## _cr06248

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---

### Introduction and Policy Priority
- Mauritania expected to become an oil producer in 2006 and to be an exporter for about 20 years.
- If skillfully managed, oil revenue can accelerate modernization, durably reduce poverty, and spread benefits to future generations; key risks include volatility, uncertainty, and possibly short-lived nature of oil revenues.
- Policy priority: put in place an efficient and transparent framework for the management of oil wealth before production begins.
- Chapter focus: institutional framework and policies for transparent collection and use of oil revenue and sound financial asset management; macroeconomic policies to ensure stability, preserve competitiveness, and promote growth.

### Hydrocarbon Sector: discoveries, operators, and contracts
- Timing and duration
  - Mauritania to be an oil exporter in 2006 for about 20 years.
- Discovered reserves (aggregate estimates)
  - 400–600 million barrels of crude oil.
  - 1–2 trillion cubic feet of gas.
- Major fields and parameters
  - Chinguetti
    - Discovered in 2001; first producing oil field.
    - Development costs: about US$600 million for the first phase; US$150 million for the second phase (to be completed in 2008).
    - Estimated recoverable oil: about 120 million barrels (a central estimate with 50 percent probability).
    - Initial production peak: 75,000 barrels/day, gradually declining over eight years.
    - Declared commercially viable in June 2004.
  - Banda
    - Discovered in 2002.
    - Expected recoverable oil: up to 100 million barrels.
    - Gas potential: up to one trillion cubic feet.
    - Development decision possible by 2007.
  - Pelican
    - Discovered in 2003.
    - Estimated gas: around one trillion cubic feet.
  - Tiof
    - Discovered in 2003.
    - Could contain about 280 million barrels of recoverable oil.
  - Tevet
    - Discovered in 2004.
    - Could contain 40–100 million barrels of recoverable oil.
- Operators and contractual framework
  - Main operator: Woodside-led consortium; other partners include Hardman Resources (Australia), British Gas, Premier Oil (UK), Roc Oil (Australia).
  - Offshore exploration and exploitation permits under a production sharing contract (PSC) model.
  - Woodside interests range from 37.5 percent to 53.8 percent in the four PSCs in which it is the main partner.
  - Dana-led consortium signed PSCs covering Blocks 1, 7, and 8 and made a major gas discovery (Pelican) in Block 7.
  - Government exercised participation option in the Chinguetti field and financed it through Sterling Energy, a UK company.

### Production Sharing Contract (PSC) legal and fiscal terms
- Legal basis
  - General principles established in Ordinance 88-151 (1988); uniform PSC model elaborated in 1994 consistent with mining code and applicable tax legislation.
- Cost recovery and profit oil sharing
  - Up to 50 percent of production in shallow water areas (less than 300 meters) can be channeled towards cost recovery.
  - Up to 60 percent in deep water areas (more than 300 meters) can be channeled towards cost recovery.
  - Contractors entitled to 50–60 percent of profit oil in shallow water and 50–70 percent of profit oil in deep water, depending on the level of production.
- Taxation and bonuses
  - Contractor’s net profits subject to profit tax of 40 percent in shallow water and 25 percent in deep water areas.
  - Contractors pay a series of (relatively small) production bonuses.
- Government participation option
  - On a commercial discovery government may take a stake of 12 or 16 percent, depending upon projected peak production level.
  - From the effective date the government must pay its share of development costs and reimburse 150 percent of (pro rata) sunk exploration costs.
- Contract duration and commencement
  - Exclusive production authorization runs for 25 years and development activities must commence within six months from the approval.

### Country experience, economic theory, and risks (“oil curse” and Dutch disease)
- Empirical evidence
  - Majority of countries with large natural resource wealth lag behind comparable countries in real GDP growth (Sachs and Warner 2001); applies to oil-dependent countries such as Cameroon, Congo, Nigeria, and Venezuela, and to other minerals producers such as Zambia.
  - The ‘oil curse’ is not inevitable; success examples include Indonesia, Botswana, Malaysia, and Australia.
- Identified origins of the ‘oil curse’
  - (a) the Dutch disease; (b) poor fiscal policies coping with volatile oil revenues; (c) negative effects of rent-seeking behavior on institutions, governance, and political processes.
- Dutch disease mechanism (conceptual)
  - Oil discovery triggers a boom raising the real effective exchange rate (through domestic price/cost increases or currency appreciation), reducing profitability and competitiveness of tradable sectors and reallocating resources toward nontradables.
  - When the boom ends, weakened tradable sectors may be unable to generate alternative fiscal and foreign exchange revenues.

### Macroeconomic effects of oil revenue volatility and fiscal sustainability
- Volatility impacts
  - Fluctuations in oil revenue can induce macroeconomic volatility and reduce investment and growth via pro-cyclical spending policies: destabilize aggregate demand; exacerbate uncertainty; reduce quality and efficiency of expenditure due to institutional and social constraints on retrenchment.
  - Historical experience: Algeria, Nigeria, Republic of Congo, Venezuela—budget deficits widened during oil booms and proved difficult to reverse; subsidies financed during booms became a drag (Gylfason, 2001).
- Fiscal policy guidance
  - Fiscal policy is the key instrument: target sustainable balances, limit spending volatility, cope with Dutch disease; coordinate with monetary and exchange rate policies; use fiscal rules and medium-term expenditure frameworks (MTEF).
  - Standard debt-based fiscal sustainability criteria are of limited relevance for oil exporters; recommended assessment based on government net wealth (wider than debt-based analysis) to allow inter-generational equity and preservation of oil wealth value.
- Permanent income (PI) approach
  - Fiscal policy that keeps government wealth constant limits spending to expected permanent income from government wealth; operationally define government wealth as net present value of expected oil revenues plus value of financial assets already accumulated, net of government debt; nonoil primary deficit should equal expected interest income on government wealth.
  - Precautionary savings necessary given uncertainty about future oil prices and production; low-income countries need relatively high precautionary savings due to limited access to international capital markets and costly hedging.
  - When price-driven fluctuations are large, a cautious approach is to base long-term fiscal policy on an assumption that oil price fluctuations could render oil wealth value equal to zero (approach used by Norway).

### Trade-offs: expenditure frontloading versus saving
- Arguments for frontloading
  - support quickly alleviating poverty; social marginal returns on public capital spending potentially high; concessional development assistance may become unavailable later (Mauritania could graduate from IDA by 2010).
- Arguments against frontloading
  - capacity constraints on managing rapidly expanding expenditures; need to build precautionary savings; need to protect budget against accumulation of contingent liabilities.
- Practical recommendation
  - Absorptive capacity permitting, some expenditure frontloading justified on developmental and social grounds, but predefined savings objectives should be set so oil price drops can be smoothly absorbed and public spending maintained in the post-oil era.
- Broader government wealth should include expected revenues from hydrocarbons, gold, copper, iron ore, external assistance (grants expected to decline), and fishing; expected declines favor conservative fiscal stance.

### Short-term macro coordination, monetary policy, and Dutch disease mitigation
- Short-term coordination
  - Decouple government spending from oil price fluctuations; focus on the nonoil balance as a gauge of fiscal stance and to smooth fiscal impulse over time, particularly spending on nontradable goods.
  - Public spending volatility reduces quality and efficiency of spending and may exceed planning/management capacities.
- Asset management and monetary policy
  - Saving oil revenue abroad has no direct macro impact; accumulation of government deposits in domestic banking sector (or reduction of domestic debt) can have expansionary impact via lower domestic interest rates.
  - Monetary policy should aim to offset interest rate effects and contain inflationary pressures; monetary tightening may be needed to offset private demand responses.
- Exchange rate policy
  - Many oil exporters maintain fixed regimes; fixed may be appropriate if most oil revenues accrue to government and fiscal/asset management insulate the economy from oil price volatility.
  - If real exchange rate appreciation is unavoidable, a more flexible exchange rate regime may be appropriate; with adequate sterilization, flexible regimes can allow nominal appreciation without real appreciation via higher domestic inflation.
  - In quasi-fixed regimes with underdeveloped financial systems, sterilization may be inefficient, leaving fiscal policy as main instrument to maintain macro stability.

### Fiscal rules, medium-term frameworks, and recommendations
- Fiscal rules
  - Can promote transparent public choices and insulate fiscal policy from political pressures; credibility depends on strong governance and democratic institutions.
  - Examples: balanced budget rule under smoothed oil price assumptions to accumulate surpluses during highs and run deficits during lows (smooths spending but does not guarantee sustainability).
  - Non-oil primary balance-based rules:
    - PI rule: limit nonoil primary deficit to expected permanent income from oil wealth; vulnerable to frequent revisions in oil wealth projections.
    - Bird-in-hand (BIH) rule: stricter — limit nonoil primary deficit to expected revenue from existing government assets excluding unconverted oil wealth; eliminates volatility from changes in oil price expectations.
- Medium-term expenditure frameworks (MTEF)
  - Help ensure smooth and efficient government spending, align spending composition with absorption capacity, and secure capital project spending.
  - Investment in infrastructure and human capital supports private development and nonoil competitiveness.

### Oil funds: experiences, design issues, and implications for Mauritania
- International examples and features
  - Azerbaijan: State Oil Fund (SOFAZ) established 1999 as extrabudgetary savings fund; assets offshore in highly rated banks; portion invested locally; conservative expenditure policy.
  - Kazakhstan: National Fund of the Republic of Kazakhstan (NFRK) created 2001 as stabilization and savings off-budget fund; domiciled in National Bank; excess revenue deposited.
  - Norway: State Petroleum Fund (SPF) established 1990 as a savings fund integrated in the budget; incorporates a BIH rule; SPF funds invested in low-risk foreign securities.
  - Sudan: Oil-Revenue Savings Account (OSA) established 2002 at Central Bank as savings and stabilization fund; integrated into MTEF in 2003.
- Issues in designing oil funds
  - Rationale: set aside portion of oil revenue for specific purposes or provide visibility/credibility for fiscal rules.
  - Risks: fragmentation of fiscal policy and asset management; fungibility risk (governments contribute to funds yet borrow elsewhere); rigid rules may be overwhelmed by prolonged price drops.
  - Integration and transparency: funds need not be separate institutions; financing funds as government accounts can enhance coherence and transparency; funds should be established by law with specified operating procedures, transfer rules, oversight, and audit.
- Implications and recommendations for Mauritania
  - Authorities intend three funds: a stabilization fund, a savings fund, and a development assistance fund.
  - Assessment: objectives could be attained with a single financing fund; multiple funds may add complexity and rigidity for uncertain gain.
  - Annual considerations of sustainability, absorption capacity, and implementation should determine fiscal policy, with remaining balances transferred to (or out of) the fund.
  - Transparency, legal status, and management efficiency concerns could be addressed by delegating asset management to the BCM under parliamentary oversight and—where appropriate—using international asset managers.
  - Mauritania’s adhesion to the Extractive Industry Transparency Initiative (EITI) would be a significant step.

