Mauritania Threshold - Constraints Analysis

MCC’s evidence-based approach to its investments begins with a mutual understanding of a country’s main growth challenges. During the first phase of the compact or threshold program development process, MCC and the selected partner country, jointly conduct a constraints-to-growth analysis (CA). This analysis identifies the constraints to private investment and entrepreneurship that are most binding to economic growth in the country. The results of this analysis enable the country, together with MCC, to select activities most likely to contribute to sustainable, poverty-reducing growth.

The Constraints Analysis Report for the Mauritania Threshold Program highlights the following binding constraints to economic growth: 

1. Vulnerability to climate-related hazards: Climate risks threaten livelihoods and intensify urbanization pressures. Threatened environmental resources and limited adaptation action to-date jeopardizes short-term and long-term growth prospects.
2. Reliance on commodity exports limit competitiveness: Reliance on commodity exports exposes Mauritania to external price shocks. It has led to persistent current account defcits, and volatility in foreign direct investment (FDI) and in relative prices. Relative price volatility and the uncertainty associated with it may impact firms’ investment decisions, including investments in new product lines.
3. Expensive and unreliable electricity: There is a high cost of electricity in Mauritania, especially monthly fixed charges. Moreover, the quality of electricity service is low, with somewhat frequent, long duration outages that also raise costs for businesses. 
4. High cost and barriers to accessing formal credit: The financial system is fragmented, interest rates are high, credit to the private sector is low, and lending is mostly short tenor. Few businesses can access credit through the formal banking system, and frms report difcult-to-meet verifcation requirements.
5. Burdensome tax and business policy: Burdensome taxes, customs, and regulations make it costly to conduct business and have created high levels of informal business practices.