Document of

The World Bank

FORonMCaL USE ONLY

IRkt No. P-41710--MOR

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL RANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A PROPOSED LOAN

IN AN AMOUNT EQUIVALENT TO US$46.0 MILLION

TO THE KINGDOM OF MOROCCO

FOR A

LARGE SCALE IRRIGATION IMPROVEMENT PROJECT

January 23, 1986

ITh doemet F a refktsi dIsbNdmmd nay he ted by recipients sly in the peffn.ne oftheir SM Isi. Id co"bmab amy n otherwise be diosed whout Wedd Bank ath.kulzadm.

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CURRENCY EQUIVALENTS

Currency Unit = Di.rham (DH)I Dirham (DH) = US$ 0.101 US Dollar (US$) = DH 10.0

FISCAL YEAR

January 1 - December 31

GLOSSARY OF ABBREVIATIONS

ASAL Agricultural Sector Adjustment Loan

CMV ORMVAs' Local Development Centers(Centre de mise en valeur)

CNCA National Bank for Agricultural Credit(Banque nationale de credit agricole)

DEAR MARA's Central Department of Training and Research(Direction de 1'enseignement agricole et de la recherche)

DER kMURA's Central Department for Rural Construction(Direction de l'quipement rural)

DPA MARA's Provincial Directorate for Agriculture(Direction provinciale de I'agriculture)

DPAE MARA's Central Department for Economic Affairs(Direction des affaires economiques)

DPV MARA's Central Department of Crop Production(Direction de la Production Vegetale)

FERTIMA: National Fertilizer Marketing Company(Sociit6 Marocaine des fertilisants)

1NRA National Institute for Agricultural Research(Institut national de la recherche agronomique)

LSI : Large Scale Irrigation

MARA : Ministry of Agriculture and Agrarian Reform(Ministere de ['agriculture et de la reforme agraire)

ORMVAs : Regional Agricultural Development Offices(Offices regionaux de mise en valeur agricoLe)

FOR OFFICIAL USE ONLY

K[NGDOM OF MOROCCO

LARGE SCALE IRRIGATION IMPROVEMENT PROJECT

LOAN AND PROJECT SUMMARY

Borrower: Kingdom of Morocco..

Beneficiaries: Nine Regional Agricultural Development Agencies (ORMVAs)

Amount: US$46.0 million equivalent

Terms: 20 years, including 5 years of grace, at the standard variableinterest rate.

Project The proposed project would help implement and complement theDescription: reform package agreed upon under the First Agricultural Sector

Adjustment Loan (2590-MOR) with regard to the irrigationsubsector. The project's objectives are to provide for greaterefficiency in the use of existing resources in the 400,000 haof large scale irrigated lands (LSI) and improve the financialperformance of the nine ORMVAs in charge of LSI schemes toreduce their dependance on the Government's budget. Theproject would consist of (a) rehabilitation or upgrading ofexisting irrigation infrastructure serving about 150,000 ha;(b) provision of equipment, vehicles and houses for O&Moperations; (c) setting up an efficient management informationsystem and improved planning, financial, accounting andoperating procedures; (d) technical assistance; and (e) on-farmdevelopment. Because of the important institutionaldevelopment and policy reform component of the project, the netflow of benefits is expected to be maintained beyond theproject execution period. The risks of slower projectimplementation and production response and of lowerrehabilitation cost savings are manageable given thegovernment's commitment to the project and its implicitreforms, which has been demonstrated by actions alreadyinitiated under the ASAL.

'This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Estimated Proiect Costs: a/ Local Foreign Total-(US$ million) --

Civil works 17.7 11.1 28.8Equipment and vehicles 7.3 10.3 17.6Maintenance contracts 0.7 0.5 1.2Technical assistance, studies and training 1.1 2.8 3.9On-farm investments 3.1 2.8 5.9Incremental recurrent costs 4.8 3.6 8.4

Total Base Costs 34.7 31.1 65.8

Physical contingencies 3.9 3.3 '.2Price contingencies 10.7 8.8 19.5

Grand Total 49.3 43.2 92.5

Total Excluding On-farm Investments 45.2 39.2 84.4

Financing Plan: Local Foreign Total=- -CUS$ million) --

World Bank 6.8 39.2 46.0Government 18.9 - 18.9Beneficiaries 2.4 - 2.4CNCA 1.7 4.0 5.7

Net Project Costs 29.8 43.2 73.0Taxes and Duties 19.5 - 19.5Total Project Costs 49.3 43.2 92.5

Estimated Disbursements:

Bank FY 1987 1988 1989 1990 1991 1992 1993---- (US$ million)---

Annual 1.9 4.1 7.7 L0.0 10.7 6.5 5.1Cumulative 1.9 6.0 13.7 23.7 34.4 40.9 46.0

Economic Rate of Return: 26%

Staff Appraisal Report: No. 5846-MOR, dated January 22, 1986.

Map No.: IBRD 19063

a! Includes US$19.5 million of taxes and duties.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT A-ND RECOMMENDATION OF THE PRESIDENT OF THE IBRDTO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN

[N AN AMOUNT EQUIVALENT TO US$46 MILLIONTO THE KINGDOM OF MOROCCO

FOR A LARGE SCALE IRRGATION IMPROVEMENT PROJECT

1. I submit the following report and recommendation on a proposed loanto the Kingdom of Mcrocco for the equivalent of US$46.0 million to helpfinance a Large .,cale Irrigation Improvement project. The loan would have aterm of 20 vears, including 5 years of grace, at the standard variableinterest rate.

PART I- THE ECONOMY

2. An economic report, entitled "Morocco: Priorities for Public Sectorinvestment (1981-85)" (No. 4156-MOR), was issued on June 15, 1983. Anothereconomic report entitled "Morocco: Industrial Incentives and Export Promotion"(No. 4893-MOR) was distributed to the Board on January 11, 1984. An economicmission on financial intermediation was in Morocco in September 1983 and itsreport (No. 4957-MOR) was issued on December 12, 1984. The following sectionreflects the findings of an economic updating mission that went to Morocco inJuly 1984 to prepare a paper, entitled "Morocco: Medium-term AdjustmentPolicies and Prospects", for presentation to a meeting of the ConsultativeGroup for Mlorocco in Paris on January 9-11, 1985. Data and analysis have beenupdated to reflect the findings of the ITPA II appraisal mission that visitedMorocco in March 1985. Country data are given in Annex I

Introduction

3. During nearly two decades after Indepenidence in 1956, Moroccofollowed relativeLy conservative economic policies. Cautious externalborrowings supplemented a weak savings effort to permit onlv a slow rise ininvestment, so that the economy grew only at about 4 percent per annum.Primary products - principally phosphates - accounted for 90 percent ofmerchandise exports. During the mid-1970s, after a sudden increase inphosphate prices, Morocco launched an ambitious pubLic investment programwhich boosted GDP growth to 7.5 percent annually during the period 1973-77.The phosphate boom, however, began subsiding as early as mid-1975. Meanwhile,the petroleum import bill, which had quadruipled in 1974, continued to placeconsiderable pressure on the balance of payments, and the current accountdeficit reached 16.5 percent of GDP in 1977. Domestically, the large publicinvestment program and increased defense expenditures in the Western Saharacaused the treasury deficit to rise to 15.8 percent of GDP in L977. Moroccoresorted to considerable foreign borrowings to finance these deficits.

4. To redress the rapidly deteriorating financial situation, theMoroccan Government introduced a three-year stabilization program in 1978centered on reductions in public sector outlays and stricter import controls.These reforms were only partially successful. They did little to stimulateexports. The exchange rate was kept overvalued and trade barriers wereraised. They did not adequately tackle the excessive budgetary exposure andmade inadequate attempts to increase the efficiency of resource use. Theagricultural sector failed to grow, while value-added in manufacturingdeclined. Meanwhile, public investment was not restrained; a number ofcostly, poorly-targetted social programs were expanded and investment ininfrastructure was undertaken often well ahead of need. Efforts to stabilizethe economy were compromised by severe external shocks - most notably the 1979oil price increase, the rise in international interest rates, theinternational recession which reduced phosphate earnings and workers'remittances, and the prolonged drought. Continued internal pressure toprovide social services and affordable basic foodstuffs to a rapidly growingpopulation put considerable strains on a budget already stretched by the needto finance expenditures in the Sahara. The 1981-85 Development Plan aimed atan ambitious 6.5 percent per annum growth rate in GDP. Notwithstanding thedifficulties confronting the economy, Morocco did not appear willing tointroduce a comprehensive program of policy measures which could haveconfronted the economic crisis. The sthortcomings in the adjustmentperformance caused the IMF to convert a three-year EFF into a one-year StandBy Arrangement in 1982 and prevented the Bank frum proceeding with a SAL atthat time.

Recent Economic Developments

5. By 1983 it had become clear that the Government's room to maneuverwas becoming very restricted by debt service payment requirements. In 1982external public long-term debt (excluding military debt) had risen to abouttwo-thirds of GDP and 235 percent of exports of goods and services while thedebt service ratio reached 35 percent. Morocco was confronted with theprospect of a very large external payments gap for 1983. With exchangereserves virtually depleted and debt service rising, the Government imposedemergency import controls and budgetary cutbacks in early 1983. In November1983 the Government entered into an 18-month standby agreement with the IMF(SDR 300 million, or 98 percent of quota) supporting a stabiliLztion programwhich included fiscal and credit restraints and a flexible exchange ratepolicy. Shortly thereafter, official creditors agreed to reschedule externaldebt interest and principal payments coming due between September 1, 1983 andDecember 1984, as well as arrears as of August 31. 1983. Commercial bankcreditors agreed in principle to provide comparable relief on amortization.The total amount of debt relief obtained in 1983-84 under these agreements wasestimated at more than $2 billion (including $575 milLion of relief onmilitary debt). In November 1983, a Donors' meeting sponsored by the IMF,generated pledges of about $500 million of exceptional balance-of-paymentsassistance for 1983-84. To meet its fiscal targets the Government restrictedpublic service recruitment and salary increases, raised the prices ofelectricity, water, petroleum products and subsidized foodstuffs (by between

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17 percent and 60 percent), and cut capital outlays by one third. At the sametime, it began a significant adjustment effort supported by the Bank, with theJanuary 1984 Industrial and Trade Policy Adjustment Loan (ITPA I)(No. 2377-MOR), to improve its balance of payments situation with a package ofmeasures to restructure its trade regime. This included a reduction in importtaxation, an easing of quantitative restrictions, and a reduction in exportlicensing. Following a Financial Sector Study conducted by the Bank in 1984(4957-MOR), the Government extended these reforms to the Financial Sector withthe objective of raising domestic resources and improving resourceallocation. Greater flexibility was introduced in setting interest rates,measures were designed to increase competition among banks, and taxationreforms to benefit the financial sector were implemented.

6. As a result of the policies adopted since 1983, macroeconomicbalances improved. The economy's resource gap shrank from 13 percent of GDPin 1982 to 8 percent in 1984 (at constant L980 prices). This was achievedthrough a significant decline in the GDP share of consumption and investmentrelative to their high levels earlier in the 1980s. Meanwhile, import growthhas been restrained by appropriate demand management and by the depreciationof the exchange rate, while the share of exports 1nd gross domestic savingsincreased substantially. The Government budget deficit was reduced from 12-percent of GDP in 1982 to about 7 percent in 1984 (8 percent before takinginto account the impact of external debt rescheduling on interest payments).Although the improvement stemmed chiefly from a sharp reduction in investmentoutlays, there was also a significant slowing down in the rate of growth ofcurrent expenditures. As was to be expected, the rate of GDP growth has beenlow (a little over 2 percent p.a.), reflecting the impact of stabilizationpolicies on consumption and investment demand, along with the effect ofdrought on agricultural sector incomes in both 1983 and 1984. A good harvestis expected to help boost the growth rate to about 4 percent in 1985.

7. The current account of the balance of payments improved considerably,reflecting both the better resource balance of the economy and the impact ofthe debt relief obtained by Morocco from its official creditors on interestand military debt service payments. In 1983, the external current accountdeficit was reduced by half, from $1-9 billion and 12.7 percent of GDP in 1982to $873 million and 6.6 percent of GDP. The balance subsequently worsened in1984, particularly in relation to GDP, but still remained under $1 billion.In both 1983 and 1984, about half of the roughl.y $1 billion improvement in thecurrent account in relation to 1982 was attributable to debt relief. I' Thenet inflow of public medium and long-term capital (including grants) hasdeclined sharply from about $1.5 billion in 1982 to an average of only $400million during 1983-1984- In 1985, the net inflow rose to about $1 billion,including an exceptional $300 million grant from Saudi Arabia. Nevertheless,these inflows had to be supplemented by continued debt relief along the linesof the 1983-84 debt rescheduling, and demand management poLicies to keepimport growth under controL.

1/ Over $200 million in interest payments were rescheduled in each of the twoyears- In addition, the current account balance benefitted from militarydebt relief in the amount of $325 million in 1983 and $250 million in 1984.

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8. Further progress in reducing both external and fiscal imbalances isenvisaged under a new stand-by arrangement with the IMF approved onSeptember 13, 1985. Preliminary data indicate some slippage in fiscalperformance in the first half of 1985 and disappointing results on externaltrade, attributed essentially to weak demand in the phosphate market. Thesesuggest that stronger corrective measures would be needed to keep thestabilization program on course including, in particular, restraining currentexpenditures and reducing subsidies on foodstuffs and public services. Aformal debt rescheduling through the Paris Club covering maturities fromSeptember 1985 to February 1987 was agreed on September 17, 1985. Ninety-fivepercent of the total debt due were rescheduled along l1aes similar to thoseobtained under the 1983-84 debt relief arrangement. The 1983-84 reschedulingagreement between Morocco and the commercial banks was signed, after longdelays, on October 21, 1985. These recent developments should help Moroccoreach a balance in its external accounts for the next two years.