### Medium- to long-term scenarios for Mauritania (baseline and low-case)
- Common features across scenarios
  - Frontloading of expenditure to address development challenges.
  - Gradual augmentation of public expenditure to respect absorption capacity limits and enable early savings.
  - Additional spending principally directed toward physical and human capital (mainly public infrastructure).
  - Emphasis on savings and sustainability varies by expected revenues; both scenarios account for growth spillovers and some real exchange rate appreciation (Dutch disease).
  - Recoverable oil assumed depleted by 2025 given intended offshore extraction technology.
- Baseline (high) scenario — key values and assumptions
  - Oil wealth estimated at about US$6.0 billion (equivalent to 4 times the 2004 GDP).
  - Implied permanent income of about US$300 million per annum.
  - Key assumptions:
    - Recoverable oil reserves of about 600 millions barrels.
    - International oil prices broadly in line with World Economic Outlook projections (February 2005): US$46 per barrel in 2006.
    - Discount rate of 5 percent.
    - Average extraction costs of US$10 per barrel.
    - Production levels rising from roughly 21 million barrels in 2006 to about 52 million barrels by 2010 and declining gradually thereafter until depletion.
  - Projections and outcomes:
    - Oil production projected to peak at some 150,000 barrels per day around 2010.
    - Real GDP projected to grow by an annual average of 12 percent in 2006–10.
    - Thereafter, average nonoil GDP growth rate projected at 4 percent per annum in real terms (assuming structural reforms bolster productivity).
    - Per capita primary spending in constant terms rises from US$181 in 2006 to US$285 in 2010.
    - Fiscal sustainability ensured provided the nonoil primary balance remains below 2.5 percent of nonoil GDP after oil depletion in 2024.
    - Average real effective exchange rate appreciates by 2–3 percent per annum.
- Low-case scenario — key values and assumptions
  - Oil reserves limited to Chinguetti and Tiof about (420 million barrels).
  - World oil prices kept at US$25 per barrel in real terms (constant 2005 prices).
  - Outcomes and constraints:
    - Permanent income and oil wealth assumed to be two-thirds of the baseline.
    - Per capita primary spending in constant U.S. dollars projected to rise from US$175 in 2006 to US$207 in 2010, then gradually reverse to initial level by 2025.
    - Nonoil real GDP projected to grow by about 3 percent a year (versus 4 percent in baseline).
    - A nonoil primary deficit of 3 to 5 percent of nonoil GDP could be sustained in 2007–15 but would need to be gradually eliminated by 2025.
    - Priority to development objectives limits opportunity to accumulate foreign assets.
    - Dutch disease effects present but somewhat less than in the baseline.

### Summary policy principles and recommendations (oil era and post-oil)
- Fiscal strategy
  - Formulation should rely on the nonoil primary balance concept to address volatility and sustainability.
  - Frontloading public expenditure during the oil era is justified for development but must be consistent with absorption capacity limits and reasonable precautionary and long-term savings objectives.
- Management of oil savings
  - Oil savings management needs to be transparent, fully integrated with the budget, and governed by sound principles.
  - Mauritania’s precautionary and long-term savings objectives can be achieved with a single financing fund.
- Mitigating Dutch disease
  - Some degree of Dutch disease is unavoidable.
  - Appropriate government asset management (abroad), pro-growth public spending, structural policies, and increased exchange rate flexibility can offset competitiveness impacts and help contain inflationary pressures.

### Poverty and social developments: trends, indicators, and policy implications
- Overview
  - Reviews poverty and social developments since 1990, links between poverty, growth and income equality over the last decade, and performance in education and health.
  - Notes the 2000 PRSP: a participatory three-year program to sustain high economic growth and direct public resources to fight poverty.
- Poverty trends and inequality (selected figures)
  - Poverty incidence: 56.6 percent in 1990 → 50 percent in 1996 → 46.7 percent in 2000.
  - Partial growth elasticity of poverty (1990–2000): -0.8.
  - Gini coefficient rose from 0.34 to 0.39 between 1990 and 2000.
  - Estimated effects 1996–2000: about 30 percent of the poverty-reducing effect of average consumption growth was eroded by greater inequality.
- Urban–rural divergence (1990–2000)
  - Rural poverty: 71.6 percent in 1990 → 61.2 percent in 2000.
  - Urban poverty: 40.3 percent in 1990 → 25.4 percent in 2000.
  - Nouakchott: 21 percent in 1996 → 25.1 percent in 2000 → 22 percent in 2002.
- Social indicators (selected)
  - Gross primary enrollment: 46 percent in 1990 → 96 percent in 2004; MDG of universal primary education nearly reached.
  - Retention rates during last year of primary education have deteriorated continuously since 2000.
  - Maternal mortality rate: 747 deaths per 100,000 live births.
  - Fertility index: 6 children per woman in 1990 → 4.6 children per woman in 2003.
  - Child vaccination rate: 30 (1990); 40 (1996); 70 (2000); 82 (2002); 93 (2003).
  - Prevalence of child malnutrition: 48 (1990); 23 (1996); 32 (2000).
- Public social spending and HIPC resources
  - Budgetary social spending averaged 9 percent of GDP in 2001–04 vs. about 6 percent of GDP in the 1990s.
  - Including emergency plan and off-budget drought spending, social spending reached about 14 percent of GDP in 2003–04.
  - Education spending: 4.1 percent of GDP in 2000 → 6.5 percent in 2003; per capita public spending on education: US$25 in 2003 vs. less than US$15 in 2000.
  - Health expenditures: 2.7 percent of GDP and US$9.3 per capita in 2002 vs. 1.9 percent of GDP and US$7.5 in 1998.
  - HIPC resources increased from UM 4.5 billion (US$18.8 million) in 2000 to UM 17.4 billion (US$64.9 million) in 2003; only half of HIPC resources have been spent to date.
- Quality and access challenges
  - Education: low internal efficiency, unfinished schools, inefficient teacher deployment, deficiencies in content and quality.
  - Health access: 23 percent of population travel more than five kilometers to a health center; 10 percent travel more than ten kilometers; quality of public health facilities poor.
- MDG prospects and projections
  - Oil production beginning in 2006 presents an opportunity to realize PRSP objectives and achieve most 2015 MDGs conditional on transparent and efficient oil revenue management, containing rises in income inequality, and targeting public spending to the poor.
  - Projected poverty incidence in 2015 from 46.7 percent in 2000:
    - If inequality increases along past trends and nonoil per capita growth maintained at 3.5 percent (baseline): poverty incidence projected to decrease to 32.5 percent by 2015 (above MDG of 28.3 percent).
    - If nonoil per capita growth is 2.5 percent (low-case): poverty incidence projected to decrease to 38.3 percent by 2015.
    - Under pro-poor policies preventing further growth in inequality (Assumption II):
      - With average annual nonoil per capita growth of 3.5 percent: poverty incidence could fall to 26.2 percent by 2015.
      - With average annual nonoil per capita growth of 2.5 percent: poverty incidence could fall to 32.1 percent by 2015.
  - Recommended pro-poor policies: appropriate macroeconomic policies to contain Dutch disease; substantial increase in per capita government spending in constant U.S. dollar terms (baseline envisages about 60 percent increase over 2005–15); sectoral policies to foster broad-based growth (particularly in agriculture), increased investments in infrastructure, better access to bank credit for SMEs, reliable provision of water, and efficient transport and communications network.

### Other MDG-related fiscal planning and social spending projections
- World Bank estimate: reaching the 2015 MDGs will require over the next ten years a social spending increase of 35 percent in real terms compared to expenditure budgeted for 2001–04.
- Table 6 (verbatim excerpts)
  - Social spending
    - In percent of nonoil GDP9.08.77.6
    - In constant 2004 US$ millions117240191
      - Percent change compared to 2001–04...10563
  - Nonoil real GDP growth (percentage change)4.45.74.6
- The Table 6 figures indicate achievement of required social spending increases is feasible under projected scenarios, conditional on absorptive capacity and governance improvements.

### Selected statistical highlights (levels and trends, 1998–2004, selected series)
- GDP (at factor cost, millions of ouguiyas): 197,415 (1998); 217,901 (1999); 239,941 (2000); 260,194 (2001); 281,687 (2002); 328,127 (2003); 378,291 (2004).
- Annual GDP growth rate (market prices, percent): 7.8 (1999); 6.7 (2000); 3.6 (2001); 2.3 (2002); 6.4 (2003); 6.9 (2004).
- Fish catch (thousands of metric tons, total): 659.154 (1998); 504.738 (1999); 544.925 (2000); 642.285 (2001); 672.643 (2002); 639.073 (2003); 753.530 (2004, Jan–Nov).
- Gross official reserves (end of period, millions of U.S. dollars): 182.6 (1998); 203.6 (1999); 250.0 (2000); 254.6 (2001); 370.3 (2002); 191.3 (2003); 39.0 (2004).
- Current account balance (millions of U.S. dollars): -30.3 (1998); -2.3 (1999); -53.5 (2000); -71.6 (2001); 12.0 (2002); -296.4 (2003); -428.0 (2004).
- Consolidated government operations (in billions of ouguiyas): Revenue and grants 53.8 (1998); 61.2 (1999); 60.7 (2000); 59.9 (2001); 112.0 (2002); 98.9 (2003); 113.7 (2004). Expenditures and net lending 47.1 (1998); 51.7 (1999); 67.8 (2000); 65.6 (2001); 84.5 (2002); 213.5 (2003); 196.7 (2004).
- Monetary aggregates (millions of ouguiyas): Money and quasi-money 28,022 (1998); 29,222 (1999); 32,951 (2000); 38,650 (2001); 42,102 (2002); 85,643 (2003); 126,338 (2004). Reserve money 8,406 (1998); 8,788 (1999); 9,222 (2000); 9,723 (2001); 10,038 (2002); 30,872 (2003); 69,769 (2004).

