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Morocco: Investor Haven in Chaotic North Africa

Before we get into the oil and gas scene that is suddenly attracting the supermajors to this unexplored venue that has all the promise of the greatest African discoveries of this decade, let’s look at the Moroccan economy as a crucial piece of the investment puzzle.

The Moroccan economy has been growing at a stable—and by most accounts, unprecedented—rate, with growth on average 4%-5% higher than the previous decade. The reasons for this are multiple, but most poignant have been economic modernization and gradual diversification away from dependence on the agriculture sector.

While the Justice and Development Party (PJD)-led government at first attempted to avoid an unpopular reduction in spending on subsidies and public wages—as in Tunisia—by 2012 it was in urgent need of an IMF credit line, and this came along with painful austerity measures. The IMF credit line of $6.2 billion was opened in August 2012 and then extended in July 2013, with a warning that Morocco would have to address subsidies and other financial reforms. By August 2013, this was made clear with an increase in the fiscal deficit for the first half of the year. Summer subsidy reforms came with political implications that included the resignation of five ministers from Istiqlal. Oil subsidy reforms were then delayed until September this year, leading to public protests and giving the opposition Istiqlal an opportunity to score some political points from the sidelines.…

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