Islamic Republic of Mauritania
Technical Assistance Report-Report on the External Sector Statistics Technical Assistance Mission (March 19-30, 2018)

With the support of the IMF’s Middle East and Central Asia Department (MCD), and at the request of the Central Bank of Mauritania (BCM), the IMF’s Statistics Department (STA) mission visited Nouakchott from March 19–30, 2018, to provide technical assistance (TA) in the area of external sector statistics (ESS). This mission is part of an initiative financed by the Financial Sector Stability Fund (FSSF): Balance Sheet Approach (BSA) Sub-Module. This intersectoral effort will enable the production of more reliable BSA matrices to support macroprudential policies, the country’s financial stability analysis, and the IMF’s surveillance missions. The mission’s key objectives were to work closely with the BCM in order to (i) improve the compilation of the balance of payments (BOP), and (ii) propose a framework for compiling the international investment position (IIP). Based on the findings and recommendations of the last TA mission on external sector statistics (ESS) carried out at the BCM in October 2016, this mission notes the need to improve the quality of most items in the BOP, particularly the financial account, which could also aid IIP compilation efforts in the near future.

Abstract

With the support of the IMF’s Middle East and Central Asia Department (MCD), and at the request of the Central Bank of Mauritania (BCM), the IMF’s Statistics Department (STA) mission visited Nouakchott from March 19–30, 2018, to provide technical assistance (TA) in the area of external sector statistics (ESS). This mission is part of an initiative financed by the Financial Sector Stability Fund (FSSF): Balance Sheet Approach (BSA) Sub-Module. This intersectoral effort will enable the production of more reliable BSA matrices to support macroprudential policies, the country’s financial stability analysis, and the IMF’s surveillance missions. The mission’s key objectives were to work closely with the BCM in order to (i) improve the compilation of the balance of payments (BOP), and (ii) propose a framework for compiling the international investment position (IIP). Based on the findings and recommendations of the last TA mission on external sector statistics (ESS) carried out at the BCM in October 2016, this mission notes the need to improve the quality of most items in the BOP, particularly the financial account, which could also aid IIP compilation efforts in the near future.

Summary of Mission Outcomes and Priority Recommendations

1. With the support of the IMF’s Middle East and Central Asia Department (MCD), and at the request of the Central Bank of Mauritania (BCM), the IMF’s Statistics Department (STA) mission visited Nouakchott from March 19–30, 2018, to provide technical assistance (TA) in the area of external sector statistics (ESS). This mission is part of an initiative financed by the Financial Sector Stability Fund (FSSF): Balance Sheet Approach (BSA) Sub-Module. This intersectoral effort will enable the production of more reliable BSA matrices to support macroprudential policies, the country’s financial stability analysis, and the IMF’s surveillance missions.

2. The mission’s key objectives were to work closely with the BCM in order to (i) improve the compilation of the balance of payments (BOP), and (ii) propose a framework for compiling the international investment position (IIP). Based on the findings and recommendations of the last TA mission on external sector statistics (ESS) carried out at the BCM in October 2016, this mission notes the need to improve the quality of most items in the BOP, particularly the financial account, which could also aid IIP compilation efforts in the near future.

3. The BCM prepares and publishes the BOP in accordance with the Balance of Payments Manual, fifth Edition (BPM5), traditionally in an analytical framework, since the BCM claims it is better suited to economic analyses, in contrast with the standard component presentation that prioritizes the visibility of the functional categories and financial instruments in the BOP. Data collection and compilation are designed to feed and fit the more aggregated analytical format, impacting on the quality of BOP indicators, in particular the financial account.

4. The primary data collection system needs significant improvements in terms of comprehensiveness and accuracy. This should be a priority. Given the proposed challenge of compiling an IIP, the mission believes that the next initiatives should focus on (i) properly breaking down financial account indicators: the initial stages could begin with making better use of monetary statistics, particularly, splitting foreign assets and liabilities of the banking sector from those of the central bank; (ii) developing new data sources (such as a direct investment survey) to better cover the cross-border operations of the nonbanking sector, which is very poorly represented in the BOP; and (iii) improving the quality of external debt statistics.

5. The implementation of this action plan will be possible only if the human resources assigned to ESS preparation are strengthened; the balance of payments is currently produced by a small number of personnel, namely one statistician and a deputy director acting as a coordinator/statistician, who is in principle responsible for three divisions.

