IMF Completes Key Reviews, Consultation With Niger

• The IMF Executive Board concluded today, the 2024 Article IV Consultation and completed the Sixth Review under the Extended Credit Facility (ECF) Arrangement for Niger, and the Second Review under the Resilience and Sustainability Facility (RSF) Arrangement for Niger, allowing for an immediate disbursement of about US$51 million cumulatively under the ECF and the RSF.
• A robust recovery is expected, with GDP growth estimated at 8.8 percent in 2024, on the back of oil production. For 2025, economic growth should remain strong at 7.9 percent driven by oil exports at full capacity and the expected normalization of supply chains and cross-border trade activities with Benin.
• Risks of external and overall debt distress in Niger are rated high, although debt remains sustainable over the medium term. Risks to the outlook are skewed to the downside.
• For the ECF arrangement, performance through end-September was mixed. Two out of three performance criteria (PCs) were met; however, only two out six Indicative targets (ITs) were met. For the RSF arrangement, all the three reform measures (RMs) for this review were implemented.

Washington, DC: Today, the Executive Board of the International Monetary Fund (IMF) concluded the 2024 Article IV Consultation, ^[1] completed the Sixth Review of Niger's economic and financial program supported by the Extended Credit Facility (ECF) arrangement, and the Second Review under the Resilience and Sustainability Facility (RSF) arrangement. The ECF arrangement for Niger was approved on December 8, 2021 (see PR 21/366 ) and complemented by the RSF arrangement in July 2023 (see PR 23/256 ). The completion of the reviews allows for the immediate disbursement of SDR 13.16 million (about US$17 million) under the ECF—bringing total disbursements under the ECF arrangement to SDR 171.08 million (about US$ 227 million)—and of SDR 25.662 million (about US$34 million) under the RSF —bringing total disbursements under the RSF arrangement to SDR 59.88 million (about US$78 million).

The Executive Board also concluded the 2024 Article IV consultation with Niger. Since the conclusion of the last Article IV consultation in 2022, the authorities have made some progress in adopting a number of key policy recommendations and have advanced their reform agenda. Nonetheless, the country continues to face daunting development challenges, which are exacerbated by fragility, conflict in the Sahel and vulnerabilities to climate shocks.

Following the Executive Board discussion, Mr. Okamura, Deputy Managing Director and Acting Chair of the Board, issued the following statement:

Niger remains trapped in high levels of fragility and conflict, which are exacerbated by climate shocks. Political instability and sanctions following the military takeover in July 2023 have severely and persistently affected economic and social conditions. Despite headwinds, a robust recovery is expected, with GDP growth estimated at 8.8 percent in 2024, owing to the start of oil exports, the lifting of sanctions, and increased agricultural production.

Economic growth should remain strong at 7.9 percent in 2025 driven by oil production in full capacity and the expected normalization of supply chains and cross-border trade activities with Benin. Inflationary pressures should gradually recede owing to a favorable agricultural season. But risks to the outlook are skewed to the downside.

Although the fiscal deficit is expected to narrow to 3 percent of GDP by 2025, Niger continues to experience a funding squeeze with a high reliance on costly regional financing. The banking sector is confronted with liquidity pressures and financial stability risks have increased.

Niger's risks of external and overall debt distress are high, though debt remains sustainable over the medium term. Roll-over risks for domestic debt are particularly elevated.

For the ECF arrangement, performance through end-September was mixed. Two out of three performance criteria (PCs) were met; however, only two out six Indicative targets (ITs) were met. Significant progress has been made regarding the implementation of structural benchmarks, including the integration of the Solidarity Fund for the Safeguarding of the Homeland (FSSP) into the 2025 budget, the adoption of an oil revenue management strategy, and the revision of the General Tax Code (CGI). For the RSF arrangement, all the three reform measures (RMs) for this review were implemented.

The implementation of policies to use efficiently the country's natural resources, expand fiscal space through domestic revenue mobilization and increased spending efficiency, manage fiscal risks and reduce vulnerabilities to shocks, is essential to sustainably address development needs. Moreover, it is critical to strengthen the private sector's contribution to growth, including by stepping up efforts to enhance the stability and soundness of the financial sector and address debt service arrears. Progress in transparency and anti-corruption frameworks is also crucial to tackle the sources of fragility and improve the business environment.

Executive Board Assessment ^[2]

Executive Directors broadly agreed with the thrust of the staff appraisal. While noting the expected strong recovery in the near term and favorable medium-term prospects, Directors stressed that significant challenges remain, and risks are tilted to the downside. Niger continues to experience a funding squeeze, with high reliance on the costly regional market financing and domestic debt roll over risks; the banking sector is under pressure, with heightened liquidity concerns and increased financial stability risks; the border with Benin remains closed; and risks of external and overall debt distress have been downgraded from moderate to high. Against this background and noting the mixed program performance, and the significant governance challenges in a fragile socio political and security environment, Directors urged steadfast implementation of sound macroeconomic policies and structural reforms. These stepped-up efforts, supported by capacity development assistance, would help Niger escape fragility and firmly put the country on a trajectory of diversified, sustained, inclusive, and resilient growth.

Directors emphasized that revenue based fiscal consolidation is essential to create fiscal space to address development needs while maintaining debt sustainability. They called for steadfast progress to mobilize domestic revenues and adopt a framework for oil revenue management. Directors also emphasized the need to improve the quality and efficiency of public spending, including through more targeted support to vulnerable groups. They highlighted the importance of maintaining a prudent debt policy supported by a zero ceiling on non-concessional external debt. Directors also urged strong implementation of the revised arrears clearance plan to help rebuild public trust and support the economic recovery.

Directors encouraged the authorities to implement measures to address financial sector vulnerabilities and promote financial inclusion. Swiftly clearing domestic debt service arrears, addressing payment delays to public sector suppliers, and implementing recapitalization plans will be critical to strengthen banks' balance sheets.

Directors underscored the critical importance of enhancing governance, anti-corruption efforts, and public financial management. They stressed that ensuring the independence of the Supreme Audit Institution, publishing the Fund's Governance Diagnostic Report, and strengthening AML/CFT will be important steps in this regard. Reforms to improve the investment climate and foster private sector development are also needed to boost growth prospects.

Directors commended the authorities for their progress under the RSF and noted that reforms implemented under the program are gradually yielding results. Given constraints, the complete roll out of planned capacity development activities will be critical for continued reform implementation. Overcoming barriers to accessing climate finance will also be essential going forward.

The next Article IV Consultation is expected to take place in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.

Table 1. Niger: Selected Economic Indicators Table, 2023-29

[1] Under the 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 summing-up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm