Press Release No. 11/159

Press Release No. 11/159
May 5, 2011

An IMF mission headed by Mr. Amine Mati visited Nouakchott during April 20 – May 4, 2011 to assess the economic situation and hold discussions with the authorities on progress in implementing economic policies and reforms in connection with the second review of the 2010-2012 three-year arrangement under the Extended Credit Facility (ECF).¹ During its stay, the mission met with the President of the Republic and several other members of the government, economic and financial policymakers, members of parliament, members of the diplomatic corps, and representatives of the banking and business sectors, the donor community, unions, and civil society. At the end of its visit, the mission issued the following statement:

“Macroeconomic results for 2010 were broadly satisfactory. Improved foreign demand and the recovery in non-extractive sectors boosted real GDP growth to 5.2 percent. Year-on-year inflation was contained at 6.1 percent despite higher commodities prices, and export performance in the mining sector (iron, gold, and copper) helped to improve the current account balance and to consolidate international reserves at US$287 million, or 2.1 months of imports. However, unemployment remains high, and for the past several months the economy has had to cope with the surge in international prices of food staples (wheat, rice) and petroleum products.

“In the short term, the additional expenditures committed by the government under the 2011 social assistance program may be justified in the current context in order to offset the impact of high food and energy prices on poor and vulnerable groups. However, as the majority of these expenditures are general subsidies financed largely by additional mining receipts, they are not sustainable over the long term in light of the economy’s vulnerability to exogenous shocks. Accordingly, the mission discussed the gradual replacement of subsidies by well-targeted social safety nets implemented in cooperation with the other development partners.

“The mission congratulates the authorities on finalizing the third action plan under the poverty reduction strategy paper covering the period 2011-2015. The mission welcomes the consensus achieved with the authorities on the need to continue fiscal consolidation efforts and deepen structural reforms in regard to public financial management, public enterprises, the financial sector, and the civil service. The mission and the authorities also agreed that strengthening social policies and improving the business climate are essential to promoting development and improving the wellbeing of the Mauritanian people.

“At the close of discussions, the authorities and the mission agreed on the 2011 objectives under the ECF, which remain in line with the program adopted for the period 2010-2012. The objectives are to achieve real non-oil GDP growth of 5.3 percent, contain inflation at 7.5 percent, raise international exchange reserves to 2.7 months of imports, and consolidate the improved fiscal and current account balance.

“The mission urged the authorities to continue satisfactory program implementation in order to achieve inclusive, sustainable growth conducive to job creation and improved living conditions for the Mauritanian people. The IMF staff will recommend that management request the completion of the second review under the ECF, to be taken up by the Executive Board in June 2011.”

The mission takes this opportunity to thank the authorities for their welcome and availability as well as for the good conditions under which the work took place.

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¹ The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused, streamlined conditionality. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.