rommt of The World Bank OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized D rommt of The World Bank FOR OMCIAL USE ONLY REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN EN AN AMOUNT EQUIVALENT TO US$12O MILLION TO CAISSE NATIONALE DE CREDIT AGRICOLE WITH THE GUARANTEE OF THE KINGDOM OF MOROCCO FOR A SIXTH AGRICULTURAL CREDIT PROJECT June 3, 1986 Report No. P-4347-MOR I This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENT Calendar 1985 June 4, 1986 Currency Unit = Dirbam (DH) DH US$ 1.00 = DH DH 1.00 = US$ GLOSSARY OF ABBREVIATIONS ADB : African Development Bank ASAL Agricultural Sector Adjustment Loan BNDE : Banque Nationale de Developpement Economique CIH : Credit Immobilier et H6telier CLCA : Caisse Locale de Credit Agriccle CICA : Caisse Nationale de Credit Agricole CRCA : Caisse Regionale de Credit Agricole DPA Direction Provinciale de l'agriculture INRA Institut National pour la Recherche Agricole ITPA : Industrial and Trade Policy Adjustment KfW : Kreditanstalt fur Wiederaufbau Nis Management Information System OERMVAs Offices R6gionales de Mise en Valeur Agricole FISCAL YEAR Government of Kingdom of Morocco : January 1 - December 31 CNCA: September 1- August 31

3 - i _ FOR OMCAL USE ONLY KINGDOM OF MOROCCO SIXTH AGRICULTURAL CREDIT PROJECT (CNCA VI) LOAN AND PROJECT SUMARY Borrower: Guarantor: Loan Amount: Lending Terms: On-lending Terms: Caisse Nationale de Credit Agricole. Kingdom of Morocco US$120.0 million equivalent. 20 years, including a 5 year grace period, at the standard variable interest rate. Most of the proceeds of the loan would be onlent to project beneficiaries for up to 20 years, at interest rates acceptable to the Bank. Proiect Description: The proposed project would pursue the Government's sectoral objectives being supported by the Bank through the recent Agricultural Sector Adjustment Loan (Loan 2590-MOR). The project would : (i) increase institutional credit penetration in rainfed areas to help increase agricultural production and to assist Morocco towards reaching self sufficiency in food stuffs; (ii) augment non budgetary financing of agriculture through increased credit extension to small farmers; this is aimed at increasing production and farmers' income; (iii) upgrade the technology being used by small farmers in rainfed areas and increase land productivity by financing more intensive use of chemical fertilizers, high yielding seeds and small scale mechanization; (iv) generate value added by financing individual and cooperative on-farm storage to safeguard the prices of cereals obtained by farmer, small- and medium-size agroindustry, construction and equipment of greenhouses for the production of vegetables and flowers, mainly for export; and (v) provide for institutional development already started during CNCA V by: strengthening CNCA's management structure; improving its lending appraisal procedures; completing the installation of the management information system in CNCA; and increasing domestic resources mobilization activity. The major risk of the project is that of adverse weather conditions, which on average occur once in every five years and which has been taken into account in the financial and economic analysis. A second risk which could affect CNCA's performance in the long term would be the failure to strengthen CNCA's management committee sufficiently so as to develop a long term policy and banking structure. To reduce this risk, an appropriate mandate and membership of the management committee will be maintained. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be discosed without World Bank aut"'rnzation.

4 - ii - Estimated Proiect Costs: LocalL' Foreign US$ million Total A. On-farm investment Agroindustry Rural housing Total Base Costs Price Contingencies Total Cost B. Physical Infrastructure Institutional Development Total Base Costs Physical Contingencies Price Contingencies Total Costs C. Total Project Costs Financing Plan: LocalL' Foreign US$ million Total Sub-borrowers equity CNCA own funds IBRD ADB KfW Total rinancing Estimated Disbursements : Fiscal Year US$ million Annual Cumulative Staff Appraisal Report: No MOR dated May 28, 1986 Map: IBRD No / Cost estimates include taxes and duties of US$78.3 million.

5 ITERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEiT REPORT ANID RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$120 MILLION TO CAISSE NATIONALE DE CREDIT AGRICOLE WITH HE GUARANTEE OF THE KINGDOM OF MOROCCO FOR A SIXTH AGRICULTURAL CREDIT PROJECT 1. I submit the following report and recommendation on a proposed loan to Caisse Nationale de Credit Agricole (CNCA), with the guarantee of the Kingdom of Morocco, for the equivalent of US$120 million to help finance the Sixth Agricultural Credit Project. The proposed Loan would have a term of 20 years, including 5 years of grace, at the standard variable interest rate. Most of the proceeds of the Loan to CNCA would be onlent to project beneficiaries for up to 20 years, at interest rates acceptable to the Bank. Co-financing is expected from the African Development Bank (ADB) through a $66 million equivalent loan and from the Federal Republic of Germany, Kreditanstalt fur Wiederaufbau (KfW), through loans totaling $35 million equivalent, to CNCA. PART I - THE ECONOMY 1 ' 2. An economic report, entitled "'Morocco: Priorities for Public Sector Investment ( )"(No MOR), was issued on June 15, Another economic report entitled "Morocco: Industrial Incentives and Export Promotion" (No iMR) was distributed to the Board on January 11, An economic mission on financial intermediation was in Morocco in September 1983 and its report (No MOR) was issued on December 12, The following section reflects the findings of an economic updating mission that went to Morocco in July 1984 to prepare a paper, entitled "Morocco: Medium-term Adjustment Policies and Prospects", for presentation to a meeting of the Consultative Group for Morocco in Paris on January 9-11, Data and analysis have been updated to reflect the findings of the ITPA II appraisal mission that visited Morocco in March Country data are given in Annex I. Introdution 3. During nearly two decades after Independence in 1956, Morocco followed relatively conservative economic policies. Cautious external 1/ Part I is essentially the same as Part I in the Education Reform Program Loan (Report No. P-4240-MOR of February 25, 1986)

6 borrowings supplemented a weak savings effort to permit only a slow rise in investment, so that the economy grew only at about 4 percent per annum. Primary prbducts - principally phosphates - accounted for 90 percent of merchandise exports. During the mid-1970s, after a sudden increase in phosphate prices, Morocco launched an ambitious public investment program which boosted GDP growth to 7.5 percent annually during the period The phosphate boom, however, began subsiding as early as mid Meanwhile, the petroleum import bill, which had quadrupled in 1974, continued to place considerable pressure on the balance of payments, and the current account deficit reached 16.5 percent of GDP in Domestically, the large public investment program and increased defense expenditures in the Western Sahara caused the treasury deficit to rise to 15.8 percent of GDP in Morocco resorted to considerable foreign borrowings to finance these deficits. 4. To redress the rapidly deteriorating financial situation, the Moroccan Government introduced a three-year stabilization program in 1978 centered on reductions in public sector outlays and stricter import controls. These reforms were only partially successful. They did little to stimulate exports. The exchange rate was kept overvalued and trade barriers were raised. They did not adequately tackle the excessive budgetary exposure and made inadequate attempts to increase the efficiency of resource use. The agricultural sector failed to grow, while value-added in manufacturing declined. Meanwhile, public investment was not restrained; a number of costly, poorly-targeted social programs were expanded and investment in infrastructure was undertaken often well ahead of need. Efforts to stabilize the economy were compromised by severe external shocks - most notably the 1979 oil price increase, the rise in international interest rates, the international recession which reduced phosphate earnings and workers' remittances, and the prolonged drought. Continued internal pressure to provide social services and affordable basic foodstuffs to a rapidly growing population put considerable strains on a budget already stretched by the need to finance expenditures in the Sahara. The Development Plan aimed at an ambitious 6.5 percent per annum growth rate in GDP. Notwithstanding the difficulties confronting the economy, Morocco did not appear willing to introduce a comprehensive program of policy measures which could have confronted the economic crisis. The shortcomings in the adjustment performance caused the IMF to convert a three-year EFF ii%to a one-year Stand By Arrangement in 1982 and prevented the Bank from proceeding with a SAL at that time. Recent Emonomic Developments 5. By 1983 it had become clear that the Government's room to maneuver was becoming very restricted by debt service payment requirements. In 1982 external public long-term debt (excluding military debt) had risen to about two-thirds of GDP and 235 percent of exports of goods and services while the debt service ratio reached 35 percent. Morocco was confronted with the prospect of a very large external payments gap for With exchange reserves virtually depleted and debt service rising, the Government imposed emergency import controls and budgetary cutbacks in early In November 1983 the Government entered into an 18-month standby agreement with the IMF

7 -3- (SDR 300 million, or 98 percent of quota) supporting a stabilization program which included fiscal and credit restraints and a flexible exchange rate policy. Shortly thereafter, official creditors agreed to reschedule external debt interest and principal payments coming due between September 1, 1983 and December 1984, as well as arrears as of August 31, Commercial bank creditors agreed in principle to provide comparable relief on amortization. The total amount of debt relief obtained in under these agreements was estimated at more than $2 billion (including $575 million of relief on military debt). In November 1983, a Donors' meeting sponsored by the IMF, generated pledges of about $500 million of exceptional balance-of-payments assistance for To meet its fiscal targets the Government restricted public service recruitment and salary increases, raised the prices of electricity, water, petroleum products and subsidized foodstuffs (by between 17 percent and 60 percent), and cut capital outlays by one third. At the same time, it began a significant adjustment effort supported by the Bank program, along with the January 1984 ITPA I (No. P-3707-MOR), to improve its balance of payments situation with a package of measures to restructure its trade regime. This included a reduction in import taxation, an easing of quantitative restrictions, and a reduction in export licensing. Following a Financial Sector Study conducted by the Bank in 1984 (No MOR), the Government extended these reforms to the Financial Sector with the objective of raising domestic resources and improving resource allocation. Greater flexibility was introduced in setting interest rates, measures were designed to increase competition among banks, and taxation reforms to benefit the financial sector were implemented. 6. As a result of the policies adopted since 1983, macroeconomic balances improved. The economy's resource gap shrank from 13 percent of GDP in 1982 to 8 percent in 1984 (at constant 1980 prices). This was achieved through a significant decline in the GDP share of consumption and investment relative to their high levels earlier in the 1980s. Meanwhile, import growth has been restrained by appropriate demand management and by the depreciation of the exchange rate, while the share of exports and gross domestic savings increased substantially. The Government budget deficit was reduced from 12 percent of GDP in 1982 to about 7 percent in 1984 (8 percent before taking into account the impact of external debt rescheduling on interest payments). Although the improvement stemmed chiefly from a sharp reduction in investment outlays, there was also a significant slowing down in the rate of growth of current expenditures. As was to be expected, the rate of GDP growth has been low (a little over 2 percent p.a.), reflecting the impact of stabilization policies on consumption and investment demand, along with the effect of drought on agricultural sector incomes in both 1983 and A good harvest is expected to help boost the growth rate to about 4 percent in The current account of the balance of payments improved considerably, reflecting both the better resource balance of the economy and the impact of the debt relief obtained by Morocco from its official creditors on interest and military debt service payments. In 1983, the external current account deficit was reduced by half, from $1.9 billion and 12.7 percent of GDP in 1982 to $873 million and 6.6 percent of GDP. The balance subsequently worsened in 1984, particularly in relation to GDP, but still remained under $1 billion.

8 - 4 - In both 1983 and 1984, about half of the roughly $1 billion improvement in the current account in relation to 1982 was attributable to debt relief. 1-' The net inflow of public medium and long-term capital (including grants) has declined sharply from about $1.5 billion in 1982 to an average of only $400 million during In 1985, the net inflow rose to about $1 billion, including an exceptional $300 million grant from Saudi Arabia. Nevertheless, these inflows had to be supplemented by continued debt relief along the lines of the debt rescheduling, and demand management policies to keep import growth under control. 8. Further progress in reducing both external and fiscal imbalances is envisaged under a new stand-by arrangement with the IMF approved on September 13, Preliminary data indicate some slippage in fiscal performance in the first half of 1985 and disappointing results on external trade, attributed essentially to weak demand in the phosphate market. These suggest that stronger corrective measures would be needed to keep tue stabilization program on course including, in particular, restraining current expenditures and reducing subsidies on foodstuffs and public services. A formal debt rescheduling through the Paris Club covering maturities from September 1985 to February 1987 was agreed on September 17, Ninety-five percent of the total debt due were rescheduled along lines similar to those obtained under the debt relief arrangement. The rescheduling agreement between Morocco and the commercial banks was signed, after long delays, on October 21, These recent developments should help Morocco reach a balance in its external accounts for the next two years. Medim Term Policies and Prospects 9. Since 1983, the Government's objective of achieving viable external and fiscal positions along with satisfactory growth has been translated into a coherent medium-term strategy to restrain domestic absorption and increase the efficiency of resource throughout the economy. The principal elements of Morocco's medium-term adjustment program involve a shift to outward-looking trade and exchange rate policies; far-reaching reforms of price, credit, tax and regulatory policies to remove institutional and other obstacles to efficient mobilization and use of resources in key productive sectors of the economy; considerable improvements in the efficiency of government investment; more cost-effective methods and better targetting of social programs; and a thorough overhaul of the public enterprise sector. 10. The shift to an outward-oriented development strategy is the cornerstone of Morocco's medium-term adjustment program. Continued adjustments in trade and exchange rate policies will be made to complete the reform of the overall incentive framework designed to accelerate export growth and reduce and rationalize import protection. Key instruments are to be a flexible exchange rate, the elimination of the special import tax (expected by 1/ Over $200 million in interest payments were rescheduled in each of the two years. In addition, the current account balance benefitted from military debt relief in the amount of $325 million in 1983 and $250 million in 1984.

9 - 5 - January 1987); a general reform of the tariff level and structure, with the objective of reducing the overall level of protection to 25 percent through decreasing maxiumum duty rates and evening out the spread in tariff rates within and between sectors; and finally, a phasing out of quantitative restrictions on imports. Domestic price controls, which were already removed in on many manufactured products, are planned to be fully eliminated, in parallel with progress in import liberalization. Remaining export licensing requirements will be abolished, with exporters to be entitled to import all inputs on a duty-free basis. II. At the same time, appropriate sector strategies for the key productive sectors, particularly agriculture and industry, will be promoted. In industry, although the development of Morocco's potential for export of phosphate fertilizers will continue to be an important objective, the \ contribution of this highly capital-intensive sector to employment and to the establishment of a broader industrial base through forward and backward linkages will remain limited. Moreover, a high degree of dependence on phosphate and phosphate fertilizer exports has made Morocco extremely vulnerable to cyclical fluctuations in the volatile world phosphate market. For this reason, the industrial strategy must be based on the diversification of manufactured exports, including processed foods and nontraditional manufactures where Morocco may have a comparative advantage on world markets. In agriculture, Morocco needs to continue developing an appropriate package of policies designed to overcome existing constraints to rational land use patterns, to ensure that farmers have adequate incentives to improve farming techniques and use modern inputs, and to provide the support services needed to bring about these changes. A first Agricultural Sector Adjustment Loan (No. P-4032-MOR) in line with such policy direction was extended by the Bank in June The low productivity of investment has been one of the major factors in the poor performance of the Moroccan economy in the past ten years. The allocation of capital and the efficiency of investment need to be improved considerably both in the public and in the private sector. In the private sector, the reform of the protection framework described above should go a long way towards removing distortions in investment patterns. However, it will also be necessary to review the bias in favor of capital-intensive activities inherent in the current investment incentive system, including tax exemptions and interest rate subsidies which artificially depress the cost of capital. In the public sector, increasing the efficiency of investment will require a considerable improvement of existing planning and budgeting mechanisms, including better procedures for setting investment priorities, strengthening of project preparation and monitoring capability, and placing more emphasis on the economic evaluation of projects before they receive Government sanction. Policy actions to improve the public investment and enterprise framework as well as continuing reform of trade policy and a comprehensive approach to financial sector reform are supported by the Bank's second Industrial and Trade Policy Adjustment loan approved in July An exceptionally strong savings effort will be essential for the success of Morocco's adjustment process. In the private sector financial

10 - 6 - savings have been repressed in the past due to inadequate financial policies and negative real interest rates. Savings are now being encouraged through increases in deposit rates and a program of financial sector reforms to improve financial intermediation and develop the domestic money and capital markets. But the most intense savings efforts in the next few years will have to take place in the public sector, which continues to be a major source of dissaving, particularly through the Government budget. In the medium term, sustained improvement in the mobilization and utilization of resources by the public sector will require fundamental reforms in a number of key areas, including social expenditure policies, taxation, and cost recovery and efficiency in the public enterprise sector. In the social sectors, where coverage of the population is still inadequate, Government activities need to be restructured so that basic services (particularly education and health) can be delivered more effectively but at substantially lower cost. More cost-effective methods and better targeting will be prerequisites to a further broadening of access to these services in the future. Food and other subsidies also need to be targeted to the groups most in need rather than directed to the general population. 14. Macroeconomic projections based on the Government's reform programs indicate that it may take the better part of the next ten years for Morocco to complete its adjustment process. The growth of the economy is likely to be severely constrained in the early years of the adjustment process. However, as the restructuring measures designed to promote exports, improve resource use and increase domestic savings begin to work their effects through the economy, the external imbalance should lessen, and restraints on domestic demand could gradually be relaxed. Moreover, the growth of external demand expected to result from the trade liberalization and export promotion policies, and the switch in the composition of domestic demand from imported to domestic goods, fostered by the adjustment of relative prices, should help mitigate the temporary negative impact of slower public expenditure growth on incomes and employment. 15. The projections suggest that GDP growth is likely to remain low (below 3 percent p.a.) until 1990, accelerating thereafter. Domestic demand is expected to grow very slowly until 1990, reflecting the impact of stabilization policies on both investment and consumption. Investment, which has been declining since 1978, should continue to fall in real terms and in relation to GDP until about 1987, then rise somewhat until 1990, recovering strongly thereafter. Assuming that central government investment expenditures would remain constant in real terms in the medium term, the adjustments would occur primarily in the public enterpises and private sectors. Government consumption, which had grown very rapidly until recently, is projected to decline marginally in real terms and to drop by 3 percentage points in relation to GDP between 1985 and The growth of private consumption, which already slowed significantly in the early 1980s, would remain just below that of GDP in , and accelerate only slightly in the 1990s. Restructuring policies should bring about an acceleration in the growth of exports of goods and nonfactor services. The acceleration of export growth would help sustain a modest recovery of imports, the overall trend of which has been downward since Imports, however, should rise much more slowly than exports between 1985 and 1990, as a result of the demand restraint and expenditure switching policies.

