Niger and the IMF |
Press Release: IMF Completes Fourth Review Under Niger's PRGF Arrangement
April 21, 2003
Country's Policy Intentions Documents
of Intent, Memorandum of Economic and Financial Policies, and Technical
Memorandum of Understanding
Mr. Horst Köhler
1. On behalf of the government of Niger, I am pleased to send you the memorandum of economic and financial policies (MEFP) for 2003. This memorandum was prepared in the context of the fourth review of the government of Niger's three-year program, which covers the period October 2000-September 2003 and is supported by the International Monetary Fund (IMF) under the Poverty Reduction and Growth Facility (PRGF). It describes the government's performance in implementing the program at end-September 2002, sets the targets for the 2003 program, and presents the policies to be carried out to achieve these targets.
2. The government requests, on an exceptional basis, flexibility in the application of the policy of the IMF Executive Board that requires a progress report on the implementation of the strategy outlined in the poverty reduction strategy paper (PRSP) one year after its presentation to the Board. The government aimed for a conclusion of the fourth review within less than one year from the presentation of its PRSP on February 8, 2002, and, therefore, intended to prepare the progress report in the context of the fifth review under the PRGF arrangement and the enhanced Initiative for Heavily Indebted Poor Countries (HIPC Initiative) completion point. However, problems in finalizing the economic and financial program for 2003 have delayed the Board consideration of the fourth review beyond February 8, 2003, and, because of a limited institutional capacity, the government has not been able to complete the progress report for this review. Expediting further the preparation of the progress report would hamper its quality, while delaying the fourth review and the related disbursement would affect severely the country. Consequently, the government requests that the fourth review proceed without consideration of the PRSP progress report; it also commits to finalizing the progress report by end-June 2003, so that it can be presented as soon as possible thereafter to the Executive Boards of the IMF and the World Bank.
3. Program implementation at end-September 2002 was satisfactory as a result of the government's commitment and steps taken in connection with the third program review (see my letter of intent of August 8, 2002). This performance enabled Niger to continue the successful implementation of the economic recovery program and the poverty reduction strategy that the government undertook at the end of 1999. All performance criteria and benchmarks at end-September 2002 were met, except for the continuous quantitative criterion on nonaccumulation of new external payments arrears and the quantitative benchmark in respect of the wage bill.
4. Despite the government's efforts to avoid external payments arrears, problems in reconciling repayment schedules and monitoring debt service payments led to temporary and small accumulations of external payments arrears vis-à-vis certain creditors, including the World Bank, in September 2002. These arrears were corrected as soon as they were identified. To avoid their recurrence, the government has enhanced internal monitoring of external debt-service payments and accelerated efforts to strengthen the External Debt-Service Unit. To this effect, the Commonwealth secretariat will provide technical assistance in May 2003 to (i) prepare for the installation by end-June 2003 of the Secretariat's new debt-management and recording software, CS-DRMS 2000+; and (ii) reinforce the institutional capacity of the External Debt-Service Unit. Accordingly, and in light of the corrective steps that have been taken, the government is requesting a waiver for nonobservance of the continuous performance criterion on nonaccumulation of external payments arrears. As for the wage bill, the overrun of its target is attributable to an initial underestimation of the decision to start paying in January 2002 the salary increases related to automatic advancement that had been frozen since March 1999. The government adjusted the level of the wage bill in the program for 2003 and took steps, as detailed in the attached memorandum, to gain more effective control over it.
5. Economic and financial developments at end-2002 remained positive. The GDP growth rate is estimated at 3 percent, and inflation declined to 2.7 percent on average for the year, owing in part to a bumper crop related to a second consecutive year of favorable rainfall levels. The external current account deficit (excluding official transfers) did not deteriorate as much as programmed and is estimated to have reached 6.7 percent of GDP. In the budget area, the government maintained its expenditure regulation system to achieve the program targets, and successfully carried out budget reforms involving the implementation of a new budget nomenclature and a new charter of public accounts. These budgetary reforms stretched to the limit the institutional capacity and delays were observed in achieving other structural reforms, such as the privatization of NIGELEC, Niger's electricity supply company. However, the government has taken steps to correct these delays by the end of the first half of 2003.
6. Niger's economic and financial outlook in 2003 will depend on a resolution of the crisis in Côte d'Ivoire, which began in September 2002, and on developments in the international situation—particularly in petroleum product prices. Although the impact of the crisis in Côte d'Ivoire on Niger was limited in 2002, the government remains concerned that a persistent crisis might affect negatively Niger. It is closely monitoring developments, while participating actively in initiatives to resolve this crisis. The implications of the crisis are still difficult to quantify, and Niger's economic and financial program for 2003 was designed under the assumptions of a crisis resolution by end-March and a relatively optimistic, albeit prudent macroeconomic framework. The macroeconomic targets for the 2003 program will be reassessed in connection with the midterm review of the program. Regarding the potential impact of an increase in international prices for petroleum products, the government intends to continue to implement the formula for setting domestic prices of these products in a flexible, automatic and transparent way.
7. The government's efforts are intended to consolidate in 2003 the progress made since end-1999, particularly in fiscal adjustment, and to accelerate the implementation of the poverty reduction strategy. The economic and financial program includes the following macroeconomic objectives for 2003: (i) a real GDP growth rate of 4.0 percent; (ii) a containment of inflation (on a 12-month, end-of-period basis) to less than 3 percent; and (iii) a current account deficit of the balance of payments (excluding official transfers) of 8.5 percent of GDP. To restore economic activity, the government will also implement structural reforms, including the restructuring of the financial system.
8. The 2003 budget law is consistent with program targets and confirms the willingness of the authorities to pursue their fiscal adjustment policy while continuing the reduction of domestic payments arrears and intensifying their fight against poverty. The basic fiscal deficit (on a commitment basis, excluding grants for budgetary assistance) is therefore limited to CFAF 34.4 billion, that is, 2.1 percent of GDP. The projected substantial increase in capital expenditure (almost 50½ percent) reflects an accelerated implementation of the poverty reduction strategy, supported by an increase in resources released under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
9. The government is counting on the IMF's continued support to meet the program objectives, and seeks completion of the fourth review under the PRGF and approval of its program for the third year. In this context, the government of Niger requests an increase in the disbursement related to the fourth review to SDR 11.84 million and a corresponding reduction in the disbursement under the fifth review to SDR 5.08 million, thereby maintaining the annual total of SDR 16.92 million in 2003. This adjustment would enable the authorities to more effectively address the deterioration envisaged in the balance of payments during the first half of 2003 owing to the impact of the crisis in Côte d'Ivoire and the absence of adequate balance of payments assistance for the first half of year.
