## Mauritania: Selected Economic and Financial Indicators, 2001–06

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### Background
- Transition authorities in power since August 2005 committed to democracy, rule of law, and good governance; presidential elections scheduled for March 11, 2007.
- Authorities expressed interest in an SMP to build a track record for a new PRGF arrangement after cancellation of the 2003 PRGF arrangement in November 2004.
- Central Bank of Mauritania (BCM) disclosed corrected monetary data for 1992–2004 and initiated an audit of its 2003 accounts, acknowledging prior practice of providing inaccurate data to the Fund.
- Revised data indicate significant imbalances and low levels of foreign reserves persisted over many years rather than a one-time 2003–04 expansion and sudden depletion.
- Comprehensive revisions of macroeconomic data expected before the next Article IV consultation scheduled for June 2006.

### Recent economic developments (2005)
- Growth and inflation:
  - Real GDP growth: estimated at 5½ percent in 2005.
  - CPI inflation: twelve-month CPI inflation fell from double-digit through August 2005 to less than 6 percent at year-end 2005.
- External and exchange:
  - Parallel FX market premium: shrank from 16 percent in September 2005 to less than 4 percent at year-end 2005 and turned slightly negative in January 2006.
  - Official reserves: nearly double end-2004 reported level but remained low at 0.7 months of import cover.
  - Real effective exchange rate: up by 7.3 percent during January–November 2005.
- Fiscal and monetary outcomes:
  - Fiscal deficit (excluding grants) contained at 8¾ percent of GDP in 2005, about ½ percent of GDP below the supplementary budget target.
  - Payment arrears reduced by 25 percent on an annual basis.
  - Broad money growth: 14.6 percent in 2005.
  - Credit to private sector growth: 7 percent in 2005 (compared with nearly 15 percent in 2004).
  - Net credit to government increased by 23 percent reflecting banks' increased holdings of treasury bills after BCM raised key policy rates.
- Structural reforms initiated:
  - Improved data reporting by BCM and Treasury; decision to adhere to EITI and United Nations Convention Against Corruption; elimination of oligopolistic practices in transportation sector.

### Policy discussions and the SMP (January–June 2006)
- SMP objectives:
  - Consolidate macro stabilization, improve governance and transparency, strengthen BCM safeguards, remedial public expenditure management measures, and establish transparent oil revenue management.
- Policy focus for 2006:
  - Balance wage pressures and revenue uncertainties while containing macroeconomic risks; keep inflation under control; ensure adequate credit growth to private sector; gradual build-up of foreign reserves.
- Medium-term preliminary outlook:
  - Oil-driven expansion and FDI in mining expected to raise annual real GDP growth in 2006–10 to 10 percent on average (half directly from oil).
  - CPI inflation expected to be brought below 5 percent within two years.
  - Official reserves expected to exceed 3 months of import cover starting in 2008.

### Fiscal policy (2006)
- 2006 budget and outcomes:
  - Consolidates late-2005 fiscal adjustment and aims to substantially reduce domestic arrears.
  - Overall fiscal position expected to improve by nearly 10 percent of GDP in 2006, leading to a 2.8 percent of GDP surplus.
  - Up to 17 percent of 2006 oil revenue (equivalent to some 1½–2 percent of GDP) to be set aside in the National Hydrocarbon Revenue Fund.
  - Spending contingencies of 1½ percent of GDP available if not used.
  - Government arrears targeted to fall from 8 percent of GDP at end-2005 to 3½ percent at end-2006 (half corresponding to normal treasury float).
- Oil and nonoil revenue dynamics:
  - Commencement of oil production will boost government revenue by more than 40 percent.
  - Nonoil revenue expected to decline slightly as percent of GDP partly due to delays in renewing fishing agreement with the EU.
  - Offsetting measures include alternative licensing with fishing operators, increased tax and nontax revenue from SNIM, sale of a cellular telephone license, collection of tax arrears from public enterprises, changes to import taxation under 2006 budget law, and administrative reforms in tax and customs directorates.
- Wages and spending:
  - Central government base salaries increased by 50 percent; implies a 20 percent increase in civil service wage bill (or ¼ percent of GDP) compared with 2005 effective payments.
  - Military expenditure rise of ½ percent of GDP and increase in subsidies and transfers of 1 percent of GDP.
  - Social expenditures expected to rise from 6.7 percent of GDP to 8 percent of GDP.
  - Central government capital spending expected to decline as percent of GDP but offset by large foreign-financed projects of 2¾ percent of GDP (compared with ¼ percent of GDP in 2005) executed by public enterprises with foreign resources on-lent by the central government.
- Cash management and early-2006 financing:
  - First-quarter 2006 financing needs estimated at UM 8 billion to be covered by temporary borrowing from the banking system (including limited drawdown of Treasury account at BCM) and from nonbanks (notably SNIM).
  - With arrival of oil revenue in second quarter, government will reduce arrears and repay first-quarter borrowings in second half of 2006.

### Monetary policy (2006)
- Objectives: contain inflation, build official foreign exchange reserves, and move toward more flexible exchange rate policy.
- Monetary projections assumptions for 2006:
  - 20 percent increase in money demand from projected 11 percent rise in real income, 7 percent in average CPI, and 2 percent in re-monetization (predominantly bank deposit increases) due to increased confidence in the ouguiya.
- Credit and liquidity management:
  - Expansion of credit to the economy expected to remain modest in 2006; reduction in government arrears will free resources for enterprises.
  - BCM reduced required reserves ratio on ouguiya deposits from 8 to 7 percentage points in early January to address bank liquidity concerns.
  - BCM reference interest rates are positive in real terms and could be raised to reduce inflation.
  - BCM to modernize liquidity management instruments with IMF technical assistance.
- Exchange rate and reserves:
  - BCM ready to accept greater exchange rate flexibility and to limit open-window FX interventions to avoid resurgence of parallel market premium.
  - With expected government oil revenue exceeding US$200 million in 2006, BCM should be able to build foreign reserves significantly in excess of one month of import cover by year-end 2006.
  - Staff emphasized maintaining BCM real interest rates at levels consistent with quarterly foreign reserves targets (MEFP ¶24).
- Contingency:
  - If money demand strengthens significantly, BCM will refrain from sterilizing net foreign asset build-up in excess of projected amounts unless inflation outlook deteriorates.

### External sector, exports and debt sustainability
- Exports and current account:
  - Exports will triple in 2006 with the start of oil production.
  - The current account will swing into a surplus of nearly 5 percent of GDP (including oil).
  - A significant impact on the external position will only be felt in the second half of the year.
  - Excluding oil and other FDI-driven mining activities, the current account deficit will widen in 2006, reflecting rising cost of imported fuel and a surge in imports related to the ambitious public investment program.
- Oil production and revenue projections:
  - Production started on February 24.
  - Projected to reach 75,000 barrels per day (b/d) in 2006 and to exceed 100,000 b/d by 2010.
  - Government oil revenue projection UM 56.7 billion based on US$60 per barrel.
  - Amount of oil revenue to be spent under 2006 budget UM 47.1 billion based on conservative US$45 per barrel assumption.
- Debt sustainability:
  - Gross public external debt burden (excluding debt under negotiation) is expected to decline substantially over the medium term, reflecting the favorable external outlook and continued impact of HIPC debt relief.
  - The net present value of these liabilities is projected to drop from 53 percent of GDP in 2004 to about 20 percent of GDP (including oil) in 2010.
  - Qualification for MDRI would imply an additional reduction of the outstanding nominal amount by nearly 40 percent.
- Authorities’ commitments:
  - Not to contract any additional medium- or long-term nonconcessional debt under the SMP.
  - To seek final agreements with bilateral creditors (Algeria, Iraq, Libya, and the United Arab Emirates) that have not yet provided irrevocable HIPC relief, and to resolve contested assessments of liabilities towards Kuwait and Libya.