11 As a result of the drop in the GDP share of both investment and consumption, there should be a steady decline in the economy's resource gap, with a small surplus projected for Gross domestic savings are expected to rise much faster than GDP throughout the period, initially as a result of improved savings mobilization by the public sector, and later reflecting continued substantial improvements in private savings as well. The marginal savings rate with respect to GNP will need to be very high (about 50 percent) in , as a necessary concomitant to reducing the external deficit; it should slacken slightly thereafter. High domestic savings should enable the economy to finance the recovery of investment without recourse to external savings in the early 1990s. This will be essential, since, throughout the remainder of the 1980s, the balance of payments will remain under considerable pressure because of continuing high debt service payments. By the end of the decade, reforms of the overall economic incentive framework and increased efficiency Af public investment should have raised the productivity of new investment considerably, and the ICOR should drop substantially from the high levels prevailing in the early 1980s. 17. It is important to recognize that the implementation of the stabilization policies and measures for structural adjustment envisaged in this scenario will entail some transitional social costs. With population growth at about 2.5 percent p.a., GNP and consumption per capita, which have been essentially stagnant since 1980, are not likely to show much improvement in real terms until the end of the present decade. Stabilization policies and measures to increase efficiency will initially be reflected to some extent in depressed domestic demand, increased unemployment, and some decline in real incomes, particularly the real income of urban populations, Government employees, and workers in less competitive industries. On the other hand, the real income of farmers, who constitute by far the poorest segment of the population, should rise as a result of incredses in agricultural producer prices and improvements in support services and marketing institutions and infrastructure. This will be particularly true of farmers in rainfed areas. The political and social implications of these welfare shifts are likely to be significant, and to keep them manageable will be a major concern of the Government in the next few years. While the cost of not undertaking the required economic adjustments would in any case be greater in the long run, it will be important to minimize the negative short-term impact of these adjustments on the poorest groups. After 1990, as a result of the reforms undertaken in the 1980s, the economy could return gradually to a higher growth path without endangering external equilibrium. Per capita levels of income and consumption could begin to rise again, and the restoration of economic dynamism would greatly improve Morocco's ability to deal with its serious unemployment problem. 18. A steady improvement in Morocco's external payments position should result from the acceleration of export growth relative to import growth anticipated in The economy's negative resource balance, which averaged more than $2 billion in , and dropped to $ billion in , is projected to decline steadily, and virtually disappear by Assuming that the growth of workers' remittances can be sustained at a modest pace, the current account should improve roughly in parallel with the overall

12 - 8 - resource balance and could reach approximate equilibrium around However, the overall balance of payments can be expected to continue to show large deficits because of the heavy principal repayments coming due on the external debt, including substantial repayments to the IMF. Because of mounting debt service obligations, gross public long-term capital requirements are projected to average close to US$2.5 billion annually during the period It is clear, under these circumstances, that Morocco will continue to require debt relief for seve-al more years. The projections include the effects of the recently concluded debt rescheduling agreement through the Paris Club, and assume debt relief from private creditors during , essentially along the lines of the debt reschedulings obtained in l ' Normal public long-term capital inflows could then be approximately sufficient to cover the remaining financing requirements in (about US$1.2 billion annually), assuming that new loan com aitments from Morocco's official lenders can be maintained at their current rate (about US$800 million a year). Recourse to comnercial bank financing, outside of these guaranteed programs, is likely to remain constrained and overall private capital flows are expected to remain sporadic, at US$ million per annum, probably strongly conditioned on, if not directly tied to, specific adjustment programs. 20. For the years , Morocco is going to need around US$2 billion annually to meet its capital requirements. Providing that US$ million a year are forthcoming from official creditors; and assuming a reasonable recovery of private source financing of about US$700 million a year, around US$400 million still remain to be generated each year to cover the gap. With Bank and IMF transfers stretched to the limit, Morocco's remaining financing requirements will have to come in the form of further debt relief, grants, or some concessional assistance. Only beginning in 1992, with debt repayments from past borrowings and successive reschedulings starting to level off, could equilibrium in the overall balance of payments appear assured on the basis of normal official capital inflows and a sustainable recourse to private financing. If the envisaged external capital flows do not materialize, the Government will have to resort to severe corrective measures to finance its resource gap. 21. In view of the continuing large capital inflows required in the next few years, the long-term external debt outstanding and disbursed would continue to rise rapidly until 1988, but would begin to stabilize thereafter. The ratio of debt outstanding and disbursed to exports of goods and services, which had risen to 260 percent in 1984, would start to decline, progressively dropping to 175 percent by 1990 and 114 percent by In the absence of debt rescheduling, the long-term debt service ratio would have risen above 50 percent of exports of goods and services in 1985 and With debt relief obtained for the period , on the other hand, the debt service 1, About US$230 million of military debt service payments comiug due each year until 1988 are assumed to be rescheduled along the same lines as other obligations.

13 ratio could be kept manageable at percent during the next few years. Assuming no further debt relief, it would rise sharply in 1988, with repayments on the rescheduled maturities (including military debt) falling due, but would then start declining gradually in the 1990s. Given this difficult debt situation, Morocco's commitment to an aggressive program of structural adjustment is essential for the country to be considered creditworthy for continued Bank lending. Bank exposure amounted to 1 of total debt outstanding in 1985, and would increase to about 17% at the end of the decade, with the current lending program. PART H - OTHER BANK GROUP OPERATIONS IN MOROCCO 1' 22. Bank lending to Morocco has supported 65 projects, financing a total of $2,654.3 million (net of cancellations), of which 125 million from a Third window loan. IDA credits, totalling $45.2 million, have been made available for five projects. IFC investments have amounted to $104.7 million ($59.9 million after cancellations, terminations, repayments and sales). Annex II contains a summary statement of Bank loans and IDA credits, and of IFC investments, as of March 31, Until recently, performance in project execution has been satisfactory overall, although in some cases management problems have caused delays in project implementation, and in others insufficient tariff adjustments have affected project entities' financial performance. However, during 1983, as budgetary constraints became more severe, projects relying on the Government budget for a substantial part of financing have been seriously delayed because of inadequnte budgetary allocations. The appreciation of the dollar vis-a-vis the dirham in recent years has reduced considerably reimbursable expenses in dollar terms, thus lowering disbursements vis-a-vis appraisal estimates. The ratio of disbursements to appraisal estimates averaged 54 percent as of March 31, 1986, close to the regional average. 24. The objectives of Bank Group activities in Morocco are to support (a) investments and policy reforms aimed at structural adjustment and strengthening the balance-of-payments; (b) measures to reduce the Treasury deficit; and (c) efforts to redress poverty and improve income distribution, particularly through lowering the unit costs for the delivery of basic services, in order to increase access by lower-income groups. Important structural reforms must be undertaken in the coming years, in order to return to a path of reasonable economic growth compatible with a sustainable external payments position. A major objective of Bank economic and sector work is to provide the analytical basis for the development of specific proposals for structural reform, which in several cases is being supported by Bank lending. At Government's request, in addition to ongoing work on the public investment 1/ Part II is essentially the same as Part II in the Education Reform Program Loan (Report No. P-4240-MOR of February 25,1986).

14 program, the Bank is assisting in developing reform proposals relating to the public enterprises. Because severe budgetary constraints are likely to persist over the medium-term, projects now under preparation or consideration, like the proposed project, are designed to be consistent with the investment strategy which aims to minimize their reliance on incremental budgetary funds and support Morocco's efforts to reform its public enterprises. 25. Agriculture continues to represent an important sector in Bank lending for Morocco. Past Bank lending has primarily supported rural development and irrigation projects focusing on particular geographical regions, in parallel with successful series of agricultural credit projects. There are no major covenants in default. New Bank's operations in those fields will continue at a pae4 consistent with the country's investment capacity while paying special attention to maximiziag non-budgetary financing and improving cost recovery. At present increased attention 's being given to agricultural support services at the national level, which are essential for backstopping regional development projects. In parallel, the Bank has helped the Moroccan authorities to review the sector policy framework and to formulate its medium-term adjustment program covering investment strategy, pricing and incentive policy and role of the public sector. The recently approved Agricultural Sector Adjustment (ASAL) loan was in support of a first phase of such a sector adjustment program and is expected to be followed by similar operations, as further specific measures to adjust the prices and incentives framework are developed. 26. Energy and mining. The Government has given high priority to reducing the oil import bill, a major factor in the current account deficit, through development of domestic energy supplies. The Bank has supported this e-fort through loans for the exploration and appraisal of petroleum (primarily natural gas) and oil shale resources as well as for power generation and transmission and coal mining modernization and expansion. Future projects would assist in the development of domestic energy supplies, including gas, and bydropower. Through these projects as well as in our sectoral policy dialogue, efficiency in energy development and use would be promoted through attention to pricing, cost recovery and management issues. 27. Bank lending for infrastructure and utilities has helped to build a number of technically competent agencies in the fields of road transportation, electricity, water supply, housing finance, and community infrastructure finance, as well as to expand the provision of essential services. Projects like the recently approved Port project will place greater emphasis on improving the productivity and efficiency of existing infrastructure through improved fi-nancial and management performance. Mobilization of private and non-budgetary financing as well as improved cost recovery in these subsectors through tariffs should also help reduce the Treasury deficit. In addition to continuing support for the above-mentioned subsectors and the proposed project, projects are under preparation for telecommunications, railways and sewerage. 28. Industrial development in Morocco has been supported in the past through strengthening the financial and institutional resources of the Banque