10. The government also requests additional IMF interim assistance under the HIPC Initiative up to September 30, 2003. It is understood that the Fund, together with the government of Niger, will conduct the two midterm reviews—the first is scheduled to be completed by September 30, 2003, and the second to be completed by March 30, 2004, at the end of the third year of the program—in order to assess program implementation. As in the past, the government consents to the Fund's publication of this letter of intent, the memorandum of economic and financial policies for 2003, the technical memorandum of understanding, and the staff report.
11. The government considers that the reforms and measures described in the attached memorandum are such as to permit achievement of the program targets for 2003. It is prepared to take any additional steps that may be required for that purpose. Moreover, the government of Niger will, on its own initiative or at the Managing Director's request, consults with the International Monetary Fund on the adoption of any measure that may prove necessary.
March 28, 2003
1. The discussions under the fourth review of Niger's three-year economic and financial program, covering the period October 2000 to September 2003, took place in Niamey on November 7-21, 2002 and in Washington on February 6-10, 2003. International Monetary Fund (IMF) support under the Poverty Reduction and Growth Facility (PRGF) was approved on December 14, 2000, in the amount of SDR 59.2 million. The approval on the same date of the decision point under the enhanced Heavily Indebted Poor Countries Initiative (HIPC Initiative) has enabled Niger to receive additional assistance from the international community. This assistance is estimated at approximately 1.2 percent of GDP in 2003, or nearly US$32 million. It will increase upon approval of the HIPC Initiative completion point, which is expected in the third quarter of 2003. It has been earmarked for the implementation of the government's poverty reduction strategy, as presented to the IMF Executive Board in the poverty reduction strategy paper (PRSP) in February 2002. The government is preparing a progress report on the implementation of the strategy in 2002, to be finalized by end-June 2003 and submitted to the IMF Executive Board in connection with the fifth review of the PRGF program and the completion point under the HIPC Initiative.
2. The third review under the three-year program was completed by the IMF Executive Board in August 2002, and Niger obtained the fourth drawing of SDR 8.46 million under the PRGF arrangement, bringing total disbursements to date to SDR 33.84 million. This third review led to revisions in the program for 2002 in order to take into account economic and financial developments in 2001 and in the first quarter of 2002. The revised 2002 program thus aimed at maintaining real GDP growth in the range of 2½ percent to 3 percent, following the exceptional growth of 7.1 percent recorded in 2001; reducing the average annual inflation rate from 4 percent in 2001 to about 3 percent in 2002; and containing the external current account deficit (excluding grants for budgetary assistance) at 8.6 percent of GDP.
3. This memorandum of economic and financial policies (MEFP), prepared in the context of the fourth review of the three-year program, describes the satisfactory results obtained in program implementation as at September 30, 2002 and presents the government's economic and financial program for 2003. Tables 1 through 4 set forth the program performance criteria and indicative targets for 2002 and 2003.
II. Recent Developments
A. Performance Under the Program at End-September 2002
4. The government's program for 2002 was implemented in a sociopolitical environment that was more difficult than anticipated. This hardening of the political environment was the outgrowth of the recovery in economic activity and the partial rehabilitation of public finances since 1999. The good performance in this regard led to greater demands on the part of the various social partners and the public administration itself. In 2002, these demands were reflected primarily in (i) the active protest of business operators against the extension of the prepayment of the corporate income tax to reexport activities, a new tax measure taken under the 2002 Budget Law; (ii) numerous strikes called by labor unions in the private sector, with a view to obtaining income tax relief; and (iii) the mutiny of some army officials in August 2002.
5. In response to these pressures, the government initiated a process of dialogue and negotiation with the social partners, and established a committee in charge of reviewing the status of the armed forces. The government's initiation of constructive dialogue does not alter its endorsement of the three-year program and its poverty reduction strategy, but it has required greater flexibility in policy making with a view to addressing certain social demands and enhancing program ownership by the population. It will also necessitate a strengthening of the government's exchanges of views and information with the international community, in order to ensure the latter's support for the government's decisions. The negotiations with economic agents and labor unions thus led to measures to reduce direct taxes, such as the tax on business profits and the income tax on wages and salaries, which were incorporated into the 2003 Budget Law and offset by new revenue-enhancing tax measures. Furthermore, the recommendations of the committee on the armed forces resulted in moderate additional expenditure in the 2003 budget in order to improve conditions in the armed forces. This dialogue process has also enabled the government to heighten the understanding of the social partners as regards the government's persistent financial problems and, consequently, to reduce their demands. In this context, the government announced the possibility of delays in making wage payments in the fourth quarter of 2002. It did in fact delay the payment of September 2002 wages until early October, but it has avoided any wage payment delays since then.
6. Niger's performance in implementing its economic and financial program was largely satisfactory at end-September 2002. All the program performance criteria and benchmarks as of that date were observed, with the exception of the continuous performance criterion on the nonaccumulation of external payments arrears and the benchmark on the wage bill. This positive overall result is attributable for the most part to (i) the strengthening of fiscal discipline, beginning with the first quarter of 2002 following the fiscal slippages observed at end-2001; and (ii) the measures taken to reduce and reallocate expenditure in the second half of the year, with a view to maintaining the fiscal targets for 2002 despite the shortfall in external financing and the appearance of new unavoidable expenditures (MEFP of August 8, 2002). Implementation of the special program financed by the resources freed up by the HIPC Initiative, which is an important element of the poverty reduction strategy, also proceeded satisfactorily.
7. As for structural reforms, significant progress was made in the budgetary area in particular, including observance of the structural benchmark for end-September 2002 on the introduction of a new budget nomenclature and a new government charter of public accounts, and their use in preparing the 2003 Budget Law. The structural reform program was nonetheless affected by limited institutional capacity, which contributed to additional delays in the implementation of some other reforms. Accordingly, the planned strengthening in debt management could not be introduced, owing to delays in the mobilization of the technical assistance planned to this end. Similarly, problems in monitoring the implementation of reforms supported by the World Bank led to delays in the introduction of the multisectoral regulatory agency (MRA) and the expected privatization operations. The continuing weaknesses of the institutional capacity are a reflection in particular of the problems experienced by the government in recruiting, motivating, and retaining high-quality supervisory personnel. However, the government continues to regard institutional capacity building as a priority and will request the active support of the international community in addressing this issue at the donors' forum that will take place in mid-2003. The government has also taken steps, in consultation with the World Bank, to reinvigorate the structural reform program and achieve concrete results in the introduction of the MRA, the privatization of NIGELEC (electricity supply company) and SONIDEP (petroleum distribution company), and the strengthening of the banking system by end-June 2003.
