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Report No. 10973
MauritaniaPublic Expenditure ReviewApril 1994
Africa RegionSahelian DepartmentCountry Operations
FOR OFFICIAL USE ONLY
Document of the World Bank
This document has as restricted distribution and may be used by recipientsonly in the performance of their official dutes. Its contents may not oherwisebe disclosed without World Bank authorization
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ACRONYMS
AfDB African Development BankAFESD Arab Fund for Economic and Social DevelopmentBCI Consolidated Investment Budget (Mauritania)BCM Central Bank of MauritaniaCCCE Caisse centrale de cooperation economique (France)CEAO Community of West African StatesCGI General Taxation Code (Mauritania)CHN Nouakchott Hospital CenterCMSM Comite militaire de salut nationalCSA Food Security Authority (Mauritania)DMER Directorate of Equipment & Road Maintenance (MET)DRASS Regional Directorates of Public HealthDT Directorate of Transportation (MET)DTP Directorate of Public Works (MET)ECU European Currency UnitEEC European Economic CommunityEPA Entreprise publique administrativeEPIC Entreprise publique industrialle ou commercialeFAC Fonds d'aide et de cooperation (France)IDA International Development AssociationIFAD International Fund for Agricultural DevelopmentIMF International Monetary FundIsDB Islamic Development BankKFAED Kuwait Fund for Arab Economic DevelopmentLSMS Living Standards Measurement SurveyMEF Ministry of FinanceMET Ministry of Infrastructure & TransportationMP Ministry of PlanningMSAS Ministry of Health & Social AffairsONS National Statistics OfficePAPR Road Policy Action Program (Mauritania)PCR Consolidation & Recovery Program (Mauritania)PE Public enterprisePFP Policy Framework PaperPIP Public Investment ProgramPREF Economic & Financial Rehabilitation Program (Mauritania)SEM Societe d'economie mixteSMEs Small- and medium-scale enterprisesSN Societe nationaleSNAT National Regional Development Master Plan (Mauritania)SNIM Societe nationale industrielle et miniereSTPN Societe des transports publics nationauxSTR Road Transport Division, Directorate of Transportation (MET)UM Monetary unit of Mauritania, the ouguiya
FOR OFFICIAL USE ONLY
FOREWORD
This first review of public expenditure in Mauritania is based on the findings of a mission which
visited the country in April-May 1991. The mission consisted of Miguel Saponara (team leader, responsible
for this report), M'hamed Cherif (consultant, macroeconomics), Jamal Kibbi (economist, Public Investment
Program), Elizabeth Huybens (economist, social sectors), Ousmian Diagana (economist, institutional
development), Filiberto Sebregondi, Marco Nicoli and Lam Hamady Amadou (consultants, rurl
development), Jean-Pierre Dihel (consultant, integrated regional development), Guy de Gonneville
(consultant, fisheries), and Vo Quang Tri (consultant, hydroelectric power). Jean-Louis Lacube, Francesco
Gosetti and Joso Matos-Ferreira (of the European Development Fund) also contributed to the work of the
mission.
The mission benefitted from the knowledge and contributions of the Mauritanian team, which was
led by M'Rabih Rabou Ould Cheikh Bounena (Senior Adviser, Ministry of Planning) and Sidi Mohamed
Ould Biye (Budget Director, Ministry of Finance).
Mr. Robert Lacey (Division Chief LA2CO) served as Lead Advisor; and the various drafts of this
report were reviewed by Ren6 Vaurs (Senior Economist, AFSPH); Bernard Larfeuil (Economist, AFSCO);
Gerard Boul-.h (Senior Public Management Specialist, AFTCB); Michel Loir (Senior Economist, AFSIN);
and Ignatius Menezes (Principal Economist, AF5IE). Susan Chase and Leo Demesmaker edited the report.
Secretarial assistance was provided by Kimberly Taborda and Monica Migliassi. The Director of the
Sahelian Department is Katharine Marshall, the Lead Economist is Frangois Laporte, and the managing
Division Chief, Country Operations Division is Jean-Louis Sarbib.
This document has a restricted distrbution and may be used by recipients only in the perfomance of their
! official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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Table of Contents
Foreword ............................................................ iii
Executive Summary, Condusiom, and Recommendations .vi
I Structural Adjustment and the Public Finances. I
Recent Macroeconomic Performance ............... e 2Overview of Main Structural Reforms. 3Public Finances. 5
Resource Mobilization. 6
II Public Expenditure 1985-91. 9
Analysis of Expenditure Trends since 1985. 9Major Economic Components .10Major Operational Components .17Analysis of Public Investment .19Changes in investment priorities .19Inter- and intrasectoral analysis of the PIP .20Formulation of the PIP .21Implementation of the PIP .21PIP Financing .26PIP for 1991-96 .29Recurrent Costs .30Aid Coordination and Management .32
m Institutional Framework and Economic and Financial NManagement Capacity .34
Budget Preparation and Monitoring .35Source of Data .35Budget Plan .35Preparation of the Budget .35Monitoring of Budget Expenditure .36Reform of the Civil Service .39
IV The Sectoral Programs ................................................ 43
The Transportation Sector .43The Human Res3urces Sector .48
Statistical Annex .61
Annex I .73Annex 1 .81Annex I . 84
V
Text Figures
1 Structure of Fiscal Revenue ................................................ 82 Structure of Tax Revenue. 83 Economic Classification of Expenditures .144 Breakdown of Expenditure by Area of Operation .185 Sectoral Distribution of Investment 1985-88 .256 Sectoral Distribution of Investment 1989-91 .257 Financing of Public Investment .28
Text Tables
1 Key Macroeconomic Indicators. 32 Strucutre of Fiscal Revenues .63a Budget Expenditures .103b Evolution of Budget Expenditure 1985-9 1.13c Sectoral Composition of the Operating Budget 1985-91 .114 Civil Service Payroll .125 Civil Service Bonus and Allowsances 136 Average Remuneration .157 Distribution of Public Investment by Sector .208 Sectoral Execution of Investments .229 European Development Funds Financing Statement .23
10 Investment Executed 1985-91 .2411 Financing Public Investment .2612 Distribution of Public Investment .3013 'r" Coefficients .3114 Expenditures on Road Transportation .4615 Breakdown of Expenditures on Education 1985-91 .4916 Projections of Operating Expenses for Public Education .217 Evolution of Health Expenditures 1985-91 .5518 Projections of Operating Expenditures for the Health Sector 1992-96 .60
Annex Tables
I Evolution of Subsidies to Administrative Public Enterprises .622 Administrative Public Enterprises Engaged in Training .633 Miscellaneous .644 Evolution of Transfers .645 Evolution of Base Salaries over 30 years (by category of Civil Servant) .656 Average Pay .667 Staff of the Ministry According to the Official Establishment (May 1991) .678 Breakdown of Ministry Staff by Duty Station (May 1991) ............................ 689 Fluctuation in the Purchasing Power of the Wage Bill of Government Employees .69
10 Projection of Operating Costs of Regional Health Centers .7011 Sources of Financing of Operating Expenditures .7112 Breakdown of Ministry of Health Operating Expenses by Type .7113 Breakdown of Ministry of Health Operating Expenses by Level .72
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Executive Summary, Conclusions, and Recommendations
The present report does not address the developments which have transpired in publicexpenditures since fiscal year 1991. Towards the end of 1992, the Governnient relaunched itsadjustment program. The ouguiya (UM) was devalued and steps were taken to strengthen themanagement of public expenditures. Notwithstanding these efforts, the consolidated fiscal deficitrose from 5 percent of GDP in 1992 to 11 percent of GDP in 1993, on the account of a larger thanexpected fiscal cost of the primary banks financial restructuring. To address this situation, theGovernment adopted in its Fifth Year Public Investment Program 1993-96 measures to lower theconsolidated fiscal deficit to 3.4 percent of GDP in 1994 and to restore equilibrium in the budgetby 1995. In light of this, expenditures should average 26 percent of GDP and then decline duringthe period 1994-96. To achieve this objective, the challenge facing the Government is to enhancethe efficiency of public outlays while reducing the overall magnitude of public expendituresconsistent with the aim of raising the level of domestic savings and reducing the role of the publicsector. Taking into account the constraints imposed by the overall wage bill in the budget on theone hand, and the need for performance incentives on the other, the Government will review thestructure of remuneration and other key elements of public service reform during 1993-96 prior tothe beginning of each fiscal year. Reductions in defense outlays each year after allowing forinflation and strict enforcement of subsidies or current transfers should assist the Government incarrying out its commitment to reorient expenditure toward basic education and health services.
Summary
1. Since independence, the public sector has played a critical role in Mauritania's developmentstrategy. A major group of parastatal enterprises has been created, government services haveexpanded, and government administrative controls widened to cover several sectors of the economy.As a result, the management of public resources has assumed increased importance. This is the firstpublic expenditure review in Mauritania since the Government committed itself to structuraladjustment of its economy in 1985. This review is a necessary step in the analysis of the country'splanning, programming, budgeting, and monitoring of its public expenditures.
2. Until the end of the 1970s, Mauritania's current and capital expenditures remained consistentwith increases in public revenue so that the Covernment was able to realize a modest budget surplus.In the early 80s, however, the country's public finances began to deteriorate. Some of the signs ofthis deterioration were significant deficits, increasing dependence on the banking system, a growinggap between projected and actual expenditure, neglect of maintenance of basic infrastructure, andincreasing retrenchment in general spending. In its effort to remedy the situation, the GovernmentLqstituted two medium-term development plans which focused on: expanding and diversifying theproductive base of the economy; strengthening the country's financial situation by observing a strictexpenditure policy, broadening the tax base, and improving tax collection; improving the externalbalance of payments and liberalizing the exchange and trade regulations; adhering to a level ofexternal indebtedness compatible with debt-service capacity; and developing coherent resource-mobilization strategies and social policies designed to mitigate the social costs of adjustment and tofoster job creation.
3. Although there have been important advances in the adjustment program, results so far havefallen short of the Government's expectations. Major reforms still need to be implemented,
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particularly in the public sector, if the resources required for the development program are to bernobilized more effectively and allocated in accordance with the priorities established.
4. One of the fundamental goals of adjustment is to change the structure of the economy tobenefit the most profitable sectors and activities, and thereby promote sustainable development.Obviously the authorities can influence and accelerate this process through better targeting of theirmacroeconomic and financial management decisions. For instance, the level of the budget deficit andthe means of financing it affect the availability of internal and external resources for productiveactivities and the Government's social objectives.
5. Prudent fiscal management is one of the objectives on the macroeconomic agenda theGovernment is currently formulating in conjunction with the IMF and the World Bank. The exogenousshocks, both external and internal, of 1989 and 1990 resulted in numerous revisions of the medium-termmacroeconomic agenda proposed in the Third Year Policy Framework Paper (PFP) for the period 1989-91,and in the draft Fourth Year PFP discussed with the Mauritanian authorities in June 1990, December 1991,and March-April 1992. Because of these adverse exogenous factors, the GDP growth rates anticipated for1990 and 1991 had to be revised downward to -1.8 percent and 2.6 percent, respectively, whereas theprojected figures had been 3 percent and 3.4 percent. These shocks included: a slowing down in certainexternal disbursements in 1989, virtual wit!hdrawal by some donors in 1990/91, higher oil prices, thecritical situation in the fisheries sector with a sharp plunge in its exports, and finally the effect of adverseweather patterns on agricultural production, exacerbated by the lack of any effective rural credit system.The negative impact of such shocks on the balance of payments and on public finances was offset by theaccumulation of arrears in both public and private debt-service obligations abroad and by the depletion ofinternational reserves.
6. These developments underscore the importance of appropriate policies in improvingeconomic performance. The Government's intention is to pursue a policy that will stimulate supply andthus promote the private sector, particularly export-oriented activities. In this context, the Governmentshould coordinate its actions so that adjustment efforts are concentrated in key areas for the prioritysectors, and thus render the economy more competitive and enable the domestic private sector to adaptto the international environment. Such actions should include carefully targeted public expenditureprograms consistent with available internal and external resources. In addition, they should help reinforcethe institutional framework, streamline bureaucratic procedures, and free the banking system fromgovernment's influence in its decisionmaking regarding the financing of economic activities.
7. Before summarizing the major conclusions of this public expenditure review, thefollowing cautionary notes are in order:
(a) This review examines trends in the current expenditure and public investment programof the central government, especially in human resource development (education andhealth) and the road transport sector. It does not cover rural development, industry, orthe mining and energy sectors, or on the various subsectors involved in integratedregional development, and so on. The fisheries sector was the subject of Sector ReportNo. 10975-MAU dated October 1992. Expenditures by decentralized governmentdepartments and agencies, and in the parastatal sector, as well as the country's debtsituation, should be the subject of future reviews.
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(b) Although revenue and expenditure trends are examined here, certain developments, whichare not captured by official statistics, could not be evaluated. Such developmentsinclude: the growing importance of the informal economy; inflation rate estimates thatignore price movements in the informal sector; periodic adjustment of the Ouguiya whichaffects revenue from taxes on foreign trade; and the lack of detailed statistics on recurrentexpenditure at the sector level, the special accounts, and the annex budget.
Conclusions
8. RESOURCE MOBILIZATION.
(a) Although the Government has been taking steps to improve resource mobilization since1989, its revenues still consist of the proceeds from taxes on international trade, nontaxreceipts, and the income tax on public enterprises, particularly those directly associatedwith the fisheries sector or indirectly with trade activities.
(b) Mobilization of resources has confronted the following obstacles: (i) major sectors suchas livestock and agriculture escape all taxation; (ii) the mining sector is not able tocontribute tax revenues; (iii) the tax office is not appropriately organized for efficient taxcollection; (iv) economic activity in the fisheries and SME sectors has shrunksignificantly since 1987/88; (v) budget preparation does not include systematic recordingof the funding of special accounts and budget grants; and (vi) capital spending financedfrom abroad or from adjustment counterpart funds is not fully recorded.
9. TRENDS IN MAJOR ExPENDITuRE CATEORIES.
(a) Total present government spending, including debt servicing, makes up a significantproportion of national expenditure. In 1991 it totalled close to UM 26.4 billion atcurrent prices, or approximately 33.5 percent of gross national expenditure at marketprices. However, it should be emphasized that numerous expenditure items are notcorrectly budgeted, particularly those funded through special accounts, adjustmentcounterpart funds, and budget grants.
(b) Since 1988 recurrent expenditure (excluding interest payments) has stabilized at roughly15.3 percent of GDP, considerably below the 22 percent level recorded in 1984.Between 1984 and 1991, this expenditure increased at an annual rate of 5.3percent-quite low considering the inflation rate and the increase in the ranks of the civilservice. Reducing annual growth rates in current expenditures has been one of the keyaims of economic policy in its overarching objective of increasing budget savings.
(c) Current expenditure is the largest government spending category-64 percent of the total.It consists mainly of payroll, nondevelopment expenses, and interest payments on thepublic debt.
(d) Compared to most Sahel countries, Mauritania is fortunate in the size of its public sectorpayroll which has represented a nearly constant 33 percent of budgeted currentexpenditure since 1981 and approximately 27 percent of fiscal revenue excluding grants.
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Its rapid growth between 1985 and 1991, at an average annual rate of 7 percent (higherthan in the previous period and higher than total current expenditure excluding interest),calls for immediate, strict containment measures. Given the expected leveling-off ofrevenue in the course of the next few years, considerable slippage appears likely.
(e) Next to payroll costs, military spending is the second largest item of budgetaryexpenditure, despite its stabilization since 1985 at the UM 3.2 billion level. In relativedomestic terms, however, it has declined, dropping from 24 percent of current spendingin 1985 (as against 31 percent in 1981) to 17 percent in 1991, or, in other terms, from6 percent of GDP in 1985 to 3.5 percent in 1991. All the same, the item remains at ahigh level by comparison with the average figures of 12 percent and 2.5 percent,respectively, observed among the Sub-Saharan countries as a group.
(f) The third largest expenditure item, debt interest payments, has increased verysignificantly since 1988-at an average rate of 25 percent. In 1991 it accounted for over11 percent of all expenditure, as opposed to 4 percent in 1985.
10. PUBLIC INVESTMENT PROGRAM.
(a) Mauritania's Public Investment Program (PIP) is an amalgamation of project concepts,projects in progress, and projects awaiting funding-few of which have been subjectedto either economic and financial analysis or assessment of likely recurrent costa. Nordoes the PIP form part of any coherent macroeconomic whole, or reflect either thecountry's sector strategies or its absorption capacity.
(b) Analysis of government capital spending at the sectoral level and of its possibleenergizing effects on the economy suggests that public investment, especially in basicinfrastructure, has not had any marked effect on the development of private investment.This can be attributed to the difficulties the Government has encountered in translatingits development objectives into coherent sector strategies, and in formulating a spendingprogram consistent with those objectives.
(c) On the subject of recurrent costs, it may be noted that: (i) in most cases, the budgetprovisions made for such costs are not adequate enough to ensure sound operation of theprojects in question; (ii) rehabilitation or carry-on projects inevitably involve significantrecurrent costs; and (iii) at least 30 percent of so-called capital spending consists in factof recurrent charges financed by donors who insist they be included in the PIP.
11. INSTrTTONAL ASPECTS OF PUBLIC EXPENDITURE MANAGEMENT.
(a) Various factors explain why the results achieved in the course of the adjustment processhave been disappointing. First, the reforms were not always launched as part of acoherent macroeconomic framework. Capacity to manage the economy and the existinginstitutional framework was not strong enough to accomodate the ensuing change oradminister the program appropriately. For instance, the role and scope of somegovernment departments-such as the Ministry of Commerce-were not redefinedfollowing the introduction of the reforms. As a result. biviget allocations were not
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reduced, and public expenditure was not modified in either volume or allocation to reflectthe new policies and reinforce their implementation.
(b) A major impediment to putting government spending on a more rational footing is theweakness of the institutional framework supporting the government sector. Withoutstrengthening, it will be unable to accommodate a well-integrated system of planning,t|bliget programming, and monitoring of publie expenditure. It must also be possible tot. suie judicious use of major external capital flows, as well as better coordination withdonors. At present, there is virtually no coordination of external aid, which consequentlyreflects first and foremost the particular preferences of the dono.s themselves.
12. SOCIAL SECTORS.
(a) Mauritania's education sector is confronted with a series of problems: (i) a low primary-school enrollment rate; (ii) ineffective secondary and higher education; (iii) high unitcosts and major budgetary constraints; and (iv) poor programming capacity. Over theperiod 1986-91, the share of the education sector in total current expenditure droppedfrom 27 percent to 24 percent. Over the same period, the share allocated to the Ministryof Education fell from 23 percent to 21 percent. In 1991, current expenditure oneducation was equivalent to 6.4 percent of GDP. Despite a proposed reallocation offunds in favor of primary education, the expenditure pattern remained unchanged overthe period, with primary accounting for approximately 32 percent of spending, secondaryfor 36 percent, higher for 25 percent and vocational training for 3 percent.
(b) Annual growth in the primary education budget was in the vicinity of 6.4 percent from1987 to 1989 and 0.8 percent from 1989 to 1990-in other words, below the plannedfigure of 9 percent. Growth in the general secondary education budget over tne sametwo periods was 8.7 percent and 4.7 percent, respectively-well beyond the goal set inthe strategy for the sector. The annual budget for scholarships and higher education wasreduced, as planned. As a result of lackluster performance and budget imbalance, theeducation sector showed increased unit costs at all levels, with the exception of highereducation, where costs declined until 1990, at which point the downward trend wasreversed.
(c) Under the education sector investment program for 1985-91 the total spent was UM 1.6billion. This represented 2.6 percent of the entire capital budget, but only 43 percent ofthe amount initially programmed, namely UM 3.7 billion-an execution rate considerablylower than for the PIP as a whole.
(d) In the case of the health sector, the current budget of the Ministry of Health increasedby an average of 9.6 percent between 1985 and 1990. The sector share of the totalcurrent budget rose from 5.1 percent in 1985 to 5.6 percent in 1989, but then fell backto 5.2 percent in 1991, a trend at variance with the Consolidation and Recovery Program,which had specified a target increase of 10 percent for 1991.
(e) Because of the way the budget is presented, it is difficult to identify the specificallocations made to the various health care levels. As far as the period under review isconcerned, it appears that the share of the Nouakchott Hospital Center (CHN) in the
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Ministry of Health budget declined. with the regional health services picking up thedifference. CHN continues to absorb 23 percent of the Ministry's current budget,compared to the 66 percent allocated to all other health facilities. This lack of balanceis especially apparent in nonwage expenditure figures: in 1991 allocations for CHN'soperating costs (medications, and so on) represented 44 percent of all the Ministry ofHealth's current expenditures.
(f) Between 1985 and 1991 Government capital spending for the health sector totaledUM 2.1 billion, or approximately 3.5 percent of total public investment expenditure forthe period. Since total capital spending on health was projected at UM 3.9 billion, thesector investment program execution rate was 54 percent, well below the PIP executionrate for the period.
Recommendations
13. The chief recommendations of this report are as follows:
(a) The Govern ment needs to make certain choices and to reevaluate its role and the natureof its interventicns so as to (i) enable the private sector to develop and (ii) ensure that thegreatest possible benefit is derived from government action in the social andinfrastructure sectors.
(b) Over the short term (6 to 12 months), given that certain reforms have already beenintroduced and other actions are in progress, the Government should proceed % ith aredistribution of resources to: (i) provide the social sectors with sufficient funds toachieve their objectives; (ii) increase budget allocations for spending on equipment,maintenance, goods and services, and miscellaneous expenses; (iii) accelerate civil servicereform so that payroll growth can be managed better-a balance can be struck betweenspending on salaries and allowances and on other costs, and a recruitment policy can bedeveloped which is transparent and coherent; (iv) reduce nondevelopment spendingfurther; and (v) reduce subsidies and transfers. The last three measures will reduce theneed to borrow abroad.
(c) Over the medium term (12 to 24 months), the Government ,Aould: (i) itnitiate thepreparation of sectoral public expenditure programs; (ii) ensure maximum transparencyin budget execution (including utilization of special accounts, adjustment counterpartfunds, and budget grants); and (iii) review and simplify the structure of the taxationsystem so as to give it greater flexibility and improve incentives for the private sector.Taxation proceeds should be appreciably increased through a broadening of the tax baseand through improved collection practices and sustained strict budgetary discipline. Inaddition, revenues should be based on direct and indirect taxation. In this regard, thereshould be reviews of the tax regulations governing the fisheries, minuing, andagriculture/livestock sectors, plus reinforcement and better management of cost recoverypolicies.
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14. The Government should ensure that its capaljp ng policy focuses on: (i) keeping
public investment within the confines of a clearly formulated development policy, introducing institutionalreforms that will lead to more effective execution of projects; (ii) limiting public investment to the socialsectors and basic infrastructure, so as to encourage the development of private enterprise; (iii) improvingthe effectiveness and the inter- and intrasectoral allocation of public investment funds; and (iv) projecting(from the outset) what funding will be needed to cover the recurrent costs of piojects.
15. As current projects are brought to completion, the Government should ensure that external
aid funds are reallocated in accordance with priorities established under sectoral strategies and a well-
structured public expenditure program. To this end, the authorities should: make certain that donor-financed projects fit in with chosen sector strategies; upgrade project execution to avoid wasting externalresources; and prohiuit the establishment, often urgAd by donors, of special project management unitswhich are intended to free their projects from the public sector's constraints.
16. The institutional framework within which the budget process takes place should be
strengthened. Planning, programming and budgeting entities need to be better defined if their technicalwork is to be consistent with the Government's development policy. Multi-year programming should fitwithin a coherent macroeconomic framework so that economic and financial data can be given due weight
and greater consistency can be maintained in expenditure decisions. It is here that consolidation of all
budget revenue and expenditure becomes one of the most important factors in financial management.
(a) The Government should consider reinforcing the role of the Ministry of Finance. Thismay well mean a series of changes in current practices. In particular, the Directoratesof Planning and Budget should work up alternative budget scenarios for the medium termand the year in question, as this would facilitate the preparation of annual budgets.Simultaneously, it would be essential to streamline the project cycle throughout the publicsector. The Government should also consider establishing a technical coordinatingcommittee, with responsibility for systematic review of sector policies and investmentproposals.
(b) Public-sector ability to produce reliable statistics must be expanded. This would requiremore extensive coordination between the Directorates of Planning, Budget, and Debt, theNational Statistics Office, and the Central Bank.
17. Better coordination of external aid: coordination with and among donors who play an
essential role in the implementation of reform and public expenditure programs needs to be improved,and the aid they provide needs to be agreed upon and made available within the setting of those programs.
18. A PRIORITY PROGRAM OF SOCIAL EXPENDITURE AND ROAD MAINTENANCE.
(a) The level of expenditure proposed for the education sector is consistent with the strategythe Government adopted in 1987. Growth rates in the primary, secondary, andsecondary technical education budgets are to be 9 percent, 5.4 percent, and 10 percent,respectively. They should be achievable by virtue of: (i) the freeze on the scholarshipbudget at its 1991 level, and (ii) the limitation on growth in expenditure at the centralgovernment level, in general secondary education, and in higher education (excludingscholarships) to 2 percent, 3 percent and 3 percent, respectively. This strategy shouldto a primary school enrollment rate of 63 percent in 1996 (assuming that unit costs
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continue at UM 7.571 per annum per pupil). However, if the primary education budgetwere to increase at no more than the 3.6 percent observed during the last two years, theprimary enrollment rate would shrink by 1996 to approximately 49 percent. It is,therefore, important that the prescribed allocation pattern within the education budget beadhered to. For the sector as a whole, the current budget should increase at an annualrate of 3 percent, which would bring it up from UM 3.6 billion in 1991 to approximatelyUM 4.6 billion in 1996.
(b) The Government's proposed strategy for the health sector should be implemented basedon a decentralized system of health care delivery which calls for: (i) a shift inGovernment spending toward the regional health system; (ii) increased communityparticipation in meeting the operating costs of public health facilities at all levels;(iii) introduction of a system for the supp:y of essential medications in generic form; and(iv) channeling of external aid into the initial investments required for decentralizationof the health care delivery apparatus. This decentralization will involve: strengtheningthe recently created regional directorates of public health; organization of a decentralizedregional health-care delivery retwork (Nouakchott Hospital Center, regional hospitals,health centers, commune-level health posts and village-level basic health units), withclearly formulated standards governing each type of facility; and introduction of effectivemanagement and monitoring systems. Obviously, the links between the centralgovernment and this decentralized system would have to be redefined, if possible withadvantageous effects on the budget.