15 Nationale de D6veloppement Economique (BNDE), the major source of industrial medium-term credit. In addition, policy changes were introduced to widen access to credit by small-scale labor-intensive industries. Other projects focused on phosphate processing and cement production. The Bank's efforts are now focused on the development and implementation of medium-term policy reforms aimed at encouraging exports and improving incentives to domestic production. The first phase of such reforms was supported by the Industrial and Trade Policy Adjustment (ITPA) loan of 1984 and was successfully implemented. Further stages of reform of trade policy, as well as a comprehensive reform of the financial sector, and policy actions on public investments and public enterprises are supported by the on-going Second Industrial and Trade Policy Adjustment Loan. 29. Education, health and urban development projects will increasingly concentrate on lowering unit costs in order to widen the access by low-income groups. Policy dialogue in these sectors continues to encourage the shift away from capital-intensive investments benefitting limited clientele and the development of more cost-effective delivery systems for basic services. While previous Bank-financed projects have supported technical education, rural primary education and improved teacher training, these will be complemented by efforts to expand basic education and skill training, as well as restructuring of the formal education system, which has represented a major drain on the recurrent budget through the recently approved Education Reform Program Loan. The recently approved first health development project will test new health care delivery systems in order to improve basic health services in rural areas. Finally, the experience of projects in urban upgrading will be continued and expanded, with increased efforts to mobilize private financing in order to reduce budgetary costs. PART m - THE AGRICULTURE SECTOR AND AGRICULTURAL CREDrT SUBSECTOR 30. Of Morocco's 60 million ha some 8 million have soils and moisture suitable for cropping, with another 20 million ha in semi-arid or mountain regions suitable for grazing and forests. Of the cultivable land, about half normally receives a good rainfall, while the other half receives an erratic rainfall of under 400 mm, which can only be put under a relatively high risk, low value barley/fallow cropping system. Only about 1.3 million ha are estimated to be irrigable economically. Fruits, vegetables, forage crops and industrial crops are grown under the more favorable irrigated conditions; but cereals and pulses dominate the cropping pattern on 80% of the land under rainfed conditions. 31. The recent poor performance of Moroccan agriculture can be divided into two contrasting trends between the modern irrigated sector, which now covers 10% of the cultivated land, and the traditional rainfed sector. Government has concentrated 60-75% of its investment and most of the producer subsidies in the irrigated sector. As a result, considerable progress was made in farming techniques and yields, output from this sector grew at 5.5%

16 during , and production of sugar beet, sugar cane, and dairy cattle showed rapid progress. Morocco now obtains 45X of the total agricultural value added and 60S of its agricultural exports from the irrigated areas. Rainfed cultivation, on the other hand, which involves 751 of the rural population and provides the bulk of the country's basic internal food supply (cereals, pulses, oil seeds and red meat), remains largely traditional. Low yields are the result of a combination of factors: climatic constraints, in which 7 out of the past 14 years have been drought years, fragmentation of holdings (typical plot size is 0.6 ha), insecure land tenure, poor farming practices, inadequate use of modern inputs and poor support services, except in small areas of special development projects. Potential does exist, however, in both the irrigated and rainfed sectors to increase yields: in the rainfed areas, mechanized land preparation, use of modern inputs and selected improved seeds and a more intensive and rational land use would improve productivity; in irrigated areas, improved farming techniques, gre.-ter cropping intensity, development of complementary infrastructure and better maintenance could expand production by as much as 100% over the next decade. 32. In response to the worsening macro-economic situation and recent poor performance by the sector, the Government developed in 1984 a five-year agricultural sector adjustment program which has been supported by the Bank through a Sector Adjustment Loan (2590-MOR) in June The program's prime objectives are: (a) to restructure the public investment and expenditure program in agriculture towards quick maturing and high return investments; (b) to correct the prices and incentives framework to encourage economically sound shifts in agricultural activities; (c) to strengthen the agricultural support services offered by the Goverment while rationalizing the role of the public sector in provision of commercially viable services, and improving cost recovery in other services; and (d) to build up institutional capacity for agricultural policy planning and analysis. Sector Issues Relevant to Agricultural Credit 33. A key element in Government strategy for structural adjustment is to rely more on private investment channelled through institutional credit, as opposed to public sector investment. CNCA is the major institutional source of funds to the agricultural sector. One of the obstacles to expand the role of CNCA, however is the limited savings and debt servicing capacitv of many rural families, which is aggravated by the lack of documented title to their lands and by the criteria used so far by CNCA to determine such capacity through their fiscal income. Recent 1985 data indicate that CNCA is lending to only about 30% of potential small-farmer borrowers. To increase accessibility of farmers to credit, CNCA has begun to expand its physical network, open temporary credit outlets and to develop a new policy on eligibility based on a direct assessment of farmers credit needs and repayment capacity. These measures, which are supported by the proposed project should increase the number of eligible borrowers and the ceilings on the loan amounts. 34. Another constraint to expanding CNCA's role is its ability to mobilize deposits and savings in order to provide an increasing share of domestic resources to finance its lending program. Efforts in that direction have met so far with moderate success. Recent initiatives, such as raising interest rates on deposits by 1-2X, creating a savings passbook system and

17 upgrading the physical conditions of existing branches to provide this service, are expected to bring additional results. However, a medium- and long-term strategy to increase savings mobilization is required and would be developed under the proposed project. Such a development would be fully consistent with the Government's priority concern of increasing private savings mobilization to finance investments. 35. Financing the development of small-scale, relatively labor intensive agroindustrial activity complementary to primary production was promoted under the Fifth Agricultural Credit Project (Loan No MOR) with encouraging results. Mostly through the establishment of a special office in the Meknes region, lending for agroindustrial activities nearly doubled from DH 25 million in 1983 to DR 48.9 million in In addition, USAID is financing technical assistance to entrepreneurs on legal, financial, technical and marketing matters. There is, however, a need to expand assistance and access to credit to small entrepreneurs to other areas of the country, and under the proposed project, it was agreed that CNCA would open by December 31, 1986 and June 30, 1987 two additional agroindustries units, respectively, in regions with sizeable and untapped potential. 36. Land distribution in Morocco is relatively skewed with 742 of farm families owning 5 ha or less and accounting for 25Z of cultivable land. The average farm size is about 5 ha, but farms are highly fragmented, with an average size of parcels being 0.64 ha., too small for efficient rainfed farming. Most private farmers do not have registered legal titles to their land and cannot offer guarantees to obtain credit for on-farm investments. In addition, absentee landlords and tenancy arrangements offer tenants little security and consequently no incentive to improve the lands. Government is aware of this situation and under the ASAL is taking the following actions: a) acceleration of collection of statistical data base on land tenure; b) land consolidation schemes to restructure farms into viable units; and c) introduction of new legislation regulating relationships between lessors and lessees of land. 37. Other sector issues which are relevant to agricultural credit and which are being dealt with under the ASAL are the improvement of the agricultural extension services and research, and the rationalization of the price and incentive system. The Agricultural Credit Bank-Caisse Nationale de Credit Agricole (CNCA) 38. CNCA, an autonomous Government owned institution, was established in 1961 to provide loans for agricultural inputs, on-farm investments and marketing to individual farmers, farmers' groups and cooperatives, and companies. Its Board of Directors is chaired by the Minister of Agriculture and includes representatives of the Ministries of Agriculture, Finance, Interior, the Central Bank and local agricultural credit institutions. Certain Board functions are delegated to a Managing Committee presided by the Director General. CNCA staff numbered 2,159 as of the end of Staff are qualified and productivity is high. Loans to companies, cooperatives, and very large farmers are handled at CNCA's headquarters, located in Rabat.

18 Tans to farmers with a fiscal income above DR 6,000 1L and cooperatives are processed and supervised by CNCA's 38 regional branches, the Caisses Rhgionales de Credit Agricole (CRCAs). Loans to small farmers with a fiscal income between DR 50 and DR 6,000 are processed by 99 Caisses Locales de Cr6dit Agricole (CLC4s) and 146 seasonal credit outlets. Credit is not extended to farmers with a fiscal income below DH Decentralization of lending responsibility, simplification of procedures and expansion of the range of investments financed have been the main characteristic of CNCA's credit policies since CNCA's objective has been to provide maximum access to credit, make the provision of credit rapid and simple and adapt credit norms to regional agroeconomic conditions. By and large, CNCA has been successful in this effort. 40. Over the period of , total lending increased at an annual rate of 9 percent in real terms, reaching DO 2,638 million in 1984/85. Over the same period, the share of short-term loans in total lending decreased from 61Z to about 431. Loans received by CLCA's clients increased from 27 percent of total CNCA's lending in 1980/81 to 32 percent in 1984/85. CNCA's lending procedures are governed by "credit guidelines" which are revised every year in collaboration with the Ministry of Agriculture, and basically aim at covering 70 percent of estimated production costs or investment costs. Overall, CNCA's appraisal criteria and procedures are adequate. Loans to small farmers are, in most cases, based on their estimated fiscal incomes, and ceilings are set for maximum borrowing. In order to expand credit coverage to small farmers, pilot schemes were introduced in 1981 and 1983 under the Bank-financed Fez-Karia-Tiss and Oulmes-Rommani Agricultural Projects, respectively, under which the farmers' eligibility for loans is based on projected annual operating revenues rather than on the fiscal income. In the project area this has led to a doubling of the unit size of short-term loans to CLCA clients, and loan recoveries appear satisfactory. CNCA aims now at expanding the coverage of this system to the whole country; however, as this would have to be done gradually, if only because of staff constraints, it was agreed that CNCA would introduce the new system in the two highly productive regions of Meknes and Settat, which account for about 401 of all CNCA lending, by June 30, 1987 and June 30, 1988, respectively. 41. Interest rates vary according to the type of investments, ranging from 8 to 12 percent for short-term loans (3 to 18 months), and from 13.3 to 141 percent for medium- and long-term loans (2 to 20 years). These rates, which were introduced in 1985, are similar to those charged by commercial banks and the industrial development bank for similar loans, and are positive in real terms. 42. CNCA's resources more than doubled since 1982 to a total of DH 6,453 million as of August 31, This increase was mostly due to the growth of long-term borrowing (51 percent p.a.) and deposits (26 percent 1/ Fiscal income is based on predetermined values for agricultural assets held by farmers. It is estimated for tax purposes. Depending upon the crops grown, real annual net farm income ranges from 3 to 20 times more than fiscal income.

