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Mauritania: Country Brief

Economic Overview

Macroeconomic developments have been broadly positive in 2010 - 2011. Non-oil output grew 5.7 percent in 2010, compared to 1.1 percent in 2009 and 3.9 percent 2008, supported by a rebound in external demand, the development of gold and copper mining projects and higher construction and services activities.

Booming mining exports, buoyed by high commodity prices, helped offset swelling food and fuel imports and narrowed the current account deficit from 10.7 percent of the gross domestic product (GDP) in 2009, to 8.7 percent in 2010. This follows an increase of 71 percent (year-on-year) of the mining exports (iron ore, gold and copper) driven by high commodity prices.

Oil production continues to remain under the expected levels. Monetary policy remained prudent, contributing to containing inflation to 6.1 percent (year-on-year) in 2010, while the non-food inflation remained below five percent, despite an increase in private sector credit.

The 2010 non-oil fiscal deficit was estimated at 2.4 percent of non-oil GDP which represents about half of the 2009 deficit. This improvement is mainly due to higher tax revenues from the mining sector, stronger tax collection efforts, and an under-execution of investment spending that more than offset an unanticipated increase in subsidy payments.

The economic outlook for 2011 is positive, with the non-oil GDP growth projected to remain above 5 percent in 2011, a trend that is expected to continue in 2012, as performance of mining, agriculture and service sectors are expected to be solid.

The 12-month inflation is projected to increase to around 7.5 percent, effecting rising international fuel and food prices. At the same time, the current account deficit is projected to narrow at 7.5 percent of GDP, as improvements in the mining production and the ongoing high commodity prices are expected to offset higher costs from food and fuel imports and profit repatriation of foreign-owned mining companies.

Fiscal consolidation is expected to continue despite increases in subsidies and transfers to public enterprises (covering the new temporary emergency program aimed at preserving the purchasing power of the poor and the implicit subsidy schemes), which are deemed to be financed among others through higher mining revenues, and a reallocation of the under-executed investment.

Despite this positive evolution, significant vulnerabilities and risks remain; a narrow export base (mining represents 75 percent of the country’s exports), volatile commodity prices, a slowdown in external demand, and further increases in food and energy prices, given the current instability in some parts of the Arab world. The recently-completed PER also stresses that, on the fiscal side, there are serious risks associated with Mauritania’s large and expanding public enterprise sector.

High unemployment and an insufficiently diversified economy represent key challenges. The newly finalized poverty reduction strategy paper (PRSP) provides a good framework for implementing a broad-based growth and poverty reduction agenda, with a focus on macroeconomic stability, inclusive growth, improvement of human capacity, and better governance. Nevertheless, an increase in fiscal space, and the strengthening of public finance and investment management are essential elements for the success of the new PRSP. 

Political Context

The local political scene in Mauritania is currently being dominated by three main topics: political dialogue, media, and elections.

Government and a dozen of opposition leaders agreed to enter in a national political dialogue series aimed at improving deteriorated relations between both sides since Mohamed Ould Abdel Aziz won the 2009 presidential elections. The move comes as a sign to implement an important component of the Dakar agreement, though boycotted by three important opposition parties: Rally of Democratic Forces (RFD) led by Ahmed Ould Daddah, the Union of the Forces of Progress (UFP) led by Mohamed Ould Maaouloud and the Tawassoul party led by Mister Jemil Mansour.

The dialogue also covers access to the public media by the opposition. Under the new law liberalizing the media, the government issued a decree on August 23 allowing five private TV and radio stations by year’s end. On August 26, authorities agreed to postpone legislative and municipal council elections previously scheduled for October 2011, following a request formulated by the majority of opposition leaders who felt that they wouldn’t be transparent. All these events come amid a wave of controversy over the way the current national census is carried out.

Over the past 30 years, Mauritania experienced several military coups -- the last occurring in August 2008 -- that shocked the country’s political and institutional stability. With the rise of Al Qaeda in the Maghreb Islamic (AQMI) in 2005, Mauritania was hit by a wave of terrorist attacks and hostage situations, the most recent of which having occurred in 2010/2011.

Development Challenges 

Diversify the tools for finance: The World Bank Group is now supporting efforts made by Mauritania and financing its needs for development with the use of other means than (International Development Association) IDA funding, such as the IBRD (International Bank for Reconstruction and Development) enclaves, the Reimbursable Technical Assistance (Assistance Technique Remboursable) and other public-private partnerships. 