8. The prudent fiscal policy pursued by the government since the first quarter of 2002 was maintained throughout the year, making it possible to observe the end-September 2002 performance criteria on the basic budget deficit (overall deficit excluding foreign-financed capital expenditure) and on the net government position vis-à-vis the banking system. Thanks to enhanced control of current expenditure, the basic budget deficit, on a payment order basis and excluding revenue resulting from the settlement of reciprocal debts between the government and enterprises, was thus limited to CFAF 22 billion, as against the ceiling of CFAF 26.4 billion set forth in the revised program. Similarly, the government's net position vis-à-vis the banking system improved by CFAF 3.0 billion, compared with an expected deterioration of CFAF 1.5 billion.
9. Fiscal revenue of CFAF 121.7 billion slightly exceeded the revised program's quantitative benchmark for end-September 2002 (CFAF 120.8 billion). The shortfalls observed in petroleum taxation receipts, business profit taxes, and taxes on goods and services were more than offset by sizable receipts from taxes on international trade, the statistical tax on reexports, and transfers from the West African Economic and Monetary Union (WAEMU).
10. The regulation of budgetary expenditure made it possible to limit total expenditure, excluding foreign-financed capital expenditure, to CFAF 135.3 billion, compared with a ceiling of CFAF 138.9 billion. This performance reflects a strict control of current expenditure, excluding interest payments and wages, to CFAF 58.4 billion, compared with a ceiling of CFAF 65.4 billion in the revised program. However, this gain was partially offset by an overrun of CFAF 3.5 billion—beyond the ceiling of CFAF 15.8 billion—in domestically financed capital expenditure. Wage payments also exceeded the indicative target under the program by CFAF 1.0 billion and totaled CFAF 41.3 billion. This overspending is largely attributable to an underestimation of the financial impact of the measure to lift the freeze on the payment of salary increases linked to automatic advancement and, to a lesser extent, to the regularization of promotions to positions within the hierarchy that entitle the incumbents to bonuses. For 2002 as a whole, the wage bill, despite exceeding the annual target by 0.1 percent of GDP, amounted to only 38.5 percent of tax receipts and 3.7 percent of GDP, as against 50.4 percent and 4.1 percent, respectively, in 2000. Despite this satisfactory performance in containing the wage bill while regularizing the financial impact of the automatic increases that were frozen between March 1999 and December 2001, the government is still vigilant in monitoring the evolution of the wage bill and in guarding against an overshooting of the target, like in 2002. In 2003 it will adopt measures aimed at improving control over the wage bill, thereby confirming its commitment to meet as soon as possible the convergence criterion of the WAEMU (wage bill not to exceed 35 percent of tax receipts).
11. The government actively pursued its policy to reduce domestic payments arrears in 2002, and the end-September performance criterion was exceeded by CFAF 3.5 billion (equivalent to 0.2 percent of GDP). This solid performance stems for the most part from the implementation in August 2002 of the third phase of the operation to settle wage arrears in exchange for public land in the amount of CFAF 3.6 billion. In addition, the arrears of the National Center for University Works (CNOU) were eliminated in the amount of CFAF 4.6 billion—of which CFAF 2 billion in cash payments and CFAF 2.6 billion in claims forgone on the part of CNOU creditors. However, as indicated above in the context of its negotiations with labor unions, the government accumulated, on an exceptional and temporary basis, CFAF 1.85 billion in wage arrears at end-September 2002, which were cleared in early October 2002.
12. External financing was broadly in line with the revised program projections at end-September 2002. As for domestic financing, a higher-than-expected level of nonbank financing (the operation of settling wage arrears in exchange for public land, as well as the waiver of claims by CNOU creditors) enabled the government to limit its recourse to bank financing and to achieve a net position vis-à-vis the banking sector that was lower by CFAF 3.0 billion at end-September 2002 than at end-December 2001.
13. The satisfactory fiscal performance at end-September 2002 was nevertheless marked by the failure to observe the continuous performance criterion on the nonaccumulation of external payments arrears, owing to temporary lags in the payments to certain creditors, including the World Bank. Despite the efforts made, institutional weaknesses persist in the area of external debt management. On the one hand, coordination difficulties between the External Debt Service Unit and the Nigerien Treasury prevented effective monitoring of the timely settlement of all of the government's external debt-service obligations. On the other hand, the planned strengthening of the External Debt-Service Unit did not progress as expected, owing to delays in marketing the French version of the Commonwealth Secretariat's debt management software (CS-DRMS) and in obtaining technical assistance for its implementation. In response to the failure to observe the continuous performance criterion on the nonaccumulation of external payments arrears, the government introduced a monthly monitoring system on external debt payments—a system designed so as to prevent in the future any delays or defaults in external debt-service payments. Likewise, in view of the continuing problems with observing the program's structural benchmark on strengthening the External Debt-Service Unit, the government approached its partners again at end-2002, particularly the Commonwealth Secretariat, regarding the implementation of the new debt-management software (initially scheduled for end-June and then set for end-December 2002 in the revised program). Thus, three senior staff received CS-DRMS training in Douala in Cameroon in October 2002. A regional seminar on debt analysis and the CD-DRMS software was also organized by the Agence Internationale de la Francophonie and the Commonwealth Secretariat during the period March 24-28, 2003, in Niamey. Furthermore, a technical assistance mission is scheduled to arrive in Niger in May 2003 to install the software by end-June 2003 and to advise on an institutional framework for improved debt management.
14. Monetary developments from December 2001 to September 2002 for the most part mirrored the decrease in net foreign assets of the Central Bank of West African States (BCEAO), despite a sizable disbursement in external assistance recorded during the third quarter. The increase in the net foreign assets of commercial banks was not sufficient to offset the decrease in those of the BCEAO, leading to a drop in the level of net foreign assets in the whole banking sector. That decline, combined with the improvement in the government's net position, accounted for the contraction of the money supply by 2.3 percent during the first nine months of 2002.
B. Developments at End-2002
15. The external shock of the crisis since mid-September 2002 in Côte d'Ivoire, as well as the risk of economic and social destabilization in the other WAEMU countries, has been and remains a major concern of the Nigerien government. Economically, Côte d'Ivoire is Niger's second-largest trading partner after France and accounts for 15 percent and 1½ percent of Niger's imports and exports, respectively. Imports from Côte d'Ivoire consist primarily of mass consumer goods, semifinished goods, and petroleum products. Onions account for some 85 percent of Niger's exports to Côte d'Ivoire. There are almost 1 million nationals of Niger residing in Côte d'Ivoire, and their remittances to Niger, although sizable, are underestimated in the country's balance of payments.
16. The crisis in Côte d'Ivoire had a limited impact on Niger in the last quarter of 2002. The most perceptible signs of the crisis were found in the customs receipts recorded in the last quarter of the year. Few of Niger's nationals residing in Côte d'Ivoire returned home, and Niger's dependence on the port of Abidjan as a source of its imports and outlet for its exports is quite limited. The disruption of trade channels with Côte d'Ivoire nevertheless resulted in shortages of certain products, such as personal care products, but the increases in their prices did not prevent a substantial reduction in inflation at the end of the year. In addition, onion exports declined in the last quarter of 2002, but the impact of the conflict threatens to assume greater significance in 2003 if it is not resolved rapidly and if new markets are not found.
