Islamic Republic of Mauritania: Selected Issues

International Monetary Fund. Middle East and Central Asia Dept.

doi:10.5089/9798400234323.002.A002

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International Monetary Fund. Middle East and Central Asia Dept.

International Monetary Fund. Middle East and Central Asia Dept.
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Publication Date:: 03 Feb 2023

eISBN:: 9798400234323

ISBN:: 9798400234323

Language:: English

Keywords:: violencein Mauritania; climate disaster; E. climate adaptation financing; B. climate change; climate change challenge; Climate change; Climate finance; Global

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Mauritania is facing enormous adaptation chaiienges, stemming from more temperature extremes, droughts, floods. The interplay between worsening natural hazards and moderate climate resilience is likely to increase human damages, land degradation and water and food insecurity. Our analyses showed that climate disasters and higher temperatures are dampening growth and adaptation needs are significant. Key measures to address climate challenges and offset medium-term growth losses should include developing a national adaption plan (NAP) with policy priorities, enhancing domestic revenue mobilization and gradually reducing untargeted energy subsidies, which combined with increased external financing could help finance the adaptation needs; (while also contributing to mitigation); a medium-term gender and climate responsive budget with a clearly defined fiscal anchor that integrate climate-related expenditures linked to the NAP priorities; and reforms to improve financial and social resilience. Mauritania can offset a portion of its medium-term growth losses from climate disasters such as droughts and floods through improving access to finance, health, electricity, and telecommunication.

Abstract

Mauritania: Economic Impact of Climate Change^¹

A. Introduction

1. Mauritania is suffering from climate change. In recent years, temperatures, droughts and floods have risen and the number of climate change disasters have grown. These disasters are taking a toll on the economic performance, particularly through agriculture, livestock and fishing. The consequences are most pronounced for lower-income households who are least equipped to handle the consequences of these shocks.

2. The economic impact of climate change on Mauritania is significant. Using various empirical analyses (IMF, 2022; Pondi and al, 2022), the paper examines how climate-related disasters impact medium-term economic growth and how a combination of fiscal policies, structural reforms and adaptation policies would be most effective in reducing its adverse economic and social consequences in Mauritania.

B. Climate Change Challenges

3. Mauritania is suffering from the ramifications of global climate change. Mauritania is essentially a desert country, with about 90 percent of its territory lying in the Sahara Desert, vast expanses of pastoral land and only 0.5 percent of arable land (Figure 1). Historically, Mauritania’s average annual temperature has been higher than its neighboring regions. Due to the degrading global climate conditions, climate conditions have harshened in recent decades with higher temperatures, more irregular precipitations. Rain variability has been much higher in Mauritania than the average for emerging and developing economies in the last two decades (Figure 2)., The average frequency droughts and floods has also increased as well as the total number of disasters (Figure 2). Annual temperatures have increased by about 0.75° C on average in Mauritania over the past three decades, faster than in emerging and developing economies. Mauritania is one of the 10 in the MENA region that has more than 100 days of extreme heat per year (IMF, 2022).

4. Harshened climate conditions are reinforcing climate challenges such as land and infrastructure degradation, water stress and inflation and food insecurity. While Mauritania’s freshwater usage is in line with the emerging and developing economies’ average, water dependency exceeds the level seen elsewhere in the world with almost 100 percent originating outside of country borders ((Figure 3, Panel 1). At the same time, Mauritania has lower levels of water use efficiency than the average of emerging and developing economies in the rest of the world (Figure 3, Panel 2). The climate change challenges described above are also eroding arable land size and fertility, surface and underground waters (which sustain farming, fishing, and hydropower), and in turn contributing to water and food insecurity (Figure 3, Panel 3, World Bank 2022).^² Both water and food insecurity are likely to exacerbate inflationary pressures.

5. They have also caused human losses and raised socioeconomic challenges in Mauritania. Vulnerability to climate is high (Figure 4). This reflects particularly high numbers of people affected by climate disasters, and some very severe events. The latter includes, for instance, the 2017 drought in Mauritania (that affected 91 percent of the population and the 2021 drought which led to 20 percent of the population impacted by acute food insecurity (Cadre Harmonise, March 2022). Moreover, from 2000–2020, on average, almost 10 percent of the population has been impacted by climate hazards, which is the highest share in the MENA region. Lastly, human climate-related losses have been important in Mauritania, with about 0.15 percent of the population having died due to climate hazards (IMF, 2022). The consequences are likely to be more pronounced for low-income households and women (Box 1). At the same time, the country’s ability to leverage investments for adaptation to climate change remains moderate (Figure 4).

^{Box 1.}

Gender and Climate Change in Mauritania^¹

Climate change carries important implications for gender equality in Mauritania. In addition, gendered resource disaggregation influences individuals’capacity to respond to the increasingly variable environment.

Mauritania is facing both higher frequency and severity of climate-related natural disasters, which threaten the health of its population, critical infrastructure, social and economic stability, and economic growth.

