By Christine Lagarde, Managing Director, International Monetary Fund
Address to the Nigerien National Assembly
Good afternoon. It is a privilege for me to be here with you today. I am grateful to President Mahamadou Issoufou for inviting me to your beautiful and vast nation. And, distinguished members of the Assembly, I am deeply honored to be here to address you today.
This is by no means my first visit to Africa, or indeed Niger. But it is my first visit as Managing Director of the IMF. I am deeply committed to making the IMF as effective as possible in meeting the needs of all its member countries—large and small, wealthy and poor alike. And this is an important opportunity for me to hear your perspectives and to strengthen our partnership for the years ahead.
Unfortunately, I am not here under the best of circumstances. These are challenging times for the global economy.
“On entend le fracas des arbres qui tombent, mais pas le murmure de la forêt qui pousse.” [Touaregue proverb]
As the thunderclouds of risk are gathering, Niger and others in the region will need to watch them carefully.
So, let me talk about four things today:
- First, the state of the global economy.
- Second, the implications for Africa.
- Third, some thoughts about the policy path forward that might help Niger guard against these global risks and capitalize on new opportunities.
- And, fourth, how the IMF can help.
1. Global Outlook and Policies
I have said many times, the world economy has been poised in a dangerous phase. The growth outlook has dimmed considerably in recent months. And, worse, there are severe downside risks.
The immediate threat is a downward spiral—of confidence, of financial market instability, and of unsustainable government debts—that together lead to weaker and weaker growth. On top of this, unemployment remains unacceptably high in too many countries.
The advanced countries in the Euro Area are at the center of the crisis. And they must be at the center of any solution.
But, we should not lose sight of the bigger picture—the need to restore stability and growth, growth that produces jobs.
Policies in the advanced economies need to strike an appropriate balance between fiscal and monetary policy to promote growth and stability. It also means forging ahead with structural policies that are focused squarely on boosting competitiveness, growth, and jobs. And, it means strengthening financial sector regulation to ensure a safer and more stable financial sector that is better able to support growth.
As Jean-Paul Sartre said, “Our responsibility is much greater than we might have supposed, because it involves all mankind.”
Without action, the crisis of confidence will grow. This would affect all countries, all regions, without exception.
2. Implications for the Region
This brings me to my second point: how might these escalating global risks affect the region?
Let me first acknowledge the progress made in Sub-Saharan African over the past decade. By no means do I want to diminish the challenges that remain. But the starting point for our discussion has shifted; shifted for the better.
Good economic policies have provided a platform for strong economic growth. Across the region, growth has averaged 5-6 percent or more over the past decade and that growth has lifted millions of people in Africa out of abject poverty.
Unfortunately, the food and fuel crisis of 2008, and the global financial crisis that followed, took a heavy toll. Economic growth in Africa declined and the social consequences were severe—the World Bank estimates by 2015 the rate of poverty in Sub-Saharan Africa will be 2 percentage points higher than it would have been without the crisis.
Still, it could have been even worse. When the crisis hit, many African policymakers were able to respond effectively. Most countries were able to maintain critical spending on health, education and infrastructure. And we saw many countries in the region recover quickly, now returning to growth rates enjoyed in the mid-2000s.
This is a testament to the hard work and dedication of Africa’s policymakers. They reduced budget deficits and public debt in the years before the crisis. They brought down inflation and built up foreign exchange reserves. In short, they built up macroeconomic buffers and put their economies on a fundamentally stronger footing. This enabled most countries to maintain critical social and infrastructure spending when the crisis hit.
But, the latest fallout from the advanced economies is testing Africa’s resilience again.
The trade and financial ties, so critical to driving our economies forward in good times, have—ironically—become the linkages that can spread today’s escalating economic risks.
A sustained growth slowdown in advanced countries, together with continued financial market instability, will dampen demand for Africa’s exports. It may also inhibit private financing flows, remittances, and possibly aid. This is not a welcome thought for Niger—aid flows are important and remittances have already been disrupted by the upheaval in Libya.
The potential for greater volatility in commodity markets could cause further disruptions. This could see both winners and losers within the region. It will also be an important watch point for Niger, given the growing importance of natural resources.
But, for many countries in the region, my main worry is that their capacity to absorb further shocks is less than it was three years ago. This would be even greater cause for concern if the global slowdown turns out to be more pronounced this time around.
This means that policies need to walk a fine line—on one hand, defending against the immediate risks from the global slowdown, while also preserving budget resources to invest in infrastructure that can help promote employment and growth.
