IMF Executive Board Concludes 2017 Article IV Consultation with the Islamic Republic of Mauritania
IMF News, August 9, 2017
Source details
- Canonical URL
- IMF Executive Board Concludes 2017 Article IV Consultation with the Islamic Republic of Mauritania
Other formats
Bibliographic details
- Published: August 9, 2017
Context and recent developments
- On July 28, 2017, the Executive Board concluded the Article IV consultation with the Islamic Republic of Mauritania.
- Mauritania faced a challenging external environment with low and volatile metal prices; a steep decline in iron ore prices in 2014–15:
- “took away half of exports, widened the fiscal deficit, put pressure on reserves, and exposed bank vulnerabilities.”
- Authorities’ 2016 policy response included:
- Budget adjustment in 2016 (by 3 percent of GDP).
- Allowing the exchange rate to adjust.
- Mobilizing foreign grants and loans.
- These efforts contributed to:
- External current account deficit narrowing to 15 percent (2016).
- Inflation contained at 1.5 percent (average in 2016).
- Growth remained low: estimated 1.7 percent (2016).
- External debt rose to 72 percent of GDP (2016).
- Reserves: dipped to 4.8 months of non-extractive sector imports as of March 2017.
- Potential upside: possible development of a recently discovered off-shore gas field could be a game-changer starting in 2021.
- Authorities preparing a national strategy for accelerated and inclusive growth covering 2016–30, including structural reforms and a large-scale, foreign-financed infrastructure investment program.
Executive Board Assessment — main messages
- Directors commended the authorities’ strong economic policy response but noted that macroeconomic and financial stability and the incipient recovery remain fragile.
- Main challenge: support growth, reduce poverty and unemployment, diversify the economy, and meet infrastructure needs while strengthening macroeconomic stability, the external position, and debt sustainability.
- Given limited resources and elevated debt, Directors called for sustained prudent policies and structural reforms.
Exchange rate, monetary, and reserve policy
- Majority view: greater exchange rate flexibility is a priority to:
- Boost competitiveness.
- Improve the external position.
- Absorb shocks.
- Allow monetary policy to better address tight bank liquidity and support economic growth.
- A few Directors questioned the exchange rate’s potential to boost competitiveness given the limited production base.
- Directors encouraged:
- Introducing a competitive and transparent foreign exchange auction system.
- Removing regulatory obstacles to development of an interbank market.
- Strengthening reserve buffers.
- Some Directors noted authorities’ concern that accommodative monetary policy could jeopardize efforts to stabilize the still weak external position.
Fiscal policy and public finance management
- Directors recommended fiscal policy focus on:
- Consolidating the adjustment achieved so far.
- Creating fiscal space by accelerating ongoing reforms to allow higher social and infrastructure spending without jeopardizing macroeconomic stability and debt sustainability.
- Specific recommendations:
- Continue to modernize tax and customs administration.
- Introduce a corporate income tax.
- Adopt the new organic budget law.
- Review and phase out tax exemptions.
- Operationalize recent measures to strengthen public investment and debt management promptly to help prioritize projects.
- Debt guidance:
- Avoid non-concessional borrowing and give preference to concessional loans and grants.
- Regarding negotiations with bilateral non-Paris Club creditors, a few Directors reiterated the importance of preserving comparability of treatment across official bilateral creditors.
Financial sector and stability
- Directors stressed the importance of addressing heightened financial stability risks and boosting credit to the private sector.
- Encouraged accelerating implementation of the 2014 FSAP recommendations, especially:
- Strengthening banking supervision.
- Adopting the new banking law and central bank statute.
Structural reforms and social policy
- Directors welcomed the draft multi-year development strategy for higher and more inclusive growth and urged swift finalization and implementation.
- Recommended expanding social policies and strengthening social safety nets.
- Continue efforts to improve business climate and governance to support private sector growth, job creation, and diversification.
- Emphasized higher spending on education and health to improve social outcomes, productivity, and poverty reduction.
Selected economic indicators, 2015–18 (as reported)
- Population: 4 million (2014 est.)
