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Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 1999
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Mauritania: ESAF

The IMF approved a three-year loan for Mauritania under the Enhanced Structural Adjustment Facility (ESAF), equivalent to SDR 42.5 million (about $56.5 million) to support the government’s 1999-2002 economic program. The first annual loan will be disbursed in two equal installments; the first, equivalent to SDR 6.1 million (about $8.1 million), will be available immediately.

Excerpts from the IMF Deputy Managing Director Shigemitsu Sugisaki’s statement on the Executive Board discussion follow:

“Directors commended the authorities for the significant progress made over the past few years in improving macroeconomic conditions and social indicators. While recognizing external vulnerabilities and the need to preserve macroeconomic stability, they considered that there was room for some gradual reduction of the overall fiscal surplus and of interest rates. Directors also underscored the need to take advantage of the favorable fiscal position to implement a program of fiscal reform and to pursue a more active role of the private sector in the economy in order to stimulate economic growth and help in further reducing poverty.

“Directors stressed the importance of preserving government revenue by strengthening tax administration and reducing exemptions particularly in view of the expected decline in trade taxes. They welcomed efforts under way to strengthen targeting and monitoring of government spending in social sectors.

“Directors commended the authorities for embarking on an ambitious and comprehensive structural reform program and encouraged a sustained effort. They noted that the proposed policies to foster private sector development, liberalize markets, and promote competition are essential for accelerating the rate of growth and creating employment.

“Directors reaffirmed their support for Mauritania’s request for assistance under the HIPC Initiative and considered that the approval of the ESAF should mark the beginning of the track record period leading to the completion point.”

Program summary

The Mauritanian authorities are embarking on an ambitious economic program aimed at raising growth rates and improving social conditions, with particular focus on poverty reduction.

The medium-term strategy will focus on consolidating macro-economic stability, deepening structural reforms, redefining the role of the government while improving governance and increasing transparency, liberalizing markets and promoting greater competition, creating a supportive environment for private sector investment, and implementing a far-reaching social development agenda. The 1999 program aims at raising GDP growth to 4.1 percent, reducing inflation to 4 percent, containing the current account deficit to 11.2 percent of GDP, and increasing official reserves to the equivalent of 5.1 months of imports of goods and nonfactor services.

Given the volatility of the external environment on the export sector, the government is targeting a budget surplus of 2.2 percent of GDP in 1999 to achieve its macroeconomic objectives.

Several key structural reforms will be implemented in the first year of the program, encompassing the exchange market system, the restructuring of the public sector, and the development of the rural sector.

Although social indicators have improved in the past decade, poverty is still widespread, affecting over 50 percent of the population, and health and education needs remain high. The program aims at significant further poverty reduction and the development of the country’s human capital through an extensive range of actions.

Mauritania joined the IMF on September 10, 1963, and its quota is SDR 64.4 million (about $85.7 million). Its outstanding use of IMF financing currently totals SDR 75.0 million (about $99.7 million).

Mauritania: selected economic and financial indicators
Projection
19961997199819992000200120022003
GDP at constant prices4.74.53.54.14.44.65.05.2
Consumer price index
(period average)4.74.58.04.03.53.02.52.5
(percent of GDP)
Overall government balance
(excluding grants)5.34.22.12.21.30.50.40.3
Current account balance
(excluding official transfers)-13.2-9.0-11.4--11.2-10.8-10.5-10.1-9.6
(months of imports of goods and nonfactor services)
Gross official reserves2.84.64.65.15.35.45.55.6
Data: Mauritanian authorities and IMF staff estimates and projections
Data: Mauritanian authorities and IMF staff estimates and projections

Madagascar: ESAF

The IMF approved the second annual loan under the Enhanced Structural Adjustment Facility (ESAF) to support Madagascar’s economic and financial program and extended the commitment period of the three-year loan under ESAF until July 27, 2000. The three-year ESAF program was approved on November 27, 1996, in an original amount of SDR 81.4 million (about $108.1 million), of which SDR 27.1 million has been disbursed. This decision provides Madagascar with SDR 27.1 million ($36.0 million) during the second annual economic and financial program supported by the ESAF, with SDR 13.6 million available as of July 30.