Priority Recommendations

6. To contribute to progress in the above-mentioned areas, the mission recommends a detailed one-year action plan, including the following priority recommendations, which are especially important for improving external sector statistics.

Table 1.

Priority Recommendations

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7. More information on the priority recommendations and the corresponding measures/benchmarks can be found in the action plan, in the section entitled “Detailed Technical Assessment and Recommendations.”

Detailed Technical Assessment and Recommendations

A. Action Plan

8. The following table contains recommendations for compiling the balance of payments and the international investment position:

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B. Introduction

9. An IMF Statistics Department (STA) mission visited Nouakchott from March 19–30, 2018, to provide technical assistance (TA) in the area of external sector statistics (ESS) to the Central Bank of Mauritania (BCM). The mission focused on (i) improving the system put in place for compiling the balance of payments (BOP) and (ii) defining a statistical framework for IIP compilation consistent with the Mauritanian BOP system. The latter was also assessed to identify progress since the last TA missions and to propose improvements to further the objective of the current project. In particular, the mission worked closely with the ESS team to identify sources of available data that could be used for both the financial account (BOP) and the IIP.

10. In view of the priorities representing the main BOP challenges, the mission met with the managers of key areas, from which progress is expected in the short term: the BCM focus team responsible for improving the collection of payments (from commercial banks and the central bank); the BCM external debt team; and the Director of Resource Mobilization and Coordination of External Assistance of the Ministry of Economy and Finance.

11. The mission met with the Governor of the BCM to discuss the steps to be taken to optimize ongoing projects, as well as the urgent necessity of strengthening the staff assigned to ESS tasks. The mission wishes to express its gratitude to the Mauritanian authorities, especially the BCM and the Ministry of Finance, for their excellent cooperation and the hospitality shown during its visit, which contributed greatly to the mission’s success.

C. Balance of Payments

Compilation Framework

12. The mission assessed the current status of the balance of payments compilation framework, including the data sources and the statistical compilation practices; it focused in particular on determining whether the status of the current BOP framework permitted a consistent linking to the needs of IIP compilation. The BOP framework was last assessed during the October 2016 TA mission on external sector statistics.

13. The BOP system is based essentially on the bank payments made by commercial banks for their own account and for the account of their customers. To avoid redundancy in the statistical data submitted by banks to the various BCM departments, the central bank devised a centralized reporting channel, through the Banking Supervision Department, which collects data (taking care to avoid superfluity) based on the demand of the BCM’s specialized departments.

14. A significant number of payments made directly by the BCM was also noted: payments for their own account, on behalf of the government, and for a number of state-owned enterprises (for example: Air Mauritanie, Société Nationale des Industries Minières, etc.). The BCM generally refers to the two payment chains as “Central bank payments” and “Commercial bank payments.”

15. Customs data, monetary statistics, and external debt data (largely covering concessional or semi-concessional loans to the public sector) complete the BOP compilation framework.

16. In contrast to the findings of the 2016 TA mission, the quality of export and import data has improved significantly, thanks to the contribution of that TA mission, which redefined a reporting system for trade and the various customs regimes (including free zone processing). Consequently, the production of merchandise statistics is now properly linked to the customs data. In fact, this is the most significant improvement since the last mission.

17. The BCM reported that due to the limited resources available, it has been difficult to implement most of these recommendations; however, a standard classification of “BOP type” transactions was drawn up by the BCM to help commercial banks better classify payments in line with BOP needs; the classification was being finalized and distributed to the banks for regular use.

18. The BOP is compiled and disseminated in an analytical format, which is better-suited to the economic analyses carried out by the IMF in the context of financial programs, and is transposed using the “F10” transmission form (standard format) used for the submission of data to STA.

19. Nevertheless, the collection of data and the production system are more suitable for that accounting framework; current account operations are always presented in an aggregated format: a relatively limited classification of services and income is used (even though details are sometimes available in banking operations). The financial account, however, lacks a more detailed breakdown of financial instruments by institutional sector and by maturity. Based on their affiliation to an institutional sector, the components of the BOP financial account indicate: (i) the overall level of credit institutions’ assets and liabilities, (ii) reserve assets that are still too aggregated, and (iii) weak coverage of private nonbank sector foreign claims and liabilities. The IIP is not produced and the framework for collecting the relevant statistical data is not yet in place.

