UPDATE 3-Ruler of cash-strapped Morocco plans Gulf Arab tour

* King had kept his distance from Gulf

* Rabat bets on Gulf demand for $1 bln bond sale in 2012

* Euro crisis has hit Morocco hard

(Releads with bond sale, adds S&P outlook revision and analyst quote)

By Sylvia Westall and Souhail Karam

KUWAIT/RABAT, Oct 11 (Reuters) - Morocco's King Mohammed will make a rare tour of Gulf Arab countries before the end of the year as his cash-strapped government tries to drum up investor interest in a sovereign bond.

While it largely escaped last year's Arab Spring unrest, Morocco has little money to improve living standards and is under heavy domestic pressure to provide jobs and measures to cut poverty.

"It (king's tour) will be a roadshow ... an opportunity to market fresh investment opportunities Morocco has to offer," said an official Moroccan source.

Morocco's $90-billion economy is heavily exposed to the euro zone, whose troubles have hit tourism revenues, migrant remittances and foreign investment this year.

Kuwait's Foreign Ministry undersecretary Khaled al-Jarallah told Reuters the monarch was expected to visit Kuwait this month or in November and would discuss investment and bilateral relations.

The monarch will also visit Saudi Arabia, the United Arab Emirates, Bahrain, Qatar and Oman, Jarallah said.

Rabat hopes Gulf institutional investors will buy heavily into the sale of a $1 billion-plus sovereign bond which has been delayed to the end of November from October.

Morocco, the biggest recipient of European Union financial aid outside Europe, raised about 1 billion euros via its most recent bond issue in 2010.

A Saudi official who declined to be named under briefing rules told Reuters that King Mohammed planned to visit Saudi Arabia after the haj, the Muslim pilgrimage to Mecca which is expected to run from Oct. 24 to 29 this year.

A spokesman for the Moroccan king's cabinet declined to comment.

A tour of fellow Gulf monarchies by King Mohammed would also be important diplomatically for Morocco, which is ruled by the Arab world's longest-serving dynasty but lacks the oil riches of the younger Gulf monarchies.

Since his enthronement in 1999, King Mohammed has kept a distance from Gulf Arab monarchies, with far fewer official visits than during his late father King Hassan's reign.

Some of the Gulf's most influential rulers, including Saudi King Abdullah, regularly visit Morocco but mostly for medical or other private reasons. Concern over the spread of Arab Spring revolts has brought Arab monarchies closer to each other.


The king urged his government in July to tap financing from Gulf sovereign wealth funds in what was widely regarded as an instruction to give Gulf investors more access and dilute the domination of European and local firms.

Last year Morocco and Jordan were invited to join the Gulf Cooperation Council (GCC) and it promised to deliver $2.5 billion in financial to each. But this has yet to bear fruit.

In August, the IMF approved a $6.2 billion precautionary line of credit for Morocco over two years which it said the country would treat as "insurance" in case economic conditions deteriorated and it faced sudden financing needs.

On Thursday, Standard and Poor's revised down the country's outlook to negative from stable and said Morocco might lose its investment grade status if it did not significantly reduce its current account and budget deficits.

"S&P's revision of Morocco's outlook to 'negative' should make its reliance on subscriptions from the Gulf Arab region even more important than before," a Casablanca-based debt analyst said.

King Mohammed is also expected to meet firms interested in the planned sale by Vivendi of its majority stake in Maroc Telecom .

Morocco is drafting a new banking law that should open the door to Islamic lenders. Rabat may also discuss partnerships between its state-run airline Royal Air Maroc and a major Gulf airline, after low-cost carriers reduced their business in Morocco due to lower European demand.

Rabat wants billions of dollars to fund ambitious solar and wind energy development plans as well as resort developments.{ID:nL5E8KO9LR]

(Reporting by Sylvia Westall and Asma Alsharif in Cairo and Souhail Karam in Rabat; Editing by Robert Woodward)

((sylvia.westall@thomsonreuters.com)(+965 2240 8945)(Reuters Messaging: sylvia.westall.thomsonreuters.com@reuters.net))