### Tax system: indirect taxes and local taxes (selected items)
- VAT (TVA)
  - Levied on imports, delivery of goods, and provision of services.
  - Rates of 0 percent and 14 percent.
  - Establishment of a procedure for refunding VAT credits (Decree R-979 of 12/31/2001).
  - Extension of refunds to capital goods imports.
- TPS (Art. 2002 of the CGI)
  - Applies to: bank transactions; financial transactions; credit transactions; service provision subject to presumptive BIC tax and not subject to VAT.
  - Rate: 16 percent.
- Registration taxes (Droits d’Enregistrement)
  - Fixed rate of 0.5 percent (applies to acts involving equity transfers or shares and to acts establishing or extending companies).
- Local government taxes (selected)
  - Contribution Foncière sur les Propriétés Bâties (tax on improved property): Rate: 8 percent; exemptions listed.
  - Patente (business license tax): simplified fixed tax ranging from UM 100,000 to UM 1,500,000 (Budget Law 2002).
  - Taxe d’Habitation: upper limit – UM 15,000 per unit (Budget Law 2001).
- Consumption taxes applied to petroleum products, alcoholic beverages, tobacco products, various goods (various flat taxes).

*Source: IMF staff analysis and extracted tables and text from the IMF staff report (_cr06248_).*

### 1. Proven Crude Oil Reserves and Average Daily Production in Selected Countries ....... 5

### 1. Proven Crude Oil Reserves and Average Daily Production in Selected Countries ....... 5

### Introduction
- Mauritania is expected to become an oil producer in 2006 and is preparing to face new challenges arising in the context of managing potentially substantial oil revenues.
- If skillfully managed, oil revenue will help the country accelerate its modernization, durably reduce poverty, and spread the benefits to future generations, well beyond the time at which the known oil resources are expected to be exhausted (in about 20 years).
- Key risks and challenges identified:
  - Volatility, uncertainty, and possibly short-lived nature of oil revenues.
  - Easing of financial constraints could reduce broad-based commitment to the reforms program and detract from achieving sustainable development and poverty reduction.
- Policy priority:
  - Put in place an efficient and transparent framework for the management of oil wealth before production begins.
- Chapter focus:
  - Institutional framework and policies for transparent collection and use of oil revenue and sound financial asset management.
  - Macroeconomic policies to ensure stability, preserve competitiveness, and promote growth.

### The Hydrocarbon Sector in Mauritania
- Timing and duration:
  - Mauritania will become an oil exporter in 2006 for about 20 years.
- Discovered reserves (aggregate estimates):
  - 400–600 million barrels of crude oil.
  - 1–2 trillion cubic feet of gas.
- Comparative note:
  - On a per capita basis, Mauritania’s estimated oil reserves are close to that of Chad, Nigeria, or Yemen, but much lower than in the Republic of Congo, Angola, Equatorial Guinea, or Azerbaijan.
- Major fields and key parameters:
  - Chinguetti
    - Discovered in 2001; will be Mauritania’s first producing oil field.
    - Developed through sub-sea wells tied back to a floating production storage and offloading system.
    - Development costs: about US$600 million for the first phase; US$150 million for the second phase (to be completed in 2008).
    - Estimated recoverable oil: about 120 million barrels (a central estimate with 50 percent probability).
    - Initial production peak: 75,000 barrels/day, gradually declining over eight years.
    - Declared commercially viable in June 2004.
  - Banda
    - Discovered in 2002.
    - Expected recoverable oil: up to 100 million barrels.
    - Gas potential: up to one trillion cubic feet.
    - Further appraisal work continuing; development decision possible by 2007.
  - Pelican
    - Discovered in 2003.
    - Estimated gas: around one trillion cubic feet.
  - Tiof
    - Discovered in 2003.
    - Could contain about 280 million barrels of recoverable oil.
  - Tevet
    - Discovered in 2004.
    - Could contain 40–100 million barrels of recoverable oil.
- Operators and contractual framework:
  - Several consortia active offshore; main operator is the Woodside-led consortium.
  - Offshore exploration and exploitation permits negotiated under a production sharing contract (PSC) model.

### Legal Framework for Offshore Petroleum Exploration and Production Activities: the Production Sharing Contract (PSC) Model
- Historical/legal basis:
  - General principles established in a 1988 Ordinance (88-151).
  - Uniform PSC model elaborated in 1994; consistent with the general mining code and applicable tax legislation.
- Cost recovery and profit oil sharing:
  - Up to 50 percent of production in shallow water areas (less than 300 meters) can be channeled towards cost recovery.
  - Up to 60 percent in deep water areas (more than 300 meters) can be channeled towards cost recovery.
  - Contractors are entitled to 50–60 percent of profit oil in shallow water and 50–70 percent of profit oil in deep water, depending on the level of production.
- Taxation and bonuses:
  - Contractor’s net profits subject to profit tax of 40 percent in shallow water and 25 percent in deep water areas.
  - Contractors also committed to pay a series of (relatively small) production bonuses.
- Gas provisions:
  - PSC model provisions for gas production are broadly the same as for deep water oil production.
- Government participation option:
  - Government does not participate in exploration; however, in the event of a commercial discovery it has the option to participate in a field’s development—take a stake of 12 or 16 percent, depending upon the project’s projected peak production level.
  - From the effective date the government must pay its share of development costs and reimburse 150 percent of (pro rata) sunk exploration costs.
- Contract duration and commencement:
  - Exclusive production authorization runs for 25 years and development activities must commence within six months from the approval.
- Current PSC geography and operators:
  - A number of PSCs signed for exploration/production areas located in eight Mauritania offshore blocks.
  - Woodside-led consortium signed PSCs covering areas A, B, and C within Blocks 2–6; most significant oil discoveries (Chinguetti, Tiof, Tevet) are in deep water PSC-B; Banda discovery in shallow PSC-A.
  - Dana-led consortium signed PSCs covering Blocks 1, 7, and 8 and made a major gas discovery (Pelican) in Block 7.
- Additional operational detail:
  - Woodside has interests ranging from 37.5 percent to 53.8 percent in the four PSCs in which it is the main partner. Other foreign partners include Hardman Resources (Australia), British Gas, Premier Oil (UK), and Roc Oil (Australia).
  - The government exercised its participation option in the Chinguetti field and financed it through Sterling Energy, a UK company.

### Country Experience and Economic Theory in Managing Natural Resources
- Empirical evidence:
  - Empirical research suggests that a majority of countries with large natural resource wealth lags behind comparable countries in terms of real GDP growth (see for instance Sachs and Warner 2001).
  - This finding holds independently of trends in commodity prices, climatic variables, or other growth impediments.
  - Applies to oil-dependent countries such as Cameroon, Congo, Nigeria, and Venezuela, and to producers of other minerals, such as Zambia (copper).
  - Many oil-producing countries, notably in sub-Saharan Africa, performed disappointingly also from a social development perspective; for some oil-exporting countries the Human Development Index is close to or below the average for sub-Saharan Africa.
  - The ‘oil curse’ is not inevitable; examples of success include Indonesia, Botswana, Malaysia, and Australia.
- Identified origins of the ‘oil curse’:
  - (a) the Dutch disease;
  - (b) poor fiscal policies in coping with volatile oil revenues, raising sustainability issues;
  - (c) negative effects of ‘rent-seeking’ behavior—exacerbated by the dominance of extractive industries—on institutions, governance, and political processes.
- Dutch disease overview:
  - Theory developed in the 1980s to describe possible deindustrialization after a natural resource discovery.
  - Mechanism:
    - The discovery may trigger a boom that raises the real effective exchange rate (either through increases in domestic prices and costs or through an appreciation of the domestic currency on the foreign exchange market).
    - Higher real exchange rate makes manufacturing (and other tradable goods) less profitable, leading to absolute or relative decline of these industries.
  - When the boom ends and resource revenues disappear, weakened tradable sectors may be unable to generate alternative fiscal and foreign exchange revenues, forcing economically painful and politically difficult adjustments.
  - Conceptual description:
    - In a three-good economy (oil, other tradable goods, nontradable goods), an oil boom increases real incomes and aggregate demand.
    - Demand pressure raises prices of nontradable goods while prices of internationally traded goods remain anchored.
    - Higher factor prices reduce profitability and competitiveness of tradable sectors, causing a resource reallocation away from tradables toward nontradables.

*Prepared by Garbis Iradian (ext. 36281), Jean Le Dem (ext. 39716), and Jaroslaw Wieczorek (ext. 37338).*

### 10.      Fluctuations in oil revenue can induce macroeconomic volatility and reduce

### _cr06248 - 10.      Fluctuations in oil revenue can induce macroeconomic volatility and reduce

### Macroeconomic effects of oil revenue volatility
- Fluctuations in oil revenue can induce macroeconomic volatility and reduce investment and growth by originating in pro-cyclical spending policies that:
  - destabilize aggregate demand;
  - exacerbate uncertainty;
  - reduce the quality and efficiency of expenditure because of institutional and social constraints on retrenchment of current spending programs.
- Historical experience: In Algeria, Nigeria, Republic of Congo, and Venezuela, budget deficits widened and external borrowing continued to rise during the oil booms of the 1970s and 1980s, and later these countries found it difficult to reverse unsustainable expenditure growth.
- Subsidies to underdeveloped or inefficient sectors financed during booms became a drag when revenues declined (Gylfason, 2001).

### UNDP Development Index — percent change (1975, 1985, 1990, 1995, 2002, 1990–2002)
- Mauritania: 0.34 0.38 0.39 0.42 0.47 20
- Good performers
  - Oman: 0.49 0.64 0.70 0.73 0.77 11
  - Iran: 0.57 0.61 0.65 0.69 0.73 13
  - Algeria: 0.50 0.60 0.64 0.66 0.70 10
  - Indonesia: 0.47 0.58 0.62 0.66 0.69 11
  - Yemen: ...... 0.39 0.44 0.48 23
- Poor performers
  - Cameroon: 0.42 0.50 0.52 0.51 0.50 -3
  - Republic of Congo: 0.45 0.54 0.53 0.53 0.49 -7
  - Nigeria: 0.32 0.40 0.43 0.46 0.47 8
  - Zambia: 0.47 0.49 0.47 0.42 0.39 -17
  - Congo, Dem. Rep.: 0.41 0.43 0.41 0.38 0.37 -12
  - Tunisia: 0.52 0.62 0.66 0.70 0.75 14
  - Egypt: 0.44 0.54 0.58 0.61 0.65 13
  - Morocco: 0.43 0.51 0.54 0.57 0.62 14
  - Ghana: 0.44 0.48 0.51 0.53 0.57 11
  - Senegal: 0.32 0.36 0.38 0.40 0.44 14
  - Benin: 0.29 0.35 0.36 0.38 0.42 18
- Regional aggregates (as presented)
  - Sub-Saharan African countries: ............ 0.47 ...
  - Low-Income countries: ............ 0.56 ...