20. The difficulty of identifying the type of transactions involved in bank payments and the lack of supplementary sources of data on the ESS (such as a direct investment survey or statements of nonbank sector assets and liabilities) limit the breakdown of financial account components. Given the objective of compiling the IIP, a classification of BOP transactions by standard component will improve identification of the items in the financial account, specifically broken down by: financial instrument (direct investments, portfolio investments, loans, etc.), by institutional sector, and by maturity. This classification will make it easier to identify correlations between the two statistics and the analysis of data sources necessary for the development of an integrated IIP.

21. The mission proposed that the “standard format” of BOP components be used for the compilation. The “analytical format” is merely a rearrangement of the items contained in the standard format and can be easily obtained if the preceding format is available. For purposes of economic analysis and to facilitate the monitoring of historical data trends, the analytical presentation can also be prepared.

Recommended Measures:

  • Adopt the standard format model containing the BOP standard components, in correlation with the classification of the IIP components;

Human Resources

22. In the area of human resources training, the mission noted that all the work on the ESS is done by a single compiler at the central bank, under the direct coordination of the Deputy Director of the BOP Sub-Directorate. Since the previous mission (October 2016), the team has lost one member, who has been assigned to another department within BCM. The loss is covered by the two above-mentioned individuals, and the support of the Deputy Director, who is well-versed in the methodology and ultimately compiles the BOP (in the absence of a department head), is essential. Inasmuch as the country plans to produce the IIP, this new task will create extra work. The mission therefore stressed the necessity of hiring additional human resources to improve production capacity and to give the senior technicians more time, as their job is to concentrate on statistical analyses in order to fine-tune estimates and adjustments. The mission notes that the Deputy Director’s upcoming retirement will require training at least one senior staff member, based on the specific needs of the statistical area and the associated compilation challenges.

23. In these circumstances, the mission worked in close collaboration with the BCM in order to (i) propose improvements to the BOP compilation system and prepare a consistent framework to serve as the starting point for compiling an IIP consistent with the BOP framework; (ii) organize workshops to develop new data sources better suited to the preparation of the financial account; and (iii) ensure a good understanding of the methodological framework with a view to identifying a consistent link between the components of the financial account and those of the IIP.

Recommended Measures:

  • Strengthen the BOP team, ideally by adding new hires, rather than relocating staff from other BCM teams.

Data Sources

24. Mauritania’s BOP statistics are based for the most part on statements of bank payments made by commercial banks and the central bank. The financial account data are obtained from the monetary survey of banks and the BCM (processed in an aggregated manner), the government’s oil account, and the statement of public debt. The data collected are not re-processed or cross-checked with other sources (with the exception of the trade in goods), and the BOP does not include staff estimations.

25. Although the coverage of cross border transactions is satisfactory, the system for reporting international bank payments does not permit correctly identifying and classifying transactions with the level of detail necessary for compiling the BOP. The BOP team has to contact bank personnel regularly to obtain additional explanations and to improve the transactions allocation. Coding is based more on empirical assumptions, and without more precise details, the BOP accounts are estimated in the aggregate (see the structure of accounts in Annex 1-source: BCM website).

26. The mission reviewed the draft classification prepared by the BCM2 (see Annex 1), which the commercial banks are adopting to improve the quality of the statement of bank payments. It also met with the representative of the I.T. Department, who is responsible for the procedures for transmitting bank statements (member of the BCM focus team tasked with improving the collection of statistical data from banks). Although the classification can be improved, the mission recommended that it be tested immediately and rolled out to facilitate reporting through commercial banks. The BCM would prefer to centralize the requests sent to the commercial banks (by its departments) and implement all significant changes at the same time. Given the prevalence of this data source in BOP compilation, the mission felt that implementing the classification should be a high priority.

27. The mission recommended that the BOP team pay particular attention to correctly identifying the denominations of commercial credits. As regards the methodological treatment, the mission proposed grouping the components of commercial credits as indicated in the structure proposed in Annex 3 (based on the recommendations of the BPM6 Compilation Guide).

28. The mission supports the BCM’s proposal of adding a field containing BOP-appropriate descriptions to the payment orders executed by Swift. This initiative would permit the coding of operations in real time, i.e., when payments are made, by the staff responsible for payment orders, using a classification of denominations similar to the one devised for bank payments. The BOP team will ensure that their colleagues receive training in BOP coding.