17. Niger's real economic growth in 2002 is estimated at 3 percent, slightly higher than the initial projection of 2.7 percent. For the second consecutive year, the rainfall level was satisfactory and well distributed over time and space, making it possible to increase agricultural production from the previous year's level (1.0 percent). The construction and public works sector was particularly dynamic, thanks to the recovery in public and private investment. The inflation rate (on a 12-month, end-of-period basis) declined from 3.2 percent in December 2001 to 0.6 percent in December 2002. This performance is attributable to a pronounced drop in the cost of fresh produce, which accounts for 25 percent of the index, despite a significant increase in the last quarter of 2002 in the prices of certain products traditionally imported from Côte d'Ivoire.
18. The external current account deficit is estimated to have been limited to 6.7 percent of GDP (excluding grants for budgetary assistance) in 2002, as against a projection of 8.6 percent of GDP. The lower level of exports resulting from declines in the export volumes of onions and cowpeas was offset by lower-than-projected imports of capital goods and petroleum products. Taking into account capital and financial operations, the accumulation of net foreign assets of the BCEAO is estimated at CFAF 3.7 billion.
19. Preliminary monetary survey data at end-December 2002 indicate money supply growth of 9.0 percent in 2002, slightly exceeding the increase of 8.3 percent projected in the revised program. This reflects a smaller improvement in net foreign assets of the banking system and a more sizable increase in domestic credit. The increase in net foreign assets was limited to 3.3 percent of the beginning-of-period money stock, as against a forecast of 8.4 percent. These assets are estimated at CFAF 37.6 billion at end-December 2002, largely owing to an increase in net foreign assets of the BCEAO. As regards net domestic assets, their increase in 2002 represented 5.7 percent of the beginning-of-period money stock, compared with a projected decrease of 0.2 percent. The larger-than-expected increase in domestic credit, which shows both a deterioration in the net government position and an increase in credit to the economy, explains the increase in net domestic assets. The deterioration in the net government position reflects a greater-than-anticipated recourse to the BCEAO, as statutory advances to the government amounted to CFAF 33.1 billion at end-2002, compared with the program's projected decline to CFAF 22.2 billion. Credit to the economy increased with the recovery in economic activity and grew by almost 15 percent in 2002, largely benefiting the manufacturing, construction and public works, trade, and services sectors.
20. In the overall context of the crisis in Côte d'Ivoire, the government maintained strict fiscal discipline during the last quarter of 2002. According to preliminary data available on budget execution in 2002, budget receipts amounted to CFAF 160.0 billion, compared with the target of CFAF 160.4 billion. This sound revenue performance, in conjunction with the regulation and effective control over expenditure before November 21, 2002, the final date for commitments, made it possible to limit the basic deficit at end-December 2002 to CFAF 26.2 billion, slightly below the revised program target. The deterioration in the net government position vis-à-vis the banking system reflects a shortfall in net foreign financing at end-2002 and a greater-than-projected reduction in domestic payments arrears.
21. These preliminary indications of satisfactory financial performance were complemented at end-2002 by the introduction of the new harmonized government budget nomenclature and charter of public accounts, which were adopted by decrees dated July 26, 2002. These wide-ranging reforms will enhance transparency and good governance in public finances, as well as fiscal management overall. Despite limited resources, these efforts were undertaken successfully within the deadlines established by the staffs of the Budget Directorate and the Nigerien Treasury. They included not only the development of new software for the expenditure process and government accounting, but also steps to improve the information technology system at the Ministry of Finance and Economy, as well as staff training. The 2003 Budget Law could thus be prepared using the new classification, and it will be executed in keeping with the new charter of public accounts. The Directorate-General of the Budget and the Treasury will devote the first half of 2003 to supplementary training activities and to the ongoing monitoring of the implementation of these new tools, so as to ensure their proper use by the staff concerned.
22. Most of the other structural reforms suffered implementation delays in 2002, attributable for the most part to problems of institutional capacity and insufficient monitoring. The government is determined to correct these delays in 2003. Nevertheless, four structural benchmarks of the program were not observed at end-December:
23. As regards the other structural reforms, principally supported by the World Bank, there have been the following developments:
III. Policies and Measures to Be Implemented in 2003
24. The government's program for 2003 reflects (i) further progress in achieving the objectives included in the three-year economic and financial program supported by the IMF under the PRGF; (ii) implementation of regional integration efforts; and (iii) sustained implementation of the policy orientations set forth in the Declaration of General Government Policy and the poverty reduction strategy paper adopted in January 2002. The government will be pursuing the following objectives:
25. The 2003 program is being carried out in an uncertain regional climate caused by the social and political crisis in Côte d'Ivoire. The government of Niger has thus initiated studies on the potential economic, financial, and social impact of a protracted crisis beyond the first half of 2003. As matters now stand, Niger's relative distance and its ability to diversify its sources of supply and export markets have prompted the government to base the 2003 program on moderately positive macroeconomic prospects. Should economic and financial developments prove to be more negative than expected, the Nigerien government will consult with the IMF on the changes to be made in the program. In the period prior to such a consultation, the government will consider a number of adjustment measures to address this external shock, such as an enhanced control of budgetary expenditure, use of the budget reserve, recourse to the regional market for government securities and bonds, and the use of food security stocks.
A. Macroeconomic Framework
26. The macroeconomic objectives targeted by the program in 2003 are as follows: (i) a real GDP growth rate of 4 percent; (ii) an inflation rate (on a twelve-month, end-of-period basis) of less than 3 percent; and (iii) an external current account deficit (excluding grants for budgetary assistance) that is contained to 8.5 percent of GDP. The economic growth projections assume normal climatic conditions that will permit good harvests as well as a continuation of the trends observed since 1999, thanks to the impetus from the promotion of the private sector and the resumption of investment, in particular the rehabilitation and construction of public infrastructures. The economic and financial policies that the government will be implementing in 2003 in order to achieve these objectives thus aim at enhancing the integration of the national economy into the regional economy through the WAEMU and the Economic Community of West African States (ECOWAS).
B. Fiscal Policy
27. The 2003 Budget Law approved by the National Assembly on December 16, 2002 closely reflects the budgetary objectives of the three-year program and the poverty reduction strategy paper adopted in September 2000 and January 2002, respectively. It was prepared using the new budget nomenclature and incorporates in a single budget all the government's current and capital expenditure. Considering the economic and financial climate, which is characterized by the persistence of cash-flow pressures and the scarcity of external resources, the budget aims not only at continuing the fiscal adjustment process under way since the new government came to power, but also accelerating the implementation of the poverty reduction strategy. This acceleration will be made possible by the larger amounts of funds available in 2003 under the HIPC Initiative and by the substantial increase in the investment program in the social sectors.
