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Harnessing Mauritania’s natural resources to promote economic growth and sustainable development
Sound management of natural resources in Mauritania has the potential to spur further economic growth and build a foundation for sustainable development in the country, according to a new World Bank Group report released today.
In the first Mauritania Economic Update, the World Bank analyzes current macroeconomic trends and identifies ways to help a resource-abundant country like Mauritania to address the challenges of achieving inclusive socioeconomic development.
“A resource-rich developing economy like Mauritania, with its high growth rates, can become one of the success stories in Sub-Saharan Africa. The country has considerable untapped potential and, with the ongoing diversification agenda and efforts to increase productivity, can rapidly achieve sustainable and inclusive development,” says Vera Songwe, Country Director for Mauritania.
Mauritania’s economy grew robustly at 6.7% in 2013, backed by a thriving mining sector, a strong rebound in agriculture, and expansions in services. The mining sector represents roughly one-fourth of GDP, almost 20% of total revenues, and more than half of total exports.
The country recently graduated as lower-middle income country thanks in large part to its considerable endowment of natural resources. A continuation of these relatively robust growth conditions is anticipated over the next three years, as the economy benefits from a continued expansion of mining output, particularly of iron ore.
The challenges of inclusive growth, economic diversification, and resource utilization efficiency
Mauritania has succeeded in increasing per capita income over recent years, thanks to a natural resources boom. However income distribution has remained relatively unchanged for the last two decades and the challenges of unemployment – especially for the under 35 and those living in rural areas – remain daunting.
“For a considerably endowed country like Mauritania, good management of natural resources is essential to ensuring that growth is shared.
“Mauritania should continue on the path of productive investments in the energy and infrastructure sectors, as well as in improving social spending and public services delivery, particularly in health and education,” says Gianluca Mele, Country Economist for Mauritania.
Policy makers in Mauritania face a difficult trade-off between responding to the immediate needs of the population and making investments to prepare for a future when non-renewable resources are exhausted or less readily available. According to the report, the key policy question facing the country is how to set up a foundation for long term growth given that an important portion of the country’s wealth stock is progressively and unavoidably being eroded.
Local worker at the artisanal fishing port of Nouakchott.
Recommendations
In addition to highlighting the importance of continuing to improve the efficiency of resource utilization, the update offers four areas of policy focus that could help Mauritania unleash its growth potential:
Considering the establishment a savings mechanism for stabilization and inter-generational transfers: The possibility of keeping at least a portion of natural resources revenues in a sovereign wealth fund should be carefully scrutinized. Mauritania counts on a successful precedent, that of a crude oil fund created in the mid-2000s, which today accounts for approximately $115 million (equivalent to almost 3% of GDP).
Investing resource revenues domestically: Fiscal analysis of Mauritania reflects a recent policy shift in this direction. Public expenditure appears to be reoriented toward areas such as energy and transportation infrastructure, as well as toward phasing-out subsidies and abandoning a reactionary approach to crises in favor of systematic methods to handle external vulnerabilities such as food crises.
Strengthening public financial management: The Government of Mauritania has recorded positive improvements in fiscal consolidation, such as a revamped coordination between customs and fiscal authorities, a tax base expansion (tax revenues moved from 14% GDP in 2009 to over 22% in 2013) and increased visibility of budget data through the adoption of the BOOST platform in 2014. Mauritania should continue consolidating public finance management by strengthening the efficiency of medium term expenditure frameworks (MTEFs), and by streamlining public procurement procedures.
Enhancing the quality of public services and fostering transparency in the public sector: While Mauritania has registered remarkable achievements in primary enrollment and gender balance in schools, more needs to be done to improve the quality of health-related services, as maternal and infant mortality Millennium Development Goals (MDGs) appear to be largely out of reach. It is also critical that the country commits to ensuring that the selection processes within the public sector follow transparent paths built on meritocracy, and that statistical intelligence is produced and disseminated regularly.