(c) The particular features of the Mauritanian way of life are at the core of transportationplanning: the population is mostly scattered, but there is concentration in certain zones;the coastal strip is quasi-desert; erosion phenomena make sand encroachment a constantthreat; and the climate is harsh, with high winds often affecting visibility. Implementationof the sector policies adopted will remain incomplete as long as the resources are lackingto ensure large-scale utilization of linked networks. As far as roads are concerned, majoruncertainties exist regarding the choices to be made between extension of the pavednetwork or maintenance of the existing network, the most effective method of linking northand south, how to make regions accessible, and how to deal with internaional traffic.Such arenas as urban development, the transport subsectors (road, sea, air) andcommunications are affected by deep divisions, with the result that investments in one havelittle connection with those in the others. In the circumstances, it should be a priority todraw up the necessary master plans, so that networks can be expanded in an orderlyfashion and infrastructure and equipment better exploited and maintained. The share oftransportation and telecommunications in the economy of Mauritania is estimated at 7percent, a figure that reflects the comparatively rudimentary nature of the infrastructureand services in place. The country's modern communications networks constitute no morethan a basic skeleton structure. Moreover, there is little combined transport (that is,utilizing two or more modes), and, using the same terms, no intermodal competition.Major traffic hubs are few and far between. Planning tends to follow strictly modal lines.
(d) The primary importance of routine maintenance, the lack of any road sector master plan,the very minimal economic justification for new link roads, and the persistinguncertainties over choices of international routes are all major factors explaining why thepresent portfolio of viable road projects is so small. To attract new donors, or retain the
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few already active, appropriate documentation must be assembled. Present allocations
for road maintenance are in the range UM 200-250 million annually, which is far toolittle. Accelerated depreciation of infrastructure and proportionally higher projections
of subsequent expenditure are necessary. Estimated budgets for projected work
requirements are in the range UM 750 million to 1.5 billion, or between three and six
times higher than at present. For the immediate future, it is recommended that
arrangements be made for supplementary funding of approximately UM 400 million, over
and above the UM 200-250 million already budgeted.
Reform Program Summary
19. Implementation of the proposed recommendations will depend on how they can be
correlated with other supporting measures to achieve greater effectiveness. The following chart suggests
a possible sequencing for the implementation process.
FIELD OP ACTION TYPE OF ACTION SHORT-TERM MEASURES MEDIUM-TERMMEASURES
Institutional Seling - Integration of multi-year - Strengthen planning,
expenditure programming into programming and budgeting
macroeconomic framework. entities (MinPlan, MinFin,ONS, BCM).
Resource Mobilization - Broadening the tax base, - Continue tax reform. - Implement study
improving tax collection, recommendations.
strengthening cost recovery. - Study tax systems offisheries, mining, &agric./livestock sectors.Improve audit of PEs. - Prepare sector expenditure
Strengthen Customs and programs (indicative only).
Taxation Directorates.
- Coordination of aid. - Improve coordination with - Continue coordination with
donors. donors.
Resource Allocation - Reorientation of public - Establish bank of - Prepare intra- and
expenditure (in both the macroeconomic data and intersectoral expenditure
economic and functional resource availability data. programs
senses) so that it is consistenwith Government's - Stabilize transfers and
development objectives and subsidies.
priorities.
- Continue freeze of non- - Prepare 3 year roUlingdevelopment expenditure. public expenditure program
which includes essentialspending on social sectors &infrastructure maintenance.
BudMet Prevaration - Reform of public accounting - Introduction of reformed - Reduce nundevelopment
system, with view to better public accounting system. expenditure to level similar
budget formulation, monitoring to other Sub-Saharan
and execution. countries.
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FIELD OF ACTION TYPE OF ACTION SHORT-TERM MEASURES MEDIUM-TERMMEASURES
- Revise budget nomenclatureso as to improve functionalclassification.
- Strengthen budgetformulation and monitoring(budget field to be extended).
Execution and Control of - Strengthening of ability of - Implement ADETEF - Design and introduction ofExpenditure central govt. dept. to control recommendations on budget computerized financial
spending. execution and monitoring, management system.
- Upgrading of budget - Issue quarterly Treasuryexecution and monitoring balances.
procedures. - introduce requirement that
MinFin and Central Bank giveprior approval of lendingagreements.
- Require automatic notice ofdisbursement andreimbursement requests to begiven to MinFin and CentralBank depts. in charge ofmonitoring debt.
Civil Service Reform - Reform of policies on hiring, - Freeze hiring except in health - introduce statisticalcompensation, career sreams and education sectors, management of personneland training, with view to movements.simplification, higher - Remove from payroll namesproductivity and better of 159 persons not properly - Fine-tune computerizedmanagement. accounted for. management system.
- Strengthening of management - Order withdrawal of at least - Lower mandatoryorgans; introduction of 141 personnel beyond retirement age to 60 for somecomputerized personnel mandatory retirement age in categories of personnel andm-anagement system. 1992. develop a voluntary
retirement progrm.- Reconcile payroll and civilservice appointments register - Introduce competitivefully. recruiting.
- Carry out second phase ofstudy on the civil service.
- Approve and introduce newcompensation scale.
Public Investment Proeram - Improvement of planning, - Draw up 3 year rolling - Allocate inter- andprogramming, budgeting and investment program consistent intrasectoral investments inmonitoring of public with available resources, accord with Governmentinvestments so as to ensure external funding and public priorities.rational allocation of resources. finance objectives.
xvi
FIELD OF ACTION TYPE OF ACTION SHORT-TERM MEASURES MEDIUM-TERMMEASURES
- Reform of procurement Ratify amended legislation Upgrade appraisal andpractices. and put into effect, planning of public investment
portfolio.
- Formulate and introduceproject appraiul guidelinesand procedures.
Soial Pzrrma - Fonnulation of nationAl anti- - Examie effects of budgeted - Analyze findings ofpoverty stegy based on: spendig and investment on the preliminary studies for(a) promotioa of employment; vulnerable groups targeted. formulation of national anti-(is) development of local poverty trategy.comunnities; and (iii) - Conduct surveys of nomadretargeting of social spending population and of workers - Complete and presentto benefit the aost vulnerble decared redundant. national anti-poverty trategy.groups.
- Evaluate efficacy of the food-for-work progam.
- Continue ongoing householdsurvey.
Public Health - Execution of master plan for - Obtain greater participation - Increase health expenditurehealth ector. by community in financing of from 5.3 percent of aU
health services, spending in 1992 to 7.3percent by 1996.
- Putting into effect of cost - Increase budget allocations torecovery sytem. health ector.
Education - Incrasing enrollment rates - Maintain numnber ofand improving internal and enrollmens in first cycle ofexternal effectiveness in secondary education andsecondary and higher admisions to ISS at 19S7education. level.
- Strengthening of planin and - Freeze cholarships for - Increae resources allocatedmangerial capabilities of key secondary nd higher for technical education by 10ministeril depts. in charge of education. percent.educationand training.
- Decentralization of chool - Inpose 3 percent ceiling on - Isnpose 3 percent ceiling onconstruction nd building rate of (nominal) annul rate of (nominal) annualmaintenance operations, with growth in the higher education growth in the higherparticipation by comnunities, current budget. education budget.
- Recruit at least 450 pupils to - Recruit 500 pupis to ENISENIS in 1992/93. in 1993194 and 550 in
1994/95.- Keep current budget for cycleI of econdary education atsame rate of growth as currentbudget for entire educationector
Maintenanc Maintining basic infradructure - Increase budget allocation - Increa expenditure fromnd supporting development of here from UM 200 miHion to UM 300 milion in 1992 to at
the private sector. UM 300 million, least UM 750 million in1994.
CHAPTER I
I. Structural Adjustment and Public Finances
1. Between the late 1970s and 1984, the Mauritanian economy suffered a major downturn followed
by pronounced instability. The Government reacted by formulating its 1985-88 Economic and Financial
Rehabilitation Program,' which was initially supported by two IMF stand-by arrangements, in 1985 and
1986. In response to a request from the Government for assistance in achieving its adjustment objectives,
the Executive Directors of the Bank approved a structural adjustment loan in 1987 to support the second
phase of the Rehabilitation Program (1987/88), consisting mainly of reforms in public sector
management, banking and the public enterprises, the energy sector, food policy, fisheries development,
and promotion of the private sector. In 1989 the Executive Directors approved two structural adjustment
programs, one in the agriculture sector and one in the public enterprises sector. Steps were taken toward
better assessment and control of the social impact of the adjustment program, and formulation of
measures to protect the most vulnerable social groups. One valuable lesson was the imperative need to
eliminate the deeply embedded weaknesses in the Government's spending policies and practices which
appeared to be affecting all sectors of the economy.
2. Since independence the public sector has been central to Mauritania's developr,1ent strategy. A
major group of parastatal enterprises has been created and there has been a rapid expansion in government
services to all strata of the population and a widening of government controls over many sectors of the
economy. Until the end of the 1970s Mauritania's current and capital expenditure remained mostly in
line with increases in public revenue and the Government was usually able to produce a modest budget
surplus. But in the early 80s, the country's fiscal position began to deteriorate, as was apparent from the
appearance of significant deficits, the Government's growing dependence on the banking system, a
growing gap between projected and actual expenditure, evident neglect of the basic infrastructure,
increasingly severe retrenchment in spending generally, and by the decline in the real value of wages.
3. Over the period 1984-90, capital flows from donors remained high, at US$204 million annually
(a rate of U$107 per capita). These flows, however, contributed indirectly to widening the gap between
budget commitments and the domestic revenues supposedly covering them. Overvaluation of the
Mauritanian monetary unit, the ouguiya, and exchange restrictions had eliminated incentives to export.
Accordingly, many economic activities are now conducted on the parallel market, with the result that
fiscal revenue has declined and major budget deficits have ensued.
4. The adjustment programs launched since 1987 brought significant progress in improving the
general business climate, creating a system of incentives and establishing a regulatory environment
conducive to development of the private sector. But the reforms have still not produced all the desired
results. Even where progress has actually been made (although the fundamental options of a free market
and privatization have continued to receive the Government's support) difficulties have been experienced
since 1989 in perpetuating these reforms and their effects, especially in the area of macroeconomic
management.
This was followed by the 1989-91 Consolidation and Recovery Program.
2
5. The Government and the donor community are aware that the economic policy reformsintroduced since 1985 need to be expanded ard extended to cover areas not yet targeted, particularly thepublic finances.
RECENT MACROECONOMIC PERFORMANCE
6. Although the measures taken by the Government reduced financial imbalances between 1986 and1991 (Table 1), the results achieved were not as conclusive as had been expected. Over the last twoyears of the period the country's financial situation became more difficult.
7. Between 1986 and 1989, annual growth in GDP averaged 3.5 percent, as against 0.2 percentbetween 1982 and 1984. The inflation rate, measured by the GDP deflator, fell from 9.8 percent in 1985to 6.2 percent in 1988, only to rise to 7.9 percent in 1989. The consolidated fiscal deficit (calculated ona payment authorization basis) excluding grants was brought down from 8.0 percent of GDP in 1986 to3.0 percent in 1989, while at the same time the external current account deficit (excluding officialtransfers) dropped from 35 percent of GDP to 14 percent. In addition, Mauritania had the benefit ofsignificant debt relief and was consequently able to eliminate all its external arrears.
8. In 1990/91 Mauritania suffered a series of exogenous and endogenous shocks, the economic andfinancial effects of which could not be offset by macroeconomic measures (for example, monetary, credit,exchange, external debt policies) or by structural measures. GDP grew at an average annual real rateof only 0.4 percent, because of adverse weather patterns, disruptions in the mining sector, and furtherdeterioration of the fisheries sector. The consolidated fiscal deficit worsened from 2.9 percent of GDPin 1989 to 5.3 percent in 1991, producing an accumulation of arrears and net recourse to Central Bankadvances. This state of affairs, in conjunction with a net decline in external aid, led to a deteriorationin the country's external position. The external current account deficit widened from 14 percent of GDPin 1989 to 15 percent in 1991; the balance of payments deficit went from SDR 45 million to SDR 87million, and gross international reserves fell by the equivalent of 1.6 months of imports to 1.2 months.
9. Nevertheless, the reforms introduced since 1986 constitute the pillars of an ambitiousadjustment program which has affected nearly all sectors of the economy and nearly all economic policyinstruments. The Government's commendable efforts to improve the system of incentives have pavedthe way for better resource allocation and greater effectiveness in management of the economy.Development policies have been formulated for most sectors, with the aim of harmonizing the actions ofthe authorities and the donors. Approximately five years of adjustment have revealed the true extent ofthe task, the problems that obstruct implementation and the difficulties of ensuring that the benefits ofadjustment are captured permanently. Since 1989 the external environment, weather patterns and eventson the domestic scene have not been conducive to economic growth.
10. The Government has good reason to undertake a critical assessment of its current policies.In doing so, it ought not to overlook the lack of strategies, particularly strategies to encourage andprovide support for private sector development. While particular attention should be paid to the SMEand fisheries sectors, for instance, it is the financial sector that should be scrutinized most closely, as thewhole financial system has been weakened by low loan recovery rates and by the lack of an adequatebanking sector structure responding to the real requirements of the economy. A searching discussionprocess is needed which will focus on the competitiveness of the economy, on identifying the sectorswhich are essential, and on the strategies that will ensure their development.
3
Table 1. Mauritania: Key Macroeconomic Indicators
1986 1987 1988 1989 1990 122
Growth Rate (%)
GDP 5.7 1.9 1.7 4.8 -1.8 2.6
GDP per capita 3.i -0.7 -0.9 2.1 4.5 -0.2
Private consumption per capita 1.0 1.1 1.0 1.3 1.I 1.0
Debt Service
Debt service (USS millions) 201.2 209.7 196.9 363.3 156.8 161.7
incl. interest (USS millions) 72.0 79.4 73.6 62.5 61.0 58.9
Service/XGNS a/ 44.2 46.5 39.8 37.2 38.9 34.8
Service/XGNS b/ 25.2 29.3 31.8 21.3 19.2 17.8
Service/GDP e/ 25.1 23.0 20.4 37.2 35.4 34.8
Service/GDP d/ 20.3 19.1 18.8 36.1 14.7 13.7
Ratios
Gross investment/GDP 26.1 24.8 16.5 13.5 13.0 13.7
Domestic saving/GDP 10.6 14.2 11.3 13.6 8.5 11.6
Budget saving/GDP -1.5 2.9 0.9 4.3 0.5 ...
Public investment/GDP 23.2 22.2 13.8 11.5 10.3 11.8
Private investment/GDP 2.9 2.6 2.7 2.1 2.7 1.9
Total fiscal revenue (ncl.grants)/GDP 22.9 23.5 27.8 25.2 26.2 24.0
Total expenditure/GDP 22.5 21.2 31.4 33.0 31.5 28.5
Surplus/deficit/GDP e/ 1.1 0.0 40.3 -0.4 -0.9 -3.6
Surplus/deficit/GDP f/ ... ... ... -2.9 -3.0 -5.3
Miscellaneous
GDP deflator 7.3 10.5 6.2 7.9 2.7 9.8
Effective exchange rate ... ... ... -1.0 0.1 0.9
Growth rate of exports 2.1 6.1 -30.8 -0.5 -6.3 -4.0
Exports/GDP 56.4 49.3 50.8 45.6 41.4 38.7
Growth rate of impons -26.8 -10.8 23.7 -3.8 6.3 -4.0
Impors/GDP 79.3 66.6 62.5 36.0 39.7 34.4
Current account (USS millions) -173.6 -153.3 -62.8 -130.3 -207.0 -158.2
Curreat account/GDP -35.0 -28.6 -22.1 -14.5 -21.5 -14.9
Gross reserves (USS millions) 53.4 75.3 61.3 80.9 45.6 61.3
(months of imports) 1.6 2.6 2.0 1.6 0.8 1.2
a/, et Before debt relief.b/, d/ After debt relief.e/ Including grant but not restructuring operations.f/ Excluding grants and restructuring operations.
4
OVERVIEW OF MAIN STRUCTURAL REFORMS
11. Since the Economic and Financial Rehabilitation Program was launched, strategies forvarious sectors have been enunciated in sector policy papers. To some degree, these strategies haveprovided the foundation on which economic policy has been conducted in recent years.
12. To foster private sector development in a climate of healthy competition, the Governmenthas instituted major reforms in particular sectors (agriculture, industry, fisheries, public enterprises andbanking) and in pricing policy, the civil service, tax management, monetary and credit policies, and theexternal sector.
13. The move to put Mauritania's economic management on a sounder footing consistedmainly in limiting growth in current expenditure, while improving tax collection and raising tax yields.The Public Investment Program was reorganized and scaled back to a level consistent with the country'sabsorption capacity. Introduction of the consolidated capital budget in 1987 had a salutary effect oninvestment programming because the systems used for this purpose were linked with new planning unitsestablished in the key technical ministries. However coordination among government departments, andcirculation of information remain weak points in the programming process and in the monitoring ofinvestment budget execution.
14. To improve public sector effectiveness, major steps were taken to strengthen theMinistries of Finance and Planning, improve administration of the civil service,2 and promoteinstitutional development. To these ends, an office responsible for institutional reform was set up withWorld Bank assistance.
15. Although additional external debt management resources were brought on line to improveexecution of this function, much room for improvement still remains. Although drafting of regulationsdesigned to reinforce coordination among the government offices concerned was completed over a yearago, these regulations have not yet been adopted.
16. The institutional and legal framework within which public enterprises operate has beenimproved, chiefly through the creation of a category of soci&&s nationale whose shares can be soldwithout government authorization. In addition to clarifying the status of public enterprises and theresponsibilities the authorities have to monitor and supervise them, the Government has prepared a newnational accounting plan for EPICs (public business enterprises) and SEMs (semi-public companies).Public enterprises must now to submit quarterly reports to the Ministry of Finance, and are required toenter into performance contracts with the authorities. On the whole, these reforms have createdconditions conducive to more rational management of the public enterprise sector and to orderlywithdrawal by the authorities from commercial and production activities. But there is still an urgent needto define the authorities' proper presence in a number of sectors (fisheries, industry, regionaldevelopment, education and health) where their direct intervention probably retards development.
2 Computer system start-up, after being delayed, was last projected for October 1992.
5
PUBLIC FINANCES
17. A fundamental goal of adjustment is to change the structure of production to derive the
most from the country's comparative advantages, and to reallocate resources so that the most profitable
sectors and activities are best served in the interests of promoting sustainable development. The
authorities can influence and accelerate this process, through the quality of their macroeconomic and
financial management. For instance, the level of the budget deficit, the choice of means of financing it,
tax policy and the composition of expenditure all affect the availability of internal and external resources
for productive purposes.
18. Although the Government of Mauritania has already made substantial progress toward
adjustment, further important reforms are needed, particularly in the public resource management sphere,
if the necessary resources are to be mobilized for development and then allocated optimally in accordance
with the priorities previously set by the Government.
19. Efforts were made between 1985 and 1991 to put the country on a sounder budget
footing: a policy reducing the subsidies to parastatal enterprises was introduced to eliminate some
pressure on the budget, but the problem was simply transferred to the banking system. The public sector
payroll was frozen in real terms, recruitment was controlled through better selection practices, and a
computerized personnel information system was designed. Since 1987 consolidated capital budgets have
been drawn up each year, and the Public Investment Program has been pruned to emphasize completion
of projects
already under way and selected rehabilitation projects. The cash deficit dropped from 27 percent of GDP
in 1985 to roughly 2 percent in 1991. However, deteriorating terms of trade and a decline in capital
inflows in 1989-91 harmed the Mauritanian economy considerably.
20. Although the Government, with the technical assistance of the IMF, made serious efforts
to strengthen demand management, increase revenues by introducing new taxes, and obtain better yields
on existing taxes, it is now necessary to ascertain what impact these measures have had on public
expenditure, to evaluate the medium-term consequences of present practices, and to determine whether
public resources must be managed even more strictly in the medium-term.
RESOURCE MOBILIZATION
21. Although this Public Expenditure Review focuses chiefly on budgetary expenditures, it
should be viewed its proper setting, given the probable trend in internal revenues I and external aid
flows. ' Since 198, the Government has instituted reforms designed to improve resource mobilization,especially in: foreign trade, by increasing the proceeds from duties and other charges while keeping
protective measures rational but effective; the Investment Code, by reducing the number of exemptions;
3 Recommendations on measures to increase tax revenue have been formulated in an IMF paper, 'Mauritania: Reform
of the Poll Tax and Turnover Tax."
4 External aid earmarked for adjustment operations and capital spending has to some degree protected Mauritania against
sharp fluctuations in the balance of payments.
6
indirect taxes, by introducing a simplified tax structure (with IMF assistance), increasing the tax-systemyield and broadening the tax base; strengthening the Customs and Taxation Directorates; and formulatingcost recovery policies (with World Bank assistance) for the agriculture, livestock, education and healthsectors.
Mobilization of internal resources
22. Mauritania's record in revenue mobilization is similar to that of other Sub-Saharan Africancountries. Between 1985 and 1991, fiscal revenue averaged 22.5 percent of GDP, compared to an averageof 20.6 percent in the rest of Sub-Saharan Africa. The Government relies heavily on the proceeds of taxesgenerated by internat 'nal trade and on nontax receipts, a situation which points up the high degree ofbudget instability. Approximately 80 percent of budget revenue is in the form of tax receipts, the averagecomposition pattern being: 26 percent from income and profits taxes, 16 percent from consumption taxes,and 35 percent from taxes on international trade (which are extremely sensitive to export volume in thefisheries sector and to import volume). For further details, refer to Annex I. Nontax receipts made up10 percent of government revenue in 1985 and 16 percent in 1991, the two major sources being fisherylicense fees and fines for infractions of fishery regulations.
23. In the medium-term, the country's internal financial constraints will continue to exertpressure on consumption and investment expenditure. In the past, the lack of counterpart funds to coverthe local costs of investment projects has held up project implementation in 1989-91 the quasi-exogenousfactors led to a reduction in external capital disbursements.5
Table 2. Structure of Fiscal Revenue (%)
1985 1986 1987 1988 1989 1990 1991
Tax revenue
Taxes on income & profits 22.5 27.3 22.7 26.7 28.7 27.4 26.8
Taxes on goods & services 16.5 13.8 16.1 17.2 14.7 17.6 18.5
Taxes on foreign trade 40.5 39.2 31.2 32.7 33.0 30.3 35.0
Nontax revenue 10.3 8.5 21.4 17.4 15.3 17.5 15.1
Capital revenue 1.5 4.5 1.5 2.6 4.7 3.9 2.7
Total budget revenue 91.3 93.3 92.9 96.6 96.4 96.7 98.1
Extrabudgetary revenue 8.7 6.7 7.1 3.4 3.6 3.3 - 1.9
TOTAL REVENUE 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: Directorate of Budget
24. The major conclusion to be drawn is that although the Government has instituted measuresto expand resource mobilization since 1989, the Treasury still depends chiefly for revenue on the
5 The conflict with Senegal in 1989 and the Gulf War in 1990 were two such factors.
7
proceeds of taxes on foreign trade and on nontax receipts. For the medium-term, the goal should be toreduce dependency on external trade and fishery license fees. Consumption taxes should become the mostimportant revenue source. At the same time, the whole tax structure needs to be reviewed and simplifiedto increase its elasticity and improve the incentives available to the private sector.
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9
CHAPTER 11
PUBLIC EXPENDITURE: 1985-91
25. The Mauritanian Government has instituted two medium-term development plans since1985, both focused on the same five priority objectives: in-depth reform of the production apparatus todiversify the productive base of the economy; strengthening of the country's financial position byapplying a rigorous expenditure policy, broadening the tax base and improving tax collection;improvement of the balance of payments position and liberalization of exchange-rate and traderegulations; maintenance of the external debt at a level in keeping with the economy's debt-carryingcapacity; and development of strategies to improve resource mobilization and formulation of socialpolicies to mitigate the social cost of adjustment and promote job creation.
26. The adjustment program introduced in 1985 was designed primarily to correct the majoreconomic and financial imbalances which had been accumulating since the mid 1970s, to liberalize theeconomy, and to reduce government action in the productive sector. This is why the Governmentassigned priority to strict management of dorrestic demand and more effective use of public resources.and why it set the following objectives: to rationalize expenditure, reduce the proportion of currentexpenditure absorbed by staffing costs, increase appropriations for essential infrastructure and capitalspending progranms, and modify expenditure structure to give higher priority to the social sectors.Measures were to be adopted to reduce spending and redirect it to basic education. Budget appropriationsfor primary education were to increase by 9 percent a year in nominal terms. The portion of currentexpenditure (excluding interest payments) going to health sern ices was to grow from 7.6 percent in 1989to 10 percent in 1991.
ANALYSIS OF EXPENDITURE TRENDS SINCE 1985
27. Bearing in mind the reservations expressed in the Introduction regarding the reliability andconsistency of the data, the following trends can be identified.
28. From 1985 to 1991, total current expenditure increased in real terms 6 more rapidly thanGDP-8.6 percent as compared with 3.5 percent-while total investment expenditure remained at around11 percent of GDP. Operating expenditure (recurrent expenditure minus interest payments) grew at amoderate annual rate as a direct result of the stabilization program the Government followed throughoutthe period.
29. Over the same period, actual operating expenses increased only slightly, by 1.4 percenta year. There were cutbacks of varying severity in all the major spending categories, with the exception
The choice between constant prices and current prices is not an easy one under any circumstances. Although ananalysis of public expenditures requires the cost of services to be measured in real and monetary terms and on the basisof their contribution to GDP, the use of constant prices has created problems. Thus, after following this practice forabout 20 years, most countries have now abandoned it. The use of constant prices makes it more difficult to analyzecash flow, to compare actual expenditure (expressed in current terms) with projected expenditure, and to identify thereal factors contributing to cost increases (particularly increases in the civil service wage bill, which by law cannotbe linked to an increase in productivity). See A. Prenchand, "Government Budgeting and Expenditure Control," IMF,1983.
10
of foreign and domestic interest payments. Military spending did not escape cutbacks in real terms, andexpenditure in this sector in fact decreased to a proportionally greater degree than did subsidies andtransfers.
30. Total public expenditure, including debt service, accounts for a large percentage ofnational expenditure today. In 1991 it was recorded at UM 26.4 billion in current prices, or 33.5 percentof g.oss national expenditure at market prices.
31. Since 1988 operating expenditure has levelled-off at about 16 percent of GDP,considerably less than the 22 percent recorded in 1984. Between 1985 and 1991, this expenditure grewby 8.6 percent a year, a relatively low rate when the average inflation rate during that period (7.5percent) Is considered. Limiting growth in operating expenditure was one of the main economic policytools used to increase public savings from which to meet the large and growing foreign and domestic debtburden. In 1991 debt-service obligations totalled approximately $161 million, equivalent to 34 percentof exports-compared to an average of 23.6 percent from 1986 to 1989, as a result of reschedulingarrangements agreed to by the Paris Club-while debt interest alone accounted for about 12 percent ofbudget expenditure.
Tablk 3(a). Budget Expenditure(as a percentage of GDP)
1985 1986 1987 1988 1989 1990 1991
Recurrnt Expenditure 20.0 19.0 19.0 18.0 18.0 19.3 19.2Debt interes payments 1.0 1.0 2.0 2.0 2.0 2.3 2.4Saaries and wages 7.0 7.0 6.0 6.0 6.0 6.0 5.8Military 6.0 5.0 5.0 4.0 4.0 4.0 3.5Education sector 4.0 3.0 3.0 3.0 3.0 2.5 2.5Health sector 1.0 1.0 1.0 1.0 1.0 1.0 1.0
32. From 1985 to 1991 total public expenditure, expressed in current prices, grew by 17percent-faster than the 10 percent computed for GDP on the same base. However the rate of increasewas not the same for Mauritania's four major budget categories: recurrent expenditure, capitalexpenditure, net lending and equity financing, and special accounts. While current expenditure increasedat an average rate of 12 percent, capital expenditure accounted for only 7 percent of total spending, netlending and equity financing declined by more than 50 percent, while special account expenditures roseby 26 percent.
A. Major Economic Components
33. Table 3(b) shows that the only economic expenditure category that recorded a clearincrease in real value was interest payments (176 percent). The outstanding domestic and foreign debtwas small during the previous decade. The small (3 percent) increase in the share of personnel costs overthe period 1985-91 is noteworthy. Although it is difficult to determine exactly what this stabilizationmeans in level of services provided by government workers (at least until civil service reft.. a isimplemented) it is clearly the result of civil service salary controls and the freeze on recruitment in allsectors except education and health.
11
Table 3(b). Evolution of Budget Expenditure: 1985-91(in billion. of UM at constant 1985 prices)
1985 1986 1987 1988 1989 1990 1991
Operatingexpenditures 10,687 10,530 10,632 10,431 10,874 11,565 11,61286% 88% 86% 87% 88% 88% 86%
Operating expenditures, excl. interest 10,165 9,643 9,766 9,590 9,777 10,204 10,16982% 80% 79% 80% 79% 77% 76%
Salaries and wages 3,649 3,553 3,641 3,669 3,726 3,838 3,75629% 30% 30% 31% 30% 29% 28%
Equipment, maintenance & supplies 1,408 1,370 1,418 1,427 1,562 1,832 2,06111% 11% 12% 12% 13% 14% 15%
Military expenditures 3,178 2,922 2,760 2,607 2,449 2,407 2,23926% 24% 22% 22% 20% 18% 17%
Subsidies and transfers 1,534 1,352 1,425 1,419 1,360 1,451 1,27612% 11% 12% 12% 11% 11% 9%
General expenditures 396 446 521 469 681 676 8373.2% 3.7% 4.2% 3.9% 5.5% S.1% 6.2%
Debt interest payments 522 887 866 840 1,097 1,360 1,4404.2% 7.4% 7.0% 7.0% 8.9% 10.3% 10.7%
Investment expenditures 858 612 681 649 793 910 1,0366.9% 5.1% 5.5% 5.4% 6.4% 6.9% 7.7%
Net lending and financing 175 182 91 19 37 59 901.4% 1.5% 0.7% 0.2% 0.3% 0.5% 0.7%
Special Trasury accounts 715 663 910 874 668 672 7065.7% 5.5% 7.4% 7.3% 5.4% 5.1% 5.3%
------------------------------------------------------------------- __--------__-------
Total Expenditures 12,435 11,987 12,313 11,973 12,372 13,206 13,441
Table 3(c). Sectoral Comoosition of the Operating Budget: 1985-91
------------------------------------------------------------ __---------------__-------
1985 1986 1987 1988 1989 1990 1991______________________________________--_______________________________________________
National Sovereignty 1,432 1,330 1,480 1,440 1,642 2,071 1,99614.1% 13.8% 15.1% 15.0% 16.8% 20.4% 19.6%
Defense and security 3,428 3,173 2,993 2,833 2,669 2,623 2,49033.7% 32.9% 30.6% 29.5% 27.3% 25.8% 24.5%
Rural development 340 290 303 302 290 292 3193.3% 3.0% 3.1% 3.1% 3.0% 2.9% 3.1%
Industrial development 165 165 161 174 183 97 931.6% 1.7% 1.6% 1.8% 1.9% 1.0% 0.9%
Land use planning 393 383 389 394 356 420 5323.9% 4.0% 4.0% 4.1% 3.6% 4.1% 5.2%
Hunm resources 3,778 3,668 3,771 3,883 3,976 4,039 3,90237.2% 38.0% 38.6% 40.5% 40.7% 39.8% 38.4%
Miscellaneous 631 636 671 564 661 619 8376.2% 6.6% 6.9% 5.9% 6.8% 6.1% 8.2%
Total 10,167 9,645 9,769 9,590 9,777 10,160 10,169---_ -_ ---------------- - -- __ -------- - ------- - ------- - ------- - ------- - -----_____
12
34. Allocations to purchase basic plant and supplies also increased by 46 percent, transfersand subsidies were reduced in real terms by 17 percent, and the ongoing reform process is expected tobring further improvements in the efficiency of the public enterprise sector and in financing for educationand health.
35. Mauritania divides its budget into six major expenditure categories: payroll; plant,maintenance and supplies; military spending; subsidies and transfers; interest on the public debt; andgeneral expenditure. These categories are now arJyzed.
36. Payroll: Compared to most Sahel countries, Mauritania enjoys a privileged position inthis category. Payroll has accounted for 33 percent of budget expenditure and about 27 percent of budgetrevenue, not counting grants, on a relatively constant since 1981, with very little variation over the lastfive years. For all government workers as a group (civil servants plus military personnel), payroll hasdeclined considerably, from 51 percent of current expenditure in 1985 to 46 percent in 1991. For civilservants alone it has remained around 29 percent ', with an average annual growth rate of 7 percentbetween 1985 and 1991.
Table 4. Civil Service Payroll
Components of base pay Breakdown Staff affected (%)(December 1989)
Civil Servants
Base pay 61.4 100.0Special supplement 22.8 100.0Lump-sum increase 9.1 100.0Bonus 0.2 2.1Lump-sum increase 80/81 1.3 29.0Lump-sum increase 85 3.4 100.0Special additional payment 1.8 100.0
Total 100.0 ...
Auxiliary Personnel
Monthly salary 77.7 100.0Salary differential 1.0 8.6Supplementary salary 0.3 3.8Standard increase 80-81 9.1 90.4Standard increase 85 9.6 100.0Special additional payment 2.3 100.0
Total 100.0 ...
7 In 1981, expenditure on military personnel was transferred to the "military expenditure' category; expenditure on theNational Guard was transferred to that same category in 1985.
13
37. Table 4 and Annex Table 5 indicate the magnitudes of the components of base pay and thetrend of base pay by category of civil servant. Statistical Annex Tables 6 through 9 shows thecharacteristics of base pay by grade, status, and sector, as well as the main components of civil servicepay; and the different supplements, increases, and other additional payments which were gradually extendedto cover all staff.8 Studies conducted as part of the civil service reform process show that the number ofcivil servants increased by 25 percent, and that average base pay increased by 13 percent, between 1986and the end of 1989.
38. Bonuses and allowances: Table 5 shows the part played by bonuses and allowances in civilservants' remuneration. These benefits are: water consumption allowance: the number of beneficiariesremains stable, but the average amount of this component has increased by 50 percent; hosiPg andfurniture allowance: this component affects nearly 8,000 government employees and represents an averageof UM 3,000 a month (UM 1,500-12,000, depending on post and grade level); incentive pay: at UM3,000-12,000, depending on grade level, this constitutes about 50 percent of base pay (paid only toteachers, its impact on the budget increases as the teaching corps increases in size); post allowance: thisranges from UM 2,000 to 12,000, depending on post (although the scale of payment here has not changed,the number of recipients has increased by nearly 40 percent).
Table 5. Civil Service Bonuses and Allowances
Bonus or allowance % of payroll % of staff affected (%)(excl. temporary staff)
Civil Servants
Incentive pay 44.6 58.7Housing/water consumption 34.0 66.4Post 13.6 22.0Dependents 3.3 26.2Other 4.5
Total 100.0 ...
Auxiliary Personnel
Incentive pay 47.3 9.9Housing 25.3 9.4Post 19.5 5.1Dependents 2.5 10.3Other 5.4 ...__ _ __ _ __ _ _
Total 100.0 ...
* Allowances and benefits in kind can be far more valuable thanthe salary.
A.
- J
:\ ' \ \ a)~~~~~~~~~~~~~~~~~~~~~~~~A
l - S~~~~~~~~~~~~~~~~~~p
r '_I\ ug E >_ = ~~~~~~~
.Y
Is4'
k *\\
8 S S30 0
15
39. At May 1991, there was a total of 15,882 government workers,9 of whom 15,530 hadpermanent status as civil servants. Of this second group, 1,502 were assigned to the Police Department.Annex Tables 7 and 8 show the number of civil servants by ministry and by region of assignment.
40. As for recruitment, there has been a freeze on hiring for the civil service, except for theeducation and health sectors. This was an attempt to reduce the governmnent payroll and allow resourcesto be transferred to priority sectors. Staffing costs account for close to 37.3 percent of the Government'stotal operating expenses. In 1991, this cost was UM 5.4 billion (including social security charges, whichaveraged about 10.8 percent).
41. The corps of auxiliary civil service personnel was reduced by 8 percent over the period.Average base pay for the corps rose by only 7 percent, the only substantial increase being in the incentivecomponent.
Table 6. Average Remuneration(January 1990)
Category Regular Civil Servants Auxiliaries Reg./Aux.
All Ministries
A 36,598 30,528 1.20B 23,724 16,442 1.44C 16,783 13,900 1.21D 14,805 8,746 1.69
Ensemble 25,592 12,126 2.10
Excluding Education
A 34,162 26,848 1.27B 21,116 16,137 1.31C 15,916 11,800 1.35D 14,779 8,869 1.67
Ensemble 21,784 11,279 1.93
Source: Directorate of Budget.
9 A January 1990 census conducted by SEDES-CEGOS as part of the Civil Service Management Policy Study, identifiedonly 17,282 civil servants. A survey in May 1991 again counted 17,282 civil servants, as against the 19,100individuals paid as such that same month by the Payroll Department. Not counting police officers paid as civil servantsbut not included in the census, there were 1,400 undocumented individuals on the payroDl, 636 of whom were excludedfrom the census rol because of inability to validate their status as civil servants.
16
42. Nondevelopment expenditure, or military spending, is the second largest budgetexpenditure category after payroll, although its relative share of current expenditure went down from 27percent in 1985 to 22.3 percent in 1991. This is still very high compared to the average of 12 percentfor the Sahel countries. Military spending accounts for 3.5 percent of GDP in Mauritania, compared toan average of 2.5 percent for the group."0
43. It is not easy to determine the extent of military spending in Mauritania" because since1981 military personnel costs have been incorporated in the military spending category. Since 1985National Guard personnel costs have also been incorporated in that category. These transfers naturallycaused a drop in the payroll category of the budget and explain to some extent the stability observed inthat category during the period under review. However it seems that the corps of Armed Forces andSecurity personnel is about the same size as the civil service corps."2
44. Debt service: debt interest payments alone make up the third largest public expenditurecategory and are one of the government's major concerns. Although such payments as a share of GDPhave increased only slightly (2.2 percent in 1991 as against 2.1 percent in 1985), this category aloneabsorbs over 11 percent of budget revenue today, compared to 5 percent in 1985,'3 mainly becauseinterest payments were underestimated in 1990 in expectation of their being rescheduled by the ParisClub. Appropriations to debt interest payments over the medium-term will of course be determined bythe maturities schedules on existing debt and on any new debt negotiated to finance the new projects listedin the 1992-95 PIP.
45. Subsidies and transfers to EPAs (public administrative enterprises), EPICs (publicbusiness enterprises), local governments, for scholarships to study abroad, and as internationalcontributions cost UM 1.9 billion in 1990, or close to 14.2 percent of total operating expenses (excludinginterest payments). Statistical Annex Tables I to 4 show trends in subsidies and transfers and give abreakdown by purpose for the period 1985-91. Since 1985 transfers have grown at a slow annual rate(3.6 percent), and subsidies somewhat faster (4.1 percent). On a number of occasions, subsidies havebeen replaced by allocations to recurrent costs, thereby inflating the PIP without necessarily increasinggross fixed capital formation. Subsidies and transfers to EPICs are expected to disappear in the medium-term, given the reform objectives set for the parastatal sector; this should free up resources for financingother budget items.
46. As for the general expenditure category (water, electricity, postage, telephone, etc.), thisfollowed a relatively irregular growth pattern and did not increase significantly (6 percent in 1990compared to 4 percent in 1985).
47. The plant, maintenance and supplies category remained at 12.6 percent of total currentexpenditure throughout the period, with an average growth rate of about 12 percent a year.
10 See U.S. Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, 1987.
" Especially since no information is available on financing of military spending under bilateral agreements.
12 Personnel figures for the Armed Forces and Security are: Army, 11,500-12,000 persons; Navy, approx. 1,000; AirForce, approx. 500; National Guard, approx. 3,000; Gendarmerie, 1,800; and Police, 1,700.
13 In 1990, before reschedulng, debt service accounted for 34.3 percent of GDP; it afterwards represented 29.4 percent.
17
48. Of the equity financing, net lending and special accounts categories," equity financingdropped sharply, from UM 176 million in 1985 to UM 77 million in 1991. However there was anincrease of 26 percent in special accounts-an area where the mission encountered many difficulties withits analysis: it appears that the resources for these accounts and counterpart funds for adjustmentoperations were not properly budgeted and disbursements were not systematically monitored by theTreasury or the Directorate of Budget.
49. Capital spending financed out of budget revenue remained stable during the period at 8percent of budget expenditure. This apparently low figure is attributable to the fact that capital spendingis budgeted separately in the Consolidated Investment Budget, 90 percent of which is financed fromforeign sources. From 1985 to 1991, 63 percent of the more than UM 70 billion invested was financedby loans and 23 percent by grants.
Major Operational Components
50. The "economic services" category saw its share of operating expenditure increase from8.8 percent in 1985 to 9.3 percent in 1991. Within this category, spending on agriculture levelled offat close to 3 percent of total expenditure. However, this item must be considered in the context of thesubstantial increase in agricultural investments recorded during the period; the question arises whetherenough funds were set aside for the operating expenses associated with such investments. The share ofoperating expenses associated with regional development grew rapidly, by 35 percent. Expenditure onsocial services increased by only 3.3 percent during the entire period (Table 3(b)).
1' In June 1991, there were 16 special accounts with the Treasury: (1) Food Aid and (2) American Food Aid, bothfunded by sales of food aid, were used to finance the free distribution of this aid and the operating expenses of theFood Security Authority; (3) Vocational Training, an account financed by foreign arms and used to cover the pay ofsailors not serving at sea and to operate the Seamen's Training Center; (4) West African Economic Commun:-Program, funded by IFAD and used for staff salaries and travel expenses and operation of the program launched bythe Directorate of Water Resources; (5) Rehabilitation Cell, an account financed by funds matching the IDA creditto the parastatal sector, to cover expenses of the unit set up within the Ministry of Planning to handle the rehabilitationof rublic enterprises; (6) Development Support Fund, consisting of surplus funds resulting from the computation ofoil price structures and used to finance oil sector research and subsidies to public enterprises active in the sector;(7) Literacy Campaign, an account financed by subsidies and used to publicize the campaign and distribute teachingmaterials; (8) Reeional Endowments, an account consisting of cash surpluses and repayments from communes to theregions in respect of investment costs met from regional budgets; (9) Inter-Commune Solidarity Fund, financed byvarious sources, provides assistance in emergencies and to victims of disasters; (10) Rural Development, consistingof foreign resources and subsidies earmarked for animal husbandry projects; (11) Maintenance of Customs DirectorateComputer System, an account financed by the data processing tax, covers expenses incurred in maintaining andpurchasing computer equipment; (12) National Education, consisting of the proceeds of sales of textbooks and teachingmaterials, covers the cost of producing and distributing the books; (13) Fund to Support Reoatriates from Senegal,consisting of the proceeds of subsidies and a one-time levy on the operating budgets of government departments andagencies, to help repatriates resettle in Mauritania; (14) Accountinp Development, an account financed by the sale ofaccounting manuals, to cover expenses incurred in training, printing manuals, and general administrative costs; (15)Promotion of Information Sector, an account financed by the TV royalty, for subsidies to public institutions in thesector; (16) Statistics Support, financed by the statistics tax, to cover operating expenses of the National StatisticsOffice. In addition to these 16 accounts, 3 others were in the process of being set up, for the following purposes:(a) promoting activities for youth; (b) development of livestock farming; and (c) support for civil defense.
18
Figure 4. Breakdown of Expenditure by Area of Operation
100
Helsuliut'
40
1985 1986 1987 1988 1989 1990 1991
19
ANALYSIS OF PUBLIC INVESTMENT
Changes in investment priorities
51. The Government's long-term strategy was set out in the Economic and FinancialRehabilitation Program (PREF) adopted in 1987. The planning objectives formulated in that documentwere focused on a major expansion of the public sector (including decentralized institutions) and thegradual "Mauritanization" of the fisheries sector. The principal long-term goal was industrialization; andnationalization of the mining companies was to be the main vehicle for increasing the public sector'spresence in production. A very substantial increase in investment was envisaged as part of this strategy.Investment grew as expected, but public and private consumption did also. Because of a lack ofcoordination and institutional shortcomings in the central government apparatus, this investment did notproduce the anticipated results.
52. Because of the budget and debt crises caused by the investment "program" and the wayit was financed, the Government was forced to revise its priorities in 1989 and to redefine them in itsConsolidation and Recovery Program (PCR), which stressed rehabilitation and maintenance expenditures,better use of existing capacity, and reversal of the tasks of government sector and the private sector.
53. In 1985 the Government began revising its public investment policy, with the help of theWorld Bank. The new policy highlighted the selection of economically profitable projects that wouldgenerate foreign exchange. The 1985-88 FIP the Government submitted to the Consultative Groupmeeting in November 1985 anticipated investments of UM 47.4 billion or 18.4 percent of GDP. Incomparison with previous programs, this PIP made a major step forward in that the projects involvedfitted in with sectoral strategies and the program was reasonably consistent in scope and cost with therevenue projections made at the time.
54. The 1989-91 PCR estimated the cost of the PIP at UM 45 billion, or 11.5 percent ofGDP, and considered that it reflected the Government's new priorities, which lay in agriculture,infrastructure, health and education. In actual practice the programming deviated considerably from theobjectives set, from the standpoint of both volume and distribution of spending by sector. Investmentsin infrastructure, health and education were substantially lower than initially anticipated because of theshortage of financing for the projects making up the programs drawn up for those sectors.
55. The portion of public investment financed from the national budget rose from 4.3 percentin 1985 to 9 percent in 1991, under the twofold impact of an increase in the capital budget and areduction in the total amount allocated to public investment. The investment allocation reflected thepriority given to regional development (25.7 percent), rural development (34.4 percent), SNIM (14.1percent) and social sectors (8.7 percent). Funds just for surveillance of fishing grounds absorbed closeto 70 percent of the total allocation to the fisheries sector. In regional development, about 90 percentof its budget allocation went to the Regional Development Fund, the supervising Directorate's operatingand equipment maintenance costs, and a new building for Congress. As far as rural development wasconcerned, the budget focused on covering Mauritania's obligations to provide counterpart funding forpublic investment projects.
20
Inter- and intrasectoral analysis of the PIP
56. Two main features can be identified from an intersectoral and intrasectoral analysis of thePIP and BCIs (Consolidated Investment Budgets). The PIP concentrated on a reduced number of sectorsand on a reduced number of operations within each sector, except for agriculture. Many expenditurescan be regarded as recurrent costs, especially in the fisheries and regional development sectors.
57. Sectoral analysis of public investment suggests that Mauritania has not yet managed tocreate an entirely satisfactory basic infrastructure that would enable priva.e investment to flourish. Thisis in large part due to the problems the Government has had in translating its dcvelopment objectives intoconsistent sectoral strategies and in drawing up a public expenditure program in keeping with thoseobjectives.
58. Table 7 shows actual sectoral distribution of public investment in Mauritania from 1985to 1991. On average, such investment accounted for 18.4 percent of GDP from 1985 to 1988 and 11.5percent from 1989 to 1990.'5 Tabies 38-40 of the Statistical Annex give a detailed picture of thesectoral distribution of investment expenditure by sector and subsector for the period 1985-91.
Table 7. Distribution of Public Investment by Sector
1985-88 1989-91(%) (%0)
Rural Development 34.0 34.4(incl. grain production) (24.4) (14.1)
Fisheries 2.1 7.5Mining (including SNIM) 19.8 14.1Industry and Energy 12.5 4.5Regional Development a/ 19.8 25.7Social b/ 7.0 8.7Miscellaneous c/ 4.8 5.1
Total 100.0 100.0
Public investment (as 18.4 11.5percent of GDP)
a/ Including public swrvices, tansportation, urban development, and communications.b/ Including education and health.c/ Including culture, public enterprise, etc.Soume: Plnning Department.
59. Sectoral distributionof public investment over time is closely linked to the implementationof major projects, frequently special ones, such as port infrastructure or energy projects. Changes in the
Is Although from 1980 to 1984 it had averaged 32 percent of GDP.
21
shares of investment funds going to the fishery and industry sectors can be explained in part by thenumber of projects to develop small-scale fishery activity which were included in the PIP as part of theeffort to resettle repatriates, and in part by the lack of bankable projects in the industry sector.
Formulation of the PIP
60. Because of Mauritania's limited ability to get profitable projects into the pipeline, the PIPhas become more a catalogue of projects to put forward to potential lenders, rather than a set of projectsin keeping with the country's priorities. In most cases, requests for financing are not based onconsiderations of economic and financial cost-effectiveness. The Planning Ministry clearly needs toimprove its project identificationl and appraisal functions so that it can better review financing requestsfrom the sectors and judiciously decide among necessary trade-offs.
61. The quality of technical studies, and especially studies on productive projects, appearsto create the worst bottleneck. There are delays in launching new projects, a problem that has alreadybeen pinpointed in a previous review of Mauritania's PIP, where it was attributed to a lack of priorstudies and to the administrative red tape surrounding decisions on terms of reference, choices ofconsultants and approval of financing arrangements. Some blame can also be laid on lenders, who maydelay in granting financing. In the agricultural sector, administrative red tape can cause delays of up totwo years in getting projects under way, with corresponding increases in implementation costs.
62. The absence of a public expenditure policy consistent with clearly defined sectoralobjectives and strategies, in combination with poor project identification, has led to the selection ofessentially unprofitable projects which have later encountered implementation problems because of poorpreparation. This has been particularly true in the industry, energy and basic infrastructure sectors. Veryfew feasibility studies have been done to assess the nature and scope of demand for the anticipatedservices or products, or to study technical options, or to determine the scope of the investment to begranted and the recurrent costs, or to identify institutional constraints. In short, these projects have notbeen seriously appraised, nor have studies been carried out to determine if there were consistent with thedevelopment objectives set forth in the PREF or the PCR.'6
Implementation of the PIP
63. Financial execution of the PIP from 1989 to 1991 ran up against a number of bothtemporary and structural problems which put a heavy brake on foreign disbursements and the financialand physical implementation of investment projects. Financial execution of the PIP over the 1989-91period reached only the 53 percent mark, despite doubling of the investment planned by the SNIM forthe same period. This poor performance was caused in large part by considerable delays in gettingprojects under way. Implementation of the PIP was not in line with the objectives initially set by theGovernment. Execution performance in connection with projects in the education, health and industrysectors was poor, a situation reflecting weak institutional capacity for project preparation and executionin these sectors, in addition to the difficulties Mauritania encountered in mobilizing foreign resources
16 During the 1970s and 1980s, incremental capital-output ratios (ICORs) were 14.2 percent and 16.3 percent,respectively. A steady increase in the ICOR over time suggests that if a country finances public investment withforeign borrowing, as Mauritania does, it could encounter debt service problems because the additional revenuegenerated by this in'vestment may not grow fast enough to meet the debt service burden.
22
from 1989 to 1991. Such a disappointing project execution record can also be attributed to delays indisbursement of project loan proceeds by agencies abroad, as a result of exceptional circumstances-firstthe conflict with Senegal, and then the Gulf War.
64. Figures like those which now follow need to be treated with caution, since governmentdepartments and agencies are not always able to monitor disbursements of project proceeds by foreigndonors correctly.
Table 8. Sectoral Execution of Investments(as percentage of projected spending)
1985-88 1989-91
Rural Development 76.5 60.5
Industrial Development 67.0 45.0
Infrastructure 63.7 60.0
Health 63.5 29.5
Education 73.5 28.0
Mining (SNIM) 105.0 92.5
Total PIP 75.0 53.0
Source: Directorate of Planning.
65. It is impossible at this time to identify the precise reasons for the low rate of projectimplementation in sectors and subsectors. However the monitoring and control work carried out by theEuropean Development Fund which is summarized in Table 9, indicates the seriousness of the problem,since the EDF, given its considerable presence in Mauritania, engages in continuous project monitoring.At the end of 1990, primary commitments (financing agreements) in respect of projects which were tohave been financed during the 1980-85 period accounted for 97 percent of the total financing availableat the start of the 5th EDF-indicating that financing agreements had not even then been concluded forthe priojects identified in the program as proposed. Secondary commitments (contracts, cost estimates,etc.) against the 6th EDF amounted to only 45 percent of its resources by the end of 1990. This explainsthe low level of disbursements (28 percent).
23
Table 9. European Development Fund Financing Statement(as of 12/31/90)
5th EDF 6th EDF1980-85 1985-90
(millions of ECU)
Available 43.3 100 62.2 100Primary commitments 42.0 97 57.9 93Secondary commitments 39.4 91 27.7 45Payments 33.5 77 17.6 28
Source: European Development Fund,
66. The main problems encountered in implementing the PIPs for 1985-88 and 1989-91stemmed from insufficient planning, questionable choice of projects, and poor implementation andmonitoring capabilities, as well as from problems encountered in mobilizing financing and putting it inplace.
67. Here are some of the major difficulties encountered in implementing the PIPs:17
Over-programming of investments: Despite the progress achieved in preparing PIPs,over-programming has remained the most serious problem in the management of publicinvestment in Mauritania. Programming work performed by government technicaldepartments and agencies and consolidated by the Directorate of Planning systematicallyfails to consider the need to prepare solid feasibility studies and obtain foreign financing,and to account for implementation constraints.
Lack of feaAibility studies: Before undertaking to finance new investments, donorsrequire feasibility studies. The fact that these have not been done when the PIPs werebeing prepared has been (and still is) a major cause of delay in launching new projects.Just drawing-up terms of reference can easily take 6-12 months, to which must be addedthe additional period of 3-6 months needed by lenders to study and approve them.
Shortage of local resources: Besides the time needed to draw-up terms of reference, ittakes 3-6 months to recruit consultants to conduct studies. But obtaining foreignfinancing has proved to be the longest process. A financing agreement must be approvedand signed by the Government before funds can be disbursed for a new project. Currentprocedures take up 6-12 months, to which given the time required for contracting andprocurement prcocedures must be added at least one year before actual on-site work onthe project gets under way.
7 These problems were identified and reported to the authorities and to lenders as early as 1989. See the report on the1989-91 Public Investment Program presented by the World Bank at the meeting of donors in Paris in July 1989.
24
Table 10. Investmcnts Exccuted 1985-91(in billions of UM at constant 1985 prices)
1985 1986 1987 1988 1989 1990 1991
Rural Develooment 2.462 2,333 3,266 2,283 2.173 1.366Agriculture 1.269 1.298 1,992 1,431 891 684
11% 13% 20% 19% 13% 11%Agric. civil works 48 60 81 160 360 51
0.4% 0.6% 0.8% 2.1% 5.4% 0.8%Village water resources 463 698 705 207 296 233
4% 7% 7% 3% 4% 4%Animal husbandry 51 57 48 114 236 161
0.5% 0.6% 0.5% 1.5% 3.5% 2.6%Environmental protection 195 55 233 191 210 III
2% 1% 2% 2% 3% 2%Rearch and training 436 166 206 179 180 126
4% 2% 2% 2% 3% 2%Develonment of Industry 475 698 3,029 1,830 399 683
Fisheries 123 130 338 262 356 2431% 1% 3% 3% 5% 4%
Mining (excluding SNIM) 60 109 26 53 20 220.5% 1.1% 0.3% 0.7% 0.3% 0.3%
Industry, artisanal 162 158 170 255 16 91.5% 1.6% 1.7% 3.3% 0.2% 0.1%
Energy 130 300 2,494 1,260 8 4091.2% 3.1% 2S.6% 16.4% 0.1% 6.5%
Infratructure 2,965 2,627 1,378 1,033 1,189 1,584Housing/utbandevelopment/transport 225 288 137 1442% 155 510
2% 3% 1% 2% 2% 8%Urban water supply 13 643 381 189 1 68
0.1% 6.7% 3.9% 2.5% 0.0% 1.1%Roads 744 317 506 569 689 796
7% 3% 5% 7% 10% 13%Ports 1,500 938 266 42 0 0
13.4% 9.8% 2.7% 0.5% 0% 0%Airports 29 5 8 7 0 4S
0.1% 0.1% 0.1% 0% 0.7%Info./telecom. 454 435 80 82 344 165
4% 5% 1% 1% 5% 3%Miscellancous 1,461 1,187 1,096 973 844 802
Culture, youth, sporu 0 0 16 27 2 00% 0% 0.2% 0.4% 0.02% 0%
Justice 20 0 0 0 0 40.2% 0% 0% 0% 0% 0.06%
Education 371 317 155 190 171 1663% 3% 2% 2% 3% 3%
Health and welfare 482 411 250 272 266 1584% 4% 3% 4% 4% 3%
PEc, miscellancous 588 459 675 484 406 4735% 5% 7% 6% 6% 8%
Total 7,363 6,844 8,769 6,119 4,604 4,435 4,806
SNIM 3,809 2,770 960 1,569 2,064 1,870 1,108
Grand Total 11,172 9,615 9,729 7,688 6,668 6,305 5,914__ __ __ _ __ __ _ __ __ _ __ __ _ __ __ _ -- -- -- -- -- -- -- - - ----- - - -- --------__ __ __ __ __
25
Figure 5. Sectoral Distribution of Investment(1985-88)
Rural develipmeflt -
Industrial development __..
Infrastructure
Health
Education Projected.. .... I_ Actual
40 o Xa a 0 5 10 IS X a aPercent of total
Figure 6. Sectoral Distribution of Investment(1989-91)
Rural development v
Industrial development
Infrastuctre u r
Health
Education ... _ _ . ___Projected
___ _Actuala Is l X10 a 0 10 4
Percent of total
26
Inadequate coordination with donors: Although the Consolidated Investment Budget hassince 1987 been designed as an instrument to coordinate foreign financing of PIP projectsbetween the Government and donors, it has not worked efficiently in practice. Followingsuccessive reviews of the BCI, World Bank missions have found that a good number ofprojects are implemented outside the PIP. Some donors prefer to finance new operationsor technical assistance projects rather than projects that are part of the PIP. These otherprojects have systematically been included in the BCI and have been financed in theirentirety by donors and lenders.
68. Project implementation has also suffered from inadequate budget appropriations, delaysin allocating foreign financing, and a lack of consistency between the PIP and BCI.
PIP Financing
69. According to official statistics and as indicated in Table 11, foreign financing of projectsduring the review period averaged around 90 percent of total public investment. This financingcomprised loans (49 percent), grants (26 percent), quasi-grants (15 percent), budget funds (9 percent) andself-financing (I percent). However only investment financed out of the budget is recorded as budgetexpenditure.
70. According to the Central Bank, about 80 percent of foreign financing of the PIP relatesto imports of goods and services, leaving only 20 percent for local expenditure on salaries and localgoods and services. So foreign financing of the PIP, 49 percent of which is in the form of loans, would,again according to the Central Bank, appear to be of little benefit to the Mauritanian economy in theshort-term, and could in the long-term constitute a cause of foreign currency outflows for debt-servicing.This further reinforces the importance of selecting profitable projects capable of generating additionalresources and promoting exports.
Table 11 Financing Public Investment(in millions of USS)
198S 18 1987 1988 1989 1990 1991 TotuI
LoAM 92 So 88 71 54 51 44 480 49Grants 38 42 51 46 27 29 22 25S 26Quasi-gants 26 34 18 11 9 9 38 14S ISBudget 6 7 11 11 14 15 is 82 9Othera/ I I 0 2 1 1 7 13 .1Total 163 164 168 141 105 105 129 975 100
a/ Including self-financing and the CommUon Fund.
Source: Directomte. of Planning and Finance.
71. In real terms, pdblic investment expenditure fell by 15 percent between 1987 and 1988,by 24 percent between 1988 and 1989, and by 1 percent from 1989 to 1990. However this drop becomesmore significant if Societe miniere (SNIM) investment expenditure is excluded and one notes that in the1985-88 and 1989-91 PIPs many expenditures were not investments strictly speaking but recurrent costson projects already concluded or under way (phased implementation).
27
72. The following conclusions can be drawn from this analysis of public investment:
Although the Govermment has made considerable efforts to strengthen the PlanningMinistry's capacity to program public investment, the current process has shortcomingsthat impede good public investment programming. The Ministry does not have the staffto conduct studies on macroeconomic and sectoral policies and strategies. There appearsto be poor coordination with the technical ministries and other institutions involved. Thecapacity for preparation and presentation of projects to donors falls short, so that requestsfor financing are not generally based on serious studies.
Sectors such as industry, artisanal activities, and transportation show no underlyingstrategy for public expenditure. In other sectors, such as fisheries, agriculture andfinance, the Government's strategy has already been overtaken by recent events, so thatin-depth revision of both policies and strategies is required. It is more than ever essentialto clarify the Government's relationship with the parastatal and private sectors. Theabsence of policies and strategies creates a void in economic life and in inter- andintrasectoral relations which could reinforce already existing stumbling blocks.
Where sectoral strategies and policies do exist, the investment program is not consistentwith them. In agriculture, the Government remains directly involved despite its policiesof disengagement and promotion of the private sector. Investment in the roadtransportation sector is not based on any coherent overall plan, so that proposedinvestments are not necessarily warranted. In the fisheries sector, the Government isplanning direct investments, even though the sector's current crisis points to the need forrevision of the institutional, regulatory, and incentive framework within which itoperates.
Combined public and private investment, equivalent in volume to roughly 21 percent ofGDP, appears sufficient to put the economy back on the path of sustained, lastinggrowth. However the incremental capital-output ratio (ICOR) indicates that investmnentis not very effective. Current expenditure is well below the minimum required to ensurethe proper functioning of projects and services that support economic activity. TheGovernment should be able to achieve its priority objectives by reallocating revenuesthrough better project selection. In investment, priority must be given to the socialsectors and to supporting private investment.
PIP sectoral distribution continues to favor directly productive investment in ruraldevelopment and industry, to the detriment of investment in infrastructure and humanresources. This runs counter to the Government's policy of giving priority toinfrastructure, education and health.
28
Figure 7. Fiuancing of Public Investment
100
60
40
20
U 86 87 U ll I690 91as6 as 87 as 8 90 91
29
PIPfor 1991-96
73. The 1991-96 Public Investment Program has been revised a number of times at the
request of the World Bank, which has proposed selection criteria such as: point to which projectpreparation has advanced, economic and financial rates of return, absorptive capacity of the apparatusof government, availability of foreign and domestic financing, and realistic implementation schedules.Drawing up a medium-term PIP has helped to identify a number of defects in the programming process,the most serious having to do with preparation and monitoring of investment projects, the absence ofsectoral strategies and policies, and the fact that projects chosen too often do not conform to priorities(when these have actually been defined).
74. The 1991-96 PIP as proposed by the technical ministries and consolidated by the
Directorate of Planning reflects the same objectives and priorities prescribed by the Government when
in the 1989-91 PCR. This PIP amounts to UM 106.3 billion (US$1.3 billion at constant 1991 prices) and
varies only slightly from the 1985-88 and 1989-91 PIPs in allocations of investment funds within and
among the various sectors. Agriculture is still the priority sector (with 31 percent of investment),followed by regional development (25 percent), and mining (13 to 90 percent of this allocation goihg to
SNIM alone). The social sectors absorb 12 percent of the total.
75. This report endeavors to define a priority investment program (see Table 12) which takesinto account sector absorptive capacities," recurrent costs, possibilities of foreign financing, and sectoralstrategies for the rural development and social sectors,"9 and such government economic policy
objectives as promotion of the private sector, reduction of the Government's presence in the productivesectors, and its interest in giving preference to social expenditures. In the proposed program, priorityis given to the agricultural, social, regional development and fishery sectors. The continuing relativeimportance of the mining sector is due to the heavy investments SNIM has planned for the 1991-94
period.
| Absorptive capacity is estimated by considering the particular sector's implementation capabilities, the economic and
financial justification for the proposed projects, and their contribution to sector objectives. (See paragraph 72 for an
analysis of institutional constraints.)
9 This priority program is the result of a joint evaluation by the mission and senior staff from the country's technical
ministries. The findings from a preliminary evaluation of the PIP by members of the geographical team were also
used.
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Table 12. Distribution of Public Investment(billions of UM)
P r o p o s a I s
GRIM Reort
Sector Cost Cost
Rural Development a/ 32.4 31.0 12.9 22.0of which: grain production (5.5) (17.0) (6.9) (12.0)
Fisheries 10.8 10.0 6.4 11.0Mining b/ 14.2 13.0 13.0 22.0Industry, energy 6.1 6.0 3.6 6.0Regional development c/ 26.2 25.0 11.4 20.0Social d/ 13.1 12.0 7.7 13.0Miscellaneous e/ 3.5 3.0 3.3 6.0
Total 106.3 100.0 58.3 100.0
Public investment as a percent of GDP 26.7 11.6
a/ Includes crop production, rural infrastructure, stock watering facilities, animal husbandry, environmental protection,and research.b/ Includes SNIM.c/ Includes housing, urban development, water supply works, roads, ports, airports, infornation, andtelecommunications.d/ Includes education, health, sport, primary schools, and employment.e/ Includes PEs, technical assistance, artisanal activities, and tourism.
Source: Diretorate of Planning.
76. This program has an estimated cost of UM 58.3 billion, or US$719.2 million, whichcomes to about US$120 million a year, a figure closer to Mauritania's absorptive capacity as observedfrom 1985 to 1990. Some 85 percent of this total would be financed by foreign resources, 37 percentof it in loans, 30.5 percent in grants and 17.5 percent in quasi-grants. The main donors would be theEEC, CCCE, IDA, FAC, AfDB, UNDP and AFESD, Germany, Italy, and Spain.
77. The Government intends to finance its investment program with loans (31 percent), grants(33 percent) and quasi-grants (25 percent). Foreign resources will make up 89 percent of total funding.The remaining 11 percent will be covered domestically, with 6 percent coming from budgeted funds, 3percent from the Common Fund and other sources, and 2 percent from public enterprises as self-financing. This domestic financing represents Mauritania's counterpart contribution to projects financedwith foreign resources.
Recurrent Costs
78. In preparing of Mauritania's investment programs, attention has been focused oninvestment expenditures and their financing to the detriment of financing recurrent costs.
79. This approach is well intentioned but misguided for the following reasons: theproductivity of existing investments is seriously undermined when the budget revenues needed to ensuretheir operation and maintenance are not forthcoming; preparing investment programs, must consider the
31
Government's capacity to finance the operating and maintenance costs of the investment, either on thebasis of potential resources or on the basis of a cost recovery policy; and many recurrent costs, andespecially those incurred in the education and health sectors, and in maintaining basic infrastructure, arejust as important for the country's economic and social development as new investment.
80. The followirg conclusions can be drawn from an analysis of the problem: most budgetestimates of recurrent costs fall short of the amounts required to operate the projects; rehabilitation orextension projects contain relatively high percentages of recurrent costs; and at least 30 percent of so-called investment expenditures are actually recurrent costs financed by donors. It is also true howeverthat a high proportion of these expenditures is included in the PIP because of donors insistence.
81. An analysis of various typical projects by sector has led to an initial estimation of thetheoretical relationship between investment expenditure and recurrent costs-the "r" coefficients. Theresults of this analysis are given in Table 13.
Table 13. "r" Coefficients
Sector/Subsector "r" coefficient
AgricultureRural civil works 0.02Rural water supply 0.04Animal husbandry 0.Z5Environment 0.09Research 0.13
Energy 0.48Construction 0.39Water Supply 0.17Roads 0.14Ports 0.19Telecommunications 0.49
Recommendations
82. In the publi investment arena, government policy should focus on: placing publicinvestment in the framework of a well-deflned development and institutional reform policy to facilitatemore effective project implementation; limiting the scope of public investment to the social sectors andthe basic infrastructure needed to develop the private sector; improving the effectiveness and the inter-and intrasectoral allocation of public investments; further reducing the public sector where, following thereform process, private investment should grow in importance; putting aside low-priority projects;planning and programming the funding of recurrert costs of projects; and improving coordination withand among donors essential to the implementation of public expenditure and reform programs.
83. The PIP is a key instrument for putting the Government's economic and sector policyoptions into effect and for coordinating donor activities. The analysis given here shows that the PIP isaffected by institutional weaknesses which hamper the budget process. The PIP is further handicapped
32
because donors frequently circumvent these weaknesses by making special arrangements which add tL
the complexity of the programming process. This indicates a need to reduce the PIP to proportions
consistent with the economy's absorptive capacity, to concentrate it on areas identified as priorities, and
to gain a better grasp of the links between investments and the recurrent costs they entail. All this
highlights the need for Mauritania to master the budget process and the use of economic and financial
management tools.
84. As ongoing projects are completed, opportunities will arise to reallocate foreign aid funds
according to the priorities set in sectoral strategies and the public expenditure program. The Government
should pay attention to: ensuring that projects financed by donors fit in with an agreed sectoral strategy;
strengthening project implementation to avoid squandering of foreign resources and giving in to pressure
from donors to create special management units whose mission is to steer their projects clear of the
normal constraints on government activities; and making sure that medium-term projects are viable, either
by earmarking the budget revenue needed to cover recurrent costs or by making arrangements with
donors to do so before execution of the project begins.'
Aid Coordination and Management
85. Mauritania has always been among the Sahel countries that receive the most aid per
capita. A total of US$1.4 billion was disbursed from 1984 to 1990, giving a net amount close to US$204
million a year, or US$107 per capita. Distribution has been as follows: project aid, US$171 million;
balance of payments aid, US$27 million; and technical assistance, US$6 million.
86. Given the large part external financing plays in the total resources available to
Mauritania,2" aid donors are crucial to the implementation of adjustment, investment and public
expenditure programs. At present, foreign aid seems to be a process initiated and managed by donors,
who provide financial and supervisory aid for operations and projects which are usually not part of the
programs within which such aid is supposed to be granted.
87. There are possibilities for redirecting foreign aid in three categories of financing: ongoing
projects, structural adjustment, and sectoral programs. For investment projects in progress or under
consideration, it is recommended that nonpriority projects be postponed, that the share of the recurrent
development costs associated with investment costs be raised, and that certain projects currently classified
as low priority be ranked as top priority. Schedules for disbursement of funds committed by donors show
that implementation of some investment projects can be deferred or can be implemented over periods of
more than five years.
88. As far as the funding of recurrent development costs is concerned, it is highly
recommended that project financing be made more similar to adjustment financing (with its rapid, parallel
and joint disbursements). To this end, adjustment countespart funds must be clearly identified so that the
Government can earmark them for financing the highest priority recurrent costs. Presentation of a
20 See C. Baum and S. Tolbert, 'Investing in Development," and the 'r- coefficients proposed by P. Helier in his article
L 'insuffisance dufinancement des coius de dveloppement rEcurrents ("Inadequate Funding of Recurrent Development
Costs").
21 A direct, sustained nlow of resources funded nearly 90 percent of public investment during the period. To this must
be added disbursements made since 1987 to support the balance of payments.
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program of priority sectoral investment would be one way to convince donors that the Government hasclear priorities. Since some donors may believe that quick-disbursing adjustment operations are moredifficult to carry out, other instruments could be developed to cover recurrent costs. It is recommendedthat sector ministries seek financing for priority investment packages that include recurrent developmentcosts.
89. Strategies using foreign aid to finance recurrent costs strongly affect the attitude ofdonors. A long-term commitment on their part is indispensable. Recurrent costs are long-term costs bynature, and any interruption in the flow of financing is to be more damaging than a temporary slowdownin implementation of an investment. The concept of permanent government service to the population isdirectly linked to the need for uninterrupted financing of recurrent costs.
90. One problem in this area has to do with the Goverrment's donor coordination policy.This coordination is provided by the Planning Ministry, the Finance Ministry or the Foreign AffairsMinistry, depending on the donors. To improve its control of the foreign aid process, the Governmentcould:
coordinate and harmonize lending procedures better, as part of the planning andbudgeting process;
improve aid coordination to have better control over disbursements in the case of ongoingoperations and to be in a better position to evaluate possibilities of new commitments bydonors; and
improve the structure of foreign aid, between balance of payments support andinvestment financing. Counterpart funds from balance of payments aid could be used torestructure public expenditure. In the long run, foreign aid should be set aside forinvestment. In the medium-term, the acute need to rehabilitate the country's social andphysical infrastructure and the possibility that donors may not continue to finance thebalance of payments indefinitely could have serious implications for the financialequilibrium of the recurrent budget.
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CHAPTER III
INSTITUTIONAL FRAMEWORK ANDECONOMIC AND FINANCIAL MANAGEMENT CAPACITY
91. In Mauritania, the greatest obstacle to preparing a macroeconomic agenda consistent withthe goals of development and a multi-year government expenditure program is the country's inadequateinstitutional framework. The main agencies now involved in planning, programming and budgeting are:the Directorates of Planning and Financing and the National Statistics Office in the Ministry of Planning;the planning units of the technical miniatries; the Directorates of Budget, Taxation, Debt, and Customsand the Treasury in the Ministry of Finance; and the Central Bank. Coordination is poor between oneministry and another and between departments in the same ministry: this is doubtless the single greatestobstacle to producing reliable macroeconomic and financial data. There is a need first to define the tasksof these agencies to avoid the duplication of effort and overlapping of powers now to be seen inmanagement and monitoring of the external debt and preparation of the PIP. Then analytic and financialmanagement capabilities must be strengthened.
92. The Government's weaknesses in planning and monitoring expenditure are such thatdonors must be found to fill the gap. Expenditure planning in Mauritania is concerned primarily withaddressing immediate needs and is clearly not part of a long-term view. Planning current expenditureis essentially making budgetary appropriations fit available resources, but the usefulness of this inMauritania is limited by shortcomings such as an inadequate project pipeline, insufficient economicanalysis, and poor communication between technical departments.
93. The structure of current and capital spending does not reflect the objectives set inallocation by sector or in the nature of the expenditure. It falls far short of the primary goals ofpromotion of the private sector, and deregulation and economic liberalization of the economy-the basicgoals of the Government's adjustment policy. The connection between expenditure and the objectivesof the adjustment program may be fairly characterized as loose.
Recommendations
94. The institutional frarnework of the budgeting process needs to be strengthened. Theresponsibilities of planning, programming, and budgeting agencies should be better defined to ensure thattheir technical recommendations are consistent with the Government's development policy. Multi-yearprogramming should fit within a coherent macroeconomic framework to ensure more effective integrationof economic and financial data and greater flexibility in spending decisions. The planning/programmingand budgeting functions should take account of all revenues and expenditure, since budgetaryconsolidation is a key element of sound financial management.
95. Regarding the budget, the Ministry of Finance should be strengthened by changing somecurrent practices. To facilitate preparation of the annual budget, the Directorates of Planning and Budgetshould prepare several budgetary scenarios for the medium-term and for the year in question. The projectcycle needs to be streamlined at all levels of administration. The Government should establish a technicalcoordinating committee that could systematically review sector policies and investment proposals.
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96. To bring the long-term view into planning, all Government resources and expenditureshould first be consolidated. This done, the management of all special accounts and expenditures onbehalf of the Treasury should be reorganized to be subject to the same strict controls as other budgetoutlays and to permit ex ante accounting. Subsidies and transfers should be regulated by performancecontracts with beneficiary establishments so that the objectives can be more closely monitored. It isimportant to assess the possibilities of increasing the resources of these establishments through moreefficient cost recovery. Given the magnitude of operating expenses under the investment pro[-qm, a cleardistinction should be drawn between gross fixed capital formation and other expenditure. TheGovernment should gradually replace donors in the financing of recurrent charges.
BUDGET PREPARATION AND MONITORING
Source of Data
97. The manner of presenting Mauritania's budget remained unchanged throughout the periodcovered by this Public Expenditure Review: the budget documents approved by the Comitd militaire desalut national (CMSN) were signed into law by the President of the Republic and published in the OfficialBulletin; they incorporated summnary tables providing expenditure and revenue estimates for the currentyear. The Directorate of Budget prepared summary tables of actual expenditure and revenue for previousyears. These two sets of documents were the principal sources of the data used for this Review.
Budget Plan
98. Mauritania's Budget Plan is divided into two parts. The first enumerates the generalconditions required for financial balance, sets forth the ways and means of achieving it, provides for andauthorizes the collection of taxes, charges and duties designated as government revenue, prescribes theamounts appropriated to major expenditure categories, sets out in summary table form the general dataon the fiscal balance envisaged, authorizes the Government to seek financing to cover Treasury shortfalls,authorizes the collection of taxes and duties earmarked for local governments and institutions in the publicsector, and identifies operations guaranteed by the Government.
99. The second section of the Budget Plan specifies revenues and expenditure under both thegeneral budget and supplementary budgets by heading, chapter and article, authorizes operations onspecial Treasury accounts, and approves program allocations and their maturity schedules.
Preparation of the Budget
100. The Ministries of Finance and Planning are pivotal to the budget process: Finance isresponsible for preparing the current budget and monitoring expenditure and revenue collection, whilePlanning is responsible for drafting the development budget and obtaining the necessary financing fromexternal sources.
101. The budget drafting process traditionally begins in August. Toward mid-August, theMinister of Finance sends a circular to all ministries, requesting that budgetary proposals be submittedto the Directorate of Budget by the end of September. At the same time, the departments in the Ministryof Finance are instructed to submit estimates of receipts by type of tax, nontax revenue and capital flow.
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102. The second stage concerns mainly the Ministries of Finance and Planning, particularlythe Directorates of Budget and Planning. These first examine the proposals from the ministries and othergovernment agencies, and then draw up a preliminary expenditure budget (which includes capitalspending). At this point, an estimate is made of debt servicing before and after rescheduling. Thisnotional expenditure budget is then reconciled with the targeted budget surplus figure, which should atleast to cover repayment of debt that cannot be rescheduled.
