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Reference No.: Language : English

Distribution : Original : French

Economic and Financial Governance Revitalization Support

Programme - PARGEF - Phase I

Country : Kingdom of Morocco

APPRAISAL REPORT October 2012

Appraisal Team e

E

Team Leader

Team Members:

Sector Director: Country Director: Division Manager:

Resident Representative:

Mr. E. DIARRA, Principal Financial Economist, MAFO/OSGE.1

Mrs. C. BAUMONT-KEITA, Lead Expert, ORNB

Mr. F. BAUDIN, Chief Legal Counsel, GECL.1

Mr. B.S. BARRY, Principal Operations Officer, MAFO

Mrs. L. A. F. DADE, Regional Coordinator, ORPF.2

Mr. M. GUEYE, Principal Education Economist, OSHD.2

Mr. J. BANDIAKY, Senior Macroeconomist , OSGE.1

Mrs. R. Y. COFFI, Consultant, ORPF.1

Mr. M. KHOALI, Economist (Consultant) OSGE.1

Mr. P. CORBIN, Economist (Consultant) OSGE.1

Mr. Isaac LOBE-NDOUMBE, Director, OSGE

Mr. Nono MATONDO-FUNDANI, Director, ORNB

Mr. Jean -Luc BERNASCONI, Division Manager, OSGE.1

Mrs. Amani ABOU-ZEID, Resident Representative , MAFO

Peer Review

E

M. GUEDEGBE, Chief Education Specialist, OSHD.2

A. DIABATE, Principal Country Economist, ORNB

A. TARSIM, Senior Macroeconomist, OSGE.1

Table of Contents

ACRONYMS AND ABBREVIATIONS ii

LOAN INFORMATION iii

PROGRAMME EXECUTIVE SUMMARY iv

PROGRAMME RESULTS-BASED LOGICAL FRAMEWORK v

PROGRAMME IMPLEMENTATION SCHEDULE vi

I – THE PROPOSAL

II – COUNTRY AND PROGRAMME CONTEXT 1

2.1 Government’s Development Strategy and Medium-Term Reform Priorities 1

2.2 Recent Economic and Social Developments, Prospects, Constraints and Challenges 2

2.3 Status of Bank Portfolio 4

III – RATIONALE, MAIN ELEMENTS OF PROGRAMME DESIGN AND SUSTAINABILITY 5

3.1 Linkages with CSP, Assessment of Country Preparedness and Underlying Analytical Elements 5

3.2 Collaboration and Coordination with Other Donors 6

3.3 Outcomes and Lessons from Past Similar Operations 6

3.4 Linkages with Other Bank Operations in the Country 7

3.5 Bank’s Comparative Advantages and Value Added 7

3.6 Good Practice Principles for the Application of Conditionality 7

3.7 Application of the Bank’s Non-Concessional Lending Policy 7

IV – PROPOSED PROGRAMME AND EXPECTED OUTCOMES 8

4.1 Programme Goal and Objectives 8

4.2 PARGEF Components, Objectives and Expected Outcomes 8

4.3 Programme Implementation Status 15

4.4 Financing Requirements and Arrangements 16

4.5 Programme Beneficiaries 16

4.6 Macro-Economic and Governance Impacts 16

4.7 Impact on the Business Environment 17

4.8 Impact on Poverty and Gender 17

4.9 Impact on the Environment 17

4.10 Climate Change 17

V – PROGRAMME IMPLEMENTATION, MONITORING AND EVALUATION 17

5.1 Implementation Arrangements 17

5.2 Monitoring and Evaluation Arrangements 18

VI – LEGAL INSTRUMENTS AND AUTHORITY 19

6.1 Legal Instruments 19

6.2 Conditions Precedent to Bank Group Intervention 19

6.3 Compliance with Bank Group Policies 19

VII – RISK MANAGEMENT 20

VIII – RECOMMENDATION 20

__________________________________________________________________________

This report was prepared by Mr. E. DIARRA, Principal Financial Economist (MAFO/OSGE.1) following World Bank and European Union joint preparation and pre-appraisal missions to Rabat in February and May 2012, and the Bank’s appraisal mission in August 2012. It also

received inputs from the Country Economist, ORPF and MAFO colleagues, as well as hired consultants and discussions with World Bank and

European Union Economists. Questions on this report should be referred to Mr. Isaac LOBE-NDOUMBE, Director, OSGE (Ext. 2077) and Mr. Jean-Luc BERNASCONI, Division Manager, OSGE 1 (Ext. 2177).

i

List of Tables

List of Boxes

Box 1 Measures Precedent to PARGEF

List of Figures

Graph 1 Annual Real GDP Growth Rate (%)

Graph 2 Key Macro-economic Indicators (% of GDP)

Graph 3 Distribution of Bank Operations by Sector in Morocco

List of Annexes

Annex 1 Letter of Development Policy

Annex 2 Matrix of Programme Measures

Annex 3 Conditions Precedent to Budget Support

Annex 4 Memorandum on Relations with the IMF

Annex 5 Comparative Socio-economic Indicators

List of Technical Annexes

Annex 1/T Recent Trend of Key Macro-economic and Financial Indicators and

Prospects

Annex 2/T Assessment of Fiduciary Risks and Mitigation Measures

Annex 3/T Development Indicators

Annex 4/T List of Analytical Work Consulted

Annex 5/T Note on the Organic Law Relating to Finance Laws (LOLF)

Annex 6/T Gender-sensitive Budgeting in Morocco

Annex 7/T Note on Compensation Expenses in Morocco

Annex 8/T Summary Note on PARAP

Annex 9/T Overview of Morocco’s Social Sector

Annex 10/T Morocco’s Citizen-centred Budget

Annex 11/T Digital Morocco 2013

Annex 12/T Note on the Moroccan Code of Good Governance Practices

inPublic Enterprises and Establishments

Fiscal Year January - December

Currency Equivalents (September 2012)

UA 1 = Moroccan Dirham (MAD) 13.34

UA 1 = Euro (EUR) 1.21

UA 1 = US Dollar (USD) 1.52

Table 1 Budget Balance and Financing Needs 2012-2015

Table 2 Programme External Financing by Source

ii

Acronyms and Abbreviations

AfDB

ADF

AREF

AWF

BAM

BADR

CIGOV

CMD

CFAA

CSP

CT

CWS

DEPTTI

EU

FB

FDI

FOMAP

GDP

GPEEC

IEM

IMF

IGF

IGM

IMGE

INDH

LOLF

MAD

MEF

MET

MIC

MICNT

MICTAF

MMSP

MN2013

MTEF

PDES

PEE

PEFA

PER

REC

RSO

PARAP

PARGEF

TGR

TOFE

TOFT

UA

WB

African Development Bank

African Development Fund

Regional Education and Training Academy

African Water Facility

Bank AL-Maghrib (Central Bank of Morocco)

Computerized Customs Network Base

E-Government Inter-ministerial Committee

Modulated Expenditure Control

Country Financial Accountability Assessment

Country Strategy Paper

Local Governments

Cities Without Slums

Department of Post, Telecommunications and Information Technologies

European Union

Finance Bill

Foreign Direct Investments

Public Administration Modernization Fund

Gross Domestic Product

Employment, Personnel and Skills Management Planning

Integrated Expenditure Management

International Monetary Fund

General Inspectorate of Finance

General Inspectorate of Ministries

Integrated Management of Government Employees

National Human Development Initiative

Organic Law on Finance Laws

Dirham (Moroccan Currency Unit)

Ministry of Economy and Finance

Ministry of Equipment and Transport

Medium-Income Country

Ministry of Industry, Trade and New Technologies

Medium-Income Countries Technical Assistance Fund

Ministry of Public Sector Modernization

Digital Morocco 2013

Medium-Term Expenditure Framework

Economic and Social Development Programme

Public Enterprises and Establishments

Public Expenditure and Financial Accountability Assessment

Public Expenditure Review

Jobs and Skills Benchmark

Reform Support Operation

Public Administration Reform Support Programme

Support Programme for the Revitalization of Economic and Financial Governance

General Treasury (Trésorerie générale du Royaume)

Table of Government Financial Operations

Table of Treasury Financial Operations

Unit of Account

World Bank

iii

LOAN INFORMATION Client Information

BORROWER : KINGDOM OF

MOROCCO

EXECUTING AGENCY: Ministry of Economy and

Finance (Budget Department)

Financing Plan

Source of Financing

Amount

Instrument

AfDB

EUR 121 M

AfDB Loan

World Bank USD 100 M IBRD Loan

European Union EUR 75 M Grant

Information on AfDB Financing

Loan Currency

Euro

Type of Interest Rate: Floating base rate with free fixing option

Base Rate (Floating) 6- month Euribor

Interest Rate Margin 60 basis points (bps)

Financing Margin: Recalculated twice a year (1 February and 1

August)

Commitment Fee Progressive

Other Fees None

Tenor 20 years maximum

Grace Period 5 years maximum

Activities Date

1. Preparation Mission 30 January-10 February 2012

2. Concept Note Approval 25 July 2012 3. Appraisal Mission August/September 2012

4. Loan Agreement Negotiations 16 October 2012 5. Board Presentation 28 November 2012 6. Signature of Loan Agreement 28 November 2012 7. Effectiveness November 2012 8. Disbursement 31 December 2012 9. Supervision May 2013 10. Completion Report June 2013

iv

PROGRAMME EXECUTIVE SUMMARY

Programme Overview

1. Programme Name: Economic and Financial Governance Revitalization Support Programme

– Phase I «PARGEF-I»

- Geographic Coverage: Nationwide

- Duration: 12 months

- Programme Cost: Not applicable

- Financing: EUR 121 million (AfDB)

USD 100 million (WB)

EUR 75 million (EU)

- Operational Instrument: General budget support

- Sector: Economic and financial governance

2. The Economic and Financial Governance Revitalization Support Programme (PARGEF) is a

reform support operation (RSO) to be financed with a EUR 121 million AfDB loan. Within the context of

the country’s new political, economic and social dispensation, it is intended to support the implementation

of a Government multi-year reform programme called “Hakama”, aligned on the priorities of the new

economic and social development programme, with a single tranche disbursement to finance the National Budget for the 2012 financial year.

Expected Programme

Outcomes and

Beneficiaries

3. PARGEF’s goal is to improve the Government’s budget management and public service

delivery efficiency so as to promote strong and inclusive economic growth. The programme’s specific

objectives are to: (i) strengthen budget management transparency and performance; and (ii) enhance transparency and performance in public service delivery.

4. The overall outcomes expected at the end of Programme implementation include: (i) the

consolidation of the macro-economic framework through budget deficit control and strong economic

growth; (ii) the modernization of the budget system for greater performance and transparency; (iii) the

streamlining of administrative procedures by strengthening e-government to ensure greater access by

citizens to public services; and (iv) the emergence of a new territorial governance.

5. The programme’s ultimate beneficiary is the entire Moroccan population who will enjoy

improved standard of living resulting from sustainable economic growth, equitable redistribution of the

fruits of growth, a more efficient public service and easy access to administrative documents through e-

government. The intermediate beneficiaries are: public services, public enterprises and establishments as well as private economic operators.

Needs Assessment and

Relevance

6. Within the socio-political context that has prevailed in Morocco in recent years, the new

Government formed after the November 2011 legislative elections has formulated an economic and social

development programme for the 2012-2016 period. Adopted by the National Assembly in February 2012,

the programme focuses on five priority thrusts: (i) consolidation of the national identity and preservation

of the coherence and diversity of the country’s component parts; (ii) establishment of the rule of law,

advanced regionalization and good governance; (iii) creation of conditions for a strong, competitive and

job-creating economy; (iv) consolidation of Morocco’s national sovereignty and influence; and (v)

institution of a new social pact that upholds solidarity between social strata, generations and regions while guaranteeing access to quality basic social services.

7. PARGEF is tended to support this new economic and social development programme. It will

support institutional good governance reforms whose implementation will be carried out in successive

phases over the 2012-2015 period. Other co-financiers (World Bank and European Union) have also

agreed to back the programme.

8. The programme adopted is relevant. The main conditions of programme success have been

fulfilled: proper ownership of the programme by the country; close coordination between co-financiers;

fulfilment of the general and technical pre-conditions for this type of programme; compliance with good

practices principles for the application of conditionality; design of a results-based monitoring/evaluation

mechanism. PARGEF’s area of intervention, namely public administration, is relevant to the priorities of the Government’s Programme.

Bank’s Value Added

9. In addition to the experience acquired with PARAP, the Bank intends to provide technical

assistance for building capacity in programme implementation. It will also provide relevant value added

through the inclusion of measures of certain specific sector reforms in the programme matrix, such as the strengthening of sector fiduciary frameworks, notably with regard to Education.

Institution and

Knowledge Building

10. PARGEF will contribute to the institution building of the public administration. Analytical

work as well as the various draft texts examined contributed to knowledge building, which has helped to improve programme design.

v

PROGRAMME RESULTS-BASED LOGICAL FRAMEWORK1

Country and Programme Name: Morocco –Economic and Financial Governance Revitalization Support Programme –Phase I (PARGEF-I)

Programme Goal: Improve the Government’s budget management and public service delivery efficiency so as to promote strong and inclusive economic growth.

RESULTS CHAIN PERFORMANCE INDICATORS MEANS OF

VERIFICATION

RISKS/MITIGATION

MEASURES

Indicator (including CSI) Baseline Situation Target

IMP

AC

T

Improvement of the

Government’s budget

management and

public service

delivery efficiency

contributes to strong

and inclusive growth

Real GDP growth rate 3.7% in 2011 3.4% in 2012

4.0% in 2013

5.3% in 2015

Reports from the

Ministry of Economy

and Finance

Risks/Mitigation

Measures

Risk 1: Change of reform

implementation policy

priorities

Mitigation Measures 1:

High-level commitment in

the implementation of

structural reforms

provided for in the new

Constitution with regard to

governance, transparency

and the fight against

corruption; Strong

ownership of the

programme by the

authorities.

Risk 2: Weakening of the

political situation by

possible resurgence of

social unrest


Social measures provided

for in the 2012 Finance

Law.

Risk 3: Low technical

ownership capacity of the

central government and

local governments.


The programme comprises

a training component. In

agreement with the

Government, technical

assistance will be provided

by programme co-

financiers, either

individually or

collectively.

