Co. the World Bank

Document of f co. The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. P-3413-MOR REPORT AND RECONMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$30 MILLION TO THE KINGDOM OF MOROCCO Public Disclosure Authorized FOR AN OULMES-ROMMANI AGRICULTURAL DEVELOPMENT PROJECT November 22, 1982 Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. KINGDOM OF MOROCCO CURRENCY EQUIVALENT Currency Unit Dirham (DH) US$ DH 5.50 DH US$0.182 FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS CNCA National Agricultural Credit Bank (Caisse Nationale de Credit Agricole) DPA Provincial Directorate of Agriculture (Direction Provinciale de l'Agriculture) INRA National Institute for Agricultural Research (Institut National de la Recherche Agricole) MARA Ministry of Agriculture (Ministere de l'Agriculture et de la R6forme Agraire) PMU Project Management Unit NPCC National Project Coordinating Committee PCC Provincial Coordinating Committee SMS Subject Matter Specialist FOR OFFICIALUSE ONLY KINGDOMOF MOROCCO Oulmes Rommani Agricultural Development Project Loan and Project Summary Borrower; The Kingdom of Morocco Amount: US$30 million including the capitalized front-end fee Terms: 17 years, including four years of grace, at variable interest rates. Project Objectives and Description: The project aims at improving the living standards of the predominantly rural population living within the administrative areas of Oulmes and Rommani in the Khemisset province through development of agriculture, livestock and forestry and through provision of better social and agricultural services. Livestock development operations would focus on animal health, genetic improvement and fodder production. The forestry component would include the establishment of forestry plantations and the introduction of better management and harvesting techniques. At the farm level, the project would introduce improved crop production techniques and encourage the use of modern inputs while altering the land-use system. The project does not face any unusual risks, but realization of the expected benefits depends on the acceptance by the beneficiaries of the proposed agricultural packages and on their willingness to accept the proposed range management and irrigation regulations. This risk is considered relatively small since similar measures have been successful in other projects in Morocco. The effect of a drought is an important risk which has been minimized through the introduction of drought-resistant crop varieties. Risks associated with delays in project implementation are considered small since steps have been taken to deal with the most recurrent causes for implementation delays. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization Project Cost Estimates Local Foreign Total … …(US$ Million)------ Agricultural development 5.0 1.7 6.7 Livestock production and range management 4.7 2.7 7.4 Irrigation infrastructure 1.5 0.6 2.1 On-farm investments 5.1 2.0 7.1 Incremental inputs 6.2 4.1 10.3 Forest development 8.9 6.1 15.0 Research 1.9 0.8 2.7 Cadastral survey 2.0 1.2 3.2 Rural roads 3.0 2.7 5.7 Social infrastructure 4.4 2.6 7.0 School and health buildings 2.6 1.8 4.4 Studies, training and technical assistance 0.9 1.1 2.0 Total Base Cost 46.2 27.4 73.6 Physical contingencies 4.7 3.1 7.8 Price contingencies 16.1 7.5 23.6 Total Project Cost 67.0 38.0 105.0 1/ Front-end fee on Bank loan --- 0.5 0.5 Total Required Financing 67.0 38.5 105.5 Financing Plan Local Foreign Total IBRD - 30.0 30.0 Government 52.0 - 52.0 CNCA (Nat. Agri. Cred. Bank) 4.8 8.5 13.3 Beneficiaries 10.2 - 10.2 Total 67.0 38.5 105.5 1/ Estimated disbursements: ---------------------US$ Million-------------- Fiscal year 1984 1985 1986 1987 1988 1989 1990 Annual 1.6 2.5 4.9 5.8 9.3 4.9 1.0 Cumulative 1.6 4.1 9.0 14.8 24.1 29.0 30.0 Economic Rate of Return: 14% Appraisal Report: Staff Appraisal Report No.4065 dated November 12, 1982 1/ Includes $23.7 million for taxes. INTERNAT(IONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR A OULMES-ROMMANI AGRICULTURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendations on a proposed loan to the Government of Morocco for the equivalent of US$30 million, including the capitalized front-end fee, to help finance an Oulmes-Rommani Agricultural Development Project. The loan would have a term of 17 years, including 4 years of grace, at variable interest rates. PART I - THE ECONOMY 2. A basic economic mission visited Morocco in November 1978, and updating missions in September and December 1979 and in May 1980. A report entitled "Morocco: Basic Economic Report" (3289-MOR) was