The state of the economy is critical to achieving political stability in Mauritania. As a country whose people depend for their living on agriculture, Mauritania had been faced with a persistent drought. About half of the population is engaged in herding and subsistence agriculture, although persistent drought drove many of the nomadic people to move into the cities. During the rainy season of 1999, a severe blow was dealt to Mauritania and many other West African nations when flooding, the heaviest the region had seen in 30 years, submerged farmlands and destroyed infrastructures. The mining sector grew quickly in the 1960s and 1970s and has now replaced agriculture in terms of contribution to the GDP, although worldwide demand for iron ore was declining in the early years of the twenty-first century. Continued mineral exploration may prove to be a saving grace for Mauritania's economy, at least for the short term, with promising reserves now known for gypsum, gold, tungsten, iron, petroleum, phosphates, diamonds, and uranium. In 2001, oil exploration in Mauritania's offshore region indicated promising petroleum reserves.
A major positive development in the economy of the 1980s and 1990s was the growth in the fishing sector. From 1983 until 1992, Mauritania insisted that all fish landings in their waters be processed in Mauritania and sold through the state fishing company. These provisions made the fishing sector an increasingly important part of the Mauritanian economy. That prosperity has been compromised, however, by overexploitation, a decline in the Mauritanian fishing fleet (with only 60% now considered operational), and disputes with neighboring Senegal.
Mauritania's chronic budget deficit has been a constant constraint on the government. These deficits have been financed by external funds, and government attempts to find new currency sources have led to domestic instability. In 1988, the World Bank classified Mauritania as "debtdistressed," allowing debt restructuring and loan repayment cancellations. In 1992, the Mauritanian currency was devalued, provoking further difficulties for the population.
In the summer of 1995, the government imposed a new Value Added Tax (VAT), which included an additional 5% on food products and 14% on industrial products. As a result, bread prices rose 25%, and the population rioted. Government measures were adopted to control the prices of essential consumer goods. At the end of 1998, Mauritania reached a three-year agreement with the World Bank for rescheduling its external debt in return for further privatization and currency controls. This agreement was enhanced in February 2000 by the World Bank and the International Monetary Fund (IMF) agreeing to a debt reduction package that would amount to about 40% of the total debt outstanding at the end of 1998. Another agreement was reached with the World Bank in October 2001 providing US $119 million to help improve living and educational conditions. The economy remains extremely fragile and threatens any political stability that could be maintained. In 2001, after qualifying for debt relief under the Heavily Indebted Poor Countries (HIPC) initiative, Mauritania began to receive financial support from donor countries. In October 2002, the World Bank and the IMF reached an agreement to reduce Mauritania's debt by US $1.1 billion, leaving it at US $1.5 billion. Mauritania also received a US $10 million loan from the African Development Bank in 2002 to fund projects in industry and services, as well as US $110,000 from the United Nations (UN) for national projects, and €45 million to construct Mauritania's first deepwater part in the city of Nouadhibou.
Clearly, development in Mauritania depends heavily on outside aid. Mauritania has an active Ba'ath party and periodically seeks agreements and aid from non-Western, Islamic/Arab states. In 2002, Mauritania also signed an agreement with the Organization of Petroleum Exporting Countries (OPEC) fund for International Development to provide US $3.5 million for fighting poverty and lack of sanitation. The government reins in these ties, however, when fears of foreign involvement in internal Mauritanian politics develop.
The slavery issue continues to shadow Mauritania in its dealings in the international community. Since 1981, when slavery was officially abolished for the fourth time, it has been illegal to refer to slavery in Mauritania. Yet reports of its continuance in the country are frequent, by both internal and external human rights organizations. Arrests of lawyers and opposition figures over the issue continued in the late 1990s and the early years of the twenty-first century. In November 1998, Anti-Slavery International, a London-based human rights group, presented an antislavery award to Cheik Saad Bouk Kamara [Sadibou Camara] of the Mauritanian Human Rights Association, further highlighting the problem to the world community. In addition, the Rally of Democratic Forces (RFD), led by Ahmed Ould Daddah, in April and May 2000 led a series of demonstrations that led to numerous arrests, causing concern regarding the political stability of the government and its willingness to confront the country's problems. Other attempts have been made to quell opposition forces. In October 2000, the government banned the Union of Democratic Forces (UFD) opposition party, and in January 2002 banned the Action for Change (AC) party, which attempted to gain rights for dark-skinned Mauritanians and those descended from slaves. This action left Mauritania officially a one-party nation, and the members of AC living in fear and under state surveillance. Opposition leaders claim one reason the party was banned was because it enjoyed great popularity with the army, and was thus a threat to the administration.
Because of such restrictive tactics, many nongovernmental relief organizations have found their work to be risky in Mauritania, and are forced to operate underground.