Medium Term Policies and Prospects

9. Since 1983, the Government's objective of achieving viable externaland fiscal positions along with satisfactory growth has been translated into acoherent medium-term strategy to restrain domestic absorption and increase theefficiency of resource throughout the economy. The principal elements ofMorocco's medium-term adjustment program involve a shift to outward-lookingtrade and exchange rate policies; far-reaching reforms of price, credit, taxand regulatory policies to remove institutional and other obstacles toefficient mobilization and use of resources in key productive sectors of theeconomy; considerable improvements in the efficiency of government investment;more cost-effective methods and better targetting of social programs; and athorough overhaul of the public enterprise sector.

10. The shift to an outward-oriented development strategy is thecornerstone of Morocco's medium-term adjustment program. Continuedadjustments in trade and exchange rate policies will be made to complete thereform of the overall incentive framework designed to accelerate export growthand reduce and rationalize import protection. Key instruments are to be aflexible exchange rate, the elimination of the special import tax (expected byJanuary 1987); a general reform of the tariff level and structure, with theobjective of reducing the overall level of protection to 25 percent throughdecreasing maximum duty rates and evening out the spread in tariff rateswithin and between sectors; and finally, a paasing out of quantitativerestrictions on imports. Domestic price controls, which were already removedin 1983-84 on many manufactured products, are planned to be fully eliminated,in parallel with progress in import liberalization. Remaining exportlicensing requirements will be abolished, with exporters to be entitled toimport all inputs on a duty-free basis.

ii. At the same time, appropriate sector strategies for the keyproductive sectors, particularly agriculture and industry, will be promoted.In industry, although the development of Morocco's potential for export ofphosphate fertilizers will continue to be an important objective, the

contribution of this highly capital-intensive sector to employment and to theestablishment of a broader industrial base through forward and backwardlinkages wilL remain limited. Moreover, a high degree of dependence onphosphate and phosphate fertilizer exports has made Morocco extremelyvulnerable to cyclical fluctuations in the volatile world phosphate market.For this reason, the industrial strategy must be based on the diversificationof manufactured exports, including processed foods and nontraditionalmanufactures where MorGcco may have a comparative advantage on world markets.In agriculture, Morocco needs to continue developing an appropriate package ofpolicies designed to overcome existing constraints to rational land usepatterns, to ensure that farmers have adequate incentives to improve farmingtechniques and use modern inputs, and to provide the support services neededto bring about these changes. A first Agricultural Sector Adjustment Loan(2590-MOR) in Line with such policy direction was extended by the Bank in June1985.

12. The low productivity of investment has been one of the major factorsin the poor performance of the Moroccan economy in the past ten years. Theallocation of capital and the efficiency of investment need to be improvedconsiderably both in the public and in the private sector. In the privatesector, the reform of the protection framework described above should go along way towards removing distortions in investment patterns. However, itwill also be necessary to review the bias in favor of capital-intensiveactivities inherent in the current investment incentive system, including taxexemptions and interest rate subsidies which artificially depress the cost ofcapital. In the public sector, increasing the efficiency of investment willrequire a considerable improvement of existing planning and budgetingmechanisms, including better procedures for setting investment priorities,strengthening of project preparation and monitoring capability, and placingmore emphasis on the economic evaluation of projects before they receiveGovernment sanction. Policy actions to improve the public investment andenterprise framework as well as continuing reform of trade policy and acomprehensive approach to financial sector reform are supported by the Bank'ssecond IndustriaL and Trade Policy Adjustment (ITPA II) loan (2604-MOR)approved in July 1985.

13. An exceptionally strong savings effort will be essential for thesuccess of Morocco's adjustment process. In the private sector financialsavings have been repressed in the past due to inadequate financial policiesand negative real interest rates. Savings are now being encouraged throughincreases in deposit rates and a program of financial sector reforms toimprove financial intermediation and develop the domestic money and capitalmarkets. But the most intense savings efforts in the next few years will haveto take place in the public sector, which continues to be a major source ofdissaving, particularly through the Government budget. In the medium term,sustained improvement in the mobilization and utilization of resources by thepublic sector will require fundamental reforms in a number of key areas,including social expenditure policies, taxation, and cost recovery andefficiency in the public enterprise sector. In the social sectors, wherecoverage oF the population is still inadequate, Government activities need tobe restructured so that basic services (particularly education and health) can

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be delivered more effectively but at substantially lower cost. Morecost-effective methods and better targeting will be prerequisites to a furtherbroadening of access to these services in the future. Food and othersubsidies also need to be targeted to the groups most in need rather thandirected to the general population.

14. Macroeconomic projections based on the Government's reform programsindicate that it may take the better part of the next ten years for Morocco tocomplete its adjustment process and become fully creditworthy. The growth ofthe economy is likely to be severeLy constrained in the early years of theadjustment process. However, as the restructuring measures designed topromote exports, improve resource use and increase domestic savings begin towork their effects through the economy, the external imbalance should lessen,and restraints on domestic demand could gradually be relaxed. Moreover, thegrowth of external demand expected to result from the trade liberalization andexport promotion policies, and the switch in the composition of domesticdemand from imported to domestic goods, fostered by the adjustment of relativeprices, should help mitigate the temporary negative impact of slower publicexpenditure growth on incomes and employment.

L5. The projections suggest that GDP growth is likely to remain low(below 3 percent p.a.) until 1990, accelerating thereafter. Domestic demandis expected to grow very slowly until 1990, reflecting the impact ofstabilization policies on both investment and consumption. Investment, whichhas been declining since 1978, should continue to fall in real terms and inrelation to GDP until about 1987, then rise somewhat until 1990, recoveringstrongly thereafter. Assuming that central government investment expenditureswould remain constant in real terms in the medium term, the adjustments wouldoccur primarily in the public enterpises and private sectors. Governmentconsumption, which had grown very rapidly until recently, is projected todecline marginally in real terms and to drop by 3 percentage points inrelation to GDP between 1985 and 1990. The growth of private consumption,which already slowed significantly in the early 1980s, would remain just belowthat of GDP in 1985-90, and accelerate only slightly in the 1990s.Restructuring policies should bring about an acceleration in the growth ofexports of goods and nonfactor services. The acceleration of export growthwould help sustain a modest recovery of imports, the overall trend of whichhas been downward since 1978. Imports, however, should rise much more slowlythan exports between 1985 and 1990, as a result of the demand restraint andexpenditure switching policies.

16. As a resu?t of the drop in the GDP share of both investment andCGnsumption, there should be a steady decline in the economy's resource gap,with a small surplus projected for 1990. Gross domestic savings are expectedto rise much faster than GDP throughout the period, initially as a result ofimproved savings mobilization by the public sector, and later reflectingcontinued substantial improvements in private savings as well. The marginalsavings rate with respect to GNP will need to be very high (about 50 percent)in 1985-90, as a necessary concomitant to reducing the external deficit; itshould slacken slightly thereafter. High domestic savings should enable the

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economy to finance the recovery of investment without recourse to externalsavings in1 the early 1990s. This will be essential, since, throughout theremainder of the 1980s, the balance of payments will remain under considerablepressure because of continuing high debt service payments. By the end of thedecade, reforms of the overall economic incentive framework and increasedefficiency of public investment should have raised the productivity of newinvestment considerably, and the ICOR should drop substantially from the highlevels prevailing in the early 1980s.

17. It is important to recognize that the implementation of thestabilization policies and measures for structural adjustment envisaged inthis scenario will entail some transitional social costs. With populationgrowth at about 2.5 percent p.a., GNP and consumption per capita, which havebeen essentially stagnant since 1980, are not likely to show much improvementin real terms until the end of the present decade. Stabilization policies andmeasures to increase efficiency will initially be reflected to some extent indepressed domestic demand, increased unemployment, and some decline in realincomes, particularly the real income of urban populations, Governmentemployees, and workers in less competitive industries. On the other hand, thereal income of farmers, who constitute by far the poorest segment of thepopulation, should rise as a result of increases in agricultural producerprices and improvements in support services and marketing institutions andinfrastructure. This will be particularly true of farmers in rainfed areas.The political and social implications of these welfare shifts are likely to besignificant, and to keep them manageable will be a major concern of theGovernment in the next few years. While the cost of not undertaking therequired economic adjustments would in any case be greater in the long run, itwill be important to minimize the negative short-term impact of theseadjustments on the poorest groups. After 1990, as a result of the reformsundertaken in the 1980s, the economy could return gradually to a higher growthpath without endangering external equilibrium. Per capita Levels of incomeand consumption could begin to rise again, and the restoration of economicdynamism would greatly improve Morocco's ability to deal with its seriousunemployment problem.

18. A steady improvement in Morocco's external payments position shouldresult from the acceleration of export growth relative to import growthanticipated in 1985-90. The economy's negative resource balance, whichaveraged more than $2 billion in 1980-82. and dropped to $1.2-1.3 billion in1983-84, is projected to decline steadily, and virtually disappear by 1989.Assuming that the growth of workers' remittances can be sustained at a modestpace, the current account should improve roughly in parallel with the overallresource balance and could reach approximate equilibrium around 1989.However, the overall balance of payments can be expected to continue to showlarge deficits because of the heavy principal repayments coming due on theexternal debt, including substantial repayments to the IMF. Because ofmounting debt service obligations, gross public long-term capital requirementsare projected to average close to US$2.5 billion annually during the period1985-90.

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19. It is clear, under these circumstances, that Morocco will continue torequire debt relief for several more years. The projections include theeffects of the recently concluded 1985-87 debt rescheduling agreement throughthe Paris Club, and assume debt relief from private creditors during 1985-87,essentially along the lines of the debt reschedulings obtained in1983-84.* Normal public long-term capital inflows could then beapproximately sufficient to cover the remaining financing requirements in1985-87 (about US$1.2 billion annually), assuming that new loan commitmentsfrom Moroccos official lenders can be maintained at their current rate (aboutUS$800 million a year). Recourse to commercial bank financing, outside ofthese guaranteed programs, is likely to remain constrained and overall privatecapital flows are expected to remain sporadic, at US$100-300 millionper annum, probably strongly conditioned on, if not directly tied to, speciflcadjustment programs (such as co-financing of the ITPA II and PERL operations)during this period.

20. For the years 1988-1991, Morocco is going to need around US$2 billionannually to meet its capital requirements. Providing that US$800-900 milliona year are forthcoming from official creditors; and assuming a reasonablerecovery of private source financing of about US$700 million a year, aroundUS$400 million still remain to be generated each year to cover the gap. WithBank and IMF transfers stretched to the limit, Morocco's remaining financingrequirements will have to come in the form of further debt relief, grants, orsome concessional assistance. Only beginning in 1992, with debt repaymentsfrom past borrowings and successive reschedulings starting to level off, couldequilibrium in the overall balance of payments appear assured on the basis ofnormal official capital inflows and a sustainable recourse to privatefinancing. If the envisaged external capital flows do not materialize, theGovernment will have to resort to severe corrective measures to finance itsresource gap.

21. In view of the continuing large capital inflows required in the nextfew years, the long-term external debt outstanding and disbursed wouldcontinue to rise rapidly until 1988, but would begin to stabilize thereafter.The ratio of debt outstanding and disbursed to exports of goods and services,which had risen to 260 percent in 1984, would start to decline, progressivelydropping to 175 percent by 1990 and 114 percent by 1995. In the absence ofdebt rescheduling, the long-term debt service ratio would have risen above50 percent of exports of goods and services in 1985 and 1986. With debtrelief obtained for the period 1985-87, on the other hand, the debt serviceratio could be kept manageable at 24-25 percent during the next few years.Assuming no further debt relief, it would rise sharply in L988, withrepayments on the 1983-84 rescheduled maturities (including military debt)falling due, but would then start declining gradually in the 1990s.

1/ About US$230 million of military debt service payments coming due eachyear until 1988 are assumed to be rescheduled along the same lines asother obligations.

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PART H - OTHER BANK GROUP OPERATIONS IN MOROCCO '

22. Bank lending to Morocco has supported 65 projects, financing a totalof $2,675.5 million (net of cancellations), of which $25 million from a Thirdwindow loan. IDA credits, totalling $45.2 millicn, have been made availablefor five projects. IFC investments have amounted to $104.7 million($59.9 million after cancellations, terminations, repayments and sales).Annex II contains a summary statement of Bank loans and IDA credits, and ofTFC investments, as of September 30, 1985.

23. Until recently, performance in project execution has beensatisfactory overall, although in some cases management problems have causeddelays in project implementation, and in others insufficient tariffadjustments have affected project entities' financial performance. However,during 1983, as budgetary constraints became more severe, projects relying onthe Government budget for a substantial part of financing have been seriouslydelayed because of inadequate budgetary allocations. The appreciation of thedollar vis-a-vis the dirham in recent years has reduced considerablyreimbursable expenses in dollar terms, thus lowering disbursements vis-a-visappraisal estimates. The ratio of disbursements to appraisal estimatesaveraged 43 percent as of September 30, 1985, low in comparison to othercountries in the region.

