Press Release: IMF Approves Second Annual Loan for Mauritania under ESAF
April 17, 1996
The International Monetary Fund (IMF) today approved the second annual loan for Mauritania under the enhanced structural adjustment facility (ESAF)1 equivalent to SDR 14.25 million (about $21million), in support of the Government's 1996 macroeconomic and structural adjustment program. The loan will be disbursed in two equal semi-annual installments, the first of which is available on April 24. The three-year ESAF credit, for the equivalent of SDR 42.75 million (about $62 million) was approved on January 25, 1995.
Mauritania's economic reform efforts during the past three years have produced positive results. Over 1993-95, the average annual GDP growth has been sustained at an estimated rate of nearly 5 percent, and the rate of inflation has been reduced to 6.5 percent in 1995 from 9.3 percent in 1993. The budget deficit has almost been eliminated and the balance of payments has strengthened considerably. Structural reforms have been implemented in a number of areas, including the establishment of a unified and market determined exchange rate, the introduction of a VAT despite technical difficulties in its implementation, and significant progress in the financial sector and other areas.
The 1996 Program
The Government's program for 1996 is consistent with the medium-term strategy of further reducing the external current account deficit while creating an environment supportive of private investment as a basis for accelerated economic growth and low inflation. The main macroeconomic objectives for 1996 are to maintain average annual economic growth at 4.7 percent, stabilize the inflation rate at about 3.5 percent, further reduce the external current account deficit (excluding official transfers) to 6.4 percent of GDP, and increase official exchange reserves to the equivalent of 3.1 months of imports. To these ends, the program emphasizes the steadfast pursuit of tight fiscal and monetary policies, the creation of a transparent and market-based exchange regime, and the implementation of structural reforms in a number of sectors, notably fisheries.
The promotion of private sector development is a key objective of the 1996 program. Building upon the liberalization of the exchange and trade system to encourage export-oriented investment, the authorities envisage a revision of the commercial code, arbitration and bankruptcy laws, and of civil and commercial judicial procedures. They plan to rationalize the investment code, and to simplify procedures for the establishment of new enterprises. In addition, tax administration, in particular of the VAT, and public expenditure control will be strengthened. Import tariff reform aimed at lowering protection and broadening the tax base will be initiated.
Addressing Social Issues
The Government's primary social objectives for 1996-98 are to further increase the literacy and school enrollment rates, to improve primary health care services, to strengthen the participation of women in the development process, and to reduce the demographic pressure on the economy. In addition, the Government has introduced a program for grassroot development and poverty alleviation - including protection of vulnerable groups - and employment generation, particularly in the informal urban sector, rural areas, and the artisanal fisheries. A plan of action based on a program of labor-intensive public works, credit arrangements, and microenterprise promotion is underway.
The Challenge Ahead
To succeed, Mauritania's reform efforts will need to be backed by further donor support in the form of new lending at concessional interest rates, a debt stock reduction with the Paris Club, and support from non-Paris Club bilateral creditors. To obtain such external financial support on the scale needed, it is essential for the authorities to continue their strong commitment in carrying out their reform program.
Mauritania joined the IMF on September 10, 1963. Its quota2 is SDR 47.5 million (about $69 million), and its outstanding use of IMF credit currently totals SDR 65.6 million (about $95 million).
Sources: Mauritanian authorities; and IMF staff estimates and projections.
1. The ESAF is a concessional IMF facility for assisting eligible low-income developing members that are undertaking economic reforms to strengthen their balance of payments and foster growth. ESAF loans carry an interest rate of 0.5 percent and are repayable over 10 years, with 5 1/2-year grace period.
2. A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of SDRs.