### Structural and institutional reforms — data transparency and public finance management
- Central bank audit and reporting:
  - Ongoing audit work at the central bank will be completed as planned (MEFP ¶27).
  - BCM continues to address qualifications in preliminary audit reports for the 2003 and 2004 accounts; improvements will be reflected in the 2005 accounts; the 2005 audit is already underway.
  - The auditor issued an adverse opinion on the 2003 financial statements; the audit opinion for the end-2004 balance sheet is more favorable, confirming with only minor qualifications the level and availability of international reserves.
  - Monetary accounts will be published monthly starting in July 2006.
  - Commercial banks’ accounts for 2005 will be subject to an international audit; BCM (in consultation with the banks) will prepare standard terms of reference by end-March 2006.
- Public finance remedial actions and reporting:
  - Authorities intend to complete remedial actions needed for MDRI qualification by end-May (MEFP ¶29–31 and Table 3).
  - Extrabudgetary spending has already stopped.
  - Treasury float reduced from more than UM 20 billion at end-2004 to UM 10 billion at end-2005.
  - A plan for clearance of other spending arrears included in the 2006 budget.
  - Public accounts regularized for 2005; Treasury closed the accounts at year-end and produced a preliminary balance.
  - A monthly treasury balance will be produced starting in April; Treasury accounts reconciled with the BCM on a weekly basis.
  - Implementation of a functional classification will enable more precise definition and tracking of poverty-reducing expenditures.

### Management of government oil revenue (FNRH arrangements)
- Institutional and transparency provisions:
  - Ministry of Energy and Petroleum, in cooperation with the Ministry of Finance (MoF) and the BCM, will produce monthly reports on hydrocarbon production, sales, and all pertinent revenue accruing to the government and the Mauritanian Hydrocarbon Company (SMH); reports will be published on the Internet on a quarterly basis.
  - Creation of the National Hydrocarbon Revenue Fund (FNRH) to receive all government oil revenue; FNRH established as an off-shore account and administered by the BCM, which will prepare quarterly reports for the MoF.
  - FNRH accounts to be audited by an independent auditor of international reputation at least once a year (and necessarily at the end of each year); audit reports will be posted on the Internet and published in national newspapers in a timely manner.
  - FNRH annual report to be audited by the General Audit Office and appended to the budget execution law.
  - FNRH will not borrow; its assets may not be pledged or subject to any encumbrances; it will adopt a prudent management profile and reinvest income earned on FNRH assets.
  - Subsequent budget laws will include projections for the FNRH and underlying assumptions.
  - Resources of the FNRH will either be saved or used to finance part of the nonoil fiscal deficit; withdrawals will take the form of monthly transfers to the single Treasury account at the BCM, within annual limits set out in budget laws and upon joint authorization by the Minister of Finance and the Governor of the BCM.
- Civil society and legal framework:
  - Government decided to create a commission open to representatives of civil society to prepare a draft law on management of oil resources to define permanent institutional framework and principles guiding optimal management and determination of the annual contribution of the FNRH to the budget.
- Short-run withdrawal cap:
  - Withdrawals during the first half of 2006 capped at UM 15.7 billion (equal to one-third of the annual limit set in the 2006 budget law). This amount will be reduced by revenue paid directly to the Treasury current account at the BCM before the FNRH is operational.

### Foreign exchange market reform
- BCM aims to introduce an auction market for interbank exchange transactions during the second half of 2006 (MEFP ¶20).
- Draft regulations and a code of procedures to be finalized by end-March 2006.
- At the first staff assessment, BCM will propose a precise timetable for implementing foreign exchange market reforms, including elimination of current foreign exchange rationing and phasing out the partial surrender requirement on fish export receipts.
- Time horizon for reform accounts for tight official reserves constraint during the first half of 2006.

### Financial sector reform program and FSAP
- Participation in FSAP crucial for finalizing the financial sector reform program.
- Authorities intend to adopt a new monetary code to strengthen BCM’s independence and establish procedures ensuring better bank compliance with capital adequacy ratios (MEFP ¶21).
- Preparations underway for reforms in payments system and microfinance.
- Final FSAP mission took place from February 19–March 3, 2006; it had been on hold for almost a year due to lack of cooperation on commercial banks’ data issues.

### Capacity building and technical assistance
- IMF TA program highlights:
  - BCM to receive TA on central bank accounting, monetary policy instruments, and reform of the foreign exchange market.
  - Ministry of Finance to receive TA on external trade taxation, tax and customs administration, and public expenditure management (in cooperation with the World Bank and the French Development Agency), notably in budget preparation and oil revenue management.
- Additional TA record (selected):
  - STA missions on monetary statistics (January 9–22, 2002) and balance of payments statistics (June 17–30, 2003).
  - FAD missions on public expenditure management (April 3–19, 2005) and fiscal administration reform (June 14–18, 2005).
  - AFRITAC and other TA on tax/customs administration, external debt management, and public finance statistics in 2003–2006.

### Program monitoring, assessments, and staff appraisal
- Monitoring and assessments:
  - SMP monitoring based on agreed quarterly quantitative targets and structural benchmarks (MEFP, Tables 1 and 2).
  - Staff assessment missions to examine performance at end-March and end-June test dates.
  - Prior actions implemented for circulation of report for Board information: submission to IMF staff of preliminary audit report for BCM accounts for 2003 and 2004; adoption by the Council of Ministers of the draft ordinance establishing the FNRH.
- Staff appraisal:
  - Recent policy turnaround under transition authorities enabled data verification breakthroughs and underpinned sound macroeconomic performance in Q4 2005.
  - Staff welcomes transparency and governance drives, including improvements in mining, energy, transportation, public finance management, and anti-corruption steps.
  - Staff supports continuation of reforms under the six-month SMP to consolidate stabilization, complete remedial actions in public finance management and data revisions, and prepare for sound and transparent management of government oil revenues.
  - Timely execution of the SMP could help Mauritania qualify for the MDRI debt relief by June 2006; completion of the first staff assessment based on quantitative targets as of end-March 2006 would mark the conclusion of the requisite six-month period of sound macroeconomic performance, taking into account satisfactory performance during Q4 2005 and completion of remedial actions by end-May 2006.

### Program risks and mitigation
- Main risks identified:
  - Technical delays in oil production reaching the projected level could jeopardize critical objectives of the SMP.
  - Other external shocks could similarly jeopardize critical objectives of the SMP.
  - A lower-than-projected level of official reserves would increase the risk of a balance of payments crisis and cause the postponement of the foreign exchange market reform.
  - Capacity constraints in key administration units could delay ongoing structural reforms.
- Mitigating measures:
  - Program design (including caps on built-in program adjustors) will help limit the risk from exogenous shocks.
  - Fiscal room provided by sizable budget spending contingency allocations could be used if needed.
  - Authorities are receiving a wide range of technical assistance to help strengthen capacity at both the MoF and BCM.