Regional GDP (Share of GDP of the three

most vulnerable regions2 in overall GDP)

Regional public investment (Share of

public investment of the three most

vulnerable regions in overall public

investment)

2.9% in 2009

4.38% in 2011

4.0% in 2012

4.5% in 2013

5.5% in 2015

5.0% in 2012

5.5% in 2013

6.5% in 2015

Reports from the

Ministry of Economy

and Finance

OU

TC

OM

ES

Outcome 1: Budget

management is more

transparent and more

efficient

1.1: Budget deficit (excluding

privatization)

1.2:PEFA3 indicators:

PI-5

PI-6

PI-9

PI-10

PI-11

PI-12

PI-23

PI-25

PI-26

PI-27

PI-28

6.2% in 2011

A in 2009

B in 2009

B in 2009

A in 2009

A in 2009

C+ in 2009

B in 2009

C+ in 2009

D+ in 2009

B+ in 2009

D+ in 2009

5.0% in 2012

4.5% in 2013

A in 2013

A in 2013

A in 2013

A in 2013

A in 2013

B+ in 2013

A in 2013

B+ in 2013

C+ in 2013

A in 2013

B+ in 2013

Reports from the

Ministry Economy and

Finance

PEFA Report 2013

Outcome 2: Public

service delivery is

more transparent and

more efficient

2.1 Reduction of average time required to

obtain administrative documents (birth

certificates and criminal records)

15 days for birth certificates

in 2011

30 days for criminal records

in 2011

7 days in 2013

15 days for criminal records

in 2013

Reports from the

Ministry of Industry,

Trade and New

Technologies

OU

TP

UT

S

Component 1. Public Finance Management System Reform: public action performance, transparency and budget democracy

1.1: Reform

implementation

institutional

framework is

strengthened

1.1.1: Establishment of a Budget Reform

Inter-ministerial Steering Committee

1.1.1: The Budget Reform

Inter-ministerial Steering

Committee is not

established at end-

December 2011

1.1.1: The Budget Reform

Inter-ministerial Steering

Committee is established

before end-December 2012

General Secretariat of

the Government

1.2: Public action

performance is

strengthened

1.2.1: Establishment of a performance

monitoring and evaluation system

1.2.1: A performance

monitoring and evaluation

system is not established at

end-December 2011

1.2.1: A draft performance


system is prepared before

end-December 2012

Budget Directorate of

Ministry of Economy

and Finance

1.3: Fairness and

transparency in

budget management

are strengthened

1.3.1: Forwarding of the draft decree on

government procurement to the General

Secretariat of the Government by MEF

1.3.1: The draft decree on

government procurement is

not forwarded to the SGG

in late December 2011

1.3.1: The draft decree on

government procurement is

forwarded by the MEF to the

SGG before 30 October

2012

Ministry of Economy

and Finance

Component 2. Enhancement of Transparency and Access to Quality Public Services

2.1: Transparency in

the management of

public services and

citizen participation

are strengthened

2.1.1: Adoption by the Council of

Ministers of the bill on access to

information, in keeping with Article 27 of

the Constitution

2.1.1: The bill on access to

information is not adopted

at end-December 2011

2.1.1: The bill on access to

information is adopted by the

Council of Ministers before

end-2012

General Secretariat of

the Government

2.2: Governance and

access to quality

public services are

improved

2.2.1: Decision by the Inter-ministerial C-

Gov Committee to extend the geographic

and operational coverage of the "Watiqa"

service

2.2.1: The decision by the

Inter-ministerial C-Gov

Committee to extend the

geographic and operational

coverage of the "Watiqa"

service is not taken at end-

December 2011.

2.2.1: The decision by the

Inter-ministerial C-Gov

Committee to extend the


coverage of the "Watiqa"

service is taken before 30

October 2012.

Ministry of 'Industry,

Trade and New

Technologies

2.2.2 : The decision of the Head of

Government setting forth the modalities for

the implementation of the Good

Governance Code in PEEs

2.2.2 : The decision of the

Head of Government

setting forth the modalities

for the implementation of

the Good Governance Code

in PEEs is not taken at end-

December 2011

2.2.2 : The decision of the

Head of Government setting

forth the modalities for the

implementation of the Good

Governance Code in PEEs is

taken before 30 October 2012

Directorate of Public

Enterprises and

Establishments of the

Ministry of Economy

and Finance.

OVERALL PROGRAMME RESOURCES

African Development Bank EUR 121 million

World Bank USD 100 million

European Union EUR 75 million

1 NB: The matrix of measures presents all the measures adopted by the Programme 2 The three most vulnerable regions are: Laâyoune-Saguia Al Hamra (1.4%), Guelmime-Oued Noun (1.2%) and Ed Dakhla-Oued Dahab (0.3%), thus

representing 2.9% of GDP in 2009. 3 The last PEFA Report was published in 2009.

vi

PROGRAMME IMPLEMENTATION SCHEDULE

Description of Activities 2012 2013

T3 T4 T1 T2

1. Loan Appraisal

1.1 Appraisal

1.2 Loan Negotiations

1.3 Loan Approval

1.4 Loan Agreement Signature

1.5 Loan Effectiveness

1.6 Disbursement Authorization

2. Programme Implementation

2.1 Implementation of Measures Reforms Reform Outcomes

3. Programme Supervision and Monitoring

3.1 Bank Supervision

3.2 Auditing

4. Programme Completion

4.1 Preparation of Programme Completion

Report by the Government of Morocco

4.2 Preparation of Programme Completion

Report by the Bank

1

REPORT AND RECOMMENDATION OF MANAGEMENT

TO THE BOARD OF DIRECTORS OF THE AFRICAN DEVELOPMENT BANK

CONCERNING A PROPOSAL FOR A LOAN TO THE KINGDOM OF MOROCCO

TO FINANCE THE ECONOMIC AND FINANCIAL GOVERNANCE REVITALIZATION

SUPPORT PROGRAMME– Phase I (PARGEF I)

I THE PROPOSAL

1.1. Management hereby submits the following proposal and recommendation to grant a loan

totalling EUR 121 million to the Kingdom of Morocco to finance the Economic and Financial

Governance Revitalization Support Programme for the 2012 financial year. Programme appraisal

was carried out in August/September 2012 based on extensive consultations embarked upon with

the Moroccan authorities following the preparation mission undertaken jointly with the World Bank

and the European Union, which are Programme co-financiers. PARGEF is hinged on the strategic

guidelines of the Government’s Medium-Term Economic and Social Development Programme

(PDES 2012-2016), taking into account the principles of the Paris Declaration on Aid Effectiveness

and principles of good practice for the application of conditionality. The Programme is in keeping

with the guidelines of the Bank’s 2012-2016 Country Strategy Paper which lay emphasis on the

strengthening of the governance system and the upgrading of economic infrastructure.

1.2. PARGEF will be implemented over the 2012-2015 period, in successive phases which the

World Bank and the European Union have also agreed to support. The overall objective of

PARGEF-1, the first phase of which is scheduled for 2012, is to improve the Government’s budget

management and public service delivery efficiency in order to promote strong and inclusive growth.

Its specific objectives are to: (i) enhance transparency and performance in budget management

(Component 1); and (ii) enhance transparency and performance in public service delivery

(Component 2). The key expected outcomes of PARGEF-1 include: (i) a rise in the economic

growth rate; (ii) a more substantial contribution by the three most vulnerable regions to gross

domestic product4; (iii) more transparent and efficient budget management, with a marked budget

deficit reduction (excluding privatization); and (iv) more transparent and efficient public service

delivery with a significant reduction in the average time taken to obtain administrative documents.

1.3. The Programme design benefited from extensive consultations involving many

stakeholders, notably the key ministries (Finance, Education, Health, Interior and New

Technologies), the Parliament, the Audit Court, the CGEM as well as civil society and the key

technical and financial partners (WB, IMF, EU, etc.), especially through the Advisory Committee

set up to review the LOLF.

II COUNTRY AND PROGRAMME CONTEXT

2.1 Government’s Development Strategy and Medium-Term Priorities

2.1.1 The Government’s strategy is defined in the Medium-Term Economic and Social

Development Programme (PDES 2012-2016). The strategy is based on the implementation of

strategic reforms and sector policies centred on major infrastructure projects. PDES 2012-2016,

which is a continuation of the previous Government’s action, seeks to meet the challenge of making

the economy competitive, to place it on the path of sustainable and inclusive growth by staying the

reform course to consolidate macro-economic balances, improve the public finance profile, promote

private sector development and reduce poverty. To back up the PDES, second generation reforms

will be undertaken in the coming years through PARGEF, which will continue and consolidate

reforms implemented under the Public Administration Reform Support Programme (PARAP), the

4 The three most vulnerable regions are: Laâyoune-Saguia Al Hamra (1.4%), Guelmime-Oued Noun (1.2%) and Ed Dakhla-Oued Dahab (0.3%), thus

representing 2.9% of GDP in 2009.

2

Financial Sector Development Support Programme (PADESFI), the Basic Medical Coverage

Reform Support Programme (PARCOUM), and the Training and Job Matching Programme.

2.1.2 The Government’s strategic guidelines are based on the diversification of economic growth

sources, the implementation of sector strategies and support to social sectors to preserve the

purchasing power of the population. The Government is also striving to implement local

government sector strategies covering various areas of economic activity. These strategies, which

aim at strengthening key sectors and diversifying the economy’s production base, are intended to

create a new regional development drive. They are in line with the dual objective of modernizing

traditional sectors and developing innovative sectors. The implementation of these short/medium-

term strategies will require an overall budget of about Dirham 700 billion (the equivalent of EUR

64 billion). For the period 2008-2011, State budget annual capital expenditures averaged EUR 5

billion and targeted the development and upgrading of infrastructure, as well the emergence of

regional development poles capable of building local capacity to absorb investments, with a view to

creating conditions for balanced development.

2.2. Recent Economic and Social Developments, Prospects, Constraints and Challenges

A. Recent Political, Macro-economic and Social Developments

2.2.1. At the political level, Morocco enjoys considerable stability, sustained by the strengthening

of the democratization process through the implementation of political governance reforms which

have enabled the country to gradually establish modern political structures, a transparent electoral

system and an increasingly active civil society. However, the ensuing wind of freedom has not

spared the Kingdom the wave of protests that has rocked countries of the sub-region since early

2011. Nonetheless, the constitutional reform approved through the 1 July 2011 referendum should

contribute to reducing tensions, consolidating the principle of balance of powers, entrenching

democracy and giving Morocco a new image on the political scene. The change of power brought

about by the November 2011 elections and the resulting coalition government are an expression of

the Kingdom’s democratic revitalization.

2.2.2. Economically, Morocco has made

significant progress in the past decade, thanks to

the implementation of coherent macro-economic

policies and sustained structural reforms. Despite

a difficult economic environment resulting from a

poor crop year and the persistent crisis in the Euro

zone in 2012, the real GDP growth rate is

expected to stand at 3.4% at end-2012, against

3.7% in 2011 and 3.6% in 2010 (Technical Annex

1/T). This growth level will however remain

above the average level for countries of the sub-

region, thanks to the good performance of non-

agricultural sectors (4.5% growth in 2012). Under the effect of the global economic slump,

Morocco’s external position showed signs of weakness, with a deterioration in its current account

deficit from 4.5% of GDP in 2010 to 6.5% of GDP in 2011, and which, owing to the lingering crisis

in the Euro zone, should deteriorate even further this year and stand at 8.0% of GDP. Consequently,

foreign exchange reserves will move from 5.2 months of imports in 2011 to about 4 months at end-

2012. Inflation is expected to reach 1.4% at the end of 2012. On the whole, inflationary pressure is

restrained by the mitigating effect of the offset mechanism that shields national prices from

variation in world prices, notably the prices of food products and fuels. In 2012, money supply

growth stood at about 5.7% in June, against 4.1% in May.

Overall GDP Non-agriculture GDP

3

2.2.3. Budget (Technical Annex 1/T). The repercussions of regional and international crises since

2009 notwithstanding, the policies conducted have helped to limit the deterioration of the fiscal

position which, after recording a surplus in 2007

and 2008, began showing a deficit from 2009.

Under the combined effect of an increase in

compensatory expenditure (6.1% of GDP) and in

the wage bill (11% of GDP) in 2011, the budget

deficit reached 6.2% of GDP, against 4.6% in

2010. Government intends to contain it at 5% in

2012, thanks notably to greater compensatory

expenditure control. On that score, the Government

is determined to undertake the reform of the

Compensation Fund. Consultations with the key

economic and institutional actors concerned as well

as representatives of consumer protection

associations are underway to find effective solutions (Technical Annex 7/T). To contain the budget

deficit, the Government is also relying on improved mobilization of tax revenue (increase of about

10% compared to 2011). The European Union will support this tax component under PARGEF.

Furthermore, the Government plans to continue efforts to improve the results-based budget

management framework, especially through reforms of the Organic Law on Finance Laws (LOLF).

2.2.4 Public debt (Technical Annex 1/T), stood at 53.6% of GDP in 2011, slightly above the

50% of GDP generally considered as desirable for an emerging country. The bulk of the debt is

contracted on the domestic market. Under the 2012 finance bill, the Government also plans to

borrow MAD 20 billion on the external market, mostly in the form of loans from multilateral

institutions (African Development Bank, Islamic Development Bank, etc.) at concessional rates to

finance Government programmes.

2.2.5. At the social level (Technical Annex 9/T), Morocco has placed the human component at

the centre of development initiatives through various Government anchor programmes, the most

illustrative of which is the National Human Development Initiative (INDH) launched in 2005.

Driven by this Initiative, the national average unemployment rate remained below 10% and dropped

from 8.9% in 2010 to 8.4% in 2011 and 8.1% in the second quarter of 2012. As concerns gender,

adult illiteracy rate is higher among women who represent 75% of illiterates in rural areas. With

regard to the fight against poverty and social exclusion, the Government launched the “Cities

Without Slums” (CWS) programme in 2006, with 2012 as the target year. The Bank supported this

programme through PADESFI-2 in 2011. Under the 2012 budget, the Bank will continue to back

Government’s efforts at strengthening domestic growth, promoting investments and developing

inclusion and social solidarity mechanisms for which a budget of MAD 2.5 billion has been set

aside (Technical Annex10/T).

B. Prospects, Constraints and Challenges

2.2.6. Prospects: the Government has decided to continue efforts started during the last five years

(2007-2011), be it in the area of major structuring projects or the deepening of on-going macro-

economic reforms that were supplemented and strengthened by the 2011 constitutional reform as

well as the LOLF reform whose objective is to enhance transparency, performance and quality in

public expenditure management. These efforts contribute to the bright medium-term economic

growth prospects noted, with a growth forecast of about 5% by 2016. The non-agricultural sector

will continue to drive the economy, with an average annual growth rate of about 5% from 2013.

The budget deficit is expected to drop to 3% of GDP in the medium term, notably thanks to the

compensation system reform which will help to reduce related expenditure from 4% to 2% of GDP

by 2013 and 2016, respectively. In contrast, inflation may record upward pressure and reach 2%.

Investment

Graph 2 : Key Macro-economic Indicators (GDP%)

Current acct. Balance

( straight axis)

National savings

Budget balance

( straight axis)

4

2.2.7. Constraints: the relatively heavy wage bill and compensation burden on the State budget

(about 18% of GDP) is a major obstacle to the control of budget balances and the improvement of

the quality and impact of public spending on the national economy. Moreover, in spite of reforms

undertaken, notably with regard to the promotion of good governance, it must be acknowledged that

there are persistent gaps between efforts made and the real effects felt by the population. Hence,

despite all the achievements recorded in the area of public management, several weaknesses have

been highlighted, especially in the management of government procurement, participation,

transparency and accountability, as well as the public sector’s capacity to provide quality services to

citizens.

