Islamic Republic of Mauritania and the IMF

Country's Policy Intentions Documents

See also:
Poverty Reduction Strategy Papers (PRSPs)



Mauritania
Enhanced Structural Adjustment Facility
Medium-Term Economic and Financial Policy
Framework Paper 1999—2002

Prepared by the Mauritanian Authorities in Collaboration
With the Staffs of the Fund and the World Bank
July 12, 1999

Contents
  1. Introduction
  2. Economic Performance in 1997-98
  3. Economic and Financial Objectives for 1999-2002
  4. Macroeconomic Policies
    1. External Sector
    2. Fiscal Policy
    3. Monetary Policy
  5. Structural Reforms
    1. Exchange and Trade Systems
    2. Public Sector Reform
    3. Private Sector Development, Regulatory Framework, and Divestiture Program
    4. Natural Resources and Environment
    5. Infrastructure and Urban Development
  6. Development of Human Resources and Poverty Alleviation
  7. External Financing Requirements and External Debt
  8. Regional Cooperation and Technical Assistance Requirements


Tables

Table 1. Mauritania: Summary and Timetable of Macroeconomic and Structural Adjustment Measures, 1999-2001
Table 2.Mauritania:Selected Economic and Financial Indicators, 1996-2001
Table 3.Mauritania: Selected Demographic and Social Indicators
Table 4.Mauritania: External Financing Needs and Resources, 1996-2001
Mauritania: Policy Framework Paper Matrix, 1999-2002

I.  Introduction

1.  Since the mid-1980s, Mauritania has implemented several Fund/IDA-supported programs1 under which it has made considerable progress in restoring positive rates of growth, reducing macroeconomic imbalances and inflation, and moving toward a market-oriented economy. This economic adjustment has been accompanied by an improvement in social indicators and poverty reduction (Table 1). In addition, since late 1991 the country has embarked on a democratization process, with parliamentary, presidential and local elections regularly held.

Contents

II.  Economic Performance in 1997-98

2.  In 1997, Mauritania achieved both its growth and inflation objectives, the overall fiscal balance continued to register a large surplus (4.2 percent of GDP), the external current account deficit (excluding official transfers) was narrowed by about 4.2 percentage points of GDP, and international reserve coverage increased to 4.6 months of imports (from 2.8 months in 1996) (Table 2). Further progress was also made on the structural front, in particular in the trade and fiscal areas. Some delays were nevertheless encountered in preparing a restructuring plan for the national airline company and a reform strategy for the fisheries sector.

3.  In the first half of 1998, macroeconomic performance deteriorated somewhat, partly owing to the weak performance of the fisheries sector. The policy response, adopted by the authorities in consultation with Fund/Bank staff, consisted of a set of corrective measures including: (i) an 11.6 percent step-depreciation of the exchange rate in July 1998, (ii) a tightening of the fiscal policy stance, and (iii) an increase in interest rates. As a result, the average inflation rate for the year was contained at 8 percent, the deterioration in the external current account (excluding official transfers) was held to 2.4 percentage points of GDP, and the overall fiscal balance maintained a surplus of 2.1 percent of GDP. Despite the negative impact of the fisheries shock, the real GDP growth rate declined only marginally to 3.5 percent, reflecting strong performance in the agriculture, transportation, and communication sectors.

4.  In 1998, significant progress was achieved in improving the functioning of the foreign exchange market through further liberalization of the foreign exchange system and the introduction of a new intervention policy of the central bank under which it stands ready to buy and sell unlimited amounts of foreign exchange at its weekly announced bid/offer rates.

5.  Mauritania remained mostly current on its external debt-service obligations vis-à-vis multilateral creditors in 1998. Delays continued to be met in reaching agreement with non-Paris Club creditors on terms at least comparable to those granted by the Paris Club. Since the expiration at end-July 1998 of the consolidation period under the 1995 Paris Club rescheduling, Mauritania has accumulated arrears on its pre-cutoff-date Paris Club debt, but has largely succeeded in clearing its short-term commercial debt arrears.

6.  On the structural front,2 adjustment efforts were intensified in the second half of 1998, in particular through: (i) the implementation of measures to restructure the national airline company, (ii) the adoption of a new fisheries strategy endorsed by the World Bank and other donors; and (iii) the achievement of a political consensus on an ambitious medium-term structural reform agenda.

Contents

III.  Economic and Financial Objectives for 1999-2002

7.  Over the medium term, Mauritania's key objectives are: (i) to place the economy on a higher sustainable growth path, thus increasing employment and reducing poverty; and (ii) to achieve external viability. To these ends, its strategy will focus essentially on: (i) consolidating macroeconomic stability; (ii) increasing the volume of investment as well as total factor productivity in the non-iron ore sectors; (iii) deepening and accelerating structural reforms to stimulate private sector investment; and (iv) implementing a social development agenda, especially in the education and health sectors.

8.  The macroeconomic objectives of the program for 1999-2002 are to: (i) achieve an average annual rate of real growth close to 4.5 percent; (ii) narrow the external current account deficit (excluding official transfers) from 11.4 percent of GDP in 1998 to 10.1 percent in 2002; (iii) increase international reserves to the equivalent of 5-6 months of imports by the same year; and (iv) reduce inflation to 2.5 percent by 2002.

9.  To achieve the growth objective,3 investment in the non-iron ore sector is projected to increase from 16.3 percent of GDP in 1998 to 18.0 percent of GDP in 2002. This will result from an increase in government investment from 4.3 percent of GDP in 1998 to 5.3 percent of GDP over the same period, and from an increase in private investment of 1.6 percentage points of GDP (to 11.1 percent of GDP). In addition, total factor productivity is expected to increase moderately following implementation of the structural reforms described below. Gross domestic savings are projected to rise from 8.0 percent of GDP in 1998 to 8.7 percent in 2002, as the decline in government savings is expected to be more than offset by higher private savings.

10.  Within the medium-term objectives outlined above, and given the uncertainty concerning the performance of the two main exports, iron ore and fish, the program sets a less ambitious real GDP growth objective of 4.1 percent for 1999 and aims at limiting average inflation to 4 percent and reducing the external current account deficit (excluding official transfers) to 11.2 percent of GDP.

Contents

IV.  Macroeconomic Policies

A.  External Sector

11.  The objectives set for the external current account (excluding official transfers) are based on the projection of an increase of about 10.1 percent in export earnings over the program period. The imports of goods (c.i.f.) are expected to increase by 11.4 percent from 1998 to 2002. Over the same period, international reserve coverage is programmed to increase to 5.5 months of imports of goods and nonfactor services. The average annual financing gap is estimated at US$79 million over the period 1999-2002 , and at US$87 million for 1999. The latter amount is expected to be fully covered, as explained in Section VII.

12.  Attainment of the above-mentioned objectives will depend to a crucial degree on fostering the competitiveness and diversification of exports through sound demand management policies and appropriate management of the exchange rate. Concerning the latter, in 1999 the authorities will continue to set the weekly official exchange rate at which they stand ready to buy/sell any quantity required to clear the market. If necessary, the authorities will adjust the rate to avoid any significant real exchange rate appreciation, particularly in response to any adverse supply shocks. Over the medium term, however, the government is committed to reducing the role of the central bank in the foreign exchange market and to moving toward a more market-oriented exchange rate policy. This objective will be achieved in part through the structural measures discussed below, and in part through the measures taken by the central bank to deepen the interbank market.

13.  Over the program period, the government's external debt policy will focus primarily on three objectives: (i) normalizing relations with its creditors; (ii) remaining current on its outstanding obligations and preventing the emergence of new arrears; and (iii) avoiding the contracting or guaranteeing of new external borrowing on nonconcessional terms, apart from normal short-term import-related credits. While past debt reschedulings have contributed to a marked improvement in the medium-term outlook, further assistance will be necessary to ensure long-run sustainability of the country's external debt. To this end, the authorities intend to request assistance under the Initiative for Heavily Indebted Poor Countries (HIPC). For the program period, the authorities will seek a new rescheduling of debt service on eligible debt to Paris Club creditors, and will intensify efforts to obtain debt rescheduling from non-Paris Club bilateral creditors on terms at least comparable to those of the Paris Club. In addition, further steps will be taken to improve debt management, notably through improvements in the coordination between the Ministry of Finance and the central bank and the utilization of new debt management software.

B.  Fiscal Policy

14.  The medium-term program envisages a gradual reduction of the budget surplus from 2.2 percent of GDP in 1999 to 0.4 percent of GDP in 2002. Given the amount of external assistance expected during the program period, this moderate relaxation of the fiscal policy stance should be possible without crowding out private sector investment, and while maintaining a sustainable level of public debt.

15.  Total revenue as a proportion of GDP is projected to decline by about 3.5 percentage points during 1999-2002 owing to lower trade tariffs, no more exceptional dividends paid by the national mining company Société Nationale Industrielle et Miniere (SNIM) after 1999, and the expiration of the current fisheries agreement with the European Union (EU) in 20004. At the same time, revenue policy will aim at increasing domestic tax revenues, in particular through: (i) elimination of the remaining tax exemptions for public enterprises, except on SNIM iron ore related activities; (ii) elimination of the reduced VAT rate; and (iii) stream-lining of tax administration. At the same time, the government proposes to lighten the direct taxation of businesses by reforming the minimum flat-rate tax and gradually eliminating the general income tax on business profits.

