Islamic Republic of Mauritania
2008 Article IV Consultation and Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility-Staff Report; Staff Supplement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for the Islamic Republic of Mauritania
Author: International Monetary Fund
Publication Date:
16 Jul 2008
eISBN:
9781451827668
Language:
English
Keywords:
ISCR; CR; debt; authority; real GDP; NPV; price measure; concessional terms; debt burden threshold; sustainability framework; Real GDP growth; government policy; Oil; Food prices; Exchange rate flexibility; West Africa; government intervention; managed float; economic statistics; exchange regime; Exchange rates; gas and mining taxes
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1. The democratization process that was initiated by transition authorities has been successful. Steps toward democracy included a referendum on constitutional amendments in June 2006, followed by parliamentary elections in November 2006, and culminating in the election of Sidi Mohamed Ould Cheikh Abdallahi as president in March 2007. International observers expressed satisfaction with the transparency and fairness of the elections. The new president appointed Zeine Ould Zeidane, a former central bank governor, as prime minister and a new government was formed in April 2007.

Abstract

1. The democratization process that was initiated by transition authorities has been successful. Steps toward democracy included a referendum on constitutional amendments in June 2006, followed by parliamentary elections in November 2006, and culminating in the election of Sidi Mohamed Ould Cheikh Abdallahi as president in March 2007. International observers expressed satisfaction with the transparency and fairness of the elections. The new president appointed Zeine Ould Zeidane, a former central bank governor, as prime minister and a new government was formed in April 2007.

I. Introduction

1. The democratization process that was initiated by transition authorities has been successful. Steps toward democracy included a referendum on constitutional amendments in June 2006, followed by parliamentary elections in November 2006, and culminating in the election of Sidi Mohamed Ould Cheikh Abdallahi as president in March 2007. International observers expressed satisfaction with the transparency and fairness of the elections. The new president appointed Zeine Ould Zeidane, a former central bank governor, as prime minister and a new government was formed in April 2007.

2. Poverty incidence remains high at about 47 percent, with 75 percent of the poor living in rural areas.1 Real GDP growth averaged 4.7 percent in the period 2001–07, which translated into an average per capita real GDP growth of 2.2 percent. However, despite progress over the past few years, Mauritania ranked 137 out of 177 countries according to the Human Development Index in 2007. The probable hike in inflation caused by high international food and fuel prices is expected to adversely affect poor households and could increase the share of population living below the poverty line.

3. Medium-term oil production perspectives have been substantially revised downward since the last Article IV consultation. This reflects both technical difficulties encountered in Chinguetti, the first offshore field that went into production in early 2006, and uncertainties on the timing of the beginning of the exploitation of the Tevet and Tiof oilfields, which is likely to be delayed until 2012. Oil production averaged 36,000 barrels a day in 2006 and 15,000 in 2007, far below the original projections of 59,000 barrels per day for 2006 and 63,000 for 2007.

4. The authorities have engaged in a comprehensive reform agenda to stimulate non-oil growth and reduce poverty in the context of the PRGF-supported program. In particular, they intend to improve infrastructure, enhance competitiveness, promote private sector development, improve fiscal management, fight corruption, maintain macroeconomic stability, and increase government’s efficiency in delivering public services. To support their development plan, the authorities successfully organized a consultative group meeting in Paris in December 2007, where they received financial pledges amounting to $2.1 billion.

uA01fig04

Oil production in barrels per day

Citation: IMF Staff Country Reports 2008, 231; 10.5089/9781451827668.002.A001

5. The president and the prime minister reiterated the government’s strong commitment to the reform program supported by the PRGF arrangement, while underlining the need to take measures to avoid a potential food access crisis, which could cause social and political unrest if it remained unaddressed.

II. Recent Developments

6. Notwithstanding a steeper-than-expected decline in oil revenue, macroeconomic developments remain broadly in line with program objectives (Table 1). Real GDP growth is estimated at 1 percent in 2007, compared to 11.4 percent in 2006, despite an increase in real non-oil GDP growth from 4.1 percent in 2006 to 5.9 percent in 2007 driven by a rebound in agriculture and new mining projects. The current account deficit increased from 1.3 percent of GDP in 2006 to 11.4 percent in 2007, reflecting higher food prices and lower oil exports. Gross international reserves amounted to $208.8 million (equivalent to about 1.9 months of imports of goods and services) at end-December 2007, as the negative impact of a shortening of oil import credit was partly compensated by higher repatriation of profits from the public iron company SNIM.

