In 2005 the International Monetary Fund (IMF) carried out a Report on the Observance of Standards and Codes (ROSC) that addressed Morocco's fiscal policy transparency, and in 2006 Oxford Analytica (OA) published a similar assessment. The OA report accorded Morocco an overall rating of "Enacted" for this standard. The IMF's ROSC found that fiscal transparency in Morocco was generally guaranteed through a mixture of strict controls to ensure the correctness of expenditures, adequate legal safeguards, and fiscal and accounting standards that had improved in the recent past. The assessment noted room for improvement in various areas, however. According to the IMF, budget coverage and monitoring should be gradually expanded, government accounting should be reformed and modernized, financial reporting during budget execution should be improved, and fiscal risks should be better evaluated. Long-term reforms should aim at introducing performance-oriented public management and reducing the current emphasis on ex-ante controls. Instead, the focus should be on ex-post evaluation and controls. The IMF's 2008 Article IV Consultation report disclosed that Morocco had implemented a three-year medium-term expenditure framework. Morocco's budget process, however, would benefit from greater efforts at openness. The 2008 Open Budget Index rates Morocco's performance in this regard at only 27 percent, citing an insufficient level of detail and the failure to make an auditor's report available to the public.

General Overview

In 2005, the International Monetary Fund (IMF) published a Report on the Observance of Standards and Codes (ROSC) on Fiscal Transparency in Morocco. The assessment noted that Morocco's fiscal management system was highly centralized and relied on strict controls to ensure the correctness of expenditures. The IMF found that the system effectively steered budget performance and was adequately supported by legal safeguards. In November 1998, the organic budget law was comprehensively amended. This, in combination with the accompanying legal and regulatory provisions, yielded significant improvements in the clarity of fiscal and accounting standards, access to financial information, control over the processes involved in preparing and executing expenditure, and the quality of financial data. The 2005 IMF assessment found that, due to these developments, "fiscal transparency is largely guaranteed" (p. 1), but noted that improvements were still needed in order to meet international best practice in a number of areas. The report called for the gradual expansion of budget coverage and monitoring, reform and modernization of government accounting, improvement of financial reporting during execution of the budget law, and the evaluation of fiscal risks. It also suggested that long-term reforms should introduce performance-oriented public management and reduce the current emphasis on ex-ante controls, shifting the focus to ex-post evaluation and controls. These findings were largely supported by the Oxford Analytica (OA) 2006 Report on Fiscal Transparency in Morocco. OA gave the country an "Enacted" rating, but noted that Morocco had achieved improvements in the availability of its information. OA noted that, since 2005, various reports (e.g. on Special Treasury Accounts and on public enterprises) have supplemented the annual Finance Law when it is presented to parliament. Also, starting in 2007, the Ministry of Economy and Finance (MoF) and the General Treasury of the Kingdom began compiling a consolidated budget that included information from the central government, local authorities, public enterprises, and Special Treasury Accounts.

However, Morocco scores only 27 percent on the 2008 Open Budget Index (OBI), which means. Morocco produces only four of the eight documents tracked by the OBI: the Executive's its budget process provides only minimal information to the public during the budget year Budget Proposal, the Enacted Budget, In-Year Reports, and a Year End Report. It does not produce a Pre-Budget Statement, Citizen's Budget, Mid-Year Review, or Auditor's Report. According to the OBI, citizens thus do not have a comprehensive understanding of the government's revenues or expenditure plans for the budget year. It is also difficult to track spending, revenues, and borrowing during the year because there is no Mid-Year Review, and budget performance is hard to judge, given that the year-end report is insufficiently detailed and there is no publicly available audit report. There is no legal guarantee of the public's right to government information, and Morocco does not hold budget hearings in which the public can participate.

