IMF Completes First Review Under the PRGF Arrangement for Niger and Approves US$5 Million DisbursementPress Release No. 08/335
December 22, 2008
The Executive Board of the International Monetary Fund (IMF) has completed the first review of Niger's economic performance under a three-year Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the review enables the disbursement of SDR 3.29 million (about US$5 million), which will bring total disbursements under the arrangement to SDR 6.58 million (about US$10.1 million).
In completing this review, the Executive Board granted waivers for the non-observance of the end-June 2008 quantitative performance criterion on the reduction in domestic payment arrears and the end-September 2008 structural performance criterion on the adoption of a decree establishing the modalities for repayment of frozen savings deposits.
The PRGF arrangement became effective June 2, 2008, for a total amount of SDR 23.03 million (about US$35.3 million) (see Press Release No. 08/127).
The Executive Board today also concluded the Article IV consultation with Niger and will issue its full assessment of economic developments in due course.
At the conclusion of the discussion on Niger's economic performance, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:
"The Nigerien authorities are to be commended on the overall satisfactory performance under the PRGF-supported programs since the 2006 Article IV consultations. Although economic growth weakened somewhat in 2007, it remained above the rate of growth of population, and rebounded in 2008, on the strength of a good harvest, higher investment, and progress in economic diversification. Inflation flared up in the first half of 2008, reflecting the sharp increase in food and fuel prices on world markets, but is now abating and is expected to decline further. The authorities have appropriately responded to the food crisis in the first half of 2008 by firming up already comprehensive mechanisms of targeted interventions in favor of vulnerable groups, and have maintained the costly tax suspensions on selected commodities for only a limited time. It is important that the targeted assistance mechanisms continue to be well funded.
"The budgetary performance was satisfactory in 2007 and the first half of 2008. The basic budget deficit in the first semester of 2008 was lower than programmed, as revenue (abstracting from an exceptional petroleum contract signature bonus received in June 2008) was in line with the program and domestically-financed expenditure remained below the programmed level. The budget for 2009 allocates large exceptional revenue received in June to priority development expenditures.
"The outlook for growth in 2009 remains favorable despite the current downturn in industrial countries as the significant investments under way in a number of sectors, including mining, transportation, irrigation and telecommunication, are expected to continue to support economic activity. While economic prospects for 2009 are positive, the downturn in the world economy, if prolonged, could deter future mining exploration and dampen medium-term growth.
"Growth must be supported by comprehensive efforts to make the economy more competitive. Improvements in the investment climate and reductions in the cost of doing business will be needed to attract investment and promote further economic diversification. In addition, continued, and possibly increased, foreign financed investment and budgetary aid in support of priority sectors are essential for Niger to achieve its growth objective and secure steady improvement in social indicators. A scaling up of aid as envisaged in the Gleneagles scenario would be compatible with macroeconomic stability. To preserve debt sustainability, it is essential that debt management remains prudent, with emphasis on grants and borrowing on highly concessional terms for highly productive projects.
"The authorities program for 2009 appropriately focuses on better management of the public finances, closely aligning the budget to PRSP priorities, streamlining corporate taxation to improve the investment climate, and furthering reforms in the financial sector. The comprehensive actions taken to strengthen public financial management are welcome. Efforts must now focus on casting the budget preparation in a medium-term framework, with a careful integration of the recurrent costs implied by the expansion of public investment," Mr. Portugal said.