28. Taking into account the normal rate of execution of budgeted capital expenditure and a number of adjustments made since its promulgation, the 2003 Budget Law seeks to stabilize the basic budget deficit at 2.1 percent of GDP. This maintenance of the basic deficit at the level envisaged for 2002 in fact constitutes an improvement in the basic balance, when the exceptional revenues from clearing reciprocal debts between the government and enterprises are excluded. The 2003 budget also aims at restoring budgetary saving to a slightly positive level; this was among the objectives of the three-year program and results in part from reclassifications of expenditure in accordance with the new nomenclature. The anticipated increase in foreign-financed investment and investment financed by HIPC Initiative resources, from 4.8 percent of GDP in 2002 to 6.9 percent in 2003, will thus boost total capital expenditure and the overall deficit (on a payment order basis and excluding grants) to 9.1 percent of GDP in 2003. The 2003 reduction in domestic payments arrears has been defined in light of foreseeable financing; targeted at 1.1 percent of GDP, it will increase the deficit on a cash basis to 10.2 percent of GDP. The net external financing of this deficit, excluding budgetary assistance, is estimated at 6.1 percent of GDP, stemming from project financing, external debt amortization, and debt relief, including proceeds under the HIPC Initiative. Domestic financing takes into account the agreements on eliminating the statutory advances from the BCEAO and the requirements of a prudent monetary policy, and has been limited to 0.2 percent of the GDP in 2003. The remaining financing requirement amounts to 4.0 percent of GDP and is covered by anticipated budgetary assistance from Niger's development partners, principally the World Bank (US$30 million), the European Union (€39 million), the African Development Bank (SDR 15 million), and certain bilateral partners, such as France and Belgium.
29. The adjustments to the 2003 Budget Law, which will take the form of a revised Budget Law, take into account recent developments since it was prepared and adopted, but do not significantly modify the financing requirement. The adjustments primarily (i) update the level of the wage bill in light of the actual spending in 2002 and the initial underestimation of the budgetary impact of the automatic salary increases, which were frozen from March 1999 to December 2001 (0.1 percent of GDP); (ii) incorporate the measures to improve the situation within the armed forces in goods and services instead of wages, as initially envisaged (0.1 percent of GDP); (iii) establish a budgetary reserve and more sizable government deposits in order to address, should the need arise, any unforeseen consequences of the crisis in Côte d'Ivoire (0.1 percent of GDP); (iv) integrate measures aimed at offsetting these identified additional expenditures; and (v) reflect revenue from new settlement operations of reciprocal debts (0.2 percent of GDP).
30. The budgetary revenue target, excluding receipts from clearing reciprocal debts between the government and enterprises, is CFAF 168.1 billion in 2003, or 10.4 percent of GDP, and equivalent to an increase of 0.4 percentage point of GDP over the 2002 level. This objective, which is in line with the initial objectives of the three-year program despite the tax relief measures negotiated with social partners, relies on ongoing improvements in the tax and customs administration and on new revenue-enhancing tax measures. Reducing the formalities required for the incorporation of businesses and the rate of the corporate income tax (BIC), which is reduced from 42.5 percent to 35 percent, will enable Niger to move closer to regional averages for tax rates and will promote investment. In addition, the tax burden on wages and salaries has been eased by introducing a 5 percent exemption for the calculation of the taxable income and making tax bracket adjustments that will be implemented gradually in 2003 and 2004. To offset these tax relief measures and achieve the revenue target of 10.4 percent of GDP, the following measures have been adopted: (i) an increase in the individual income tax on industrial and commercial profits and in the income tax on noncommercial profits (BNC) from 30 percent to 35 percent, thereby harmonizing the BIC and BNC rates; (ii) the introduction of a tax on lottery winnings and an increase in the rate of the tax on lottery receipts; (iii) an extension of the collection of prepayments of the corporate income tax to reexport activities and introduction of a flat-rate fee for authorizing such activities in respect of tobacco and cigarettes; (iv) the application of the VAT to rice, replacing the temporary 10 percent import levy that was not in line with WAEMU community directives; (v) application of excise duties to coffee instead of tea; (vi) a broadening of the tax base by adjusting the rate schedule for the comprehensive business license; (vii) the introduction of a special tax for environmental protection; and (viii) the introduction of measures to improve the collections of miscellaneous revenue, such as mining receipts.
31. These tax measures are accompanied by the continuing reform of the tax and financial administration with a view to enhancing the efficiency of resource mobilization. The Directorate-General of Customs will, in 2003, expand its activities to improve its coverage of the national territory and strengthen the fight against customs fraud, in particular as regards petroleum products. The Directorate-General of Taxes will continue to strengthen its capacities in all areas, be it management, auditing, or collections. Concomitantly with communications and taxpayer information operations, the action plan for 2003 is focused principally on the following:
32. The government intends to enhance the tax adjustment effort through the pursuit of a prudent expenditure policy. Budgetary expenditure other than externally financed investment will be limited to 12.7 percent of GDP in 2003, or CFAF 206 billion, compared with 12.3 percent of GDP in the revised 2002 program. Given the drop in external interest payments as a result of debt-relief agreements signed in 2002, this slight increase corresponds to an increase of about 0.9 percent of GDP in domestically financed capital expenditure and current expenditure other than debt service and wages. It thus permits the government to continue to implement the poverty-reduction strategy through an increase in social spending, as well as to strengthen activities in the areas of security (Ministries in charge of Justice, the Interior, and the Armed Forces), improve the operations of the public authorities (National Assembly and Office of the Prime Minister), contribute to a number of important cultural and social activities, and finance certain investment projects for which external assistance could not be lined up (such as the rehabilitation of 50 kilometers of sewer lines in Niamey).
33. The extent of the implementation of the poverty reduction strategy is measured nonetheless in the context of capital expenditure, where the envisaged execution of foreign-financed projects will increase by 55 percent in 2003 to 6.9 percent of GDP. On the one hand, the resources freed by the HIPC Initiative will increase from 0.6 percent of GDP in 2002 to 1.1 percent of GDP in 2003. They will continue to be allocated entirely to meeting the objectives of the strategy and hence, make it possible to intensify the activities carried out with success since 2000. A new program covering 1,000 classrooms, 1,000 basic health centers, and 1,000 wells will be initiated and complemented by projects involving dams and weirs, rural roads, and support for livestock farming through the development of local veterinary services. The programming, execution, monitoring, and sustainability of these projects will continue to require the involvement and participation of the local population. On the other hand, the share of capital expenditure devoted to the social sectors (education, health, and water resources), excluding those financed by the HIPC Initiative, will represent nearly one-half of the total in 2003, compared with a share of one-third in 2002. Education-related projects will thus increase by nearly 50 percent, health projects double, and water projects increase by a factor of four. Programs to finance rural development and the productive sectors will remain stable, representing 1.2 percent of GDP in 2003, while road infrastructure projects will decline by one-third in 2003 following the completion of the Niamey-Dosso road project. The government will take all steps necessary to ensure that this ambitious capital budget is executed and to accelerate poverty reduction in Niger.