16.  Expenditures are projected to decline by about 2 percentage points of GDP over the program period. However, expenditure policies will be designed, with World Bank assistance, to: (i) increase the efficiency of social expenditures; (ii) redirect government expenditure toward priority areas such as basic infrastructure and social outlays; and (iii) ensure a balanced allocation of resources between maintenance expenses and investment in new infrastructure. This, together with a projected decline in interest payments on external debt, will allow an increase of about 1 percentage point of GDP in the resources allocated to the social sectors.

17.  To achieve its economic growth and lower unemployment objectives, Mauritania will continue to require the support of donors and lenders for the financing of investment projects on highly concessional terms. A rolling three-year public investment program (PIP) covering 1999-2001, adopted within the framework of the 1999 budget, gives priority to projects to improve living conditions for the poorest population groups, expand agricultural services, and rehabilitate existing infrastructure. The government is also committed to increasing the share of domestic counterpart resources devoted to public investment. The institutional framework for the implementation of the PIP will be further strengthened, particularly in the areas of project identification and coordination among executing agencies. The procurement code and its procedures are being reviewed, with World Bank assistance, so that both absorptive capacity and investment efficiency can be gradually increased.

18.  The budgetary process will also be improved over the medium term through the consolidation of counterpart funds and externally financed capital expenditures in the budget presented to the legislature.

C.  Monetary Policy

19.  The medium-term objectives of the Central Bank of Mauritania (BCM) will be to develop further its capacity to formulate and implement monetary policy in order to achieve its exchange rate and inflation objectives. Consistent with these objectives is a projected increase in broad money of about 3.5 percent in 1999 and a projected increase in credit to the private sector of about 16 percent.

20.  While the authorities will continue to rely on treasury bill auctions to control liquidity, they will take measures to increase the number of indirect instruments available for monetary purposes and to improve coordination between their foreign exchange and monetary interventions. In particular, the authorities will introduce a repo (and reverse repo) facility, which will allow the BCM to react quickly to changes in liquidity conditions. This will facilitate the goal of maintaining several financial variables (liquidity, interest rates, and exchange rates) within desired ranges. In addition, with the objective of promoting longer term savings and increasing competition in the treasury bill market, the authorities will introduce longer maturity treasury bills and will cautiously reduce the cut-off rate.

Contents

V.  Structural Reforms

A.  Exchange and Trade Systems

21.  A crucial element of the government's medium- and long-term foreign exchange policy is its commitment to liberalize the foreign exchange market further by increasing the supply of foreign currency available to the commercial banks, and by taking steps to increase activity on the interbank market. The key structural measures that will be introduced to achieve these objectives are: (i) eliminating the surrender requirement on repatriated export proceeds of SNIM; (ii) removing all remaining restrictions on the amount and period of time for which non-mineral export proceeds may be retained by exporters; (iii) adjusting prudential limits on the net open foreign exchange positions of commercial banks; and (iv) revising interbank market regulations according to the recommendations of a recent MAE technical assistance mission. In addition, the government is committed to removing all remaining restrictions inconsistent with the acceptance of the obligations referred to under Article VIII.

22.  The government will continue its strategy of liberalizing the trade system through further streamlining the tariff structure in the year 2000. Measures to support this strategy include reducing the number of rates to four, unifying the statistical tax rates, and limiting the maximum combined import tax rate to 20 percent.

B.  Public Sector Reform

23.  Central to the government's strategy for public enterprise sector reform is the policy to privatize a wide range of public enterprises and utilities. Over the program period, four public enterprises will be privatized. Private sector participation in the capital and management of an additional six public enterprises will be opened up for the first time, and existing private sector participation in a seventh public enterprise will be increased (Matrix, Section E.2 and Annex 3). As part of this process, and as a means of promoting substantial participation by small entrepreneurs, the government proposes to introduce measures to combat any economic concentration and attract foreign investors. Monitoring of key enterprises remaining in the public sector will be strengthened.

24.  A major component of the reform program is a restructuring of the whole apparatus of government in light of the role it is called upon to play in a market economy system. This will mean reducing its size, improving its organizational structure, and streamlining its administrative procedures. The goal will be to ensure that government's activities foster economic growth either through direct promotion, or by using regulation to facilitate improved performance by the private sector-with all other activities becoming the province of the private sector. To this end, in addition to privatization, the government will implement an ambitious set of reforms focused on: (i) improving governance; (ii) redefining the functions and organization of key public sector institutions; and (iii) continuing with reform of the civil service (paragraph 25). To improve governance, the government is committed to revising the public procurement code in order to streamline the procedures for the award, supervision, and payment of contracts and at the same time make them more transparent. It will also restructure the Food Security Committee (CSA), mainly to increase the transparency of its financial operations. As part of its program to redefine the functions and structure of key institutions, the government will continue to implement the plan agreed with the World Bank for the reorganization of five key economic ministries, and will undertake a review of the administrative organization of the central bank.

Civil service reform

25.  In parallel with the restructuring of the public sector apparatus, the government will strengthen its administrative capacity and raise the quality of its decision-making by reorganizing the civil service. To this end, it will establish Civil Service Staff Regulations no later than December 2000, commence performance-based evaluations, and introduce public competitive recruitment.

Judicial system reform

26.  The government will continue to improve the effectiveness and transparency of the legal system so as to reinforce the rule of law. To improve effectiveness, steps will be taken to enhance the training of judges and members of the other branches of the legal profession, and to reduce the number of cases awaiting hearing in courts of first instance. The draft legislation governing organization of the judicial system, which is currently the focus of a review process, will be adopted before the end of June 1999. In addition, judges and members of the other branches of the legal profession will have the benefit of a continuous training program.

C.  Private Sector Development, Regulatory Framework, and Divestiture Program

27.  The government's strategy for accelerating economic growth is founded mainly on a series of measures designed to support development of the private sector. In addition to the extensive privatization program discussed above, the following measures, which affect three key areas, are planned: (i) improvement of the legislative and regulatory framework supporting economic commercial activity; (ii) reform of direct taxation and elimination of tax distortions; and (iii) reform of the financial sector to enhance its efficiency, reinforce its soundness, and deepen financial intermediation.

Legislative and regulatory framework

28.  Over the PFP period, the government will adopt and implement an action plan for removing the administrative and regulatory barriers to private sector development identified in a recent report it requested from the Foreign Investment Advisory Service (FIAS). Priority will be given to simplifying the operations of the one-stop window, and reducing both the number of licenses required (in particular for the establishment of businesses and private associations) and the paperwork involved in obtaining them. Implementation of these measures will be monitored through user surveys and management audits of key institutions. The government will also encourage private initiative, at the same time promoting the competitiveness of the private sector by simplifying the formalities associated with the creation of both businesses and entrepreneurial associations. In an additional move to strengthen this competitiveness, the government, with World Bank assistance, will undertake a study on regulatory reform. Reform of the regulatory framework will be carried out in the following sectors: (i) telecommunications (June 1999); (ii) postal services (December 1999); (iii) water and power (November 1999); and (iv) air-transportation (December 1999).

Direct taxation

29.  With World Bank and IMF assistance, the government will reform the business profits tax and the personal income tax, with a view to reducing the relative tax burden affecting domestic production, while at the same time rationalizing investment incentives. The authorities will also take new administrative steps to enlarge the tax base and thereby keep fiscal revenues at an adequate level (Matrix, Section D1). In addition, the government will commence a study on ways to simplify the VAT system. However, should these reforms cause a temporary drop in revenue during transition from the present to the new fiscal system, the government wishes the World Bank to assist it with the mobilization of other resources to offset this loss.

Financial sector

30.  To increase private sector confidence in the banking system and to deepen financial intermediation, the strict enforcement of prudential regulations will continue to be essential. To this end, the BCM's supervisory capacity will be strengthened. In addition, banking supervision procedures will be improved and additional regulations aimed at enhancing both information disclosure and transparency will be issued. The authorities will come to an agreement with the Islamic Bank (BAMIS) on a new restructuring plan, which will include the repayment of the BCM advances by June 2000. The BCM will withdraw as a shareholder of the Housing Bank, but will supervise it closely to ensure that it takes the measures required to maintain financial viability in the long term.

Petroleum prices

31.  Petroleum product prices will be adjusted monthly to reflect movements in inter-national prices. In addition, by the end of 1999 the government will undertake a study in preparation for revising trading margins so as to foster greater competitiveness in the sale of these products.

D.  Natural Resources and Environment

Rural sector

32.  The government's strategy for rural sector development is to promote efficiency and diversification in agricultural production. Key measures to support this strategy have been introduced: (i) liberalization of the rice sub-sector (Annex 4); (ii) implementation of the Integrated Development Program for Irrigated Agriculture (PDIAM), which is supported by the World Bank and provides for the rehabilitation of irrigated areas; (iii) and expansion of access to credit for small producers, mainly by strengthening the specialized financial institution concerned.