24. The objectives of Bank Group activities in Morocco are to support (a)investments and policy reforms aimed at structural adjustment andstrengthening the balance-of-payments; (b) measures to reduce the Treasurydeficit; and (c) efforts to redress poverty and improve income distribution,particularly through lowering the unit costs for the delivery of basicservices, in order to increase access by lower-income groups. Importantstructural reforms must be undertaken in the coming years, in order to returnto a path of reasonable economic growth compatible with a sustainable externalpayments position. A major objective of Bank economic and sector work is toprovide the analytical basis for the development of specific proposals forstructural reform, which in several cases is being supported by Bank lending.At Government's request, in addition to ongoing work on the public investmentprogram, the Bank is assisting in developing reform proposals relating to thepublic enterprises. Because severe budgetary constraints are likely topersist over the medium-term, projects now under preparation or consideration,like the proposed project, are timed and designed to be consistent with theinvestment strategy which aims to minimize their reliance on incrementalbudgetary funds and, if applicable, support Morocco's efforts to reform itspublic enterprises within the framework and to complement the agreedstructural reforms in various sectors.

1/ Part II is essentially the same as Part V in the Second Industrial andTrade Policy Adjustment loan (Report No. P-4075-MOR of May 6, 1985).

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25. Agriculture continues to represent an important sector in Banklending for Morocco. Past Bank lending has primarily supported ruraldevelopment and irrigation projects focusing on particular geographicalregions, in parallel with successful series of agricultural credit projects.There are no major covenants in default. Bank's operations in those fieldswill continue at a pace consistent witb the country's investment capacitywhile paying special attention to maximizing non-budgetary financing andimproving cost recovery. At present increased attention is being given toagricultural support services at the national level, which are essential forbackstopping regional development projects. In parallel, the Bank has helpedthe Moroccan authorities to review the sector policy framework and toformulate its medium-term adjustment program covering investment strategy,pricing and incentive policy and role of the public sector. The recentlyapproved Agricultural Sector loan was in support of a first phase of such asector adjustment program and is expected to be followed by similaroperations, as further specific measures to adjust the prices and incentivesframework are developed.

26. Energy and mining. The Government has given high priority toreducing the oil import bill, a major factor in the current account deficit,through development of domestic energy supplies. The Bank has supported thiseffort through loans for the exploration and appraisal of petroleum (primarilynatural gas) and oil shale resources as well as for power generation andtransmission and coal mining modernization and expansion. Future projectswould assist in the development of domestic energy supplies, including gas,and hydropower. Through these projects as well as in our sectoral policydialogue, efficiency in energy development and use would be promoted throughattention to pricing, cost recovery and management issues.

27. Bank lending for infrastructure and utilities has helped to build anumber of technically competent agencies in the fields of road transportation,electricity, water supply, housing finance, and community infrastructurefinance, as well as to expand the provision of essential services. Futureprojects will place greater emphasis on improving the productivity andefficiency of existing infrastructure through improved financial andmanagement performance. Mobilization of private and non-budgetary financingas well as improved cost recovery in these subsectors through tariffs shouldalso help reduce the Treasury deficit. In addition to continuing support forthe above-mentioned subsectors, projects are under preparation for railways,sewerage and telecommunications.

28. Industrial development in Morocco has been supported in the pastthrough strengthening the financial and institutional resources of the BanqueNationale de D6veloppement Economique (BNDE), the major source of industrialmedium-term credit. In addition, policy changes were introduced to widenaccess to credit by small-scale labor-intensive industries. Other projectsfocused on phosphate processing and cement production. The Bank's efforts arenow focused on the development and implementation of medium-term policyreforms aimed at encouraging exports and improving incentives to domesticproduction. The first phase of such reforms was supported by the Industrial

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and Trade Policy Adjustment (ITPA) loan of 1984 and was successfullyimplemented. Further stages of reform of trade policy, as well as acomprehensive reform of the financial sector, and policy actions on publicinvestments and pubLic enterprises are supported by the on-going SecondIndustrial and Trade Policy Adjustment Loan.

29. Education, health and urban development projects will increasinglyconcentrate on lowering unit costs in order to widen the access by low-incomegroups. Policy dialogue in these sectors continues to encourage the shiftaway from capital-intensive investments benefitting limited clientele and thedevelopment of more cost-effective delivery systems for basic services. Whileprevious Bank-financed projects have supported technical education, ruralprimary education and improved teacher training, these should be complementedby efforts to expand basic education and skill training, as well asrestructuring of the formal education system, which has represented a majordrain on the recurrent budget. A loan in support of this kind of reforms isnow being negotiated with Government. The recently approved first healthdevelopment project will test new health care delivery systems in order toimprove basic health services in rural areas. Finally, the experience ofprojects in urban upgrading will be continued and expanded, with increasedefforts to mobilize private financing in order to reduce budgetary costs.

PART m - THE AGRICULTURAL SECTORAND THE IRRIGATION SUBSECTOR

30. Of Morocco's 60 million ha only 7.7 million have soils and moisturesuitable for cropping, with another 20 million ha in semi-arid or mountainregions suitable only for grazing and forests. Of the cultivable land, about507 receives an erratic rainfall of under 400 mm, which can only be put undera relatively high risk, low value barley/fallow cropping system. Only about1.3 million ha are estimated to be irrigable economically. Fruits,vegetables, forage crops and industrial crops are grown under the morefavorable irrigated conditions; but cereals and pulses which dominate thecropping pattern on 807 of the land are mostly grown under rainfed conditionswhere cultivation practices remain, for the most part traditional. Given thehigh variability in rainfall, considerable efforts have been made to developirrigated agriculture.

31. The performance of the agricultural sector has been uneven.Following a period of solid growth in the sixties, when agriculture grew atmore than 3% p.a. and accounted for 25X of the total growth in GDP, Moroccanagriculture has since developed more slowly. During the seventies and earlyeighties, the sector's average annual growth rate, held back by successivedroughts which not only affected rainfed production but caused a seriousshortage of water in the irrigated areas, averaged only 1.27. among theslowest-growing relative to other middle income countries. Currently, theagriculture sector accounts for about 17% of GDP and provides about 40Z of allemployment compared with 28% of GDP and 55% employment in 1974. Since themid-seventies, Morocco has seen a continued widening of the "food gap", withits adverse consequences on the trade balance. Agricultural imports nowaccount for about 25% of the merchandise imports (approximately the same levelas petroleum imports) and agricultural exports have declined as a share of

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total exports. The agricultural trade balance has gone from a surplus up to1974 to a deficit of about US$200 million per year at present. The recentpoor performance of Moroccan agriculture, however, conceals highly contrastingtrends between the irrigation sub-sector and the rainfed sub-sector. Theprogress in use of improved farming techniques and production inputs forcommodities grown under irrigated conditions has been significant.

32. In response to the worsening macro-economic situation and recent poorperformance by the sector, the Government developed in 1984 a five-yearagricultural sector adjustment program which has been supported by the Bankthrough a Sector Adjustment Loan (2590-MOR) in June 1985. The program's primeobjectives are: (a) to restructure the public investment and expenditureprogram in agriculture towards quick maturing and high return investments;(b) to correct the prices and incentives framework to encourage economicallysound shifts in agricultural activities; (c) to strengthen the agriculturalsupport services offered by the Goverment while rationalizing the role of thepublic sector in provision of commercially viable services, and improving costrecovery in other services; and (d) to build up institutional capacity foragricultural policy planning and analysis.

Experience with past lending

33. Bank group lending for agriculture began in 1965, and to date 10projects have been completed and 10 projects are underway. They include sixirrigation projects, five agricultural credit projects, an agro-industries andflood control project, five rainfed agricultural development projects, anexport-oriented project, a Forestry Project, and an Agricultural SectorAdjustment Loan. Performance under these projects has generally beensatisfactory.

34. Performance under past irrigation projects has been good once initialproblems of land distribution and organizational delays in construction andprocurement of irrigation equipment were overcome. Inadequate cost recoverywas a major issue in the seventies, but improvements in cost recoverylegislation and sizeable increases in irrigation water and pumping chargessince 1980 are contributing to a satisfactory resolution. The projectperformance audit report (PPAR) for the Sebou I Project (Loan No. 643-MOR)stresses the project's success in institution building and in providinginfrastructure to achieve production increases in irrigated crops. It alsohighlights the importance of successful extension work, timely allocation offunds to O&M, and collection of water charges, as well as the need to completethe land reform programs before the start of irrigation works. The PPAR forthe Doukkala I Irrigation Project (Loan No. 1201-MOR) indicates that theproject was successfully completed with actual production and croppingintensity exceeding appraisal targets. The Doukkala II project(Loan 1416-MOR), to be completed in 1986, is expected to achieve a similarperformance. The PPAR of the Souss Groundwater Project (Loan No. 1123-MOR)stresses the successful Land consolidation of private freehold anddistribution of state and collectively owned land and the establishment ofservice cooperatives. It, however, warns against the neglect of operation andmaintenance caused by inadequate funding and lack of qualified staff. The

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proposed project would contribute to resolving the issues highlighted in theaudits of the completed projects by improving operation and maintenance,increasing ORMVAs' revenues for better funding of O&M, improving collection ofwater charges and reorganizing extension services.

The hrrgation Subsector

35. The total irrigated area has more than doubled over the last twentyyears and presently covers some 900,000 ha. This represents less than 70% ofthe country's potential for irrigation. The Large Scale Irrigation (LSI)schemes cover 400,000 ha or 45% of the total area and are concentrated in ninelarge schemes each controlled by one Regional Agricultural DevelopmentAuthority (ORMVA)'; a high proportion of investment resources andmanagerial talent has been concentrated in the past in these areas. Water isprovided in these schemes from twelve major storage reservoirs or fromtubewells. At present surface irrigation covers 80% of the LSI area andsprinkler irrigation 20X.

36. The Government introduced substantial changes in its irrigationdevelopment policy under the 1981-85 Plan. The previous expansionist andinterventionist policy has gradually shifted towards: (a) ensuring optimaluse ot water through rehabilitation of existing schemes and more efficientoperation and maintenance; (b) allocating a larger share of investments forthe development of small- and medium-scale schemes because of their lowerdevelopment cost per hectare and their more rapid build-up of benefits;(c) favoring investments in those LSE areas which are served by existing dams;(d) increasing farmers' contribution to water management and to recovery of0&M and investment costs incurred by the Government; and (e) establishing moreeffective extension services to promote more appropriate cropping patterns,agricultural farming practices and water saving technologies. Theseobjectives are further pursued under the Agricultural Sector AdjustmentProgram, under which Government plans to: (a) reduce its administrative andfinancial controls over the ORMVAs to expedite and facilitate theiroperations; (b) establish a system of medium-term contracts b-tween theGovernment and each ORMVA; (c) improve the ORMVAs' financial autonomy byintroducing user charges to gradually recover the full cost of thosecommercial services provided by them, while transferring to the private sectoror cooperatives those services which are viable to them; and (d) improve costrecovery levels in order to reduce the total budgetary support to the ORMVAs.Measures to achieve these objectives would be taken under the proposed project.

Lssues

37. Operation and Maintenance has been long neglected because of higherpriority given to expansion of the schemes. Since 1980, however, improvementshave taken place through the creation of separate O&M units in most ORMVAs,appointment of skilled engineers and other technical personnel and the

11 The nine ORMVAs are: Loukkos in the high rainfall zone of the country,Moulouya and Gharb in the medium rainfall zone, and Doukkala, Tadla,Haouz, Souss, Tafilalet and Ouarzazate in the low rainfall zone (See Map).

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introduction of improved O&M methods. Budgetary constraints and expansion ofcomplex irrigation systems have limited the effect of such improvements.Matters requiring further attention are the following: (a) the need toestablish clear procedures for planning and budgeting well defined O&Mprograms; (b) preventive maintenance is often neglected in favor of emergencymaintenance thus increasing the need for rehabilitation; (c) insufficientqualified middle-level staff to operate and maintain the pumping stations andtubewells; d) aging O&M equipment of ORMUAs and communications deficiencies;and (e) insufficient efforts are made to ensure adequate maintenance ofon-farm irrigation systems as compared with maintenance of headworks anddistribution systems. The proposed project would help tackle these issues byrationalizing O&M organization and management, securing funds for O&M,providing adequate O&M equipment, training middle-level staff and encouragingthe farmers to play a role in O&M.

38. Exte-asion has been insufficient and not well organized or linked toresearch, particularly for the non-industrial crops. Insufficient number andtraining of agents, ambiguous lines of responsibility, loose supervision andlack of discipline account for most of the deficiencies. Government ispreparing a national plan to improve agricultural extension including changesin the field organizational structure, detailed work programs, increasedmobility and training of the extension staff and linkage with research. Theproposed project would support the reorganization of the extension of servicesof ORMVAs along the lines of the T&V system decided by Government under theASAL.

39. Research undertaken by ORMVAs has had little impact on production inthe irrigated areas. Lack of coordination of the ORMVAs research stationswith agricultural research organizations, and lack of focus of the workprograms of such stations on the farmers problems, together with inadequatetraining of the research staff and funds, are responsible for the inefficiencyof the ORMVAs' research programs. The proposed project would help reorganizethe research activities of the ORMVAs in line with the national plan forreorganization of agricultural research currently being prepared under theASAL.

40. Cropping patterns are determined by the Ministry of Agriculture andAgrarian Reform (MARA) for each perimeter on the basis of feasibility studieswhich were cdrried out in the seventies for most perimeters and not updateddespite important changes in the relative prices of products. Although onlysugar production has been closely monitored by ORMVAs in order to assuresufficient raw material for the sugar mills, the system has not led to optimalutilization of land. The proposed project would ensure that cropping patternsare reviewed to improve the crop mix and intensity of irrigation.

