Statement by IMF Mission in MauritaniaPress Release No. 13/151
May 2, 2013
An IMF staff mission, headed by Mercedes Vera Martin, visited Nouakchott from April 23 to May 2, 2013, to engage in discussions on the sixth and final review under the Extended Credit Facility (ECF) arrangement.1 The mission met with President Mohamed Ould Abdel Aziz, the Governor of the Central Bank Sid’ Ahmed Ould Raiss, Minister of Finance Thiam Diombar, Minister of Economic Affairs and Development Sidi Ould Tah, as well as several economic and financial policymakers. The mission also held productive discussions with representatives of the diplomatic community, the banking and private sectors, trade unions, donors and lenders, and civil society.
At the end of its mission, Miss Vera Martin, mission chief for Mauritania, issued the following statement:
“Mauritania’s economic performance in 2012 was strong, characterized by the consolidation of macroeconomic stability and an upsurge in economic activity, despite an international economic climate that remains challenging. Stronger activity in the services sector, a rebound in agricultural production, and an uptick in construction and public works have resulted in a real GDP growth rate of 6.9 percent (8 percent excluding extractive industries), despite the difficulties that Europe has experienced and the drought early in the year. Inflation decreased to 3.4 percent at end-December 2012, significantly below projections, as lower food prices more than offset the regular increases in fuel prices. Notwithstanding this favorable performance, growth is not yet sufficiently sustained or inclusive enough to achieve decreases in the elevated rates of poverty and unemployment.
“The overall fiscal balance, including grants, amounted to 2.8 percent of GDP in 2012, the first surplus of its kind in Mauritania’s recent history, notwithstanding major emergency social programs and a sizable increase in domestically funded investment. This performance is primarily attributable to intensified revenue collection efforts, substantial improvements in mining revenues, the contribution made by non-recurring revenues, and the curbing of nonessential expenditure. Furthermore, the current account deficit worsened (attaining 32 percent of GDP), on account of a decline in iron ore exports, and the increase in imports brought about by the emergency food programs and capital projects in extractive industries. This deterioration was readily met by foreign direct investment, grants, and exceptional revenues, as well as a substantial repatriation of mining revenues, which pushed the official reserve position to record levels of US$962 million at end-2012, i.e., the equivalent of 6.7 months of imports.
“The mission noted positively the implementation of appropriate economic policies which have enabled the authorities to meet the quantitative performance criteria set for end-December 2012 with comfortable margins. The mission congratulated the authorities on successfully implementing a policy for phasing out generalized, poorly targeted subsidies, creating additional fiscal space for poverty-reducing spending.
“Furthermore, in order to preserve fiscal achievements, the mission called the authorities’ attention to the need to ensure the sustainability of public debt, which remains high. Accordingly, the mission continues to recommend that the authorities meet their financing needs through concessional and domestic resources.
“The mission encouraged the authorities to apply systematically the fuel pricing formula—whether upward or downward—and to replace emergency programs with a permanent and better targeted social protection system. Such a system could eventually be based on experiences with cash transfers that benefited poor and vulnerable populations in the city of Nouakchott during 2012.
“The mission noted the significant progress made during the program in implementing reforms designed to modernize the tax administration, reorganize public expenditure management, prepare a new investment code, and develop a new social protection strategy. The implementation of these reforms, as well as the rigorous and systematic application of new government procurement procedures, is necessary in order to achieve stronger and more inclusive growth conducive to considerably lowering unemployment and poverty rates.
“Furthermore, the mission welcomed the authorities’ determination to ensure transparency in developing and utilizing the financial resources generated by the mining sector. The establishment of a facility designed to improve the management of extractive industry revenues will enhance the resilience of the Mauritanian economy to external shocks, support economic growth, and ensure fairness.
“The mission also underscored the need to achieve further improvements in the business climate in order to create more favorable conditions for private sector development. During these discussions, the mission stressed the importance of continued application of current regulations in a uniform and neutral manner across the board. The mission further called upon the authorities to continue strengthening the performance of the foreign exchange market, formalize the framework for dialogue between the government and the private sector, ease appeals procedures for taxpayers, and further strengthen the reforms in an effort to remedy the constraints identified in the Doing Business Survey, such as the simplification of tax procedures, business registration procedures, and the issuance of construction permits.
“For 2013, economic growth will maintain its momentum, in spite of global demand that remains subdued. Accordingly, the rate of growth in real GDP is expected to turn out at about 6 percent, thanks to the sectors of construction and public works, agriculture, and services. Inflation will be contained at 5 percent (y-o-y). However, the current account deficit will remain sizable in view of imports linked to mining investments and infrastructure projects, financed mostly by foreign direct investment. Official reserves will be maintained at a level equivalent to 7.3 months of imports at end-2013, thereby enabling the Mauritanian economy to withstand exogenous shocks more solidly. “Following the satisfactory attainment of the program objectives for 2012, IMF staff will submit for approval by the IMF Executive Board the conclusion of the sixth and final review of the three-year arrangement under the ECF arrangement, scheduled for June 2013. “The mission would like to take this opportunity to thank the Mauritanian authorities, and all those that it met with, for their warm welcome, the quality of the discussions held as well as and the good conditions under which its work was conducted.”
1 The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund's main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.