afrol News, 23 November - Mauritania is witnessing a rebound in economic growth after a series of adverse shocks - including high import and low export prices, political instability, the global crisis - took a toll in recent years. Optimism is back, even if there will be no oil boom.
According to IMF analysts Boileau Loko, Abdelrahmi Bessaha and Younes Zouhar, Mauritania's government was just given "a vote of confidence for the country's economic reforms" by the International Monetary Fund (IMF). After 19 months of frozen ties, the first IMF disbursement of a three-year loan was agreed on.
The three analysts, writing in 'IMF Survey', "estimate that the economy will grow by 5 percent this year and just over 5 percent in 2011. This growth reflects the authorities' strong reform agenda, the rebound in prices of Mauritania's main exports, and the normalization of relations with the international community."
The West African country had high hopes for a dramatic change of fortune when oil was discovered off its shores in 2001. Production in Chinguetti, the main oil field, started in 2006 and immediately ran into major technical difficulties, which led output to fall from close to 75,000 barrels per day (bpd) in early 2006 to 23,000 by end-2006. Since then, oil production has steadily declined, with output projected to be as low as 7,000 bpd in 2011.
On the back of the unexpected and prolonged fall in oil output, Mauritania was hit hard by the fuel and food crisis and the global recession in 2008–09. In addition, an August 2008 military coup - the second in the past five years - led to a political crisis and the suspension of assistance from many bilateral and multilateral donors, including the IMF.
The combination of these adverse shocks had a profound impact on this desert nation of just over 3 million people. Non-oil real GDP contracted by 1.1 percent in 2009, down from 4.1 percent in 2008.
With the decline in oil production, total GDP also fell by 1.2 percent. The fiscal deficit widened and the external position deteriorated sharply, with external reserves dropping below 1.5 months of imports of goods and services. As a result, progress on poverty reduction slowed.
The country's internationally recognised presidential election of July 2009, won by Mohamed Ould Abdel Aziz, marked the return to a constitutional order. This step enabled the international community to resume normal relations with Mauritania, signalling a turning point for the country.
According to Loko, Bessaha and Zouhar, the IMF was one of the first agencies to respond, resuming its provision of technical assistance in September
Oil production (green) and GDP growth (blue) in Mauritania 2005-11
2009 and starting discussions with the Mauritanian authorities on a new programme of economic reforms supported by a three-year loan programme, which was approved by the IMF's Board in March this year.
Today, "Mauritanian authorities have made good progress in re-establishing macroeconomic stability," the IMF analysts hold. "Inflation is projected to remain in the single digits, while rapid credit growth, a strong pickup in exports, and a rebound in industrial production point to robust growth in the non-oil sector."
Non-oil real GDP is expected to grow by 5.6 percent in 2010 and 5.5 percent in 2011, supported by strong activity in the agriculture, mining, and construction sectors. Thanks to higher prices and production levels of Mauritania's iron ore, gold, and copper exports, the fiscal and external positions could improve, they hold.
The analysts also hold Mauritania has a "solid reform agenda." Reforms focus on achieving fiscal consolidation; creating more room for higher social and infrastructure spending; maintaining low inflation; improving the business environment to support broad-based private sector–led-growth; and strengthening social protection and safety nets.
In a move to signal a strong commitment to the reform agenda, Mauritania's central bank lowered its policy rate from 12 to 9 percent in November 2009 and restored the foreign exchange auction system in mid-December 2009. The system had been suspended in late 2008 following an acute shortage of foreign currency.
As with many low-income countries, the main goal is to achieve high and sustainable growth in order to boost employment and reduce poverty. Almost one out of two Mauritanians lives below the poverty line, and a large segment of the population remains subject to food insecurity.
"Progress has been made in many areas, but private investment is still low, in part because limited infrastructure and an unfavourable business climate continue to hamper economic growth," according tot he analysts.
Diversifying the economy is seen as essential to reducing Mauritania's vulnerability to external shocks, since the mining sector represents nearly 75 percent of exports but less than 3 percent of employment. "Meeting these challenges will require sound macroeconomic policies and the steady implementation of structural reforms," the IMF analysts claim.
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