41. Irrigation cost recovery policy in Morocco is sound. It aims atrecovering, through water charges and a land betterment fee, the full cost ofO&M plus up to 40% of all investment costs attributable to irrigation. Tocarry out this policy water charges were doubled in 1980 and in 1984 increasedby a further 65%. A nation-wide formula for indexation was also adopted.Moreover, adequate pumping charges, where applicable, were introduced in 1980

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and updated in 1984, and an indexation formula based on power tariffs wasadopted. These actions need to be complemented by ensuring that the chargesare revised on the basis of the indexation formula by September 30 every year(thus eliminating the late issuance of ministerial orders to that effect) andintroducing legislation to charge for water distributed by ORMVAs fornon-agricultural purposes, which represent about 5Z of total waterdistributed. More important, however, is to improve the collection rate whichat present is about 43% of total amounts due. Under the ASAL the principle ofincreasing such rate to 90% by 1990 was accepted. The specific actionsrequired to achieve this would be supported under the proposed project.

Regional Agricultural Development Authorities (ORMVAs)

42. The Regional Agricultural Development Authorities (ORMVAs) arestate-owned enterprises with separate legal identity and financial autonomyresponsible for the development of irrigation, operation and maintenance ofirrigation schemes and promotion of crop and livestock production. Inpractice, however they have expanded considerably their operations byproviding a growing number of services to farmers in the irrigatedperimeters. Recently, government has decided to expand ORMVAs formaldevelopment responsibility to the rainfed areas surrounding their respectiveperimeters and new organizational charts together with ministerial ordersgoverning their reorganization will be issued shortly (para. 52). The mainproblems regarding ORMVA's operations and performance include: (a) theirorganization and management which is lacking strategic and operationalplanning capability, management information systems, financial audits, stafftraining programs and plhces over-emphasis on commercial services at theexpense of extension, research and O&M; (b) the administrative and technicalcontrol of ORMVAs by MARA which represents an obstacle to their operatingefficiency; (c) the financial control by the Ministry of Finance on an apriori basis from Rabat; and (d) the poor financial performance of all o2 themthat has resulted from low water charges until 1984, poor collection rate andlow contribution of beneficiaries to the cost of providing commercialservices. These factors have resulted in a deficit of DH 320 million in 1983for the nine ORMVAs, or about 40% of total government operating subsidies topublic enterprises.

PART IV - THE PROJECT

43. The proposed project was identified in 1984 and prepared by theGovernment with the assistance of the FAO/IBRD Cooperative Program. Projectappraisal took place in April 1985. Negotiations were heLd in Washington,D.C. on December 2-11, 1985; the Moroccan delegation was Led by Mr. Belkourafrom the office of the Minister of Economic Affairs and included Mr. OuladChrif, Director of the Central Department for Rural Construction (DER) in theMinistry of Agriculture. The main features of the project are outlined in theLoan and Project summary at the beginning of this report, and a SupplementaryProject Data Sheet, and Map No. IBRD 19063 are also attached. A StaffAppraisal Report (No. 5846-MOR, dated January 22, 1986) is being circulatedseparately.

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Project Objectives and Description

44. The project's overall objectives are to provide for greaterefficiency in the use of existing resources in the 400,000 ha of large scaleirrigated land and to improve the financial performance of the nine ORMVAs incharge of the LSI schemes to reduce their dependance on the Government'sbudget. These objectives are to be achieved through: (a) improvements in theuse of developed water resources to increase water availability by 25% inabout 150,000 ha; (b) improvements in O&M operations in all perimeters;(c) improvements in extension services and research; and (d) improvement ofactual cost recovery by increasing water charges collection rates.

45. The proposed project would be implemented over six years (mid 1986 tomid 1992) and would consist of: (a) an investment component includingrehabilitation or upgrading of existing infrastructures serving a total areaof 150,000 ha, improvement of O&M works over 400,000 ha through contracts withspecialized firms for complex tasks, purchase of O&M equipment, vehicles andconstruction of houses for key O&M staff; (b) technical assistance to ORMVAsfor management support and studies and training of ORMVAs and Governmentstaff; (c) an institutional and policy reform component which would providefor improvements in the organization, operation, management and financialperformance of ORMVAs, rationalization of their relations with the Government,improvement of recovery of water and service users charges, increased farmersparticipation in O&M, revision of cropping patterns, and help in the solutionof problems posed by the historical water rights and collectively-owned landin some of the perimeters; and (d) on-farm investments.

Costs and fnaancing

46. Total project costs, including $19.5 million of taxes and duties, areestimated at $92.5 million of which about $43.2 million in foreign exchange.Base costs are estimated in December 1985 prices. Physical contingencies havebeen included at 15% for civil works and 10% for equipment, vehicles,supplies, studies and technical assistance; these amount to $7.2 million or 8%of total project costs. Price contingencies have been calculated on the basisof projected annual price increases in local currency costs of 10% in 1986 and6% thereafter; for costs in foreign exchange the projected increases are 7% in1986 and 1987 and about 7.6% in 1998-90 and 4.5% thereafter; pricecontingencies amount to $19.0 million or 21% of total project costs.

47. The proposed $46 million loan would finance 100% of foreign exchangecosts and 23Z of local currency costs of the project (net of taxes andcredits), excluding on-farm investments which would be financed bybeneficiaries and CNCA, operating under its current lending policies ar.uprocedures, and partly making use of Loan 2367-MOR of March 1984, and futureloans which are currently planned. Overall, external financing of the projectfrom this loan would represent 63% of total project costs, net of taxes. TheGovernment would finance the balance of the project costs, or $46.5 million.

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Procurement

48. Procurement arrangements are summarized in the table below.Equipment, vehicles and other goods, estimatetd to cost US$200,000 equivalentor more each and valued at a total of $20.6 m;llion would be awarded throughinternational competitive bidding (ICB). Qualifying domestic manufacturers ofequipment and vehicles would recei'-e preference in bid evaluation of 15Z orthe prevailing import duty, whichever is less. Contracts for equipment andvehicles estimated to cost less than $200,000 but not less than $10,000equivalent each and aggregating no more than US$4.8 million could be awardedon the basis of local competitive bidding (LCB) in accordance with proceduresacceptable to the Bank. Procurement of miscellaneous supplies costing lessthan US$10,000 equivalent each and aggregating no more than US$0.3 millionwould be made in small lots on the basis of local shopping with quotationsfrom at least three suppliers. Automatic water control equipment of aproprietary or specialized nature would be procured under contract awarded onthe basis of direct negotiations up to an aggregate amount of $0.8 million.Contracts for civil works, including irrigation, drainage and road networksand buildings, valued at a total of about US$36.0 million would be awardedthrough LCB procedures. Works for the placement of tertiary canals in Tadla(US$1.5 million), the rehabilitation of the road systems in Gharb and Moulouya(US$1.4 miLlion) desiltation of Tafilalet irrigation network and for the dunefixation in Tafilalet and Ouarzazate (US$1.6 million) would be carried out bythe corresponding rJRMVA under force account using equipment partly procuredunder the Project through ICB. These rehabilitation works are scatteredthroughout the perimeters and must be carried out without disruptingirrigation operations so that force account is the most efficient method ofprocurement. Contracts for training, studies and technical assistance wouldbe awarded in accordance with Bank guidelines on consultants. All biddingdocuments and contract awards greater than (a) US$300,000 for civil works and(b) US$200,000 for goods and (c) regardless of price for automatic watercontrol and data processing equipment and the first two contracts awarded byeach ORMVA would require the Bank's prior approval.

49. Local competitive bidding procedures are generally consistent withthe need for economy and efficiency in the execution of the project. Thereare, however, a few procedures which are inconsistent with Bank procurementguidelines and others which require clarification. During negotiations,agreement was reached regarding the changes needed to make the proceduresacceptable to the Bank, and assurances that such changes take place wereobtained.

Disbursements

50. The proposed loan would be disbursed over a period of seven years,consistent with the historical disbursement profiles for irrigation projectsin Morocco. It would be disbursed as follows: 65Z of total expenditures forcivil works, 65Z of local and lOOZ of foreign expenditures for equipment,vehicles and materials, and 100% of total expenditures for training, technicalassistance, studies and maintenance contracts. Disbursement requests will be

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- ------ US$ million----Procurement Methods Total

Proiect element ICB LCB Other N.A Cost

Civil Works - 36.0 4.5 - 40.5

(23.3) (1.8) (25.1)Equipment and Vehicles 19.0 4.5 1.L - 24.6

(12.6) (2.7) (0.7) (16.0)

Maintenance Contracts 1.6 - - - 1.6

(1.3) (1.3)

Technical Assistance, Studies - - 5.2 - 5.2

and Training (3.6) (3.6)

Incremental Operation Costs - - - 12.5 12.5

On-farm Investments - - - 8.1 8.1

TOTAL 20.6 40.5 10.8 20.6 92.5(13.9) (26.0) (6.1) (-) (46.0)

a/ Figures in parenthesis are the respective amounts financed by the proposedBank loan.

fully documented except for works done under force account and servicesprovided under contracts of less than $100,000 for civil works and $50,000 forgoods where statements of expenses will suffice. Supporting documentationwill be kept by the implementing agency and will be available for inspectionby Bank supervision missions and external auditors. Total amount of the loandisbursed on the basis of statement of expenditures would not exceed$5.5 million. Retroactive financing of goods and consultant services incurredafter June 1, 1985 for an amount of up to $500,000 is being proposed. To

* contribute to the efficient and timely implementation of the project, arevolving fund of up to $2.5 million would be established in a special accountat the Bank of Morocco- This fund would be used to pay the Bank's share ofeligible expenditures and the Bank would replenish the fund upon receipt of

* satisfactory evidence that expenditures paid were eligible for financing outof the fund.

Project implementation

51. The project would be implemented over a period of six years by theORMVAs in their respective areas except for the studies on farmerscooperatives and on the environment, training of MARA staff and provision ofrelated equipment and vehicles which would be carried out by MARA, and thetraining of financial controllers of the ORMUAs which would be carried out bythe Ministry of Finance. CNCA would provide credit for financing on-farminvestments. 80% of detailed designs and bidding documents are completed andthe rest is expected-for completion by June 1986. Sufficient capable staff tocarry out the project is currently available in the ORMVAs. Terms ofreference and job descriptions for major technical assistance and trainingitems are available; a draft program contract was prepared prior to appraisal.

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52. The project includes four components of interest to all ORMVAs.These are: (a) training; (b) planning, management information systems andcomputer use; (c) operation and maintenance; and (d) cropping patterns. Toensure adequate coordination among ORMVAs and between ORMVAs and MARA, fourcoordinating units would be created in Central Directorate of MARA tocoordinate each component. Creation of these units would be a condition ofloan effectiveness. Other conditions of loan effectiveness are that asatisfactory organization for each ORMVA is established by Government (para.42) and that satisfactory arrangements have been concluded between Governmentand CNCA for the financing of on-farm investments under the project.

53. Overall coordination of project implementation and institutionaldevelopment would be carried out at the national level by a ProjectCoordination Committee, which was created on November 28, 1985 for thatpurpose. This committee would oversee progress in project implementation andinstitutional and policy reforms, and resolve problems involving differentGovernment departments. This conmittee would be chaired by the Minister ofAgriculture and include ORMVAs' directors, the concerned MARA's centraldirectors, and representatives of the Ministries of Finance and Interior andother interested ministries.

Institutional Development and policy reforms

54. The component of institutional development and policy reform of theproposed project addresses the problems identified in the subsector and in theORMVAs (paras. 37 through 42). As mentioned earlier in the report, neglectedO&M has been pervasive throughout 'he irrigated perimeters. Under theproject, O&M services would be established in the ORMVAs of Ouarzazate andTafilalet, and the "bureau technique des irrigations" of all ORMVAs would bemade responsible for planning, monitoring and evaluating ORMVAs and farmers'performance in water use and system operation and maintenance. This wouldinclude establishing operating procedures, and programs for preventivemaintenance of irrigation, drainage and road networks as well as operation ofpumping stations. Assurances were obtained during negotiations that these O&Mservices and planning units are in place by December 31, 1986.

55. For the reasons pointed out in para. 38, the organization ofextension services of each ORMVA would be modified to: ( a) include a fulldepartment at headquarters in charge of extension services and structure suchdivision along the T&V system model, and (b) assign an extension coordinatorat each field subdivision to monitor extension staff in the ORMVAs developmentcenters. On the operational side, extension work would be separated fromcommercial activities and, to the extent possible, from administrativeduties. Each year extension agents will attend a two-week training session onspecific subjects and in addition there would be one or two-day briefingsessions per month. During negotiations assurances were obtained that the newextension system is in place not later than June 30, 1987, and that adequatestaffing levels be reached in at least one sub-division in each ORMVA by June30, 1988. The timetable for completion of staffing in the remainder of theORMVA areas would be established at the time of the mid-term review (para. 63)based on the experience gained. To improve coordination with research

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activities (para. 38 aad 39) assurances were obtained that each ORMVA wouldprepare by June 30, 1987, a suitable three-year research program (1988-1990)and that an agreement would be signed between appropriate researchorganizations and each ORMVA before December 31, 1987 to carry out suchprogram.