2.2.8. Challenges: over the last decade, Morocco forcefully embarked on the drive to diversify

its economy, strengthen its competitiveness, improve the business climate and modernize public

administration. However, in view of recent social

demands for more transparency and social justice within

the context of the “Arab Spring”, it seemed necessary to

refocus public action even more, for it to be better

perceived and felt by the citizens. In that connection and

following His Majesty’s speech in March 2011 which

outlined a far-reaching constitutional reform capable of

meeting the expectations of the Moroccan people, a new

Constitution was adopted in July 2011. Among other

things, it entrenches the principle of good governance,

transparency and performance in public resource

management, accountability of managers, advanced

regionalization and local capacity building to improve

access by disadvantaged groups to basic infrastructure

and social services. The Government’s challenge is to translate these priorities into concrete actions

consisting notably in: (i) strengthening economic governance through greater transparency and

accountability; (ii) supplementing the compensation system reform with a more focused transfer

mechanism and better social protection; (iii) strengthening public finance viability in the medium term,

thanks to greater public expenditure efficiency and increased revenue; and (iv) promoting strong and

inclusive growth through job-creating reforms to solve the problem of youth unemployment. In

particular, PARGEF intends to address challenges (i), (iii) and (iv) through support to reforms

included in the first component. As concerns the compensation system challenge, the measures

taken by the Government are outlined in Technical Annex 7/T.

2.3 Status of Bank Portfolio

2.3.1. As at 16 October 2012, the Bank’s active portfolio in Morocco had increased by 7.8%

compared to 2011, with net commitments rising from UA 1.8 billion to about UA 2 billion during the

period under review. Loans amount to UA 1 893 million (99.6% of the portfolio made up of

infrastructure projects and public sector reform support programmes (89.4% and 10.6%, respectively),

that is 16 projects and programmes, each operation averaging approximately UA 120 million.

Operations financed with grant resources amount to UA 6.7 million (0.4% of the portfolio). These

comprise 11 operations (10 technical assistance studies financed by the Middle Income Countries

Technical Assistance Fund – MICTAF, and 1 Grant from the African Water Facility- AWF).

2.3.2. The disbursement rate reached 38.7% in October 2012 compared to 40.5% during the same

period in the previous year. This disbursement level is beyond the 2012 target both for Morocco (30%)

and the Bank as a whole (32%). Public sector reform support operations are recording better

performance with an average disbursement rate of 98.9% and a relative age5 of 0.26 year, against

5 Relative age (ratio ≤ 1): Age of the project since its effectiveness in relation to the period between effectiveness date and closing date as

provided for at project appraisal

5

18.4% and 0.7, respectively, for the rest of the portfolio. This good performance in the implementation

of public sector reform support operations bears testimony to the quality, regularity and proximity of

Bank dialogue with the Government. It is also worth noting that good government ownership is a

factor of good portfolio performance.

III RATIONALE, MAIN ELEMENTS OF PROGRAMME DESIGN AND

SUSTAINABILITY

3.1 Linkages with CSP, Assessment of Country Preparedness and Underlying Analytical

Elements

3.1.1. During the 2002-2011 period, Morocco embarked on a series of far-reaching

administration reforms through PARAP, thanks to which the country achieved significant

outcomes. Implemented gradually (Phases 1 to 4), PARAP focused specifically on: (i) the

implementation of experimental reforms with the preparation of budget and human resource

management tools; (ii) the extension of reform implementation beyond target ministries; and (iii)

sustained wage bill reduction. Hence, these experimental and gradual reforms must conform to a

unified legal framework to enhance their application. In this way, the constitutional change that

entrenches good governance and places the citizen at the centre of public action (accountability by

managers, access to information, quality public services) should further consolidate the

performance of the new management tools introduced by PARAP.

3.1.2. Linkages with the CSP: PARGEF is in keeping with the new Government policy,

particularly through strategic thrusts (ii) and (v) namely: (1) the establishment of the rule of law,

advanced regionalization and good governance, and (2) the institution of a new social pact that

upholds solidarity between social strata, generations and regions, while guaranteeing access to

quality basic social services. In addition, PARGEF is in line with the guidelines of the 2012-2016

Country Strategy Paper, which has the strengthening of governance and social inclusion as its first

pillar. Moreover, it is aligned on the governance strategy (GAP) and the Bank’s long-term strategy,

currently being finalized. Among other things, the latter focuses on support for the establishment of

more transparent and accountable governance that seeks to include civil society actors with a vital

role to play in making governments and service providers accountable for their actions.

3.1.3 Conditions Precedent to Budget Support Implementation

3.1.3.1 Morocco had a Country Policy and Institutional Assessment (CPIA) rating of 4.2 in

2011 and fulfils the conditions precedent to a programme support operation6 at both the general and

technical levels (Annex 3). Generally, the country enjoys political and economic stability and

Government's commitment to conduct reforms has been constantly demonstrated. Morocco's

economic performance has been good in recent years and, technically, the country meets the core

6 Bank Group Policy on Programme Support Operations (PSO) - ADB/BD/WP/2011/68/Rev.3/Approval – ADF/BD/WP/2011/38/Rev.3/Approval

6

___________ 7 An information note was published to that effect on the IMF website in August 2012. 8 Four phases of the Financial Sector Support Programme (PASFI-I to IV); two phases of the Financial Sector Development Support

Programme (PADESFI-I & II); four phases of the Public Administration Reform Support Programme (PARAP-I to IV); two phases of the

Medical Coverage Support Programme (PARCOUM-I & II); the Education System Emergency Plan Support Programme (PUEN)

pre-conditions requiring the existence of a medium-term programme, public finance management

system and institutional capacity.

3.1.3.2 Morocco has also received a high credit rating in recent years and was recently rated

“Investment Grade” by Standard & Poor's and Fitch (2011). In 2012, Morocco has been rated by

these same agencies respectively BBB-/Stable/A-3 and BBB-/Stable/F3. The Bank’s Risk

Assessment Department (FFMA) submitted to the Board of Directors a Summary Note on

Morocco’s country risk which confirmed the country’s rating in the "Low Risk" category for 2011

and in the "Low Risk/Stable” category for 2012. The Summary Note, which is in line with both the

March 2011 Guidance Note on "Fiduciary Risk Management Framework for AfDB Reform Support

Operations " and the new March 2012 Bank RSO Policy, reflects Morocco’s resilience in the face

of the global financial and economic crisis and the recent socio-political events in North Africa. It

is also reinforced by the opening by the IMF in August 2012 of a Precautionary and Liquidity Line

(PLL) amounting to USD 6.2 billion for Morocco7. The PLL offers Morocco a guarantee to meet

immediate financing needs in the event of balance of payments risks occurring (Annex 4).

Furthermore, ORPF reviews deemed the fiduciary framework for both procurement and financial

management satisfactory (Technical Annex 2/T). In addition, it is worth noting the existence of a

framework for harmonization of governance aid.

3.1.4. Analytical work: the list of analytical work consulted is given in Technical Annex 4/T of

this report. These studies have shown the importance of the following elements for strong and

inclusive economic growth included in PARGEF: (i) consolidation of the macro-economic

framework through budget deficit control; (ii) modernization of the budget system for greater

performance and transparency; (iii) streamlining of administrative procedures by strengthening e-

government to ensure greater access by citizens to public services; and (iv) emergence of new

territorial governance.

3.2 Collaboration and Coordination with other Donors

There is a "Governance" Thematic Group in Morocco bringing together technical and

financial partners to promote dialogue and exchange of information on governance. As part of the

partnership between donors, joint operations have been implemented successfully for many years

now between the AfDB, the World Bank and the European Union (PARAP, PADESFI, etc.). In

particular, programme design and monitoring/evaluation have been carried out in a coordinated and

harmonized manner, including the provision of technical assistance to support reform programmes.

This experience of coordination and harmonization between the Bank, the World Bank and the

European Union is being pursued under this programme in line with the guidelines of the Paris

Declaration on Aid Effectiveness, especially by supporting, as in previous programmes, the same

reforms on the basis of a joint matrix of programme measures.

3.3 Outcomes and Lessons from Past Similar Operations

The Bank has financed many budget support programmes in Morocco8. Completion reports

for these programmes and the evaluation conducted by OPEV in Morocco (1999-2009) highlighted

the country’s good performance in implementing the programmes and strong ownership of

programme measures. With specific regard to PARAP which was broken down into four successive

phases (Technical Annex 8 / T), its implementation demonstrated the merits of a programme

approach with a single disbursement for each phase. Thus, this programme has been designed based

on the same approach, taking into account the lessons learned from PARAP, and will be

implemented in several successive phases, each with a single disbursement. In addition, the various

7

PARAP completion reports identified the need to strengthen monitoring and inter-ministerial

coordination in the implementation of reforms. Building on the lessons from PARAP, it was

deemed necessary, under PARGEF, to set up a steering unit charged with specific missions.

3.4 Linkages with Other Bank Operations in the Country

PARGEF implementation will consolidate the reforms carried out under the previous

PARAP budget support. Moreover, the programme will support measures that help to strengthen the

fiduciary framework for financial management in the education sector in order to reinforce the pre-

conditions for budget support in the sector. Specifically, it will support the conduct of a study for

the institution of general accounting and internal audit committees in AREFs. Furthermore, the

adoption of the new decree on government procurement will contribute to the use of the national

system, thus facilitating the implementation of Bank projects in Morocco.

3.5 Bank’s Comparative Advantages and Value Added

The Bank has gained experience with PARAP and other sector budget support operations.

In addition, it contributes substantial value added through the institutional support operations it will

provide for implementing this Programme, especially on two counts: (i) the development of a

framework for monitoring/evaluation of the LOLF; and (ii) the development of a Regional Strategy

for e-government. It will also provide relevant value added by including in the matrix of measures

some specific sector reforms aimed particularly at strengthening the fiduciary framework of some

sectors, for instance education. It will be recalled that the Bank has already financed about ten

reform support programmes in Morocco in several sectors, including the education, health,

transport, drinking water and financial sectors. Therefore, the Bank has a thorough knowledge of

the various sectors of the Moroccan administration enabling it to play an important role in PARGEF

design and implementation monitoring. In this regard, it has been able to maintain a high-level

quality dialogue with the authorities to better target reforms.

3.6 Good Practice Principles for the Application of Conditionality

3.6.1. The design of PARGEF-I took into account good practice principles for the application of

conditionality. Indeed, the Programme retains a limited number of conditions precedent to Board

presentation (4) that were selected based on their soundness and overarching importance vis-à-vis

Programme objectives, and the high likelihood of government ownership. Similarly, a single

condition precedent to disbursement was retained. The Bank’s support will also be aligned on the

country’s budget cycle.

3.6.2. The Bank, the World Bank and the European Union, all three supporting PARGEF,

engaged in sustained dialogue during various programme preparation and appraisal missions to

strengthen the synergy and coherence of their respective operations. An accountability framework

(a common matrix of measures) has been developed in a coordinated manner by the Government

and various donors to particularly harmonize the choice of major reforms and the modalities for

monitoring their implementation.

3.7 Application of the Bank's Non-Concessional Lending Policy

The Programme will be financed from the AfDB window in accordance with the Bank's

policy on such lending.

8

IV PROPOSED PROGRAMME AND EXPECTED OUTCOMES

4.1. Programme Goal and Objectives

4.1.1. PARGEF’s goal is to improve government’s efficiency in budgetary resource management

and provision of quality public services, in order to promote strong and inclusive economic growth.

Specifically, it aims to strengthen: (i) budget management transparency and efficiency by

implementing a reform of the public finance management system focused more on transparency,

government performance and budget democracy; and (ii) transparency and performance in public

service delivery by improving transparency and access to quality public services.

4.1.2. Extending PARAP to consolidate its achievements, PARGEF is expected to enable,

particularly: (i) the consolidation of all new budget management tools designed under PARAP in a

unique, consistent and legal architecture that not only establishes the principle and methods of their

use, but also permits stakeholder involvement (Government, Parliament, Audit Court, civil society)

especially in terms of access to information and control; (ii) an extension and greater targeting of

electronic administrative simplification tools for citizens by facilitating the population’s access to

routine administrative services; and (iii) better inclusion of transparency and performance in the

provision of public services by public enterprises and establishments (PEEs) to improve the quality

of service offered to citizens.

4.2. PARGEF Components, Objectives and Expected Outcomes

4.2.1. Similar to other countries in the region, Morocco has experienced events that have

highlighted the need to establish a relationship of trust between citizens, their government and the

administration. Such trust can only be based on participation, transparency and accountability, as

well as the public sector's ability to live up to the legitimate expectations of the population. Thus,

the New Constitution (Good Governance, Part XII, Art. 154-171) entrenches the principles of

participation, responsibility, transparency, moralization of public life, equal access to public

services and accountability. Furthermore, the orientations of the advanced regionalization project

reiterate and support territorial organization for better participation and consideration of citizens’

needs. As one of the responses to these claims, the budget management system reform seeks to

modernize, optimize and streamline the financial resource management process by putting the

manager and the citizen back at the heart of the concerns of public policy, and focusing on the quest

for performance in public expenditure.

4.2.2. In this context, this Programme will focus on enhancing transparency and performance in

budget management, based on an approach that lays greater emphasis on improving citizens' access

to quality public services. To this end, the Programme focuses on two components: (i) Public

Finance Management System Reform: Government Action Performance, Transparency and Budget

Democracy; (ii) Improving Transparency and Access to Quality Public Services. The two

components of the Programme are closely interrelated and complementary: the first improves,

through the normative framework, transparency and budget management performance. In terms of

budget execution, this condition is imperative for improving transparency and the performance of

public services - the subject of the second component. The various measures supported by PARGEF

are described in the matrix of measures (Annex 2).

4.2.3. As with PARAP, PARGEF adopts a programmatic approach, aligning reforms to be

implemented in successive phases. The first of such reforms is translated through this Programme,

hence its name PARGEF-I. Under these conditions, some reforms will be fully operational only at

the end of the Programme. As examples, the Programme includes: (i) the preparation of a draft

LOLF in 2012, the implementing orders of which will be published in 2014; (ii) the preparation of

the new budget nomenclature in 2012 with a view to generalization of credit transferability in 2015;

9

and (iii) the establishment of the IEM system platform in 2012 for access by all local governments

in 2015.

COMPONENT 1: Public Finance Management System Reform: Government Action

Performance, Transparency and Budget Democracy

4.2.4. This component is divided into three sub-components: (i) Institutional Framework for

Reform Implementation, which focuses on the establishment of a normative institutional framework

for budget management; (ii) Government Action Performance based on a system of performance

monitoring and evaluation, and the operationalization of a new performance-based budget

management method; and (iii) Budget Fairness and Transparency ,which focuses on the integration

of public establishments and enterprises in the performance-based approach, reform of the

government procurement system and computerization of the public expenditure management

system.

Sub-component 1.A: Institutional Framework for Reform Implementation

4.2.5. Initial Context and Rationale

For several years now, Morocco has embarked on a major project to reform its public

administration. To accompany this reform process and modernize the general framework for its

implementation, the revision of the LOLF was initiated. The LOLF is considered the preferred

instrument of public action commitment, implementation and control (Technical Annex 5/T). The

new LOLF being validated in the institutional channels is a recast of the budgetary programming,

implementation and control framework and tools. It falls in line with the move to enhance

managerial accountability, establish a new culture of performance, accountability and enhanced

transparency. It is the culmination of a long process that started with PARAP and its legal,

institutional and operational consolidation is a major focus of PARGEF.

4.2.6. PARAP Answers and Achievements

Under PARAP, the reforms of the Administration helped to develop and test new budget

management principles, methods and instruments, and to promote the development of the

Administration’s human resources. The reforms implemented focused mainly on MTEF

development, credit transferability, contracting, devolution, evaluation and performance audits.