Environment

33.  Addressing environmental concerns such as desertification, increased population pressures, and emerging urban environmental problems forms an integral part of the government's development strategy. Key measures that will be implemented over the program period include the preparation and implementation of a national strategy for the environment, the design of a multi-sectoral program to combat desertification, and the formulation of a legal and institutional framework for environmental management. Senegal River Valley environmental issues will be dealt with in conjunction with the neighboring countries.

Fisheries sector

34.  The government is committed to introducing measures to improve management of the country's fishery resources, in accordance with the strategy agreed with donors in June 1998. Key measures will include: (i) strengthening surveillance; (ii) evaluating the existing fishing rights and licensing system; (iii) issuing prohibitions and restrictions on fishing of specific species, in line with the recommendations of the National Center for Oceanographic and Fisheries Research (CNROP); and (iv) ensuring that fishing licenses are granted on the basis of CNROP recommendations for sound fisheries management, with information on the number of current fishing licenses to be published regularly.

Mining sector

35.  The government intends to promote the development of the mining sector and its contribution to national growth. A sector capacity building project, supported by the World Bank, will consist of a number of measures, including specifically: (i) reorganization of the Ministry of Mines; (ii) amendment of the legislation governing the sector, with promulgation of a new Mining Code in June 1999 and its implementing regulations the following September; and (iii) regulation and monitoring of development of the sector. The authorities also intend to formulate procedures for assessment of the environmental impact of mining activities, and to bring the registry of mines and mining activities into full operation.

E.  Infrastructure and Urban Development

36.  The government recognizes the importance of providing effective electric power, water, and telecommunications services in response to steadily growing demand created by urban development, and of doing so within a market-based system. To this end, the government has decided to undertake the reform of the water, power, and telecommunications sectors. The objectives of reforms in the water and power sectors are to: (i) improve the performance of both sectors and provide access to these services to a larger number of consumers at affordable prices; (ii) reduce their production and distribution costs; and (iii) mobilize private capital to ensure an adequate level of investment, while reducing the burden on public sector finances. A feasibility study on technical and financial separation of the two sectors is to be completed by June 1999. A new legislative and regulatory framework will be put in place to enable the private sector to participate in both sectors, although SONELEC's "water assets" will continue to be government-owned.

Water

37.  The main features of water sector reform, scheduled for completion by October 2001 at the latest, will be: (i) the setting of tariffs on an economic-cost basis; (ii) the division of the sector into an urban subsector and a rural and semi-urban subsector; and (iii) the establishment of a partnership between the public and private sectors founded on the new sector's regulatory framework, and on the separation of the production, distribution, and marketing functions.

Electricity

38.  The main features of electric power sector reform will be: (i) the elimination of the public sector monopoly, more competition, and greater transparency; (ii) the privatization of SONELEC's assets; and (iii) the setting of tariffs on an economic-cost basis. The restructuring program will be carried out, with the assistance of an investment bank, in three stages, as per the details given in Annex 3.

Telecommunications

39.  Adoption by the government in May 1999 of a new telecommunications law has paved the way for a sector reform program in which the key components are privatization and increased competition. The government will adopt a new regulatory framework based upon the new legislation, and by the end of 1999 will issue an international call for tenders for the first cellular license to be granted to a private operator. The successful bidder will be selected by the end of March 2000. Implementation of the government's privatization strategy will take the form of the sale of the principal operating enterprise to a strategic partner (who will purchase a portion of enterprise capital) by the end of the year 2000 (Annex 3). Another component of the reform program will be promotion of the development of communications and information services in rural areas.

Land and air transport

40.  With support from the EU, the government has drawn up a ten-year transport development plan focused on a significant reduction in sector bottlenecks and on lowering transport costs by abolishing current price controls. At the same time, however, the government will assess the feasibility of granting transport budget subsidies to isolated rural regions, relying for this purpose on the findings of a planned study. In the interests of expanding the road system and upgrading road maintenance, the government, with assistance from donors, will commit the necessary resources, on a priority basis, for road construction and maintenance in agricultural production districts and isolated regions. In the air transport subsector, the government is already setting up an action plan for the privatization of Air Mauritanie which should be completed by the end of February 2000 at the latest (Annex 3).

Urban development and decentralization

41.  Given the rapid pace of urbanization, the government has opted for a strategy of gradually transferring responsibility for urban infrastructure to the municipalities, while assisting them to build up their management and resource mobilization capacities. It has also launched a long-term study on taxation by local authorities, which is scheduled for completion in June 1999.

Contents

VI.  Development of Human Resources and Poverty Alleviation

Education

42.  In April 1999, the government committed itself to an ambitions reform of the country's education system so that it would be in a position to meet the challenges of training for all in an increasingly open world. This reform program focuses mainly on: (i) elimination of the system of streams based on languages of instruction, and changeover to a single system; (ii) improvement of the quality of instruction through strengthening of the scientific disciplines; and (iii) education for all children of school age and strengthening of literacy programs. In order to fund this reform, the government is committed to raising its social expenditure to the levels agreed with the World Bank. In the case of primary education, the government's strategy is to achieve a 99 percent primary school gross enrollment rate by the end of the program period, and to reduce disparities between regions and between boys and girls. In addition, the government has decided to emphasize vocational education. As part of this process, particular attention will be paid to labor market needs, so that the mobilization, management, and effectiveness of resources in the sector can be improved.

Health

43.  On the health front, the government is committed to: (i) improving primary health services (maternal and child health and family planning programs in particular); (ii) extending the coverage of primary health care services in rural areas; (iii) expanding access to safe drinking water and sanitation in rural areas; and (iv) promoting a more decentralized and efficient health services delivery system, as well as greater community involvement. The government is also committed to increasing current expenditure in the health sector from 7 percent of total noninterest current expenditure in 1999 to 8.5 percent in 2002. Execution of the government's population policy action plan continues, and in 1999-2000 a population census and a demographic health survey will be conducted.

44.  Monitoring of the measures introduced in the education and health sectors will be based on a range of quantifiable indicators such as specific expenditure targets, outputs such as enrollment rates and vaccination coverage, and social indicators such as infant mortality and malnutrition rates (Annex 5).

Poverty reduction

45.  The government's policies for the promotion of economic growth will support long-run poverty alleviation. The government remains strongly committed to taking immediate steps to reduce poverty by redirecting public expenditure toward priority social sectors. To this end, the program of labor-intensive public works, as well as credit arrangements for micro-enterprise promotion and for financing artisanal fisheries activities, will be further strengthened. Other elements of the government program include: (i) ensuring access to water and electric power in rural areas; (ii) allowing local authorities to allocate a larger share of their resources to the delivery of public services; (iii) strengthening the poverty-monitoring system as well as data collection through household surveys; and (iv) promoting savings and loan cooperative schemes, particularly in rural areas. In addition, the government is committed over the medium term to increasing its funding of social spending so as to enable the country to achieve the social objectives set as part of the HIPC Initiative.

Women in development

46.  To promote women in the development process, the government is implementing a plan of action which includes the provision of nonformal education, skills training, and assistance in the formation of cooperative production groups with a view to increasing women's participation in farming, livestock, and artisanal fishery activities.

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VII.  External Financing Requirements and External Debt

47.  Implementation of the reform program described above will contribute significantly to strengthening the balance of payments. The current account deficit (excluding official transfers) is expected to improve from 11.2 percent of GDP in 1999 to 10.1 percent of GDP in 2002. Exports are projected to grow at an average of 2.4 percent over the 1999-2002 period, driven by a recovery in export volumes of fish. In 1999, however, export growth is projected at only 1.4 percent on account of a projected 12 percent decline in international prices for iron which, along with lower prices for higher value fish (cephalopods), largely accounts for the terms of trade decline in 1999. Import volume growth is also expected to be fairly modest with a large decline in SNIM's investment-related imports offset by higher private sector imports driven by the growth in domestic demand. The net services position is projected to decline by 9 percent over the program period due to lower fishing royalties and higher business related service payments which are projected to rise broadly in line with nominal GDP. Official transfers increase until the year 2000 but decline thereafter mainly due to the assumption of a lower fisheries licence fee payment from the European Union following the expiry of the current agreement in that year.

48.  Taking into account the current account deficit, scheduled external debt-service payments, the programmed reduction in arrears, and the target accumulation of external reserves, the gross external financing requirement would average about SDR 170 million per year in 1999?2002 (Table 3). Official disbursements (transfers and project loans) are expected to average SDR 112 million over the projection period, with a decreasing share accounted for by SNIM as its external financed investment projects wind down after 1999. In 1999, the financing gap of SDR 64 million is expected to be covered by: (i) highly concessional program disbursements from official sources (including SDR 2.7 million from IDA and SDR 14.3 million from the EU); (ii) use of Fund resources under the Enhanced Structural Adjustment Facility (ESAF) arrangement amounting to SDR 6.1 million; (iii) debt relief through a new Paris Club flow rescheduling (covering arrears and current maturities) on terms similar to those of the 1995 Naples terms rescheduling, and comparable treatment from non-Paris Club creditors. For 2000 and 2001, the financing gaps are projected at SDR 52.9 million and SDR 54.3 million, respectively, excluding purchases from the Fund, balance of payments support from other donors, or any rescheduling or forgiveness that might be obtained in those years. In order to cover those gaps, the government intends to request financial support from the Fund, the World Bank, and other multilateral and bilateral institutions, and will seek a rescheduling on debt due to official bilateral creditors on highly concessional terms.