### Key macro-financial figures and indicators cited in the text
- Gross official reserves (in millions of US$, end-period): 40, 74, 32, 39, 70, 142
- Gross official reserves (in months of following year's imports of goods and services) 1/: 0.8, 1.3, 0.4, 0.5, 0.7, 1.4
- Current account balance (in percent of GDP): -10.7, -3.7, -18.3, -37.0, -35.0, 4.6
- Current account balance (in percent of GDP) 1/: -5.7, 1.0, -12.2, -14.7, -7.2, -9.6
- Overall balance (in percent of GDP): -7.3, -1.4, -9.0, -6.6, -3.9, 1.3
- Money and quasi-money (percent): 34.3, 23.8, 25.5, 13.5, 14.6, 20.0
- Exports of goods, f.o.b. (percentage change in U.S. dollars): -1.8, -2.4, -8.2, 34.8, 47.8, 200.0
- Of which: non-oil exports (percentage change in U.S. dollars): -1.8, -2.4, -8.2, 34.8, 47.8, 23.6
- Imports of goods, f.o.b. (percentage change in U.S. dollars): -3.2, 11.2, 24.2, 64.0, 27.1, 2.4
- Official transfers (in percent of GDP): 7.2, 6.0, 5.6, 4.8, 3.6, 2.2
- Oil revenue (including capital income): 9.7
- Nominal GDP (in millions of U.S. dollars): 1,098; 1,116; 1,340; 1,517; 1,938; 3,134
- Population (in millions): 2.7, 2.8, 2.8, 2.9, 2.9, 3.0
- GDP per capita (in U.S. dollars): 404, 397, 465, 521, 650, 1,027
- REER (percentage change; period average) 3/: 0.9, -5.3, -8.6, -0.3, 7.8, ...
- REER (percentage change; end of period) 3/: 4.5, -9.3, -13.4, 10.1, 7.3, ...
- Trade balance (in percent of non-oil GDP): -261.2, -516.8, -572.5, 606.7
- Exports (in trade-table context): 303.1, 408.6, 604.0, 1,811.6
- Imports, f.o.b. (in trade-table context): -564.3, -925.3, -1,176.5, -1,204.9
- Current account balance (in percent of annual GDP) (memorandum): -18.3, -37.0, -35.0, 4.6
- Gross official reserves 1/ (memorandum): 31.7, 38.8, 70.4, 141.8
- In months of imports 2/: 0.4, 0.5, 0.7, 1.4
- PPG external debt (in percent of annual GDP): 132.8, 135.5, 109.1, 70.9
- Debt service after debt relief (in percent of exports): 10.9, 9.6, 7.1, 2.6
- Projected payments to Fund (without HIPC Assistance) — Principal (by year, in millions of SDRs): 2006: 7.31; 2007: 9.53; 2008: 8.50; 2009: 8.50; 2010: 6.68
- Projected payments to Fund (without HIPC Assistance) — Charges/Interest (by year, in millions of SDRs): 2006: 0.53; 2007: 0.50; 2008: 0.45; 2009: 0.41; 2010: 0.37
- Projected payments to Fund (without HIPC Assistance) — Total (by year, in millions of SDRs): 2006: 7.84; 2007: 10.02; 2008: 8.95; 2009: 8.91; 2010: 7.05
- Projected payments to Fund (with Board-approved HIPC Assistance) — Principal (by year, in millions of SDRs): 2006: 4.76; 2007: 8.43; 2008: 8.50; 2009: 8.50; 2010: 6.68
- Projected payments to Fund (with Board-approved HIPC Assistance) — Charges/Interest (by year, in millions of SDRs): 2006: 0.53; 2007: 0.50; 2008: 0.45; 2009: 0.41; 2010: 0.37
- Projected payments to Fund (with Board-approved HIPC Assistance) — Total (by year, in millions of SDRs): 2006: 5.29; 2007: 8.92; 2008: 8.95; 2009: 8.91; 2010: 7.05

*IMF staff report content (excerpts) from the referenced chapter.*

### 1. Mauritania: Selected Economic and Financial Indicators, 2001–06 ......................... 16

### Mauritania: Selected Economic and Financial Indicators, 2001–06

### Background
- Transition authorities in power since August 2005 committed to democracy, rule of law, and good governance; presidential elections scheduled for March 11, 2007.
- Authorities expressed interest in an SMP to build a track record for a new PRGF arrangement after cancellation of the 2003 PRGF arrangement in November 2004.
- Central Bank of Mauritania (BCM) disclosed corrected monetary data for 1992–2004 and initiated an audit of its 2003 accounts, acknowledging prior practice of providing inaccurate data to the Fund.
- Revised data indicate significant imbalances and low levels of foreign reserves persisted over many years rather than a one-time 2003–04 expansion and sudden depletion.
- Comprehensive revisions of macroeconomic data expected before the next Article IV consultation scheduled for June 2006.

### Recent economic developments (2005)
- Real GDP growth: estimated at 5½ percent in 2005, driven by rebound in agriculture, growth in public administration, and spillovers from hydrocarbon investments.
- Inflation: twelve-month CPI inflation fell from double-digit through August 2005 to less than 6 percent at year-end 2005.
- Parallel FX market premium: shrank from 16 percent in September 2005 to less than 4 percent at year-end 2005 and turned slightly negative in January 2006.
- Official reserves: nearly double end-2004 reported level but remained low at 0.7 months of import cover.
- Real effective exchange rate: up by 7.3 percent during January–November 2005.
- Fiscal outcomes:
  - Fiscal deficit (excluding grants) contained at 8¾ percent of GDP in 2005, about ½ percent of GDP below the supplementary budget target.
  - Payment arrears reduced by 25 percent on an annual basis (Table 3 referenced).
- Monetary sector (2005):
  - Broad money growth: 14.6 percent.
  - Credit to private sector growth: 7 percent (compared with nearly 15 percent in 2004).
  - Net credit to government increased by 23 percent reflecting banks' increased holdings of treasury bills after BCM raised key policy rates.
- Structural reforms initiated: improved data reporting by BCM and Treasury; decision to adhere to EITI and United Nations Convention Against Corruption; elimination of oligopolistic practices in transportation sector.

### Policy discussions and the SMP (January–June 2006)
- SMP objectives: consolidate macro stabilization, improve governance and transparency, strengthen BCM safeguards, remedial public expenditure management measures, and establish transparent oil revenue management.
- Fiscal and monetary policy focus for 2006: balance wage pressures and revenue uncertainties while containing macroeconomic risks; keep inflation under control; ensure adequate credit growth to private sector; gradual build-up of foreign reserves.
- Medium-term preliminary outlook: oil-driven expansion and FDI in mining expected to raise annual real GDP growth in 2006–10 to 10 percent on average (half directly from oil).
- Inflation and reserves projection: CPI inflation expected to be brought below 5 percent within two years; official reserves expected to exceed 3 months of import cover starting in 2008.