19 p.a.). As of August 31, 1985, long-term borrowing represented about 52 percent of CNCA's total resources, short-term borrowing 14 percent, deposits 14 percent, equity and special funds, including provisions for bad debts, 19 percent. 43. CNCA's financial position is good, reflecting its efficient management and excellent loan recovery rate (77-83 percent annually in ) with only 6% of its portfolio oustanding more than 15 months. Although the equity to total assets ratio decreased from 13.9 percent in 1982 to 12.3 percent in 1985, it remains satisfactory and reflects adequate capitalization. CNCA's long-term debt to equity ratio is at 5.1, within the 6 to 1 ceiling set under the Fifth Agricultural Credit Project (Loan No MOR), and its current ratio of 1.3 indicates a favorable liquidity position and complies with the requirements under the Fifth Agricultural Credit Project. Net profits increased from DH 19.1 million in 1981/82 to DH 70.8 million in 1984/85, an increase of 552 p.a. In 1984/85, profits represented a 13.6X return on equity as compared to 5.3X in 1981/82. This increase in profitability has made possible an increase in reserves of about 52X during the period. Performance under previous Bank financed agricultural projects 44. Bank group lending for agriculture began in 1965, and to date 10 projects have been completed and 11 projects are underway. They include seven irrigation projects, five agricultural credit projects, and agro-industries and flood control project, five rainfed agricultural development projects, an export-oriented project, a Forestry Project, and an Agricultural Sector Adjustment Loan. Performance undbr these projects has generally been satisfactory. 45. OED reports are available for the four completed Agricultural credit projects.l'' These reports stress the contribution made by the projects to agricultural development, their success in introducing institution building measures, and the expansion of credit to small farmers. The first and second projects (Loan 433-MOR, and Loan 961-MOR, Credit 338-MOR) financed mechanization and modernization of medium and large farms resulting in a maximum short-term production impact in an effort to meet urgent domestic food requirements. Part of the Third Credit Project (Loan 1361-MOR) was directed to meet rural smallholder needs by financing improved subsistence production. The Fourth Agriculture Credit Project enlarged the project scope to include small- and medium-scale, rurally based agroindustries to promote processing and exports. The Fifth Agricultural Credit Project is pursuing the objectives of CNCA IV and particularly strengthening the management structure of CNCA. All five projects had a strong institutional impact by strengthening CNCA's capital structure and its lending appraisal procedures, improving loan collection performance and transforming it in an effilient credit institution. 1/ First Agricultural Credit Project reviewed in Background Paper No. 4 of OED's Report on Agricultural Credit Programs; Second in Report 2543, June 25, 1979, Third in Report 3248, December 23, 1980 and the Fourth in report 3812 of January 21, 1985.

20 Rationale for Bank involvement 46. Bank lending to CNCA would help fill the financial gap of the institution and would help attract other funds from co-financiers to close such a gap. Ensuring sufficient funds for agricultural credit in the country is an objective fully consistent with our sector strategy, as spelled out in connection with the Agricultural Sector Adjustment Loan, which aims, inter alia, at improving and rationalizing agricultural services. On the institutional development front, the proposed loan would consolidate achievements under past loans and would concentrate in determining the long-term institutional development requirements of CNCA. This component would assure the adequacy of the institution to its increasing size and role in the future. PART IV - THE PROJECT 47. The proposed project was identified and prepared by CNCA in the course of supervision of the Fifth Agricultural Credit project. Appraisal took place in November 1985 and January Negotiations were held in Washington on April 28-May 2, 1986; CNCA delegation was led by Mr. M. Bouarfa, Director General of CNCA; Government's representation was headed by Mr. Aissaoui, Deputy Director of the Treasury in charge of Money and Credit in the Ministry of Finance. The main features of the project are outlined in the Loan and Project Summary at the beginning of this report; a Supplementary Project Data Sheet and Map No. IBRD are also attached. A Staff Appraisal Report (No MOR, dated May 28, 1986) is being circulated separately. Project obiectives and description 48. The project objectives are part of the overall objectives agreed upon with Government on a sectoral context under the Agricultural Sector Adjustment Loan. They are: Ci) increasing institutional credit penetration in rairf'ed areas where present CNCA lending is estimated to reach only about 302 of eligible farmers, and to increase dairy, meat and cereal production and self sufficiency in food stuff availability; (ii) maximizing non budgetary financing of agriculture through increased credit extension to small farmers; (iii) improving the pattern of cultivation of small farmers in rainfed areas to increase land productivity by financing more intensive use of chemical fertilizers, high yielding seeds and small scale mechanization; (iv) generating value added by financing individual and cooperative on-farm storage to prevent the collapse of the prices of cereals at cropping time, small- and medium size agroindustry, construction and equipment of greenhouses for the production of vegetables, bananas and flowers mainly for export; and (v) emphasizing institutional development already started during CNCA V by strengthening CNCA's management structure, improving its lending appraisal procedures, completing the installation of the management information system in CNCA, and increasing domestic resources mobilization. 49. To achieve the above objectives, the proposed project would support over a three-year period (September 1986 through August 1989) the investment

21 credit operations and the institutional development activities of CNCA by financing: a) on-farm investments by farmers and co-operatives; b) investment in agroindustries; c) investment in rural housing; d) procurement and installation of microcomputers in CNCA's branch offices; e) CNCA's program of construction and rehabilitation of CNCA's branch offices and part of the construction of new headquarters and; f) technical assistance for the establishment of an MIS, and a budgetary and medium- and long-term planning system, and other consulting services for the infrastructure activities. The Project is expected to be completed by September 30, Project implementation and CNCA institutional development 50. CNCA would be the Borrower and would be fully responsible for implementing the Project using its existing organization and network of agencies. CNCA is fully capable of implementing the project as shown under the previous five credit lines. However, to improve efficiency under the project, CNCA would pursue a number of institution building activities, some of which were initiated during CNCA V, including specifically: (a) the maintenance of an effective management committee to determine medium and long term development plans, annual budgets and organizational, operational, financial, staff recruitment and remuneration policies; (b) the introduction of an overall management information system; (c) the rehabilitation and extension of its branch offices network; (d) the adoption of new lending policies; and (e) the development of CNCA banking activities. 51. Although CNCA has operated efficiently with its current institutional structure, the very growth and increasing complexity of its operations calls for a reinforcement of its management tools to make the institution capable of coping with its increasing responsibilities in the future. To meet the challenge of future growth, CNCA: (a) is upgrading its present management committee by staffing it with senior representatives of the Ministries of Agriculture, Finance, Interior and the Central Bank, and has delegated to it important functions of the Board of Directors; and b) would submit no later than December 31, 1986 an action plan to develop and implement a budgeting and medium- and long-term planning system. Assurances were obtained that CNCA would maintain its management committee with membership and terms of reference satisfactory to the Bank; it would also employ consultants as needed to assist in the development of a medium- and long-term planning system. Regarding CNCA's long term development, it was agreed that the Guarantor would (a) establish by January 1, 1987 a task force to develop proposals to enhance CNCA's development as an agricultural financing institution and to enable CNCA to meet effectively the needs of Morocco's agricultural sector; (b) exchange views with the Bank on the task force's program of activities, by January 30, 1987 and thereafter anoxally on the task force's progress.

22 Under the fifth agricultural credit project, CNCA started to overhaul the entire manarement information system to make it suitable to the needs of the institution, and a plan of action is being prepared for its implementation. Under the proposed project, assurances were obtained that CNCA would continue to employ consultants for its implementation; a management control unit would be operational by December 31, 1988; and the MIS would be introduced in 3 branches by January 31, For the construction of CRCA and CLCA offices included in the project, and the headquarters building, it was agreed that CNCA would employ on its staff an architect and an engineer to review design and specifications of each building and to supervise their construction. These offices would not be constructed/rehabilitated unless CNCA has submitted an ecor:mic justification acceptable to the Bank. CNCA would also recruit consultants to prepare adequate technical specifications for the new headquarters building in Rabat and a cost benefit analysis for this investment. The headquarters would be constructed only after CNCA furnished the cost benefit analysis and plans to the Bank and the Bank approved the constructions. 54. Through the implementation of the proposed project a number of lending policies would be adjusted or introduced. It was mentioned above that new methods of appraising creditworthiness of borrowers (para. 40) would lead to increased volume of lending and that financing of agroindustrial activity would be vigorously expanded (para. 35). Subloans for agroindustry would be made only to enterprises satisfying the criteria for a small and medium scale enterprise as set forth in the Industrial Investment Code, except that up to $5.8 million in subloans could be made to other enterprises. Another innovative area of lending would be for rural housing. CNCA has been lending for rural housing on a modest scale (DH million in 1984 and 1985) while a considerable demand for such financing remains, and no other financial institution is equipped to handle it. Under the proposed project CNCA financing of up to Dirhams 200 million during the period Sept Aug for rural housing has been agreed upon on a pilot basis. Subloans made out of the Bank loan proceeds would be made in accordance with agreed criteria. Specialists would be employed by Oct. 31, 1986 to assist in appraising and supervising these sub-loans. This would provide CNCA time to gain experience in this field and to evaluate results before undertaking further expansion. Also it was agreed that the 7% and 6% interest rate rebates currently in effect for this type of lending depending on the size of the loan, would be reduced by the Guarantor, so as to ensure that the effective interest rates charged on such loans made on or after Oct. 31, 1986 are at least 8% and 9%, respectively, (i.e., positive in real terms). The question of eliminating interest rate rebates in the medium-term is being studied under ITPA II loan. 55. To maintain CNCA's sound financial position (para. 43) it was agreed that CNCA would: a) carry out an annual review of lending interest rates to ensure that the weighted average rate is at least e:qual to the rate of inflation (as measured by the Central Bank's producer price index); b) ensure that it earns an annual return of 12% on equity; and c) keep separate accounts for CLCA's operations and take appropriate measures to ensure that annual revenues from such operations would cover all operating expenses of CLCAs and CRCAs' total debt service requirements. Furthermore, to assist CNCA in maintaining a prudent financial structure and liquidity position, assurances

