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International Monetary Fund. Middle East and Central Asia Dept.

This paper discusses Pakistan’s First review Under the Extended Arrangement Under the Extended Fund Facility and Request for Waiver of Nonobservance of a Performance Criterion (PCs) and Modification of Performance Criteria. All quantitative PCs for end-September 2013 were observed except for the one on net international reserves. The indicative target on social transfer payments was also missed, but the technical problems that caused the shortfall have since been rectified. The IMF Staff supports authorities’ request for completion of the first review under the arrangement and for a waiver for the nonobservance of the performance criterion on net international reserves accumulation.

International Monetary Fund. Middle East and Central Asia Dept.

KEY ISSUESContext. Mauritania’s economy has benefited from macroeconomic stability and highgrowth in the context of contained inflation, responsible macro-policies, high iron oreprices and scaled-up public investment. However, economic growth has not translatedinto broadly improved living standards and is being hit by a sharp decline in iron oreprices.Outlook and Risks. Although the outlook remains favorable, it hinges heavily onstabilizing iron ore prices and expanding mining capacity. Downside risks to the outlookdominate because iron ore prices may decline further in response to excess supply in theglobal market.Key Policy Recommendations. With high risk of debt distress and deteriorating termsof trade, Mauritania’s fiscal policy needs to remain focused on consolidation to supportfiscal sustainability. Over the medium term, a fiscal framework with a full-fledged fiscalrule will help prevent the boom–bust cycles that ensue from volatility in natural resourcerevenue, and with strengthened governance in managing mining wealth. The centralbank should take advantage of the low-inflation environment to strengthen monetarypolicy formulation, gradually liberalize the foreign exchange market, and introduceliquidity support and banking resolution frameworks. The implementation of the recentFSAP recommendations should be pursued to enhance the stability of the financialsector stability.Economic diversification and inclusive growth are the foremost medium-termchallenges. The authorities should accelerate structural reforms needed to raiseMauritania’s potential growth, create jobs, and improve living standards for allMauritanians.Article VIII. A comprehensive analysis of the foreign exchange market identifiedexchange restrictions and multiple currency practices (MCPs) subject to Fund approvalunder Article VIII. Effective November 20, 2013, the exchange rate regime is classified as“stabilized” arrangement.