Mauritania must stick to fiscal plans, says IMF

20 Aug 12
Mauritania has been urged to press ahead with efforts to consolidate its public finances and reduce the impact of volatile commodity prices on its economy.

By Nick Mann | 20 August 2012

In its annual review of the West African country, the International Monetary Fund said ‘prudent policies’ and a commodity price boom over the past two years had helped the economy to make a ‘solid recovery’ from the global crisis.

Despite the eurozone slowdown and the Sahel drought which hit central and western Africa in 2010, the Mauritanian economy grew by 4% in 2011.

It also maintained domestic economic stability last year despite high international fuel and food prices, the IMF noted, while fiscal consolidation continued in 2011 for the third consecutive year. Higher mining revenues and strong tax collection more than offset the cost of a programme aimed at reducing the impact of higher food and energy prices on the most vulnerable people.

The IMF warned, however, that ‘progress in tackling unemployment and poverty has been limited, and the economy remains vulnerable to external shocks due to its dependency on commodity exports’.

In light of this, it welcomed government plans to replace ‘ill-targeted’ universal price subsidies with ‘well-targeted’ social safety nets. The board also endorsed plans to delink fiscal policy from ‘volatile’ commodity prices, in particular by improving non-mining tax collection and seeking new revenues from the natural resource sector.

And it backed the government’s ‘moderate’ loosening of its spending restraint this year as it addressed the impact of the drought. There must, however, be a ‘quick phase-out’ of this once the drought emergency ends.

The IMF added: ‘Structural reforms are needed to diversify the economy away from commodity exports and foster more inclusive growth, particularly in labour-intensive sectors like agriculture.’

Authorities were also urged to tackle remaining governance problems, notably through the systematic application of a procurement code.

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