Abstract
This paper discusses key findings of the Second Review Under the Staff Monitored Program (SMP) for Mauritania. Mauritania’s performance since the beginning of 2006 has been fully satisfactory. All quantitative targets and structural benchmarks under the SMP that covered the first six months of 2006 were observed. Sound macroeconomic policies reined in inflation and contributed to the elimination of the parallel foreign exchange market premium. The proposed Poverty Reduction and Growth Facility (PRGF)-supported program will consolidate the progress achieved during the SMP toward macroeconomic stabilization.
1. This statement summarizes information on recent economic developments that has become available since the staff report for the PRGF request was circulated to Executive Directors on December 4, 2006. This information does not alter the thrust of the staff appraisal.
2. The prior action related to the government’s adoption of a 2007 budget ordinance was observed, as a budget ordinance consistent with paragraphs 25-29 of the MEFP was adopted by the Council of Ministers on December 1.
3. Monthly inflation was less than 0.6 percent in both October and November 2006, bringing the 12-month rate of inflation to 9.1 percent in November 2006, in line with program projections. Inflation continues to be driven by foodstuff prices, both local and imported.
4. A key component of the government revenue projection for 2006 has recently been confirmed. The adoption of the 2007 budget, which provides for fishing-related spending in line with what had been agreed with the EU under the new fishing agreement, will make possible the first disbursement of the EU annual compensation under the agreement by year-end. The new agreement will yield annual revenue of €108 million over six years, of which €86 million will be disbursed from the EU budget and €22 million directly by the EU fishing companies.
5. On December 14, 2006, the authorities eliminated the requirement to partially surrender fish export proceeds to the BCM.