49.  External debt outstanding before debt relief is expected to decline from 215 percent of GDP at end-1998 to 169 percent at end-2002. Debt service before debt relief would decrease from about 34 percent of exports of goods and nonfactor services in 1998 to 27 percent in 2002 and from 51 percent of central government revenue in 1998 to 40 percent in 2002. Assuming a new flow rescheduling from the Paris Club, and terms at least as comparable granted by non-Paris Club bilateral creditors, the debt-service ratio is expected to decline to 22 percent in 2002.

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VIII.  Regional Cooperation and Technical Assistance Requirements

Regional cooperation

50.  The government will continue to seek ways to improve cooperation and coordination of efforts at the regional level in order to ensure successful implementation of its reforms. To this end, Mauritania will proceed with implementation of a fisheries resource management program in an attempt to extend this framework at the sub-regional level. Actions undertaken by Mauritania in cooperation with its neighboring countries as part of the campaign against epidemics of water-borne diseases are already beginning to show results.

Technical assistance needs

51.  Multilateral and bilateral agencies will continue to provide technical assistance in support of the government's structural reform program, in accordance with the details given in the Matrix and Annexes. The government will ensure that requirements are properly prioritized, that adequate Mauritanian personnel and local resources are allocated to counterpart work, and that the recommendations set forth in the programs are implemented in a timely manner.


1 Mauritania has also benefited from considerable external financial assistance, mainly from Paris Club and other bilateral creditors.
2 The second stage of the trade reform was implemented, as scheduled, at the beginning of 1998.
3 A modest diversification of the economy is expected as a result of structural reforms detailed below. Sectors projected to grow faster than GDP include: nontraditional agriculture and services (in particular tourism). A gradual recovery of the fisheries sector is also projected.
4 Projections are based on conservative assumptions concerning a new agreement with the E.U.




Table 1. Mauritania: Social Indicators, 1990–96


1990

1991

1992

1993

1994

1995

1996


Population

  Total population (millions)

1.9

2.0

2.0

2.1

2.1

2.2

2.3

  Growth rate

2.6

2.6

2.6

2.6

2.6

2.6

2.6

  Rural population (percent of total)

57.0

55.3

53.6

51.8

50.1

49.9

48.6

Health

  Life expectancy (years)

48.6

49.0

49.5

49.9

50.4

51.4

51.8

  Female

49.6

50.1

50.5

51.0

51.4

52.4

52.8

  Male

47.5

48.0

48.4

48.9

49.3

50.5

50.9

Infant mortality (per thousand)

128.7

126.3

123.8

121.3

118.8

116.3

113.7

Population per physician (per thousand)

15.8

9.0

Education

  Primary gross enrollment (in percent)

48.0

54.0

61.0

69.0

72.0

78.0

83.0

    Female

41.0

46.0

55.0

62.0

72.0

76.0

    Male

56.0

61.0

68.0

76.0

84.0

88.0

  Secondary gross enrollment (in percent)

14.0

14.0

15.0

15.0

15.0

15.0

17.0

  Illiteracy rate (percent of

    population above age 15)

66.0

62.0

Income

  GDP per capita (constant 1987 U.S.dollars)

488

489

485

501

510

520

530

Urban unemployment (in percent)

26.0

Poverty (percent of the population)

57.0

50.0

Government expenditure in social

    sectors (in percent of GDP)

  Total

4.7

5.2

4.7

5.9

6.3

7.4

7.8

    Education

3.5

4.0

3.7

4.1

4.1

4.3

4.3

    Health

1.2

1.2

1.0

1.2

1.5

2.0

1.8

    Poverty alleviation

0.0

0.0

0.0

0.6

0.7

1.1

1.7

  Capital expenditure 1/

0.5

0.6

0.7

1.5

1.6

2.3

2.0




Sources: Data provided by the Mauritanian authorities; and Social Indicators of Development (World Bank)
1/ The decline recorded in 1996 reflects the completion of large projects that were started in 1994.



Table 2. Mauritania: Selected Economic and Financial Indicators, 1996–2003


1996

1997

1998

     1999

2000

2001

2002

2003

   Proj.1/  Proj. Projection


(Annual percentage changes; unless otherwise indicated)

National income and prices

GDP at constant prices

4.7

4.5

3.5

4.4

4.1

4.4

4.6

5.0

5.2

GDP deflator

5.1

6.2

9.2

5.0

3.9

3.2

3.0

2.5

2.6

Consumer price index (period average)

4.7

4.5

8.0

5.4

4.0

3.5

3.0

2.5

2.5

External sector

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

-1.6

-14.9

-10.6

-0.8

1.4

2.9

2.8

2.7

3.2

Imports, c.i.f. (in U.S. dollars)

6.4

-6.9

0.7

-1.0

2.4

2.6

3.0

2.9

2.8

Export volume

-1.5

-16.0

-0.2

1.9

9.3

0.5

1.0

1.8

1.9

Import volume

2.3

-4.9

3.4

-2.4

0.4

0.5

0.8

0.7

0.7

Terms of trade

0.3

9.2

-8.0

-4.0

-9.0

0.3

-0.4

-1.3

-0.8

Nominal effective exchange rate 2/

-1.0

-4.4

-21.2

...

...

...

...

...

...

Real effective exchange rate 2/

0.9

-1.0

-16.8

...

...

...

...

...

...

Money and credit

Net domestic assets 3/

-56.8

-27.6

-6.2

-23.1

-21.2

-3.3

...

...

...

Domestic credit 3/

-45.4

-32.7

-32.3

-22.7

-18.8

-3.3

...

...

...

Credit to the government 3/

-60.6

-44.5

-41.8

-40.0

-42.3

-25.7

...

...

...

Credit to the economy 3/

15.3

11.8

9.5

17.0

23.5

22.4

...

...

...

Money and quasi-money 3/

-5.1

8.0

4.1

7.2

3.5

7.0

...

...

...

Velocity of money

5.9

6.5

6.9

7.1

7.1

7.3

...

...

...

Interest rate 4/

8-10

8-10

10-11

10-11

10-11

...

...

...

...

(In percent of GDP; unless otherwise indicated)

Investment and savings

Investment

19.2

17.5

21.0

21.0

22.4

21.9

21.9

21.8

22.0

Government

4.1

3.8

4.3

5.0

4.9

5.1

5.2

5.3

5.4

Others (including PEs)

15.1

13.7

16.7

16.1

17.5

16.8

16.7

16.5

16.6

National saving

16.8

17.4

20.9

21.4

23.3

22.3

21.7

21.2

21.2

Government

9.5

8.0

8.3

7.3

8.4

7.7

6.9

6.8

6.8

Other (including PEs)

7.3

9.4

12.6

14.0

14.9

14.6

14.9

14.4

14.4

Consolidated government operations

Revenue, excluding grants

29.8

26.9

27.2

28.0

28.5

26.5

25.4

25.1

25.0

of which

Tax revenue

17.5

15.6

15.7

15.5

15.4

15.4

15.4

15.5

15.6

Nontax revenue

12.1

11.2

11.3

11.8

12.6

10.9

9.8

9.5

9.3

Special accounts

0.2

0.1

0.2

0.7

0.6

0.2

0.1

0.1

0.1

Expenditure and net lending

24.5

22.7

25.1

25.7

26.4

25.2

24.9

24.8

24.7

of which

Current expenditure

17.5

16.6

17.3

18.0

17.9

17.6

17.3

17.0

16.8

Capital expenditure and net lending

6.8

5.8

7.3

7.7

8.3

7.6

7.7

7.8

7.9

Other

0.2

0.3

0.4

0.0

0.2

0.0

0.0

0.0

0.0

Overall surplus or deficit (-) 5/

5.3

4.2

2.1

2.3

2.2

1.3

0.5

0.4

0.3

Primary balance (deficit -) 5/

8.7

7.1

5.7

5.7

5.7

4.5

3.4

3.0

2.8

Domestic public debt 6/

11.2

10.8

11.1

...

...

...

...

...

...

(In percent of GDP; unless otherwise indicated)

External sector

Current account balance

Excluding official transfers

-13.2

-9.0

-11.4

-11.6

-11.2

-10.8

-10.5

-10.1

-9.6

Including official transfers

-0.8

2.0

-0.1

0.4

0.9

0.4

-0.1

-0.6

-0.8

Debt outstanding 7/

214.4

175.1

215.0

...

...

...

...

...

...

Debt service ratio before debt relief 8/

30.9

37.0

34.0

32.5

33.6

32.3

29.6

28.7

28.6

Debt service ratio after debt relief 8/ 9/

22.3

29.4

23.2

...