At the same time, gender inequality in Mauritania hampers economic growth and stability. Women in Mauritania have on average, about two fewer years of schooling than men and face discriminatory legal barriers in employment, access to credit, marital status, and asset ownership (World Economic Forum, 2022; World Bank 2022).

On average, only 14 percent of Mauritanian women have an account at a financial institution compared to 26 percent of men. The gender gap in those who have been able to save any money at all stands at almost 10 percentage points (37 percent for women versus 46 percent for men).

Looking at the nexus between climate change and gender inequality, a growing literature shows that women experience climate change differently than men. Women aredisproportionally reliant on natural resources; however, climate variation makes the dependance on these resources a challenge (Sorenson etal. 2011). During droughts, women and girls must venture more than an hour to collect a few liters of water (UNICEF2016), and the added distance they must travel exposes them to greater risk of violence and the associated social repercussions of sexual assault (Sorenson etal. 2011). The lack of legislation that adequately define and criminalize sexual violencein Mauritania further expose women in rural areas. Female laborers more often rely on breeds of livestock that are not as well adapted to the challenges of climate change. In comparison, men have better access to the types of networks, financial capital, and information to not only acquire, but also to raise more durable breeds of livestock (McOmber2020).

To encourage women’s full participation in the green economy, a study by the African Development Bank and UN Women (2021) points to several key policy recommendations. First, addressing gender gaps in education, particularly in STEM fields and reskilling women will be crucial. However, in Mauritania, only 43 percent of women are literate compared to 64 percent of men (World Economic Forum 2022; World Bank), making access to knowledge on climate change and adaptation and reskilling more difficult. Second, legal barriers pose further challenges in creating a level playing field. Mauritania directly inhibits women’s abilities to participate in sectors projected to be less affected by climate change (e.g. underground operations in mining). The country also lacks legislation on sexual harassment in employment. Finally, social norms and lack of accessto finance further hinder women’s ability to own land or invest in new agricultural tools and inputs.

^¹ Prepared by Lisa Kolovich and Sahar Priano

6. Conflicts in Mali, natural resource competition, and natural disasters are also triggering migration. People are moving to Mauritania to escape conflicts in Mali and harsher climate conditions. Migration flows disrupt communities, harm local economies, and put stress on locations that house refugee camps or receive large numbers of migrants or displaced people, especially in the Hodh Chargui region, where currently around 90.000 Malian refugees, and around Mauritanian locals are vulnerable to water and food insecurity. This large influx of refugees is increasing pressure on natural resources, especially with herding communities on both sides of the border (Stavropoulou and Harper, 2022).

7. Global climate change is set to further intensify Mauritania’s current climate stress trends. Mauritania is likely to see temperatures rise according to multi-model climate projections (Figure 5). Higher temperatures, aggravated by more irregular rainfalls will worsen existing geographic challenges. They could also accelerate desertification in Mauritania. Higher global surface temperatures are set to magnify climate anomalies, including hotter and drier weathers. This will exacerbate extreme hazards, such as warm spells and drought severity in Mauritania (Figure 6). The intensification of climate stresses combined with population growth would markedly worsen human damages. It would also further aggravate Mauritania’s challenges of land degradation, water stress and food insecurity.

C. Macroeconomic Impact of Climate Change in Mauritania

8. Climate change poses macroeconomic policy challenges. These include lower growth, higher inflation, shifting GDP and employment shares, as well as larger fiscal and external imbalances (IMF, 2022). Climate effects can also erode the soundness of financial institutions, including insurance companies. Channels include a deterioration of balance sheets, deposit withdrawals, nonperforming loans, and reevaluation of stranded assets used as collateral or asset (IMF 2020b). Disasters can also damage the infrastructure of payment systems.

9. We assess the effects, on growth, of the frequency and intensity of climate-related disasters for Mauritania, using a model developed by Pondi and al (2022). In accordance with the Emergency Events Database (EM-DAT) compiled by the Centre for Research on the Epidemiology of Disasters (CRED), climate-related disasters are defined as climate-related hazards that lead minimally to one of the following tolls: at least 10 people dead, at least 100 people affected, a declaration of a state of emergency, or a call for international assistance. Both intensity and frequency of climate-related disasters can alter economic outcomes, therefore, the econometric strategies rely on introducing quantitative proxies of disasters, factoring in intensity and frequency, into a growth model a la Barro (1991). However, pastfindings confirm that the intensity of a disaster matters more than its frequency, as higher adverse effects on medium-term growth are found to be associated with intensity.