distributed to the Executive Directors in December 1980. A mission to review Morocco's Public Sector Investment Program for 1981-85 was in the field in December 1981. Another economic mission on industrial incentives and export promotion was in Morocco in September 1982. Country and Economic Data Sheets are attached as Annex I. Introduction 3. Compared with many developing countries, Morocco is well endowed with natural resources. Morocco has the world's largest and most easily recoverable phosphate reserves, which makes the phosphate sector a key export sector. Other minerals such as iron ore, manganese, lead and zinc are also exported, but in much smaller amounts. Coal and hydropower plants satisfy only a small part of the country's energy requirements, but Morocco has some uranium and oil shale resources which could become significant energy sources in the long term. There are moreover preliminary indications of natural gas reserves. Morocco has also a relatively good agricultural potential. In addition, Morocco's proximity to Europe has favored trade, tourism and labor migration with the EEC countries. 4. During the first 15 years after independence (1956), a conservative approach to economic policy predominated in Morocco, and GDP increased at an average rate of 4% a year in the 1960s. However, a relatively weak savings effort and conservative external borrowing policies permitted only a slow rise in the share of resources allocated to investment. Morocco thus entered the 1970s with no major financial imbalances, but a relatively limited growth capacity. Although some industrialization had taken place, over half of the labor force was employed in the relatively inefficient traditional agricultural sector, and primary products accounted for close to 90% of merchandise exports, with phosphates representing about a quarter of the total. -2 Economic Expansion in the mid-1970s 5. During the 1970s, economic policy became more ambitious, and the original 1973-77 Development Plan strategy stressed an intensified savings effort and development of exports. In 1974, with the sudden jump in phosphate prices, phosphate export earnings more than quadrupled, and although the petroleum import bill also quadrupled in 1974, the current account of the balance of payments remained in surplus. The plan's concern for exports and savings lost some of its urgency. The Government launched a massive public investment program which brought about a sharp acceleration in the rate of growth of the economy, and GDP grew at the rate of 6.7% per year between 1973-1977. The expansion of the investment program also led to a considerable increase in demand for imported goods and services, whose share in GDP doubled from 19% in 1972 to 37% in 1977. 6. The phosphate boom, however, was shortlived and phosphate exports started falling in both volume and value already by mid-1975. Phosphate prices continued to decline until 1980. Markets for other exports as well as for tourism and labor migration were also negatively affected by the world recession. Agricultural production and exports entered a period of prolonged stagnation and Morocco turned from a net exporter to a net importer of foodstuffs. As a result of all these factors, the growth of exports of goods and nonfactor services, which in constant prices had exceeded 8% a year in 1968-72, averaged only 1% a year in 1973-77. 7. Accelerated investment, growing public expenditures, and particularly increased defense spending in response to growing tensions in Western Sahara, created strong pressures on both the balance of payments and the Government budget. While investment jumped from about 15% of GDP in the early 1970s to 32% in 1977, gross domestic savings rose briefly from 15% of GDP in 1972 to 20% of GDP in 1974 thanks to phosphate receipts, but fell back to 10-12% in 1976-77. The large resource gap which emerged as early as 1975 rose to an unsustainable 20% of GDP in 1977 (in current prices). To help finance the gap, Morocco borrowed heavily from the international capital market, which led to rapid increases in external debt and the debt service burden. The debt service ratio rose from 5.6% of exports of goods and services in 1975 to 10.7% in 1977. 8. The Government's overall budget position also deteriorated considerably during the period 1973-77. While budgetary revenues increased rapidly as a result of the windfall phosphate profits in 1974 and 1975 and of the growth of import duties and taxes in following years (reaching 22% of GDP in 1977), the growth of expenditure far exceeded that of revenues.

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