23 were obtained that: (a) CNCA's medium- and long-term debt (i.e., over 18 months) would not exceed eight times its equity; (b) its current ratio would equal at least 1.2; and c) its total financing to any one beneficiary (loans, guarantees, investments) not secured by government or other acceptable guarantees would not exceed 20% of CNCA's equity. 56. Four other initiatives affecting CNCA's financial prospects have been agreed under the proposed project which are consistent with general reforms being introducei in the financial sector. The first one relates to the initial steps aimed at elimination of financial privileges of CNCA which are not available to other institutions. Given the sptisfactory financial performance of CNCA and in order to encourage a better market orientation of CNCA, it was agreed that a study to establish a program to enable CNCA to eliminate gradually its recourse to 3Z bonds in which commercial banks are required to invest will be carried out by June 30, 1987; it has also been agreed that CNCA would establish a yearly special provision equivalent to 1Z of these bonds to cover bad loans resulting from droughts or other adverse natural conditions. The second action relates to the foreign exchange risk. Traditionally in Morocco the Government has born most of the foreign exchange risk of external debt contracted by specialized institutions. In the context of the Second Industrial and Trade Policy Adjustment (ITPA II) loan, a shift in policy to eventually make the specialized institutions and their borrowers fully responsible for the foreign exchange risk was developed. Under the formula developed under ITPA II to initiate the transfer of the foreign exchange risk from Government to the institutions: (i) CNCA bears the full cost of the foreign exchange losses incurred from variations of up to 2Z in the exchange rate; CNCA's average lending rate (ll%) and the concessionary interest rate in its foreign borrowings from Kreditanstalt fur Wiederaufbau and OPEC fund (2Z) less a margin to assure adequate profitability (5.5%) would be credited to a foreign exchange risk fund in the name of Treasury; iii) CNCA would deposit into such a fund the proceeds of a 1% up-front commission on its medium- and long-term loans, with the exception of loans to small farmers. Under the proposed project assurances were obtained that CNCA would further contribute to the foreign exchange risk fund, at the end of each fiscal year ls of the value of the then outstanding principal amount of CNCA's above mentioned 3S bonds. With regard to the third initiative, the Government, who is DH 155 million in arrears with CNCA in reimbursing CNCA foreign exchange losses on past borrowings, has agreed under the project that such arrears would be paid by December 1987 in accordance with a schedule acceptable to the Bank and that all fut-are foreign exchange losses payable by Government would be paid to CNCA within six months of incurrance of the loss. Fourth. assurances were obtained that the Government will pay CNCA a fee aeequate to compensate CNCA for the costs incurred in administering the agr. cultural development fund. Project Costs and Financing 57. Total project costs are estimated at DH 7,203.0 million (US$720.3 million) 30X of which, or about US$221.0 million, would be in foreign exchange. Cost estimates include taxes and duties of about DH million or 1l1 of Project costs. Base costs are estimated at June 1986 prices. The Project credit component is established in financial terms on projections

24 calculated on the basis of historical lending and on the increase in lending expected to take place as a consequence of the new credit policy being applied by CNCA (para. 40). Physical investment targets have been only approximately estimated, therefore only price contingencies have been calculated for this component at the rate of 102 in 1986 and 82 thereafter. For the Institutional Development component, contingency allowances have been calculated separately; physical contingenices have been calculated at i52 for CNCA infrastructural development and 101 for the computer hardware. 58. CNCA would finance about DH 2,880 million (US$288.0 million), or 40% of total project costs, from its own resources. Sub-borrowers would finance DH 2,113.0 million (US$211.3 million), or 30% of total project costs, as their equity contribution to on-farm, agroindustrial and housing investments. The remaining gap of US$221 million, or about 30% of total project costs would be financed by the proposed loan of $120 million, a loan from the African Development Bank of $66 million equivalent, and loans from KfW of $35 million equivalent. The amount of foreign financing approaches the estimated foreign exchange component of the project. 59. The Bank loan to CNCA would be for a period of 20 years including a five-year grace period at the standard variable interest rate. Subloan repayments not yet needed to service the Bank loan would be used for additional agricultural investments. The Government would maintain with CNCA arrangements to protect CNCA against the foreign exchange risks in connection with the service of the Bank loan to the extent specified in para. 56. CNCA would bear the variable interest risk. The ADB loan would be for a period of 16 years, of which 4 of grace, at an interest rate of 10 percent. The KfW loans would be for a period of 30 years, including a ten-year grace period, at an interest rate of 21. Government would provide or assist CNCA to obtain any additional resources required for the project. Since the KfW loan would not be required until April 1987, the only special condition of effectiveness is that all conditions precedent to the effectiveness of the ADB loan have been met. The Bank would have the right to suspend the loan if by April 30, 1987, the conditions precedent to the right of CNCA to withdraw the KfW loan proceeds have not been met. Procurement 60. The range of goods to be financed under the Project for on-farm investments is varied and would not be suitable for bulk procurevent. There are private dealers in Morocco who sell and service a large variety of tractor makes and other farm equipment and implements well representing the international suppliers market. Competition is keen and prices competitive. Sub-borrowers would therefore purchase agricultural machinery and equipment of their choice through existing local channels. As in the case of other Bank-financed IDF projects in Morocco, procurement for the agroindustry, and rural housing components would also be undertaken through existing local channels and according to normal commercial practices in Morocco, where the inherent self-interest of entrepreneurs has led to almost universal competitive bidding or shopping. Electronic data processing equipment would be purchased after ICB and technical assistance contracts would be awarded in accordance with Bank guidelines for the use of consultants. Goods and civil works for the construction of the headquarters would be awarded under ICB,

25 provided that certain items supplied through a limited number of suppliers estimated to cost less than $1 million in the aggregate could be procured through limited international bidding. Contracts for goods for CNCA's branch offices would be awarded under ICB. Civil works for new construction and rehabilitation of CNCA's branch offices would be undertaken all over the country and executed through small contracts of an average unit cost of about US$0.3 million. These works, valued in total at about US$5.3 million, would not be of interest to foreign contractors and would be awarded on the basis of competitive bidding advertised locally (LCB). A sufficiently large and representative number of construction firms are operating in Morocco to ensure competitive prices under LCB procedures, which are generally consistent with the need for economy and efficiency in the execution of the project. There are, however, a few procedures which need to be modified so as to be acceptable to the Bank. During negotiations agreement was reached that these procedures would be modified for Bank financed civil works so as to be acceptable to the Bank. Procurement arrangements are summarized in the table below: US $ million - ICB LCB Other Total Cost Civil Works and goods for CNCA infrastructure 2.21' (1.0) (2.0) (3.0) Microcomputers (1.0) (1.0) Agricultural machinery & Equip. & implements & (115.5) (115.5) civil works under subloans Technical Assistance (0.5) (0.5) TOTAL (2.0) (2.0) (116.2) (120.0) Figures in parenthesis represent Bank loan financing. 1/ Certain goods and work. for the headquarters costing up to $1 million equivalent could be procured under limited international bidding. 61. Bidding packages for CNCA's works estimated to cost US$400,000 equivalent or more each would be subject to the Bank's prior approval. Prior Bank approval would also apply to the first two contracts for civil works regardless of cost and to the purchase of goods. This would represent prior review by the Bank of about 60Z of total contract value. The other contracts would be subject to random post-review by the Bank after contract award.

26 Disbursements 62. The proposed loan would be committed over a three-year period starting in July 1986, when the funds under the Fifth project would be exhausted, and disbursed over a period of four years, which is consistent with disbursement profiles of EMENA and Moroccan agricultural credit projects. The Bank would disburse against certified statement of expenditures for 16Z of disbursements by CNCA under sub-loans made through CLCAs, 25Z of disbursements by CNCA under sub-loans through CRCAs (except for sub-loans for greenhouses, when the percentage would be 75% of such disbursements), 75Z of disbursements by CNCA under sub-loans to agroindustries, and 50S of disbursements by CNCA under sub-loans for rural housing. Disbursements for the construction of the new headquarters building (501 of total expenditures), branch offices (40% of total expenditures), electronic data processing equipment (1001 of foreign expenditures and 80X of local expenditures) and technical assistance (1002 of total expenditures) would be made on receipt of full standard documentation except that for contracts for CNCA's infrastructure not exceeding $400,000 each, SOEs would be permitted. No disbursements will be made for the construction of branch offices and the headquarters building until an economic and financial report satisfactory to the Bank justifying such investment has been received by the Bank. Approval by the Bank of the investment and Subloan for each agroindustry subproject estimated to cost more than $500,000 equivalent would be a condition of disbursement of such subloan. To contribute to the timely implementation of the project a revolving fund of up to US$10 million equivalent would be established in a special account in the Bank of Morocco or other acceptable bank. Maintenance of the account in Dirhams would be permitted. Retroactive financing of up to US$12 million for expenditures made from July 1, 1986, is permitted under the loan to avoid disruptions in CNCA's lending program once the 5th line of credit is fully disbursed. The loan closing date would be March 31, Reporting, Accounts and Auditing 63. CNCA would submit to the Bank semi-annual progress reports on the implementation of the project within three months of the end of each semester in a format acceptable to the Bank, ananual reports on the operations of its sub-loan monitoring system within six months of the close of the year concerned, copies of the MIS consultants reports upon their completion, and a Project Completion Report not later than six months after the Closing Date. CNCA has a satisfactory accounting system. Audits of its accounts and financial statements are done and would continue to be done annually by independent auditors which are acceptable to the Bank. Audits of the Special Account and of SOEs would also be made. Audit reports of adequate standards under previous loans have been regularly received by the Bank. Audit reports would continue to be sent to the Bank within six months of the end of each CNCA fiscal year. Benefits and Justification 64. The Project would increase crop, milk and meat production in Morocco through changed cropping patterns, increased crop yields, and livestock improvements. Incremental annual production at full development is estimated as follows: cereals, 329,000 tons, pulses, 8,000 tons, vegetables, 392,000,