The regression is based on a five-year aggregation of a yearly model following Islam (1995). The model assesses the effects, on growth, of the frequency and intensity of climate-related disasters is as follows.

\begin{matrix} {\bar{G}}_{i, p} = a \bar{L o g} ({\bar{Y}}_{i, p}) + b_{1} \bar{{I n t e n}_{i, p}^{k}} + b_{2} \bar{{F r e q}_{i, p}^{k}} + B_{3} {\bar{X}}_{i, p} + c_{2, p} + d_{2, i} + ϵ_{1, p} & (1) \end{matrix}

where p is a 5-year period, going from t_p,1 to t_p,5 $\bar{I n t e n_{i, p}^{k}} = \frac{1}{N} Σ_{t = t_{p 1}}^{t_{p 5}} I n t e n_{i, t}^{k}$ (with N_k the number of disasters of type k during the 5-year period) and $\bar{{F r e q}_{i, p}^{k}} = \frac{1}{N} Σ_{t = t_{p 1}}^{t_{p 5}} {F r e q}_{i, t}^{k}$ . Moreover, ${\bar{G}}_{i, p}, \bar{L o g} ({\bar{Y}}_{i, p}) a n d {\bar{X}}_{i, p}$ are the averages, over the 5 years, of per capita GDP growth, per capita GDP and additional controls, respectively, c_2,p and d_2,i are time and country specific effects, respectively, and ε_l,p is the error term. In this specification, the intensity and frequency proxies are the rate of disruptive disasters and the average relative fatalities over 5 years, respectively. In this model, the frequency and intensity proxies correspond to the average frequency and the relative intensity over a 5-year window, respectively. ^³

10. The analysis shows that there is a significant negative impact of climate-related disasters on medium-term growth, with most of the significant effects originating from droughts and floods (see Table 1, Annex I for detailed results). If a drought intensifies by 10 percentage points, medium-term annual per capita growth can decline by almost 0.8 to 1 percentage points in Mauritania. An intensification of floods by the same amount takes one-fifth to one-fourth the toll on medium-term growth. The negative impact of droughts on Mauritania growth is up to 3 times that in emerging and developing economies. Another empirical study (IMF, 2022) also shows that a temperature increase of one degree Celsius in Mauritania, would lead to an immediate two percentage point drop in per capita economic growth, with agriculture and industry and construction sectors being the most severely impacted.

11. We then look at the relative gains in resilience to climate-related disasters from advancing structural reforms in areas such as telecommunication, health, financial depth, education and, electricity and agriculture modernization for Mauritania. The following model is considered:

\begin{matrix} {\bar{G}}_{i, p} = a G_{i, p - 1}) + b_{1} \bar{{D ι s}_{i, p}^{k}} + b_{2} \bar{{D ι s}_{i, p}^{k}} . z_{i, p} + b_{3} z_{i, p} + c_{p} + d_{i} + ϵ_{1, p} & (2) \end{matrix}

where i represents countries, p is a 5-year period, ${\bar{G}}_{i, p}$ , c_p and d_i are defined as in equation (1), z_i,p is a policy variable—representing a structural area—and ${D D i s}_{i, p}^{k}$ is either the intensity proxy or the frequency proxy associated with a climate-related disaster of type k in country i and period p. The analysis focuses on the sign and significance of parameter b₂ (which is the slope for the interaction term). Policy variables (or structural reform areas) are analyzed one at a time. In accordance with the results from the previous section, b₁ would be negative. Hence, a positive and significant estimate for b₂ would mean that the policy variable (or structural area) helps improve resilience to the type of climate-related disaster being analyzed.

12. The results, summarized in Table 2 (Annex I), show that resilience to climate-related disasters is significantly improved by raising access to telecommunication, finance and electricity as well as improving health, education, and mechanization. For Mauritania, Figure 7 shows that better access to electricity can halve the majority of the medium-term economic loss from a drought. Electricity is essential for powering irrigation systems and deep tube-well pumps, which are critical for rural populations and the urban poor during prolonged dry spells and water shortages. Access to finance also contribute to halving a small proportion of the loss. Access to finance for households and small and medium enterprises allows them to invest in weather-resilient infrastructure (such as irrigation systems and electricity) and provides post-disaster buffers. The analysis also indicates that the bulk of the medium-term growth loss from floods could be avoided with better health care, followed by, access to finance and telecommunication. Health care acts through several channels to protect economies from the adverse consequences of floods—especially in terms of food security, income, and employment. Telecommunication and access to finance are also resilience-building areas.

D. Mauritania’s Climate Commitments and Policies

13. Although Mauritania contributes to only around 0.03 percent of global GHG emissions, it has pledged to achieve net-zero emissions by 2050. Mauritania submitted nationally Determined Contributions (NDCs,) under the Paris Agreement and updated those NDCs at the COP26 meeting in Glasgow, with a new target to cut greenhouse emissions by 11 percent in 2030. The commitments cover energy, agriculture, land use and forestry and waste (Box 2). 92 percent of this ambitious target in terms of reduction of its greenhouse gas emissions is conditional on the country receiving substantial support from external sources

14. Mauritania’s adaptation commitments cover a wide range of areas, including agriculture and livestock; conservation of ecosystems, biodiversity and forests; water and sanitation; energy and infrastructure; gender and social protection; land use planning; health; education; and fisheries and aquaculture (Box 2).

