Mauritania - Economy
Mauritania remains among the world’s poorest countries, ranked 136th of 169 countries in the United Nations Human Development Index in 2010. In a country that imports some 70% of its food, rising world prices for staple commodities could cause great hardship, especially for the urban poor. In rural areas, management of food stocks is frequently inadequate. Malnutrition is on the rise in some rural areas, including in the area affected by an outbreak of Rift Valley Fever in late 2010. Drought, disease, and locusts could destroy much of 2011's crops and livestock.
Local rice and sorghum are the food items most consumed by poor households in Mauritania, followed by imported wheat, which is the substitute food to which these households rely most. Local rice is grown in the river valley (in the southern regions of Trarza, Brakna, Gorgol and Guidimakha). Sorghum is produced in all areas of production (rain-fed sorghum) and in walo and dams (recession sorghum). However, a significant portion is imported from Mali and Senegal.
Mauritania lives much more of its imports (70% in good agricultural year and up to 85% in bad year) than of its internal production. Nouakchott is the main collection market for products coming from outside and also the distribution market where it comes to supply the animators of the secondary distribution markets that are the other referenced markets. Cooking oil is mainly consumed in urban areas. The sale of animals is a way of life in all areas and an important source of income and food.
The authorities’ initial response to the fall of international metal prices was geared to supporting economic activity with countercyclical policies using fiscal and external buffers built during the boom years for metal prices. As the terms-of-trade shock became increasingly perceived as long-lasting, the authorities have started adjusting their fiscal and exchange rate policies, including measures to strengthen revenues and contain current expenditures, and allowing for nominal depreciation. Growth slowed to about 2 percent in 2015 due to lower mining activity and slower construction and fishing activity because of base effects, and rebounded to 4 percent in 2016.
The Mauritanian authorities took determined steps to adapt their economic policies to take account of the difficult conditions of the two years following the fall in metal prices. They significantly reduced the fiscal deficit by more than three percent of GDP in 2016, drew on external loans and grants, and used the exchange rate to regain competitiveness. They also undertook a significant series of economic reforms and public investments, particularly in infrastructure. these actions helped reduce macroeconomic imbalances.
The country faced numerous challenges, in particular as regards supporting inclusive economic growth and diversification; creating jobs; reducing poverty, which is an ongoing challenge despite the progress made; and safeguarding macroeconomic stability while seeking to keep external debt levels within sustainable limits over the medium term.
After two years of recession in 2008 and 2009, which reflect the vulnerability of the Mauritanian economy to external shocks, the country returned to growth in 2010, returning to its pre-crisis level. Gross domestic product slowed to 2% in 2015 due to slower revenues from mining, construction and fishing. The International Monetary Fund expected it to reach 4.1% in 2016.
Iron, gold and copper, as well as petroleum, account for four-fifths of exports, with the remainder consisting mainly of agricultural and fishery products. The overall investment climate in Mauritania remains challenging for U.S. and other foreign investors. The Mauritanian government continues to encourage foreign direct investment, but a weak judicial system, opaque tax laws, complicated labor laws, a fragile political system, an underdeveloped infrastructure, and a lack of skilled labor remain major challenges to foreign investors in Mauritania.
Mauritania has a diverse range of mineral resources, including gold and diamonds. However, exploitation of these resources has been limited by the country’s poor infrastructure. A significant iron ore mining industry contributes up to 11% of the country’s GNP, as well as 40% of export earnings.. A significant expansion in the mining sector should help to raise real growth in non-oil GDP to 5.6% in 2007.
Mauritania has offshore oil and gas deposits and a growing upstream oil industry. Offshore oil extraction began in February 2006. GDP surged 11.2% in 2006, one of the highest growth rates in the world. However, technical difficulties affected oil production in the second half of 2006 causing a sharp fall in output from 75,000 barrels per day in February to around 22,000 barrels p/d in December. Production is expected to stabilise at around 30,000 barrels p/d in 2007 thereby moderating recent GDP growth.It is one of the four oil refining countries in West Africa. Its downstream oil industry is a significant element in the country’s economy. Oil derived products supply 95% of the country’s commercial energy needs.
In the past, drought and economic mismanagement resulted in a build-up of foreign debt. In February 2000, Mauritania qualified for debt relief under the Heavily Indebted Poor Countries (HIPC) initiative and in December 2001 received strong support from donor and lending countries at a triennial Consultative Group review. In June 2006 Mauritania had its Multilateral debt cancelled under the G8 Multilateral Debt Relief Initiative (MDRI). Ongoing negotiations with the IMF involve problems of economic reforms and fiscal discipline. The government’s main objectives remain the reduction of poverty, improvement of health and education, and promoting privatisation of the economy.
If the promising oil and gas prospects being explored offshore are brought to fruition, Mauritania will have the chance to diversify its currently narrow export base. In addition, Mauritania has Least Developed Country status. This means it can export to the EU most goods (provided that they meet EU standards) on a tariff-free basis.
Mauritanian economic growth remains poorly inclusive and does not significantly reduce poverty and inequality. 66% of the population lives in a situation of multidimensional poverty within the meaning of the United Nations Development Program and Mauritania comes in 156th position (out of 188) in the human development index.
The business climate is deteriorating, with Mauritania 168th out of 189 in the ease of doing business for 2016. However, there has been some progress in recent years: a new investment code, efforts to facilitate cross-border trade.
A majority of the population still depends on agriculture and livestock for a livelihood, even though most of the nomads and many subsistence farmers were forced into the cities by recurrent droughts in the 1970s and 1980s.
The tax system remains opaque. Over the last two years the rate of tax collection has increased, although in a targeted manner. Tax rates on businesses start at 25 percent on profits and two percent on revenue; moreover, the procedures required to pay taxes lack transparency and are time-consuming. Some businesses have faced retaliatory tax bills when they sought, in good faith, to follow the law’s provisions. When commodity prices decrease, the government becomes more aggressive in tax collection efforts, seemingly to bail out government owned enterprises. For instance, we saw government collection efforts increase dramatically when iron ore hit a low at the end of 2015. As the iron ore price recovers, however, we expect the government’s aggressive attitude towards tax collection to mellow.
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