- Source for table: UNDP, 2004 Human Development Report.

### Governance, rent-seeking, and conflict risks
- Oil revenue flows concentrated in a few institutions and controlled by a small number of individuals create incentives for rent-seeking, diversion of funds, waste of resources, and suboptimal growth.
- Corruption risk is significant where property rights are weak, the judiciary is inefficient, and law enforcement is lax (Leite and Weidmann, 1999).
- Poor oil revenue management can contribute to violent conflicts and undermine human development.

### Fiscal sustainability in new oil-exporting countries
- Fiscal policy is the key instrument to address macroeconomic challenges: target sustainable balances, limit spending volatility, and cope with Dutch disease; coordinate with monetary and exchange rate policies; use fiscal rules and medium-term expenditure frameworks (MTEF).
- Standard debt-based fiscal sustainability criteria (primary fiscal deficit that keeps public debt-to-GDP ratio constant) are of limited relevance for oil exporters — they can lead to large spending swings and explosive debt dynamics or painful adjustment after resource exhaustion. This is particularly relevant where reserves depletion horizon may not exceed 20 years (Mauritania example).
- Recommended assessment: sustainability should be based on government net wealth (wider than debt-based analysis), allowing inter-generational equity and preservation of oil wealth value over time.
- Permanent income (PI) approach:
  - Fiscal policy that keeps government wealth constant over time limits spending to expected permanent income from government wealth, imposing a limit on the nonoil primary deficit in oil-exporting contexts.
  - Operational version: restrict government wealth definition to the net present value of expected oil revenues plus value of financial assets already accumulated, net of government debt; the nonoil primary deficit should equal expected interest income on government wealth.
- Precautionary savings are necessary because of uncertainties about future oil prices and production; low-income countries need relatively high precautionary savings due to limited access to international capital markets and costly hedging.
- When price-driven fluctuations in government oil wealth are large, sustainable nonoil primary deficits may change dramatically between fiscal years; a cautious approach is basing long-term fiscal policy on the assumption that oil price fluctuations could render oil wealth value equal to zero (approach used by Norway).

### Trade-offs: expenditure frontloading vs. saving
- Arguments in favor of frontloading expenditures:
  - support quickly alleviating poverty;
  - social marginal returns on public capital spending potentially high;
  - development assistance on concessional terms may become unavailable later (Mauritania could graduate from IDA by 2010).
- Arguments against frontloading:
  - capacity constraints on managing rapidly expanding expenditures compromising efficiency;
  - need to build precautionary savings in initial boom stages;
  - need to protect the budget against possible accumulation of contingent liabilities (including pension liabilities) with high future uncertainty.
- Broader definition of government wealth could include expected revenues from hydrocarbons, gold, copper, iron ore, external assistance (grants expected to decline), and fishing; expected declines in these components favor a more conservative fiscal stance.
- Practical recommendation: absorptive capacity permitting, some degree of expenditure frontloading is justified on developmental and social grounds, but predefined savings objectives should be set so oil price drops can be smoothly absorbed and public spending maintained in the post-oil era.

### Short-term fiscal and macroeconomic coordination
- Decouple government spending from oil price fluctuations and focus on the nonoil balance; the nonoil budget balance is immune to temporary oil revenue fluctuations and better gauges fiscal stance.
- Macroeconomic volatility (including real exchange rate fluctuations) damages investment and growth, especially when deriving from fiscal and monetary conditions.
- In economies with limited diversification (e.g., Mauritania with two commodities accounting for most exports and government revenues), fiscal policy can be strongly pro-cyclical if sector booms trigger spending increases.
- Need to smooth fiscal impulse over time, particularly spending on nontradable goods. Spending should be cautiously adjusted to sharp rises in oil incomes (Gelb and Associates, 1988).
- Public spending volatility reduces quality and efficiency of spending; rapid large-scale programs may exceed planning and management capacities and put fiscal sustainability at risk.

### Asset management and monetary policy
- Management of government assets (or debt) requires special attention.
- Savings of government oil revenue abroad have no direct macroeconomic impact; however, accumulation of government deposits in the banking sector (or reduction of domestic debt) may have an expansionary impact similar to government spending through reduction in domestic interest rates, especially if capital mobility is limited.
- Monetary policy should aim to offset interest rate effects and contain inflationary pressures; monetary tightening may be needed to offset private demand responses to oil price fluctuations.

### Dutch disease and exchange rate policy
- Many oil-exporting countries maintain fixed exchange rate regimes; this may be appropriate if most oil revenues accrue to government and sound fiscal/asset management insulate the economy from world oil price volatility.
- If real exchange rate appreciation is unavoidable (due to expected government spending on nontradables), a more flexible exchange rate regime may be more appropriate.
- With adequate sterilization, flexible regimes can allow nominal appreciation and prevent real appreciation from occurring through higher domestic inflation.
- Oil booms may trigger private capital inflows as confidence in the local currency rises; in quasi-fixed regimes with underdeveloped financial systems, sterilization may be inefficient, leaving fiscal policy as the main instrument to maintain macro stability — raising compatibility issues between short-term macro-management and long-term fiscal objectives.

### Fiscal rules and medium-term frameworks
- Fiscal rules can promote transparent public choices and help insulate fiscal policy from political pressures, but credibility depends on strong governance and democratic institutions.
- A fiscal rule is a permanent constraint on fiscal policy; successful rules incorporate contingency mechanisms for exogenous shocks.
- Several oil exporters use a balanced budget rule under smoothed oil price assumptions: accumulate surpluses during high prices/production and run deficits during lows; this smooths spending but does not necessarily ensure fiscal sustainability.
- Fiscal rules should be based on the nonoil primary balance:
  - PI rule: limit nonoil primary deficit to expected permanent income from oil wealth; smooths spending but is vulnerable to frequent revisions in oil wealth projections.
  - Bird-in-hand (BIH) rule: stricter — limit nonoil primary deficit to expected revenue from existing government assets excluding unconverted oil wealth; BIH eliminates volatility from changes in oil price expectations (only projected rate of return on financial assets may affect stance).
- Medium-term expenditure frameworks (MTEF):
  - Help ensure smooth and efficient government spending, especially in new oil exporters;
  - Allow analysis of spending composition to stay within absorption capacity and secure capital project spending;
  - Investment in infrastructure and human capital supports private development and nonoil competitiveness, helping offset negative effects of a appreciated real exchange rate.

### Oil funds
- Oil funds are a salient feature of oil-producing countries (examples include Kazakhstan’s National Fund and Norway’s State Petroleum Fund).
- Experience with oil funds has been mixed:
  - they contributed marginally to improved fiscal policy conduct or higher savings in some cases (Davies et al., 2001);
  - often resulted in fragmentation of fiscal policy and asset management.
- The case for oil funds mostly rests on political economy arguments.

*Source:  UNDP, 2004 Human Development Report.*

### Box 3. Selected Examples of Oil Funds

### Box 3. Selected Examples of Oil Funds

### Examples of oil funds
- Azerbaijan: State Oil Fund (SOFAZ) established in 1999 as an extrabudgetary savings fund.
  - Asset management regulations require financial assets be kept offshore in highly rated banks.
  - A portion is invested in local investment projects.
  - A conservative expenditure policy has ensured steady growth of savings.
- Kazakhstan: National Fund of the Republic of Kazakhstan (NFRK) created in 2001 as both a stabilization and savings (off-budget) fund.
  - Excess revenue (from generally conservative budget reference prices) is deposited to the fund; revenue shortfalls can be compensated by transfers from the fund.
  - The NFRK is domiciled in the National Bank of Kazakhstan, which manages its assets on behalf of the government.
- Norway: State Petroleum Fund (SPF) established in 1990 as a savings fund integrated in the budget.
  - Incorporates a BIH rule to preserve oil wealth for future generations in per capita terms.
  - Government net oil income flows directly into the SPF; an annual transfer is made to the treasury to meet the nonoil deficit.
  - The nonoil deficit is limited by law and cannot exceed the projected SPF income.
  - SPF funds are invested in low-risk foreign securities, sovereign or similar.
- Sudan: Oil-Revenue Savings Account (OSA) established in 2002 at the Central Bank of Sudan as a savings and stabilization fund; integrated into the medium-term budget framework in 2003.
  - The nonoil deficit set in the budget is covered with oil revenue projected at a (conservative) oil price.

### Issues in designing oil funds
- Rationale and risks
  - Typical rationale: set aside portion of oil revenue for specific purposes or provide visibility and credibility for fiscal rules.
  - In countries with pressing social and infrastructure needs, a savings fund provides an explicit mechanism for long-term financial strategy (Bartsch et al. 2004).
  - Oil funds can deter political claims and pro-cyclical fiscal policy, but may lead to dual budget systems or extrabudgetary spending procedures susceptible to governance problems.
  - Fungibility risk: governments may contribute to funds yet borrow elsewhere, effectively mortgaging oil receipts rather than saving them.
- Substitution for good fiscal policy
  - Oil funds cannot substitute for good fiscal policy; oil revenue can be well managed without formal funds.
  - Budget processes can address oil price risks by building government liquidity cushions and introducing explicit contingencies.
- Integration and transparency
  - Oil funds need not be separate institutions; financing funds whose balance reflects government saving of oil wealth are an option.
  - Integrated funds should operate as government accounts, enhancing coherence in budgetary planning and expenditure control.
  - Integration enhances transparency by subjecting oil fund resources to the same oversight as the budget.
- Legal and operational design
  - Oil funds should be established by law.
  - Operating procedures—including rules for transfers, authority, internal and external oversight (including audits)—should be specified and approved by parliament.
  - Accumulation and withdrawal rules should incorporate flexibility to accommodate market price changes; rigid rules have been overwhelmed historically (e.g., funds collapsing under the prolonged drop in oil prices of the 1980s).