Officially announced by the MEF before Parliament during the preparation of the 2009 Finance

Law, the revision of the LOLF was included in a PARAP IV sub-component entitled "Reform of the

Organic Finance Law ". In this respect, a think tank on the LOLF reform was set up by the

Government and it produced the draft LOLF currently being discussed and finalized.

4.2.7. Outstanding Challenges

The new constitutional provisions institute a novel public consultation approach involving

increased availability of budget and financial information to citizens to enable better legibility of

budgetary choices and increased participation of Parliament. In this regard, the LOLF drafting

process was revived with the establishment of an advisory committee comprising the various

stakeholders (Secretaries-General of ministries, the Parliament, the Audit Court, CGEM, civil

society, etc.). In this context, three major challenges remain: (i) rendering coherent all budget

management components and tools in a single normative framework, namely the new LOLF; (ii)

completing the consultation process leading to the finalization and adoption of the LOLF to enable

it to come into force from 2013; and (iii) operationalizing the LOLF whose implementation could

receive technical assistance from the Bank.

10

4.2.8. Actions Planned Under PARGEF-I

4.2.8.1. Actions supported by PARGEF-1 in this sub-component include: (i) the new LOLF

institutional and steering framework; (ii) its implementation action plan; (iii) the plan for training

stakeholders in PARGEF-I implementation; and (iv) the communication plan to support its

implementation.

4.2.8.2. Concerning the new LOLF institutional and steering framework, the programme

provides for: (i) the setting up of a Budget Reform Inter-ministerial Steering Committee comprising

Secretaries-General of ministries, at the inter-ministerial level; and (ii) at ministerial level, the

formation of a committee to steer the reform implementation in the various ministries and the

appointment, in each ministry, of an LOLF officer in charge of monitoring reform implementation

in the ministry.

4.2.8.3. For other measures, the following tools will be developed: (i) a draft action plan for

LOLF implementation, specifying the ministry, the aspect of the reform and an implementation

schedule; (ii) a draft training plan consistent with the action plan, to support reform implementation;

and (iii) a draft plan of internal and external communication on fiscal reform.

4.2.9. Expected Outcomes

The establishment of an efficient institutional framework for implementation of the LOLF

reform should help to maintain in 2013 the PEFA indicator PI-11 "Organized and participatory

nature of the annual budget preparation process" at its 2009 “A” score.

Sub-component 1.B: Government Action Performance: Results-based Management and

Managerial Accountability


4.2.10.1. Redesigning the budget management system cannot overlook the need to develop

mechanisms to better measure and monitor the performance of government action in the context of

results-based management and managerial accountability. Thus, the new LOLF should uphold and

enhance the performance-based approach.

4.2.10.2. In this regard, the quest for performance also addresses the dual issue of

simplification and improvement of budget information availability to Parliament and the public,

with a view to enhancing parliamentary debate during the budget preparation and evaluation phases.

It helps to define and monitor government priorities and enriches the parliamentary debate by

focusing discussions on performance perspective, and steering them more towards public

expenditure effectiveness and efficiency.


4.2.11.1. Through its successive phases, PARAP adopted MTEFs as an ideal framework for

multi-year budget programming likely to enhance the effectiveness of state intervention and the

quality of public service delivery by setting productivity and cost-control goals. Therefore, the

introduction of the multi-year dimension has contributed to improving the overall performance of

the Administration without upsetting the annual budgeting principle governing the budgetary

process. With the generalization of three-year rolling MTEFs, managing bodies now have an

efficient tool for improving conditions for the preparation of the finance law that fits squarely into

the normal budgetary process.

4.2.11.2. Performance audits were institutionalized under PARAP and the task entrusted to the

General Inspectorate of Finance (IGF). Partnership protocols between the IGF and the General

Inspectorate of Ministries (IGM) were also adopted to improve the latter’s performance audit

capacity. Thus, based on such capacity and to assess the performance of government departments,

11

the Government undertook to conduct performance audits in most departments and consolidate

them in a summary report.


Challenges to the operational implementation of the new management method are closely

linked to greater control and coordination by the Government. The implementation of PARAP was

mainly coordinated by a few key ministries. This approach failed to generalize the implementation

of reforms. For PARGEF-1, fiscal reform implementation primarily entails the development of

coordination bodies and entities providing strategic and operational support to its implementation at

inter-ministerial level and within each service.


4.2.13.1. PARGEF-1 will support actions related to: (i) steering of the performance monitoring

and evaluation system; and (ii) operational implementation of the new performance-based budget

management method.

4.2.13.2. With regard to the steering of the performance monitoring and evaluation system,

PARGEF-1 will support the development of a performance monitoring and evaluation system,

including: (i) the establishment of an inter-ministerial mechanism for validating programmes and

the performance-based approach in sector ministries; (ii) the development of a performance

monitoring system in the MEF and pilot ministries; (iii) the conduct of performance audits; and (iv )

possibly, the conduct of performance evaluations by external experts.

4.2.13.3. Concerning the implementation of the new performance-based budget management

method, PARGEF-1 envisages the following actions: (i) development of a new budget

nomenclature to accompany the new LOLF; and (ii) appointment of programme managers by the

pilot ministries, specifying their roles and responsibilities in accordance with the new budget

management.


The implementation of these actions should help to improve the following PEFA

indicators: (i) PI-12 "Multi-year perspective in budget planning and public expenditure policy"

which should improve from C+ in 2009 to B+ in 2013; (ii) PI-5 "Budgetary classification " which

should be maintained at its 2009 A score in 2013; (iii) PI-6 "Completeness of information in budget

documentation" which will move from B in 2009 to A in 2013; and (iv) PI-25 "Quality and

timeliness of annual financial statements" which should score B+ in 2013 up from C+ in 2009.

Sub-component 1.C: Fairness and Transparency: Promoting Accountability


The involvement of various State structures in the performance process is an important

move that enhances the transparency and performance of government action and improves its

consistency. Similarly, the quality of the government procurement system regulatory framework is a

core area of reform for greater efficiency and effectiveness of government action, as is the public

expenditure execution system.


Actions undertaken with support from PARAP enabled: (i) greater flexibility and

timeliness of expenditure, thanks to the introduction of modulated expenditure control and the

operationalization of the Integrated Expenditure Management (IEM) system; (ii) the development

12

of procedures manuals for government procurement control and commitment accounting; and (iii)

the institution of a procurement electronic portal to enhance procurement transparency.


To expand and consolidate PARAP achievements, PARGEF-1 must meet challenges,

including rendering the regulatory and PEE budget management frameworks consistent with those

devoted to central government finance. Government procurement regulations must also be revised

to achieve transparency, enshrine non-judicial redress and ensure the unity of the regulatory

framework across the entire public sector, including PEEs. Thus, the actions of PEEs can be better

taken into account and made visible in budget documents and prospective/retrospective

performance drafts/reports. Their contribution to public policy objectives could be guided by the

development of programme contracts with the State by ensuring their consistency with prospective

performance documents of ministries. To extend the IEM system to local governments and develop

the supplier IEM system for monitoring suppliers’ claims, the computerization of the public

expenditure management system should also be strengthened.


4.2.18.1. PARGEF-1 will support actions in the context of: (i) transparency and coherence of

government actions and financing through the integration of various State structures; (ii)

transparency and equal access to government procurement; and (iii) computerization of the public

expenditure management system.

4.2.18.2. Regarding the transparency and coherence of government action and financing,

PARGEF-1 plans to conduct a study on the financial control of PEEs, including redesigning their

segmentation. Concerning government procurement, PARGEF-1 makes provision for: (i) the

transmission of the draft decree on government procurement by the Ministry of Economy and

Finance to the General Secretariat of the Government (condition precedent to Board presentation);

and (ii) the adoption of the following instruments: the draft decree on government procurement; the

ministerial order specifying the PEEs governed by these new regulations; the draft decree

establishing the National Tenders Board to improve the non-judicial redress system; the national

strategy for training on government procurement. Lastly, with regard to the computerization of the

public expenditure management system, the programme provides for the establishment of the IEM

platform for five (5) pilot local governments and the IEM supplier platform for suppliers to enable

them to monitor the processing of their claims.


The implementation of these policies should help to improve the PEFA PI-9 indicator

"Monitoring the aggregate fiscal risk attributable to other public sector entities", which should

improve from B in 2009 to A in 2013. Similarly, for government procurement, the OECD/DAC

sub-indicators achieved should rise from 78% in 2011 to 85% in 2013.

COMPONENT 2: Improving Transparency and Access to Quality Public Services

. PARGEF is anchored on the new Constitution and the new good governance principles

enshrined therein in terms of accountability in public management, transparency and participation.

As such, it includes reforms to implement these good governance principles and the new

constitutional rights of access to information and public consultation. The second component of

PARGEF-1 is essentially designed to meet these challenges. It revolves around two sub-

components: (i) transparency in public management and citizen participation; and (ii) governance

and access to quality public services.

13

Sub-component 2. A: Enhancing Transparency in Public Management and Citizen Participation


To date, information on government action and particularly budget information has

remained inaccessible to the majority of citizens despite its strategic importance. Besides the

difficulty of having access to budget data provided by the MEF, some citizens find it difficult to

read and understand the provisions of budgetary framework instruments, hence the need to render

them easier and more accessible to ordinary citizens. To address this shortcoming, the new

Constitution gives priority to collective action and to the principles of participation, responsibility,

transparency, morality in public life, equal access to public service and accountability.


Under PARAP, the focus was mainly to streamline administrative procedures through e-

government, including: (i) the establishment of an institutional framework for streamlining

administrative procedures and developing e-government; (ii) the establishment of a government

procurement decision base covering all ministries and local governments; and (iii) the stabilization

of the BADR system that electronically handles over 90% of customs declarations.


The challenges still to be met after the first generation reforms consist primarily in

promoting citizen-focused budget debate, the right of citizens to access information held by the

Administration and the public consultation process.


4.2.24.1. These actions are aimed at: (i) deepening budget democracy, especially with better

information and increased powers to Parliament; (ii) financial transparency with the promotion of

citizen-focused budget debate; (iii) implementing Article 27 of the new Constitution confirming the

right of citizens to access information held by the Administration; and (iv) developing public

consultation processes.

4.2.24.2. Concerning the deepening of budget democracy, PARGEF-I plans to support the

2013 FB of 10 of the 14 reports provided by the draft LOLF, including, in particular, those relating

to public debt, compensation expenditure and the wage bill. Regarding financial transparency

related to citizen-focused budget debate, the programme will support the implementation of the

following measures: (i) the adoption of a decision by the MEF to formalize public dissemination of

budget information, including a document on fiscal guidelines, the draft budgets of sector

ministries, cumulative monthly budget execution reports per ministry and corpus, and a pro-citizen

budget (Technical Annex 10/T); and (ii) the development of a communication strategy paper for the

dissemination of public financial information. As regards the right of citizens to access information

held by the Administration, the programme provides for the adoption by the Council of Ministers of

a bill on access to information, consistent with Article 27 of the Constitution. As for the

development of public consultation processes, the programme makes provision for a circular by the

Head of Government mandating publication of all bills and draft regulations prior to their

submission to the Council of Ministers for approval.


The implementation of these actions should improve the following PEFA indicators: (i) PI-

6 "Completeness of information in budget documentation", which is expected to improve from a B

in 2009 to an A in 2013; (ii) PI-27 "Review of the annual finance law by the legislature" from B+ in

14

2009 to A in 2013; (iii) PI-28 "Review of external audit reports by the legislature", which will move

from D+ in 2009 to B+ in 2013; (iv) the maintenance in 2013 of indicator PI-10 "Public access to

key budget information" at its 2009 A rating, and improvement of the indicator; and (v) PI-26

"Scope, type and monitoring of the external audit", which will improve from D+ in 2009 to C+ in

2013.

Sub-component 2.B: Governance and Access to Quality Public Services


Based on the general perception of the quality of public services by Moroccan citizens,

much remains to be done in this area. Therefore, it is necessary to move towards new modes of

management focused on strengthening citizen-government relationship based primarily on the new

concept of authority which highlights closeness to citizens, mutual trust, protection of freedoms and

social inclusion, among others. Cognizant of this need, and in response to the high aspirations of the

population, the new Constitution widely enshrined the principles of good governance in terms of

transparency, access to information, consultation and improved access to quality public services

throughout the public sector (central government, PEEs and LGs). Due to the importance of

strengthening local governance and community public services, special attention should be paid to

enhancing e-government and PEE and LG governance.


PARAP mainly enabled the simplification of administrative procedures through the

development of e-government in some specific areas not necessarily affecting the entire population.

In particular, these include: (i) the establishment of an institutional framework for the

implementation of the Digital Morocco 2013 programme; (ii) the development of the BADR system

which currently covers over 90% of customs transactions; (iii) the generalization of the on-line

government procurement portal to all government departments to enable the

downloading/uploading of tenders, terms of reference and results, and the extension of e-

procurement tools to PEEs under state control and LGs.


. To improve citizens’ access to government services through e-government, the main

challenge is to better target needs and extend the geographic reach of services provided in this form.

Similarly, services provided by PEEs and local governments cannot be truly efficient and of good

quality if good governance mechanisms do not guide their operation - hence, the need to integrate

these new dimensions through PARGEF.


4.2.29.1. These actions concern: (i) e-government; (ii) good governance of PEEs; and (iii)

strengthening of local governance.

4.2.29.2. As regards e-government, actions envisaged in the Programme entail, firstly, "the

decision of the Inter-ministerial C-Gov Committee to extend the geographic and operational

coverage of the “Watiqa” service" (condition precedent to Board presentation). Watiqa is an

online service for ordering administrative documents, currently covering only birth certificates for

the Rabat Region (Technical Annex 11/T). In addition, a new agreement between the Ministry of

Foreign Affairs and International Cooperation, the Ministry of Industry, Trade and New

Technologies and the Postal Department will be signed to extend the geographical and operation

coverage of the Watiqa service to Moroccans born abroad. Plans have also been made to increase

the number of municipalities benefiting from the Watiqa service and the type of administrative

15

documents that can be ordered online, such as criminal record, residence permit, life or death

certificates, cadastral documents or payment of vehicle tax.

4.2.29.3. Regarding good governance of PEEs, the programme provides for: (i) "the decision

of the Head of Government to lay down the procedures for implementing the PEE Good

Governance Code " (condition precedent to Board presentation); this code was adopted and

launched in March 2012 (Technical Annex 12/T); (ii) the adoption of the good governance code

implementation action plans by the Boards of Directors of two (2) public enterprises and three (3)

public establishments; and (iii) "the issuance of invitations to tender by at least 12 of the 16 AREFs

for the recruitment of consulting firms responsible for the study on the implementation of general

accounting in AREFs "(condition precedent to Board presentation); the issuance of this invitation

to tender could enable the strengthening of the AREF fiduciary framework starting 2013

(implementation of general accounting, setting up and installation of internal audit committees),

thereby facilitating the possibility of budget support in the education sector.

4.2.29.4. Concerning the strengthening of local governance, the Programme provides for the

adoption by the Council of Ministers of the implementing decree of the 2009 amended Municipal

Charter (Law No. 78 00) on transparency and access to information, particularly financial and

regulatory information.


The implementation of the adopted actions should contribute to: (i) reducing, between

2011 and 2013, the average time for obtaining administrative documents notably from 15 to 7 days

for birth certificates, and from 30 to 15 days for criminal records; (ii) improving, especially

concerning AREFs, PEFA indicator PI-23 "Availability of information on resources received by

primary service delivery units " from B in 2009 to A in 2013.

