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URL:
https://www.elibrary.imf.org/view/journals/002/2023/073/article-A001-en.xml
Submission: On December 06 via api (December 6th 2024, 5:06:54 am UTC) from US — Scanned from DE

Form analysis
6 forms found in the DOM

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Islamic Republic of Mauritania: 2022 Article IV Consultation and Request for
42-Month Arrangements under the Extended Credit Facility and the Extended Fund
Facility-Press Release; Staff Report; and Statement by the Executive Director
for the Islamic Republic of Mauritania
Author:
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: 9798400234217 Language: English Keywords:
excess reserves; borrowing plan; authorities ranks people; government Finance
Statistics Manual; legacy government debt; Operational risk; Inflation
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* Abstract
* Full Text
* Related Publications

1. The Mauritanian authorities have successfully completed their 2017–21 program
supported by an Extended Credit Facility (ECF) arrangement. The arrangement
supported the recovery following the 2014–15 terms-of-trade shock, and helped
meet social and infrastructure needs while maintaining macroeconomic stability.
The fiscal balance improved, and international reserves rose; Fund financing
also helped catalyze other donor flows. The program helped to broadly stabilize
the external debt-to-GDP ratio. During the last ECF arrangement, the Fund has
also provided sizable financing to increase spending on health services and
social protection programs in response to the pandemic and catalyze additional
donor financing.1

ABSTRACT

CONTEXT

2. However, considerable challenges remain to achieve sustainable and more
inclusive growth, while a confluence of shocks has narrowed the policy space.
Poverty remains high and infrastructure limited. The COVID-19 pandemic widened
the gap to reach the SDGs—especially related to hunger, good health and
wellbeing, education, gender equality, decent work, and access to affordable and
clean energy (Text Table 1)—and delayed reform implementation. Surging
international commodity prices following the war in Ukraine have significantly
impacted trade, economic activity, and domestic prices (Box 1). The war in
Ukraine and regional tensions have also reverted the trend accumulation of FX
reserves and policy buffers have been coming under pressure again in 2022. In
addition, a sizable unfinished reform agenda remains, notably on Public
Financial Management (PFM) and public investment management, monetary and
foreign exchange policy, social safety nets, and governance.

3. In March 2021, the authorities requested a successor program to support their
economic development and structural reform agenda. The Strategy for Accelerated
Growth and Shared Prosperity covering 2016–30 (SCAPP)2 and the president's
Priority Program (PROPEP), covering 2020–23 and consistent with the SCAPP, aim
to support the recovery and boost long-term growth. The SCAPP is based on three
pillars: i) promote sustainable, and inclusive growth, by revitalizing sectors
with high employment and growth potential through the modernization of public
infrastructures, and strengthened the role of the private sector; ii) develop
human capital and improve access to basic social services; and iii) strengthen
governance, including economic governance, and the fight against corruption. The
second five-year action plan of the SCAPP (PA2 SCAPP) focuses mainly on
environmental protection and natural disaster risk management, infrastructure
development, education, health services, employment promotion, resilience of the
most vulnerable groups, security, peace and social cohesion, and protection
against radicalization and violent extremism.

4. Albeit government reshufflings the political situation remains stable, but
security risks persist in the Sahel. On March 31, President Ghazouani appointed
a new government and central bank governor. Two partial cabinet reshuffles
followed in September. Legislative, regional, and municipal elections are
scheduled in 2023 and the presidential election in 2024. The authorities
contained protests following the increase in fuel prices in July 2022 (Table
13). Security risks have increased following multiple military coups in the
region, an increasing number of refugees, and rising violence at the border with
Mali.

Text Table 1.

Percentage Change in Scores by Sustainable Development Goal

▴ Positive growth ▾ Negative growth ▸ Stagnation Source: Sustainable Development
Report 2022; and IMF staff calculations. View Table
Text Table 1.

Percentage Change in Scores by Sustainable Development Goal

SDGs 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Goal 1. No Poverty ▴ ▴ ▴
▴ ▴ ▴ ▴ ▴ ▴ ▴ Goal 2. Zero Hunger ▴ ▴ ▴ ▾ ▾ ▴ ▴ ▾ ▸ ▸ Goal 3. Good Health and
Well-Being ▴ ▴ ▾ ▾ ▴ ▴ ▾ ▴ ▾ ▸ Goal 4. Quality Education ▴ ▴ ▴ ▴ ▾ ▴ ▴ ▾ ▸ ▸
Goal 5. Gender Equality ▴ ▾ ▴ ▴ ▴ ▴ ▾ ▴ ▾ ▸ Goal 6. Clean Water and Sanitation ▴
▴ ▴ ▴ ▴ ▴ ▴ ▴ ▴ ▸ Goal 7. Affordable and Clean Energy ▴ ▴ ▾ ▴ ▴ ▾ ▴ ▴ ▸ ▸ Goal
8. Decent Work and Economic Growth ▾ ▾ ▴ ▾ ▾ ▾ ▾ ▴ ▾ ▾ Goal 9. Industry,
Innovation and Infrustructure ▾ ▴ ▴ ▴ ▾ ▾ ▴ ▴ ▴ ▸ Goal 10. Reduced Inequalities
▸ ▸ ▴ ▸ ▸ ▸ ▸ ▸ ▸ ▸ Goal 11. Sustainable Cities and Communities ▾ ▴ ▴ ▾ ▾ ▴ ▾ ▴
▸ ▸ Goal 12. Responsible Consumption and Production ▾ ▾ ▾ ▾ ▾ ▾ ▾ ▾ ▸ ▸ Goal 13.
Climate Action ▾ ▴ ▴ ▴ ▴ ▾ ▴ ▴ ▴ ▸ Goal 14. Life Below Water ▾ ▾ ▾ ▾ ▾ ▾ ▴ ▴ ▴ ▸
Goal 15. Life on Land ▾ ▸ ▸ ▸ ▾ ▸ ▸ ▸ ▸ ▾ Goal 16. Peace, Justice and Strong
Instituitions ▴ ▾ ▾ ▾ ▾ ▴ ▾ ▴ ▴ ▾ Goal 17. Partnerships for the Goals ▾ ▴ ▴ ▴ ▾
▴ ▴ ▴ ▾ ▸

▴ Positive growth ▾ Negative growth ▸ Stagnation Source: Sustainable Development
Report 2022; and IMF staff calculations.

RECENT DEVELOPMENTS

Economic activity is recovering despite a challenging global environment,
supported by a rebound in the extractive sector—following a fire that occurred
in TASIAST in 2021, a sizeable monetary expansion in 2021, and increasing public
investment in 2022.

5. Economic activity is recovering despite rising inflation. Growth reached 2.4
percent in 2021 (from a 0.9 percent contraction in 2020), mainly driven by the
non-extractive sector (6.3 percent) with activity in services rebounding
following the 2020 recession.3 The drought had a severe impact on agriculture in
2021 and early 2022. This, combined with rising international commodity prices,
led to higher food insecurity, with 20 percent of the population impacted (Box
1). Inflation accelerated to 12.7 percent y-o-y in October, reflecting surging
food and oil prices and monetary expansion in 2021 (Text Figure 1).

View Full Size

Text Figure 1.

Contributions to Inflation

(In percent)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: Mauritanian authorities; and IMF staff calculations.
* Download Figure
* Download figure as PowerPoint slide

6. International commodity price movements have worsened the external position.
The CA deficit widened to 5.3 percent of GDP in first half of 2022 relative to
3.2 percent of GDP in same period of 2021. Pressures on international food and
energy prices and the decline of iron ore prices have further widened the trade
balance in the third quarter of 2022 (Text Figure 2). By end-October 2022,
international reserves declined to $1.6 billion (5.5 months of prospective
non-extractive imports), compared to $2.3 billion (7.3 months of prospective
non-extractive imports) at end-2021. The bilateral exchange rate (ER) of the
Ouguiya against the US dollar almost stabilized in the first half of 2022 but
depreciated in July 2022 by 3.4 percent before stabilizing again during
August-October (Text Figure 3). Mauritania's external position in 2021 was
broadly in line with fundamentals and desirable policies (Annex II). At
end-October 2022, the Nominal Effective Exchange Rate (NEER) and REER had
appreciated by 8.0 percent and 11.9 percent respectively (Text Figure 4) mainly
reflecing the appreciation of the nominal ER relative to the euro—in line with
the appreciation of the US dollar against the Euro—and widening inflation
differential with trading partners.

7. Fiscal policy became expansionary in response to rising energy and food
import prices. A revised budget law was adopted in July 2022 with a projected
overall fiscal deficit of 4.4 percent of GDP and a non-extractive primary
deficit of 8.7 percent of GDP in 2022. The revised budget law reflects
expenditure increases for: i) the subsidy for refined petroleum products
resulting from higher international oil and gas prices (MRU 13.1 billion or 3.5
percent of GDP), despite the increase in administered prices for gas and diesel
by 30 percent in July, ii) social spending in response to surging food prices,
and iii) public investment and security. On the revenue side, a record dividend
of MRU 12.3 billion (14.0 percent of tax and non-tax revenue) by the state-owned
mining company SNIM was announced reflecting the high realized iron prices in
2021 and the first half of 2022. As in 2021, the budget execution is backloaded
in 2022 with total expenditure at the end of September 2022 reaching MRU 58.5
billion out of a total budget envelop of MRU 107.1 billion and resulting in a
primary fiscal deficit (excluding grants) of 2.2 percent of GDP. The budget
deficit and negative external financing was mainly financed by drawdowns of the
treasury account totaling MRU 15.1 billion (3.8 percent of GDP).

View Full Size

Text Figure 2.

International Commodity Prices, 2016–22 (In U.S. dollars)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: Bloomberg database; and IMF staff calculations.
* Download Figure
* Download figure as PowerPoint slide

View Full Size

Text Figure 3.

Ouguiya per US Dollar—Official and Parallel Market

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Mauritanian authorities; and IMF staff calculations.
* Download Figure
* Download figure as PowerPoint slide

View Full Size

Text Figure 4.

Nominal and Effective Exchange Rates

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: Mauritanian authorities; and IMF staff calculations.
* Download Figure
* Download figure as PowerPoint slide

8. Credit growth accelerated in 2022 following monetary expansion in 2021.
Credit growth reached 19.7 percent in September 2022 from 8.4 percent at
end-2021. Broad money growth slowed to 4.7 percent in September 2022 (20.4
percent in December 2021) due to the reduction of international reserves and the
start of mobile banking activity, which led to a decrease of the currency in
circulation. Bank reserves contracted significantly in the first half of 2022,
reflecting increasing FX interventions to cover CA transactions, but the trend
reversed starting in July (Figures 4). Non-performing loans (NPLs) decreased
from 22.7 percent at end-2021 to 20.5 percent in September 2022 as result of
write-offs of fully provisioned NPLs. Although the banking system remains
well-capitalized, the overall capital adequacy ratio (CAR) declined from 18.1
percent at end-2021 to 17.7 percent in September 2022, due to increasing FX
risks (Figure 5).4 Banks' short FX net open positions (NOPs)—resulting mainly
from imports financed through letters of credit—decreased to 38.3 percent in
September 2022 after reaching a peak of 53.2 percent in March 2022 but remain
substantially above the regulatory limit of 20 percent.

Box 1.

Impact of the War in Ukraine on Inflation and Food Security in Mauritania

The impact of the war in Ukraine and related sanctions on Russia have
contributed to higher inflation and wider CA deficit. Mauritania is a large
importer of food products, particularly wheat, from both Russia and Ukraine. The
drop in supply following the war increased global prices of wheat and other
related products including bread, cereal, and pasta. The country experienced
23.3 percent increase in bread cereal inflation (year-on-year growth) in October
2022, compared to 4.2 percent increase in October 2021. Overall inflation
accelerated to 12.7 percent y-o-y in October 2022, endangering the post-pandemic
economic recovery.

Food inflation has pushed the population, especially the vulnerable, to acute
food insecurity. The ripple effects of the war in Ukraine led to higher food
insecurity, with 20 percent of the population impacted, one of the highest rates
in the Sahel, and a record level in Mauritania.1 The number of people in severe
food insecurity has more than doubled in 2022 to reach 878,921, compared to
410,000 people in 2021, partly due to the impacts of war. The 2022 numbers
include 136,254 children in malnutrition, of which 76 percent are in moderate
and 24 percent are in severe malnutrition.

The most prominent transmission channel through which the war has impacted
Mauritania's economy is via food and fertilizer imports from Russia and Ukraine.
Sanctions on fertilizer exports from Russia led to an increase in the cost of
most agricultural inputs, particularly fertilizers (Box 1. Figure 1) and
pesticides. The increase in these agricultural input prices has negatively
impacted agricultural production capacity in Mauritania. Higher oil prices
affected the global cost of shipping and put further upward price pressure on
imported food.

Dependence on food imports is particularly high in Mauritania. 97 percent of
wheat consumed in Mauritania is imported, with Ukraine and Russia being major
sources of wheat imports historically. In 2021, 35 percent of wheat imports came
from Ukraine (24 percent) and Russia (11 percent) combined, compared to 4
percent in 2022, all of which was from Ukraine, with no wheat imported from
Russia.

View Full Size

Box 1. Figure 1.

Fertilizer Index includes DAP, Potash, Urea

(2016=100)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Bloomberg
* Download Figure
* Download figure as PowerPoint slide

Due to the war in Ukraine, sourcing wheat has become a major obstacle. Prior to
the war, wheat imports to Mauritania were sourced from a diverse group of 13
countries (Box 1. Figure 2). With the knock-on impact of the war, the number of
countries from which Mauritanian importers could source wheat shrank to only
four in 2022 (Box 1. Figure 3). Furthermore, importers in Mauritania report
mounting difficulty in sourcing wheat at predicable prices, particularly
following India's ban on wheat exports on May 2022. While Mauritania does not
import wheat from India, India is an important wheat exporter and its decision
to ban wheat exports has caused knock-on effects on international wheat prices
including in Mauritania.

View Full Size

Box 1. Figure 2.

Wheat Import Origin Countries, 2021

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Mauritanian authorities
* Download Figure
* Download figure as PowerPoint slide

View Full Size

Box 1. Figure 3.

Wheat Import Origin Countries 2022

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Mauritanian authorities
* Download Figure
* Download figure as PowerPoint slide

The authorities have boosted the existing programs to support vulnerable groups.
Spending on social protection programs focused on food security have increased:
Coverage of the regular cash transfer program (Tekavoul), targeting poor
households through the social registry increased by 92 percent since 2020 with a
corresponding government spending increase of 96 percent in 2021, and a further
52 percent in 2022.

Coverage under the new shock window targeting poor households using the social
registry, created in 2021 to respond originally to the economic effects of
COVID-19 pandemic on poor households, and later adapted to respond to the food
price increases, also increased by 80 percent in 2022 compared to 2021 (Box 1.
Figure 4). These increases in social protection programs are vital for the poor
and at-risk populations and have increased fiscal expenditures from 1.9 percent
of GDP in 2020 to 3.6 percent of GDP in 2021 and are expected to reach 5.2
percent of GDP in 2022.

View Full Size

Box 1. Figure 4.

Evolution of Subsidies (exclusing gas and petroleum subsidies)

(in billions of MRU)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Mauritanian authorities
* Download Figure
* Download figure as PowerPoint slide

1/ Survey conducted by the authorities ranks people in five different levels of
food insecurity. Those considered to be food insecure are in level 3 and above,
with 3=crisis, 4=emergency, and=5 famine. Sources: Mauritanian authorities
(data) and IMF staff.

OUTLOOK AND RISKS

9. Growth prospects remain broadly positive despite a challenging global
environment, high inflation and decreasing international reserves (Figure 1).

* In 2022, growth is expected to have accelerated to 5.3 percent, mainly driven
by the recovery of the extractive sector (17.0 percent). Despite the stronger
than expected performance of the agriculture and fishing sectors,
non-extractive growth should have slowed to 2.1 percent as high inflation
affects consumption and the construction sector, which relies heavily on
imported inputs. Inflation will likely stabilize at around 11 percent
following the recent monetary contraction and additional tightening envisaged
by the BCM, conditional to the absence of supply disruptions in wheat
imports. In 2022, the CA deficit is expected to have widened to 17.3 percent
of GDP (from 7.9 percent in 2021) due to increasing imported food and energy
prices and decreasing iron ore prices, and international reserves to have
fallen to $1.5 billion (5.1 months of prospective non-extractive imports). A
drawdown from the treasury account (around 3 percent of non-extractive GDP,
NEGDP) would finance a primary fiscal deficit (excluding grants) of 2.1
percent of NEGDP.5

* In 2023–27 non-extractive growth is projected to reach 5.0 percent. A higher
projected gold price from 2024 onward, the start of gas exports in 2024, and
the projected normalization of oil and food prices from 2023 will likely help
improve the CA, with international reserves projected to increase back to 5.5
months of non-extractive imports in 2027. Increasing iron ore production and
revenue from the Grand Tortue/Ahmeyim (GTA) offshore gas project starting
2024 would provide additional fiscal space of 0.5 percent of GDP from 2024
onwards. Structural reforms are also expected to accelerate with support from
Fund capacity development.

10. The outlook is subject to significant uncertainties and downside risks.
Tensions in the Sahel region, intensifying spillovers from the war in Ukraine
and resulting sanctions on Russia, and a global recession could weaken exports
and extractive revenues and further increase import prices, thus widening
Balance of Payments (BoP) needs, weighing on international reserves and
worsening the fiscal outlook. Surging international prices of essential
commodities, and more frequent climate disasters, could further fuel domestic
inflation, increase food insecurity and jeopardize the economic recovery.
Climate risks are substantial with implications on growth (Selected Issues Paper
II). New waves of the pandemic also remain a risk.

Authorities' Views

11. The authorities broadly agreed with staff's assessment of the outlook and
risks but projected higher agriculture production in 2023. According to the
authorities, increasing government support to the agriculture sector is expected
to result in a steady increase of agriculture production despite global warming
and frequency of droughts (Text figure 9). The authorities anticipated pressure
on financing to increase in 2023.

Text Table 2.

Selected Economic Indicators, 2019-23

Sources: Mauritanian authorities; and IMF staff estimates and projections. View
Table
Text Table 2.

Selected Economic Indicators, 2019-23

2019 2020 2021 2022 2023 Est. Est. Proj. National accounts and prices (Annual
change in percent) Real GDP 5.4 -0.9 2.4 5.3 4.3 Real extractive GDP 16.8 2.4
-12.6 17.0 8.3 Real non-extractive GDP 4.0 -1.5 6.3 2.1 3.3 Consumer prices
(end of period) 2.7 1.8 5.7 11.0 9.0 Central government operations (in percent
of nonextractive GDP, unless otherwise indicated) Revenues and grants 19.4 20.4
21.3 24.0 22.0 Nonextractive 16.4 16.3 15.6 16.8 17.8 Taxes 11.9 10.7
10.8 12.5 13.5 Extractive 1.6 2.1 3.6 5.8 2.9 Expenditure and net lending 17.4
18.2 19.2 25.4 24.6 Of which: Current 10.9 11.8 12.0 17.0 15.2
Capital 6.6 6.5 7.2 8.6 9.4 Primary balance (excl. grants) 1.4 1.1
0.8 -2.0 -3.2 Overall balance (in percent of GDP) 2.0 2.2 2.2 -1.4 -2.6 Public
sector debt (in percent of GDP) 55.7 55.8 49.1 48.4 50.3 External sector Current
account balance (in percent of GDP) -10.3 -6.7 -7.9 -17.3 -11.4 Excl.
externally financed extractive capital goods imports -3.8 2.2 0.9 -5.8 -5.5
Gross official reserves (in millions of US$, eop) 1,135 1,542 2,347 1,501 1,568
In months of prospective non-extractive imports 5.8 6.7 7.3 5.1 5.2 External
public debt (in millions of US$) 3,782 4,139 4,285 4,313 4,560 In percent of
GDP 46.9 48.1 43.3 41.8 43.4

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

ARTICLE IV POLICY DISCUSSIONS

12. Mauritania faces significant structural challenges, and has significant
development needs. External vulnerabilities are elevated due to limited economic
diversification, dependence on a few exporting sectors (mining and fishing), and
vulnerability to external shocks. Private investment is constrained by a limited
access to finance and a challenging business environment, limited competition,
and the prevalence of State-Owned Enterprises (SOEs) in key sectors of the
economy. Low human capital, unemployment, informality—mainly among youth and
workers in small firms6—and urban-rural disparities remain high. Significant
infrastructure gaps persist, while macro-critical institutional reforms have
been delayed by the pandemic. In addition, migration flows and the number of
refugees have increased with rising insecurity in the Sahel (Text Figure 6).
Consequently, Mauritania has a way to go to achieve income convergence relative
to its North African peers (Text Figure 5).

View Full Size

Text Figure 5.

GDP per Capita

(2017 PPP International Dollars)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: World Economic Outlook Database.
* Download Figure
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View Full Size

Text Figure 6.

Refugee Population—Mauritania and Neighboring Countries

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: World Bank Databank; United Nations High Commissioner for Refugees
(UNHCR) and UNRWA through UNHCR's Refugee Data Finder.
* Download Figure
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13. Implementation of some recommendations of the 2019 Article IV was delayed by
the pandemic and the war in Ukraine. While the authorities responded effectively
to the COVID-19 shock by prioritizing health and social spending and advancing
structural reforms on governance, the pandemic followed by the war in Ukraine
led to a policy loosening, deterioration of the external balance, and increasing
financial vulnerabilities. The BCM has made important progress in developing the
banking and liquidity management regulations since the last Article IV
consultation, but the reform of the FX market needed to support a smooth
transition of greater exchange rate flexibility was delayed. Progress in the
implementation of some key FSAP recommendations has stalled, including the
gradual securitization of BCM's claims on government, using marketable
securities and the publication of financial statements of banks audited by the
BCM.

14. Policies should be carefully calibrated to avoid an overheating of the
economy with adverse consequences on the external balance. Near-term policy
priorities should focus on containing inflation pressures and cushioning the
impact of the war in Ukraine on the poor. Monetary policy will need to remain
tight and fiscal policy consistent with the disinflation efforts of the central
bank. Government spending accelerated since 2020 on the back of increasing
extractive revenues; the dependance on volatile extractive revenues increases
budgetary risks and should be reduced. The volatility of international commodity
prices and its impact on extractive revenues and the wider economy call for a
better anchoring of fiscal policy aimed at stabilizing expenditures and hence
reducing the transmission of the volatility to the non-extractive parts of the
economy.

15. The adequate policy mix calls for tighter liquidity conditions as budget
execution accelerates. As excess reserves and credit growth reversed their
downward trend in July and September 2022 respectively, additional liquidity
tightening is warranted. This should however be carefully calibrated given the
lack of collateral for central bank refinancing operations and muted interest
rate transmission (Selected Issues Paper I). Staff recommended accelerating the
reforms needed to implement a price-based monetary policy through more active
liquidity management and deepening government securities and interbank markets.

16. As the recovery takes hold and inflation is contained, policies will need to
focus on rebuilding economic resilience. This will require entrenching fiscal
sustainability, strengthening monetary policy, developing financial markets, and
preparing for a gradual move toward ER flexibility to absorb external shocks,
and support economic diversification (Selected Issues Paper I).

* The macro-fiscal agenda will need to target a gradual tightening in line with
the fiscal anchor (Annex III). Fiscal policy will need to be anchored on the
fiscal balance excluding extractive revenues and be calibrated with the
objective of stabilizing public debt. At the same time, public expenditures
should be reoriented from generalized subsidies to targeted social spending
in support of the vulnerable, and quality public investment to address
infrastructure gap and developmental needs (roads, ports, renewable energy
infrastructure, irrigation, sanitation, electrification, digitalization,
etc.).

* Given the magnitude of external shocks, the reforms needed to support the
transition to greater ER flexibility have become critical. These include: (i)
implementing the technical platform for interbank FX market transactions,
(ii) adopting regulations needed to create an interbank FX market, (iii)
better enforcing limits on banks' FX NOPs, (iv) strengthening the monetary
policy framework and banking sector reliance to shocks, and (v) anchoring
fiscal policy on a debt stabilizing non-extractive primary balance (NEPB).
The BCM has already taken major steps to improve the functioning of the FX
market and remove constraints on its development (Box 2).7 Generating an
active interbank FX market while maintaining monetary and fiscal discipline
are paramount for a smooth transition to a market-determined ER.

* Structural reforms to improve governance and strengthen institutions should
yield longer-term growth dividends conducive to stronger competition, and
private investment.

Authorities' Views

17. The authorities agreed with the need to anchor fiscal policy and strengthen
monetary policy, but raised concerns about the timing and ability to implement
tighter and more targeted policies considering the magnitude of development
needs. They also stressed the need to continue improving their social registry
to better target subsidies. They agreed with the need to closely coordinate
fiscal and monetary policy and to adjust both should inflation continue to
increase.

18. The BCM agreed that further tightening is needed. However, the central bank
raised concerns about muted interest rate transmission and the cost of
sterilization, and emphasized the need for addressing its stock of claims on
government through a gradual conversion into marketable government securities in
order to strengthen its financial position and ease adoption of IFRS.

19. The authorities reiterated their commitment to maintaining a prudent fiscal
policy, including keeping debt levels stable. They acknowledged that budget
risks have risen with the increasing reliance on extractive revenues to finance
the expansionary budgets. However, this was due to external shocks (COVID-19,
war in Ukraine, drought, and regional tensions), which required an adequate
fiscal response. They saw great merits in stabilizing expenditure and reducing
budget risks by targeting a debt-sustaining or reducing NEPB over the medium
term. They reiterated their goal to reduce debt over time and emphasized the
need to recalibrate the sustainable extractive revenue level consistent with
this objective after 3-5 years to take into account new mining greenfields. They
also emphasized ongoing work for a new pricing formula for refined petroleum
products, which is expected to further reduce untargeted subsidies, and
highlighted that a reform of the subsidy for domestically used gas was not
envisaged currently.

NEW 42-MONTH ECF/EFF ARRANGEMENTS: RATIONALE, OBJECTIVES, AND POLICIES

20. Mauritania has large development needs, and its structural reform agenda
remains unfinished. During the last ECF arrangement real GDP growth stood at an
average of 5.5 percent, and the poverty headcount dropped by 3 percentage points
to 28 percent in 2019, the external debt-to-GDP ratio stabilized, and the
external reserve position surged from $0.9 billion in December 2017 to $2.3
billion in 2021. However, key structural reforms from the previous ECF which
remain unfinished, are related to: (i) PFM and revenue administration; (ii) the
adoption of International Financial Reporting Standards (IFRS), and (iii)
implementation of the technical platform for interbank FX market transactions.

21. In addition, recent shocks have put policy buffers under pressure, raising
the urgency to rebuild resilience. The volatility of international prices of
exported minerals, and the increase of energy import prices and its impact on
subsidies, accentuate the need to anchor fiscal policy in a Medium-Term Fiscal
Framework (MTFF) supported by better targeted spending and domestic revenue
mobilization. At the same time, a modern monetary policy framework, and a deeper
and more resilient financial sector would better support the fulfillment of
BCM's price stability objective and the gradual move to greater exchange ER
flexibility, needed to help absorb real shocks and dampen growth and financial
volatility.

22. A new ECF/EFF arrangements will support the economic recovery and
implementation of structural reforms, while providing the reserves buffer to
ensure a smooth transition to ER flexibility. Priorities include: i) anchoring
fiscal policy in the face of high international food and energy prices and
volatile commodity prices, ii) strengthening fiscal, monetary, and foreign
exchange policy frameworks, and iii) bolstering governance, transparency, and
the environment for private investment. The proposed structural benchmarks (SBs)
under the program focus on i) expenditure policy and public finance management;
ii) tax policy and revenue administration; iii) monetary, foreign exchange, and
financial sector policies; iv) measures to improve governance; and v) social
protection. The new ECF/EFF arrangements will also prioritize policies that
mitigate the impact of surging commodity prices on the poor and critical
structural reforms while building capacity.

A. SUPPORT THE RECOVERY WHILE MAINTAINING ECONOMIC STABILITY

Fiscal Policy

23. To address large infrastructure and development needs, the authorities plan
to increase public investment. The draft 2023 budget (Text Table 3) targets an
increase of public investment of 1.4 percent of GDP over the 2022 revised
budget, primarily through faster execution of externally financed projects
(grants and loans). The authorities also plan to increase public wages by 0.6
percent of GDP in 2023. This increase will be fully offset by cuts in other
current spending items compared to the draft 2023 budget. With non-extractive
revenue staying flat, the budget relies heavily on uncertain extractive revenue
as reflected in the NEPB of MRU -27.1 billion (-6.7 percent of GDP).8

Text Table 3.

Key Budget Figures, 2020-24

Source: Mauritanian authorities; and IMF staff estimates and projections. View
Table
Text Table 3.

Key Budget Figures, 2020-24

2020 2021 2022 2023 2024 Act Act Rev. budget Proj. Draft budget Proj. Proj. MRU
billions Total revenue incl. grants 63.8 76.9 90.4 91.5 102.4 89.5 96.5 Tax
revenue 36.8 44.0 54.5 51.3 59.0 59.6 64.8 Non-tax revenue 20.1 24.0 33.1 32.0
33.6 23.4 23.8 Petroleum revenue 0.8 1.4 1.0 2.6 1.0 1.0 3.4 Grants 6.2 7.6
1.9 5.6 8.9 5.5 4.5 Expenditure and net lending 56.9 69.1 107.1 96.5 111.4 99.4
98.0 Current expenditure 36.8 43.3 68.8 64.5 64.8 61.3 62.1 Of which:
Energy subsidy 13.2 13.0 5.0 5.0 0.5 Of which: Interest 2.9 2.8 3.3 3.0 3.1
2.6 2.9 Capital expenditure 20.3 26.0 38.3 32.3 46.6 38.1 35.9 Net lending
-0.2 -0.2 0.0 -0.3 0.0 0.0 0.0 Primary balance (excl. grants) 3.6 3.0 -15.2 -7.6
-14.7 -12.8 -3.1 Non-extractive primary balance 3.2 -2.5 -33.4 -24.0 -27.1 -19.0
5.5

Source: Mauritanian authorities; and IMF staff estimates and projections.

