Press Information Notice: IMF Concludes Article IV Consultation with Mauritania

August 27, 1997

Public Information Notices (PINs) are issued, (i) at the request of a member country, following the conclusion of the Article IV consultation for countries seeking to make known the views of the IMF to the public. This action is intended to strengthen IMF surveillance over the economic policies of member countries by increasing the transparency of the IMF's assessment of these policies; and (ii) following policy discussions in the Executive Board at the decision of the Board.

The IMF Executive Board on July 14, 1997 concluded the 1997 Article IV consultation1 with Mauritania.


Since 1992, Mauritania has been implementing a comprehensive program of economic adjustment and structural reform. The program has been supported by the international community, including the International Monetary Fund (IMF), the World Bank Group, the African Development Bank, the European Union (EU), other multilateral and bilateral partners, and official bilateral debt relief. The program aims at achieving macroeconomic stabilization and, over the medium term, transforming Mauritania into a more diversified, private sector–led market economy. Implementation of the program has produced significant results: savings and economic growth have rebounded, allowing for some increase in per capita income; inflation has been maintained at a low level; and the external current account deficit has been considerably reduced. Key factors behind these results have been a strong fiscal adjustment supported by a tight monetary stance.

Macroeconomic policies have been supported by the steady implementation of structural reforms. These have recorded progress in a number of areas. Domestic prices have been liberalized. The banking system and key public enterprises have been restructured. The reform of the tax system has been initiated with the introduction in 1995 of the Value Added Tax (VAT). The liberalization of the exchange system is underway. In the fisheries sector, a transparent access rights system has been introduced. The institutional framework favoring private sector activity has been strengthened. Moreover, mainly as a result of reorienting public resources to the social sectors, education and health indicators have improved and poverty has been reduced.

In 1996, strict demand management policies and exceptionally high fishing royalties resulted in a fiscal surplus of more than 5 percent of GDP compared with a deficit of 0.8 percent in 1995. Economic growth continued at more than 4.5 percent and the annual rate of inflation declined to 4.7 percent from 6.5 percent in 1995. The external current account deficit (excluding official grants) narrowed to 9.7 percent of GDP, compared with 13.1 percent in the previous year. This improvement, however, as well as the increase in gross international reserves fell short of the objectives, largely reflecting significantly higher-than-anticipated imports. Despite this further progress in strengthening financial balances, Mauritania’s economy remains vulnerable to external shocks. This reflects its narrow export base and the high external debt burden, two major challenges to be addressed to attain the goals of accelerated economic growth and poverty reduction.

Structural reforms proceeded with further progress in bank surveillance and recovery of bank nonperforming loans; enforcement of more stringent performance contracts with key public enterprises; the announcement of the trade reform that became effective in January 1997; and the opening up of some fisheries so far reserved for nationals to foreign fleets. However, the improvement in the administration of the VAT was slower than expected, partly reflecting the gradual pace in the implementation of the tax audit program and institutional bottlenecks in tax collection. Also, the foreign exchange market remained fragmented and characterized by very limited interdealer transactions.

For 1997, economic growth and inflation are targeted at about 5 percent. A smaller fiscal surplus is envisaged in line with lower fishing royalties, while a further improvement of the external account and an important build-up of gross official reserves are expected. Attainment of the external objectives are predicated on continued adherence to restrained fiscal and monetary policies and ongoing stepped-up efforts to achieve a transparent and market-based exchange system. A number of measures to improve VAT efficiency are being adopted. To further enhance the role of the private sector, procedures for the establishment of new enterprises have been accelerated and the opening to private investment and management of activities previously reserved for public enterprises has been initiated. Finally, the authorities are committed to observing minimum levels of expenditures on health and education and are taking steps to strengthen the social safety net.

Looking ahead, the strategy to achieve high and sustainable growth will consist of maintaining sound macroeconomic policies, and accelerating the reforms already in place to further promote private sector development and encourage a strong supply response, particularly from the rural sector. At the same time, despite the improved medium–term prospects resulting from the debt rescheduling granted by the Paris Club in 1995 and the commercial debt buyback operation completed in 1996, Mauritania’s external debt burden remains heavy. Sustained progress in economic policy implementation will need to be supported by continued external financial assistance on concessional terms, including further debt relief.