Recommended Measures:

  • Commercial bank payments:

    • a. BCM project focus team: Test and implement the classification developed for use by commercial banks with a view to improving accuracy regarding the type of transactions carried out by banks on behalf of their customers—high-priority recommendation;

    • b. BOP team: Fine-tune the classification in question and harmonize the treatment of commercial credits by adopting the treatment recommended by the mission.

  • Central bank payments:

    • a. BCM project focus team: Add fields to the details collected by Swift containing denominations/codes to permit identification of the nature of BOP transactions;

    • b. BOP team: Ensure that the coding is done by payments personnel; train their colleagues to gain proficiency in coding payments for BOP purposes.

29. The central bank’s foreign assets and liabilities are obtained from two aggregated items concerning the BCM’s assets and liabilities (net). However, the reserve assets components proposed by BPM6 include: (i) monetary gold, (ii) currency and deposits, (iii) securities; (iv) special drawing rights, (v) reserve position in the IMF, and (vi) other claims. After working closely with the BOP team on an analysis of the classification currently available in the BCM’s statement of assets and liabilities, the BOP team found it necessary to contact the department responsible for monetary statistics to obtain more detail concerning the balance sheet data, which will permit correctly identifying the central bank’s foreign assets and liabilities.

Recommended Measures:

  • The BOP Sub-Directorate works in close consultation with the Monetary Studies Sub-Directorate to identify the components of the central bank’s assets and liabilities, in accordance with the structure analyzed with the mission; in particular, a more detailed breakdown of the central bank’s accounts in the monetary statistics would be necessary;

30. With regard to commercial banks’ foreign assets and liabilities, the previous mission noted that some of the commercial banks’ transactions for their own account are still not fully taken into account. As in the case of the statement of central bank assets and liabilities, the financial transactions of commercial banks can be identified in just two lines: “Commercial banks (net)”; and “of which: Assets and Liabilities”.

31. The mission recommended that the monetary statistics be analyzed in the same way as the central bank’s assets and liabilities; the structure proposed in Table A 6.3 of the BPM6 Compilation Guide would be followed.

Recommended Measures:

  • Identify a more detailed structure of commercial banks assets and liabilities in the monetary statistics, following the example in Table A6.3 “Reconciliation of Other Depository Corporations’ Balance Sheet Items with International Investment Position (IIP) Components.”

32. The most important components to be monitored for the government are: (i) “the oil account” opened with foreign banks (to collect revenue) – for foreign assets and (ii) the external debt;

Recommended Measures:

  • Foreign assets: Ask the Investment Directorate to report amounts outstanding and income (including interest) related to investments of funds for the account of the government;

  • Foreign liabilities: Check the completeness of the amounts of disbursements tracked by the BCM against projections and other available information at the Directorate of Financial Resources Mobilization of the Ministry of Economy and Finance. Ask the Directorate of Financial Resources Mobilization for a list of enterprises involved in public infrastructure projects. Include those enterprises in the sample of direct investments (transactions and positions). Ensure reconciliation between the direct investment components reported by enterprises and the disbursements/reimbursements made by the government.

33. External claims and liabilities of the private nonbank sector: the foreign exchange control on financial transactions limits the types of international transactions carried out by the nonbank sector; nevertheless, the foreign claims and liabilities of the nonbank private sector are very poorly covered in the financial account. The debt position of the nonbank sector cannot be estimated in a context of nearly nonexistent data.

34. As initial measures the mission recommended: (i) for foreign assets: use BIS statistics as a source of information for estimating the foreign deposits of the nonbank private sector, (ii) for liabilities: conduct a foreign direct investment survey, which will support the recording of all key BOP and IIP financial transactions.

Recommended Measures:

  • Use BIS statistics as a source of information for estimating the foreign deposits of the private nonbank sector.

  • Compile a directory of direct investment companies as agreed during the mission and conduct a direct investment pilot survey for end-2016 positions.

Direct Investment

35. Direct investment appears in the BOP as an aggregated item: “Direct investment (net), of which: oil industries (net).” Data collection is based largely on bank settlements. Because the latter do not cover all the components of direct investment (particularly reinvested earnings), the poor quality of the transactions tracked by Mauritania’s BOP system adds to the difficulties of correctly identifying direct investment flows. Moreover, there are no data on stocks.

36. The mission recommended conducting an annual foreign direct investment survey. It also proposed for use a draft survey questionnaire (Annex 5). Given the limited resources available to the BCM and the complexity of such a survey, the mission first recommended conducting a pilot survey of a certain number of concerned enterprises. This will make it possible to improve questionnaire testing and respondents’ understanding of the methodology, promote the survey to ensure a reasonable response rate and, most importantly, collect an initial series of direct investment transactions and positions and attempt to compare them with data obtained from existing sources. The survey could then be conducted on a regular basis.