24. Nonetheless, the authorities were committed to fiscal discipline, including
to avoid further fueling inflationary pressures. They agreed to maintaining the
primary deficit (including grants) at one to two percent of GDP in 2023, by
further rationalizing current spending (untargeted subsidies) to offset lower
extractive revenues and strengthen efforts to raise non-extractive tax revenues
(Text Table 4). Additional fiscal space created through increased non-extractive
revenues or reduced current expenditures will be used to ramp up public
investment and increase targeted social spending. In case of
higher-than-expected extractive revenues, the windfall will be used to build
buffers or reduce debt.

25. Fiscal policy will be anchored on a NEPB aimed at fiscal sustainability,
shielded from the volatile natural resource sector. To prevent a return to high
risk of debt distress, the fiscal anchor has been calibrated based on a maximum
debt limit (Annex III).9 Operationalizing this anchor, implies a NEPB (including
grants) of -3.5 to -4.5 percent. This will be achieved by reducing current
spending to 13.7 percent of GDP by 2027 from 16.9 percent estimated in 2022,
preserving capital spending at around 8.6 percent of GDP and raising
non-extractive tax revenue annually by 0.5 percent of GDP by strengthening
revenue administration (Section B) and gradually phasing out tax exemptions.10
In 2023, tax policy measures are expected to contribute 0.2 percent of GDP, and
revenue administration efficiency gains are expected to contribute an additional
0.3 percent of GDP. The remaining 0.5 percent of GDP increase in 2023 is a
result of the impact of growth and profits rebound after covid. Social
protection is supported through a floor on social spending that allows to
increase quarterly cash transfers to poor households, from 2,200 MRU in 2022 to
2,900 MRU in 2023 (proposed SB) and 3,600 MRU in 2024.

Text Table 4.

Selected Subsidy Programs

Source: Mauritanian authorities; and IMF staff estimates and projections. View
Table
Text Table 4.

Selected Subsidy Programs

2020 2021 2022 2023 Program Realized Realized Proj. Proj. MRU billions Tekavoul
régulier (cash transfer) Targeted (social registry) 0.29 0.58 0.88 1.30 Tekavoul
choc (cash transfer) Targeted (social registry) 0.00 0.07 0.03 0.00 El Maouna
(cash transfer) Targeted (social registry) 0.07 0.30 0.62 0.00 Temwine
(subsidized food) Untargeted 0.82 1.53 1.95 1.95 CSA food handout Targeted 0.20
0.69 0.22 0.22 CSA handout of agricultural inputs Targeted 0.48 0.48 1.501 1.50
Subsidy gas/LPG Untargeted 0.07 0.60 2.20 2.00 Subsidy refined petroleum
products Untargeted 0.00 0.00 11.00 3.00 Tertiary scholarships Untargeted 0.20
0.27 0.41 0.53 Total 2.14 4.50 18.81 10.50 Nominal growth 5.62 15.32 5.60 6.87

Source: Mauritanian authorities; and IMF staff estimates and projections.

26. To remain compliant with the fiscal anchor in 2023 and reduce budgetary risk
related to reliance on extractive revenues, the authorities agreed to take
revenue measures and reduce the pace of planned increases in public investment.
With the draft 2023 budget proposing a further increase in public investment by
3 percentage points of GDP and spending on energy subsidy being only partly
eliminated, the NEPB is set to deteriorate further. The authorities agreed to
introduced new revenue measures and reduce public investment (Text Table 5) to
keep the NEPB at the estimated debt-sustaining level of -4.5 percent of GDP. The
authorities' budget is aligned with staff projections after correcting
grant-financed investments based on historically observed execution. In case of
lower-than-expected execution of projects financed through grants, the overall
budget for externally financed investment will be reduced by the corresponding
amount. A revised budget will be prepared by mid-2023 to make the agreed fiscal
path consistent with a revised budget law. A revised 2023 budget in line with
program understanding will be submitted to Parliament by June 2023 (proposed
SB).

Text Table 5.

Budget Measures for 2023

Source: Authorities and Staff estimates and projections View Table
Text Table 5.

Budget Measures for 2023

Agreed Budget Measures Expected Yield Increase of VAT rate for
telecommunications sector from 16 percent to 18 percent MRU 0.1 billion
Introduction of a special levy on the telecommunications sector of 5 percent of
turnover MRU 0.3 billion Removal of the custom duty exemptions for imports of
consumer goods into the Nouadhibou Free Zone MRU 0.4 billion Reduction of budget
for internally-financed investments MRU 2.5 billion Reduction of budget for
externally-financed investments MRU 2.5 billion Total MRU 5.8 billion

Source: Authorities and Staff estimates and projections

Monetary Policy

27. Monetary conditions were largely expansionary during the pandemic including
due to the gold purchase operations. In March 2020, the BCM reduced its policy
rate by 150 basis points (Text Figure 7) and the reserve requirement ratio from
7 to 5 percent in response to the pandemic, increasing it back to 6 percent in
December 2020. In addition, gold purchases by the BCM have led to a significant
balance-sheet expansion and record level of excess reserves in the banking
system (MRU 11.3 billion at end-December 2021 compared to MRU 5.6 billion at
end-2020 and MRU 1.7 billion in end-2019). At the same time, the BCM has been
gradually reforming its liquidity management regulations during the previous
ECF-supported program with Fund TA. It has introduced the necessary instruments
needed to operate an interest rate corridor system.11 However, these tools are
not actively used due to sterilization costs and lack of monetary policy
collateral (Box 2).

View Full Size

Text Figure 7.

Inflation and BCM’s Policy Rate

(In percent)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: Mauritanian authorities; and IMF staff calculations.
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28. The BCM started tightening its monetary policy in 2022. In August, the
central bank increased its policy rate by 200 basis points to 7 percent. Excess
reserves also decreased in the first half of 2022. Staff welcomed the BCM's
recent decisions to increase the policy rate and tighten liquidity as the
substantial excess reserves built in 2021 fueled inflation and the demand for FX
in the official market. Increased FX interventions to cover CA transactions are
also consistent with the removal of the FX restriction of insufficient FX
availability at the sessions organized by the BCM.12 Despite the monetary
contraction, the policy rate remains negative in real terms (Text Figure 7).

29. Staff and the BCM agreed that further tightening is needed to rein in
inflation and mitigate the risk of adverse external developments. The BCM would
cease its gold purchase operations at end-2022, and resume its 7-day main
liquidity management operations to absorb excess reserves. It will also
implement a more forward-looking monetary policy that reacts preemptively to
future monetary developments and deviations of forecasted inflation from BCM's
comfort zone. At the same time, the government will increase the issuance of
T-bills for banks to support the implementation and transmission of monetary
policy (Box 2). More broadly, the monetary policy framework needs to be
strengthened to increase its effectiveness and support the move to greater ER
flexibility (see Section B). In the meantime, in the extreme event of sharply
declining foreign reserves the central bank would need to adjust the exchange
rate to maintain its international reserves at an adequate level.

B. STRENGTHEN POLICY FRAMEWORKS

30. Significant reform challenges still lie ahead to cement the recovery plan
and strengthen the policy framework. The policy framework will aim at building
and modernizing fiscal, monetary, and financial institutions.

Fiscal Policy

31. The program is underpinned by an ambitious reform agenda centered on
enhancing fiscal performance, modernizing revenue administration, and
strengthening PFM.13 To enhance tax policy and revenue administration, the
taxation framework needs to be simplified, the tax base broadened, standard tax
rates applied equally to all sectors of the economy, and the tax directorate and
customs directorate modernized with a clear reform strategy. PFM would be
strengthened by fully internalizing a fiscal anchor with clear policy targets
supported by medium-term budgeting and an improved budget credibility,
strengthening in-year execution, and improving infrastructure governance
(strengthening project appraisal and selection, enhancing budgeting for
infrastructure maintenance). For the next twelve months, the following
structural reforms were agreed:

* Tax policy: reform the Nouadhibou Free Zone (proposed SB), make declaration
for CIT compulsory, including for companies that are temporarily exempt
(proposed SB), create a tax policy structure in the Cabinet of the Minister
of Finance (proposed SB), and reform the Investment Code by abolishing the
Free Point regime and reducing the number of special fiscal regimes.

* Revenue administration: put in place a platform connected with the Jibaya
software enabling electronic filing and payments (proposed SB), make e-filing
and e-payments for tax and customs for large taxpayers compulsory; integrate
all large taxpayers in the large taxpayers' office once e-filing has become
available and linked with Jibaya, and expand access for customs brokers to
e-filing.

* PFM and expenditure policy: adopt the medium-term fiscal and expenditure
frameworks (MTFF and MTEF) consistent with the fiscal anchor of the program
at the Council of ministers and transmit it to Parliament (proposed SB),
develop and pilot a methodology to systematically budget for the maintenance
of public investment, adopt GFSM 2014 and transition to accrual accounting.

* Natural resource revenue management: reform the policy framework to manage
revenues from mining, oil and gas, by: i) integrating gas revenues into the
medium-term budget framework, ii) establishing rules to smoothen the
volatility of revenues financing the budget and apply best practices in the
reporting revenues and savings fund assets/gains, iii) reviewing the FNRH14
and examining its suitability for managing larger financial flows and assets.

Monetary and Foreign Exchange Policy

32. Modernizing the monetary policy framework will help to better contain
inflation and prepare for greater ER flexibility. Efforts to strengthen BCM's
financial autonomy, and deepen the money, government securities, and FX markets
are critical to improving monetary policy implementation and transmission.
Regular auctions of 4, 13, 26, and 52-week T-bills for conventional banks will
be conducted to reach a volume of MRU 1 billion by June 2023 and MRU 2 billion
by September 2023 (proposed SB). To strengthen BCM's control over interest rates
and inflation, the central bank would gradually narrow its interest rate
corridor and implement more active liquidity management through the resumption
and regular implementation of 7-day main liquidity absorption operations.

33. The monetary and fiscal authorities agreed on the necessity to swiftly
revive the government securities, interbank money, and FX markets. An effective
coordination framework between the BCM and the ministry of finance would be
established to ensure regular issuances of T-bills and extend the yield curve. A
schedule of issuance of government securities over the program period would also
be established in consultation with IMF staff and in accordance with program
objectives. The reform of the interbank FX market—which was paused during the
lockdown in 2020—is critical to supporting greater access to FX and preparing
the transition to greater ER flexibility (Box 2, text figure 8, and Selected
Issues Paper I). The BCM agreed that the technical platform for interbank FX
market transactions would be launched before June 2023 (proposed SB), and
expressed interest in receiving TA to develop the interbank FX market once the
platform is acquired. In addition, to reduce the imbalance in the official FX
market and foster its development, the central bank would reduce its role of
main supplier of FX in the official market by gradually channeling export
revenues to the official market.

View Full Size

Text Figure 8.

Gradual Transition to Greater Exchange Rate Flexibility—Benefits and Risk
Mitigating Policies

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Selected Issues Paper I.
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34. Implementation of key outstanding recommendations of BCM's last safeguards
assessment should be accelerated under the program.15 These include adopting
IFRS, discontinuing BCM's participation in the gold program, enhancing the Audit
Committee's oversight, agreeing with the government on a conversion of the
outstanding claims on government to securities priced at market rates, and
strengthening internal audit capacity. Following the enactment of the new Gold
Law (in November 2022), and in line with the authorities' commitments, the BCM
is expected to cease artisanal gold purchases. The adoption of IFRS remains
critical to enhancing transparency in financial reporting; given capacity
constraints, the BCM intends to hire an external consultant to help complete the
remaining work related to the full implementation of IFRS (MEFP ¶39). The BCM
will need to undergo an updated safeguards assessment in the context of the new
ECF/EFF arrangements, which should be completed before the first review of the
program at the latest.

Financial Sector Policies

35. The BCM has made commendable progress in recent years to align banking
regulation with Basel requirements and modernize financial infrastructure. The
Liquidity Coverage Ratio (LCR) was introduced in 2020 and solvency requirements
were aligned with the Basel framework. Work is also underway to introduce the
Net Stable Funding Ration (NSFR), in order to monitor and contain the
transformation risk. The instruction on bank governance was adopted in March
2022 and the BCM has been working on the strict compliance by banks with the new
regulation. In parallel with these developments, progress is being made to
introduce the key principles of risk-based supervision, such as the
identification of systematic banks, establishment of early warning indicators
and the bank's rating system. A new law on digital payments was adopted by
Parliament in 2021; the BCM is currently developing its regulatory framework
governing the activity of electronic payments.16 A modern payment
system—including a large-value payment system, a central securities' depository,
and a clearing house—would also be operational in 2023.

36. Progress in addressing problem banks is underway. One of the three problem
banks was liquidated while another one was put under temporary administration.
The third has already increased its capital and would fully comply with the
minimum capital requirement of one billion MRU soon. Building on the progress
achieved during the previous ECF-supported program, measures aiming at
strengthening the capital positions of the few banks remaining undercapitalized,
reinforcing banking supervision, and developing banking regulation will be
pursued. The BCM needs to strengthen human resources in charge of off-site
supervision and develop its regulatory framework governing the supervision of
payment institutions and electronic payment activities.

37. Better enforcement of the prudential regulation is critical to ensuring
banking system's resilience to shocks and preparing for greater ER flexibility.
The banking system remains particularly exposed to FX risks. To this end, the
BCM will reduce banks' short FX NOPs to below 20 percent by December 2023
(proposed SB). The BCM intends to revise its regulation on sanctions, and in
particular the penalties on the non-compliance with limits on FX NOPs in order
to make them easily applicable. It also needs to enforce prudential limits on
connected lending.

38. Efforts to strengthen the anti-money laundering and combatting the financing
of terrorism (AML/CFT) regime should be sustained. Since the issuance of
Mauritania's Mutual Evaluation Report in 2018, the authorities have taken steps
to rectify its strategic deficiencies relating to its technical compliance with
FATF standards. BCM should continue strengthening its AML/CFT regime to ensure
the effectiveness of implementation of the AML/CFT measures. To support
anti-corruption efforts, BCM should conduct AML/CFT risk-based supervision to
ensure compliance by banks with the enhanced due diligence requirements for
politically exposed persons and increase the use of financial intelligence to
detect and prevent corruption. Following steps taken to improve the legal
framework on transparency of beneficial ownership of legal persons, the
authorities should establish adequate mechanism to ensure timely access by
competent authorities to accurate and up-to-date beneficial ownership
information.

Box 2.

Progress made in Strengthening Monetary and Exchange Rate Policies and Key
Remaining Reforms

The Mauritanian authorities have made good progress in modernizing the monetary
and foreign exchange policy framework and implementation, yet critical reforms
remain for a successful transition to greater ER flexibility.

Central bank independence and law. A new central bank law strengthening the
BCM's autonomy was adopted in July 2018. The law modernizes the central bank
institutional structures and incorporates many of IMF staff recommendations on
governance, internal and external audit, and publication of financial
statements. The new BCM bodies were established: The Audit Committee in 2018 and
the Prudential, Resolution, and Financial Stability Board in July 2019. The
Shariah-Compliance Committee was set up in December 2019. A memorandum of
understanding between the BCM and the government on the consolidation of legacy
government debt to the central bank was ratified by parliament in January 2019.

Monetary operations. In 2017, the BCM introduced a new regulation including the
instruments needed to operate an interest rate corridor system—i.e., 7-day main
refinancing operations, BCM bills and deposit auctions, overnight standing
lending and deposit facilities, fine-tuning and long-term operations, and
reserve requirements. However, these tools are not actively used due to the
sterilization cost and lack of monetary operations eligible collateral; issuance
of T-bills dropped substantially with the buildup of balances on the government
account at the central bank (Box 2. Figures 1, & 2), with T-bill rates
significantly deviating from the central bank policy rate (Box 2. Figure 3). In
2018, the BCM defined the framework for collateral eligible for its monetary
policy operations to extend it to bank credits; it is working to operationalize
this mechanism, by carrying out an inventory of bank claims, defining their
haircuts, and preparing the legal framework for their mobilization.

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Box 2. Figure 1.

Treasury Bills—Volume Issued by Maturity, 2019-22

(In millions of MRU)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: Mauritanian authorities.
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Box 2. Figure 2.

Treasury Bills—Outstanding Volume by Ownership, 2010-21

(In millions of MRU)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Mauritanian authorities
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Box 2. Figure 3.

Treasury Bill Rates and BCM Policy Rate, 2019-22

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Mauritanian authorities.
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In 2018, the central bank also introduced a new emergency liquidity assistance
(ELA) regulation.

Foreign exchange market and operations. In November 2017, the BCM modified its
fixing mechanism to allocate FX at the ER offered, with the maximum selling rate
limited to the marginal rate plus 2 percent (Instruction No. 5/GR/17). In
December 2019, the BCM eliminated the obligation to channel bank customers'
transactions through the official FX market by authorizing the netting of
customer's orders (Instruction No. 9/GR/2019). In May 2022, it ceased rationing
its FX interventions for CA transactions, while strengthening its monitoring of
FX operations. In November 2022, the BCM phased out the surrender requirement of
receipts from fishing exports of SCMP to accounts at the central bank
(Instruction No. 9/GR/2022). The BCM has also been working on establishing the
technical platform for interbank FX market transactions; the platform, initially
scheduled for September 2020, was delayed due to the containment measures linked
to the COVID-19 pandemic. The central bank produced the terms of reference for
the procurement of the technical platform in January 2021 and prepared a draft
regulatory framework for the interbank FX market. A new tender for the selection
of the firm that will implement the technical platform was launched in October
2022.

Key remaining reforms. Critical steps remain to strengthen monetary policy
implementation and transmission and to allow the switch to an alternative
monetary policy anchor. These include the effective implementation of a narrower
interest rate corridor system and deepening of key markets—i.e., the interbank
money, FX and government securities' markets. The short-term focus should be on
(1) gradually narrowing the interest rate corridor, (2) managing liquidity more
actively with more frequent use of the BCM main liquidity management operations,
(3) addressing the constraints on the deepening of the interbank money market,
(4) developing the government securities' market, (5) reforming the collateral
framework, (6) developing a Forecasting and Policy Analysis System (FPAS) and
the central bank's communication, and (7) accelerating the reforms needed to
create and gradually deepen the interbank FX market and support the move to
greater flexibility (for further details, see Selected Issues Paper I).

Sources: IMF (2018b), IMF (2021), and Selected Issues Paper I.

C. BOLSTER GOVERNANCE, TRANSPARENCY, PRIVATE INVESTMENT, AND RESILIENCE TO
CLIMATE SHOCKS

39. The authorities are taking actions in key governance areas. The Court of
Accounts published the 2020 and 2021 audit of pandemic-related spending in March
and May 2022. The authorities also published the names of the legal owners of
companies awarded public procurement contracts by the social fund managing
COVID-19 emergency spending. The implementing decree of the Public Procurement
Code clearly defining the beneficial ownership and information requirements was
approved by the government in mid-2022. A time-bound action plan based on the
Governance Diagnostic report is expected to be finalized and published by
end-September 2023 (proposed SB) and implementation initiated thereafter. The
authorities are revising the standard bidding documents to enable collection of
beneficial ownership information and aim to publish such information for tenders
awarded by end-2023.

40. Reforms to improve the business environment and financial inclusion are a
priority. Obstacles to private sector development include the limited access to
finance, particularly for SMEs. An SME guarantee fund was set up by the
authorities in 2020 to improve access to finance but has yet to be
operationalized. The authorities will operationalize the SME guarantee fund by
end-2023 (proposed SB). The new law on electronic payment services provides
opportunities for financial service providers to advance financial inclusion by
enhancing access to low-value, transactional payment services in the country. To
further simplify administrative procedures, the authorities will fully
dematerialize the one-stop shop by end-2023. The authorities are committed to
the implementation of reforms for a more resilient and durable private
sector-led growth, as outlined in the SCAPP. They have set up an investment
promotion agency (APIM) and elaborated a roadmap to improve the business
environment.

41. Strengthening human capital is paramount to achieving higher and more
inclusive growth. Mauritania ranked 150 out of 157 countries on the WBG Human
Capital Index (HCI) in 2018. In 2020, Mauritania's score was 38 percent,
slightly higher than in 2018 (35 percent). Mauritania's score and rank are low
primarily because of education-related challenges, including teacher
competencies and inefficient operational and financial management of schools.
The increase in the refugee population is an additional strain on the education
system, in addition to challenges to social cohesion and the local labor market
where refugees represent a large share of the local population. The authorities
are working to improve the performance of the education system, through reduced
teacher absenteeism and improved teaching skills. Staff encouraged the
authorities to strengthen the linkages between private sector demand and the
education system to improve the quality of education and to provide job-relevant
skills demanded by the labor market.

42. Climate adaptation policies will need to be embedded within a national
strategy to address climate change. Mauritania is facing higher frequency and
severity of climate-related natural disasters, which affect economic stability
and growth and create large adaption needs. Climate adaptation costs are
estimated by the authorities in their revised Nationally Determined Contribution
(NDC) report at $10.6 billion over 2021–30. The authorities agreed on the need
for a national climate change strategy and coordination across government
agencies and development partners, which would help increase external finance
for climate adaptation (Selected Issues Paper II); they are working with the
Green Climate Fund to develop bankable projects eligible for climate financing.
The funding needs would be further refined and linked with the country's
macro-fiscal framework. Adaptation policy priorities would include measures to
enhance drought resilience. The authorities are setting up—with World Bank
support—a common financial mechanism to respond to climate shocks (drought
episodes) leading to food insecurity, which needs to be operationalized this
year.

View Full Size

Text Figure 9.

Climate Developments and Agriculture Production

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: FAO; EM-DAT; World Bank; and IMF staff calculation
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PROGRAM MODALITIES

43. Access under the 42-month ECF and EFF arrangements is proposed at SDR 64.40
million (50 percent of quota), or SDR 21.47 million (16.67 percent of quota) and
SDR 42.93 million (33.33 percent of quota) respectively.17 Given the protracted
BoP problem and the size of the existing financing gap, low access arrangements
with 50 percent total access would be warranted. While reserves are projected to
increase beyond the adequacy threshold of 5.2 months by 2027, a comfortable
buffer is warranted due to Mauritania's exposure to volatile commodity prices,
and the need to support the transition to a more flexible exchange rate. The
proposed access therefore reflects both the size of Mauritania's BoP needs and
the strength of its policy ambitions under the program. The financing will be
used to build foreign reserves rather than financing the fiscal deficit given
adequate existing fiscal buffers. 25 percent of quota will be disbursed in 2023
when reserves are expected to fall below the adequacy threshold, and 25 percent
uniformly across the remaining program period (Table 9). The front-loaded
disbursements are supported by front-loaded policy implementation and the
strengths of the program. At end-2021, Mauritania's outstanding credit to the
Fund was SDR 239.6 million (186 percent of quota).

44. Program performance will be monitored through semi-annual proposed
quantitative performance criteria (QPCs) and quarterly indicative targets (ITs),
as well as SBs (Attachment I). Adjusters would allow for flexibility.18 12
proposed SBs will build on achievements under the previous three-year ECF
arrangement and support the near-and-medium-term policy challenges. Given the
large unfinished structural reform agenda and still-limited capacity, the
proposed SBs will be sequenced, prioritized on a 12-month rolling basis.

45. The program is fully financed, with firm commitments for first 12 months of
the program and good prospects for the remainder of the program (Table 7). The
authorities' financing needs beyond the ECF/EFF disbursements and external
financing will be met by grants. The 2021 revised budget indicated that part of
the SDR allocation was used to finance the 2021 fiscal deficit and will
contribute to the constitution of the strategic food stocks, and the support of
prices and purchasing power.19

46. Mauritania's capacity to repay the Fund remains adequate, but subject to
significant risks (Table 8). Total Fund outstanding credit (based on existing
and prospective drawings) peaks at over 3.2 percent of GDP in 2023, while annual
obligations to the Fund would peak at about 2.6 percent of revenues excluding
grants in 2026, well above the 75th percentile. Risks to the program are
elevated given security risks, international commodity market volatility,
climate change, and uncertainty related to the start of the GTA project. The
authorities' continued commitment to reforms and donors' support will be
critical to mitigating these risks.

47. External debt is sustainable and was revised from high to moderate risk of
debt distress (Debt Sustainability Analysis), following the upward revision of
GDP and conversion of the Saudi deposit of $300 million at the BCM into a
concessional loan and the reclassification of a ring-fenced loan by a public
company (GTA loan) from direct to contingent liability. The debt service
obligations deferred in 2020-21 under the DSSI restarted in 2022. Consequently,
external debt service obligations, from end-2021 outstanding debt, are expected
to increase from 2.2 percent of GDP in 2021 to 3.2 percent in 2022, and to 4.1
percent of GDP in 2024. In the context of the Debt Limits Policy, staff
discussed the authorities' borrowing plan (see MEFP) to contribute towards an
adequate buffer, and highlighted the importance of the authorities evaluating
each new loan for its impact on the DSA.20

48. Considering uncertainties surrounding the outlook, staff suggested
contingency measures to support successful program implementation. If an adverse
scenario were to materialize (e.g., lower growth and domestic revenue collection
due to unexpected shocks), the macroeconomic framework and fiscal program would
be revised by reducing lower-priority spending and delaying non-priority
investment. An ECF/EFF augmentation and usage of fiscal buffers could be
considered if the adjustment measures were insufficient.

49. A well-integrated Capacity Development (CD) program to support the new ECF
and EFF arrangements is critical (Annex I). Staff discussed the authorities' TA
needs, their capacity to implement the program, and coordination with different
CD providers. A revised CD strategy will then be prepared and discussed with IMF
CD departments. Based on the program design, priorities are to establish an
MTFF, modernize the monetary policy framework, deepen the government securities,
and interbank money and FX markets, strengthen banking supervision, and improve
financial inclusion and governance.

STAFF APPRAISAL

50. A determined response to the COVID-19 pandemic and sizable international
financial support have placed Mauritania on a recovery path, but buffers have
been coming under pressure again in 2022. Staff welcomes the authorities'
response to contain the effects of the pandemic, including by rolling out
well-targeted cash transfers to the poorest, while implementing their national
strategy to support the recovery and longer-term inclusive growth. With donors'
support, sound policies and favorable iron ore price during the pandemic,
international reserves accumulated and the fiscal balances in 2020 and 2021
ended in a surplus. Mauritania's external position in 2021 was broadly in line
with the level implied by fundamentals and desirable policy settings, based on
the results of the IMF's EBA-lite current account model.21 The reserve position
was more than adequate. However, a confluence of shocks including the war in
Ukraine and regional tensions have reverted the trend accumulation of FX
reserves in 2022 and narrowed the space for policy intervention, while
Mauritania still faces significant human and infrastructure development gaps.

51. Staff welcomes the proposed program which addresses the main challenges
facing Mauritania. The policy and reform package aims to support the recovery,
preserve fiscal discipline, strengthen the central bank's control over
inflation, increase the resilience of the economy to terms of trade shocks, and
meet infrastructure needs while maintaining macroeconomic stability. The program
also seeks to support authorities' efforts in reducing poverty and inequality
and fostering private sector growth. The proposed policy mix is expected to
preserve the purchasing power of the Mauritanians, support the gradual move to
increasing ER flexibility, diversification and growth, and strengthen the
economy's resilience to terms of trade shocks.

52. Additional monetary and fiscal responses may become necessary to rein in
inflation. The drop in iron ore prices and increase in food and oil prices
weakened export revenues, widened imbalances, and exposed financial
vulnerabilities. The acceleration of government spending in 2022 added liquidity
in the banking system, in an environment of rising inflation; widening inflation
differentials with main trading partners results in a real appreciation and
overvaluation of the currency and loss of competitiveness. Inflation also
negatively impacts consumption and long-term growth. While the set of policy and
reform commitments made by the authorities under the program should rein in
inflation and ensure macroeconomic stability, staff urges the authorities to
continuously coordinate fiscal and monetary policies and to stand ready to
further tighten the monetary policy stance and implement contractionary fiscal
measures if inflation reveals more persistent than expected.

53. The authorities' broad strategy to preserve infrastructure investment and
social spending is adequate, as long as it remains withing a disciplined fiscal
policy that lowers public debt. Staff stresses the need to further rebalance
public expenditure away from untargeted current spending by containing
non-priority transfers and subsidies and to enhance the efficiency of public
investment through better prioritization, implementation and maintenance while
maintaining control of the wage bill. This should be accompanied by measures to
improve non-extractive tax revenues with ambitious tax policy and administration
reforms and rationalizing costly and untargeted tax exemptions. Staff advises to
use additional fiscal space created through the mobilization of non-extractive
revenues to ramp up public investment and increase targeted social spending.

54. Tight monetary conditions, fiscal discipline, strong FX reserve buffers, a
sound financial sector, and sufficiently developed interbank FX market are key
ingredients for a successful transition to greater ER flexibility. Sizeable
excess reserves in 2021 combined with a more stabilized ER increased the demand
for FX in the official market, the risk of overheating and disorderly ER
adjustments. Staff urges the Central Bank to continue the sterilization of
excess reserves and to gradually reduce its dominant role of supplier of FX in
the official market by gradually channeling export revenues to the official FX
market. This will help reduce the imbalance in the official FX market and
support the move to a market-determined ER.

55. Coordinated efforts are needed to modernize the monetary policy framework
and strengthen liquidity management. The conversion of the BCM claims on
government, a narrower interest rate corridor, and more active liquidity
management are expected to foster the development of interbank and government
securities' markets, strengthen monetary policy transmission and the central
bank's control over inflation. The commitment of the Ministry of Finance to
conduct more regular auctions of government securities and deepen the market is
critical to supporting the BCM's capacity to implement an effective and
independent monetary policy.

56. Staff supports the authorities' request for 42-month ECF and EFF
arrangements. The Letter of Intent and Memorandum of Economic and Financial
Policies set out appropriate policies to pursue the program's objectives. While
implementation risks are significant, they are mitigated by the authorities'
commitment to the program.

57. It is proposed that the next Article IV consultation be held on a 24-month
cycle, in accordance with Board decisions on consultation cycles.

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Figure 1.

Mauritania: Real Sector Developments, 2013-22

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: Mauritanian authorities; and IMF staff estimates and projections.
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Figure 2.

Mauritania: External Sector Developments, 2013-22

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: Mauritanian authorities; and IMF staff estimates and projections
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Figure 3.

Mauritania: Fiscal Sector Developments, 2013-22

(Percent of GDP, unless otherwise indicated)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: Mauritanian authorities; and IMF staff estimates and projections.
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Figure 4.

