Public Information Notice: IMF Concludes 2002 Article IV Consultation with the Islamic Republic of Mauritania

October 11, 2002

Public Information Notices (PINs) are issued, (i) at the request of a member country, following the conclusion of the Article IV consultation for countries seeking to make known the views of the IMF to the public. This action is intended to strengthen IMF surveillance over the economic policies of member countries by increasing the transparency of the IMF's assessment of these policies; and (ii) following policy discussions in the Executive Board at the decision of the Board.

On June 7, 2002, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Islamic Republic of Mauritania.1


Mauritania continued to consolidate the economic gains of recent years, and sound macroeconomic policies were supported by further structural reforms.

Real GDP growth slowed in 2001, reflecting weaker international demand for iron ore and the impact of uneven rain and flooding on agriculture. The stronger performance in other sectors, mainly industrial fishing, construction, and telecommunications, and strong domestic demand, could not fully compensate for contraction in mining and agriculture.

Consumer price inflation remained low, even though the exchange rate came under pressure in the second half of 2001 and in early 2002. The consumer price index rose by 4.7 percent on average over 2001, and there was a modest rise in the end-year rate of 1.7 percent. The pressure on the exchange rate reflected mainly seasonal factors. Over 2001, the ouguiya depreciated by 5 percent against the U.S. dollar, and by under 1 percent against the euro; the real effective exchange rate remained virtually unchanged.

The external current account (including official transfers) moved from a small surplus in 2000 to a deficit in 2001, reflecting a delay in the receipt of 2001 fishing license fee (€ 86 million, 8 percent of GDP) from the European Union. Imports were lower, and higher fish exports compensated for some of the decline in iron ore exports. Capital inflows were lower than envisaged, with slower disbursements reflecting weak implementation capacity. Nevertheless, gross reserves remained at a comfortable level of about 7 months of imports. The authorities continue to manage external debt prudently and have made progress with creditors on debt relief in the context of the enhanced Highly Indebted Poor Countries Initiative.

Fiscal policy remained prudent during 2001, and although expenditure was lower than envisaged, the overall budget deficit was wider than envisaged only due to the late receipt of the EU fishing fees. Lower mining exports resulted in lower than expected turnover tax revenue and the authorities made deliberate efforts to curb current expenditure. Capital spending was lower than projected, despite efforts to make up for delays. Social spending was also lower than envisaged, mainly due to delays in implementing a training program for poor unskilled labor.

The central bank continued to ease monetary conditions, in the low inflation environment, and broad money grew by 17 percent, faster than in 2000. Credit to the private sector grew by a little less than in the previous year. The discount rate was lowered by 2 percentage points in late October, resulting in lower bank lending rates. At the same time, the central bank also reduced the stock of treasury bills sharply, resulting in a fall in treasury bill rates from 10 percent in September to around 4 percent in December 2001.

The authorities continued to make progress in structural reforms, although there have been some delays. Of note, the investment code was revised to remove targeted tax incentives, and a VAT refund system was established. However, privatization of the electricity company has not yet occurred due to weakness in the world energy sector.

The 2000 household survey indicated that although the poverty rate has declined from 50 percent in 1996 to 46 percent in 2000, the improvement has not been even across regions. Poverty has increased in both the capital city, Nouakchott, and in the Senegal River valley. Education and literacy indicators have improved, but there has been little progress in increasing access to health and other basic services.

Looking ahead, the authorities' medium term macroeconomic strategy as outlined in their revised Poverty Reduction Strategy Paper, will be to continue to stimulate growth and reduce poverty, maintain macroeconomic stability and shield the economy from exogenous shocks

Executive Board Assessment

Executive Directors commended the authorities for Mauritania's continued strong economic performance and the good progress made in implementing its poverty reduction strategy. Despite the adverse impact of the recent global economic slowdown on Mauritania's exports and a weather-related contraction in the agricultural sector, in 2001 economic growth remained relatively solid, the international reserve position was comfortable, and inflation remained subdued. Directors attributed these achievements to sound macroeconomic and structural policies, including a solid fiscal position, a market-responsive exchange rate, a prudent external debt policy, adherence to the monetary program, and sustained structural reforms.

Directors noted that poverty and social indicators have improved, as shown by the results of the 2000 household survey, but not at the pace originally expected. They urged the authorities to strengthen their efforts to further improve these indicators and ensure a sustainable and equitable reduction in poverty. They also recommended that the experience of the first-year's implementation of the Poverty Reduction Strategy (PRS) be carefully reviewed to help overcome obstacles that could be encountered over the coming years.