### Implications for Mauritania (design and institutional recommendations)
- Authorities intend three funds: a stabilization fund, a savings fund, and a development assistance fund.
  - Stabilization fund: smooth fluctuations in oil-related resources available to the budget and mobilized for natural disasters.
  - Savings fund: build assets for future generations and finance public spending after oil production ends.
  - Development assistance fund: used to help other nations’ development; operational only if oil production is sufficiently high.
  - Details on transfer rules not yet available; authorities state arrangements will reflect PRSP priorities and align with the MTEF.
- Assessment and recommendations
  - Mauritania’s objectives could be attained with a single financing fund; multiple funds may add complexity and rigidity for uncertain gain.
  - Annual considerations of sustainability, absorption capacity, and implementation should determine fiscal policy, with remaining balances transferred to (or out of) the fund.
  - Transparency, legal status, and management efficiency concerns could be addressed by delegating asset management to the BCM under parliamentary oversight and—where appropriate—using international asset managers.

### Transparency and governance requirements
- Transparency and accountability are essential due to the high concentration and large share of oil revenues in total budget revenues, which increase corruption and rent-seeking risks.
- Institutional framework should be comprehensive and include safeguards for transparency of any government-owned national oil company.
- Well-established practices:
  - All oil-revenue related operations should be subject to disclosure procedures based on explicit guidelines and free from political interference.
  - Regular audits best ensure accountability; audit reports should be submitted to parliament and published, consistent with international standards.
- Mauritania’s adhesion to the Extractive Industry Transparency Initiative (EITI) would be a significant step toward establishing oil revenue transparency.

### Medium- to long-term scenarios for Mauritania (baseline and low-case)
- Common features
  - Frontloading of expenditure to address development challenges.
  - Gradual augmentation of public expenditure to respect absorption capacity limits and enable early savings.
  - Additional spending principally directed toward physical and human capital (mainly outlays on public infrastructure).
  - Emphasis on savings and sustainability varies by expected revenues; both scenarios account for growth spillovers and some real exchange rate appreciation (Dutch disease).
  - Recoverable oil assumed depleted by 2025 given intended offshore extraction technology.
- Baseline (high) scenario key values and assumptions
  - Oil wealth estimated at about US$6.0 billion (equivalent to 4 times the 2004 GDP).
  - Implied permanent income of about US$300 million per annum.
  - Key assumptions:
    - Recoverable oil reserves of about 600 millions barrels.
    - International oil prices broadly in line with World Economic Outlook projections (February 2005): US$46 per barrel in 2006.
    - Discount rate of 5 percent.
    - Average extraction costs of US$10 per barrel.
    - Production levels rising from roughly 21 million barrels in 2006 to about 52 million barrels by 2010 and declining gradually thereafter until depletion.
  - Projections and outcomes:
    - Oil production projected to peak at some 150,000 barrels per day around 2010.
    - Real GDP projected to grow by an annual average of 12 percent in 2006–10.
    - Thereafter, average nonoil GDP growth rate projected at 4 percent per annum in real terms (assuming structural reforms bolster productivity).
    - Per capita primary spending in constant terms rises from US$181 in 2006 to US$285 in 2010.
    - Fiscal policy geared to accelerate investment and build financial assets while frontloading poverty-reducing programs.
    - Fiscal sustainability ensured provided the nonoil primary balance remains below 2.5 percent of nonoil GDP after oil depletion in 2024.
    - Average real effective exchange rate appreciates by 2–3 percent per annum.
- Low-case scenario key values and assumptions
  - Oil reserves limited to Chinguetti and Tiof about (420 million barrels).
  - World oil prices kept at US$25 per barrel in real terms (constant 2005 prices).
  - Outcomes and constraints:
    - Permanent income and oil wealth assumed to be two-thirds of the baseline.
    - Per capita primary spending in constant U.S. dollars projected to rise from US$175 in 2006 to US$207 in 2010, then gradually reverse to initial level by 2025.
    - Nonoil real GDP projected to grow by about 3 percent a year (versus 4 percent in baseline).
    - A nonoil primary deficit of 3 to 5 percent of nonoil GDP could be sustained in 2007–15 but would need to be gradually eliminated by 2025.
    - Priority to development objectives limits opportunity to accumulate foreign assets.
    - Dutch disease effects present but somewhat less than in the baseline.

### Summary: policy principles and recommendations
- Fiscal strategy
  - Fiscal policy formulation should rely on the nonoil primary balance concept to address volatility and sustainability.
  - Frontloading public expenditure during the oil era is justified for development but must be consistent with absorption capacity limits and reasonable precautionary and long-term savings objectives.
- Management of oil savings
  - Oil savings management needs to be transparent, fully integrated with the budget, and governed by sound principles.
  - Mauritania’s precautionary and long-term savings objectives can be achieved with a single financing fund.
- Mitigating Dutch disease
  - Some degree of Dutch disease is unavoidable.
  - Appropriate government asset management (abroad), pro-growth public spending, structural policies, and increased exchange rate flexibility can offset competitiveness impacts and help contain inflationary pressures.

*Source: IMF staff analysis (Box 3 and surrounding sections).*

### 1.      This chapter reviews the evolution of poverty and other social developments

### This chapter reviews the evolution of poverty and other social developments

### Overview
- Reviews poverty and social developments since 1990, links between poverty, growth and income equality over the last decade, and performance in education and health.
- Notes the 2000 Poverty Reduction Strategy Paper (PRSP): a participatory three-year program to sustain high economic growth and direct public resources to fight poverty.
- Data on income poverty not yet available for 2004; recent social indicators used for preliminary assessment.
- Explores prospects for reaching the MDGs by 2015 under long-term scenarios presented in Chapter I.

### Developments in poverty and international comparisons
- Poverty incidence decreased from 56.6 percent in 1990 to 50 percent in 1996 and 46.7 percent in 2000.
- Other poverty measures (poverty gap, squared poverty gap) showed similar downward trends.
- Partial growth elasticity of poverty (1990–2000) estimated at -0.8 (i.e., a one percent increase in real per capita income lowers incidence of poverty by 0.8 percent).
- The partial elasticity of -0.8 is significantly below selected low-income countries (e.g., Ghana, Uganda) and below the panel estimate of -1.1 (Iradian, 2005).
- Gini coefficient rose from 0.34 to 0.39 between 1990 and 2000, limiting poverty reduction.
- Estimated effects 1996–2000: about 30 percent of the poverty-reducing effect of average consumption growth was eroded by greater inequality.
  - Had inequality not increased, poverty headcount would have declined by 4.8 percentage points rather than by 3.3 percentage points.
- International comparisons (selected figures):
  - Mauritania (2000): Poverty incidence 46.7, Gini 39.0, GNP per capita PPP (US$) 1,616.
  - Madagascar (2001): Poverty incidence 69.5, Gini 47.5, GNP per capita PPP (US$) 1,102.
  - Uganda (2000): Poverty incidence 35.0, Gini 40.5, GNP per capita PPP (US$) 1,230.
  - Average (selected African countries): Poverty incidence 48.3, Gini 42.8, GNP per capita PPP (US$) 1,585.
- Urban–rural divergence (1990–2000):
  - Rural poverty: 71.6 percent in 1990 → 61.2 percent in 2000.
  - Urban poverty: 40.3 percent in 1990 → 25.4 percent in 2000.
  - Nouakchott: poverty incidence increased from 21 percent in 1996 to 22 percent in 2002, peaking at 25.1 percent in 2000.
- Drivers:
  - Low agricultural growth (contribution to GDP growth < 1 percent per year in 1990s), limited public investment in Senegal river valley.
  - Services contribution to GDP growth about 3 percentage points per year in 1990s.
  - Heavy migration to Nouakchott (share of population rose from about 30 percent in 1990 to about 35 percent) negatively affected capital living conditions.
  - Improvements in other urban areas attributed to expansion of electricity, water systems, and transport infrastructure.

### Poverty perceptions
- Subjective surveys did not confirm the statistically observed poverty reduction in the 1990s:
  - 2001 survey: about 40 percent of household heads believed poverty had not changed much since 1996; numbers thinking poverty increased were almost as numerous as those thinking it decreased. Most expected poverty to stabilize or decrease over the next five years.
  - Preliminary 2004 household survey questionnaire: 44 percent of household heads thought their economic situation in 2004 was worse than in 2001; 34 percent thought it was identical.
  - Full 2004 household survey results expected June 2005 (to update objective and subjective trends).

### Social indicators (education, health, other)
- General: Most recent education and, to a lesser extent, health and other social indicators show improvement over the last 15 years.
- Education:
  - Gross primary enrollment: 46 percent in 1990 → 96 percent in 2004; MDG of universal primary education nearly reached, including remote/extremely difficult circumstances (10 percent of children).
  - Secondary enrollment: significant progress.
  - Tertiary enrollment: decreased due to deliberate policies to regulate student flows.
  - Gender parity: remarkable progress in access to primary and secondary education; related MDG within reach.
  - Retention rates during last year of primary education have deteriorated continuously since 2000.
- Health:
  - Child vaccination improved significantly; child mortality roughly remained constant since 1994 despite higher vaccination rates.
  - Infant mortality and maternal mortality concerns:
    - Maternal mortality rate 747 deaths per 100,000 live births (noted as under the sub-Saharan Africa average but above neighbors such as Senegal, Niger, Mali).
    - Fertility index decreased from 6 children per woman in 1990 to 4.6 children per woman in 2003.
  - Chronic malnutrition remains a serious rural problem, notably among children and pregnant women.
  - Infectious diseases (malaria, tuberculosis) remain major public health problems.
- Selected indicators (from Table 4):
  - Overall poverty incidence: 57 (1990), 50 (1996), 47 (2000).
  - Incidence of poverty in Nouakchott: 36 (1990), 21 (1996), 25 (2000), 22 (2002).
  - Prevalence of child malnutrition: 48 (1990), 23 (1996), 32 (2000).
  - Gross primary enrollment ratio: 46 (1990), 82 (1996), 88 (2000), 90 (2002), 96 (2003), 100 (2004).
  - Share of girls in total primary enrollment: 42 (1990), 46 (1996), 48 (2000), 49 (2002), 49 (2003), 50 (2004).
  - Retention rate at entrance of the 5th grade: 55 (1996), 48 (2000), 47 (2002).
  - Adult literacy rate: 58–59 (reported range).
  - Child mortality (under five years old): 137 (1990), 122 (1996), 123 (2000).
  - Infant mortality rate: 81 (1990), 74 (reported).
  - Maternal mortality rate: 747 (reported).
  - Child vaccination rate: 30 (1990), 40 (1996), 70 (2000), 82 (2002), 93 (2003).