103. The expenditure-surplus reconciliation process is repeated until a solution is found thattakes major sector objectives into account. In this way, a draft budget is prepared by late October orearly November and submitted for ratification to the Minister of Finance, who then requests meetingswith the ministries to negotiate their proposals.
104. This series of negotiation meetings is held in November. Once negotiations arecompleted, the resulting final draft Budget Plan is submitted to the Government for adoption in mid-December, and subsequently to the CMSN in late December for approval. It becomes law in the firstweek of January.22
Monitoring of Budget Expenditure
105. Implementation of the budget is subject to both ex ante and ex post controls. TheAuthorizing Officer, the Financial Comptroller, and the Chief Government Accountant are involved inex ante control, while the more complex ex post process is primarily the responsibility of the ComptrollerGeneral (and to a lesser extent of the Inspector General's Office) and those departments of the Directorateof Budget which have inspection responsibilities.
106. Ex ante monitoring: Generally speaking, government spending is classified as eitherstaffing or plant expenditure. Staffing expenditure consists of remuneration (salaries and allowances) andsocial security contributions paid in respect of civil servants and other government workers. All otheritems are considered plant expenditure.
107. The government payroll itself is the instrument used to monitor staffing expenses, whilethe commitment order (bon d'engagement) is used to monitor plant expenditure. These two classes ofexpenditure are monitored and scrutinized at four levels: Authorizing Officer, Financial Comptroller,Chief Government Accountant (Treasurer General) and Directorate of Info,rmat-on Systems.
108. Staffing expenditure is monitored by the Authorizing Officer through a coordinatingstructure within the Payroll Department that scrutinizes and verifies all payment transactions to check forirregularities (relying on vouchers and other documentary proof).
109. The Treasury verifies the validity of supporting documents submitted, while the FinancialComptroller performs ex ante examination of texts and documents as there are issued by the civil serviceand user ministries.
22 Since the March 1991 parliamentary elections, the Govemment's draft Budget Plan must be passed by a vote of thelegislature.
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110. With respect to plant expenditure, the Directorate of Budget is responsible for thecentralization and scrutiny of commitments, payment authorizations and budget accounting. This providesan opportunity to consider the advisability of the expense, verify that it is chargeable to the budget, checkcontract ceilings, ensure that funds are available, and so on.
111. The Financial Comptroller's scrutiny involves verification of commitment orders andcertifications submitted for his ratification (chargeability to the budget, availability of funds). TheTreasurer General monitors payments made and countersigns certifications after verifying all supportingdocuments.
112. Ex Dost monitoring: Checks and controls are performed by the Chief GovernmentAccountant, the Inspector General's Office, and those departments of the Directorate of Budget withinspection responsibilities. They have to do mainly with checking observance of the regulatiorsgoverning budget execution, confirming that spending authorizations existed, and evaluating handling ofthe disbursement process.
113. The Comptroller General has full powers of inspection (central government, publicenterprises). He has the authority to carry out on-site inspection and if necessary to take over from themanagement being audited. This is the most stringent form of control.
114. The Minister of Finance is assisted by an Inspectorate General, which performsinspections at the Minister's request. Although its auditors may be authorized to perform random checksor cash audits, they do not have the powers of government comptrollers.
115. The Authorizing Officer is represented within each ministry by a "central" accountant whois responsible for administering and paying out the funds appropriated to it. The Directorate of Budgethas an audit department responsible for on-site checks of each ministry's budget transactions and theaccounting records prepared by the central accountants. This type of audit is carried out quarterly andserves as a basis for a report on budget implementation prepared for the Director of Budget.
116. The mission analyzed the procedures in three specific cases: recruitment of a memberof the civil service, promotion of a civil servant already in office, and execution of one plant expenditureoperation.
Recommendations:
117. The following action is recommended to improve the budgeting procedures:
Specify and clarify the powers of officers of the Central Accounting Departments, whoshould normally monitor authorized expenditures on behalf of and under the authority ofthe Director of Budget. Decree Law 89.84 of 12.19.1989 separates central accountingstaff from the Directorate of Budget, while Decree Law 80.148 of 7.8.1980 places themunder the authority of the uset Ministry and its Secretary Genera!. This contradictionneeds to be resolved.
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Compile inventories of the tasks performed by the staff members of each directorate whoare responsible for budget implementation. Once the inventories have been completed,the Directors concerned should be able to eliminate any duplications of effort revealedin the inventories and to streamline procedures as necessary.
Set up an inter-agency working group (Office of the Financial Comptroller, Directorateof Budget, Directorate of Treasury and Public Accounting) with a mandate to:
- identify all tasks which are duplications of eftort;- recommend their elimination;- maintain only those controls that ensure strict adherence to budgeting and
government accounting regulations.
Controls appear to be truly effective and therefore essential at only two points:commitment and payment.
Establish a classification of government expenditure vouchers, arranged by category ofexpenditure. This classification should strike a balance between simplicity and clarity ofvouchers and the rigor required to identify irregularities and serve as a guide for usersthroughout the government sector who are responsible for executing expenditure plans.In each case, it should indicate the only requirements that need to be fulfilled to ensureeffective monitoring.
Accord actual documents the status of accounting records. These or at least one of theircopies, should be considered as such, and should be bound and numbered consecutivelyby budget year and kept at the Directorate of Budget. Those kept at Central AccountingOffices and at the Directorate of Budget should be checked at least once a month andreconciled, any discrepancies being noted and any necessary rectifications being effected.
Number bills of quantities consecutively. If carry-overs from earlier years are shown anda summary balance given from the beginning of the current year, they will have the forceof pavment orders and will conclude the authorization phase. This will facilitatereconciliation with the accounting records of the Directorate of Treasury and theGovernment Accounting Office, ensuring that each month's entries by the AuthorizingOfficer and the Treasurer General will match.
Complete drafting of the Manual of Accounting Procedures rapidly, and review and fine-tune the organization of accounting channels. Efficient accounting procedures and anefficient accounting structure are prerequisites for the success of any computerizedsystem.
Produce a revenue and expenditure account for 1992 on the basis of a new chart ofaccounts and the reinstatement of accounting procedures and principles. It would beequally advisable to reestablish judicial review along the same lines.
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REFORM OF THE CIVIL SERVICE
118. An analysis of the civil service is important for two reasons-first because of themagnitude of the expenditure involved, and second because remuneration is essential in motivating civilservants, and a motivated civil service is crucial to any attempt at institutional strengthening. The datanow available on the civil service are highly questionable, while their usefulness is limited by insufficientcapacity for analysis and proposal. The Government has instituted reform measures which are the resultof better understanding and analysis of the present: a civil service staff census, salary adjustments andad hoc initiatives all of which underscore the importance of global approach to this delicate issue.
119. The main objectives of the reform are to take the human factor in Mauritania'ssociocultural context more into account, to achieve stricter and more transparent management of therecruitment, compensation, and career development of civil servants, and to restore the authority andcredibility of the civil service. In late 1991, the prospects for reform of the civil service seemedextremely bright because: financing was available for implementing a new, more motivational systemof remuneration; and detailed studies had been done on human resources and administrative structuresand the links between them. It was possible to design a strategy for reform in which a salary adjustmentwould be one key to enhancing the operations of Government.
120. This outlook could now be put at risk by at least three factors: the salary increasedecreed in January 1992, quite outside the reform process, cuts seriously into the projected fundingearmarked for the current year's total wage bill; and the financial impact of the civil service staff censuson the wage bill is disappointing at less than 1.5 percent-a figure that puts the census in a poor light(although it will still supplement personal data on government employees); and no reform has yet beenactually undertaken.
121. Using the assessments and proposals made over the last two years, the Government ofMauritania must decide on and implement action to control the 1992 civil service payroll and embark onsubstantive reform. The main actions to be taken in the short-term will be: stabilization of the numberof civil servants, particularly by rectification of the irregular situations revealed by the census, loweringof the retirement age of support staff to 60 years, and institution of a freeze on hiring except in thepriority sectors of education and health; drafting of the new Civil Service Act and its Regulations (plusan analysis of their financial impact on the public sector payroll), for entry into effect on January 1,1993; and coordinated preparations for institutional reorganization which should gradually be expandedto cover the entire government sector in 1993.
122. Census: Conducted by an expatriate consultant in conjunction with the National StatisticsOffice in an effort to supply much-needed information on civil service staffing, in quantitative andqualitative terms, this survey produced disappointing findings. An initial estimate indicates thatrectificarion of irregular situations would affect less than 2 percent of all staff (159 positions eliminatedand departure of 168 employees at or above mandatory retirement age) and would bring down totalpayroll by less than 1.5 percent. These unusually low figures are not clearly explained by the fewreferences to them in the report. It is stated, for instance, that "changes in methodology" probablyreduced the number of staff in irregular situations from 1,000 to approximately 595 (a lack of clarityserious enough to undermine the credibility of the census). Accepting that assertion, the number ofdeletions from the payroll came out to 327-159 phantom employees not belonging to the civil servicealthough on the payroll (108 professionals and 51 contractual personnel), plus 168 employees over thestatutory retirement age.
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123. The census does give a clearer picture of the Mauritanian civil service-it is young andmale-dominated (71 percent are under the age of 40 and 80 percent are men); four ministries account for78 percent of employment-Education (44 percent), Health (14 percent), Interior (13 percent) and Finance(7 percent); 30 percent are support and contract staff and 70 percent are professional staff; and only arelatively small percentage is based in the capital (47 percent). The census also allows both projectionsregarding retirements and potential decisions based on this variable to be made. Given the potentialimpact on the total wage bill, it is strongly recommended that the retirement age for support staff belowered to 60 years, which would lead to 234 additional departures in 1992.
124. Salary adiustment and institutional development. Compared with most countries in theSahel region, Mauritania enjoys a relatively advantageous position in government-sector wage bill.Remarkably stable since 1981, it accounts for 33 percent of expenditure under the current budget and 27percent of budgetary revenue excluding grants. (This compares to: 41 percent and 33 percent,respectively, in Mali, 42 percent and 63 percent in Niger, 49 percent and 49 percent in Senegal, and 55percent and 83 percent in Chad.) Yet Mauritania compares unfavorably where the size of its civil serviceis concerned-18,723 individuals in February 1992 (13,036 professional staff, 4,793 support staff and894 contract staff). The number of civil servants per 100 inhabitants is very much higher in Mauritania(1.0) than in most Sahel countries (0.5). Average monthly remuneration (base salary, allowances, andother benefits) is low at approximately UM 22,500, or US$270. For professional staff the average is UM26,400 and for support staff UM 13,591. More than anything else, this accounts for the lack ofmotivation in the civil service.
125. A salary adjustment should be accompanied by a ceiling on the size of an already largecivil service. The compensation package should be restructured and simplified, in part through anincrease in allowances and cther benefits with respect to base salary, which averages 71.5 percent of totalremuneration.
126. As things now stand, a salary adjustment without fundamental legislative reform andreorganization of management structures would do little to enhance the efficiency of the machinery ofgovernment-the ultimate goal of any meaningful reform of the civil service. Being able to motivategovernment employees through greater financial equity, a more balanced and stable organizationalstructure, and more transparent management would be of considerable benefit: it would be unfortunate tolet this opportunity pass.
127. January 1992 salary increase. The individual increase amounted to 1,500 ouguiyas or1,000 ouguiyas, with the higher anount going to lower-level staff. Its budgetary impact in 1992 was toraise the total wage bill by an estimated 6 percent. Automatic salary indexation increments will raise thewage bill by 2 percent to 3 percent on average each year. The compensating effect of the freeze on basesalarres (the previous increase was in 1985) is hard to assess (from 2 percent to 4 percent, depending onthe decrease in purchasing power). The government payroll will show an upward trend, increasing by10 to 14 percent this year (assuming a constant staffing level).
128. The 1992 salary increase will have four effects: it is highly likely to cause a budgetshortfall in the present fiscal year; it precludes any adjustment in compensation based on a reform ofpresent pay scales; and it should prevent manipulation of compensation figures (if old habits can bebroken). The results of the civil service census prompted the 1992 staff stabilization initiative.
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Recommendations
129. Analysis points up the importance of a careful study of the consequences of reform asproposed in the Government's October 1990 Declaration, since it is clear that the adjustment processundertaken in the country's production sectors will have to be supplemented by comprehensive civilservice reform focused on: a salry policy Y that prescribes both salary levels and a salary structure,and is competitive with the private sector (allowances and benefits in kind) a staffing policy thatprescribes the size of the civil service, and staff hiring and retrenchment procedures, taking into accountbudgetary constraints and sector priorities; a redundancy policy to facilitate absorption into the privatesector of civil servants who are laid off; and a job creation policy.
130. Studies undertaken as part of the Development Management Project (DIAR) are likelyto provide a sound basis on which to plan, design and initiate a reform of human resources and staffstructures. To facilitate the decision-making process, the mission recommends that coordination bestrengthened at the levels where reforms are formulated, implemented and monitored. At present,considerable functional compartmentalization separates the Directorate of Budget (Payroll and InformationSystems, although changes in the payroll data processing system are slated for next July), the Directorateof the Civil Service (which is implementing its own automated management file and preparing a seriesof reforms), the General Secretariat of the Government (with the activities of the Bureau of Order andMethod), and the decentralized departments of ministries and regional authorities. Without suchcoordination (encouraged by the ministerial committee set up to monitor the DIAR studies), the activitiesare likely to lack overall coherence and to lose sight of their objectives. Coordination should make itpossible to establish a schedule for the activities planned as part of the different components of the reformprogram.
131. A freeze should be placed on hiring, except in education and health (meaning that therewould be a maximum of 600 positions to be filled each year), and reinstatement of competitive civilentrance exams (provided for by law but not given). If put into effect by March 30, 1992, thesemeasures should prevent any increase in recruitment in 1992, and even reduce them slightly, allowingfor normal attrition due to retirement (114 employees), dismissals, resignations, secondments, deaths, andso on.
132. Starting in 1993, planning in connection with civil service staff size and total payroll willbe easier, given genuine acceptance of the principles involved by decisionmakers and their commitmentto the implementation process.
3 As part of the agreement with the IMF, the Government agreed to keep the increase in wages and salaries below theinflation rate. It is possible, however, that the reform will cause this item to increase as a share of currentexpenditure, even if the size of the public service is reduced.
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CHAPTER IV
THE SECTORAL PROGRAMS
133. This chapter discusses the prospects and constraints of the transportation sector (roadtransport subsector) and the human resources sector (education and health subsectors); it summarizes theconclusions and recommendations of the working groups which participated in the review of publicexpenditure.
THE TRANSPORTATION SECTOR
134. The share of transportation and telecommunications in the Mauritanian economy isestimated to account for 7 percent of GDP, reflecting the rudimentary stage of both infrastructure andservices. While traditional transport (caravans and portage) have not disappeared, they are of minimalimportance in absolute terms. They retain considerable importance, however, in terms of trade flows insparsely populated areas and areas where nomads are found. Modern communications networks arereduced to the bare bones. There is little mixed transportation (involving two or more modes), and thusno intermodal competition to speak of; major traffic hubs are few and far between, and often separatedby great distances. Planning tends to follow strictly modal lines. There is no framework (master planor scheme) for transportation development.
135. Most inland trade, except for iron ore shipments, is carried by motorized vehicles. Thesize of the motor fleet is not known with any accuracy. Registration records show 37,000 vehicles.Expressed in terms of the present population, the fleet is modest: 1 vehicle for every 80 inhabitants anda haulage payload of 1 ton for every 160 inhabitants. Registration receipts must do little or nothing tomaintain the present fleet.
Road Transport
136. The national road network is shaped like a semicircle with Nouakchott at its center. Atotal of 1,748 km of paved roads has been built, to which can be added the 70 km of roadways inNouakchott. Their condition is variable. The aggregate value of the paved network (combined total ofconstruction costs) was estimated in 1986 at UM 36 billion, its residual value being approximately UM20 billion.
137. Improved dirt roads totalling 710 km have been built, with an additional 5,000 km oftracks. The main causes of road degradation are: erosion due to rainwater-the drought has greatlyreduced the surrounding vegetation and hence runoff times; and the heavy traffic, which usually exceedsthe permissible load. The cure is (or ought to be) to keep the works maintained by repaving the surfaceevery 15 years and applying a monolayer treatment in between. As with initial construction, theseimportant works are financed by foreign aid.
138. A peculiarly Mauritanian problem-sand encroachment-requires regular treatment tokeep some roads open to traffic. It is a road operations issue rather than one of maintenance, calling forspot treatment simply to uncover the roadway. Since this eats up much of the budget allocated for roadmaintenance, maintenance is not carried out as it should be. The inspected portion of the classified
43
network is well documented (a road register has been kept up to date in the Department of Public Workssince 1987), but the less heavily travelled sections receive no-or only sporadic-attention from thegovernment.
139. One result of this state of affairs (skeletal network, often low traffic volume) is weakorganization of public road transportation (of goods and passengers alike). The government issuesdecrees setting the maximum rates haulers can charge, based on distance (more or less than 200 km), typeof vehicle, number of passengers and road condition ("paved, passable, mediocre, poor"). Discussionson these rates between the government and the haulers are laborious in view of the constant degradationof certain sections.
Organization of the subsector
140. Overall transport activities are nominally placed under the authority of the Ministry ofInfrastructure and Transportation (MET), with the following exceptions: rail transport of iron ore(SNIM) and activities at the port facilities of Nouadhibou (SNIM and Ministry of Fisheries). The Stateis the contracting authority for the construction of roads, ports and airports and is the owner of all theseinfrastructure works. It operates the roads directly and carries out routine maintenance by force account(DMER). For construction and periodic maintenance, financed for the most part by donors, it has thework performed under contract. Oversight is exercised by the Department of Public Works (DTP).
141. The only government-owned commercial overland transport company is thie SociOtOnationale des transports de Nouakchott (SNTN), which is concerned with urban transport and which itwas decided would, as part of structural adjustment in the public enterprise sector, be graduallyprivatized. The Public Works Laboratory forms an independent department.
142. Relations between (MET) and the other stakeholders are haphazard. Most take placethrough the Cabinet, particularly those that relate to the programming of investments. Someinterministerial committees have a sporadic existence, with widely varying results. The most recentamnong them is the interministerial committee for implementing the Road Policy Action Program. Thishas a chance of accomplishing its mission, routine road maintenance (including sand clearing)-in additionto which it is receiving EEC support. MET has had virtually no involvement in preparatory work on theNational Regional Development Plan (SNAT) currently at the approval stage: this undermines theinstitutional legitimacy of the work carried out.
143. MET has done little in the way of design and evaluation in the past. Sectoral masterplans (roads, airport runways, ports, storage facilities) needed for proper planning of governmentprograms have been lacking. A statistical base has yet to be compiled, especially in the area of roadtransportation (origin and destination flows), which could be used as a starting point for impact studiesand ex post evaluation of the effects of the projects carried out.
144. MET employs 240 civil servants directly: 175 in the central administration, 40 in thedistricts (9 in the Nouakchott district) and 25 on secondment (PANPA, STPN, PW Laboratory). Thereare 53 managers in the central administration and 10 in the districts. The districts are under the authorityof MET's headquarters staff, although in theory their work (mostly road maintenance) is coordinated withthat of other government departments by the regional governors. In addition, MET uses day laborers(approximately 180 on a full-time basis in 1990).
44
Sectoral policy
145. According to the Consolidation and Recovery Program PCR, the overall objective is toprepare the National Regional Development Plan (SNAT). The guiding principles of this plan are topersuade those living in the communities in the interior to stay put, to curb the growth of Nouakchott,and to improve urban and inter-city transportation. Secondary objectives in the infrastructure subsectorare to assure service to areas with economic potential, to open up access to isolated regions, and topromote inter-country links. The strategy in the infrastructure subsector is to protect the infrastnuctureagainst encroachment by sand, to implement the agreed road maintenance policy, and to restrict theconstruction of new roads to those that support rural development and regional development operations.
146. In the area of road transportation, the present split (DT for relations with haulers; DTPfor construction and heavy maintenance; and DMER for operation/maintenance) can be retained providedthat greater autonomy for DMER, associated with increased funding, enables it to compile recordsdocumenting the impact of its operations on the condition of the roads, and, that a reasoned dialogue isestablished with the haulers so that the benefits (improved traffic) and disadvantages (higher levies) canbe assessed by them in equitable terms.
147. The major investment in the subsector in 1985-90 was the eastern highway, with itssouthern spur between Boghe and Kaedi. Maintenance and operation of paved roads are costly and notperformed to high standards, and certain sections (east of Aleg) have deteriorated to the point wheremajor capitals outlays will be needed to rehabilitate them. This suggests that a moratorium on the con-struction of new paved roads is advisable until the funding required for proper maintenance of the entirenetwork can be mobilized.
148. About 20 percent of the PIP was executed in the transportation and telecommunicationssectors during the periods of the PREF and the PCR, half of it on roads. The slump in 1987/88 was anaberration unlikely to be repeated.
149. Most major investments were funded by foreign aid, with operational funding fromdomestic sources. This split has classic consequences: routine, periodic maintenance is often performedto lower standards than required for optimum use of the facilities. This holds good for the physical plantand, to a lesser degree, for the equipment and vehicles (SNTN).
150. In the current national budget, maintenance of infrastructure (roads, ports, airportrunways) accounts for less than 1.3 percent. The result of inadequate maintenance is higher vehicleoperating costs. The authorities acknowledge this state of affairs in the matrix of maximum rates thatroad haulers may charge over the different sections of the network: each time a new matrix is negotiated,the classification of each section according to the categories (paved, passable, mediocre, poor) is thesubject of heated debate. In this way, substandard maintenance is reflected in haulage rates and thuspassed on to consumers. Aside from the proposals of the specialized consultants, there is a clear needto study the cost-benefit balance sheet of an adequate maintenance policy. All the technical and economicdata needed to assess its advantages are to hand: the road policy is at stake.
151. There is a road fund, but it is not adequately funded. The road maintenance force iscofinanced by the European Community, which is a decisive presence in the transportation sector. Theamounts currently devoted to road maintenance are on the order of UM 250 to 270 million annually,which is highly inadequate. Recent thinking on road maintenance has been expressed in a number of
45
documents. The budgets cited as needed to carry out the work envisaged range from several hundredmillion UM a year to more than I billion, or 3 to 6 times the present outlay.
Review of the investment program
152. In its early years the regional development investment program was dominated by: roadmaintenance, combined with strengthening of the Nouakchott-Aleg link, and improvements to the workbeing done to complete the Nouakchott air terminal, the wharf and the electrification network. Itamounted essentially to a lumping together, subject to external financing constraints, of programs uniqueto particular departmnents, and to the companies and authorities in the sector. The program ischaracterized by the preponderance of operating and routine maintenance expenditures, the fact that somecomponents have not been sufficiently thought through in relation to sector strategy, and the absence ofany framework document to facilitate decision-making.
153. The low level of central budget funding of the road infrastructure sector is reflected inheavy reliance on donors and in confusion between periodic maintenance work and new projects; forexample, a new road is regarded as a project with a life span limited to 7 to 10 years, at the end of whichit is identified as a new project again. Improved resource allocation could help bring about better useof transport capacities and offer a consistent overall framework for allocating resources to take care ofrecurrent costs and periodic maintenance (and even new construction). The problem is much the samein the transportation, port traffic and telecommunications sectors, except that there the entities involvedare autonomous.
Recommendations
154. Although transport planning in Mauritania is built around its characteristic features-scattered population, with a few areas of concentration, an almost desert-like seaboard, unstable soils thatreadily lead to encroachment by sand, and a rough climate with strong wind gusts-the sector policiesadopted have been only partially implemented. The lack of coherent sector planning means the subsectorsof urban development, transportation (road, sea and air) and communications are considered in isolation,so that investments in one are independent of those in the others. It is a matter of priority to develop thenecessary master plans, complete with all legitimate economic considerations, to regulate the orderlyexpansion of the networks and to manage the facilities.
46
Table 14. Expenditures on Road Transportation 1985-91(in millions of current UM)
[ . . 1 1985 j 1986 1987 1988 1989 1990 199191
E. Public Works 0 0 is 56 58 53 52Personnel - 13 45 47 42 50Equipment - 2 11 11 11 2
E. Infrastructure 15 16 0 0 0 0 0Personnel 13 14Equipment 2 2 - -
Road Fund 33 34 0 0 0 0 0Peronnel 25 26Equipment 8 8 - - -
E. Surveying 5 5 8 13 14 12 15Personnel 3 3 5 10 10 7 10Equipment 2 2 3 3 4 5 5
E. Depots 0 7 10 9 9 7 9Personnel - 7 9 8 8 6 8Equipment - 7 1 I 1 1 1
E. Tnapoilation 4 4 4 5 6 6 6Personnel 3 3 3 4 4 4 4Equipment I I I 1 2 2 2 l
Source: Budget Depatnent.
155. Medium and long-term studies are needed to permit implementation of the NationalRegional Development Plan, the formulation of which is still at a rudimentary stage. These studies mustalso bring out the relevance of scenarios based on sustained expansion of regional trade, (at presentinsignificant); road transit to Mali, air links, upsurge in port traffic. Some statistical data and specificsurveys are already being compiled, but efforts should be devoted to improving their preparation,discussion and dissemination. Preparation of the master transportation plan is vital, provided that it isdone to conventional standards. It would be particularly useful to carry out subsectoral studiesbeforehand and to take account of the planning work being done on regional development in general.
156. While ordinary road maintenance (including the operations-related task of sand clearing)is currently being defined in terms compatible with engineering requirements, and available funding, thereare still two main issues. First, ways must be found to combine routine maintenance (DMER, domesticresources and force account works) with periodic maintenance (DTP, external funding and work doneunder contract). Second, the departments responsible must be provided with sufficient resources tosupport the priority Road Policy Action Program (PAPR). It is recommended that at least UM 600million be allocated to road maintenance in 1993, UM 750 million in :994 and UM I billion in 1995.
47
THE HUMAN RESOURCES SECTOR
Education
157. Mauritania's education sector faces several problems, including: the weakness and unevendevelopment of primary education; the poor external efficiency of higher and secondary education; thepoor quality of instruction; high unit costs and budgetary constraints; and the lack of planning capacity.In the context of the Economic and Financial Rehabilitation Program (PREF), the Government haddefined a sector strategy that was confirmed as part of the Consolidation and Recovery '.'-gram (PCR)and supported by the World Bank and the African Development Bank.
1. Sector policy
158. The principal objectives of this strategy are:
To achieve an enrollment rate of approximately 77 percent in 1993/94 through:implementation of a classroom construction and rehabilitation program; an increase of 9percent per year in the current budget for education; and introduction of a multigrade,dual-shift system.
To improve the internal and external efficiency of secondary, higher and vocationaleducation by: keeping the rate of intake into the second cycle of the secondary level at5,000 students and limiting enrollment at the Institut sup6rieur scientifique to 6,000students; ensuring that the annual rate of growth of the recurrent budget allocated to thesecondary level as a whole does not exceed the rate of growth of the public budgetallocated to the education sector, and that the growth rate in the budget for higher educa-tion, excluding scholarships, does not exceed 3 percent per year; keeping scholarships atthe secondary and higher levels at their 1977 levels; improving the teaching of science atthe secondary and higher levels; rehabilitating and improving the quality and usefulness oftechnical instruction; strengthening and diversifying the skills enhancement programs foremployees in the commercial and industrial sectors; and establishing training programs forthe industrial fisheries sector.
To improve quality at all levels of the education system.
To encourage the financing of education by the private sector through: the introductionof incentives to private education; and expansion of the private sector financing of publiceducation.
Strengthening the planning and management capacities of the Ministry of Education andother key ministries involved.
2. Results achieved
159. Despite a clearly defined sector strategy, objectives have been only partially achieved.Although intakes at the secondary and higher levels have indeed been restricted, the primary schoolenrollment rate fell from 55 percent in 1986/87 to 52 percent in 1989/90. Nevertheless preliminary datafor 1991 point to a reversal of this adverse trend, with an anticipated enrollment rate of about 55 percent,
48
still below the target of 66 percent for that year. Regional disparities appear to have lessened, with therange of extremes falling from 25-90 percent in 1986/87 to 41-87 percent in 1990/91. Enrollment of girlsrose from a rate of 40 percent in 1986 to 42 percent in 1991. The promotion rate in the last year ofprimary school fell from 38 percent in 1986 to 22 percent in 1988, but improved again to 35% in 1990.The pass rate in the baccalaureat dropped from 43 percent in 1980 to 22 percent in 1990.
160. Over the period 1985-91, the share of the education sector in total current expendituresdeclined from 27 percent to 24 percent. The share allocated to the Ministry of Education fell from 23to 21 percent. In 1991 current expenditures on education accounted for 3 percent of GDP. In spite ofthe fall-off in budget allocations, the education sector remains well endowed with public resources incomparison with other African countries with comparable income levels.
161. In contrast with the goal of increasing the share of education in the national budget,allocations by level remained unchanged during the period, with about 32 percent of expenditures goingto the primary level, 36 percent to the secondary level, 25 percent to the higher level, and 3 percent tovocational training. The growth of the primary level budget was about 6.4 percent and 0.8 percent in1989 and 1990, respectively, well below the target of 9 percent, while the increase in the budget for thesecondary level stood at 8.7 percent and 4.7 percent, respectively, considerably above the target set inthe sector strategy. The annual budget for study scholarships and that for higher education were bothrestricted, as planned.
162. The weak performance of the education sector and the lack of balance in its budgetcombined to produce high unit costs at all levels of the system, except for higher education, where hadinitially declined but have again risen since 1990. A conservative estimate of unit costs in primaryeducation, excluding common expenditures, housing allowances for teachers, expenditures by the localauthorities, and those made by the Ministry of Infrastructure and Transportation, amnounts toapproximately 26 percent of per capita GDP. As far as the primary level is concerned, student-teacherratios fell from 51 in 1985/86 to 45 in 1990/9 1, the corresponding drop at the secondary level being from24to 18.
49
Table 15. Breakdowa of Expendcures on Education 1985-91(in nillions of current UM)
r------------------------------------------------------------------------------__________
1985 1986 19898 1989 1990 1991l ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(proj.) I
Basic education: 798 891 990 1,069 1.116 1.145 1,257Rate of growth 12 % 12% 7% 4% 3% 10%
- Personnel 781 869 975 1,045 1,089 1,117 1,225Rateofgrowth 11% 12% 7% 4% 3% 10%
- Plant 17 22 23 23 27 28 32Rate of growth 27% 4% -1% 18% 5% 13%
- Scholarships
Secondaryeducation: 657 798 891 1,029 1,124 1,174 1,170Rateofgrwth 21% 12% 16% 9% 4%
- Personnel S39 651 734 880 972 1,029 1,023Rate of growth 21% 13% 20% 10% 6% -I%
- Plant 32 39 40 40 42 44 50Rate of growth 24% 2% 1 % 4% 4% 14%
- Scholarships 87 107 117 109 110 101 102Rate of growth 28% 9% -7% 1% -8% 1%
Teachertraining (ENI): III 97 84 80 81 90 97Rate of growth *13% -14% 4% 1% 11% 8%
- Personnel 35 36 38 39 41 49 51Rate of growth 5% 5% 2% 6% 19% 5%
-Plant 2 2 2 2 2 2 2Rate of growth 0% 0% 0% 0% 0% 0%
- Scholarships 75 59 44 40 38 39 44Rate of growth -21% -25% -9% 4% 2% 13%
Technical education: 134 95 90 88 107 85 99Rate of growth -29% -5% -3% 22% -20% 16%
- Personnel S0 30 27 31 33 40 38Rate of growth 41% -8% 15% 4% 24% -7%
- Plant 29 29 33 35 34 26 33Rate of growth 1% 16% 4% -1% -23% 27%
- Scholarships 56 37 30 22 40 19 28Rate of growth -33% -19% -28% 8S% -53% 48%
Higher education: 176 186 191 209 219 251 245- Personnel 14 13 14 15 16 36 20
Rate of growth -8% 4% 11% 4% 131% -45%- Plant 37 45 51 47 59 71 67
Rate of growth 20% 15% -8% 25% 20% -5%- Scholarships 125 128 126 147 144 143 160
Rate of growth 2% -2% 17% -2% -1% 12%
TOTAL 1,876 2,067 2,254 2,475 2,647 2,745 2,869Ra teof growth 10% 9% 10% 7% 4% 5%
163. The investmnent program of the education sector during 1985-90 amounted to UM 1.6billion, equivalent to 2.6 percent of the total investment budget but only 43 percent of the amount initiallyplanned (UM 3.6 billion). This execution rate is markedly weaker than that for the public investmentprogram as a whole, which was 76 percent. The lion's share of the investment in the sector wasaccounted for by the Education Sector Rehabilitation Project, supported by the World Bank and theAfrican Development Bank. This focuses on primary education, vocational training and technicaleducation. About 9 percent of the project costs correspond to recurrent expenditures disguised in the
50
investment project, and about 16 percent of the cost is allocated to technical assistance. The project didnot become fully operational until 1991; the main impact of this was felt in school construction andrehabilitation, the publication of textbooks and the completion of studies to identify the measures requiredto improve resource use.
164. The private sector's contribution to primary education and vocational training isimportant. Parents are legally responsible for the construction of schools and for financing recurrentexpenses other than those for staff. With respect to vocational training, a large part of the current budgetof the Basic and Advanced Training Center (CFP) comes from payments made by employers for servicesto customers. The same approach to cost recovery is followed in the Seamen's Training Center. Largecompanies, such as SNIM, provide basic and further training courses themselves. The presence ofprivate schools, both for-profit and otherwise, remains weak. The Living Standards Measurement Survey(LSMS) reveals that 96.9 percent of primary and secondary school enrollment in 1988 was funded by thepublic sector. The Government has issued a decree granting tax and customs concessions to privateeducation.
3. The 1991-96 program
165. For the period 1991-96, the Ministry of Education has proposed a budget consistent withadherence to the main elements of the strategy adopted in 1987. The rates of growth in the budgets forprimary education, teacher training and secondary technical education are 9 percent, 5.4 percent and 10percent, respectively.
166. It is clear that significant increases in the enrollment rate can be achieved only by imple-menting measures to improve efficiency at all levels. It is important that all the studies suggested in thisconnection be carried out as quickly as possible and that the Government revise its plan accordingly.
167. The program of investment in the education sector proposed by the Government amountsto UM 1.8 billion, but about 12 percent of it represents recurrent expenditures in disguised form. Theprimary investment program consists in continuing the sector rehabilitation project. It also comprises anutrition program in the primary schools, a famil) education program, an adult literacy program, theequipping of a maintenance service and the construction of five vocational training centers linked toKoranic schools for adults.
168. Apart from the main investment program outlined here, the Government has begunpreparing a new sector project as a successor to the present education project. The preparatory studiesare not yet underway, but the Government has provisionally programmed investments totalling UM 4.3billion, with 47 percent allocated for the primary level, 8 percent for general secondary education, 27percent for technical education and 18 percent for higher education. This seems very ambitious in lightof the sector's past performance. The generous allocation to the higher level appears unwarranted,particularly since most would go to construct a sciences faculty at the University of Nouakchott. Theproposed program contains no investments in vocational training, an oversight that may be correctedfollowing definition of an action plan for vocational training that the Government is preparing.
4. Recommendations
169. The level of expenditures proposed for the education sector is entirely consistent with thestrategy adopted by the Government in 1987. The rates of growth in the budgets for primary education,
51
secondary education and secondary technical education are 9 percent, 5.4 percent and 10 percent,respectively. These rates ought to be attainable thanks to the scholarship budget being frozen at the 1991level and to the growth of expenditures for the central services, general secondary education and highereducation (excluding scholarships) being limited to 2 percent, 3 percent and 3 percent, respectively. Thisstrategy would allow a primary enrollment rate of 63 percent to be achieved by 1996 (assuming unit costsare kept at UM 7,571 per student per year). But If the budget for primary education were to increaseonly at the rate of 3.6 percent, (as has been the case in the last two years) the primary enrollment ratewould decline to around 49 percent by 1996. It is important that the allocation within the budget beadhered to. It is estimated that, for the sector as a whole, the operating budget will need to increase atan annual rate of 3 percent, which would raise the budget allocation from UM 3.6 billion in 1991 toabout UM 4.6 billion in 1996.
*52
Table 16. Projections of Operating Expenses for Public Education(in millions of current UM)
Level/Type of Education 1991 1992 1993 1994 1995 1996 Annual1 1 j ~~~~~~~~~~~~~~~Rateof_ Growth
Central Services 146.00 148.92 151.90 154.94 158.04 161.20 2.0%
MED 83.00 84.66 86.35 88.08 89.84 91.64 2.0%
ILN and IPN 63.00 62.26 65.55 66.86 68.20 69.56 2.0%
Basic Education 1,259.00 1,372.31 1,495.82 1,630.44 1,777.18 1,937.13 9.0%
General Secondary Education 1,156.00 1,187.62 1,220.19 1,253.74 1,288.29 1,323.88
Teaching Expenditures 1,054.00 1,085.62 1,118.19 1,151.74 1,186.29 1,221.88 3.0%
Scholarships 102.00 102.00 102.00 102.00 102.00 102.00 0.0%
Secondary Teacher Training 97.00 99.86 102.88 106.06 109.41 112.94
Teaching Expenditures 53.00 55.86 58.88 62.06 65.41 68.94 5.4%
Scholarships 44.00 44.00 44.O' 44.00 44.00 44.00 0.0%Technical Secondary Education 108.00 116.00 124.80 134.48 145.13 156.84
Teaching Expenditures 80.00 88.00 96.80 106.48 117.13 128.84 10.0%
Scholarships (local) 20.00 20.00 20.00 20.00 20.00 20.00 0.0%
Scholarships (abroad) 8.00 8.00 8.00 8.00 8.00 8.00 0.0%Higher Education 811.00 823.84 837.07 850.69 864.72 879.17 =
Teaching Expenditures 428.00 440.84 454.07 467.69 481.72 496.17 3.0%
Scholarships (local) 223.00 223.00 223.00 223.00 223.00 223.00 0.0%
Scholarships (abroad) 160.00 160.00 160.00 160.00 160.00 160.00 0.0%
TOTAL for MED 3,577.00 3,748.55 3,932.66 4,130.35 4,342.77 4,571.16 5.0%
Total Operating Budget 16,764.00 17,266.92 17,784.93 16,318.48 18,868.03 19,434.07 3.0%MED Percentage 21.34 21.71 22.11 22.55 23.02 23.52
53
Health
1. Issues and strategic options
170. In spite of the priority accorded the health sector since the 4th Development Plan 198 1-85, Mauritania's health situation remains deplorable. In 1987, life expectancy at birth was estimated at46 years and the crude mortality rate at 19 per thousand, sharply above the average for lowincomecountries, which is 10 per thousand. The infant mortality rate is 129 per thousand, compared with anaverage of 72 per thousand for low-income countries.
171. The public health system covers three levels of oversight and supervision and five levelsof health services. The oversight and supervision levels are: the Ministry and its central administrationat the national level; the Regional Directorates of Public Health (DRASS) at the level of the wilayas; andthe health districts at the level of the moughataats. The five levels of health services are: the NationalHospital Center (CHN) at Nouakchott; the regional wUlaya hospital; the moughataa health center (CS);the community health station (PS); and the village basic health unit (USB). The USBs, while fullyincorporated into the public health system, are run entirely by the local population (including personnel).
172. The essential lse facing the public health service delivery system are the deteriorationin the quality of services and the system's inability to cater to the growing health needs of the people.The results of the Living Standards Measurement Survey (LSMS) show that in 1988 only 46 percent ofall those sick or injured consulted health care services. This percentage rises to 73 percent forNouakchott, compared with 32 percent for rural areas. Because there is no operational decentralizedhealth care system with well-defined referral levels, the CHN is congested.
173. The problems arise mainly because the population has rapidly become more sedentaryover the last 15 years, and from poor allocation of the resources available to the system. Evidence ofweak resource management is found: at the planning level, with respect to the development ofinfrastructure facilities and the deployment of human and operating resources; in the proliferation ofvertical programs through parallel and duplicate delivery channels; and in the absence of a distributionsystem for essential generic drugs.
174. Although they pinpointed the sector's constraints, the PREF and PCR did not lead to theimplementation of a consistent program for developing the country's public health system, because therewac no coherent policy for the sector. Since 1987 preparation of the Health/Population Project hasprovided the Government with the opportunity to embark on a search for ways to develop and financethe health system.
175. A master plan for the period 1992-96 was adopted recently by the Council of Ministers.It outlines a strategy based on the following measures: effective decentralization of the public health caresystem; the mobilization of resources to assist the regional health care systems; strengthening of planningand supervision capacities at the central level; and establishment of an essential drugs supply system.
176. Effective decentralization of the health care system implies: strengthening the recentlycreated DRASS; organizing a regional health service delivery network, in accordance with standardsclearly defined for each category of facDity; and establishing effective management and monitoringsystems. The mobilization of resources to assist regional health care systerms will be achieved by:reallocation of human and physical resources in favor of the regional health facilities; universal
54
introduction of a cost recovery system; and channeling of foreign aid toward initial investments in thedecentralization of the health care system.
177. During the period 1985-90, the operating budget of the Ministry of Health increased byan average of 9.6 percent. The share of the Ministry's budget in the total operating budget rose from5.1 percent in 1985 to 5.6 percent in 1989, only to fall to 5.2 percent in 1990. The share of the healthsector (including common expenditures) in the national operating budget went up marginally from 5.6percent in 1985 to 5.9 percent in 1990.24 The target set by the PCR was that the share of the healthsector in that budget was to increase to 10 percent by 1990.
178. Although the way the budget is now presented makes it difficult to pinpoint how thehealth care budget is allocated among sectors, the CHN's share in the Ministry's budget seems to havelost ground to the regional health services. Yet the CHN still claims 25 percent of the Ministry'soperating budget, compared with 66 percent for the other health facilities. This imbalance can be seenmost clearly in non-salary expenditures: in 1990 allocations for CHN operating expenses (such as drugs)represented 44 percent of the Ministry's operating expenses other than salaries.
179. Public investment expenditures for the health sector amounted to UM 2.1 billion for theperiod 1985-90, or, compared with a planned total of UM 3.9 billion, to approximately 3.5 percent oftotal public investment expenditures during this period.
180. Aside from its budgeted alloeations for capital spending, the public health sector benefitsfrom many gji in kind that are not passed thwugh the national budget. In 1990, the value of these gifts(main'y drugs) was estimated at UM 111 million, equivalent to some 14 percent of the Health Ministry'soperating budget. These gifts are often unsuited to the country's needs and their usefulness is open toquestion. For example, there are frequently drugs whose expiration date has expired.
181. Up until now, the services provided by the public health sector have been free, exceptfor those delivered by the CHN. However in view of the scarcity of resources, several projects financedby international aid have for some years been experimenting with a cost recovery mechanism that requirespayment for certain services, particularly at the USB level. Under the 1992-96 Master Plan, this costrecovery system will be made universal for all service delivery levels. To this end, a decree was adoptedby the Council this year, and implementing regulations are being drafted.
4 These estimates do not include lodging expenses for health personnel, which were estimated at UM 45 million in 1990.If these expenses are included, the share of the health sector in the national operating budget rises to 6.2 percent.
55
Table 17. Evolution of Health Expenditures 1985-91(in millions of curmnt UM)
1985 1986 1987 1988 1989 19901 1991
Cabinet 8 9 11 11 12 15 16Personnel 4 4 4 4 S 5 5Plaid 3 5 6 6 6 9 10Subsidies 1 0 1 1 1 1 1
DAF 4 4 3 4 4 4 5Personnel 3 3 2 3 3 3 3Plant I I I I I 1 2
Health facilities (interior) 173 186 207 0 0 0 0Personnel 157 170 189 -Plant 16 16 18 - - - -
Hospital Medicine 0 0 0 is 46 35 48Personnel - 0 30 18 31Pant - - - IS 16 17 17
NatiorAl Hospital 147 144 163 165 171 183 186Personnel 81 87 92 95 101 94 107Plat 66 57 71 70 70 89 79
National School of Public Health 0 0 0 25 25 22 26Personnel - - - 5 5 3 5Plant 3 3 3 3Subsidies - - 17 17 16 18
Preventive rnedicine 10 11 9 0 0 0 0Permonnel 9 9 7 -Plat 1 2 2 - - - -
Dept. of Social Affair 19 21 21 20 22 19 22Personnel 18 20 20 19 20 17 20Plant I I I 1 2 2 2
Polyclinic 61 6S 67 0 0 0 0Personnel 59 63 66Plant 2 2 1 - - -
Fight against Tuberculosis 1 2 2 0 0 0 0Personnel 0 0 0 - -
Plant 1 2 2
-Sabah Hospital 18 19 20 20 21 0 0Personnel 2 3 3 2 3PInt 16 16 17 18 18 -
SEGDI 3 3 4 4 4 4 5Personnel 2 2 3 3 3 3 3Plat I I I I I 1 2
56
Table 17 (cons d). Evolution of Health Expenditures 1985-91(in millions of current UM)
198 186 1987 1988 1989 1990 1991
(p roj.)
Dept. of Hygiene & Health Protection 0 0 0 386 403 435 446Personnel - - 370 381 414 424
Plant - 16 22 21 22
Pharmrcy & Drugs 0 0 0 56 61 60 62
Personnel - - 0 2 4 3 4
Plant - - 0 54 57 57 58
P.M.I. 2 10 2 0 0 0 0Personnel 0 8 0 - -
Plant 2 2 2 - -
Dept. of Planning 0 0 0 3 3 3 4Perwonnel - - I I 1 2
Plant - 2 2 2 2
PhnningService I I 1 0 0 0 0Peronnel I I I - - -
Plant 0 0 0 - - -
Dcpt. of Health 16 32 64 0 0 0 0
Personnel 15 31 62 - -
Plant I 1 2
Procurement 50 54 56 0 0 0 0Personnel 3 4 3 - - - -
Plant 47 50 53 - - -
Education Health Prot. Service 0 1 0 0 0 0 0Personnel 0 0 0 - -
Plant 0 1 0 - -
National School of Nursing and Midwifery 22 26 25 0 0 0 0Personnel 5 6 S - - - -
Plant 1 3 3Subsidies 16 17 17 - -
Gen. Inspectorateof Health 0 0 0 0 0 1 2Personnel - - - 0 0
Plant - - - - - 1 2
Psychiatric Hospital 0 0 0 0 10 10 10Personnel - - - 0 0 0Plant - - 10 10 10
Ksar-HospiaJ 0 0 0 0 4 4 2Personnel - - - - 0 1 0
Plait - - - 4 3 2
ridjikja Hospital 0 0 0 0 0 0 9Personnel - - - - 0Plant - - - - - 9
TOTALS 53S.3 588.1 655.3 709 786 795 843
57
182. he private medical sector, although essentially limited to the capital and the port cityof Nouadhibou, has recently undergone a sizable expansion. In 1989, there were, in the whole of thecountry, 8 clinics with hospital beds, 6 general practitioners' offices, 6 specialized physicians' offices,4 dentists' offices, 17 general nursing care establishments, and 7 nursing care offices. Authorized in1983, the private pharmaceutical sector has expanded exponentially since. In 1989 it was estimated thatthe private sector imported drugs worth UM 670 million, compared with a budget allocation of UM 109million for drugs. National expenditure on drugs in the private sector has been estimated atUS$7/inhabitant/year. For 1988, data from the LSMS show that on average Mauritanian householdsspent about 20 percent of their income on health care. Apart from the private for-profit medical sector,a large number of nongovernmental organizations (NGOs) are active in the health sector, although nostatistical information is available on their activities.
183. The sogial security system in the health sector is made up of four elements: the assump-tion by the Government of the hospitalization and health care expenses of established civil servants (com-mon expenditures, Art. 10, para. 60); the assumption by the Government of aid to indigents (commonexpenditures, Art. 19, para. 10); the provision of employee health benefits by private and parapublicenterprises; and the Family Services and Occupational Risks divisions of the social security systementrusted to the National Social Security Fund (CNSS). In the absence of data, it is impossible toestimate how much the different social security schemes contribute to national health expenditures.Membership in the CNSS is mandatory for all workers subject to the provisions of the Labor Code orthe Merchant Marine Code and for salaried government employees not covered by a social securityscheme (auxiliary employees). An audit of the organization and management of the CNSS is currentlyunder way, and the results will make it possible to tell how much the CNSS spe:ads on health care.However, the health benefits for those insured seem to be limited. The budgetary allocations set asideto underwrite the health care expenses of civil servants and indigents (about UM 48 million) fall far shortof reimbursing the expenses incurred by the health facilities (in particular by the CHN and outside thecountry) for the services provided. This explains why the Government has been obliged since 1991 tointroduce the budget line item "Public Assistance Shortfall" (common expenditures, Art. 10, para. 61).
2. The Program for 1991-96
184. The Mauritanian Govermnent is proposing a strategy for financing public health servicesbased on implementation of the decentralized public health care system. With respect to currentexpenditures on personnel in the public health sector, preparation of the Health and Population Projectprovided an opportunity to define deployment norms for each level of the public health care system. Onthe basis of these norms, the Government is working on a program to redeploy Ministry of Healthpersonnel. Although this redeployment plan has not yet been adopted, the following conclusions can bedrawn: the present number of personnel employed by the Ministry appears to be sufficient to run thedeceniralized public health care system provided that some personnel are redeployed to the regional healthfacilities; and this redeployment will consist essentially in scaling back the number of personnel assignedto the national level (Ministry, CHN) to strengthen the staffing of the regional health services. Sinceadditional recruitment would not appear necessary, the Ministry's staffing expenses have been kept attheir current level shown in Table 18, which presents projections of public expenditures for the healthsector for the period 1991-96. It is proposed that the Government continue to fund the salaries of publichealth personnel, except the support staff at the PS level and all personnel at the USB level, whosesalaries will be borne by the community.
58
185. With respect to current expenditures other than for personnel, a special effort has beenmade to calculate the operating costs of the regional health services. These costs have been establishedfor each region, taking into account the specific features of each. The estimation shows that the operatingcosts of the regional health services, excluding personnel costs, amount to UM 227 million a year. Inestimating the respective contributions of government and community in financing these costs, thefollowing assumptions were made: the cost of essential drugs would be recovered in full at the level ofthe health centers, health stations and basic health units; the beneficiary population would assume the costof running the health stations and basic health units; users would cover 15 percent of the operating costs(including drugs) of the regional hospitals; and the authorities would assume responsibility for operatingthe DRASS, the CSMs and the Health Centers, 85 percent of the cost of operating the regional hospitals,and the full cost of specialty drugs at health centers.
186. Regarding the shares of government and community in financing the operating costs ofthe regional health services, the authorities are expected to contribute 56 percent toward operating costs(excluding personnel), compared with a 44 percent contribution from the community. These willcontribute chiefly through the cost of drugs (71 percent) the State's contribution will for the most partcover the other operating costs (89 percent). To make the system operational from 1992 onward, theoperating budget, excluding pharmaceutical products, ought to amount to UM 91 million, compared withits present level of UM 43 million. On the assumption that a total of UM 10 million of the presentcategory "Regional Services" is spent at the central level, the budget for this category ought to increaseby UM 58 million, which represents an increase of 7 percent in the Health Ministry budget. With suchan increase, the share of the Ministry's budget in the national operating budget would amount to about5.5 percent, compared with 5.2 percent at present.
187. With respect to pharmaceutical products, the contribution required from the State undera decentralized system operating fully in accordance with the assumptions stated should amount to UM36 million, compared with its current level of UM 61 million. This is explained in part by the savingsthat will be achieved by importing drugs in generic form and in part by the impact of improvements inprescription practices following the planned training of drug prescribers for each health facility.However, it is proposed that the State's contribution be maintained at UM 61 million until 1996 whilethe new drug distribution system evolves.