15. Mauritania has low-carbon economic growth strategies with a strong focus on developing their renewable energy potentials, and specific renewable energy targets. It plans to increase renewable energy (hydro, solar, wind) to 50 percent of the energy mix by 2030 from 38 percent currently. In addition to setting these targets, it also plans to achieve universal energy access by 2030. However, resilience and climate risks are largely absent in sector planning, even though climate change greatly affect power system assets and harm the availability of hydropower resources (World Bank, 2022). As the result of these issues and others, energy tariffs are high, both the on-grid and off-grid markets in the country are subsidized and do not allow the state to recover operating costs, contributing to the electricity utility’s high deficits. Mauritania has recently revised its electricity code to promote consumption and production of renewable energy.

16. The Mauritanian government recently signed an agreement with an international company to develop green hydrogen production and export site in Mauritania. This project (AMAN) aims to build 30GW of hybrid wind (18 GW) and solar (12 GW) generation capacity to produce renewable energy for zero emissions power and green hydrogen and ammonia for both domestic use and export.

^{Box 2.}

Mauritania’s Climate Policy Commitments in the NDCs

Mitigation Policy Measures Focus on Energy, Transport, Livestock, Forestry and Waste.

• Evaluate country’s available resources on renewable energies and green hydrogen

• Update legislation and legal framework to encourage clean energy production

• Promote energy efficiency production

• Develop clean public transport

• Develop and implement a National Solid Waste Management Plan and a waste recovery

• Build technical landfill centers consistent with the international standards

• Step up reforestation by increasing reforested areas (to 30,000 ha by 2030) and fight against deforestation

• Expand protected areas

• Develop genetic improvement of breeds to increase productivity and reduce emissions from the livestock sector (create 20 artificial insemination farms)

Adaptation Policy Measures Focus on Water, Agriculture, Forestry, Livestock, Fisheries, Health, Infrastructure.

• Strengthen access to clean water, develop desalination of seawater and improve sanitation systems in top fivecities at high risk of flooding (Nouakchott, NDB, Rosso, Atar and Kaedi)

• Promote agroecological production practices (6000 ha) and sustainable breeding

• Support sustainable management of the fisheries sector

• Set up an appropriate insurance schemes for farmers, breeders and fishermen

• Develop and adopt sustainable construction standards for buildings and other infrastructure

• Develop a national land use plan resilient to climate change

• Implement the Great Green Wall Program: 2000 ha/year

• Promote assisted regeneration of forests: 2,500 ha/year – and aerial seeding:10,000 ha/year

• Fight against coastal erosion-Protect the coastline, coastal and marine ecosystems

• Develop knowledge/data on the health-related risks associated with climate change, improve health capacity and promote health system accessto all

• Conduct vulnerability risk assessments and improve information system on climate change; develop early warning systems and risk management capacity.

• Raise awareness among local stakeholders of environmental and climate issues

Integrate environment and climate into educational programs for all levels

To qualify as “green hydrogen”, it must be produced from non-fossil fuel sources and non-emitting processes, more specifically using renewable energy to power large-scale electrolysis to separate and capture hydrogen from water. At full 30 GW renewable capacity, the project will generate an estimated 110TWh of electricity per annum. If directed fully to hydrogen production, the project is expected to produce 1.7 mtpa of green hydrogen or 10 mtpa of green ammonia for both local industrial consumption and export. The project will require an estimated capital investment of US$40 billion over the next 8 to 10 years and would be entirely funded by private foreign direct investment. Those expenditures will be required for a) the installation of wind and solar power infrastructure, b) the construction of an industrial complex with production facilities for hydrogen/ammonia synthesis, electricity storage and distribution, and ocean water desalination, and c) supporting transport, storage, communications, and residential infrastructure. It will support the government’ efforts to increase electricity and water supply, as well as develop the manufacturing sector (green steel) to boost growth and create jobs.^⁴ It is also looking into providing locally-produced green electricity and hydrogen to help power SNIM’s iron ore production, and to pursue zero-emission production of steel, for example hot-briquetted iron (HBI), adding local value prior to export.

17. The Great Green Wall movement, to which Mauritania belongs, is a reforestation initiative that aims to grow an 8,000-kilometre-long barrier to combat environmental degradation and drought in the Sahel. This initiative, across 20 countries, including Mauritania aims to combat desertification and drought with the planting of new trees to restore degraded land – in total over 100 million hectares will be restored. The restored land is expected to sequester 250 million tons of carbon and create 10 million new green jobs. The project was launched in 2007, but only 4 percent of the goal was met as of 2021.^⁵

