Capital Markets and Portfolio Investment
The government is favorable to portfolio investment. Private entities, whether foreign or national, have the right to freely establish, acquire, own, and/or dispose of interests in business enterprises and receive legal remuneration. Privatization and liberalization programs have also helped put private enterprises on an equal footing with respect to access to markets and credit. In principle, government policies encourage the free flow of financial resources and do not place restrictions on access by foreign investors. Most foreign investors, however, prefer external financing due to the high interest rates and procedural complexities that prevail locally. Credit is often difficult to obtain due to a lax legal system to enforce regulations that build trust and guarantee credit return. There are no legal or policy restrictions on converting or transferring funds associated with investments. Investors are guaranteed the free transfer of convertible currencies at the legal market rate, subject to the availability. Similarly, foreigners working in Mauritania are guaranteed the prompt transfer of their professional salaries.
Commercial bank loans are virtually the only type of credit instrument. There is no stock market or other public trading of shares in Mauritanian companies. Currently, individual proprietors, family groups, and partnerships generally hold companies, and portfolio investments.
Money and Banking System
The IMF has assisted Mauritania with the stabilization of the banking sector and as a result, access to domestic credit has become easier and cheaper. A proliferation of banks has fostered competition that has contributed to the decline in interest rates from 30 percent in 2000 to 10 percent in 2009, to 6.5 percent in 2020, not including origination costs and other fees
Nevertheless, the banking system remains fragile due to liquidity constraints in the financial markets. The country’s five largest banks are estimated to have USD 100 million in combined reserves; however, these figures cannot be independently verified, making an evaluation of the banking system’s strength impossible. As of April 2020, 25 banks, national and foreign, operate in Mauritania, despite the fact that only 15 percent of the population hold bank accounts.
The Central Bank of Mauritania is in charge of regulating the Mauritanian banking industry, and the Central Bank has made reforms to streamline the financial sector’s compliance with international standards. The Central Bank performs yearly audits of Mauritanian banks. There are no restrictions enforced on foreigners who wish to obtain an individual or business banking account.
In March 2020 the Central Bank of Mauritania (BCM) announced the reduction in interest rate on credit from 9 percent to 6.5 percent as part of measures aimed at counter the effects of COVID-19 on the country’s economy.
In 2018, the Central Bank of Mauritania lost all correspondent banking relationships with banks in the United States due to de-risking policies enforced by U.S. banks. The Central Bank subsequently was able to reestablish a correspondent banking relationship in 2019, however there are still no Mauritanian banks that have been able to do so. Local branches of international banks (such as Societe Generale or Attijari) do maintain correspondent banking relationships with U.S. banks and are able to clear transactions in USD.
Foreign Exchange and Remittances
There are no legal or policy restrictions on converting or transferring funds associated with investments. Investors are guaranteed the free transfer of convertible currencies at the legal market rate, subject to the availability of such currencies. Similarly, foreigners working in Mauritania are guaranteed the prompt transfer of their professional salaries. To transfer funds, investors are required to open a foreign exchange bank account in Mauritania. There are no maximum legal transaction limits for investors transferring money into or out of Mauritania, although regulations to withdraw money may be complicated in practice.
Businesses transfer money through the traditional Hawala system—they deposit their money in a Hawala store and designate a beneficiary for pick up. The Hawala system has become a reliable substitute to the high interest rate, long wait period and transaction fees imposed by local banks. However, the Central Bank closed 691 illegal money transfer points in 2019 to restructure the financial sector. Currently, only nine agencies have a provisional authorization for transfer of funds. Individuals and companies may obtain hard currency through the informal market and commercial banks for the payment of purchases or the repatriation of dividends. If the bank has hard currency available, there is no delay in effect for remitting investment returns. However, if the bank does not have enough reserves, the hard currency must be obtained from the Central Bank in order to conduct the transfer. The Central Bank is required to prioritize government transfers, which could present further delays. Delays of one to three weeks, although relatively uncommon, can occur.
In January 2018, the government of Mauritania introduced a new currency. The new currency drops a zero from the country’s previous currency; the value and the name of the currency remained the same, although the currency code changed from MRO to MRU. Local banks had to adapt their software, change their checkbooks, and reconfigure their ATMs to bring them into compliance with the new currency.
There is no limit on the inflow or outflow of funds for remittances of profits, debt service, capital or capital gains. The local currency, the ouguiya, is freely convertible within Mauritania, but its exportation is not legally authorized. Hard currencies can be obtained from the central bank and local commercial banks or parallel financial market in the informal sector. The Central Bank holds regular foreign exchange auctions, allowing market forces to fix the value of the ouguiya.
Sovereign Wealth Funds
The Central Bank administers the National Fund for Hydrocarbon Reserves, a sovereign wealth fund (SWF), which was established in 2006. The SWF is funded from the revenues received from the extraction of oil, any royalties and corporate taxes from oil companies, and from the profits made through the fund’s investment activities. The fund’s mandate is to create macroeconomic stability by setting aside oil revenues for developmental projects. However, the management of the SWF lacks transparency and the projected revenue streams remain unrealized.