Mauritania: Monetary Sector Developments, 2013-22

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: Mauritanian authorities, and IMF staff calculations.
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Figure 5.

Mauritania: Financial Sector Indicators, 2017-22

(In percent)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: National authorities, and IMF staff calculations.Notes: ratios follow
national standards, and observations are in: June 2022 for Mauritania, 2020 for
Algeria, June 2021 for Morocco, and September 2020 for Tunisia.1 / Liquid assets
in Mauritania: cash, reserves, and treasury bills.
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Figure 6.

Mauritania: Capacity to Repay Indicators Compared to UCT Arrangements for PRGT
Countries

(In percent of the indicated variable)

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Sources: National authorities, and IMF staff calculations.
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Table 1.

Mauritania: Macroeconomic Framework, 2018-27

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

1/Including government debt to the central bank recognized in 2018.

2/From 2021, including renegotiated, previously passive debt to Kuwait.

3/Defined as end of year stock in hydrocarbon fund and treasury account minus
gross debt.

4/Excluding the hydrocarbon revenue fund; including 2021 SDR allocation.

View Table
Table 1.

Mauritania: Macroeconomic Framework, 2018-27

Poverty rate: 28 percent (2019) Quota: SDR 128.8 million Population: 4.4 million
(2018) Main exports: iron ore, fish, gold 2018 2019 2020 2021 2022 2023 2024
2025 2026 2027 Est. Est. Est. Proj. Projections (Annual change in percent;
unless otherwise indicated) National accounts and prices Real GDP 4.8 5.4 -0.9
2.4 5.3 4.3 5.7 6.6 3.9 5.1 Real extractive GDP -4.6 16.8 2.4 -12.6 17.0 8.3
11.1 14.0 0.4 5.5 Real non-extractive GDP 5.8 4.0 -1.5 6.3 2.1 3.3 4.4 4.7
4.8 5.0 Real GDP per capita 2.5 3.2 -3.1 0.2 3.1 2.1 3.4 4.4 1.7 2.9 Iron
ore production (million tons) 11.1 12.7 13.1 13.1 13.9 14.6 16.4 17.2 17.7 18.0
GDP deflator 4.6 5.3 6.6 12.6 0.2 2.5 4.9 2.7 2.9 1.5 Nominal GDP 9.5 11.0
5.6 15.3 5.6 6.9 10.8 9.4 6.8 6.7 Consumer prices (period average) 3.1 2.3 2.3
3.8 8.3 10.0 7.5 5.5 4.5 4.0 Consumer prices (end of period) 3.2 2.7 1.8 5.7
11.0 9.0 6.0 5.0 4.0 4.0 (In percent of GDP) Savings and Investment Gross
investment 46.2 48.1 44.2 47.8 48.7 45.8 40.5 44.0 44.8 43.5 Gross national
savings 33.2 37.8 37.5 39.9 31.4 34.4 34.6 37.9 38.7 37.7 Saving - Investment
balance -13.1 -10.3 -6.7 -7.9 -17.3 -11.4 -5.9 -6.1 -6.1 -5.7 (In percent of
GDP) Central government operations Revenues and grants 21.3 19.4 20.4 21.3
24.0 22.0 21.8 21.9 22.0 22.5 Nonextractive 18.0 16.4 16.3 15.6 16.8 17.8
18.0 18.1 18.4 18.8 Taxes 13.3 11.9 10.7 10.8 12.5 13.5 14.0 14.5 15.0
15.5 Extractive 2.9 1.6 2.1 3.6 5.8 2.9 2.6 2.6 2.6 2.9 Grants 0.5 1.5
2.0 2.1 1.5 1.4 1.2 1.1 1.0 0.8 Expenditure and net lending 19.0 17.4 18.2
19.2 25.4 24.6 23.6 22.9 22.5 22.2 Of which: Current 12.1 10.9 11.8 12.0
17.0 15.2 14.8 14.4 14.0 13.6 Capital 6.8 6.6 6.5 7.2 8.6 9.4 8.8
8.6 8.6 8.6 Primary balance (excl. grants) 3.0 1.4 1.1 0.8 -2.0 -3.2 -2.2 -1.4
-0.7 0.4 Non-extractive primary balance (incl. grants) 0.6 1.3 1.0 -0.7 -6.4
-4.7 -3.6 -2.9 -2.3 -1.7 Overall balance 2.3 2.0 2.2 2.2 -1.4 -2.6 -1.8 -1.1
-0.5 0.3 Public sector debt 1/ 2/ 57.9 55.7 55.8 49.1 48.4 50.3 49.7 49.2 49.6
49.0 Net financial assets 3/ -49.0 -43.7 -46.3 -38.4 -40.6 -46.2 -48.1 -48.8
-49.0 -48.1 (Annual change in percent; unless otherwise indicated) Money Broad
money 13.8 11.8 21.0 20.4 5.0 8.1 14.8 12.0 9.3 7.9 Credit to the private
sector 19.4 12.9 6.8 8.4 16.4 12.1 14.0 14.7 9.2 10.7 External sector Exports
of goods, f.o.b. 7.3 22.4 11.7 14.4 25.1 -5.4 11.1 8.4 -0.3 -0.3 Imports of
goods, f.o.b. 24.2 11.1 -0.4 23.1 34.6 -19.2 -2.5 5.6 2.0 0.7 Terms of trade
-1.2 23.0 22.7 9.6 -18.4 1.3 1.8 0.9 3.2 0.6 Real effective exchange rate -0.3
1.8 0.9 4.5 … … … … … … Current account balance (in percent of GDP) -13.1
-10.3 -6.7 -7.9 -17.3 -11.4 -5.9 -6.1 -6.1 -5.7 Excl. externally financed
extractive capital imports -8.1 -3.8 2.2 0.9 -5.8 -5.5 -2.5 -1.9 -2.4 -2.7
Gross official reserves (US$ million, eop) 4/ 918 1,135 1,542 2,347 1,501
1,568 1,635 1,755 1,822 1,832 In months of prospective non-extractive
imports 4.5 5.8 6.7 7.3 5.1 5.2 5.2 5.5 5.5 5.5 External public debt (US$
million) 2/ 3,614 3,782 4,139 4,285 4,313 4,560 4,731 4,933 5,090 5,245 In
percent of GDP 48.4 46.9 48.1 43.3 41.8 43.4 42.9 42.7 42.6 42.1 Memorandum
items: Nominal GDP (MRU billion) 266.6 296.0 312.6 360.5 380.7 406.8 450.9
493.4 527.2 562.8 Nominal non-extractive GDP (MRU billion) 240.2 250.7 249.3
282.0 308.1 330.4 361.1 387.4 417.7 450.7 Nominal GDP (US$ million) 7,472
8,065 8,612 9,892 10,314 10,507 11,021 11,541 11,953 12,456 Nominal GDP (US$,
annual change in percent) 9.5 7.9 6.8 14.9 4.3 1.9 4.9 4.7 3.6 4.2 Exchange
rate (MRU/US$) 35.7 36.7 36.3 36.4 … … … … … … Price of oil (US$/barrel) 66.2
61.2 41.8 69.4 98.2 85.5 80.2 76.2 73.3 71.0 Price of iron ore (US$/Ton) 70.1
93.6 108.1 158.2 121.0 101.5 95.7 90.0 90.0 85.0 Price of gold (US$/Ounce)
1,269 1,392 1,770 1,800 1,820 1,816 1,875 1,930 1,960 1,989

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

1/Including government debt to the central bank recognized in 2018.

2/From 2021, including renegotiated, previously passive debt to Kuwait.

3/Defined as end of year stock in hydrocarbon fund and treasury account minus
gross debt.

4/Excluding the hydrocarbon revenue fund; including 2021 SDR allocation.

Table 2a.

Mauritania: Balance of Payments, 2018-27

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

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

1/Disbursed official grants moved above the line for 2020 estimated outturn.

View Table
Table 2a.

Mauritania: Balance of Payments, 2018-27

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

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Est. Est. Est. Proj.
Projections Current account balance -976 -831 -576 -782 -1,783 -1,193 -652 -700
-731 -712 Excl. externally financed extractive capital imports -606 -303 187
87 -602 -574 -274 -223 -287 -335 Trade balance -706 -570 -288 -580 -1,060 -347
139 257 167 125 Exports, fob 1,895 2,319 2,591 2,964 3,708 3,508 3,898 4,226
4,215 4,203 Of which : Iron ore 508 831 1,029 1,544 1,251 1,099 1,166 1,152
1,185 1,136 Hydrocarbons 11 0 0 0 0 0 208 500 478 461
Copper 148 145 153 192 103 133 138 122 0 0 Gold 420 596
787 388 1,454 1,335 1,422 1,490 1,548 1,571 Fish 750 712 584 659 723
749 752 728 748 757 Imports, fob -2,601 -2,889 -2,879 -3,544 -4,769 -3,854
-3,759 -3,969 -4,048 -4,078 Of which : Food -495 -484 -687 -792 -1,032 -840
-831 -860 -903 -924 Petroleum -624 -560 -417 -708 -1,250 -932 -897
-863 -849 -850 Capital goods -558 -825 -1,011 -1,052 -1,338 -880
-642 -821 -798 -744 Services and income (net) -471 -577 -630 -618 -1,062
-1,088 -1,039 -1,210 -1,157 -1,107 Services (net) -432 -481 -524 -472 -1,094
-1,010 -958 -1,046 -1,056 -1,009 Credit 250 313 272 321 263 275 286 298 309
309 Debit -682 -793 -796 -793 -1,357 -1,284 -1,244 -1,343 -1,365 -1,319
Income (net) -38 -96 -106 -146 32 -78 -81 -164 -101 -98 Credit 80 86 84
60 233 242 243 243 237 238 Debit -119 -183 -190 -206 -200 -320 -323 -407
-338 -335 Current transfers (net) 202 316 342 416 339 242 247 253 259 270
Private unrequited transfers (net) 97 102 153 143 155 163 169 175 181 195
Official grants 1/ 104 214 189 272 184 79 79 78 77 75 Capital and financial
account 1,008 900 620 1,978 1,262 1,229 730 845 844 814 Capital account 19 22
73 987 75 0 39 39 39 39 Financial account 989 878 548 991 1,187 1,229 692 806
805 775 Foreign direct investment (net) 772 884 928 1,062 1,025 840 311 520
524 397 Official medium- and long-term loans 83 127 94 52 434 112 127 167
148 167 Disbursements 253 316 287 314 361 353 378 414 363 370 Of
whch: GTA gas project 0 0 83 83 125 0 0 0 0 0 Amortization (before DSSI) 169
189 193 262 -73 241 251 248 214 203 SNIM medium- and long-term loans -63 -64
-60 -204 22 -5 -7 -4 -2 20 Other financial flows 196 -69 -415 81 -293 282
260 124 136 192 Errors and omissions 159 19 91 350 0 0 0 0 0 0 Overall balance
191 88 135 1,545 -520 36 78 144 113 102 Financing -191 -88 -135 -1,545 520 -36
-78 -144 -113 -102 Net foreign assets -195 -92 -229 -731 520 -36 -78 -144 -113
-102 Central bank (net) -57 -202 -191 -635 535 -31 -73 -132 -97 -53
Assets (negative=accumulation of reserves) -70 -219 -422 -805 846 -67 -67
-120 -66 -10 Liabilities 13 17 231 170 -311 36 -6 -12 -30 -43 Use
of Fund resources 47 46 182 24 0 43 17 17 9 0 ECF/EFF (actual and
prospective) 47 46 52 24 0 43 17 17 9 0 RCF … … 130 … … … … … … 0
Other, incl. deposit from Saudi Arabia -34 -29 -24 -24 -311 -6 -23 -29
-39 -36 Commercial banks (net) -44 25 -35 -47 0 0 0 0 0 0 Hydrocarbon
revenue fund (net) -93 85 -3 -49 -15 -5 -5 -12 -16 -49 Exceptional financing
(incl. DSSI and debt cancellation) 4 5 94 -814 0 0 0 0 0 0 Exceptional
official grants 1/ … … … … … … … … … Gross official reserves, incl. IMF
financing (US$ million) 918 1,135 1,542 2,347 1,501 1,568 1,635 1,755 1,822
1,832 (in months of imports excluding extractive industries) 4.5 5.8 6.7
7.3 5.1 5.2 5.2 5.5 5.5 5.5 Memorandum items: Current account balance (in
percent of GDP) -13.1 -10.3 -6.7 -7.9 -17.3 -11.4 -5.9 -6.1 -6.1 -5.7 Excl.
externally financed extractive capital imports -8.1 -3.8 2.2 0.9 -5.8 -5.5 -2.5
-1.9 -2.4 -2.7 Trade balance (in percent of GDP) -9.5 -7.1 -3.3 -5.9 -10.3
-3.3 1.3 2.2 1.4 1.0 Total external financing requirements (in percent of GDP)
16.2 13.5 9.6 12.6 16.6 13.7 8.3 8.3 7.9 7.3 External public debt (in millions
of US$) 3,614 3,782 4,139 4,285 4,313 4,560 4,731 4,933 5,090 5,245 (in
percent GDP) 48.4 46.9 48.1 43.3 41.8 43.4 42.9 42.7 42.6 42.1 External public
debt service (after DSSI - US$ million) 209 211 151 168 313 316 349 361 337 328
(in percent of revenue) 13.4 14.6 9.5 8.8 13.4 14.6 15.4 15.1 13.4 11.4
SNIM contribution to BOP (US$ millions) 173 462 275 619 665 678 771 768 810
818 Hydrocarbon revenue fund balance (US$ millions) 168 83 86 135 150 155 160
173 189 238

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

1/Disbursed official grants moved above the line for 2020 estimated outturn.

Table 2b.

Mauritania: Balance of Payments, 2018-27

(In percent of GDP, unless otherwise indicated)

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

1/Disbursed official grants moved above the line for 2020 estimated outturn.

View Table
Table 2b.

Mauritania: Balance of Payments, 2018-27

(In percent of GDP, unless otherwise indicated)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Est. Est. Est. Proj.
Projections Current account balance -13.1 -10.3 -6.7 -7.9 -17.3 -11.4 -5.9 -6.1
-6.1 -5.7 Excl. externally financed extractive capital imports -8.1 -3.8 2.2
0.9 -5.8 -5.5 -2.5 -1.9 -2.4 -2.7 Trade balance -9.5 -7.1 -3.3 -5.9 -10.3 -3.3
1.3 2.2 1.4 1.0 Exports, fob 25.4 28.8 30.1 30.0 36.0 33.4 35.4 36.6 35.3
33.7 Of which : Iron ore 6.8 10.3 11.9 15.6 12.1 10.5 10.6 10.0 9.9 9.1
Hydrocarbons 0.2 0.0 0.0 0.0 0.0 0.0 1.9 4.3 4.0 3.7
Copper 2.0 1.8 1.8 1.9 1.0 1.3 1.2 1.1 0.0 0.0 Gold 5.6
7.4 9.1 3.9 14.1 12.7 12.9 12.9 13.0 12.6 Fish 10.0 8.8 6.8 6.7 7.0
7.1 6.8 6.3 6.3 6.1 Imports, fob -34.8 -35.8 -33.4 -35.8 -46.2 -36.7 -34.1
-34.4 -33.9 -32.7 Of which : Food -6.6 -6.0 -8.0 -8.0 -10.0 -8.0 -7.5 -7.5
-7.6 -7.4 Petroleum -8.3 -6.9 -4.8 -7.2 -12.1 -8.9 -8.1 -7.5 -7.1
-6.8 Capital goods -7.5 -10.2 -11.7 -10.6 -13.0 -8.4 -5.8 -7.1 -6.7
-6.0 Services and income (net) -6.3 -7.2 -7.3 -6.3 -10.3 -10.4 -9.4 -10.5 -9.7
-8.9 Services (net) -5.8 -6.0 -6.1 -4.8 -10.6 -9.6 -8.7 -9.1 -8.8 -8.1
Credit 3.3 3.9 3.2 3.2 2.5 2.6 2.6 2.6 2.6 2.5 Debit -9.1 -9.8 -9.2
-8.0 -13.2 -12.2 -11.3 -11.6 -11.4 -10.6 Income (net) -0.5 -1.2 -1.2 -1.5
0.3 -0.7 -0.7 -1.4 -0.8 -0.8 Credit 1.1 1.1 1.0 0.6 2.3 2.3 2.2 2.1 2.0
1.9 Debit -1.6 -2.3 -2.2 -2.1 -1.9 -3.0 -2.9 -3.5 -2.8 -2.7 Current
transfers (net) 2.7 3.9 4.0 4.2 3.3 2.3 2.2 2.2 2.2 2.2 Private unrequited
transfers (net) 1.3 1.3 1.8 1.5 1.5 1.5 1.5 1.5 1.5 1.6 Official grants 1/
1.4 2.7 2.2 2.8 1.8 0.8 0.7 0.7 0.6 0.6 Capital and financial account 13.5 11.2
7.2 20.0 12.2 11.7 6.6 7.3 7.1 6.5 Capital account 0.3 0.3 0.8 10.0 0.7 0.0
0.4 0.3 0.3 0.3 Financial account 13.2 10.9 6.4 10.0 11.5 11.7 6.3 7.0 6.7 6.2
Foreign direct investment (net) 10.3 11.0 10.8 10.7 9.9 8.0 2.8 4.5 4.4 3.2
Official medium- and long-term loans 1.1 1.6 1.1 0.5 4.2 1.1 1.2 1.4 1.2 1.3
Disbursements 3.4 3.9 3.3 3.2 3.5 3.4 3.4 3.6 3.0 3.0 Of whch: GTA
gas project 0.0 0.0 1.0 0.8 1.2 0.0 0.0 0.0 0.0 0.0 Amortization (before
DSSI) 2.3 2.3 2.2 2.6 -0.7 2.3 2.3 2.1 1.8 1.6 SNIM medium- and long-term
loans -0.8 3.8 -0.7 -2.1 0.2 0.0 -0.1 0.0 0.0 0.2 Other financial flows 2.6
-5.4 -4.8 0.8 -2.8 2.7 2.4 1.1 1.1 1.5 Errors and omissions 2.1 0.2 1.1 3.5 0.0
0.0 0.0 0.0 0.0 0.0 Overall balance 2.6 1.1 1.6 15.6 -5.0 0.3 0.7 1.3 0.9 0.8
Financing -2.6 -1.1 -1.6 -15.6 5.0 -0.3 -0.7 -1.3 -0.9 -0.8 Net foreign assets
-2.6 -1.1 -2.7 -7.4 5.0 -0.3 -0.7 -1.3 -0.9 -0.8 Central bank (net) -0.8
-2.5 -2.2 -6.4 5.2 -0.3 -0.7 -1.1 -0.8 -0.4 Assets (negative=accumulation
of reserves) -0.9 -2.7 -4.9 -8.1 8.2 -0.6 -0.6 -1.0 -0.6 -0.1 Liabilities
0.2 0.2 2.7 1.7 -3.0 0.3 -0.1 -0.1 -0.3 -0.3 Use of Fund resources 0.6
0.6 2.1 0.2 0.0 0.4 0.2 0.2 0.1 0.0 ECF/EFF (actual and prospective)
0.0 0.6 0.6 0.2 0.0 0.4 0.2 0.2 0.1 0.0 RCF … … 1.5 … … … … … … 0.0
Other, incl. deposit from Saudi Arabia -0.5 -0.4 -0.3 -0.2 -3.0 -0.1
-0.2 -0.3 -0.3 -0.3 Commercial banks (net) -0.6 0.3 -0.4 -0.5 0.0 0.0 0.0
0.0 0.0 0.0 Hydrocarbon revenue fund (net) -1.2 1.1 0.0 -0.5 -0.1 -0.1 0.0
-0.1 -0.1 -0.4 Exceptional financing (incl. DSSI and debt cancellation) 0.0
0.1 1.1 -8.2 0.0 0.0 0.0 0.0 0.0 0.0 Exceptional official grants 1/ … … … … …
… … … … Gross official reserves 12.3 14.1 17.9 23.7 14.6 14.9 14.8 15.2 15.2
14.7 (in months of imports excluding extractive industries) 4.5 5.8 6.7 7.3
5.1 5.2 5.2 5.5 5.5 5.5 Memorandum items: Current account balance (in percent
of GDP) -13.1 -10.3 -6.7 -7.9 -17.3 -11.4 -5.9 -6.1 -6.1 -5.7 Excl.
externally financed extractive capital imports -8.1 -3.8 2.2 0.9 -5.8 -5.5 -2.5
-1.9 -2.4 -2.7 Trade balance (in percent of GDP) -9.5 -7.1 -3.3 -5.9 -10.3
-3.3 1.3 2.2 1.4 1.0 Total external financing requirements (in percent of GDP)
1.1 1.0 0.8 2.2 0.2 0.2 0.1 0.1 0.1 0.1 External public debt (in millions of
US$) 3,614 3,782 4,139 4,285 4,313 4,560 4,731 4,933 5,090 5,245 (in
percent GDP) 48.4 46.9 48.1 43.3 41.8 43.4 42.9 42.7 42.6 42.1 External public
debt service (after DSSI - US$ million) 209 211 151 168 313 316 349 361 337 328
(in percent of revenue) 13.4 14.6 9.5 8.8 13.4 14.6 15.4 15.1 13.4 11.4
SNIM contribution to BOP (US$ millions) 173 462 275 619 665 678 771 768 810
818 Hydrocarbon revenue fund balance (US$ millions) 168 83 86 135 150 155 160
173 189 238

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

1/Disbursed official grants moved above the line for 2020 estimated outturn.

Table 3a.

Mauritania: Central Government Operations, 2018-27

(In billions of MRU, unless otherwise indicated)

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

1/Including transfers to public entities outside the central government.

2/Overall balance excluding foreign-financed investment expenditure.

3/Defined as end of year stock in FNRH and treasury account minus gross debt.

View Table
Table 3a.

Mauritania: Central Government Operations, 2018-27

(In billions of MRU, unless otherwise indicated)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Est. Projections Revenues and
grants 56.8 57.5 63.8 76.9 91.5 89.5 98.4 107.9 116.1 126.5 Revenues 55.6 53.1
57.6 69.3 85.9 84.0 92.9 102.4 110.9 122.0 Nonextractive 47.9 48.5 51.1 56.2
63.9 72.4 81.4 89.5 97.0 105.7 Tax 35.4 35.4 33.5 38.8 47.7 55.0 63.3 71.7
78.8 87.3 Nontax 12.5 13.1 17.6 17.5 16.3 17.4 18.1 17.8 18.1 18.5
Extractive 7.7 4.6 6.5 13.1 22.0 11.6 11.5 12.9 13.9 16.3 Oil and gas
6.0 1.8 0.5 1.2 1.2 0.5 0.5 1.9 3.2 3.1 Mining 1.6 2.8 6.0 11.9 20.8 11.2
11.1 11.0 10.7 13.2 Grants 1.2 4.4 6.2 7.6 5.6 5.5 5.5 5.5 5.3 4.5 Of
which: Projects 1.0 1.8 2.6 2.6 5.0 5.0 5.0 5.0 4.7 4.1 Expenditure and net
lending 50.6 51.6 56.9 69.1 97.1 100.0 106.5 113.1 118.9 124.8 Current 32.4
32.4 36.8 43.3 64.8 61.9 66.9 70.8 73.6 76.6 Compensation of employees 14.0
15.4 16.8 18.9 21.0 24.1 26.4 27.8 29.9 32.3 Goods and services 6.4 6.6 7.4
9.3 9.8 12.9 14.3 15.7 16.7 17.9 Subsidies and transfers 1/ 6.0 4.8 6.4 9.0
27.2 17.4 18.1 17.2 16.0 14.5 Interest 3.1 2.6 2.9 2.8 3.3 3.2 3.5 4.0 4.4
4.9 External 2.6 2.2 2.2 2.1 2.8 2.6 2.9 3.2 3.4 3.6 Domestic 0.4
0.5 0.7 0.7 0.6 0.6 0.6 0.8 0.9 1.3 Special accounts 1.1 1.4 0.9 1.4 1.4 4.3
4.6 6.1 6.5 7.0 Common reserves 1.2 1.4 2.5 1.6 1.7 0.0 0.0 0.0 0.0 0.0
Others 0.6 0.2 -0.1 0.3 0.3 0.0 0.0 0.0 0.0 0.0 Capital 18.1 19.7 20.3
26.0 32.6 38.1 39.6 42.3 45.2 48.2 Foreign-financed 2.8 4.5 5.2 5.2 8.4 9.8
10.4 12.0 11.1 10.7 Domestically financed, incl. COVID-19 15.3 15.2 15.0
20.8 24.0 28.3 29.2 30.3 34.1 37.4 Net lending 0.2 -0.4 -0.2 -0.2 -0.3 0.0 0.0
0.0 0.0 0.0 Primary balance (excl. grants) 8.0 4.1 3.6 3.0 -7.6 -12.8 -10.1 -6.7
-3.6 2.2 Primary balance 9.3 8.5 9.7 10.6 -2.1 -7.3 -4.6 -1.2 1.6 6.7
Non-extractive primary balance 1.6 3.9 3.2 -2.5 -24.0 -18.9 -16.1 -14.1 -12.3
-9.6 Overal balance (excl. grants) 5.0 1.4 0.7 0.2 -11.0 -16.0 -13.6 -10.7 -8.0
-2.7 Overall balance 6.2 5.9 6.8 7.8 -5.4 -10.5 -8.1 -5.2 -2.7 1.8 Financing
-6.2 -5.9 -6.8 -7.8 5.4 10.5 8.1 5.2 2.7 -1.8 Domestic 1.5 -4.8 -12.6 -5.6 9.9
14.1 11.8 8.1 5.7 2.4 Banking system 0.1 -4.2 -9.4 5.5 9.9 13.7 10.4 7.0 2.9
1.2 Treasury account 0.8 -5.3 -19.9 -15.6 9.9 13.3 9.1 6.0 0.0 0.0
Central bank -0.6 0.0 11.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Commercial
banks -0.1 1.1 -0.9 -0.4 0.0 0.4 1.3 1.1 2.9 1.2 Nonbanks 0.4 0.1 -0.4 -1.3
0.0 0.4 1.3 1.1 2.9 1.2 Domestic arrears 0.0 1.4 -1.5 1.5 0.0 0.0 0.0 0.0
0.0 0.0 Other deposits accounts 1.0 -2.0 -1.3 3.8 0.0 0.0 0.0 0.0 0.0 0.0
SDR allocation … … … 6.4 … … … … … External -7.7 -1.1 5.9 -2.2 -4.5 -3.6
-3.7 -2.8 -3.0 -4.1 Hydrocarbon revenue fund (net) -3.1 3.5 0.2 -1.4 -0.6
-0.2 -0.2 -0.5 -0.7 -2.2 Oil and gas revenue -6.3 -1.8 -0.8 -1.4 -2.6 -1.0
-1.1 0.0 0.0 0.0 Transfer to the budget 3.1 5.3 1.0 0.0 2.0 0.8 0.8 0.0
0.0 0.0 Other external financing -4.6 -4.6 5.6 -0.8 -3.9 -3.3 -3.5 -2.3
-2.3 -1.9 Borrowing (net) -4.3 -4.1 -3.9 -5.8 -3.9 -3.3 -3.5 -2.3 -2.3
-1.9 Disbursements 2.0 2.8 2.8 2.6 4.5 6.0 6.7 8.4 7.7 8.0
Amortization -6.3 -6.9 -6.8 -8.4 -8.4 -9.3 -10.1 -10.7 -10.0 -9.9
of which debt relief (DSSI) 0.0 0.0 3.5 4.1 -1.5 -2.2 -2.3 -1.1 -1.1
-0.8 IMF (RCF) … … 4.7 … … … … … … … IMF (ECF/EFF, actual and
prospective) 0.0 0.0 1.9 0.9 0.0 0.0 0.0 0.0 0.0 0.0 Residual financing gap … …
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Errors and omissions 0.0 0.0 -0.2 0.0 0.0 0.0
0.0 0.0 0.0 0.0 Memorandum items: Real growth rate of public expenditure
(percent) -0.3 -0.3 7.8 17.0 29.7 -6.4 -0.9 0.7 0.6 0.9 Current (percent)
8.0 -2.1 11.2 13.3 38.1 -13.2 0.6 0.3 -0.5 0.0 Capital (percent) -12.0 6.3
0.9 23.5 15.8 6.2 -3.4 1.3 2.3 2.4 Non-extractive primary balance (excl.
grants) 0.4 -0.5 -3.0 -10.1 -29.9 -24.5 -21.6 -19.6 -17.5 -14.1 Non-extractive
primary balance (incl. grants) 1.6 3.9 3.2 -2.5 -24.3 -18.9 -16.1 -14.1 -12.3
-9.6 Basic budget balance (excl. grants) 2/ 7.8 5.9 5.9 5.4 -2.6 -6.2 -3.2 1.3
3.2 8.0 Net financial assets 3/ -130.6 -129.3 -144.6 -138.4 -154.7 -188.1
-216.7 -240.6 -258.6 -270.7 Social spending 8.8 9.6 14.6 15.6 19.3 20.7 22.6
24.2 26.1 28.2

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

1/Including transfers to public entities outside the central government.

2/Overall balance excluding foreign-financed investment expenditure.

3/Defined as end of year stock in FNRH and treasury account minus gross debt.

Table 3b.

Mauritania: Central Government Operations, 2018-27

(In percent of GDP, unless otherwise indicated)

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

1/Including transfers to public entities outside the central government.

2/Overall balance excluding foreign-financed investment expenditure.

3/Defined as end of year stock in FNRH and treasury account minus gross debt.

View Table
Table 3b.

