FINANCE: Mauritania Wins Debt Relief, Outlook Remains Guarded

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Jun 19 2002 (IPS) - Mauritania’s creditors have agreed to write off 1.1 billion dollars of the country’s external debt servicing over time, on condition that the government in Nouakchott follow World Bank and International Monetary Fund (IMF) prescriptions for economic restructuring.

Mauritania, which qualified for the debt relief in January 2000, thus becomes the sixth country to reach the Heavily Indebted Poor Countries (HIPC) Initiative’s completion point, the IMF and Bank said Wednesday.

For Mauritania, one of the world’s poorest nations, this means that the net present value of its total external debt would be reduced by some 50 percent, the two lenders said in a statement.

“This, however, will require continued efforts to monitor the debt level and to apply prudent debt management policies,” they added.

Debt service payments for the largely desert country will be cut from about 88 million dollars in 1998, before Mauritania qualified for HIPC, to an average of 35 million in 2003.

From 2002 to 2011, Mauritania will be paying an average of 39 million per year as a result of HIPC and what the statement described as “additional sources of debt relief”.

The Bank’s soft-loan arm, the International Development Association (IDA), will provide 100 million in debt relief, or 65 percent reduction in debt service on IDA credits, wile the IMF will provide some 47 million and bilateral creditors are expected to relieve up to 261 million, the statement said.

Mauritania had previously negotiated a debt rescheduling agreement with the Paris Club of bilateral creditors to get a 90 percent debt reduction.

Finally, around 124 million of Mauritania’s HIPC relief is expected from non-Paris Club and commercial creditors.

Mauritania, a country of 2.8 million people living mostly on farming and fishing, has committed itself to running strong macroeconomic and structural policies backed by an IMF Poverty Reduction and Growth Facility (PRGF) programme, and to carrying out a raft of social, structural, and institutional changes.

The creditors said they were satisfied with the country’s performance under President Maaouiya Ould Sid Ahmed Taya.

“Mauritania’s eligibility for debt relief under the enhanced HIPC Initiative underscores recognition by the international community of its satisfactory progress in implementing sound macroeconomic and structural policies,” said the statement.

According to the Bank and the Fund, the gross primary education enrolment rate reached 88 percent in 2001, up from 82 percent in 1996 and 46 percent in 1990.

In February 2002, the rate of vaccination against tuberculosis, mumps, diphtheria and tetanus reached 67 percent, up from 30 percent in 1996 but still short of the target of 70 percent.

The two Washington-based agencies commended Nouakchott’s economic performance, saying that gross domestic product (GDP) rose by 4.8 percent in 2000-01, from an annual average of 4.2 percent in 1995-1999 despite the adverse impact of a global economic slowdown in the second half of 2001.

Inflation remained in check, averaging around four percent in 2000 and 2001, and the current account deficit remained under control at about six percent of GDP in 2001.

The country suffered a decline in world demand for its main export, iron ore, as a result of the world economic slowdown, however. It also faces desertification and natural droughts — factors that helped put the country in debt in the first place.

In contrast to the figures from the two organisations, civil society groups have said that HIPC has had relatively poor performance in the 26 countries that already have qualified for relief.

Anti-debt campaigners and several think tanks argue that HIPC, led by the Bank and the IMF, has not helped to rid poor countries of choking debt.

Launched in 1996, the HIPC scheme aims to reduce the poorest countries’ debt — particularly the portion owed to multilateral agencies like the Bank and the IMF — to levels at which creditors think those countries will be able to keep up with repayments.

In April, Bank and IMF staff released a report saying HIPC was largely off track and that this did not augur well for future plans.

Of the 26 countries that have reached their decision point, when creditors agree to ease the debt, only six, including Mauritania, have graduated to the completion point, when the relief is actually delivered.

The countries that preceded Mauritania to the completion point are Bolivia, Burkina Faso, Mozambique, Tanzania and Uganda – still some of the world’s most impoverished and heavily indebted nations.

The Zimbabwe-based African Forum and Network on Debt and Development (AFRODAD) estimated Mauritania’s debt at 2.6 billion dollars and warned that even with debt relief the country will endure poverty and debt for a long time to come.