4.3. Programme Implementation Status

As part of the preparation of this operation and in accordance with the conditionality

principles, the Government and the Bank have jointly identified a set of preliminary measures to be

taken before presenting the operation to the Board. The preliminary measures are presented in Box

1 below.

Box 1: Measures Precedent to PARGEF I

1. Transmission of the draft decree on Government procurement by the Ministry of Economy and Finance to the General

Secretariat of the Government;

Evidence required: Draft decree on Government procurement and its transmittal letter from the Ministry of Economy and Finance

to the General Secretariat of the Government.

2. Decision by the Inter-ministerial C-Gov Committee to extend the geographic and operational coverage of the "Watiqa"

service;

Evidence required: Minutes of the meeting of the Inter-ministerial C-Gov Committee.

3. Head of Government’s Decision laying down the procedures for implementing the Good Governance Code for Public

Enterprises and Establishments

Evidence required: Head of Government’s Circular laying down the procedures for implementing the Good Governance Code for

Public Enterprises and Establishments.

4. Issuance of invitations to tender by at least 12 of the 16 AREFs for the recruitment of consulting firms responsible for the

study on the implementation of general accounting in the said AREFs;

Evidence required: Copies of the publication of at least 12 invitations to tender in newspapers or Government procurement portal

for the recruitment of consulting firms responsible for the study on the implementation of general accounting in the said AREFs.

16

4.4. Financing Needs and Arrangements

4.4.1. In 2012, the financing needs of the Treasury, as shown in Table 1 below, stand at MAD

60.6 billion, or EUR 5.5 billion. These requirements will be covered to the tune of 78% by the

country's own resources and 22% by external resources. The current Bank loan of EUR 121 million

represents 10% of the external financing needs for 2012.

Table 1: Budget Balance and Financing Needs 2012-2015 (in MAD billion)

Item 2012* 2013** 2014** 2015** TOTAL

Total Revenue (excl. Hassan II Fund & transf. to Loc. Gov’t.) 188.5 215.2 239.0 259.3 902.0

Including: Tax Revenue 170.7 221.1 239.0 259.3 890.1

Non-tax Revenue (Excl. Privatization & Hassan II Fund)

Revenue from some Special Treasury Accounts

14.6

3.2

19.1

20.6

22.3

76.6

3.2

Expenditure and Net Loans (Excl. Hassan II Fund) 237.1 284.2 300.6 320.6 1.142.5

Including: Current Expenditure 194.1 209.7 220.1 233.2 857.1

Capital Expenditure 46.0 47.1 50.8 55.0 198.9

Other Current Primary Expenditure

Overall Balance (Commitment Basis, excl. Hassan II Fund) -48.6 -69.0 -61.6 -61.3 -240.5

Grants 2.5 2.5 2.5 7.5

Changes in Arrears -17.0 0.0 0.0 0.0 -17.0

Other Revenue 5.0 0.0 0.0 0.0 5.0

Overall Balance (Cash Basis, excl. Hassan II Funds) -60.6 -66.5 -59.1 -58.8 -245.0

Financing (= - Overall Balance (Cash Basis)) 60.6 66.5 59.1 58.8 245.0

Domestic Financing 47.3 59.7 52.0 51.2 210.2

External Financing 13.3 6.8 7.1 7.6 34.8

Source: * Government of Morocco, August 2012. ** Article IV of the IMF in November 2011.

4.4.2. TFP contributions to cover external financing needs in 2012, under PARGEF, are

presented in Table 2 below:

Table 2: Programme External Financing by Source

Source of Financing Financing

EUR million MAD billion Share of the Total

African Development Bank 121 1.3 44%

World Bank 75 0.8 28%

European Union 75 0.8 28%

Total 271 2.9 100%

4.5. Programme Beneficiaries

The ultimate beneficiary of the programme is the Moroccan population as a whole. The

population will benefit from the improvement of living standards resulting from sustained economic

growth which will generate employment and income. Indeed, as in the past, growth was not

sufficiently inclusive to benefit the entire population; this programme aims to increase the share of

GDP going to the most disadvantaged regions and facilitate access of these populations to quality

public services. The intermediate beneficiaries are public services and private economic operators.

4.6. Macro-economic and Governance Impacts

With PARGEF, not only a reduction in the budget deficit and an increase in the rate of

execution of public investments in vulnerable regions are expected, but a substantial reduction in

the time required to obtain key administrative and legal documents in these regions. The

Programme forecasts the GDP growth rate to stand at 3.4% in 2012, down from 3.7% in 2011. The

overall budget deficit is expected to decline over the same period from 6.2% to 5% in 2012.

Inflation should stabilize at less than 2% in 2012. At regional level, the regional GDP of the three

most vulnerable regions9 is expected to grow from 2.9% in 2009 to 4.0% in 2012, and the share of

public investment in these regions from 4.38% in 2011 to 5.0% in 2012 and 5.5% in 2013. The

17

PEEs will also benefit from the Programme through the strengthening of their internal governance.

So too will the LGs, expected particularly to benefit from the IEM system. Lastly, by improving the

institutional framework for government procurement, bidders responding to state and LG invitations

to tender will benefit from greater transparency in the award of government contracts. PARGEF

will thus contribute to revitalizing economic and financial governance in Morocco by

mainstreaming the human, civic and local dimension in the budget management and public service

delivery process.

4.7. Impact on the Business Environment

By improving public finance management and the Administration’s skills, and

streamlining administrative procedures, the Programme will help to improve the business

environment and promote investment. In this connection, it will support Government's efforts to

implement sector strategies (infrastructure development, Industrial Emergence Compact, Green

Morocco Plan, CWS, etc.) that will contribute to consolidate economic diversification and

strengthen the country’s growth and export potential.

4.8. Impact on Poverty and Gender

With Programme support, the Government plans to strengthen "pro-citizen budgeting" in

order to improve social inclusion and communication with citizens (Technical Annex 10/T). By

backing special measures to support youth employment and citizen’s purchasing power, "pro-

citizen budgeting" has particular interest in efforts made by the Moroccan State in the fields of

education, training, health and housing. Moreover, by structuring the new LOLF to include de facto

the gender dimension, gender responsive budgeting (GRB) will be reinforced with a transparent

allocation of public resources (Technical Annex 6/T). In addition, Morocco has made significant

progress in gender equity and equality and gender mainstreaming is already included in sector

policies. GRB is also applied by all government departments (Technical Annex 6/T). This is further

reflected in the increased representativeness of women in the labour market, in particular public

administration with the proportion of women employees at 34% in 2012, up from 23.8% in 2005.

Women executives alone make up 56.32% of all women in the public service. Women employees at

the supervisory level represent about 31%, while those at the non-managerial level represent only

13%. Moreover, training cycles were organized in 2010, with support from the Canadian

International Development Agency, with the objective of sensitizing human resource managers to

gender issues.

4.9. Impact on the Environment

The Programme is a budget support. It will have no impact on the environment and has

been classified under Environmental Category III.

4.10. Climate Change

4.10.1 PARGEF does not include investments but rather reforms; its implementation should not

any impact on climate change.

V PROGRAMME IMPLEMENTATION, MONITORING AND EVALUATION

5.1. Implementation Arrangements

5.1.1. Institution in Charge: the implementation of PARGEF-1 will be monitored by the MEF

(Budget Department) under the auspices of an Inter-ministerial Steering Committee.

9 (Laâyoune-Saguia Al Hamra, Guelmine-Oued Noun and Ed Dakhla-Oued Dahab)

18

5.1.2. Financial Management: due to the nature of the operation, resources will be used in

accordance with national public finance regulations. The Ministry of Economy and Finance will be

responsible for the administrative, financial and accounting management of the said resources. The

initial fiduciary risk is deemed moderate (Technical Annex 2/T) and reduced to a low residual level

by the continuation of the reforms undertaken and the implementation of new actions in particular

within the PARGEF. Thus, the following actions are planned : (i) the development and

generalization of a monitoring and evaluation system, including the conduct of performance audits;

(ii) the stocktaking and strengthening of General Inspectorates of ministries and mapping of

management risks for pilot ministries; (iii) the condition and measures related to financial reporting

and governance of National Education Academies to improve the fiduciary environment of the

education sector and the next Education Programme envisaged by the Bank; (iv) the continued

dialogue between the Government and TFPs to reach a lasting consensus on the independent

external audit of externally-funded projects. Thus, for the resources allocated to PARGEF by the

Bank, the public expenditure circuit will be used in its entirety and the rules of internal control of

the public expenditure circuit will be applied. The internal audit of the programme and its

performance monitoring will be based on the national internal audit system and all of the

programme’s monitoring/evaluation and performance audit mechanism, as provided in Thrust 1 B

of results-based management. Lastly, to allow for adequate supervision, quarterly budget execution

reports will be forwarded to partners during the Programme period.

5.1.3. Procurement of Goods and Services: since the loan is a general budget support operation,

the programme does not include any procurement. The review of the national government

procurement system by the Bank in August 2012, the summary of which is presented in Technical

Annex 2/T, concluded that the regulations are largely consistent with the Bank's policy standards,

but for a few differences and weaknesses currently under discussion between the Bank and the

Moroccan authorities.

5.1.4. Disbursements: the loan will be disbursed in a single tranche upon approval by the Board

of Directors and its entry into force, subject to fulfilment of general and specific conditions related

thereto. Upon submission of a payment request, amounts disbursed will be deposited in a

specifically designated foreign exchange account of the Treasury opened at the Central Bank (Bank

Al-Maghrib). The Borrower shall ensure that once the money is deposited into the said account, the

equivalent amount in local currency is transferred to the Treasury current account, which is the

State budget account. The Bank has undertaken to disburse its support for the 2012 budget. The

Ministry of Economy and Finance will forward a letter to the Bank within 30 days confirming the

transfers, showing that the total amount of the loan has been received, converted and transferred to

the single Treasury account. In addition, the Bank reserves the right to request an audit of the

financial flows of the designated account, if necessary.

5.1.5. External Audit: insofar as PARGEF resources will be disbursed into a special Treasury

account opened at the Central Bank (Bank Al-Maghrib), the use of the funds will be audited as part

of external control of public spending exercised by the Audit Court. A copy of the 2012 Budget

Review Act and the declaration of conformity which will be published within the time limit set

forth in the LOLF, shall be forwarded to the Bank.

5.2. Monitoring and Evaluation Arrangements

5.2.1. Monitoring and Evaluation of Outcomes: the agreed logical framework and matrix of

measures will be PARGEF monitoring and evaluation frameworks. The Budget Department under

the auspices of the Programme Steering Committee within the Ministry of Economy and Finance

will collect data and coordinate monitoring and evaluation, and make information available to the

Bank. There will be a joint supervision mission with the World Bank and the European Union

19

during programme implementation to assess progress. At the end of the programme, a completion

report will be prepared jointly with the Government.

5.2.2. Programme Sustainability: to ensure programme sustainability, it was agreed between all

co-financiers and the Government that institutional support projects will be implemented to enhance

ownership and build the capacity of Government services for its implementation. The Bank is

expected to contribute, through MIC grants, particularly in the design of LOLF

monitoring/evaluation mechanisms and regionalization of the Digital Morocco Strategy.

VI LEGAL INSTRUMENTS AND AUTHORITY

6.1. Legal Instruments

The Programme shall use the Loan Agreement as the legal instrument. The parties to this

Agreement are the African Development Bank and the Kingdom of Morocco.

6.2. Conditions Precedent to Bank Group Intervention

A Conditions Precedent to Programme Presentation to the Board of Directors

6.2.1. Prior to presentation of the loan proposal to the Board for approval, the Government shall

provide the Bank with evidence of implementing the measures outlined in Box 1 (§ 4.3.1).

B Conditions Precedent to Loan Effectiveness

6.2.2. Loan effectiveness shall be subject to fulfilment of conditions set forth in Section 12.01 of

the General Conditions Applicable to Loan Agreements.

C Conditions Precedent to Disbursement

6.2.3. Dialogue on the Programme between the Government and the technical and financial

partners began in 2011 and continued throughout 2012. Significant progress has been noted in the

implementation of reforms, especially those related to conditions precedent to Board presentation.

This dialogue will continue in 2013 to monitor programme implementation. Against this

background, the disbursement of the single tranche of EUR 121 million shall be subject to

fulfilment of the following condition by the Government:

- Submission to the Bank of the evidence of the existence of a Treasury account

opened at Bank Al-Magrhib (Central Bank of Morocco) into which the loan

resources will be deposited (§ 5.1.4);

- Evidence required: Letter of the Ministry of Economy and Finance specifying the

Treasury foreign exchange account opened at Bank Al-Magrhib (Central Bank of

Morocco) into which the loan resources will be deposited.

6.3 Compliance with Bank Group Policies

PARGEF aligns with the Bank’s Long-Term Strategy (LTS) guidelines being finalized and

the strategic guidelines on governance (GAP, 2008), and complies with the Bank’s March 2012 new

policy on Reform Support Operations (RSO). No waiver is requested in this proposal in relation to

these Guidelines.

20

VII RISK MANAGEMENT

7.1.1. The major risks that may affect the achievement of Programme outcomes could result from

the following factors: (i) a change in policy priorities for reform implementation; (ii) a weakening

of the political situation due to the potential resurgence of social demands; and (iii) low capacity of

the central government and local governments to own the programme.

7.1.2. The Government has already taken steps to anticipate these risks. With regard to the risk of

changing policy priorities, a high-level commitment to implement reforms has been expressed,

especially since the expected outcomes of the Programme lie at the heart of social demands.

Moreover, there is a strong demand for reforms as reflected in the 71% participation in the

referendum on the new Constitution, which has governance as one of the main pillars. Regarding

the weakening of the political situation due to a possible resurgence of social demands, social

measures provided for in the 2012 Finance Bill provide cushioning for possible social crises. Lastly,

as concerns the risk of low capacity for Programme technical ownership by the central and local

governments, the Programme includes training-related measures.

VIII RECOMMENDATION

It is recommended that the Board of Directors approve an African Development Bank loan

not exceeding EUR 121 million to the Kingdom of Morocco to finance the Economic and Financial

Governance Revitalization Support Programme - Phase I (PARGEF –I), subject to the fulfilment of

conditions set forth in this report.

ANNEX 1

Page 1/5

LETTER OF DEVELOPMENT POLICY

KINGDOM OF MOROCCO

The Minister

MR PRESIDENT

OF THE AFRICAN DEVELOPMENT BANK GROUP

P.O. Box 323 1002 TUNIS BELVEDERE

TUNISIA

SUBJECT: Letter of Development Policy on the Governance and Public Administration Reform Strategy

Mr President,

I wish to inform you, hereafter, about the Public Administration Reform Programme which is one of

the priorities that the Government of the Kingdom of Morocco has undertaken to implement as part

of its Agenda tabled before Parliament on 19 January 2012, as well as the actions adopted to put it

into effect.

The Public Administration Reform Programme, which our country is now embarking upon, is a

continuation of the PARAPs undertaken some ten years ago with the support of various development

partners including, notably, the African Development Bank Group.

Reform Context and Principles

I would like to remind you, Mr President, that the conceptual and operational bases of the various

dimensions of public administration reform initiated a few years ago, some of which were supported

by your Institution, are found in the speeches of HIS MAJESTY THE KING and in various

Government Declarations.

