Country case study morocco

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  • 1. In morocco, a unitary state with highlycentralized governance, a national lendingagency has dominated local governmentborrowing. The country is working to decentralize itsgovernance and still developing its domesticfinancial markets, which have had little experiencein lending to subnational governments. Moroccorelies on a municipal development fund, theCommunal Infrastructure Fund, as a vehicle forensuring access to credit for municipalities that aretoo small and too heavily dependent on thecentral government to tap credit market directly.Deficiencies in financial management andreporting by subnational governments hampertheir access to private credit, and centrallyprovided credit has limitations.
  • 2. Deficiencies of subnationalgovernments to access inprivate credit are the mainproblem in Morocco’seconomic situation.
  • 3. 1. Deficiencies in financial management andreporting by subnational governmentshamper their access to private credit.2. Subnational governments’ lack ofautonomy in fiscal decision making coupledwith poor planning and operatingcapabilities.3. The inefficiency of asset management ofsubnational governments.4. The inadequacy of cost recovery practicesand their lack of differentiation betweenrevenue – generating services and publicgoods.
  • 4.  There should be a quality of fiscal and financial management, the budgetary and control systems, and the planning and implementation of their investments programs. To foster a more efficient subnational finance system, the central government has embarked on reforms to help expand the bankable demand for private credit and to increase the participation of private financial institutions in subnational investment funding.
  • 5.  Information to prospective creditors about the financial situation of subnational borrowers, particularly their indebtedness – whether direct liabilities or contingent liabilities such as guarantees. Use financial intermediary like COMMUNAL INFRASTRUCTURE FUND that can tap credit markets on behalf of subnational borrowers is one way to foster market access for small and medium – size municipalities that still cannot directly access Morocco’s long – term credit markets.
  • 6.  Strength Private investors are encouraged to lend to local government. Private investors will give their full trust to local government, because central government will embarked on reforms to help expand the bankable demand for private credit and to increase the participation of private financial institutions in subnational investment funding.
  • 7.  Weakness Morocco’s subnational governments may encounter difficulties in implementing budgetary controls, financial management and procedures to secure the investments of private investors.
  • 8.  Opportunities A lot of private investors will encourage lending capital to local government. In pooling the credit demand of subnational borrowers, the fund could act as an intermediary or bridge between subnational governments and institutional investors. Then a lot of infrastructure may establish in Morocco.
  • 9.  Threat Some private investors are afraid to lend its capital to subnational governments. It is because they think that investing to Morocco’s subnational governments is too risky.
  • 10. As shown in the alternativesolutions, we recommend that local andcentral government must consider thequality of fiscal and financialmanagement, the financial situation ofsubnational governments, and use afinancial intermediary to pool privateinvestors.
  • 11. Therefore, if Morocco’s local and centralgovernment consider all possible solutions inpooling private investors, a lot of privateinvestors are encouraged to lend to localgovernments. As well, private investors willgive their full trust to localgovernment, because central governmentwill embarked on reforms to help expandthe bankable demand for private creditand to increase the participation of privatefinancial institutions in subnationalinvestment funding.
  • 12. Morocco, a unitary state with highlycentralized governance, a national lendingagency has dominated local governmentborrowing . From the centralized governance itwas shifted to decentralization in order to tapprivate undertakings by the subnationalborrowers and also to help uplift the status of lifeof the small sectors within the country in terms ofemployment, business, education, industry, agriculture and other necessities for survivalparticularly the needs of the people of Morocco.Through the financial intermediary so-calledCommunal Infrastructure Fund , as a vehicle forensuring access to credit for municipalities thatare too small and too heavily dependent on thecentral government to tap credit market directly,
  • 13. it will serve as a middleman between those whohave capital surpluses like investors and to thosehave capital deficits like the needing small sectors,subnational borrowers or even the localgovernment. But the problem of Morocco was thatthere are deficiencies in financial managementand reporting of subnational governments toaccess in private credit , lack of autonomy in fiscaldecision making coupled with poor planning andoperating capabilities, inefficiency of assetmanagement of subnational governments andinadequacy of cost recovery practices and theirlack of differentiation between revenue –generating services and public goods. In supplyingsolutions to these problems, we recommend thatlocal and central government must consider the
  • 14. quality of fiscal and financial management, thefinancial situation of subnational governments, anduse a financial intermediary to pool privateinvestors. If this may happen, there is morepotential private investors who will invest and thatthe projects of the government will be put intoaction to serve the people and as well as toimprove the economy of the country. Through theincome generated by its projects the investors willbe confident as to credit worthiness of the localgovernment.
  • 15. 1. Hyacinth Quijano2. Mel Joy Benigno3. Nessie Divina