Economic Challenges Mount for Niger After Coup

International Funding Suspended

In the wake of the July 26 coup that ousted Niger's President Mohamed Bazoum, the economic outlook for one of the world's poorest nations has become increasingly clouded. Sanctions imposed by the Economic Community of West African States (ECOWAS) and the suspension of international funding are taking a toll on Niger's prospects.

The European Union (EU), a key partner for Niger, had initially allocated €503 million ($554 million) to support governance, education, and sustainable growth in Niger from 2021 to 2024. However, following the coup, the EU, along with France and other partners, swiftly halted its budget support.

As a result, the total budget support for Niger has been significantly reduced, with only $254 million expected to be disbursed, in contrast to the $1.166 billion projected before the coup. These numbers, according to a study by the World Bank (WB) and the United Nations World Food Programme (WFP), do not account for the additional suspension of over $500 million in support programs by Washington.

A Slashed Budget

Niger's budget relies heavily on international support, with only 62% funded by domestic revenue, as stated by the EU. In October, the military regime announced a 40% cut in the 2023 national budget due to the severe sanctions imposed by international and regional organizations. These sanctions have not only hindered Niger's access to regional financial markets but have also frozen the Treasury account.

In response to the revenue decline, the government has asked taxpayers to pay their taxes in cash, a move driven by the frozen Treasury account. This has forced the government to prioritize paying civil servants' salaries over public investments, resulting in missed interest payments on its debt.

Infrastructure Under Threat

The suspension of cooperation from Western nations has put several infrastructure projects at risk. The Gorou Banda solar power plant, funded by the French Development Agency (AFD), faces delays, and work on the Kandadji dam, financed by multiple institutions, has come to a standstill. These setbacks are likely to impede increased access to affordable and reliable electricity in a country where only 20% of the population has such access.

Sluggish Economy

Niger's GDP growth, initially expected to reach 6% in 2023, driven by oil exports, now faces the risk of plummeting to 2.3% if the sanctions persist throughout the year, according to the World Bank. Such a scenario could push an additional 700,000 people into extreme poverty in 2023.

Although the risk of a cash shortage has somewhat diminished, money transfer agencies continue to operate in Niger despite the sanctions. Remittances to Niger, while limited, tend to benefit the country's poorest households.

Mali's Example

A parallel can be drawn with Mali, which also faced economic sanctions from ECOWAS following a coup. In Mali's case, a World Bank note from April 2023 highlights that economic growth remained relatively resilient, but the budget deficit persisted at a high level of 5% of GDP, negatively affecting public investments and leading to an increase in poverty.

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