IMF Approves New Funding, Concludes Reviews for Mauritania

• The IMF Executive Board concluded today the first reviews under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) Arrangements, enabling the authorities to draw SDR 16.10 million (approximately US$21.52 million).
• The IMF Executive Board also approved a Resilience and Sustainability Facility (RSF) arrangement for Mauritania in the amount of SDR 193.2 million (approximately US$258.21 million).
• The RSF arrangement will support Mauritania's efforts to strengthen its resilience to climate shocks, enhance its capacity to protect the vulnerable against climate shocks, and expedite the transition toward cleaner energy sources.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the first reviews under the Extended Credit Facility and Extended Fund Facility arrangements (ECF/EFF) for the Islamic Republic of Mauritania and approved the request to modify the end-December 2023 Net International Reserves and Net Domestic Assets performance criteria. The Board granted a waiver of nonobservance of the performance criterion on the non-introduction and non-modification of multiple currency practices. The Board approval will allow for SDR 16.10 million (US$21.52 million) to be made available immediately to Mauritania. IMF Executive Board also approved a 31-month arrangement under the IMF Resilience and Sustainability Facility (RSF) for a total amount of SDR 193.2 million (approximately US$258.21 million).

Economic growth is expected to slow to 4.8 percent in 2023 compared to 6.4 percent in 2022, while inflation should continue its downward trend, reaching 4.5 percent at end-2023 compared to 11 percent in 2022. However, the economic outlook remains uncertain.

Mauritania's economic reform program supported by the IMF ECF/EFF 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 developing 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.

The RSF arrangement will help build resilience to climate change and strengthen the policy framework to maximize synergies with other official financing and catalyze private financing. The reform measures focus on: (i) incorporating climate issues into public financial management (PFM) and public investment management (PIM); (ii) social protection against climate shocks; (iii) decarbonization; and (iv) the strengthening of the institutional framework for water management, providing disbursements in line with the pace at which reforms are implemented.

Executive Board Assessment[1]

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

"With sound policies, donor support, and normalized food and energy prices, Mauritania's economic growth remained strong in 2023. Inflation declined, the current account deficit narrowed, international reserves remained comfortable, and fiscal performance remained in line with the authorities' medium-term goal of declining external debt."

"The authorities' implementation of a fiscal anchor helps shield public expenditure from volatile commodity prices and stabilize debt. A disciplined fiscal policy that preserves infrastructure investment and social spending would help achieve higher and greener growth while containing debt. In this context, it will be important to increase domestic revenues to create more fiscal space, rebalance public expenditure away from untargeted current spending, and enhance the efficiency of public investment."

"To anchor low inflation and to ensure a smooth and gradual transition to a more flexible exchange rate in the context of the recently introduced interbank foreign exchange market platform, the central bank has appropriately tightened its monetary stance. Continued tight monetary policy and keeping excess liquidity minimal would help keep inflation anchored and develop interbank markets. Careful monitoring of financial sector developments and continued enforcement of prudential regulation would strengthen the banking sector's resilience to shocks. Continued improvements in the AML/CFT framework are also important."

"Decisive implementation of structural reforms is key to support higher, more inclusive and diversified, private sector-led growth. Priorities include strengthening governance and transparency, promoting financial inclusion, and implementing the governance action plan to improve the business environment."

"Continued implementation of the arrangements under the Extended Credit Facility and Extended Fund Facility, and of the ambitious reform measures to address climate-related vulnerabilities, supported by the new Resilience and Sustainability Facility, will help address Mauritania's medium- and long-term term challenges and catalyze additional financing. In particular, the programs aim to help maintain reserves above the adequacy threshold during the gradual flexibilization of the exchange rate, strengthen policy frameworks, and promote sustainable and inclusive growth. The arrangements will also contribute to the development of human capital, private sector growth, and poverty reduction, and to climate change adaptation and mitigation."

[1] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.