18. The authorities are strengthening their adaptative social protection system to respond to climate shocks. As noted in the previous section, climate-related shocks are having a substantial negative impact on the well-being of the households in Mauritania. More generally, the quality of the rainy season constitutes a major driver of food insecurity variations in rural areas. The World Food Program estimates that 90 percent of agriculture production is subsistence based in Mauritania, resulting in a large number of people being vulnerable to droughts, failed harvests, and desertification due to climate change (World Bank, 2021). The government has two cash transfers programs to respond to climate shocks. The Elmaouna program is implemented during each lean season to support households affected by climate-related shocks (mainly drought but response to rapid-onset shocks such as floods is also being piloted). “Tekavoul choc” respond to shocks by expanding vertically (temporary transfer increase) and horizontally (increase in number of beneficiaries selected from the Social Registry) in areas where Elmaouna does not operate. They reached a total of 69.000 households in 2022 in response to the highest level of food insecurity ever recorded in Mauritania. In additional, the authorities recently set up a unified institutional framework to manage the entire cycle of prevention, preparation, coordination, implementation, monitoring, and capitalization of the national response plan to food insecurity and nutrition shocks. They have established a contingent fund to help the Government secure and streamline the sources of domestic and external funding. They are in the process of defining rules to allocate the necessary resources to respond to food security and nutrition shocks as well as boost households’ resilience before a climate shock hits.

E. Climate Adaptation Financing

19. Funding needs for adaptation efforts to climate change are large. The cost of climate change can be significantly reduced through achieving greater level of adaptation. For example, upfront investment in adaptation would be considerably less costly than frequent climate disaster relief—ranging from up to 3 times less costly for droughts (Cantelmo and others 2019, IMF 2022). According to the authorities’ NDCs, adaptation financing needs could amount to up to US$10.6 billion over 2021–30, or an average annual investment of 12 percent of 2021 GDP. Under a medium-growth scenario for Mauritania, World Bank staff estimates that NDC adaptation investments (if financed through public resources) would absorb an average of 69 percent of annual tax revenues between 2023–30 (World Bank, 2022).^⁶ While NDC reporting is managed by ministries in charge of environment or climate, is it is essential that the ministries in charge of budgeting and planning are involved in NDC implementation, reporting, and refining of data.^⁷

20. The authorities are planning to tap both domestic and external sources. Funding plans currently rely heavily on contributions from the international community (approximately 92 percent of the total amount). The NDC report outlines several potential sources for funding for climate adaptation in Mauritania, including from the private and financial sector. An action plan is expected to be finalized by end-2023.

21. To date, external financing for climate adaptation has been limited for Mauritania. Between 2010–2020, international commitments for adaptation have only reached $500 million, according to the OECD’s climate financing data, with the majority in the form of grants, and the rest through concessional loans (Figure 8). The main donors are the EU, World Bank, Germany, Islamic Development Bank and France and these top five donors have covered around 72 percent of the total adaptation-related development finance the country has received in the last decade (Figure 8). This raises concerns about prospects for success on climate commitments, given the reliance on external funding.

22. Climate funds are one form of concessional financing that could be tapped much more in Mauritania. A climate readiness assessment is currently being developed by the Green Climate Fund to develop bankable projects eligible for climate financing. Direct access to climate funds would allow better engagement with stakeholders and control over a climate project, and improve capacity to implement similar projects. Mauritania could upgrade its capacity to access existing climate finance, including by incorporating lessons from other countries’ experiences. For example, the County Climate Change Funds (CCCFs) in Kenya and the Acuerdo Verde in Chile contributed to the country’s national climate goals as well as helped with attracting financing from climate funds for climate projects. When developing climate projects, the experiences of Madagascar, and Tanzania with climate funds could be useful—especially learning from their execution and disbursement challenge.

23. Climate insurance could be a useful tool to improve resilience among households and businesses and the government against the impact of climate change and natural disasters. Climate insurance, which operates like standard insurance system, would have a positive impact on the stakeholders’ investments and macroeconomic outcome as well as complement targeted social assistance (Surminski, Bouwer, and Linnerooth-Bayer, 2016). The lack of data on weather and meteorological services and capacity to translate them into an assessment of risks are key obstacles to expanding climate insurance in Mauritania.

24. On the domestic front, a few additional sources of funding could be considered. There may be scope to redirect some of the existing spending (for example, from fossil fuel subsidies) to cover climate adaptation costs for infrastructure resilience (Figure 9). Mobilizing domestic revenues would also be a way of increasing fiscal space to raise adaptative investment for greater resilience. Boosting the efficiency of tax collection systems and streamlining exemptions would support this objective. Carbon taxation could also be considered to generate additional revenue and could help raise of more than 4 percent of GDP in Mauritania (IMF, 2022). This would require increased capacity to collect such revenues within the revenue administration.

F. Concluding Comments and Policy Recommendations

25. This paper shows the enormous adaptation challenges that climate change poses for Mauritania. The interplay between worsening natural hazards (especially droughts, and floods), extreme temperatures and moderate climate resilience is likely to increase human losses, land degradation and water and food insecurity. The empirical analyses showed that climate disasters and higher temperatures are dampening growth, with losses of up to one percentage point of medium-term per capita growth if droughts intensify by ten percentage points, one-fifth to one fourth of this impact if floods intensify by the same amount and two percentage points of medium-term per capita growth if temperatures increase by one Celsius in Mauritania. Mauritania can offset a portion of its medium-term growth losses from climate disasters such as droughts and floods through improving access to finance, health, electricity and telecommunication.