188. It is thus proposed that the present supply of drugs be used in 1992 to provide the healthcenters and one-third of the health stations and basic health units with an initial supply of drugs to enablethem to launch the cost recovery system. The allocation of UM 61 million would be used the secondyear to supply the second third of the health stations and basic health units, as well as to assure thedistribution of benchmark drugs in the regional hospitals and the Health Centers. The third year, itwould cover the last third of the stations and units, as well as the regional hospitals and the healthcenters, for benchmark drugs. From 1995 onward, the allocation from the national budget wouldcontinue to finance the benchmark drugs in the regional hospitals and the health centers and would, ifnecessary, finance the extension of the cost recovery system, together with any losses.
189. A special effort has been made to calculate the operating costs of the regional healthservices. These costs have been established taking into account the specific features of each region. Theoperating costs of the regional health services, excluding personnel costs, will amount to UM 27 milliona year until the system is fully operational.
59
190. The investment program proposed for 1991/92 amounts to a total of UM 5.3 billion,corresponding to about 6 percent of all proposed capital spending. Approximately 27 percent of thatspending can be regarded as operating expenditures "hidden in the investment program." In the contextof the proposed strategy, the investment program is concerned with the rehabilitation and equipping ofregional hospitals, health centers and stations, and with the training and refresher courses that healthpersonnel will need to run the decentralized health services system. The program will be financed bythe World Bank and AfDB, with coordinated assistance from other donors-China, Germany, Italy,France, United Nations agencies (Unicef, WHO, UNFPA), FED and AFESD.
3. Recommendations
191. It is recommended that the roles of the central administration, the National School ofPublic Health and CHN be redefined. This will no doubt have favorable repercussions on operating costsand financing.
192. Since the introduction of the cost recovery system will enable the management committeesof the different health facilities to institute a decentralized system of aid to indigents, in which themanagement committees will be responsible for identifying and taking care of the indigents, it isrecommended that the Government analyze and refocus the present system of that aid. This system isineffective in that the Government cannot meet its obligations; this has serious consequences for thefinancial situation of the hospitals and the National Hospital Center in particular. The same problemarises with the Government's assumption of the hospitalization expenses of civil servants.
193. It is recommended that expenditures for health facilities other than CHN (such as drugs)be covered under a separate chapter of the budget and be removed from the chapters dealing with theDepartment of Hygiene and Health Protection, the Department of Hospital Medicine, and the Departmentof Pharmacy and Drugs, from which these expenditures are currently drawn. This is necessary to enablea clear distinction to be made between the operating costs of the central administration and the regionalhealth services.
60
Table 18. Projections of Operating Expenditures for the Health Sector 1992-96(in millions of UM)
Type of Expenditure 1991 1992-96
Personnel 604.00 604.00
Central 25.00 25.00Administration
Operation 25.00 25.00
National School of 21.00 21.00Public Health
Operation 3.00 3.00
Scholarships 10.00 10.00
-National Hospitals 89.00 89.00
Operation 35.00 35.00
Pharmnceu- 54.00 54.00tical products
Regional Services 104.00 102.10
Operation 42.90 101.00
Pharmaceu- 61.10 61.10tical products
CNORF and CHN 20.25 20.25
Total for Ministry of 863.25 921.35Health
Common expenditues 108.75 108.75
Total for Health 972.00 1,030.10Sector
Totl operating budget 16,764.00 16,764.00
Percentage of MSAS 5.15% 5.50%
Percentage of Health 5.80% 6.14%Sector
A:PERENG.TXT/WP51/4.11.94
61
STATISTICAL ANNEXES
62
Statistical Annex Table 1
Evolution of Subsidies to AdministrativePublic Enterprises (Excl. Training)
(in millions of UM)
1 42 Im 144 S 1SIN? .4 19t7 1 9W 1990 1991
CNRAOA 7.000 14.000 14,00 14.000 14.000 14,000 MM 15.100 13.160 15.106 15,140
CNN 10.000 10.000 10.0w 1l.02 10.500 1.000 12.030 13.230 13,230 1 3,230 13,50
CNERV 10.00 10.0 10.000 11.931 11 .X 12.0 13.750 14.0- I4.00 14.00 14.0 I
0435 14.300 15.410 IIS. 13.00 1400 16.- -- I 19.Xo 19.- 19o.= 19.10
PIIA 7,050 9.J 9. 10.*Y 11.90000 13.41 .2 14.1 16.13 14.100 14.300
ONACGV 2.000 2,O3 2.00 2.00 2A3 2.O0 2.010 3.0 3.00 31.0 5.030
CNROP - 9.== 9.*_ 9.*_ 9*4 9.40 9._0 9.30
CCIA 10.000 1o03oo 10. 10.00 11.300 II-VD 11.30 11 .M0 I I.0 D 11.300
ANIM '--- - - - - - - 73MM 73I
OMIo 10.000 10.000 10.000 9.000 6.000 3,000 3.301 11.M MM 15.00 15.00
RADIO 4,0 74,100 600 106.14 103.100 124.3 240 mm 124.0 154_ s4w
lV)'- - ----- 39 ,0
Oco 3.000 -,4XI 4._ = 439
sum - 40_0 4011_ 4_ 44M 4.00 _
AMP 19.30 a,= 3,10M 21.000 21,0 2440 21400 27.93 V7.90 _ _
TOTAL 15'4.20 176.110 1964 216,9M 259,0 7300 M 312 M2 319,71 321,71
=w 5|w* *- a- X b- -W -bXX (9 Sm ilast bm b. uW . ,s3 X a7b do if. Tb b lb - uO dl d
SMPM m AMP mg lb ftq d OlT) W" MPA isb amini at tw o1.d - TV' ad RADIO.
63
Statistical Annex Table 2
Administrative Public Enterprises Engaged in Training
(in millions of UM)
_ 1 ,m sX 1 1 l gS 1i9 1i97 Igo 1*9 1990 991
CFPP 0.000 12.000 12.O 12.2WO 12.000 13.5Z0 13,X00 13,O5 3D.X3OZ 3O.000
ENS () _- _ 26.100 2.710 30,000 453,30 13,300 73.MO $0.313 1).237
CSET _ _ 10IO,C 30X,O i,O 23,000 311 73n.m 38.06O 300 38,0O
ENA Sol= 93,30 I142.0m I63Dl 71.00 w 65.0 0.33 38,00 42.JW 20 47._a
ENFVA 30,00 l0, 3001 23,000 22.400 3.0 4 42.0 24.13 2 l13D 24,1 D
N 16=50 1 4Y10 I 0 190 16.39O 2U,000 22.17 x l 25.0 25,0 25,.
___4 3000 25.W 2D,W 33.,r 31.300 35.000 3YIW 25,000 38.= A= J.
Lgs cn) 13.0 29.009 2. 275.00 301O 210.00 - f m .w - 3M _ . l6i. 1_.0
LSERI IS930 15.10 25.000 25.000 27.35 30.30 47,430 300.00 3040 34100W 34.400
CFPMN - -_ 3l 0 21.M 30.00 39.390 350 24.= 30
UNIVERSrY - 190.0 M9 25 3.0M 215,000 24."co 3 o
TqAL 2740W 432.500 I.W 104._ 641,710 671.3 72490 7.799 0 11U 1U.4 745,30
V1MM§ s *. bw bm bm
64
Statistical Annex Table 3
Miscellaneous
(in millions of UM)
19a 1*2 1963 1*4 19S 196 IN7t 1im l9O 1W0 191
ENAiJ 4,200 13.000 10.00 7.000 3., _ _ - _ _
OMPP = 180 ==_ = - =_ _
SOMADER _ _ 20.00 20,o0 20,000 0,000 10.000 - _ _ _
OTM 12.1 - - - -- -- - -
TOTAL 17,300 31.000 30.000 27.0 23.= 1I0.0 10.0, 0., 0,00 0.0 0.0
Statistical Annex Table 4
Evolution of Transfers
(in millions of UM)
I 6 1 ,,° T0 196 4lO 10 ''°°° 10 am To l o '
OURO - - Is.=0 10.00 6.000 3.000 6,60 SAm 1114=0 14,30 34,0W
cNTop - - - - - - - 3T A s500
OTM3 - -L - 14I0 14.500 --
SOMAD 147 w | 5,150 49,i0 0.79 123.910| 120.016S | .00| - | -
0,4S i - _ -_ _ -_ -_ -_- l _ o - --- -- -
oco m - - - r - - - - - T .
CNERV - _ -_ S,OT - - - - - - 2.00
CNRAD - 3.= = _ 7.0 7UN 7.0,
CNOiU - _ _ - 3.000 2.X0 2.0 2.010 3,0 5.0 7.0W
CFPMN 7, 12,7107 19.7011 in am 1.300 21.06 300w 35.000 31.200 11.8o0 11.000
TOTAL 7.X7 39,9 D 113 8 91,010 1 11 0,3 11 14-,= 11,6 9I0S0 - 124
65
Statistical Annex Table 5
Evolution of Base Salaries over 30 Yearsby Category of Civil Servant
_~~~ - - - ..
You A C A C
XO0 ka 60 626 324 192
W t p (ax 163) 13.040 6,503 4.401 2
si=i mPVW- .30.0% *30.0 .30.01 .30.0%
bt. tb 16.052 11,054 5.721 3.0 dsp A 190
~vuMh.i 1960.00
1972 .w u in i _ , .5.0% 20.01 10.0 +.20.01
NMbm .7.60 1 4 II,9Q 6.161 3.651 1.2% 1.61 2.0s 2.6%
1974 h In 0e kw= d0.196 13,657 7.06t 4,189
(-> in)
Ialaitm i e 2,500 .2.500 I.XO5 .2.500
NWb ................... 21.696 15.MM7 .5 $5,669
19t0 2A LOwi _e 0 0 +5SW +.5
N boa ..................... 1,6 15,157 9,066 64It9 AdW m191D
1901 3sdLaj.. _ 0 0 +5W +.5SW
Now t~ ....................... 21.606 15.157 9,54 0 669 0.9S 2.0O 4.5S 6.s
1962 SpohA -- (+31) +449 +293 2521 +90
Now bo ...... .......... 2..15.450 9,719 6779
1905 4SkLAi _i + 5XD +500 +.0= 2I.0
Nw b .2.645 25,9 10, 729 7,77M
Am m at' d- oe + lOS + l 1.2S 2 2.0S .2.9
t0 6 e0.0 (-iw PtMN) 0.30 031s I.67* 2.29S
A1w1 dli d 2, 2, A_00 5
Tbwmwah of= of a" pmvA 6.00 4,09 2,409 240 Avwoa inah
l-P XiUil6, d _,nnm 2909000
Nt b.t_ 29il 31964 19.959 11119 IQ179
Am_infm t _ wkd +_ +2.01 +241 3.71 LOt 2.5-% 1 *.47S 2%.1
Wd_mi ~,w_m - 1.72=
66
Statistical Annex Table 6
Average Pay a/(January 1990 wage rate)
Category Civil Servants Auxiliaries Civil(UM) (uM) Servants/Auxiliaries
ALU Nlinistries
A 36,598 30,528 1.20B 23,724 16,442 1.44C 16,783 13,900 1.21D 14,805 8,746 1.69
Overall 25,592 12,126 2.10
Excluding
Education
34,162 26,848 1.27A 21,116 16,137 1.31B 15,916 11,800 1.35C 14.779 8,869 1.67D
21,784 11,279 1.93Overall
a/ Aveagc budget charge (and not net payal'es').
Note: The auxiliaries ar, on avenge, older than the civil servants. Their pay is therefom subject to an 'ageeflect,' which involves an overstatement compared with tat of the civil servants.
I
Staftstcal Annex Table 7. Staff of the Ministries According to the Official Establishment (May 1991)
STAFF NOUAKCHO1Tr Pclcnt jmll fieenor of Cowmiry
MINISTRY Civ. Auxv. AUI. Cona. TOTAL Civ.Serv. Au iD. Cimmar. TOTAL Civ.Scrv. Auxii. Contr. 'ITAI.
PresidtcY 26 53 70 149 25 53 68 146 3.3 0.0 29 2.0
Sec,lriat-nenlof Govt. 19 52 9 s0 19 52 9 s0 0.0 0.0 0.0 0.0
P em. Staof CMSN 42 160 0 208 46 125 0 171 4.2 21 9 - 17.8
D.renm I 0 0 1 0 0 0 0 99.1 -- -- 99.1
Fob ig Affain_ 30 52 2 84 30 49 2 81 0.0 5.3 0.0 3.6
aroann lion 32 35 0 67 32 35 0 67 0.0 0.0 -- 0.0
Wai OuuWGuidaoe 63 57 3 128 62 57 3 122 5.5 0.0 0.0 4.7
luNice 339 166 128 633 ISO 73 36 289 46.9 56.0 71.9 54.3
ifd.io-r/Prr 485 287 11 783 242 139 7 38Y 50.1 51.6 36.4 50.4
Fma,ce 907 403 27 1.337 565 289 21 878 37.4 28.3 22.2 34.3
Tndc 55 101 1 187 61 S0 1 142 21.2 20.8 0.0 24.1
Fisheric 36 54 3 93 33 49 2 84 5.3 9.3 33.3 9,7
milladusry 21 46 2 69 21 46 2 69 0.0 0.0 0.0 0.0
hlinftwctur 74 121 2 197 61 103 2 166 17.6 14.9 0.0 15.7
Rw*U DeveIoPumi 441 257 14 712 IS0 76 5 231 66.0 70.4 64.3 67.6
Wacr Rccource 33 23 1 57 26 19 1 46 21.2 17.4 0.0 19.3
CWU ser_vice 169 239 t0 415 III 179 10 300 34.3 25.1 0.0 28 2
Nuioeul Educalion 6,449 1,315 37 7,501 2.026 498 28 2,552 686 62.1 24.3 67.3
IkhJso.W Afar 1,413 1.101 28 2,542 502 503 19 1,324 43.2 54.3 32.1 47.9
Conxryioler&wnul 19 IS 5 39 19 Is 5 39 0.0 u.e 0.0 0.0
Uwracy I6b 24 0 190 106 20 0 126 36.1 16.7 - 33.7
Flamim 19 57 0 76 19 57 0 76 0.0 0.0 - 0.0
Maibab Affira 3 2 0 5 3 2 0 5 0.0 0.0 - 0.0
Uecitsid Is 12 - 27 0 0 0 0 - - -- _
TOTAL. 10898 4,632 353 15,883 4.642 2,519 221 7,382 57.4 45 6 37 4 S S
TOTAL(excl. Min. of Eda.) 4.449 3,317 316 5.082 2,616 2.021 193 4,.30 41.2 39.1 38.9 402
Fild: Caoum of .aploys holdib usgirasion munbr. rcgrdles of sheir ctploymenal latuSpwe.- Ceams of Girctvenmu Pcsnal.
Statistical Annex Table 8. Breakdown of Miviistry Staff by Duty Station i may 1991)
Presidency 148 -1 - 2 -- 149 98
Sec *onr GOA,-. s0o.- 80 1OO
Pecrn.SisEi CmsN 171 2 2 1 2 14 .- - --- 3 1 2 208 82
Fetin Affair el - .-----. -..- 3 84 96
InEor~rnaion 67 -. - - -- 67 10O
CLor 122 ... - -. 4I 1 -128 95
Justice 239 5 66 35 38 40 23 40 7 24 3 33 1 598 48
tntoliVpr-r -383 13 38 36 46 47 21 18 20 24 II1 35 32 42 769 50
firmince 878 14 24 39 28 45 1 1 169 9 29 49 27 a q,388 66
Tred., 14 3 6 3 3 6 -- I 1 I 48 4 9 231 61
Fisheries 84 -* - - 9 4 97867
* inAndusir 69 .- . .-- - .69 t00
Infraswuctu,e 166 1 I 6 I 10 4 1 1 2 2 2 197 84
"WeiDvelopmnt 231 5 52 106 53 55 1 4 4 28 39 4 55 46 1s 710 33
Waio. Enwa, 46 1 I 1 2 I 1 2 2 57861
CiilServce 300 10 1 11 9 15 10 15 2 4 7 6 a 10 418 72
National Educesi 2.552 166 489 582 769 978 281 246 294 365 122 512 438 7 7.801 33
Mh6INSm,c Aleji 1.324 37 110 106 173 173 s0 68 67 113 25 130 77 9 2.542 52
C uno8.lo Gard. 39 - -- . - - ** 39 100
Soc.1, iforcv- 126 2 7 .- 10 18 5 -. 4 3 1 7 7 190 66
Plantna - 76 - - - - -76 100
M eatb A1fimm 5 -. - -* - *- 10o
Un. sitiei-d- 29 29
TOTAL INo. 7.3812 256 793 1.006 1.143 1,408 425 577 434 605 186 853 675 139 15882 46
1% ~~46.5 1.6 5.0 6.3 7.2 8.9 2.7 3.6 2.7 38 1.2 b4 43 09 100 0
[duc. INo. 2,552 166 489 582 769 978 281 246 294 365 122 512 438 7 1.801 .331% 32.7 2.1 6.3 7.5 9.9 12.5 3.6 3.2 3.8 4.7 1 6 66 56i 0 1 100 0
Excl.Edn. No. 4.830 90 304 424 374 430 144 331 140 240 64 341 237 13 2 8.081 bo1% 59.8 1.1 3.8 52 46 .3 18a 4.1 1.7 3 0 0 8 4?2 2 9 1 6 1 00 0
Populalion (No. 387802 33741 161307 179718 185883 200592 60633 61799 65255 116676 13635 208386 152329 1827756 2)in, I988 1% 21.2 1.8 8.8 9.8 10.2 11.0 3.3 3.4 3.6 6.4 0.7 11 4 3 1oo00Pap./Cov.Svi. 53 132 203 179 163 142 143 107 150 193 73 244 226 1)5PUP.ICIV.SVI. excl. 80 375 531 424 497 466 421 187 466 486 213 611 643 22bfdn.
Sou,re: Census of Gvovenrmnu P.isonnel.
69
Statistical Annex Table 9
Fluctuation in the Purchasing Power of the Wage Billof Government Employees
(Average annual increase in percent)
Wage BillYear Consumer Purchasing
Total Per Employee Per Employee Prices Powerl __________ _________ (gross) (adjusted) a/
1982 7.9 0.8 0.6 12.7 -12.1
1983 13.8 12.7 10.2 5.0 -5.2
1984 7.0 -2.9 -2.3 7.8 -10.1
1985 3.6 -0.4 40.3 3.1 -3.4
1986 7.4 5.5 4.4 7.4 -3.0
1987 9.3 7.3 5.8 4.7 -2.4
1988 8.7 6.7 5.4 4.7 -0.7
1989 6.0 4.1 3.3 9.4 -6.1
Average 8.0 4.0 3.4 7.3 -5.4198i-89
1990 5.6 7.5
1991 5.0 5.6
1 1992 12.3 17.5
IV Adjud to takc account of the shift in staffing structurm in favor of civil servanus(whose average pay is substantially higher thn that of the auxiliaries).
Source: National Statistics Office.
70
Statistical Annex Table 10
Projection of Operating Costs of Regional Health Centers(excluding Personnel) for Mauritania (1996)
(In UM thousands)
Level and Type of Expenditure IOperation of DRASS 23,719.00
Operation of CSMs 3,700.00
Operation of Regional Hospitals 73,342.00
Pharmaceutical products 25,950.00
Other operating expenditures 47,392.00
Operation of CS/PMI A (including 23,328.00Nouakchott polyclinic) __
Pharmaceutical products - station 17,850.00
Pharmaceutical products - benchmark 2,160.00
Other operating expenditures 3,318.00
Operation of CS[PMI B 53,405.00
Pharmaceutical products - station 28,200.00
Pharmaceutical products - benchmark 12,560.00
Other operating expenditures 12,645.00
Operation of PS with refrigerator 16,920.00
Pharmaceutical products 10,040.00
Other operating expenditures 6,880.00
Operation of PS without refrigerator 18,570.00
Pharmaceutical products 13,720.00
Other operating expenditures 4,850.00
USBs: Pharmaceutical products 13,770.00
TOTAL for Mauritania 226,754.00
71
Statistical Annex Table 11
Sources of Financing of Operating Expenditures (Excluding Personnel)of Regional Public Health Centers
(In UM thousands)
Type of Expense Source of Financing |Amount Percentage
Pharmaceutical Products Govermment 36,069 29%
Population 88,181 71%
Other Operating Expenses Government 90,774 89%
Population 11,730 11%
Total Government 126.843 56%
Population 99,911 44%
Statistical Annex Table 12
Breakdown of Ministry of Health Operating Expenses (1985-91)by Type (excl. Subsidies to Adm.Publ.Ent.)
Type of Expense 1985 J 1986 1987| 1988 | 1989 9 1990 | 1991
Personnel 67.1% 70.1% 69.8% 71.1% 70.7% 70.7% 71.6%
Pharmaceutical Products 16.5% 16.5% 15.6% 14.2% 13.9% 14.0% 13.7%
Scholarships 3.0% 2.9% 2.6% 2.4% 2.2% 2.0% 2.1%
Other operating expenses 13.4% 10.5% 12.0% 12.3%T 13.2% 13.3% 12.6%
Total Min, operting expenses 100% 100% 100% 100% 100% 100% 100%
72
Statistcal Annex Table 13
Breakdown of Ministry of Health Operating Expenses (1985-91)by Level (excl. Subsidies to Adm.Publ.Ent.)
Type of Expense 1985 1986 1987 1983 1989 1990 1991
Central Administrion 10.6% 12.9% 16.6% 6.6% 6.9% 6.5% 7.4%
National School of Public 4.1% 4.4% 3.8% 3.5% 3.2% 2.8% 3.1%Health
Natonal Hospitab 30.8% 27.8% 28.0% 26.1% 25.7% 24.3% 23.2%
Regional Servics 54.5% 54.9% 51.6% 63.8% 64.2% 66.4% 68.3%
Total Minsty lOO% 10o% 100% 1o0% 100% too0s 100%
- - - - - - m~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
73
ANNEX I
74
THE REFORMS AND THE COMPOSITION OF BUDGETARY REVENUES
1. For some years now, the Government has been faced with insufficient public funds to meetits public financing targets and to redefine its role in the economy. The Government, to achieve thesegoals, with the help of the World Bank and the IMF, has undertaken a number of reforms for the purposeof raising resources. These reforms were implemented in international trade, taxation, and cost recoverypolicy. In the medium-term, the Government's capacity to increase its financial resources will dependon broadening the tax base; strengthening tax administration; improving public expenditure controls;and maintaining fiscal discipline.
2. The purpose of the International Trade Reform, launched in 1989, is to phase out allpersonal exemptions, except those specified in the new Investment Code introduced under the 1989budget. Another aim is to promote a competitive environment by streamlining administrative proceduresto achieve a more effective distribution of resources and enhance the productivity of small and medium-size businesses. Consequently, the Government has taken the following measures: implementing in 1991the third and final phase of the new customs arrangement to reduce the effective rate of protection from60 to 40 percent, a level comparable with the rates in other CEAO countries, and to do away with thespecial treatment accorded imported inputs and equipment; promoting private investment by liberalizingthe exchange rate and international trade systems; and eliminating price controls. By the end of 1991,the Governrment expects to have removed all price controls and dismantled the departments responsiblefor administering them. Although taxes on international trade account for 33 percent of budgetaryrevenues, with 20 percent of this figure coming from import taxes, the Government expects that theinternational trade reform will encourage the trade sector to boost its imports, thereby increasingbudgetary revenues.
3. A key factor in raising public funds was a tax reform to streamline and simplify thestructure in place. This was done in 1990, with assistance from the IMF, which is now helping theGovernment to institute the reform with a view to increasing the tax yield and broadening the tax base.In its analysis, the PER takes into account the impact on the budget of the tax reform, as recommendedby the IMF, and has reviewed the main features of the Mauritanian tax system to better define theconstraints on overall government expenditure. The review does not treat in the same detail other policymeasures such as indirect tax reform which are now being introduced with IMF assistance.
4. The World Bank has helped formulate cost recovery policies ineducation, irrigatedagriculture and livestock. But, as important as this may be, cost recovery cannot be applied in all areasor circumstances, and there are limits to its application. In some sectors (health, education and services)measures can be implemented quickly and easily: in others cost recovery should be introduced graduallyand only after the quality of public services has been improved.
5. - The budgetary measures taken by the Government as part of the structural adjustmentprocess have had a favorable impact on fiscal and nonfiscal revenues. The composition of budgetaryrevenues over the 1985-90 period are set out for comparison in Annex I.
6. The Government budget is approximately US$245 million, or about US$122 per capita,roughly equivalent to one quarter of per capita GDP. Measures to increase the Treasury's revenues havebeen stepped up since 1986. The many factors having an impact on Treasury revenues include duties onfish exports and fishing royalties under the EEC agreement. Economic factors have also affectednonfiscal revenues, especially in 1987 and 1988, when dividend payments by public enterprises rose toUM 1.4 billion and UM I billion, respectively.
75
7. Fiscal pressures are now strong, particularly in view of the narrow tax base. The trendin Government resources is not closely linked to the trend in GDP, mainly because of the amount ofnonfiscal resources and import revenues. Informal activities beyond the reach of the tax system accountfor a major share of domestic production. The informal economy, which is implicit in calculating GDP,is estimated at roughly one third of GDP. Efforts to raise government resources must concentrate on theformal sector of the economy which has deteriorated considerably since 1989 as a result of the criticaleconomic and tinancial situation.
Annex Table 1. Composition of budgetary revenues (in percentage)
1985 1986 1987 1988 1989 1990
Tax revenues
Taxes income and profits 22.5 27.3 23.2 26.7 28.7 27.4
Taxes on goods and 16.5 13.8 16.1 17.2 14.7 17.6services
Taxes on international 40.5 39.2 30.7 32.7 33.0 30.3trade
Nonfiscal revenues 10.3 8.5 21.4 17.4 15.3 17.5
Ca2ital revenues 1.5 4.5 1.5 2.6 4.7 3.9
Total budgetary revenues 91.3 93.3 92.9 96.6 96.4 96.7
Nonbudgetary revenues 8.7 6.7 7.1 3.4 3.6 3.3
TOTAL REVENUES 100.0 100.0 100.0 100.0 100.0 100.0
Sourcew Diuectomi of Budget.
