Aid may boost Mauritania economic recovery -IMF
by Daniel Flynn

Reuters    Translate This Article
2 February 2008

NOUAKCHOTT, (Reuters) - More than $2 billion in donor aid pledged in December should help Mauritania's economy grow by more than 4.5 percent this year as it emerges from a slowdown in 2007, the IMF said on Friday.

The Saharan state's economic growth slowed to 0.9 percent in 2007 due to a sharp fall in output from the fledgling oil sector while the non-oil economy performed well, growing 5.7 percent.

Marc Carre, the IMF's representative in Mauritania, said a stabilization in oil production and an increase in gold output would underpin a recovery of overall growth this year.

The government expects the $2.8 billion economy to grow by 4.5 percent this year and average 4 percent growth until 2010, as the government pushes ahead with reforms.

At a donor conference in Paris in December, Mauritania won $2.1 billion in pledges—well in excess of a $1.5 billion target—as donors hailed the transition from decades of dictatorship and a peaceful presidential election in 2007.

'There could be some economic upside,' said Carre. 'After the Paris meeting, they could benefit from very strong donor support and that might have a positive impact on growth over the next few years.'

'People obviously think that things are moving in the right direction, not only in the political field but also in the economic field,' he said, singling out efforts to tackle corruption and improve government finances.

OIL DISAPPOINTS

Almost half Mauritania's 3 million people live below the poverty line. The start of oil production in 2006 triggered hopes of prosperity in the former French colony and the economy grew by 11 percent that year.

But many Mauritanians have voiced frustration as the economy slowed last year after oil production hit technical problems.

From a peak of around 75,000 barrels a day, output dropped to average 22,000 barrels a day by the end of 2006 and fell more steeply than expected last year to some 15,000 barrels a day. 'For its 2008 macroeconomic outlook, the government takes into account that production will stabilize and perhaps decrease a little bit from that level, which we think is a prudent approach' said Carre.

However, the start-up of two new fields, Thiof and Tevet, between 2010 and 2012 should give new impetus to the industry, Carre said.

'With the volatility shown by the oil sector, Mauritania has to continue with reform and diversify the economy,' he said.

In 2007 almost 40 percent of Mauritania's $1.3 billion exports came from the state-run iron sector. Oil was second at around $300 million, followed by fishing, copper and gold.

In recent years, the oil sector has led foreign investment, but shortfalls in production has shaken confidence. Australia's Woodside Petroleum sold its assets last year for $418 million to Malaysian state oil company Petronas.

Elsewhere there are pockets of investor interest. In telecoms, companies from Tunisia, Morocco and Sudan have pumped cash into the three mobile operators, while France's Societe Generale and BNP Paribas have entered the underdeveloped banking sector.

After slashing its foreign debt through the G8 Multilateral Debt Relief Initiative in 2006, Mauritania also is negotiating its outstanding liabilities with Arab donors. Foremost amongst these is Kuwait, which is owed $1 billion by Mauritania.

'We have indications that they have made progress with Kuwait and a few others,' Carre said.

(Edited by Alistair Thomson and Tony Austin)

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