Executive Board Assessment

Executive Directors commended the authorities for the further progress achieved in 1996, the fourth consecutive year of ESAF-supported programs. Those efforts had contributed to positive growth, subdued inflation, a substantial budgetary surplus, and a further strengthening of the external current account. Directors also commended the implementation of key structural reforms. At the same time, they noted the difficulties facing the authorities in addressing weaknesses in the VAT administration and in the functioning of the new exchange system, and called for a strengthening of administrative capacity, including through technical assistance.

Directors agreed with the emphasis of the 1997 program on continued adherence to tight fiscal and monetary policies, and on timely implementation of targeted structural measures. Those elements were crucial to the maintenance of a stable environment, to underpin the exchange reform and the ongoing trade reform, and to enhance the economy’s prospect for growth and diversification. It was observed that the program’s fiscal targets were ambitious and that the achievement of the budget surplus in 1996 had been partly attributable to fishing royalties. Accordingly, Directors emphasized that it would be important to strengthen VAT administration and to broaden the tax base to offset revenue losses expected from the customs tariff reform and declining fishing royalties. Directors stressed that it was important that the authorities follow through to implement strictly the VAT audit program and to entrust tax collection to the General Tax Directorate. Some also called for an elimination of tax exemptions. Directors welcomed the authorities' readiness to identify additional contingency measures in case of revenue shortfalls. They called for firm restraint over spending, and stressed the critical importance of making further progress in reorienting spending toward social sectors and infrastructure, and in improving the targeting of poverty programs.

Directors stressed the need to maintain a tight monetary policy. They also emphasized the need for strict enforcement of prudential regulations, including close surveillance of the newly-created specialized financial institutions, and for addressing the problems of non-performing loans to ensure the soundness of the banking sector.

Disappointment was expressed that a uniform exchange system was not yet in place. Directors emphasized the role of well-functioning exchange markets and urged further efforts to strengthen market practices and related regulations. Directors urged the elimination of the export surrender requirement and the complex repatriation procedures. The authorities were also encouraged to accept the obligations of Article VIII.

Directors urged further progress in strengthening the regulatory framework and in increasing the role of the private sector in mining, utilities, and telecommunications. Those steps, together with the liberalization of the exchange and trade systems, would help foster private sector development. Some Directors also called on the authorities to study carefully, in consultation with World Bank staff, the use of the temporarily sterilized financial resources in the fisheries sector to diversify the productive base over the medium term.

Directors noted Mauritania’s external debt constraint, particularly the heavy fiscal burden of the debt and the vulnerability of the economy to external shocks. A strong track record of sustained policy implementation would be needed to ensure continued financial assistance on appropriate terms, including further debt relief. The authorities and non-Paris Club creditors were encouraged to work together to resolve speedily the outstanding external payments arrears.

Directors welcomed recent efforts to strengthen Mauritania’s statistical database. Noting remaining deficiencies, particularly in the areas of prices and national income accounts, they encouraged the adoption of additional steps for further improvement.

Mauritania: Selected Economic Indicators

  1993 1994 1995 1996

  In percent
Domestic Economy
    Change in real GDP 5.5 4.6 4.6 4.7
    Deflator 4.3 6.4 4.4 3.5
    Change in consumer prices (period average) 9.3 4.1 6.5 4.7
  In millions of U.S. dollars1
External Economy2
    Exports; f.o.b. 400 394 493 485
    Imports; f.o.b. 375 340 417 436
    Current account balance
       excluding official transfers
-199 -114 -140 -106
    Capital account balance 67 17 62 71
    Gross official reserves 51 44 93 149
         In months of imports 1.1 1.0 1.7 2.6
    Current account balance (in percent of GDP)
       excluding official transfers
-21.2 -11.1 -13.1 -9.7
    External debt (in percent of GDP) 228.0 222.4 223.2 218.3
    Debt service ratio3 30.4 28.0 22.2 19.6
    Change in real effective exchange
       Rate (in percent)4
-8.6 -8.0 -8.6 0.9
  In percent of GDP1
Financial Variables
Overall budget balances (excluding grants) -11.0 -4.5 -0.8 5.3
Change in broad money (M2) (in percent) 0.7 -0.7 -5.1 -5.0
Interest rate (in percent)5 9.0 9.0 9.0 8.0-10.0

1Unless otherwise noted.
2Balance of payments data for 1995 and 1996 are not strictly comparable with those for previous years due to methodological changes to estimate imports and other components.
3After debt relief. In percent of exports of goods and non-factor services.
4(+) = appreciation.
512-month time deposits.

1Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepare a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. In this PIN, the main features of the Board’s discussion are described.


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