8. In 1990 the composition of government budgetary revenues was largely: taxes on incomeand profits (27 percent), apprenticeship tax and property taxes and registration fees (I percent), goodsand services tax (17 percent), international trade tax (29 percent), nonfiscal revenues (16 percent), capitalrevenues (4 percent), and special accounts (5 percent).' This breakdown hides major structuralweaknesses in the tax system and the narrowness of the tax base. The composition of resources haschanged considerably on two occasions. First, a hefty increase in the poll tax in 1986 led to a doublingof taxes on profits that year; subsequently the reform of the customs code, the investment code andindirect taxation has caused import-related taxes to increase as a share of the total since 1989.
9. Revenues from local taxes, other than nonfiscal revenues and expok duties on fish,account for no more than approximately 27 percent of total Treasury revenues. Nonfiscal revenues,including capital revenues and special accounts, amount to more than 26 percent of the total.
1. The composition of the governent budgeSty venues has changed: tax reveuwe rprmented 88% of to evmnuoin 1985 but jus 79% in 1990; revam frm the tax on income cnd pnrits ha incrased a a peeeatase of Uth total;revenue from the international Utrde tax hbs decme-sd as a poenta; nd nontax revenues ccounted for 17% in1990 compared with 10% in 1985.
76
International trade taxes, including the poll tax under the customs service and the consumption tax onimported goods, represent approximately 48 percent of the total. Public enterprises in the fishing andimport sactors account for a major share of domestic tax revenues. It is estimated that the public sectoritself is the source of approximately 43 percent of budgetary revenues.'
Annex Table 2. Nonbudgetary revenues (in oercent)
l9 8 1987 198 1 98 199
Budgetary grants 8.0 0.0 8.0 0.0 27.0 0.0
Special accounts 92.0 100.0 92.0 100.0 73.0 100.0
10. The Mauritanian Treasury is highly dependent on taxes on international trade, nonfiscalrevenues, taxes on public enterprises, revenues from activities related directly to fishing or indirectly toimports.
11. But extreme caution must be used in analyzing the trend in budgetary revenues since itfails to take into account developments not reflected in official statistics. These include the increasinglyimportant informal economy; estimates of inflation do not reflect prices in the informal sector, and thesteady adjustment in the value of the UM affects both sides of the budget, particularly revenues fromtaxes on foreign trade.
12. The analysis of revenue is fiirther complicated because, in addition to these factors onemust consider other major developments: important areas such as livestock and agriculture that escapethe. tax system; the mining sector does not contribute tax revenues; the administrative structure is notstrong enough to ensure effective tax collection; since 1987/88 economic activity in the sectors of fishingand small and medium-sized business has contracted considerably; (v) budgetary operations do notsystematically record changes in special accounts and budgetary grants; and (vi) capital expenditurefinanced with foreign funding or with local counterpart funding from adjustment operations is not fullyrecorded.
COMPOSMON OF TAX REVENUES
Taxes on income and profits
13. These consist of the poll tax of 4 percent, the tax on business profits (BIC) of 40 percent,the progressive taxes on wages and salaries (IGR), and the tax on property income (IRCM).
2. Tw he rgca public ternperi include SMCP. SONIMEX, OPT. SMCPP and MAUSOV.
77
Annex Table 3. Taxes on income and profits(in UM millions)
I.2B5 1986 1987 12 1989 1990
BIC 930 1,808 1,675 2,448 2,477 2,605
ITS 1,698 1,986 2,115 1,979 2,754 2,689
IGR 225 179 103 69 154 158
IRCM 98 106 211 295 157 86
Total 2,951 4,079 4,104 4,791 5,542 5,538
Source: Disctomto of Budget.
Annex Table 4. Other direct taxes(in UM millions)
18 .12X 1987 12f 12B2 1220Apprenticeship tax 11 28 27 29 25 32Property taxes and 121 167 144 153 151 187
registration fees
Source: Directone of Budget.
14. The poll tax was introduced in 1962 to ensure a minimum level of revenues. Under the1986 budget law, it was raised from I to 4 percent of turnover for the previous year, with a minimumof UM 120,000. The poll tax deductibility from the BIC was lowered to 50 percent, and subsequentlyto 25 percent. After the reform was instituted, revenues from the poll tax and BIC increased fromUM 930 million in 1985 to UM 1.8 billion in 1986 and UM 2.6 billion by 1990. In 1989, poll taxrevenues alone were estimated at approximately UM 1.8 billion, or 73 percent of total revenues ofUM 2.5 billion. Recovery is not comprehensive, however, since an annual amount of approximatelyUM 400 million is not recovered.
15. With respect to total ITS receipts of UM 2.8 billion in 1990, approximately UM 724million, or 26 percent, came from deduction on civil service salaries. Of the remaining noncivil servicerevenues of about UM 2 billion, 20 companies in the public sector accounted for UM 680 million. In1990 the ITS noncivil service recovery rate was 95 percent of total receipts and the average tax rate was19.5 percent of the tax base.
78
Aanex Table 5. Taxes on wages and salaries
Braqket Staff size Base sala= Withheld (%Mi
48 336 15.6 15.9
72 271 17.1 10.5
120 4,396 412.9 9.8
240 7,048 1,258.0 10.1
300 2,854 755.1 19.9
360 967 320.7 23.3
480 1,917 790.6 26.0
720 302 160.7 29.0
960 15 12.6 33.0
1,200 1 1.6 39.0
Total 18,107 3,744.9 21.6
Source: Minitry of Finance.
16.: Revenue from direct taxes such as the apprenticeship tax, property tax, and registrationfees is substantial.
Indirect taxes on goods and services
17. These have mainly to do with the turnover tax (TCA), the tax on services (TPS), variousconsumption taxes on staples, and import duties. The TCA is now levied at a preferential rate of 2percent, a reduced rate of 5 percent, and a standard rate of 10 percent, and a mark-up rate of 20 percent.
18. For the full effect of the BIC tax to be felt, the IMF has recommended that the poll taxbe subsumed into the TCA. The rate would then be lowered from 4 to 2 percent by 1993, and phasedout entirely during a second stage, after the TCA has been converted into a general tax on the resale ofgoods within the country.
79
Annex Table 6. Indirect taxes on goods and services(in UM millions)
185 1986 1987 198 1989 1990
TCA and TPS 337 383 569 625 675 763
Tax on petroleum products 664 469 612 795 1,077 1,167
Other consumption duties 949 991 1,250 1,340 773 1,327
Other 77 53 112 120 104 111
Total 2,027 1,896 2,543 2,880 2,629 3,368
Source: Directome of Budget.
19. The TCA and the TPS from domestic sales amounted to UM 763 million in 1990 withreceipts of UM 953 million, of which the TPS accounted for UM 714 million, or approximately 13percent of the value added in the tertiary sector. The TCA covers approximately 80 percent of the valueadded in the manufacturing sector. The average recovery rate for the TCA and TPS, excluding bankTPS, was 75 percent. The TPS on bank credits, levied at a rate of 16 percent, was about UM 190million. This means that the tax base, (interest on total credit) amounted to UM 1.2 billion in 1990. Atan average rate of 10 percent, total credit would then be UM 11.9 billion: total claims on the privatesector stood at approximately UM 29.7 billion as of December 31, 1990. This substantial differencepoints up the pervasiveness of the problems in the banking system and the extent of potentiallynonperforming loans.
20. The consumption tax is levied on imported staples such as tea, sugar, rice, milk and otherfoods. In 1990 the revenues from this tax amounted to approximately UM 1.3 billion, compared withcustoms receipts of UM 828 million. The proceeds of the consumption tax are likely to be affected bychanges in tariffs and SONIMEX's reduced role. Customs duties on all dutiable imports is estimated at25 percent.
Taxes on international trade
21. Apart from import taxes, a fishing fee (export tax) is levied on the f.o.b. value of seafoodexports. The rate varies from 8 to 20 percent, except for specialty seafoods such as lobster and shrimp,on which the rate is 5 percent. This tax brought in UM 1.7 billion in 1990 compared with UM 2.3million in 1989 (see Table 7), an indication of the critical state of the fishing sector.
80
Annex Table 7. Taxes on international trade(in UM millions)
1985 129 1987 1988 1989 1990
Import taxes 3,132 3,170 2,946 3,198 3,549 4,079
Export taxes 1,850 2,202 2,059 2,266 2,368 1,733
Total 4,982 5,372 5,005 5,464 5,917 5,812
Source: Miunstry of Finane.
Nontax revenues
22. These include fishing rights and fines, revenues from public enterprises, assigned debtand its recovery, the recovery of bank claims and Social Development Fund (FSD) contributions.Table 2 of the main text, sets out for comparison the amounts by year. It also shows their share as apercentage of total government revenues.
Capital revenues
23. These comprise land sales, sales of other government assets, and other revenues(properties and rents). These revenues increased from UM 187 million in 1985 to UM 760 million in1990. Revenue from the sale of land was up 192 percent during the period: other revenue declined by144 percent.
81
ANNEX I
82
ANALYSIS OF EXPENDFURE PROCEDURES
The mission analyzed expenditure procedures in three cases:
Recruitment of an official: this goes through seven different people and involves 14different steps which are often similar or matter of formality.
Promotion of an employee: six different departments and eight separate stages areinvolved. This epitomizes the bureaucratic nature of expenditure procedures. In the civilservice, promotion is based solely on seniority. Since decision is merely a formality,serving simply to confirm a fact, the usefulness of these eight steps is open to question.
Infrastructure expenditure: infrastructure expenditures involve several procedures whichmay be classified in four specific groups:
Expenditure on certificates of commitment which is the procedure of commonlaw for expenditure at the central level;
Notification of credits for expenditure for services outside the capital (regionsand embassies);
The procedure for immediate settlement which is the exception to the previouscases. In principle, this is used for emergency expenditure (payment of debt,subsidies), imprest accounts and special appropriation accounts, although it isalso used to meet shortfalls and to expedite lengthy procedures of common law;and
The procedure for the blocking of credits is used exclusively for Governmentcontracts and the appropriation of credits for ordinary expenditure to a ministerialdepartment. Settlement of expenditure for a certificate of commitment involvessix departments and 17 separate steps.
2. Some departments turn down a large number of applications owing to discrepancies inthe files. Financial Control puts this at 10 to 15 percent during the expenditure commitment phase. Thiscalls into question the effectiveness, and even the usefulness, of such controls.
3. The complexities of these bureaucratic procedures are most often of these kinds:
Excessive departmental bottlenecks caused by users who are following-up on their files;
Problems relating to the transfer of files from one department to another:
- loss of documents, and- fraud at various stages of the procedure.
4. The administrative departnments' involvement in the different stages of the procedures ismainly to exercise control. Repeating these controls leads to duplication of efforts at various levels:
83
Between departments:
- between Financial Control and the Directorate of Budget at the commitment andauthorization (settlement) stage;
- between the Directorate of Budget and the Directorate of Treasury andGovernment Accounting at the settlement and payment stages.
Within a single department:
- between the Central Accountants and the Payroll Department or the InfrastructureExpenditure Department;
- between the Expenditure Commitments Division and the Coordination Divisionwithin the Infrastructure Expenditure Department.
S. Another factor slows the procedures for arranging government expenditures has to do withthe imprecise nature of the supporting documentation required for the service performed and forsettlement of expenditure. One type of expenditure can use different types of supporting documentationdepending on the department and the control stage.
6. Accounting: Rather than true accounting procedures, there are 'accounting" follow-upsat different levels or stages of budgetary implementation. The Central Accountants record expenditurecommitments in one register, and expenditure payments in another to monitor the use of credit. Registerscan also be combined to save time in copying entries and to reduce the likelihood of error. TheDirectorate of Information Systems reviews different documents after processing: detailed statements ofcredit use by chapter and article, consolidated statements with a general overview of budgetaryimplementation, and general invoices. If generally accepted accounting standards are any guide, theredoes not appear to be any true general accounting of Treasury operations. No administrative accountsor management accounts and enabling regulations have been produced for many years. This shortcomingprobably explains (at least in part) the accounting problems and gaps noted and the absence of effectivecontrol by the Auditor of Accounts.
84
ANNEX HI
ANNEX 3
MAURfTANIA - Summary of the Tax Sysem, 1991
TAX DESCRIPTION OF TAX EXEMPTIONS AND DEDUCTIONS TOTAL
CENTRALGOVERNMENT
1. Tax on income and neturofita
1. 1 Corostc and business There is no corporate tax. Thc scheduled tax described in paragraph1. 11 bis kvied on companies and individuals.
1. 11 Tax on business Scheduled tax Ievied on profits of corporations, limited liability Conpanies and cenifted cooperatives 40 percent
profits and farm operting companies, and statutory bodies (EPICe and SEM). Capital gains arc established purwant to law 67/171 of
income (RIC) not taxed if rcinvested within three yean. Nonresidents are taxed on July 18, 1967 are exempt.profits earned in Maurtiui. Tax returns wrust be filed within thre eomonth of fiscal year-end nd tax an"t be paid within 30 dya of the U'
deadline for filing returns.
1. 13 Income from necurities LAvied on profits distributed by companies and other bodics subject to tax Ordinary rate: 16 percent
- CGI (IRCM) on business profits (dividends, interest on shares and bonds, attendanzcfees, income on debt, deposits, collateral and current accounts) andpremiunts. Tax withheld at source.
1. 14 Tax on property Levied on property income. The propety tax was introduced Rate: 20 percent
income ([1R) CGI under the 1986 budget to replace thetax on property income and realestate. Propety income is no longertaxable under the BIC. The 1990budget reintroduces the tax on realestate income and the property tax asper the pre- 1986 legislation.
Rate: 10 percent
TAX [ DESCRIPTION OF TAX | EXEMPTIONS AND DEDUCTIONS TOTAL
1.2 Peraqol tax
Tax on busines profits and Levied as described in paragraph .11 on corporate profits. Since 1989,faum operating income, taxpayets with annual turnover of up to 3 million for amounis due on
activities concerned with tL eale of merchandise, or 1.6 million if theyare uppliers of srvices, my be eligible for flat-rate scheme. Taxpayerswith annual turnover of 3 to 6 million who are engaged in the resale ofmnerchandise, or 1.5 to 3 miOlion if they are supplien of arvices, mayqualify for the simplified system.
1.22 Poll tax on individuals Levied on individuals under BIC system and BMC from lanaury 1, 1984.Taxpayers subject to tax on business profits who are engaged in importactivities are also subject to the 4 percent tax in addition to import dutyon the value of imported goods. Amounts paid tn the financial yearended December 31 of the preceding year (to Customs and poUl taxdeductions) are deductible from poll tax payable for current year.
1.23 Tax OD incomc from See 1 13 above. See 1 13. See I 13.securities
co1.24 Tax on conbusineu Levied on individuals in liberal professions not subject to another With the 1989 budget law, niinimumprofits scheduled tax. The poll tax also applies. UM 120,000
poll tax deductible from BNC at therate of 50% until 1990 and 25%starting with the 1991 budget
1.25 Tax on suaries, Levied on salaries, allowances, pensions, fixed incomes, bonuses, fees Family allowances, special Monthly paymentallowances, pensions and and benefits in kind. Withheld at source, compensation up to 10,000/month, fromannuitiea (CGI) Pensions paid to victims of war, 0 to 4,000 = 0%
veterans, and victims of industrial 4,000 to 6,000 = 6%accidents arm exempt. Pension 6,000 to 10,000 = 9%payments and certain other similar 10,000 to 20,000 = 16%Social ecukity paymnents may be 20,000 to 25,000 =21 %deducted from gros asmount received. 25,000 to 30,000=23%S
30,000 to 40,000= 26%40,000 to 60,000=30%60,000 to 80,000=33 %S0,000 to 100,000=36%Over 100,000 = 39%
1.26 Tax on property See 1. 14. See 1. 14. Standard deduction 30%. See 1. 14bcome (CGI) Annual income of under 50,000 is
exempt.
TAX | DESCRIPflON OF TAX | EXEMPFIONS AND DEDUCTIONS TOTAL
1.27 General income tax Levied on total net income, regardleu of source, of individuals whoe The tax is levied on income as Up to 120,000 = 0%CGI nomnal or principal place of residence is Mauritania, or individuals calculated for scheduled tax purposes from
whose principal place of busineu is Maurtania. (after a 10% deduction on salaries). 120,001 to I 80,000 = 5 %One share for a spouse and one half 180,001 to 380,000 = 10%shae for each dependent child is 380,001 to 500,000 = 15%allowed up to a msxinum of five 500.001 to 700,000= 20%shares per family. Th rates shown 700,001 to 1,000,000 = 25%in the column adjacent apply to each 1,000,001 to 1,380,000 = 30%sharm and dhe total payment per 1,380,001 to 1,t50.000= 35%family unit is equal to the aggregate 1,8S0,001 to 2,S00,000 = 40%amount due for each shame. Salaries 2,500,001 to 2,900,000 = 45%have been exempt from the IGR since 2,900,001 to 4,000,000 = 50%1986. Over 4,000,000 = 55 %
2. Social swcurity Coven: (I) family allowances; (2) professiona: risks; (3) retiremet. Contributions and family allowances:contribution The monthly maximum aatount of Wary that may be taken into account Employers: 9 %(Law 67/039 of February for contribution purpoesc is UM 30,000. Employees: 0%3, 1967) Professional risks:
Emnpk.ycrsi: 2%Employces: 0% 0Retirenment:Employers: 2%Employees: 1%
3. Payroll tax on emplover
3.1 Apprenticeshio tux Levied on salaries paid by businesses or individual operaton in an Employenr tating steps to inmrove 0.6 % of the total amnount of aslaries(CGII indusrial, commercial or agricultural activity, the quality of tcchnical instuction or paid.
apprenticeship are exempt. A taxreduction of UM 400 is allowed onamounts paid to apprentices up to amaximum of 50% of the tax normllypayable.
A. Pro2et taxer Levied on developed properties, including permanent facilities on Permanent exemptions: 3% principal dwelling4.1 Proegt3 toh commercial premises and on uncultivated land used for commercial or buildings owned by the authorities, 10% rented buitdings4.11 Poperty tax on indusrial purposea Based on rental value, local governments, and public 10% vacant buildingsdeveloped properties (CGI) institutions; buildings used for health 9% other properties
or social services or for schools andtemporary structues. A deduction of30% is allowed on the rental valueset to cover expenditure.
TAX DESCRIMfION OF TAX EXEMPTIONS AND DEDUCTIONS [ TOTAL
4.12 Prqteity taxes on Levied on market value of undeveloped and unoccupied ubea land. TMe Lnds belonging to the State, sports Eliminated by the 1986 budget lawundeveloped properties value is set by the govemment. grounds, grounds used for woship,(CGI) and farm lands are also exempt.
4.2 Convevanciux On the truasfer of real property, going concem value, nd tocks and Purchases of state-owned buainoewes 5% real estatefees(CG share in the equity including regional fnancial groups, 12% going concern value
the Centnl Bank of Mauritania, dhe 2% merchandise in going concemDevelopment Bank, the Savings 0.5% on sharing between cobeir,Bank, dte National Social Security co-owners, and patners.Bank, cooperatives, mutual societies,conpenies in which the State holds atleast 51% of the capital, nd directgiflt between spouwes and betweenparenu.
4.3 Tax on livestock (COI) Levied on canle, horses, camels, donkeys and mules, sheep and goats. None Rates vary from UM 20 to UM 300per head of livestock. EliminAted.
S. Tax on toods andservices (CG
oo
S General tax on sales.turnover tax and valueedded tax
S. .I Turnover tax, CGI, Levied on value of imports, specific services, or the sae of goods within Exports air, sea and river transport, Tax rate: Donmestic sales: generaland Customs tariffs the country. hnposu are taxed on their cif customs valustion plus and fishing boats, nets, cereals, ratc: 10% after tax.
Customn duties, staples, bread, and fuit are exempt. Reduced rste: 4% after tax onAlso exempt are the resale of goods concession saks of pubiic services.already taxed, business transactions of n :insurance conpanies which come Genernl rate: 10%; nark-up rate:under a different tax regime (see 5.31 20%;below), newspapersand public Services: 16%trnsport. A deduction is allowed onthe cost price, delivered atwarehouse, for supplies or othergoods nmude entirely or partly fromtaxable finished products.
TAX DESCRIPTION OF TAX | EXEMPTIONS AND DEDUCTIONS | TOTAL
S.2 Consumotion taxes
5.21 Tax on petroleum Levied on petroleum products at specific rates. The tax on corpomte profits ia et as Super gasoline: Um 2,316ihlproducts (CGI) follows: t9ms Regular gas: UM 2,429hl
Regur gas: UM 629/hectoliter Heavy oil: UM 800/hWSuper: UM 465ihectoliter Diesel: UM 400/IdDiesel: tJM 120/hectoliter. Fuel oil: UM 220hiFuels delivered to shipping, fishing Kerowne: UM U4/hlboats and commercil aircraft, etc., Lubricating oil: UM 4,200/Tltare exempt except for tax on Butane: UM 1,0401Mrcorpornte profits.
5.22 Other consumption Lcvied on alcoabolic beverages, tobacco products, tea and gst. Beer: 195%
taxes Dutiable valueOrdinary wine: 209% dutiable valueSparkling wines: 229% dutiablevalueSpirits: 294% dutiable valueCigarettes and cigan: 30% dutiablevalueTobacco kaves: 20% dutiable value ooTea: UM 120/kg netBlock sugar: UM 2.5/kg netCube sugar: 10% value CIFGranulated sugar: 20% value CIF
5.3 Taxes on certsirervicee
5.31 Special tax oan Tax lvied annually on premiums charged by inwmance companies. Reinaurnce operations, irsurance 10%: life and snimiar insurance
insurance (CGI) premiums, indwtrial ccident 10%: renVAl contctinmurwe, and premiums charged by 0.10%: expot creditcoopeotives are exempt. 10%: other types of isrance5 % insured ris of a*l kind andshippiag10%: river and ar risks of a1 kinds10%: fire imure
5.32 Special cinema tax Levied on gr rceipts of cinemaa or for film renals. Noae 1.8% on turnoverUM Shicket value
5.4 Taxes on te use ofeoods or Prwerdv. orpennies for cenain ctivities
TAX [ DESCRIMON OF TAX | EXEmC-flONS AND t)EDUCTKOS TOTAL
5.42 Tax on oto- Levied auully on mIo-powered vehiles, bd an emin shze. Vebicks beloging to tbe State, Iocal fairs vary from UM 2,700 sopowerd vehidces (CGI) authorities, sad dhe dlomtic coqw UM 15,600
ae ex_nyl.
5.43 usines licene tax Annal ax payable by indivias or coqraenom moey operatin i The Sate lcal sautoities, artista, Two types of dutie:(CGe Maurtanis a profesioa, bu_iness tade, rfi or iAnity not muter operators, fidbenme, m_bea Fixd dutie of UM 23,O0 to
exprusuy declaed exempt. of a parnersip, coopeative, or UM 50,000 in 13 i _malmasshareholden is a corlwaesta. s,d N Duie proacd at the a of 5S ofaslow ate exCt dhe _atd value of preI ass p c_
whch h abi ciiy bcshatd.
5.44 heins pernJit tax, Am iax payabe by any indvidual or coe_sy th els, wholesale o None UM 25,000Cal natal, alcoholc or fermeate beverages for con.uqatiomnm tdo preammse
or lw cum ear
6. Tuaw on trmii
6.1 Ietd
6.11 Cusom dute Levied oa imou on te basis of cif valu or offiil price poded by Oe Ceainc e of eqwm sa Harmization widHin CEAO 0Govwm_at. various con_margoods uch as tea, Gencal ate: 15S
at, sad modicines ar exempt. Ad Reduced me: 5%imporu fret. CEAO membercountries ubject S thed regionalcooperationa tax as well as certain-Ve 2roms MorAoo Algeria,Tunisa, &cd EEC at asexTniEpt.
6.12 Custom fisal duty Levied on the sme basis a Customs dutie fered to in paragraph 6.11 Various exeuftioms have been agreed Rates rnge fiom 5% to 166%upoz-
6.13 Tax on impots Levied on impots according to cif Custos valuAtio pb Cuooms fi Various exemption have been agreed Regulr rt:duty. upone Mak up ate: 20%
6.14 Regionl cooperation Levied on certain industril imports frm CEAO _mebe cousine Duties are either apecific or adtex, TCR inuad of Customs duties kvied on other impocts as descred in valem, dpenadg on the cae.
pararphs 6.11 sad 6.12; special gts mated by CELO Coacil ofMiniaten, deteinued on a cae-by-cae basis.
6.2 Exmoat dutiec(Cust*o tariffs)
6.21 Fisal export duties Levied on fob value of expora. All goods not of Maurinian origin This tax s- levied.are exempt upon expo1rt or reexpot.
S
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IBRD 25784
MAURITANIA
PUBLIC EXPENDITURE REVIEW MOROCCO
- PAVED ROADS t RPIRWS AI RFIoEY
- - - PAVED ROADS UNDER CONSTRUCTION , PORTS (50
GRAVEL ROADS 0 IRONOM MINES
TTRACKS
RAILROADS
NATIONAL CAPITAL ALGERIAINTERNATIONAL OUNDARIES
INDICATES THE TERRTOE OF THE -|- FORMER SPANISH SAHARA
(WESTERN SANAR/I/ | )\ ° ~~~~~~~~~~~50 100 150 200 250
Fe IRON -- KILOMETERS
<'I FISHING
FISHING ZONES
AGRICULTURAL ZONES J
SAHARAN DESERT
SAHARAN SUB -DESERT FORMER r gren
b.RIEUIAN SPANISHSAHARA 1
A t I a n tc I C M'HaoudotJ + ggoue~~~~~~~~~~rot
O c e a n Fd erik Kedia M A L I
Nouadhibou | Ouadone
At8r Chinguetti
)NOUAKCHOTT Moudj6ria >/~ii_ 'Tichi
. > tlimit Ae T6mchekketoc: 0Oual6ta
erd Aleg3 Barena I + - _ AyoOn+ [ Brn + , el AtroOs ONtMA
U6 Ki mbedgh,% .
The boundories. colors.
cder.ominotions and ony
S4fibi ~other information shown jon this map do not -Vimply, on the port of JThe World Bonk Group,
\ 1 1W A I I any judgment on the legaltii A L sIotus of any terrt0ry'
or any endorsenentor acceptance of such
boundries.
APRIL 1994