial inclusion strategy (SNIF); (ii) the implementation of a seed fund for young entrepreneurs and innovative start-ups; and (iii) the launch of a national mobile payments solution to further improve access to banking services at competitive rates, especially for populations hitherto excluded from the banking system.
Mr President, these are the main thrusts of this new milestone in the ongoing process of reform and modernisation of our financial sector.
Thank you for your valuable support in the implementation of this ambitious programme.
Yours faithfully,
To Mr Akinwumi A. ADESINA President of the African Development Bank CCIA Building - Plateau Avenue Jean Paul II 01 B.P.1387 – Abidjan 01 COTE D’IVOIRE
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MATRIX OF PROGRAMME REFORM MEASURES 2016-2017
Sub/Componants Measures Targeted Output Indicators
Targeted Outcome
Indicators
Data Sources and Institutions
Responsible
Component I – Strengthening of the stability and role of the insurance and pension sectors in private sector development and in the improvement of the people’s quality of life
Sub-component I.1 – Strengthening of the stability of the insurance and pension sectors
STRENGTHEN
GOVERNANCE,
TRANSPARENCY AND THE
PRUDENTIAL RULES OF
THE FRAMEWORK
GOVERNING THE
INSURANCE SECTOR
Adoption by the Council of Government of the Bill amending and
supplementing Law No. 17-99 on the Insurance Code to strengthen governance, transparency and compliance with the prudential rules of the
insurance sector and integration of Takaful insurance (Islamic insurance)
(*)
Bill No. 59-13 amending and
supplementing Law No. 17-99 on the insurance code is adopted by the Council of
Government before end-June 2016
The claims rate in
the insurance sector drops from 72.5%
in 2015 to 70% in
2017
DS: Letter from the Ministry of
Economy and Finance forwarding the summary record of the Council of
Government having adopted the Bill
amending the insurance code.
IR MEF
ENHANCE THE
SUSTAINABILITY OF THE
CIVIL SERVANTS PENSION
PLAN
Adoption by the Council of Government of the draft law amending and supplementing Law No. 011.71 of 12 Kaâda 1391 (30 December 1971) to
strengthen the viability of the civil servants pension scheme through
integration of parametric reform (dues, annuities, base) (*)
Bill No. 71.14 is adopted by the Council of Government before end of June 2016
Technical deficit of the CMR scheme
limited to MAD
3.14 billion in 2017
Reserves of at least
MAD 81.15 million
in 2017
DS: Letter from the Ministry of Economy and Finance forwarding the
summary record of the Council of
Government having adopted Bill No. 71.14
IR MEF
Adoption by the Council of Government of the draft law amending and supplementing Law No. 012.71 of 12 Kaâda 1391 (30 December 1971) to
strengthen the viability of the civil servants pension scheme by raising the
retirement age (*)
Bill No. 72.14 is adopted by the Council of Government before end of June 2016
DS: Letter from the Ministry of Economy and Finance forwarding the
summary record of the Council of
Government having adopted Bill No. 71.14
IR MEF
Sub-component I.2 – Strengthening of inclusion in the insurance and pension sectors
EXPAND ACCESS TO THE
PENSION SYSTEM AND
INSURANCE SERVICES
Adoption by the Council of Government of Bill No. 99-15 establishing a pension scheme for categories of professionals, self-employed workers
and non-employed persons who are self-employed
Bill No. 99-15 is adopted by the Council of Government before end of June 2016
Rise in the
insurance
penetration rate
from 3.1% in 2015 to 3.3% in 2017.
DS: Letter from the Ministry of Economy and Finance forwarding the
summary record of the Council of
Government having adopted Bill No. 99-15
IR MEF Adoption by the Council of Government of the Bill amending Act No. 17-
99 on the insurance code (Book IV) to extend the distribution of insurance
products to distance, online selling, by financing companies and
extending the list of insurance products marketed by banks
Bill amending and supplementing Law No.
17-99 on the insurance code is adopted by
the Council of Government before end-
2016
DS: Letter from the Ministry of
Economy and Finance forwarding the
summary record of the Council of
Government having adopted the law amending Law No. 17-99
IR MEF
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IMPROVE THE LIVING
CONDITIONS OF RETIREES
Adoption by the Council of Government of the Bill amending and
supplementing the Dahir relating to Law No. 1.77.216 of 4 October 1977 establishing the Collective Retirement Benefit Scheme to raise the
minimum pension from MAD 1 000 to 1 500
Bill No. 96-15 is adopted by the Council of
Government before end-2016
Rise in the pension
coverage rate from 36% in 2015 to
40% in 2017
DS: Letter from the Ministry of
Economy and Finance forwarding the summary record of the Council of
Government having adopted Bill No.
