INTERNATIONAL MONETARY FUNDJANUARY 2014

The Mauritanian Economy: Performance and Outlook

Achieving Macroeconomic Stability

1. Achieving Macroeconomic Stability

Successful completion of the 3-year Extended Credit Facility program with the Fund (2010-13).

In a difficult external environment: Global financial crisis, European crisis, food price hikes.

And challenging regional and domestic conditions. Political uncertainty related to the Arab Spring Mali crisis 2012 Drought

1. Achieving Macroeconomic Stability

Restored macroeconomic stability Strong growth dynamics combined with contained

inflation Buildup of external and fiscal buffers Progress with restoring the health of the financial

sectorSubstantive progress with the structural

reform agenda Fiscal: Public financial management, revenue

mobilization, tax and custom administration Progress on financial sector reforms and foreign

exchange markets Elimination of the diesel subsidy

Growth has been above peers, ..and across sectors

1

1. Achieving Macroeconomic Stability

2008 2009 2010 2011 2012 2013-4

0

4

8

12

16

20

Sub-Saharan AfricaMENAP oil importersMauritania

Real GDP Growth

1 2 3 4 5 6 7-2

0

2

4

6

8

10

12

14

16

Real non-oil GDP growthReal non-extractive GDP growth Real GDP growth

Gross Domestic Prod-uct (Percent)

..with significant growth in cereal production…

..and mining production.

1. Achieving Macroeconomic Stability

2008 2009 2010 2011 2012 2013 2014100

150

200

250

300

350

400Cereal Production (in tons)

2008 2009 2010 2011 2012 2013 20140

10

20

30

40

50

0

50

100

150

200

250

300

350

Irone ore (thousands of tons, LHS)Copper ( thousands of tons, LHS)

Mining(Tons)

Inflation has remained under control…

…in line with declining local and imported inflation

1. Achieving Macroeconomic Stability

2008 2009 2010 2011 2012 20130

2

4

6

8

10

12

14

16

18Sub-Saharan AfricaMENAP oil importersMauritania

Inflation(Period aver-age)

Feb-09 Apr-10 Jun-11 Aug-12 Oct-13-4

-2

0

2

4

6

8

10

12

14

16OverallLocalImported

Infla-tion(Percent)

Fiscal outcomes have been stronger than in peers…

…driven by improved revenue mobilization

1. Achieving Macroeconomic Stability

1 2 3 4 5 6-12

-8

-4

0

4

8

12

MENAP oil importersSub-Saharan Africa

Overall Fiscal Balance(including grants, percent of GDP)

2008 2009 2010 2011 2012 20130

20

40

60

80

GrantsNon-extractive non-tax revenuesNon-extractive tax revenues

Revenues

..which has supported a hike in public investment

…financed mostly by domestic resources

1. Achieving Macroeconomic Stability

2008 2009 2010 2011 2012 2013 20140

15

30

45

60

75InterestSubsidies and transfersGoods and services Wage bill

Expenditures

2008 2009 2010 2011 2012 2013 20140

5

10

15

20

25

Foreign-financed in-vestment Domestically financed investment

Investment

Concessional external financing dominates.

Public debt remains elevated, but debt service has improved.

1. Achieving Macroeconomic Stability

2008 2009 2010 2011 2012 2013 20140

2

4

6

8

10

12

14

-20

25

70

115

160

205

250

Interest Payments (Percent of GDP)Principal Amortization (Percent of GDP)Debt to GDP (Percent, RHS)

Debt Profile

2008 2009 2010 2011 2012 2013 2014-15

-10

-5

0

5

10

15

External financing DomesticUse of oil revenues

Sources of Financing(percent of GDP)

Widening of the current account mostly driven by extractive industries

And has been mostly financed with FDI and official loans

1. Achieving Macroeconomic Stability

2008 2009 2010 2011 2012 2013 2014-40

-25

-10

5

20

35

50

Other Financial FlowsOfficial MLT LoansFDI (Net)

Financial Account(in percent of GDP)

2007 2008 2009 2010 2011 2012 2013-40

0

40

80

120

Current Account BalanceCurrent account balance excluding imports of extractive industries

Current Account (In percent of GDP)

Current account relies on traditional exports…

…and benefits from benign price dynamics

1. Achieving Macroeconomic Stability

2008

2008

2008

2008

2009

2009

2009

2009

2010

2010

2010

2010

2011

2011

2011

2011

2012

2012

2012

2012

2013

2013

2013

2013

2014

2014

2014

2014

80

180

280

380

480

580

680

780

880

FoodIron oreCopperOil

Commodity Price Indices (2005=100)

20 20 20 20 20 20 20 20 20 20 20 20 20 20-10

10

30

50

70

90

110

130

150

Iron ore exports Fish exports OthersGold

Goods Export Revenue(Percent of total exports)

External buffers are at an historically record level…

…in the context of a relatively stable currency

1. Achieving Macroeconomic Stability

2008

2008

2008

2008

2009

2009

2009

2009

2010

2010

2010

2010

2011

2011

2011

2011

2012

2012

2012

2012

2013

2013

0

10

20

30

0

1

2

3

4

5

6

7

8

Gross official reserves (percent of GDP)Reserves (in months of non-extractive imports; RHS)

Foreign Exchange Re-serves

0

20

40

60

80

100

120

140

160

0

50

100

150

200

250

300

350

Real effective exchange rateNominal effective exchange rateUM/USD (right scale)

Exchange Rates(Index, 2005=100)

Private sector credit growth has remained subdued

..banks remain well capitalized but have low profitability

1. Achieving Macroeconomic Stability

Jun-08 Oct-09 Feb-11 Jun-12 Oct-130

5

10

15

20

25

30

35

40

Policy rateCredit growthT-bill rate

Private-sector Credit Growth(y-o-y; percent)

Return on assets

Return on equity

Capital to assets ra-

tio

Regulatory capital ra-

tio

0

5

10

15

20

25

30

35Banking Indica-tors(End-2012; percent)

Economic Outlook

2. Economic Outlook

Initial Condition

s•Macroeconomic stability•Higher resilience to external shocks

Context •Prudent macroeconomic policies•Still elevated commodity prices•A strong mining potential

Outlook •Positive, with an opportunity to support stronger and more inclusive economic growth dynamics.

2. Economic Outlook

Positive economic outlook: Annual average real GDP growth above 7 percent over the medium term.

…fueled by mining, agriculture and fishing, construction and services,

…and with positive effects on potential growth.

….and challenges remain.

2. Economic Outlook: Challenges

Resilience to external shocks

Private sector development and economic diversification

More inclusive growth dynamics

Economic Diversification

Private Sector Development

Increasing resilience of the economy to external shocks

Enhance domestic sources of growth dynamics

Economic transformation to increase higher value-added output

Improve business environment

Financial deepening and access to finance

Improve labor markets dynamics

Reduce informality

2. Economic Outlook: Challenges

2. Economic Outlook: Challenges

More inclusive growth dynamicsAccess to drinking water and

electricityImprove education and access to

healthBetter targeted social transfers to

reach the most vulnerable

3. Conclusions

Mauritania’s economic potential is large, with opportunities to capitalize in the coming decade.

Private sector development will drive economic diversification and job creation.

Promoting more inclusive economic growth is crucial to improve living standards for the population overall.

Good management of the economic juncture will provide Mauritania with a historic opportunity to transform this country.

Thank you!