In addition, the World Bank will continue to put together fiduciary funding resources such as fast track funding (Education for All) and catalytic funding, such as the US$20 million allocated for the rehabilitation of the Rosso-Nouakchott road corridor.

Energy/extractive industries: The government is poised to use its Banda offshore gas field to generate electricity through a new power plant of up to 700 megawatt capacity, to be developed in phases. The project is part of a public-private partnership (PPP) between the government, the national power utility and four international mining companies. Financing of US$100m for the 500 km transmission line from Nouakchott to Nouadhibou, which would enable power to flow toward the mining areas, has already been approved by the Saudi Fund. The Bank is helping the project's steering committee with project design and feasibility study management. Since the project has bankable off-takers as anchor customers (the mining companies), there is a heightened likelihood of successfully structuring Bank financing as an International Bank of Reconstruction and Development (IBRD) enclave.

Mining Sector

Mauritania has a long history of a vibrant mining industry with Société Nationale Industrielle et Minière (SNIM), extracting iron ore for almost half a century. Starting from 2006, substantial gold and copper deposits have also been exploited by international ventures. Since then, production volumes have gradually increased for all three commodities, with a combined annual export value averaged some US$1 billion for 2008 and 2009. This figure climbed to US$1.4 billion 2010. By 2012, expansion of existing plants is predicted to increase production to around US$2 billion. Besides the impressive production growth rates of more than 30 percent per annum since 2003, another derived outcome is a 20 percent annual growth rate in mine investor’s exploration expenditure. Both of these achievements are results of the government’s legal and regulatory reform and general capacity building which was supported by the Mining Sector Capacity Building Project.

Governance and Fragility. Mauritania has a CPIA of 3.2 and is still consolidating its democracy following disruptive conflicts and coups in the course of this decade. The government has begun to take steps to strengthen accountability, including public financial management reforms, establishing an Anti-Corruption Council, and working on the extractive industries transparency initiative process. There is also a need to build confidence and strengthen institutions, as recommended in the last World Development Report.

Achievement: Investment Code:  The World Bank continues to support the government in the finalization of a new draft code. The new code aims to promote international investment through financial and non-financial incentives, ensuring the preservation of development of national private sector and development of special economic zones with key economic potential. 

State-owned Enterprises Governance: SOE have key impact on the economic activity as supplier of electricity, water, port facility, natural gas and communication; the Government has identified the need of reform for SOE as a priority and the project contributions have been defined as i) financing SOE audits and ii) financing the elaboration and implementation of performance contract with SOE to ensure compliance with management and governance standards.

Reinforce Public Finance Management: Improving public spending and finance management is crucial in order to support improved access to public utilities in Mauritania.  Short-term measures include the limitation of non-budgeted spending, a reinforcement of the annual budgeting process and an upgrade of the country's debt management system. In the medium term, measures include concentrating on the establishment of a spending framework and a budgeting program, along with the creation of an integrated financial management system.

Reform the Role of Government in the Economy: The government recently adopted measures aimed at considerably increasing the role of the public sector in the economy. This includes the creation of companies handling public transport and housing, a public bank, and the planned expansion of energy production that is not backed by the private sector. In the future, a closer, more detailed look at these political decisions and their implementation will be required in order to minimize the potential for negative incidence on the economy in Mauritania and development in the private sector.

 

 

The World Bank opened its branch office for Mauritania in the city of Nouakchott in 1986, but in 1963 the Bank carried out its first development program in the country by financing MIFERMA (Mines de Fer de Mauritanie or Mauritania Iron Ore Project), a multi-national mining company.  This partnership has progressively grown since 1985 and has been a source of considerable financial funding.   As of April 2011,   the World Bank portfolio includes 11 country projects, three regional, one GEF and two new operations, representing a total of US$357.7 million. This amount includes US$66.88 million for regional projects and US$116 million undisbursed.  Mauritania’s portfolio is getting old and hampered by period of political instability. The Average is 5.2 years and seven national projects are due to close by the end of FY 2011.

In July 2007, the World Bank and Mauritania came to an agreement on a new development strategy (Country Assistance Strategy 2008 to 2011) that is directly aligned with the Poverty Reduction Strategy Paper (CSLP2). The new PRSP (CSLP3) is now effective since March 2011 and the Bank will accordingly launch a new CAS to reflect government’s new priorities. 

