Front Matter Page
IMF Country Report No. 19/145
ISLAMIC REPUBLIC OF MAURITANIA
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE ISLAMIC REPUBLIC OF MAURITANIA
May 2019
In the context of the Third Review Under the Extended Credit Facility Arrangement, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on May 20, 2019 following discussions that ended on March 13, 2019 with the officials of the Islamic Republic of Mauritania on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on May 3, 2019.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association.
A Statement by the Executive Director for the Islamic Republic of Mauritania.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of the Islamic Republic of Mauritania*
Memorandum of Economic and Financial Policies by the authorities of the Islamic Republic of Mauritania*
Technical Memorandum of Understanding*
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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International Monetary Fund
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© 2019 International Monetary Fund
Front Matter Page
ISLAMIC REPUBLIC OF MAURITANIA
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT
May 3, 2019
Executive Summary
Program implementation continued to be satisfactory despite a somewhat less favorable external environment in 2018. Macroeconomic stability was maintained, external debt to GDP declined, official reserves rose, and some fiscal space was created by strong revenue performance and exceptional extractive proceeds, albeit also by under-execution of public investment. Structural reform implementation progressed as planned.
The economic outlook has improved, buoyed by more favorable terms of trade and the upcoming development of a large offshore gas field. Growth is projected to accelerate to 6¾ percent this year, supported by a recovery in extractive sectors and continued broad-based non-extractive growth reflecting strong domestic demand and budding diversification. Downside risks related to global economic developments, commodity price volatility, and regional security concerns remain elevated.
Considerable challenges remain to entrench macroeconomic stability, support inclusive growth, and build resilience to shocks. The prospective fiscal space should be used prudently for priority social policies (education, health, and social protection) and public infrastructure. Establishing a robust macro-fiscal framework will be critical to efficiently manage future offshore gas revenues. Borrowing should continue to focus on concessional terms.
Continued institutional and structural reforms are needed to support the policy agenda. Urgent priorities include strengthening tax policy and administration to ensure broad-based and equitable tax compliance; and reforming budget processes to improve the effectiveness of public spending. Modernizing the foreign exchange policy framework should seek to increase exchange rate flexibility to buffer the economy against external shocks; activating the new monetary policy instruments should proceed in parallel to improve liquidity management. Upgraded bank regulatory standards and supervision are needed to strengthen banking sector soundness and financial inclusion. Efforts to improve the business environment and governance and to fight corruption should be stepped up.
Staff supports completion of the third review under the ECF arrangement. Program targets were met—except for the floor on social spending due to capacity constraints—and the authorities are maintaining the course on policy and reform implementation.
Approved By
Taline Koranchelian and Kevin Fletcher
Discussions took place in Nouakchott during February 28– March 13, 2019. The team comprised Eric Mottu (head) Jean van Houtte, Imen Ben Mohamed (all MCD), Louis Dicks-Mireaux (SPR), and Joseph Karangwa (Resident Representative) assisted by Aichetou Maaloum Braham (local economist). Mohamed-Lemine Raghani and Mohamed Sidi Bouna (both OED) attended some meetings. Ms. Kalla provided research assistance and Ms. Cruz, Ms. Bondar, and Mr. Kane provided administrative support. The mission met with Prime Minister Salem Béchir, Central Bank Governor Abdel Aziz Dahi, Minister of Economy and Finance El Moctar Djay, Minister of Budget Mohamed Kembou, Minister of Petroleum, Energy, and Mining Mohamed Abdel Vetah, and other senior officials, private sector representatives, and development partners.
Contents
CONTEXT
RECENT ECONOMIC DEVELOPMENTS
PROGRAM PERFORMANCE
OUTLOOK AND RISKS
POLICY DISCUSSIONS
A. Fostering More Responsive Monetary and Exchange Rate Policies
B. Maintaining a Prudent Yet Growth-Friendly Fiscal Policy
C. Strengthening Resilience in the Financial Sector
D. Improving Social Policies, Economic Governance, and the Business Environment
E. Safeguards and Other Program Issues
STAFF APPRAISAL
FIGURES
1. Program Scenarios, 2015–24
2. Real Sector Developments, 2010–19
3. External Sector Developments, 2010–19
4. Fiscal Sector Developments, 2010–18
5. Monetary and Financial Sector Indicators, 2010–18
6. Business and Governance Indicators, 2007–19
TABLES
1. Macroeconomic Framework, 2015–24
2. Balance of Payments, 2015–24
3a. Central Government Operations, 2015–24 (In billions of MRO)
3b. Central Government Operations, 2015–24 (In percent of non-extractive GDP)
4. Monetary Survey, 2015–21
5. Banking Soundness Indicators, 2010–18
6. External Financing Requirements and Sources, 2015–21
7. Capacity to Repay the Fund, 2019–33
8. Access and Phasing Under the Three-Year ECF Arrangement, 2017–20
9. Risk Assessment Matrix
ANNEXES
I. Natural Resource Revenue Management Principles in the Context of the Upcoming Gas Project
II. Financial Inclusion in Mauritania
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
Front Matter Page
ISLAMIC REPUBLIC OF MAURITANIA
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT—DEBT SUSTAINABILITY ANALYSIS UPDATE
May 3, 2019
Approved By
Taline Koranchelian and Kevin Fletcher (IMF) and Marcello Estevao (IDA)
Prepared by staffs of the International Monetary Fund and the International Development Association
| Risk of external debt distress: | High |
| Overall risk of debt distress: | High |
| Granularity in the risk rating: | Sustainable |
| Application of judgment: | No |
| Risk of external debt distress: | High |
| Overall risk of debt distress: | High |
| Granularity in the risk rating: | Sustainable |
| Application of judgment: | No |
The risk of external debt distress remains high as the present value (PV) of public and publicly guaranteed (PPG) external debt-to-GDP and debt service-to-revenue ratios both breach their relevant thresholds over the next several years under the baseline projections. The overall risk of public debt distress also remains high because the two external debt indicators and the PV of public debt-to-GDP ratio exceed their thresholds and benchmark value, respectively, under the baseline projections. However, external and public debt are assessed to be on a sustainable path as the three above-mentioned indicators are projected to be on a steady downward trend and to fall (and remain) below their respective thresholds and benchmark value within 5–7 years.
The outlook has improved relative to the previous Debt Sustainability Analysis (DSA) in November 2018, with the PV of external debt-to-GDP ratio projected to fall below its relevant threshold one year earlier. This stems from a more favorable growth outlook related to the new offshore gas project despite associated debt disbursements under the project. Nevertheless, projected export and growth performance, as well as fiscal and debt trajectories, continue to be highly vulnerable to metal and oil prices, adverse weather, policy implementation risks, and regional security developments. The DSA highlights the need to follow sound economic policies, including a prudent borrowing strategy that avoids non-concessional borrowing and relies instead on grants and concessional financing taken up at a moderate pace consistent with absorptive capacity.1
Front Matter Page
Press Release No. 19/177
FOR IMMEDIATE RELEASE
May 20, 2019
International Monetary Fund
Washington, D.C. 20431 USA
Telephone 202–623–7100
Fax 202–623–6772