27 milk, 127,000 tons, and meat, 17,000 tons. The major part of the incremental production would be used to satisfy domestic demand for food, although some pulses, fruit and vegetables may be exported. Analysis of illustrative farm models (various farm sizes with different types of investments) indicates that farmers incomes would increase significantly and that incentives to undertake envisaged on-farm investments are high. 65. CNCA's financial viability would be maintained, thus consolidating the basis for future expansion with diminishing recourse to concessional funding. Projected balance sheets and income statements indicate that CNCA would preserve a satisfactory liquidity position and financial structure throughout the Project period. CNCA's net worth would increase from DH 750 million at end-1986 to DH 900 million as of August 31, This increase would be mostly achieved through increased profitability and a policy of capitalizing retained earnings. Annual net profits would remain above 12 percent of CNCA's equity. 66. Economic rates of return (ERRs), estimated for illustrative farm models, range from 14 to 50 percent. Financial rates of return (FRRs) range from 15 to 53 percent. Sensitivity analysis shows that fairly large increases in either investment or operating costs and similarly large decreases in benefits are necessary for most mod2ls to render them uneconomic; only the modex for investments in sheep shows a greater sensitivity to a small decrease in benefits. Thus the economic viability of the project should not be threatened. Project Risks 67. The major risk is that of adverse weather conditions which, on average, occur once in every five years. The estimated average yields used in illustrative farm models have taken this factor into account. Farmers' ability to pay wou:d likely be affected in such adverse years but historically, the delay in repayments has not resulted in losses for CNCA. Furthermore, the Government is committed to cover CNCA's temporary liquidity needs. A second risk, which could have substantial negative effects on CNCA's performance in the longer term, would be the failure by the strengthened management committee to develop its long term development plans and operational policies. To reduce this possible outcome, the appropriate level of representation from the various ministries, would be maintained in its membership. The project does not present environmental risks.

28 PART V - RECOMOENDATION 68. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recomend that the Executive Directors approve the proposed loan. A. W. Clausen President June 3, 1986 Washington, DC

29 -25 - ANNEX I Page 1 of 7 TB DOLE SA 3 a(thodms SQ. n) TOAL IC /c "6.6 Ic ACRIWLURAL ID~~ - Oa4rx n - - nok 19701t? ETtL P. AFRICAA NED EAT LAT. A.CA6 CAR a cm Cn) CKWLAMG OF OIL -UE'.: ) ATO ANID TI STAEUS POPULATIO.NLD-TtAR (TumSAIlD) URBA POULATIoN CE OF TOTAL) POPULATION IN TEAR 2000 CHILL) 31.2 STATXCRT POPULATION ClIL) 70.0 POPLATION NONWND 2.0 sopmaio DZNsm PE SQ. EN Et SQ. IaK. AGRI. Lwe fpopuatioi SE STrUCTUR (C) 0-14 iss irs AD ABOVE POPUATION CROWTH RATE CR) TOL URLAN Culls UR71 RATE CPZR TM07S) CRUDC DEATH RATZ (CPE THU5) G0oss REUODUCTI0o RT PAMIL! PUNNING AGGRPTORS. A_UL (THOUS) Id S=S ( OFNARRIZZD WN) IlNE OF 00 POD. PER CAPITA ( ) PER CAPITA SUPPLY OF CALORS (S OF REQUIIHMENS) I PROTEIN (GRUMS PER DAY) Of SWHICH AmTL AND PU I CHILD (AGES 1-4) DEATH RATE LIF EXPECT. AT BERTH EYZARS) INFArT MT. RATE (PER THWIS) a 59.7 ACCESS TO SANE MATER (SPOP) TOTAL Id URBN T RURAL ACCS TO EXRCEA DISPOSAL (Z OF POPULATION) TOTAL * URA RURAL POPULUTZzg PER USTMCIAN /f PoP. PER HORSING PERSON POP. PER HSPITAL BED TOTAL to UBANI o.0 re RURAL ; ADNISSIONS PER HOSPITAL BED /a smml AVERAE SIZE OF HOUSEHOLD TOTAL flbad RURAL AVERAGE NO. Of PERSONS/ROOM TOTAL URBAN RURAL PERCENTAGE OF DWELLINGS W11TH ELECT. TOTAL.... UtRIN /- RRAL.....

30 ANNEX I Page 2 of 7 MOPOCCO - SOCIAL OIMICAORS DATA SHCET MOEOCCO REFERNCE GOPS (WEIGTE AVERAGES) /a HOBS (MOST RECENT ESTIMATE) 7b RECENT MIDDLE INCOME.MDDLC INCOME In/b 197(tk ESSTALb a. AFRICA & MID EAST LAT. AMERICA 1 CAR ADJUSTED ENROLLMENT RATIOS PRIMA: TOTAL b.7 IULE FEMALE SECONDARYI TOTAL : MALE n FEMALE VOCATIONAL (2 OF SECONDARY) FUFL-TEACNR RATIO PRIMAWl SECONDARY PASSENGE CARS/THOUSAND POP L RADIO NECEIVERS/TUOUSAND POP TV RUCCVEJS/TUOUSAD POP NEWSPAPI ("DAILGY GENWAL INTEREST") CIRCULATION PE TROUSAND POPULATION : CINEMA ANNUAL ATTENDANCEICAPITA /h 2.0 /a An rats- TOTAL LABOR FORCM (THOGS) FEMALE (PERCENT) AGRICULTUME (PERCENT) / DUMTY CPERCENT) ;.3 PARTICIPATION RATE (PERT) TOTAL MALE FEKALE J 15.9 ECONOMPC DEPENDCNC RATIO XM DmSm3uI PERCENT OF PRIVATE INCOE RECEIVED ST HICHgST 52 OF IOUSEHOLDS 18.0 Li 20.0 HRICEST 20? OF ROUSENOLDS LOWEST 202 OF ROUSIOLDS il WEST 402 OF HOUSEHOLDS j F;i na-cit ESTIMED ABSOLUTE POVERTY INCOME LaVx (USS PER CAPITA) URBAN /f RURAL ? ESTIMAED RELATIVE POVERTY INCOME LEVEL CUSS PER CAPITA) URBAN /f RURAL ESTIMATED POP. BELOW ABSOLUTE POVER! INCOME LEVEL (2) URBAN /f RURAL ' 29.0 NOT AVAILABLE NOT APPLICABLE t O T E S Ia The group averages for each indieacor are population-weighted aritbmetic means. Coverage of countries song the indlcators depens on availability of data and Ia not uniform. /b Unless otherwise noted. 'Data for 1960" refer to any year between 1959 and 1961; 'Data for 1970" between 1969 and 1971; and data for "Most Recent Estimte" between 1951 and Ic Exclu the ex-spnish Sahara; Id 1976; Ie 1977; /f 1979; a 1978; lh 1972; /I 1980; fj Concuption expenditure of households. JUNE. 1985