26. The authorities are taking a number of commitments to address these climate challenges, including through their NDCs, which estimated adaptation needs at around 12 percent of 2021 GDP annually between 2021–30. Given insufficient adaptation progress with these commitments, more and urgent action will be needed to further Mauritania’s adaptation agenda:

National Adaptation plan: An integrated and well-coordinated approach to climate change adaptation between donors and ministries is lacking and urgently needs to be developed and implemented to advance the adaptation agenda. In view of the large adaptation needs, adaptation policy priorities should be developed, and the funding needs should be further refined and linked with the country’s macro-fiscal framework. They could be embedded within a guiding framework, while considering Mauritania’s specific climate risks and capacity. The National Adaptation Plan (NAP) under the United Nations Framework Convention on Climate Change (UNFCCC) framework helps countries refine and update national initiatives and incorporate them in a cohesive climate adaptation plan, integrate climate change into national decision-making, and guide implementation and regular review.
Fiscal Measures: To make space for adaptation spending while preserving debt sustainability, Mauritania should continue to implement measures to enhance domestic revenue mobilization and could consider carbon taxation. Expenditure efficiency could also be further improved, including by gradually eliminating generalized energy subsidies and replacing them with targeted measures for the poorest households.
Fiscal Framework Medium-term gender and climate responsive budgeting will also be key, with a clearly defined fiscal anchor and a medium-term expenditure framework consistent with public debt sustainability and that integrate climate-related expenditures defined in the NAP. Incorporating and labeling climate issues throughout the budgeting process, transparent procurement, and pertinent risk management will be critical to planning, implementing, monitoring, and reporting on climate-related projects.
Climate resilience Infrastructure: Targeted investments in climate resilience infrastructure are needed. More frequent flooding for example demands higher protection over the country’s infrastructure system. The 2020 Fiscal Monitor estimated that Mauritania would need 2 percent of GDP annually to invest in infrastructure for climate resilience. The economic and social outcomes of these investments depend crucially on the efficiency of public investment management, including from the climate change perspective. Mauritania could identify potential improvements in public investment and processes to build climate-resilient infrastructure. These range from climate-aware planning to coordination between entities, project appraisal and selection, budgeting and portfolio management and risk management.
Renewable energy: The authorities should press ahead with their current efforts to_expand renewable energy production, which would help deliver a reduction of GHG emissions while pivoting toward greener sources of energy production. An enabling environment and appropriate legislation should be developed to support the development of green hydrogen, given the potential to increase domestic revenues for adaptation needs and energy and water supply.
Climate Adaptation Financing. Climate adaptation needs are likely to remain significant, especially as climate challenges increase in the next few decades. External financing for climate has been limited so far and more external financing, particularly on concessional terms to preserve debt sustainability, will be crucial. An enabling business environment, better governance, a cohesive climate adaptation plan and support from the international community could help crowd-in private investment and increase external finance. Pursuing partnerships with climate funds can help unlock untapped resources. The IMF can provide financial support to member countries hit by adverse climate effects through existing facilities and with balance of payment (BOP) needs. In addition, the recently proposed Resilience and Sustainability Trust (RST) can help support member countries address risks to prospective BOP stability stemming from selected long-term structural climate challenges.
Financial and Social Resilience: Given existing climate vulnerability and increase in the occurrence of climate disaster, it is important to strengthen disaster preparedness and coping capacities, both for droughts and floods. In particular, the authorities should move ahead with the operationalization of their recently adopted institutional framework to respond to food insecurity and nutrition shocks. Reforms to enhance the efficiency and effectiveness the social safety net program should continue to be implemented, with a particular focus on ensuring that the social registry and existing social programs can be used to respond to climate shocks. Efforts to develop climate insurance schemes should be pursued to improve resilience of households and firms. This will require better data on weather and meteorological services and capacity to translate them into an assessment of risks along with progress on financial inclusion.

Annex I. Growth Regression and Impact of Structural Reforms on Climate Resilience

Intensity Proxy

1. The intensity proxy is defined with a dummy variable that provides information on whether the total annual effect of disasters weighs on over 0.01 percent of the population. To be specific, following Fomby et al. (2013), the intensity, during the year t, of disasters of type k in country i, is measured as follows:

{I n t e n s i t y}_{i, t}^{k} = {\begin{cases} 1, i f \frac{{F a t a l i t i e s}_{i, t}^{k} + 0.3 * {A f f e c t e d}_{i, t}^{k}}{{P o p u l a t i o n}_{i, t}} > 0.0001 \\ 0, o t h e r w i s e \end{cases}

where $F a t a l i t i e s_{i, t}^{k} a n d 0.3 * A f f e c t e d_{i, t}^{k}$ represent the total deaths and total affected that are associated with disasters of type k in country i during year t. Population_i,t the population of country i in year t.

EM-DAT defines “Affected” as “People requiring immediate assistance during a period of emergency, i.e. requiring basic survival needs such as food, water, shelter, sanitation and immediate medical assistance.”