### Fiscal policy (2006)
- 2006 budget:
  - Consolidates late-2005 fiscal adjustment and aims to substantially reduce domestic arrears.
  - Overall fiscal position expected to improve by nearly 10 percent of GDP in 2006, leading to a 2.8 percent of GDP surplus.
  - Up to 17 percent of 2006 oil revenue (equivalent to some 1½–2 percent of GDP) to be set aside in the National Hydrocarbon Revenue Fund.
  - Spending contingencies of 1½ percent of GDP available if not used.
  - Government arrears targeted to fall from 8 percent of GDP at end-2005 to 3½ percent at end-2006 (half corresponding to normal treasury float).
- Oil revenue and nonoil revenue dynamics:
  - Commencement of oil production will boost government revenue by more than 40 percent.
  - Nonoil revenue expected to decline slightly as percent of GDP partly due to delays in renewing fishing agreement with the EU.
  - Offsetting measures include alternative licensing with fishing operators, increased tax and nontax revenue from SNIM, sale of a cellular telephone license, collection of tax arrears from public enterprises, changes to import taxation under 2006 budget law, and administrative reforms in tax and customs directorates.
- Wages and expenditures:
  - Central government base salaries increased by 50 percent; implies a 20 percent increase in civil service wage bill (or ¼ percent of GDP) compared with 2005 effective payments.
  - Military expenditure rise of ½ percent of GDP and increase in subsidies and transfers of 1 percent of GDP.
  - Social expenditures expected to rise from 6.7 percent of GDP to 8 percent of GDP.
  - Central government capital spending expected to decline as percent of GDP but offset by large foreign-financed projects of 2¾ percent of GDP (compared with ¼ percent of GDP in 2005) executed by public enterprises with foreign resources on-lent by the central government.
- Cash management and early-2006 financing:
  - First-quarter 2006 financing needs estimated at UM 8 billion to be covered by temporary borrowing from the banking system (including limited drawdown of Treasury account at BCM) and from nonbanks (notably SNIM).
  - With arrival of oil revenue in second quarter, government will reduce arrears and repay first-quarter borrowings in second half of 2006.

### Monetary policy (2006)
- Objectives: contain inflation, build official foreign exchange reserves, and move toward more flexible exchange rate policy.
- Monetary projections assumptions for 2006:
  - 20 percent increase in money demand from projected 11 percent rise in real income, 7 percent in average CPI, and 2 percent in re-monetization (predominantly bank deposit increases) due to increased confidence in the ouguiya.
- Credit and liquidity:
  - Expansion of credit to the economy expected to remain modest in 2006; reduction in government arrears will free resources for enterprises.
  - BCM reduced required reserves ratio on ouguiya deposits from 8 to 7 percentage points in early January to address bank liquidity concerns.
  - BCM reference interest rates are positive in real terms and could be raised to reduce inflation.
  - BCM to modernize liquidity management instruments with IMF technical assistance.
- Exchange rate and reserves management:
  - BCM ready to accept greater exchange rate flexibility and to limit open-window FX interventions to avoid resurgence of parallel market premium.
  - With expected government oil revenue exceeding US$200 million in 2006, BCM should be able to build foreign reserves significantly in excess of one month of import cover by year-end 2006.
  - Staff emphasized maintaining BCM real interest rates at levels consistent with quarterly foreign reserves targets (MEFP ¶24).
- Contingency: If money demand strengthens significantly, BCM will refrain from sterilizing net foreign asset build-up in excess of projected amounts unless inflation outlook deteriorates.

### External sector and debt sustainability (summary points in text)
- Underlying current account balance improved in 2005 excluding imports related to FDI in oil and other mining, mainly due to high iron ore export prices.
- Underlying financial account balance deteriorated due to reduced official disbursements (excluding oil-related and other FDI).
- Official reserves remained low at 0.7 months of import cover at end-2005 despite improvement from end-2004.
- Oil production projections referenced: production started on February 24; projected to reach 75,000 barrels per day (b/d) in 2006 and to exceed 100,000 b/d by 2010.
- Oil revenue projection notes:
  - Government oil revenue projection UM 56.7 billion based on US$60 per barrel.
  - Amount of oil revenue to be spent under 2006 budget UM 47.1 billion based on conservative US$45 per barrel assumption.

_Italic line: IMF staff report content (excerpts) from the referenced chapter._

### 19.      With the start of oil production, Mauritania’s exports will triple in 2006, and the

### With the start of oil production, Mauritania’s exports will triple in 2006, and the

### External position and exports
- Exports will triple in 2006 with the start of oil production.
- The current account will swing into a surplus of nearly 5 percent of GDP (including oil).
- A significant impact on the external position will only be felt in the second half of the year.
- Excluding oil and other FDI-driven mining activities, the current account deficit will widen in 2006, reflecting:
  - rising cost of imported fuel; and
  - a surge in imports related to the ambitious public investment program.
- External financing expectations:
  - Successful completion of the SMP should facilitate mobilization of two tranches of balance of payments support from the Arab Monetary Fund.
  - The authorities expect the European Union and other donors to participate in financing the electoral process (MEFP ¶22).

### Debt sustainability and fiscal policy commitments
- Staff projections:
  - Gross public external debt burden (excluding debt under negotiation) is expected to decline substantially over the medium term, reflecting the favorable external outlook and continued impact of HIPC debt relief.
  - The net present value of these liabilities is projected to drop from 53 percent of GDP in 2004 to about 20 percent of GDP (including oil) in 2010.
- MDRI implications:
  - Qualification for debt relief under the MDRI would imply an additional reduction of the outstanding nominal amount by nearly 40 percent.
- Authorities’ commitments:
  - Not to contract any additional medium- or long-term nonconcessional debt under the SMP.
  - To seek final agreements with bilateral creditors (Algeria, Iraq, Libya, and the United Arab Emirates) that have not yet provided irrevocable HIPC relief, and to resolve contested assessments of liabilities towards Kuwait and Libya.

### Structural and institutional reforms — data transparency
- Central bank audit and accounts:
  - Ongoing audit work at the central bank will be completed as planned (MEFP ¶27).
  - BCM continues to address qualifications in preliminary audit reports for the 2003 and 2004 accounts.
  - Improvements will be reflected in the 2005 accounts; the 2005 audit is already underway.
  - The auditor issued an adverse opinion on the 2003 financial statements; the audit opinion for the end-2004 balance sheet is more favorable, confirming with only minor qualifications the level and availability of international reserves.
- Reporting and publication timetables:
  - Monetary accounts will be published monthly starting in July 2006.
  - Commercial banks’ accounts for 2005 will be subject to an international audit; BCM (in consultation with the banks) will prepare standard terms of reference by end-March 2006.
  - Further measures to improve transparency and reporting are being implemented (MEFP ¶28).

### Structural and institutional reforms — public finance management
- Remedial actions and timing:
  - Authorities intend to complete remedial actions needed for MDRI qualification by end-May (MEFP ¶29–31 and Table 3).
- Control of extrabudgetary spending and arrears:
  - Extrabudgetary spending has already stopped.
  - Treasury float reduced from more than UM 20 billion at end-2004 to UM 10 billion at end-2005.
  - A plan for clearance of other spending arrears included in the 2006 budget.
- Treasury reporting and reconciliation:
  - Public accounts regularized for 2005; Treasury closed the accounts at year-end and produced a preliminary balance.
  - A monthly treasury balance will be produced starting in April.
  - Treasury accounts are reconciled with the BCM on a weekly basis.
- Functional classification:
  - Implementation will enable a more precise definition of poverty-reducing expenditures to improve priority treatment and tracking throughout the year.

### Management of government oil revenue (Box 1)
- Transparency and reporting commitments:
  - Ministry of Energy and Petroleum, in cooperation with the Ministry of Finance (MoF) and the BCM, will produce monthly reports on hydrocarbon production, sales, and all pertinent revenue accruing to the government and the Mauritanian Hydrocarbon Company (SMH).
  - Reports will be published on the Internet on a quarterly basis.
- Institutional mechanism (ordinance):
  - Creation of a Treasury fund: the National Hydrocarbon Revenue Fund (FNRH) to receive all government oil revenue (including government share of profits and bonuses from production sharing agreements, taxes paid by enterprises in the sector, and dividends paid by the SMH).
  - FNRH will be established as an off-shore account and administered by the BCM, which will prepare quarterly reports for the MoF.
  - FNRH accounts will be audited by an independent auditor of international reputation at least once a year (and necessarily at the end of each year); audit reports will be posted on the Internet and published in national newspapers in a timely manner.
  - The annual report of the FNRH will also be audited by the General Audit Office and appended to the budget execution law.
  - The FNRH will not borrow; its assets may not be pledged or subject to any encumbrances; it will adopt a prudent management profile and reinvest income earned on FNRH assets.
  - Subsequent budget laws will include projections for the FNRH and underlying assumptions.
  - Resources of the FNRH will either be saved or used to finance part of the nonoil fiscal deficit; withdrawals will take the form of monthly transfers to the single Treasury account at the BCM, within annual limits set out in budget laws and upon joint authorization by the Minister of Finance and the Governor of the BCM.
- Civil society and legal framework:
  - Government decided to create a commission open to representatives of civil society to prepare a draft law on management of oil resources to define permanent institutional framework and principles guiding optimal management and determination of the annual contribution of the FNRH to the budget.
- Short-run withdrawal cap:
  - The SMP foresees that withdrawals during the first half of 2006 will be capped at UM 15.7 billion (equal to one-third of the annual limit set in the 2006 budget law). This amount will be reduced by revenue paid directly to the Treasury current account at the BCM before the FNRH is operational.

### Foreign exchange market reform
- BCM aims to introduce an auction market for interbank exchange transactions during the second half of 2006 (MEFP ¶20).
- Draft regulations and a code of procedures to be finalized by end-March 2006.
- At the first staff assessment, BCM will propose a precise timetable for implementing foreign exchange market reforms, including elimination of current foreign exchange rationing and phasing out the partial surrender requirement on fish export receipts.
- Time horizon for reform accounts for tight official reserves constraint during the first half of 2006.

### Financial sector reform program and FSAP
- Participation in the FSAP is crucial for finalizing the financial sector reform program.
- Authorities intend to adopt a new monetary code to strengthen BCM’s independence and establish procedures ensuring better bank compliance with capital adequacy ratios (MEFP ¶21).
- Preparations underway for reforms in payments system and microfinance.
- FSAP recommendations (to be summarized in the next Article IV report) will form the basis for an action plan for financial sector reforms during the second half of 2006.
- The final FSAP mission took place from February 19–March 3, 2006; it had been on hold for almost a year due to lack of cooperation on commercial banks’ data issues.

### Capacity building and technical assistance
- IMF TA to support program objectives:
  - BCM to receive TA on central bank accounting, monetary policy instruments, and reform of the foreign exchange market.
  - Ministry of Finance to receive TA on external trade taxation, tax and customs administration, and public expenditure management (in cooperation with the World Bank and the French Development Agency), notably in budget preparation and oil revenue management.

### Program monitoring and assessments
- SMP monitoring:
  - Based on a set of agreed quarterly quantitative targets and structural benchmarks (MEFP, Tables 1 and 2).
  - Staff assessment missions to examine performance at end-March and end-June test dates.
- Prior actions implemented for circulation of report for Board information:
  - Submission to IMF staff of preliminary audit report for BCM accounts for 2003 and 2004.
  - Adoption by the Council of Ministers of the draft ordinance establishing the FNRH.
- Targets for BCM’s net international reserves and net domestic assets are subject to adjustors for deviations from projected quarterly paths for net international assistance (including additional debt relief) and withdrawals from the FNRH.

### Staff appraisal and policy guidance
- Recent policy turnaround under transition authorities enabled data verification breakthroughs and underpinned sound macroeconomic performance in Q4 2005.
- Staff welcomes transparency and governance drives, including improvements in mining, energy, transportation, public finance management, and anti-corruption steps.
- Macroeconomic stabilization observed via declining inflation and increased confidence in the ouguiya; fiscal tightening and monetary policy consistency (tightened progressively since mid-2004) were instrumental.
- Staff supports continuation of reforms under the six-month SMP to:
  - Consolidate stabilization;
  - Complete remedial actions in public finance management and data revisions;
  - Prepare for sound and transparent management of government oil revenues.
- Medium-term planning:
  - Six-month period will allow elaboration of a medium-term strategy to be reflected in a new PRSP covering 2006–10 and a medium-term fiscal policy framework consistent with Millennium Development Goals while limiting real exchange rate appreciation.
- Foreign exchange liberalization:
  - Authorities should prepare for liberalization of the foreign exchange market and elimination of payments restrictions for current international transactions as soon as the external position improves, and for introduction of a more flexible exchange rate policy to help consolidate macroeconomic stability.
- MDRI qualification timeline:
  - Timely execution of the SMP could help Mauritania qualify for the MDRI debt relief by June 2006.
  - Completion of the first staff assessment based on quantitative targets as of end-March 2006 would mark the conclusion of the requisite six-month period of sound macroeconomic performance, taking into account satisfactory performance during Q4 2005 and completion of remedial actions by end-May 2006.
- Institutional and governance commitments:
  - Authorities’ policies reflect a commitment to reforms; endorsement of international initiatives on transparency and governance, including the EITI, and reestablishment of candor in policy dialogue have increased motivation for change among high-ranking civil servants and central bank staff.

*Source: IMF staff report content provided in the prompt.*

### 32.      Exogenous shocks and capacity constraints are the greatest risks to the program.

### 32.      Exogenous shocks and capacity constraints are the greatest risks to the program.

### Main risks identified
- Technical delays in oil production reaching the projected level could jeopardize critical objectives of the SMP.
- Other external shocks could similarly jeopardize critical objectives of the SMP.
- A lower-than-projected level of official reserves would increase the risk of a balance of payments crisis and cause the postponement of the foreign exchange market reform, scheduled for the second half of the year.
- Capacity constraints in key administration units could delay ongoing structural reforms.

### Program design and mitigating measures
- The program design (including caps on the built-in program adjustors) will help limit the risk from exogenous shocks.
- The fiscal room provided by sizable budget spending contingency allocations could be used if needed.
- Authorities are receiving a wide range of technical assistance to help strengthen capacity at both the MoF and BCM (as indicated in ¶25).