Although they considered the outlook for the economy to be relatively favorable, Directors cautioned that important downside risks remained, especially in view of the vulnerability of the economy to external shocks. In this context, they encouraged the authorities to pursue increased diversification of the economy to reduce the dependence on only two major export. They also recommended maintaining a relatively high level of international reserves and responsive macroeconomic policies.

Directors saw a need for better policy coordination, particularly in exchange rate and liquidity management policies, to enhance macroeconomic policy effectiveness. They encouraged the authorities to use indirect monetary instruments more proactively and stand ready to act on interest rates to stem any potential pressure on inflation. Directors also welcomed steps taken to improve foreign exchange cash management, including through providing sufficient foreign currency bank notes to narrow the spread between the cash and transfer rates.

Directors commended the authorities' prudent fiscal stance in 2001. Nevertheless, they stressed the need to improve public expenditure management. In this context, Directors welcomed the authorities' commitment to take measures to upgrade poverty expenditure tracking in line with the joint recommendations of the Bank and the Fund on this issue. They encouraged the authorities to develop analytical tools for social impact analysis. Directors also welcomed the recent joint Bank-Fund fiscal Report on the Observance of Standards and Codes (ROSC) and the Country Financial Accountability Assessment (CFAA), aimed at improving transparency and accountability of all public spending. They urged the authorities to accelerate their efforts to improve implementation capacity, which remains a major impediment to project execution and thus poverty reduction.

Directors urged the authorities to follow through vigorously with structural reforms, especially regarding banking supervision, monetary management and privatization. They also emphasized that the difficult financial position of the social security fund needs to be addressed. They welcomed the recently initiated restructuring of the central bank. Directors also commended the authorities' efforts to combat the financing of terrorism.

Directors stressed the need to improve economic and financial data, including national accounts, balance of payments, and the consumer price index, and urged the authorities to make better use of Fund technical assistance. They welcomed the authorities' commitment to follow the recommendations of the recent safeguards assessment of the central bank, particularly the appointment of external auditors and the publication of its audited financial statements before year-end.

The Islamic Republic of Mauritania: Selected EconomicIndicators






(Percentage changes; unless otherwise noted)


National income and prices


GDP at constant prices




GDP deflator




Consumer price index (period average)




Consumer price index (12 months, end of period)





External sector


Exports, f.o.b. (in U.S. dollars)




Imports, f.o.b. (in U.S. dollars)




Terms of trade




Nominal effective exchange rate




Export volume




Import volume




Real effective exchange rate





Money and credit


Money and quasi-money 1/




Net foreign assets 1/




Net domestic assets 1/




Domestic credit 1/




Credit to the government 1/




Credit to the economy 1/




Velocity of money




Interest rate 2/





(In percent of GDP)


Investment and savings


Investment 3/




National saving





Consolidated government operations


Revenue, excluding grants




Expenditure and net lending




Overall surplus or deficit (-) excluding grants 4/




Primary balance excluding grants (deficit -) 4/





External sector


Current account balance


Excluding official transfers




Including official transfers





Debt outstanding




Debt service ratio before rescheduling


(in percent of exports of GNFS) 5/




Debt service ratio after rescheduling


(in percent of exports of GNFS) 5/




Gross official reserves (in months of imports of GNFS)





Memorandum items:


Ouguiya/US$ exchange rate (period average)




Current account balance, excluding official transfers (in millions of U.S. dollars)




Nominal GDP (in billions of ouguiyas)








Sources: Data provided by the Mauritanian authorities; and IMF staff estimates and projections.


1/ In percent of broad money at the beginning of the period, adjusted starting from 2000 to include two additional banks.

2/ Interest rates on 12 months passbook savings.


3/ The sharp increase in 2000 reflects mainly new investments in the telecom sector, an increase in poverty reduction investments financed by debt relief under the HIPC, and a rebound in SNIM investment.

4/ The increase in the deficit in 2000 is due mainly to the cash advance granted by the government to the telecom company Mauritel.

5/ Until 1999, these ratios include Paris Club rescheduled debt on Naples terms. For the years 2000-2001, they include rescheduling under Cologne terms by Paris Club creditors, and comparable treatment by non-Paris Club bilaterals and HIPC interim assistance, as reported in Mauritania's decision point document relief under Cologne terms after the completion point.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.


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