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Mauritania’s International Reserves Decline as Economy Faces Challenges

Mauritania’s International Reserves Plunge to $1.6 Billion

Nouakchott, Mauritania - The Islamic Republic of Mauritania has witnessed a significant decline in its international reserves, falling to $1.6 billion by the end of 2022, according to the International Monetary Fund (IMF). This represents a drop of over 30% from the $2.3 billion recorded at the end of 2021.

Bilateral Exchange Rate Fluctuations

The bilateral exchange rate of the Ouguiya against the US dollar has also seen fluctuations throughout the year, depreciating by 3.4% in July before stabilizing again in August and October.

External Position Remains Broadly in Line with Fundamentals

Despite these challenges, Mauritania’s external position remains broadly in line with fundamentals and desirable policies, according to the IMF. The Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER) have appreciated by 8.0% and 11.9%, respectively, mainly due to the appreciation of the nominal exchange rate relative to the euro and widening inflation differentials with trading partners.

Fiscal Policy Response

The Mauritanian government has responded to rising energy and food import prices by adopting an expansionary fiscal policy. A revised budget law was passed in July, projecting a fiscal deficit of 4.4% of GDP and a non-extractive primary deficit of 8.7% of GDP.

  • Increased expenditures for:
    • Subsidies on refined petroleum products
    • Social spending to mitigate the impact of surging food prices
    • Public investment and security
  • Revenue boosted by record dividend from state-owned mining company SNIM

Credit Growth Accelerates, Broad Money Growth Slows

Credit growth has accelerated in 2022, reaching 19.7% in September from 8.4% at the end of 2021. However, broad money growth slowed to 4.7% in September due to a reduction in international reserves and the start of mobile banking activity.

Banking System Remains Well-Capitalized

The banking system remains well-capitalized, but the overall capital adequacy ratio has declined from 18.1% at the end of 2021 to 17.7% in September due to increasing foreign exchange risks.

Sources

  • IMF staff calculations
  • Data provided by Mauritanian authorities