### Key related macro-financial figures and indicators cited in the text
- Gross official reserves (in millions of US$, end-period): 40, 74, 32, 39, 70, 142
- Gross official reserves (in months of following year's imports of goods and services) 1/: 0.8, 1.3, 0.4, 0.5, 0.7, 1.4
- Current account balance (in percent of GDP): -10.7, -3.7, -18.3, -37.0, -35.0, 4.6
- Current account balance (in percent of GDP) 1/: -5.7, 1.0, -12.2, -14.7, -7.2, -9.6
- Overall balance (in percent of GDP): -7.3, -1.4, -9.0, -6.6, -3.9, 1.3
- Money and quasi-money (percent): 34.3, 23.8, 25.5, 13.5, 14.6, 20.0
- Cumulative change in private sector credit (in percent of end-2004 stock of broad money) — shown in figure as an indicator (no numeric series reproduced in paragraph).
- Exports of goods, f.o.b. (percentage change in U.S. dollars): -1.8, -2.4, -8.2, 34.8, 47.8, 200.0
- Of which: non-oil exports (percentage change in U.S. dollars): -1.8, -2.4, -8.2, 34.8, 47.8, 23.6
- Imports of goods, f.o.b. (percentage change in U.S. dollars): -3.2, 11.2, 24.2, 64.0, 27.1, 2.4
- Official transfers (in percent of GDP): 7.2, 6.0, 5.6, 4.8, 3.6, 2.2
- Oil revenue (including capital income): 9.7 (reported in table footnote placement)
- Nominal GDP (in millions of U.S. dollars): 1,098; 1,116; 1,340; 1,517; 1,938; 3,134
- Population (in millions): 2.7, 2.8, 2.8, 2.9, 2.9, 3.0
- GDP per capita (in U.S. dollars): 404, 397, 465, 521, 650, 1,027
- REER (percentage change; period average) 3/: 0.9, -5.3, -8.6, -0.3, 7.8, ...
- REER (percentage change; end of period) 3/: 4.5, -9.3, -13.4, 10.1, 7.3, ...
- Trade balance (in percent of non-oil GDP): -261.2, -516.8, -572.5, 606.7 (table values)
- Exports (in same trade-table context): 303.1, 408.6, 604.0, 1,811.6
- Imports, f.o.b. (in same trade-table context): -564.3, -925.3, -1,176.5, -1,204.9
- Current account balance (in percent of annual GDP) (memorandum): -18.3, -37.0, -35.0, 4.6
- Gross official reserves 1/ (memorandum): 31.7, 38.8, 70.4, 141.8
- In months of imports 2/: 0.4, 0.5, 0.7, 1.4
- PPG external debt (in percent of annual GDP): 132.8, 135.5, 109.1, 70.9
- Debt service after debt relief (in percent of exports): 10.9, 9.6, 7.1, 2.6

*Source: _cr06255 - 32.      Exogenous shocks and capacity constraints are the greatest risks to the program.*

### APPENDIX I

### APPENDIX I

### I. Membership and Quota
- Status: Joined: September 10, 1963 Article VIII
- Quota: 64.40 SDR Million (100.00 percent)
- Fund holdings of currency: 64.40 SDR Million (100.01 percent)
- Reserve Position: 0.00 SDR Million (0.00 percent)
- SDR Department
  - Net cumulative allocation: 9.72 SDR Million (100.00 percent)
  - Holdings: 0.10 SDR Million (1.03 percent)

### II. Outstanding Purchases and Loans / Latest Financial Arrangements
- PRGF Arrangements outstanding: 47.19 SDR Million (73.27 percent of quota)
- Latest PRGF approvals and draws:
  - PRGF Jul. 18, 2003 — Expiration Nov. 07, 2004 — Amount Approved: 6.44 SDR Million — Amount Drawn: 0.92 SDR Million (Cancellation date noted)
  - PRGF Jul. 21, 1999 — Expiration Dec. 20. 2002 — Amount Approved: 42.49 SDR Million — Amount Drawn: 42.49 SDR Million
  - PRGF Jan. 25, 1995 — Expiration Jul. 13, 1998 — Amount Approved: 42.75 SDR Million — Amount Drawn: 42.75 SDR Million

### III. Projected Payments to Fund (without HIPC Assistance)
(In millions of SDRs; based on existing use of resources and present holdings of SDRs)
- Principal (by year):
  - 2006: 7.31
  - 2007: 9.53
  - 2008: 8.50
  - 2009: 8.50
  - 2010: 6.68
- Charges/Interest (by year):
  - 2006: 0.53
  - 2007: 0.50
  - 2008: 0.45
  - 2009: 0.41
  - 2010: 0.37
- Total (by year):
  - 2006: 7.84
  - 2007: 10.02
  - 2008: 8.95
  - 2009: 8.91
  - 2010: 7.05

### IV. Projected Payments to Fund (with Board-approved HIPC Assistance)
(In millions of SDRs; based on existing use of resources and present holdings of SDRs)
- Principal (by year):
  - 2006: 4.76
  - 2007: 8.43
  - 2008: 8.50
  - 2009: 8.50
  - 2010: 6.68
- Charges/Interest (by year):
  - 2006: 0.53
  - 2007: 0.50
  - 2008: 0.45
  - 2009: 0.41
  - 2010: 0.37
- Total (by year):
  - 2006: 5.29
  - 2007: 8.92
  - 2008: 8.95
  - 2009: 8.91
  - 2010: 7.05

### V. Implementation of HIPC Initiative (Enhanced Framework)
- I. Commitment of HIPC assistance
  - Decision point date: Feb. 2000
  - Assistance committed by all creditors (US$ millions): 622.00
  - Of which: IMF assistance (US$ millions): 46.76
    - (SDR equivalent in millions): 34.80
  - Completion point date: Jun. 2002
- II. Disbursement of IMF assistance (SDR millions)
  - Assistance disbursed to the member: 34.80
  - Interim assistance: 16.88
  - Completion point balance: 17.92
  - Additional disbursement of interest income: 3.63
  - Total disbursements: 38.43
- Footnotes preserved in source:
  - Decision point definition and interim/completion point mechanics as stated.
  - Note that assistance committed under original and enhanced frameworks are expressed in different NPV terms and cannot be added.
  - Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned.

### VI. Safeguards Assessments
- A full safeguards assessment of the BCM was completed on May 21, 2004.
- Key findings:
  - Identified serious vulnerabilities in the central bank's safeguards framework.
  - Little progress since the 2002 transitional assessment, except appointing an international audit firm.
  - Critical vulnerabilities in financial reporting (including reporting of monetary data to the Fund) and controls.
- Recommendations and actions:
  - Recommendations included audits of reserves and quarterly monetary program data, preparation of financial statements on the basis of International Financial Reporting Standards (IFRS), and measures to improve controls in reserves management.
  - Measures have been taken in some areas; a new timetable for implementation of outstanding safeguards recommendations was agreed with the authorities in November 2005.
  - External audits of FY 2003 and FY 2004 are substantially complete; expected FY 2005 audit finalization by end-June 2006.
  - IFRS adopted by the BCM Board as the financial reporting framework; IFRS-compliant financial statements envisaged for FY 2006.
  - Recommendations related to monetary program data remain relevant for possible future programs.

### VII. Exchange Arrangements
- Currency: ouguiya (UM).
- Regime: managed float with no predetermined path for the exchange rate.
- Exchange rate as of January 31, 2006: US$1 = UM 268.6.
- Historical operational details:
  - Beginning April 2000, official exchange rate fixed based on daily foreign exchange auctions (Extended Foreign Exchange Market).
  - August 2002: BCM issued two circulars — limits/regulation on handling foreign bank notes; reimposed a variant of a surrender requirement where 70 percent of fishing export receipts should be repatriated via the BCM.
  - Starting mid-2003: BCM suspended foreign exchange auctions and introduced foreign exchange rationing — constituting a restriction on payments and transfers for current international transactions under Article VIII, section 2.