96-15 IR MEF
Extension of the CMR geographic coverage network to cover the regions
of the Kingdom and the introduction of online services (e-CMR) for CMR
affiliates
CMR has expanded its geographic coverage
and launched e-CMR services before end-
2017
DS: Letter from the Ministry of
Economy and Finance attesting to the
geographic extension and launch of e-CMR for all affiliates
IR MEF Adoption by the CMR Board of Directors of a resolution on support for
access to banking services for the remaining segment of retirees of the
civil servants pension plan without access to banking services
Resolution on support for access to banking
services for the remaining segment of
retirees without access to banking services
taken by the CMR Board of Directors before end-2016
DS: Letter from the Ministry of
Economy and Finance forwarding a
copy of the resolution of the CMR
Board on access to banking services for the remaining segment of retirees
without access to banking services (30
000) IR MEF
Component II - Strengthening of the stability and role of the banking sector and capital markets in private sector development and in the improvement of the people’s quality of life
Sub-component II.1 – Strengthening of the stability of the banking sector and capital markets
STRENGTHEN THE
CAPITAL MARKET
SUPERVISION MECHANISM
Adoption of an Order of the Minister of Economy and Finance on the General Regulations of AMMC
The Order of the Minister of Economy and Finance on the General Regulations of
AMMC is adopted before end-2016
Increase in market
capitalization relative to GDP
from 52% in 2015
to 55% in 2017
DS: Letter from the Ministry of Economy and Finance forwarding the
Order of the Minister of Economy and
Finance on the General Regulations of AMMC
IR MEF
Appointment of the members of the AMMC Sanctions Board Members of the AMMC Sanctions Board
are appointed before end-2016
DS: Letter of the MEF forwarding a
copy of the Decision of the MEF appointing the Chairperson of the
Sanctions Board and a copy of the
record of the AMCC Board of Directors on the appointment of the other
members
IR MEF
The AMMC concludes its assessment relative to the IOSCO objectives
and principles
Assessment of AMMC according to the
IOSCO principles and objectives is conducted before end-2016
DS: Letter of MEF attesting to conduct
of the assessment. IR MEF
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IMPROVE GENDER
MAINSTREAMING IN THE
FINANCIAL SECTOR
GOVERNANCE MECHANISM
Issuance of an AMMC circular mainstreaming gender in the annual
reports of listed companies
The AMMC circular on annual reports of
listed companies is issued before end-2017
Increase in the
share of credit to MSMEs from 36%
in 2015 to 40% in
2017.
DS: Letter of MEF forwarding the
AMMC circular IR MEF
Issuance of a BAM circular on independent directors, that includes respect
for gender parity among independent directors of banking and financial institutions
The BAM circular on independent directors
of banking institutions is issued before end-2016
DS: Letter of MEF forwarding the BAM
circular IR MEF
STRENGTHEN THE
STABILITY OF THE
BANKING SECTOR
Issuance by BAM of a Directive on information to be required by credit
institutions within the framework of examination of group-based
counterpart credit dossiers
BAM Directive on information to be
required by credit institutions within the
framework of examination of group-based
counterpart credit dossiers end-2016
DS: Letter of MEF forwarding the BAM
Directive
IR: MEF
DIVERSIFY FINANCIAL
INSTRUMENTS
Adoption by the Council of Government of the draft law on the status of Bank Al Maghrib to strengthen the financial stability prerogatives
regarding BAM's emergency liquidity
Draft law on the status of Bank Al Maghrib is adopted by the Council of Government
before end-2017
DS: Letter from the Ministry of Economy and Finance forwarding the
summary record of the Council of
Government adopting the draft law on the status of Bank Al Maghrib
IR MEF
Adoption by the Council of Government of the draft law on chattel
securities
Draft law on reform of chattel securities is
adopted by the Council of Government before end-2017
DS: Letter from the Ministry of
Economy and Finance forwarding the summary record of the Council of
Government having adopted the Bill on
the reform of chattel securities. IR MEF
Adoption of the Decree implementing Law No. 18-14 on Collective
Capital Investment Agencies (OPCC) to modernise the framework for equity and venture capital, to allow investments in small and start-up
companies
The Decree implementing Law No. 18-14
on Collective Capital Investment Agencies (OPCC) is adopted by the Council of
Government before end-2016.
DS: Letter from the Ministry of
Economy and Finance forwarding the records of the Council of Government
having adopted the Decree
implementing Law No. 18-14 on Collective Capital Investment Agencies
(OPCC).
IR MEF
Issuance by BAM of the circular on the technical characteristics of participatory finance products and the terms and conditions of their
presentation to clients
Issuance of the BAM circular on participatory finance products before end-
2016
DS: Letter from the Ministry of Finance forwarding BAM circular on
participatory finance products
IR MEF
REVITALIZE THE
FINANCIAL MARKET
Construction of a yield curve based on e-listing for Treasury bonds on the
Treasury’s Bloomberg platform
A yield curve based on e-listing for
Treasury bonds on the Bloomberg platform
is available before end-2017
DS: Letter of the Ministry of Economy
and Finance attesting to the construction
of a yield curve IR MEF
Forwarding to the SGG of the draft law amending Law No. 45-12 on
securities lending to improve the rules governing the securities lending business, particularly by opening it to non-residents
The draft amendment of Law No. 45-12 on
securities lending is prepared and forwarded to SGG before end-2016
DS: Letter from the Ministry of
Economy and Finance attesting to transmission of the draft amendment of
Law No. 45-12 on securities lending.
IR MEF
Casablanca Stock Exchange’s associate membership in the West African Capital Markets Integration Council (WACMIC), to strengthen the
Casablanca Stock Exchange’s associate membership in the West African Capital
DS: Copy of WACMIC statement reporting membership of the Casablanca
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integration of African capital markets Markets Integration Council (WACMIC) is
achieved before end-2016.
Stock Exchange in WACMIC
IR MEF
Sub-component II.1 - Strengthening inclusion in the banking sector and capital markets
DEVELOP A FINANCIAL
INCLUSION STRATEGIC
FRAMEWORK
Establishment of a governance structure to prepare and monitor the
implementation of the National Financial Inclusion Strategy (SNIF)
The governance structure for preparing and
monitoring the implementation of the
National Financial Inclusion Strategy is established before end-2016
Increase of at least
54% in the number
of smallholders farmers with access
to credit through
SFDA (from 52 000 in 2015 to at
least 80 000 in
2017) and doubling
of the number of
women
smallholders farmers (from 1500
in 2015 to at least 3
000 in 2017).
Doubling of the
volume of credit granted by SFDA
to smallholders
from MAD 640 million in 2015 to
at least MAD 1.2
billion in 2017
At least 50 MSMEs
have access to the
resources of the Fund for start-ups
in 2017
20% increase in
volume of card payments in 2017
relative to 2015
(from MAD 16.3 billion in 2015 to
MAD 19.5 billion
in 2017)
DS: Letter from the Ministry of
Economy and Finance attesting to the
establishment of a governance structure IR MEF
Validation of the national financial inclusion strategy The National Financial Inclusion Strategy is
validated before end-2017
DS: Letter from the Ministry of
Economy and Finance attesting to the
validation of SNIF IR MEF
IMPROVE THE OFFER OF
FINANCING TO
INNOVATIVE MSMES,
YOUTH AND FARMERS
Establishment of a fund for start-ups for young entrepreneurs and
innovative start-ups under management by the Caisse Centrale de Garantie (Central Guarantee Fund) (*)
The fund management agreement for start-
ups is signed between the State and the Caisse Centrale de Garantie before end-
June 2016
DS: Letter from the Ministry of
Economy and Finance forwarding the management agreement
IR MEF
Amendment to the State/CAM agreement on the Prudential Stabilization
Fund (FSP) to improve access to financing for farmers by removing the ratio constraint required between the investment credit and operating
credit, within the "Tamwil el fellah" framework (*)
Signing of the amendment to the
State/CAM agreement on the Prudential Stabilization Fund (FSP) before end-June
2016
DS: Letter from the Ministry of
Economy and Finance regarding the
amendment to the FSP agreement
IR MEF / CAM
Issuance of an Order of the Minister of Economy and Finance on the
revision of the framework for calculating the maximum conventional interest rate (TMIC) in order to introduce more flexibility
The Order on the revision of the TMIC is
issued by the Minister of Economy and Finance before end-2017
DS: Letter from the Ministry of
Economy and Finance forwarding the Order of the Minister of Economy and
Finance on the TMIC FACILITATE ACCESS TO
MOBILE FINANCIAL
SERVICES
Establishment of a framework governing payment institutions, through the issuance by BAM of the circular on payment institutions and the