The report on the 2008 Article IV Consultations between Morocco and the IMF noted that Morocco has suffered little spillover from the ongoing global economic upheavals, in large part due to its low external debt and strengthened macroeconomic policies. The report noted that Morocco's authorities have based their fiscal outlook "on sound expenditure controls and reorientation of spending to investment and education, further strengthening tax administration, and simplifying the tax regime" (p. 10). On the other hand, the IMF cautioned that Morocco's determination to subsidize domestic commodity prices rather than pass along the increases in world commodity prices could prove to be a major challenge.

On December 15, 2005, Morocco became the 62nd subscriber to the IMF's Special Data Dissemination Standard (SDDS). The IMF's 2008 Article IV Consultations report noted in its "Statistical Issues" annex that there were several ongoing issues to be addressed with regard to Morocco's government finance data. The compilation of local government data has improved and they have been consolidated with government budgetary data, but "actual use of those source data for general government compilation requires critical clarification of responsibilities between various directorates" (Annex III, p. 15). Morocco hosted an SDDS mission in 2005 in order to develop procedures for producing consolidated general government operations. A mission in 2007 sought to carry out a government finance pilot study, but was stymied by "burdensome administrative procedures" (p. 15) in its efforts to extend data collection beyond the budgetary central government. The report noted that there is a lag time of a few months before central government finance data is available. Morocco reports limited government finance statistics for inclusion in the Government Finance Statistics Yearbook (i.e., only the budgetary central government), and only irregularly reports data for publication in the International Finance Statistics. The SDDS website discloses that Morocco's fiscal data meets most SDDS requirements of timeliness, periodicity, and coverage, but that a timeliness flexibility option is taken for general government operations data.

The Principles

Clarity of roles and responsibilities.

CP

OA, in its 2006 Fiscal Policy Transparency report, rated Morocco's compliance with this principle as "In Progress." The 2005 IMF ROSC noted that Morocco employs a definition of the general government that accords with the definition employed by the 2001 edition of the Government Financial Statistics Manual, but added that general government activities "are not clearly defined, as fiscal data are only consolidated at the central government level" (p. 5). OA reported that the roles of the Ministry of the Interior (MoI) and the MoF had not been clearly differentiated in the past with respect to local finances. However, a joint reform project undertaken by the MoI and MoF addresses the local finances issue and was presented with the draft Finance Law for 2007. Furthermore, the new Banking Law and statutes of the Bank Al-Maghrib which came into force in February 2007 clarified the roles of the central bank and the MoF regarding monetary, exchange rate, financial, and credit policy. The guidelines and procedures for the Budget Finance Law are defined in the 1998 Organic Law, its subsequent amendments, and other laws. These stipulate that the Finance Law has to be approved annually by parliament, and that only supplementary budgetary laws may be used to amend it during the course of the year. The texts of many laws and decrees touching on fiscal matters can be found on the MoF website. According to OA, the website also provides public access to reports, procurement information, information on fiscal reform, and macroeconomic statistics, as well as the texts of draft legislation.

The IMF's 2005 ROSC asserted that "public expenditure management is governed by a clear legal and administrative framework, largely based on the French model's strict separation between officials with power to authorize payment and the public accountants. The rules are very largely observed" (p. 13). According to OA, the Finance Law of 2006 has provided a number of key fiscal reforms such as harmonizing the VAT and instituting a General Tax Code aimed at simplifying and harmonizing tax legislation. This Code has been approved by the lower house of Parliament and was expected to come into force in 2007. OA noted that after some MoF operations had been decentralized as part of the ministry's Strategic Action Plan for 2001-2004, the monitoring of local government expenditures has become more efficient. In addition, the World Bank has assisted the government in the preparation of a medium-term expenditure program (Cadre de Dépenses a Moyen Terme - CDMT), which was scheduled to be linked to the annual Finance Law submitted by the MoF beginning in 2008.