The new Constitution has marked a turning point in and given a new impetus to public

administration reform, while clarifying its objectives and priorities. Indeed, the Constitution has

instituted strong principles of good governance, moralization of public life and the rule of law.

Furthermore, it has established the principle of correlation between the exercise of responsibilities

and accountability.

Thus, the new Constitution sets forth a series of approaches and initiatives that form the basis and

benchmark for public administration reform. It has made ample allowance for consultation (Article

13) as a key element in public policy design, implementation and evaluation, the right to information,

easing of equal access by citizens to government services (Article 31), and subsidiarity as the

principle for sharing central government skills with local governments (Article 140). Henceforth, the

notion of public service has a constitutional basis. Article 154 stipulates that government services are

organized based on equal access by all citizens, equitable coverage of the national territory and

continuity of service delivery. The services are subject to the standards of quality, transparency,

accountability and responsibility, and are governed by the democratic principles and values

enshrined in the Constitution. Article 156 states that the Administration shall lend a sympathetic ear

to users and follow their remarks. It also stipulates that the Administration shall be accountable for

its management of public funds. Furthermore, the Constitution has made the formulation of a public

service charter outlining the rules of good governance in the functioning of the public administration

a necessity (Article 157). In like manner, it has expressed the need to institute governance and public

service promotion bodies (Articles 160 to 170).

ANNEX 1

Page 2/5

The operational convergence of these constitutional rules and principles requires the establishment of

operating methods and mechanisms that can reflect their content and real impact on citizens’ day-to-

day life. In this regard, the Government’s Declaration as well as its policy memorandum highlight

the priority thrusts that should structure public administration reform. They include the following

actions:

(1) Restoring trust between the Administration and citizens (streamlining of procedures,

rigour in punishing offences instead of cumbersome control procedures, effective

application of the law on reasons for administrative decisions, acceleration of the

passing of the law on the right to information, establishment of public administrative

units to ensure the proper reception of citizens, and provision of electronic services for

citizens, enterprises and investment;

(2) Good governance in public management: drafting of a good governance charter for

government services on the management of public administrative services and local

governments;

(3) Drafting of the Organic Law on Finance Laws as a tool to entrench good governance

principles and mechanisms, using a participatory and concerted approach involving

Parliament upstream to deepen discussions on the content of this anchor instrument

and guaranteeing its successful implementation;

(4) Reform of the government procurement code through a thorough review of

government procurement processes to make them more effective, more efficient and

more consistent with international best practices.

In this regard, the new Administration Reform Support Programme (referred to as “Hakama”) seeks,

in addition to consolidating the progress made under PARAPs, to further promote the entrenchment

of principles of accountability, transparency and improvement of public service quality, mainly by

recasting the organic law on finance laws, owing to its reform potential and impact on methods of

action and management by Government services, while paying special attention to access to quality

public service deemed a fundamental resource for enhancing the population’s capacity.

II PARAP Performance and Achievements

Since its launch under various PARAP programmes, public administration reform has made

significant strides in various areas, including:

1- The improvement of the Administration’s efficiency in managing budget resources

through:

- The institution of multi-year budget programming by putting in place a three-

year rolling Medium-Term Expenditure Framework (MTEF). The MTEF is a

budget mechanism aimed at ensuring better predictability and visibility of trends

in public spending, and its compatibility with the objective of controlling the

budget deficit;

- The deployment of the credit transferability mechanism, which is a key area in

implementing a results-based management system, and ensuring performance

and accountability. This mechanism aims to further empower managers in the

use of their budget appropriations in return for honouring their commitment to

ANNEX 1

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achieving predefined objectives measured by performance indicators, among

others;

- Strengthening of administrative devolution. This consists particularly in

developing a real community-based management, bringing the administration

closer to users by reviewing the organization of administrative units and

restoring the role of decentralized services in public policy implementation;

- The reform of public spending control to ensure more flexibility, fluidity and

effectiveness in public spending;

- The implementation of performance audits through joint audit missions by the

General Inspectorate of Finance and General Inspectorates of ministries;

- The implementation of the Integrated Expenditure Management (IEM) system to

streamline procedures in order to ensure greater fluidity in public expenditure

implementation and adherence to set deadlines for the preparation of budget

review acts;

- The launch of brainstorming on the reform of the organic law on finance laws,

which seeks to entrench the new results-based budget approach principles and

ensure high performance and accountability. To that end, a reform platform

outlining the various themes to be considered has been prepared.

2- The improvement of public administration efficiency in human resource management

by:

- Generalizing jobs and skills planning through the implementation of jobs and skills

benchmarks (REC), preparation of jobs and skills planning guidelines (GPEEC) and

their dissemination to Government services, and through the implementation of a

human resource management information system;

- Conducting a study on job classification in a common nomenclature that aims to

classify all civilian public service jobs, in order to match human resources with

employment needs;

- Launching a study on the design of a new remuneration system based on the new

classification of jobs in the common nomenclature;

III Hakama” Programme Objectives and Operations

In a bid to consolidate various achievements mentioned above and incorporate a greater citizen-

focused dimension in public action, the new Public Administration Reform Programme has defined

two main objectives, namely:

1- To strengthen Government accountability and performance-based public resource

management;

2- To enhance transparency and access to quality public services.

This will be possible mainly through:

ANNEX 1

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1- The reform of the public finance management system, which will seek to consolidate

the budget reform by adopting and implementing the new Organic Finance Law

(LOF). This reform seeks to achieve the following four main objectives:

Strengthen the role of the finance law in supporting and facilitating the

implementation of structural reforms and sector strategies by the country, and

assert the role of the budget in economic and social development, while

pursuing efforts to maintain the sustainability of the macro-economic

framework;

Modernize public management by enhancing public expenditure performance in

order to improve the quality of public service delivery, control cost and further

empower managers in their effort to achieve set objectives with authorized

budget resources;

Strengthen parliamentary control of Government action by improving the

quality of information on the finance law tabled before Parliament and focusing

parliamentary debate more on budget performance and its impact on citizens’

quality of life;

Adapt the budget mechanism to support the new regionalization drive and

contribute to fostering administrative devolution by further empowering local

managers and encouraging synergy and convergence of local government

operations.

2- The improvement of transparency and access to quality public services. In line with the new

constitutional provisions mentioned above, the “Hakama” programme aims to translate these

guidelines into action and deliver the new acquired rights of access to information and public

consultation. Thus, there are plans to:

- Improve financial transparency by involving the public in the debate on budget

guidelines;

- Develop public consultation mechanisms by disseminating all bills and draft

regulations before their adoption;

- Establish an institutional and operational framework for exercising the right to

information by citizens;

- Consolidate the relationship of trust between users and the Administration, and

develop e-government by expanding the geographic and operational coverage of the

online administrative documents ordering service (WATIQA).

All these actions and measures will help to improve the quality of public policy design,

implementation and evaluation to ensure inclusive development at the service of citizens.

Lastly, I thank you for your support in implementing this important Moroccan Public Administration

Reform Programme.

Accept, Mr President, the assurances of my highest consideration.

(Signed) Nizar BARAKA

Minister of Economy and Finance

ANNEX 2

Page 1/11

MOROCCO – Economic and Financial Governance Revitalization Support Programme

PARGEF-Phase I

Appraisal Report PROGRAMME INDICATIVE MATRIX OF MEASURES 2012-2015

Strategic

Objectives/Thrusts

2012 2013 2014 2015 Outcome

Indicators

Output

Indicators

Sources of Verification of

Implementation of Measures Thrust I: Public Finance Management System Reform : Public Action Performance, Transparency and Budget Democracy

Axis I. A. Reform Implementation Institutional Framework

Normative Framework

- Adoption by the Council

of Ministers of the Organic

Bill on Finance Laws

(LOLF).

- Adoption and publication of

the Implementing Decree of

LOLF.

- Publication of Orders and

signing of Circulars/Decisions

to implement the LOLF.

LOLF is adopted by the


end-2013

Implementing Decree of the

new LOLF is adopted by the

Council of Ministers and

published before end-2013

Budget Deficit:

(excluding

privatization):

2011: 6.2%

2012: 5.0%

2013: 4.5%

2014: 4.5%

PEFA Indicators:

2009-2013

PI-5 A A

PI-6 B A

PI-9 B A

PI-10 A A

PI-11 A A

PI-12 C+ B+

PI-23 B A

PI-25 C+ B+

PI-26 D+ C+

PI-27 B+ A

PI-28 D+ B+

2013:

- Communiqué of the Council of Ministers

adopting the LOLF.

-Official Gazette publishing the

implementing decree of the LOLF.

2014: Official Gazette(s) publishing the

ministerial orders relating to LOLF

implementation and reform-related

Circulars/Decisions signed.

2013 PEFA Report

Institutional Framework

and Reform Steering

Decision by the Head of Government designating

the three pilot ministries for LOLF implementation.

At the inter-ministerial level:

- Establishment of an Inter-ministerial Budget

Reform Steering Committee comprising

Secretaries-General (SGs) of ministries

At ministerial level:

- Establishment of a committee in charge of

steering reform deployment in ministries,

comprising directors in the central services and

presided over by the Secretary-General of the

Ministry

- Designation, in each ministry, of an official in

charge of LOLF (attached to the SG) responsible

for monitoring budget reform implementation in

the ministry.

-Monitoring implementation

of the reform by the steering

bodies, minutes of meetings:

biannual meetings of the

operational inter-ministerial

steering committee and;

biannual meetings of the

committee of directors in

ministries

- Production at end of year of

a report on budget reform

implementation by the

relevant service in the Budget

Department and updating of

the Action Plan

The three pilot ministries for

LOLF implementation are

designated by the Head of

Government before end-2012

The Inter-ministerial Budget

Reform Steering Committee

is established before end-

2012.

The Committee in charge of

reform deployment is

established in each ministry

before end-2012.

2012:

- Circular by the Head of Government

designating the three pilot ministries for

LOLF implementation

-Circular by the Head of Government

instituting the Inter-ministerial Budget

Reform Steering Committee;

-Letter of the Ministry of Economy and

Finance attesting to the establishment of a

committee responsible for steering the

deployment of the reform in ministries.

-Letter of the Ministry of Economy and

Finance attesting to the designation of an

official in charge of LOLF in each Ministry,

including the list of officials.

PI-5: “Budget Classification” PI-23: “Availability of Information on Resources Received by Primary Service Provision Units”

PI-6: “Completeness of Information in Budget Documents” PI-25: “Quality and Adherence to Time-limits of Annual Financial Statements (Preparation of the Budget Review Act)”

PI-9: “Monitoring of Overall Budget Supervision Risk Attributable to Public Sector Entities” PI-26: “External Audit Scope, Nature and Monitoring”

PI-10: “Access by the Public to Key Budget Information” PI-27: “Annual Finance Law Consideration by the Legislature”

PI-11: “Organized and Participatory Annual Budget Preparation Process” PI-28: “External Audit Reports Consideration by the Legislature”

PI-12: “Multi-year Budget Planning and Public Expenditure Policy Outlook”

ANNEX 2

Page 2/11

Strategic

Objectives

/Thrusts

2012 2013 2014 2015 Outcome

Indicators

Output

Indicators


Implementation of

Measures Thrust I. A. Reform Implementation Institutional Framework

Action Plan Preparation of a draft LOLF implementation

Action Plan by ministry, reform component,

etc. and specifying an implementation

schedule.

Validation and publication of the

LOLF implementation Action

Plan by ministry, reform

component and specifying an

implementation schedule

- The draft LOLF

implementation

Action Plan is

prepared before

end - 2012

- The LOLF

implementation

Action Plan is

adopted and

published before

end - 2013.

2012: Draft LOLF implementation

Action Plan document.

2013: Report on Approval of the

Action Plan by the Steering

Committee and the Action Plan.

Training Plan

Preparation of a Draft Training Plan,

consistent with the Action Plan, for support

to LOLF Implementation, specified by:

-Reform component;

-Type and level of responsibility of budget

system actors to be trained;

-Needs of each service and public body

- Adoption of the Training Plan

by the Inter-ministerial

Committee and launching of the

Training Plan: determination of

required resources, identification

of training bodies and trainers’

training

- Deployment of the

Training Plan, up to 50 %

of the number of actors to

be trained.

- Production at end

of year of a report

on Training Plan

implementation,

analysing the extent

of skills ownership.

The Training Plan

is prepared before

end - 2012.

2012: Training Plan Report.

2013: Minutes of the approval of the

Training Plan by the Inter-ministerial

Committee.

2014: Transmission by MEF of a

report indicating the Training Plan

deployment by Ministry

Communication

and Sharing of

Experience on

Reform

Implementation

- Preparation of a draft internal and external

Communication Plan on budget reform,

comprising, notably;

an Internet and Intranet Site capable of

disseminating information on the reform

(vision, content and schedule), as well as the

documents needed for its implementation

- Adoption of the Communication

Plan by the Inter-ministerial

Committee and implementation of

the first communication actions,

including an Internet and Intranet

site;

- Organization of an annual

colloquium on reform

implementation.

- Implementation of

planned actions in the

Communication Plan.

- Running reform Internet

and Intranet sites (sharing

experience)

The

Communication

Plan is prepared

before end -2012.

2012: Communication Plan Report.

2013: Minutes on the approval of the

Communication Plan by the Inter-

ministerial Committee.

ANNEX 2

Page 3/11

Strategic

Objectives

/Thrusts

2012 2013 2014 2015 Outcome Indicators Output Indicators Sources of Verification of

Implementation of Measures

Thrust 1. B. Public Action Performance: Results-based Management and Empowerment of Managers

Steering of the

Performance

Monitoring

and Evaluation

System

- Preparation of a performance

monitoring and evaluation system,

comprising :

-the establishment of an inter-

ministerial mechanism for the

validation of programmes, and

the performance approach in

sector ministries.

-the development of a

performance monitoring system

in MEF and pilot ministries;

- the conduct of performance

audits

-the conduct of performance

evaluations, involving external

experts.

- Approval in the Council of Ministers

of the Bill to revise the duties of the

General Inspectorate of Finance

(Dahir No.1-59-269), in line with its

future functions in the context of the

new LOLF.

- Adoption of a performance

monitoring and evaluation system,

comprising:

the establishment of an inter-

ministerial mechanism for the

validation of programmes and the

performance approach in sector

ministries;

the development of a

performance monitoring system

in MEF and pilot ministries;

the conduct of performance

audits;

the conduct of performance

evaluations, involving external

experts.

-Experimental

implementation of the

performance

monitoring and

evaluation system in

all ministries.

- Situation of

management control

services in ministries

and recommendations

for strengthening

them.

- Generalized implementation

of the performance monitoring

and evaluation system

- Capacity building of control

services in ministries

- Development of management

risk mapping in pilot ministries.

- First performance evaluation

exercises (impact assessment)

in pilot ministries, conducted by

external experts and users.

The Bill to revise the duties

of the General Inspectorate of

Finance is adopted by the


end - 2013.

The draft performance


system is prepared before end

- 2012.

The performance monitoring

and evaluation system is

adopted before end - 2013.

2013:

-Council of Ministers’ Communiqué

adopting the Bill to revise the duties of

the General Inspectorate of Finance;

-Forwarding Letter of the Head of

Government transmitting the Bill to the

President of the Parliament following its

approval by the Council of Ministers.