But, for the most part, policymakers need to focus on restoring the fiscal buffers that served them so well during the last downturn.
3. Niger’s Policy Path Forward
Which brings me to my third point: how reforms in Niger can help guard against these risks and also capitalize on new opportunities. At the outset, let me be clear—I am impressed by the government’s ambitious development plan.
Investments in the oil and mining sectors provide the opportunity for a brighter economic future. But, it will not be easy to fully realize Niger’s economic potential.
First, you must contend with growing global risks. Then, there is the hard truth that relatively few countries have managed natural resource wealth well. Although, Niger has an advantage—you can benefit from the experiences of others.
And, at home, Niger faces some daunting development challenges. Poverty is the most pressing concern, with more than 40 percent of the population living on less than $1.25 a day.
The serious food shortages that have emerged in recent months are a sober reminder of Niger’s vulnerability to climatic shocks—especially drought—and food insecurity. Yet, weak infrastructure and the high cost of doing business inhibit the development of agriculture and other sectors.
These needs may be great. But the increase in oil and mining revenues, if used effectively, could help promote more broad-based and inclusive growth. Growth that would benefit all Nigeriens.
I see three broad priorities for achieving this goal.
One, effective and transparent management of natural resource revenues.
Niger’s adherence to the Extractive Industries Transparency Initiative earlier this year is a major milestone.
A key objective should be to offset, to the extent possible, Niger’s vulnerability to fluctuating commodity prices as natural resources become a more important source of budget revenue.
This requires a medium-term approach to fiscal policy that aims to smooth out spending and helps to use the gains from higher prices wisely.
“Il faut creuser les puits aujourd’hui pour étancher les soifs de demain.” [Touaregue proverb]
I can’t stress enough the importance of being prepared. A little saving during the good times can go a long way to guard against future shocks.
Two, maximizing returns on natural resources.
This means channeling natural resource revenues toward efficient public investments in infrastructure, agriculture, health and education. Investments that will yield high returns and that are needed for growth and jobs.
It is important to create space for other critical public spending. Stronger social safety nets are particularly important. They help the most vulnerable in times of crisis. Your comprehensive support system to manage and prevent food crises, the Dispositif National de Prévention et de Gestion des Crises Alimentaires, is an excellent example.
But, I urge you to keep a watchful eye on public debt sustainability, containing aggregate borrowing and debt levels while seeking to get the best possible terms on loans.
Three, pursue a broad-based development strategy
Niger’s growth and development strategy should not focus exclusively on developing natural resources and public investment. Improving the business environment will help attract more job-creating private investment in a wider range of sectors.
Encouraging a more diversified economy will reinforce efforts to help Niger better withstand shocks. It will also be more likely to deliver more inclusive growth, with opportunities and jobs for the entire population. I experienced Niger’s warmth, hospitality and dynamism, first hand, when I met villagers this morning at the market in Boubon.
Nigeriens are a tremendous resource. And I encourage the government to be even more inclusive in developing the new Economic and Social Development Plan 2012-2015.
4. Role of the Fund
This brings me to my fourth and final point: this is a broad and challenging agenda, and the IMF is here to support you in that endeavor. A deeper dialogue—with the IMF listening even more carefully to your needs and Africa’s needs—will help us serve you even more effectively. It will help us be a better advocate for the region in global forums.
I am committed to a deeper, more fruitful dialogue.
An important lesson that the IMF has learned in recent years is that for our financial support to be effective, it must reach our members quickly and leave sufficient room for high-priority spending, to support growth and protect the most vulnerable.
That is why we have boosted our concessional lending capacity and made our lending instruments more flexible.
We are also reinforcing our efforts to assist the region with policy and technical advice. The IMF has expertise to offer, expertise that can help African countries achieve their social and economic objectives. For example, we will continue to work closely with Niger in providing critical technical advice on budget execution and management, tax policy, and analysis of natural resource projects. We can also play an important role, through our regional technical assistance centers, of facilitating a sharing of expertise country-to-country.
Niger is at a critical juncture. The policy road ahead is not an easy one. The stakes are high; only heightened by today’s global risks. But the opportunity is great, to change course and chart a new future for all Nigeriens.
“Le présent n’est pas un passé en puissance, il est le moment du choix et de l’action.” (Simone de Beauvoir)
But Niger is not alone. We all must do our part.
The IMF—and others in the international community—must be prepared to do more. We are your friend, your partner. We are here to listen and help you chart your course to a more prosperous future and lasting gains for all Nigeriens.