Morocco and IMF Resilience and Sustainability Trust: Balancing debt, privatisation and neocolonial dynamics

13 December 2023

Solar panels being cleaned. June 10, 2010. Credit: Dana Smillie / World Bank.

In late October, Morocco obtained a $1.32 billion loan from the IMF’s Resilience and Sustainability Trust (RST). Established in 2022, the RST uses rechanneled Special Drawing Rights for concessional long-term financing, and is intended to help low- and middle-income countries address future balance of payments challenges related to climate change (see Inside the Institutions, What is the Resilience and Sustainability Trust?).

The Moroccan RST programme mandates 16 reforms across six pillars. Pillar 2 targets electricity market reform, including the unbundling of Morocco’s publicly-owned electricity and water company, the Office National de l’Électricité et de l’Eau Potable (ONEE). The RST justifies separating generation, transmission and distribution by stating that it would allow for greater competition, boost investment in renewable energy, and eventually lead to lower electricity prices.

These reforms align with the RST’s operational guidance note, including employing climate-related public-private partnerships (PPPs; see Observer Spring 2023, Spring 2019). This approach raises concerns because unbundling state-owned enterprises can conflict with climate goals, undermining just transition principles (see Observer Summer 2022Spring 2022). Although, in the short term, PPPs may free up public funds, in the longer term, the risks of public debt from contingent liabilities that may materialise can drain fiscal resources for climate action and privatise gains, exposing countries to Investor-State Dispute Settlement tribunals known for corporate bias and lack of democratic accountability (see Observer Spring 2023, Summer 2020).

Moroccan civil society expresses concern over the perceived neocolonial impact of the RST on Morocco, seeing it as a tool favouring foreign interests at the expense of our nation's well-being.Shereen Talaat, MENAFem Movement For Economic, Development and Ecological Justice

This PPPs approach also imposes costs on citizens. Concerningly, the RST’s strategy in Morocco is linked to taxation reforms, raising carbon prices to motivate “behavioural changes” in accordance with climate objectives, all the while saving public resources for debt repayment. Consequently, the public bears the cost of de-risking climate projects for private profit, facing higher energy costs without corresponding public support.

Who wins? The role of the RST in the international grab for green hydrogen

Concluding the IMF board discussion on Morocco’s RST programme in September 2023, IMF Deputy Managing Director Kenji Okamura, asserted, “Morocco is well-placed to reap the benefits of the global decarbonisation agenda.” But who will really benefit from this agenda?

RST reforms might help drive a hydrogen rush in Morocco, fueled by the EU’s interest as outlined in the EU’s 2020 Hydrogen Strategy. Netherlands-based think tank the Transnational Institute warns the push “for green hydrogen might serve Europe’s energy transition, but in North Africa it will translate into a proliferation of sacrifice zones in the region.”

The impact of the EU’s strategy on shaping Morocco’s RST reforms is apparent from their alignment with the World Bank’s 2022 Country Climate and Development Report (CCDR) for Morocco. The CCDR focuses on easing the entry of European investors into Morocco’s renewable energy sector, by, for example, unbundling ONEE and enhancing the legal and regulatory framework for EU market compatibility.

Consequently, the focus seems to be on utilising Morocco’s renewable energy resources for the benefit of Europe. This dynamic can be exemplified in projects like the Tan-Tan solar and wind project, managed by the British company Xlinks, which aims to meet 8 per cent of the UK’s electricity needs by 2030. Other examples include a French project covering 170,000 hectares of state-owned land, and the Australian company CWP Global contemplating a $20 billion deal with Morocco for a mega green hydrogen and green ammonia project.

Shereen Talaat of Morocco-based CSO MENAFem Movement For Economic, Development and Ecological Justice said, “Moroccan civil society expresses concern over the perceived neocolonial impact of the RST on Morocco, seeing it as a tool favouring foreign interests at the expense of our nation’s well-being. The emphasis on green hydrogen projects, influenced by external entities like the EU Global Gateway, raises fears of exploitation and the creation of sacrifice zones. There is apprehension that our renewable energy resources might be used for the benefit of the Global North, echoing historical patterns of resource extraction and colonisation that prioritise profit over our citizens’ needs.”