Press Release No. 11/248

Press Release: IMF Executive Board Completes Second Review Under ECF Arrangement for Mauritania and Approves US$17.6 Million Disbursement

June 22, 2011

The Executive Board of the International Monetary Fund (IMF) completed its second review of Mauritania’s economic performance under a program supported by the Extended Credit Facility arrangement (ECF)¹. The decision enables Mauritania to draw an additional amount equivalent to SDR 11.04 million (US$17.6 million), bringing total disbursements under the arrangement to an amount equivalent to SDR33.12 million (about US$52.9 million).

The Executive Board approved a three-year ECF arrangement for Mauritania in March 2010 in an amount of SDR 77.28 million, equivalent to 120 percent of the country’s quota in the IMF (See Press Release No. 10/89).

Following the Executive Board discussion, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, issued the following statement:

“The Mauritanian authorities are to be commended for the strong performance under the ECF-supported program. Sound policies, coupled with rising external demand and export prices, have helped restore macroeconomic stability and improve near-term prospects. At the same time, high unemployment, widespread poverty, and vulnerability to external shocks are still serious challenges that need to be addressed decisively.

“The authorities are firmly committed to fiscal consolidation, while increasing spending in the short run to mitigate the impact of higher fuel and food prices, mostly through temporary subsidy payments. To this end, it will be important to enhance revenue mobilization, reduce nonpriority spending, and pursue a cautious borrowing strategy. Moreover, fiscal discipline and social cohesion would also be strengthened by the authorities’ plans to replace general subsidy schemes by well-targeted and more cost effective social safety nets.

“While the current monetary policy stance appears appropriate, the authorities stand ready to respond to any inflationary pressures. The increased flexibility of the exchange rate over the past year is commendable and should be reinforced by continuing to limit foreign exchange intervention to smoothing excessive volatility. Additional external buffers by increasing net international reserves are also needed to further reduce vulnerability.

“Ongoing plans to reform the financial sector, including through improved banking supervision and accounting standards, are welcome. Timely implementation of the latest safeguards assessment recommendations is of the highest priority.

“The newly finalized poverty-reduction strategy paper appropriately addresses the main challenges facing Mauritania, and continued close engagement with donors will be important. The planned structural reforms aimed at restructuring public enterprises, enhancing the labor market, strengthening transparency, and improving the business climate are key to promote sustainable employment and broad-based inclusive growth.”

¹ The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years (http://www.imf.org/external/np/exr/facts/ecf.htm). The Fund reviews the level of interest rates for all concessional facilities every two years.