Mauritania, which has historically been classified as a subsistence economy, is working to add value to traditional industries and leverage new sources of revenue to create sustainable and inclusive growth.
Decades of over-reliance on exports of iron ore, gold and crude oil fostered a cycle of boom and bust as the country was exposed to fluctuations in global demand for commodities. Meanwhile, drought and desertification have seen the agriculture sector’s share of GDP decline, from 25% in the late 21st century to around 20% in 2020. That same year services accounted for the largest share of the total, at 42.5%, while industry comprised 28.8%, including a 6.1% contribution from manufacturing. In 2020 headwinds related to the Covid-19 pandemic led GDP growth to contract by 1.5%, for a value of $7.8bn.
ECONOMIC OUTLOOK
Mauritania’s public finances are relatively strong following a series of reforms in the wake of the 2015 collapse in global commodity prices, which revealed the country’s vulnerability to terms of trade shocks. These reforms helped improve Mauritania’s fiscal position: turning a fiscal deficit of 2.7% of GDP in 2014-15 to a surplus of 1% in 2016-19 – one of the most robust in sub-Saharan Africa at the time. Despite some continuing financial pressures in 2021, the authorities are in a good position to ramp up social and investment spending to support a resilient recovery, and the fiscal balance is expected to remain strong over the medium term. However, external debt remains high, at 62% of GDP in 2019, and includes arrears to Kuwait estimated at 12.8% of GDP, which the authorities have been unable to settle for several years. According to an IMF debt sustainability analysis, the country’s risk of external and public debt distress is high: public external debt as a percentage of GDP was expected to rise to 69% in 2020 and 70% in 2021, before moderating to 68% in 2022 – above the 40% of GDP that is generally considered to be sustainable figure.
Mauritania’s fiscal well-being will be vital as the government seeks to address the multiple mid-pandemic challenges facing the country, including reversing an unwelcome uptick in poverty and malnutrition following decades of improvements, and achieving broad-based economic growth. Prime Minister Mohamed Ould Bilal Messoud, who took office in August 2020, is leading the implementation of the Expanded Priority Programme of the President of the Republic of Mauritania. The programme integrates the country’s response plan to the Covid-19 pandemic and focuses on charting a course towards a resilient economic recovery.
While the Mauritanian economy was significantly impacted by the pandemic, its future outlook is relatively bright, with the World Bank projecting GDP growth will recover to an average of 4.1% between 2021 and 2023. However, this economic outlook is subject to risks, including the potential for the Omicron variant of Covid-19 to extend the pandemic and delay the government’s efforts to pursue further reforms. Other downside risks include weaker prices for metals, minerals and fuel, and climate hazards.
MONETARY POLICY
The Central Bank of Mauritania was established in 1973 and issues the national currency, the ouguiya. It is responsible for setting benchmark interest rates and ensuring price stability. As of October 2021 headline inflation in the country stood at 4.7% year-on-year, slightly above the authorities’ 4% target, and up from 2.3% in 2019 and 2.4% in 2020. According to the IMF’s October 2021 World Economic Outlook database, inflation is forecast to reach 3.8% in 2022.
The banking sector is centred in Nouakchott and includes several commercial banks of varying sizes. Insurance companies in Mauritania were state-owned prior to the liberalisation of the sector by the government in the 1990s; by the early 2000s the state-owned insurance provider was in competition with a number of privately owned firms.
EXTERNAL SUPPORT
Mauritania has long relied on foreign aid from bilateral partners and multilateral agencies to help balance the national budget and assist in project development, as well as support food security. This vital financial lifeline has grown increasingly important over time, with net official development assistance expanding from $236.2m in 1990 to $412.2m as of 2020.
Key development partners include France, other members of the EU, the African Development Bank, the Islamic Development Bank, the IMF, the International Fund for Agricultural Development and the EU itself. For its part, the World Bank’s portfolio comprises an overall commitment of $825.75m. A newly approved Youth Employability Project complements the bank’s supporting operations in water, agriculture, urbanisation and energy.
POVERTY REDUCTION
Mauritania ranks 150th out of 157 countries surveyed on the World Bank’s Human Capital Index, underscoring wide disparities in access to services and therefore economic opportunites. Recurrent droughts have undermined the country’s food production capacity and fuelled the incidence of poverty. However, the government launched a poverty reduction law and strategy in 2001 that has had a positive impact to date, and helped reduce the share of people living in monetary poverty from 10.9% in 2008 to 6% in 2014, though some other measurements put the proportion of people living in poverty at a higher level.
Nonetheless, a wide disparity in living standards, food insecurity, malnutrition, gender inequality and land degradation pose considerable hurdles to inclusive growth. In March 2021 close to 500,000 people in the country were projected to be food insecure, encompassing both Mauritanians and refugees from the volatile security situation in Mali.
