In Morocco, as elsewhere, banking is the principal financial sector it has the potential to contribute the most or to most severely retard economic development. But the banking industry’s potential performance is constrained by the monetary policies of the central bank. This paper reviews some major factors favoring a strong banking industry that boosts development, as well as the major obstacles that have or continue to face the industry and the economy. The Moroccan central bank, Bank al’Magrib, has been very successful in providing a strong financial environment for the nation. Within this environment, indeed, perhaps because of it, the nation’s banking sector is performing very well. One of the main recent achievements has been the near elimination of so-called “specialized banks,” government institutions set up to provide directed credit to key sectors of the economy. These banks were a major drag on the private financial sector, boosting risk and raising costs, lowering returns to private banks and reducing the their supply of credit and raising the cost of credit for the private sector. These institutions have largely been merged into private firms and their special status eliminated. Fiscal policy continues to remain a major barrier to private capital formation and bank lending. Unfortunately government policy continues to favor running large budget deficits, continuing the waste of scarce national resources. In addition, very high marginal tax rates kick in at very low levels of income, penalizing saving and investment and risk-taking activity.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
4121.
Find related papers by JEL classification: E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance G2 - Financial Economics - - Financial Institutions and Services