37. The central bank should develop a directory of direct investment enterprises to be surveyed annually in the key sectors; the target population could include: (i) major mining and oil companies, (ii) fishing enterprises, (iii) resident banks with foreign investment, (iv) telecommunications companies, and (v) other types of companies identifiable at the Nouadhibou “Guichet unique” (for free zones) and the “Guichet unique” of the Ministry of Economy and Finance.

Recommended Measures:

  • Conduct a direct investment pilot survey to estimate end-2016 positions and 2017 flows;

  • Compile a directory of direct investment companies as agreed during the mission and conduct a direct investment pilot survey for end-2016 positions.

D. Debt Statistics

38. The compilation of external public debt statistics is somewhat controversial in Mauritania: since the BCM is responsible for debt service payments, the main concern of the BCM (as well as the government) is to carefully monitor debt service to ensure that payments due can be made regularly, on the due date. In principle, donors notify the BCM of debt service payments owed, fifteen days before the due date.2

39. This means that the emphasis is on monitoring debt service, based essentially on notices from creditors. However, the estimation of disbursements is also based on the data provided by donors concerning actual drawings, rather than on statistical data collected from resident sources; in the case of suppliers’ credits, for example, the creditors are themselves aware of the disbursements. For the time being, it appears that nonresident creditors have the most complete disbursement records. Again, creditors send data on actual disbursements related to their contracts. This is how disbursements of drawing loans are monitored (donors report the disbursed amounts, with a lag vis-à-vis the drawing date). Communication with creditors concerning debt service payments is the main source of public debt information.

40. In addition, a Directorate responsible for monitoring financial resources at the Ministry of Economy and Finance has a disbursements database containing data obtained from disbursement requests. These two data sources are used to compile debt statistics, on the assumption that nearly 80 percent of all disbursement requests would be disbursed.

41. It has been shown that a significant percentage of public external debt is used to finance public construction projects lasting more than a year; the mission recommended identifying those projects by requesting a list of projects from the Directorate of Financial Resources Mobilization at the Ministry of Economy and Finance, identifying local enterprises (branches) that carry out such transactions, and classifying their operations in the BOP as foreign direct investments (while at the same time monitoring government disbursements and debt payments); the structure of the data needed to ensure classification as direct investments and the topic of reconciliation with public debt flows were discussed by the mission with the BOP team (an example of a calculation model and the components to be monitored for estimating the amount of foreign direct investment is presented in Annex 4).

Recommended Measures:

  • Check the exhaustivity of the amounts of disbursements tracked by the BCM against projections and other available information at the Directorate of Financial Resources Mobilization of the Ministry of Economy and Finance;

  • Ask the Directorate of Financial Resources Mobilization for a list of long-term public projects, with a view to surveying them; add transactions related to those projects to direct investment; ensure reconciliation between the direct investment components reported by enterprises and the disbursements/reimbursements made by the government.

E. International Investment Position

42. The mission believes that Mauritania’s IIP could be compiled at the end of a cycle of preparation of the corresponding data sources. The point of departure would be sufficient coverage of financial transactions and identification of the sectoral components of stocks that could be more easily surveyed (regarding the central bank and the banking sector, for example). Then, the collection of appropriate data would be needed to identify financial assets and liabilities in sufficient detail (especially as concerns the private sector and direct investment in particular). Certain data on positions should be monitored regularly (for example, BIS statistics, the foreign direct investment survey, the government account, public debt monitoring, etc.).

43. Implementation of the foreign direct investment survey (covering the related flows and stocks) will be key to significantly improving the quality of the BOP and obtaining data on financial positions for the IIP. Incidentally, almost all public infrastructure projects are foreign-financed.

44. At the same time, research work and closer cooperation with the BCM’s monetary statistics team will be necessary to make better use of the monetary statistics and the data on reserve assets. At present, highly aggregated monetary statistics data are used to estimate the net banking sector assets and liabilities, as well as the reserve assets.

F. Officials Met During the Mission

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Islamic Republic of Mauritania: Technical Assistance Report-Report on the External Sector Statistics Technical Assistance Mission (March 19-30, 2018)
Author: International Monetary Fund. Statistics Dept.