Debt vs GDP / Bonds vs bills
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All Data - Mauritania
|GDP (billions US$)||5.12||4.85||5.03||5.46||-||-|
|Total Outstanding Amount (Billion US$)||0.46||0.40||0.33||-||-||-|
|Outstanding Amount/GDP (%)||9.06%||8.34%||6.50%||0.00%||-||-|
The economic dynamism displayed by Mauritania in 2012 continued in 2013, fuelled by agriculture, mining and construction. Growth is estimated to have been at 6.8% in 2013 and is projected at 6.9% in 2014 and 7.3% in 2015. This favourable outlook relies on a series of optimistic assumptions: new iron deposits available to the mining sector, good climate conditions and a positive impact of the country’s new fishing agreement with the European Union (EU) signed in October 2013. Benefits are also expected from the Brussels round table held in 2010 to finance the government’s economic and social programme under its strategic framework to combat poverty, the CSLP III (Cadre stratégique de lutte contre la pauvreté). In the long run, however, the economy remains vulnerable to changes in the terms of trade.
The year 2013 was marked by a satisfactory implementation of the three-year programme supported by the Extended Credit Facility. The programme was completed in June 2013 when national authorities had met almost all the quantitative performance criteria. Official reserves had reached the equivalent of 7.3 months of imports at end-2013. In addition to good budgetary performance, macroeconomic stability was supported by a prudent monetary policy aimed at absorbing the inflationary pressures resulting from excess bank liquidity.
Strong growth seems to have created jobs, bringing unemployment down to 10.1% according to the national survey on employment and the informal sector (Enquête nationale de référence sur l’emploi et le secteur informel, ENRE/SI) conducted in 2012 and published in 2013. This is significantly lower than the 32% unemployment rate found in the 2008 EPCV survey on household living conditions (Enquête permanente sur les conditions de vie des ménages), but these surveys each used a different methodology. The ENRE/SI results seem encouraging, but the labour market still poses structural challenges: 96% of non-agricultural, non-government employees work in the informal sector, and 53% of jobs are classed as vulnerable. In addition, some of the Millennium Development Goals (MDGs) set for 2015 seem difficult to reach, especially the health goals. Significant progress was however achieved in education, access to safe drinking water, sanitation and gender equality.
The country’s participation in global value chains (GVCs) is hindered by several obstacles, including the level of infrastructure and the limited value added of exported natural resources. The priority for the authorities is to remove these constraints and to implement a genuine innovation policy to diversify the economy.
Mauritania has twelve commercial banks, serving only 4% of the population. The country’s five largest banks have an estimated USD 100 million in combined reserves. Mauritania’s banking sector dominates the financial system, with 88% of the sector’s assets held by commercial banks. Bank loans and deposits represent less than 20% of GDP. The Central Bank of Mauritania regulates the Mauritanian banking industry.
Private sector development is constrained by considerable government interference in the economy. The prevalence of state-owned enterprises limits opportunities for private investment. Availability of financing in the local market remains weak. Moreover, the country has neither a corporate bond market nor an equities market.
Source: African Economic Outlook
Monetary policy & Public debt
The main mission of the Central Bank of Mauritania (BCM) is to maintain inflation at desired levels. To achieve this mission, the BCM intervenes in the money and interbank market. The BCM issues Treasury bonds to finance budget deficits. However, the BCM, by the creation of the monetary policy committee, seeks to strengthen its independence.
The Ministry of Finance does not have a specific debt management strategy. Treasury bills are issued:
- To finance the budget deficit on more favourable terms
- To encourage better management of the state’s debt
The domestic debt to GDP ratio reached 7,24% in 2012 while the external debt to GDP was 91,22%.
Instruments issued and Market Participants
The BCM only issues Treasury Bills.
Maturities available are 4-week, 13-week, 26-week, 50-week and 90-week.
The Ministry of Finance may also, if it deems necessary, not comply with the weekly issue.
The Central Bank of Mauritania (BCM) is the sole issuer of government debt instruments.
Commercial banks are the main holders of T-Bills, holding 66,8% of the total amount outstanding. There is limited foreign investor participation in the Mauritanian bond market due to stringent bureaucratic procedures.
