A mission of the International Monetary Fund (IMF) led by Mr. Amine Mati, visited Nouakchott from April 29 to May 14, 2012 to conduct discussions related to the fourth review of Mauritania's arrangement under the Extended Credit Facility (ECF) (1) and consultations under Article IV of the IMF Articles of Agreement.
The mission met with the President of the Republic and several economic and financial policymakers and also held productive discussions with members of parliament, academics, members of the diplomatic corps, and representatives of the banking and private sectors, unions, the donor community, and civil society.
At the end of its visit, Mr. Amine Mati issued the following statement:
"Economic growth in Mauritania remains sustained despite the effects of the acute drought and the slowdown in external demand. Real GDP growth, estimated at 4 percent for 2011, underperformed initial forecasts, owing essentially to the significant drop in agricultural production. Inflation remains under control at 5.7 percent, despite higher international prices of food and petroleum products.
"In 2011, the Mauritanian economy showed greater resilience to exogenous shocks as policies were implemented to bolster macroeconomic stability in the context of the challenging national and international environment. In effect, fiscal performance was better than expected, with the basic fiscal deficit amounting to less than 1 percent of GDP, underpinned by very solid revenue collection, including from the mining sector, which more than offset emergency spending under the 2011 solidarity program. Owing to the good performance of mining exports, the external current account deficit improved significantly, with foreign exchange reserves doubling to an unprecedented level of US$ 501.6 millions, that is, the equivalent of [3.3] months of imports. This strong macroeconomic performance was, however, still insufficient to absorb the country's high unemployment and poverty rates.
"Implementation of the solidarity program in 2011 helped mitigate the impact of rising food and energy prices on the most vulnerable segments of the population. In 2012, the EMEL program constitutes an appropriate response to the adverse effects of the drought on people and livestock. While encouraging the authorities to ensure rapid, efficient, and well-targeted implementation of this program, the mission noted with satisfaction the conduct of the survey on vulnerability and poverty in Nouakchott and the launch of cash transfers to vulnerable groups. The mission supports the adoption of the new hydrocarbon price structure, which will make it possible to return to market-based pricing by end-2012, thus creating additional fiscal space for effective deployment of poverty-reducing expenditure.
"The mission congratulated the authorities on having successfully met the end-2011 program performance criteria and structural benchmarks. The mission also urged the authorities to accelerate the pace of implementation of structural reforms even more, with regard to the civil service, public enterprises, public financial management, and social protection. Further, the authorities are encouraged to continue improving the business environment, including by implementing the new procurement code, adopting the new investment code, making tax credit refund payments on a regular and ongoing basis, and putting in place a framework for consultation with the private sector.
"For 2012, growth is projected to reach 5.5 percent, buoyed by the vigorous recovery in agricultural production and the expected uptick in activity in the building and public works sector. Inflation is set to remain contained within the 7 percent ceiling. However, the current account is expected to worsen significantly, largely as a result of imports under the 2012 EMEL program and infrastructure projects, in particular, the new power plant and the new airport in Nouakchott. Mauritania's economic resilience to exogenous shocks will be further strengthened by its comfortable foreign exchange reserve position, equivalent to around 3.8 months of import coverage at yearend.
"The mission conducted discussions under Article IV of the IMF Articles of Agreement and commended the authorities on their commitment to devise an optimal mining policy and to implement coherent sectoral, fiscal, and monetary policies conducive to accelerating the development of an industrial base and making the Mauritanian economy less vulnerable to external shocks. The mission supports the authorities' efforts to put the economy on a path to sustained and more inclusive growth with a view to significantly reigning in unemployment and improving the living standards of the Mauritanian people.
"In view of the satisfactory performance of the program objectives for 2011, Fund staff will recommend that management request the completion of the fourth review under the three-year ECF arrangement, to be taken up by the Executive Board in June 2012."
The mission would like to take the opportunity to thank the Mauritanian authorities, and all those that it met with, for the warm welcome it received, the quality of the discussions held and the good conditions under which its work was conducted.
(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