CONFIDENTIAL
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|subsidies and compress imports this year as he had earlier planned. Reported aid
from Saudi Arabia and other sources has so far allowed the authorities to avoid
rescheduling or going to the IMF (anathema to the Algerians) but payments delays are
worsening. However, ECAS with large exposures are operating normally and some
(including the Italians, Japanese and Americans) are considering additional
credits.
As
Some banks are showing concern but in general believe the present crisis
is being weathered and the forfaiting market for Algerian paper remains active.
market perceptions of Algeria's creditworthiness have deteriorated over the year
(reflected in higher spreads), the authorities have increasingly turned to the
development banks, notably the IBRD, AfDB and Arab Monetary Fund.
Morocco
84
Following approval in August of a new SBA, a Paris Club deal was agreed in
October to reschedule current maturities and (some) PRD due in the period July 1988
to December 1989. The Moroccans are now likely to seek a new commercial bank
resheduling to cover 1989 and possibly 1990 maturities. The external position has
improved significantly and Morocco intends to eliminate all remaining trade arrears
by end 1988, but the fiscal deficit remains a problem reflecting a lack of budgetary
control and the high cost of agricultural subsidies. Progress on privatisation has
been very slow but may speed up in 1989.
Oman
85 Economic prospects have worsened significantly in 1988 with the downturn in the
oil market. The IMF estimate that the current account deficit could rise to 8-11%
of GNP in 1989/90 if oil prices are $12 pb. The fiscal position is already weak,
with a deficit of $520 mn projected for 1988, due mainly to overruns on defence
spending and uncontrolled expenditure by the Royal Diwan. The authorities intend
to meet the deficits out of reserves but the drawdown could be very heavy if oil
prices remain weak given the relatively high cost of Omani production. Additional
external borrowing is also a possibility but the DSR is already set to rise to over
20% in 1989-90. A recent IMF report recommends new revenue-raising measures,
higher interest rates and a more flexible exchange rate strategy to protect the
reserves and avoid excessive borrowing.
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