Primary and Secondary Markets
The total amount of T-Bills issued in 2012 was MRO 531,9 billion compared to MRO 730,8 billion in 2011. The monthly average amount for issuances was approximately MRO 44 billion in 2012. Around 78,7% of the 2012 issuances were held by the banking sector. In this market investors are interested in T-Bills with maturities that are less than 13-weeks. The share of issuances with maturities beyond 13-weeks was 1,2% of total issuances in 2012 compared to 5% in 2011.
The slowdown of T-Bill issuances has had direct consequences on the interest rates which decreased and bank reserves which increased.
The total amount outstanding of the stock of T-Bills at end of 2012 was MRO 84,8 billion.
The secondary market of T-bills allows two types of operations:
- The definitive disposal of Treasury securities
- The temporary transfer of Treasury securities
This market is illiquid because no transactions are recorded. Investors opt for a “buy & hold” strategy.
Clearing, Settlement and Custody
The BCM settles all secondary market trades on Treasury bills. The BCM holds securities accounts for the Ministry of Finance. The settlement of trades for investors with securities accounts with the BCM is handled by the BCM through an intermediary. The securities are traded OTC by transfer to the accounts opened for the owners. They circulate in bearer form only. Each security is identified by a code.
Protection of investors
The protection of the investors is guaranteed by the BCM, which plays the role of market watchdog. In the event of a dispute, the BCM is required to produce the original documents, including bid submission forms as well as the other documents issued by bidders.
Guide to Buying Bonds
Procedures for market participation
Issuances are conducted following the Dutch auction system. Auctions are held every Tuesday and if the auction falls on a public holiday, the auction is carried out the next working day.
A bidder can submit multiple bids for the same maturity and can make several proposals on several dates. Tenders are sent to the BCM. The auction adjudication committee first process the bids with the lowest rates, then the highest rates up to the maximum amount awards.
The committee may award higher amounts, up to 30% of the amount issued, if it finds that the situation provides preferential rates and, or, if the state has need for resources from the higher bid amounts. If the auction is beyond the 30% threshold, a decision to award the subscribed amount should be submitted in writing to the Ministry of Economy and Finance.
The treasury securities on the secondary market are traded over the counter (OTC).
The BCM plays the following role in the secondary market:
- It facilitates trading operations by providing daily information it receives from market participants on the supply and demand of securities (amount, rate, maturity). The Treasury operations must be settled at the BCM under the principle of settlement / delivery. Settlement / delivery means that the payment and delivery of the securities take place simultaneously.
- The BCM stores all data and information on all the Treasury securities issued by the Ministry of Finance. The BCM publish regularly information on securities issued (maximum rate, minimum rate, weighted average rate, offers not satisfied).
For secondary market transactions, market participants are required to send a notification to the BCM by mail or fax which details the terms of the transaction: the type of transaction (buy / sell), the date of the transaction, the counterparty category title (maturity date, nominal amount of the transaction, net to settle).
The settlement process is completed through computer software at the BCM, capturing the price of the security and the nominal values to be allotted to the corresponding accounts.
The settlement cycle for treasury securities is T+2.
There is no special tax applied to Treasury securities. Interest income is taxed under the 25% income tax for banks and businesses.
|Rating Agency||Current Rating||Outlook|
|Moody's||No rating||No outlook|
|Fitch||No rating||No outlook|
|Standard and Poor's||No rating||No outlook|
There are no intermediaries between Mauritania Treasury and the investors. Physical and legal persons of Mauritanian nationality may submit bids on auctions. However, they are required to hold a bank account in a resident bank in Mauritania or the BCM, and a treasury securities account at the BCM.
Openness to international investors
The government bond market is open to foreign investors. Despite the Mauritanian government’s programmes to attract investment in the debt market such as the removal of possible discriminatory policies against foreign investors, foreign investor participation remains subdued as a result of complex bureaucratic procedures.
There are no restrictions on foreign ownership or control, except in sectors where public companies hold monopolies.
Restrictions on FX and profit repatriation
There are no restrictions on the transfer, repatriation and conversion of funds linked to an investment. However, it is mandatory for investors to open foreign exchange bank accounts in Mauritania to transfer funds. There is no limit on the amount that can be transferred, especially for remittances of profits, debt service, capital, and capital gains.