IDA program: Despite the fall in IDA allocations, Mauritania has currently a broad portfolio covering key sectors (Education, Health, Transport, Urban Development, Rural Development, Mining, Private Sector and Public Sector). Many of those projects will be closed before or during FY 2012. Therefore, the choice of new operations will be a real challenge, given the small IDA envelope and the new selectivity criteria. The Government has already requested a rapid preparation of the second phase of the Urban Program (APL), including a new component dedicated to youth in poor neighborhoods. It also has requested additional funding for the community projects (CBRD) and support for the Agricultural Sector to support the food security strategy being finalized. Moreover, the Government wants to take advantage from the regional projects, particularly the West African fishing Project and the Senegal River Basin Integrated Multimodal Transport.

IBRD enclaves: Given a very limited IDA allocation to Mauritania, the Bank Group is encouraging the authorities to consider using innovative instruments, including IBRD enclaves and Public-Private Partnerships (PPP). Two such operations were subject to an memorandum of understanding (MOU) signed with the Government during former World Bank President Robert Zoellick’s visit in Mauritania in 2008. The first project at the Port of Nouakchott includes: (i) new container terminal parallel to the shore; (ii) new quays perpendicular to the shore, more specifically aimed at oil, bulk and general cargo traffic; and (iii) environmental and social measures aiming at mitigating the adverse impacts of both the initial port concept and the extensions. China is funding Component 2 for new quays. The Bank is supporting the government to put in place a public private partnership (PPP) scheme for the new container terminal under an IBRD enclave project providing funding for Component 3 and possibly bridging the funding gap of Component 1. Board approval is expected in FY 2012, Q4; The second project is Gas to Power for US$75 million in FY 2012. The latest government plans are to finance a first phase of 120 megawatt dual fuel plant (i.e. it can burn either heavy fuel oil or natural gas).  Arab and Islamic Funds promised US$135 million, the Bank has presented a joint offer with IFC to help the government to structure the gas-to-power project in the form of a PPP and to finance the remaining gap through an IBRD enclave. 

Fisheries:  In October 2010, the Government of Mauritania formally requested the World Bank to provide support to the fisheries sector, in terms of: (i) strengthening governance of the sector (including policy planning and implementation, transparent allocation of fishing licenses at sustainable levels, investment climate reforms, etc.), and (ii) increasing local value added to the fish caught in the country's waters, through greater onshore processing of fish via infrastructure investments in a port at Nouadhibou, as well as a smaller port at Tanit for coastal and artisanal fisheries.

 

The World Bank opened its branch office for Mauritania in the city of Nouakchott in 1986, but in 1963 the Bank carried out its first development program in the country by financing MIFERMA (Mines de Fer de Mauritanie or Mauritania Iron Ore Project), a multi-national mining company.  This partnership has progressively grown since 1985 and has been a source of considerable financial funding.   As of September 2011,   the World Bank portfolio includes 11 country projects, three regional, one GEF and two new operations, representing a total of US$383.7 million. This amount includes US$66.88 million for regional projects and US$116 million undisbursed.  Mauritania’s portfolio is getting old and hampered by period of political instability. The Average is 5.2 years and seven national projects are due to close by the end of FY 2011.

In July 2007, the World Bank and Mauritania came to an agreement on a new development strategy (Country Assistance Strategy 2008 to 2011) that is directly aligned with the Poverty Reduction Strategy Paper (CSLP2). The new PRSP (CSLP3) is now effective since March 2011 and the Bank will accordingly launch a new CAS to reflect government’s new priorities. 

Portfolio and Pipeline: The US$8 million Food Security project is one of two operations to be funded in equal parts by IDA and by the Food Price Crisis Response Trust Fund (FPCR TF). The US$110 million Port of Nouakchott Development Project is the other, to be funded through an US$50 million IBRD enclave loan, along with private sector (US$50 million) and government (US$10 million) contributions.  A concept review this year supported continued preparation of the project for delivery in September 2012. The next steps are an analysis of the port’s financial performance and the production of a financial model and the review of PANPA’s legal and regulatory framework, which is required to enhance the viability of an IBRD enclave. The government has confirmed its agreement to a joint Bank/IFC PPP proposal, to be structured as an IBRD enclave.

The newly finalized poverty reduction strategy paper (PRSP) provides a good framework for implementing a broad-based growth and poverty reduction agenda. The main pillars of the PRSP -- macroeconomic stability, inclusive growth, improving human capacity, strengthening governance, and monitoring -- are fully aligned with the Bank’s new strategy for Africa region.