circular on payment services in application of Banking Law No. 103.12
Circulars on payment establishments and payment services are issued by BAM before
end-2016
DS: Letter from the Ministry of Economy and Finance forwarding
copies of BAM circulars
IR MEF
Launching of national mobile payments solutions National mobile payments solution is launched before end-2017
DS: Letter of MEF attesting to launching of the national mobile payments solution
IR: MEF
Annexe 3
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Notes on Relations with the IMF
IMF Executive Board Completes the Third Review of the Precautionary and Liquidity Line for
Morocco
Press Release No. 16/26
January 28, 2016
On January 27, 2016, the Executive Board of the International Monetary Fund (IMF) completed the
third and last review of Morocco’s economic performance under a program supported by a two-year
Precautionary and Liquidity Line (PLL) arrangement, and reaffirmed Morocco’s continued
qualification to access PLL resources.
The current two-year PLL arrangement in an amount equivalent to SDR 3.2351 billion (about US$5
billion at the time of approval or 550 percent of Morocco’s quota at the IMF) was approved by the
IMF’s Executive Board in July 2014. (See Press Release No. 14/368). The arrangement supports the
authorities’ program to rebuild fiscal and external buffers and promote higher and more inclusive
growth. It will expire in July 2016. Morocco’s first 24-month PLL arrangement was approved on August
3, 2012, with an access equivalent to 700 percent of the quota, and expired in July 2014.
The PLL arrangement has provided insurance against external risks. The Moroccan authorities are
treating the arrangement as precautionary, as they did with the 2012–14 PLL arrangement, and do not
intend to draw under the arrangement unless Morocco experiences actual balance of payments needs
from a significant deterioration of external conditions.
The PLL, which was introduced in 2011, provides financing to meet actual or potential balance of
payments needs of countries with sound policies, and is intended to serve as insurance or help resolve
crises under wide-ranging situations.
Following the Executive Board discussion on Morocco, Mr. Mitsuhiro Furusawa, IMF Deputy
Managing Director and Acting Chair of the Board, made the following statement:
“Morocco’s overall economic performance has continued to improve in 2015. Strong policy
implementation has helped reduce fiscal and external vulnerabilities and significant progress has been
achieved on reforms. In an environment that remains vulnerable to important downside risks, continued
efforts to move ahead with difficult but necessary reforms will be key for reducing the remaining
vulnerabilities while promoting higher and more inclusive growth.
“Fiscal developments have been positive and consistent with the authorities’ objective to reduce the
deficit to 4.3 percent of GDP in 2015. Substantial progress has been achieved on the subsidy reform,
while support to the most vulnerable has expanded. Now that the draft legislation on the public sector
pension reform has been approved by the Government, its timely adoption by parliament and
implementation will be key.
“Progress has also been made in upgrading the financial policy framework, including implementing
recent Financial Sector Assessment Program recommendations, in addition to implementing Basel III
norms and the new banking law. An important further step should be to finalize the new central bank
law in order to enhance its independence and extend its supervisory and resolution powers. Preparations
for a more flexible exchange rate regime, which will help preserve competitiveness and the economy’s
ability to absorb economic shocks, are progressing well.
Annexe 3
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“Morocco’s external position has improved considerably, owing mainly to strong policies, rising
exports in newly developed sectors, lower oil prices, and robust FDI, with reserves reaching a
comfortable level. Structural reforms to improve the business climate and enhance competitiveness
continue to be a priority in order to build on those gains. The implementation of the National Strategy
for Employment will help address constraints in the labor market and reduce unemployment, especially
among the youth.
“The arrangement under the Fund’s Precautionary and Liquidity Line (PLL) remains on track. The PLL,
which the authorities continue to treat as precautionary, has provided Morocco with insurance against
external risks while supporting the authorities’ economic strategy.”