Mauritania: Central Government Operations, 2018-27

(In percent of GDP, unless otherwise indicated)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Est. Projections Revenues and
grants 21.3 19.4 20.4 21.3 24.0 22.0 21.8 21.9 22.0 22.5 Revenues 20.9 17.9
18.4 19.2 22.6 20.6 20.6 20.7 21.0 21.7 Nonextractive 18.0 16.4 16.3 15.6
16.8 17.8 18.0 18.1 18.4 18.8 Tax 13.3 11.9 10.7 10.8 12.5 13.5 14.0 14.5
15.0 15.5 Nontax 4.7 4.4 5.6 4.8 4.3 4.3 4.0 3.6 3.4 3.3 Extractive
2.9 1.6 2.1 3.6 5.8 2.9 2.6 2.6 2.6 2.9 Oil and gas 2.3 0.6 0.2 0.3 0.3
0.1 0.1 0.4 0.6 0.5 Mining 0.6 0.9 1.9 3.3 5.5 2.7 2.5 2.2 2.0 2.3
Grants 0.5 1.5 2.0 2.1 1.5 1.4 1.2 1.1 1.0 0.8 Of which: Projects 0.4 0.6
0.8 0.7 1.3 1.2 1.1 1.0 0.9 0.7 Expenditure and net lending 19.0 17.4 18.2 19.2
25.5 24.6 23.6 22.9 22.5 22.2 Current 12.1 10.9 11.8 12.0 17.0 15.2 14.8 14.4
14.0 13.6 Compensation of employees 5.3 5.2 5.4 5.2 5.5 5.9 5.8 5.6 5.7 5.7
Goods and services 2.4 2.2 2.4 2.6 2.6 3.2 3.2 3.2 3.2 3.2 Subsidies and
transfers 1/ 2.3 1.6 2.0 2.5 7.2 4.3 4.0 3.5 3.0 2.6 Interest 1.1 0.9 0.9
0.8 0.9 0.8 0.8 0.8 0.8 0.9 External 1.0 0.7 0.7 0.6 0.7 0.6 0.6 0.7 0.7
0.6 Domestic 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.2 0.2 0.2 Special accounts
0.4 0.5 0.3 0.4 0.4 1.1 1.0 1.2 1.2 1.3 Common reserves 0.4 0.5 0.8 0.5 0.5
0.0 0.0 0.0 0.0 0.0 Others 0.2 0.1 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 Capital
6.8 6.6 6.5 7.2 8.6 9.4 8.8 8.6 8.6 8.6 Foreign-financed 1.1 1.5 1.7 1.4 2.2
2.4 2.3 2.4 2.1 1.9 Domestically financed, incl. COVID-19 5.7 5.1 4.8 5.8
6.3 7.0 6.5 6.1 6.5 6.7 Net lending 0.1 -0.1 -0.1 -0.1 -0.1 0.0 0.0 0.0 0.0
0.0 Primary balance (excl. grants) 3.0 1.4 1.1 0.8 -2.0 -3.2 -2.2 -1.4 -0.7 0.4
Primary balance 3.5 2.9 3.1 2.9 -0.5 -1.8 -1.0 -0.2 0.3 1.2 Non-extractive
primary balance 0.6 1.3 1.0 -0.7 -6.3 -4.7 -3.6 -2.9 -2.3 -1.7 Overal balance
(excl. grants) 1.9 0.5 0.2 0.1 -2.9 -3.9 -3.0 -2.2 -1.5 -0.5 Overall balance 2.3
2.0 2.2 2.2 -1.4 -2.6 -1.8 -1.1 -0.5 0.3 Financing -2.3 -2.0 -2.2 -2.2 1.4 2.6
1.8 1.1 0.5 -0.3 Domestic 0.6 -1.6 -4.0 -1.6 2.6 3.5 2.6 1.6 1.1 0.4
Banking system 0.0 -1.4 -3.0 1.5 2.6 3.4 2.3 1.4 0.5 0.2 Treasury
account 0.3 -1.8 -6.4 -4.3 2.6 3.3 2.0 1.2 0.0 0.0 Central bank -0.2 0.0
3.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Commercial banks 0.0 0.4 -0.3 -0.1 0.0 0.1
0.3 0.2 0.5 0.2 Nonbanks 0.2 0.0 -0.1 -0.3 0.0 0.1 0.3 0.2 0.5 0.2
Domestic arrears 0.0 0.5 -0.5 0.4 0.0 0.0 0.0 0.0 0.0 0.0 Other deposits
accounts 0.4 -0.7 -0.4 1.1 0.0 0.0 0.0 0.0 0.0 0.0 SDR allocation … … … 1.8
… … … … … External -2.9 -0.4 1.9 -0.6 -1.2 -0.9 -0.8 -0.6 -0.6 -0.7
Hydrocarbon revenue fund (net) -1.2 1.2 0.1 -0.4 -0.1 -0.1 0.0 -0.1 -0.1
-0.4 Oil and gas revenue -2.3 -0.6 -0.2 -0.4 -0.7 -0.2 -0.2 0.0 0.0 0.0
Transfer to the budget 1.2 1.8 0.3 0.0 0.5 0.2 0.2 0.0 0.0 0.0 Other
-1.7 -1.6 1.8 -0.2 -1.0 -0.8 -0.8 -0.5 -0.4 -0.3 Borrowing (net) -1.6 -1.4
-1.3 -1.6 -1.0 -0.8 -0.8 -0.5 -0.4 -0.3 Disbursements 0.7 0.9 0.9 0.7
1.2 1.5 1.5 1.7 1.5 1.4 Amortization -2.3 -2.3 -2.2 -2.3 -2.2 -2.3 -2.2
-2.2 -1.9 -1.8 of which debt relief (DSSI) 0.0 0.0 1.1 1.1 -0.4 -0.5
-0.5 -0.2 -0.2 -0.1 IMF (RCF) … … 1.5 … … … … … … … IMF (ECF/EFF,
actual and prospective) 0.0 0.0 0.6 0.2 0.0 0.0 0.0 0.0 0.0 0.0 Errors and
omissions 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Memorandum items:
Non-extractive primary balance (excl. grants) 0.1 -0.2 -0.9 -2.8 -7.8 -6.0
-4.8 -4.0 -3.3 -2.5 Non-extractive primary balance (incl. grants) 0.6 1.3 1.0
-0.7 -6.4 -4.7 -3.6 -2.9 -2.3 -1.7 Overall balance (in percent of GDP) 2.3 2.0
2.2 2.2 -1.4 -2.6 -1.8 -1.1 -0.5 0.3 Basic budget balance (excl. grants) 2/
2.9 2.0 1.9 1.5 -0.7 -1.5 -0.7 0.3 0.6 1.4 Net financial assets 3/ -49.0 -43.7
-46.3 -38.4 -40.6 -46.2 -48.1 -48.8 -49.0 -48.1 Social spending 3.3 3.3 4.7
4.3 5.1 5.1 5.0 4.9 5.0 5.0

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

1/Including transfers to public entities outside the central government.

2/Overall balance excluding foreign-financed investment expenditure.

3/Defined as end of year stock in FNRH and treasury account minus gross debt.

Table 4.

Mauritania: Monetary Survey, 2019-27

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

Sources: Mauritanian authorities; and IMF staff estimates and projections. View
Table
Table 4.

Mauritania: Monetary Survey, 2019-27

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

2019 2020 2021 2022 2023 2024 2025 2026 2027 Est. Proj. Monetary survey Net
foreign assets 18.5 27.0 52.7 34.5 37.8 42.9 50.2 55.9 59.6 Net domestic
assets 60.9 69.0 63.0 86.8 93.4 107.6 118.3 128.2 139.1 Net domestic credit
89.7 86.4 89.3 102.4 128.5 154.9 181.1 197.7 216.3 Net credit to the
government 13.9 5.5 1.6 0.4 14.1 24.5 31.5 34.4 35.6 Credit to the economy
75.8 80.9 87.7 102.1 114.4 130.4 149.6 163.3 180.7 Other items net -28.8
-17.4 -26.3 -15.6 -35.1 -47.3 -62.8 -69.5 -77.1 Broad money (M2) 79.4 96.0
115.6 121.4 131.2 150.6 168.5 184.2 198.7 Monetary authorities Net foreign
assets 21.6 29.5 52.2 34.0 37.3 42.4 49.6 55.3 58.9 Net domestic assets 9.4
12.2 -0.3 6.0 8.3 16.0 24.3 25.5 28.2 Net domestic credit 13.7 7.2 1.6 0.3
13.7 22.8 28.7 28.7 28.7 Net credit to the government 13.1 6.5 0.5 -0.7
12.6 21.7 27.7 27.7 27.7 Other items net -4.3 5.0 -1.9 5.7 -5.4 -6.8 -4.5
-3.3 -0.5 Reserve money 31.0 41.7 51.8 40.1 45.6 58.4 73.9 80.8 87.1
Currency in circulation 17.4 22.7 25.7 23.5 25.4 29.1 32.6 35.6 38.4
Reserves of banks 13.5 19.0 26.1 16.6 20.2 29.2 41.3 45.1 48.7 Of
which : Banks deposits in FX 4.0 4.9 4.7 2.9 3.5 5.1 7.2 7.9 8.5 Commercial
banks Net foreign assets -3.1 -2.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 Net domestic
credit 76.2 79.6 88.4 102.7 115.4 132.7 152.9 169.6 188.1 Net credit to the
government 0.8 -1.0 1.0 1.0 1.4 2.7 3.8 6.7 7.9 Credit to the private sector
75.4 80.5 87.3 101.7 114.0 130.0 149.1 162.9 180.3 Other items net -24.7 -22.3
-24.5 -21.9 -30.3 -41.1 -58.9 -66.8 -77.2 (Annual change in percent) Monetary
survey Net foreign assets 85.6 46.3 94.7 -34.4 9.5 13.5 17.0 11.3 6.5 Net
domestic assets -0.3 13.3 -8.7 37.9 7.6 15.3 9.9 8.4 8.5 Net domestic credit
3.4 -3.7 3.4 14.7 25.4 20.6 16.9 9.2 9.4 Net credit to the government
-28.9 -60.6 -71.5 -77.1 3828.7 74.2 28.7 9.1 3.4 Credit to the economy
12.9 6.7 8.5 16.3 12.1 14.0 14.7 9.2 10.6 Other items net -12.3 39.7 -51.7
40.7 -124.7 -34.7 -32.8 -10.7 -11.0 Broad money (M2) 11.8 21.0 20.4 5.0 8.1
14.8 12.0 9.3 7.9 Monetary authorities Net foreign assets 57.0 36.7 76.7 -34.8
9.5 13.6 17.2 11.4 6.6 Net domestic assets -37.9 30.0 -102.5 -2044.3 37.4 93.2
51.8 4.9 10.8 Net domestic credit -29.8 -47.5 -78.5 -78.3 3962.5 66.6 26.2
0.0 0.0 Net credit to the government -31.1 -50.8 -91.8 -229.7 -1950.8 72.0
27.5 0.0 0.0 Reserve money 7.4 34.7 24.4 -22.8 13.7 28.1 26.7 9.3 7.9
Commercial banks Net foreign assets 18.1 20.3 120.1 3.8 6.0 5.4 3.7 2.7 2.2
Net domestic credit 13.2 4.5 11.1 16.2 12.4 15.0 15.2 10.9 10.9 Net credit
to the government 48.4 -225.7 -206.4 0.6 35.9 94.1 38.5 75.5 17.6 Credit to
the private sector 12.9 6.8 8.4 16.4 12.1 14.0 14.7 9.2 10.7 Memorandum items:
Velocity of broad money (to non-extractive GDP) 3.2 2.6 2.4 2.5 2.5 2.4 2.3
2.3 2.3 Credit to the private sector (percent of non-extractive GDP) 30.1 32.3
31.0 33.0 34.5 36.0 38.5 39.0 40.0 Net foreign assets of banks (in millions of
U.S. dollars) -83.3 -67.6 13.8 13.8 13.8 13.8 13.8 13.8 13.8

Sources: Mauritanian authorities; and IMF staff estimates and projections.
Table 5.

Mauritania: Banking Soundness Indicators, 2010-22

(In percent, unless otherwise indicated)

Sources: Mauritanian authorities; and IMF staff.

1/Revised definition from 2020.

2/Liquid assets: cash, reserves, and treasury bills.

3/Introduced in 2020, defined as liquid asset over 30-day ahead net outflows.

View Table
Table 5.

Mauritania: Banking Soundness Indicators, 2010-22

(In percent, unless otherwise indicated)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Sept. Balance sheet Assets / GDP 31.1 30.9 32.5 35.2 42.5 43.2 45.6 36.0 41.3
34.7 36.7 43.3 41.6 Net private-sector credit / total assets 53.2 48.2 50.8
52.1 55.5 57.0 54.9 43.8 41.2 41.0 42.8 39.8 44.5 Public enterprise credit /
total assets 13.3 10.2 7.2 3.4 6.9 3.3 5.4 5.3 4.7 5.3 3.7 3.3 3.2 Government
securities / total assets 18.8 11.1 11.2 5.8 5.8 2.0 2.0 1.0 0.6 0.9 0.4 0.9 0.1
Private-sector credit growth (y-o-y) 16.0 10.6 15.1 14.9 21.3 8.0 8.3 7.5 19.4
12.8 6.8 8.4 19.7 Gross NPLs / gross loans 45.3 39.2 25.7 20.4 23.0 30.0 25.5
22.4 22.6 21.5 24.1 22.7 20.5 Provisions / (gross NPLs - accrued interest)
30.0 31.2 53.1 52.9 52.5 78.5 63.0 70.7 77.8 76.1 71.7 58.4 62.3 Provisions /
loans 360+ days in arrears 87.7 90.7 88.0 88.8 87.0 93.0 58.0 72.3 107.0 104.8
91.6 81.5 80.3 Deposits / total assets 59.3 60.9 59.1 57.8 61.0 60.8 59.0 60.2
55.6 63.2 63.5 69.1 66.9 Private-sector gross loans / private-sector deposits
118.4 105.9 110.7 113.7 137.7 134.1 110.4 88.4 94.5 94.7 88.3 80.6 93.4 Capital
ratios Capital / total assets 16.7 18.5 17.5 18.7 14.7 13.7 14.2 13.8 12.9
18.4 16.0 13.9 14.8 Capital adequacy ratio (statutory min. = 10 percent) 1/
34.0 35.2 29.2 32.4 28.1 23.1 23.7 22.2 24.7 25.3 19.9 18.1 17.7 Foreign
exchange exposure Fx assets / total assets 10.5 10.5 10.5 10.6 10.5 6.7 8.9
12.0 10.1 12.0 12.4 9.0 9.2 Fx assets / fx liabilities (on balance sheet)
112.1 135.2 100.1 106.6 138.6 108.2 116.0 102.5 99.5 103.2 117.8 89.8 98.8
Open fx position / capital (including off balance sheet) -16.0 -32.7 -45.9
-26.0 -70.4 -72.7 -69.8 25.0 -32.6 -31.8 -23.5 -37.4 -38.3 Profitability and
liquidity Return on assets 0.4 1.2 1.4 1.2 1.2 0.7 … 0.6 0.4 0.5 0.3 0.0 …
Return on equity 2.7 6.0 8.4 6.4 6.6 5.1 … 3.4 3.5 3.1 1.8 -0.1 … Liquid
assets / total assets 2/ 29.5 29.7 29.8 24.0 23.5 21.4 17.0 24.6 19.6 20.9 26.1
26.4 19.3 Liquidity coverage ratio (statutory min. = 100 percent) 3/ … … … … …
… … … … … 148.9 152.5 119 Memorandum items: Share of assets held by three
largest banks 53.7 50.7 45.4 42.3 45.7 42.0 41.0 38.8 42.3 35.9 36.8 35.5 36.2
Number of banks 10 12 12 15 15 16 16 17 17 18 18 18 18

Sources: Mauritanian authorities; and IMF staff.

1/Revised definition from 2020.

2/Liquid assets: cash, reserves, and treasury bills.

3/Introduced in 2020, defined as liquid asset over 30-day ahead net outflows.

Table 6.

Mauritania: Central Government Financing Needs and Sources, 2020-27 1/

(In billions MRU)

Sources: Mauritanian authorities; and IMF staff.

1/Sign convention: positive is financing source, negative is financing need.

2/In 2020, including on-lending to the budget of the Saudi deposit.

View Table
Table 6.

Mauritania: Central Government Financing Needs and Sources, 2020-27 1/

(In billions MRU)

2020 2021 2022 2023 2024 2025 2026 2027 Est. Est. Proj. Gross financing needs
(A) 6.1 8.2 20.8 27.5 26.0 22.5 19.1 13.4 Primary balance, excl. grants and
before DSSI 3.6 3.0 -7.6 -12.9 -10.1 -6.7 -3.6 2.2 External public debt
amortization -6.8 -8.4 -8.4 -9.3 -10.1 -10.7 -10.0 -9.9 Interest payments -2.9
-2.8 -3.3 -3.2 -3.5 -4.0 -4.4 -4.9 External -2.2 -2.1 -2.8 -2.6 -2.9 -3.2
-3.4 -3.6 Domestic -0.7 -0.7 -0.6 -0.6 -0.6 -0.8 -0.9 -1.3 Rescheduled
debt service under Debt Service Suspension Initiative (DSSI) … … -1.5 -2.2 -2.3
-1.1 -1.1 -0.8 Financing sources 6.4 8.2 17.9 23.2 21.4 20.3 16.9 11.9 Domestic
-12.7 -5.6 9.9 14.1 11.8 8.1 5.7 2.4 Drawdown of treasury account -19.9 -15.6
9.9 13.3 9.1 6.0 0.0 0.0 Borrowing (net) 2/ 10.1 -1.7 0.0 0.7 2.7 2.1 5.7 2.4
Other (incl. arrears variation) -2.9 5.3 0.0 0.0 0.0 0.0 0.0 0.0 SDR
allocation … 6.4 … … … … … … External 19.1 13.8 8.0 9.1 9.7 12.2 11.1 10.6
Official grants 6.2 7.6 5.6 5.5 5.5 5.5 5.3 4.5 Project grants 2.6 2.6 5.0
5.0 5.0 5.0 4.7 4.1 Budget support grants 3.6 5.0 0.6 0.6 0.6 0.6 0.5 0.5
External borrowing (gross) 2.8 2.6 4.5 6.0 6.7 8.4 7.7 8.0 Project loans
2.7 2.6 3.4 4.8 5.4 7.1 6.4 6.7 Budget support loans 0.2 0.0 1.1 1.2 1.2 1.3
1.3 1.4 DSSI 3.5 4.1 -1.5 -2.2 -2.3 -1.1 -1.1 -0.8 Drawdown of oil account
0.2 -1.4 -0.6 -0.2 -0.2 -0.5 -0.7 -2.2 IMF financing 6.6 0.9 0.0 0.0 0.0 0.0
0.0 0.0 ECF 2017-21 and 2020 RCF 6.6 0.9 … … … … … … New arrangement
(prospective) … … … 0.0 0.0 0.0 0.0 0.0 Errors and omissions -0.2 … … … … … … …
Residual financing gap … 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Treasury account
balance 27.5 40.3 30.4 17.1 8.0 2.0 2.0 2.0 Gross international reserves
(US$ million) 1,542 2,347 1,501 1,568 1,635 1,755 1,822 1,832

Sources: Mauritanian authorities; and IMF staff.

1/Sign convention: positive is financing source, negative is financing need.

2/In 2020, including on-lending to the budget of the Saudi deposit.

Table 7.

Mauritania: External Financing Requirements and Sources, 2020-27 1/

(In millions of U.S. dollars)

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

1/Sign convention: positive is financing source, negative is financing need.

2/Including central government, central bank, and SNIM.

3/Including SNIM, SMHPM, commercial banks, errors and omissions, and HIPC Debt
Relief.

4/Disbursed official grants moved above the line for 2020 estimated outturn.

5/Estimated, includes discount factor to account for domestic execution
capacity.

View Table
Table 7.

Mauritania: External Financing Requirements and Sources, 2020-27 1/

(In millions of U.S. dollars)

2020 2021 2022 2023 2024 2025 2026 2027 Est. Est. Proj. Total requirements
-1,044 -1,481 -2,210 -1,525 -1,011 -1,060 -1,064 -1,033 Current account
balance, excl. grants -765 -1,055 -1,967 -1,272 -731 -779 -808 -787 External
public debt amortization DSSI 2/ -278 -426 -243 -252 -281 -281 -256 -246 o/w
Rescheduled debt service under the Debt Service Suspension Initiative (DSSI) … …
-43 -61 -61 -27 -27 -18 Total sources 768 2,271 2,026 1,402 916 964 978 958
Foreign direct investment and capital inflows (net) 1,001 2,049 1,100 840 350
559 562 435 Official grants (historical) 71 272 … … … … … … Official loan
disbursements (excluding IMF) 247 230 361 353 378 414 363 370 Other flows 3/
-126 574 -267 282 260 124 136 212 Drawdown of official reserves (negative =
accumulation) -422 -805 846 -67 -67 -120 -66 -10 Drawdown of hydrocarbon
revenue fund (negative = accumulation) -3 -49 -15 -5 -5 -12 -16 -49 Financing
gap 276 -791 184 122 96 96 86 75 Expected sources of financing 276 -791 184 122
96 96 86 75 DSSI 94 814 … … … … … … IMF financing (actual and prospective)
182 24 0 43 17 17 9 0 Of which: new ECF/EFF 0 0 0 43 17 17 9 0 Official
grants (prospective) 4/ … … 184 79 79 78 77 75 Of which: World Bank 5/ … …
98 39 44 54 54 54 European Union 5/ … … 28 15 8 8 8 8 Residual financing gap
0 0 0 0 0 0 0 0 Memorandum items: Gross official reserves (US$ million) 1,542
2,347 1,501 1,568 1,635 1,755 1,822 1,832 Hydrocarbon revenue fund balance
(US$ millions) 86 135 150 155 160 173 189 238

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

1/Sign convention: positive is financing source, negative is financing need.

2/Including central government, central bank, and SNIM.

3/Including SNIM, SMHPM, commercial banks, errors and omissions, and HIPC Debt
Relief.

4/Disbursed official grants moved above the line for 2020 estimated outturn.

5/Estimated, includes discount factor to account for domestic execution
capacity.

Table 8.

Mauritania: Capacity to Repay the Fund, 2023-36

Sources: IMF staff estimates and projections.

1/For 2020, between November 30 and December 31, 2020

View Table
Table 8.

Mauritania: Capacity to Repay the Fund, 2023-36

2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Payments
to the Fund based on existing credit Principal (in million of SDRs) 6.07 11.59
26.13 44.71 46.37 41.40 34.78 20.24 1.66 0.00 0.00 0.00 0.00 0.00 Charges and
interest (in million of SDRs) 5.13 5.17 5.16 5.16 5.16 5.17 5.16 5.16 5.16 5.17
5.16 5.16 5.16 5.17 Payments to the Fund based on existing and prospective
credit 1/ Principal (in million of SDRs) 6.07 11.59 26.13 44.71 47.26 45.87
42.50 30.26 12.89 11.45 10.02 5.15 2.86 0.57 Charges and interest (in million
of SDRs) 5.57 6.12 6.44 6.74 6.79 6.71 6.54 6.32 6.06 5.79 5.52 5.33 5.22 5.17
Total payments to the Fund based on existing and prospective credit 1/ In
millions of SDRs 11.64 17.71 32.57 51.45 54.05 52.58 49.04 36.58 18.95 17.24
15.54 10.48 8.08 5.74 In millions of US$ 14.90 22.67 41.69 65.85 69.18 67.30
62.77 46.82 24.25 22.07 19.89 13.41 10.34 7.35 In percent of exports of goods
and services 0.39 0.54 0.92 1.46 1.53 1.46 1.52 1.13 0.59 0.56 0.49 0.32 0.23
0.16 In percent of debt service 4.73 6.57 11.71 19.99 21.64 20.87 17.96 12.62
5.99 5.19 4.75 3.03 2.45 1.75 In percent of GDP 0.14 0.21 0.36 0.55 0.56 0.52
0.48 0.34 0.17 0.15 0.13 0.08 0.06 0.04 In percent of Gross International
Reserves 0.95 1.39 2.37 3.61 3.78 3.73 4.08 3.57 2.55 4.91 43.43 -4.66 -2.30
-1.54 In percent of quota 9.04 13.75 25.29 39.95 41.96 40.82 38.07 28.40 14.71
13.39 12.07 8.14 6.27 4.46 Outstanding Fund credit In millions of SDRs 259.1
260.4 247.1 208.8 161.6 115.7 73.2 42.9 30.1 18.6 8.6 3.4 0.6 0.0 In millions
of US$ 331.6 333.2 316.3 267.3 206.8 148.1 93.7 55.0 38.5 23.8 11.0 4.4 0.7 0.0
In percent of exports of goods and services 8.8 8.0 7.0 5.9 4.6 3.2 2.3 1.3
0.9 0.6 0.3 0.1 0.0 0.0 In percent of debt service 105.3 96.5 88.9 81.1 64.7
45.9 26.8 14.8 9.5 5.6 2.6 1.0 0.2 0.0 In percent of GDP 3.2 3.0 2.7 2.2 1.7
1.1 0.7 0.4 0.3 0.2 0.1 0.0 0.0 0.0 In percent of gross international reserves
21.1 20.4 18.0 14.7 11.3 8.2 6.1 4.2 4.1 5.3 24.0 -1.5 -0.2 0.0 In percent of
quota 201.1 202.1 191.9 162.1 125.5 89.8 56.8 33.3 23.3 14.4 6.7 2.7 0.4 0.0 Net
use of Fund credit (in millions of SDRs) 36.75 5.64 -8.81 -36.00 -47.26 -45.87
-42.50 -30.26 -12.89 -11.45 -10.02 -5.15 -2.86 0.43 Disbursements 42.82 17.23
17.32 8.71 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 Repayments 6.07
11.59 26.13 44.71 47.26 45.87 42.50 30.26 12.89 11.45 10.02 5.15 2.86 0.57
Memorandum items: Exports of goods and services (in millions of US$) 3,782
4,184 4,524 4,525 4,512 4,615 4,135 4,132 4,079 3,933 4,034 4,176 4,440 4,605
Debt service (in millions of US$) 315 345 356 329 320 322 349 371 405 426 419
443 421 421 Nominal GDP (in millions of US$) 10,507 11,021 11,541 11,953
12,456 12,984 13,134 13,647 14,118 14,679 15,383 16,211 17,035 17,934 Quota
(millions of SDRs) 128.8 128.8 128.8 128.8 128.8 128.8 128.8 128.8 128.8 128.8
128.8 128.8 128.8 128.8

Sources: IMF staff estimates and projections.

1/For 2020, between November 30 and December 31, 2020

Table 9.

Mauritania: Proposed Schedule of Reviews and Disbursements Under the ECF-EFF
Arrangements, 2023-26

Source: IMF staff calculations.

1/Mauritania’s quota is SDR 128.8 million. Percentages are rounded.

View Table
Table 9.

Mauritania: Proposed Schedule of Reviews and Disbursements Under the ECF-EFF
Arrangements, 2023-26

Availability date Amount of Disbursements Conditions ECF EFF Total Millions of
SDR Percent of Quota 1/ Millions of SDR Percent of Quota 1/ Millions of SDR
Percent of Quota 1/ Jan 25, 2023 5.37 4.17 10.73 8.33 16.10 12.50 Approval by
the Executive Board October 17, 2023 5.37 4.17 10.73 8.33 16.10 12.50 First
review and end-June 2023 performance criteria April 17, 2024 2.15 1.67 4.29 3.33
6.44 5.00 Second review and end-December 2023 performance criteria October 17,
2024 2.15 1.67 4.29 3.33 6.44 5.00 Third review and end-June 2024 performance
criteria April 17, 2025 2.15 1.67 4.29 3.33 6.44 5.00 Fourth review and
end-December 2024 performance criteria October 17, 2025 2.15 1.67 4.29 3.33 6.44
5.00 Fifth review and end-June 2025 performance criteria April 17, 2026 2.13
1.65 4.31 3.35 6.44 5.00 Sixth review and end-December 2025 performance criteria
Total 21.47 16.67 42.93 33.33 64.40 50.00

Source: IMF staff calculations.

1/Mauritania’s quota is SDR 128.8 million. Percentages are rounded.

Table 10.

Mauritania: Decomposition of Public Debt and Debt Service by Creditor, 2021-231

(Based on end-2021 debt outstanding)

1/ As reported by Country Authorities according to their classification of
creditors, including by official and commercial. Debt coverage is the same as
the DSA. 2/ Debt is collateralized when the creditor has rights over an asset of
revenue steam that would allow it, if the borrower defaults on its payment
obligations, to rely on the asset or revenue stream to secure repayment of the
loan. Collateral is “unrelated” when it has no relationship to a project
financed by the loan. An example would be borriwing to finance the budget
deficit, collateralized by oil revenue receipts. See the joint IMF-World Bank
note for the G20 “Collateralized Transactions: Key Considerations for Public
Lenders and Borrowers” for a discussion of issues raised by collateral. 3/
Includes other one-off guarantees not included in publicly guaranteed debt (e.g.
credit lines) and other explicit contingent liabilities not elsewhere classified
(e.g. potential legal claims, payments resulting from PPP arrangements). See
2014 Government Finance Statistics Manual (7.252) for more infomation. Sources:
Mauritanian authorities and IMF staff estimates. View Table
Table 10.

Mauritania: Decomposition of Public Debt and Debt Service by Creditor, 2021-231

(Based on end-2021 debt outstanding)

Mauritania: Risk Assessment Matrix 1/

1/The Risk Assessment Matrix (RAM) shows events that could materially alter the
baseline path. The relative likelihood is the staff's subjective assessment of
the risks surrounding the baseline (“low” is meant to indicate a probability
below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a
probability between 30 and 50 percent). The RAM reflects staff views on the
source of risks and overall level of concern as of the time of discussions with
the authorities. Non-mutually exclusive risks may interact and materialize
jointly. The conjunctural shocks and scenario highlight risks that may
materialize over a shorter horizon (between 12 to 18 months) given the current
baseline. Structural risks are those that are likely to remain salient over a
longer horizon.

View Table
Table 11.

Mauritania: Risk Assessment Matrix 1/

Sources of Risks Relative Likelihood Expected Impact Policy Response Global
Risks: Conjunctural shocks and scenarios Intensifying spillovers from Russia's
war in Ukraine. High High. Further sanctions resulting from the war and related
uncertainties exacerbate trade and commodity price volatility.

- Package of policy measures aiming at making monetary policy more effective,
subsidies better targeted, and social transfers to the most vulnerable.

- Monetary policy tightening to respond to possible second-round effects from
imported food and energy prices.

Commodity price shocks. High High. Rising food and energy prices lead to food
insecurity, increasing social unrest, a deteriorated CA, and higher subsidies.

- Monetary policy tightening and strengthening of the monetary policy framework

- Better targeted subsidies

- Use external and fiscal buffers, and donor support if needed.

- Greater ER flexibility for medium-term adjustment. Structural reforms to
diversify the economy.

Systemic social unrest High High. Rising inflation and food insecurity,
declining incomes, and worsening inequality amplify social unrest and political
instability, slowing economic growth, and fueling social and political
instability.

- Use fiscal space to increase health, education, social and infrastructure
spending toward SDGs.

- Monetary policy tightening and strengthening of the monetary policy framework.

- Improve communication on social measures and targeted subsidies

De-anchoring of inflation expectations Medium High. Lack of clear nominal anchor
and monetary policy framework cause a rapid de-anchoring of inflation
expectations. Fiscal expansion further fuels inflation. Rising inflation and
limited ER flexibility widen inflation differentials with main trading partners,
resulting in a real appreciation, overvaluation, loss of competitiveness, and
widening the CA deficit. Package of policy and operational measures aiming at
eliminating the remaining excess liquidity and making monetary policy more
effective, including increasing the policy rate, scaling down BCM's gold
purchases, resuming monetary operations, and deepening the government
securities' market. Abrupt global slowdown or recession Medium Medium. Widening
of external imbalances and pressures on international reserves.

- Structural reforms to diversify the economy and export markets, away from the
traditional mining sectors, such as iron ore.

- Greater ER flexibility to absorb external shocks and preserve international
reserves.

Local Covid-19 outbreaks Medium Low. Emergence of more contagious
vaccine-resistant variants force new lockdowns or inhibit commerce. This results
in extended supply chain disruptions, declining external demand, and
reassessment of growth prospects.

- Use external and fiscal buffers, and donor support if needed.

- Greater ER flexibility for medium-term adjustment. Structural reforms to
diversify the economy.

- Use fiscal space to increase health, education, social and infrastructure
spending toward SDGs.

- Structural reforms to diversify the economy and increase resilience.

Global Risks: Structural risks Deepening geo-economic fragmentation and
geopolitical tensions High

High. Intensified geopolitical tensions, security risks, and conflicts cause
economic and political disruptions, disorderly migration, production reshoring,
a decline in trade, and lower investor confidence.

Reduced international cooperation accelerate deglobalization, resulting in
supply disruptions, technological and payments systems fragmentation, rising
input costs, financial instability, and lower potential growth.

Create policy space for contingencies by consolidating the budget and broadening
the tax base through reforms and economic diversification. Deepen regional
security cooperation. Cyberthreats Medium Low. Cyberattacks on critical physical
or digital infrastructure trigger financial instability and disrupt economic
activities.

- Accelerate digitalization and business climate reforms and increase ER
flexibility to mitigate shocks.

- Develop prudent borrowing plans.

Natural disasters related to climate change Medium High. More frequent natural
disasters lead to severe damage to infrastructure and amplify supply chain
disruptions and inflationary pressures, causing water and food shortages,
reducing medium-term growth, and accelerating migration. Higher emergency
spending. Social and economic disruption. Improve infrastructure mitigation;
increase buffers for contingencies. Structural reforms to diversify the economy
and reduce dependency of agriculture on weather. Domestic Risks Political and
social unrest; regional terrorist attacks Medium High. Higher public spending,
including on security; impaired investor confidence and lower growth prospects
Improve governance and business climate, strengthen anti-corruption frameworks.
Promote inclusive growth and increase social spending. Slower pace of reforms
Low High. Negative impact on social outcomes, confidence, and growth Build
consensus on reforms. Improve communication. Invest in human capital and
institutions. Reduced correspondent banking services Medium Medium. Curtailed
cross-border payments affecting trade and remittances. Rise in informality
Strengthen the AML/CFT framework and its implementation; step up outreach to
foreign banks.

Table 12.

Mauritania: 2014 FSAP Main Recommendations and Progress

1/“Immediate” refers to within one year; “near term” is 1–3 years; “medium term”
is 3–5 years.

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Table 12.

Mauritania: 2014 FSAP Main Recommendations and Progress

Recommendation Timeframe1/ Status Central Bank Adopt the Banking Act giving more
legal protection to decisions made as part of the exercise of the BCM's powers.
Near term Done Adopt the Act concerning the BCM's charter, bolstering its
independence, responsibilities and transparency. Near/Medium term Done
Parliamentary approval of the 2013 agreement on BCM's claims on the government.
Near term Done. New agreement in 2018, ratified by the parliament in 2019.
Financial stability Issue a timeline in which scheduled auction dates for
Treasury bills are separate from those for Treasury bonds. Immediate No progress
Quarterly updates of monetary programming tables, setting out medium-term
monetary objectives. Medium term Partial progress, the BCM is developing a
monetary program and a forecasting model Gradually securitize the stock of BCM's
claims on government, using marketable securities that would extend the yield
curve. Medium term No progress Increase the quality and reliability of data
gathered by the banks' supervisor. Near/Medium term In progress Ensure strict
compliance with the new instruction issued in June 2014 concerning loan
classification and provisioning. Immediate Done Foreign exchange markets Adopt
an instruction concerning systematic field audits for banks by applying the
foreign currency regulation (authentication of the request, application of the
upper limit of USD 100,000). Immediate Partially done, the BCM reinforced
compliance with FX operations requirements Adopt an instruction on
non-compliance with FX regulations, and applying penalties with repeated
violations, including suspension of participation in FX auctions on the fixing
market (after two warnings). Immediate In progress. Eliminate all penalties and
commissions applied to foreign exchange auctions. Near term Partially done
(commissions are still applied) Adopt a multiple-rate auction system with a
benchmark rate. Near term In progress Eliminate direct sales of FX outside the
official market Near term Done Non-banking financial institutions (MFIs,
pensions, insurance) Encourage the establishment of insurance companies. Medium
term No progress Transfer auditing and surveillance of the CDD (public
development bank) and insurance companies to the BCM. Medium term Done
Supervision and oversight Publish the financial statements of banks audited by
the BCM in June after the year-end. Medium term No progress Establish a
qualification approval system by the BCM for auditors, based on objective and
known criteria. Medium term Done Implement, without exceptions, the regulation
on loans to related parties and application of sanctions in cases of
infractions. Immediate In progress, instruction adopted Crisis Management and
Bank Resolution Approve the legal and regulatory framework on bank resolution.
Immediate Done Increase banks' contributions to the Deposits Guarantee Fund, to
reach at least MRU 0.6 billion in 3 years. Near term Done. Fund to increase
further to MRU 1 billion

1/“Immediate” refers to within one year; “near term” is 1–3 years; “medium term”
is 3–5 years.

Table 13.

Mauritania: Key Measures Implemented Since March 2021

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Table 13.

Mauritania: Key Measures Implemented Since March 2021

Monetary policy Tightening monetary policy to reduce inflation

In August 2022, the BCM increased its policy rate by 200 basis points to 7
percent.

Since May 2022, increased FX interventions to finance imports resulted in a
substantial reduction of excess liquidity from MRU 11.3 billion at end-2021 to
MRU 1.5 billion by end-July.

Strengthening BCM governance and mandate A new law on the organization of the
artisanal gold sector was approved by the council of Ministers in June 2022 and
Parliament in November 2022. Foreign Exchange Policy Improving the functioning
of the FX market

In May 2022, the BCM ceased rationing its FX interventions for CA transactions,
while strengthening its monitoring of FX operations.

In October 2022, a new tender was launched for the selection of the firm that
will implement the technical platform for interbank FX transactions.

In November 2022, the BCM phased out the surrender requirement of receipts from
fishing exports of Mauritanian Corporation for Fisch Marketing (SCMP: “Société
Mauritanienne pour la Commercialisation de Poisson”).

Financial Sector Policies Strengthening banking regulation The instruction on
bank governance was issued in March 2022. It strengthens the need of appointing
independent managers for banks. Improving financial infrastructure and access to
finance A new law on digital payments was adopted by Parliament in April 2021.
The BCM issued new implementing regulations of the law on services and means of
payment, payment institutions, electronic money institutions, and agents
authorized by banks and payment institutions to execute payment transactions.
Fiscal Policy Reducing expensive and untargeted subsidies In July 2022, the
authorities raised fuel prices by 30 percent, which substantially reduced fuel
subsidies (of around 4 percent of GDP in 2022). Approval of revised budget 2022
In July, Parliament approved a revised budget for 2022. The total envelope
increased from MRU 88.5 billion to MRU 107.1 billion to account for the energy
subsidies, increase the protection against food price inflation and meet
additional security costs. On the revenue side, non-extractive revenue increased
by MRU 5 billion thanks to strong growth and higher import prices and extractive
revenue by MRU 10 billion as a result of the record dividend from the
state-owned enterprise SNIM. The revised budget increased the projected deficit
by 1 percent of GDP compared to the initial budget 2022. First draft of a
medium-term fiscal framework Benefitting from extensive technical assistance
(TA) from the IMF Fiscal Affairs Department (FAD), the government prepared a
medium-term fiscal framework (MTFF), thus shifting fiscal discussions from
immediate needs to medium-term fiscal management. Debt Restructuring
Restructuring the Kuwaiti debt In August 2021, the Kuwaiti passive debt was
restructured into a concessional loan with 20-year maturity and a grace period
of two years. Renegotiating the Saudi deposit In April 2022, the Saudi deposit
was restructured into a concessional loan with 20-year maturity and a grace
period of eight years. Policy Coordination Reviving the debt committee

The National Committee on Public Debt (CNDP; Comité National de la Dette
Publique) was revitalized in 2022. It includes representatives from the Ministry
of Economy, the Ministry of Finance, and the BCM.

Its operational capacities will be strengthened to improve coordination between
the various entities responsible for debt matters. The Committee will continue
to meet regularly to assess the impact on debt of any new project to be financed
with non-concessional external borrowing, that must be validated by the CNDP
before the relevant agreements are signed.

Establishing a macroeconomic framework committee

The committee (CTCMB; Comité Technique de Cadrage Macro-économique et
Budgétaire) was established in November 2022 with the objective of coordinating
macroeconomic forecasts produced by different bodies of the government and the
central bank. It includes representatives from the Ministry of Economy, the
Ministry of Finance, and the BCM.

Key functions of the CTCMB include (among others): i) the preparation of the
medium-term fiscal framework and its consistency with the SCAPP, ii) the
consistency between forecasts of the four sectors of the economy (real, fiscal,
external and monetary), iii) the consensus on the macroeconomic framework and
recommendations for improving the quality, consistency and regularity of
macroeconomic forecasts, iv) the recommendation of appropriate policy measures
to preserve a stable and robust macroeconomic framework, and v) support to
structures responsible for negotiating and monitoring economic and financial
programs.

Governance

Enhancing transparency and audit of emergency pandemic related spending

The Court of Accounts published the 2020 and 2021 audit of pandemic-related
spending in March and May 2022.

The authorities also published the names of the legal owners of companies
awarded public procurement contracts by the social fund managing COVID-19
emergency spending.

Implementing decree of the new Public Procurement Code The implementing decree
of the new Public Procurement Code became effective in June 2022, providing the
necessary legal framework for submission and publication of beneficial ownership
information for awarded tenders. Governance diagnostic The government undertook
a governance diagnostic assessment with the support of the IMF.

ANNEX I. INTEGRATION OF CAPACITY DEVELOPMENT IN THE NEW PROGRAM, 2023–24

CD will be closely integrated in the new ECF and EFF supported economic program,
mainly through TA either from headquarters or from AFRITAC West. The planned CD
Activities to support the next 12-month proposed SB under the new ECF and EFF
arrangements are provided below.

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Program Proposed Structural Benchmarks Supporting CD and Diagnostic Tools Social
protection 1 Increase the quarterly amount paid to households from 2,200 MRU to
2,900 MRU TA is being provided by the WB under their Social Safety Net Project
Fiscal Policy 2 Submit a revised budget in line with program understanding to
Parliament Tax policy and revenue administration 3 Put in place a platform
connected with the Jibaya software enabling electronic filing and payments TA
has been provided by FAD under the RMTF project 4 Make declaration for CIT
compulsory, including for companies that are subject to tax holiday TA has been
provided by FAD under the RMTF project. 5 Create a tax policy structure in the
Cabinet of the Minister of Finance TA has been provided by FAD under the RMTF
project. 6 Submit a law reforming the Nouadhibou Free Zone to Parliament TA has
been provided by FAD under the RMTF project. Expenditure policy and public
finance management 7 Adopt a medium-term expenditure framework consistent with
the program's fiscal anchor in the Council of Ministers and transmit it to
Parliament TA has been provided by the IMF through AFRITAC West Monetary,
foreign exchange, and financial sector policies 8 Implementation the technical
platform for interbank FX market transactions by June 2023 Assistance is being
provided by the AfDB under the financial infrastructure modernization project
(PAMIF) 9 Conduct regular auctions of 4, 13, 26, and 52-week T-bills for banks
to reach a volume of MRU 1 billion by June 2023 and MRU 2 billion by September
2023 MCM TA on the government securities' market 10 Gradually reduce banks'
short FX net open positions to below 20 percent by December 2023 through a
better enforcement of the prudential limit (20 percent) Governance and Private
Investment 11 Publish a time-bound action plan based on Governance Diagnostic
report TA has been provided by the IMF staff (LEG, FIN, FAD, and MCM) to prepare
the Governance Diagnostic assessment 12 Operationalize the SME guarantee fund TA
was previously provided by the WB

ANNEX II. EXTERNAL SECTOR ASSESSMENT1

1The foreign direct investment stock is here proxied by the cumulative net FDI
starting in 2011. This approach has limitations as previous years are ignored,
however many of the large extractives investments took place post-2011 and hence
are incorporated.

2The IMF staff report for the 2017 Article IV Consultation with Mauritania
states that, as of July 13, 2017, Mauritania maintains one exchange restriction
subject to IMF approval under Article VIII of the IMF's Articles of Agreement.
The exchange restriction arises from the insufficient FX availability at the
fixing sessions organized by the BCM for those transactions which are required
to be submitted to the sessions.

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Overall Assessment: The external position of Mauritania in 2021 was broadly in
line with the level implied by fundamentals and desirable policies. The CA
deficit slightly increased during 2020-21, following global price rises of key
import goods (food and petrol). However, it widened significantly in 2022
following increases in import prices due to Russia's war in Ukraine, and
reductions in commodity prices of Mauritania's main exports. While this deficit
is expected to narrow once gas exports begin in 2024, the country remains
significantly exposed to external shocks due to its heavy dependence on
commodity exports.

Potential Policy Responses: Priorities to address these imbalances include
greater ER flexibility, structural reforms to boost productivity, and targeting
of a well-designed fiscal anchor.

Foreign Assets and Liabilities: Position and Trajectory

Background. While the Net International Investment Position (NIIP) is not
available for Mauritania, it is nonetheless possible examine certain components
for which data is available, including: the foreign asset position of the
central bank and commercials banks, the external debt position of the
government, and cumulative foreign direct investment.1 Commercial banks
oscillate between negative and positive net foreign positions, but the values
remain very close to zero as a fraction of GDP. Central Bank assets, primarily
made up of foreign reserves, are positive and peak in 2021 at 14.6 percent of
GDP. Government external debt stock contributes a large and consistently
negative net position, at 43.9 percent of GDP in 2021 and following a slight
downward trend until 2027. As discussed in the DSA, Mauritania is assessed to be
at moderate risk of debt distress but with an overall sustainable debt position.
The negative net FDI position is likely the largest component of Mauritania's
negative NIIP, reflecting major investments in Mauritania's extractives sector
(including gold, iron ore, and gas). Net FDI flows are consistently positive,
with sharp increases during the 2010s, and are projected to taper off but not
reverse up to 2027.

Assessment. There is significant uncertainty about the net international
investment position in Mauritania and hence a clear assessment is not possible.
However, government debt, undoubtedly a large contributing factor, is judged as
sustainable with moderate risk of debt distress in the DSA. The central bank
overall has significant positive assets, while foreign direct investment is
likely to only adjust slowly and predictably as new extractives projects start
up and others reach the end of their lifecycle.

Net Foreign Assets

(% GDP)

Current Account Background. The CA balance stood at -7.9 percent of GDP in 2021,
slightly more negative than in 2020 (-6.7 percent) but less negative than the
five-year average of -10.2 percent (2016-20). Exports slightly increased, with
stronger iron ore prices counteracting the negative shock on gold exports due to
a fire at the main refining factory. However, this was more than compensated for
by increases in imports due to jumps in world petrol and food prices. The CA
balance is projected to reach -17.3 percent of GDP in 2022 in the wake of import
price increases due to the war in Ukraine, a reduction of the iron ore price
relative to its 2021 peak, and an increase in services imports related to the
GTA project, investments in gold production, and freight services. The CA
deficit is then projected to decrease to 11.4 percent in 2023 after a
renormalization of world prices and to moderate further once gas exports come
online in 2024.

Assessment. The CA gap (difference between the cyclically adjusted CA and CA
norm) is estimated at 0.5 percent of GDP in 2021. Staff therefore assesses that
the external position of Mauritania in 2021 was broadly in line with the level
implied by fundamentals and desirable policies. This represents a change
relative to the 'moderately stronger' assessment of the 2020 ESA, and primarily
reflects (i) increased imports due to global price rises and (ii) a more
negative CA norm due to a more expansionary optimal fiscal balance resulting
from the 2021 SDR allocation and the renegotiation of a $300 million loan from
the Saudi Arabian government from non-concessional to concessional terms.
Cyclical contributions are minimal, resulting from a small output gap and
contribution of the detrended terms of trade. The policy gap is primarily driven
by three components: (i) the cyclically adjusted fiscal balance was positive in
2021 (1.1 percent of GDP) due to strong revenue performance from extractives and
under-execution of the budget, while the optimal medium-term policy is to run a
contained deficit of 1.5 percent of GDP (ii) health spending in 2021 was
estimated at 1.4 percent of GDP while the optimal policy from cross country
regression analysis was 6 percent (iii) reserves accumulation was unusually high
in 2021 at 8.5 percent of GDP, in part due to the SDR allocation, while the
optimal policy is considered to be maintaining a constant level.

Mauritania: Model Estimates for 2021 (in percent of GDP)

Real Exchange Rate

Background. The REER depreciated by 0.7 percent between 2020 and 2021, compared
to an average depreciation of 1.4 percent over the previous 5 years. In
contrast, at end-October 2022, the REER had appreciated by 11.9 percent in line
with the appreciation of the nominal rate with respect to the Euro (reflecting
the importance of France, Spain, Italy and Belgium as trading partners and the
appreciation of the USD against the Euro). The authorities have been maintaining
a narrow crawling band with the US Dollar, while allowing a stronger
depreciation in July.

Assessment. Staff assesses that the REER was slightly overvalued in 2021, based
on the CA model's 1.9 percent gap, and in part reflecting government policies to
stabilize the ER and restrict access to FX.2 Starting in 2022, BCM changed its
policy by meeting the demand for FX in the official market and allowing a
stronger adjustment of the ER in July. While the REER model suggests a 3.5
percent undervaluation, this model is less reliable for countries such as
Mauritania with data issues or that have experienced large structural changes.

Capital and Financial Accounts: Flows and Policy Measures

Background. Non-CA flows in Mauritania are dominated by financial account flows.
In 2021 the net financial flows amounted to 10.2 percent of GDP, up from 6.4
percent in 2020, and compared to an average of 9.9 percent over the past 5 years
(2016-2020). These flows can be decomposed into direct investment at 10.7
percent of GDP, official loans at 0.5 percent, and other capital transactions at
-1.2 percent. The financial account has seen a downward trend over time after a
peak in 2012 of 26.5 percent of GDP resulting from direct investment in the
extractives sector. As Phase One of the GTA gas project comes online, Staff
projects comparatively low direct investment, and hence financial inflows, over
the coming years. While the authorities have been more flexible in 2022 in
providing FX than in previous years, this has generally been targeted towards
financing imports as opposed to significantly opening up the capital or
financial accounts.

Assessment. While public sector borrowing has been significant in recent years,
financial flows in Mauritania have largely been driven by direct investment
linked to the extractives sector. As current investment projects come to a
close, inflows are likely to remain lower than previous years. Public sector
external debt is considered sustainable, with a moderate risk of debt distress,
as discussed in the Debt Sustainability Analysis.

Financial Account

(% GDP)

FX Intervention and Reserves Level

Background. Foreign reserves at end-2021 stood at 23.7 percent of GDP, or 7.2
months of non-extractive imports, an increase from 6.7 months in 2020 and
significantly higher than the previous 5-year average (5.4 months). This
increase was due to a combination of factors, including the SDR allocation,
investment in extractive industries, and strong iron ore prices. However, with
high world prices for fuel and food (resulting from the war in Ukraine) in 2022
and the increase of BCM FX sales, reserves declined to 5.5 months at
end-October, with a projected 5.1 months by end-2022. As world prices normalize
in 2023, and gas exports begin in 2024, staff projects a reversion to 5.5 months
of imports by 2027. The ER is typically managed in a crawl-like arrangement.

Assessment. The IMF's reserve adequacy for credit-constrained economies metric
provides an adequacy level of 5.2 months of non-extractive imports, up from 5.1
months in the last ESA, assuming a fixed ER, an IMF program, and a marginal cost
of holding reserves of 6.2 percent. While the assessment is sensitive to the
assumed marginal cost of holding reserves—which is uncertain—Mauritania's
official reserves would be assessed as more than adequate in 2021 using a
reasonable range of values for that cost. However, large past variations in key
mineral export prices such as gold and iron ore could indicate that a higher
level of reserves than indicated by the metric could be considered appropriate
to avoid an overly abrupt adjustment in case of exogenous shocks. Furthermore,
2022 reserves are projected to drop to 5.1 months of imports, slightly below the
updated reserve adequacy metric.

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ANNEX III. FISCAL ANCHOR1

Mauritania currently does not have a fiscal anchor. The fiscal anchor proposed
by staff is designed to set Mauritania on a declining debt path with a gradual
convergence towards the debt anchor while reducing the impact of the volatile
natural resource sector on the economy and the budget. The proposed policy
framework is used as a basis for discussing with the authorities how Mauritania
should anchor its medium-term fiscal policy and guides the calibration of the
proposed quantitative performance criteria under the program.

1. Mauritania's fiscal policy lacks a medium-term perspective. Fiscal policy is
set by annual budgets and often considerably revised mid-year. No medium-term
fiscal framework (MTFF) nor medium-term expenditure framework (MTEF) are
prepared to guide and constrain fiscal policy. Sectoral ministries have no
planning certainty for the medium-term which in turn results in weak planning,
in particular for public investment.

2. The Mauritanian economy is highly dependent on volatile revenues from the
natural resource sector. The extractive sector is the backbone of the economy.
Comprising iron ore, copper and gold, it brings the majority of export earnings
and contributes a substantive share to government revenue. Over the period
2010-20, the extractive sector accounted in average for 67 percent of total
exports (figure 1, panel 1)—generating the bulk of foreign exchange—and 17
percent to GDP (Figure 1, panel 2). Over the same period, the extractive sector
contributed on average 18 percent of total revenue (figure 1, panel 3).

3. Mauritania's fiscal performance is heavily influenced by international
commodity price cycles and production levels. Without a clear medium-term
perspective, the authorities have not been able to cushion the shocks to revenue
from one year to another, and hence delink central government expenditures from
volatile revenues. The stop-and-go nature of public investment has been
particularly visible over the last two phases of the commodity cycle. Figure 1,
panel 4 illustrates this link between public investment and the commodity export
price index.

4. The proposed policy framework is designed to set a stronger top-down
constraint to fiscal policy and encourage it to play a stabilizing role in
Mauritania. Encouragingly, there are plans to address this: since the new
organic law of 2018, the government is mandated to prepare an MTFF which has to
be adopted by Cabinet by June 30 and presented to Parliament by July 15. The
government has not yet complied with this requirement but has produced a draft
MTFF in 2022. Staff proposes to adopt a policy framework that anchors the MTFF
through:

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Annex III. Figure 1.

Importance and Impact of Mauritania’s Volatile Extractive Sector

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Staff estimates
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* A debt anchor aimed at bringing debt to a level that includes an adequate
safety margin (below the maximum debt limit). The limit is set at a level
above which public debt is deemed detrimental to economic growth, and other
macroeconomic fundamentals, and/or essential public expenditure (e.g., debt
servicing crowding out spending on infrastructure, health or education). The
debt anchor is calibrated to ensure fiscal sustainability in the face of
shocks, provide fiscal space to respond to these shocks, while being mindful
of the development needs of Mauritania and its current fiscal position.

* An operationalization of the fiscal anchor through a limit on the
non-extractive primary balance (NEPB), aimed at (i) ensuring convergence to
the debt anchor in the medium-term; (ii) shielding the budget from volatile
resource revenue. The NEPB excludes extractive revenue from the primary
balance.2 Using the NEPB over a simpler expenditure ceiling has the benefit
that additional fiscal space created through the mobilization of
non-extractive revenues can be used to address development needs. The
authorities could consider using the non-extractive GDP as a denominator for
the operationalization of the NEPB target. This would have the benefit to
further reduce the impact of the volatility of the extractive sector.3

5. The underpinning of the fiscal anchor is a maximum debt limit of 55 percent
of GDP in nominal terms. The authorities have expressed their intent to stay out
of high risk of debt distress. A maximum debt limit of 55 percent of GDP is
consistent with the DSA threshold on external debt of 40 percent in discounted
terms. The maximum debt limit is also in-line with what many other countries do
(see box 2 below and IMF fiscal rule database).4 The debt anchor is
intentionally covering external and domestic public and publicly-guaranteed debt
to avoid incentivizing one form of debt over the other and to ensure debt
contracted through state-owned enterprises and guaranteed by the government is
taken into account. The definition of debt is also aligned with the definition
used in the Debt Sustainability Analysis (DSA).

6. The maximum debt limit implies a fiscal anchor of gross public debt of 35
percent of GDP. Staff estimates that to reduce the probability of breaking the
maximum debt limit to 10 percent, a buffer of around 15-20 percent of GDP is
required.5 The DSA also indicates that a range of PV of total public debt
between 24 and 32 percent would be adequate to stay in moderate risk of debt
distress. Converting this range into undiscounted terms results in a similar
range as suggested by the staff calibration.

7. Staff recommends using net financial assets as key indicator to observe
performance against the fiscal anchor. Mauritania currently has around 10
percent of GDP saved in liquid financial assets. The FNRH holds its assets in
liquid treasury bonds in US dollars and Euros while the treasury holds savings
in the treasury single account at the Central Bank.6 In case of a shock, these
assets could be used before any additional debt would have to be contracted to
finance the budget.

Annex III. Box 1.

Maximum Debt Limit vs Debt Anchor

Maximum debt limit. The limit can be envisaged in terms of the economy's maximum
fiscal capacity. It is a level of debt that should not be exceeded in almost all
circumstances. In general, it should reflect considerations about the economic
costs of bearing excessive debt. For example, the debt dynamic could spiral out
of control when debt surpasses a certain level (IMF 2016). Other considerations
such as the negative impact of debt on growth and financing conditions also
motivate the choice of a maximum debt limit. Specific maximum debt limits vary
significantly across countries, often at a range between 40 and 70 percent of
GDP.

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Debt anchor. This is the level—or a range—at which debt should be kept at, on
average, to ensure that debt remains well below the maximum debt limit even
under large shocks, allowing policy makers to have sufficient time and space to
take corrective actions. These shocks could go beyond the standard macro-fiscal
impacts that drive the debt accumulation to include the impact of the contingent
liability realizations. This requires the setting of a sufficiently large safety
buffer to arrive at a prudent debt anchor below the maximum debt limit.

Interim debt ceiling. This is the level of debt over which corrective action
should be undertaken to prevent debt from reaching its maximum limit, while
guiding debt closer to its anchor over the medium-term. Below the maximum debt
limit but above the debt anchor, the interim debt ceiling, serving as a
threshold, guides fiscal policy to bring debt close to its anchor level /range
over the medium-term, should it be trending upwards. Countries that adopt an
interim ceiling generally have provisions under a correction mechanism, which is
preferably automatic (in which case the ceiling becomes a debt brake).
Progressive debt thresholds can also be set, requiring more intensive corrective
actions if debt continues to rise.

While using net financial assets adds an additional concept, it has the benefit
of allowing the authorities to optimize asset and liability management. If the
fiscal anchor would only focus on gross debt, it might require the authorities
to pay back concessional debt instead of building of financial assets. Net
financial assets are easy to track as the difference between gross public debt
minus the stock in the FNRH and the treasury single account. With the current
level of assets, this would mean that the targeted gross debt level would be at
around 45 percent of GDP (35 percent debt anchor plus 10 percent in assets).

8. Staff recommends operationalizing the fiscal anchor through a primary deficit
of 1 to 2 percent of GDP over the medium-term. For the period 2022-2027, the
automatic debt dynamics and hence debt stabilizing primary deficit including
grants are estimated at -2.0 to -2.5 percent of GDP. Even though the positive
automatic debt dynamics would allow for a higher debt sustaining primary
deficit, staff recommends choosing a lower deficit target to reduce debt or
build buffers over the medium-term. This would result in a stabilization of
public debt at 49 percent of GDP.

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Annex III. Figure 2.

Debt Anchor Calibration

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Staff calculations based on IMF (2018, How to Calibrate Fiscal Rules: A
Primer, How To Notes, Fiscal Affairs Departments).1/ For the PV debt/GDP, x is
20 percent and y is 40 percent.
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Annex III. Table 1.

Mauritania: Public Sector Debt Sustainability Framework, Baseline Scenario

1/Coverage of debt: The central government, central bank, government-guaranteed
debt. Definition of external Definition of external debt is Residency-based.

2/Includes exceptional financing (i.e., changes in arrears and debt relief) such
as the projected resolution in 2020 of the debt owed to the Kuwait Investment
Authority; changes in gross foreign assets; and valuation adjustments. For
projections also includes contribution from price and exchange rate

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Annex III. Table 1.

Mauritania: Public Sector Debt Sustainability Framework, Baseline Scenario

Actual Projections 2019 2020 2021 2022 2023 2024 2025 2026 2027 2032 2042 Public
sector debt 1/ 55.7 55.8 49.1 48.4 50.3 49.7 49.2 49.6 49.0 47.1 49.2 of
which: external debt 47.7 48.6 43.1 42.6 44.7 44.0 43.5 43.1 42.6 41.1 38.0
Change in public sector debt -2.2 0.2 -6.7 -0.8 1.9 -0.5 -0.5 0.4 -0.6 -0.2 0.9
Identified debt-creating flows -7.0 -7.2 -20.3 -3.9 -0.9 -2.0 -2.8 -2.2 -4.9
-2.8 -1.6 Primary deficit -2.9 -3.1 -2.9 0.5 1.8 1.0 0.2 -0.3 -2.5 -1.4 -0.7
Revenue and grants 19.4 20.4 21.3 24.0 22.0 21.8 21.9 22.0 23.8 22.7 22.1
of which: grants 1.5 2.0 2.1 1.5 1.4 1.2 1.1 1.0 0.8 0.2 0.1 Primary
(noninterest) expenditure 16.6 17.3 18.4 24.6 23.8 22.8 22.1 21.7 21.3 21.3 21.5
Automatic debt dynamics -3.9 -3.2 -7.4 -4.4 -2.7 -3.0 -3.1 -1.9 -2.4 -1.4 -1.0
Contribution from interest rate/growth differential -3.6 0.1 -3.4 -4.4 -2.7
-3.0 -3.1 -1.9 -2.4 -1.4 -1.0 of which: contribution from average real
interest rate -0.6 -0.5 -2.1 -1.9 -0.8 -0.3 0.0 -0.1 0.0 -0.1 0.3 of
which: contribution from real GDP growth -3.0 0.5 -1.3 -2.5 -2.0 -2.7 -3.1 -1.8
-2.4 -1.3 -1.3 Contribution from real exchange rate depreciation -0.3 -3.3
-4.0 … … … … … … … … Other identified debt-creating flows -0.3 -0.8 -10.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0 Privatization receipts (negative) 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Recognition of contingent liabilities
(e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Debt relief (HIPC and other) -0.3 -0.8 -10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
0.0 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0 Residual 2/ 4.8 7.3 13.6 3.1 2.8 1.4 2.3 2.6 4.3
2.6 2.5

1/Coverage of debt: The central government, central bank, government-guaranteed
debt. Definition of external Definition of external debt is Residency-based.

9. The extractive sector is estimated to contribute on average 2.5 percent of
GDP in revenues over the medium-term. Mauritania has three main sources of
extractive revenue: The iron ore production of the state-owned SNIM, the TASIAST
gold mine and the Grand Tortue Ahmeyim (GTA) project which starts production in
2024. Using some simplifying assumptions as detailed in table 1, staff estimates
that the three projects contribute sustainable revenues of 0.8 percent, 1.4
percent and 0.4 percent of GDP respectively. This seems to align with
performance of extractive revenues observed in the past (Figure 2, panel 1).

10. To shield the budget from the volatile revenues, it is proposed to target a
NEPB of – 3.5 to -4.5 percent of GDP. Using the NEPB has the following
attractive properties: (i) it is the fiscal aggregate which the authorities have
the most control upon, having extractive revenue and interest payment stripped
out of the fiscal balance; (ii) it allows the authorities to undertake
counter-cyclical fiscal policy in response to commodity shocks: a windfall in
extractive revenues—that is extractive revenues exceeding 2.5 percent of GDP—is
de facto saved (either by paying back debt, increasing the balance in the
treasury account at the central bank or into a resource fund—see below) while
shortfall in extractive revenues (the equivalent of 2.5 percent of GDP minus
actual mining revenues) is met through higher debt and/or drawing from the
treasury account or resource fund. Figure 2 shows historical fiscal performance
against the proposed target.

11. Operationalizing the fiscal anchor would be best done by adjusting the
existing natural resource wealth fund. Mauritania already has a savings fund,
the FNRH, in place, which could be used for the operationalization of the fiscal
anchor. The Fund was set up with oil production in mind. However, there are two
adjustments recommended: 1) Contributions and withdrawals from the FNRH should
be guided by the NEPB path set by the operational fiscal rule mentioned earlier,
instead of annual decisions subject to short-term considerations, 2) The
coverage should be expanded to include mining revenues.

12. The calibration of the contributions from the extractive sector and what
constitutes an optimal debt anchor should be recalculated not earlier than every
3-5 years to ensure its validity. This is particularly relevant with respect to
automatic debt dynamics and the changing extractive sector. A longer period has
the advantage to limit interference, thus increasing the credibility of the
fiscal framework. A shorter period, in turn can help quicker adjustments to the
fiscal anchor if fundamentals change or if granular data for an optimal
calibration is not available.

13. The proposed policy framework is also used to anchor the fiscal path under
the IMF-supported program. The adoption of a fiscal anchor by the authorities is
related but distinct from the proposed quantitative targets under the program.
While the former is a recommended structural reform to be implemented through
domestic policy and legislation, the latter is a numerical target that will be
monitored by IMF staff during the program's reviews. For the proposed
quantitative program target, the fiscal anchor has been translated into a
numerical floor on the NEPB including grants. While for 2023 the proposed
quantitative target is slightly above the recommended target of 4.5 percent of
GDP, it is consistent with the fiscal anchor over the remaining program period,
Box 2 shows that the proposed anchor for the program is aligned with the
approach taken by other recently approved IMF-supported programs in natural
resource-rich countries.

View Full Size

Annex III. Figure 3.

Sustainable Extractive Revenues and Primary Balance Target

Citation: IMF Staff Country Reports 2023, 073; 10.5089/9798400234217.002.A001

Source: Staff calculations.
* Download Figure
* Download figure as PowerPoint slide

Annex III. Table 2.

Mauritania: Simplified Calculations of Sustainable Extractive Revenue

Staff estimate that the sustainable revenue for the three main extractive
projects is 2.5 percent of GDP per year.

View Table
Annex III. Table 2.

Mauritania: Simplified Calculations of Sustainable Extractive Revenue

Staff estimate that the sustainable revenue for the three main extractive
projects is 2.5 percent of GDP per year.

Project Assumed annual production Assumptions and Calculation of Sustainable
Annual Revenue SNIM 13’000’000 tons of iron ore US$ 70/t * 13’000’000t * 36
MRU/US$ * SNIM Single Tax of 9 percent = MRU 2.9 bn = 0.8 percent of GDP TASIAST
500’000 ounces of gold

Royalty: 500’000 ounces of gold * US$1’500/ounce * Royalty rate of 6.5 percent =
MRU 1.7 billion = 0.4 percent of GDP

CIT: ((500’000 ounces of gold * (US$1’500/ounce - All-in sustaining cost of
US$560/ounce) – Depreciation of capital costs of US$ 150 million over five
years) – Royalty) * CIT rate of 25 percent = US$100 million = MRU 3.5 billion =
1.0 percent of GDP

GTA 2.5 million ton of LNG, equivalent to 59 million MMBTU

Effective royalty from start of production = (1-62 percent) * (1-69 percent) =
11.78 percent 59 million MMBTU * US$ 60 / barrel * slope of 10% of Brent price
per MMBTU * effective royalty of 11.78 percent = MRU 1.5 bn = 0.4 percent of GDP

Annex III. Box 2.

Fiscal Anchor in Other IMF-Supported Programs

* Rwanda: EAC debt ceiling in-line (60 percent of GDP), national debt ceiling
(50% of GDP), operationalization through overall balance floor

* Uganda: EAC debt ceiling in-line (60 percent of GDP), national debt ceiling
(50 percent of GDP), operationalization through primary deficit floor. Move
towards non-oil primary balance when oil production starts

* Senegal: After suspension of WAEMU convergence criteria during covid, no
defined fiscal rule. Program imposes floor on lending /borrowing, ceiling on
central governments overall net financing requirement and ceiling on total
nominal public debt. Authorities working on a long-term budgetary anchor to
guarantee the sharing of hydrocarbon revenues with future generations and a
short-term operational rule likely centered on non-hydrocarbon revenue
primary balance

* Angola: Authorities and staff agreed to reducing government debt to 60
percent of GDP in the medium-term, operationalization through floor on
non-oil primary deficit

* Mozambique: No defined fiscal rule—Program puts floor on primary budget
balance

ANNEX IV. IMPLEMENTATION OF GOVERNANCE MEASURES IN CRISIS-RELATED SPENDING1

View Table

Type of Instrument Commitments Status RCF/ECF

RCF: “We will maintain all spending on-budget and make sure to track, account
for, and report in a transparent manner the resources deployed for emergency
response. To avoid any misappropriation of funds, we will carefully control
emergency spending and will publish information on the ministry of finance's
website regarding public procurement contracts related to crisis mitigation, the
names of the awarded companies and their beneficial owners, and ex-post
validation of delivery. We will ask the Court of Accounts to audit emergency
spending once the crisis abates and to publish its results.”

ECF, 5th review: “We will ask the Court of Accounts to audit emergency
expenditures and to publish the findings of those audits before September 2021.

To avoid the misuse of resources, we will carefully monitor emergency spending
and we will publish on the website of the Ministry of Finance the full text of
the public procurement contracts related to crisis mitigation, the names of the
contracting companies and their beneficial owners, the nature of the goods and
services and their price per unit, and the ex post certificates of delivery. We
will consider expanding those transparency measures to all procurement next
year.

To ensure a comprehensive monitoring and a clear reading of the exceptional
expenditures related to the crisis, we have created dedicated budget lines for
emergency response spending, and we have integrated their execution with public
accounting systems; we will ensure all these budget resources (including
external grants) are channeled through these lines (SB).”

ECF, 6th review: “The urgency of implementing an adequate crisis response, and
the magnitude of the financing that was mobilized, justify a particular emphasis
on transparency, expenditure quality, accountability and the integrity of
financial management.

* The government has set up a national committee for the monitoring of the
execution of the Solidarity Fund and of all expenditure of the fight against
COVID-19. This committee is chaired by the Minister of Finance and includes
20 members representing Parliament, the democratic opposition, the economic,
social and environmental council, regional councils, the Association of
mayors of Mauritania, Ulemas and Imams, the employers' association, workers'
unions, civil society, technical and financial partners, the press, and the
diaspora. It will regularly brief the public at large in full transparency on
the execution of the special fund for social solidarity and the fight against
the coronavirus. This committee is accountable to the inter-ministerial
council in charge of the management and monitoring of the fight against the
COVID-19 pandemic, which is chaired by the Prime Minister.

* We will ask the Court of Accounts to audit emergency expenditures and to
publish the findings of those audits before September 2021.

* To avoid the misuse of resources, we will carefully monitor emergency
spending. As part of the report on the execution of emergency pandemic
response spending published every two months on the website of the public
treasury, we have started to publish detailed information on public
procurement contracts, the names of the contracting companies and their legal
owners, the nature of the goods and services, and the status of the delivery
of the relevant goods and services. We will strengthen disclosure
requirements on beneficial ownership for those contracts, with support from
Fund TA, and will consider expanding those transparency measures to all
procurement in 2021.

To ensure a comprehensive monitoring and a clear reading of the exceptional
expenditures related to the crisis, we have created dedicated budget lines for
emergency response spending, and we have integrated their execution with public
accounting systems. All these budget resources (including external grants) are
channeled through these lines (SB).”

Procurement contract information. Since June 2020, the Ministry of Finance has
prepared and published on its website bimonthly reports on the execution of
spending of the special social solidarity and pandemic response fund:

The first two reports included the nature of the goods, the amount of the
contract, the source of financing, the payment modalities, and the status of the
delivery. The third report added the list of the awarded companies, while the
fourth report added the legal owners. Since the fifth report covering up to
February 2021, details on shareholders of the companies have been added,
including tax identification numbers and national identification numbers, as
well as itemized goods and quantities ordered. The report also provided
information on over-invoicing—and rebates obtained—following audits by the
government's inspectorate general, as well as penalties assessed for delays in
delivery. Existing legislation on public contracts prohibits the publication of
confidential information that may be included in offers, including those of a
technical and/or commercial nature. The bi-monthly reports provide information
on the status of delivery for each contract, although certificates of delivery
have not been published.

Beneficial ownership of contracting companies. The authorities have published
the names of the legal owners of those awarded COVID-related contracts on the
website of the Treasury (https://tresor.mr/fr/plus.php?tb=lKesq5qj). Reports are
published every two months (see, for example, p. 14 of the December 2021
report). With TA from the IMF, the authorities have strengthened the disclosure,
including ensuring that the beneficial owners' information (as opposed to legal
owners) of the companies awarded contract is made public. They have incorporated
beneficial ownership transparency requirements in the implementing regulation of
their revised public procurement code, which was approved in mid-2022.
Beneficial ownership information for tender awards should be published by end
2023.

Audits. The government's inspectorate general audited all contracts awarded by
the special fund. The Court of Accounts published the 2020 audit of
pandemic-related spending in March 2022 and the 2021 audit in May 2022 (see here
published audits by Court of Accounts)

Reporting. An inter-ministerial committee, chaired by the prime minister, is in
charge of the management and monitoring of the fight against the COVID-19
pandemic. Pandemic-related emergency spending is executed through a dedicated
social solidarity and pandemic response fund. A national oversight commission is
charged with monitoring the execution of the fund and of all expenditure of the
fight against COVID-19. This commission, chaired by the finance minister,
includes 20 members representing parliament; the democratic opposition; the
economic, social, and environmental council; regional councils; mayors;
religious authorities; employers, trade unions, civil society, technical and
financial partners, the press, and the diaspora. It has met six times so far and
has regularly briefed the public on the execution of the fund, including through
publication of detailed reports. AMI - Creation of a national commission to
monitor the execution of the special fund for social solidarity and the fight
against the coronavirus (see here).

APPENDIX I. LETTER OF INTENT

ISLAMIC REPUBLIC OF MAURITANIA

Nouakchott, December 19, 2022

Madame Kristalina Georgieva

Managing Director

International Monetary Fund

Washington, D.C.

CENTRAL BANK OF MAURITANIA

Nouakchott, December 19, 2022

Madame Managing Director,

On behalf of the Mauritanian authorities, we request IMF Executive Board
approval of new 42-month arrangements under the Extended Credit Facility (ECF)
and Extended Fund Facility (EFF). We are pleased to submit herewith a Memorandum
of Economic and Financial Policies (MEFP).

The new program will support the economic recovery and the Mauritanian
authorities' social and economic program amid an uncertain outlook with
significant downside risks, to consolidate macroeconomic stability, and promote
strong, durable, and inclusive growth. The program will also help the
development of human capital and access to basic social services, reduce
poverty, and improve governance. We will pursue these economic and social
policies in the context of the second five-year annual development plan of the
Strategy for Accelerated Growth and Shared Prosperity (SCAPP), covering
2021–2025, which constitutes a flexible intervention framework allowing us to
integrate the main challenges posed by the multifaceted crisis caused by the
COVID-19 pandemic and the conflict in Ukraine.

We thank the IMF for the swift support since the wake of the COVID-19 pandemic.
In response to the economic and social challenges posed by the pandemic, the IMF
emergency support under the Rapid Credit Facility (RCF) approved in September
2020, followed successively by the G-20 Debt Service Suspension Initiative
(DSSI) and the general SDR allocation, have provided us with some policy space,
helped Mauritania withstand the health crisis and maintain macroeconomic
stability. We have maintained our increased support for health and social
protection for the most deprived, including expanding our cash transfer program.
Also, with the help of WHO and other development partners, we have taken
important steps to contain the spread of the pandemic and accelerate the
COVID-19 vaccine rollout. As of November 2022, 33 percent of the population has
been fully vaccinated and 46 percent of the population received one dose.

The successful implementation of the December 2017—March 2021 ECF arrangement
has helped maintain macroeconomic stability, despite the challenges posed by the
COVID-19 pandemic, the conflict in Ukraine, climate change, and regional
security concerns. During 2017–19, the per capita real GDP growth stood at 3.3
percent and poverty headcount declined to 28 percent in 2019 from 31 percent in
2014 (before the ECF arrangement).

Notwithstanding this strong past performance, headwinds are strong—particularly
following the conflict in Ukraine—and our reform agenda remains largely
unfinished. The pandemic has delayed some reform implementation from the
previous ECF arrangement while considerable development challenges remain to
reach the Sustainable Development Goals (SDG). While growth is picking up,
considerable risks remain to the outlook including the conflict in Ukraine and
the rising food prices, the COVID-19 pandemic, climate shocks, and regional
insecurity. Uncertainties weighing on the global economy and the sustainable
development challenges we face remain significant. In particular, the conflict
in Ukraine and sanctions against Russia are exacerbating inflationary pressures.
This is hitting households and firms.

The 42-month ECF and EFF arrangements would support our development program,
institutional reform agenda, and address capacity constraints. The key economic
policies of our program aim to:

* Support the recovery toward greater macroeconomic stability through enhanced
social protection and infrastructure spending in line with the SCAPP. This
will include improving fiscal performance by anchoring fiscal policy over the
medium-term supported by higher domestic revenue mobilization and greater
expenditure efficiency; and a prudent monetary policy with the main objective
of containing inflation while supporting the recovery.

* Anchor the near-term recovery efforts to a strong policy framework supported
by a sequenced and prioritized structural reform agenda. Reforms will focus
on modernizing revenue administration and strengthening PFM and the monetary
policy framework while preparing for greater exchange rate flexibility.

* Bolster governance and transparency and support private investment by
improving the business environment and financial inclusion and stepping up
efforts to accelerate key governance reforms.

Continued efforts to improve governance and fight against corruption will be
central under the new ECF and EFF arrangements. Two audit reports by the Court
of Accounts of COVID-19 emergency spending have been completed and published. We
have strengthened disclosure requirements on beneficial ownership for those
contracts, with support from Fund technical assistance, and have adopted a
regulation reflecting the key elements of the beneficial ownership transparency
measures for all public procurement contracts. Eager to further improve our
governance framework we conducted an IMF governance diagnostic with IMF support.
We are looking forward to discussing its findings and commit to publishing a
time-bound action plan based on the Governance Diagnostic report by September
2023.

We have communicated all loans to public enterprises that benefit from a
government guarantee and will consult with the IMF on any future guarantees
before granting them.

We request the Fund's financial support for our program through new 42-month
arrangements under the ECF and EFF of a combined SDR 64.40 million (50 percent
of quota) or SDR 21.47 million (16.67 percent of quota) and SDR 42.93 million
(33.33 percent of quota) respectively. Our program will be monitored through
semiannual reviews (the first on or after October 17, 2023, and the second on or
after April 17, 2024) with quantitative criteria and structural benchmarks as
described in the attached MEFP and defined in the Technical Memorandum of
Understanding (TMU) attached.

We look forward to continuing to receive technical assistance from the IMF on
economic policies and reforms. In line with the IMF's safeguards policy, we
commit to adopting the safeguards assessments key recommendations of the IMF,
finalized in July 2021. These include adopting the IFRS, discontinuing BCM's
participation in the gold program, and strengthening internal audit capacity. We
are also committed to undergo before the first review an update safeguards
assessment in the context of the new ECF/EFF arrangements.

We will provide the IMF with all the data and information required to monitor
implementation of the measures and achievement of the objectives as detailed in
the TMU. We believe the policies described in the MEFP, which are built on the
SCAPP and SDGs, are appropriate to achieve the program objectives. We will take
any additional measures that become necessary for this purpose. We will consult
the IMF on the adoption of such measures, and prior to any revision of the
policies set forth in the MEFP, in accordance with the Fund's policies on such
consultations. We consent to the publication of this letter and its attachments,
and the related staff report.

Very truly yours,

View Table

/s/

Mr. Mohamed-Lemine Dhehby

Governor of the Central Bank of Mauritania

/s/

Mr. Isselmou Ould Mohamed M’Bady

Minister of Finance

/s/

Mr. Ousmane Mamoudou Kane

Minister of Economic Affairs and Promotion of Productive Sectors

Attachments (2):

1. Memorandum of Economic and Financial Policies

2. Technical Memorandum of Understanding

ATTACHMENT I. MEMORANDUM OF ECONOMIC AND FINANCIAL POLICIES

A. CONTEXT: GOVERNMENT DEVELOPMENT PROGRAM(S)

1. This memorandum describes Mauritania's economic and financial program
supported by the IMF under the Extended Credit Facility (ECF) and the Extended
Fund Facility (EFF) for the period 2023–26. The program is designed to preserve
macroeconomic stability, to consolidate the foundations for sustainable,
inclusive growth, and to reduce poverty in accordance with the Strategy for
Accelerated Growth and Shared Prosperity (SCAPP).

2. The SCAPP illustrates Mauritania's strategic development vision for the
period 2016–30. It also takes into account the 2030 Agenda and a number of
targets considered to be priorities for the country among the Sustainable
Development Goals (SDGs), as well as the Agenda 2063 of the African Union. It is
based on the following three pillars:

* Promoting robust, sustainable, and inclusive growth by revitalizing sectors
with substantial employment and growth potential, through the modernization
of public infrastructures and strengthened role of the private sector;

* Developing human capital and improving access to basic social services, and
more specifically, education, vocational training, and healthcare;

* Strengthening governance in all its dimensions, including economic governance
and the fight against corruption.

B. ECONOMIC DEVELOPMENTS

3. Growth amounted to 2.4 percent in 2021 (against a contraction of 0.9 percent
in 2020), mainly driven by the non-extractive sector (6.3 percent), with
activity in services rebounding. The extractive sector contracted by 12.6
percent in 2021 as a result of the temporary suspension of operations of the
mining company TASIAST following the fire that occurred in June 2021. The
agricultural sector was affected by a drought in 2021 and the start of 2022.
This situation, along with the rise in international commodity prices in the
context of the escalating conflict in Ukraine, have led to increased food
insecurity.

4. The 2022 Supplementary Budget Law (LFR 2022) adopted in July 2022 aims to
support the government's efforts to address the increase in hydrocarbon prices,
to undertake social spending in connection with the increase in food prices, and
to meet the urgent requirements for increased security. It provides an increase
in social spending, energy subsidies, public investment, security spending, tax
and nontax revenues deriving primarily from the extractive industries, and more
specifically from the National Industrial and Mining Company (SNIM). In total,
the Supplementary Budget Law provides an increase in revenues of 2.8 percent of
GDP, an increase of 9.3 percent of GDP in spending, and a primary fiscal balance
(excluding grants) of 5 percent of GDP in 2022. At end-September 2022, the
primary balance (excluding grants) registered a deficit of 2.2 percent of GDP,
against a positive primary fiscal balance in 2021, while the non-extractive
primary balance deteriorated from 0.8 percent to -2.2 percent of GDP.

5. The terms of trade deteriorated sharply in 2022 as a result of international
commodity price movements. The current account balance declined to 2.6 percent
of GDP during the first quarter of 2022, against 4.2 percent of GDP for the
fourth quarter of 2021. However, higher international food and energy prices and
lower iron ore prices undermined the balance of trade for the second and third
quarters of 2022. International reserves amounted to approximately US$1.6
billion (equivalent to 5.5 months of prospective non-extractive imports) at
end-October 2022, as compared with US$2.3 billion (equivalent to 7.3 months of
prospective non-extractive imports) at end-2021. The decline in international
reserves is attributed to increased energy and food prices and decline in iron
prices, with increasing FX interventions.

6. Credit growth recovered in 2022 as a result of the monetary expansion that
occurred in 2021. Broad money growth slowed to 4.7 percent at the end of
September 2022, against 20.4 percent at end-2021 due to the reduction of
international reserves as well as the start of mobile banking activity which led
to a decrease of the currency in circulation. Credit growth accelerated to 19.7
percent at end-September 2022, as compared with 8.4 percent at end-2021.
Nonperforming loans decreased to 20.5 percent in September 2022, from 22.7
percent at end-2021. Although the banking system is still well capitalized, the
capital adequacy ratio declined slightly from 18.1 percent at end-2021 to 17.7
percent at end-September 2022. The banking sector's open net foreign exchange
position remains well above the levels set by the prudential standards (37.4
percent at end-2021 and 38.3 percent in September 2022), compared with the
prudential limit of 20 percent. Inflation accelerated in 2022 as a result of
higher food and oil prices and monetary expansion driven by the accumulation of
foreign exchange reserves and gold purchases by the central bank in 2021. In
August 2022, the BCM raised the policy rate by 200 basis points. The BCM also
absorbed most of the excess liquidity in the banking system through increasing
interventions in the foreign exchange market.

C. SHORT- AND MEDIUM-TERM OUTLOOK

Short-term Projections for 2022

7. In 2022, economic activity is expected to continue to recover (5.3 percent),
mainly driven by the extractive sector (+17 percent). Non-extractive sector
growth is expected to slow to 2.1 percent in 2022, against 6.3 percent in 2021,
reflecting the impact of rising inflation on consumption and the construction
sector, which is heavily dependent on imported inputs. Inflation is expected to
stabilize at approximately 11 percent year-on-year (an average of 8.3 percent
per annum) after the recent monetary contraction, conditional to the absence of
supply disruptions in wheat imports. However, there is a risk that the current
account balance will deteriorate to 17.3 percent of GDP in 2022, against 7.9
percent in 2021 due to increasing imported oil and food prices and decreasing
iron ore prices. The primary balance (excluding grants) is expected to turn into
deficit of 2 percent of GDP, against a primary surplus of 0.8 percent recorded
in 2021. Our efforts to mobilize concessional financing will enable external
public debt to stabilize at approximately 41.8 percent of GDP in end-2022. Gross
official reserves are expected to amount to approximately US$1.5 billion
(equivalent to 5.1 months of prospective non-extractive imports).

Medium-Term Projections for 2023–27

8. During 2023–27, growth in the non-extractive sector is expected to strengthen
to 5 percent in 2027. A higher projected gold price from 2024 onward, the start
of gas exports in 2024, and the projected normalization of oil and food prices
from 2023 will likely help improve the CA, with international reserves projected
to reach 5.5 months of non-extractive imports in 2027. Revenue from the Grand
Tortue/Ahmeyim (GTA) offshore gas project starting 2024 would provide additional
fiscal space of 0.5 percent of GDP from 2024 onwards and should provide scope to
continue to increase social and infrastructure expenditure while maintaining
sustainable primary balances. Structural reforms are also expected to accelerate
with support from the IMF-supported program.

9. The outlook is subject to significant uncertainties and downside risks.
Tensions in the Sahel region, the conflict in Ukraine, the sanctions against
Russia, and a worldwide recession could weaken extractive exports and revenue
and lead to further increases in import prices, widening the balance of payments
needs, exerting pressure on international reserves, and worsening the fiscal
outlook. The sharp increase in international commodity prices and more frequent
natural disasters could further fuel for inflation, increase food insecurity,
and jeopardize the economic recovery. There is also still a risk of new waves of
the pandemic.

D. ECONOMIC PROGRAM FOR 2023–26

Objectives of the 42-Month Program

10. Implementation of reforms under the last ECF arrangement (2017–21) was
generally satisfactory, although some challenges remain. In 2017–19, real GDP
growth averaged 5.5 percent and the poverty rate fell by 3 percentage points to
28 percent in 2019 (against 31 percent in 2014). We have also implemented
substantial institutional reforms in the fiscal, monetary, and financial sectors
as well as in the management of natural resources, albeit with some delay,
primarily as a result of the pandemic and capacity shortages. However,
Mauritania still has significant development needs, and its structural reform
agenda remains unfinished despite the progress that has been made. There is also
scope for progress in a number of human development indicators, and the impact
of COVID-19 has delayed the achievement of some of the Sustainable Development
Goals (SDGs).

11. The second five-year action plan of the Strategy for Accelerated Growth and
Shared Prosperity (PA2 SCAPP) will address these challenges based on the three
strategic levers provided by the framework law for this strategy. Each of the
levers is divided into projects covering several interventions (projects,
programs or reforms):

* Promoting robust, sustainable, and inclusive growth (Lever 1) will be
achieved by promoting diversified growth in the productive and service
sectors, protection of the environment, control of natural disaster risks,
and strengthening infrastructures to support economic growth (energy,
transportation and water infrastructures, and digital transition).

* Developing human capital and access to basic social services (Lever 2) will
be achieved through greater access to higher quality education and vocational
training, improved conditions for access to health services, promotion of
employment, youth, and culture, and through strengthened resilience in the
most vulnerable sectors.

* Strengthening governance in all of its dimensions (Lever 3) will involve
improvements in terms of policy, security, sustainable building of peace and
social cohesion, protection of young persons against violent extremism and
radicalization, migration and refugee management, land management, and
management of decentralization and civil status.

12. The implementation of our development program is dependent on our ability to
preserve macroeconomic stability and to cope with exogenous shocks. In this
regard, the program supported by the ECF/EFF will enable us to: (1) stimulate
recovery while preserving economic stability; (2) consolidate the economic
policy frameworks; and (3) strengthen governance, transparency, and the business
environment for private investment.

Pillar 1: Stimulating Recovery While Preserving Economic Stability

Fiscal Policy

13. To offset rising inflationary pressures, we will rationalize current
expenditures (untargeted subsidies) to compensate for the decline in extractive
revenues, and we will intensify our efforts to increase non-extractive tax
revenues. Should extractive revenues be higher than expected, the gain will be
used to build reserves or to reduce debt. In the opposite case, available
reserves will be used, or the debt will be increased. This automatic approach to
extractive revenues will enable us to reduce the volatility of commodity prices
and therefore to improve fiscal programming and execution. The calibration of
sustainable extractive revenues will be updated during a specified period of
three to five years. The additional fiscal space created by the increase in
non-extractive revenues or the reduction in current expenditure will be used to
increase public investment and targeted social spending so that the
non-extractive primary balance will remain unchanged and in line with our
medium-term fiscal objective.

14. Our fiscal policy will be anchored with a medium-term fiscal framework
(MTFF) aiming for fiscal sustainability and reducing the volatility of
extractive sector resources. The fiscal anchor will be a debt ceiling that will
keep Mauritania below high risk of debt distress. Implementation of this fiscal
anchor involves a non-extractive primary deficit (including grants) in the range
of 3.5-4.5 percent of GDP. This objective will be achieved by reducing current
expenditure to 13.7 percent of GDP by 2027, against 16.9 percent estimated in
2022, while maintaining capital expenditure at approximately 8.6 percent of GDP
and increasing non-extractive tax revenues annually by 0.5 percent of GDP. By
June 2023, we will submit a revised 2023 budget in line with program
understanding to Parliament (structural benchmark).