Open budget processes

EN

The 2006 OA Fiscal Policy Transparency report rated Morocco's compliance with this principle as "Enacted." The 2005 IMF ROSC noted that the MoF is responsible for budget preparation, and the procedures by which it is carried out are clear, well understood, and applied by the line ministries. The ROSC added that the budget classifications and nomenclature are essentially consistent with international standards. OA asserted that Morocco's fiscal policy objectives are "clearly laid out in connection with the presentation of the Finance Law" (p. 330), including key macroeconomic goals and more general policy targets. The Finance Law for the new budget and its related reports must be presented to parliament at least 70 days before the end of the current fiscal year, which is coterminous to the calendar year. The budget is presented in a format which separates the data by administrative, economic, and functional levels of government, and budgetary management. OA noted that, in 2006, the government made a "significant effort" to include "very detailed information on budget revenues and expenditures" (p. 331). Several laws lay out the specific procedures to be followed in executing and monitoring the budget, including the Law for the Control of Expenditure Commitments and its amendments. Control over the execution is conducted by the General Inspectorate of Finances (Inspection Générale des Finances), the Accounts Chamber (the Cour des Comptes) and parliament. However, OA asserted that this control is weak: "The effectiveness of the extant control mechanisms is constrained, partly because of limited human resources, but primarily due to a lack of cooperation between different bodies charged with monitoring and control functions". (p. 331). Nonetheless, OA praised Morocco's significant improvements in the transparency and efficiency of its public procurement process.

Morocco scores only 27% on the 2008 OBI, which means the budget process provides only minimal information to the public during the budget year. Morocco produces only four of the eight documents tracked by the OBI: the Executive's Budget Proposal, the Enacted Budget, In-Year Reports, and a Year End Report. It does not produce a Pre-Budget Statement, Citizen's Budget, Mid-Year Review, or Auditor's Report. According to the OBI, citizens thus do not have a comprehensive understanding of the government's revenues or expenditure plans for the budget year. It is also difficult to track spending, revenues, and borrowing during the year because there is no Mid-Year Review, and budget performance is hard to judge, given that the year-end report is insufficiently detailed and there is no publicly available audit report. There is no legal guarantee of the public's right to government information, and Morocco does not hold budget hearings in which the public can participate.

Public availability of information.

CP

In its 2006 Fiscal Policy Transparency report, OA rated Morocco's compliance with this principle as "In Progress." On December 15, 2005, Morocco became the 62nd subscriber to the IMF's SDDS. The 2005 IMF ROSC noted that Morocco's budget documentation "covers all budgetary activities of central Government - with the exception of the social security systems and miscellaneous agencies of the central government - but the format used to present the breakdown of the budget detracts from its clarity and readability" (p. 17). OA listed the annual budget, the Budget Presentation Note, the Finance Law, and periodic reports from the MoF as the principal fiscal information sources provided by the government to the public. According to OA, beginning with the 2008 budget year, Morocco broke with its prior practice of including only a one-year forecast of its principle economic indicators, and would begin to implement three-year forecasts. OA noted that this should make it easier to do longer-term budget planning and fiscal sustainability analyses. Already, budget documentation provides aggregate documentation on central government operations for the previous three years and the current fiscal year. From 2008, the documentation is supposed to include estimates for upcoming years.

Independent assurances of integrity.

EN

OA's 2006 Fiscal Policy Transparency report rated Morocco's compliance with this principle as "Enacted." According to the 2005 IMF assessment, fiscal data are generally reliable and, in case of discrepancy between the forecasts for the principal fiscal aggregates and actual results, the discrepancy is shown and explained. However, this explanation is made only to Parliament, not to the public. The OA assessment noted that, "no statements are made about the accounting basis in the budget documentation or final account documents" (p. 32). The applied double-entry book-keeping system used in Morocco, while still reliable, no longer conforms to international standards, according to the IMF. OA added that the government is working to introduce changes that would lead to compliance with international standards, in parallel with the introduction of accrual accounting. OA also stated that the Accounts Chamber is responsible for the independent oversight of public finances is the responsibility. The Chamber has two main functions: conducting annual inspections of the accounts of public accountants, and carrying out management audits of public entities. The Chamber is empowered to act on its own, or it may conduct an audit or inspection at the request of a ministry or other government entity. OA suggested that accountability could be improved by strengthening Parliament's oversight role.