34. The wage policy to be followed in 2003 will remain prudent, and measures to keep it under control will be continued. No net civil service recruiting is planned, no adjustments have been made in base wages and benefits, and two months of wage payments arrears will be settled in 2003. The 2003 wage bill is, hence, projected to amount to 3.5 percent of GDP, or 35 percent of tax receipts in line with WAEMU criteria and compares favorably to the over 50 percent of tax receipts in 2000, taking into account the habitual rise in personnel costs and the final settlements to be paid in connection with the unfreezing of the automatic raises that were blocked between March 1999 and December 2001. Nevertheless, in light of the slippages observed in 2002 and to ensure better control over the wage bill, the government has decided to implement the following measures: (i) conduct a financial audit of government personnel expenditure in 2003; (ii) strengthen the management of the civil service by improving the monitoring of promotions and transferring complete responsibility for managing the civil service master file to the Ministry of the Civil Service; (iii) complete a study on the decision to start paying in January 2002 the salary increases that are linked to automatic advancement and had been frozen between March 1999 and December 2001; and (iv) use more extensively the banking system for paying wages, so as to limit banknote handling and cash payments, which were used for almost 80 percent of wage payments until 2002. The government thus anticipates that its control over the wage bill will be improved and the bill will be financially rehabilitated by end-2003. In addition, in 2003 it will relaunch the civil service reforms aimed at modernizing the administration and controlling staffing levels and the wage bill. Other activities planned for 2003 will improve the preparations for the envisaged decentralization of the government and study the problems of recruitment, motivation, career management, and training as raised by the implementation of the poverty reduction strategy. In this vein, the government will require support from the international community to help it devise a sustainable and comprehensive civil service policy.
35. The reduction in domestic payments arrears will be continued in 2003, with CFAF 18 billion allocated to this end. This amount, which will be revised upward in the event budgetary assistance exceeds projections, will allow a reduction of the stock of domestic arrears to less than CFAF 62 billion (or 3.8 percent of GDP) by end-2003, thereby bringing the nominal stock of identified arrears down to half its end-2000 level. The 2003 objective includes a reduction of two months' wage arrears of CFAF 6.7 billion as well as operations to eliminate reciprocal debts between the government and its partners in the amount of CFAF 3 billion. Wage arrears will thus be reduced from CFAF 45.3 billion at end-1999 to less than CFAF 12 billion at end-2003. The government will also examine the feasibility of clearing additional wage arrears by granting land. The rest of the reduction in payments arrears envisaged for 2003 will relate first to small-claims holders (claims lower or equivalent to CFAF 5 million) and creditors from sectors related to the privatization program.
36. The continuation of administrative reforms aimed at improving the expenditure process and the Nigerien Treasury will seek to ensure the successful implementation of the new budget nomenclature and the new government charter of public accounts, particularly during the first half of 2003. Teams have been put in place to monitor these reforms and to ensure the reliability and timeliness of the budget and account entries relating to the 2003 Budget Law. Concomitantly, several steps will be taken to improve the quality of expenditure, budget preparation, and the automation of services. The computerization of the regional treasury offices will be the subject of a study in the last semester of 2003 that will aim for an effective implementation by end-December 2003. Operations to implement the government procurement code will be complemented by an improved computerization of the expenditure process. Similarly, the budget preparation process will be strengthened by developing a methodology and suitable timetable. The actual preparation of the budget will be improved by conducting a review of public expenditure, principally in cooperation with the World Bank and the European Union, and by preparing a medium-term budgetary expenditure framework by the end of the year.
C. Monetary and Financial System Issues
37. The BCEAO will continue in 2003 to pursue a prudent regional monetary policy aimed at supporting the objectives of economic growth and price stability in the WAEMU, while ensuring a high degree of coverage of currency issues by external reserves. Such prudence is all the more necessary because the crisis that started in Côte d'Ivoire on September 19, 2002 has not yet been fully resolved and its impact on socioeconomic developments throughout the region remains uncertain. In this regard, the BCEAO will strengthen its surveillance of the banking system and its monitoring of economic and financial developments in the region, including the absorption of statutory advances to governments in the region. In the context of intensifying its auditing activities, the BCEAO adopted a new directive on combating money laundering in September 2002, and the member states have committed themselves to enforcing it. In these circumstances, Niger's indicative monetary program, adopted during the fourth quarter of 2002, envisaged money supply growth of about 6.1 percent in 2003. This projection reflected an improvement in the BCEAO's net foreign assets and a 4.3 percent reduction in domestic credit, largely because the net government position vis-à-vis the monetary system would improve through the reduction in statutory advances from the BCEAO over the course of the year (CFAF 5.9 billion). This amount represents the coverage of overruns over the ceiling on assistance to the government, or CFAF 4.1 billion, and the coverage of the BCEAO's consolidation of the outstanding balance of statutory advances to the government of Niger.
38. In view of the economic and financial developments at end-December 2002 and the finalization of the budget program, the 2003 monetary program has been modified, and the expansion of the money supply is now projected at 8.7 percent, a rate slightly exceeding that of the growth of GDP. The revised program takes into account a slight deterioration in the 2003 balance of payments and a projected deterioration in the net government position following the payment of external arrears to the European Investment Bank (EIB). Net foreign assets are projected to rise by only CFAF 4 billion to CFAF 41.6 billion at end-December 2003, an increase of 11 percent. Expressed as a percentage of the beginning-of-period money stock, net domestic credit is expected to increase by 6 percent, as a 4.1 percent expansion in credit to the economy and an increase in the government's net position vis-à-vis the banking system of 1.9 percent will more than offset a 4.5 percent decrease in statutory advances.
D. Structural Reforms
39. In addition to the administrative reforms pursued in the budget area and described above, the government seeks to accelerate the structural reform program. The government is committed to achieving concrete results by end-June 2003 in the following areas: (i) the establishment of the multisectoral regulatory agency; (ii) the privatization of NIGELEC and SONIDEP; (iii) the restructuring and privatization of the CDN; (iv) the implementation of the decision to freeze CPCT activities (except for loan collection); (v) the implementation an agreement on BINCI between the government of Niger and the other shareholders; and (vi) the restructuring of the ONPE, including the establishment of its postal and financial services subsidiaries. The government, in consultation with the World Bank, will take all steps necessary to ensure that these reforms are carried out on schedule. Additional reforms, to be implemented in the second half of 2003, will also be discussed with the World Bank in the context of its forthcoming budgetary support for Niger and the effective implementation of its credit to strengthen the financial system.
