News Brief: IMF Completes Fourth Review Under Mauritania's PRGF Arrangement and Approves US$8 Million Disbursement
November 21, 2001
The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of Mauritania's performance under the Poverty Reduction and Growth Facility (PRGF)1. As a result, Mauritania will be able to draw up to SDR 6.07 million (about US$8 million).
Mauritania's three-year program was originally supported under the Enhanced Structural Adjustment Facility (ESAF) approved on July 21, 1999 (see Press Release 99/32), for SDR 42.49 million (about US$54 million). So far, Mauritania has drawn SDR 24.28 million (about US$31 million) under the arrangement.
After the Executive Board's discussion on Mauritania, Eduardo Aninat, Deputy Managing Director and Acting Chairman, stated:
"The Mauritanian authorities are to be commended for their impressive track record of implementation of their PRGF-supported economic program. The authorities have observed all performance criteria and structural benchmarks for the fourth review under the PRGF arrangement, and are making a strong effort to satisfy the conditions for the floating completion point under the enhanced HIPC Initiative as quickly as possible. Substantial progress has been made in important structural reforms—notably the improved functioning of the foreign exchange market, the preparation of medium term expenditure frameworks for priority sectors, and an ambitious banking sector reform program. As a result, macroeconomic stability with low inflation has been attained, economic growth is relatively robust, and international reserves remain at a comfortable level.
"The implementation of the poverty reduction strategy will require an improvement in project implementation capacity and in public expenditure efficiency. The authorities are committed to dealing with these issues immediately, and are receiving technical assistance from the IMF and the World Bank for this purpose. The authorities are also preparing a progress report on implementation of the poverty reduction strategy, and should take the opportunity to critically evaluate the experience to date.
"Mauritania's economy remains vulnerable given its narrow production and export base and the possible downside risks for growth from the current downturn in the world economy. Enhancing the resiliency of the economy to exogenous shocks hinges on implementation of structural reforms to diversify the production base and encourage private sector development.
"The government's macroeconomic and structural policies for the remainder of 2001 and for 2002 remain appropriate. The authorities are encouraged to maintain their policy of lowering interest rates, improving the conduct of monetary policy, strengthening banking supervision, and further liberalizing the foreign exchange market.
"The 2002 budget orientation is aimed at increasing social spending and some other current outlays, in order to establish an appropriate balance between capital and current spending and to safeguard the efficiency of capital projects and the provision of basic public services. To facilitate this, the authorities are making every effort to maintain a solid tax base, in order to boost revenue. Important tax measures are also being adopted in the context of the 2002 budget to reduce the corporate tax burden and simplify the tax structure.
"The authorities intend to take remedial measures to halt the financial deterioration of the Caisse Nationale de Securité Sociale (CNSS) and complete the privatization of Socíeté Mauritanienne d'Electricité (SOMELEC)," Mr. Aninat said.
1 On November 22, 1999, the IMF's facility for low income countries, the enhanced Structural Adjustment Facility (ESAF), was renamed Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies articulated in a Poverty Reduction Strategy Paper (PRSP). 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. Mauritania completed its Poverty Reduction Strategy Paper at end-2000. This resulted from a broad participatory process, which led to the elaboration of a comprehensive long-term strategy with a prioritized action plan for the period 2001-04. This strategy, which will guide the policy setting in the context of the arrangement, is based on four main pillars: accelerating growth, reorienting growth to benefit directly to poor, promoting human resources, and promoting institutional development based on good governance. PRGF loans carry an annual interest of 0.5 percent, and are repayable over 10 years with a 5 ½ year period on principal payments.