31 ANNEX I Page 3 of 7 DMmoNs or SOCIAL INDICATORS Natos Althoulh she darn an drawn from sour.. lyjudg d h mt authoritative and Minbl.1 is should abo be noedsh theya nay not be ncmlionnlly compamble bame of the lack of tandardid deinito nd conept umd by diffrent countries in coleciing she darn. The da amr nonethekls, useful to describc order of manitudc. indikte treas and caractaw certain major diffrec between countri. The eference group are (1) the amme country grou the subject country and (2) a country group with somewhat higher avyerg income than she country group ad he subject counsty (except for "Hih Income Oil Ex poter group whlee Middle Income North Africa and Middle Eas' im choen bemuse of stronger sociocultural allaisie). In the mfierence group data the avea am population weighted arithmetic mans for each indicator and shown only when majority or the coaoris in group has dat for that indicator Since the covage ocountrie among the indicato depend on the availabity afdata and is not uniform. caution must be csertsed in relting averags of one indicator to snooher Thee averapr ate only useful in composring the value of one indicator at a time among the country and reference group. AREA (thousand sq.km.) Crude tjit Rate (pr trhesaud)-numberof live births in the year Teult-Total surface area comprising land area and inbnd waters; per thousand of mid-year population; 1960, and 1983 data. 1960, 1970 and 1983 data. Crude Deat Rate (per thousau d)-number of deaths in the year AgrWeurbuIL-Estimate of agricultural area used tempomrily or per thousand or mid-year population: 1960, and 1983 data. permanently for crops. pastures, market and kitchen gardens or io Gros Reprodctin Rate-Average number ordaughters a woman lie fallow, and 1982 data. will bear in her normal reproductive period ir she experiences prcsent age-specific fertility rates; usually five-year averages ending GNP PER CAPITA (USS)-GNP per capita estimates at current in and market prices, calculated by same conversion nmthod as World F.mdlp Pmmiag-Accepwrs, Ammal (thasantfl-annual num- Bank Atlas ( basis) 1983 data. ber of acceptors of birth-cntrol devices under auspices of national ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program. consumption of commercial primary energy (coal and lignite, FNW PPlar4ag-JUsers (perem of reeled women)-the percnpetroleum. natural gas and hydro-, nuclear and geothernul elec- tage of married womnen or child-bearing age who are practicing or tricity) in kilograms of oil equivalent per capita; 1960, 1970, and whose husbands are practicing any form of contraception. Women 1982 data. orchild-bearing age are generally women aged although for some countries contraceptive usage is measured for other age POPULATION AND VITAL STATISTICS groups. Tota Popeatiwi, Mid-Yea (hausauds)-as of July 1; FOOD AND NUTRMON and 1983 data. Urban Populatino fjr (percent {ptret P e of el totu)-ratio, etet)rallo of f urban uron to to t otat capita IeFx annual of I'oodPrfoduction production Per Of Cpta all food ( commodities )-Index Production of per population; different definitions of urban areas may affect compar- eclude animal feeduand seed for Iculture. Fo d commodictie ability of data among countries; , and 1983 data. eicludes aimal ryed andseted f(er griarcaure instead of sugar) Popuato Projetio which are edible and contain nutrients (e.g. coffee and tea are Populatw in year 2000-The projection of population for 2W00 excluded); they comprise ecreals. root crops. pulses, oil seeds. made for each economy separately. Starting with information on vegetables, fruits, nuts, sugarcane and sugar beets, livestock, and total population by age and sex. fertility rates, mortality rates, and livestock products. Aggregate production of each country is based international migration in the bas year 1980, these parameters on national average producer price weights, and were projected at five-year intervals on the basis of generalized 1982 data. assumptions until the population became stationary. hrn Ceapita Suy of Caoes (Percent of requiremus)-com put- Stationary population-is one in which age- and sex-specific mor- od from calorie equivalent of net food supplies available in country tality rates have not changed over a long period, while age-specific per capita per day. Available supplies comprise domestic producfertility rates have simultaneously remained at replacement klvel tion. imports less exports, and changes in stock. Net supplies (net reproduction rate= 1). In such a population, the birth rate is constant and equal to the death.ate. the age structure is also exclude animal feed. seeds for use in agriculture. quantities used in food processing. and losses in distribution. Requirements were constant, and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity size was estimated on the basis of the projected characteristics of and health considering environmental temperature. body weights, the population in the year and the rate of decline of fertility age and sex distribution of population. and allowing I0 percent for rate to replacement level. waste at household level; and 1982 data. Population Momentwn-Is the tendency for population growth to Per Capita Sxpply of Protein (grems per day)-protein content of continue beyond the time that replacement-leve fertility has been per capita net supply of food per day. Net supply of food is defined achieved; that is, even after the net reproduction rate has reached as above. Requirements for all countries established by USDA unity. The momentum of a population in the year t is measured as provide for minimum allowances of 60 grams or total protein per a ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein, of which 10 grams the year :. given the assumption that fertility remains at replace- should be animal protein. These standards.are lower than those of mes level from year i onward data. 75 grams of total protein and 23 grams of animal protein as an Popuatio Dedts* average for the world. proposed by FAO in the Third World Food Per sq.km.-mid-year population per square kilometer (100 hec- Supply; and 1982 data. tares) of total area: and 1983 data. Per CapitaProtein Spply From Animuul nd le--protein supply Per sq.km. agrinutural land-computed as above for agricultural of food derived from animals and pulses in grams per day: land only and 1982 data and 1977 data. Populaton Age Structure (perceat)-children (0-14 years). work- Child (ages -4) Deat Rate (perthousand)-numberofdeathsof ing age (I5-64 year). and retired (65 years and over) as percentage children aged 1-4 years per thousand children in the same age of mid-year population; 1960, and 1983 data. group in a given year. For most developing countries data derived Popudation Growth Rate (percessr)-toral-annual growth rates of from life tables; and 1983 data. total mid-year population for and HEALTH Populat Growth Rate (percean)v-ra--annual growth rates Life Expecancy at Birth (years)-number of years a newborn of urban population for and data. infant would live if prevailing patterns of mortality for all peopic

32 ANNEX I Page 4 of 7 at the eime of of its birth were to stay the same throughout ius life; Pupr-tachar Ratio - primary, and secondary-total students en- 1960, 1970 and 1983 data. rolled in primary and econdary levels divided by numbers of hfat Maut Rate (par ghaaandd-number or infants who die teachers in the corresponding vels. before reaching one year of age per thousand live births in a given year and 1983 data. CONSUMPTION Aem to So Waer (prcet i!f popm i)-rotl ura, ad Paenr Cas (per thasand papmlalrdj)-psen ger cars comnmw-number of people (total, urban. and rural) with reamonable prise motor cars seating leas than eight persons; excludes ambulaccess to safe water supply (includes treated surface waters or ances. hearses and military vehicles. untreated but uncontaminated water such a that from protected Rai Reeivm (per thousand popsations-all types of receivers borehoks. sprirnp and sanitary wells) as pemtenages of their respec- for radio broadcasts to geeal public per thousand of population; dve popuationl In an urban area a public fountain or standpost excludes un-licenwsd receivers in countries and in years when located not more than 200 meters from a house may be considered registration of radio sets was in effect; data for recent years may as being withn resonable access of that house. In rudal areas not be comparable since most countries abolshed licensing. reasonable aemas would imnply ftat the housewife or members or the TRcirv prtosn.ualu- eevr o racs housethold do not have to spend a disproportionate part of the day TV Recies (pr N m_h rceivers ror broadcast in setching the fa veily's water needs to general pubic per thousand populadon; excludes unbcensed TV in Acces fetching to the Exrcera fwamoiy's Asp.,.!5 water (percent needs. of popnilaffon--40sid urban, rcceivers in countries and in yeas when registration of TV sets was in effect. ad ruril-number of people (total, urban, and rural) served by excret disposal as percentages of their respective populations. Newspaper Cfrcuat (per thosand papal.rij)-shows the aver- Excreta disposal may include the collection and disposal, with or age circulation of daily general interest newspaper." defined as a without treatment, of human excreta and waste-water by water- periodical publication devoted primarily to reckirding general news borne systems or the use of pit privies and similar installations. It is considered to be -daily' if it appears at kast four times a weck. Pouatioa per Physd.n-Population divided by number or prac- Cnma Ammi Aneubuce per Capita per Yea-Based on the tising physicians qualified from a medical school at university level, number of tickets sold during the year. including admissions to Population per Nrsixg Arsion-Prpulation divided by number of drive-in cinenas and mobile units. practicing male and female graduate nurses. assistant nurses. practical nurses and nursing auxiliaries. ABOR FORCE Population per Hospital *ed-t40al, ura, ad rwa-population Total Labr Foc (thousandsj-economically active persons, in- (total, urban. and rural) divided by their respective number of cluding arned forces and unemployed but excluding housewives. hospital beds available in public and private, genva and spaialized students, etc.. covering population of all age. Definitions in hospitals and rehabilitation centers. Hospitals are establishments pemnanently staffed by at least one physician. Estabtishments provvarious countries are not compar bk and 1983 data Fealk (percenat-firnale labor force as perccntage of total labor iding principally custodial care are not included. Rural hospitals force. however. include health and medical centers not permanently staffcd Agri bkwe (percextj-labor force in farming, forestry, hunting by a physician (but by a nedical assistant, nurse, midwife. etc.) and fishing as pecentage of total labor force; 1960, 1970 and 1980 which offer in-patient accommodation and provide a limited range data. of medical facilities. Indhnsry (percent)-labor force in mining. construction. manu- Adnissiou per Hospital BEd-Total number of admissions to or discharges from hospitals divided by the number of beds. facturing and dectricity, water and gas as percentage of total labor force and 1980 data. Parrric Rae (pere)-rt4 ak, aindfmsae-participation HOUSING or activity rates are computed as total, male, and female labor formc Aveag SiZe of Houoldw (permss per hauseold)-total, urban, as percntages of total, male and fenalc population of all ages andrwrur-a household consists ofa group of individuals who share respectively; 1960, and 1983 data. These are based on ILO's living quarters and their main meals. A boarder or lodger may or participation rates reflecting age-sex structure of the population and may not be included in the household for statistical purposes. long time trend. A few estimnates are from national sources. Araee Nuxber of Persons per Root--teoal, aro. nd rura- Econonc Dependency Ratio-Ratio of population under 15. and Aveage number of persons per room in all urban. and rural 65 and over, to the working age population (those aged 15-64). occupied conventional dweluings, respectively. Dwellings exdude non-pernanent structures and unoccupied parts. INCOME DISTRIBtlTION Percentae of DweliC with Ekecricity-otral, wam, and rural- Percenage of Tota Diosabk Inco1e (bot a cah *d hd)- Conventional dwellings with electricity in living quarters as percen- Accruing to percentile groups of households ranked by total housetage of total, urban, and rural dwellings respectively. hold income. EDUCATION POVERTY TARGET GROUPS A*dst Enrolenr Ratos The following estimates are very approximate measures of poverty Prtnary school - total. m'le and femakl-gross total. mnale and levels. and should be interpmeted with considerable caution. femalenrollment of all ages at the primary lcvd as oercentages of Estimaed Absolute Povry rome Level (USS per capital -uran respective primary school-age populations. While many countries and rural--absolute poverty income level is that income level consider primary school age to be 6-1l years. others do not. The below which a minimal nutritionally adequate diet plus essential differences in country practices in the ages and duration of school non-rood requirements is not affordable. are refkcted in the ratios given. For some countries with universal Estimated Relative Pvert.y Income Level (U SSper capitaj-arbau education. gross cnrollment may exceed 100 peroent since some and ruraf-rural relative poverty income level is one-th'rd of pupils are below or above the country's standard primary-school average per capita personal income of the country. Urban lcvel is age. derived from the rural level with adjustment for higher cost of SeonAry school - total. male and female-computed as above. living in urban areas. secondary education requires at least four years of approved pri- Etimaed Pobpulion Below Absoirte Povery Income Level (permary instruction provides general. vocational. or teacher training cnri-arhran and rural- Percent of population (urban and rural instructions for pupils usually of 12 to 17 years of age: correspond- who are "absolute poor." ece courses are generally exduded. Vocational Enrollnwni (percent of second2ry)-vocational institu- Comparative Analysis and Data Division tions indude technical industrial. or other programs which operate Economic Analysis and Projections Department indepndently or as departments of secondary institutions. June 1985