Nigeria moves closer to debt relief
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Nigeria moves closer to debt relief

IMF approval sets stage for Paris Club agreement

The Executive Board of the IMF has approved a two-year Policy Support Instrument (PSI) for Nigeria. The Paris Club had stipulated in August that its $18 billion debt relief deal with the country was conditional upon IMF support for Nigeria's domestic reform programme.

The Paris club has now commenced final negotiations with top Nigerian government officials. The Nigerian team is being led by Finance Minister Ngozi Okonjo-Iweala and Debt Management Office (DMO) Director General Mansur Muktar. Nigeria is the first country to be eligible for debt relief without a formal IMF programme in place, and the first to benefit from the PSI.

The IMF's framework for PSI's is designed for low-income countries that may not need, or want, IMF financial assistance, but still seek advice, monitoring and endorsement of their policies. In commenting on the Executive Board decision, Ms. Anne O. Krueger, First Deputy Managing Director and Acting Chair, stated:

'The Nigerian authorities requested a Policy Support Instrument in support of a comprehensive reform program based on their National Economic Empowerment and Development Strategy (NEEDS). The program includes measures to strengthen budget procedures, advance civil service reforms, restructure the banking system, unify foreign exchange markets, rationalize the external tariff system, and improve governance and transparency. The authorities' recent decision to allow oil marketers to increase gasoline prices by about 25 percent will help reduce allocation distortions and implicit subsidies.'

'Implementation of the agreement in principle that Nigeria has reached with Paris Club creditor countries should improve investor confidence and free up resources for poverty reduction. Negotiations on a comprehensive debt treatment are expected to take place in the near future', she added.

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