A Look in the Rear-View Mirror

A visitor walks past a giant replica of a 10-dirham banknote dating back to the 1960s at the Numismatic Museum in the Moroccan capital Rabat on June 26, 2012. (ABDELHAK SENNA/AFP/Getty Images)

A visitor walks past a giant replica of a 10-dirham banknote dating back to the 1960s at the Numismatic Museum in the Moroccan capital, Rabat, on June 26, 2012. (ABDELHAK SENNA/AFP/Getty Images)

Morocco's former King Hassan II used to say that he was lucky to be the leader of an ancient country with a rich and long history. Indeed, according to the monarch, each time he faced a tough decision, he could take a look in the rear-view mirror of Morocco’s history to make a considered choice for the country's future.

This July, the International Monetry Fund (IMF) executive board completed the second review of Morocco’s performance under an economic program supported by a two-year Precautionary Liquidity Line (PLL) arrangement. The access under the arrangement in the first year is equivalent to around USD 3.6 billion, rising in the second year to about USD 6.2 billion. Morocco has long been one of the “good students” praised regularly by the IMF. Since the implementation of a harsh structural adjustment plan in the 1980s, the kingdom has regularly called upon the international donor organization to support its economy and development plans. With the global crisis and the drying up of foreign investments and remittances from Moroccan workers in Europe, it quickly turned to its former nemesis for urgently needed cash. These contracted loans (from the IMF but also from other friendly countries) have meant that Morocco's external debt has reached a record high of MAD 216 billion (around USD 26 billion). This is an increase of MAD 3.9 billion (around USD 430 million) since the end of 2012.

The Abdication of Moulay-Hafid, Sultan of Morocco, cover illustration of 'Le Petit Journal', August 25, 1912 (French School, (20th century) / Musee de La Presse, Paris, France / Giraudon / The Bridgeman Art Library)

The Abdication of Moulay-Hafid, Sultan of Morocco, cover illustration of 'Le Petit Journal', August 25, 1912 (French School, (20th century) / Musee de La Presse, Paris, France / Giraudon / The Bridgeman Art Library)



Through its budget minister, the current Islamist government defended the recourse to indebtedness by pointing out that the external debt represents only 25 percent of the country’s GDP and that these loans are financing critical infrastructure projects like roads, railways, ports and airports that will ultimately generate strong amounts of cash and thus facilitate a quick repayment. Nevertheless, the general trend and the growing recourse to debt remain disturbing—and Morocco’s modern history provides us with several warning signs when it comes to external debt and the international constraints linked to it.

If one takes the time to look into Morocco's history, there is indeed a troubling symmetry between the evolution of Morocco during the period stretching from 1856 to 1912 and the signing of the Treaty of Fez instituting the French Protectorate over the country, and from 1956, when the country obtained full independence, to 2012.

In 1856, Morocco was under the reign of Moulay Abd Al-Rahmane. Eight years previously, it had registered a crushing defeat at the Battle of Isly at the hand of the French army. The 1844 Franco–Moroccan War was the direct consequence of Moroccan support for the Algerian resistance against French colonization. The defeat brought to light the weakness of the Moroccan state and quickly drew the interests of European imperial powers. In 1856, in a bid to pay the French war reparations, Morocco agreed to open up to European trade and signed a free-trade agreement with Great Britain. The agreement provided that British trade companies and British trade operators in Morocco were exempted from any taxes and were given preferential treatments and tariffs. This put Morocco in a position of weakness. Quickly the agreement was extended to Moroccan nationals working as intermediaries for British firms. They were also exempted from any tax and were under the judiciary protection of the British consulate. Thus, the Moroccan treasury saw a considerable part of its revenues melt away. Another war and defeat against Spain in 1860 forced the Moroccan authorities to seek new accommodations to pay off a rapidly increasing debt. New British loans were contracted.

Custom revenues acted as a warrant for these loans. In the years leading up to the twentieth century, economic under-performance and mismanagement saw Morocco increasingly tapping into its debt pool. In 1904, a new loan contracted from BNP Paribas was conditioned on the strict implementation of a reform program—and, more importantly, on allowing officials from the bank to control customs and port traffic across the country. Morocco was gradually losing its sovereignty and the country was increasingly rocked by internal rebellions and foreign invasions. The 1906 Algeciras Conference could not change anything, and only allowed the great powers to continue their coordination over Morocco. In 1912, Sultan Moulay Hafid, facing an uprising and besiegement in his capital, was forced to abdicate and sign the Treaty of Fez consecrating the division of the country under the French and Spanish Protectorates.

The period between 1956 and 1980 saw the newly independent Moroccan state try to build a development model through the export of agricultural products, tourism and a nascent textile industry. Nevertheless, a long drought, the increasing cost of the war in Western Sahara and the second oil shock forced the Moroccan government to reconsider its path at the end of the 1970s. As Milton Friedman’s deregulation theories swept across the world, Morocco embarked on the neo-liberal ship at the turn of the 1980s by implementing an IMF-backed structural adjustment plan.

The long-term effects of the plan are in some part positive, as they allowed the Moroccan economy to begin to shake off its monopolistic and quasi-feudal characteristics. But the involvement of the IMF meant a gradual disengagement of the state regarding the steering of the economy. Indeed, economic policies from the 1990s onward were reduced to successive budget monitoring to abide by the IMF rules. The parallel with the situation at the turn of the twentieth century in regards to sovereignty and increasing international constraints is not far fetched. Morocco has a very limited flexibility and the increasing reliance on external debt during the first decade of the twenty-first century will not improve the situation.

The one who ignores his past is condemned to relive it. External debt is a serious and potentially dangerous subject that should not be shrugged at considering the current economic context. Morocco has just to take a moment and look into its rear-view mirrors to understand why.


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