IMF Executive Board Approves Three-Year US$120.97 Million Extended Credit Facility Arrangement and US$ 17.28 Million Disbursement
Press Release No. 12/90
March 16, 2012
The Executive Board of the International Monetary Fund (IMF) today approved a new arrangement for Niger under the Extended Credit Facility (ECF) in an amount equivalent to SDR 78.96 million (about about US$120.97 million). The Board’s decision will enable an immediate disbursement equivalent to SDR 11.28 million (about US$17.28 million).
The authorities’ program is aimed at maintaining macroeconomic stability while increasing resilience to shocks; strengthening public finance and debt management; putting in place a transparent legal and supervisory framework for the mining and petroleum sectors; and supporting private and financial sector development.
Following the Board’s discussion of Niger, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair issued the following statement:
“The authorities’ new ECF-supported economic program aims at addressing the development challenges ahead, maintaining macroeconomic stability, and increasing resilience to shocks. Policies under the program will focus on strengthening public finance and debt management, putting in place a transparent legal and supervisory framework for the natural resources sector, and supporting private and financial sector development.
“The 2012 budget is well aligned with the authorities’ growth and poverty reduction program. Medium-term fiscal policy is rightly geared towards creating the fiscal space for increased development spending, while maintaining debt sustainability. Rising receipts from oil production and strengthened domestic revenue should primarily finance the planned investment. It will also be important to step up efforts to seek grants and concessional financing for large infrastructure investment and other projects. Non-concessional loans should only be contracted for well-assessed, high-yield projects.
“A significant build-up of government reserves at the central bank will provide flexibility in budget execution and bolster Niger’s resilience to exogenous shocks.
“Important structural reforms are underway. Measures to strengthen budget execution, reduce the number of tax exemptions, and modernize tax and customs administration will help maintain fiscal stability. At the same time, steps to strengthen and develop the financial system and improve the business climate will promote private sector development and diversify the economy,” Mr. Shinohara added.
Recent economic developments
Niger is emerging from a prolonged period of social unrest and from military rule. A democratically-elected government came into power in April 2011. Building on the poverty reduction strategy, the government has adopted an ambitious development program.
Economic activity in recent years has been affected by large swings in agricultural production. Following a year of serious food shortages, economic growth recovered quickly in late 2010, driven by an excellent harvest and the expansion of services related to agriculture
The authorities’ medium-term policy framework is based on a favorable growth outlook driven mainly by the oil and mining sectors. With the startup of a new petroleum project, GDP is projected to expand by13.4 percent in real terms in 2012. Investments in a large new uranium mine and the development of the petroleum sector should sustain economic activity in the years after 2012.
Niger’s medium-term prospects are nevertheless subject to various risks. The country is vulnerable to exogenous shocks, including recurrent, weather-related food crises and fluctuations in commodity prices. The deteriorating security situation in the region is another factor adding to Niger’s vulnerabilities.
The authorities’ new three-year program builds on the government’s medium-term development strategy, and draws on the lessons of the Ex Post Assessment discussed by the
Executive Board of the IMF on December 2, 2011. It is aimed at:
- Creating fiscal space for rising development spending while maintaining external debt
- Rebuilding government deposits at the central bank to facilitate budget execution and
- enhance resilience to exogenous shocks;
- Strengthening public finance and debt management,
- Establishing a sound, transparent supervisory and legal framework for the natural resource sector
- Improving the business environment, including reforms aimed at sustaining the stability of the financial sector and increasing access to financial services.
Medium-term fiscal policy will aim at maintaining debt sustainability while creating room for increased development spending. At the same time, the objective to strengthen government cash balances to increase the resilience of the budget to unexpected shocks. In light of these objectives and the current projections for external donor aid, the authorities intend to keep the basic fiscal deficit below 1.5 percent of GDP during the program period.
The government is committed to further strengthening public oversight of the natural resources sector in 2012 through the Interministerial Committee for natural resources assessment, which will ensure appropriate information flows and coordination between government representatives in each natural resource company. In addition, the government intends to undertake a study on its overall strategy and policy in the petroleum and mining sector, including the policy to maximize the government’s petroleum resources and the structure of government oversight in that sector. This study is to be completed by end-December 2012. A key objective for the medium term will be to bring the Investment Code into line with best practices. In collaboration with the World Bank, the authorities are planning to undertake a comprehensive review of the Code in 2012.