Frequency Proxy

2. The frequency proxy considers the total effects related to the occurrence of disasters during the year. Because of the non-linear cumulative effects of successive disasters, considering only the number of disasters as the frequency proxy would be misleading.4 For this purpose, following Loayza et al. (2012), the frequency proxy associated with disasters of type k, during the year t in country i, is defined as follows:

{F r e q u e n c y}_{i, t}^{k} = \begin{matrix} \frac{{F a t a l i t i e s}_{i, t}^{k}}{{P o p u l a t i o n}_{i, t}} \end{matrix}

where $F r e q u e n c y_{i, t}^{k} a n d P o p u l a t i o n_{i, t}$ , and Population_i,t are defined as previously. A frequency proxy that considers both fatalities and affected people in its numerator is applied as a robustness check.

3. The proxies build on human capital destruction (as opposed to physical capital destruction). This strategy is mainly driven by data availability, as the EM-DAT database provides information mostly on fatalities and affected people associated with natural disasters. A strategy based on physical capital destruction could also be used, but the data on economic costs are scarce. However, physical capital deterioration could be captured through conventional growth model controls.

4. Note that, although both types of proxies gather information on the overall severity of disasters, the intensity proxy aims at distinguishing disasters that have a priori significant macroeconomic impacts while the frequency proxy includes all disasters without any ex-ante consideration with regard to their severity.

5. The first regression is estimated using GMM methods to correct for potential correlation between the unobserved effects and the lagged regressor, as the model builds on a dynamic panel. The instruments are selected to ensure exogeneity while the endogenous variables are the per-capita GDP and the disaster proxies.

^{Annex I. Table 1.}

Mauritania: Growth Regression

Note: (1), (2), (3) and (4) represent models for droughts, floods, epidemics and storms, repectively. * ** and *** indicate statistical significance at 10, 5 and 1 percent, respectively. Year-dummy parameters are not presented.

^{Annex I. Table 1.}

Mauritania: Growth Regression

Selected economies: Growth models with disaster indicators (SSA)
	GMM				Fixed effects
	(1)	(2)	(3)	(4)	(1)	(2)	(3)	(4)
Log of per capita GDP	-2.774* (1.422)	3.090 (2.340)	0.039 (1.329)	4.239 (2.597)	-2.369 (1.433)	-1.566 (1.373)	-1.509 (1.069)	6.724 (3.936)
Drought Intensity	-11.328* (6.118)				-7.810*** (2.157)
Drought Frequency	-0.448*** (0.076)				-0.412*** (0.042)
Flood Intensity		-3.216*** (1.219)				-1.192** (0.564)
Flood Frequency		-0.053 (0.115)				-0.178** (0.084)
Epidemic Intensity			-0.770 (0.633)				-0.532 (0.409)
Epidemic Frequency			0.169 (0.175)				-0.010 (0.161)
Storm Intensity				1.071 (1.381)				0.320 (0.996)
Storm Frequency				-1.106 (6.585)				-12.262 (11.267)
Education	0.056 (0.047)	-0.113* (0.068)	-0.004 (0.036)	-0.131 (0.083)	-0.051 (0.059)	-0.075* (0.039)	-0.056 (0.050)	-0.159 (0.160)
Investment	0.040** (0.019)	0.031 (0.038)	0.041 (0.027)	0.001 (0.064)	0.032*** (0.010)	0.049* (0.024)	0.046** (0/321)	0.088 (0.062)
Government Consumption	0.012 (0.026)	-0.002 (0.039)	-0.031 (0.020)	-0.041 (0.046)	-0.006 (0.021)	0.060* (0.030)	0.055** (0.025)	0.084 (0.058)
inflation	0.001 (0.001)	-0.002-	-0.002*** (0.001)	0.070 (0.066)	0.001 (0.001)	-0.001*** (0.000)	-0.001*** (0.000)	0.065 (0.058)
Trade Openness	2.842* (1.586)	-0.081 (1.483)	3.412** (1.564)	1.724 (1.449)	0.628 (1.268)	1.741 (1.416)	4.524** (1.869)	-1.525 (4.765)
Change in terms of trade	-0.275*** (0.095)	0.084 (0.093)	0.046 (0.060)	0.008 (0.284)	-0.115 (0.088)	0.069 (0.062)	0.063* (0.036)	-0.027 (0.357)
Intercept	31.844** (14.145)	-15.547 (14.858)	-1.006 (8.775)	-27.931 (19.670)	26.846*** (9.383)	12.288 (9.117)	7.993 (8.791)	-46.390 (27.146)
Observations	113	163	158	67	113	163	158	67
Number of instruments	45	46	46	45
R2					0.666	0.514	0.536	0.503
Arellano-Bond test for AR(1)	0.048	0.024	0.015	0.062
Arellano-Bond test for AR(2)	0.269	0.527	0.119	0.431
Hansen test	0.987	0.798	0.698	1.000
Difference-in-Hansen test	0.115	0.011	1.000	0.879