### Public expenditures in social sectors and use of HIPC resources
- Social spending:
  - Budgetary social spending averaged 9 percent of GDP in 2001–04 vs. about 6 percent of GDP in the 1990s.
  - Note: including emergency plan costs and off-budget social spending related to the 2002 drought, social spending reached about 14 percent of GDP in 2003–04.
- Education spending:
  - As percent of GDP: 4.1 percent in 2000 → 6.5 percent in 2003.
  - Average annual real growth rate of public spending on education: 8.4 percent during 2000–2003.
  - Per capita public spending on education: US$25 in 2003 vs. less than US$15 in 2000.
  - Between 1998–2003: increased recurrent allocations to primary education; decreased allocations for tertiary education and vocational training; secondary education share fairly constant.
- Health spending:
  - Health expenditures accounted for 2.7 percent of GDP and US$9.3 per capita in 2002, versus 1.9 percent of GDP and US$7.5 in 1998.
  - Budget allocations increased but low absorptive capacity limited actual spending.
  - Shift toward primary health care and rural/remote services has started.
- HIPC resources:
  - HIPC resources increased from UM 4.5 billion (US$18.8 million) in 2000 to UM 17.4 billion (US$64.9 million) in 2003.
  - Only half of HIPC resources have been spent to date.
  - Sectoral allocation: health, water, energy received substantial increases; infrastructure, rural development, multisectoral projects received less.
  - Regional allocation of HIPC expenditures in 2003 did not match contribution to total poverty by Wilaya; regions contributing most to incidence of poverty (including Trarza, Guidimagha and Gorgol) were not the primary recipients of HIPC expenditure.

### Quality and access of social services
- Education system quality issues: low internal efficiency, high number of unfinished schools, inefficient teacher deployment across regions and within schools, deficiencies in content and quality.
- Health access and quality:
  - 23 percent of population must travel more than five kilometers to reach a health center or post.
  - 10 percent must travel more than ten kilometers to reach the nearest health facility.
  - Quality of public health facilities remains poor, reflected in low attendance rates and high unit costs.

### Expected performance with respect to MDG targets
- Oil production beginning in 2006 presents an opportunity to realize PRSP objectives and achieve most 2015 MDGs, conditional on:
  - Transparent and efficient oil revenue management.
  - Containing rises in income inequality.
  - Targeting public spending to the poor.
- Projected poverty incidence in 2015 under different assumptions (from 46.7 percent in 2000):
  - If inequality increases along past trends and nonoil per capita growth maintained at 3.5 percent (baseline): poverty incidence projected to decrease to 32.5 percent by 2015 (above MDG of 28.3 percent).
  - If nonoil per capita growth is 2.5 percent (low-case): poverty incidence projected to decrease to 38.3 percent by 2015.
- Under pro-poor policies that prevent further growth in inequality (Assumption II):
  - With average annual nonoil per capita growth of 3.5 percent: poverty incidence could fall to 26.2 percent by 2015.
  - With average annual nonoil per capita growth of 2.5 percent: poverty incidence could fall to 32.1 percent by 2015.
- Recommended pro-poor policies include:
  - Appropriate macroeconomic policies, in particular to contain Dutch disease.
  - A substantial increase in per capita government spending in constant U.S. dollar terms (the baseline scenario envisages about 60 percent increase over 2005–15).
  - Appropriate sectoral policies to foster broad-based growth (particularly in agriculture), increased investments in infrastructure, better access to bank credit for small and medium-size enterprises, reliable provision of water, and an efficient transport and communications network.

*Source: IMF staff report chapter on poverty and social developments (text provided).*

### 16.      Other MDGs are also within reach if government spending priorities posted in

### 16.      Other MDGs are also within reach if government spending priorities posted in

### Summary findings
- According to the World Bank estimates, reaching the 2015 MDGs will require over the next ten years a social spending increase of 35 percent in real terms compared to the expenditure budgeted for 2001–04.
- Table 6 shows that this can be achieved under both scenarios.
- Improvement in the delivery of health and education services to the poor will require the substantial building of human capital and strengthening of institutional capacities.

### Poverty and inequality projections (excerpted numbers as presented)
- 2.02.53.03.54.0  index2.02.53.03.54.0
- 200544.943.942.942.041.0   0.40842.841.840.939.938.9
- 201043.141.139.237.235.3   0.42538.937.035.033.131.1
- 201541.238.335.432.529.5   0.44335.032.129.226.223.3

- Source:  IMF staff calculations based on estimated growth of poverty of -1.1 and inequality elasticity of poverty of 1.40 (see Iradian, 2005).
- Footnotes reproduced:
  - 1/ Inequality increases further from 0.39 in 2000 to 0.44 by 2015.
  - 2/ Inequality remains constant at 0.39 through 2015.

### Table 5 caption (as presented)
- Table 5.  Mauritania: Projections of Poverty Incidence Under Different Inequality (In percent of the population)
- Assumption II (Constant Inequality) 2/
- Per Capita Growth RatesPer Capita Growth Rates
- Assumption I (Increasing Inequality) 1/
- and Growth Rate Assumptions
- 2001–04
- Baseline    Low-case    
- scenarioscenario

### Table 6 — Budgetary social spending: key projected figures (verbatim)
- Social spending
  - In percent of nonoil GDP9.08.77.6
  - In constant 2004 US$ millions117240191
     - Percent change compared to 2001–04...10563
- Nonoil real GDP growth (percentage change)4.45.74.6

- Sources: Mauritanian authorities for 2001–04; and staff projections for 2005–15.
- Actual
- 2005–15
- Table 6. Mauritania: Budgetary Social Spending—Long-Term Projections

*Source: IMF staff calculations and text from _cr06248 - 16.      Other MDGs are also within reach if government spending priorities posted in_*

### References

### _cr06248 - References and Statistical Appendix (Selected Highlights)

### References
- Dollar, David, and Aart Kraay, 2002, “Growth is Good for the Poor,” Journal of Economic Growth, Vol. 7, No. 3, pp. 195–225.
- Iradian, Garbis, 2005, “Poverty, Inequality and Growth: Cross Country Evidence,” WP/05/28, (Washington: International Monetary Fund).
- Islamic Republic of Mauritania, 2003, Poverty Reduction Strategy Paper Annual Progress Report, IMF Board Papers EBD/03/59, Washington DC.
- Ravallion, M., 2001, “Growth, Inequality, and Poverty: Looking Beyond Averages,” World Development, Vol. 29 (11), pp. 1803–15.
- UNDP, Human Development Report 2004, Oxford University Press, New York.
- World Bank, 2004, Public Expenditure Review: Focusing Public Expenditure on Growth and Poverty Reduction (Green cover, mimeo), Washington DC.

### GDP, Sector Composition, and Growth (1998–2004)
- GDP (at factor cost) levels (in millions of ouguiyas): 197,415 (1998); 217,901 (1999); 239,941 (2000); 260,194 (2001); 281,687 (2002); 328,127 (2003); 378,291 (2004).
- GDP (at market prices) levels (in millions of ouguiyas): 213,590 (1998); 235,849 (1999); 258,245 (2000); 280,688 (2001); 303,368 (2002); 352,519 (2003); 406,487 (2004).
- Sector shares of GDP (percent of GDP, selected): Rural sector 20.2 (1998), 19.1 (1999), 17.9 (2000), 17.0 (2001), 16.7 (2002), 16.8 (2003), 15.2 (2004); Public administration 15.2 (1998), 15.8 (1999), 16.0 (2000), 16.4 (2001), 16.3 (2002), 19.0 (2003), 17.8 (2004).
- Annual GDP growth rate (market prices, percent): 7.8 (1999), 6.7 (2000), 3.6 (2001), 2.3 (2002), 6.4 (2003), 6.9 (2004). (Table 2 shows growth at constant 1998 prices.)

### Agriculture, Cereals, and Food Supply
- Area cultivated (total cereals, in thousands of hectares): 175.6 (1998/99 est.); 223.2 (1999/00); 207.2 (2000/01); 194.5 (2001/02); 109.3 (2002/03 est.); 212.5 (2003/04 est.); 191.4 (2004 est.).
- Cereals production (thousands of metric tons): Total cereals 194.2 (1998/99 est.); 192.8 (1999/00); 178.5 (2000/01); 124.8 (2001/02); 115.8 (2002/03 est.); 181.2 (2003/04 est.); 102.9 (2004 est.).
- Supply of cereals (in thousands of metric tons): Production 139.6 (1998); 191.2 (1999); 194.6 (2000); 179.9 (2001); 120.4 (2002); 142.5 (2003); 109.5 (2004). Imports 71.3 (1998); 209.7 (1999); 269.8 (2000); 247.7 (2001); 259.1 (2002); 355.3 (2003); 264.7 (2004).
- Per capita cereal supply (kg): 145.3 (1998); 147.0 (1999); 162.0 (2000); 154.8 (2001); 134.2 (2002); 175.6 (2003); 112.5 (2004). (Table 5)

### Livestock
- Livestock herd (stock at year-end, in thousand heads): Cattle 1,448 (1998); 1,497 (1999); 1,550 (2000); 1,620 (2001); 1,676 (2002); 1,315 (2003); 1,354 (2004). Sheep and goats 11,960 (1998); 12,558 (1999); 13,384 (2000); 13,775 (2001); 14,045 (2002); 14,329 (2003); 15,900 (2004). Camels 1,206 (1998); 1,230 (1999); 1,278 (2000); 1,329 (2001); 1,381 (2002); 1,323 (2003); 1,350 (2004). (Table 6)

### Fisheries and Fish Exports
- Estimated fish catch (thousands of metric tons): Total 659.154 (1998); 504.738 (1999); 544.925 (2000); 642.285 (2001); 672.643 (2002); 639.073 (2003); 753.530 (2004, Jan–Nov). Pelagic 534.264 (1998); 419.880 (1999); 458.093 (2000); 544.837 (2001); 602.565 (2002); 532.714 (2003); 678.200 (2004). (Table 7)
- Composition of fish exports (volume and value, selected): Total export value (millions of ouguiyas) 26,099 (1998); 32,554 (1999); 35,445 (2000); 36,340 (2001); 32,924 (2002); 35,365 (2003); 30,478 (2004). (Table 8)

