São Paulo – This Monday (2nd), the International Monetary Fund announced a US$ 16.78 million loan to Mauritania. The loan is part of an Extended Credit Facility (ECF) established in 2010 and valid for three years. The new loan will raise the total loaned to US$ 83.89 million, according to the Fund.
ECFs are loans destined for poor countries and feature special conditions, such as more flexible issuance rules and zero interest rates. The total value of the agreement with Mauritania is US$ 117.4 million.
The IMF has also announced the completion of its fourth report on Mauritania since the agreement went into force. In a press statement, the Fund’s deputy managing director Nemat Shafik said that the country performed strongly in 2011, with fiscal and foreign policies that caused the country’s economy to withstand a strong drought, a declining international demand, and high food and fuel prices. The country is dependent on commodities exports.
Shafik said, however, that progress in tackling unemployment has been limited. For this year, the Fund believes that the loosening of fiscal policy is “appropriate” in order to counter the effects of the drought, but advises on spending cuts once the dry spell is over, so as to ensure “fiscal sustainability.”
The executive emphasizes the determination of local authorities to consolidate the fiscal position over the medium term, and claims a “key component of this strategy” is to replace universal price subsidies with “well-targeted social safety nets”.
To further reduce vulnerabilities, the IMF advises that the country’s exposition to commodity price volatility must be lowered by creating a fund to manage export revenues, especially those from mining, by improving tax collection, and by seeking revenues from further exploration of natural resources.
“Structural reforms to create employment, reduce poverty, and diversify the economy away from commodity exports remain crucial,” said Shafik.
*Translated by Gabriel Pomerancblum