56. As part of the reorganization of the ORMVAs introduced under theproject, they would start to divest the commercial services they provide tofarmers. This would be done gradually so as to avoid the risk of declines incrop production and only when alternative delivery mechanisms exist or arelikely to be created in the areas concerned. To that effect MARA has issued acircular to all ORMVAs (except the remote ones in Ouarzazate and Tafilalet)enabling them to transfer over a three-year period input services to theprivate sector or farmer cooperatives and instructing them to cease over thesame period commercial services in which the private sector has beenprogressively involved, i.e. farm machinery services, animal breeding, poultryproduction and veterinary services (other than prophylactic). Furthermore,during negotiations assurances were obtained that before August 31, 1986,Government would submit to the Bank a specific program of actions for each ofthese ORMVAs to divest the input or commercial services provided to fain.ers bySeptember 1989 at the latest, except for the farm machinery services providedby the Loukkos and Gharb ORMVAs which will cease in 1991.

57. A comprehensive set of measures to improve ORMVAs management isforeseen under the proposed project. These include the introduction of amanagement information system (MIS) based on the restructuring of the ORMVAsaccounting system and budgetary procedures and the introduction of an internalsystem of performance control and input-output system; the strengthening ofthe planning activities, the adoption of external audit; and the introductionof systematic staff training for ORMVAs and their supervisory bodies. Thesenew arrangements wouljd be first carried out in the Doukkala, Gharb, Loukkosand Tadla and then expanded to the other ORMVAs. Assurances were obtainedthat the ORMUAs and Government will follow a mutually agreed timetable ofactions to gradually introduce such reforms in all ORMVAs by end 1990.

58. Relations between Government and ORMVAs would be rationalized throughthe adoption of program contracts (PC) which would be first implemented on apilot basis with the Doukkala ORMVA, starting in 1987, and then expanded toall other ORMVAs. The PC would be designed to facilitate the implementationof an action plan, prepared for each ORMVA and reviewed by the Bank, whichwould set forth ORMVA's development objectives, activities to achieve theseobjectives, financial and other resources for these activities, operating andfinancial performance targets measured by specific and agreed upon indicators,and methods of financial and administrative control to be exercised by theGovernment over the ORMVA. The action plans would be subject to systematicannual review by the Project Coordination Committee based on previous yearperformance and new circumstances. Agreement to introduce the first PC forthe Doukkala ORMVA was obtained under the ASAL. During negotiations of theproposed loan, confirmation was obtained that a PC for Doukkala ORMVA would besigned by December 31, 1986. In addition, assurances were obtained that:(a) draft PCs for three other ORMVAs (Gharb, Loukkos and Tadla) will be signedby end 1988; and (b) PCs for the remaining ORMVAs will be signed byDecember 31, 1989.

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59. In certain areas of the country, irrigation has been practiced forcenturies before the Government constructed modern systems. In such areastraditional grouping of users took place and strong cooperation existed amongthem for distributing water and maintaining the system. Such cooperation hassomewhat declined as reliance on Government has increased. Under the projectsuch farmers' participation in the operation and maintenance of the systems isto be encouraged by the promotion of water users' associations in those ORMVAswith irrigation tradition (Ouarzazate, Tafilalet and Haouz) and a pilotexperience with water users' associations in one other ORMVA (Tadla). Shouldthis experience prove positive, such associations would be promoted in theother ORMVAs.

60. Collective ownership of land in LSI areas, and particularly in theGharb area, leads to less than optimal use of land. Of the 150,000 ha to beret.ibilitated under the project about 5,600 ha or 4Z is owned by tenancy incommon in the Gharb. This land is often farmed by individuals whose ownershiprights to the land are not established and who are disinclined to intensifyproduction and pay water charges. Under the proposed project, a strategywould be developed by September 30, 1986 to increase productivity of theselands. A committee composed of Gharb ORMVA, MARA, and the Ministry ofInterior representatives would be created by September 30, 1986, to monitorthe carrying out of such a strategy. Assurances to this effect were obtainedat negotiations.

61. As discussed in para. 40 above, Government has now recognized theneed to revise cropping patterns. These would now be updated and then revisedas necessary. Each ORMVA would carry out a separate study to update croppingpatterns in its area. Assurances were obtained at negotiations that (a) bySeptember 1, 1987, ORMVAs would complete the studies for the determination ofnew cropping patterns; and (b) after exchange of views with the Bank on theconclusions of these studies, MARA would establish appropriate croppingpatterns not later than September 30, 1987, and thereafter review them atleast once every three years. Central to any assessment of cropping patternsis the role that sugar beets and cane would play in future land use in theirrigated areas. The major problem of sugar is the risk of an inefficientallocation of resources, including land, to sugar production in view of priceprospects for this commodity. Under the Agricultural Price and IncentiveStudy being carried out under Bank supervision, the Government sugardevelopment policy including the identification of areas of relativecomparative advantages will be reviewed and appropriate recommendations areexpected to be formulated under the second agricultural sector adjustment loan(FY87) to phase out those areas which prove not to be economical for sugarbeet and cane production. The studies on the new cropping paterns woulddetermine the most viable alternative crops that would substitute for sugarcrops in the areas where these would be phased out.

62. Considerable progress has been made in setting the basis for animproved cost recovery record. A joint circular signed by the Ministers ofAgriculture and rnterior was issued in November 1985, instructing the ORMVAregional committees to take actions to ensure satisfactory progress in aprogram to increase water charge collections from 43Z in 1983 to 90X in 1989.

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Assurances were obtained at negotiations that (a) the Government wouldestablish, before December 31, 1986, adequately staffed recovery units inHaouz and Souss-Massa, the only ORMVAs where such units are still lacking;(b) by December 31, 1986, take all action required to determine and ensureprompt collection of water charges and betterment taxes owed to Haouz ORMVA byall irrigation beneficiaries; (c) water charges would be revised in Septemberof every year for each ORMVA perimeter starting in September 1986 on the basisof established indexation formulas; (d) water charges in Moulouya would beincreased to take into account the investment and O&M costs of the pumpingstation to be constructed under the Project; the schedule for adjusted watercharges would be prepared and submitted to the Bank by the Government byDecember 31, 1989; (e) the Government would carry out a study to develop anappropriate system of water charges allocated by ORMVAs for non-agriculturaluse and furnish the results of the studies to the Bank by December 31, 1987;and (f) the annual statement of recovery of arrears for each ORMVA would bemade available by the Government not later than June 30 of each year, startingin 1987.

Monitoring, Evaluation Reportig, Accounts and Audit

63. The Directorate of Rural Construction (DER) of MARA would beresponsible for overall monitoring of Project implementation, including itsphysical, institutional and policy components. It would also be responsiblefor monitoring preparation by the ORMVAs of semi-annual progress reports andsynthesizing them in an overall annual report to be submitted to the Bank. Inaddition, MARA's department for Economic Affairs (DPAE) would prepare annualreports to be submitted to the Bank on the implementation of ORMVAs'medium-term development plans, program contracts and annual financialresults. DER would also coordinate preparation by ORMVAs and DPAE of aproject completion report within six months of the loan closing date.

64. Because of the heavy emphasis -c the Project on institutional andpolicy reforms, assurances were obtaineci that the Moroccan Government and theBank would carry out a mid-term review of tre Project implementation beforeJune 30, 1989, three years after the Project's start. This would involvereviewing the physical implementation of the Project and the progressaccomplished in meeting its institutional and policy objectives. As an inputto this review, DER would prepare, on behalf of MARA and in agreement with theMinistries of Finance and Interior, an overall report on progress, issues andrecommendations based on ORMVAs' reports.

65. To prepare for a shift from the present a priori financial control,external audits of the project and ORMVA accounts by independent auditorswould be introduced under the Project. Assurances were obtained atnegotiations that: (a) the Borrower would maintain separate accounts for theProject, and that these accounts would be audited by independent auditorsacceptable to the Bank and their reports sent to the Bank within 6 months ofthe end of each fiscal year; and (b) ORMVA's would maintain accounts toreflect their operations and financial condition and these accounts andORMUAs' annual Einancial statements would be audited by independent auditorsacceptable to the bank and the auditors' reports, including an assessment ofORMVAs' management efficiency, would be sent to the Bank within six months ofthe end of each fiscal year.

- 23 -

Impact on the Government Budget

66. The measures proposed under the Project on cost recovery for ORMVA'sservices and irrigation water, along with efficiency gains in the delivery ofthose services in the irrigated areas would have a highly beneficial impact onthe ORMVA's financial situation, and thus reduce Government subsidies. Themajor impact would come from the expected increase in water charge collectionrates from 47% in 1984 to 90% in L990 (and 93% in 1994). Action on improvedcollection on water charges and cost recovery for services would provide forincreased revenues, but this would be offset significantly by increasedmaintenance expenditures. The incremental cash flow of the Offices due to theproject would however be slightly positive, i.e. from an estimatedDH 42.3 million in 1986, to DH 45.6 million in 1990. Since maintenanceexpenditures would stabilize after 1990, the Office's cash flow would increaseto DH 88.5 million by 1994 (in constant 1984 Dirhams). By 1994, five out ofnine ORMVAs, covering 80% of the irrigated areas, would pass beyond thebreakeven point in charging for services rendered, and globally net revenueswould more than cover costs by 1994. However, in the case of the smallertraditional schemes covering less than 202 of the irrigated areas, revenuesare not expected to completely cover costs by 1994 because of difficulties inresolving traditional water rights. After the investment phase (1986-90),during which the Government budget would accumulate deficits ofDH 27.5 million, the Project would have a positive impact on Government'sfinances from 1991 onwards, with net annual surpluses ranging (in 1990 prices)from DH 11.4 million in 1991 to DH 120.0 million in 2005 (year 20 of theProject). The average annual surplus would amount to about DH 64.8 million.

Justification

67. The direct quantifiable benefits of the proposed project would mainlyarise from: (a) an increase in agricultural and livestock production causedby increased availability of water; and (b) cost savings in repeatedrehabilitation as a result of more efficient operation and maintenance. Otherimportant benefits of the project are the direct foreign exchange savings thatit will generate and the positive impact of the improved financial performanceof ORMVAs in the Government budget. Annual foreign exchange savings due tothe project are estimated at $18.4 million in 1985 prices at full developmentand the need for overall operating subsidies to ORMVAs exceeding $300 millionper year from the Government budget would be eliminated. The project woulddirectly benefit 46,500 farm families (or-about 256,000 people) in the projectareas. Employment on the benefitting farms would increase by about3.5 million man-days, which is equivalent to the creation of 14,000 full-timeon-farm jobs, of which 80% would be hired labor and 20% additional familylabor.

68. The economic rate of return (EER) is estimated at 26%; the NetPresent Value (NPV), at the opportunity cost of capital of 12X, is estimatedat DH 1,263 million. The innovative nature of the project design and thepressure on the management of ORMUAs created by the expected reorganizationmay bring implementation delays; also slower response from the private sectorto divestiture by ORMVAs of input distribution and other commercial services

- 24 -

may slow down production increases. However, these risks are minimized by thedemonstrated priority of the project in Government plans and careful design ofproject with full participation of Government and ORMVAs. Sensitivityanalysis to assess the impact of adverse risks has been carried out and showsthat production benefits and rehabilitation cost savings would have to fall44% to reduce the EER to 12%, the assumed opportunity cost of capital; on thecost side the analysis shows that project costs would have to increase by 79%to threaten the economic viability of the project.

69. The project does not pose unusual environmental hazards. Rather, theproject would have a positive effect on the environment by reducing the riskof schistomatosis transmission in the areas where irrigation schemes will beimproved. The Tadla perimeter has been determined to be a high risk area forbilharzia, but remedial measures by the Ministry of Public Health are well inhand. No such effort has been made, however, to evaluate and control therisks of contamination of wells by river overspills during floods or the risksof pollution caused by the effluents of the sugar mills. To improve thissituation, assurances were obtained during negotiations that DER will conductin consultation with the ORMVAs by December 31, 1987 a baseline survey on thestatus of such environmental hazards in the LSI areas.

PART V - RECOMMENDATION

70. I am satisfied that the proposed loan would comply with the Articlesof Agreement of the Bank and recommend that the Executive Directors approvethe proposed loan.

