The economy grew by 4 percent in real terms in 2016, overcoming the low-growth environment that resulted from negative spillovers from Nigeria. Inflation turned negative in 2016 (-0.8 percent), reflecting bumper harvest and low oil prices.
The fiscal deficit narrowed in 2016, thanks to the authorities’ strong measures to contain expenditure. Prospects for 2017 and the medium term are favorable and largely dependent on a sustained implementation of the Government’s Action Program (GAP), 2016–21 and the recovery of the Nigerian economy. For 2017-19, the budget program foresees an average deficit (including grants) of 4.6 percent of GDP consistent with the sustainability of the budget and the debt. The medium-term macroeconomic framework foresees a shrinkage of the deficit to 1.9 percent of GDP in 2019, well below the West African Economic and Monetary Union convergence criterion of 3 percent of GDP.
“Consistent with the economic program supported by the Extended Credit Facility (ECF) arrangement approved by the Executive Board on April 7, 2017, the authorities are implementing a package of measures to maintain macroeconomic and financial stability and raise living standards. They have passed legislation to strengthen domestic revenue mobilization and improve the quality of spending to create fiscal space for infrastructure and priority social spending, preserving debt sustainability. They are also implementing reforms to integrate the electronic systems of the tax and customs administrations to enhance their respective efficiencies, strengthen their coordination, and improve revenue mobilization.
“IMF staff and the authorities agreed that the early progress in program implementation should be strengthened through timely enactment of the programmed reforms. In this regard, continued efforts to promote good governance and transparency are needed to attract private investments and foster implementation of the GAP. Accelerating the implementation of the new harmonized framework at regional level for the resolution of bank failures and the strengthening of the microfinance supervisory body is critical to maintain the stability and development of the financial sector. Policies to achieve more efficient financial intermediation and deepening the financial sector are needed to increase rural people’s access to financial services and promote financial inclusion.
“The IMF team met with the Minister of State in charge of Planning and Development, the Minister of Economy and Finance, the National Director of the regional central bank (BCEAO), and other government and central bank officials, as well as representatives of the diplomatic community and international development partners. The first review of the ECF arrangement is expected to take place in September, 2017.
“The IMF team wishes to express its gratitude to the authorities, as well as all other interlocutors, for the constructive, candid discussions and their hospitality.”