15. We are developing our social protection system. Cash transfers benefited
98,245 vulnerable households under the Tekavoul Program in 2022. We plan to
increase the quarterly payment to households from 2,200 MRU in 2022 to 2,900 MRU
in 2023 (structural benchmark), and to 3,600 MRU by 2024. We will update and
enhance the social registry and will encourage its use for social programs,
while taking into account the need for geographic equity by 2025. At the same
time, food distribution centers (Temwine Program) will be reorganized so that
they can be more effectively targeted. Recruitment of the firm to conduct the
study on the restructuring plan is in progress and will aim to improve
efficiency and targeting. The study will be finalized by mid-2023.

16. We will prioritize spending on primary and secondary education, primary
health care, access to water and sanitation, and more effectively targeted
social assistance programs. We will also continue with budget tagging that will
ultimately enable us to incorporate climate and gender expenditure into a
medium-term fiscal framework to more effectively fight against climate
challenges and gender inequalities that Mauritania is facing.

17. Knowing that the remuneration ceiling subject to contributions to the
private social security system was raised in 2021, we will undertake the
required studies and reforms to review the public pension system to ensure that
we have a more sustainable, financed system. This approach will enable us to
maintain current expenditure below 62 billion MRU in 2023 and 67 billion MRU in
2024.

18. We increased fuel prices by 30 percent to mitigate the fiscal impact of
higher international market prices. We are in the process of reviewing the price
structure of refined petroleum products to eliminate the subsidies. This reform
will ensure that prices at the pump can be relatively flexible while maintaining
a neutral fiscal impact or generating additional revenues. We are reforming
electricity production and distribution to improve the financial situation of
the sector and to reduce the fiscal risks to the government. We are aiming for
annual increases of 5 percent in the rate of return (+3.5 percent in 2021) in
the medium term. The electricity sector will be open to independent producers,
and we plan to reorganize the Mauritanian electricity company, SOMELEC, into
four entities: a holding company and three subsidiaries, respectively
responsible for production and transportation, distribution and marketing, and
rural electrification.

19. To increase domestic revenue, we plan to accelerate the ongoing fiscal
administration and policy reforms. Most of the increase in revenue under the
ECF/EFF-supported program will derive from a strengthened administration. We
will also make every effort to reduce tax expenditure (estimated at 3 percent of
GDP) to provide a margin for increased expenditure. We will publish a
comprehensive analysis of tax expenditure in an annex to the budget for 2023 and
subsequent years, that can be used as a basis for eliminating unproductive
exemptions and special arrangements. We will ensure that mandatory corporate tax
filing is fully implemented, including for enterprises subject to tax exemptions
(Investment Code, free trade area, and agreements) to improve our taxpayer
register and our estimates of tax expenditure (structural benchmark).

20. The following measures will be applied in 2023 to increase the level of
revenue: (1) gradual elimination of nontargeted tax exemptions and incentives;
(2) reinstatement of the 18 percent VAT rate on telecommunication services; (3)
introduction of a 5 percent special tax on telecommunication services; and (4) a
limit on consumer goods exemptions in the free trade area.

21. The government commits to maintaining a prudent debt policy. Our debt
strategy will be based on the principle of avoiding excessive, costly borrowing
arrangements. We will finance our investments with grants and loans contracted
at a moderate pace, consistent with a moderate debt risk of debt distress and
our absorption capacity. For that purpose, the present value of external loans
(public and government guaranteed) will be capped at the limits provided in
Table 1. An annual borrowing plan is being developed in consultation with the
IMF to strengthen our medium-term debt reduction strategy. We also acknowledge
that this ceiling alone will not guarantee a moderate risk of debt distress. We
are therefore committed to assessing the impact of the loan agreements on debt
sustainability, and to informing the IMF of the financing agreements in this
connection.

Monetary Policy

22. The BCM will conduct a prudent monetary policy designed to contain
inflationary pressures. The central bank will cease artisanal gold purchases at
end-2022. In case of increasing inflation, the central bank will deploy all
efforts to use the instruments required to effectively fulfill its mission of
price stability. We will concurrently strengthen the monetary policy framework
to increase its effectiveness.

Pillar 2: Strengthening the Economic Policy Frameworks

Fiscal Policy Framework

23. The reforms will focus on improving fiscal performance, modernizing the tax
administration, and strengthening public financial management. For that purpose,
we will continue to implement the structural reforms that are in progress. To
strengthen the medium-term fiscal policy outlook and stabilize debt, we will
finalize the medium-term budget framework (MTBF) and clearly define the fiscal
anchor as our fiscal policy target. The Council of Ministers will adopt the MTBF
and submit it to the National Assembly in June 2023 (structural benchmark).

24. Public financial management: Following completion of the Public Expenditure
and Financial Accountability Assessment and the Public Investment Management
Assessment (PIMA) in 2020, in consultation with the IMF, we will gradually
incorporate the key recommendations from the PIMA into the 2024 budget process.
These recommendations include safeguard measures for the systematic budgeting of
maintenance expenditure required to extend the useful life of public investments
and for the Public Investment Analysis and Programming Committee (CAPIP) to play
a more active role in selecting investment projects based on an improved project
selection method. We will also develop a methodology for the budgeting of
maintenance expenditure for public investments, under which annual maintenance
costs will be phased in for investments made during recent years, beginning with
the 2024 Budget Law.

25. To improve fiscal transparency, we will modernize the presentation of fiscal
statistics and the Table of Government Financial Operations (TOFE) in line with
the international standards of the 2014 Government Finance Statistics Manual
(2014 GFS Manual) with technical assistance from the IMF. For that purpose, we
have established a technical team to steer the production work for the 2014 GFSM
TOFE. This team used manual techniques with the trial balance to prepare a first
draft of the TOFE in accordance with GFSM 2014. The managers of the new
Integrated Government Accounting Application (ARKAM) will soon provide the
General Treasury and Public Accounting Directorate (DGTCP) with an extraction
model that will make it possible to produce the new TOFE on a regular basis. In
addition, the TOFE for the local authorities will be produced in 2023 and the
model will be refined before the authorities consider incorporating it into the
central government TOFE. The absence of an integrated accounting system for
public administrative institutions (EPAs) is a constraint against their
inclusion in the central government TOFE. We are concurrently developing a
strategy to make further improvements in the quality of the accounting and
budget information and to make it more consistent and relevant. Last, as part of
the accounting reform and the transition to accrual-basis accounting, an initial
opening balance sheet (BO) is planned for January 1, 2024.

26. Tax policy: We will create a unit responsible for tax policy that reports to
the Office of the Minister of Finance, to strengthen our tax policy framework
(structural benchmark). To enhance the neutrality, fairness, and efficiency of
the tax system and to generate additional revenues, we will (i) eliminate the
system of special free zones (points francs) and reduce the number of special
arrangements in a revised Investment Code; (ii) we will reform the free trade
area to bring it into line with the International Convention on the
Simplification and Harmonization of Customs Procedures. More specifically, the
relevant tax system will only apply to industrial units located within defined
limits confirmed and controlled by customs, and will exclude consumer goods from
the tax benefits (structural benchmark); and (iii) we will ask for assistance
from the IMF to provide a tax policy diagnostic to identify recommendations to
eliminate economic distortions, to simplify it, and to increase revenue, while
ensuring that Mauritania is still attractive to new investments. The diagnostic
assessment will review the operation of the tax system, and will specifically
analyze property tax and consumption tax.

27. Tax administration: To increase domestic revenues, we plan to accelerate the
reforms of the tax administration that are now in progress. To guide our tax
administration reform strategy, we conducted an assessment using the Tax
Administration Diagnostic Assessment Tool (TADAT) with support from the IMF. We
will concurrently continue the reforms that are in progress, that are designed
to increase tax revenue. Accordingly, we will establish the e-filing and
e-payment platform linked to the Jibaya platform by June 2023 (structural
benchmark) and will make e-filing and e-payment mandatory for large taxpayers
beginning in 2024. Large taxpayers will also be included in the large enterprise
register beginning in 2024. In collaboration with the staff responsible for the
automated customs data system, ASYCUDA, the General Customs Directorate intends
in 2023 to expand access to customs agents (declaring parties) so that they can
declare their customers' merchandise online.

28. Extractive sector revenue management: We will reorganize our gas and mining
resource management system before gas production begins under the Greater Tortue
Ahmeyim (GTA) natural gas project in 2024. We will incorporate gas revenue into
the medium-term budget framework. We will establish rules to reduce volatility
in the gas and mining revenue that finance the budget, and we will use best
practices in reporting gas and mining revenue and holdings or gains in the
savings fund. At the same time, we will examine the performance of our sovereign
fund, the National Hydrocarbon Revenue Fund (FNRH), and will conduct an
assessment to determine its suitability to manage increased volumes of financial
and asset flows.

Monetary Policy Framework

29. We will establish the key requirements needed to implement and strengthen
the transmission of a price-based monetary policy, and more specifically: (1)
the regular issuance of marketable government securities in coordination with
the Ministry of Finance with conditions that enable the market to operate
without any restrictions, in accordance with the regulatory provisions, and in
particular, with regard to the marginal rate accepted at Treasury bill auctions;
(2) the gradual narrowing of the BCM's interest rate corridor; (3) more active
management of banking system liquidity; and (4) a more developed interbank money
and government securities markets. We will use the policy rate more actively,
and the main liquidity absorption operations more regularly. We will foster the
development of the interbank money and government securities markets, and
support the emergence of a daily benchmark interbank rate and government
securities yield curve. With support from IMF staff, our objective is to
strengthen the role of the interest rate in the conduct and transmission of
monetary policy and to provide a better anchor for inflation expectations.

30. We will modernize the monetary policy framework and will conduct a
forward-looking monetary policy while laying the groundwork for a more flexible
exchange rate regime. Our monetary policy will focus on its primary objective of
price stability. During the transition phase, we will continue to monitor the
growth rate of money supply (the aggregate M2) as well as the growth rate of
base money. We will use the reserve requirement ratio as a structural liquidity
management instrument: we will reduce the ratio in case of the structural
tightening of liquidity to inject liquidity permanently; and we will increase
the ratio to address any structural increases in banking system liquidity to mop
up liquidity permanently.

31. We will strengthen coordination between the monetary and fiscal authorities
to restore the government securities market. We will create a committee with
representatives from the Ministry of Finance, the BCM, and banks to develop the
government securities market. Although funding needs are limited, we will
revitalize the market to provide eligible collateral for monetary policy
operations and to strengthen monetary policy transmission. An effective
coordination mechanism will be established between the central bank and the
Ministry of Finance to ensure regular issuances of government securities and to
extend the yield curve. We will hold regular auctions of conventional 4, 13, 26,
and 52-week Treasury bills for the benefit of conventional banks, to achieve a
minimum volume of 1 billion MRU by June 2023 and 2 billion MRU by September 2023
(structural benchmark). In addition, if y-o-y inflation remains higher than 12
percent in March 2023, we will accelerate the issuance of T-bills to achieve a
minimum volume of 2 billion MRU by June 2023. We will also issue Islamic
government securities for Islamic banks. Further, we will take the necessary
steps to issue two-year government securities for banks. We will establish a
schedule of government securities' issuances for the period 2023-26 in
consultation with IMF staff and in accordance with the objectives of the
program.

32. The BCM has already established all the instruments required to operate an
interest rate corridor system: seven-day main refinancing operations and
liquidity absorption operations, BCM bonds, overnight standing lending and
deposit facilities, fine-tuning and long-term operations, and reserve
requirements. The BCM will start implementing weekly liquidity management
operations more regularly. It will also start gradually narrowing its interest
rate corridor, by gradually reducing the spread between the overnight lending
facility rate and the overnight deposit facility rate. The objective will be to
move gradually towards an interest rate system with a width of 200 basis points
centered around the BCM's policy rate.

33. To calibrate the volume of its main operations, the BCM will prepare daily
forecasts of autonomous liquidity factors during the reserve requirement
maintenance period. Against this backdrop, we will strengthen coordination
between the entities responsible for liquidity management and government cash
management. With the support of the IMF, the BCM will develop its short- and
medium-term liquidity forecasting and monitoring capabilities by improving its
short-term liquidity forecasting system.

Foreign Exchange Policy

34. Foreign exchange policy will focus on creating the conditions required for
fully competitive foreign exchange auctions and for a successful transition to a
market-determined exchange rate. The BCM will modernize the functioning of the
official foreign exchange market, and will continue to improve access to foreign
exchange, to develop the interbank foreign exchange market activity, and, when
the monetary policy framework has been strengthened, it will gradually allow
increasing exchange rate flexibility to strengthen its role of exogenous shock
absorber and preserve external sustainability. The objective of the reform is
ultimately to reduce the BCM's role as the main supplier of foreign exchange in
the official market, to preserve international reserves, and to unify the
foreign exchange market.

35. We will continue to reform the official foreign exchange market to develop
interbank transactions. In October 2022, we launched a new tender to select the
selection of the service provider of the technical platform for interbank
foreign exchange market transactions, that we intend to launch in June 2023
(structural benchmark). We will also: (1) establish a market maker mechanism;
(2) publish the draft regulation on the interbank foreign exchange market; and
(3) publish the ethic code for the foreign exchange market, that is essential to
promote good governance and the observance of market practices.

36. When the regulatory framework and technical infrastructure for the interbank
foreign exchange market have been established, we will take the necessary steps
to support the development of its activity. We will then implement a system of
regular multiple price foreign exchange auctions, and we will ultimately evolve
from an intervention strategy designed to stabilize the exchange rate to a
strategy designed primarily to limit the excessive volatility of a
market-determined exchange rate.

37. We remain committed not to impose or intensify restrictions on payments for
international current account transactions, or to introduce or modify multiple
currency practices. To continue improving access to the official foreign
exchange market, we will meet the demand for foreign exchange on the official
market to cover current account transactions, in line with the foreign exchange
reserve objectives established by the program. We will use information on banks'
letters of credits and documentary remittances to help calibrate the BCM's
intervention in the official foreign exchange market. In addition, to improve
access to the official market, we will gradually phase out the requirement to
establish provisions in ouguiyas equal to the value of bids on the foreign
exchange market when excess liquidity has been absorbed. To support foreign
exchange policy reform, the BCM will ensure strict compliance with the limits
applied to foreign exchange positions. We will gradually reduce banks' net open
foreign exchange positions to below 20 percent by December 2023 through the
strict application of the regulatory ceiling of 20 percent (structural
benchmark).

38. In light of the transmission of exchange rate fluctuations to domestic
prices, we will gradually allow increasing exchange rate volatility to promote
interbank trading when the regulatory and technical infrastructure is in place.
We will subsequently define an intervention budget in line with the reserve
objectives established by the program. The foreign exchange policy reforms that
we are planning will require ongoing IMF technical assistance and support from a
central bank of the region that has already established an interbank foreign
exchange market.

BCM: Transparency and Governance

39. The BCM will continue its work towards the adoption of the International
Financial Reporting Standards (IFRS). The BCM has achieved significant
milestones with the preparation of pro forma IFRS financial statements for the
2018 and 2019 fiscal years. The central bank remains committed to the transition
and plans to implement the IFRS by the end of 2023. In light of the capacity
limits, the BCM will hire an external consultant by March 2023 to help complete
the remaining tasks related to IFRS implementation, as recommended by the 2021
Safeguards Assessment, along with an actuarial specialist for the BCM.

40. The BCM will continue to strengthen the anti-money laundering and combating
the financing of terrorism (AML/CFT) system and its implementation, in
consultation with all parties involved, including the Mauritanian Financial
Investigations Unit and banks. We will strengthen AML/CFT supervision by the BCM
to ensure compliance by banks with enhanced due diligence requirements for
politically exposed persons, increased use of financial intelligence by the
Mauritanian Financial Investigations Unit to detect corruption cases, and
dissemination of this information to the law enforcement agencies.

Financial Sector

41. Our financial sector roadmap is based on the recommendations of the
Financial Sector Assessment Program (FSAP) on preserving financial stability and
deepening the financial markets. We will continue to make every effort to
establish risk-based supervision. For that purpose, our activities will focus on
further strengthening of the banking regulations, compliance with prudential
standards and their rigorous application, and improving the quality of the
statistics. To support the foreign exchange policy reform, the BCM will ensure
strict compliance with the limits applied to foreign exchange positions.

42. We have launched a project to modernize the financial infrastructure and
payment system based on a new law adopted in July 2018. A new modern payment
system—including a large-value payment system, a central securities depository,
and a clearing system—will soon be introduced and will serve as a driving force
for the development of the financial system. It will also promote faster and
more secure trading, and will accordingly enhance the stability of the financial
system.

Financial Surveillance and Regulation

43. During the past two years, with the help of technical assistance from the
IMF, we have adopted a number of new guidelines on the composition of capital,
calculation of net weighted assets, and solvency and liquidity requirements.
Work is also in progress to incorporate the net stable funding ratio (NSFR) into
the regulatory framework to monitor transformation risk at the prudential level.
At the same time, the adoption and implementation of some principles of
risk-based supervision—such as the identification of systematic banks, the
rating system for institutions, and the on-site supervision manual—is in
progress.

44. We have also increased the minimum capital for banks by two thirds to 1
billion MRU, which has strengthened their creditworthiness. To date, 15 out of
17 banks have increased their capital threshold in accordance with the
regulations. With technical assistance from the IMF, the BCM strengthened and
modernized the penalties to make them more effective and deterrent, through a
new Instruction on Administrative Penalties adopted in June 2020. We will review
the regulations on penalties, and, more specifically, the penalties relating to
noncompliance with the limits on foreign exchange positions, so that they can be
applied quickly in the event of breach. To strengthen the resilience of the
banking sector, we will ensure the strict application of the prudential
regulations and the application of penalties if case of breaches. An internal
procedure on penalties will be in place by December 2022.

45. In addition, we will strengthen the human resources responsible for off-site
supervision and will connect our data transmission system with banks'
information systems to improve data collection, processing, and analysis, to
strengthen the supervision process, and to enhance the quality of our analysis.
Following the promulgation of the electronic payments law, implementing
regulations on the conditions for engaging in payment, management, and
distribution services of electronic money were adopted in 2022, i.e.,
Instructions 02/GR/2022, 03/GR/2022, 04/GR2022, and 05/GR/2022, respectively on
(1) payment services and mechanisms; (2) payment institutions; (3) electronic
money institutions; and (4) agents authorized by banks and payment institutions
to carry out payment transactions. We will continue to develop the implementing
regulations of the electronic payments law and to strengthen the control and
supervision of payment institutions and electronic payment activities. In this
connection, the following draft regulations are currently being prepared: (1)
the draft instruction regulating remote banking operations; and (2) the draft
instruction regulating banks engaging in a payment activity with the support of
a payment account or operating as an issuer and distributor of electronic money.
The BCM intends to strengthen good governance of banks, as provided in the new
banking law. For that purpose, the central bank adopted a directive in September
2020 requiring banks to establish the appropriate audit, credit, and risk
committees, and to verify that the members of the board of directors and banking
committee meet the integrity requirements. The Instruction on Bank Governance
was finalized and adopted in March 2022. Since then, the central bank has been
working towards strict compliance by banks, and considerable progress is being
made in areas such as the establishment and quality of the management and
administration bodies (board of directors, management committee, and internal
control entities). We are particularly attentive to this aspect to ensure
overall compliance with the regulation in the coming months.

Debt Management

46. Improving debt management is still a key priority. Further efforts will be
made to ensure consistency between borrowing and spending priorities,
particularly for large infrastructure projects, and to ensure coordination
between institutions. We will continue to improve procedures for borrowing and
granting public guarantees by clarifying the responsibilities and conditions for
approval between the ministries. The National Public Debt Committee (CNDP) has
been revitalized. Its operational capacities will be strengthened to improve
coordination between the various entities responsible for debt matters. The
Committee will continue to meet regularly to assess the impact on debt of any
new project to be financed with non-concessional external borrowing, that must
be validated by the CNDP before the relevant agreements are signed. Similarly,
we will continue to strengthen the capacities of the directorate responsible for
debt, the directorate responsible for finance of the Ministry of Economic
Affairs and Promotion of Productive Sectors (MAEPSP), and the BCM directorate
responsible for debt, in terms of debt sustainability analyses, concessionality
calculations for projects under a financing arrangement, and development of a
medium-term debt management strategy.

47. To improve coordination between the various entities responsible for debt
management, we will use the Debt Management and Analysis System (SYGADE), the
Integrated Government Accounting Application (ARKAM), the El Istithmar
Investment Project Management Information System, and the Automated Expenditure
Cycle System (RACHAD), i.e., software used by the institutions involved in debt
service (Debt Directorate, General Budget Directorate, General Treasury and
Public Accounting Directorate—DGTCP, General Finance and Economic Cooperation
Directorate—DGFCE, and the BCM) to monitor external debt disbursements and debt
service payments. We will strengthen real-time monitoring by the DGTCP and the
Debt Directorate of debt service programming and execution by the BCM, as
delegated by the Ministry of Finance. This monitoring will be carried out using
web services between the SYGADE system of the Debt Directorate, the system used
by the DGTCP, and the BCM. The establishment of these linkages will strengthen
debt management capacity through the systematic monitoring of external debt
disbursements (SYGADE-El Istithmar) and will make it possible to integrate debt
service payment operations into the automated expenditure system chain
(SYGADE-RACHAD).

48. We will publish annual debt bulletins containing information on external and
domestic borrowing by public entities, including detailed information on each
loan, debt service profiles and, where possible, arrears of public enterprises.
The External Debt Directorate will accelerate actions aimed at strengthening the
technical and functional capacities of the DDE for more effective recording and
monitoring of public debt and better dissemination and analysis of the debt data
through targeted technical assistance, covering international best practices in
recording, monitoring, and analysis of debt, and increasing the reliability of
the system and its use.

Pillar 3: Improving Governance, Transparency, and the Business Environment for
Private Investment

Governance, Transparency, and Business Environment

49. Technical assistance from the IMF has enabled us to amend the implementing
decree of the Government Procurement Code so that beneficial ownership and
information requirements are clearly defined. Our aim is to prevent corruption,
to ensure financial integrity, and to improve accountability and oversight. By
the end of 2023, the information on beneficial ownership of enterprises to which
contracts have been awarded will be made public along with other important
tender data. The Commercial Court is also taking steps to strengthen legal and
institutional mechanisms to establish a beneficial ownership registry of
companies and ensuring timely access to the information by competent
authorities.

50. We conducted a diagnostic governance assessment with support from the IMF in
2022. In line with the IMF's Enhanced Governance Framework, the diagnostic
assessment focused on weaknesses in governance and vulnerabilities to corruption
in the following macro-critical priority areas: (i) central bank governance and
operations; (ii) financial sector oversight; (iii) AML/CFT activities; (iv)
fiscal governance, revenue administration (including customs), natural resource
management, and public procurement and auditing; (v) enforcement of property and
contractual rights; and (vi) legal and institutional frameworks and strategies
to fight corruption. Based on its findings, we will prepare and publish by
end-September 2023 a time-bound action plan, including responsible institutions
(structural benchmark) and initiate implementation thereafter.

51. Corruption is one of the fundamental problems that our courts are required
to address. From the early stages, we recognized the extent to which such
activities had been impeding growth and development, and we had established a
commission responsible for leading and monitoring implementation of our 2014
anticorruption strategy. This strategy was updated in 2022 and it is now being
validated by the government. The National Anticorruption Strategy (SNLC) planned
for the horizon 2030 focuses on integrity, accountability, transparency, and
ethics in Mauritania. It has the vision of a “Mauritania that is strengthening
integrity and substantially reducing corruption” in general, with four specific
strategic objectives: (i) restoring transparency and building integrity; (ii)
creating an environment hostile to corruption; (iii) engaging and strengthening
the players; and (iv) protecting the most vulnerable sectors. For that purpose,
the 2030 SNLC is based on five pillars that support the elimination of
corruption in the country, that include: good governance, prevention and
detection, enforcement, communication and awareness, and an anti-corruption
culture.

52. Reforms designed to improve the business climate are essential to attract
investors and to support private sector development. Mauritania has facilitated
the creation of businesses by establishing a one-stop shop, significantly
reducing the costs of establishing a new company, and generally simplifying
business registration procedures. However, further efforts are required for the
greater simplification of the formalities required to establish a business. We
will simplify the administrative procedures applicable to the private sector,
including the full digitization of procedures with a one-stop shop by the end of
2023.

53. We envisage the following medium-term measures as part of the reforms
designed to simplify and improve business startup procedures, encouraging the
formalization of the informal economy, and further promoting entrepreneurship
among young persons and women: (i) adoption of a common nomenclature of economic
activities for Mauritania; (ii) creation of the status of micro entrepreneur
(auto-entrepreneur) in Mauritania, that provides a simple option for an
individual business, to encourage the formalization of the informal sector, and
to further promote entrepreneurship among young people. This status will
simplify business establishment and cancellation procedures and will allow micro
entrepreneurs to benefit from a simplified legal, accounting, and tax system;
(iii) contribution to the implementation of the Startup Act, an innovative legal
framework designed to facilitate the establishment, growth, and development of
startups; (iv) launch of a program to promote female entrepreneurship; (v)
implementation of a youth entrepreneurship and innovation program; (vi) leading
of a national campaign for enterprises to re-register and update their data, to
provide a tool that can generate reliable, real-time information on the domestic
private sector; (vii) assessment of the transformation of the one-stop shop into
a real center for business formalities that will enable enterprises to complete
in one place all of the formalities required to start, change, or terminate
their activities. The objective is to provide a center for historical business
records and to have an accurate, current view of the local economic fabric.

Financial Inclusion

54. Supporting small and medium-sized enterprises (SMEs) is one of the
priorities of our national development program: we intend to correct the
shortage of long-term banking resources to finance productive investment and to
create jobs, particularly for SMEs. Against this backdrop, in collaboration with
national economic partners, at the end of 2020, we established a company under
Mauritanian law with the African Guarantee Fund as a strategic partner. This
fund will provide partial guarantees for bank loans to SMEs to provide better
access to financing and contribute to job creation. This newly created Small and
Medium-Sized Enterprise Guarantee Fund (FGPME) is based on the principles
established by the World Bank Group in an investigation published in 2015 and by
the Organisation for Economic Co-operation and Development (OECD) in the area of
corporate governance in public financial institutions. The first general meeting
of the fund was held in 2022, and a distribution of capital was agreed between
the various partners. The Ministry of Finance has committed to provide the
capital required to operationalize the guarantee fund by the end of 2023
(structural benchmark).

55. With the support of the African Development Bank (AfDB), the BCM is
developing a National Financial Inclusion Strategy (SNIF). It launched a
national survey to collect data on financial inclusion. The work related to the
SNIF will be carried out with assistance from the two consultants recruited by
the Alliance for Financial Inclusion (AFI) as part of its technical assistance,
that more specifically involves a diagnostic of the various studies and
implementation of a governance unit.

56. We intend to strengthen the regulatory framework for mobile banking services
to reduce the amount of cash in the economy and to promote financial inclusion
for the poorest population sectors. Parliament adopted legislation on mobile
banking services and means of payment in 2021.

Climate Change

57. Our country faces tremendous challenges in connection with climate change,
that is leading to increasingly extreme temperatures, droughts, floods, and
coastal erosion. The populations most vulnerable to climate change are those in
rural areas, who derive their livelihoods from crop farming, livestock farming,
and inland fishing, as well as poor urban populations affected by floods and
rising sea levels. Mauritania ratified the United Nations Framework Convention
on Climate Change in January 1994 and the Paris Agreement on Climate Change in
February 2017. Under this Agreement, we updated Mauritania's Nationally
Determined Contribution (2021 NDC) and presented it in Glasgow in 2021. By
harmonizing its development process with the Strategy for Accelerated Growth and
Shared Prosperity process, and based on the country's sector strategies and
programs, the NDC defines Mauritania's climate policy framework with the horizon
2030.

58. In terms of mitigation issues, Mauritania's updated NDC provides an
economy-wide net reduction in greenhouse gas emissions of 11 percent in 2030, as
compared to the business-as-usual scenario. This ambition is based on the
development of national clean energy potential with green hydrogen, solar
energy, and wind energy projects. The cost of this ambition is estimated at
US$34.25 billion, of which US$0.63 billion is unconditional (financed from the
country's resources).

59. Where adaptation issues are concerned, the NDC provides actions to increase
access to drinking water, to develop seawater desalination and improve
sanitation systems in the five major cities at high risk of flooding, to
implement an appropriate insurance program for crop farmers, livestock farmers,
and those engaged in fishing, to develop and adopt sustainable construction
standards for buildings and other infrastructures, to develop a national land
use plan resilient against climate change, and to promote assisted forest
regeneration. The cost of the adaptation elements is estimated at US$10.6
billion, of which US$0.4 billion is unconditional. The ongoing NDC planning and
implementation process includes specific sessions on clarifying funding
requirements for NDC implementation and defining the areas of a national climate
action finance strategy. We plan to adopt a national adaptation plan focusing on
adaptation measures and projects to be implemented in the medium term.

60. In terms of the mobilization of climate finance, we have developed a Country
Program for the Green Climate Fund. This program identifies a portfolio of ideas
for multisector projects that align with national climate change adaptation and
mitigation priorities. It also encourages the domestic private sector to take
advantage of the opportunities offered by this Fund (training/awareness
activities were made available to members of the employers' organization). We
will use the national adaptation plan as a basis to raise additional external
financing. The Ministry of Economic Affairs and Promotion of Productive Sectors,
that is responsible for mobilizing external financing, will coordinate the
mobilization of climate finance resources in conjunction with the ministry
responsible for environment.

61. We are establishing a common financial mechanism to address climate change
shocks that lead to food and nutritional insecurity, with the support of our
technical and financial partners. The establishment of a cyclical food
insecurity risk financing strategy will enable us to more effectively plan and
manage the financial aspects of shocks deriving from episodes of drought leading
to a substantial increase in food insecurity in rural areas. The financial
strategy will provide upstream mechanisms and resources to maximize the
assistance the government provides to communities affected by drought. Advance
planning and an adapted, scalable financial strategy to reflect potential future
effects will reduce spending in the medium and long term by protecting
subsistence resources and building resilience, leading to greater fiscal
stability and enhanced public financial management, creating an institutional
framework leading to better coordination between the players involved in the
response, more effective monitoring of expenditure, and facilitating the
mobilization of resources from donors. We are prepared to provide the resources
required to support households affected by shocks.

