IMF Executive Board Completes First Review of Niger’s ECF Arrangement and Approves US$19.9 Million
December 15, 2017
On December 15, 2017, the Executive Board of the International Monetary Fund(IMF) completed the first review of Niger’s economic performance under the program supported by the Extended Credit Facility (ECF) arrangement, and considered and endorsed the staff appraisal without a meeting. [1]
Despite security challenges and unfavorable commodity prices, economic performance has been satisfactory against the backdrop of a good crop season, with real GDP growing by 5 percent in 2016 while inflation remained contained at 0.2 percent. Growth is expected to reach 5.2 percent in 2017, mainly on the back of strengthening hydrocarbon and services sectors, and robust credit growth. The current account deficit will likely decline to 13.4 percent of GDP, reflecting rising exports of oil products, a rebound in uranium exports, and the winding down of import-intensive infrastructure projects. Together with continued high donor support, the overall balance of payments should thus turn positive in 2017 with Niger starting to contribute to WAEMU’s international reserves.
The main tenets of the ECF-supported program remain focused on (i)
preserving macroeconomic stability by pursuing prudent fiscal and debt
policies; (ii) broadening the revenue base; (iii) prioritizing public
spending and improving expenditure control; and
(iv) diversifying the economy and confronting the demographic challenge,
with a strong emphasis on private and financial sector development.
However, adverse external developments and high population growth, which
dilutes investment and poses the challenge of job creation for the bulging
labor force, pose risks to program performance and long-term development
prospects.
Executive Board Assessment
In concluding the first review of Niger’s economic performance under the ECF-supported program, Executive Directors endorsed the staff’s appraisal, as follows:
The authorities have been implementing their ECF-supported program in a broadly satisfactory manner. All quantitative performance criteria and all but one indicative target have been met. Fiscal policy has been prudent thanks to strict expenditure control, while fiscal revenue mobilization remained lower than programmed. The structural reform agenda is progressing, but limited implementation capacity has led to some delays, notably in establishing a Treasury Single Account.
Adequate steps have been taken to advance the program through end-2017. A supplementary budget has cut the 2017 spending allocations to protect deficit and domestic budget financing targets in the face of revenue shortfalls that are to be expected for end-2017. Measures to strengthen revenues are showing first results, such as the valuation of imports with transaction prices for border tax purposes. Work on a broad agenda of structural reforms continues.
The program is underpinned by a realistically ambitious macroeconomic framework. GDP growth is set to rise to around 5.5 percent with attendant poverty reduction and despite headwinds. Policies to keep inflation moderate are in place and fiscal policy is headed toward meeting WAEMU convergence criteria by 2021. Strong donor support alleviates possible adverse growth effects from fiscal consolidation and helps turn the overall balance of payments positive.
The 2018 budget is in line with program objectives. It enshrines judicious fiscal consolidation with a reduction of the basic fiscal deficit to 3.9 percent of GDP from 4.6 percent in 2017, tax revenue gains of 0.5 percent of GDP underpinned by concrete measures, such as reductions in VAT exemption, tighter control of investment incentives, and minimum taxes, and expenditure restraint.
The authorities have articulated a comprehensive fiscal structural reform agenda. It includes a host of tax administration measures, improvements in public financial management, and efforts to raise the quality of public spending. Extensive technical assistance from donors, including the Fund, are at hand to support these efforts.
The authorities rightly recognize that developing Niger’s private sector and diversifying the economy are indispensable for achieving development objectives. To this end, work to improve the business environment will continue. Banks’ lending capacity will be strengthened by a swift completion of the government’s arrears clearance program, by increasingly channeling fiscal payments through the financial system, and by implementing the new legal framework for leasing. But the recent decision to quit the Extractive Industry Transparency Initiative (EITI) jeopardizes results from other commendable reforms in the mining sector and should be reconsidered.
The authorities deserve credit for putting demographic and gender issues high on the political agenda. Implementation for results on the ground will now be key, to avoid rapid population growth undermining progress toward development objectives. The envisaged formulation of a five-year gender action plan building on the updated National Gender Policy and draft legislation to keep girls in school longer and delay marriage and child-bearing are welcome.
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Niger: Selected Economic and Financial Indicators, 2015-22 |
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[1] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.
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