Press Release No. 00/69

Press Release: IMF Approves in Principle Three-Year US$76 Million PRGF Loan for Niger

December 14, 2000

The Executive Board of the International Monetary Fund (IMF) today approved in principle a third-year arrangement for Niger under the Poverty Reduction and Growth Facility (PRGF) in an amount equivalent to SDR 59.20 million (about US$76 million) to support the government's program of economic reform and poverty reduction. The first annual loan equivalent to SDR 25.38 million (about US$33 million) will be available in three installments, with the equivalent of SDR 8.46 million (about US$11 million) available immediately.

The decision by the IMF Board included a finding that Niger's interim Poverty Reduction Strategy Paper (PRSP) provides a sound basis for the development of a fully participatory PRSP and for concessional assistance by the Fund.

In commenting on the Executive Board's discussion on Niger, Eduardo Aninat, IMF Deputy Managing Director and Acting Chairman, said:

"The efforts of the new authorities to resume the economic and structural reform program interrupted in 1999 and to strengthen Niger's track record of performance, including a restoration of budgetary transparency, improved governance, and a strong commitment to structural reforms, are commended.

"The new three-year program provides a framework to buttress economic performance and socioeconomic trends by improving the fiscal and external situation, remove the structural obstacles to economic development, and facilitate implementation of a new strategy to reduce poverty. The program is cast in a context of increased democratization, administrative decentralization, and regional integration of the Economic Community of West African States (ECOWAS) and the West African Economic Monetary Union (WAEMU).

"The priorities for the first year of the program year focus on fiscal consolidation and the adoption of key structural reforms. To achieve the targeted reduction in the overall budget deficit, the authorities are encouraged to implement in a timely manner the envisaged revenue-enhancing measures, the control of the wage bill, and the restructuring of budget allocations toward goods and services, as well as investment. The authorities' commitment to settle domestic arrears, and the need to improve further the quality and structure of expenditure, are critical to the program's success.

"The structural reform agenda for 2000-01 aims at strengthening governance and continuing the privatization program. In this context, public expenditure management is to be improved to ensure transparency and accountability. Other areas where major reforms are to be undertaken include the tax and customs administration, the financial system (including microfinance and mutual institutions), and the civil service. The privatization of the water, electricity, and telecommunications utilities, as well as the public company in charge of petroleum imports and storage, are scheduled to be completed in the coming year.

"In the context of its new strategy for reducing poverty, the government of Niger will broaden the participatory process for the preparation of a full poverty reduction strategy paper (PRSP) by end-2001. It will also reinforce the institutional capacity to assess and monitor progress in implementing a poverty reduction-strategy. In order to ensure the full budgeting and proper monitoring of the new poverty-reduction-related programs to be financed by the enhanced Heavily Indebted Poor Countries (HIPC) Initiative, the authorities are committed to publishing semiannual reports on the use of this assistance and on the budget execution of these programs.

"A final decision on Niger's debt relief under the enhanced HIPC Initiative is pending action on December 20, 2000, by the World Bank's Executive Board. A press release will be issued jointly with the World Bank following those deliberations. The full participation of all Niger's creditors, including all non-Paris Club creditors, in debt relief will be important for the success of the Initiative," Mr. Aninat said.

ANNEX

Program Summary

The program of economic and financial structural adjustment policies supported by the IMF since 1996 under the Enhanced Structural Adjustment Facility, and by the international community of donors, had resulted in substantial progress in correcting Niger's major macroeconomic and budgetary imbalances and introducing structural reforms focusing on private sector development, privatization, and civil service reform. Achievements during 1996-98 remained fragile, however, and suffered a number of setbacks caused by the political and social instability that followed the political events of April 1999. The economic consequences of this instability were aggravated by the almost total withdrawal of external financial assistance from Niger during the transition period.

Transparent and democratic elections took place at end-1999. The newly elected authorities quickly established the economic, social, and political agenda that underpins the new PRGF program. While resuming financial relations with its development partners, the government has maintained social and political stability, restored transparency and accountability in public finance, implemented a tight cash management system to prevent budgetary slippages, and prepared an interim PRSP to support its commitment to fight poverty.

In this context, the PRGF program aims at implementing a series of key policies. Priority will be given to poverty reduction and revival of the economy in a context of financial stability, and high, sustainable growth. Consequently, the government, intends to continue to implement policies and reforms that will make it possible to achieve a growth rate of at least 4.5 percent by 2003, while gradually increasing the investment rate to about 14 percent of GDP. As a result, per capita GDP growth rate should be close to 1.5 percent in 2003. Consistent with the exchange rate arrangement linking the CFA franc to the Euro, inflation is expected to be kept less than 3 percent over the period of the program.

In support to these macroeconomic objectives, fiscal policy will aim at strengthening revenue performance and upgrading the quality of public spending. Budgetary revenues are programmed to increase from 8.2 percent of GDP in 2000 to more than 10 percent in 2003, while current expenditure would be slightly reduced from 10.1 percent of GDP in 2000 to 9.9 percent in 2003. The current budget is thus expected to rebound from a deficit equivalent to approximatively 4 percent of GDP in 1999 to equilibrium by 2003, and budgetary savings to increase significantly. A key element of the program is to improve the quality and structure of expenditure to support the authorities' interim poverty reduction strategy, while strengthening the expenditure process to enhance transparency and accountability. The overall budget deficit (on a commitment basis and excluding grants) would increase from 7.5 percent of GDP in 2000 to 8 percent in 2001, reflecting mainly higher investment expenditure, before declining to 7 percent in 2003.

Besides the strengthening of tax and customs administrations, the structural reform program will focus on improving budget management, continuing the privatization program in coordination with the World Bank, reforming the oil sector, liberalizing prices of goods and services still subject to controls, and finalizing a strategy for rehabilitating and expanding the financial sector. The government has also made a commitment to deepen budget management reforms. Efforts in that area will focus on modernizing the chain of expenditures, in terms of both management procedures and the information system used. Efforts will also be made to modernize budget preparation.

Poverty reduction

Niger remains one of the poorest countries in the world, with real GDP per capita estimated to have fallen by more than 40 percent over the past twenty years, owing to economic stagnation and a population growing at about 3.3 percent annually.

As part of its policy for reducing poverty and improving the living conditions of the population, the government will undertake a series of measures in the fields of education, health, rural development, and transportation in line with the preliminary strategy developed in the interim PRSP.

Niger joined the IMF on April 24, 1963; its quota¹ is SDR 65.8 million (about US$ 85 million). Niger's outstanding use of IMF funds totals SDR 48.30 million (about US$ 62 million).