Niger - Economic Recovery Project

 Economic recovery project Report No: ; Type: Report/Evaluation Memorandum ; Country: Niger; Region: Africa; Sector: Macro/Non-Trade; Major Sector: Economic Policy; ProjectID: P035591 Niger: Economic Recovery Credit (Credit 2581-NIR) The Implementation Completion Report (ICR) for the Niger Economic Recovery Credit (ERC, Credit 2581-NIR, SDR 18.2 million approved in FY94, disbursed in a single tranche, and closed as scheduled in FY95) was prepared by the Africa Regional Office, with Appendix 2 contributed by the Borrower. This credit was one of nine quick-disbursing operations the Bank approved in support of adjustment programs in the countries of the CFA franc zone after the devaluation of the CFA franc in January of 1994. The objectives of the ERC were to: (a) support the postdevaluation reform program of the government; and (b) mitigate the negative social impact of the devaluation of the CFA franc on January 12, 1994. The government reforms related to overall macro-economic management, public finance, public enterprise and private sector growth. These reforms were to be accompanied by social measures geared to mitigate the immediate effects of devaluation on vulnerable groups, e.g., providing the market with essential goods at subsidized prices, increasing expenditures in education and health and ensuring adequate supply of free drugs within the public health system. The main objectives of the ERC were not achieved. The reform program intensified after the devaluation in January 1994, but weakened later in the year. Several key indicators of performance fell short of their objective in 1994. In particular, the overall fiscal deficit was 3.5% of GDP higher than the agreed target in 1994, reduction of external arrears fell short of the agreed target by CFAF 37 billion, settlement of internal arrears was negligible (compared with a target of CFAF 35 billion) and the external current account deficit was higher than the target by 8.4% of GDP. Inflation, however, was kept within its target of 37 per cent a year. Several measures to ameliorate the adverse social impact of the devaluation were only partially put in place, or not at all. The medium term program of structural reforms derailed in 1995, and further reforms have become uncertain after the military takeover of government in January 1996. The ICR rates outcome as satisfactory, sustainability as uncertain, institutional development impact as negligible and Bank performance as satisfactory. OED agrees with these ratings, except for outcome, which OED rates as unsatisfactory because the main objective of the credit_to support structural reforms after the devaluation_was not achieved, and the measures to ameliorate the social cost of the devaluation were only partially achieved. Donor support for adjustment, which restarted after the devaluation, subsided later in the year when the reform program weakened. Lessons drawn by the ICR include the importance of keeping the loan design simple and the appropriateness of using one tranche operations for addressing concrete, up-front policy decisions. The ICR also emphasizes the need for promoting a meaningful communications efforts among all stakeholders when reforms are introduced in uncertain and unstable political conditions. The ICR is of unsatisfactory quality because it states the objectives of the loan differently than the President Report and confuses the objectives of the ERC with the objectives of the devaluation. Also, the coverage of the ICR is limited as it does not report on how the ERC mitigated the negative social impact of the devaluation, on the outcome of special targeted programs for vulnerable groups, or on valuable information (provided by the Country Brief) on the weakening of the reform program later in the year after the devaluation. No audit is planned.