VZCZCXRO6541
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHRB #0442 1371751
ZNR UUUUU ZZH
R 161751Z MAY 08
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 8579
INFO RUEHCL/AMCONSUL CASABLANCA 4092
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 3611
RUEHFR/AMEMBASSY PARIS 5036
RUEHNK/AMEMBASSY NOUAKCHOTT 3748

UNCLAS RABAT 000442 
 
DEPT FOR NEA/MAG 
STATE PLEASE PASS TO USTR (BURKHEAD) 
 
SIPDIS 
SENSITIVE 
 
E.O.12958: N/A 
TAGS: ECON EPET EFIN MO
SUBJECT:  MOROCCO RECEIVES USD 500 MIL SAUDI GIFT 
 
REF: RABAT 00265 
 
¶1. (SBU) On May 6, the Moroccan Foreign Ministry announced that 
Saudi Arabia had granted Morocco USD 500 million to help it weather 
the shock of oil price increases.  Over the previous fortnight 
Foreign Minister Taieb Fassi Fihri visited Saudi Arabia, Kuwait and 
the United Arab Emirates as a special envoy of the King.  To date, 
the latter two countries have not made similar offers. 
 
¶2.  (SBU) The GOM, through its Compensation Fund, subsidizes the 
retail cost of gasoline, diesel, butane, gas, bread, flour, and 
sugar (reftel).  The cumulative effect of both rising world oil and 
food prices is becoming increasingly apparent in Morocco.  After a 
year in which it essentially achieved a balanced budget for the 
first time in decades, Morocco faces the prospect of a sizeable 
budget shortfall that has already led one international ratings 
agency to lower its outlook from "positive" to "stable."  Many 
analysts believe the actual cost of Morocco's Compensation Fund will 
double from its current budgeted level of 20 billion MAD (USD 2.7 
billion) to more than 40 billion (USD 5.4 billion), as it is based 
on a world oil price of 75 USD per barrel. 
 
¶3.  (SBU) Analysts estimate that each increase above 75 USD in the 
per barrel price of oil results in an additional 450 million MAD 
(USD 60.8 million) obligation for Morocco's Compensation Fund.  With 
oil reaching USD 125, Morocco is facing a USD 3.0 billion shortfall. 
 While the USD 500 million Saudi gift (we have assurances it is not 
a loan) relieves immediate pressure, we note it represents only 17 
percent of the projected shortfall.  To date, the MFA has released 
no additional details of the deal and has been non-committal and 
vague in their responses to our requests for more information. 
However, one local economic contact remarked, "Certainly, the Saudi 
gift was welcomed, but the government was hoping for more." 
 
RILEY