...

...

...

Gross official reserves (in months of

imports of GNFS)

2.8

4.6

4.6

5.3

5.1

5.3

5.4

5.5

5.6

Memorandum items:

Ouguiya/US$ exchange rate (period average)

137.2

151.9

189.0

...

...

...

...

...

...

Exports, f.o.b. (in millions of US dollars)

484.3

413.0

369.4

357.3

374.6

385.4

396.2

406.7

419.9

Imports, c.i.f. (in millions of US dollars)

437.9

386.3

389.0

386.3

398.3

408.6

421.0

433.3

445.5

Current account balance excluding

-144.4

-98.8

-113.2

-138.4

-109.4

-114.8

-118.3

-122.7

-125.3

official transfers (in millions of US dollars)

Nominal GDP (in billions of ouguiyas)

150.1

166.7

187.8

202.8

203.1

218.7

235.6

253.6

273.6


Sources: Data provided by the Mauritanian authorities; and Fund staff estimates and projections.
1/ As shown in SM/99/7, 01/13/99.
2/ Based on the Information Notice System (INS). A decrease in the index implies a depreciation.
3/ Annual changes in percent of broad money at the beginning of the period.
4/Interest rates on savings deposits of 12 months.
5/ Excluding grants.
6/ This includes the stock of treasury bills outstanding. However, in light of the large net creditor position of the government with respect to the central bank, its net domestic debt has been negative since 1997.
7/ There is no official short term debt outstanding.
8/ In percent of exports of goods and nonfactor services. Includes clearence of post cut-off date arrears to bilateral creditors of US$16.6 million over the program period.
9/ Debt service after relief follows rescheduling from Paris Club creditors and comparable treatment from non-Paris Club bilateral creditors.




Table 3. Mauritania: External Financing Requirements, 1996–2003
(In millions of SDRs)


Projections
     _____________________________

1996

1997

1998

1999

2000

2001

2002

2003



Requirements

-254.7

-182.6

-139.5

-174.6

-168.2

-166.5

-171.4

-166.6

Current account deficit (excluding public transfers)

-99.1

-71.8

-83.5

-80.6

-81.7

-84.1

-87.2

-88.9

Debt amortization due , excl.IMF and FMA

-57.5

-64.5

-66.2

-64.3

-57.6

-54.5

-54.3

-53.4

Change in gross official reserves

-39.3

-41.4

-1.7

-17.7

-13.1

-10.7

-10.7

-10.6

IMF repurchases

-6.8

-5.4

-5.1

-6.8

-8.3

-10.3

-12.5

-13.6

Other liabilities of the CBM

-6.7

-11.4

-9.0

-3.4

-2.8

-3.4

-3.2

0.0

Arrears flow

-45.3

11.9

26.0

-1.8

-4.6

-3.6

-3.6

0.0

Resources

254.7

182.6

139.5

110.6

115.2

112.2

114.9

112.5

Official transfers 1/

93.1

87.7

82.6

87.3

84.6

83.0

81.9

81.8

Committed medium-, long-term loans

32.4

46.0

25.8

24.7

30.5

26.2

28.0

25.5

Program loans

13.8

16.8

5.3

0.0

0.0

0.0

0.0

0.0

IMF disbursements

14.3

14.3

0.0

0.0

0.0

0.0

0.0

0.0

Direct investment

-0.3

-2.4

-0.2

0.4

2.0

3.0

5.0

5.3

Other capital inflows (net)

32.8

-3.7

19.6

-1.8

-1.8

0.0

0.0

0.0

Obtained debt relief

68.8

24.0

6.5

0.0

0.0

0.0

0.0

0.0

Overall financing gap

-0.0

0.0

0.0

64.0

52.9

54.3

56.5

54.1

Identified forthcoming exceptional financing

0.0

0.0

0.0

64.0

IMF

0.0

0.0

0.0

6.1

Potential debt relief

0.0

0.0

0.0

37.8

Program grants and loans

0.0

0.0

0.0

20.2


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

1/ Includes in 1996 a grant for debt reduction.




Table 4. Mauritania: Debt Service Payments Projections, 1999–2017
(In millions of U.S. dollars)


Arrears

1/

Projections

Average

1998

1999

2000

2001

2002

2005

2010

2015

2017

1999

2008

–2007

–2017


A. Total debt service before debt relief 2/

...

135

133

128

129

101

99

90

78

117

90

   Principal

...

98

98

96

98

75

79

74

72

88

74

   Interest

...

36

35

32

30

25

20

16

5

29

16

   Scheduled debt service on existing debt 3/

...

135

132

127

127

95

77

69

61

113

71

      Principal

331

98

98

96

98

73

63

61

56

86

60

          Multilateral 4/

2

55

60

58

60

45

29

27

24

52

27

         Bilateral, of which:

329

43

39

37

38

28

33

35

31

35

33

            Paris Club creditors

11

21

22

23

24

16

21

23

20

20

22

               Post-cutoff date debt

0

4

5

6

6

9

7

7

8

7

7

               Pre-cutoff date debt

11

17

17

17

18

7

13

16

12

13

14

               NPRD and NC

6

8

8

7

7

2

1

0

0

4

1

                  PRD-Toronto

3

5

5

5

5

1

1

0

0

3

1

                  PRD-London

2

2

2

3

3

4

10

15

11

3

12

                  PRD-Naples

0

2

2

2

3

0

0

1

2

2

1

            Commercial

0

0

0

0

0

0

0

0

0

0

0

            Other non-Paris Club creditors

318

22

17

14

14

12

13

11

11

15

11

      Interest

...

36

34

31

28

22

14

8

5

27

11

         Multilateral 4/

...

18

17

15

14

10

5

3

3

13

5

         Bilateral, of which:

...

18

17

16

14

12

9

4

2

14

7

            Paris Club creditors

...

14

14

13

12

10

7

3

2

11

5

               Post-cutoff date debt

...

3

3

2

2

2

1

1

0

2

1

               Pre-cutoff date debt

...

12

11

10

9

8

6

3

1

9

4

               NPRD and NC

...

2

1

1

1

0

0

0

0

1

0

                  PRD-Toronto

...

2

2

2

2

1

0

0

0

1

0

                  PRD-London

...

6

6

6

6

6

5

2

1

6

3

                  PRD-Naples

...

2

2

2

1

1

1

1

1

1

1

            Commercial

...

0

0

0

0

0

0

0

0

0

0

            Other non-Paris Club creditors

...

3

3

3

3

2

2

1

0

3

1

      Debt service on new borrowing

...

0

1

1

2

5

22

21

27

4

21

         Principal, of which:

...

0

0

0

0

2

16

13

17

2

14

            IMF

...

0

0

0

0

2

11

0

0

2

5

         Interest

...

0

1

1

2

3

6

9

10

2

7

   Debt service ratio before debt relief 5/

...

33

30

28

27

20

14

10

7

25

12

B. Debt service after debt relief 6/

...

98

109

105

108

91

87

88

93

98

85

      Principal

...

62

73

71

75

60

61

62

68

66

59

      Interest

...

36

35

34

33

30

27

26

25

32

26

   Debt service ratio after debt relief 5/

...

24

26

24

24

18

13

9

9

21

11

Memorandum items:

   Total debt stock before debt relief

2,135

2,082

2,072

2,056

2,044

1,990

1,945

2,058

2,136

2,024

2,009

      (In percent of GDP)

215

213

196

182

169

132

97

76

69

159

87

      (In percent of exports of goods and nonfactor services)

523

512

492

473

456

387

283

223

203

430

255

   Total debt stock (NPV) after hypothetical debt relief 6/

1,240

1,226

1,217

1,208

1,199

1,171

1,163

1,254

1,298

1,190

1,212

      (In percent of GDP)

125

125

115

107

99

78

58

46

42

94

52

      (In percent of exports of goods and services)

304

302

289

278

267

228

169

136

123

253

153

   GDP

993

978

1,060

1,129

1,209

1,510

2,001

2,713

3,073

1,316

2,367

   Exports of goods and nonfactor services

409

407

421

435

448

514

688

925

1,051

478

809




Sources: Central Bank of Mauritania; and staff estimates and projections.
1/ Arrears of principal and interest
2/ Public and publicly guaranteed debt.
3/ On debt outstanding and disbursed at end-December, 1998.
4/ Includes debt service to the IMF and AMF.
5/ In percent of exports of goods and nonfactor services
6/ Assuming hypothetical stock-of-debt operation by Paris Club creditors on Naples terms at end-1998 and comparable treatment from other bilateral creditors.



Mauritania: Policy Framework Paper Matrix, 1999–20021/



Policy Area

Objectives

Measures

Implement
Period

TA
Request


A. External Sector Policies
    1. Exchange
    system and
    market
Further liberalize the exchange system to promote external competitiveness and ensure a viable balance of payments position in the medium term.
  • Improve the methodology used to calculate the weekly official exchange rate.

1999

IMF

  • Initiate purchases of foreign exchange by the central bank on the interbank market (see Annex 1).