Washington, D.C. A. W- ClausenJanuary 23, 1986 President

- 25 -

TA ELC 34 ANNEX I

mmccc - mcTAiL IDICATORS DATA 5 Page 1 of 7m cM REFCma Caou (uWRICTUD AERSSI

mIST (mmr mACUT urz ) lbl 1 1 _ MIDDLE 1 01 L0 IINCOM

19a sram m.n ESTITAI-b ** AFRICA & NO ET LAM. A *RICA CA

MM lIWSA SQ. MOXTOTAL 446.6 c 446.6 Ic 46.6 IcARICULTUML 192.J 200.1 209.2

mW M CAA (U$) . .. 760.0 113&.9 1875.9

-~~~Mw comuru alaM Chr1T(KILYRANS OF OIL EQU1'¶ NIT) 113.0 174.0 204.0 623.9 993.6

rOMAT. AimD YTL STATISTICPOPULATION.NID-?E CTiOUSANDS) 11626.0 14968.0 20S01.0URJAN POPULATION CZ OF TOTAL) 29.3 34.6 *2.6 49.0 67.7

POPULATION PtoJEcrroysPOPUIA.TIN IN na 2000 (HILL) 31.2SrATIOKNA POPULATION (HILL) 70.0POUlATItON HOHENM 2.0

POPULATIDO DENStTIPER SQ. Nh. 26.0 33.5 *6.6 37.3 48.0PER SQ. XI. ACRI. LAND 60.3 74.8 96.9 470.1 91.1

POPULATION ACE STRUCURE (2)0-14 YRS 44.8 47.5 6-9 43.S 38.5

15-64 YRS 52.5 4U.2 52.0 53.0 57.165 AND ABOVE 2.7 4.1 3.0 3.3 4.2

POPULATION CROW1H RATE (I)TOTAL 2.6 2.5 2.5 2.8 2.4URaN 3.7 4.2 4.1 4.4 3.6

CRUDE BIRTH RATe (PE THOUS) 50.3 47.5 39.7 40.0 30.9CUM DEATH RATE (PE TMOUS) 21.2 16.9 14.3 11.5 8.0GROSS REPRODUCTION RATE 3.5 3.5 2A. 2.3 Z.0

FPtLt PLANINGACCEPTORS. AUA (THOUS) .. 25.1 73.0 IdUSERS C( OF r1RRtCD WMEN) .. .. 26.0 21.4 45.3

FOOD AM NaTIno.ISDEX OF FOOD PtOD. PER WITA(1969-71-100) 99.0 9S.0 75.0 95.1 109.6

PER CAPITA SUPPLY OFCALOrIES CI OF RQUIREDENTS) 95.0 103.0 118.0 11.2 113.2PROTEINS (GlANS PEA DOY) 60.0 65.0 79.0 77.3 69.4

OF Wl1CH ANIMAL AND PULSE i1.o 13.0 14.0 /a 17.8 34.2

C.HILD (AGES 1-4) DEATH RATE 37.6 26.4 12.0 12.8 4.6

LIFE EXPECT. AT BlXRT CTeARS) 46.7 50.6 52.2 57.8 646.INFANT mar. RArE (PER THOUS) 160.5 136.5 98.0 96.3 59.7

ACCESS TO SAFE WATEr (%POP)TrOAL 30.6 531.0 55.0 I4 67.2 65.3URBaN 58.7 92.0 100.0 7i 93.4 76.5

RURAL 19.0 28.0 25.0 7i 45.8 4".2

ACCESS TO EXCRETA DISPOSALCZ OF POPULATION)

TOTAL .- 29.0 .. 45.9 56.3UREAN . 75.0 .. 63.0 73.4

RURAL . 4.0 .. 2.6 25.5

POPULATION PER PHYSICIMA 9410.0 12790.0 10750.0 If 4331.0 1909.7POP. PER NURSItG PERSON .. 274 15301830.0 7; 1345.0 308.2POP. PER HOSPITAL SED

TOTAL 630.0 660.0 750.0 I. 621.3 362.0URAZI 450.0 6io.0 7; 545.0 422.0RURAL 5310.0 @io.o 7T 2511.3 2716.7

ADIS1SIOVS PER HOSPITAL BED .. 15.5 17.9 It 25.7 27.5

AVERAGE SIZE OF HOUSEHOLDTorAL 4.8 5.5URBAX 4.3 4.9RURAL 5.1 5.8

AVERAGE SO. OF PERSONSIRONTOTAL 2.2 2.4URBAN 2.1 2.1RURAL 2.3 2.6

PERCENTAGE OF DWELLINCS WITH ELECT.TOTAL .. ..

URBAN .. 63.4 65.0 /.RURAL . ,.

- 26 -

T A B L E 3A ANNEX IlADLE IA ~~~Page 2 of 7

HROCCO - SOCIAL INDICATORS DATA SKEETMOROCCO REFERENCE GROUPS (WEIGHTED AVERAGES) /a

HOST (HOST RECENT ESTIMATE) lb1960-b 19T NECENT MIDDLE INCOME MIDDLE INCOME

196 4b 1 5 7n/b ESTI&ATLF/b S. AFRICA £ HID EAST LAT. AMERICA CAR

ADJUSTED ENIRLLNENT RATIOSPRIMART: TOTAL 47.0 52.0 80.0 89.8 10b.7

MALE 67.0 67.0 93.0 103.7 10P.5FEMALE 27.0 36.0 62.0 75.2 Itl4.6

SECONDAY: TOTAL 5.0 13.0 28.0 *2.9 44.2MALE 7.0 18.0 33.0 50.9 ;2.7FEMALE 2.0 7.0 22.0 34.6 £64.

VOCATIONAL (2 OF SECONDARY) 0.0 0.0 1.8 10.0 13.3

PUPIL-TEACHER RATIOPRIMAY £2.0 34.0 36.0 29.7 29.9SECONDARY 6.0 20.0 21.0 18.8 16.7

PASSENGRE CARSITHWOUSD POP 10.7 14.9 21.5 j 17.8 46.0RADIO RECEVERSMOUSAND POP £5.8 62.5 167.7 175.9 328.3TV RECEIVERSITHOUSAND POP 0.4 11.6 41.7 5t.2 112. NEOSPAPER ("DATLY GENERAL

INTEREST) CIRajAuTIONPER THOUSAND POPULATION 22.1 16.2 L2.6 37.2 81.1

CINEMA ANNUAL ATTENDANCE/CAPITA 1.5 1.5 /b 2.0 /a 2.4 2.4

LS PORCHTOTAL LABOR FORCE (THOUS) 3389.0 3939.0 556.0 _ -

FEMALE (PERCENT) 10.0 14.2 16.2 11.0 23.6ACRICULTURE (PERCENT) 62.0 57.0 52.0 A1 42.4 31.INDUSTRY (PERCENT) 14.0 17.0 21.0 7f 27.9 2;.3

PARTICIPATION RATE (PERCENT)TOTAL 29.1 26.3 26.7 26.2 33.5HALE 52.1 45.2 4.5 66.2 51.3FEMALE 5.9 7.5 8.5 5.8 15.9

ECONOIUC DEPENDENCY RATIO 1.6 2.0 1.8 1.8 1.3

IXfl DISTUTIONPERCEST OF PRIVATE INCOMERECEIVED BY

IICREST 5S OF HOUSEHOLDS 18.0 7 20.0 71HICUEST 20Z OF SOUSEHOLDS 63.3 /i 69.0 1'LOWEST 201 OF HIOSEHOLDS 7.0 4.0 71.LOWEST 460 OF HSEHOLDS 18.0is 12.0 1

PW T C-OIESTIMATED ABSOLUTE POVERTY INCOMELEVEL CUSS PER CAPITA)

URBAN 107.0 157.0 389.0 If 226.3 288.3RURAL 66.0 101.0 238.0 IE 134.0 185.3

ESTIMATED RELATIVE POVERTY INCOMELEVEL CUSS PER CAPITA)

URBAN .. .. 262.0 /f 431.5 519.8RURAL .. .. 157.07F 132.0 359.7

ESTIMATED POP. BELOW ABSOLUTEPOVERTY INCOME LEVEL C?)

URBAN 51.0 38.0 28.0 IfRUIAL 49.0 45.0 5.0 E7 29.0

NOT AVAILABLENOT APPLICABLE

N O T E S

/a The group averages for each indicacor are population-weighted arithmetic meCns. Coverage of countriessong the indicators depends on availabiilty of data and is not unLEorm.

lb Unless otherwise noted, -Data for 1960" refer co any year between 1959 and 1961; "Data for 1970" bet-een1969 and 1971; and data for 'Most Recent Estimate" between 1981 and 1983.

/c Excludes the exSpanish Sahara; Id 1976; /e 1977; /f 1979; /j 1978; lb 1972; IL 1980;L1 Consumption expenditure of households.

JUNE. 1985

27 - ANNEX 1Page 3 of 7

DEFINmONS OF SOCIAL INDICATORSNotes. Although the data are dra n frmon sourwcs gcncrafly judgcd the moms authontatvc and reliabk. it should also be noted that thes may not be internAtionallyComparable because of the lcek or stdrdzed definitons and concepts used by different countnes in coleting the data. The data are. nonetheless. useful todescrbe orders of magnitude. indcate trends. and characterize certain mapjr differnces between countrisThe reference groups are IlI the sane countrt group of the subjet country and t21 a counry grour with somnewhat higher averge income than the countr%group of the subjet countr tseaceptfor-Hsgh IncorneOil Exponrm grougv wvhere -'Mddle Income North Afnica and Middle Easat mschoen because oi.. nagerssoio-cultural afitinitie. In the refeence group data the averages are population weighted anthmetic means ror each indicator arnd shown onh vhen majortorthe countries in a group has dsta for that indicator Since the covmge o countnes among the indicators depends on the availabilht of data and is not umnformLcution must be excerscsd in relaung averages of one indicator to another These averages are only useful in companng the value of one indictor at a time amongt she country and reference proups.

AREA (thousane sq.km.) Crde Sirrh Rxae (per thoasand)-Number of live births in the vear

rotal-Total surface area comprising land area and inland waters. per thousand of mid-year population: 1960. 1970. and 1983 data.1960. 1970 and 1983 data. Crate Death Rare (per thoNuaadi-Number of deaths in the year

AgricuburaI-Estimate of agricultural area used temporarily or per thousand of mid-year population; 1960. 1970. and 1983 data.permanentlv for crops. pastures. market and kitchen gardens or to Gross Reprotdrrioa Rate-Averagc number of daughters a womanlie fallow. 1960. 1970 and 1982 data. will bear in her normal reproductivc period if she experiences

present age-specific fertility rates; usuallv five-year averages endingGNP PER CAPITA (USS)-GNP per capita estimates at current in 1960. 1970. and 1983

market prices, calculated by same conversion method as World Faidly Plaaing-Acceprors. A Dana f(:hou.saads-Annual nani-Sank Atlas f1981483 basis); 1983 data ber of acceptors of birth-control devices under auspices of national

ENERGY CONSUMPTION PER CAPITA-Annual apparent FaE mly plannng program.consumption of commercial primary energy (coal and lignite. Family Plaing- Users (percent of married weae) -The percen-petroleum. natural gas and hydro-. nuclear and geothermal elec- tage of married women of child-beanng age who are practicing ortricity) in kilograms of oil equivalent per capita; 1960. 1970. and whose husbandsare practicingany formofcontraception Women1982 data. of child-bearing age are generally women aged 15-49. altheugh for

some countries contraceptive usage is measured for other agePOPULATION AND VITAL STATISTICS groups.

Total Populzaion..Wid-Ye (rlousaads)-As of July 1. 1960. 1970. FOOD AND NU'TRITIONand 1983 data.

Index of Food Pr oducriasn Per Capita (19691-71 = l6Oj - Index of perUrban Population (percent of rotal)-Ratio of urban to total capita annual production of all food commodities. Productionpopulation; different definitions of urban areas mav affect compar- exclude animal feed and seed for agriculture. Food commoditiesability of data among countries: 1960. 1970. and 1983 data incltude primary commodities te.gc sugarcane instead of sugar)

Popuaion Pojetoas which are edible and contain nutnents (e.g. coffee and tea arePopularion in year )000-The projection of population for 2000. excludcdj. they compnse cereals. root crops. pulses. oil seeds.made for each economy separately. Starung with information on vegetables, fruits, nuts. sugarcane and sugar beets. livestock andtotal population by age and sex. ferttlity rates. mortalitt rates. and Livestock products. Aggregate production of each country i haicdinternational migration in the base year 1980. these parameters on national average producer pnce weights; 19bl-bR 1970. andwere projected at five-year intervals on the basis of generalized 1982 data.assumptions until the population became stationary. Per Capita Stnyf- of Calories fpereet of requirementsi-Comput-

Stauionarr population-Is one in which age- and sex-specific mor- ed from calone equivalent of net food supplies available in countrytality rates have not changed over a long period. while age-specific per capita per day Available supplies comprise domestic produc-fertilitv rates have simultaneously remained at replacement level tion. imports less exports. and changes in stock. Net supplies(net reproduction rate = II. In such a population. the birth rate is exclude animal feed. seeds for use in agriculture. quantities used inconstant and equal to the death rate. the age structure is also rood processing. and losses in distribution. Requirements wereconstant. and the growth rate is zero. The staLionary population estimated bv FAO based on physiological needs for normal activnsssize was estimated on the basis of the projected characteristics of and health considenng environmental temperature. bodv weights.the population in the year 2000. and the rate of decline of fertility age and xex disinbution of population. and allowing 10 percent forrate to replacement level waste at household level. 1961. 1970 and 1982 data

Population omenrtum-l s the tendencv for population growth to Per Capita Supply of Prosein (gramn per tap-Protein content *,fcontinue bevond the time that replacement-level fertility has been per capita net supplv of food per dav. Net supply of food is definedachieve&d that is. even after the net reproduction rate has reached as above Requiremnents for all countnes established by USDAunity The momentum of a population in the year I is measured as provide for minimum allowances of 60 grams of total protein pera ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein. of which 10 gram,the year r. given the assumption that fertility remains at replace- should be animal protein. These standards-are lower than those ofment level from vear r onward. 1985 data. 75 grams of total protein and 23 grams of animal protein a's an

Popklation Densiry avertge for the world, proposed bv FAO in the Third World Food

Per sq.km.-Mid-year population per square kilometer t100 hec- Supply. 1961 1970 and 1982 data.tarm) of total area: 1960. 1970. and 1983 data. Per Capina Porerin Supply from Animul ad Puse-Protein supplyPer sq.km. agrscutrural land-Computed as above for agricultural of .ood derived from animalIs and pulses in ra:ns per da%. 1,11 -65.land oniv. 1960. 1970. and 1982 data. 1970 and 1977 data

Population Age Strtrmure (percenti-Chitlren 0-014 vearsl. work- Child(agev 14) Death Rate (perrhousand)--Numher ofdcazh! oftig age (I5-64 vears), and retired (65 years and over) as percentage children aged 1-4 years per thousand children in the sairc aecof mid-year population: 1960. 1970. and 1983 data. group in a given year For most developing countnes data denved

