Mauritania : Improving Budget Management to Promote Sustainable Development and Reduce Poverty, Public Expenditure Review Update

Abstract

The Public Expenditure Review (PER) has provided a basis for analysis and action under the Public Sector Capacity Building Program(PRECASP), one of components is related to the improvement of public finance management and is expected to support the implementation of the measures proposed in this document. These analyses deal with issues closely related to this review, including (i) the problems faced by the financial sector and their impact on public finances; (ii) the issue of transparency with regards to the management of oil revenues, and (iii) medium-term and long-term macroeconomic projections that determine the prospects for growth and for achieving the Millennium Development Goals (MDGs). Its objectives are to identify ways to improve public financial management in the sector and to alleviate the constraints on agriculture development, with a view to increasing productivity and reducing poverty in rural areas. Moreover, the PRECASP will finance expenditure reviews in priority sectors. Oil-related research, promotion and exploration activities are being intensified and are expected to lead to the exploitation of additional fields in the short term. Exploitation of other off-shore reserves is expected to start in the next few years. The largest oil field, Thof, should be operational by 2010. As a result of oil revenues, per capita GNP is expected to double. Mauritania must rise to the challenge posed by that windfall by establishing adequate mechanisms for the rational management of public resources, including oil revenue. The mobilization of tax revenue should be intensified and an adequate tax base ensured, compatible with private sector development, so that public spending relies more on stable revenue sources, not volatile ones like oil. Monetary and budget policies should aim at controlling inflation and ensuring a real effective exchange rate (REER) favorable for Mauritania's competitiveness.