IDA-16 Allocation. With a total indicative allocation of SDR40.5 million (US$65.3 million equivalent), the IDA-16 allocation to Mauritania has considerably increased as compared to the (initial) IDA-15 allocation (SDR23 million). Most of the CPIA indicators, however, are below the IDA average in all categories, and have not increased significantly during the last two years.

IBRD enclaves: Given a very limited IDA allocation to Mauritania, the Bank is encouraging the authorities to consider using innovative instruments, including IBRD enclaves and Public-Private Partnerships (PPP). Two such operations were subject to a memorandum of understanding (MOU) signed with the government during World Bank President Robert Zoellick’s visit in Mauritania in 2008. The first project at the Port of Nouakchott includes: (i) new container terminal parallel to the shore; (ii) new quays perpendicular to the shore, more specifically aimed at oil, bulk and general cargo traffic; and (iii) environmental and social measures aiming at mitigating the adverse impacts of both the initial port concept and the extensions. China is funding Component 2 for new quays. The Bank is supporting the government to put in place a public private partnership (PPP) scheme for the new container terminal under an IBRD enclave project providing funding for Component 3 and possibly bridging the funding gap of Component 1. Board approval is expected in FY 2012, Q4; The second project is Gas to Power for US$75 million in FY 2012. The latest government plans are to finance a first phase of 120 megawatt dual fuel plant (i.e. it can burn either heavy fuel oil or natural gas).  Arab and Islamic Funds promised US$135 million, the Bank has presented a joint offer with IFC to help the government to structure the gas-to-power project in the form of a PPP and to finance the remaining gap through an IBRD enclave. 

Fisheries: In October 2010, the government formally requested the World Bank to provide governance support to the fisheries sector by strengthening policy planning and implementation, transparent allocation of fishing licenses at sustainable levels, investment climate reforms, and increasing local value added to the fish caught in the country’s waters. This would be done through greater onshore processing of fish via infrastructure investments in a port at Nouadhibou, as well as a smaller port at Tanit for coastal and artisanal fisheries.

Agriculture and Rural Development: The government launched the finalization of a food security strategy following a validation workshop held end of July 2011. The preparation of an updated agricultural strategy for the period of 2011-2015 is ongoing with the support of the World Bank. In February 2011, the government requested the Bank’s help to maintain social stability in the face of high prices of imported food. In fact, about 70 percent of Mauritania’s cereal needs (mostly wheat) are imported. The bank has confirmed funding for USD$8 million (USD$4 million /IDA and USD$4 million/GFRP). The bank team has started the project preparation with the government with an expected board approval by mid-December 2011. Globally, prices remain still high compared to last year’s prices, particularly for wheat (from 108 UM/Kg to 150 UM/kg).

Increased Energy Prices: Amid heightened social and political tensions in the region, the Mauritanian authorities introduced emergency measures aimed at mitigating the impact of recently increased fuel and food prices on the poor. Unlike the 2008 emergency plan, this package, which is worth about UM 40 billion (3.4 percent of GDP) and was the largest among the region’s oil importers, comprises mostly reversible measures (e.g., it does not include a raise in civil servant wages). Its main elements include food subsidies, gas and electricity subsidies and other short term measures, e.g. income-generating activities for the poor.

The European Union (EU), a key outside partner, officially announced in January 2010 that it would resume cooperation with Mauritania, which had been frozen since the coup in August of 2008.  In concrete terms, this translates into the pursuit of new program establishment, over 156 million euros, under the indicative program of the tenth European Development Fund (FED).  Fishery agreements, newly revised in April 2010, make up for a major part of the EU-Mauritania cooperation.

On March 4, France, first bilateral partner to Mauritania (leading ahead of China, Germany, Japan and Spain primarily), decided to cancel a debt of 17.4 million euros in favor of Nouakchott within the framework of a process called "the French Debt Cancellation Initiative" (C2D).

The United Nations system, including seven principal agencies, is also a partner of choice in Mauritania, where it intervenes under the heading of UNDAF (United Nations Development Assistance Framework), as well as the multilateral and bilateral partnership with the Gulf nations.  On March 15, 2010, the Administrative Council at the IMF (International Monetary Fund) approved a triennial agreement for a total sum of 77.28 million DTS (approximately US$118.1 million) in favor of the Islamic Republic of Mauritania under the heading of FEC (Facilité Elargie de Crédit, or Extended Credit Facility).

 

Last updated October 2011




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