1999

  • Further liberalize the foreign exchange market by, inter alia, removing the surrender requirement on SNIM’s repatriated export proceeds and the limits on retention of export proceeds by exporters (see Annex 1).

1999–2002

  • Eliminate all remaining restrictions that are inconsistent with Article VIII.

6/1999

    2. External
    debt

Restore normal financial relations with foreign creditors. Attain a viable external debt position.

  • Seek rescheduling with bilateral official non-Paris Club creditors on terms comparable with those granted by the Paris Club.

1999

  • Maintain a prudent debt policy and improve external debt management (see Annex 1).

1999–2002

    3. Tariff reform

Further reform of tariffs and liberalization of trade system.

  • Implement a fourth phase of tariff reform to reduce the number of rates to four, limit the maximum combined import tax rate to 20 percent (excluding the statistical tax, which will be unified in the context of the year 2000 budget).

2000

  • Re-examine the municipal import surcharge in light of the conclusions of the municipal taxation study, with a view to abolishing it and to identifying equivalent resources.

2000

  • Remove remaining non-fisheries export taxes.

2000

  • Eliminate the import-export card.

1999

  • Eliminate the "Statistical Visa" for exports while introducing a system to monitor exports and corresponding repatriations of foreign exchange.

2000

B. Pricing Policy

Further price liberalization.

  • Carry out a study to determine optimal price structure and taxation for petroleum products.

1999

WB

  • Update petroleum products price structure monthly.

5/1999

  • Launch adjustment of petroleum product retail prices whenever the cumulative variation in import prices in ouguiyas reaches 5 percent of the most recent retail price adjustment, following the procedures agreed upon with the IMF and keeping budget objectives in mind.

1999

  • Implement study recommendations.

2000

  • Abolish price controls on land transport.

7/2000

  • Evaluate the need for budget subsidies for transport to remote areas in the context of comprehensive transport sector reform (following the 1999 study).

7/2000

C. Monetary and credit policy

 

Further develop the money market and improve monetary policy instruments

1999–2000

IMF

  • Introduce new monetary policy instruments (see Annex 1).

1999–2002

IMF

  • Modify regulations governing reserve requirements (see Annex 1).

1999–2002

IMF

D. Fiscal policy and public sector reforms

   1. Consolidated
   government
   operations

Strengthen revenue, tax, and customs administration.

  • Continue to use the services of a pre-shipment inspection company.

1999–2000

  • Strengthen the Customs Inspection Unit by installing a database linked to the pre-shipment inspection company.

7/2000

Broaden the tax base.

  • Eliminate tax exemptions for public enterprises, excluding those for SNIM’s activities relating directly to iron ore extraction.

2000

WB

  • Prepare to unify the two VAT rates. Conduct study to determine which rate to retain.

2000

  • Define area of application of VAT exemptions, particularly on essential goods.

2000

  • Apply unified VAT rate.

1/2001

  • Eliminate special exemptions from VAT.

2000

  • Strengthen management monitoring of large taxpayers by creating within the Directorate of Taxation a Corporate Division whose mandate includes administration, collection, and surveillance.

2000

  • Inaugurate first phase of reform of direct taxation, as agreed with the World Bank and the IMF. This calls for:
    -  gradual reform of the general income tax;

2000

    -  gradual reform of the minimum presumptive tax and its conversion into an advance on the business profits tax;

2000

    -  broadening of the tax base through introduction of a standard tax rate applicable to all small taxpayers.

1/2001

Strengthen the control and monitoring of expenses.

  • Continue to monitor the use of external assistance counterpart funds, submitting monthly reports to the IMF (in agreement with the Ministry of Finance) and following established procedures.

1999

Improve efficiency of expenditure.

  • Budget counterpart funds for food aid.

1999–2002

Improve efficiency of expenditure.

  • Strengthen cost-recovery systems in the social sectors.

1999–2002

WB

  • Provide adequate funds to cover maintenance expenses associated with existing infrastructure and new investment.

1999–2002

  • Prepare estimates of the budgetary impact of separating the postal and telecommunications functions of OPT.

10/1999

  • Incorporate counterpart funds and externally financed capital expenditures in budget presented to the legislature.

2000–2002

  • Draw up a medium-term expenditure framework for priority sectors, especially education and health.

2000

WB

    2. Public
    investment

Improve the programming, budgeting, and monitoring of public investment.

  • Formulate a core PIP in accordance with adopted inter- and intra-sectoral priorities .

1999–2002

WB

  • Reconcile PIP disbursement data from the Ministry of Economic Affairs and Development (MAED), the central bank and donors.

1999–2002

  • Make the PIP monitoring unit of MAED operational and provide quarterly reports to WB/IMF on PIP execution.

1999–2002

EU

    3. Public
    administration

Improve the efficiency of public services.

  • Limit new recruitment on a net basis to the education and health sectors.

1999–2002

Enhance the effectiveness of the civil service.

  • Increase civil service salaries in accordance with inflation objectives.

2000

  • Put into effect the rules and regulations and remuneration system already formulated as part of civil service reform.

1999–2000

WB

Improve transparency of the procurement process.

  • Revise the public procurement code in order to streamline procedures pertaining to contract award, supervision, and payment (see Annex 2).

6/2000

WB

E. Sectoral Policies

    1. Private
    sector
    development

Create a legal and regulatory environment conducive to private sector development

  • Adopt the regulatory text on the autonomy of the Chamber of Commerce.

1999

  • On the basis of the FIAS report, adopt an action plan to remove administrative barriers constraining private sector development.

6/1999

WB/FIAS

  • Implement the above-mentioned action plan.

1999–2000

  • Transmit the revised commercial code, commercial and civil procedures code, arbitration code, law on the organization of the judiciary, and statute on personnel in the legal system to:

WB

    -  The Council of Ministers

5/1999

    -  Parliament.

6/1999

  • Adopt telecommunications law.

6/1999

  • Adopt postal services law.

12/1999

  • Put into effect implementing instruments relating to Decree 98/48 and Order R075 on liberalization of the transport sector.

6/2000

EU

  • Approve petroleum sector’s legal and regulatory framework, including third party access to storage and transport facilities for petroleum products, in light of study recommendations.

1999

  • Reduce by half the number of cases pending before courts of first instance within two years.

2000

    2. Public
    enterprise
    reforms

Increase efficiency of public enterprises.

  • Liquidate SAMIN.

12/1999

  • Increase private sector participation in SONIMEX.

12/1999

  • Open up to the private sector the capital and management of:
    -  MPN and SAN

12/1999

    -  PAMPA, PAN, Baie du Repos, and Société des Bacs de Rosso .

12/2000

  • Restructure the Food Security Committee (CSA) per agreement signed with the European Union.

1999–2000

EU

  • Provide World Bank annually with certified profit and loss statements and balance sheets of key public enterprises.

1999–2002

    3. Privatization

Reduce the role of the public sector in the economy and promote private sector-led growth

  • Privatize four public enterprises (ALMAP, SPPAM, MASHREF, NASR).

12/1999

  • Privatize the telecommunications service of OPT (see Annex 3).

12/2000

WB

2/2000

WB

10/2001

WB

    4. Financial
    sector

Consolidate the restructuring of the banking sector and strengthen regulation of the financial sector

  • Extend effective central bank supervision to non-bank financial institutions and the Housing Bank, and to Mauritanie-Leasing.

2000

IMF

  • Introduce regulations on internal monitoring of banks.

2000

IMF

  • Introduce regulations on supervision of savings cooperatives.

2000

IMF

  • Prepare a new restructuring plan for BAMIS guaranteeing repayment of the central bank’s advance by the end of the program .

6/1999

  • Begin altering the Housing Bank’s rules and commercial practices to make it commercially viable.

12/1999

  • Withdrawal of the central bank as a shareholder from the Housing Bank.

6/1999

  • Ensure that the central bank responds to applications for authorization of new bank licenses within six months.

6/1999

  • Publish the central bank’s annual reports:
    -  for 1997:

5/1999

    -  for 1998:

12/1999

  • Review the administrative organization of the central bank.

12/1999

  • Transmit the central bank’s 1997 and 1998 financial statements to the IMF.

6/1999

    5. Mining
    sector

Promote the development of the sector and its contribution to growth.

  • Adopt new Mining Code.

6/1999

WB

  • Prepare regulations to implement the new Mining Code.

9/1999

WB

  • Prepare satisfactory procedures for environmental assessments of mining activities.

9/1999

  • Make mining cadastre fully operational.

6/2000

    6. Rural sector
    and
    environment

Promote diversified production.

  • Implement first phase of a long-term Integrated Development Program for Irrigated Agriculture as agreed with the WB (see Annex 4).

6/1999

WB/donors

1999–2002

  • Adopt by UNCACEM of an interest rate policy which guarantees its current operations viability and financial self-sufficiency by 2000 and 2001, respectively.

5/1999

Protect the environment.

  • Complete the preparation of and implement a National Environmental Plan.

12/2000

    7. Fisheries
    sector

Establish conditions conducive to the efficient use of national fisheries resources and fully develop the potential of this sector.

