**Good-quality investment projects with insufficient growth-dividend augment the exposure to fiscal risks** . Higher-investment policy not accompanied with an offsetting rationalization in current expenditures tilts budgets towards deficit and deteriorates the performance of public finances (relative to the baseline outlook). The estimated growth-dividend appears insufficient to prevent such deterioration. Furthermore, the policy widens the exposure to fiscal risks precisely because weaker public finances are more sensitive to unforeseen macroeconomic shocks whenever they occur. Fan charts obtained using the stochastic DSA and the scenario with higher investment and growth-dividend are reported in Figure C3 and C4. The dotted line represents the path in the absence of shocks, in which the public debt-to-GDP ratio reaches 40 percent in 2023. The higher-investment policy coupled with macroeconomic shocks may deliver a debt ratio in the range 33-50 percent in 2023 with a 90 percent probability. Thus, if public capital projects are scaled up and yield an insufficient growth-dividend—as this study estimates—there are fewer chances for Mauritania to achieve a large reduction in the public debt in the next 10 years.

**Further scaling up the public investment—over and above the current level of capital spending, which is already high—is likely to deteriorate Mauritania’s debt sustainability despite slightly accelerating economic growth** . Two recommendations for the policy makers in Mauritania can be drawn from the analysis of alternative public investment options. Firstly, whereas keeping the current level of capital expenditure and seeking for balanced budgets—i.e., the baseline policies—are anticipated to support a strong macroeconomic performance and permit a large reduction in the public debt relative to GDP, an attempt to further scale up capital projects—i.e., the higher-investment policy—would bring the budgets back to deficit and slowdown the pace of debt reduction. Even if capital projects are of goodquality, selected strategically, and implemented efficiently, the estimated (marginal) growth-dividend associated to the higher-investment policy is not strong enough so as to avoid a deterioration of debt sustainability (relative to the baseline policies). In other words, Mauritania should not take for granted that any _additional_ investment expenditure is good for the economy and automatically creates the repayment capacity necessary to service the public debt incurred to fund it. Secondly, the stochastic DSA suggests macroeconomic volatility and uncertainty would be more worrisome if higher public investment leads to budget deficits and thus widens exposure to adverse shocks. The government debt may reach levels significantly above those anticipated in the baseline scenario—it can be as high as 50 percent of GDP if a very poor macroeconomic performance unfolds. The window of opportunity offered by a prudent fiscal policy to reduce the government debt and strengthen sustainability will probably narrow if the country’s public spending—even in capital projects—goes beyond the revenue potential, abandons the target of balanced budgets, and requires further borrowings.

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