Islamic Republic of Mauritania: Selected Issues
IMF Staff Country Reports, February 3, 2023
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Bibliographic details
- Published: February 3, 2023
- Series: IMF Staff Country Reports
Overview
- Publication date: February 3, 2023
- Scope: Desirable institutional and macro-financial conditions and optimal path toward greater exchange rate flexibility in the Islamic Republic of Mauritania; macro-financial risks and mitigation measures; reforms needed for a successful and smooth shift to greater exchange rate flexibility.
- Context: Mauritania is a small economy exposed to terms-of-trade shocks. The current account deficit is volatile and sometimes sizeable. International reserves remained adequate until 2021 but are expected to fall around the adequacy threshold due to the negative external shock.
Key findings
- A more flexible exchange rate would reduce the economy’s vulnerability to external shocks and preserve international reserves.
- Countries heavily reliant on a single commodity or a group of commodities need more exchange rate flexibility to respond to changes in world commodity prices and to mitigate their spillovers into other sectors.
- Institutional and macro-financial prerequisites are important to ensure a smooth transition to greater exchange rate flexibility.
Macro-financial risks and mitigation measures
- Identified risks:
- Volatile and sometimes sizeable current account deficits.
- Exposure to negative external shocks leading international reserves to approach adequacy thresholds.
- Suggested mitigation measures (themes identified in the paper):
- Adopt an alternative nominal anchor and a modern monetary policy framework.
- Develop more advanced financial markets.
- Strengthen a resilient financial sector to absorb adjustment needs.
Policy recommendations and reforms
- Move toward greater exchange rate flexibility, conditional on:
- Establishing an alternative nominal anchor.
- Implementing a modern monetary policy framework.
- Developing financial markets to support market-based adjustments.
- Building resilience in the financial sector to manage transitional macro-financial risks.
- Emphasize that flexibility helps absorb world commodity price changes and limit spillovers to other sectors for commodity-dependent economies.
Content in this bundle
- Islamic Republic of Mauritania: Selected Issues; IMF Country Report No. 23/74; December 20, 2022