### Mining, SNIM, and Iron Ore
- Iron ore production (thousand metric tons): Production 11,373 (1998); 10,401 (1999); 11,345 (2000); 10,302 (2001); 9,553 (2002); 10,153 (2003); 8,396 (2004, Jan–Sep). Exports 11,402 (1998); 11,042 (1999); 11,069 (2000); 10,093 (2001); 10,460 (2002); 9,627 (2003); 8,347 (2004, Jan–Sep). (Table 9)
- SNIM operating accounts (in millions of ouguiyas, total revenue/expenses/operating profits): Total revenue 44,951 (1998); 42,819 (1999); 54,330 (2000); 57,177 (2001); 44,759 (2002); 48,860 (2003); 51,348 (2004, Jan–Sep). Total expenses 32,670 (1998); 35,772 (1999); 44,976 (2000); 50,472 (2001); 43,750 (2002); 48,163 (2003); 38,012 (2004, Jan–Sep). Operating profits (+)/losses (-) 12,281 (1998); 7,047 (1999); 9,354 (2000); 6,705 (2001); 1,009 (2002); 697 (2003); 13,336 (2004, Jan–Sep). (Table 10)
- SNIM balance sheet (in millions of ouguiyas, end of period): Assets 100,476 (1998); 101,402 (1999); 100,905 (2000); 99,936 (2001); 107,311 (2002); 114,462 (2003); 121,520 (2004, Jan–Sep). Liabilities and equity mirror assets. (Table 11)

### Public Utilities, Energy, and Petroleum Consumption
- Selected public utility rates (SONELEC electricity in ouguiyas per kilowatt hour): Medium voltage (one hook-up) 17.6 (1998); 20.2 (1999); 23.8 (2000); 23.8 (2001); 23.8 (2002); 23.2 (2003); 23.2 (2004, Jan–Nov). (Table 12)
- Consumption of petroleum products (thousands of metric tons): Ordinary gasoline 36.7 (1998); 33.8 (1999); 26.0 (2000); 22.3 (2001); 24.3 (2002); 26.9 (2003); 25.7 (2004, Jan–Nov). Gas oil 197.5 (1998); 213.5 (1999); 224.8 (2000); 246.8 (2001); 277.4 (2002); 289.2 (2003); 285.4 (2004, Jan–Nov). (Table 13)
- Unit prices of petroleum products (selected monthly indices, 2004/2005): Regular gasoline (example values across 2004): January 173.1; February 173.1; March 171.1; April 167.0; May 152.5; December 150.7; 2004 final listed value 212.8. Butane (bottle of 12.5 kg) listed as 1500 (2001) to 1560 (repeated entries) and 1560 (2004), with 2004 column showing 1560 and one entry 1560 repeated; 2004 final column lists 1560 and 1560 for 2004—(Table 14).

### Consumer Prices (Nouakchott CPI), January 2004–February 2005
- CPI overall index (annual average 2004): 114.1.
- Monthly overall index (2004 January–December, and 2005 January–February): January 108.0; February 109.0; March 111.6; April 112.6; May 113.8; June 116.0; July 117.7; August 121.8; September 122.5; October 126.3; November 127.6; December 128.5; 2005 January 131.5; 2005 February 132.4.
- CPI component weights (percent): Foodstuffs 54.4; Clothing 5.9; Lodging 13.7; Furniture 6.3; Health 1.5; Transport 10.3; Leisure Culture 1.6; Education 0.6; Hotels Restaurants 1.8; Services and other 4.1. (Table 15)

### Wages and Salaries
- Guaranteed minimum industrial wage (SMIG) and agricultural wage (SMAG) in ouguiyas: 42.83 (1998–2004 listed repeatedly).
- Public sector (civil servants' monthly salaries, in ouguiyas, selected categories): Category A1 120,932 (1998); 21,350 (1999) [note: inconsistent formatting in source]; later years displayed: 23,485; 25,455; 27,464; 32,682; 38,565. Category B 22,559 (1998); 23,687 (1999); 26,056; 28,077; 30,139; 35,865; 42,321. Category E (teachers — Teachers) 24,718 (1998); 25,212 (1999); 27,733; 29,788; 31,883; 37,941; 44,771. (Table 16)

### Public Investment Program and Financing (1998–2004)
- Total investment (in millions of ouguiyas): 16,290 (1998); 17,969 (1999); 21,355 (2000); 26,497 (2001); 33,843 (2002); 38,127 (2003); 17,965 (2004 est.). Breakdown by sector shows Infrastructure 5,148 (1998) to 13,748 (2003) then 5,449 (2004 est.); Human resources 3,107 (1998) to 6,453 (2002) then 5,242 (2003) and 2,586 (2004 est.). (Table 17)
- External financing (memorandum): 10,289 (1998); 13,537 (1999); 12,938 (2000); 14,651 (2001); 17,349 (2002); 16,987 (2003); 17,965 (2004). Grants and loans split provided in table. (Table 17)

### Consolidated Government Operations (1998–2004) — Levels and Shares
- Consolidated government operations (in billions of ouguiyas): Revenue and grants 53.8 (1998); 61.2 (1999); 60.7 (2000); 59.9 (2001); 112.0 (2002); 98.9 (2003); 113.7 (2004). Expenditures and net lending 47.1 (1998); 51.7 (1999); 67.8 (2000); 65.6 (2001); 84.5 (2002); 213.5 (2003); 196.7 (2004). (Table 18)
- As percent of GDP: Total revenue 51.1 (1998); 56.0 (1999); 55.8 (2000); 47.3 (2001); 96.1 (2002); 85.0 (2003); 103.2 (2004). Tax revenue 29.5 (1998); 31.6 (1999); 33.3 (2000); 33.6 (2001); 38.7 (2002); 43.5 (2003); 57.6 (2004). Nontax revenue 21.6 (1998); 24.4 (1999); 22.5 (2000); 10.9 (2001); 57.4 (2002); 41.5 (2003); 45.6 (2004). (Table 19)
- Expenditure composition (percent of GDP, selected): Current expenditures 33.1 (1998); 36.3 (1999); 39.1 (2000); 42.6 (2001); 52.6 (2002); 127.3 (2003); 122.4 (2004). Capital expenditures and net lending 13.8 (1998); 15.1 (1999); 28.7 (2000); 23.1 (2001); 32.0 (2002); 56.1 (2003); 67.3 (2004). (Table 18)

### Government Revenue Composition (1998–2004)
- Tax revenue composition (percent of GDP and percent of tax revenue): Taxes on goods and services (percent of GDP) 14.3 (1998); 15.8 (1999); 16.5 (2000); 18.2 (2001); 19.5 (2002); 24.2 (2003); 30.1 (2004). VAT contribution to GDP 6.1 (1998); 6.9 (1999); 7.8 (2000); 9.3 (2001); 10.4 (2002); 16.0 (2003); 20.7 (2004). Fishing royalties and penalties as percent of GDP (nontax revenue): 17.4 (1998); 16.1 (1999); 16.4 (2000); 5.3 (2001); 51.8 (2002); 32.9 (2003); 38.2 (2004). (Tables 20–21)

### Financial Sector and Monetary Indicators
- Monetary survey (in millions of ouguiyas, end-period): Money and quasi-money 28,022 (1998); 29,222 (1999); 32,951 (2000); 38,650 (2001); 42,102 (2002); 85,643 (2003); 126,338 (2004). Reserve money 8,406 (1998); 8,788 (1999); 9,222 (2000); 9,723 (2001); 10,038 (2002); 30,872 (2003); 69,769 (2004). Net foreign assets (monetary survey) -2,266 (1998); -2,329 (1999); 7,865 (2000); 15,475 (2001); 46,526 (2002); -6,530 (2003); -47,050 (2004). (Table 24)
- Central Bank assets and liabilities (in millions of ouguiyas): Assets 87,376 (1998); 95,048 (1999); 114,098 (2000); 117,980 (2001); 149,407 (2002); 175,858 (2003); 125,558 (2004). Foreign assets 41,753 (1998); 43,747 (1999); 57,507 (2000); 67,253 (2001); 99,511 (2002); 50,811 (2003); 9,952 (2004). (Table 24)
- Commercial banks assets and liabilities (in millions of ouguiyas): Assets 54,354 (1998); 61,671 (1999); 72,557 (2000); 82,318 (2001); 98,753 (2002); 157,705 (2003); 195,338 (2004). Demand deposits 12,467 (1998); 14,787 (1999); 17,749 (2000); 21,033 (2001); 22,628 (2002); 51,556 (2003); 67,961 (2004). (Table 25)
- Interest rates (percent per year): Central Bank discount rate 18 (1998) then listed 18 13 11 11 11 11 (1999–2004); Maximum commercial lending rate 28 (1998); 28 (1999); 23 (2000); 21 (2001–2004); Treasury bill rate overall average 6.0 (2001); 6.0 (1999 shown as dots in some years) 6.3 (2002); 5.9 (2003); 7.2 (2004). (Table 27)

### Bank Credit Distribution
- Total bank credit (millions of ouguiyas; end of period): 33,802 (1998); 40,015 (1999); 56,571 (2000); 66,552 (2001); 80,014 (2002); 102,023 (2003); 107,300 (2004).
- Sectoral distribution (short-term credit, selected): Fishing 8,533 (1998); 9,677 (1999); 12,259 (2000); 13,228 (2001); 14,788 (2002); 14,310 (2003); 13,573 (2004). Trade 12,750 (1998); 14,854 (1999); 21,548 (2000); 26,810 (2001); 33,373 (2002); 24,176 (2003); 25,875 (2004). (Table 28)

