IMF Executive Board Completes the Second Review Under the Extended Credit Facility (ECF), Approves US$ 52.6 Million Disbursement, and Concludes the 2022 Article IV Consultation with Niger
December 21, 2022
- Despite an expected rebound in growth this year and an acceleration over the near term, Niger continues to face daunting development challenges, while being exposed to a deteriorating security situation in the Sahel and recurrent climate shocks.
- Program performance has been broadly on track. Overall macroeconomic performance is satisfactory, and the implementation of the structural reform agenda is gaining momentum, including on governance-related issues.
- Key priorities to build resilience to shocks include improving domestic revenue mobilization and spending quality and creating an enabling environment for economic diversification and private sector development.
Washington, DC: Today, the Executive Board of the International Monetary Fund (IMF) concluded the 2022 Article IV Consultation [1] and completed the Second Review of the Extended Credit Facility (ECF) arrangement for Niger. The completion of the review enables the disbursement of SDR 39.48 million (about US$ 52.6 million), bringing total disbursements under the arrangement to SDR 118.44 million (about US$ 157.8 million). Niger’s three-year ECF arrangement for SDR 197.4 million (about US$ 275.8 million at the time of program approval or 150 percent of quota) was approved on December 8, 2021 (see press release PR21/366). The arrangement is expected to catalyze additional bilateral and multilateral financial support.
The Executive Board also concluded the 2022 Article IV consultation with Niger. Since the conclusion of the last Article IV consultation in 2019, authorities have made progress in adopting a number of key policy recommendations and have advanced their reform agenda. Nonetheless, despite a positive macroeconomic outlook, the country continues to face daunting development challenges against a backdrop of fragility, which are exacerbated by a decade of conflict in the Sahel and exposure to climate shocks.
Following the Executive Board discussion, Ms. Sayeh, Deputy Managing Director and Acting Chair, issued the following statement:
“Niger’s near and medium-term economic outlook remains broadly favorable with growth expected to bounce back this year and accelerate thereafter driven by private investment and oil exports through the new pipeline. Steadfast implementation of the authorities' structural reform agenda aimed at strengthening human capital, addressing the sources of fragility, and diversifying the country’s production base by promoting private sector development, would create the conditions for sustained and shock-resilient long-term growth and poverty reduction.
Program performance has been broadly satisfactory in a challenging context. All quantitative performance criteria were met at end-June and end-September 2022, and five out of six indicative targets were observed at end-September. Nonetheless, the present value of new PPG external debt exceeded its ceiling in November 2022. The implementation of the authorities’ structural reform agenda is also broadly on track.
A gradual fiscal consolidation path is warranted to address urgent spending needs related to the food crisis and the deteriorating security situation in the Sahel region as well as to accommodate pressing spending priorities in education, infrastructure, and social safety nets. The authorities should however avoid entrenched large fiscal deficits to preserve fiscal and public debt sustainability and revert to the WAEMU fiscal deficit norm by 2025.
Advancing the domestic revenue mobilization agenda is key to create the needed fiscal space for priority spending. The authorities are therefore encouraged to accelerate reforms to reduce tax exemptions and evasion, revise the tax code to simplify the tax system and increase its efficiency, and enhance revenue administration through digitalization. It is also urgent to establish a transparent oil resource management framework before the start of oil exports. Efforts to enhance the efficiency and quality of spending and improve the performance of state-owned enterprises to create fiscal space for priority social and investment spending are also needed.
Stepping up efforts to preserve the stability and soundness of the financial sector is essential for private sector development and inclusive growth. In particular, restructuring the microfinance sector remains critical to promoting financial inclusion and increasing the resilience of the most vulnerable to shocks.
Progress on the governance agenda is key to address the country’s sources of fragility and improve the business environment. Efforts to address remaining inadequacies of the AML/CFT framework and steps taken to publish the asset declarations of high-ranking officials are welcome. Building resilience to climate shocks in the agricultural sector and fostering export diversification are also critical for long-term inclusive growth.”
Executive Board Assessment [2]
Executive Directors agreed with the thrust of the staff appraisal. They welcomed the Nigerien authorities’ commitment and progress in implementing reforms under the ECF-supported program, despite the challenging context. While the medium-term outlook is favorable, driven by rising oil exports, the risks remain significant, including from climate shocks, security threats, and protraction of Russia’s war against Ukraine. In this context, Directors called for continued commitment to policies that would promote macroeconomic stability and build resilience to shocks, while implementing reforms targeted at developing the private sector and improving governance. Continued donor involvement and leveraging the IMF’s capacity development support will be key in assisting these efforts.
Directors agreed that a more gradual fiscal consolidation trajectory is appropriate to support Niger’s daunting development needs and urgent spending priorities. However, they agreed that the authorities should adhere to the envisaged fiscal consolidation path to meet the WAEMU fiscal deficit norm by 2025 and pursue a prudent debt policy by prioritizing concessional loans. They also recommended strengthening capacity in the compilation of debt and fiscal statistics.
Directors emphasized the importance of advancing the authorities’ revenue mobilization agenda, notably the revision of the tax code to broaden the tax base and the implementation of measures to reduce tax exemptions and evasion. They also stressed that developing a transparent framework for the management of oil revenues before the start of exports is crucial to ensure proper management of these resources.
Directors encouraged the authorities to accelerate efforts to enhance the efficiency and quality of spending and improve the performance of state-owned enterprises to create fiscal space for priority social and investment spending and improve the delivery of public services. They stressed the importance of strengthening social safety nets to protect the most vulnerable and welcomed the authorities’ commitment to foster girls’ education and gender equality.
Directors noted rising vulnerabilities in the financial sector and called for close monitoring of the deterioration in asset quality in the banking and microfinance sectors.
Directors underscored the importance of advances in the implementation of the structural reform agenda to promote the development of the private sector. Building resilience to climate shocks in the agricultural sector and fostering export diversification and financial inclusion are key to boost long-term inclusive growth. Directors also encouraged continued efforts to strengthen governance and anti-corruption frameworks and leverage digitalization and encouraged further efforts in these areas.
It is expected that the next Article IV consultation with Niger will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing-up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm
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Niger: Selected Economic and Financial Indicators, 2019-23 |
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