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                                                        Conformed copy
                                                  LOAN NUMBER 4010 MOR
                           Guarantee Agreement
                (Second Sewerage and Water Re-Use Project)
                                 between
                            KINGDOM OF MOROCCO
                                   and
                   INTERNATIONAL BANK FOR RECONSTRUCTION
                              AND DEVELOPMENT
                           Dated May 30, 1996
                                                  LOAN NUMBER 4010 MOR
                           GUARANTEE AGREEMENT
     AGREEMENT, dated May 30, 1996, between KINGDOM OF MOROCCO (the
Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
(the Bank).
     WHEREAS (A) the Guarantor and the Water and Electricity Distribution
Authority of Fes (the Borrower), having been satisfied as to the
feasibility and priority of the Project described in Schedule 2 to the
Loan Agreement, have requested the Bank to assist in the financing of
the Project;
     (B)  by the Loan Agreement of even date herewith between the Bank
and the Borrower, the Bank has agreed to extend to the Borrower a loan
in various currencies equivalent to forty million dollars ($40,000,000),
on the terms and conditions set forth in the Loan Agreement, but
only on condition that the Guarantor agree to guarantee the obligations
of the Borrower in respect of such loan as provided in this Agreement;
and
     WHEREAS the Guarantor, in consideration of the Bank's entering into
the Loan Agreement with the Borrower, has agreed so to guarantee such
obligations of the Borrower;
     NOW THEREFORE the parties hereto hereby agree as follows:
                                 ARTICLE I
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                        General Conditions; Definitions
     Section 1.01. The "General Conditions Applicable to Loan and
Guarantee Agreements" of the Bank, dated January 1, 1985, with the
modifications set forth in Section 1.01 of the Loan Agreement (the
General Conditions) constitute an integral part of this Agreement.
     Section 1.02. Unless the context otherwise requires, the several
terms defined in the General Conditions and in the Preamble to and
Section 1.02 of the Loan Agreement have the respective meanings therein
set forth.
                                ARTICLE II
                                Guarantee
     Section 2.01.  Without limitation or restriction upon any of its
other obligations under the Guarantee Agreement, the Guarantor hereby
unconditionally guarantees, as primary obligor and not as surety merely,
the due and punctual payment of the principal of, and interest and other
charges on, the Loan, and the premium, if any, on the prepayment of the
Loan, all as set forth in the Loan Agreement.
                              ARTICLE III
                            Other Covenants
     Section 3.01.  The Guarantor shall take all measures as may be
required on its part (including, without limitation, the granting of
licenses and issuance of approvals) to enable the Borrower to carry
out the Project and to comply with its other obligations under the
Loan Agreement.
                             ARTICLE IV
              Representative of the Guarantor; Addresses
     Section 4.01. The Minister of the Guarantor responsible for finance
is designated as representative of the Guarantor for the purposes of
Section 11.03 of the General Conditions.
     Section 4.02. The following addresses are specified for the purposes
of Section 11.01 of the General Conditions:
     For the Guarantor:
          Ministry of Finance and External Investments
          Rabat
          Kingdom of Morocco
          Cable address:               Telex:
               MINFIN                  36147
                                       36936
     For the Bank:
          International Bank for
            Reconstruction and Development
          1818 H Street, N.W.
          Washington, D.C. 20433
          United States of America
          Cable address:               Telex:
               INTBAFRAD               248423 (MCI) or
               Washington, D.C.         64145 (MCI)
     IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be signed in
their respective names in Rabat, Kingdom of Morocco, as of the day and
year first above written.
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               KINGDOM OF MOROCCO
               By /s/ Thami El Barki
                                             Authorized Representative
               INTERNATIONAL BANK FOR
                  RECONSTRUCTION AND DEVELOPMENT
               By /s/ Amir Al-Khafaji
                                       Acting Regional Vice President
                                         Middle East and North Africa