Current account of balance of payments — practice question

A large share of Mauritania’s territory is desert, and repeated droughts create pressure on the nation’s food supply. Even so, the African country has one major advantage: coastal waters that are among the most abundant fishing grounds in the world. Roughly $95\%$ of the fish landed by Mauritania’s small-scale fishing boats is sent abroad. The money earned from selling fish overseas adds to the current account in the country’s balance of payments. In 2013, Mauritania recorded a surplus on trade in goods and also a surplus on current transfers. Very little of the catch is processed in Mauritania into products with higher value, apart from a few factories in Nouakchott, the capital city. This lack of processing is affecting both the income earned from the fish caught and the country’s economic growth. Total output did rise from US$8 billion in 2012 to US$8.5 billion in 2013. That same year also brought a shift in population figures. The birth rate stood at $31.83$, the death rate at $8.35$, and the migration rate at $-0.85$ per thousand of the population. Some Mauritanian economists criticise the government for allowing other countries, such as Algeria, Morocco, Japan and Russia, to take large amounts of fish from Mauritania’s waters. They have recently objected to the government’s agreement with the European Union (EU), which permits more than one hundred large EU vessels to fish in Mauritania’s waters in exchange for US$105 million each year. These EU vessels, with their highly trained workers, are catching very large quantities of fish, including highly valuable squid, and are believed to be endangering the long-term sustainability of Mauritania’s fishing industry. Mauritanian economists expect fish stocks to fall sharply over the next twenty years. At present, the country’s economy depends very heavily on the primary sector. If both the fishing industry and agriculture became more productive, that would help to lower unemployment and reduce poverty in the country.