Plopulation Growth Rate (perrcer-toral- Annual growth rates of from life tables: 1960. 1970 and 1983 datatotal mid-year population for 1950-60. 1960-70. and 19'70-83. HEALTH

Popuation Growth Rate (percenti-urhar - Annual growth rates Life Expectancy at Rinh (years- Number of *cars a nc hornof urban population for 1950160. 1960-'0. and 1970-83 data. inflini would livc if prcvailing patterns of mortalitt flor all peoplk

ANNE I- 28 -- Page 4 of 7

at the time of of izs birth wee to stay the same throughout iu life: PupMteacher Ratio - primary,. d secondury-Total students en.1960. 1970 and 19B3 data. rolled in primary and secondary leves divided by numbes ofbIfa Mwrely Rate (pwr thNaiad)--Number of infants who tie teachen in the cormspondin blvelsbefore reaching one year of age per thousnd live births in a givenyear; 1960. 1970 and 1983 data. CONSUMPTIONAccss to S Water (pecn of popekdtlon-,aeal rbwham and Pesenser Cars (per trhusnd p.pelu n-fPasmger cars com-nal-Number of people (total. urban. and rual) with resonable prise motor ca seting less than eight persons excludes ambul-access to safe water supply (inudes treated surface waters or ance,. hearses and rmiliary vehicld.untreated but uncontaminated water such as that from protected Radio ReeirS (per trhmmsadpoepnltlj-AII types of receiversboreholes, springs and sanitary wells) as percentages of their rpc- for radio broadcast to general pubik per thousand or population.dve populations. In an urban area a public fountain or standpost excludes un-licensed receivers in countries and in yea whelocated not rore than 200 mers from a house may be considere -d riration of radio set was in effect; data for recent years mayas being within reasonable access of that house. In rurai aros not be compable since most counties abolished lcensing.reasonable acces would imply that the housewife or nembers of thehousedoJd do not have to spend a disproportionate part of the day TV Receives pr tJo_sand pohpbaio)-TV revers for broadcastin fetching the famnily's water needis to general public per thousand population; excudes unlicensed TVAccess to Escrete Dispumi (percent of pop_lataon)-tetal, when, recvers in countries and in year when regitrtion of TV sets wasad rural-Number of people (total. urban, and rural) served by i effect.acreta disposal as percentages of their respective populations. Aewspaper Cfrculuatin thobusand popdon)-Show the aver-Exace disposal may include the coOection and disposl, with or age cirulation of -daily Sneal interest newspaper, defined as awithout treatnent, of human excreta and waste-water by water- periodc publication devoted prinmanily to recording genral news.borne systems or the use of pit privies and simnilar instaUations. It is considered to be 'daily" if it appears at lkast four times a week.Popkaton per PhJysidav-Population dividcd by number of prac- Cinm An_w Attendancr per Capita per Year-Based on thetising physicians qualified from a medical school at university Icl. number of tickets sold during the year. including admissions toPopstmno per Nu M8 Person-Fbpulation divided by number of drive-in cinemas and mobile units.practicing male and female graduate nurses, assistant nurses,practical nurses and nursing auxiliaries. LABOR FORCEPopltion per Hospital Bed--ota, ubn, and ro-sPopulation Total Labor Force (roaoadsj-Economically active persons, in-(total, urban. and rural) divided by their respective number of cluding armed forces and unemployed but excluding housewives.hospital beds available in public and private. general and specialized students. etc.. covering population of all ages. Definitions inhospitals and rehabilitation centers. Hospitals are establislunents various countries are not comparable; 1960, 1970 and 1983 data.permanendy staffed by at least one physician. Establishments prov- Fem_ae (perc)--Fmale labor force as percentage of toal laboriding principally custodial care are not included. Rural hospitals. force.however, inchde health and medical centers not permanently staffed Agricuture (perrearJ-Labor force in farming, forestry. huntingby a physician (but by a medical assistant, nurse. midwife. et ) and fishing as percentage of total labor forc; 1960. 1970 and 1980which offer in-patient accommodation and provide a limited range data.of mnedic faldities. udastry (percent)-Labor force in mnining. construction. manu-Admssios per Hospital Bed-Total number of admissions to or facturing and electricity, water and gas as percentage of total labordischarges from hospitals divided by the number of beds. force. 1960. 1970 and 1980 data.

Partication Rate (percet-torA, ma. andfenak-ParticipationHOUSING or activity rates are computed as toaL malc. and femnale labor forceAere gm of Flo--hold (perwens pt Q JM)-"re! -4!A. as percentages of totaL male and female population of all agesnd rwral-A household consists of a group of individuals who share repectvely: 1960. 1970. and 1983 data. These are based on ILOs

living quartrs and ditr main meals. A boarder or lodger may or participation rates reflecting agc-sex structre of the population, andmay not be included in the household for statistical purposes. long time trend. A few estimates are fromn national sources.Averae Number of Persosm per Room-toraf, arban, md rural- Economic Dependency Rato-Ratio of population under 15 andAverage number of persons per room in all urban. and rural 65 and over, to the working age population (those aged 15-64).occupied conventional dwellings, respecively. Dwellings excludenon-permanent structures and unoccupied parts- INCOME DISTRIBlTIONPercentage of Dwe sng witk Elaticky-iotal, urban, and rural- Percenrage of Total Disposabkle Incm (both m cash and kind)-Conventional dwellings with electricity in living quarters as percen- Accruing to percentile groups of households ranked by total house-age of total. urban. and rural dwellings respectively, hold income.

EDUCATION POVERTY TARGET GROUPSAdjuted Emroll Rados The following estimates are very approximate measures of povcrtyfviary school - total. maek and fmal-Gross total. male and leves. and should be interpreted with considerable caution.female enrollment of aU ages at the primary levl as pnerctages of Estiaated Absolte Poverty cme Level (MM per capta1--arhanrespective pnrmary schoowage populations. While many countnes and rurl-Absolute poverty income level is that income levelconsider primary school age to be 6-11 vears. others do not. The below which a minimal nutritionally adequate diet plus essentialdifferences in country practices in the ages and duration of school non-food requirements is not affordable.are reflected in the ratios given. For some countries with universal Emated Relt Pboerty Income Level fruSS per eaptaj-erbaneducation. gross enrollnent may exceed 100 pereent since Some and rarut-Rural relative poverty income level is one-third ofpupils are beow or above the country's standard primary-school average per capita personal income of the country. Urban level isagc. derived from the rural level with adjustment for higher cost ofSecondarr !chool - sowl. male and-femae-Computed as above: living in urban areas.seondary education requires at kast four years of approved pri- Estimated Populan Below Absolue Poverty Income Lld (per-mary iastrucnon; provides genrraL vocationaL or teacher training cei)-urban and rural- Percent of population (urban and ruralinstructions for pupils usually of 12 to 17 years of agc correspond- who are "absolute poor."ence courses are generally excluded.Vocationa En&omeni (percent of secondary)-Vocational institu- Comparative Analysis and Data Divisiontions include technical. industrial. or other programs which operate Economic Analysis and Projections Departmentindependently or as departments of secondary institutions. June 1985

- 29 -

Puoulation : Z9.a million iaid-1983) AMELlCGP Per Capita: USS 750 giai3 Page £ of 7

aorta - Ecrame rmirrrohTns

AMount

(million USS at Anual rowth Rte 1tt1current prices) Actual Preted

Indicator 19Eh4 9lU3 113 Lz i1 a' nil a/ 13 1 Li 112 121

NAfHIAL AELaLit

Cr0ss _otic product a1 12145 -1.3 6.0 2.2 2.4 4.3 2.4 2.1 2.8 2.. 2.9Agriculture 2023 -22.9 19.9 -4.6 2.0 6.0 2.0 2.0 2.5 2.5 2.5Industry 3932 -0.1 2.2 3.1 0.8 3.0 1.s 2.0 2.5 2.5 3.0Services 6183 5.8 6.1 3.8 3.4 4.7 3.0 3.0 3.0 3.0 3.0

Consawption 10647 1.S 6.0 0.3 1.2 3.4 2.3 1.8 1.6 1.6 2.2Gross Investment 2792 -9.4 1.1 -14.8 8.1 -S.0 -4.6 -0.6 2.9 2.8 3.0Exports of CfS 3055 0.2 5.5 7.3 3.6 6.1 8.1 7.8 8.2 7.5 5.6Imports or GltS 4349 2.0 3.7 -11.9 3.2 -4.2 2.0 2.3 3.4 3.3 3.0

Gross national savings 1325 -32.2 4.5 21.2 7.9 1.7 3.4 7.4 6.3 IZ.5 11.0

PRIMDP deflator 11980 = 100) , 5.4 91.7 100.0 110.8 12.8 121.0 136.4 152.8

Exchange rate (US$ Per ON) . .z40 .256 .254 .193 .166 .141 .114 .10

Share of GOP at market Prices (2) AverRae AnnAl toereRxa tttat current oricesi cJ tat constant 1969 orient tat constn 1980 prices)

maq un San u2 rns u7s ia7 1z58 19ao-as mgesa- s

Gross domestic product 4.9 s.s 3.1 Z.7 4.9Agriculture 19.9 17.9 18.1 15.0 14.7 13.5 -1.4 4.4 0.s 23 3.0Industry 27.0 3S.2 32.3 30.6 30.1 31.2 7.4 4.2 1.9 2.3 1.7Services D/ 53.; 46.9 4.6 54.4 11.2 55.3 5.6 6.4 4.7 3.0 4.9

Consmptson 3U.s 85.5 88.5 86.8 83.5 79.6 s.8 6.1 Z.4 1.8 3.9Gross Investment 18.s 25.4 22.6 16.8 11.2 20.4 13.0 -1.1 -2.6 1.0 11.2Exports G975 17.6 22.5 18.4 19.9 24.9 25-5 u-. a.;9 48 7.6 5.3Imports GUFS 21.6 33.4 29.4 23.5 23.7 25.3 8.3 1.7 -2.0 2.9 6.4

Gross national savings 14.5 19.3 14.6 .12.0 15.8 z2.6 11.3 -4.4 -1.2 8.5 10.6

As t of IMPnfl nf 12 1 123 ff2 1a32 1313

Current re-enues 16.1 23.3 21.6 22.7 22.3 21.9Current ebenditureS 14.5 20.2 21.8 22.7 22.8 21.9Surplus (i or deficit 1-) 1.6 3.1 -4.z 0.8 -0. 0.0Capital exlendlture 5.7 12.2 12.2 13.8 6.4 6.6Foreign Firnancing 1.3 3.7 5.6 7.2 3.6 5.0

anX Z nnzeal uai unsaaZ in5

DOER INOICATORS

COP growth rate i:l 6.0 4.9 2.9 2.4 5.1CUP Per caoita growth raLe Ct: 3.1 1.8 0.4 -0.1 2.6Enrgy cansumatton growth rate {zi 6.7 S.6 3.4 3.3 4.9

[C 3.0 4.1 6.9 5.8 3.5argrnal sa.ings rate 3.06 -0.15 0.14 0.48 0.36report elasticity 1.84 0.13 -o..is 1.08 1.32

At market orces.C tmiort takes included in servtct.c Projected yearS at constant 1980 po1ces.a Estimate. Oecefber la. 19Sa

ErEMA CPUIB.I 39nS9 P1

Population :20. *111on (utd-1951 - 30 - AIEXGIP Per Capita: US$ 750 119B3) Page 6 of 7

~UMOR a M IEXIrMAt TRADE

Xndcator (mdlilon USS at 1 Grth 0.taq *SI tat constant lOb nricmslcurrent PriesI Aetual Prftected

194I 3211 3213 21 12 Z 3 J 211 . 32 3231 192

CEITEAL TRADEMerchandise exports (FMl) Z169 2.9 1.1 10.3 5.1 5.5 5.1 7.8 3.2 7.4 5.3

Prlimry products 1250 -3.6 -11.4 5.6 3.7 5.3 4.3 3.0 3.0 3.0 3.0Phosphate roek 524 -5.6 -10.1 5.4 2.7 3.0 3.0 3.0 3.0 3.0 3.0Others 726 -2.2 -12.4 5.7 4.4 6.9 5.2 3.0 3.1 3.0 3.0

Intermdiate & mnufactures 919 21.9 30.0 17.7 7.0 6.5 13.3 13.7 14.8 *11.9 7.4

Merchaise toIprts (CIF) 3904 2.9 5.5 -5.4 7.1 -4.3 2.5 2.9 3.6 3.5 3.2Food 660 23.1 -.1.5 -4.9 2.6 -8.0 3.0 3.1 3.Z 3.3 3.3Fuels 1021 10.6 -1.5 1.1 4.8 -2.0 2.4 2.5 2.5 2.5 2.9Macnlnwy and equia_nt 733 -7.7 31.4 -27.2 S.5 -1S.1 -2.3 -0.7 2.5 2.5 2.9

Others 1490 -S.0 12.7 -5.5 0.5 0.7 4.1 4.2 4.8 4.3 3.3

BI= (1910 * 1005E,ort price tndex . 120.7 124.4 135.9 164.7 173.7 206.1 249.3 276.7 307.3 341.0Zwort price tndex 130.0 142.2 1S3.4 191.0 211.1 239.0 281.2 304.6 330.S 3s8.3rem of trade index . 92.5 57.5 55.6 87.3 82.3 56.2 58.7 90.8 93.0 95.2