As has been the case in many countries around the world, some measurements suggest that the Covid-19 pandemic is fuelling an increase in poverty levels in Mauritania, which rose from 5.4% in 2019 to 6.3% in 2020 and 6.4% in 2021.
EXTRACTIVE INDUSTRIES
Mining remains an important engine of economic growth, contributing 59% of exports by value and nearly 10% of GDP, as well as one-10th of government revenue. Iron ore and gold mining are predominantly centred in Fderik, in the Sahara Desert, while copper is primarily found around the western city of Akjoujt. Iron ore and gold are two of the country’s largest exports, with the former earning $1.7bn in 2019, though the processing of both largely takes place overseas.
The government is committed to diversifying the mining sector and is placing greater emphasis on non-metal commodities such as limestone, clay for construction, phosphate and industrial minerals. Importantly, the National Industrial and Mining Company (Société Nationale Industrielle et Minière, SNIM), Africa’s second-largest iron ore producer, has attracted African Development Bank Group and European Investment Bank support to enlarge the berthing capacity at the Port of Nouadhibou, from which it ships export cargo abroad. The project plans to deepen and widen the SNIM’s berths to handle larger ships, maximising the efficiency of its transport chain while reducing costs.
The development of the oil and gas sector, for its part, has been less straightforward. After offshore reserves at the Chinguetti field were developed in 2006, the field quickly fell short of the expectations of the government and investors alike. However, Kosmos Energy’s 2014 discovery of 15trn cu feet of recoverable gas reserves in the waters between Mauritania and Senegal looks set to drive a new phase of investment and government revenue. To be developed in phases, the Greater Tortue Ahmeyim liquefied natural gas (LNG) project will produce up to 10m tonnes of LNG per annum, with the potential for further expansion after commercial production is slated to begin in 2023 (see Energy analysis).
AGRICULTURE & FISHING
In the few locations where precipitation exceeds 43 cm per year, farmers grow millet and dates, along with sorghum, beans, yams, maize and cotton. Along the riverbanks of the Sahelian zone, flooding allows rice to be cultivated, along with other grains and watermelon.
The government is working to expand irrigation projects in oasis zones, primarily through the drip technique, a form of micro-irrigation that saves water by slowly feeding moisture directly into the roots of plants, thereby avoiding evaporation. Successive governments have endeavoured to increase the amount of irrigated land next to the Senegal River in the south, as well as improve well water access and palm tree coverage to allow vegetables and grains to be grown in oases.
Mauritania currently relies on imports to meet the bulk of its food security requirements. Three-quarters
of the population is engaged in raising livestock; goats and sheep are the most prevalent, followed
by cattle and camels, and the sale of animals is an important source of income and food for those in
the industry (see Agri-business analysis).
Lévrier Bay opens onto some of the world’s richest fishing grounds, and fishing contributes about 5% to GDP. Since 1980 the government has required that foreign fleets form a joint venture and establish a processing terminal in Nouadhibou. In 2015 the country adopted a new national fisheries strategy to ensure transparency and sustainable practices in the sector. In 2021 the EU sealed a new five-year agreement granting its vessels access to Mauritanian waters. They are allowed to catch some 290,000 tonnes per year, in return for €16.5m in sector support and an annual contribution of €57.5m.
TRADE & INVESTMENT
Frozen fish is another of the country’s top exports, along with gold, molluscs and processed crustaceans. Its top imports, meanwhile, include special-purpose ships, planes and helicopters, as well as wheat, raw sugar and refined petroleum. China is its largest overall trading partner, while Switzerland is the second-largest export market and France is its top import partner.
In 2020 the current account deficit widened to a record 17.6% of GDP, driven by a one-third decline in
iron ore exports and a pause in exports of fish products. This saw the economy contract and pushed
an estimated 48,000 people into extreme poverty.
From 2009 to 2015 foreign investment helped drive growth in the construction, utilities, transport and communications sectors. In 2013 the government sought to capitalise on the influx and launched a free zone in Nouadhibou to improve the port’s competitiveness and attract fish-processing industries such as tuna canning.
However, despite investment from mainly Spanish and Moroccan companies, the free zone failed to
take off. The government continues to court interest, with plans for a new airport, a tourist area and
the continued expansion of the deepwater fishing port. President Ghazouani chairs a strategic council
devoted to enhancing its attractiveness to investors. Incentives include a cap on salary tax for expats,
reductions in administration fees, and exemptions on Customs duties and fees for imported goods.
OUTLOOK
While the pandemic saw a significant drop in foreign direct investment, from an originally
forecast $937m to $594m in 2020, and put pressure on socio-economic indicators, there are prospects
for recovery in step with the global economy.