### VIII. Article IV Consultation
- Discussions for the 2005 Article IV consultation:
  - Held in Nouakchott: January 8 to 22, 2005.
  - Held at headquarters: March 12 to 14, 2005.
- Country Report 06/247 considered by the Executive Board on May 27, 2005.
- The Executive Board approved the HIPC Completion Point document for Mauritania on June 7, 2002.

### IX. FSAP Participation, ROSCs and Assessments
- FSAP:
  - Joint Fund/Bank FSAP preparatory mission visited Nouakchott in February 2005 requesting detailed financial data.
  - Full FSAP mission visited Nouakchott during February 19–March 3, 2006 to assess financial sector soundness, provision of financial services, regulatory/legal/judicial framework, and identify policy measures.
- ROSC Fiscal Transparency Module:
  - Final Report based on missions: May 14–24, 2002 and August 6–13, 2002.
  - Final fiscal ROSC report published on the IMF website.

### X. Technical Assistance (since 2001)
- 1. MFD (formerly MAE)
  - a. Money and banking
    - Follow-up TA mission on reform of monetary instruments and assessment of technical assistance needs: February 7–20, 2001.
    - Resident expert on banking supervision: August 1, 2001–February 2, 2003, and January 6–February 3, 2004.
  - b. Exchange system
    - Peripatetic TA missions by panel expert on exchange system reform: 2001–02.
    - TA mission on foreign exchange market issues: January 9–23, 2005.
    - Peripatetic TA missions by panel expert on foreign exchange reserves management: July 13–26, 2005.
- 2. FAD
  - TA mission on tracking poverty-reducing expenditures: October 10–17, 2001.
  - TA mission on setting up a VAT refund system: November 18–23, 2001.
  - TA mission on reforming taxes on income and profits: July 7–21, 2003.
  - TA mission on public expenditure management: April 3–19, 2005.
  - TA mission on fiscal administration reform: June 14–18, 2005.
- 3. LEG
  - TA mission on drafting laws to combat money laundering and the financing of terrorism: February 23–March 1, 2005.
- 4. STA
  - TA mission on monetary statistics: January 9–22, 2002.
  - TA mission on balance of payments statistics: June 17–30, 2003.
  - TA mission on GDDS: April 14–28, 2004.
  - TA consultant on banking and monetary statistics: November 8–22, 2005.
- 5. AFRITAC
  - Several TA missions in 2003-2006, including on tax and customs administration, computerization of public expenditure chain, external debt management, and public finance statistics.

### XI. Resident Representative
- In October 2004, Mr. Philippe Callier was assigned as resident representative to Mauritania to replace Mr. Prosper Youm (assignment ended July 2004).

*Source: APPENDIX I, _cr06255 - APPENDIX I (As of January 31, 2006).*

### 15. As part of its overall assistance to Mauritania––through lending, country analytical

### _cr06255 - 15. As part of its overall assistance to Mauritania––through lending, country analytical work, and technical assistance––the Bank supports policy reforms in close collaboration with the Fund, in the following areas

### Public expenditure management
- Joint Fund and Bank emphasis on significantly improving public expenditure management, accountability, and transparency following the deterioration in macroeconomic management during 2003-2004.
- Identified challenges: fragmented budget system; weak links between the budget and medium-term projections (MTEF); weak budget controls; non-performing public accounting system.
- Specific focus areas for strengthening public expenditure management:
  - Budget formulation:
    - unification of the budget;
    - re-launch of the MTEF process and link it to the elaboration of the second PRSP and its integration in the budget preparation framework;
    - adoption of a new functional budget classification.
  - Budget execution:
    - elimination of all extra-budgetary spending;
    - satisfactory progress in the clearance of spending arrears and regularization of public accounts;
    - production of monthly treasury balance and fiscal accounts reconciled with the Central Bank (BCM);
    - improvement in public expenditure tracking (including poverty-reducing spending).

### Eligibility for Multilateral Debt Relief Initiative (MDRI)
- Mauritania requires remedial measures to be fully eligible for the Multilateral Debt Relief Initiative.
- Bank and Fund support focuses on strengthening the public expenditure management system as detailed above.

### Oil sector and revenue management
- Mauritania is about to enter the oil era; government recently adhered to the Extractive Industry Transparency Initiative (EITI).
- Bank and Fund support in EITI implementation and oil revenue management focuses on:
  - Creation of a single oil account (SOA) managed by the BCM where all government hydrocarbon revenues should be directly deposited.
  - Treatment of oil in the budget laws: state that all hydrocarbon revenues will accrue to the SOA and indicate the portion of resources held by the SOA to be either saved or used to finance part of the non-oil budget deficit.
  - Auditing of SOA accounts by an independent auditor on a quarterly basis; reports should be timely posted on the MF website and published, together with audited and reconciled data on production and sales, in coordination with the (to-be-established) EITI committee.
  - Creation of an oil fund.

### Financial sector reform
- As part of the CAS, the Bank and Fund are assisting authorities to improve financial sector intermediation, mobilize savings, and promote competition.
- Completed and planned analytical/technical work:
  - Financial Sector Study completed in 2004.
  - FSAP mission took place in mid-2005; follow up visit expected during February 10–March 3, 2006.
  - World Bank Treasury providing technical assistance to the BCM in reserve management; assistance is in agreement with the IMF.
- For 2005, accounts of commercial banks will be subject to an international audit; BCM to prepare standard terms of reference in consultation with banks by March 30, 2006.

### Poverty and Social Impact Analysis (PSIA)
- Bank and Fund agreed to closely review poverty and social impact of reforms.
- Analytical work to date and planned:
  - Benefit-incidence analysis conducted in the health and education sectors; to be updated with data from EPCV 2004.
  - PSIA in the mining sector to evaluate impacts of reducing services provided by the national mining company (SNIM).
  - Additional work: survey on dynamics of rural labor markets (finalized); elaboration of poverty maps (ongoing).

### Contact persons
- Ms. Diarietou Gaye, Acting Country Director, ext. 5390-3320
- Mr. Francois Rantrua, Country Manager, ext. 5353-312
- Mr. Nicola Pontara, Senior Economist, ext. 5873-185

### Statistical issues — General
- Authorities revising economic and financial statistics over a period of more than 10 years; preliminary data revisions released in November 2005 covered the majority of economic sectors.
- Revisions revealed divergence in central bank gross official reserves from previously disclosed levels since 1994.
- Broad money revision: revised level of broad money in 2002 is now more than twice the previously reported level.
- Bank financing of a larger-than-disclosed fiscal deficit identified as main factor driving higher monetary expansion.
- Revised public finance data consistent with monetary revisions provided to staff for the 1999–2004 period.
- Balance of payments and consumer price data also revised for several years.
- Revision process (government finance, balance of payments, national accounts) going back to 1992 will continue.
- A preliminary report by an intergovernmental working group headed by the BCM due by April 2006 for discussions with IMF staff during the next Article IV consultation.
- National Statistics Council (CNS) established on February 15, 2006; definitive report to be adopted by the CNS and published by June 30, 2006.