Comosition of Merchandise Trade ) A.PI-race Annual Tner.naafat current or¶cel_ (Constant 1969 prices) (Constant 19a0 orices)

lw75 ~~~~~~~~~~~~~1970 j l7S 97SRo I L75-HK 19e-g5 1SS990q§-9s

E.Ports -1.3 7.0 S.3 7.5 5.2Prinry produects 86.9 74.4 57.3 47.2 42.6 -2.8 S.4 -0.3 3.2 3.1Interomediates & minufactures 13.1 25.6 42.7 52.5 57.4 7.9 12.7 16.7 12.4 7.0

mports 9.0 0.7 0.4 3.2 6.6Food 25.0 16.9 18.3 1a.3 16.0 14.0 2.9 1.1 3.2 3.7Petroleum 10.5 23.6 26.0 25.4 24.3 9.6 5.2 2.1 2.7 S.6Machinery and eauihunt .:4.0 18.9 15.0 13.5 15.S 12.8 -7.3 -3.5 1.2 13.5Others 40.2 40.6 40.7 42.5 41.2 5.3 2.a 0.7 4.2 5.7

Share oF Trade with Share of Trade with Share of Trade withIndutrre1l aCuntrlexs t21 Deelaotn Countnes IXI Cabital Surolus Oil Exporters !1%32R1 1121 211 1272 1221 360 32Ri11 II J3

CaFrEMO OF rRADEExports 72.3 73-7 76.5 27.7 25.4 21.6 0.9 1.9Imports 76.7 74.9 72.9 23.3 25.1 8.3 . . 18.8

, Estimate

October 15. 1985EDlEA CPIuB. 339i3

- 31 -

Population : 20.5 million (mid-1983) ANINEX IGaP Per Capita: USS 750 (1983) Page 7 of 7

scoocco - SALANCE pp PAyfi EXTErAL CAPYTAL AMP nEAl(million USS at current prices)

Indicator Actual _ Prnlorted11K lull l2l 132 1l ul R 2I a Jll 1321 I SL 1

BALANCE OF PAYMENTSExports of goods and services 4364 4132 3343 3921 1975 3988 4528 5209 6036 6973 7977

or whiCh: Merchandise f.o.b. 2414 2233 2043 2086 2169 2106 2457 2935 3525 420s 4912

Imorts of goods nd services 5912 cU9

5 5912 4388d so0 4787 Sill 5648 6393 7060 7753OF which: erchiandise f.o.b. 423' 4363 4335 3627 3904 3637 3839 4258 4781 5168 6005

Net current transfers 128 102 .70 94 61 64 69 75 81 87 94

Current account balance -1420 -1861 -Ih.9 -873 -964 -735 -SI4 -364 -277 6 3la

Net DireCt Foreign Investment 109 73 102 47 51 56 62 63 75 82 91Official Grants 97 313 124 142 16 380 - -HLT loans (net) 1036 1103 1354 230 442 781 656 564 328 le2 -121

OffIcial 72z 1033 740 340 372 595 643 560 53 -386 -629Private 314 70 614 -110 70 186 8 4 270 568 578

Other capital (netl 22 336 395 297 468 -Zz -135 -232 -154 -179 -152Change In reserves 156 36 -76 157 -13 -191 -69 -36 23 -91 -136

International reserves 814 510 540 376 266 457 526 562 534 625 761Of which: Gold 415 280 322 269 217 Z17 217 217 217 217 Z17

Reserves as months imports 1.7 1.0 1.1 0.9 0.6 1.1 1.2 1.2 1.0 1.1 1.2

ExTERNAL CAPITAL AND DEBTGross disbursements 1711 2047 2230 982 1105 1SbS

Official Grants 97 113 124 142 16 300Concessional loans 761 889 557 209 274 373

DAC 100 126 125 49 134 177OPEC S84 746 401 115 79 124IDA 1 1 1 1 3 2Other 76 16 30 43 58 74

Non-concessional loans 854 845 1549 631 1S5 887Official export credits 12 54 103 50 135 85

IBRD 64 9 134 174 240 402Other multilateral 13 123 70 23 24 47

Private 765 570 1243 383 416 354Suppliers credits 8 26 52 a 16 19Financial credits & bonds 758 543 1111 375 400 335

E.ternal DebtDebt outstanding and disbursed 7109 7983 9054 9445 10347 11513

Official 3496 4373 5004 S894 6s79 7450Private 3612 3610 4049 1552 3768 4062

tindisbursed debt 2154 3146 2487 3655 3093 2359

Debt serviceTotal service payments 17 1193 1266 1334 1120 1196 990

Interest 614 634 531 s51 548 506Payments as X eKports of G.S Z/ Z7.3 30.6 34.7 28.6 30.1 Z4.8

Average interest rate on new loans it) 3.2 8.4 10.1 7.4 7.4 3.4Official 3.3 3.7 6.9 S.S 6.7 n.a.Private 13.4 13.7 11.3 10.5 11.8 n.a.

Average aturity of new loans (years) 13.7 9.5 11.0 15.9 17.5 12.6Official 18.6 11.6 19.7 21.1 203 n.a-Private 7.9 7.1 6.3 7.6 6.1 n.a.

As X of Debt Dutstandina at End of Most Recent Year 119811

maturity structure of debt outstandingMaturities due within 5 years 49.4Maturities due within 10 years 80.6

Interest structure of debt outstandingInterest due within First year 5.8

Ce EstiateI/ After rescheduling October 30. 19852/ ServIces Include workersr remittances EMENA CP II-8

I0 39390p2

- 32 -

ANNEX II"oroc ck

STATUS OF BAhK OPERATIONS

A. STATEMENT OF BANK LOANS AND IDA CREDITS(As of September 30. 1985)

Loan or Amount (less cancellattons)Credit USS Millionumber fear Burrower Purpose 8ank IDA Unisbursed

Thirty five Loans fully disbursed 1.047.47Five Credits fully disbursed 45.16

1416 1977 Kingdom of Morocco Agriculture 41.0 14.001602 1978 Kingdom of Morocco Agriculture SO.0 34.961681 1979 Kingdom of Morocco Education 88.0 58.751695 1979 Kingdom of Morocco Power 42.0 19.661724 1979 Kingdom of Morocco Water Supply 49.0 12.131757 1980 Kingdom of Morocco Agriculture 44.0 1S.SS1830 1980 etngdom of Morocco Highways 62.0 12.381848 1980 Kingdom of Morocco Agriculture 24.0 16.851943 1981 CIH Tourism 100.0 37.391944 1981 Kingdom of Morocco Urban Development 25.0 19.162006 1982 Kingdom of Morocco Water Supply 87.0 64.692037 1982 BNDE OFC 70.0 41.442038 1982 Kingdom of Morocco DFC (SSI) 40.0 37.372092 1982 Kingdom of Morocco Agriculture 24.0 21.972109 1982 Kingdom of Morocco Mining 9.S 7.632110 1982 Kingdom of Morocco Forestry 20.5 17.262114 1982 ONAREP 0il Shale 11.2 4.162149 1982 Kingdom of Morocco Education 38.0 30.842217 1983 Kingdom of Morocco Agriculture 30.0 28.79224S 1983 CIN Housing Oevt. 60.0 S6.812253 1983 Kingdom of Morocco Agriculture 42.0 40.892254 1983 Kingdom of Morocco Highways 85.0 81.792271 1983 ONAREP Oil Exploration 75.2 38.332272 1923 Kingdom of Morocco Village Infrastr. 16.0 15.302367 1984 CNCA Agric. Credit 11S.4 56-992477 1985 Kingdom of Morocco Voc.Training 27.1 27.032487 198S Kingdom of Morocco Elec.b. Mec.Ind 25.1P2508 1985 Kingdom of Morocco Jerada Coal Min. 27.02590 1986 Kingdom of Morocco Agr.Sec.Adj.- 100.02604 1986 Kingdom of Morocco 2nd Ind-gTrsoe" 200.0

Total 2675.47 45.16of which has been repaid 448.Z8 Z.37

Total now outstanding 2227.19 42.79

Amount Sold 20.11of which has been repaid 20.11 0.0 0.0

Total now held by 3ank and rOA 2227.19 42.79

Total undisbursed 812.12

B. STATEMENT OF IFC INVESTMENTS(As of September 30. 1985)

USS MillionFiscal Year Loan Eouyt1986 Frumat Food 8 Food Processing 5.7 5.71963/1978/1984 ONDE Development Bank 37.6 2.7 40.31966 CIL Canning Factory 0.9 0.5 1.41976 Marrakech Cement Cement Factory 1.2 1.31977/1980 Temara Cement Cement Factory 4.7 3.6 8.31979 Agadir Cement Cement Factory 12.5 2.2 14.71980 SOMIFER Copper Mining 13.0 2.3 15.31981/1983 Casablanca Cement Cement Factory 5.8 2.0 17.8

Total Gross Commitments 90.2 14.S 104.7Less cancellation. terminations. repayments and sales 41.4 3.4 44.8

Total commitments now held by IFC 48.8 11.1 59.9

Total Undisbursed 5-7 0.3 6.0

Not yet effective.Became effective October. 1985

--- Agadir Cement has been cancelled.

10.04798 p212/17/35

- 33 -

ANNEX IIIPage I of 2

KINGDOM OF MOROCCO

LARGE SCALE IRRIGATION IMPROVEMENT PROJECT

Supplementary Project Data Sheet

Section I: Timetable of Key Events

(a) Project Identification: Early 1984

(b) First Bank mission to review project: June 1984

(c) Departure of Appraisal mission April 1985

(d) Negotiations December 1985

(e) Planned date of effectiveness: May 1986

Section 1I: Special Bank Implementation Actions

Mid-term implementation review in the first half of 1989.

Section III: SpeciatlConditions

(a) Effectiveness:

i) Establishment of four coordinating units (para. 52);ii) Conclusion of arrangements satisfactory to the Bank between

Government and CNCA for the financing of on-farm investments underthe project (para. 53).

(b) Other Conditions

i) local competitive bidding procedures would be adjusted to make themconsistent with Bank procurement guidelines (para. 49);

ii) a revolving fund of up to $2.5 million equivalent would be set up(para. 50);

iii) O&M services would be created in Ouarzazate and Tafilalet andplanning units in all ORMVAs by December 31, 1986 (para. 54);

iv) A new extension system would be in place no later than June 30, 1987and adequate staffing levels would be reached in at least onesub-division in each ORMVA by June 30, 1988 (para. 55);

v) Each ORMVA would prepare a three-year research program (1988-1990)and sign an agreement with appropriate research organizations tocarry it out (para. 55);

- 34 -

ANNEX IIIPage 2 of 2

vi) ORMVAs would introduce a management information system, strengthenthe planning activities, adopt external audit and introducesystematic staff training (para. 57);

vii) Program Contract (PC) for Doukkala will be signed by December 31,1986; PCs for Gharb, Loukkos and Tadla ORMVAs by end 1988 and forthe rest by end 1989 (para. 58);

viii) Revised Cropping patterns would be established by September 30, 1987and thereafter reviewed at least every three years (para. 61);

ix) The directorate of Rural Construction of MARA would undertake byDecember 31, 1987 a baseline survey on the status of environmentalhazards (para. 69);

x) Measures would be taken to facilitate the divestiture by ORMVAs notlater than September 1989 of provision of commercial services(para. 56).

xi) Cost recovery units would be created in Haouz and Souss-Massa ORMVAs;water charges owed by Haouz farmers would be determined by December31, 1986; water charges would be revised every September on the basisof established indexation formulai water charges in the Moulouyawould be increased to reflect investment and O&M costs of the pumpingstation included in the project; new charges will be proposed byDecember 31, 1987, for water allocated for non-agricultural use(Para. 62).

IBRD 19063EONTJNAL SPAN C' IEAI GEESE :'IURREE r 5615 CA SPAIN .E

F W .,.- ITGLL AEEOERAISfTAllD\E SIA Yt

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,!ORMVAGYn f t N ( / ITOU^N ORMVA

~~-uril^NA! ~ ~ ~ ~ ~ ~ ~ ~ A \- .-) .wcu MOULOUYA

ORMVA' ~~~ORMVAA - I.R

NA{tlA -> ( ~~~LOUKKOS LOU OM;A-\1<................. 1rW k

A N T I C -Al

DOUKKALA

- A ORJ' RE AJ- C 1,\ fA L G E R I A

i0j > > j / 0 y F Svc--< a j7 - O U~~~~~~~~OA RZ

0D9.L UUARZA rE 50

s7OUv- -e ; , t ~~~~~~~~~~~~~~~~~~~M O R O C C O

U \ ,,,¢s' LARC 0 ol LARGE SCALE IRRIGATIONeNnIMP IMPROVEMENT PROJECT

~~~~~~~~V 11GO 1U SOTCE OREGRIONLALRD SE AS ES VAMELNANT ORIAAA IIITSIOIEIICI tETSU.III IT MSI IN A iAUS ASS COLTI I 4 ,P)l

fZ / ~~~~~~~~~~~~~~~IARGASSCLE NEAION AREAS LAKES SCALE IEISAIIOS SEITOIlC1DI]WSN CIE

/ ~~~~~~I; .CT 5505 IFRNASTE AREAS ERITASI: IESICEIC^I AREAS .R)N FIS

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__!NESS ANNJUA RIOSEL IS SILSISETREI GE PN ANNUS ASCAl A1 INI Alil .l IS AILIILI 151 LEASS ,lASTERN CAASRAA ST

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