### Balance of Payments and External Position (1998–2004)
- Trade balance (millions of U.S. dollars, selected years): Trade balance 1.9 (1998); 28.4 (1999); 8.5 (2000); -33.7 (2001); -78.9 (2002); -349.1 (2003); -377.8 (2004 est.). Exports 359.7 (1998); 333.1 (1999); 344.7 (2000); 338.6 (2001); 330.3 (2002); 303.1 (2003); 408.2 (2004). Imports f.o.b. -357.9 (1998); -304.7 (1999); -336.2 (2000); -372.3 (2001); -409.1 (2002); -652.2 (2003); -786.0 (2004). (Table 29)
- Current account balance (millions of U.S. dollars): -30.3 (1998); -2.3 (1999); -53.5 (2000); -71.6 (2001); 12.0 (2002); -296.4 (2003); -428.0 (2004). (Table 29)
- Gross official reserves (end of period, millions of U.S. dollars): 182.6 (1998); 203.6 (1999); 250.0 (2000); 254.6 (2001); 370.3 (2002); 191.3 (2003); 39.0 (2004). Months of imports: 4.1 (1998); 5.0 (1999); 5.9 (2000); 5.5 (2001); 5.8 (2002); 2.6 (2003); 0.6 (2004). (Table 29)
- Exports composition (millions of U.S. dollars): Iron ore value 217.0 (1998); 177.1 (1999); 194.1 (2000); 178.5 (2001); 183.8 (2002); 175.3 (2003); 244.2 (2004). Fish value 140.6 (1998); 154.8 (1999); 149.1 (2000); 156.9 (2001); 143.5 (2002); 125.8 (2003); 162.7 (2004). (Table 30)

### Services, Transfers, and External Assistance
- Services (net, millions of U.S. dollars): Total services (net) -122.5 (1999); -133.3 (2000); -164.4 (2001); -6.4 (2002); -80.3 (2003); -153.5 (2004). Fishing royalties and payments and fish license payments feature prominently: fish license payment receipts 57.2 (1999); 47.5 (2000); 0.0 (2001); 161.6 (2002); 95.6 (2003); 106.8 (2004). (Tables 32, 29)
- Transfers (net): Total transfers 91.8 (1999); 71.2 (2000); 126.5 (2001); 97.3 (2002); 132.9 (2003); 103.3 (2004). Private unrequited transfers (net) 55.9 (1999); 42.4 (2000); 35.4 (2001); 47.9 (2002); 30.4 (2003); 45.0 (2004). Official transfers and multilateral HIPC assistance noted in the series. (Table 32)

### External Debt and Debt Service (1998–2004)
- Total external debt outstanding (millions of U.S. dollars): 2,136.8 (1998); 1,982.7 (1999); 1,962.6 (2000); 1,991.3 (2001); 1,826.8 (2002); 1,779.8 (2003); 1,886.5 (2004). (Table 33)
- Total debt service due (including Fund, millions of U.S. dollars): 137.1 (1998); 131.0 (1999); 134.0 (2000); 125.5 (2001); 131.0 (2002); 137.1 (2003); 130.5 (2004). Total debt service after debt relief (percent of exports of goods and services): 23.5 (1998); 24.1 (1999); 23.0 (2000); 12.3 (2001); 11.5 (2002); 10.1 (2003); 9.2 (2004). (Table 33)
- Composition of medium- and long-term debt (percent shares of total, 1998–2004): Multilateral loans 1,096.6 (1998) rising to 1,414.9 (2004) in level terms; bilateral loans 1,040.3 (1998) to 471.6 (2004) in level terms; table provides creditor-by-creditor breakdown. (Table 34)

### Average Terms of Contracted Public External Debt (Selected Averages)
- Average interest rate on total loans (percent): 0.5 (1998); 1.4 (1999); 1.6 (2000); 1.3 (2001); 1.6 (2002); 0.8 (2003); 2.5 (2004).
- Average maturity (years) for total loans: 39.6 (1998); 32.1 (1999); 28.8 (2000); 31.8 (2001); 20.1 (2002); 24.5 (2003); 25.5 (2004).
- Grant element reported as 82.7 (1998) for total loans in the table context. (Table 35)

### Banking System and Commercial Banks (Selected)
- Commercial banks (as of end-December 2004): Listed banks include Banque Al Wava Mauritanienne Islamique (BAMIS) established 1985, Banque de l'Habitat de Mauritanie (BADH) established 1997, Banque Mauritanienne pour le Commerce International (BMCI) established 1974, Banque Nationale de Mauritanie (BNM) established 1989, Chinguetti Bank established 1972, Générale de Banque de Mauritanie (GBM) established 1995, Banque du Commerce et de l'Industrie established 1999, BACIM established 2002. Shareholder structures and subscribed capital (UM millions) are provided in the table. (Table 22)

### Tax System Summary (Selected Elements)
- Income Tax (Impôts sur les Bénéfices Industriels et Commerciaux—BIC): Art. 2 base; rate 25 percent (Budget Law 2005). Exemptions include cooperative companies and entities authorized under Law 67-171 of July 18, 1967.
- Impôt sur les Bénéfices Non Commerciaux (BNC): rate 35 percent.
- Impôt Minimum Forfaitaire (IMF): Art. 24 (CGI) Four percent of turnover; 100 percent deductible (Budget Law 2002).
- Impôt sur les Revenus Fonciers (IRF): Rate 6 percent (Budget Law 2002); exemption for taxpayers with annual rental income ≤ UM 60,000 (exclusive of other income).
- Impôts sur les Traitements et Salaires (ITS): progressive rates with a general exemption UM 10,000; bracket specifications include “Under 32,500: average rate 15 percent” and “Over 32,500: marginal rate 40 percent” (Budget Law 2005—source text formatting indicates further details).
- Impôt Général sur les Revenus (IGR) for habitual resident individuals: rates listed by bands—Up to UM 180,000: 0 percent; UM 180,001–UM 380,000: 5 percent; UM 380,001–UM 700,000: 10 percent; UM 700,001–UM 1,350,000: 20 percent; UM 1,350,001–UM 2,500,000: 30 percent; Over UM 2,500,000: 40 percent.
- Motor vehicle tax (Taxe sur les Véhicules à Moteur, T.V.): flat tax by horsepower categories (example rates: 4 cylinders: 10.8; 5 = 7 cylinders: 15.0; 8 = 11 cylinders: 19.8; 12 = 16 cylinders: 27.0; = 17 cylinders: 46.8) with listed exemptions. (Tax summary tables)

*Source: _cr06248 - References and Statistical Appendix (tables and text extracted from the source PDF).*

### 0.60 percent

### _cr06248 - 0.60 percent

### Indirect Taxes
- Taxe sur la Valeur Ajoutée (TVA) [Value Added Tax (VAT)]
  - Levied on imports, delivery of goods, and provision of services.
  - Rates of 0 percent and 14 percent
  - Exemptions: (Art. 177 Quinquiès of the CGI).
  - Establishment of a procedure for refunding VAT credits (Decree R-979 of 12/31/2001).
  - Extension of refunds to capital goods imports.
- Taxe sur le Chiffre d’Affaires (TCA) [Turnover tax]
  - Levied on operations that are not subject to the VAT.
  - Flat tax
  - None
- TPS (Art. 2002 of the CGI)
  - Applies to: bank transactions; financial transactions; credit transactions; service provision subject to the presumptive BIC tax and not subject to VAT.
  - Rate: 16 percent
  - Premiums on funds captured by rediscounting or repurchase of public or private securities.

### Taxes de Consommation [Consumption taxes]
- Applied to: petroleum products; alcoholic beverages; tobacco products; various goods.
- Various flat taxes
- None

### Registration and Stamps
- Droits d’Enregistrement [Registration taxes]
  - Applied to acts involving equity transfers or shares and to acts establishing or extending companies (Art. 296 of the CGI).
  - Fixed rate of 0.5 percent.
  - Budget Law 2002: Mergers: UM 200, 5 percent, 1 percent , 0.5 percent; Property deeds: 9.2 percent, 6 percent, 15 percent, 5 percent; Miscellaneous acts: 12 percent, 1 percent, 8 percent; Fixed taxes: UM 200, UM 300, and UM 1,000
  - Applies to: Commercial paper; Security for goodwill; Change-of-ownership acts in relation to companies and cooperatives.
- Droits de Timbre [Stamp taxes]
  - Applied to different written acts and documents subject to the stamp tax.
  - UM 400, UM 200, and UM 100
  - None

### Taxes Levied to the Benefit of Local Governments
- Contribution Foncière sur les Propriétés Bâties [Tax on improved property]
  - Art. 429: The tax base is the rental value at January 1 of the tax year of property subject to the tax on improved property.
  - Rate: 8 percent
  - Art. 428: Exemptions:
    - The property, buildings, or premises belonging to the government and local governments.
    - The property, buildings, or premises belonging to administrative public enterprises, when used for a public service or general utility, provided that it is nonincome generating.
    - The buildings used as public places of worship.
    - Facilities established for supplying drinking water and electrical energy.
    - Property used for farming or for housing animals or storing harvests.
    - Property belonging to foreign governments and used as the official residence of their diplomatic and consular missions accredited to the Mauritanian Government.
    - Property used as schools.
    - Property used as medical or social assistance facilities.
    - Straw huts.
- Patente [Business license tax]
  - Schedule based on actual turnover (Art. 449) - Simplified fixed tax
  - Simplified fixed tax ranging from UM 100,000 to UM 1,500,000 (Budget Law 2002)
  - Art. 447 exemptions:
    - Individuals, except carriers, meeting the conditions set out in Articles 7 and 29, defining the scope of application of the presumptive regime, provided that they have not opted for the simplified real profits regime of the industrial and commercial profits tax;
    - The government and its departments, including the food security commissioner’s office;
    - Local governments;
    - Humanitarian organizations and welfare and aid organizations;
    - Public establishments for supplying water.
- Taxe d’Habitation [Tax on housing]
  - Payable by wage-earners on owner-occupied housing for: the residential space; the space used by companies, associations, groups, and other private agencies not subject to the business license tax. (Art. 437 of the CGI).
  - The rate is based on the bracket. There are five brackets. Upper limit – UM 15,000 per unit (Budget Law 2001)
  - Exemptions:
    - The government, regions, communes, and administrative public enterprises.
    - Ambassadors and other diplomatic staff of foreign nationality in the commune of their official residence, for that residence only, provided that the countries they represent grant the same benefits to Mauritanian ambassadors and diplomatic staff.
    - Humanitarian organizations and welfare and aid organizations; the personal housing of staff members of these organizations remains taxable.
- Taxes Communales [Communal taxes]
  - Tax base: Profession or activity practiced (Art. 465 New Budget Law 2001)
  - Rates vary from UM 50 to UM 6,000 (Budget Law 2001), set by the Municipal Council after deliberation.
  - None

*IMF staff report (Mauritania: Summary of the Tax System).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06248.pdf_