IV. External Debt
40. The government continues to follow a prudent policy as regards external borrowing. In this context, it places special emphasis on seeking grants and concessional loans. The government is continuing its discussions with the OPEC Fund to renegotiate the terms of the US$10 million loan, that do not meet the required grant element under the program supported by the PRGF. The government remains committed to refraining from drawing on this loan for as long as the grant element of 50 percent is not achieved.
41. In the context of the HIPC Initiative, the amount of debt relief obtained by the government from its creditors at end-December 2002 represents approximately 80 percent of total relief in net present value (NPV) terms. During the year, the government signed three new debt-relief agreements with the OPEC Fund, the Islamic Development Bank (IsDB), and the Kuwait Fund for Arab Economic Development (KFAED), for total debt relief of US$46 million in NPV terms. In addition, in late 2002, the European Commission conveyed to the government its modalities for debt relief in the context of the interim period, thereby taking upon itself the payment of certain maturities falling due in 2002 and 2003. Its contribution for the two years consequently amounts to €3.8 million in nominal terms. In addition, the government is contacting the ECOWAS Fund and the Conseil de l'Entente in order to obtain their participation in and contribution to the HIPC Initiative. Also, it is contacting the bilateral non-Paris Club creditors to either finalize agreements for securing HIPC Initiative relief (Algeria and China) or gathering their effective participation (Saudi Arabia, United Arab Emirates, Iraq, Libya, and Taiwan Province of China). In this context, the government will propose the use of the IDA debt-buyback mechanism, which would enable these creditors to repurchase their debt at a significant discount and cancel all interest arrears. This discount would correspond to the creditor's contribution under the HIPC Initiative.
42. Virtually all measures pertaining to Niger's access to the HIPC Initiative completion point have been implemented. The remaining measures relate to the increase in the immunization rate for children aged 12 to 24 months, the reduction in grade repetition at the sixth grade, and the pilot beneficiary incidence analysis on the impact of public spending on the poor. The government has taken steps to achieve these aforementioned conditions and hopes to be able to reach the completion point during the third quarter of 2003, at the same time as the submission of the fifth review of the three-year program, and after more than a year of implementation of the poverty reduction strategy. In order to carry out a new analysis of the external debt burden, which will serve as the basis for the HIPC Initiative completion point document, the government has already sent to their creditors letters requesting a reconciliation of the figures at end-December 2002.
V. Program Monitoring
43. Monitoring of the 2003 program will be based on quarterly quantitative performance criteria and indicative targets (evaluated beginning December 31, 2002), one structural performance criterion and several structural benchmarks for 2003, and a review. The quantitative performance criteria and indicative targets are specified in Table 3 and defined in the attached technical memorandum of understanding; the structural criteria and benchmarks are defined in Table 4. The quantitative performance criteria and indicative targets include (i) a ceiling on net bank credit to the government; (ii) a ceiling on the basic budget deficit (on a commitment basis, excluding grants and excluding receipts from the settlement of reciprocal debts between the government and enterprises); (iii) a reduction in the government's outstanding domestic payments arrears; (iv) the nonaccumulation of new external payments arrears by the government; (v) a limit on new nonconcessional external borrowing or loan guarantees at maturities of more than one year contracted or guaranteed by the government; and (vi) a limit on new short-term external borrowing to finance imports. Variables (i) to (iii) constitute performance criteria under the program for end-March and end-September 2003, and indicative targets at end-June and end-December 2003. Variables (iv) to (vi) represent continuous performance criteria. In addition, quarterly indicative targets are set for revenue (excluding receipts from the settlement of reciprocal debts) and the wage bill. The quarterly ceilings on net bank credit to the government will be adjusted on the basis of the gap between projected net amounts of exceptional external assistance and the amounts actually received, within the limits set out in Table 3.
44. The 2003 program also includes a structural performance criterion on the continuous implementation of the pricing formula for petroleum products, as well as a number of structural benchmarks as set forth in Table 4. These include (i) introduction and use of a new debt-management and recording software by end-June 2003; (ii) completion of a study on the remuneration of the petroleum sector operators by end-June 2003; (iii) completion of an actuarial study of the National Retirement Pension Fund by end-September 2003; (iv) completion of a financial audit of the wage bill by end-September 2003; (v) computerization of the regional treasury offices for the implementation of the new government charter of public accounts by end-December 2003; and (vi) preparation of a medium-term expenditure framework for two key social sectors by end-December 2003.
45. The government will continue to comply with the statistical reporting
requirements set out in the technical memorandum of understanding.
Niamey, March 28, 2003
1. This technical memorandum of understanding provides the definitions of the quantitative performance criteria and indication targets for the third year of Niger's program supported under the Poverty Reduction and Growth Facility (PRGF). The quantitative performance criteria and indicative targets for March, June, September and December 2003 are set out in Table 3 attached to the government's memorandum of economic and financial policies (MEFP) dated March 28, 2003. This technical memorandum also sets out the data-reporting requirements for monitoring the program.
I. Definition of Terms
2. For the purpose of this technical memorandum, the following definitions of "debt," "government," "payments arrears," and "government obligations" will be used:
(a) As specified in point 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted by the Executive Board of the IMF on August 24, 2000, debt will be understood to mean a current, that is, not contingent, liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take a number of forms, the primary ones being as follows: (i) loans, that is, advances of money to the obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans, and buyers' credits) and temporary exchanges of assets that are equivalent to fully collateralized loans, under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements); (ii) suppliers' credits, that is, contracts where the supplier permits the obligor to defer payments until some time after the date on which the goods are delivered or services are provided; and (iii) leases, that is, arrangements under which property is provided that the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of the guideline, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement, excluding those payments that cover the operation, repair, or maintenance of the property. Under the definition of debt set out above, arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt. The external debt excludes treasury bills and bonds issued in CFA francs on the regional financial market of the West African Economic and Monetary Union (WAEMU).
(b) Government refers to the central government of the Republic of Niger; it does not include any political subdivision, the central bank, or any government-owned entity with a separate legal personality.
(c) External payments arrears are external payments due but not paid. Domestic payments arrears are domestic payments due (following the expiration of a 60-day grace period, excluding obligations with a specific grace period and for which this grace period applies) but not paid.
(d) Government obligation is any financial obligation of the government verified as such by the government (including any government debt).