^{Annex I. Table 1.}

Mauritania: Growth Regression

Selected economies: Growth models with disaster indicators (SSA)
	GMM				Fixed effects
	(1)	(2)	(3)	(4)	(1)	(2)	(3)	(4)
Log of per capita GDP	-2.774* (1.422)	3.090 (2.340)	0.039 (1.329)	4.239 (2.597)	-2.369 (1.433)	-1.566 (1.373)	-1.509 (1.069)	6.724 (3.936)
Drought Intensity	-11.328* (6.118)				-7.810*** (2.157)
Drought Frequency	-0.448*** (0.076)				-0.412*** (0.042)
Flood Intensity		-3.216*** (1.219)				-1.192** (0.564)
Flood Frequency		-0.053 (0.115)				-0.178** (0.084)
Epidemic Intensity			-0.770 (0.633)				-0.532 (0.409)
Epidemic Frequency			0.169 (0.175)				-0.010 (0.161)
Storm Intensity				1.071 (1.381)				0.320 (0.996)
Storm Frequency				-1.106 (6.585)				-12.262 (11.267)
Education	0.056 (0.047)	-0.113* (0.068)	-0.004 (0.036)	-0.131 (0.083)	-0.051 (0.059)	-0.075* (0.039)	-0.056 (0.050)	-0.159 (0.160)
Investment	0.040** (0.019)	0.031 (0.038)	0.041 (0.027)	0.001 (0.064)	0.032*** (0.010)	0.049* (0.024)	0.046** (0/321)	0.088 (0.062)
Government Consumption	0.012 (0.026)	-0.002 (0.039)	-0.031 (0.020)	-0.041 (0.046)	-0.006 (0.021)	0.060* (0.030)	0.055** (0.025)	0.084 (0.058)
inflation	0.001 (0.001)	-0.002-	-0.002*** (0.001)	0.070 (0.066)	0.001 (0.001)	-0.001*** (0.000)	-0.001*** (0.000)	0.065 (0.058)
Trade Openness	2.842* (1.586)	-0.081 (1.483)	3.412** (1.564)	1.724 (1.449)	0.628 (1.268)	1.741 (1.416)	4.524** (1.869)	-1.525 (4.765)
Change in terms of trade	-0.275*** (0.095)	0.084 (0.093)	0.046 (0.060)	0.008 (0.284)	-0.115 (0.088)	0.069 (0.062)	0.063* (0.036)	-0.027 (0.357)
Intercept	31.844** (14.145)	-15.547 (14.858)	-1.006 (8.775)	-27.931 (19.670)	26.846*** (9.383)	12.288 (9.117)	7.993 (8.791)	-46.390 (27.146)
Observations	113	163	158	67	113	163	158	67
Number of instruments	45	46	46	45
R2					0.666	0.514	0.536	0.503
Arellano-Bond test for AR(1)	0.048	0.024	0.015	0.062
Arellano-Bond test for AR(2)	0.269	0.527	0.119	0.431
Hansen test	0.987	0.798	0.698	1.000
Difference-in-Hansen test	0.115	0.011	1.000	0.879

The second regression is different from the previous model. It helps investigate the growth effects of policy variables that are not necessarily relevant for growth models and each policy variable is included separately. To mitigate any potential multicollinearity issues, the intensity and the frequency proxies are included separately. The estimation strategy is the same as before, with GMM and MDE models.

^{Annex I. Table 2.}

Mauritania: Impact of Structural Policies on Climate Resilience

^{Annex I. Table 2.}

Mauritania: Impact of Structural Policies on Climate Resilience

Mauritania: Intensity (Fixed effects)
	Droughts	Floods
Telecommunication		0.009**
Access to finance	0.026*	0.016**
Education
Health		0.086**
Mechanization	-0.000**	0.000**
Electricity	0.114***

^{Annex I. Table 2.}

Mauritania: Impact of Structural Policies on Climate Resilience

Mauritania: Intensity (Fixed effects)
	Droughts	Floods
Telecommunication		0.009**
Access to finance	0.026*	0.016**
Education
Health		0.086**
Mechanization	-0.000**	0.000**
Electricity	0.114***

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Prepared by Anta Ndoye, Jarin Nashin, and Eric M. Pondi.

https://www.ipcc.ch/sr15/chapter/chapter-3/

The intensity proxy is defined with a dummy variable that provides information on whether the total annual effect of disasters weighs on over 0.01 percent of the population (see Annex I).

A macro-economic study, commissioned by the international company, estimated the project could boost Mauritania’s GDP by40 to 50 percent by 2030, and by 50 to 60 percent from 2035 onwards, including a boostto employment in industry by 23 percent, and a reduction in total national unemployment by almost a third by 2035.

Mauritania takes steps to protect agriculture by planting trees | Africanews

The medium-growth scenario is based on historical episodes of sustained growth performance in each country

Estimating adaptation costs raises difficult methodological issues.Two approaches exist: (1) top-down, relating expected climate change to climate impacts and sectoral costs and (2) bottom-up, aggregating detailed cost estimates of specific adaptation strategies.

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