Press Release No. 07/272

Press Release: IMF Executive Board Completes Second Review Under the Poverty Reduction and Growth Facility with the Islamic Republic of Mauritania and Approves US$3.1 Million Disbursement

November 21, 2007

The Executive Board of the International Monetary Fund (IMF) today completed the second review of the Islamic Republic of Mauritania's economic performance under a three-year Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the review enables the release of an amount equivalent to SDR 1.93 million (about US$3.1 million), bringing total disbursements under the arrangement to SDR 8.38 million (about US$13.3 million).

In completing the review, the Board approved a waiver for the nonobservance of a performance criterion against the contracting or guaranteeing of medium- and long-term nonconcessional external debt.

The three-year PRGF arrangement for Mauritania (see Press Release No. 06/288) was approved on December 18, 2006 in an amount equivalent to SDR 16.1 million (about US$25.6 million).

The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies that are adopted in a participatory process involving civil society and development partners and articulated in the country's Poverty Reduction Strategy Paper. This is intended to ensure that PRGF-supported programs are 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 percent and are repayable over 10 years with a 5½-year grace period on principal payments.

Following the Executive Board discussion on Mauritania, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:

"Mauritania's economic performance under its PRGF-supported program remained satisfactory despite a steeper-than-expected decline in oil production. Sound macroeconomic policies helped contain inflation, improve government finances, and enhance the external position. Significant progress was achieved in the governance and structural reform areas, including the submission to parliament of an oil revenue management law in line with best practices.

"The authorities intend to intensify efforts to stimulate private sector-led growth and reduce poverty. To that effect, they will tackle the most significant impediments to growth, including the poor quality of public services and infrastructure, limited access to bank financing, weak governance and tax structure.

"The authorities are committed to maintaining a stable macroeconomic environment. In light of the downward revision of the oil revenue outlook, this will imply the maintenance of a cautious fiscal stance, based on the mobilization of additional tax revenue, the implementation of civil service reform, and further strengthening of budget preparation, execution, and control. A better prioritization of spending will also increase its contribution towards poverty reduction. Monetary policy will continue to be geared towards reducing inflation in the context of a flexible exchange rate.

"The program envisages ambitious public sector reforms and good governance measures. In particular, the restructuring of the state-owned enterprises will contribute to improving their services, ensuring their financial viability and avoiding further drain on the budget. Financial sector reforms will aim at improving the commercial banks' financial situation, developing the foreign exchange and money markets, facilitating access to banking services and increasing competition in the sector.

"To ensure external sustainability, the authorities will need to rely on concessional external financing and seek agreements with the creditors that have not yet provided debt relief under the enhanced HIPC initiative," Mr. Portugal said.