Statement by the IMF Mission on the First Review Under the Islamic Republic of Mauritania's PRGF-Supported Program

Press Release No. 07/33
February 27, 2007

The following statement was issued February 20, 2007 in the Islamic Republic of Mauritania:

"A mission of the International Monetary Fund led by Mr. Jean Le Dem visited Mauritania during February 6 through February 20, 2007 to conduct the first review under the PRGF supported program. The program targets a reduction in poverty levels and an acceleration of growth through the adoption of sound macro-economic policies and the implementation of structural reforms, including in the financial sector and the public finance areas. The PRGF support amounts to US$24.2 million of which an initial amount of US$6.6 million was disbursed with Board approval of the program on December 18, 2006.

"The program is on track, and all end-2006 performance criteria were met. Macro-economic performance through end-2006 was broadly in line with program expectations. The central government budget deficit and money supply growth were held within target. Inflation decreased faster than targeted. Official reserves exceeded end-2006 program expectations despite the recent elimination of foreign exchange rationing and of surrender requirements in the fishery sector. However, the treasury float was higher, and poverty reducing spending was somewhat lower than envisaged

"Reflecting difficult conditions in a number of sectors (oil, but also agriculture, fishery and construction), growth in 2006 was less buoyant than projected, and the supplementary budget law adopted in July has not yet shown significant impact on activity. Non-oil growth is now estimated at 4.3 percent over 2006 against an original target of 6 percent.

"The transition government has achieved important progress in structural reform. Key steps included the passing of an ordinance that will increase central bank autonomy in the conduct of monetary policy, and the successful launching of the foreign exchange market in January 2007. In addition, a banking ordinance approved by the council of ministers in December 2006 is expected to take effect soon. This ordinance will limit loans to related parties and ensure separation between bank managers and owners.

"Some delays were experienced in the structural reform agenda, notably with respect to the introduction of a new money market instrument, the adoption of a computerized execution of the budget, and of balanced budgets in 2007 for the water and electricity companies. The authorities intend to take the necessary measures on these issues in the coming weeks.

"The IMF stands ready to work with the post-transition government to discuss the next steps in implementing the program."



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