Country Report Mauritania July 2008

Outlook for 2008-09

The president, Sidi Mohamed Ould Cheikh Abdallahi, has won several political battles by dealing with many of the grievances that beset the country under the previous authoritarian regime, but his government still faces many challenges owing to a difficult economic environment, disunity within the pro-presidential camp and a significant terrorist threat. Although oil production will remain depressed, real GDP growth is forecast to accelerate to 4.5% in 2008 and 5% in 2009, supported largely by increasing activity in mining and construction. High international prices for cereal and oil will continue to generate inflationary pressure: inflation is forecast to average 8.5% in 2008 and 5% in 2009.

The political scene

Mauritania has suffered a period of political instability with the demise of two governments. Mr Abdallahi appointed a new prime minister, Yahya Ould Ahmed Waghef, in May to tackle growing discontent with his administration. However, Mr Waghef's government was forced to resign after facing a vote of no-confidence pushed by deputies of pro-presidential parties, who were angry that the distribution of cabinet posts did not reflect the relative weight of each party in the National Assembly. Terrorist threats have temporarily subsided following the arrest of those involved in the terrorist attacks that afflicted the country in late 2007 and early 2008.

Economic policy

The IMF has completed the third review under the poverty reduction and growth facility (PRGF) and expressed satisfaction that the government has been able to achieve all of the quantitative targets and structural benchmarks. The use of the national oil revenue fund has generated controversy among the country's political parties.

The domestic economy

The measures adopted by the government to offset the rising cost of living have been successful in controlling inflation in the first four months of 2008. Malaysia's Petronas has begun drilling two new production wells, which may increase production from the Chinguetti oilfield. Petronas's exploration programme has also confirmed the existence of significant oil and gas resources in the Banda discovery. US-based Emerging Capital Partners (ECP) has announced that it has acquired a majority stake in Bacim-Bank.

Foreign trade and payments

According to IMF estimates, the current-account deficit widened from 1.3% of GDP in 2006 to 11.4% of GDP in 2007, owing to increased imports of goods and services.