## IMF Executive Board Concludes 2017 Article IV Consultation with the Islamic Republic of Mauritania

_IMF News, August 9, 2017_

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## Bibliographic details
- Published: August 9, 2017

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### 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).*

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## References

- [The Executive Board](http://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Islamic Republic of Mauritania and the IMF](http://www.imf.org/external/country/MRT/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2017/08/09/pr17324-imf-executive-board-concludes-2017-article-iv-consultation-with-mauritania_