  • Prepare an Artisanal Fisheries Development Strategy.


  • Publish information by the National Center for Oceanographic and Fisheries Research (CNROP) on permissible annual catch and ensure compliance with CNROP-imposed fishing-ground limits and restrictions on fishing equipment and motors.

1999



1999–2002

France

  • Implement CNROP’s action plan as agreed with donors.

1999–2002

  • Carry out a study to evaluate the fishing rights and licensing system.

1999–2002

WB

  • Implement recommendations of this study in agreement with the WB.

2000

WB

  • Issue fishing licenses to national and foreign vessels on the basis of CNROP’s recommendations on management of fisheries resources.

1999–2002

  • Continue strengthening surveillance.

1999–2002

Germany

  • Continue to keep Zone A of Banc d’Arguin completely closed; continue to apply Decree No. 89/100 to Zones B and C; continue to apply sanctions as provided for in the regulations.

1999–2002

   8.
   Infrastructure
   and
   decentralization

Build and maintain main roads, improve accessibility of rural areas.

  • Allocate adequate funds to ENER for road maintenance.

1999–2002

  • Award contracts for road maintenance work to small- and medium-size enterprises on a competitive basis.

1999–2002

 

Strengthen coordination between regional governments and municipalities to provide basic services and manage local infrastructure.

  • Set up urban land records offices in Nouakchott and Nouadhibou.

2002

  • Complete study on municipal tax reform.

1999

  • Implement municipal tax reform.

2000

  • Decentralize management of social and education infrastructure to the local level.

1999–2002

F. Social Sectors

    1. Education

Increase access to primary and lower secondary education.

1999–2002

WB/France

Improve the quality of instruction.

  • Analyze problems affecting secondary education and develop a restructuring plan.

12/1999

  • Conduct an audit of the Ministry of Education and develop an improvement plan.

2/2000

  • Develop a 10-year sector quantitative and qualitative expansion program consistent with the education reform plan adopted by the government.

6/1999

  • Convene donors’ panel meeting and finalize financing plans for the initial phase of the 10-year program.
  • Launch programs under the initial phase, particularly those focusing on:
  • improving management at the central, decentralized, and institutional levels;
  • improving quality of instruction in languages, science, and mathematics, particularly at the primary and secondary levels;
  • diversifying technical and vocational education in consultation with economic operators.

10/1999

  • Ensure respect for the legal and regulatory structure and strengthen the administrative and educational structures.

1999–2002

    2. Health

Expand access to primary health care services (particularly in isolated areas) by targeting women and children and improving quality and effectiveness of services provided (see Annex 5).

1999–2002

  • Base sector development on primary health care services and autonomous regional hospitals.

1999-2002

AfDB/WB/ EU/GTZ/ UN/SPA/ France

  • Implement institutional strengthening plan to build capacity of MSAS and DRASS for planning, budgeting, and monitoring.

1999–2002

Strengthen the participation of the population in sector financing.

  • Improve sector financing, consolidate cost recovery, issue regulation to facilitate the development of private services, ensuring their quality and equitable pricing.

1999–2002

Encourage private sector participation.

  • Strengthen drug procurement and distribution, including establishment of a central drug purchasing unit set up as a financially autonomous public facility.

1999–2001

WB/EU

  • Finalize maintenance strategy and increase private sector involvement, particularly in maintenance of biomedical equipment

1999–2001

.

  • Implement cost-effective programs in the areas of family planning, nutrition, immunizations, and maternal and child health.

1999–2002

WB

Limit population growth rate.

1999–2002

  • Implement population policy and plan of action developed for this purpose.

1999–2002

    3. Poverty
    reduction

Further reduce the number of people living below the poverty line.

  • Increase public funding for poverty reduction.

1999–2002

 

Monitor household poverty levels and living conditions.

  • Conduct quantitative and qualitative surveys.

11/2000

  • Publish findings of survey of household living conditions.

6/2001

  • Establish database and geographical information system; prepare poverty map.

12/1999

  • Promote establishment of cooperative savings societies and community-based credit unions.

1999–2002

  • Draw up a multi-year plan for analyzing household poverty levels and living conditions.

6/1999

  • Coordinate actions by the government department responsible for poverty reduction with those of the Micro-Projects Execution Agency.

1999–2000

    4. Participation
    of women in
    the     development
    process

Enhance and promote the contribution of women to the economic and social development of the country.

  • Promote development of supply and marketing networks for women’s cooperatives, particularly in agriculture and artisanal fisheries.

1999–2002

    5. Statistical
    issues

Improve the quality of the macroeconomic and sectoral database.

  • Improve the methodology for estimating balance of payments, national accounts, the consumer price index, and agricultural statistics.

1999–2002

IMF/WB/ EU/UNDP

  • Report monetary and fiscal data directly to the Statistical Department of the IMF.

1999–2002

  • Provide breakdown of government expenditures by economic and functional category.

2000–2002

  • Utilize the IMF’s General Data Dissemination System as a framework for statistical development.

2001

 

ANNEX I

Mauritania: Foreing Exchange Market and Monetary Instruments, 1999—2002


Policy Area
Objectives
Measures
Implement
Period
TA
Request


 

A. External sector

    1. Exchange
    system and
    market

Further liberalize the exchange system to promote external competitiveness and ensure a viable balance of payments position in the medium term.

  • Increase the percentages of proceeds from non-mineral exports remaining at the disposal of exporters to:

    -  60 percent in 6/1999

    -  70 percent in 12/1999

    -  80 percent in 6/2000

    -  100 percent in 12/2000.

1999–2000

 

 

 

  • Increase the periods during which exporters may retain the proceeds from nonmineral exports to:

    -  6 months in 6/1999

    -  9 months in 12/1999

    -  1 year in 6/2000

    -  unlimited in 12/2000.

1999–2000

  • Reduce the surrender requirement (to the central bank) on SNIM’s repatriated export proceeds as follows:
    -   from 80 percent to 50 percent
6/1999
    -   from 50 percent to 40 percent
12/1999
    -   from 40 percent to 30 percent
6/1999
    -   from 30 percent to 20 percent
12/1999
    -   to 0 percent
6/1999
  • Adjust the limits on commercial banks’ net open forward positions on foreign exchange in three stages:
    -   To a maximum of 5 percent (6/1999), 7.5 percent (12/1999), and 10 percent (6/2000) of net capital per currency;

    -   To a maximum of 13 percent (6/1999), 16 percent (12/1999), and 20 percent (6/2000) of net capital for all currencies.

    -   Apply these limits to both short and long positions.

1999–2000

  • Allow residents to open foreign currency deposit accounts with commercial banks and enforce a corresponding prudential regulatory framework.

6/2000

  • Review agreement on the interbank exchange market taking into account recommendations of the March 1999 MAE technical assistance mission concerning:
    -  operations
    -  quotations
    -  obligations to complete transactions organizational issues.

6/1999

IMF

  • Utilize the provisions of the revised convention to initiate central bank purchases of foreign exchange in the interbank market.

6/1999

  • Eliminate restrictions on foreign exchange sales for travel abroad.

6/1999

  • Reduce the spread between the central bank’s buying and selling rates to +/- 0.75 percent.

5/1999

  • Review legislation and procedures governing capital transactions of non-residents, including repatriation of dividends and payment of interest.

6/1999

  • Improve the payment system by linking the central bank to SWIFT.

2000

  • Establish appropriate organizational arrangements for exchange transactions within the central bank.

12/1999

IMF

    2. External
    debt

Restore normal financial relations with foreign creditors. Attain a viable external debt position.

  • Acquire and use new debt management software at the central bank.

1999–2002

WB/IMF/ FR

  • Prepare quarterly reports on the work of the debt monitoring committee.

1999–2002

  • Strengthen staff training to improve debt recording and analysis.

1999–2002

 

B. Monetary and credit policy

    1. Monetary
    instruments

Further develop the money market and improve monetary policy instruments.

  • Improve bidding for treasury securities by:
    -   introducing treasury securities with a maturity date of up to three months

    -   introducing a maximum amount (UM 200 million) per bid

    -   not routinely selling the total amount requested by bidders.

6/1999

IMF

  • Eliminate the discount window for treasury securities.

12/1999

IMF

  • Establish facility for repo transactions (purchase and repurchase of treasury securities), with rates periodically set by the central bank.

12/1999

IMF

  • Shorten interval between the period for calculating the level of required reserves and the holding period.

6/1999

  • Review penalties for insufficient compulsory reserves.

6/1999

  • Introduce reserve requirements (in foreign currency) for foreign exchange deposits.

6/1999

 

ANNEX II

Mauritania: Public Administration, 1999—2002


Policy Area
Objectives
Measures
Implement
Period
TA
Request


 

A. Public administration

Increase the transparency of the procurement process.

  • Apply government procurement procedures to concession contracts.

6/2000

  • Strengthen the Central Procurement Commission’s capacity to improve supervision and ensure a posteriori quality control over bidding activities conducted by departmental procurement commissions.