Statistics

62. Development of economic statistics remains one of our priorities: we indeed
intend to conduct better assessments of the effects of our economic policy and
to monitor implementation of our development strategy more effectively. With
technical assistance from the IMF, we were able to adopt the IMF standard
classification for monetary and financial statistics. We also intend to improve
balance of payments, fiscal, and real sector statistics with technical
assistance from the IMF.

E. PROGRAM MONITORING

63. We will activate the monitoring committee for structural reforms and
developments in Mauritania's macroeconomic, monetary, and financial outlook
(CSR) to ensure that this program is implemented effectively. This Committee
includes representatives from the Ministry of Finance, the Ministry of Economic
Affairs, the BCM, as well as other ministries and public bodies able to provide
assistance. The CSR will have a permanent secretariat, it will meet regularly to
assess progress, and it will ensure that the data required to monitor program
implementation are transmitted. The IMF Executive Board will evaluate program
implementation on a semiannual basis, using the performance criteria and
structural benchmarks (Tables 1 and 2). The first and second reviews are
scheduled to take place on or after October 17, 2023 and April 17, 2024,
respectively, and will be based on performance criteria and indicative targets
(Table 1), as well as structural benchmarks (Table 2). These criteria,
indicative targets as well as the adjustors should any contingencies arise, are
defined in the Technical Memorandum of Understanding (TMU). The CSR will work in
close coordination with the macroeconomic framework committee and the CNDP.

Table 1.

Mauritania: Performance Criteria and Indicative Targets for 2023

(Cumulative changes) 1/

1/For definitions, see Technical Memorandum of Understanding. Quantitative
targets correspond to cumulative changes from the beginning of the relevant
year, unless otherwise indicated.

2/Adjusted by the difference between planned and realized EU fishing
compensation.

3/Cumulative limit of both non-concessional external debt and concessional
external debt.

4/Excluding arrears subject to rescheduling.

5/Narrowed to social spending (education, health, and social protection) from
December 2019 onward. includes COVID19-related spending on emergency social
programs, transfer to houseolds and sanitary measures.

Note: In addition to QPCs enumerated in this table, the Standard Continuous
Performance Criteria will also apply: (i) not to impose or intensify
restrictions on the making of payments and transfers for current international
transactions, (ii) not to introduce or modify multiple currency practices, (iii)
not to conclude bilateral payments agreements that are inconsistent with Article
VIII, (iv) not to impose or intensify import restrictions for balance of
payments reasons. View Table
Table 1.

Mauritania: Performance Criteria and Indicative Targets for 2023

(Cumulative changes) 1/

End-March End-June End-Sept. End-Dec. 2023 2023 2023 2023 Indicative Target
Performance Criteria Indicative Target Performance Criteria Quantitative
Performance Criteria Net international reserves of the BCM (floor); in million
of U.S. dollars 22.6 10.7 16.0 55.7 Net domestic assets of the BCM (ceiling); in
billions of ouguiyas (MRU) 0.1 1.2 11.7 3.0 Non-extractive primary balance
excluding grants; in billions of ouguiyas (MRU) 2/ 10.00 15.00 18.33 20.00
Present Value of new public and publicly-guaranteed (PPG) external debt
contracted since January 1, 2023; in billions of ouguiyas (MRU) 3/ 25.8 25.8
25.8 25.8 New external payment arrears (continuous ceiling) 4/ 0.0 0.0 0.0 0.0
Indicative Targets Floor on social spending; in billions of ouguiyas (MRU) 5/
1.67 5.00 10.00 20.00 Adjustment Factors (in millions of U.S. dollars) Net
international assistance -75.5 -151.0 -226.5 -301.9 Cumulative disbursements
of official loans and grants in foreign currency 3.6 7.3 10.9 14.6 Cumulative
amounts of external cash debt service payments -79.1 -158.2 -237.4 -316.5
European Union fishing compensation fee, in millions of Euros 0.0 0.0 0.0 57.0
Memorandum items: Program exchange rate (MRU/USD) 37.79 37.79 37.79 37.79

1/For definitions, see Technical Memorandum of Understanding. Quantitative
targets correspond to cumulative changes from the beginning of the relevant
year, unless otherwise indicated.

2/Adjusted by the difference between planned and realized EU fishing
compensation.

3/Cumulative limit of both non-concessional external debt and concessional
external debt.

4/Excluding arrears subject to rescheduling.

Mauritania: Structural Benchmarks 2023

View Table
Table 2.

Mauritania: Structural Benchmarks 2023

Item Measures Date (end-of-period) Outcome / Status Objective Rationale and
measurement Social protection 1 Increase the quarterly amount paid to households
from 2,200 MRU to 2,900 MRU End-December 2023 Social safety net program

Protect vulnerable households and strengthening targetting of social assistance.

Publish a report by Taazour/World Bank

Fiscal policy 2 Submit a revised budget in line with program understanding to
Parliament End-June 2023 Sustainable fiscal policy

Keep risk of debt distress at moderate level. Reduce reliance on extractive
revenue. Smoothen expenditure policy.

Revised budget law shared with IMF.

Tax policy and revenue administration 3 Put in place a platform connected with
the Jibaya software enabling electronic filing and payments End-June 2023
Domestic revenue mobilization

Reduce cost of paying taxes. Limit face-to-face interactions between taxpayers
and officials to reduce opportunities for coruption.

Strengthen taxpayer information system.

DGI circular to all large taxpayers

4 Make declaration for CIT compulsory, including for companies that are subject
to a tax holiday End-June 2023 Domestic revenue mobilization - strengthening
taxpayer registry and the foundation for a comprehensive tax expenditure
assessment Enhance transparency of tax system, reduce number of special regimes
over time resulting in a more equitable and efficient tax system. 5 Create a tax
policy structure in the Cabinet of the Minister of Finance End-September 2023
Domestic revenue mobilization - building capacity for tax policy analysis and
design Enhance transparency of tax system, reduce number of special regimes over
time resulting in a more equitable and efficient tax system. 6 Submit a law
reforming the Nouadhibou Free Zone to Parliament End-March 2023 Domestic revenue
mobilization - reduction of tax exemptions

Comply with the International Convention on the Simplification and Harmonization
of Customs Procedures, enhance transparency of tax system, reduce number of
special regimes over time resulting in a more equitable and efficient tax
system.

Only provide benefits to industrial units located within defined limits,
materialized and controlled by customs and exclude consumer goods from tax
exemptions.

Expenditure policy and public finance management 7 Adopt a medium-term
expenditure framework consistent with the program's budgetary anchor in the
Council of Ministers and transmit it to Parliament. End-June 2023 Sustainable
fiscal framework

Integrate fiscal policy and budgeting over the medium-term, reduce volatility of
public expenditure, strengthen budget credibility and transparency

Publish MTEF on homepage of Ministry of Finance

Central bank monetary, FX, and financial sector policy 8 Implement the technical
platform for interbank FX market transactions by June 2023 End-June 2023
Exchange rate flexibility Support the move to exchange rate flexibility 9
Conduct regular auctions of 4, 13, 26, and 52-week T-bills for banks to reach a
volume of MRU 1 billion by June 2023 and MRU 2 billion by September 2023
End-September 2023 Strengthen monetary policy Strengthen monetary policy
implementation and transmission 10 Gradually reduce banks’ short FX net open
positions to below 20 percent by December 2023 through a better enforcement of
the prudential limit (20 percent) End-December 2023 Exchange rate flexibility
Support the move to exchange rate flexibility and mitigate exchange rate risk
Gouvernance and Private Investment 11 Publish a time-bound action plan based on
the Governance Diagnostic report End-September 2023 Strenghten governance and
transparency and reduce corruption risks Adress governance vulnerabilities to
strengthen business environment and the quality of government policy making.
Action planned adopted by Cabinet 12 Operationalize the SME guarantee fund
End-December 2023 Support financial inclusion Improve access to finance and
foster private sector development.

ATTACHMENT II. TECHNICAL MEMORANDUM OF UNDERSTANDING

A. INTRODUCTION

1. This Technical Memorandum of Understanding (TMU) describes the performance
criteria, indicative targets, and their adjusters established to monitor the
program supported by the Fund's Extended Credit Facility and Extended Fund
Facility and described in the Memorandum of Economic and Financial Policies
(MEFP), Table 1. It also specifies the content and periodicity of the data that
must be forwarded to Fund staff for program monitoring purposes. Under this
memorandum, the government is defined as the central government exclusively.

2. The quantitative targets are defined as ceilings and floors set on cumulative
changes between the reference periods described in Table 1 of the MEFP and the
end of the month covered, unless otherwise indicated.

B. DEFINITIONS

3. Net international reserves (NIR) of the Central Bank of Mauritania (BCM) are
defined as the difference between the reserve assets of the BCM (i.e., the
external assets that are readily available to, and controlled by, the BCM, as
per the 6th edition of the IMF Balance of Payments Manual), minus the BCM's
foreign exchange liabilities to residents and nonresidents (including letters of
credit and guarantees issued by the BCM, but excluding resident foreign exchange
deposits that are payable in local currency). SDR allocations are not included
in the calculation of liabilities for NIR, considering the long-term nature of
these instruments. Monetary gold holdings will be evaluated at the gold price in
effect on September 30, 2022 (US$1,671.75 per oz.), and the U.S. dollar value of
the reserve assets (other than gold) and foreign exchange liabilities will be
calculated using the program exchange rates, namely, the September 30, 2022
rates for exchange of the U.S. dollar against the new ouguiya ($1 = MRU 37.79),
the SDR ($1.28 = SDR 1), the euro ($0.98 = 1 euro), and other currencies
published in the IMF's database International Financial Statistics (IFS).

4. Net domestic assets (NDA) of the BCM are defined as reserve money minus net
foreign assets (NFA) of the BCM. Reserve money comprises: (a) currency in
circulation (currency outside banks plus the commercial banks' cash in vaults);
and (b) deposits of commercial banks at the BCM. NFA are defined as the gross
foreign assets of the BCM, including external assets not included in the reserve
assets, minus all foreign liabilities of the BCM (i.e., NDA = reserve money—NFA,
based on the BCM balance sheet). NFA includes the BCM's equity investments in
three foreign financial institutions but excludes assets held as participation
in the capital of the Arab Monetary Fund and will be measured at the program
exchange rates described in paragraph 3.

5. The non-extractive primary fiscal balance including grants is defined, for
program monitoring purposes, as the overall balance, including grants of the
central government, but excluding interest due on public debt and extractive
revenues. The overall balance is equal to government revenue minus government
expenditure. Extractive revenues are defined as the mining and hydrocarbon tax
and non-tax revenues included in the TOFE. Extractive tax revenues correspond to
TOFE headings denominated “SNIM single tax” and corporate income tax and capital
gains tax paid by mining and hydrocarbon operators (excluding subcontractors).
Indirect taxes, other direct taxes and withholding taxes paid by these companies
are excluded. Non-tax extractive revenues correspond to dividends paid by SNIM,
to mining non-tax revenues (bonus, royalties, cadastral revenues, operating
revenues, and other mining revenues); and hydrocarbons non-tax revenue (bonuses,
royalties, capital income, profit oil and profit gas, etc.). The non-extractive
primary fiscal balance will be measured on the basis of Treasury data. Revenue
and expenditures are defined in accordance with the Government Finance
Statistics Manual (GFSM 2001). It will be monitored on a cash basis.

6. Treasury float (technical gap) is defined as the stock of payments validated
and recorded at the Treasury but not yet executed by the latter. With the
introduction of the payment module in the RACHAD system, this technical gap is
defined as the stock of payments validated in the RACHAD payment module but not
yet executed by the Treasury.

7. Social spending is estimated using the public expenditure for primary and
secondary education, health, TAAZOUR, the Commissariat à la Sécurité Alimentaire
and the Ministère des Affaires Sociales, de I'Enfance et de la Famille. Social
spending is limited to domestically funded expenditure and reported under the
following headings: “Health,” “Education,” and “Social action and protection.”

8. For program purposes, the definition of external debt is set out in paragraph
8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements,
attached to IMF Executive Board Decision No. 16919-(20/103) adopted on October
28, 2020.1

* (a) For the purposes of these guidelines, the term “debt” is understood to
mean a current (i.e., noncontingent) liability created by a contractual
arrangement whereby a value is provided in the form of assets (including
currency) or services, and under which the obligor undertakes to make one or
more payments in the form of assets (including currency) or services at a
future time, in accordance with a given schedule; these payments will
discharge the obligor from its contracted principal and interest liabilities.
Debt may take several forms, the primary ones being as follows:

* i. Loans, that is, advances of money to the borrower by the lender on the
basis of an undertaking that the borrower will repay the funds in the
future (including deposits, bonds, debentures, commercial loans, and
buyers' credits), as well as temporary swaps of assets that are equivalent
to fully collateralized loans, under which the borrower is required to
repay the funds, and often pays interest, by repurchasing the collateral
from the buyer in the future (repurchase agreements and official swap
arrangements);

* ii. Suppliers' credits, that is, contracts under which the supplier allows
the borrower to defer payments until sometime after the date when the
pertinent goods are delivered, or the services are provided; and

* iii. Leases, that is, agreements governing the provision of property that
the lessee has the right to use for one or more specified period(s),
generally shorter than the total expected service life of the property,
while the lessor retains the title to the property. For the purposes of the
guidelines, the debt is the present value (at the inception of the lease)
of all lease payments expected to be made during the period of the
agreement, apart from payments related to the operation, repair, or
maintenance of the property.

* (b) Under the definition of debt set out above, arrears, penalties, and
judicially awarded damages arising from the failure to make payment under a
contractual obligation that constitutes debt are debt. Failure to make
payment on an obligation that is not considered debt under this definition
(e.g., payment on delivery) will not give rise to debt.

* (c) The Present Value (PV) of a loan is calculated by discounting future
principal and interest payments, on the basis of a discount rate of 5
percent.

* (d) For debts carrying a variable interest rate in the form of a benchmark
interest rate plus a fixed spread, the PV of the debt would be calculated
using a program reference rate plus the fixed spread (in basis points)
specified in the debt contract. The program reference rate for the six-month
USD SOFR is 2.03 percent and will remain fixed for the duration of the
program.2 The spread of six-month Euro LIBOR over six-month USD SOFR is -200
basis points. The spread of six-month GBP SONIA over six-month USD SOFR is
-100 basis points. For interest rates on currencies other than Euro and GBP,
the spread over six months USD SOFR is -100 basis points. Where the variable
rate is linked to a benchmark interest rate other than the six-month USD
SOFR, a spread reflecting the difference between the benchmark rate and the
six-month USD SOFR (rounded to the nearest 50 bps) will be added.

9. External payment arrears are defined as payments (principal and interest) on
external debt contracted or guaranteed by the government or the BCM that are
overdue (taking into account any contractually agreed grace periods). For the
purposes of the program, the government and the BCM undertake not to accumulate
any new external payments arrears on its debt, with the exception of arrears
subject to rescheduling. The performance criterion on the non-accumulation of
new external public payments arrears will be continuously monitored throughout
the program. The accumulation of any new external payments arrears will be
reported immediately by the government to Fund staff.

10. External debt, in the assessment of the relevant criteria, is defined as any
borrowing from or debt service payable to nonresidents. The relevant performance
criteria are applicable to external debt contracted or guaranteed by the
government, the BCM, and public enterprises (excluding the debt of the National
Industrial and Mining Company (SNIM) not guaranteed by the government), or to
any private debt for which the government and the BCM have provided a guarantee
that would constitute a contingent liability. Guaranteed debt refers to any
explicit legal obligation for the government and the BCM to repay a debt in the
event of default by the debtor (whether payments are to be made in cash or in
kind). For program purposes, this definition of external debt does not include
routine commercial debt related to import operations and maturing in less than a
year, rescheduling agreements, and prospective IMF disbursements.

11. Medium- and long-term external debt contracted or guaranteed by the
government, the BCM, and public enterprises corresponds, by definition, to
borrowings from nonresidents maturing in one year or more. Short-term debt
corresponds, by definition, to the stock of borrowings from nonresidents
initially maturing in less than one year and contracted or guaranteed by the
government, the BCM, and public enterprises.

12. External debt is deemed to have been contracted or guaranteed on the date of
approval by the Council of Ministers. For program purposes, its U.S. dollar
value is calculated using the average exchange rates for September 2022 as
described in the IFS (International Financial Statistics) database of the IMF,
namely, the rates of exchange of the U.S. dollar against the SDR ($1.2904 = SDR
1) and other national currencies, namely, the euro (1.01 euro = $1), the Kuwaiti
dinar (KWD 0.3098 = $1), the Saudi rial (SR 3.75 = $1), and the pound sterling
(£ 0.88 = $1).

C. ADJUSTMENT FACTORS

13. NIR and NDA targets are calculated on the basis of projections of the
contribution of the National Hydrocarbon Revenue Fund (FNRH) to the budget, the
amount of the European Union (EU) fishing compensation, and the volume of net
international assistance. The latter is defined as the difference between: (a)
the sum of the cumulative loan disbursements of official foreign currency
denominated loans and grants (budget support, excluding assistance under the
Heavily Indebted Poor Countries (HIPC) Initiative and project-related loans and
grants) and the impact of any debt relief obtained after June 30, 2006; and (b)
the total amount of cash payments for servicing the external debt (including
interest paid on the BCM's foreign liabilities).

14. If the volume of net international assistance or the FNRH's contribution to
the budget or the amount of EU fishing compensation falls short of the amounts
projected in Table 1, the NIR floor will be lowered, and the NDA ceiling will be
raised by an amount equivalent to the difference between the recorded and
projected amounts. For its part, the NDA ceiling will be converted into ouguiya
at the programmed exchange rates. The lowering of the NIR floor will be limited
to US$70 million. The raising of the NDA ceiling will be limited to the ouguiya
equivalent of US$70 million, at the programmed exchange rates. If the volume of
net international assistance or the FNRH's contribution to the budget or the
amount of EU fishing compensation exceeds the amounts indicated in Table 1, the
NIR floor will be raised, and the NDA ceiling will be lowered by an amount
equivalent to the difference between the recorded and projected amounts.

15. The floor pertaining to the non-extractive primary fiscal balance (including
grants) at the end of the fiscal year will be adjusted by an amount equivalent
to the EU fishing compensation relative to the amount projected in Table 1. The
EU fishing compensation is defined as the annual payment of Euro 57.5 million
agreed under the sustainable fisheries partnership agreement (SFPA) between the
European Union and the Islamic Republic of Mauritania signed on 16 November
2021. For reviews during the course of the year, the adjuster does not apply.

D. IMF REPORTING REQUIREMENTS

16. To facilitate the monitoring of developments in the economic situation and
performance of the program, the Mauritanian authorities will provide the IMF
with the information listed below:

Central Bank of Mauritania (BCM)

* The monthly statement of the BCM and monthly statistics on: (a) the gross
international reserves of the BCM (calculated at the programmed and actual
exchange rates); and (b) the balance of the FNRH, as well as the amounts and
dates of its receipts and expenditures (transfers to the Treasury account).
These details will be provided within a period of two (2) weeks after the end
of each month;

* The monthly monetary survey, the consolidated balance sheet of the commercial
banks, and the weekly statistics on the net foreign exchange positions of the
individual commercial banks, by foreign currency and in consolidated form, at
the official exchange rates recorded. These details will be supplied within a
period of five (5) weeks after the end of each month;

* The Financial Soundness Indicators (FSIs), at the end of each quarter, as
well as the outcome of prudential norms, that is the number of banks in
non-compliance for each prudential ratio and share of banks in non-compliance
(weighted by their share of assets in the banking system). These details will
be supplied within a period of four 45 days after the end of each quarter;

* The monthly cash flow table and projections to the end of the year, within a
period of 15 days after the end of each month;

* Data on Treasury bill auctions and on the new stock of Treasury bills, within
a period of one (1) week after each auction, including bids (volumes,
interest rates, and bidders), successful bids, and volumes and interest rates
auctioned;

* Data on the BCM daily FX interventions, at the end of each week, including:
(1) data on bids (volumes, exchange rates, and bidders), successful bids, and
volumes and exchange rates auctioned; and (2) BCM direct purchases from
exporting compagnies: volumes and exchange rates with each counterpart;

* Monthly data on the volume of each public enterprise's liabilities to the
banking sector, within a period of one (1) month after the end of each month;

* Monthly external debt data within a period of 30 days after the end of the
month under consideration, following the monthly meeting of the technical
committee on debt, the minutes of which will be attached. The information
required consists of: the external debt file; external debt service of the
BCM, the government, and the SNIM, including any changes in arrears and in
rescheduling operations; the amount of debt service that became payable and
the portion of it paid in cash; the HIPC relief granted by the multilateral
and bilateral creditors; and the amount of HIPC relief provided to Mauritania
in the form of grants;

* The quarterly balance of payments and the annual data on the stock of
external debt (broken down by creditor, debtor, and currency denomination),
within a period of two (2) months after the end of each quarter, or year;

* Daily statistics on the autonomous factors and on foreign exchange market
operations, within a period of 10 days after the end of the month;

* Daily statistics on the required reserves and the current account balance, by
bank, within a period of 10 days after the end of the month;

* Quarterly data on lending and borrowing rates, by bank, as well as the
liquidity ratios;

Ministry of Economic Affairs

* Monthly reports on the execution of externally funded capital expenditure,
based on the summary statement of the consolidated capital budget, as well as
on the external grants and loans received or contracted by the government,
its agencies, and public enterprises, classified by donor or creditor and by
disbursement currency. This information will be provided within a period of
two (2) weeks after the end of each month;

* A monthly list of new medium-term and long-term foreign borrowings contracted
or guaranteed by the government, with indications, for each loan, of: the
creditor, the borrower, the amount, and the currency denomination, as well as
the maturity and grace period, interest rate, and fees. This list should also
cover loans under negotiation. Data on new external debt will be provided
within a period of two (2) weeks;

Ministry of Finance

* The Treasury's cash and liquidity management plan, updated by the technical
committee on fiscal and monetary policy coordination, will be forwarded on a
bimonthly basis with the minutes of weekly meetings;

* Monthly data from the Treasury on budget operations: revenues disaggregated
by non-extractive revenues and extractive revenues (including FNRH transfers)
and disaggregated by revenue collected by the tax and customs directorates,
expenditure (current, capital and special accounts operations), main fiscal
balances including non-extractive primary balance and the overall balance and
its financing (internal and external). This information will be provided
within one (1) month after the end of each month;

* Quarterly reports on the production of oil and other hydrocarbons and the
related financial flows, including data on oil sales and the breakdown of oil
revenue among the various partners, and the stocks and flows of the FNRH
within a period of one (1) month after the end of each quarter;

* Annual balance sheets, audited or certified by a statutory auditor, for the
public enterprises and autonomous public institutions;

National Statistics Office

* The monthly consumer price index, within a period of two (2) weeks after the
end of each month;

* The quarterly industrial production index, within a period of 45 days after
the end of each quarter;

* Quarterly memoranda on economic activity and foreign trade.

Technical Committee on Program Monitoring

* Monthly program implementation report: four (4) weeks, at the latest, after
the end of the month.

17. All data will be sent by electronic means. Any revision of previously
reported data will be immediately submitted to IMF staff, together with an
explanatory memorandum.

E. CENTRAL GOVERNMENT OPERATIONS TABLE

18. The Treasury will compile a monthly budget execution report in the format of
a central government operations table (TOFE). For the preparation of this table,
the definitions below will be applied:

* Grants are defined as the sum of the following components: foreign project
grants (used for the implementation of foreign-financed investment projects
contained in the parts of the consolidated investment budget covering the
central government and other administrative units (EPA) —parts BE and BA);
and foreign program grants for budget support, including multilateral HIPC
debt relief as regards the public external debt and the external debt of the
BCM and the SNIM (including the portion of the relief pertaining to the debt
to the African Development Fund/African Development Bank on Cologne terms);

* Domestic bank financing of the government deficit is defined as a change in
net banking system credit to the government, that is, claims on the
government minus government deposits with the banking system (excluding
deposits of public institutions and EPA at the BCM, but including the HIPC
account);

* Domestic nonbank financing of the government deficit is defined as a change
in the stock of Treasury bills held by nonbanks;

* Domestic arrears are defined as a net change (beyond a period of three
months) in the Treasury float and in the stock of domestic claims on the
government recorded by the Ministry of Finance (including but not limited to
cumulative payment arrears to public enterprises (water, electricity, etc.)
and international organizations, and those covered by government contracts
and court decisions);

* External financing is defined as the sum of the net drawings on the FNRH
(i.e., the opposite of a change in the FNRH's offshore account balance), net
disbursements of foreign loans, and exceptional financing. The latter
comprises: (a) the cumulative debts payable and technical arrears defined in
paragraph 9; and (b) the debt relief obtained on the government's external
debt net of HIPC assistance, deemed to be a part of grants.

The Fund provided a total of $329 million in 2020–21 under the Rapid Credit
Facility (SDR 95.68 million or about $130 million) and the ECF (SDR 149.04
million or 115.7 percent of quota, about $206 million) and the general SDR
allocation (SDR 123.4 million, about $176 million) also provided additional
reserve assets in 2021.

The acronym SCAPP stands for “Stratégie de Croissance Accélérée et de Prospérité
Partagée and the acronym PROPEP stands for “Programme Prioritaire Elargi du
Président”.

In May, the authorities revised growth for 2018-20. Real GDP in 2020 contracted
by 0.9 percent in 2020 (against a contraction of 1.8 percent before the
revision).

The minimum CAR ratio is 10 percent.

A record dividend of MRU 12.3 billion (3.4 percent of GDP) from the state-owned
mining company SNIM partly offsets the increase in expenditure.

“Informality, Development, and the Business Cycle in North Africa", MCD
Departmental Paper No. DP/2022/011, June 2022.

The key changes to Mauritania' exchange system since the last Article IV
consultation are detailed in Box 2. Staff is not aware of the introduction by
the authorities of any exchange restriction.

The draft 2023 budget was approved by Cabinet and submitted to Parliament in
November 2022.

The targeted fiscal path would reduce net financial liabilities to 38.4 percent
by 2027 from 41 percent in 2022.

Tax exemptions are estimated at 3.2 percent of GDP in 2019 and 3.6 percent of
GDP in 2020.

BCM Instruction No. GR 2017 on monetary policy instruments (Instruction N° 08 GR
2017 du 27/12/2017 sur les instruments de la politique monétaire).

The IMF staff report for the 2017 Article IV Consultation with Mauritania states
that, as of July 13, 2017, Mauritania maintained one exchange restriction
subject to IMF approval under Article VIII of the IMF's Articles of Agreement.
The exchange restriction arises from the insufficient FX availability at the
fixing sessions organized by the BCM for those transactions which are required
to be submitted to the sessions.

Leveraging TA inputs: Tax expenditure assessment and review of investment
incentives (2022) PIMA 2020; PEFA 2020; AFRITAC PFM support, FSAP 2014; RMTF
project to support tax administration including TADAT assessment 2022; AFRITAC
customs program; Monetary and exchange policy framework (2019, team's analytical
work); AFRITAC bank supervision program; Governance diagnostic 2022; Natural
resource management (2021); Financial inclusion tool.

The acronym stands for “Fonds National des Revenus des Hydrocarbures", a fund
managed by the Central Bank of Mauritania and held at the Banque de France

The safeguards assessment was concluded in July 2021.

The BCM issued new instructions on: i) services and means of payment, ii)
payment institutions, ii) electronic money institutions, and iv) agents
authorized by banks and payment institutions to execute payment transactions.

Mauritania is a presumed blender because the relevant income threshold is met,
and the new DSA assesses the risk of debt distress to be moderate.

They include: (1) shortfall in the amount of EU fishing compensation and
extractive industry revenue; and (2) change in net external financing
assistance.

In August 2021, BCM on-lent the SDR allocation to the government via a
memorandum of understanding between the Ministry of Finance and BCM.

Mauritania has debt arrears to Brazil, which are deemed away under the policy on
arrears to official bilateral creditors, as the underlying Paris Club agreement
is adequately representative, and the authorities are making best efforts to
resolve the arrears. Mauritania also has outstanding pre-HIPC arrears to the
Arab Fund for Economic and Social Development, on which the authorities continue
to offer a restructuring in line with relief committed at the time of the HIPC
initiative, such that staff assesses that a credible plan to resolve the arrears
is in place.

The external sector assessment is based on staff's estimates.

Prepared by Benjamin Kett (SPR).

Prepared by Thomas Benninger and Fazeer Sheik Rahim (both FAD) with support by
Peter Wankuru (AFR). The proposed policy framework is aligned with the technical
advice provided to the Mauritanian authorities by FAD under the Managing Natural
Resource Wealth project.

Extractive revenues include: Licensing and surface rental fees, production-based
royalties, government's profit petroleum share under production sharing, CIT
paid by extractive companies and the single tax and dividend paid by the
state-owned mining company SNIM (Société Nationale Industrielle et Minière).

So far, the authorities report all ratios in relation to GDP. In the absence of
a developed methodology to measure non-extractive GDP and the required automatic
debt dynamics in a timely manner, staff estimated the NEPB target as a share of
the overall GDP.

https://www.imf.org/external/datamapper/fiscalrules/map/map.htm

Staff calculations based on IMF (2018, How to Calibrate Fiscal Rules: A Primer,
How To Notes, Fiscal Affairs Departments). To simulate potential debt
trajectories over a medium-term projection horizon, a terms of trade shock of 30
percent and a materializing contingent liability of 5 percent of GDP was
assumed.

As of August 2022, the FNRH held US$ 163 million (1.6 percent of GDP) and the
treasury single account MRU 29 billion (7.8 percent of GDP).

Information as of September 2022, unless stated otherwise. This list includes
governance safeguards related to crisis-related spending in Letters of Intent
(LOIs) accompanying IMF financing during the COVID-19 crisis. It excludes the
commitment to undertake a central bank safeguards assessment, which is required
in all cases. For the reasons outlined in paragraph 19 of the staff paper on
Progress in Implementing the Framework for Enhanced Fund Engagement on
Governance, LOIs for a few financing instruments (mainly cases very early in the
COVID-19 crisis and/or cases with somewhat lower corruption risks) did not
include commitments specifically related to the governance of crisis-related
spending and hence are not covered in this list.

http://www.imf.org/external/pp/longres.aspx?id=4927

The program reference rates and spreads are based on the “average projected
rate” for the six-month USD SOFR over the following 10 years from the October
2022 World Economic Outlook (WEO).

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