2012: Draft report on the performance

monitoring and evaluation system.

2013: Circular adopting the performance

monitoring and evaluation system.

2014: Report on the situation of control

services in ministries and

recommendations for strengthening

them in the context of the new budget

management system.

2015: IGM-IGF reports on risk mapping

in pilot ministries

2015: Impact assessment reports.

ANNEX 2

Page 4/11

Strategic

Objectives/

Thrusts

2012 2013 2014 2015 Outcome

Indicators

Output

Indicators


Implementation of Measures

Thrust 1. B. Public Action Performance: Results-based Management and Empowerment of Managers

Operational

Implementation

of the New

Performance-

based Budget

Management

system

- Preparation of the new budget

nomenclature.

- Designation of programme managers

by Pilot ministries, specifying their role

and responsibilities, in keeping with

the new budget management system.

- Forwarding to Parliament, as an

annex to the 2014 FB, ministerial draft

budgets, based on the new

nomenclature, structured around

programmes, for the 5 Pilot ministries.

- Adoption of conditions for the

implementation of credit transferability,

under the programme, in the 5 pilot

ministries, from the 2014 FL.

- Introduction in the FB preparation

circular, of instructions on the preparation

of programme budgets and prospective

and retrospective performance documents.

- Production for pilot ministries of

prospective performance annual

ministerial documents, annexed to the FB.

- Forwarding to Parliament, as an

annex to the FB, of ministerial

budgets, based on the new

nomenclature, structured around

programmes, for all ministries.

- Implementation of credit

transferability, under the

programme in the 5 pilot

ministries.

- Annual report on the

experimentation of credit

fungibility, stating the timeliness

of expanding the programme

footprint and credit transferability.

- Designation of programme

managers/officers in all ministries.

- Experimental production for all

ministries of prospective

performance ministerial annual

documents, annexed to the FB.

- Tabling of the FB before

Parliament based on the new

budget nomenclature

- Experimentation of an

activity-based budgetary

accounting (or activity-based

costing) in pilot ministries.

- Implementation of credit

transferability, under the

programme, in all ministries.

- Annual report on the

experimentation of credit

fungibility, stating the

timeliness of expanding the

programme footprint and credit

globalization.

- Production of annual

prospective performance

documents, annexed to the FB,

for all ministries.

- Production in pilot ministries

of annual retrospective

performance documents.

The 2014 FB

drafted before end

- 2013, including

in an annex the

programme

budgets of the 5

pilot ministries,

based on the new

nomenclature

The new budget

nomenclature is

prepared before

end - 2012.

Number of

programme

managers

appointed in

ministries

increases from 0

in 2011 to 5 in

2012.

Pilot ministries’

prospective

performance

documents are

produced and

annexed to the

2014 FB before

end - 2013.

2013:

- The 2014 FB, including in an

annex the budget documents of the

5 pilot ministries.

2014: The 2015 FB including in an

annex the budget documents of all

ministries.

2012: Document on the new

budget nomenclature.

2012: Order(s)/Circular(s)

designating the managers and

officers and defining their duties in

the pilot ministries.

2013: Signed circular on FB

preparation signed with

instructions on prospective and

retrospective performance

documents.

2013: Pilot ministries’ prospective

performance documents annexed

to the FB.

Multi-year

Budget

Programming

- Implementation of overall and sector

multi-year programming for pilot

ministries.

ANNEX 2

Page 5/11

Strategic

Objectives/

Thrusts

2012 2013 2014 2015 Outcome Indicators Output

Indicators

Sources of Verification of Implementation of

Measures

Thrust 1. C. Fairness and Transparency: Promoting Accountability

Public Action

and Financing

Transparency

and Consistency:

Integration of

External State

Structures

Conduct of the study on

financial control of public

enterprises and

establishments (PEE),

including reorganization

of the segmentation of the

said PEEs.

- Adoption by the Council of Ministers of

the Bill on PEE Financial Control

Reform, in keeping with the new

segmentation.

- Incorporating PEEs in the performance

approach by including them in the pilot

ministries’ prospective performance

documents.

-Drafting of programme contracts between

the State and Public Enterprises and

Establishments, in line with ministerial

prospective performance documents.

- Launching of the

implementation of the new

regulations on PEE financial

control upon approval by

Parliament.

- Signing with the State of

programme contracts by PEEs

supervised by pilot ministries,

ensuring their consistency with

ministerial prospective

performance documents

-Incorporating PEEs in the

performance approach by

including them in the


documents of all ministries.

- Incorporating PEEs in the

performance approach by

including their achievements

in the prospective

performance documents of

all ministries.

.

- Signing with the State of

programme contracts by

PEEs supervised by pilot

ministries, ensuring their

consistency with ministerial


documents

Study on the financial

control of public enterprises

and establishments (PEEs) is

conducted before end - 2012

Number of Public

Enterprises and

Establishments having

prepared programme

contracts increases from 2 in

2011 to 5 in 2013.

2012: Report on the study of the financial control of

Public Enterprises and Establishments (PEEs),

including the reorganization of their segmentation;

2013: Letter of the Ministry of Economy and

Finance to the General Secretariat of the

Government forwarding the Bill to reform the

financial control of PEEs.

2013: Prospective performance documents of pilot

ministries annexed to the Finance Bill and

Programme Contracts, including their segmentation

2014: Programme contracts signed by PEEs

supervised by pilot ministries

2015: Programme contracts signed by all PEEs

Transparency

and Equal Access

to Government

Procurement

-Forwarding by MEF of

the draft government

procurement decree to

the General Secretariat

of the Government

- Adoption of the draft

government procurement

decree by the Council of

Ministers.

- Adoption of the

Ministerial Order

specifying the Public

Enterprises and

Establishments governed

by the new regulations.

-Adoption of a decree to

institute a National

Tenders Board to improve

the non-judicial redress

system.

- Approval of the national

Government procurement

training strategy

- Adoption, in line with the new

regulations, of standard documents to be

included at the contract award phase,

notably CPS and those to be included at

the execution phase (updating of the

CCAG for Works and Services,

preparation of a CCAG for Supplies).

- Deployment of the national strategy for

training in Government procurement.

- Deployment of the national

strategy for training in

Government procurement.

- Deployment of the

national strategy for training

in Government procurement

The draft government

procurement decree is

forwarded by MEF to the

General Secretariat of the

Government

The draft government

procurement decree is

adopted by the Council of

Ministers before end - 2012.

The Ministerial Order

specifying Public

Enterprises and

Establishments governed by

the new regulations is

adopted in 2013.

The decree to institute the

National Tenders Board is


The national strategy for

training in Government

procurement is approved

before end - 2012.

The

OECD/CAD

indicators

achieved

increase from

78% in 2011

to 85% in

2013

2012:

-Draft government procurement decree and letter of

the Ministry of Economy and Finance forwarding it

to the General Secretariat of the Government

-Draft procurements decree

-Council of Ministers’ Communiqué adopting the

draft procurement decree.

-Ministerial Order specifying Public Establishments

and Enterprises governed by the new regulations.

-Council of Ministers’ Communiqué adopting the

decree to institute the National Tenders Board.

-Draft decree to institute the National Tenders

Board.

- National strategy for training in Government

procurement

2013:

- Ministerial Orders approving CPS, CCAG for

Works and Services, and CCAG for Supplies.

Draft CPS, CCAG for Works, Services and

Supplies.

ANNEX 2

Page 6/11

CPS, CCAG for Works and

Services, CCAG for

Supplies are available in

2013.

Strategic Objectives/ Thrusts 2012 2013 2014 2015 Outcome

Indicators

Output

Indicators

Sources of Verification of Implementation of

Measures

Thrust 1. C. Sincerity and Transparency: Promoting Accountability

Computerization of the Public Expenditure

Management System

-Establishment of the IEM platform for 5

pilot local governments

-.Establishment of the supplier IEM

platform for monitoring suppliers’ claims.

- Extension of the IEM system

to 5 pilot local governments

-Revision of the information

system to adapt it to the new

budget nomenclature, preparation

of models and guides

- Extension of the IEM

system to half of local

governments

.

Number of

local

governments

included in

the IEM

system

2011: (0);

2012: (5);

2013: (10);

2014: (50%

of local

governments)

The supplier

IEM system

is instituted

before end -

2012.


Finance attesting to the institution of the IEM

system in 5 local governments, including a list of

the 5 local governments.


Finance attesting to the development of the

supplier IEM system.

ANNEX 2

Page 7/11

Strategic

Objectives/

Thrusts


Indicators

Sources of Verification

of Implementation of

Measures

Thrust 2: Improvement of Transparency and Access to Quality Public Services

Thrust 2. A. : Enhance Public Management Transparency and Citizen Participation

Deepen Budget

Democracy:

Information and

Increased Powers

of Parliament

-Annexing 10 of the 14 reports

provided for in the LOLF to the

2013 FB, including:

Report on public debt;

Report on compensation

expenditure;

Report on the wage bill.

- Transformation of the current

table of fiscal balance, of a legal

nature, annexed to the FL, into a

real balance table informing the

actual FL fiscal balance.

- Building the budget analysis

capacity of Parliament/Finance

Committee.

- Access by Parliamentarians to the

Integrated Expenditure

Management (IEM) system to

monitor budget execution and

possibly the other phases of the

budget cycle, in accordance with

rules to be specified.

-Annexing the 14 reports provided for by

LOLF to the FB.

- Building the budgetary analytical

capacity of Parliament/Committee on

Finance.

- Access by Parliamentarians to the

Integrated Expenditure Management

(IEM) System to monitor budget

execution and possibly the other phases of

the budget cycle, in accordance with rules

to be specified.

-Tabling of the Budget Review

Bill in accordance with the

provisions of the Organic Law

on Finance Laws (LOLF).

Ten (10) reports

annexed to the 2013 FB

drafted before end -2012

2012: Reports annexed to

the 2013 FB.

2014: Reports annexed to

the 2015 FB.

2015: Budget Review

Bill.

Financial

Transparency:

Promotion of

Citizen-focused

Participation in

Budget Corpus

Debate

- Adoption by MEF of a decision

formalizing public dissemination

of budget information, including:

(i) a budget orientation

document; (ii) draft budgets of

sector ministries; (iii) cumulative

monthly budget execution reports

by ministry and corpus; and (iv) a

citizen-focused budget

- Drafting of a Summary Note on

the improvement of

communication in order to

disseminate public finance

information: Internet site,

brochures, notices in government

services, Public Enterprises and

Establishments, and local

governments.

- Publication of: (i) a budget

orientation document; (ii) draft

budgets of sector ministries; (iii)

cumulative monthly budget

execution reports by Ministry and

corpus; and(iv) a citizen-focused

budget

- Public availability on the Internet

of the main aggregated financial

data of the budgets of ministries,

local governments and subsidies to

Public Establishments and

Enterprises.

The following budget

information is

disseminated before end

- 2013: (i) a budget

orientation document;

(ii) draft budgets of

sector ministries; (iii)

cumulative monthly

budget execution reports

by ministry and corpus;

and (iv) a citizen-

focused budget

The Summary Note on

the improvement of

communication in order

to disseminate public

finance information is

drafted before end -

2012.

2012: Letter of the

Ministry of Economy and

Finance formalizing the

public dissemination of

budget information,

including the list of types

of budget information that

will be disseminated.

2012: The Summary Note

on the improvement of

communication in order

to disseminate public

finance information.

ANNEX 2

Page 8/11

Strategic

Objectives/ Thrusts

2012 2013 2014 2015 Outcome Indicators Output Indicators Sources of Verification of

Implementation of

Measures

Thrust 2. A. : Enhance Public Management Transparency and Citizen Participation

Implementation of

Article 27 of the

New Constitution:

Right of Access by

Citizens to

Information Held

by the

Administration

-Adoption by the Council

of Ministers of the Bill

on access to information,

in line with Article 27 of

the Constitution.

- Forwarding to Parliament of

the Bill on access to

information, in line with Article

27 of the Constitution;

- Establishment of an institution

of experts responsible for

promoting, supporting,

monitoring and evaluating the

implementation of the new right

of access to information as well

as appeals (National

Commission on Access to

Information).

- Measure relating to the

implementation of access to

information

The Bill on access to

information is adopted by

the Council of Ministers

before end - 2012.

2012: Council of Ministers’

Communiqué adopting the

Bill on access to

information.

2013: Letter of the Head of

Government forwarding the

Bill to the President of

Parliament following

approval by the Council of

Ministers.

Development of

Public Consultation

Processes

- Decision of the Head of

Government to publish

all bills and draft

regulations before their

submission to the

Council of Ministers for

approval

- Adoption of a general

consultation policy in line

with the relevant

constitutional provisions and

international best practices.

Circular/Decree by the Head

of Government to publish

all bills and draft regulations

is issued before end - 2012.

2012: Circular/Decree by the

Head of Government to

publish all bills and draft

regulations.

ANNEX 2

Page 9/11

Strategic Objectives/

Thrusts


Indicators


Implementation of

Measures

Thrust 2. B Governance and Access to Quality Public Services

E-Government - Decision of the C-Gov Inter-

ministerial Committee to extend the


coverage of the "Watiqa" service.

- Signing of an agreement between the

Ministry of Foreign Affairs and

Cooperation, the Ministry of Interior,

the Ministry of Industry, Trade, New

Technologies and the Postal

Department “Barid Al-Maghrib” to

extend the geographic and operational

coverage of the "Watiqa" Service.

- Initiative extended to at least 3 new

municipalities and services provided

expanded to criminal records, and to

other frequently requested administrative

documents.

Initiative extended to Moroccans born

abroad.

The decision of the C-

Gov Inter-ministerial

Committee to extend

the geographic and

operational coverage

of the "Watiqa" service

is taken before end -

2012

Number of

municipalities

benefiting from the

“Watiqa” system: 2011

(0), 2012 (1), 2013 (4),

2014 (8)

Number of

administrative

documents included in

“Watiqa”: 2011 (0),

2012 (1), 2013 (3);

2014 (5)

A new agreement or

amendment of the

existing agreement to

extend the geographic

and operational

coverage of the

“Watiqa" service is

signed before end -

2012.

Reduction in the

average time

taken to obtain

administrative

documents:

-15 days for birth

certificates in

2011 and 7 days

in 2013

-30 days for

criminal records

in 2011 and 15

days in 2013

2012: Minutes of the C-Gov

Inter-ministerial Committee.

2012: Report on the

implementation of “Watiqa”

in the Rabat Municipality

2012: Agreement signed

between the Ministry of

Foreign Affairs and

Cooperation, the Ministry of

Industry, New Technologies

and the Postal Department

“Barid Al-Maghrib”.

ANNEX 2

Page 10/11

Strategic

Objectives/

Thrusts

2012 2013 2014 2015 Outcome Indicators Output Indicators Sources of

Verification of

Implementation of

Measures

Thrust 2. B. : Governance and Access to Quality Public Services

Good

Governance of

Public

Enterprises and

Establishments

- Decision by the Head of

Government setting out the

modalities for implementing the

PEE Good Governance Code

-Adoption by the Boards of Directors of 2

public enterprises and 3 public

establishments of action plans to

implement the Good Governance Code,

adopted by the Government by Circular

No 19 of March 2012.