- Poverty rate: 31 percent (2014)
- Per capita GDP: US$ 1,335 (2014)
- Unemployment: 13 percent (2014)
- Output and prices (Annual change in percent)
- Real GDP: 2015: 0.9; 2016: 1.7; 2017 (Proj.): 3.8; 2018 (Proj.): 3.0
- Extractive: 2015: -6.7; 2016: -1.4; 2017 (Proj.): 10.3; 2018 (Proj.): -3.5
- Non-extractive: 2015: 2.1; 2016: 2.2; 2017 (Proj.): 2.9; 2018 (Proj.): 4.0
- GDP deflator: 2015: -4.4; 2016: 4.1; 2017 (Proj.): 4.2; 2018 (Proj.): 2.6
- Consumer prices (period average): 2015: 0.5; 2016: 1.5; 2017 (Proj.): 3.7
- Central Government Operations (In percent of non-extractive GDP; unless otherwise indicated)
- Revenues and grants: 2015: 32.5; 2016: 31.8; 2017 (Proj.): 30.8; 2018 (Proj.): 30.3
- Taxes: 2015: 26.7; 2016: 28.0; 2017 (Proj.): 26.9; 2018 (Proj.): 26.5
- Expenditure: 2015: 36.3; 2016: 32.2; 2017 (Proj.): 31.5; 2018 (Proj.): 32.8
- Current: 2015: 20.5; 2016: 18.5; 2017 (Proj.): 18.1; 2018 (Proj.): 18.1
- Capital: 2015: 15.5; 2016: 13.3; 2017 (Proj.): 12.9; 2018 (Proj.): 14.5
- Primary balance (excl. grants): 2015: -4.5; 2016: -1.3; 2017 (Proj.): -1.5; 2018 (Proj.): -2.8
- Overall balance (in percent of GDP): 2015: -3.4; 2016: -0.3; 2017 (Proj.): -0.6; 2018 (Proj.): -2.1
- Public debt (in percent of GDP) 1/: 2015: 77.8; 2016: 78.3; 2017 (Proj.): 77.7; 2018 (Proj.): 80.8
- Money and Credit (Annual change in percent; unless otherwise indicated)
- Broad money: 2015: 0.4; 2016: 7.1; 2017 (Proj.): 7.3; 2018 (Proj.): 7.5
- Credit to the private sector: 2015: 9.7; 2016: 8.0; 2017 (Proj.): 6.5; 2018 (Proj.): 7.4
- Balance of Payments
- Current account balance (in percent of GDP): 2015: -19.7; 2016: -14.9; 2017 (Proj.): -15.3; 2018 (Proj.): -11.2
- Excl. FDI-financed imports of extractive capital goods: 2015: -11.9; 2016: -11.1; 2017 (Proj.): -8.1; 2018 (Proj.): -9.3
- Foreign direct investment (net, in percent of GDP): 2015: 32.0; 2016: 16.3; 2017 (Proj.): 25.0; 2018 (Proj.): 11.1
- Gross official reserves (in millions of US$, end of period): 2015: 822.8; 2016: 824.5; 2017 (Proj.): 724.9; 2018 (Proj.): 622.8
- In months of prospective non-extractive imports: 2015: 5.6; 2016: 5.5; 2017 (Proj.): 4.3; 2018 (Proj.): …
- External public debt (in percent of GDP) 1/: 2015: 68.1; 2016: 72.2; 2017 (Proj.): 71.2; 2018 (Proj.): 73.9
- Real effective exchange rate (period average): 2015: 8.2; 2016: -5.7; 2017 (Proj.): …
- Memorandum items:
- Price of iron ore (US$/Ton): 2015: 56.1; 2016: 58.6; 2017 (Proj.): 65.1; 2018 (Proj.): 51.7
- Nominal GDP (in millions of US$): 2015: 4,844.2; 2016: 4,729.0; 2017 (Proj.): 4,960.6; 2018 (Proj.): 4,999.6
1/ Excluding passive debt to Kuwait under negotiation.
IMF Communications Department — Press Release No. 17/324 (August 9, 2017).