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This paper investigates inflation risks for 12 Middle East and Central Asia countries, with an equal share of commodities exporters and importers. The empirical strategy leverages the recent developments in the estimation of macroeconomic risks and uses a semi-parametric approach that balances well flexibility and robustness for density projections. The paper uncovers interesting features of inflation dynamics in the region, including the role of backward versus forward-looking drivers, non-linearities, and heterogeneous and delayed exchange rate pass-through. The results have important implications for the conduct of monetary policy and central bank communication in the Middle East and Central Asia and emerging markets in general.

Iran, Islamic Republic of

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This paper discusses Islamic Republic of Mauritania’s 2022 Article IV Consultation and Requests for 42-Month Arrangements under the Extended Credit Facility and the Extended Fund Facility. The Mauritanian authorities’ IMF-supported reform program presents a comprehensive policy package to preserve macroeconomic stability, strengthen the fiscal and monetary policy frameworks, and improve governance, to consolidate the foundations for sustainable, inclusive growth, and reduce poverty. Mauritania’s economic growth has accelerated in 2022, driven primarily by the extractive sectors, while Inflation should stabilize at approximately 11 percent reflecting the central bank tight monetary policy. Mauritania has present and prospective balance of payments (BoP) needs while a confluence of shocks including the war in Ukraine and regional tensions have narrowed the space for policy intervention. The BoP needs could widen considering significant risks to the baseline including a protracted war in Ukraine, tensions in the Sahel region, climate shocks, increasing volatility in international commodity markets, and delays in the start of the Grand Tortue/Ahmeyim offshore gas project.

Mauritania, Islamic Republic of

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The COVID-19 pandemic is having a severe human, economic, and social impact on Mauritania. The economy is estimated to have contracted by about 2 percent in 2020 and the crisis generated large financing needs. The authorities responded swiftly to mitigate the impact of the pandemic while international partners provided grants, loans, and debt service suspension. This, compounded by higher commodity exports (iron ore and gold) and some delays in emergency spending, resulted in unexpected fiscal surpluses and an accumulation of international reserves, which may now be used to support the recovery in 2021–22. The outlook remains highly uncertain and dependent on volatile commodity markets, with sizable downside risks in case new waves of the pandemic spill over into Mauritania.

Mauritania, Islamic Republic of

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We develop a detailed model to evaluate the necessary investment requirements to achieve affordable universal broadband. The results indicate that approximately $418 billion needs to be mobilized to connect all unconnected citizens globally (targeting 40-50 GB/Month per user with 95 percent reliability). The bulk of additional investment is for emerging market economies (73 percent) and low-income developing countries (24 percent). We also find that if the data consumption level is lowered to 10-20 GB/Month per user, the total cost decreases by up to about half, whereas raising data consumption to 80-100 GB/Month per user leads to a cost increase of roughly 90 percent relative to the baseline. Moreover, a 40 percent cost decrease occurs when varying the peak hour quality of service level from the baseline 95 percent reliability, to only 50 percent reliability. To conclude, broadband policy assessments should be explicit about the quantity of data and the reliability of service provided to users. Failure to do so will lead to inaccurate estimates and, ultimately, to poor broadband policy decisions.

Afghanistan, Islamic Republic of

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High and volatile inflation has been an endemic economic and social issue in Iran that has contributed to rising poverty and social tensions. For policymakers to effectively address the inflation problem, it is critical to understand its causes. This paper seeks to contribute to this endeavor by applying a vector error-correction model to study the short- and long-term determinants of inflation in Iran over the past two decades and identify policy options to curb it. Using quarterly data spanning 2004-2021, it finds that money growth drives inflation only in the long term, while currency depreciation, fiscal deficits, and sanctions (proxied by oil exports) drive inflation both in the short- and the long term. In the absence of a removal of US trade and financial sanctions that could significantly boost the rial, budget deficits will have to be adjusted to contain inflation, albeit gradually to avoid hindering the recovery. Over the medium term, strengthening the inflation targeting framework could help improve monetary transmission and contain inflation durably.

Iran, Islamic Republic of