News Brief: IMF Completes First Review of Mauritania Under PRGF-Supported Program, Approves US$16.2 Million Disbursement
June 19, 2000
The International Monetary Fund's (IMF) Executive Board completed today its first review of Mauritania's economic performance under a program supported by a three-year, SDR 42.49 million (about US$56.6 million) Poverty Reduction and Growth Facility (PRGF)1 arrangement (See Press Release No. 99/32). As a result of the review, the Board approved the release of a further SDR 6.07 million (about US$8.1 million) disbursement, which brings total disbursements to Mauritania under the current program to SDR 12.14 million (about US$16.2 million).
At the conclusion of the Executive Board's discussion of the Mauritania structural and economic reform program, Eduardo Aninat, Deputy Managing Director and acting Board Chairman, summarized the discussion:
"The Mauritanian authorities are to be commended for the encouraging economic performance under the first six months of the program supported by the PRGF arrangement, which consolidates the progress made in the past few years in strengthening macroeconomic stability and moving forward a wide-ranging structural reform agenda.
"The authorities' policy mix for the remainder of 2000 will be based on an easing of the fiscal stance, allowing for increased social and poverty reduction expenditures; the continuation of a managed float of the exchange rate more responsive to market forces and consistent with the reserve accumulation objective; and a prudent monetary policy, which could permit a reduction in nominal interest rates in light of declining inflation. Structural reforms will focus on advancing the utilities' privatization program; implementing the first steps towards the liberalization of the oil products sector, including the establishment of a mechanism for the automatic adjustment of oil product prices in line with evolution of international prices; undertaking tax reforms and strengthening tax administration; and enhancing the supervisory capacity of the central bank and the transparency of its accounts.
"With almost half of the population living below the poverty line, the main challenge facing the authorities is to ensure a transition to a higher, pro-poor growth path. To meet this objective, Mauritania needs to expand and diversify the productive base of the economy and the government needs to concentrate public resources in the provision and maintenance of basic infrastructure, in improving the country's human capital, and in executing well-targeted poverty reduction programs. The 2000 budget and the May supplementary budget represent a step in this direction. However, there is need to put in place effective monitoring mechanisms to strengthen expenditure management and control so as to ensure that public expenditures are effectively directed to improve growth and reduce poverty. The authorities are also committed to continue efforts to reform taxation and tax administration, although pressure for granting tax exemptions must be resisted.
"The preparation of a full-fledged Poverty Reduction Strategy is well under way in the context of a broad-based participatory process. The authorities plan to finalize a comprehensive Poverty Reduction Strategy Paper by the end of the year. This will constitute the reference framework for the design and the implementation of economic policy in the years to come," Mr. Aninat said.
1On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility, was renamed the Poverty Reduction and Growth Facility, and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper. This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5%, and are repayable over 10 years with a 5 ½-year grace period on principal payments.