Excerpts from IMF Deputy Managing Director Shigemitsu Sugisaki’s statement on the Executive Board discussion follow:

“Directors welcomed the government’s recent efforts to strengthen the implementation of its reform strategy. Directors considered the program to be appropriately aimed at increasing growth and supporting an ambitious poverty reduction plan. They concurred that continued fiscal reform, a reduced role for government in the production of marketable goods and services, and a transparent regulatory framework were crucial to ensuring macroeconomic stability and creating an environment for much-needed foreign investment.

“Directors noted that reform of public finances was central to the success of the program. They supported the authorities’ intention to shift the emphasis of public expenditure further toward key priorities in health and education and to take steps to improve the efficiency of public spending.

“Pointing to the heavy debt burden faced by Madagascar, Directors supported the authorities’ desire to secure early debt relief. To this end, Directors underscored the importance of establishing a strong policy track record, through full implementation of the envisaged macroeconomic and structural measures.”

Medium-term strategy

The program for 1999-2001 is designed to provide a strong signal to potential investors and an impetus for growth. It seeks to accelerate real GDP growth from 3.9 percent in 1998 to 4.5 percent in 1999 and 5.3 percent in 2000; reduce annual inflation from an expected 6.6 percent in 1999 to 4.8 percent in 2000; and narrow the external current account deficit from 7.9 percent of GDP in 1998 to 7.3 percent of GDP in 1999 and 7.0 percent of GDP in 2000. Rising aid flows and foreign exchange receipts from privatization are expected to help replenish gross official reserves, to a level equivalent to 3½ months of imports.

The government is committed to keeping the fiscal deficit at 4.9 percent of GDP in 1999 and at 3.2 percent of GDP in 2000. Monetary policy will remain geared toward achieving the program’s inflation and balance of payments targets.

As part of its strategy to eradicate poverty, which is estimated to afflict 70 percent of the population, the government intends to raise budget allocations for health care and education by 0.4 percentage points of GDP in 2000 from 3.4 percent of GDP in 1999.

Given Madagascar’s low income level, its domestic savings capacity will remain constrained, implying that the achievement of the high investment strategy will hinge on concessional foreign aid and foreign direct investment. The country’s debt-to-export ratios over the next years suggest that Madagascar may qualify for assistance under the Heavily Indebted Poor Countries (HIPC) Initiative, assuming a decision point in 2001.

Structural reforms

The authorities are committed to accelerating the implementation of structural reforms, particularly the privatization of key enterprises; the removal of barriers to competition in sectors with high growth potential, such as mining, fishing, and tourism; and the creation of a more effective legal framework and judicial system.

Madagascar joined the IMF on September 25, 1963, and its quota is SDR 122.2 million (about $162.4 million). Its outstanding use of IMF financing currently totals SDR 36.1 million (about $48.0 million).

Madagascar: selected economic and financial indicators
1995199619971998199920002001
ProgramActualRevisedActualTargetActualprogram
program1scenario
(annual percent change)
Real GDP at market prices1.72.02.13.53.73.63.94.55.35.7
Traditional consumer price index
(average)49.019.719.86.74.56.36.26.64.83.0
Total overall government balance
(cash basis)-5.8-5.4-4.9-2.3-3.2-6.2-6.3-4.9-3.2-2.4
(weeks of imports of goods and nonfactor services)
Gross official reserves5.49.312.314.914.013.67.813.614.513.4
Data: Malagasy authorities and IMF staff estimates and projections

Figures contained in a 1997 Executive Board document.

Data: Malagasy authorities and IMF staff estimates and projections

Figures contained in a 1997 Executive Board document.

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