Mauritania: IMF Executive Board Concludes 2019 Article Iv Consultation With the Islamic Republic of Mauritania

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On December 11, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the 2019 Article IV consultation [1] with the Islamic Republic of Mauritania. During the same meeting, the Board also completed the fourth review of the three-year arrangement with Mauritania under the Extended Credit Facility; a press release on the review was issued separately.

Mauritania faces the challenges of a low-income country with sizable development needs and dependence on commodity exports. The economy was hit by the 2014-15 drop in commodity export prices, and the authorities took decisive measures to restore macroeconomic stability. Since late 2017, the authorities' economic program has been supported by a three-year Extended Credit Facility arrangement covering 2017-20. Nevertheless, considerable challenges remain to achieve high and more inclusive growth and significantly reduce poverty and inequalities. Poverty remains high, social outcomes poor, and infrastructure limited.

Growth is expected to accelerate to 6.9 percent in 2019, up from 3.4 percent last year, driven by buoyant activity in both extractive and non-extractive sectors, and favorable terms of trade. Macroeconomic stability was maintained, official reserves rose, external debt-to-GDP declined, and fiscal space was created by solid non-extractive tax revenue performance, albeit also by under-execution of public investment. Structural reforms progressed, albeit with some delays.

The economic outlook has improved, buoyed by favorable terms of trade, but downside risks remain high. Growth is projected to exceed 6 percent in 2020 and in the following years, supported by continued expansion of mining production, the upcoming development of a large offshore gas field, and strong domestic demand. However, downside risks remain elevated owing to the global slowdown, commodity prices volatility, and security threats in the Sahel.

Executive Board Assessment [2]

Directors welcomed Mauritania's strong macroeconomic performance under the ECF-supported program and the authorities' continued commitment to the program's objectives. They noted that while the economic outlook is positive, the economy faces external downside risks. They emphasized that continued implementation of sound policies and structural reforms and efficient use of fiscal space are critical to entrench macroeconomic stability and debt sustainability as well as to achieve sustainable and more inclusive growth to reduce persistent poverty and inequalities.

Directors welcomed the authorities' plans to pursue prudent fiscal policies while using the available fiscal space to increase social and infrastructure spending to help achieve the SDGs. They underscored the importance of maintaining primary budget surpluses in the medium term and relying mainly on concessional borrowing. Directors called for continued efforts to strengthen revenue mobilization and rationalize current expenditures. Priority needs to be given to strengthening tax and customs administration and broadening the tax base. They also underscored the importance of improving budget preparation and execution frameworks, including strengthening public investment management. Directors emphasized that establishing robust macro-fiscal and institutional frameworks for managing future gas revenues will be critical.

Directors noted that pushing ahead with operationalizing the monetary policy framework and completing the reform of the official foreign exchange market would help ease liquidity conditions and support growth and competitiveness. To improve the soundness of the financial sector and increase banks' ability to finance economic growth and SMEs, Directors called for action to strengthen prudential requirements and bank supervision. Further strengthening the AML/CFT framework will also be important.

Directors encouraged steadfast implementation of structural reforms aimed at enhancing the business environment, improving transparency in the extractive sectors, and fighting corruption. They underscored the need to strengthen public financial management and to push forward with the national anti-corruption strategy. Measures to better fund the court system and audit institutions will be helpful.

Mauritania: Selected Economic Indicators, 2015-20

Per capita GDP: US$ 1,335 (2014)

Poverty rate: 31 percent (2014)

Population: 4 million (2014

Quota: SDR 128.8 million

2015

2016

2017

2018

2019

2020

Est.

Proj.

(Annual change in percent; unless otherwise indicated)

National accounts and prices

Real GDP

0.4

1.8

3.1

3.4

6.9

6.3

Real extractive GDP

-5.6

0.7

-7.1

-18.6

27.7

10.2

Real non-extractive GDP

1.4

2.0

4.5

6.1

5.0

5.8

GDP deflator

-4.2

3.4

3.4

2.7

4.7

2.9

Consumer prices (period average)

0.5

1.5

2.3

3.1

3.0

3.4

(In percent of nonextractive GDP; unless otherwise indicated)

Central government operations

Revenues and grants

32.6

31.7

31.8

33.7

31.5

29.9

Nonextractive

26.8

27.9

27.9

28.3

27.8

26.8

Taxes

16.9

18.7

19.7

20.9

20.7

20.8

Extractive

3.8

1.7

2.8

4.7

2.0

2.2

Grants

2.0

2.2

1.1

0.7

1.6

0.9

Expenditure and net lending

37.2

32.3

31.9

30.0

28.9

29.5

Current

20.6

19.0

19.6

19.2

18.7

18.9

Capital

15.8

13.3

12.3

10.8

10.3

10.6

Primary balance (excl. grants)

-4.5

-1.5

0.3

4.8

2.7

1.1

Overall balance (in percent of GDP)

-3.4

-0.5

0.0

3.3

2.1

0.3

Public sector debt (in percent of GDP) 1/ 2/

75.2

77.4

75.9

82.8

77.4

78.9

(Annual change in percent; unless otherwise indicated)

Money and Credit

Broad money

0.4

7.1

13.7

13.8

14.0

11.4

Credit to the private sector

9.7

8.1

7.5

19.4

11.0

12.3

Balance of Payments

Current account balance (in percent of GDP)

-19.8

-15.1

-13.8

-18.7

-11.4

-20.7

Excl. FDI-financed imports of extractive capital

-12.0

-11.2

-7.6

-13.4

-7.0

-13.2

Gross official reserves (in millions of US$, eop) 3/

822.8

824.4

849.0

918.3

1,105.0

1,180.8

In months of prospective non-extractive imports

5.6

5.4

4.6

4.9

5.5

5.6

External public debt (in millions of US$) 2/

3,208.6

3,354.9

3,573.0

3,616.3

3,698.7

3,912.7

In percent of GDP

66.4

71.6

72.5

69.2

65.6

66.2

Real effective exchange rate

7.8

-5.8

-2.1

-0.3

...

...

Memorandum items:

Nominal GDP (in millions of US$)

4,830.5

4,685.6

4,925.1

5,227.0

5,641.1

5,912.2

Price of iron ore (US$/Ton)

56.1

58.6

71.1

70.1

93.9

76.4

Sources: Mauritanian authorities; and IMF staff estimates and projections.

1/ Including government debt to the central bank recognized in 2018.

2/ Excluding passive debt to Kuwait under negotiation.

3/ Excluding oil fund.

[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 summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .

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