The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation and approved 42-Month arrangements of SDR 64.40 million (about US$ 86.9 million) under the Extended Credit Facility and Extended Fund Facility with the Islamic Republic of Mauritania. The Board approval will allow for SDR 16.10 million (US$ 21.7 million) to be made available immediately to Mauritania. The remaining amount will be phased in over the duration of the program, subject to semi-annual review.

Mauritania’s economic reform program supported by the IMF arrangements aims to preserve macroeconomic stability, strengthen the fiscal and monetary policy frameworks, consolidate the foundations for sustainable, inclusive growth, and reduce poverty. The program includes three pillars: (i) improving medium-term budgeting to maintain fiscal sustainability, to gradually reduce debt and to smoothen the volatility of extractive revenues and protect social spending; (ii) strengthening the monetary and foreign exchange policy frameworks and development of the money and foreign exchange markets to gain better control of inflation and to ensure that Mauritania’s economy is more resilient against exogenous shocks; and (iii) structural reforms designed to strengthen governance, transparency, and the private sector through an improved business climate and financial inclusion.

Economic growth has accelerated and is expected to reach 5.3 percent in 2022, driven primarily by the mining sector, agriculture, and fisheries. Inflation is expected to stabilize at approximately 11 percent as a result of the tight monetary policy conducted recently by the Banque Centrale de Mauritanie (BCM).

Following the Executive Board discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, made the following statement:

“A determined response to the COVID-19 pandemic and sizable international financial support have placed Mauritania on a recovery path. With sound policies, donor support, and favorable iron ore prices, international reserves accumulated, and the fiscal balance ended in a surplus in 2021.”

“However, a confluence of shocks including Russia’s war in Ukraine and regional tensions have reverted the trend accumulation of foreign exchange reserves in 2022 and narrowed the space for policy intervention, while Mauritania still faces significant human and infrastructure development needs. Surging international commodity prices have led to inflationary pressures and food insecurity.”

“The Central Bank of Mauritania has appropriately tightened its monetary stance in 2022 to contain rising inflation. A continued tight monetary policy stance closely coordinated with budget execution is needed to actively manage the banking system’s liquidity and reduce inflation. Careful monitoring of financial sector developments is also needed to strengthen the banking sector resilience to shocks.”

“The authorities’ strategy to preserve infrastructure investment and social spending would help achieve higher and greener growth and need to remain within a disciplined fiscal policy to contain debt. In this context, rebalancing public expenditure away from untargeted current spending and enhancing the efficiency of public investment through better prioritization, implementation and maintenance are needed.”

“Decisive implementation of structural reforms would limit scarring from the COVID-19 pandemic and pave the way for a higher, more inclusive and private sector-led growth. Priorities include improving governance, transparency, the business environment and financial inclusion, and mitigating the challenges posed by climate change.”

“The new 42-month arrangements under the Extended Credit Facility and Extended Fund Facility have a credible policy package to address Mauritania’s challenges. In particular, the program aims to help maintain reserves above the adequacy threshold in preparation for greater exchange rate flexibility, strengthen policy frameworks, and promote sustainable and inclusive growth. The arrangements will also contribute to the development of human capital, poverty reduction, and private sector growth.”