Table 1

Selected Economic and Financial Indicators, 2003–13

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Sources: Mauritanian authorities; and Fund staff estimates and projections

The decline in the deflator in 2007 reflects the sharp decline in the share of the oil sector in total GDP that year and the fact that, owing to the authorities’ choice of 1998 (when oil prices were particularly low) as the base year for the calculation of national accounts at constant prices, the price index for oil is much higher than the indices for other sectors.

Excluding oil account.

Excluding oil exploration/production and other mining-related activities, and imports financed by FDI and aid.

Including oil signature bonuses.

Includes both public and private sector external debt. Revised estimates are based on new debt stock data as of 2007 after HIPC and MDRI debt relief, include estimates for additional new borrowing in 2008 following pledges made at the consultative group meeting.

Excluding oil, copper, and gold -related activities, and imports financed by other FDI.

Table 2

Central Government Operations, 2006–13

(In billions of ouguiya, unless otherwise indicated)

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

Reflecting the authorities new classification, which is closer to GFS standards; estimates for 2006.

Including transfers to public entities outside the central government.

Domestic financing was adjusted in line with paragraph 17 of the TMU.

Defined as government non-oil revenue (excluding grants) minus government expenditure (excluding foreign-financed investment expenditure and interest on external debt).

BCM financing was adjusted in line with paragraph 17 of the TMU.

In 2006, includes receipts from the sales of a telecom license for $103 million. Adjusted for the repatriation, in 2008, of a grant received from Koweit in 2007 on a special account.

Treasury float and other unpaid obligations recognized by the government.

After MDRI stock of debt operation. Domestic debt excludes the "float".

7. The partial pass-through of increases in international food and petroleum prices led to large-scale demonstrations in November 2007. In response, the authorities adopted additional fiscal measures in the 2008 budget to alleviate the social impact of price increases while maintaining the non-oil fiscal balance unchanged.2 By end-2007, year-on-year inflation had picked up from 5.9 percent in September to 7.4 percent in December, but was still lower than the 7.9 percent program estimate for 2007, and the 8.9 percent realized in 2006.

8. All the quantitative performance criteria at end-December 2007 were met (Attachment I, Table 1). In particular, the basic—excluding foreign-financed spending— non-oil fiscal deficit reached 2.5 percent of non-oil GDP (compared to 2.9 percent envisaged underthe program), reflecting higher-than-expected tax revenues as a result of more efficient tax collection. Both quantitative indicative targets were also met. First, the stock of outstanding payments at the treasury was cleared due to improved monitoring of the cash position, and computerization and deconcentration of the expenditure process; second, poverty related spending also exceeded the program target as pro-poor spending accelerated in the second half after some initial difficulties in implementing poverty reduction programs in the first half of the year.

9. The authorities have maintained a prudent monetary policy stance (Table 4). The Central Bank of Mauritania (BCM) absorbed commercial banks’ excess liquidity through the issuance of treasury bills in coordination with the ministry of finance. Treasury bills rates remained relatively stable in the 10–11 percent range and the discount rate was unchanged at 12 percent. The exchange rate vis-à-vis the dollar appreciated from UM/$268.6 at end-2006 to UM/$252 at end-2007, as a result of increased confidence in the domestic currency and occasional BCM’s intervention to limit the inflationary impact of the Euro appreciation against the dollar. The parallel market premiums have remained insignificant since February 2007.

Table 3

Balance of Payments, 2006–13

(In millions of U.S. dollars, unless otherwise indicated)

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

Figures based on staff estimates and projections, for lack of data provision from the respective FDI companies.

Excluding HIPC grants on debt service that have fallen subject to MDRI relief.

MDRI debt and assumed arrears relief is treated as a one-time stock operation.

Imports of goods and services for the year ahead, excluding FDI- and external aid-financed imports.

Table 4

Monetary Situation, 2003–08

(In billions of ouguiya at end-of-period exchange rates, unless otherwise indicated)

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

Reflects MDRI debt relief from the Fund.

Change relative to the end of the previous year.