- Issuance of invitations to tender by at

least 12 AREFs out of 16, to recruit

consulting firms to conduct the study on

the introduction of general accounting

in the said AREFs.

-Implementation of the Good Governance

Code in 2 public enterprises and 3 public

establishments, and adoption of action

plans to implement the code by the

Boards of Directors of 10 other public

enterprises and establishments.

Finalization of the study to introduce

general accounting in AREFs.

Establishment and commissioning of

audit committees in AREFs.

- Implementation of

the Good Governance

Code in the preceding

10 Public Enterprises

and Establishments

and adoption by the

Boards of Directors of

10 others.

Completion and start-

up of the

implementation of

recommendations of

the study to introduce

general accounting in

AREFs.

- Implementation of the

Good Governance Code

in the preceding 10

Public Enterprises and

Establishments and

adoption by the Boards

of Directors of 10

others.

The modalities for

implementing the PEE Good Governance Code

are laid down by decision

of the Head of

Government.

Number of action plans

adopted: 2011 (0); 2012 (5);

2013 (15)

The invitations to tender of at

least 12 out of 16 AREFs, for

the recruitment of consulting

firms to conduct the study to

introduce general accounting

in the said AREFs are issued

before end – 2012.

The study on the introduction

of general accounting in

AREFs is finalized before end

- 2013.

Number of AREFs having

general accounting: 2011 (0),

2012 (0), 2013 (0), 2014 (16)

Number of AREFs having an

internal audit function: 2011

(0), 2012 (0), 2013 (16)

2012: Circular by

the Head of Government setting

out the modalities

for implementing

the PEE Good

Governance Code

2012: Minutes of the

Boards of Directors of

2 Public Enterprises

and 3 Public

Establishments

adopting the action

plans.

2012: Copies of the

publication of at least

12 invitations to tender

in newspapers or the

government

procurement portal, for

the recruitment of

consulting firms by the

said AREFs

2014: -Existence and

use of general

accounting in AREFs.

2014: Existence and

functioning of AREF

audit committees.

ANNEX 2

Page 11/11

Strategic Objectives/

Thrusts

2012 2013 2014 2015 Outcome Indicators Output Indicators Sources of Verification

of Implementation of

Measures

Thrust 2. B. : Governance and Access to Quality Public Services

Strengthening Local

Governance

- Adoption by the Council of Ministers

of the implementing decree of the

Council Charter (Law No. 78 00),

revised in 2009, on

transparency/access to information,

particularly financial and regulatory

information.

- Adoption of the Decree on the financing of local

governments, outlining, in a single instrument, the criteria

for allocating, equalizing and distributing State transfers;

- Adoption by the Council of Ministers of the Organic Bill

on Local Governments (LGs) and implementing

instruments relating to: (i) the aligning of budget

management principles, methods and practices of Local

Governments with those of State finances recast by the

new LOLF; (ii) the operationalization of new economic

and social regional planning modalities; and (iii) the

implementation of contracting in decentralized and

devolved services.

- Streamlining and rationalization of the local taxation policy

by adopting a revised version of the Local Taxation law at a

Council of Ministers.

The implementing decree of the

Council Charter is adopted before

end - 2012.

The decree on the financing of

Local Governments is adopted

before end - 2013

The Organic Bill on Local

Governments and its

implementing instruments are


The Local Taxation Law is

revised before end - 2013.

2012: -Council of

Ministers’ Communiqué

adopting the

implementing decree of

the Council Charter.

- Order adopting the

Decree on Public

Accounting of Local

Governments.

2013: -Decree on the

financing of Local

Governments;

-Council of Ministers’

Communiqué adopting

the Organic Bill on Local

Governments and the

implementing

instruments.

- Council of Ministers’

Communiqué adopting

the revised local Taxation

Law.

NB: Measures in bold type for the year 2012 are conditions precedent to Board presentation

ANNEX 3

CONDITIONS PRECEDENT TO BUDGET SUPPORT Pre-conditions Key Points

1. Government’s

commitment to poverty

reduction

The Government has in the past shown its commitment to undertake structural reforms by

successfully implementing Public Administration support programmes (PARAP I to IV),

financial sector development support programmes (PADESFI I and II)), and medical coverage

support programmes (PARCOUM I and II). PARGEF-I falls squarely in line with new priorities

ensuing from the constitutional reform of 2011 which places governance and the citizen at the

centre of public action to ensure that the latter enjoys the fruits of growth, notably in vulnerable

regions, and to reduce poverty. To this end, its implementation is a major challenge to the new

Government formed after the legislative elections of November 2011.

2. Macro-economic

stability

3. Fiduciary risk

assessment

4. Political stability

5. Harmonization

The economic situation is stable. Despite the global financial crisis, the fundamentals of the

economy have been preserved. The viability of the macro-economic framework has been

demonstrated by the macro-economic and financial performance recorded in recent years. Over

the 2006-2011 period, the average economic growth rate stood at about 5%, the inflation rate

was around 2%, the budget deficit was contained at -2% of GDP and the balance of payments

current account deficit at -1.7% of GDP, and international reserves were equivalent to over 8

months of merchandise imports. In 2011, despite the global crisis context, the growth rate was

3.7% with an inflation rate of 0.9%. In August 2012, Morocco requested a 24 month PLL

amounting to USD 6.21 billion to take precautions against possible exogenous shocks. This

mechanism contributes to building investors’ confidence and facilitating access to international

private capital markets.

Consultation under Article IV of the IMF conducted in November 2011 concluded that thanks

to the in-depth macro-economic and political reforms in recent years, Morocco now has

adequate means to respond to the effects of the 2008 global crisis and face the socio-political

pressure triggered in the Arab world. The report notes that Morocco has recorded good

performance both economically and socially.

Satisfactory Fiduciary Risk Assessment: the risk assessment conducted by the Bank’s

fiduciary services (detailed in Technical Annex 2/T) is in line with both the guidelines of March

2011 on the “Fiduciary Risk Management Framework for AfDB Reform Support Operations”

and the new March 2012 Bank Reforms Support Operations (RSO) Policy started in March

2012. Considering most recent diagnoses on public finance management, procurement and the

level of corruption, the country’s initial fiduciary risk deemed moderate fell back to a low and

adequate residual level, enough for the Bank to envisage a general budget support operation. In

fact, the Moroccan Government has initiated many reform operations in recent years and shows

good prospects of pursuing them. PARAP I to IV achievements will be consolidated by the

present PARGEF measures jointly supported by the AfDB, WB and EU. The effective

implementation of PARGEF will help: (i) through the new LOF, to operationalize multi-year

results-based budgeting, improve and extend the accounting system, extend the scope of

consideration of the budget cycle by Parliament and citizens, improve public establishment

governance; and (ii) through the new decree on procurement, finalize the new regulations

enhancing transparency, the non-judicial reform system and unity of the regulatory framework.

Furthermore, it will institute a reform steering and monitoring framework. PARGEF’s success

should, in the long run, result in the improvement of many of Morocco’s PEFA indicators.

Morocco is a constitutional monarchy and the Kingdom’s institutions are solid and stable.

Political changes take place through free and transparent elections, and civil society is very

active. The recent constitutional revision and the peaceful and successful political change

following legislative elections confirm the Kingdom’s stability.

The partnership between donors operating in Morocco has been demonstrated for several years

now by successful joint operations conducted by the AfDB, World Bank and European Union

(PARAP, PADESFI). In particular, the design of programmes as well as their monitoring and

evaluation are conducted in a coordinated and harmonized manner, including assistance to

support reform programmes.

ANNEX 4

MEMORANDUM ON RELATIONS WITH THE IMF

Agreement Under the Precautionary and Liquidity Line (PLL) August 2012

In order to take precautions against exogenous shocks, Morocco requested a 24-month PLL, amounting to SDR

4.117 billion (about 6.21 billion dollars, 700 per cent of quota). This PLL was approved by the IMF’s Executive

Board on 3 August 2012.

This mechanism aims to offer Morocco a guarantee to respond to immediate financing needs should potential

balance of payments risks occur. The PLL contributes to bolstering investors’ confidence and facilitating access

to international private capital markets. The Moroccan authorities indicated to the IMF staff that they intend to

treat this agreement as a precaution.

Consultations Under Article IV November 2011

Observations: in the context of consultations under Article IV of the IMF’s Articles of Agreement for 2011, the

Fund’s staff made the following main observations:

- Morocco has successfully faced major challenges over the past two years.

- Relatively favourable medium-term prospects would benefit from a reorientation of some macro-economic

policies to ensure high and sustainable growth rates (at least 5% annually).

- On the whole, Morocco has achieved solid economic performance (a strong non-agricultural GDP

performance of 4.5%, and inflation firmly contained at 1%).

- The 2010 global economic recovery sustained in part growth recovery in Morocco but new risks emerged in

2011.

- In 2011, the increase in some types of expenditure owing to measures adopted by the authorities to respond to

social demands led to an increase in total expenditure of 1.5% of GDP.

- Fiscal policy reorientation measures in 2011 equivalent to 2% of GDP helped to contain the budget deficit at

about 6.2% of GDP.

- Following efforts to limit the scope of budget expansion in 2011, the authorities are preparing to adopt firm

consolidation measures from 2012.

- To achieve that fiscal objective, the authorities are ready to re-launch and accelerate reforms aimed at

increasing revenue, controlling and streamlining expenditure, and improving expenditure efficiency.

- Monetary policy has maintained the inflation rate in line with Bank Al-Maghrib (BAM) objectives.

- Monetary authorities have the means and capacity to move on to a formal inflation and more flexible exchange

rate targeting regime.

- The Moroccan financial sector has developed significantly but the continuation of its growth will require the

mobilization of additional resources.

- The authorities are continuing with efforts to implement a vast structural reform programme in order to

enhance the economy’s competitiveness.

- The authorities have continued to support coherent social policies which helped, inter alia, to reduce the

poverty rate by 6.5% between 2000 and 2008 and improve social indicators.

- The constitutional reform will contribute to efforts to deepen structural reforms and stimulate growth in the

medium term.

- Conclusion: Cautious macro-economic policies over the past decade have enabled Morocco to have sufficient

flexibility to face the recent crises.

ANNEX 5

COMPARATIVE SOCIO-ECONOMIC INDICATORS

Year Morocco Africa

Develo-

ping

Countries

Develo-

ped

Countries

Basic Indicators

Area ( '000 Km²) 2011 447 30 323 80 976 54 658Total Population (millions) 2011 32,3 1 044,3 5 733,7 1 240,4Urban Population (% of Total) 2011 58,8 40,4 45,5 75,4Population Density (per Km²) 2011 72,3 36,1 59,9 36,5GNI per Capita (US $) 2010 2 900 1 549 3 304 38 657Labor Force Participation - Total (%) 2011 135,0 74,7 65,0 60,4Labor Force Participation - Female (%) 2011 26,6 42,5 49,2 50,2Gender -Related Dev elopment Index Value 2007 0,625 0,502 0,694 0,911Human Dev elop. Index (Rank among 187 countries) 2011 130 ... ... ...Popul. Liv ing Below $ 1.25 a Day (% of Population) 2007 2,5 40,0 22,4 ...

Demographic Indicators

Population Grow th Rate - Total (%) 2011 1,0 2,3 1,3 0,4Population Grow th Rate - Urban (%) 2011 2,0 3,4 2,3 0,7Population < 15 y ears (%) 2011 27,7 40,4 28,7 16,5Population >= 65 y ears (%) 2011 5,6 3,4 5,9 16,2Dependency Ratio (%) 2011 49,8 78,1 53,0 48,6Sex Ratio (per 100 female) 2011 96,1 99,5 103,4 94,6Female Population 15-49 y ears (% of total population) 2011 28,4 24,4 26,2 23,6Life Ex pectancy at Birth - Total (y ears) 2011 72,2 57,7 77,7 67,0Life Ex pectancy at Birth - Female (y ears) 2011 74,5 58,9 68,9 81,1Crude Birth Rate (per 1,000) 2011 19,2 34,5 21,1 11,4Crude Death Rate (per 1,000) 2011 5,8 11,1 7,8 10,1Infant Mortality Rate (per 1,000) 2011 30,0 76,0 44,7 5,4Child Mortality Rate (per 1,000) 2011 33,1 119,5 67,8 7,8Total Fertility Rate (per w oman) 2011 2,2 4,4 2,6 1,7Maternal Mortality Rate (per 100,000) 2010 100,0 530,7 230,0 13,7Women Using Contraception (%) 2007-09 63,0 28,6 61,2 72,4

Health & Nutrition Indicators

Phy sicians (per 100,000 people) 2009 62,0 57,8 112,0 276,2Nurses (per 100,000 people)* 2009 89,0 134,7 186,8 708,2Births attended by Trained Health Personnel (%) 2007-09 62,6 53,7 65,3 ...Access to Safe Water (% of Population) 2010 83,0 65,7 86,3 99,5Access to Health Serv ices (% of Population) 2007-09 ... 65,2 80,0 100,0Access to Sanitation (% of Population) 2010 70,0 39,8 56,1 99,9Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 2009 0,1 4,3 0,9 0,3Incidence of Tuberculosis (per 100,000) 2010 91,0 241,9 150,0 14,0Child Immunization Against Tuberculosis (%) 2010 99,0 85,5 95,4 ...Child Immunization Against Measles (%) 2010 98,0 78,5 84,3 93,4Underw eight Children (% of children under 5 y ears) 2007-09 9,9 30,9 17,9 ...Daily Calorie Supply per Capita 2007 3 236 2 462 2 675 3 285Public Ex penditure on Health (as % of GDP) 2009 1,9 2,4 2,9 7,4

Education Indicators

Gross Enrolment Ratio (%)

Primary School - Total 2011 113,7 101,4 107,8 101,4 Primary School - Female 2011 110,3 97,6 105,6 101,3 Secondary School - Total 2007 56,1 47,5 64,0 100,2 Secondary School - Female 2007 51,8 44,3 62,6 99,8Primary School Female Teaching Staff (% of Total) 2011 51,0 44,3 60,7 81,7Adult literacy Rate - Total (%) 2009 56,1 67,0 80,3 98,4Adult literacy Rate - Male (%) 2009 68,9 75,8 86,0 98,7Adult literacy Rate - Female (%) 2009 43,9 58,3 74,9 98,1Percentage of GDP Spent on Education 2009 5,4 4,6 4,1 5,1

Environmental Indicators

Land Use (Arable Land as % of Total Land Area) 2009 18,0 7,6 10,7 10,8Annual Rate of Deforestation (%) 2007-09 0,0 0,6 0,4 -0,2Forest (as % of Total Land Area) 2010 11,5 23,0 28,7 40,4Per Capita CO2 Emissions (metric tons) 2009 1,2 1,1 2,9 12,5

Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update :

UNAIDS; UNSD; WHO, UNICEF, WRI, UNDP; Country Reports.

Note : n.a. : Not Applicable ; … : Data Not Available.

COMPARATIVE SOCIO-ECONOMIC INDICATORS

Morocco

June 2012

0102030405060708090

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Infant Mortality Rate( Per 1000 )

Morocco Africa

0

500

1000

1500

2000

2500

3000

3500

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

GNI Per Capita US $

Morocco Africa

0,0

0,5

1,0

1,5

2,0

2,5

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Population Growth Rate (%)

Morocco Africa

111213141516171

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Life Expectancy at Birth (years)

Morocco Africa