Press Release: IMF Executive Board Completes the First Review of Niger's PRGF Arrangement and Approves US$15.4 Million Disbursement Along With a US$28.1 Million Augmentation
November 14, 2005
The Executive Board of the International Monetary Fund (IMF) completed today the first review of Niger's economic performance under the Poverty Reduction and Growth Facility (PRGF), and approved an augmentation of IMF support amounting to SDR 19.7 million (about US$28.1 million), which will bring total access under the arrangement to SDR 26.32 million (about US$37.5 million).
The Board also granted waivers for the nonobservance of the end-June 2005 quantitative performance criteria on the basic budget deficit and the reduction in government domestic payments arrears.
As a result of the completion of the review, Niger will be eligible to draw an amount equivalent to SDR 10.81 million (US$15.4 million), bringing the total amount disbursed under the arrangement to SDR 11.75 million (about US$16.7 million). Niger's PRGF arrangement was approved on January 31, 2005 (see Press Release No.05/20).
"A drought in 2004 has had a severe impact on Niger that affected a quarter of the population and caused acute malnutrition and starvation in the course of 2005. The drought and a significant deterioration in the terms of trade in 2005 due to higher oil prices reduced economic growth and triggered steep price increases. These adverse shocks have weakened economic performance and government finances, necessitating a revision to the original IMF-supported program and augmentation of access to Fund resources, especially needed to replenish depleted strategic grain reserves.
"The revised program addresses the impact of the drought while minimizing sustained deviations from the original IMF-supported program. It accommodates additional expenditure for rebuilding strategic grain reserves and boosting public investment to address the factors underlying the country's vulnerability to exogenous shocks, and envisages tax and customs administration reforms that will strengthen revenue over the medium term. Spending will be prioritized to ensure adequate financing for pro-growth and pro-poor programs.
"Going forward, Niger's main challenge is to strengthen economic growth and reduce its vulnerabilities to alleviate poverty. This will require a strong commitment to implementing growth-enhancing sectoral strategies. As outlined in the country's Poverty Reduction Strategy, priorities include the implementation of a rural sector strategy, with an emphasis on developing irrigation infrastructure, and diversifying the economy including through the development of tourism. Success in the implementation of these strategies will hinge on strengthened economic governance, increased external support, and domestic consensus to strengthen program ownership. The authorities plan to organize a donor conference in early 2006 to mobilize much-needed development finance.
"The authorities have reiterated their commitment to reforming the financial sector and privatizing public utilities. The government intends to finalize its disengagement from Crédit du Niger and to restructure the National Postal and Saving Institution; it also plans to revisit the privatization strategy for the petroleum-importing (SONIDEP) and electricity (NIGELEC) companies. The authorities recognize that successful implementation of their reform agenda is predicated on continued strengthening of Niger's weak institutional capacity, in collaboration with development partners," Mr. Carstens said.
The PRGF is the IMF's concessional facility for low-income countries. PRGF loans carry an annual interest rate of 0.5 percent, and are payable over 10 years with a 5½ -year grace period on principal payments.