IMF Executive Board Completes Fourth and Fifth ECF Reviews, Approves US$16.52 Million Disbursement and Concludes 2014 Article IV Consultation with Niger
NIAMEY, Niger, December 19, 2014/African Press Organization (APO)/ -- On December 17, 2014 the Executive Board of the International Monetary Fund completed the fourth and the fifth reviews of Niger's economic performance under a program supported by an Extended Credit Facility (ECF) arrangement. The decision enables the disbursement of SDR 11.28 million (about US$16.52 million, 17 percent of quota), bringing total disbursements under the ECF arrangement to SDR 56.40 million (about US$82.62 million, 86 percent of quota)
In completing the reviews, the Executive Board approved the authorities' request for waivers for the performance criterion related to net domestic financing at the end of December 2013 and June 2014, and the modification of performance criteria of the end of December 2014.
The ECF arrangement for Niger was approved on March 16, 2012 (see Press Release No. 12/90).
Following the Executive Board's discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:
“Niger's overall macroeconomic performance has been broadly satisfactory. After the economic slowdown in 2013 due to the regional security situation and adverse climatic conditions, economic growth has rebounded in 2014. Inflation has been contained, in part due to the government's efforts to improve food security and the functioning of food markets. However, program performance has been mixed, as a combination of unexpected security and food expenditures and a shortfall in external financing have strained fiscal management. The structural reform agenda is advancing, although with delays in implementing some key public financial management measures. Significant progress has been made on the limitation of exceptional expenditure and timely release of quarterly budget allocations.
“In the near term, containing the fiscal deficit through measures to improve tax policy and administration, reform customs administration, and reduce exemptions is essential to ensure sustainability. Medium-term prospects appear favorable, but depend critically on the authorities' ability to leverage Niger's natural resource wealth into sustained inclusive growth. Critical in this regard will be further strengthening debt and public financial management, the management of natural resource wealth, and the business climate. The Inter-Ministerial Committee on Debt Management is an important step forward and should play an increasing role in ensuring the public investment efficiency. Establishing a treasury single account would significantly improve cash management and budget execution.
“Further structural reforms to improve the business environment are critical. In this context, swift implementation of the recently approved financial sector development strategy would support economic growth by increasing financial stability and transparency as well as financial deepening. Strengthening the resilience of the economy through steps to enhance food security; removing trade barriers, including for food products; and improvements in the legislative environment could all promote stronger and more inclusive growth and alleviate poverty.”
The Executive Board also completed the 2014 Article IV Consultation1 with Niger.
Niger's overall macroeconomic performance has been satisfactory. Economic growth slowed to 4.1 percent in 2013 largely due to the regional security situation and adverse climatic conditions on agricultural production despite a significant increase in oil production. Inflation was contained at 2.3 percent in 2013 as food prices fell thanks to the government's efforts to improve food security and the functioning of food markets. Growth is estimated to rebound to 6.5 percent in 2014, driven by agriculture and inflation to remain subdued. Reflecting continued expenditure pressures and weak revenues, the basic fiscal deficit has widened but arrears were significantly reduced. The external current account is expected to widen in 2014 because the growth of exports was outpaced by the rise in imports of goods and services related to investment projects in the extractive industries and public works. Limited government resources and project implementation capacity continued to weigh on public investment.
Macroeconomic prospects look favorable. Growth is expected to average 5.6 percent in 2014-16 and 8.5 percent in 2017-19 as two large natural resource projects—crude oil export and uranium production—are expected to begin in 2017/18 and 2019, respectively. On the external side, the decline in oil prices in the second half of 2014 will lower the current account over the medium term, resulting in a lower but still significant accumulation of reserves. The main near-term risks relate to further deterioration in the regional security situation, which could severely impact foreign direct investment, trade flows, and fiscal outcomes. The economy also remains vulnerable to climatic shocks, commodity price volatility, and limited predictability of donor support. The timing, financing, and feasibility of government involvement in projects in the extractive industry pose particular risks, due their inherent elevated uncertainty and the authorities' limited implementation capacity.
Executive Board Assessment2
Executive Directors agreed with the thrust of the staff appraisal. They noted that despite the unfavorable security situation and adverse climate shocks, which have complicated program implementation, Niger's economy delivered positive growth in 2013 and rebounded in 2014. While the medium-term outlook is favorable, it is vulnerable to domestic and external risks, and poverty remains high. Against this backdrop, Directors welcomed the authorities' commitment to their economic program and stressed the importance of continued efforts to improve the resilience of the economy, strengthen fiscal sustainability, and foster inclusive growth.
Directors underscored the importance of further strengthening the fiscal framework to ensure fiscal sustainability while addressing development needs and security challenges. They called for measures to improve tax policy and administration, reform customs administration, and reduce exemptions. Welcoming the authorities' intention to prioritize spending in key sectors, Directors encouraged prudence in budget planning and continued efforts to improve budget execution. Investment spending should be scaled up prudently, supported by reforms to improve the efficiency of spending and absorptive capacity. Directors welcomed the authorities' commitment to undertake additional capital spending only as revenue materializes.
Directors acknowledged the authorities' efforts to strengthen the debt management framework through better coordination of relevant ministries and regular reporting of debt stocks and flows. They urged the authorities to develop a medium-term debt management strategy to guide prudent borrowing plans and safeguard debt sustainability.
Directors noted that the medium-term economic outlook will depend critically on the authorities' ability to leverage expected natural resource revenues for advancing the inclusive growth agenda. In this context, they emphasized the importance of further strengthening the fiscal and institutional frameworks. Priorities are the enhancement of public financial management, including the establishment of a treasury single account, and improved governance and transparency of natural resource management in order to provide room for increased social and infrastructure spending.
Directors emphasized the need for further structural reforms to improve the business environment. They welcomed the recent approval of the decree to implement the financial sector development strategy and encouraged the authorities to speed up its implementation. The strategy aims at increasing financial stability and transparency as well as financial deepening and inclusion, and would improve the legal and judicial framework. Directors also noted that enhancing food security through investments in agriculture and fostering regional trade would promote stronger and more inclusive growth and faster poverty reduction.
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 summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.