II. Quantitative Performance Criteria
A. Net Bank Credit to Government
Definition of the performance criterion
3. Net bank credit to the government is defined as the balance of the government's claims and debts vis-à-vis national banking institutions. Government claims include the cash holdings of the Nigerien Treasury, deposits with the central bank, deposits with commercial banks, and secured obligations. Government debt to the banking system includes funding from the central bank (essentially IMF assistance and refinancing of secured obligations), government securities held by the central bank, funding from commercial banks (including government securities held by commercial banks), and deposits with the postal checking system.
4. Government securities held outside the Nigerien banking system are not included in the net bank credit to government.
5. The net bank credit to government is calculated by the Central Bank of West African States (BCEAO), whose figures are those deemed valid within the context of the program. The scope of the net bank credit to government as defined by the BCEAO includes all central government administrations. The targets are based on the variation of stock in net bank credit to the government from December 31, 2002 to the date considered for the performance criterion or benchmark.
6. The ceiling on net bank credit to the government will be subject to adjustment if disbursements of external budgetary assistance (excluding IMF financing and the assistance to be provided under the Initiative for Heavily Indebted Poor Countries, but including traditional debt relief), net of debt-service obligations (excluding IMF repayment obligations) and payments of external arrears, exceed or fall short of program forecasts. In the event of disbursements in excess by more than CFAF 3.0 billion, the ceiling will be adjusted downward pro tanto by the amount of the excess disbursements beyond these CFAF 3.0 billion, unless they are used to absorb domestic payments arrears. In contrast, if at the end of each quarter disbursements are less than the programmed amounts, the ceiling will be raised pro tanto by the amount of the shortfalls up to the limit (on a noncumulative basis) of CFAF 7.5 billion at end-March and end-June 2003, and 15.0 billion CFAF at end-September and end-December 2003. The amount of external assistance provided is calculated from end-December 2002 onward.
7. If HIPC Initiative assistance is granted to Niger, the debt-service savings will be transferred to a central bank account and used to finance new poverty reduction programs that have been approved in the budget law and are in line with the poverty reduction strategy paper (PRSP).
8. Detailed data on net bank credit to government will be provided monthly within six weeks following the end of each month.
B. Basic Budget Balance
9. The basic budget balance is defined as the difference between total revenue, excluding grants and revenue from the settlement of reciprocal debts between the government and enterprises, and total expenditure, excluding externally financed capital expenditures (including investment expenditures financed by resources freed up as a result of the HIPC Initiative assistance). The performance criterion and indicative targets are based on the cumulative basic budget balance since end-December 2002.
10. This information will be provided to the IMF monthly within six weeks following the end of each month.
11. If the amount of external assistance is higher than scheduled in the revised program, the performance criterion and indicative targets will be adjusted pro tanto up to CFAF 3.0 billion.
C. Reduction of Domestic Payments Arrears on Government Obligations
Definition of the performance criterion
12. Domestic payments arrears on government obligations are reduced through the payment of these obligations as defined under 2c and 2d above. The government undertakes not to accumulate any new domestic payments arrears on government obligations, except for arrears on obligations other than government debt, in which case the government undertakes not to accumulate beyond six months. The Centre d'Amortissement de la Dette Intérieure de l'Etat (CADIE - the government domestic debt amortization center) keeps and updates the inventory of domestic payments arrears on government obligations and maintains records of their repayments.
13. Data on the outstanding balance, accumulation, and repayment of domestic payments arrears on government obligations will be provided monthly within six weeks following the end of each month.
D. Nonaccumulation of External Payments Arrears
Definition of the performance criterion
14. Government debt is outstanding debt owed or guaranteed by the government. Under the program, the government undertakes not to accumulate external payments arrears on government debt (including treasury bills and bonds issued in CFA francs on the WAEMU regional financial market), with the exception of external payments arrears arising from government debt being renegotiated with creditors, including Paris Club creditors.
15. In addition, the government undertakes to attempt in good faith and without delay to sign agreements that would confirm the preliminary understandings reached on the settlement of its external payments arrears before the consideration by the Executive Board of the IMF, on December 14, 2000, of the authorities' request for a new three-year arrangement under the Poverty Reduction and Growth Facility.
16. Data on the outstanding balance, accumulation, and repayment of external payments arrears will be provided monthly within four weeks following the end of each month.
E. External Nonconcessional Loans Contracted or Guaranteed
Definition of the performance criterion
17. The government will not contract or guarantee external debt with original maturity of one year or more with a grant element of less than 50 percent. Nonconcessional external debt is defined as all debt with a concessionality level of less than 50 percent. To calculate the level of concessionality for loans with a maturity of at least 15 years, the discount rate to be used is the ten-year average commercial interest reference rate (CIRR), calculated by the IMF on the basis of the rates published by the OECD; for loans of less than 15 years, the six-month average CIRR is to be used.
18. This performance criterion applies not only to debt as defined in Point 9 of the Guidelines on Performance Criteria with Respect to Foreign Dept adopted on August 24, 2000, but also to commitments contracted or guaranteed for which value has not been received. However, this performance criterion does not apply to financing provided by the Fund, to debt rescheduling in the form of new loans and to treasury notes and bonds issued in CFA francs on the WAEMU regional financial market.
19. Details on any external government debt will be provided monthly within four weeks following the end of each month. The same requirement applies to guarantees extended by the central government.
F. Short-Term External Debt of the Central Government
Definition of the performance criterion
20. The government will not contract or guarantee external debt with original maturity of less than one year. This performance criterion applies not only to debt as defined in Point 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted on August 24, 2000, but also to commitments contracted or guaranteed for which value has not been received. Excluded from this performance criterion are short-term import-related trade credits and short-term treasury notes issued in CFA francs on the regional financial market.
21. Details on any external government debt will be provided monthly within four weeks following the end of each month. The same requirement applies to guarantees extended by the central government.
III. Indicative Targets
22. Total revenue is an indicative target for the program. It includes tax, nontax, and special accounts revenue, but excludes revenue from the settlement of reciprocal debts between the government and enterprises.
23. The civil service wage bill is another indicative target of the program. Wage bill data are provided by the budgetary accounts and exclude the salaries paid for the reinstatement of former rebellion members, the medical and training indemnities, the contributions from the budget to the national retirement fund, and the wage refunds. The wage bill includes cash vouchers.
B. Reporting Requirement
24. This information will be provided to the IMF monthly within six weeks following the end of each month.
IV. Additional Information for Program-Monitoring Purposes
A. Public Finances
25. The government will report to IMF staff the following:
B. Monetary Sector
26. The government will provide the following information within eight weeks following the end of each month:
C. Balance of Payments
27. The government will provide the following information:
D. Real Sector
28. The government will provide the following information:
E. Structural Reforms and Other Data
29. The government will provide the following information: