On July 28, 2017, the Executive Board of the International Monetary Fund
(IMF) concluded the Article IV consultation
[1]
with the Islamic Republic of Mauritania.
Mauritania continues to face 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. In response, the authorities
adjusted the budget significantly in 2016 (by 3 percent of GDP), allowed
the exchange rate to adjust, and mobilized foreign grants and loans. These
efforts contributed to reducing external imbalances and maintaining
macroeconomic stability: the external current account deficit narrowed to
15 percent and inflation was contained at 1.5 percent on average in 2016.
However, growth remained low at an estimated 1.7 percent and external debt
continued to rise (to 72 percent of GDP). The deceleration of economic
activity also increased financial stability risks. In response, the
authorities are strengthening bank supervision and are preparing a national
strategy for accelerated and inclusive growth covering 2016–30, including
structural reforms and large-scale, foreign-financed infrastructure
investment program to support jobs, growth, and diversification.
Growth prospects have improved along with planned public investment and
structural reforms and some—albeit short-lived— recovery in metal prices.
However, large external imbalances remain; exogenous commodity price
developments and foreign investment in the extractive sectors continue to
shape the outlook; and upcoming debt repayments could put further pressure
on reserves, which have dipped to 4.8 months of non-extractive sector
imports as of March 2017. Possible development of a recently discovered
off-shore gas field could be a game-changer starting in 2021.
Executive Board Assessment
[2]
Executive Directors commended the Mauritanian authorities for their strong
economic policy response to the challenging external environment of low
metal prices, but noted that macroeconomic and financial stability as well
as the incipient recovery remain fragile. Against this background, they
agreed that the main challenge now is to support growth, reduce poverty and
unemployment, diversify the economy, and meet infrastructure needs while,
at the same time, strengthening macroeconomic stability, the external
position, and debt sustainability. To achieve these objectives in the
context of limited resources and elevated debt, Directors called for
sustained prudent policies and structural reforms.
Directors concurred that structural reforms and infrastructure improvements
are critical to address external imbalances and promote economic
diversification. At the same time, most Directors called for greater
exchange rate flexibility as a priority to help boost competitiveness,
improve the external position, absorb shocks, and 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 country’s limited production base. Some
Directors also noted the authorities’ concern that an accommodative
monetary policy could jeopardize ongoing efforts to stabilize the still
weak external position. More generally, Directors encouraged the
authorities to introduce a competitive and transparent foreign exchange
auction system, remove regulatory obstacles to the development of an
interbank market, and strengthen reserve buffers.
Directors recommended that fiscal policy be focused on consolidating the
adjustment achieved so far and on creating fiscal space by accelerating
ongoing reforms. This would allow for higher social and infrastructure
spending without jeopardizing macroeconomic stability and debt
sustainability. Directors encouraged the authorities to continue to
modernize tax and customs administration, introduce a corporate income tax,
adopt the new organic budget law, and review and phase out tax exemptions.
They called for recent measures to strengthen public investment and debt
management to be operationalized promptly to help prioritize projects.
Directors generally agreed on the need to avoid non-concessional borrowing
and, instead, give preference to concessional loans and grants. Regarding
Mauritania’s ongoing negotiations with bilateral non-Paris Club creditors,
a few Directors reiterated the importance of preserving comparability of
treatment across official bilateral creditors.
Directors stressed the importance of addressing heightened financial
stability risks and boosting credit to the private sector. In this regard,
they encouraged the authorities to build on recent progress and accelerate
the implementation of the 2014 FSAP recommendations, especially
strengthening banking supervision and adopting the new banking law and
central bank statute.
Directors welcomed the authorities’ draft multi-year development strategy
to achieve higher and more inclusive growth, and encouraged its swift
finalization and implementation. They recommended expanding social
policies, strengthening social safety nets, and continuing efforts to
improve the business climate and governance to support private sector
growth, job creation, and diversification. Directors emphasized that higher
spending on education and health would improve social outcomes and
productivity, and help reduce poverty.
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Mauritania: Selected Economic Indicators, 2015–18
|
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Population: 4 million (2014 est.)
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Poverty rate: 31 percent (2014)
|
|
Per capita GDP: US$ 1,335 (2014)
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Unemployment: 13 percent (2014)
|
|
|
2015
|
2016
|
2017
|
2018
|
|
|
|
|
Proj.
|
|
(Annual change in percent)
|
|
Output and prices
|
|
|
|
|
|
Real GDP
|
0.9
|
1.7
|
3.8
|
3.0
|
|
Extractive
|
-6.7
|
-1.4
|
10.3
|
-3.5
|
|
Non-extractive
|
2.1
|
2.2
|
2.9
|
4.0
|
|
GDP deflator
|
-4.4
|
4.1
|
4.2
|
2.6
|
|
Consumer prices (period average)
|
0.5
|
1.5
|
2.1
|
3.7
|
|
(In percent of non-extractive GDP; unless
otherwise indicated)
|
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Central Government Operations
|
|
|
|
|
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Revenues and grants
|
32.5
|
31.8
|
30.8
|
30.3
|
|
Non-extractive
|
26.7
|
28.0
|
26.9
|
26.5
|
|
Taxes
|
16.8
|
18.9
|
18.8
|
19.0
|
|
Extractive
|
3.8
|
1.7
|
1.9
|
1.7
|
|
Expenditure
|
36.3
|
32.2
|
31.5
|
32.8
|
|
Current
|
20.5
|
19.0
|
18.5
|
18.1
|
|
Capital
|
15.5
|
13.3
|
12.9
|
14.5
|
|
Primary balance (excl. grants)
|
-4.5
|
-1.3
|
-1.5
|
-2.8
|
|
Overall balance (in percent of GDP)
|
-3.4
|
-0.3
|
-0.6
|
-2.1
|
|
Public debt (in percent of GDP) 1/
|
77.8
|
78.3
|
77.7
|
80.8
|
|
(Annual change in percent; unless otherwise
indicated)
|
|
Money and Credit
|
|
|
|
|
|
Broad money
|
0.4
|
7.1
|
7.3
|
7.5
|
|
Credit to the private sector
|
9.7
|
8.0
|
6.5
|
7.4
|
|
|
|
|
|
|
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Balance of Payments
|
|
|
|
|
|
Current account balance (in percent of GDP)
|
-19.7
|
-14.9
|
-15.3
|
-11.2
|
|
Excl. FDI-financed imports of extractive
capital goods
|
-11.9
|
-11.1
|
-8.1
|
-9.3
|
|
Foreign direct investment (net, in percent
of GDP)
|
32.0
|
16.3
|
25.0
|
11.1
|
|
Gross official reserves (in millions of
US$, end of period)
|
822.8
|
824.5
|
724.9
|
622.8
|
|
In months of prospective non-extractive
imports
|
5.6
|
5.5
|
4.3
|
3.7
|
|
External public debt (in percent of GDP) 1/
|
68.1
|
72.2
|
71.2
|
73.9
|
|
Real effective exchange rate (period
average)
|
8.2
|
-5.7
|
…
|
…
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Memorandum items:
|
|
|
|
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Price of iron ore (US$/Ton)
|
56.1
|
58.6
|
65.1
|
51.7
|
|
Nominal GDP (in millions of US$)
|
4,844.2
|
4,729.0
|
4,960.6
|
4,999.6
|
|
|
|
|
|
|
|
Sources: Mauritanian authorities; and IMF
staff estimates and projections.
1/ Excluding passive debt to Kuwait under
negotiation.
|
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[1]
Under 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
prepares a report, which forms the basis for discussion by the
Executive Board.
[2]
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. An
explanation of any qualifiers used in summing up can be found here:
http://www.imf.org/external/np/sec/misc/qualifiers.htm
.