### Selected data revisions provided to IMF staff in November 2005 (examples from table)
- Gross official reserves (in millions of US$), Broad money (growth rate in percent), Net bank financing of the government deficit (in percent of GDP) — comparison with data provided in 2003 (selected rows):
  - 1992: Original 61; Revised 65; Difference 4.
  - 1993: Original 45; Revised 46; Difference 1. Original broad money 10.7; Revised 1.0; Difference -9.7. Original net bank financing 0.3; Revised 1.7; Difference 1.4. (Table shows additional related entries: -0.6)
  - 1994: Original 40; Revised 31; Difference -9. Original broad money -0.5; Revised 13.5; Difference 14.1. Original net bank financing -1.3; Revised 3.7; Difference 5.0.
  - 1995: Original 86; Revised 53; Difference -33. Original broad money -5.1; Revised -5.0; Difference 0.1. Original net bank financing -5.0; Revised -0.4; Difference 4.5.
  - 1996: Original 141; Revised 59; Difference -83. Original broad money -5.1; Revised 16.3; Difference 21.4. Original net bank financing -4.9; Revised -2.8; Difference 2.1.
  - 1997: Original 201; Revised 52; Difference -149. Original broad money 8.0; Revised 24.0; Difference 16.0. Original net bank financing -3.4; Revised 3.6; Difference 7.0.
  - 1998: Original 203; Revised 52; Difference -151. Original broad money 5.0; Revised 1.4; Difference -3.6. Original net bank financing -5.2; Revised 0.8; Difference 6.0.
  - 1999: Original 194; Revised 39; Difference -156. Original broad money 4.3; Revised 10.6; Difference 6.3. Original net bank financing -4.7; Revised 1.2; Difference 5.9.
  - 2000: Original 283; Revised 49; Difference -234. Original broad money 12.8; Revised 19.5; Difference 6.7. Original net bank financing -7.1; Revised 2.9; Difference 9.9.
  - 2001: Original 286; Revised 40; Difference -246. Original broad money 17.3; Revised 34.3; Difference 17.0. Original net bank financing -1.0; Revised 13.7; Difference 14.7.
  - 2002: Original 400; Revised 74; Difference -326. Original broad money 8.9; Revised 23.8; Difference 14.9. Original net bank financing -12.2; Revised -2.8; Difference 9.4.
  - 2003 (data provided to IMF staff in May 2004): Original 415; Revised 32; Difference -383. Original broad money 10.5; Revised 25.5; Difference 15.0. Original net bank financing -3.5; Revised 5.8; Difference 9.4.
- Comparison with data provided after August 2004 (selected rows):
  - 2003: Original 191; Revised 32; Difference -159. Original broad money 103.3; Revised 25.5; Difference -77.8. Original net bank financing 29.3; Revised 5.8; Difference -23.5.
  - 2004: Original 39; Revised 39; Difference 0. Original broad money 57.2; Revised 13.5; Difference -43.7. Original net bank financing 17.0; Revised -1.0; Difference -18.0.

### Real sector
- National accounts revisions ongoing; new national accounts following 1993 SNA use 1998 as base year and show a significant (10–15 percent) increase in recorded activity level compared to previous 1985-based set.
- ONS has produced final estimates for 1998 and 1999 and preliminary estimates for 2000–04.
- Technical assistance still needed to conduct statistical surveys and prepare informal sector estimates (current estimates based on tax authority data).
- CPI methodology: 1996 STA mission recommendations for geographical/product coverage, updating weights, improving computer resources, creating specialized team.
- Based on 2001 household expenditure survey and AFRISTAT assistance, ONS started publishing in May 2004 a new CPI index with updated consumption basket; geographical coverage still limited to Nouakchott.

### Government finance statistics
- No monthly or annual government finance statistics currently reported to STA.
- Monthly statements of treasury accounts could provide basis for future reporting to STA covering budgetary central government statistics.
- Monthly Treasury balance will be reconciled with Treasury accounts at the BCM and constitute basis for a monthly fiscal reporting table (TOFE) to be provided to the Minister of Finance with a maximum lag of one month.
- Expenditures to be recorded on payment order basis and using a functional classification of expenditure by end-April 2006, allowing monthly tracking of execution of poverty-reducing expenditure; a detailed quarterly publication on such spending will be issued.
- Verification of fiscal data ongoing:
  - Single tax identifier for enterprises to improve tax auditing and crosschecking across administrations.
  - General Directorate of Customs to improve import verification methods.
  - Quarterly reconciliation by Office of the Minister of Finance between Customs import valuations and values reported by Société Générale de Surveillance (SGS).
  - Review of payroll database to identify and eliminate ghost workers is underway.
- 2006 budget includes all expenditures previously financed without budgetary appropriations; substantial proportion of centralized appropriations broken down by ministry; budget document shows operating and domestically financed capital expenditure together for each ministerial department.

### Money and banking
- Data on monetary authorities and deposit money banks reported irregularly to STA; most recent monetary data in IFS are for March 2004.
- BCM to publish monetary accounts on a monthly basis starting in July 2006.
- Commercial bank accounts for 2005 to be subject to an international audit; BCM to prepare terms of reference by March 30, 2006.
- Verification of monetary and financial data ongoing alongside data revisions; STA expert provided recommendations in November 2005 on deriving central bank statistics from central bank accounts.
- Implementation of January 2004 IMF safeguards assessment mission recommendations will continue, particularly on presentation of central bank accounts.
- Preliminary audit reports on BCM financial statements for 2003 and 2004 prepared; several qualifications in prior reports removed.
- BCM intends to deal with bulk of residual problems before finalization of reports by end-May 2006.
- Audit of BCM accounts for 2005 under way; confirmation of end-2005 official reserves should be completed by end-March 2006; final audit report for 2005 will be available by end-June 2006 and published on BCM’s official website.

### Balance of payments
- Methodology being revised in light of exchange system changes; central bank foreign exchange record supplemented by secondary sources to capture international transactions carried out in cash or by settlements.
- Significant weaknesses remain: nonmining exports, short-term capital flows, and private transfers reflected in often large errors and omissions.
- A balance of payments statistics mission (June 17–30, 2003) noted introduction of a bank-reporting system requiring commercial banks to report details of external transactions to the BCM.
- 2003 mission proposed improvements for merchandise trade statistics, external debt coverage, service and transfers components, and foreign direct investment (in particular oil sector transactions); BCM agreed to work plan to implement recommendations.
- Latest balance of payments data reported to STA are from 1998.

### Debt statistics and data management
- BCM and Ministry of Finance recently unified debt databases, but data management needs strengthening.
- New software being installed by UNCTAD; personnel need training in its use.

### Poverty and social indicators
- Household expenditure surveys conducted nationally in 1990, 1996, and 2000; limited survey in 2003 in Nouakchott.
- Results of surveys are main source for poverty profiles and targets.
- New PRSP covering 2006–10 being prepared; will include detailed stock-taking of 2001–04 PRSP, analysis of poverty profile based on 2004 survey, and discussion on optimal use of oil revenues.
- PRSP to be finalized in June 2006 after discussions with external partners and regional and national public consultations.

*Content adapted from IMF staff report text provided in the source content unit.*

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