6/2000

WB

  • Adopt standard bidding documents following national procedures.

6/2000

WB

  • Launch a major training program on procurement procedures.

6/2000

  • Establish a mechanism for calculating the amount of moratory interest paid during the procurement process.

12/2000

  • Ensure that the legal reform process includes provision for instruments allowing legal proceedings on behalf of the State against bidders, officials, and procurement monitoring personnel who violate the rules.

6/2000

 

ANNEX III

Mauritania: Privatization, 1999—2002


Policy Area
Objectives
Measures
Implement
Period
TA
Request


 

A. Telecommunications

   

Privatization of OPT.

  • Finalize the new regulatory framework, including standard specifications.

12/1999

WB

  • Separate OPT’s postal services from its telecommunications services.

12/1999

  • Invite bids for the first cellular license to be awarded to a private operator.

12/1999

  • Award licenses to new cellular phone operators.

3/2000

  • Sign sales contract completing the strategic sale of the telecommunications component to a new OPT operator.

12/2000

 

B. Air Mauritanie

Privatization of Air Mauritanie.

  • Finalize equipment leasing agreement.

4/1999

WB

  • Prepare terms of reference and establish a short list.

3/1999

  • Invite bids to select consultants and evaluate technical and financial proposals.

5/1999

  • Negotiate contract and hire consultants.

6/1999

  • Analysis/audit/evaluation of the company, market, and regulatory framework; identify other constraints (infrastructure, etc.).

7/1999

  • Invite bids and evaluate proposals.

8/1999

  • Designate provisional successful bidder.

12/1999

  • Negotiate with buyer.

1/2000

  • Complete sale to buyer.

2/2000

C. Energy sector

   

Privatization of SONELEC.

  • Publish letter of invitation for consultants.

4/1999

WB

  • Launch studies and report on separation of water and electricity services.

8/1999

  • Develop legal and regulatory structure.

11/1999

  • Reorganize SONELEC on the basis of separation studies.

12/1999

  • Define privatization strategy and complete engineering design for SONELEC .

2/2000

  • Invite pre-qualification bids.

3/2000

  • Evaluate pre-qualification bidding documents.

5/2000

  • Invite bids for privatization.

6/2000

  • Submission of financial proposals.

7/2000

  • Provisional award.

7/2000

  • Select concessionaire/strategic partner.

7/2000

  • Sell shares to other private parties.

7/2000

  • Sell 49 percent of SONELEC capital to private interests; launch new company.

8/2000

  • Sell at least 51 percent of SONELEC capital to private interests.

10/2001

 

ANNEX IV

Mauritania: Rural Sector, 1999—2002


Policy Area
Objectives
Measures
Implement
Period
TA
Request


A. Rural sector

Promote production.

  • Enact order or issue circular on land use development and planning (amendment to MDRE circular 008).

6/1999

  • Continue to apply provisions of land use act concerning development and planning as a prerequisite for authorizing the use of land and granting temporary and, subsequently, permanent title.

1999–2002

  • Devise strategy for managing water resources for irrigation and implement cost recovery measures.

12/2000

  • Enact regulations for irrigation water-user associations.

12/2000

 

Liberalize and modernize the rice sector.

  • Officially inform all the stakeholders in the rice sector of the following measures:

-   Elimination of quota system linking rice imports to purchases of local paddies.

6/1999

-   Elimination of marketing subsidies on local rice.

6/1999

-   Elimination of state intervention in establishing prices paid to producers.

9/1999

  • Establish an information system on rice and paddy prices and markets.

12/1999

  • Apply the same VAT rate to both local and imported rice.

1/2002

 

ANNEX V

Mauritania: Social Development Indicators, 1999—2002


Objectives
Verifiable Indicators
Means of Verification
Target


A. Education

    1. Outputs

      1.1 Expand access to

  • Primary education

Gross enrollment rate.

Statistics - Ministry of Education (MOE).

Increase the rate from 86 percent in 1996/97 to 99 percent by 2001/2002.

  • Primary education for girls

Share of girls in total primary enrollment.

Statistics - MOE.

Increase the share from 47 percent in 1996/97 to 49 percent by 2001/2002.

  • Lower secondary education

Gross enrollment rate.

Statistics - MOE.

Increase the rate from 18 percent in 1996/97 to 29 percent by 2001/2002.

  • Lower secondary education for girls

Share of girls in total lower secondary enrollment.

Statistics - MOE.

Increase the share from 34 percent in 1996/97 to 46 percent by 2001/2002.

      1.2 Maintain access to:

  • Upper secondary education

Intake.

Statistics - MOE.

Maintain annual access at about 7,000.

  • Upper secondary education for girls

Share of girls in total upper secondary enrollment.

Statistics - MOE.

Increase the rate from 37 percent in 1996/97 to 42 percent by 2001/2002.

  • Higher education

Enrollment.

Statistics - University.

Maintain annual enrollment at about 10,200 students.

      1.3 Increase level of
      permanent literacy

Survival rate at the entrance of the fifth grade in primary education.

Statistics - MOE.

Increase from 64 percent in 1996/97 to 67 percent by 2001/2002.

   2. Inputs

      2.1 Rationalize budget
      allocation and use

Current expenditures for education as percentage of total budgetary recurrent expenditures.

Budget allocation and execution.

Maintain MOE expenditures at about 26 percent of total budgetary expenditures.

Primary education expenditures as a percentage of total current expenditures for education.

Budget allocation and execution.

Within MOE budget, increase allocation for primary education from 39 percent in 1996/97 to 40 percent by 2001/2002.

Share of expenditure for maintenance in total current expenditure for education.

Budget allocation and execution.

Increase the share to 1 percent for the period 1999–2002.

Number of additional classrooms per year.

Statistics - MOE.

For primary education :
780 in 1999/2000
660 in 2000/2001
590 in 2001/2002

For lower secondary education (college)
15 in 1999/2000
8 in 2000/2001
8 in 2001/2002

Number of net additional teachers/professors.

Statistics - MOE.

For primary education :
780 in 1999/2000
690 in 2000/2001
590 in 2001/2002

For lower secondary education
190 in 1999/2000
72 in 2000/2001
72 in 2001/2002

For upper secondary education
10 in 1999/2000
7 in 2000/2001

      2.2 Improve internal
      efficiency of education

Student/teacher ratios.

Periodic monitoring by MOE.

Primary school :
Maintain student/pedagogical division ratio at 40:1.

Secondary school:
Increase the student/teacher ratio from 15:1 in 1997 to 20:1 in 2001.

B. Health

    1. Outcomes

      1.1. Increase the health
      standards of the population

Infant mortality rate.

Under 5 mortality rate.

Malnutrition rate.

Total fertility rate.

Demographic and health surveys (Ministry of Health).

Reduce: (i) infant mortality rate from 118/000 in 1998 to 95/000 by 2000 and to 80/000 by 2002; (ii) under 5 malnutrition rate from 30 percent in 1998 to 25 percent in 2000 and to 15 percent in 2002; and (iii) fertility rate from 6.5 (children per woman) in 1998 to 6 by 2000 and to 5.5 by 2002

    2. Outputs

      2.1 Increase access to
      quality health care

Vaccination coverage (percentage of children immunized).

Statistics - Ministry of Health (MOH).

Increase
from 65 percent in 1998
to 70 percent in 1999
to 75 percent in 2000
to 80 percent in 2001
to 85 percent in 2002

Post-natal care (percentage of mothers receiving postnatal care).

Statistics - MOH

Increase
from 22 percent in 1998
to 30 percent in 1999
to 40 percent in 2000
to 50 percent in 2001
to 60 percent in 2002

Health facilities fully operational (number).

Statistics - MOH

Increase
from 208 in 1998
to 280 in 1999
to 350 in 2000
to 400 in 2001
to 450 in 2002

Hospital utilization rates (percent).

Statistics - MOH.

Increase
from 60 percent in 1998
to 65 percent in 1999
to 70 percent in 2000
to 75 percent in 2001
to 80 percent in 2002

      2.2 Reduce the rate of
      population growth

Contraceptive prevalence rate (percentage of women in reproductive age using modern contraceptives methods).

Statistics - MOH.

Increase
from 2.5 percent in 1998
to 3.0 percent in 1999
to 5.0 percent in 2000
to 6.0 percent in 2001
to 7.5 percent in 2002

    3. Inputs

      3.1 Improve health
      outcomes by increasing
      level and improving
      allocation of resources
      to basic health care.
      

Recurrent health budget allocation/Total recurrent budgetary allocation.

Statistics - MOH.

Increase
from 6.5 percent in 1998
to 7.0 percent in 1999
to 7.5 percent in 2000
to 8.0 percent in 2001
to 8.5 percent in 2002

Salaries for health personnel/Total recurrent health expenditures (percent).

Statistics - MOH.

Maintain at <60 percent for the period in 1999–2002.

Expenditure for primary and secondary health care/Total recurrent health expenditures.

Statistics - MOH

Maintain at >45 percent for the period in 1999–2002.

 

1/ Certain measures, which form an integral part of the program, are outlined in the annexes attached to this matrix.

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