## cr1759 — Niger: Selected Economic and Financial Indicators and ECF Program (content unit) ## Source details **Canonical URL:** [cr1759 — Niger: Selected Economic and Financial Indicators and ECF Program (content unit)](https://www.imf.org/-/media/files/publications/cr/2017/cr1759.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2017/cr1759.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2017/cr1759.pdf.json) --- ### Recent developments and outlook — growth, inflation, and external position - GDP at constant prices (annual percent change): 2014: 7.0; 2015: 3.5; 2016 Est.: 4.6; 2017 Prog.: 5.2; 2018 Proj.: 5.5; 2019 Proj.: 5.4; 2020 Proj.: 7.4; 2021 Proj.: 6.2. - Non-resources GDP at constant prices (annual percent change): 2014: 7.9; 2015: 4.1; 2016 Est.: 4.3; 2017 Prog.: 5.0; 2018 Proj.: 5.6; 2019 Proj.: 5.5; 2020 Proj.: 6.0; 2021 Proj.: 5.7. - Oil production (thousand barrels per day): 2014: 17; 2015: 13; 2016 Est.: 16; 2017 Prog.: 18; 2018 Proj.: 19; 2019 Proj.: 19; 2020 Proj.: 40; 2021 Proj.: 50. - Consumer price index, annual average (percent): 2014: -0.9; 2015: 1.0; 2016 Est.: 1.1; 2017 Prog.: 2.0; 2018 Proj.: 2.1; 2019 Proj.: 2.0; 2020 Proj.: 2.0; 2021 Proj.: 2.0. - External current account balance excluding official grants (percent of GDP): 2014: -17.7; 2015: -19.7; 2016: -17.3; 2017 Prog.: -19.5; 2018 Proj.: -20.0; 2019 Proj.: -20.0; 2020 Proj.: -16.7; 2021 Proj.: -14.3. - External current account balance including grants (percent of GDP): 2014: -15.4; 2015: -18.1; 2016: -15.4; 2017 Prog.: -18.0; 2018 Proj.: -18.5; 2019 Proj.: -18.5; 2020 Proj.: -15.4; 2021 Proj.: -13.3. - Recent 2016 developments: - Growth increased to 4.6 percent in 2016 (from 3.5 percent in 2015), helped by a strong 2016-17 crop year and expansion of crop irrigation that boosted agricultural production by nearly 8 percent. - Inflation subdued: consumer price inflation around 1 percent annualized in 2015 and through October 2016. - Gross official reserves at end-2015: 4.6 months of import of goods and services projected for 2016. - Broad money in the nine months through September 2016 increased by 9 percent. - Official net foreign assets decreased by 20 percent compared to end 2015. - Credit to the private sector increased by 9 percent in the first three quarters of 2016; credit to the government increased by CFAF 98 billion from end 2015. ### Fiscal performance, projections, and composition - Total revenue (percent of GDP): 2014: 17.5; 2015: 18.1; 2016: 15.3; 2017 Prog.: 16.1; 2018 Proj.: 16.8; 2019 Proj.: 17.5; 2020 Proj.: 19.1; 2021 Proj.: 20.3. - Total expenditure and net lending (percent of GDP): 2014: 31.0; 2015: 32.7; 2016: 26.5; 2017 Prog.: 28.1; 2018 Proj.: 27.3; 2019 Proj.: 26.4; 2020 Proj.: 26.0; 2021 Proj.: 24.4. - Basic balance (excluding grants, percent of GDP): 2014: -6.4; 2015: -7.5; 2016: -4.4; 2017 Prog.: -4.9; 2018 Proj.: -4.0; 2019 Proj.: -2.8; 2020 Proj.: -0.9; 2021 Proj.: 1.5. - Overall balance (commitment basis, including grants, percent of GDP): 2014: -8.0; 2015: -9.1; 2016: -6.5; 2017 Prog.: -7.4; 2018 Proj.: -6.0; 2019 Proj.: -4.7; 2020 Proj.: -2.9; 2021 Proj.: -0.9. - Key 2016 fiscal facts and measures: - By end-September 2016, revenue shortfalls widened to 2 percent of GDP; revenues were 14.5 percent below end-September 2015. - Specific end-September 2016 revenue shortfalls: VAT collections short by CFAF 30 billion; special tax on petroleum products short by CFAF 5.4 billion; customs taxes short by CFAF 26.2 billion. - Projected end-2016 revenue shortfall estimated at CFAF 114.5 billion (2.6 percent of GDP). - Government froze planned non-priority expenditures (including CFAF 48.2 billion in current spending), safeguarded salaries, debt service, and security spending; increase in basic balance deficit limited to CFAF 24.3 billion financed domestically by CFAF 14.3 billion and by slightly slower reduction of domestic arrears. - 2017 budget framework: - Basic deficit targeted at CFAF 235.9 billion (4.9 percent of GDP). - Domestic revenue projected at CFAF 770.8 billion (16.1 percent of GDP). - Domestically financed spending projected at CFAF 1,006.7 billion (21.1 percent of GDP). - Net decrease in arrears projected in 2017: CFAF 43.4 billion. - Budget support projected at CFAF 92.4 billion (composition: EU grants CFAF 43.1 billion; France grants CFAF 6.5 billion; other donors CFAF 5 billion; concessional loans World Bank CFAF 29.1 billion; AfDB CFAF 8.7 billion). - Domestically financed capital spending projected at 6.5 percent of GDP (increase of 1.2 percent of GDP over 2016). ### Debt dynamics, DSA findings, and risks - Total public and publicly guaranteed debt (percent of GDP): 2014: 33.7; 2015: 41.9; 2016: 47.0; 2017 Prog.: 51.1; 2018 Proj.: 53.0; 2019 Proj.: 53.9; 2020 Proj.: 52.4; 2021 Proj.: 50.3. - Public and publicly guaranteed external debt (percent of GDP): 2014: 25.1; 2015: 30.4; 2016: 34.1; 2017 Prog.: 35.8; 2018 Proj.: 37.1; 2019 Proj.: 38.1; 2020 Proj.: 38.5; 2021 Proj.: 39.0. - NPV of external debt (percent of GDP): 2014: 22.1; 2015: 22.1; 2016: 24.4; 2017 Prog.: 25.4; 2018 Proj.: 26.2; 2019 Proj.: 26.8; 2020 Proj.: 27.1; 2021 Proj.: 27.4. - Debt-service ratio as percent of exports of goods and services: 2014: 4.2; 2015: 5.5; 2016: 7.2; 2017 Prog.: 7.7; 2018 Proj.: 6.3; 2019 Proj.: 5.9; 2020 Proj.: 4.4; 2021 Proj.: 4.8. - DSA conclusions and stress test results: - Niger assessed at moderate risk of external debt distress. - Under the terms-of-trade shock (25 percent decrease of baseline oil and uranium prices in 2017 and going forward) the debt-to-export ratio would exceed the 150 percent threshold by 15.4 percent in 2017. - Under the security shock (1 percent of GDP increase in security-related spending and one-year delay in resource exports) debt ratios would remain under thresholds. - Historical and combined shocks could breach debt-to-GDP and debt-to-export thresholds in medium term; sensitivity to export and exchange-rate shocks emphasized. - Policy guidance: - Maintain prudent new borrowing consistent with debt sustainability framework. - Strengthen debt management, including establishment of Inter-Ministerial Committee on Debt Management with a permanent secretariat coordinating debt policy. - Refrain from signing new PPP contracts until a reviewed PPP framework is in place; assess fiscal impact of PPPs. ### Program request, IMF staff position, and program modalities - Authorities requested a three-year arrangement under the ECF in the amount of SDR 98.7 million (75 percent of quota). - Program goals: preserve macroeconomic stability, enhance fiscal space to attain development objectives given protracted balance of payments needs and likely continued elevated security spending. - IMF staff: - Supports the Article IV Consultation conclusion and the authorities’ request for a new ECF-supported program. - Approval by the Executive Board will result in a disbursement of SDR 14.1 million. - Program design and conditionality: - Program comprises six reviews, with disbursements phased evenly; SDR 14.1 per disbursement for a total of SDR 98.7. - Semi-annual performance criteria (PC) and an agenda of structural reforms; PCs set for end-June and end-December 2017; indicative targets for end-March and end-September 2017. - Prior action: amended 2017 budget consistent with the program approved on November 4, 2016. - Program financing and selected table figures: - Program disbursements under the new ECF arrangement (Table 12): SDR 14.1 — Executive Board Approval of the ECF Arrangement — January 23, 2017; subsequent SDR 14.1 disbursements tied to reviews through January 8, 2020; Total SDR 98.7. ### Revenue mobilization, tax and customs administration reforms - Key tax and customs measures: - Broaden tax base; strengthen efficiency of tax and customs administration; prioritize public spending; enhance expenditure control and liquidity management. - Finalize electronic inter-connection of all customs offices; deploy ASYCUDA World to main offices not yet covered; interconnect Niger customs office with Benin and Togo. - Introduce tax identification numbers for all importers; transfer about 120 companies to the Directorate of Large Enterprises (DGE) by end-2016/January 2017 threshold CFAF 500 million annual cash flow. - Establish two tax assessment centers and two tax payment centers by June 2017 in Niamey. - Implement VAT credit reimbursement measures: escrow account opened; stock of VAT credits estimated at CFAF 22.1 billion at end-October 2016; mechanism to be operational by end-March 2017. - Strengthen customs facilitation, risk-based inspections, and bonded warehouse management transfers to private operators. - Exemptions and tax expenditures: - Exemptions increased from CFAF 194 billion in 2012 to CFAF 300 billion in 2015. - DGI average exemptions (2012–2015): CFAF 86 billion. - Customs exemptions rose from CFAF 85 billion to CFAF 222 billion in 2015. - Authorities committed to take stock of tax expenditures, repatriate tax provisions in sectoral codes into general codes, and streamline exemptions. ### Public financial management, TSA, and budget execution - Public financial management measures: - Inter-Ministerial Budgetary Regulation Committee established mid-2016 to align expenditure commitments with resource availability. - Full implementation of the Treasury Single Account (TSA) expected during the program period; sign account management agreements with BCEAO and selected commercial banks and close all inactive accounts by end-March/June 2017 (structural benchmarks). - Prepare 2018 budget under program format (DPBEP and DPPD) by end-June 2017. - Produce quarterly budget execution reports and commitment and cash plans; limit expenditures paid through exceptional procedures to 5 percent of total authorized expenditures during each quarter. - Arrears management: - Securitization of 2014 arrears (CFAF 38.8 billion) completed; CFAF 40 billion securitization of 2015 arrears planned (delayed to 2017); net reduction in domestic arrears at end-2016 projected at about CFAF 8.4 billion. ### Structural reform priorities and capacity building - Structural benchmarks and reforms (selected 2017 items and timetables): - Prior Action: amend the 2017 budget adjusting downward revenue — Met. - Transfer identified 120 large companies to the DGE — End-January. - Estimate stock of VAT credit arrears and launch reimbursement mechanism — End-March. - Finalize ASYCUDA interconnection with main customs offices and with Benin and Togo — End-July. - Finalize TSA framework and close outstanding public accounts covered by TSA — End-June. - Elaborate action plan for audit of major public enterprises — End-July. - Submit updated national gender policy — End-December. - Capacity-building findings and recommendations: - IMF technical assistance focused on customs, tax administration, and PFM; deployment of resident advisors recommended to accelerate TSA and PFM reforms. - Coordination with other donors (UNDP, WB, AfDB, EU) is critical; donor coordination matrix recommended. ### Risks, vulnerabilities, and policy recommendations - Principal risks: - Uncertainty on timing of major new projects in uranium and crude oil sectors. - Significant regional security risks and potential adverse contagion from Nigeria. - Revenue mobilization weaknesses from underperforming tax and customs administration and trade disruptions with Nigeria, including Naira depreciation effects. - Continued accumulation of debt if policy implementation and debt management remain weak. - Recommended policy focus: - Enhance revenue mobilization through tax and customs administration reform. - Contain non-priority current spending while safeguarding salaries, debt service, and security outlays. - Strengthen expenditure control, liquidity management, and public investment efficiency. - Maintain prudent new borrowing consistent with debt sustainability framework. - Improve disaster risk management and expand early warning systems. - Prioritize human capital, vocational training, gender equality measures, and measures to harness the demographic dividend. ### Social, demographic, and structural issues: gender, demographic dividend, and disaster risk - Gender and demographics: - Fertility rate: 7.6 children per woman. - Population growth rate: 4.1 percent a year. - Niger ranks among the lowest on UN’s Gender Inequality Index; staff recommends removing legal restrictions on ownership and inheritance, and on opening bank accounts for women. - Authorities actions: National Gender Policy (2008) and regional cooperation; SWEDD launched November 2015. - Staff calls for increased girls’ education and vocational training to create jobs for over 250,000 youth entering the labor force each year. - Natural disasters: - Dependence on rain-fed agriculture renders Niger vulnerable to droughts, locusts, floods; Early Warning System (EWS) and donor-supported DNPGCCA in place. - Niger subscribed to Africa Risk Capacity (ARC); Ministry of Humanitarian Action and Disaster Management created May 2016. - Staff recommends improving institutional coordination, expanding EWS coverage, and building on 3N Initiative policies. ### Financial sector and business environment - Financial sector metrics and plans: - Financial penetration (money supply to GDP) was "27 percent" in 2015 versus "37 percent" SSA average. - Banking sector: 11 of 12 banks meet minimum capital requirement; prudential indicators show capital adequacy ratios above 8 percent for most banks at end-September 2016. - Gross non-performing loans: 18.5 percent of total loans at end-September 2016. - National Strategy for Financial Inclusion adopted July 2015: total cost "CFAF 34 billion" (2016-20); objective to make available through 2021 CFAF 35 billion in credits to small businesses. - Business environment: - World Bank Doing Business ranking: 150th out of 190 countries in 2017 (up from 176th in 2014). - Remaining constraints: dealing with construction permits, getting credit, paying taxes. - Reforms: one-stop-shop for investors, credit bureau, specialized commercial court. - Staff recommendations: - Accelerate tax administration improvements, strengthen banking supervision, conclude recapitalization of two banks not meeting prudential criteria, and deepen financial inclusion implementation. _Italic: Source — cr1759 (PDF chapter/section) — content unit provided._ ### 131.6 million. ### cr1759 - 131.6 million. ### Key indicators (selected series from "Niger: Selected Economic and Financial Indicators, 2014-21") - GDP at constant prices (annual percent change): 2014: 7.0; 2015: 3.5; 2016 Est.: 4.6; 2017 Prog.: 5.2; 2018 Proj.: 5.5; 2019 Proj.: 5.4; 2020 Proj.: 7.4; 2021 Proj.: 6.2. - Non-resources GDP at constant prices (annual percent change): 2014: 7.9; 2015: 4.1; 2016 Est.: 4.3; 2017 Prog.: 5.0; 2018 Proj.: 5.6; 2019 Proj.: 5.5; 2020 Proj.: 6.0; 2021 Proj.: 5.7. - Oil production (thousand barrels per day): 2014: 17; 2015: 13; 2016 Est.: 16; 2017 Prog.: 18; 2018 Proj.: 19; 2019 Proj.: 19; 2020 Proj.: 40; 2021 Proj.: 50. - GDP deflator (annual percent change): 2014: -0.5; 2015: 0.5; 2016 Est.: 2.0; 2017 Prog.: 2.4; 2018 Proj.: 2.1; 2019 Proj.: 1.8; 2020 Proj.: 1.6; 2021 Proj.: 1.9. - Consumer price index, annual average (percent): 2014: -0.9; 2015: 1.0; 2016 Est.: 1.1; 2017 Prog.: 2.0; 2018 Proj.: 2.1; 2019 Proj.: 2.0; 2020 Proj.: 2.0; 2021 Proj.: 2.0. - Exports, f.o.b. (CFA francs, annual percent change): 2014: -8.8; 2015: -10.1; 2016 Est.: -10.7; 2017 Prog.: 13.7; 2018 Proj.: 12.3; 2019 Proj.: 12.3; 2020 Proj.: 33.4; 2021 Proj.: 17.8. - Imports, f.o.b. (CFA francs, annual percent change): 2014: 7.0; 2015: 9.6; 2016 Est.: -11.7; 2017 Prog.: 19.5; 2018 Proj.: 11.2; 2019 Proj.: 9.3; 2020 Proj.: 9.0; 2021 Proj.: 6.7. - Broad money (annual percent change): 2014: 25.7; 2015: 3.6; 2016 Est.: 11.3; 2017 Prog.: 11.1; 2018 Proj.: 10.9; 2019 Proj.: 10.6; 2020 Proj.: 10.3; 2021 Proj.: 8.2. - Velocity of broad money (ratio): 2014: 3.7; 2015: 3.7; 2016 Est.: 3.5; 2017 Prog.: 3.4; 2018 Proj.: 3.3; 2019 Proj.: 3.2; 2020 Proj.: 3.1; 2021 Proj.: 3.1. - GDP at current market prices (Billions of CFAF): 2014: 4,077; 2015: 4,242; 2016: 4,432; 2017: 4,773; 2018: 5,146; 2019: 5,524; 2020: 6,025; 2021: 6,523. ### Recent developments and outlook (text summary) - Growth and inflation: - Economic growth increased to 4.6 percent in 2016 (from 3.5 percent in 2015), helped by a strong 2016-17 crop year and expansion of crop irrigation that boosted agricultural production by nearly 8 percent. - Inflation remained subdued, with consumer price inflation around 1 percent annualized in 2015 and through October 2016. - Sector and regional factors: - Continued weakness in the oil and mining sectors; resumption of oil production was slower than expected. - Adverse spillovers from the economic downturn in Nigeria and elevated security threats. - Niger still ranks last on the UN’s Human Development Index; growth is barely above estimated population growth (4.1 percent a year). - Fiscal performance in 2016: - Overall fiscal balance improved in the first half of 2016; all end-June performance criteria (PC) met. - By end-September 2016, revenue shortfalls widened to 2 percent of GDP; revenues were 14.5 percent below end-September 2015. - Specific revenue shortfalls at end-September 2016: VAT collections short by CFAF 30 billion; special tax on petroleum products short by CFAF 5.4 billion; customs taxes short by CFAF 26.2 billion. - Projected end-2016 revenue shortfall estimated at CFAF 114.5 billion (2.6 percent of GDP). - Government measures: froze planned non-priority expenditures (including CFAF 48.2 billion in current spending), safeguarded salaries, debt service, and security spending; increase in basic balance deficit limited to CFAF 24.3 billion financed domestically by CFAF 14.3 billion and by slightly slower reduction of domestic arrears. - External sector and balance of payments: - External current account balance excluding official grants (percent of GDP): 2014: -17.7; 2015: -19.7; 2016: -17.3; 2017 Prog.: -19.5; 2018 Proj.: -20.0; 2019 Proj.: -20.0; 2020 Proj.: -16.7; 2021 Proj.: -14.3. - External current account balance including grants (percent of GDP): 2014: -15.4; 2015: -18.1; 2016: -15.4; 2017 Prog.: -18.0; 2018 Proj.: -18.5; 2019 Proj.: -18.5; 2020 Proj.: -15.4; 2021 Proj.: -13.3. ### Government finances and debt metrics (selected fiscal ratios) - Total revenue (percent of GDP): 2014: 17.5; 2015: 18.1; 2016: 15.3; 2017 Prog.: 16.1; 2018 Proj.: 16.8; 2019 Proj.: 17.5; 2020 Proj.: 19.1; 2021 Proj.: 20.3. - Total expenditure and net lending (percent of GDP): 2014: 31.0; 2015: 32.7; 2016: 26.5; 2017 Prog.: 28.1; 2018 Proj.: 27.3; 2019 Proj.: 26.4; 2020 Proj.: 26.0; 2021 Proj.: 24.4. - Basic balance (excluding grants, percent of GDP): 2014: -6.4; 2015: -7.5; 2016: -4.4; 2017 Prog.: -4.9; 2018 Proj.: -4.0; 2019 Proj.: -2.8; 2020 Proj.: -0.9; 2021 Proj.: 1.5. - Basic balance (WAEMU definition; including grants, percent of GDP): 2014: -4.8; 2015: -5.7; 2016: -2.9; 2017 Prog.: -3.8; 2018 Proj.: -2.8; 2019 Proj.: -1.7; 2020 Proj.: 0.0; 2021 Proj.: 2.1. - Overall balance (commitment basis, including grants, percent of GDP): 2014: -8.0; 2015: -9.1; 2016: -6.5; 2017 Prog.: -7.4; 2018 Proj.: -6.0; 2019 Proj.: -4.7; 2020 Proj.: -2.9; 2021 Proj.: -0.9. - Total public and publicly guaranteed debt (percent of GDP): 2014: 33.7; 2015: 41.9; 2016: 47.0; 2017 Prog.: 51.1; 2018 Proj.: 53.0; 2019 Proj.: 53.9; 2020 Proj.: 52.4; 2021 Proj.: 50.3. - Public and publicly guaranteed external debt (percent of GDP): 2014: 25.1; 2015: 30.4; 2016: 34.1; 2017 Prog.: 35.8; 2018 Proj.: 37.1; 2019 Proj.: 38.1; 2020 Proj.: 38.5; 2021 Proj.: 39.0. - NPV of external debt (percent of GDP): 2014: 22.1; 2015: 22.1; 2016: 24.4; 2017 Prog.: 25.4; 2018 Proj.: 26.2; 2019 Proj.: 26.8; 2020 Proj.: 27.1; 2021 Proj.: 27.4. - Public domestic debt (percent of GDP): 2014: 8.7; 2015: 11.5; 2016: 12.9; 2017 Prog.: 15.3; 2018 Proj.: 15.9; 2019 Proj.: 15.8; 2020 Proj.: 13.9; 2021 Proj.: 11.4. - Debt-service ratio as percent of exports of goods and services: 2014: 4.2; 2015: 5.5; 2016: 7.2; 2017 Prog.: 7.7; 2018 Proj.: 6.3; 2019 Proj.: 5.9; 2020 Proj.: 4.4; 2021 Proj.: 4.8. ### Program request, IMF staff position, and policy priorities - Request for an Extended Credit Facility (ECF) arrangement: - Authorities requested a three-year arrangement under the ECF in the amount of SDR 98.7 million (75 percent of quota). - Program goals: preserve macroeconomic stability, enhance fiscal space to attain development objectives given protracted balance of payments needs and likely continued elevated security spending. - Fiscal measures: broaden the tax base; strengthen efficiency of tax and customs administration; prioritize public spending; enhance expenditure control and liquidity management. - Growth agenda: more efficient investment; improved business climate; more inclusive financial development. - IMF staff views: - Staff supports the Article IV Consultation conclusion and the authorities’ request for a new ECF-supported program. - Approval by the Executive Board will result in a disbursement of SDR 14.1 million. - Program modalities and operational considerations: - New borrowing needs to be managed prudently; DSA indicates Niger is at a moderate risk of debt distress. - Strengthening debt management: establishment of an Inter-Ministerial Committee on Debt Management with a permanent secretariat coordinating debt policy. ### Risks, vulnerabilities, and recommended focus areas - Principal risks: - Uncertainty on timing of major new projects in uranium and crude oil sectors. - Significant regional security risks and potential adverse economic contagion from neighboring Nigeria. - Revenue mobilization weaknesses driven by tax and customs administration underperformance, slowdown in mining and oil, lower trade flows with Nigeria, and Naira depreciation diverting refined petroleum products to parallel markets. - Recommended policy focus: - Enhance revenue mobilization through tax and customs administration reform. - Contain non-priority current spending while safeguarding salaries, debt service, and security outlays. - Strengthen expenditure control, liquidity management, and public investment efficiency. - Maintain prudent new borrowing consistent with debt sustainability framework. *Source: Nigerien authorities; and IMF staff estimates and projections.* ### 6. Broad money in the nine months through September 2016 increased by 9 percent, ### cr1759 - 6. Broad money in the nine months through September 2016 increased by 9 percent, ### Monetary developments and fiscal financing - Broad money in the nine months through September 2016 increased by 9 percent. - Official net foreign assets decreased by 20 percent compared to end 2015, as the external budget support envisaged for the second half of the year will only be disbursed at the end of the year. - Credit to the private sector increased by 9 percent in the first three quarters of 2016, a deceleration relative to the previous year. - Credit to the government increased by CFAF 98 billion from end 2015 as the government, faced with lower foreign support, turned to domestic financing. - Spending cuts were mostly related to office supplies, mission travel, maintenance, renovations, and infrastructure projects in some major cities. *Key statistic* - Gross official reserves at end-2015: 4.6 months of import of goods and services projected for 2016. ### External position and current account - The current account deficit is projected to decrease from 18.1 percent of GDP in 2015 to 15.4 percent in 2016. - This reflects a reduction in imports that more than offsets the fall in goods exports due to low international prices for uranium and petroleum products, and the economic slowdown in Nigeria. - Exports and reserves context: - Exports fell due to low international prices for uranium and petroleum products and the economic slowdown in Nigeria. - At end-2015, gross official reserves remained at 4.6 months of import of goods and services projected for 2016. ### Outlook (baseline projections) - Growth projections: - Growth is projected to rise to 5.2 percent in 2017. - Growth is projected to average 5.4 percent during 2017-19. - Drivers: expansion of irrigated agriculture under the national food security program (3N Initiative). - Natural resource projects timing and impact: - Main natural resource projects—an oil pipeline through Chad and the Imouraren uranium mine—are now expected to be completed in 2020 and 2021, respectively, providing for a boost to growth beginning in 2020. - Current account and reserves: - The current account deficit is projected to rise to about an average of 18.6 percent of GDP in 2017-19, driven by capital and intermediate goods imports associated with FDI and the government’s investment program. - Gross official reserves are projected to remain stable at 4 months of import of goods and services. - Inflation: - Inflation is expected to remain subdued at about 2 percent. ### Exchange rate and competitiveness - The exchange rate remains broadly in line with model-based estimates of fundamentals. - The EBA-lite methodology suggests that the real effective exchange rate (REER) during 2015 was broadly in line with macroeconomic fundamentals. - Risks to competitiveness: - Recent Naira depreciation could lead to a weakening of Niger’s competitiveness. - Broader competitiveness indicators (e.g., World Bank’s Doing Business Indicators) highlight structural gaps in dealing with construction permits, getting credit, and paying taxes. ### Risks to the outlook - Overall tilt: Risks to the outlook are tilted to the downside. - Downside risk factors: - Lingering security concerns could discourage foreign investment, disrupt domestic production, and force further reprioritization of expenditures towards security. - Persistent weak commodity prices could delay implementation of resource projects underpinning growth prospects. - Upside factors: - A rebound in uranium and oil prices or a pickup in the Nigerian economy would boost Niger’s fiscal space and growth. ### Alternative scenarios and simulated impacts - Two alternative scenarios simulate security and terms of trade shocks: - Assumption common to both scenarios: exports from the new resource projects will be delayed by one year as a result of the shock. - Security shock: increase of security-related spending equivalent to 1 percent of GDP that affects trade and other economic activities. - Terms of trade shock: 25 percent decrease of the baseline oil and uranium prices in 2017 and going forward. - Simulation results (2017, relative to baseline): - Decline in GDP growth of 0.3 to 0.8 percentage points. - Deterioration of the current account of 0.8 to 1.7 percent of GDP. - Fall in reserves. - Fiscal stance deterioration as revenue would fall and security spending expand. - Debt-sustainability implications: - Under the security shock the debt ratios would remain under their respective thresholds. - Under the terms of trade shock the debt-to-export ratio would exceed the 150 percent threshold by 15.4 percent in 2017. - Climatic and natural disaster impacts: - Climatic shocks have a large and persistent impact on Niger’s economic activity, but limited impact on consumer prices, inter alia due to the government’s mitigating policies in place. - A natural disaster causing losses of 0.5 percent of GDP would have a weak fiscal impact but could be magnified in terms of economic growth and the current account deficit. ### Spillovers from Nigeria - Nigeria-related impacts: - Niger has been adversely impacted by spillovers from its main trading partner, Nigeria. - Niger’s conventional exports to Nigeria fell by 16 percent in 2015, and re-exports fell by 17 percent in 2015. - At end-June 2016 exports to Nigeria had fallen by 45.4 percent compared to end-June 2015. - Re-exports fell by a further 15 percent during 2016. - Total imports from Nigeria increased by 36.6 percent in 2016, mostly primary and locally manufactured goods that generate little tax due to regional agreements. - Causes: - Nigeria’s economic downturn, large exchange rate depreciation, and restrictions on access to foreign exchange since late 2014 reduced Nigeria’s demand for Niger’s products and disrupted transit trade. - Fiscal impact: - Significant customs revenue losses resulted from the fall in exports and re-exports to Nigeria. ### Article IV policy discussions: advancing the growth agenda - Core focus areas discussed: - Reducing gender inequality. - Managing the impact of natural disasters. - Harnessing Niger’s demographic dividend. - Consensus: - Need to address these issues within a time-bound strategic agenda and from a long-term perspective, scaled up with investment in education and capacity development. ### Reducing gender inequality (findings and recommendations) - Findings: - Gender inequality in Niger is among the highest in the world; Niger has the seventh lowest score in the world on the United Nation’s Gender Inequality Index (GII). - Niger ranks at the bottom of the OECD’s Social Institutions and Gender Index (SIGI). - Poverty and social norms contribute to early marriage and a high fertility rate of 7.6 children per woman. - Authorities’ actions: - Adoption of a National Gender Policy in 2008 with a four-pronged strategy: - (i) supporting teenagers’ school enrolment to discourage early marriages; - (ii) providing guidance and maternal support to teenagers; - (iii) expanding opportunities for revenue generating activities and improved access to finance; - (iv) promoting public awareness by strengthening partnership with non-governmental organizations and opinion leaders. - Institutions: Ministry of Women Promotion and the National Gender Observatory. - Regional collaboration with Burkina Faso, Côte d’Ivoire, Chad, Mali, and Mauritania on programs for empowering women and adolescent girls and improving reproductive health services. - Staff recommendations: - Continue addressing gender-based legal restrictions. - Remove restrictions on ownership and inheritance of assets to provide women with access to collateral. - Remove restrictions on women opening bank accounts to promote financial inclusion and small business entrepreneurship. - Pursue proven economic, legal, and institutional reforms such as improved access to finance and revenue generating activities. - Increase opportunities for women to enter the formal sector through enhanced training programs. ### Preventing and managing natural disasters - Findings: - More frequent natural disasters periodically inflict substantial economic and social losses linked to geographical conditions, climate change and high population growth. - Dependence on rain-fed agriculture and rudimentary technology leaves Niger vulnerable to droughts, locust plagues, floods, and periodic food shortages. - Recent food crises (2005 and 2010) showed that a timely response coordinated through an Early Warning System (EWS) could mitigate cereal shortages. - Authorities’ framework: - Donor-supported disaster prevention and management framework (DNPGCCA), including famine outbreaks. - Bottom-up information system collecting data from villages and counties to national level, including vulnerability monitoring observatories (OSV) and an early warning network at village level (SCAPRU). - Programs financed under the Support Plan to Vulnerable Populations (PSPV) with annual budgets (4-5 percent of GDP) reflected in the overall government budget. - Niger subscribed to Africa Risk Capacity (ARC), a sovereign drought insurance for African Union member countries. - A Ministry in charge of Humanitarian Action and Disaster Management was created in May 2016. - Staff recommendations: - Improve institutional coordination among agencies involved in disaster prevention and management. - Expand the information system under the early warning system and extend the geographical coverage of the disaster management framework. - Build on policies under the 3N Initiative’s investment plan for 2016-20 and the recently signed Millennium Challenge Compact (MCC). ### Harnessing the demographic dividend - Demographic facts: - Niger has the world’s fastest growing population. - Fertility rate: 7.6 children per woman. - Population growth rate: 4.1 percent a year. - The working age population share is projected to provide a demographic dividend expected from 2020, though the dividend could be low in terms of income per capita gains but would last beyond 2100. - Authorities’ actions: - Policies to reduce fertility, promote vocational education, and create more job opportunities. - Specific actions: - Launch in 2012 of informal education venues (“école des maris”) to promote family planning through increased involvement of husbands. - Initiation in November 2015 of the Sahel Women's Empowerment and Demographic Dividend project (SWEDD), supported by the World Bank and the United Nations Population Fund. - Priorities for vocational education and job creation identified in the EDD through the Sectoral Program for Education and Training Development project (PSEF 2014-24). - Staff recommendations: - Continue policies to reduce fertility and expand vocational training. - Improve quality universal education and speed up job creation for vocational graduates by improving the business environment to stimulate private sector initiative. _Italic: Source — cr1759 (PDF chapter/section) — content unit provided._ ### 21. Staff welcomed the measures taken so far to harness the expected demographic ### 21. Staff welcomed the measures taken so far to harness the expected demographic ### Demographic dividend and labor market implications - Staff welcomed measures to harness the expected demographic dividend but called for better coordination among multiple institutions mandated to address demographic challenges to avoid inefficient allocation of resources. - Staff urged greater priority to vocational education and enhanced investment in human capital to improve women education and develop a more gender balanced and skilled workforce. - Strong policies to curb population growth, based on other countries’ experience, could shorten the duration of the demographic dividend window and increase its size. - With the goal of creating the needed jobs for the more than 250,000 young expected to join the labor force each year, staff called for: - improvement of the business environment; - sustained modernization of agriculture through the 3N Initiative; - leveraging resource revenues to promote economic diversification. ### Program context and development strategy (ECF, EDD, PDES) - The ECF-supported program is anchored on the government’s Economic Development Document (EDD) and seeks to preserve sustainability while enhancing inclusive growth. - International partners provide 60 percent of total budget financing. - Under the PDES (2012-16): - poverty rate declined from 48.2 percent in 2011 to 45.4 percent in 2014; - average rate of growth during PDES 2012-15 was 6.6 percent, but growth was highly volatile. - The EDD aims to further enhance the macroeconomic environment; the EDD estimates that annual growth of 7 percent is needed to achieve a significant sustained reduction in poverty and unemployment. ### Fiscal policy stance and medium-term objectives - The 2017 fiscal program envisages a modest expansion in the expenditure envelope relative to 2016, entailing an increased deficit of the basic balance to 4.9 percent of GDP, compared to a projected 4.4 percent of GDP in 2016. - Key numerical fiscal measures and sources: - Total revenues would increase by 0.8 percent of GDP, driven by a rise of 0.6 percent of GDP in tax revenue from higher VAT taxes (0.5 percent of GDP). - Domestically financed expenditures will increase by 1.5 percent of GDP, relative to the projected 2016 outcome, driven by interest payments and priority sector investments. - Financing would be sourced from donors and additional regional borrowing; budget support is projected at CFAF 92.4 billion comprising both grants and highly concessional loans. - For the period 2017-20, domestic financing includes PPP contracts for building infrastructure; in 2017, those contracts represent 1.3 percent of GDP. - Medium-term fiscal consolidation objective: - Authorities committed to converge toward the WAEMU convergence criterion of an overall balance deficit of no more than 3 percent of GDP. - Staff encouraged authorities to reach understandings with the WAEMU Commission on a slight deferment of the budgetary convergence criterion. ### Revenue policy, exemptions, and priority spending - Streamlining tax exemptions is important to limit medium-term revenue losses: - Over the last five years, tax exemptions reached about CFAF 80 billion in 2015 (1.7 percent of GDP) for tax and CFAF 150 billion in 2015 (4.5 percent of GDP) for customs revenues respectively. - Authorities committed to bring tax exemptions under the Investment Code in line with best practices by reducing their number and streamlining their scope. - Under the program, part of the fiscal space will be used to advance the inclusive growth agenda: - Authorities committed to using part of the increased fiscal space to strengthen resilience to disasters and address issues in gender and demographics. - Pro-poor spending is planned to increase by 36 percent in 2017. ### Structural reform priorities - A strong reform agenda is identified to address past slippages and implementation issues in PFM and revenue administration. - Priority reforms draw on recent FAD technical assistance and include measures to strengthen revenue and spending controls and improve implementation capacity. ### Tax and customs administration (Box 2 highlights) - Strategy to modernize customs administration while strengthening transparency and governance: - Finalization of electronic inter-connection of all customs offices and deployment of ASYCUDA World Software to main offices not yet covered. - Introduction of tax identification numbers for all importers to enable risk-based tax audits. - Deeper collaboration with the customs of Benin and Togo. - Tax administration reforms aim to broaden the tax base and strengthen staff capacity: - Expand the competency of the large enterprises Directorate (DGE) to all companies meeting the threshold of CFAF 500 million annual cash flow; 120 companies will be transferred to the DGE before end-2016. - Establish two tax assessment centers and two tax payment centers by June 2017 in Niamey. - Strengthen tax audit function by joint customs and tax administration staff; decentralize the tax control unit to the regions. - Continue project to provide a full information system and finalize measures to strengthen VAT credit reimbursement initiated in 2016. - Enhanced management of tax exemptions and monitoring to broaden the tax base; review PPP framework and consider transferring tax provisions from sector codes to general tax and customs codes. - Treasury measures: - Strengthen accounting procedures, improve non-tax revenue collection and liquidity management. - Full implementation of the Treasury Single Account (TSA) is expected during the program period; by end-March 2017 the government will sign account management agreements with the BCEAO and selected commercial banks and close all inactive accounts (compte dormants). ### Public Financial Management and state-owned enterprises - Public expenditure management and budget execution enhancements: - Inter-Ministerial Budgetary Committee created in Mid-2016 aligns expenditure commitments with resource availability to prevent arrears. - From the 2018 budget, preparation will be in line with the budget program framework under the 2012 budget law; execution will be subject to commitment authorizations and payments credits. - Full implementation of the TSA is expected during the program period. - State-owned enterprises reform: - A comprehensive evaluation of state-owned enterprises will be launched to limit fiscal risks and generate cost savings. - An action plan will audit financial relations between the state and main companies, quantify implicit government subsidies, and inform policies for reducing exemptions. ### Debt management and PPPs - Debt dynamics and risks: - Public debt rose from 25.6 percent of GDP in 2013 to 41.9 percent of GDP in 2015, partly due to public investment in natural resources and infrastructure and securitization of domestic arrears. - Niger’s risk of debt distress remains moderate (Debt Sustainability Analysis). - Policy and programmatic responses: - Authorities exploring PPP investments to address infrastructure financing gaps while staff stressed importance of strengthening the PPP framework and assessing fiscal impact of PPP contracts for consistency with the external borrowing plan under the Debt Limits Policy. - Authorities agreed to suspend conclusions of new PPPs until the PPP framework is fully reviewed and have requested FAD Technical Assistance; a mission is expected in early 2017. - Authorities plan to restructure the debt portfolio by reconsidering pending conventions that are yet to become operational. *cr1759 - 21. Staff welcomed the measures taken so far to harness the expected demographic* ### 36. The decline in commodity prices has placed Niger’s resource sector under considerable ### The decline in commodity prices has placed Niger’s resource sector under considerable pressure ### Resource sector impacts and project delays - Decline in commodity prices has placed Niger’s resource sector under considerable pressure. - Construction of the pipeline to transport crude oil through the Chad-Cameroon pipeline put on hold by the government and partners (China National Petroleum Corporation and the state of Chad), delaying its completion to around 2020 while other alternatives are considered. - Niger’s third largest uranium producer (SOMINA) was not able to finance its expansion and has suspended production. - Imouraren, the largest uranium project, has been delayed pending a recovery in uranium prices. - Financial situation of the public mine-holding company (SOPAMIN) has not improved; most commercial contracts expire this year and the company is barely exporting its quota of uranium production. - Niger owes a small amount of pre-HIPC Initiative arrears to non-Paris Club creditors which continue to be deemed away under the revised arrears policy for official creditors, as the underlying Paris Club agreement was adequately representative and the authorities have made best efforts to resolve remaining arrears to Iraq and Libya. ### Oil sector measures and refinery finances - Structural reforms in the oil sector are progressing with exports gradually liberalized to better align incentives and improve financial standing. - Government measures to improve the national refinery (SORAZ): - Lowered the crude oil price from Niger’s oil fields to US$45 per barrel from US$47. - Increased the contractually determined price to the government-owned fuel distributor (SONIDEP) by CFAF 10 per liter. - These measures are expected to restore a comfortable operating margin for the refinery. ### Natural resource revenue management and institutional recommendations - Natural resource endowments remain the major source to finance Niger’s development despite price declines. - Staff urged authorities to enhance natural resource revenue mobilization by strengthening revenue evaluation, forecasting, and audit capacities. - Staff advised pursuing a stronger institutional framework for natural resource management, drawing on peer country experiences and recent FAD technical assistance. - Authorities expressed interest in resuming the FAD Technical Assistance initiated two years ago. - In the energy sector, staff welcomed the recently created Agence de Régulation du Secteur de l’Energie, which the authorities agreed to operationalize promptly. ### Business environment findings and reforms - Niger’s business environment remains difficult despite recent improvements: - World Bank’s 2017 Doing Business Index ranked Niger 150th out of 190 countries, up from 176th out of 189 countries in 2014. - Problematic areas identified: dealing with construction regulations, paying taxes. - Local business concerns: declining activity in telecommunications after a tax on incoming calls in 2014; delays in processing reimbursements of VAT credits and tax exemptions refunds. - Reforms and improvements noted: - Shortened time and procedures to start a business. - Improved access to credit information via a credit bureau. - Made contract enforcement easier by creating a specialized commercial court. - Staff urged acceleration of efforts, particularly improvements in tax administration, and measures to overcome barriers in dealing with construction permits, getting credit, and paying taxes. ### Macro-financial linkages and financial sector risks - Banking system appears adequately capitalized and efficient relative to the region: - At end-September 2016, prudential indicators suggest capital adequacy ratios for most banks remain above the regulatory threshold of 8 percent. - Gross non-performing loans are 18.5 percent of total loans at end-September 2016; have risen slightly and are a source of concern for two banks. - Financial system characteristics and risks: - Domestic banking sector remains shallow with limited financial instruments; four commercial banks control about 90 percent of total banking sector assets. - Credit distribution skewed to trade, services, and mining; underdeveloped capital market dominated by banks and the government. - Agriculture benefits marginally from bank financing despite being the largest contributor to growth. - Key risks from growing exposures to the public sector through government bonds and domestic arrears, which hamper banks’ clients’ capacity to repay loans. - Authorities and staff agreed on the need to establish a consultative platform with the banking association. - Microfinance and financial inclusion: - National Strategy for Financial Inclusion adopted July 2015. - CFAF 300 million earmarked in the 2016 budget for implementation and another CFAF 300 million for the National Financial Sector Development Strategy (NFSDS) approved in late 2014. - Objective: make available through 2021, CFAF 35 billion in credits to small businesses, in particular those run by women and young entrepreneurs. - Government plans to ask for donor assistance at a Round Table to be held in 2017. - Staff highlighted the role of microfinance in deepening financial inclusion and reducing poverty; authorities and staff concurred on quick establishment of the steering committee to implement the NFSDS. ### Program modalities, risks, and safeguards - Authorities requested a three-year arrangement under the ECF in an amount of SDR 98.7 million (75 percent of quota). - Proposed access is above the norm for countries with Niger’s level of outstanding drawings from the PRGT but in line with established limits and commensurate with program strength and financing needs. - Program design: - Comprises six reviews, with disbursements phased evenly throughout the arrangement. - Includes semi-annual performance criteria (PC) and an agenda of structural reforms. - PCs set for end-June and end-December 2017. - Indicative Targets (IT) set for end-March and September-2017. - As a prior action, an amended 2017 budget consistent with the program was approved on November 4, 2016. - Repayment capacity and risks: - Niger denotes sufficient capacity to repay the Fund, with repayment obligations peaking at 1.2 percent of export revenue in 2023-24. - Key risks: security developments, adverse spillovers from neighboring countries, climatic shocks, capacity constraints, continued debt accumulation from weak policy implementation and debt management. - Program mitigation: building fiscal space, strengthening institutions, boosting growth resilience. - Safeguards: - Safeguard assessments conducted at the regional central bank (BCEAO); most recent assessment completed in December 2013 found a continuing strong control environment. - All recommendations implemented, including appointing an international audit firm for FY 2015-17, reinforcing the audit committee with external expertise, and adopting the International Financial Reporting System starting with financial year 2015. ### Staff appraisal: macro outlook and policy priorities - Recent performance and outlook: - Economic growth averaged 6.6 percent annually over the last five years, driven by agriculture, services, and the oil sector. - Inflation remains under control; external position stable with official reserves at comfortable levels. - Niger remains one of the least developed countries despite some social indicator improvements. - Medium-term growth projected at 5.9 percent, driven by agriculture and the resource sector. - Exchange rate remains broadly in line with fundamentals; recent depreciation of the Naira could affect competitiveness. - Policy priorities and recommendations: - Enhance management of natural disasters and broaden implementation of the 3N Initiative to mitigate food insecurity. - Create jobs to harness the demographic dividend; develop a comprehensive strategy as youth enter the job market. - Scale up public resources for girls’ education to discourage underage marriages, reduce birth rate, and improve future employment opportunities. - Create fiscal space and improve public spending efficiency to preserve development priorities amid elevated security spending. - Strengthen public finance management in line with Fund TA recommendations and align budget processes with WAEMU guidelines; prepare 2018 budget in line with the 2012 budget law for longer-term planning. - Mobilize domestic revenues through strengthened tax administration and broadening the tax base as resource revenues rise over the medium term. - Continue institutional capacity building for improved accountability and transparency (including natural resource revenue recording and debt management), and strengthen investment efficiency assessment, tax and customs administration, liquidity management, financial sector development, and national accounting. - Deepen financial access to make growth more inclusive; step up implementation of the Financial Inclusion Strategy approved in 2015. - Strengthen banking supervision in line with regional protocols, including concluding recapitalization of the two banks that do not meet some prudential criteria. - Data and statistics: - Macroeconomic statistics are broadly adequate for surveillance; participation in WAEMU harmonization and AFRITAC-West supported processes. - Data adequacy and timely provision lag for debt stocks and flows, and for financial flows due to lack of capacity. - Staff supports authorities’ request for a three-year ECF arrangement with access equivalent to SDR 98.7 million (75 percent of quota); LOI and MEFP set out appropriate policies to achieve program objectives. *Source: IMF staff report contained in the provided content.* ### 54. It is proposed that the next Article IV Consultation be held on the 24-month cycle. ### 54. It is proposed that the next Article IV Consultation be held on the 24-month cycle. ### Proposal - It is proposed that the next Article IV Consultation be held on the 24-month cycle. ### Recent economic developments and outlook — key indicators and projections - GDP at constant prices: 7.0 3.5 4.6 5.2 5.5 5.4 7.4 6.2 - Non-resources GDP at constant prices: 7.9 4.1 4.3 5.0 5.6 5.5 6.0 5.7 - Oil production (thousand barrels per day): 17 13 16 18 19 19 40 50 - GDP deflator: -0.5 0.5 2.0 2.4 2.1 1.8 1.6 1.9 - Consumer price index (Annual average): -0.9 1.0 1.1 2.0 2.1 2.0 2.0 2.0 - Consumer price index (End-of-period): -0.6 2.2 1.2 2.2 2.0 2.0 2.0 2.0 External sector (selected) - Exports, f.o.b. (CFA francs): -8.8 -10.1 -10.7 13.7 12.3 12.3 3.4 17.8 - Of which: non-uranium exports: -1.5 -15.2 -8.6 10.3 13.4 21.1 49.0 22.5 - Imports, f.o.b (CFA francs): 7.0 9.6 -11.7 19.5 11.2 9.3 9.0 6.7 - Terms of trade (deterioration -): -19.4 -7.5 7.3 0.1 1.6 -3.6 -9.1 -1.8 Government finances (percent of GDP, selected) - Total revenue: 17.5 18.1 15.3 16.1 16.8 17.5 19.1 20.3 - Total expenditure and net lending: 31.0 32.7 26.5 28.1 27.3 26.4 26.0 24.4 - Current expenditure: 14.6 15.6 14.4 14.6 14.2 13.9 13.4 13.2 - Capital expenditure: 16.4 17.1 12.1 13.5 13.1 12.5 12.5 11.3 - Basic balance (excluding grants): -6.4 -7.5 -4.4 -4.9 -4.0 -2.8 -0.9 1.5 - Basic balance (WAEMU definition; including grants): -4.8 -5.7 -2.9 -3.8 -2.8 -1.7 0.0 2.1 - Overall balance (commitment basis, including grants): -8.0 -9.1 -6.5 -7.4 -6.0 -4.7 -2.9 -0.9 Public debt and debt-service (selected) - Total public and publicly guaranteed debt: 33.7 41.9 47.0 51.1 53.0 53.9 52.4 50.3 - Public and publicly guaranteed external debt: 25.1 30.4 34.1 35.8 37.1 38.1 38.5 39.0 - NPV of external debt (Percent of exports): 22.1 22.1 24.4 25.4 26.2 26.8 27.1 27.4 - Debt-service ratio as percent of exports of goods and services: 4.2 5.5 7.2 7.7 6.3 5.9 4.4 4.8 Balance of payments and reserves (selected) - Current account balance (Billions of CFAF): -628.5 -767.3 -681.9 -857.9 -949.9 -1019.3 -930.1 -869.5 - Current account (in percent of GDP): -15.4 -18.1 -15.4 -18.0 -18.5 -18.5 -15.4 -13.3 - Gross Official Reserves (in months of next year's imports of goods and services): 4.8 4.6 4.2 3.9 4.0 4.0 4.1 4.4 - Exports, f.o.b (Billions of CFAF): 715.2 643.2 574.5 653.3 734.0 824.2 1,099.5 1,295.3 - Imports, f.o.b (Billions of CFAF): 1,066.2 1,168.6 1,031.6 1,232.5 1,370.6 1,498.6 1,634.0 1,744.2 Monetary and financial sector (selected) - Broad money (percent change): 25.7 3.6 11.3 11.1 10.9 10.6 10.3 8.2 - Net foreign assets (BCEAO and commercial banks, Billions of CFA francs): 715.2 579.0 618.6 609.3 665.1 730.8 802.1 927.9 - Money and quasi-money (Billions of CFA francs): 1,110.7 1,151.3 1,281.6 1,424.2 1,579.8 1,747.8 1,928.0 2,085.6 - Credit to the economy (Billions of CFA francs): 573.6 649.1 725.0 790.8 862.4 935.8 1,030.8 1,126.0 Program financing and fiscal operations (selected) - Total revenue (Billions of CFAF): 714.2 768.7 676.6 770.8 866.0 968.2 1,151.6 1,322.8 - Total expenditure and net lending (Billions of CFAF): 1,263.7 1,387.7 1,175.8 1,341.4 1,404.5 1,460.7 1,564.7 1,593.7 - Overall balance (commitment) (Billions of CFAF): -549.6 -619.0 -499.1 -570.6 -538.4 -492.5 -413.1 -270.9 - Overall balance (commitment including grants ) (Billions of CFAF): -327.4 -386.4 -289.7 -351.8 -311.2 -257.4 -173.4 -56.4 - Financing: 491.8 632.1 507.6 614.0 548.4 492.5 413.1 270.9 - External financing (Billions of CFAF): 342.3 416.3 387.5 387.2 398.8 409.1 419.5 408.5 - Grants (Billions of CFAF): 222.1 232.6 209.5 218.9 227.3 235.2 239.7 214.5 - Domestic financing (Billions of CFAF): 149.5 215.8 120.0 226.8 149.6 83.4 4.6 -137.6 Tabled program envelope and conditionality (selected) - Quantitative performance criteria and indicative targets (cumulative for each fiscal year): Net domestic financing of the government: 113.8 62.0 120.3 186.6 207.0 - Reduction in domestic payment arrears of government obligations (adjusted criteria): -8.4 10.0 20.0 10.0 -43.4 - Ceiling on new external debt contracted or guaranteed by the government on concessional terms (cumulative): 800.0 350.0 350.0 350.0 350.0 Program disbursements under the new ECF arrangement (Table 12) - SDR 14.1 — Executive Board Approval of the ECF Arrangement — January 23, 2017 - SDR 14.1 — Observance of June 30, 2017 performance criteria, and completion of the first review under the arrangement — October 31, 2017 - SDR 14.1 — Observance of December 31, 2017 performance criteria, and completion of the second review under the arrangement — April 30, 2018 - SDR 14.1 — Observance of June 30, 2018 performance criteria, and completion of the third review under the arrangement — October 31, 2018 - SDR 14.1 — Observance of December 31, 2018 performance criteria, and completion of the fourth review under the arrangement — April 30, 2019 - SDR 14.1 — Observance of June 30, 2019 performance criteria, and completion of the fifth review under the arrangement — October 31, 2019 - SDR 14.1 — Observance of September 30, 2019 performance criteria, and completion of the sixth and last review under the arrangement — January 8, 2020 - SDR 98.7 Total ### Fiscal and structural reform commitments (selected structural benchmarks and measures) Repetitive structural benchmarks (quarterly / annual) - Release the quarterly budget allocation in the first month of each quarter based on the proposal of the regulation committee. — Quarterly — Improve budget and cash flow management. - Prepare a quarterly commitment plan consistent with the corresponding cash plan. — Quarterly — Improve budget and cash flow management. - Prepare quarterly debt management report to be validated by the National Public Debt Management Committee. — Quarterly — Improve debt management. - Produce a quarterly report on VAT credit reimbursement. — Quarterly — Improve efficiency of the VAT. - Prepare a Revised Borrowing Plan. — Each year at end-June — Improve debt management. Proposed structural benchmarks, 2017 (selected) - Prior Action: Amend the 2017 budget already sent to the National Assembly, adjusting downward revenue in line with the program. — Prior Action Met — Improve public financial management. - Broaden the jurisdiction of the large enterprises Directorate (DGE) of the DGI by transferring to the DGE the control of the identified 120 large companies previously under the competency of regional tax offices outside Niamey. — End-January — Improve tax collection and expand the tax base. - Estimate the stock of VAT credits arrears and launch the VAT reimbursement mechanism using a share of the VAT collected by the DGE. — End-March — Improve fiscal management. - Finalize the interconnection of the ASYCUDA world central server with all the main customs offices and the interconnection of the Niger customs office with those of Benin and Togo. — End-July — Improve tax collection. - Launch the process of establishing the 2018 budget under the program format by finalizing the required documents (DPBEP and DPPD). — End-June — Improve public financial management enhance spending efficiency and control. - Finalize the framework of the TSA by signing the agreements with the BCEAO and the Commercial Bank on the management of the TSA, and close all the outstanding public accounts covered by the TSA. — End-June — Improve liquidity management. - Elaborate and submit to staff an action plan for the audit of the major public enterprises. — End-July — Improve the management of public enterprises. - Send to The National Assembly a new law on public private partnership (PPP) consistent with the investment code and the 2012 budget law. — End-December — Align with existing laws. - Submit to staff the update of the 2008 national policy on gender. — End-December — Enhance gender equality. ### Risk assessment and recommended policy responses (Risk Assessment Matrix, October 2016) - Deterioration of security situation - Relative Likelihood: Medium (in view of the military gains made in 2016) - Impact if realized: High - Recommended Policy Response: - Allow a relaxation of the fiscal stance in 2017 and onwards as needed to accommodate high priority security spending in response to developments on the ground. - Increase engagement with neighboring countries and international community on security issues. - Delays in the realization of extractive industry projects - Relative Likelihood: High (in view of continued weak prices and regional insecurity) - Impact if realized: High - Recommended Policy Response: - Enhance oversight and transparency of the sector. - Continued accumulation of debt due to weak policy implementation and debt management capacity - Relative Likelihood: Medium to High - Impact if realized: High - Recommended Policy Response: - Continued efforts to enhance debt management. Careful selection of projects financed with debt to ensure cost recovery. - Unfavorable weather conditions/natural disasters - Relative Likelihood: High (in view of cyclical draught and locust plague occurrences) - Impact if realized: High - Recommended Policy Response: - Rebuild fiscal buffers to accommodate well-targeted spending in case of shocks due to natural disaster. - Lower oil/uranium prices - Relative Likelihood: High (in view of lack of prospects for a rebound in prices from their currently depressed levels) - Impact if realized: High - Recommended Policy Response: - Enhance resources management to avoid excessive pro-cyclicality of the fiscal position (fiscal rule, resources fund) and improve spending quality. Over the medium to long-term create conditions to foster private sector growth and increase non-resource revenue. - Reduced donor support - Relative Likelihood: Low (in view of Niger’s growing importance in the fight against terrorism and illegal immigration) - Impact if realized: High - Recommended Policy Response: - Enhance engagement with traditional and new donors. Enhance implementation capacity to ensure high return from the projects financed by donors. *Sources: Nigerien authorities; and IMF staff estimates and projections as presented in the document.* ### Introduction ### cr1759 - Introduction ### Program background and objectives - Two Extended Credit Facility (ECF) arrangements supported Niger over the last decade: - First ECF arrangement (2008-11; SDR 23.03 million): first three reviews completed; policy dialogue interrupted by a military coup in early 2010 pending international recognition of the transitional government. - Second ECF arrangement (2012-16; SDR 120.09 million): approved March 2012; initially scheduled through Q1 2015; extended twice (to end-December 2015 and end-December 2016) because of delays in implementing structural reforms and larger balance of payments needs from security and humanitarian situations. Second extension accompanied by an augmentation of access of 62.5 percent of quota. - The 2012-16 program, aligned with the government’s Plan de Development Economique et Social (PDES), aimed to leverage natural resource wealth into sustained and inclusive growth through large-scale investments in Imouraren (uranium mine) and the Niger-Chad-Cameroon oil pipeline; these projects were delayed as international market prices fell. - Main program objectives: - Maintain macroeconomic stability. - Promote growth. - Reduce poverty. - Increase resilience to shocks, strengthen public finances and debt management, establish a transparent legal and supervisory framework for mining and petroleum sectors, and support private and financial sector development. - Fiscal policy emphasis: create fiscal space for increased development spending while preserving external debt sustainability; strengthen tax administration and expenditure control with Fund technical assistance. ### Program performance (2012–16) - Overall environment and shocks: - Performance adversely impacted by deterioration in security starting in 2012, collapse of export prices starting in 2013, droughts, floods, and negative spillovers from the economic slowdown in neighboring Nigeria starting in 2015. - Domestic policy slippages led to fiscal underperformance and delays in structural reform implementation, causing delays in completing several reviews. - Key macroeconomic outcomes (2012-16): - Economic growth: average growth rate was 6.6 percent in 2012-16, compared with a projection of 8.2 percent. - Under-performance attributed to external shocks, volatility in agricultural production (which accounts for 35-40 percent of GDP), and delays in resource projects. - Inflation: averaged 1.3 percent a year, below the 3 percent WAEMU convergence criteria; partly due to government food and price stabilization programs. - Current account deficit: averaged 15.7 percent of GDP in 2012-16, compared with a projection of 16.7 percent. - International reserves: kept at comfortable levels in excess of 4 months of imports of goods and services. - Fiscal stance: overall balance averaged 5.5 percent of GDP over 2012-16 compared with projections of 4.5 percent, due to exogenous shocks, repeated underperformance of revenue, shortfalls in external financing, and failure to adjust spending in response to shocks. - Financing of deficits: financed by domestic arrears and external debt accumulation; external debt-to-GDP ratio rose from 21.3 to 34.1 percent of GDP between 2012 and 2016. - Quantitative performance criteria: missed for net domestic financing and net reduction in domestic arrears for most reviews. ### Progress on structural reforms (achieved) - Revenue mobilization: - Modernized customs administration with migration to ASYCUDA World and interconnection of main customs offices that collect more than 90 percent of customs revenue. - Public financial management: - Adopted an action plan for the 2012 organic budget law in 2013, leading toward the full WAEMU-harmonized budget law in preparation of the 2018 budget. - Spending executed through exceptional procedures kept below the benchmark 5 percent of total expenditures since Q1 2013. - Established an Inter-Ministerial Budgetary Committee in 2016 to align expenditure commitments with resource availability and reduce arrears. - Business environment: - Adopted a new investment code and established a one-stop-shop for investors in 2015; a one-stop-shop for starting business was operationalized in early-2014. - Debt management: - Established the Secretariat of the inter-ministerial committee on debt management in 2015, producing regular reports on debt management. - Financial sector reform and inclusion: - Adopted a financial sector development strategy in November 2014 and a financial inclusion strategy in 2015 targeting Nigeriens with limited access to financial services. ### Outstanding reforms (for 2017 program) - Establishment of a Treasury Single Account (TSA): - Initially envisaged by end-December 2013; not completed and expected to be in place at end-2017. - Implementation broken into well-defined steps used as structural benchmarks with secured progress. - Operationalization of customs electronic transit system. - Preparation of documents required for establishment of the 2018 budget in line with the 2012 budget law. - Curtailing widespread fiscal exonerations. ### Lessons from the 2012-16 ECF-supported program - Ambitious targets vs. capacity and shocks: - Some targets may have been too ambitious relative to administrative capacity and incidence of shocks (notably revenue targets which were overly ambitious after good performance in 2013); missed revenue targets were used to justify ambitious spending, leading to breaches in performance criteria and missed targets. - Staff assessments of domestic absorptive capacity for investment were optimistic. - Need for flexibility: - Greater flexibility in adjusting macroeconomic targets and policies in response to shocks may have been warranted; failure to adjust timely highlighted need for fiscal discipline, effective oversight over the expenditure chain, and flexibility in macroeconomic and development plan design. - Capacity building and ownership: - Capacity building and strong ownership of technical assistance recommendations are essential for reform progress; some reforms (e.g., customs administration and TSA) were initiated without ensuring implementing capacity or political will. - Institutional stability and coordination: - High managerial turnover at the Ministry of Finance slowed reform implementation. - Co-management of debt by the Ministry of Finance and the Ministry of Planning created difficulties in coordinating and monitoring debt operations. ### Authorities’ response - Authorities broadly concurred with staff’s assessment of the Fund-supported program. - Authorities acknowledged the adverse impacts of exogenous shocks on program performance and emphasized the importance of flexibility in government policy to respond to such shocks. - Authorities expressed intent to incorporate lessons learned into the proposed new program. *Prepared by IMF staff (Victor Davies; reviewed by Salifou Issoufou) based on the 2012-16 ECF-supported program assessment.* ### Annex Table 4. Niger: Structural Reforms under the 2012-16 Program (continued) ### Annex Table 4. Niger: Structural Reforms under the 2012-16 Program (continued) ### Structural reform measures (items 22–39) - 22. Census of accounts for the TSA - 23. Adopt the design of the TSA - 24. Put in place the one-stop shop for the investment code - 25. Limit expenditure not authorized in advance to a maximum of 5 percent of committed expenditure, with the exception of debt-service payments and fiscal expendit related to exemptions. - 26. Operationalize the custom electronic transit. - 27. Finalize a study on the introduction of the investment budgeting in commitment, authorization, and payment credit. - 28. Prepare a comprehensive procurrement plan to match a commitment plan anda a cash plan. - 29. Adopt and send to the parliament the draft revised budget for 2016 in line with the program. - 30. Create an Interministerial budgetary regulation and cash management committee - 31. Submit a draft report of the 2015 budget execution. - 32. Submit the quarterly commitment plan for Q3 consistent with the corresponding cash plan - 33. Migration to ASYCUDA (SYDONIA) World. - 34. Establish a steering committee for implementation of the financial sector development plan - 35. Introduce quarterly reports on debt mangemen activities to be submitted to the National Public Debt Management Committee. - 36. Limit expenditures executred through exceptional proecedures to a maximum of 5 percent of authorized spending, with the exception of debt service payments and budget expenditure associated with exemptions. - 37. Establish the legal framework for the closure of public accounts to be consolidated under the TSA. - 38. Prepare a borrowing plan. - 39. Completion of the civil service staff biometric census. ### Implementation status snapshot (as presented) - 2015 / 2016: numerical entries shown as 22, 13, 3 (context: table columns/rows in source) - Status labels shown: Met / Not Met / Met with Delay ### Annex Box 1 — Capacity Building: main findings and recommendations - IMF capacity building efforts supported effectively the authorities’ macro-critical objectives, focusing on customs and tax administration and public financial management (PFM). - Technical assistance also aimed at enhancing capacity of the National Institute of Statistics and improve debt management for coverage and completeness. - IMF technical assistance and training to Niger has however been moderate relative to the median for fragile states or LICs. - IMF technical assistance increased significantly in 2012-13 in support of: the implementation of the 2009 WAEMU PFM directives; the taxation of natural resources; and the conduct of the 2012 Public Expenditure and Financial Accountability (PEFA) assessment. - Coordination with other capacity building providers was critical; Niger received support from UNDP, the WB, the AfDB, and the EU under the 2012-15 PFM reform program. - Coordination weaknesses: donors’ support for the introduction of the medium-term expenditure framework (MTEF) and the investment budgeting in commitment authorization and payment credit was weak. - Implementation of technical assistance recommendations has been slower than expected: - Recommendations in revenue administration were implemented loosely. - Treasury management reforms (notably Treasury Single Account, TSA) were repeatedly postponed, reflecting low capacity and a lack of clear strategy. - A project for a FAD long-term resident advisor is being set up to speed up treasury management reform, in particular the TSA implementation. - Recommendations: - Continue technical assistance in line with macro-critical objectives, but be more demand-driven and reflect implementation capacity. - Deploy resident advisors in a few key PFM reform areas to assist coordination, knowledge transfer, and ownership of reforms. - Improve donor coordination in PFM through a donor technical assistance coordination matrix. ### Letter of Intent — key commitments and request (Niamey, December 21, 2016) - Program context and objectives: - New economic and financial program (2017-20) builds on 2012–16 program lessons; primary objective is preservation of a sound macroeconomic framework, in particular through a prudent debt policy. - Program aims to broaden the tax base, strengthen public financial and debt management, enhance monitoring of natural resources, consolidate the financial sector, and improve the business environment. - Emphasis on domestic revenue mobilization, streamlining spending, and diversification of the production base to increase resilience and finance development programs while maintaining a sustainable debt level. - Tax and public enterprise policy: - Commit to rationalizing the tax exemptions policy and introduce reforms in the management of public enterprises and concessions. - Debt policy: - Government committed to pursue a prudent debt policy and will limit loans contracted or guaranteed on non-concessional terms as prescribed in the Fund’s Debt Limits policy. - IMF engagement: - Government ready to consult with Fund staff before adopting additional measures or revisions to MEFP policies and to provide information for monitoring per the Technical Memorandum of Understanding (TMU). - Financial request: - Requests IMF support under the Extended Credit Facility (ECF) for a three-year program. - Requests financial assistance of SDR 98.7 million, equivalent to 75 percent of quota, and an initial disbursement of SDR 14.1 million (10.7 percent of quota) following approval of the arrangement by the Executive Board. - Publication consent: - Government consents to publication of the Letter of Intent, the MEFP, the TMU, and the IMF staff report after adoption of the ECF arrangement by the IMF Executive Board. ### Memorandum of Economic and Financial Policies — selected results and recent economic trends - Program implementation 2012–16: - Program performance was broadly not in line with expectations; the three-year arrangement begun on March 16, 2012, was extended to 2016. - Repeated terrorist attacks by Boko-Haram increased military and humanitarian spending and disrupted production and border trade. - Drop in uranium prices and fall in international oil prices since end 2014 adversely affected performance. - Revenue losses from reduced re-exports to Nigeria and declines in traditional exports undermined budget execution and some fiscal targets, including domestic payment arrears and domestic financing. - Delays in structural reforms occurred, notably in setting up the TSA. - Positive outcomes: - Macroeconomic stability maintained; growth sustained; inflation contained. - Coverage of foreign reserves remained satisfactory. - Program indicative target for poverty reduction spending observed in some reviews. - Incidence of poverty fell to 45.4 percent in 2014 from 48.2 percent in 2011. - Child mortality declined. - Noted progress in modernization of tax and customs administrations, management of public expenditure (adoption of regulations to implement the program budget), framework for inclusive finance development, supervision of natural resources sectors, and business climate improvements. - Remaining challenges: - Economy vulnerable to shocks; rising debt though debt risk rating remains moderate. - Need to strengthen resilience via diversification and improved fiscal management. - Need to increase domestic revenue mobilization and better manage public expenditure. - Many MDG targets unmet; Human Development Index remains very low. - Recent economic developments (selected statistics): - Agriculture production up by nearly 8 percent in 2016 (good yield for irrigated crops). - Growth expected to rise from 3.5 percent in 2015 to 4.6 percent in 2016. - At end-September, inflation was contained at an annual average of 1 percent; average inflation rate for 2016 expected to be around 1.1 percent. - Broad money in the nine months through September 2016 increased by 9 percent. - Official net foreign assets decreased by 20 percent. - Credit to the private sector increased by 9 percent in the first three quarters of 2016. - Credit to the government increased by FCFA 98 billion in the same period. - Current account deficit: 18.1 percent of GDP in 2015; projected to decrease to 15.4 percent of GDP in 2016. - Overall balance of payments projected positive with a slight increase in international reserves of CFAF 40 billion in 2016. - External position covers 4.2 months of next year imports of goods and services. - Budget execution: at end-September 2016, basic deficit of 1.4 percent of GDP higher than projected. - Deficit financed by more domestic resources (by 1 percent of GDP) and larger accumulation of domestic payment arrears (by 0.2 percent of GDP). - Shortfall in revenue at end-September: CFAF 87 billion (2 percent of GDP); revenue down by CFAF 79.1 billion compared to 2015. - Tax revenue shortfalls: - Shortfall valued at CFAF 11.9 billion (0.3 percent of GDP) at end-June 2016; reached CFAF 87 billion (2 percent of GDP) at end-September 2016. - DGI shortfalls: CFAF 32.9 billion (taxes on goods and services, VAT, mining royalty, superficial royalty, domestic tax on petroleum products, excise taxes) and CFAF 20.5 billion (income tax). - DGD (customs) shortfall: CFAF 26.2 billion (decline of VAT and other customs duties). - Non-tax revenue was in line with projections. *Source: IMF.* ### 12. Despite security pressures, spending was contained at end-June 2016. Current ### 12. Despite security pressures, spending was contained at end-June 2016. Current ### Spending execution and budget outcomes (end-June to end-September 2016) - At end-June 2016: - Current expenditures were lower than projected by CFAF 13.8 billion. - Savings recorded in all spending categories except wages. - Wage bill overrun of CFAF 3.2 billion driven by new hiring in priority sectors, security and back pay. - Capital expenditures executed on domestic resources were lower than projections by CFAF 13.4 billion. - Streamlining measures included eliminating fictitious employees and dualism identified by HALCIA, streamlining back pay, and stopping unsubstantiated payments of allowances (responsibility, family, desert area, etc.). - At end-September 2016: - Domestic financing was higher by CFAF 35.3 billion relative to projections. - Government paid off outstanding arrears accumulated before end-2014 amounting to CFAF 17.4 billion that could not be paid by end-2015, but accumulated about CFAF 10 billion more in arrears. - Budget support mobilization amounted to roughly CFAF 28.6 billion, CFAF 7.4 billion lower than projected; composition included grants of CFAF 17.6 billion from Saudi Arabia and CFAF 1.8 billion from Nigeria, and loans of CFAF 9.2 billion from the French Development Agency (AFD). - Most scheduled financing expected to be disbursed in the last quarter of 2016. ### Medium-term outlook and risks (2017–20) - Growth and activity: - Growth projected to increase to 5.2 percent in 2017. - Average growth over 2017-20 expected to reach 5.9 percent, supported mainly by agriculture investments, major road infrastructure projects, Cotonou-Niamey-Ouagadougou-Abidjan railway loop, oil pipeline construction scheduled in 2020, Salkadamna energy project, Garadawa and Kao cement plants, resumption in 2017 of Kandadji hydroelectric and agricultural dam construction, and upgrades of Diori Hamani International Airport. - Niger expected to benefit from gradual improvement in Nigeria. - Inflation and external sector: - Inflation expected to remain contained below the WAEMU convergence criterion, at less than 3 percent annual average. - Current account projected to deteriorate slightly in 2017-19 then improve gradually; current account deficit projected to increase to 18.3 percent of GDP in 2017 and remain high until 2019 due to low exports in absence of higher prices for uranium, oil, and gold. - Key risks: - Climate shocks. - Shocks to crude oil export price and possible delays in oil pipeline construction. - Deteriorating security tensions in the sub-region. ### Medium-term objectives and policy priorities - Government aims tied to the Economic Development Document (EDD, 2016-20): - Strengthen spending management and domestic revenue mobilization to secure financing of development projects and safeguard debt viability. - Sustain investment under the 3N Initiative to increase and diversify agricultural production and resilience. - Invest in priority infrastructure (energy, transportation) to overcome landlocked constraints and improve competitiveness. - Diversify production by enhancing the business environment. - Boost technical skills and strengthen institutional and administrative capacities. - Fiscal structure and projections: - Budget execution realism emphasized to avoid arrears accumulation and overreliance on domestic financing. - Spending expected to remain elevated due to security and humanitarian needs. - Budgetary revenue projected to level from 15.3 percent of GDP in 2016 to 17.5 percent of GDP in 2019; with a sizable increase starting in 2020 as crude oil exports begin to reach 19.1 percent of GDP. - Current spending to stabilize at an average of 14 percent of GDP in 2017-20. - Investment spending using domestic resources projected to rise from 5.3 percent of GDP in 2016 to an average of 6.5 percent of GDP in 2017-20. - Basic deficit after widening to 4.9 percent of GDP in 2017 should decrease to 0.9 percent of GDP in 2020. - Overall balance including grants projected to decline from 7.4 percent of GDP to 2.9 percent of GDP over the same period. ### Program performance, reforms, and public financial management actions (2016) - Program compliance (end-June 2016): - All program performance criteria met at end-June 2016, including continuous criteria on non-accumulation of external arrears and nonrecourse to non-concessional external loans or guarantees, and quantitative criteria on net domestic government financing and net reductions in domestic arrears. - Indicative target for domestic revenue was not achieved at end-June 2016. - Indicative target for the basic balance was observed. - Poverty reduction targets not fully met due to curtailed spending. - Structural benchmarks observed: - DGB produced quarterly budget execution reports regularly. - Quarterly debt management reports prepared and submitted to the Inter-Ministerial Committee for Monitoring Debt Policy and Negotiating Budgetary Aid. - Payments by anticipation remained below 5 percent target: 2.9 percent of authorized spending at end-March 2016, 2 percent at end-June, and 2.9 percent at end-September 2016. - Borrowing plan for 2017-20 prepared. - Structural benchmarks delayed: - Treasury Single Account (TSA) statutory framework for closing government accounts was not finalized as scheduled in late-June 2016; draft management convention unsigned though BCEAO comments incorporated. - Selection by Procurement Directorate of banks to serve as government cashier in areas not covered by BCEAO in progress. - Impact assessment study on commercial banks for transferring government accounts to the TSA not yet started. - Annual procurement plan benchmark not observed due to weak capacity; commitment and cash plans for Q3 and Q4 were elaborated. - Biometric database for all civil servants (World Bank support) delayed; expert hired October 15, 2016, began work in November preparing roadmap and consultant specifications. ### Revenue administration, customs, and other revenue measures - Customs modernization (DGD): - Migration to ASYCUDA World effective since April 2016 for first six interconnected offices; expanded to other fully operational offices except Agadez and Arlit (no fiber optic coverage). - Offices covered by ASYCUDA World collect 90 to 95 percent of customs revenue; now interconnected and electronic transit operational. - Transfer of bonded warehouse management to private sector begun (Niamey Rive Droite transferred to Bolloré in July 2016); further transfers contracted to Chamber of Commerce. - Measures underway include tracking systems (PPP contract signed), interconnection with regional customs systems (Togo and Benin), and a one-stop shop for vehicle customs clearance. - Tax administration and VAT: - Arbitration Committee for Tax Appeals (CARFI) became operational in August 2016 (launched May 31, 2016). - Communication with taxpayers strengthened (Third National Taxpayer Day; newsletter Le Fisc). - Measures to operationalize VAT credit reimbursement per May 6, 2016 order: “refundable VAT” escrow account opened at the BCEAO; funds to be added monthly by withholding 5-10 percent of VAT revenue collected by DGE office. - DGI to review VAT reimbursement requests and design reimbursement plan after creditor consultations; DGI strengthening audit in sectors such as banking and telecommunications. - Non-tax revenue and arrears management (DGTCP): - Survey identified 134 non-tax revenue niches; 37 established as collection agencies with managers appointed. - French cooperation funding to support training in November 2016. - Tamper-proof booklets made available to increase revenue collected by police, gendarmes, and water and forests. - Second phase securitization of 2014 arrears converting CFAF 38.8 billion of short-term securities into five-year Treasury notes completed in early November 2016. - Discussions with local banks to securitize a portion of 2015 domestic payment arrears (CFAF 40 billion) under way. - Public financial management reforms: - Preparations for introducing program budget starting in 2018 in accordance with DGB roadmap; EU backing for IT hardware and software. - National Assembly adopted 2012, 2013 and 2014 budget review laws in April 2016; 2015 budget review law submitted for adoption. - PEFA review finalized in December 2016, basis for new PFM reform strategy. - Cash management and arrears prevention: - Realistic commitment and cash plans prepared for Q3 and Q4 2016. - Inter-Ministerial Budget Regulation Committee established by Order No. 0094/PM of June 15, 2016, with a Technical Committee for Budget Regulation and Cash Management to regulate appropriations, commitments and payment authorizations consistent with available cash and revenue projections. ### Fiscal policy actions and projections for 2016–2017 - Fiscal policy for rest of 2016: - Government stepped to contain the basic deficit to 4.4 percent of GDP in 2016. - Revenue level for 2016 reduced to CFAF 676.6 billion (15.3 percent of GDP), a decline of CFAF 92.1 billion compared to 2015 and CFAF 114.5 billion (2.6 percent of GDP) compared to initial projections. - Cabinet ordered a freeze of budgetary credits on November 1, 2016 totaling net CFAF 89.6 billion, including CFAF 48.2 billion in current expenditures. - Basic deficit at end-2016 would deteriorate by CFAF 24.3 billion (0.6 percent of GDP), financed by increased domestic financing of CFAF 14.3 billion and additional accumulation of domestic payment arrears of CFAF 10 billion. - Arrears clearance: - Stock of domestic payment arrears accumulated in 2015 (CFAF 71.7 billion) planned to be cleared in 2016 via securitization with local banks (CFAF 40 billion) and by bond in regional financial market; securitization delayed and arrears expected to be cleared in first half of 2017. - Net reduction in domestic arrears at end-2016 projected at about CFAF 8.4 billion. - Fiscal framework for 2017: - Basic deficit targeted at CFAF 235.9 billion (4.9 percent of GDP). - Domestic revenue projected at CFAF 770.8 billion (16.1 percent of GDP). - Domestically financed spending projected at CFAF 1,006.7 billion (21.1 percent of GDP). - Total revenue projected to increase by 0.8 percent of GDP compared to 2016; tax revenue increase of 0.6 percent of GDP. - Tax revenue projected at CFAF 721.3 billion (15.1 percent of GDP), an increase of 12.4 percent over 2016. - Revenue mobilization measures (2017): - Customs: certification of value for admissibility of customs declarations; requirement of Tax Identification Number (NIF) for all importers; management of bonded warehouses transferred to private sector; start of single automobile window (GUAN) with SONILOGA; tracking system with GEOTRACK; interconnections with Benin and Togo. - Tax: finalization of VAT credit reimbursement measures; streamline taxpayer management in Directorate of Large Enterprises (DGE); strengthen tax audits and collection. - Treasury: non-tax revenue expected to increase by CFAF 11.3 billion (0.2 percentage of GDP) relative to 2016 through strengthened inspections, expanded collection agencies and Treasury prepayment facility managers in registry offices. - 2017 draft budget law requires branches of foreign companies to prepare accounts and be subject to income tax (ISB); revenue targets to be assigned to revenue agencies. - If revenue exceeds projections, government will discuss with IMF staff the possibility to incorporate higher revenue into a revised budget. *Source: IMF staff report chapter on Niger fiscal and macroeconomic developments (excerpts).* ### 33. Domestically financed spending is set to increase by 1.5 percentage of GDP. This level of ### 33. Domestically financed spending is set to increase by 1.5 percentage of GDP. This level of ### Fiscal spending and composition - Domestically financed spending is set to increase by 1.5 percentage of GDP. - Current expenditures are projected to increase by 0.2 percentage of GDP, to 14.6 percent of GDP compared to 2016. - Increase mostly reflects the rise in interest on the domestic debt of 0.1 percentage of GDP issued in the regional financial market in recent years. - Current primary expenditures: - Expected to stabilize with a 0.3 percent of GDP increase in spending on goods and services to account for items related to security spending. - Wages and salaries are expected to decline by 0.3 percent following measures to control the wage bill. ### Measures to further stabilize expenditures - Curtailment measures: - Curtailing water and electricity supplies and telephone consumption. - Eliminating ghost workers and unjustified allowances. - Streamlining back pay that cost CFAF 9 billion at end-October 2016. ### Investment spending - Investment spending is expected to increase substantially. - Domestically financed capital spending is projected at 6.5 percent of GDP. - This represents an increase of 1.2 percent of GDP over 2016. - Increase reflects current investments in infrastructure and social sectors. - Investments using external financing projected to increase by 0.1 percent of GDP due to efforts to collect external resources and improve absorption capacity. - Investment priorities (reaffirmed in the EDD development strategy): - (i) the security of goods and persons; - (ii) urban, village and rural water systems; - (iii) continuation of the 3N initiative and food security; - (iv) infrastructure and energy; - (v) education and health. ### Budget framework and financing for 2017 - The 2017 budget framework is fully funded. - Basic budget deficit: CFAF 235.9 billion. - Net decrease in arrears projected in 2017: CFAF 43.4 billion. - Financing composition: - Budget support projected at CFAF 92.4 billion, including: - European Union grants: CFAF 43.1 billion. - France grants: CFAF 6.5 billion. - Other donors: CFAF 5 billion. - Concessional loans: World Bank CFAF 29.1 billion; African Development Bank CFAF 8.7 billion. - Net Treasury bond issuances limited to CFAF 116.7 billion. - CFAF 40 billion in bonds to be issued with local banks to absorb the arrears from 2015. - CFAF 60 billion from implementation of PPP contracts included in non-banking domestic financing. - IMF resources under the ECF intended to cover the residual financing gap. ### H. Medium-Term Tax Policy — Exemptions and tax expenditures - Exemptions have increased from CFAF 194 billion in 2012 to CFAF 300 billion in 2015, an increase of around 50 percent. - DGI average exemptions (2012–2015): CFAF 86 billion. - Customs exemptions rose from CFAF 85 billion to CFAF 222 billion, including exemptions connected with security operations. - Public-private partnership contracts have broadened the scope of exemptions, increasing revenue losses. - Management of exemptions remains problematic: imputations and flows are difficult to trace. - Frameworks granting exemptions include: - Investment code (most common), 2006 mining code, petroleum code, government agreements in natural resources, and agreements with NGOs. - Public enterprises are among beneficiaries (energy, water, distribution sectors). ### Government commitments on exemptions and public enterprises - Commitments: - Take stock through an effective assessment of tax expenditures. - Repatriate tax provisions in sectoral codes into the General Tax Code and General Customs Code for consistency. - Improve transparency and financial information and governance of public enterprises. - Conduct a full audit of some large public enterprises with partner support. - Planned 2017 activities for public enterprises: - Prepare a list of all public enterprises by end-March 2017. - Evaluate direct and indirect subsidies to public enterprises by end-June 2017. - Prepare an action plan for financial and operational audits of key public enterprises by end-July 2017 (structural benchmark). - Finalize study on electricity pricing and proposals to the government by June 2017. ### I. Structural reforms — Domestic revenue mobilization and customs - Objective of structural reforms: improve domestic tax collection; strengthen public financial management, debt and natural resources management; strengthen financial sector; improve business climate. Customs reforms and governance: - Steps to strengthen customs operations: - Reduce time needed for customs tax operations clearance; outlaw delays incompatible with ASYCUDA World. - Strengthen customs cooperation and regular information exchange in the sub-region. - Conduct monthly risk-based checks using international customs cooperation arrangements until interconnection with partner ports. - DGD to operationalize interconnections with Togo and Benin customs by end-July 2017 (structural benchmark). - Require all importers to have a tax identification number (NIF); restrict occasional importer status to non-commercial importers. - Strategic reforms already initiated: - Revision of the General Customs Code (awaiting validation and adoption by National Assembly). - Drafting of a manual of procedures to be finalized after adoption of the General Customs Code (parliament second regular session, September–December 2017). - Adoption in April 2016 of draft law amending Law No. 2013-31 of July 4, 2013 on Autonomous Status of Customs Employees. - Restructuring order signed August 2015 revised after cabinet reshuffling. Customs IT and facilitation: - IT upgrade objectives and timelines: - Implementation of IT development plan: contracts awarded for interconnection and acquisition of systems to be completed by end-March 2017. - Interconnection of all customs units to single server beginning July 2017. - Extension of electronic customs transit to all main full-service customs posts by end-July 2017 (structural benchmark) once interconnection completed. - Full migration from ASYCUDA++ to ASYCUDA World to be completed at end-December 2017 with World Bank financial support and UNCTAD technical support; hardware financed by Niger government computer royalty funds. - Strengthen computer monitoring of exemption management via ASYCUDA World migration. - Customs facilitation and anti-fraud measures: - Resume study on release with MCC support to reduce customs clearance delays. - Advance customs clearance following ASYCUDA World migration. - Strengthen administrative assistance with Benin and Togo via interconnection. - Adopt risk-based scheduling of inspections and strengthen inspection teams by end-March 2017. - Start operations of the single customs clearance window for vehicles (GUAN) starting November 2016 in Niamey. - Improve cargo monitoring using tracking systems to prevent export diversion and fraud. - Expand Bolloré activities to Dosso bonded warehouses and implement convention with Chamber of Commerce for other bonded warehouses starting January 2017. - Improve monitoring of re-exports to Nigeria by constructing a 49-hectare parking space in Maradi near the Nigeria border. ### DGI (Directorate General of Taxes) reforms to improve tax collection Major reforms and actions: - Enhance capacity-building through ongoing staff training. - Strengthen territorial coverage: - Establish two new tax centers and two tax revenue facilities in Niamey by end-June 2017. - Expand authority of the DGE and DME: - Extend DGE and DME authority to all eligible businesses regardless of location in Niamey by end-March 2017. - Transfer to the DGE all taxpayers with a CFAF 500 million yearly turnover threshold (about 120 companies) by end-January 2017 (structural benchmark). - Transfer management of NGOs to the DME from the DGE. - Implement VAT credit refund mechanism: - Escrow account for reimbursing VAT credits opened at the BCEAO; funded by withholding 5-10 percent of VAT paid to the DGE. - DGI steps to fund account and begin clearing stock of VAT credits estimated at CFAF 22.1 billion at end-October 2016. - Stock of VAT credit at end-2016 to be prepared and reimbursement mechanism made operational by end-March 2017 by end-January 2017 (structural benchmark). - Prepare schedule for quarterly reimbursements in consultation with VAT creditor companies. - Continue SISIC (Computerized Tax and Taxpayer Monitoring System) implementation: - Company hired in September 2015 to computerize operations and develop the information system. - Another company hired in March 2016 to train staff in system use. - World Bank support through PRAAC to clean up the NIF file. - Revitalize DGI-DGD inspection teams and decentralize tax auditing. Additional DGI measures and organizational reforms: - Full computerization of services via SISIC. - Monitor activities of the Tax Appeal Arbitration Committee (CARFI). - Study to strengthen statistical framework and administrative circuit of tax base. - Improve taxpayer file and monitoring; strengthen research and investigations and regularly update the NIF. - Make more use of ASYCUDA World information on taxpayers’ imports. - Publish results of DGI/DGD joint control team. - Reorganization: - April 29, 2015 order No. 0157 defined organization scheme of central and local DGI offices. - November 2015: 117 staff assigned to the DGI. - Transfer of taxpayers and improved enterprise database management to improve default rates and spontaneous declaration rates. - Default rates and targets: - Default rate in the DGE remains about 2 percent. - DME default rate: declined from 17.5 percent in 2014 to 12.1 percent in 2015. - Returns with payment: 18 percent for the DGE and 4 percent for the DME. - DME target to reduce average default rate to around 10 percent compared to 12 percent at end-2016 and 20 percent at end-2015. - Inspections to identify issues for significant default payments. - Reorganization of tax audit processes: - New organization chart to make units more dynamic and establish risk-based auditing. - Joint customs-tax administration team auditing 40 files. - Creation of regional investigation and research teams at eight (8) regional directorates. - Gradual decentralization of tax audits to management units; DCF to assume strategic management role. - Pilot experiment at the DME to be widely rolled out by end-December 2017. ### Strengthening internal control, audit, and treasury management (DGTCP) - Reinforce staff resources to improve internal control and audit. - Strengthen partnership between DGTCP and Court of Auditors to better monitor revenue collectors and publish procedural manuals. - Pilot projects to improve operational efficiency in internal audit at DGE, Niamey 2 center, and Niamey 3 revenue office, to be extended to all DGI offices. - DGTCP actions for 2017: - Regularly monitor and update dormant or inactive accounts; close dormant accounts and transfer credit balances to the TSA. - Regularly monitor and update balances of government accounts in commercial banks. - Implement legal framework for the Treasury Single Account (TSA), including: - Sign account management agreement with the BCEAO by end-June 2017. - Sign three-party convention with the government’s cashier bank(s) for areas not covered by BCEAO by end-June 2017. - Close all accounts in the commercial bank that are covered by the TSA (structural benchmark). - Acquire hardware for interconnection BCEAO-DGTCP (SICA and TSAR). - Finalize securitization operation for arrears accumulated in 2015 (CFAF 40 billion) by end-September 2017. - Put in place Treasury payment facilities managers in registry offices to improve collection of non-tax revenue. *Source: cr1759 - 33. Domestically financed spending is set to increase by 1.5 percentage of GDP. This level of* ### 53. Budget execution regulation and cash management will be enhanced. To eliminate ### cr1759 - 53. Budget execution regulation and cash management will be enhanced. To eliminate ### Budget execution regulation and cash management - Strengthened in June 2016 by establishing: - the Inter-Ministerial Budgetary Regulation Committee; - the Technical Budgetary Regulation Committee and Monitoring of the Government Treasury. - Objective: match immense spending needs with limited and often very uncertain resources by establishing realistic commitment and cash plans that stakeholders concur on. - Government commitments: - Ensure procurement plan is prepared in sufficient time for the budget to be in place at the beginning of the year. - Make preparation of procurement, commitment, and cash plans systematic as essential tools for regulating the expenditure chain. - Information improvements: - An integrated table on the execution of budgetary expenditures will show quantitatively the movement of credits voted by Parliament, by nature, between the DGB and the DGTCP. - The DGB will prepare this table in conjunction with the DGTCP to ensure consistency and facilitate reconciliation. ### Priority measures to be implemented in 2017 - Prior actions and structural benchmarks: - Adopt the 2017 draft budget law in accordance with the budgetary program for 2017 described in paragraphs 30 and 31 (prior action). - Validate by the Directorate General of Procurement Supervision and Financial Commitments the procurement plan for 2017. - Produce the commitment plans and quarterly cash plans for the Inter-Ministerial Budgetary Regulation Committee and send it to the IMF staff (structural benchmark). - Produce quarterly budgetary execution reports regularly (structural benchmark). - Prepare the Multiyear Budgetary and Economic Programming Paper (2018-20 DPBEP) by end-May 2017 and submit to the National Assembly by end-June 2017 (structural benchmark), supplemented by the Multiyear Expenditures Programming Papers (2018-20 DPPD) (structural benchmark). - Human resources and payroll measures: - Eliminate the duplicates and fictitious employees identified by HALCIA and eliminate unjustified allowances. - Select two firms to assist with civil service reform by June 2017; both firms to: (i) reform the statutory framework for managing the public service; and (ii) develop integrated Pay-Civil Service databases based on a comprehensive biometric census of civil servants. Final reports by end-December 2017. - Identify procedures of paying wages through the financial system in agreement with the bank and microfinance institutions by end-June 2017. - Other fiscal controls and timing: - Limit expenditures with no prior authorization to a maximum of 5 percent of total authorized expenditures (indicative target for each quarter). - Avoid overlap between fiscal years by: (i) implementing provisions for stopping commitments in relation with the complementary period; (ii) shortening the complementary period from three months to one, in line with the WAEMU directives; and (iii) preparing by line ministries procurement plans and flexible credit commitment plans so the Ministry of Finance can prepare comprehensive procurement and commitment plans and a government cash plan. ### Public financial management reforms and systems - Continue implementing the 2009 WAEMU public financial management directives. - DGB prepared a roadmap to implement the program budget expected with the 2018 budget law. - Preparatory stages for implementing the program budget include: (i) preparation in 2017 of the 2018 budget in program format; and (ii) implementing the 2018 budget in program format. - A dedicated unit for implementing the public finance reform was established in the DGB in December 2016. - Strengthen budgetary procedures and deconcentration: - Public expenditure chain deployed in main ministries that execute about 80 percent of public expenditures to reduce spending delays and enhance budget deconcentration. - Budgetary transparency: - Quarterly budgetary execution reports will continue to be produced regularly (structural benchmark) as well as implementation status of pro-poor expenditures. - Budget review laws will continue to be produced on time. - Control the wage bill and human resources management: - From 2010 to 2015, civil servants rose from 48,237 to 75,597, a 56.7 percent increase, largely for education, security and health services. - Government recognizes necessity to streamline hiring to control impact on the wage bill. ### Treasury Single Account (TSA) and computerization - Implement a Treasury Single Account (TSA) per conceptual blueprint adopted in September 2015; target to establish TSA by end-September 2016, with capacity constraints. - An IMF expert, using European Union funding, will be hired to support the unit implementing the TSA. - Computerize the expenditure chain: - Program to adapt computer systems for budget preparation, management and execution, and public accounting in line with WAEMU directives. - Technical assistance funded by the European Union to update or revamp the public finance computer system managed by the Financial Data Processing Directorate. - First phase foresees 8 major deliverables (in budget programming, sectoral program budgets, and public accounting). - Budget execution aspects to be covered after detailed analysis of deconcentrating authorization. - Government will set up an interface between the DGTCP and the DGB to improve monitoring of payment arrears. ### Debt management - Institutional strengthening: - Implemented institutional framework for June 18, 2015 decree on monitoring public debt policy and negotiating budgetary aid to strengthen procedures, eliminate risks of noncompliance with criterion on new non-concessional loan agreements, and contain impact of new loans on sustainability. - Update medium-term external borrowing plan after adoption of PDES 2017-21 action plan; plan will include: (i) investment strategy and list of investment projects; (ii) sources of funding; (iii) uses of financing; and (iv) debt management strategy considering debt, fiscal, and external sustainability. - Borrowing plans prepared in line with national debt policy established with technical assistance from the World Bank and the IMF. - Oversight and reporting: - Inter-Ministerial Committee for Monitoring Debt Policy and Budgetary Support Negotiation will continue to review all new loan agreements, guarantees, financing in natural resources sector, and PPP agreements; its review is prerequisite for Council of Ministers approval. - Government plans to provide IMF staff detailed quarterly reports on outstanding public debt, new commitments and borrowing (including disbursements) and public debt service (structural measure). - Restructuring and specific cases: - Plan to restructure certain contracted debts not yet used based on AFRITAC West report findings. - Government planning to review the US$1 billion loan contracted with the Export-Import Bank of China; National Assembly approved this loan in June 2014. Procedures required for restructuring will be presented by June 2017. - Borrowing policy: - Continue to limit government guarantees and carefully assess new borrowing impact on debt sustainability; intend to finance investment projects with concessional resources and limit borrowing to high-yield, properly evaluated projects. - If concessional resources are insufficient, government will consult IMF staff about modifying financial program to include non-concessional borrowing compatible with debt sustainability. - PPPs: - Requested IMF technical assistance to strengthen institutional framework governing PPPs and will refrain from engaging in new PPPs that require fiscal contributions. - Risks: - Debt obligations continue to grow very rapidly with significant borrowing costs; pace of borrowing could pose major risks to the banking system given current program for issuing Treasury bills and bonds. ### Natural resources and energy sector management - Mining and mineral export diversification: - Policy to encourage exploration beyond oil and uranium to coal, limestone, gold; require security deposit with a local bank when permits are granted to secure signing bonus payments. - SOPAMIN’s role strengthened to better defend Niger’s interests; World Bank support via PRAAC is assisting refurbishing of the national laboratory. - Uranium sector and mining agreements: - AREVA group mines maintained low production pending Imouraren Project delayed until 2021; one mining company shut down production in 2015 pending decisions on capital. - New mining agreements signed based on new mining code; low uranium prices mean tax benefits will be marginal. - Technical assistance from France to strengthen evaluation, projection, and control of mining revenue. - Gold production organization: - Renewed interest in small-scale gold production in Liptako region and northern Niger; government committee established to supervise producers, collect information, provide security, minimize environmental impact, and increase revenue contribution. - In April 2016, SOPAMIN transferred 75 percent of capital of Société des Mines du Liptako (SML) to a private operator. - Oil sector dynamics and pricing history: - Depreciation of CFAF and drop in oil prices increased input costs for refining and caused additional losses to SORAZ. - Government and partners adjusted selling price from CNPC to SORAZ: - from US$70 per barrel to US$57 per barrel in March 2015; - to US$50 per barrel in January 2015; - to US$47 in January 2016; - and finally to $US45 in July 2016. - Operational and infrastructure issues: - Agadem-Zinder pipeline was plugged in 2016, hindering SORAZ production for ten days; after resumption, production reached 20,000-21,000 barrels per days since September 2016. - Planned PPP (BOOT type) pipeline to ship refined products to inland Niger and Burkina Faso and Mali markets at a cost of about US$800 million, with no government guarantee; private developer to conduct feasibility study and government will share results with IMF staff. - Refinery export and pricing arrangements: - May 11, 2016 government decisions: - increase SORAZ selling price to SONIDEP for domestic consumption; - authorize SORAZ and SONIDEP to export refined products jointly, equitably sharing production in excess of local needs, based on an export floor price set monthly. - 2008 Production Sharing Agreement (PSA) addendum reflecting these terms was signed on August 15, 2016; SORAZ began export operations immediately. - Crude oil export prospects: - Crude oil exports expected to begin in 2020 given negotiation finalization for pipeline construction. - Discovery in Agadem allows for production of 80,000 barrels per day, of which 60,000 barrels per day for export, over an estimated time horizon of 25 years. - Chinese partner CNPC studies selected route via pipeline to connect to existing Chad-Cameroon pipeline; negotiations with Chad expected to establish NOTCO for construction and management; Niger’s participation arrangements being worked out; work could begin in 2017. - Energy sector governance and capacity: - Electricity code approved in April 2015 and adopted by National Assembly in May 2016; implementing regulations adopted in September 2016 including decree establishing regulatory agency ARSE and decree for third-party access to power transmission grid. - Projects to build solar power plants financed by French Development Agency, EU, and India expected to increase electricity supply and ease dependence on Nigeria, which provides 65 percent of Niger’s consumption. - Gourou-Banda thermal power plant: capacity of 100 MW, expected operational in early 2017; tests on four generators are being performed. - Audit of NIGELEC conducted in 2015 with World Bank assistance; study on pricing mechanism to be finalized by June 2017. - Niger declared “compliant country” under the Extractive Industries Transparency Initiative (EITI) in 2011; latest report on royalties and tax revenue for fiscal year 2014 published in 2016. - Mining and petroleum registries in two ministries are regularly updated and accessible to the public. *International Monetary Fund. cr1759.* ### 72. In spite of the progress that has been made in recent years, the development of the ### cr1759 - 72. In spite of the progress that has been made in recent years, the development of the ### Financial sector: current status and structural issues - Financial penetration (money supply to GDP) was "27 percent" in 2015 compared to "37 percent" for the average of the Sub-Saharan Africa countries. - Banking sector capitalization: 11 of Niger’s 12 banks fulfill the minimum capital requirement. - The Banking Commission placed the one bank not meeting the requirement under close monitoring, imposing: - restriction on its credit operations until the recovery of outstanding loans, - an order to increase its capital. ### Financial sector development strategy and institutional setup - Government committed to implement the financial sector development strategy based on the 2014-19 strategy document action plan. - In March 2016 the government established a steering committee attached to the Ministry of Finance, to be extended to the Ministry of Finance, BCEAO, and the Professional Association of Banks, among others. ### National Strategy for Financial Inclusion (SNFI) - Adopted in July 2015. - Consolidates results of the 2012 National Strategy for the Microfinance Sector (SNMF). - Overall cost for the five years (2016-20) implementation: "CFAF 34 billion", to be covered in part by donors. - Priority beneficiaries: small economic operators excluded from traditional banking, in particular women, young people, and other poor classes lacking access to basic financing for income-generating activities. ### Government withdrawal from the banking system (privatization and restructuring) - BOAD acquired "44 percent" of BRS; Raban Group (ORAGROUP) acquired "56 percent". - Restructuring of BIA to be completed with acquisition of government shares by Banque Centrale Populaire du Maroc (BCP); takeover delayed by negotiations with a private minority shareholder. - BAGRI (the agricultural bank): temporary administration lifted on "April 1, 2014" after nine months; new board and new executive director appointed. - Government progressing in contacts with BOAD and domestic/foreign private investors regarding transfer of the "65 percent" stake it holds in a portage operation. ### Business climate: institutional reforms and Doing Business progress - Government aims to make private sector the driver of diversification and sustainable growth; created institutional frameworks for public–private dialogue: - National Private Investors Board (CNIP) under the Prime Minister, - Permanent Consultative Committee (CPC) between the Ministry of Commerce and Private Sector Development and the Chamber of Commerce and Industry, - Technical committee and thematic groups to improve specific doing business indicators. - Result: Niger moved up "10 positions" in the 2017 Doing Business ranking, from "160th" in 2016 to "150th" out of "190" countries. ### Measures implemented to improve the business climate (selected actions) - (i) Opened the Business Center—Maison de l’Entreprise—and implemented an online governance system (e-Regulations). - (ii) Reduced procedures, time, and cost of business creation; issued July 2014 decrees: - standard model of corporate bylaws for limited liability companies (LLCs), - implementation of provisions of the Uniform Act of OHADA related to Commercial Companies and Economic Interest Groups. - (iii) Adopted law regulating credit information bureaus (BICs); set up Niger’s first BIC in "March 2016". - (iv) Facilitated cross-border trade via two orders signed in December 2014: - documents required for import/export of goods, - public transportation of goods, types of roadside inspections, checkpoints and redress mechanisms. - (v) Strengthened legal framework for settling commercial disputes through creation/operationalization of: - Niamey Commercial Court, - Niamey Mediation and Arbitration Center led by the Chamber of Commerce and Industry. ### 2017 business climate priorities (action plan items) - (i) Government domestic arrears payment program. - (ii) Clearance of the stock of VAT credits and improvement of the VAT credits reimbursement mechanism to avoid accumulating new credits. - (iii) Access and pricing of electricity. - (iv) Adoption by end-March 2017, with World Bank assistance, of the implementing regulations for the law on land tenure to streamline establishment of real estate titles and transfers of ownership. - (v) Study on para-fiscal and other taxes in the telecommunications and information and communication technologies sector in Niger, with World Bank support. ### Demographic dividend and gender initiatives - Measures to maximize demographic dividend by curtailing early marriage, increasing girls’ enrollment, and lengthening years of schooling. - Regional "Niamey Appeal" led to the "Sahel Women's Empowerment and Demographic Dividend (SWEDD)" project covering six countries (Burkina Faso, Côte d'Ivoire, Mali, Mauritania, Niger and Chad), with World Bank financing and UNFPA technical support. - Prime Minister launched SWEDD in Niamey in "November 2015". - Project coordination team to be put in place by end-"December 2016". - Activities to promote gender aligned with the 2008 national gender policy (being revised with UNFPA assistance). - Government will elaborate a new national gender policy to be shared with staff by end-"December 2017" (structural benchmark). ### Program monitoring, reviews, and conditionality - IMF Executive Board will monitor the program every six months based on quantitative monitoring indicators (Table 1) and structural benchmarks (Table 2 and 3). - First and second reviews based on performance criteria (PCs) and indicative targets (ITs) of end-"June 2017" and end-"December 2017", expected to be completed by end-"December 2017" and end-"June 2018" respectively. - Semi-annual reviews based on performance criteria at end-"June" and end-"December", and indicative targets at end-"March" and end-"September". - Authorities will submit statistical data and information in the Technical Memorandum of Understanding (TMU). - Government commitments during program period: - refrain from introducing or increasing restrictions on payments and transfers related to current international transactions without IMF approval; - refrain from introducing any multiple exchange rate practices; - refrain from entering into bilateral agreements that do not comply with Article VIII of the IMF’s Articles of Agreement; - refrain from introducing or strengthening restrictions on imports for balance of payments reasons. - The first semi-annual review of the program will be based on performance criteria at end-"June 2017". ### Key quantitative figures from Table 1 and program tables (selected exact figures) - Net domestic financing of the government (cumulative for each fiscal year) projections (Billions of CFAF): End-December 2016: "113.8"; End-March 2017: "62.0"; End-June 2017: "120.3"; End-September 2017: "186.6"; End-December 2017: "207.0". - Reduction in domestic payment arrears of government obligations (Adjusted criteria): End-December 2016: "-8.4"; End-March 2017: "10.0"; End-June 2017: "20.0"; End-September 2017: "10.0"; End-December 2017: "-43.4". - External budgetary assistance — Budget support (Memorandum item): End-December 2016: "14.3"; End-March 2017: "0.0"; End-June 2017: "0.0"; End-September 2017: "0.0"; End-December 2017: "92.4". - Ceiling on new external debt contracted or guaranteed by the government on concessional terms (ceiling): "800.0" (End-December 2016), then "350.0" for subsequent projected dates. - Continuous quantitative performance criteria (all zeros in 2017 projections): - Accumulation of external payments arrears: "0.0". - New external debt contracted or guaranteed by the government with maturities of less than 1 year: "0.0". - New non concessional external debt contracted or guaranteed by the government and public enterprises with maturities of 1 year or more: "0.0". - Indicative targets (Billions of CFAF): - Basic budget balance (commitment basis, excl. grants): End-December 2016: "-194.3"; End-March 2017: "-71.2"; End-June 2017: "-130.7"; End-September 2017: "-186.6"; End-December 2017: "-235.9". - Basic budget balance (commitment basis, incl. budget grants): End-December 2016: "-130.7"; End-March 2017: "-71.2"; End-June 2017: "-130.7"; End-September 2017: "-186.6"; End-December 2017: "-181.3". - Total revenue: End-December 2016: "676.6"; End-March 2017: "160.7"; End-June 2017: "353.4"; End-September 2017: "554.5"; End-December 2017: "770.8". - Spending on poverty reduction: End-December 2016: "356.8"; End-March 2017: "103.8"; End-June 2017: "222.2"; End-September 2017: "348.4"; End-December 2017: "487.5". - Ratio of exceptional expenditures on authorized spending (percent): "5.0" across projected dates. ### Repetitive structural benchmarks (Table 2, quarterly and annual) - Quarterly: - Release the quarterly budget allocation in the first month of each quarter based on the proposal of the regulation committee. (Improve budget and cash flow management.) - Prepare a quarterly commitment plan consistent with the corresponding cash plan. (Improve budget and cash flow management.) - Prepare quarterly debt management report to be validated by the National Public Debt Management Committee. (Improve debt management.) - Produce a quarterly report on VAT credit reimbursement. (Improve efficiency of the VAT.) - Annual (each year at end-June): - Prepare a Revised Borrowing Plan. (Improve debt management.) ### Proposed structural benchmarks for 2017 (Table 3, measures, timetables, rationale, and progress where indicated) - Prior Action: - Amend the 2017 budget already sent to the National Assembly, adjusting downward revenue in line with the program. — Timetable: Prior — Progress: Met. (Improve public financial management.) - Fiscal Policy and Revenue Administrations: - Broaden the jurisdiction of the large enterprises Directorate (DGE) of the DGI by transferring control of the identified "120" large companies previously under regional tax offices outside Niamey. — Timetable: End-January. (Improve tax collection and expand the tax base.) - Estimate the stock of VAT credits arrears and launch the VAT reimbursement mechanism using a share of the VAT collected by the DGE. — Timetable: End-March. (Improve fiscal management.) - Finalize the interconnection of the ASYCUDA world central server with all the main customs offices and the interconnection of the Niger customs office with those of Benin and Togo. — Timetable: End-July. (Improve tax collection.) - Public Financial Management: - Launch the process of establishing the 2018 budget under the program format by finalizing the required documents (DPBEP and DPPD). — Timetable: End-June. (Improve public financial management, enhance spending efficiency and control.) - Finalize the framework of the TSA by signing agreements with the BCEAO and the Commercial Bank on TSA management, and close all outstanding public accounts covered by the TSA. — Timetable: End-June. (Improve liquidity management.) - Other Structural Reforms: - Elaborate and submit an action plan for the audit of the major public enterprises. — Timetable: End-July. (Improve management of public enterprises.) - Send to the National Assembly a new law on public private partnership (PPP) consistent with the investment code and the 2012 budget law. — Timetable: End-December. (Align with existing laws.) - Submit to Staff the update of the 2008 national policy on gender. — Timetable: End-December. (Enhance gender equality.) ### Disbursements schedule under the ECF arrangement (Table 4, SDR amounts and dates) - SDR "14.1" — Executive Board Approval of the ECF Arrangement — Date: "January 23, 2017". - SDR "14.1" — Observance of June 30, 2017 performance criteria, and completion of the first review under the arrangement — Date: "October 31, 2017". - SDR "14.1" — Observance of December 31, 2017 performance criteria, and completion of the second review under the arrangement — Date: "April 30, 2018". - SDR "14.1" — Observance of June 30, 2018 performance criteria, and completion of the third review under the arrangement — Date: "October 31, 2018". - SDR "14.1" — Observance of December 31, 2018 performance criteria, and completion of the fourth review under the arrangement — Date: "April 30, 2019". - SDR "14.1" — Observance of June 30, 2019 performance criteria, and completion of the fifth review under the arrangement — Date: "October 31, 2019". - SDR "14.1" — Observance of September 30, 2019 performance criteria, and completion of the sixth and last review under the arrangement — Date: "January 8, 2020". - Total: SDR "98.7". *Source: International Monetary Fund, Memorandum and Technical Memorandum of Understanding (Niamey, December 21, 2016).* ### 3. Net domestic financing of the government is defined as the sum of (i) net bank credit to ### 3. Net domestic financing of the government is defined as the sum of (i) net bank credit to ### Definition of net domestic financing - Net domestic financing of the government is defined as the sum of: - (i) net bank credit to the government; and - (ii) net nonbank domestic financing of the government, including government securities issued in CFAF on the WAEMU regional financial market and not held by resident commercial banks, proceeds from the sale of government assets, and privatization receipts. ### Net bank credit to the government - Net bank credit to the government is equal to the balance of government claims and debts vis-à-vis national banking institutions. - Government claims include: - cash holdings of the Nigerien Treasury; - secured obligations; - deposits with the central bank; and - deposits of the Treasury (including regional offices) with commercial banks. - Government deposits with commercial banks are excluded from government claims insofar as they are used solely to finance externally financed capital expenditure. - Government debt to the banking system includes: - assistance from the central bank (excluding net IMF financing under the ECF); - the CFAF counterpart of the 2009 General SDR Allocation; - assistance from commercial banks (including government securities held by the central bank and commercial banks); and - deposits with the CCP (postal checking system). - The scope of net bank credit to the government, as defined by the BCEAO, includes all central government administrations. - Net bank credit to the government and the amount of Treasury bills and bonds issued in CFAF on the WAEMU regional financial market are calculated by the BCEAO. ### Net nonbank domestic financing - Net nonbank domestic financing includes: - (i) the change in the stock of government securities (Treasury bills and bonds) issued in CFAF on the WAEMU regional financial market and not held by resident commercial banks; - (ii) the change in the balance of Treasury correspondents’ deposit accounts; - (iii) the change in the balance of various deposit accounts at the Treasury; and - (iv) the change in the stock of claims on the government forgiven by the private sector. - Net nonbank financing of the government is calculated by the Nigerien Treasury. ### Quarterly targets and adjustment mechanism (2017) - The 2017 quarterly targets are based on the change between the end-December 2016 level and the date selected for the performance criterion or indicative target. - Adjustment: - The ceiling on net domestic financing of the government will be subject to adjustment if disbursements of external budgetary support net of external debt service and external arrears payments, including disbursements under the ECF, fall short of program projections. - If, at the end of each quarter of 2017, disbursements of external budgetary support fall short of the projected amounts at the end of each quarter, the corresponding quarterly ceilings will be raised pro tanto, up to a maximum of CFAF 15 billion. ### Reporting requirements (domestic financing) - Detailed data on domestic financing of the government will be provided monthly, within six weeks after the end of each month. ### Reduction of domestic payments arrears - Definition: - The reduction of domestic payments arrears is equal to the difference between the stock of arrears at end-2016 and the stock of arrears on the reference date. - Administration: - The Centre d’amortissement de la dette intérieure de l’Etat (CAADIE) and the Treasury are responsible for calculating the stock of domestic payments arrears on government obligations and recording their repayment. - Reporting: - Data on the stock, accumulation (including the change in Treasury balances outstanding), and repayment of domestic arrears on government obligations will be provided monthly, within six weeks after the end of each month. ### External payments arrears - Definition: - Government debt is outstanding debt owed or guaranteed by the government. - For the program, the government undertakes not to accumulate external payments arrears on its debt (including Treasury bills and bonds issued in CFAF on the WAEMU regional financial market), with the exception of external payments arrears arising from debt being renegotiated with external creditors, including Paris Club creditors. - Reporting: - Data on the stock, accumulation, and repayment of external payments arrears will be provided monthly, within six weeks after the end of each month. ### External nonconcessional loans contracted or guaranteed by the government - Definition and ceilings: - The government and the public enterprises listed in paragraph 21 undertake not to contract or guarantee external debt with an original maturity of one year or more, and having a grant element of less than 35 percent. - For program purposes, a debt is concessional if it includes a grant element of at least 35 percent, calculated as follows: the grant element (the difference between the present value (PV) of debt and its nominal value) expressed as a percentage of the nominal value of the debt. - The PV of debt at the time of its contracting is calculated by discounting the future stream of payments of debt service due on this debt. The discount rate used for that purpose is 5 percent. - Scope: - This performance criterion applies not only to debt, as defined in paragraph 8 of the Guidelines on Public Debt Conditionality in Fund Arrangements, adopted by the Decision No. 15688-(14/107) of the Executive Board of the IMF of December 5, 2014, but also to any obligation contracted or guaranteed for which no value has been received. - This performance criterion does not apply to financing provided by the IMF and to debt rescheduling in the form of new loans. - For the purposes of the relevant performance criteria, the guarantee of a debt arises from any explicit legal obligation of the government to service a debt in the event of nonpayment by the debtor (involving payments in cash or kind). - External debt is defined as debt denominated, or requiring repayment, in a currency other than the CFA franc. This definition also applies to debt contracted among WAEMU member countries and with WAEMU financial institutions. - Public sector coverage: - For program purposes, the public sector includes the government and the following public enterprises: - (i) Société Nigérienne d’Electricité (Nigelec); - (ii) Société de Construction et de Gestion des Marchés (Socogem); - (iii) Société Nigérienne des Produits Pétroliers (Sonidep); - (iv) Société Nigérienne des Télécommunications (Sonitel); - (v) Société de Patrimoine des Mines du Niger (Sopamin); and - (vi) Société propriétaire et exploitante de l’Hotel Gaweye (SPEG). - Reporting: - Details on all external public sector debt will be provided monthly, within six weeks after the end of each month. - The same requirement applies to guarantees granted by the central government. - The Ministry of Finance will regularly forward to Fund staff a list of loans in process of negotiation. - The Ministry of Finance will also prepare semiannual reports on any external debt contracted or in process of negotiation and the terms thereof, as well as on the borrowing program for the next six months including the terms thereof, and will forward them to Fund staff. ### Short-term external debt of the central government - Definition: - The government will not accumulate or guarantee new external debt with an original maturity of less than one year. - This performance criterion applies not only to debt as defined in paragraph 8 of the Guidelines Public Debt Conditionality in Fund Arrangements, adopted by the Decision No. 15688-(14/107) of the Executive Board of the IMF of December 5, 2014, but also to any obligation contracted or guaranteed for which no value has been received. - Short-term loans related to imports are excluded from this performance criterion, as are short-term securities issued in CFAF on the regional financial market. - Reporting: - Details on all external government debt will be provided monthly, within six weeks after the end of each month. The same requirement applies to guarantees granted by the government. ### Quantitative targets: definitions and limits - Total revenue: - Total revenue is an indicative target for the program. - It includes tax, nontax, and special accounts revenue, but excludes proceeds from the settlement of reciprocal debts between the government and enterprises. - Basic fiscal deficit: - The basic fiscal deficit is defined as the difference between: - (i) total tax revenue, as defined in paragraph 25; and - (ii) total fiscal expenditure excluding externally financed investment expenditure but including HIPC-financed expenditure. - According to the WAEMU definition, the basic fiscal deficit is defined as the basic balance described under paragraph 26 plus budgetary grants. - Poverty-reducing expenditure: - The floor on poverty-reducing expenditure is an indicative target for the program. - This expenditure comprises all budget lines included in the Unified Priority List (UPL) of poverty-reducing and HIPC-financed expenditures. - Exceptional procedures: - A limit is set on the amount of expenditures paid through exceptional procedures (without prior commitment) excluding debt service payments and expenditures linked to tax exemptions. - The limit is 5 percent of total authorized expenditures during the quarter for which the target is assessed. - Reporting: - Information on basic budget revenue and expenditures will be provided to the IMF monthly, within six weeks after the end of each month. - Information on UPL expenditures will be provided to the IMF quarterly, within six weeks after the end of each quarter. - Information on exceptional expenditure will be provided to the IMF quarterly after six weeks after the end of the quarter. ### Additional information for program monitoring — A. Government Finance - The authorities will forward the following to IMF staff: - Detailed monthly estimates of revenue and expenditure, including priority expenditure, the payment of domestic and external arrears, and a breakdown of customs, DGI, and Treasury revenue. - The Table of Government Financial Operations with comprehensive monthly data on domestic and external financing of the budget, and changes in arrears and Treasury balances outstanding. These data are to be provided monthly, within six weeks after the end of each month. - Comprehensive monthly data on net nonbank domestic financing: - (i) the change in the stock of government securities (Treasury bills and bonds) issued in CFAF on the WAEMU regional financial market and not held by resident commercial banks; - (ii) the change in the balance of various deposit accounts at the Treasury; - (iii) the change in the stock of claims on the government forgiven by the private sector. - Quarterly data on expenditure for UPL lines (statement of appropriations approved, disbursed, and used). - Quarterly reports on budget execution, including the rate of execution of poverty-reducing expenditure and, in particular, the use of appropriations by the line ministries concerned (National Education, Public Health, Equipment, Agriculture, Livestock). - Monthly data on Treasury balances outstanding, by reference fiscal year, with a breakdown of maturities of more than and less than 90 days. - Monthly data on effective debt service (principal and interest) compared with the programmed maturities provided within four weeks after the end of each month. - List of external loans contracted in process of negotiation and projected borrowing in the next six months, including the financial terms and conditions. ### Additional information for program monitoring — B. Monetary Sector - The authorities will provide the following information each month, within eight weeks following the end of each month: - Consolidated balance sheet of monetary institutions and, where applicable, the consolidated balance sheets of individual banks. - Monetary survey, within eight weeks following the end of each month, for provisional data. - Borrowing and lending interest rates. - Customary banking supervision indicators for banks and nonbank financial institutions (where applicable, these same indicators for individual institutions may also be provided). ### Additional information for program monitoring — C. Balance of Payments - The authorities will provide IMF staff with the following information: - Any revision of balance of payments data (including services, private transfers, official transfers, and capital transactions) whenever they occur. - Preliminary annual balance of payments data, within six months after the end of the reference year. ### Additional information for program monitoring — D. Real Sector - The authorities will provide IMF staff with the following information: - Disaggregated monthly consumer price indexes, within two weeks following the end of each month. - The national accounts, within six months after the end of the year. - Any revision of the national accounts. *Source: cr1759 - 3. Net domestic financing of the government is defined as the sum of (i) net bank credit to (PDF).* ### 37. The authorities will provide IMF staff with the following information: ### 37. The authorities will provide IMF staff with the following information ### Legal and policy documents - Any study or official report on Niger’s economy, within two weeks after its publication; - Any decision, order, law, decree, ordinance, or circular with economic or financial implications, upon its publication or, at the latest, when it enters into force. ### Contracts, agreements, and sectoral disclosures - Any draft contract in the mining and petroleum sectors, including production and sales volumes, prices, and foreign investment; and - Any agreement with private sector stakeholders having economic or financial repercussions for the government, including in the natural resources sector. ### Summary of data to be reported — real sector - National accounts. Frequency: Annual. Reporting Deadline: End-year + 6 months - Revisions of the national accounts. Frequency: Variable. Reporting Deadline: 8 weeks after the revision - Disaggregated consumer price indexes. Frequency: Monthly. Reporting Deadline: End-month + 2 weeks ### Summary of data to be reported — government finance - Net government position vis-à-vis the banking system. Frequency: Monthly. Reporting Deadline: End-month + 6 weeks - Complete monthly data on net nonbank domestic financing: (i) change in the stock of government securities (Treasury bills and bonds) issued in CFAF on the WAEMU regional financial market and not held by resident commercial banks; (ii) change in the balance of various deposit accounts at the Treasury; (iii) change in the stock of claims on the government forgiven by the private sector. Frequency: Monthly. Reporting Deadline: End-month + 6 weeks - Provisional TOFE, including a breakdown of revenue (DGI, Monthly DGD and DGTCP) and expenditure, including the repayment of domestic wage and nonwage arrears, as at end-1999, and the change in Treasury balances outstanding. Frequency: Monthly. Reporting Deadline: End-month + 6 weeks - Data on Treasury balances outstanding (RAP), by reference fiscal year (total and RAP at more than 90 days). Frequency: Monthly. Reporting Deadline: End-month + 6 weeks - Monthly statement of Treasury correspondents’ deposit accounts. Frequency: Monthly. Reporting Deadline: End-month + 6 weeks - Execution of the investment budget. Frequency: Quarterly. Reporting Deadline: End-quarter + 6 weeks - Table of fiscal expenditure execution, unified list expenditure, and HIPC-financed expenditure. Frequency: Monthly. Reporting Deadline: End-month + 6 weeks - Treasury accounts trial balance. Frequency: (implied monthly) - Monthly statement of the balances of accounts of the Treasury and of other public accounts at the BCEAO. Frequency: Monthly. Reporting Deadlines: End-month + 6 weeks (provisional); End-month + 10 weeks (final) - Petroleum products pricing formula, petroleum products tax receipts, and pricing differentials. Frequency: Monthly. Reporting Deadline: End-month + 6 weeks ### Summary of data to be reported — monetary and financial - Monetary survey / Consolidated balance sheet of monetary institutions and, where applicable, consolidated balance sheets of individual banks. Frequency: Monthly. Reporting Deadline: End-month + 8 weeks - Borrowing and lending interest rates. Frequency: Monthly. Reporting Deadline: End-month + 8 weeks - Banking supervision prudential indicators. Frequency: Quarterly. Reporting Deadline: End-quarter + 8 weeks ### Summary of data to be reported — balance of payments and external debt - Balance of payments. Frequency: Annual. Reporting Deadline: End-year + 6 months - Balance of payments revisions. Frequency: Variable. Reporting Deadline: At the time of the revision. - Stock and repayment of external arrears. Frequency: Monthly. Reporting Deadline: End-month + 6 weeks - Breakdown of all new external loans signed and projected borrowing, including the financial terms and conditions. Reporting Deadline: End-month + 6 weeks - Table on the monthly effective service of external debt (principal and interests), compared with the programmed maturities. Frequency: Monthly. Reporting Deadline: End-month + 4 weeks *Source: STAFF REPORT FOR THE 2016 ARTICLE IV CONSULTATION AND REQUEST FOR THREE YEAR ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY—INFORMATIONAL ANNEX (December 22, 2016).* ### 1. This joint International Monetary Fund (IMF) and World Bank (WB) DSA, updates the DSA ### cr1759 - 1. This joint International Monetary Fund (IMF) and World Bank (WB) DSA, updates the DSA ### Overview - Joint IMF and World Bank DSA updating the 2015 DSA for the sixth and seventh reviews under the ECF; based on end-2015 data and the baseline scenario of the 2016 Article IV consultation and the new arrangement under the Extended Credit Facility. - Uses the standard debt dynamics template for low-income countries. - Debt data cover: external and domestic debt of the central government, debt of public enterprises and parastatals, state guarantees and private external debts. - Domestic debt includes: government arrears, debt to the regional central bank (Banque Centrale des Etats de l’Afrique de l’Ouest-BCEAO) resulting from statutory advances, Niger’s Special Drawing Rights (SDR) allocation, government issued securities, and government public-private-partnership contracts (PPP) to finance capital projects. ### Debt Composition and Trends (2005–15) - Total Public Debt: - End-2005: 1,217.8 billion CFAF; 100 percent of public debt; 68.5 percent of GDP. - End-2010: 860.2 billion CFAF; 100 percent of public debt; 30.4 percent of GDP. - End-2013: 969.3 billion CFAF; 100 percent of public debt; 25.6 percent of GDP. - End-2015: 1,776.5 billion CFAF; 100 percent of public debt; 41.9 percent of GDP. - External Debt (central government included): - End-2005: 956.9 billion CFAF; 78.6 percent of public debt; 53.9 percent of GDP. - End-2010: 651.2 billion CFAF; 75.7 percent of public debt; 23.0 percent of GDP. - End-2013: 799.9 billion CFAF; 82.5 percent of public debt; 21.1 percent of GDP. - End-2015: 1,290.7 billion CFAF; 72.7 percent of public debt; 30.4 percent of GDP. - External creditor composition shifts: - Multilateral creditors: End-2015: 968.9 billion CFAF; 54.5 percent of public debt; 22.8 percent of GDP. - Bilateral creditors: End-2015: 218.7 billion CFAF; 12.3 percent of public debt; 5.2 percent of GDP. - Public guarantee (SORAZ) declined to 103.1 billion CFAF at end-2015 (5.8 percent of public debt; 2.4 percent of GDP). - Domestic Debt: - End-2005: 260.9 billion CFAF; 21.4 percent of public debt; 14.7 percent of GDP. - End-2010: 209.0 billion CFAF; 24.3 percent of public debt; 7.4 percent of GDP. - End-2013: 169.4 billion CFAF; 17.5 percent of public debt; 4.5 percent of GDP. - End-2015: 485.8 billion CFAF; 27.3 percent of public debt; 11.5 percent of GDP. - Drivers of domestic debt increase by end-2015: - Government issued regional bonds: CFAF 119.8 billion (CFAF 18.2 billion taken by local banks). - Securities issued to repay domestic arrears: CFAF 38.8 billion (entirely issued to local banks). - Government securities on the regional market increased from 1.3 percent of GDP in 2010 to 8.3 percent of GDP in 2015. - Projected additional domestic PPPs: - PPP contracts amounting to around 6.5 percent of GDP mainly in road construction to be implemented in the next 4 years. ### Debt Relief History and Recent Developments - Niger reached the HIPC completion point in April 2004 and benefited from MDRI assistance in 2006 from AfDF, IDA, and IMF. - Since 2010 public external debt increased significantly due to participation in natural resource projects and ambitious public investment financed by multilateral and domestic borrowing. - Public external debt reached 30.4 percent of GDP in 2015 and projected to reach 34 percent of GDP in 2016. ### Debt Management and Institutional Reforms - Debt management capacity remains low but improving. - June 18, 2015 Prime-Ministerial decree: - Elevates Inter-Ministerial Debt Management Committee chaired by the Prime Minister. - Committee oversees overall budget support; supported by a permanent secretary for coordination across ministries. - Regular outputs now published: - Quarterly report on debt management. - Three year borrowing plan defining debt strategy and identifying investment projects and financing sources. ### Policy Classification and Thresholds - Niger is a medium policy performer: - World Bank CPIA rating: 3.4. - External public debt burden thresholds (without remittances scenario): - PV of debt in % of Exports: 150 - PV of debt in % of GDP: 40 - PV of debt in % of Revenue: 250 - Debt service in % of Exports: 20 - Debt service in % of Revenue: 20 - Total public debt benchmark: PV of total public debt in percent of GDP: 56 - Remittances are low in Niger; scenario with remittances not considered. ### Underlying DSA Assumptions and Macroeconomic Outlook - Projections updated to account for: lower oil prices, regional security situation, delays in natural resource projects, economic slowdown in Nigeria. - Shocks materialized during ECF (2012–16) contributed to recurrent fiscal slippages. - Proposed successor ECF 2017–19 program: maximum access of 75 percent of quota. - Fiscal outlook: - Revenue projections revised down due to delays in resource projects. - Slightly higher expenditure envelope to preserve development spending and accommodate elevated security spending, including assistance to refugees. - Increase in resource revenue projected only in 2020 due to delays in crude oil export project (expected operational in 2020); Imouraren uranium project completion date kept at 2021. - Basic fiscal balance expected to gradually improve and turn to a surplus when crude oil export revenue becomes significant. - Growth and exports: - GDP growth path revised downward; longer-term growth marginally higher once resource projects come on stream. - Conservative export growth assumption due to Nigerian downturn and low commodity prices, leading to lower export-to-GDP ratio through medium and long-term. - Public investment in agriculture and infrastructure expected to promote export-oriented growth and efficiency gains. - Current account financing: - Reliance on external grants and loans to finance current account deficit expected to decline gradually as natural resource revenues increase. - Current account deficit expected to be financed by debt-creating flows, FDI, substantial inflows of project grants and private capital. - Required fiscal and institutional reforms: - Step-up implementation of technical assistance recommendations, including completed 2016 public expenditure and financial assessment. - Budget regulation committee established under the Prime Minister to ensure spending aligns with revenue mobilization. - Preparation of 2018 budget law expected in program budgeting format. - Recruitment of a long-term technical assistant to accelerate implementation of Treasury single account. - Development of a new medium-term public finance reform program based on 2016-PEFA recommendations. ### Risks to the Macroeconomic Outlook - Numerous risks mostly tilted to the downside: - Vulnerability to exogenous shocks: political tensions, commodity price fluctuations, weather-related shocks (drought and flooding). - Continued low oil and uranium prices may delay resource projects further. - Persistence or intensification of violent conflicts could divert resources from social and development projects. - Upside potential: - Rebound in uranium and oil prices and recovery in the Nigerian economy would substantially increase exports and improve fiscal space. ### External DSA — Baseline Assumptions and Results - Baseline assumes US$1 billion credit line from EximBank of China will be disbursed progressively over 2020-27 when crude oil exports start. - Disbursement schedule assumed: US$50 million in 2020, US$100 million in 2021, US$100 million in 2022, remainder US$750 million spread over following years. - Master facility: signed September 2013; individual loans under facility: 2 percent interest rate, 25 years maturity, 5 years grace period; contracts tied to Chinese contractor and earmarked for infrastructure projects with high economic rates of return; preliminary approval of Eximbank required. - Baseline debt trajectory (2016−36): - External debt ratios remain below policy-dependent thresholds throughout projection period. - PV debt-to-GDP, debt-to-exports and debt-to-revenue ratios expected to remain below relevant thresholds over medium term. - Ratios slightly increase in next 3 years should government borrow for infrastructure investment plans. - Debt-to-export and debt-to-revenue ratios expected to decline starting 2020 when crude oil exports begin. - Baseline debt-to-exports ratio increases to less than 5 percent of breaching the threshold; probability approach applied indicating all debt ratios remain well below relevant thresholds during projection period. ### External DSA — Alternative Scenarios and Stress Tests - Under most extreme shock scenarios: - Only PV of debt-to-export ratio breaches relevant thresholds; other debt ratios and debt service ratios remain under thresholds. - Historical scenario: - Key macro parameters set at historical values. - Debt ratios increase long term, debt-to-GDP breaches threshold in 2032, debt-to-export breaches threshold in 2028 and stays above. - Stress test highlights: - Largest shock to PV external debt-to-GDP ratio: 30 percent depreciation of national currency in 2017. - Under that shock, debt-to-GDP will rise to almost reach policy dependent threshold of 40 percent in 2014-25 before declining progressively to 31.7 percent at end of projection period. - Largest shock to PV external debt-to-export ratio: export shock where export values grow at historical average minus one standard deviation in 2017 and 2018 (stemming from disruption in oil industry, low uranium and oil prices, severe drought). - Under that shock, ratio breaches threshold in 2017 and increases to a maximum of 230.5 in 2018 before declining as crude oil exports boost aggregate exports. - Debt-to-export ratio also breaches threshold in case of: - (i) a shock on non-debt creating flows; - (ii) a combined shock on growth and non-debt creating flows; - (iii) a tightening of new borrowing terms. - PV external debt-to-revenue and debt service ratios remain under policy relevant thresholds under most extreme shocks. - Two alternative scenarios developed for high vulnerability to shocks: - Scenarios simulate security and terms-of-trade shocks; both assume a one-year delay of crude oil export project completion. - Simulation results: - GDP growth declines by 0.3 to 0.8 percentage points. - Current account widens by 0.8 to 1.7 percent of GDP, causing reserves to fall. - Fiscal stance deteriorates as revenue falls and security spending expands. - Security shock: debt ratios remain under thresholds. - Terms-of-trade shock: large impact on exports causes debt-to-export ratio to exceed threshold by 15.4 percent in 2017. ### Public DSA — Baseline and Risks - Baseline assumptions on domestic issuance and rollover: - Government will continue to rollover outstanding treasury bills. - Issuing on annual average CFAF 130 million in treasury bonds over medium term and around CFAF 70 billion in the long-term as revenue collection improves. - Domestic public debt trajectory: - 2015: domestic debt 11.5 percent of GDP. - Projected to peak at 15.9 percent of GDP in 2018 as government implements 6.5 percent of GDP of PPP contracts. - 2016 budget planned bond issuance: CFAF 170 billion (including CFAF 40 billion to be issued to local banks to repay domestic arrears). - Due to delays, CFAF 40 billion issuance will only be completed in 2017. - Long-term projection: domestic public debt-to-GDP ratio projected to fall to 1.7 percent of GDP in 2036. - Short-term fiscal risk: - Rapid buildup in domestic borrowing expected to generate debt service equivalent to 4.7 percent of GDP in 2017, posing significant risks if regional liquidity conditions deteriorate. - Vulnerability when domestic public debt included: - Under extreme shock with primary balance set at historical average minus one standard deviation in 2017-18, public debt-to-GDP ratio will exceed benchmark between 2018 and 2021 then decline in long term. - Under no improvement in fiscal situation (primary fiscal balance remaining at 2016 level, a deficit of 5.3 percent of GDP), public debt will rise continuously: - PV of debt-to-GDP ratio will exceed benchmark in 2025 and reach 79.6 percent in 2036, above threshold of 56 percent of GDP. ### Private External Debt Dynamics - Private external debt is included in coverage of debt data; dynamics considered in external DSA scenarios and stress tests (details summarized above under external DSA scenarios and stress tests). *Source: IMF–World Bank DSA update based on end-2015 data and the 2016 Article IV consultation baseline scenario.* ### 16. The current DSA includes identified private debt flows, linked to the large oil and uranium ### 16. The current DSA includes identified private debt flows, linked to the large oil and uranium projects ### Identified private debt and projections - The DSA incorporates the contracts of a loan by the SORAZ refinery (60 percent privately owned), part of the FDI that will finance the Niamey-Cotonou railroad and the Imouraren uranium mine project. - The stock of external private debt is estimated at 27.5 percent of GDP in 2015 and is projected to stabilize at just above 9 percent of GDP over the long run. - This projection is lower than in the previous DSA, reflecting a downward revision in FDI due to persistent security challenges and lower commodity prices. ### Conclusion: external debt distress and vulnerabilities - Niger continues to be assessed as being at moderate risk of external debt distress — unchanged from the previous DSA conducted during the 2014 Article IV and updated during the sixth and seventh reviews of the ECF 2012-16 program. - Debt sustainability is highly sensitive to shocks on exports stemming from the collapse of commodity prices (oil and uranium) and severe drought. - Debt is vulnerable to: - a large reduction in the combined FDI and donor project supports; and - tightening of borrowing conditions. - Overall public debt dynamics highlight vulnerabilities: - rapid increase in domestic debt; and - total public debt-to-GDP ratio exceeding the benchmark under an assumption of unchanged policies and larger deterioration of the fiscal balance due to significant loss in revenue or spending pressures. - Further delay in the implementation of the resource projects could add significant pressures on debt and fiscal sustainability. ### Policy recommendations and institutional measures - Authorities should sustain commitment to strengthen debt management and moderate the amount of new borrowing. - The Inter-Ministerial Debt Committee should: - play an active role in strengthening institutional coordination and streamlining debt approval processes; - continue to be actively involved in the evaluation of PPP contracts to ensure they are in line with procurement standards, the government borrowing plan, and debt sustainability. - Staff advises the government to refrain from signing new PPP contracts until a new legal framework for PPP is established. - Staff recommends restricting external financing to grants and concessional borrowing. - Authorities are encouraged to review the debt portfolio based on Afritac-West technical assistance recommendations to address the large amount of debt signed but not yet disbursed, including the Chinese master facility agreement signed in 2013. - For that facility it is important to ensure that loans contracted under the facility finance self-sustaining development projects. - Authorities are encouraged to: - build buffers to cope with exogenous shocks; - strengthen revenue administration; and - prioritize spending needs. - Continued technical assistance in debt management is recommended to help build capacity in developing comprehensive borrowing plans on a regular basis that are consistent with medium-term debt sustainability and aligned with development priorities. ### Financial sector and domestic borrowing - Containing government’s borrowing to local banks could help reinforce the stability of the banking system and limit crowding out of the private sector. - As in other WAEMU countries, banks’ exposure to government debt raises concern over systemic financial risks from sovereign default as fiscal positions become tight. - Reducing government debt will reduce risks to the banking system and free resources to finance private sector development, which is essential for strong and sustained long-term growth. ### Authorities’ responses and intentions - The Nigerien authorities welcomed the conclusions of the DSA as broadly consistent with the previous DSA and their own assessment. - They reiterated commitment to finance development projects primarily through grants and concessional loans. - They intend to streamline the debt portfolio to ensure that contracted loans that have not been disbursed for many years are canceled to provide room for other priority projects. - They agreed to strengthen revenue mobilization and reinforce spending control to minimize the need for borrowing (including through bonds) to preserve fiscal sustainability. - They noted the need to reinforce the debt management framework and to design a PPP framework that will minimize the budgetary risks from PPP implementation. ### Box 1. Niger: Baseline Scenario Assumptions (2016−36) - Real GDP growth: - projected to maintain 5.2 percent average growth over the medium-term, lower than assumed in the previous DSA, as the growth rebound expected from the resource sector is now expected only from 2020 due to delays in completing the major uranium and crude oil projects. - Consequently, average annual growth rate in the longer-run is higher at 5.4 percent. - Inflation fairly stable at about 2 percent over the projection period in line with the WAEMU target. - The export price for Niger’s crude oil is assumed to be on average 85 percent of the international oil price projected in the current World Economic Outlook. - Total revenue-to-GDP ratio (excluding grants): - will decline from about 18.1 percent in 2015 (including 1.2 percent of GDP of exceptional revenue) to 15.3 percent in 2016. - This ratio will rise to average 21.8 percent in 2036. - Primary fiscal expenditure: - was 32.4 percent of GDP in 2015. - Current expenditure expected to decline from 15.6 percent of GDP in 2015 to 12 percent of GDP in 2036. - Capital expenditure expected to decline only gradually; primary fiscal expenditure projected at 24.1 percent of GDP in 2036. - The basic balance (the fiscal balance net of grants and externally-financed capital expenditure) will gradually converge to zero and remain positive in the long run. - The overall fiscal deficit (commitment basis excluding grants) will decline from 14.6 percent of GDP in 2015 to 3 percent of GDP in 2036. - Current account and trade: - The non-interest current account deficit projected to gradually decline to 10.4 percent of GDP at the end of the projection period, from 17.9 percent of GDP in 2015. - Export volumes would increase, mainly driven by much larger export growth of crude oil and uranium (after oil production comes on stream in 2020 and the Imouraren mine in 2021). - Imports of goods and services, representing 41.1 percent of GDP in 2015, would slowdown initially before stabilizing at 35.6 percent of GDP in 2036. - Net FDI: - projected to increase from 6.9 percent of GDP in 2015 to above 10 percent of GDP in 2018-19 with the construction of the new oil pipeline. - Expected to decrease afterward as large investment projects come to completion; projected to average 7 percent of GDP in the long term. - External debt parameters: - The average interest rate on external debt is projected to be around 2.1 percent. - The rate of external debt accumulation is expected to decrease after the major resources projects are completed and the Chinese master facility is fully disbursed by 2026. - The concessionality of new borrowing will decline from an average of 33.5 percent in 2016 to about 30.2 percent in 2036 as the share of commercial loans increases gradually to 10 percent of total loans. - The analysis assumes continued inflow of grants and loans of about on average 3.1 percent and 3.3 percent of GDP, respectively. - The discount rate remains at 5 percent. - Domestic debt profile: - Assumes no net accumulation of domestic arrears and that securitized domestic arrears will be repaid over the next 5 years. - The baseline includes an average bond issuance of about CFAF 90 billion a year after 2017 under the present terms of regional bonds for Niger (i.e., *IMF staff summary based on the DSA text in the provided content unit.* ### 6.3 percent interest rate, 5 years’ maturity and 1-year grace period) and 6.5 percent of GDP of PPP ### cr1759 - 6.3 percent interest rate, 5 years’ maturity and 1-year grace period) and 6.5 percent of GDP of PPP ### Indicators of public and publicly guaranteed external debt (2016–36) - External debt (nominal) by year series: 46.8, 48.9, 57.9, 61.0, 62.0, 61.9, 61.6, 60.4, 59.5, 54.8, 40.1 (columns correspond to 2013–2021 and averages/projections as presented). - Public and publicly guaranteed (PPG) share of external debt series: 21.1, 25.1, 30.4, 31.4, 35.8, 37.1, 38.1, 38.5, 39.0, 39.1, 30.6. - Change in external debt series: -2.9, 2.1, 9.0, 3.1, 0.9, -0.1, -0.3, -1.3, -0.8, -1.2, -1.3. - Identified net debt-creating flows series: 2.2, 3.2, 18.6, 5.2, 5.9, 4.4, 4.4, 3.1, 2.3, 2.3, 2.2. - PV of external debt (selected values): 49.6, 51.4, 51.6, 51.0, 50.3, 49.0, 48.0, 43.6, 31.8 (as presented). - PV of PPG external debt (selected values): 22.1, 24.4, 25.4, 26.2, 26.8, 27.1, 27.4, 27.8, 22.3. - PV of PPG external debt in percent of exports (selected values): 118.8, 142.2, 143.5, 145.4, 145.1, 122.8, 117.0, 112.0, 99.6. - PV of PPG external debt in percent of government revenues (selected value): 121.9, 160.1, 157.2, 155.7, 152.8, 141.9, 135.3, 128.7, 102.2. - Debt service-to-exports ratio (in percent) series: 4.9, 2.9, 4.1, 12.7, 13.0, 12.4, 12.4, 7.8, 7.8, 8.4, 9.3. - PPG debt service-to-exports ratio (in percent) series: 2.4, 2.2, 3.2, 11.8, 12.1, 11.6, 11.7, 7.3, 7.3, 8.2, 9.2. - PPG debt service-to-revenue ratio (in percent) series: 3.2, 2.6, 3.3, 13.2, 13.2, 12.4, 12.3, 8.4, 8.5, 9.4, 9.5. - Total gross financing need (Billions of U.S. dollars) series: 0.6, 0.6, 0.8, 0.7, 0.8, 0.8, 0.8, 0.8, 0.7, 1.0, 1.8. ### Baseline macroeconomic assumptions and key statistics - Real GDP growth (in percent) series: 5.3, 7.0, 3.5, 5.6, 3.8, 4.6, 5.2, 5.5, 4.5, 7.4, 6.2, 5.7, 5.2, 5.1, 5.3 (as tabulated across periods and averages). - GDP deflator in US dollar terms (change in percent) series: 4.9, 0.6, -16.1, 2.5, 9.2, -0.2, -0.6, 2.0, 2.0, 1.9, 1.8, 1.2, 2.0, 2.2, 2.0. - Effective interest rate (percent) series: 0.4, 0.3, 0.3, 1.3, 1.3, 1.5, 1.6, 1.6, 1.7, 1.7, 1.9, 1.7, 1.6, 1.6, 1.6. - Growth of exports of G&S (US dollar terms, in percent) sample series: 14.3, -0.2, -23.0, 10.1, 16.4, -3.5, 7.5, 9.7, 10.2, 30.9, 14.9, 11.6, 11.1, 6.4, 7.1. - Growth of imports of G&S (US dollar terms, in percent) sample series: 9.6, 6.9, -7.9, 12.2, 18.6, -6.3, 12.8, 9.5, 8.4, 10.6, 5.9, 6.8, 8.9, 6.3, 6.5. - Grant element of new public sector borrowing (in percent) (selected series): 33.5, 32.8, 32.1, 32.0, 31.7, 31.4, 32.2, 30.4, 30.4, 30.2 (as presented). - Government revenues (excluding grants, in percent of GDP) series: 16.6, 17.5, 18.1, 15.3, 16.1, 16.8, 17.5, 19.1, 20.3, 21.6, 21.8, 21.8. - Aid flows (Billions of US dollars) series: 0.9, 0.7, 0.7, 0.6, 0.6, 0.6, 0.6, 0.6, 0.5, 0.6, 1.2. - of which: Grants series: 0.6, 0.4, 0.4, 0.4, 0.4, 0.4, 0.4, 0.4, 0.4, 0.4, 0.8. - of which: Concessional loans series: 0.2, 0.3, 0.4, 0.2, 0.2, 0.2, 0.2, 0.2, 0.2, 0.2, 0.4. - Grant-equivalent financing (in percent of GDP) (selected series): 6.7, 6.4, 6.1, 5.8, 5.3, 4.6, 4.0, 3.3, 3.7. - Grant-equivalent financing (in percent of external financing) (selected series): 63.4, 63.4, 63.1, 63.7, 64.6, 61.7, 62.0, 62.7, 62.2. - Memorandum - Nominal GDP (Billions of US dollars) sample series: 7.7, 8.3, 7.2, 7.5, 7.8, 8.4, 9.1, 9.9, 10.7, 15.5, 31.3. - PV of PPG external debt (Billions of US dollars) series (selected): 1.6, 1.8, 2.0, 2.2, 2.4, 2.7, 2.9, 4.3, 6.9. - (PVt-PVt-1)/GDPt-1 (in percent) sample series: 3.0, 2.8, 2.9, 2.5, 2.8, 2.6, 2.8, 1.8, 1.0, 1.6. - Debt service of PPG external debt (in percent of exports + remittances) selected: 3.2, 11.8, 12.1, 11.6, 11.7, 7.3, 7.3, 8.2, 9.2. ### Public sector debt metrics and dynamics (baseline) - Public sector debt (percent of GDP) series: 25.6, 33.7, 41.9, 47.0, 51.1, 53.0, 53.9, 52.4, 50.3, 43.3, 32.3. - Foreign-currency denominated share of public sector debt (percent of GDP) series: 21.1, 25.1, 30.4, 31.4, 35.8, 37.1, 38.1, 38.5, 39.0, 39.1, 30.6. - Change in public sector debt series: 4.5, 8.7, 11.5, 12.9, 15.3, 15.9, 15.8, 13.9, 11.4, 4.2, 1.7. - Primary deficit series: 2.5, 7.9, 8.8, 2.3, 19.1, 5.3, 6.0, 4.5, 3.0, 1.1, -0.9, 3.2, -1.1, -0.1, -0.9 (as shown across periods). - Revenue and grants (percent of GDP) series: 24.6, 23.0, 23.6, 20.0, 20.7, 21.2, 21.8, 23.1, 23.6, 24.5, 24.3. - of which: grants series: 8.0, 5.4, 5.5, 4.7, 4.6, 4.4, 4.3, 4.0, 3.3, 2.9, 2.4. - Primary (noninterest) expenditure (percent of GDP) series: 27.1, 30.9, 32.4, 25.3, 26.7, 25.7, 24.8, 24.2, 22.7, 23.5, 24.1. - Automatic debt dynamics (percent) series: -2.5, 0.5, 2.3, -0.2, -2.0, -2.1, -1.9, -2.7, -2.3, -2.0, -1.6. - Contribution from interest rate/growth differential series: -1.6, -1.9, -1.1, -1.0, -1.8, -2.1, -2.1, -2.5, -2.0, -1.6, -1.3. - Contribution from average real interest rate sample: -0.3, -0.2, 0.0, 0.8, 0.5, 0.5, 0.7, 1.2, 1.1, 0.6, 0.3. - Contribution from real GDP growth sample: -1.3, -1.7, -1.2, -1.8, -2.3, -2.7, -2.7, -3.7, -3.1, -2.2, -1.6. - Residual, including asset changes series: -0.8, -0.3, -2.8, 0.1, 0.1, -0.4, -0.2, 0.1, 1.0, 1.6, 0.8. - PV of public sector debt (selected series): 33.5, 37.4, 40.7, 42.1, 42.5, 41.0, 38.8, 32.1, 24.0. - Gross financing need (percent of GDP) series: 8.4, 11.7, 15.7, 11.6, 13.6, 12.6, 11.2, 8.9, 6.6, 3.4, 2.7. - PV of public sector debt-to-revenue and grants ratio (selected): 142.1, 186.9, 196.9, 2198.2, 195.3, 177.6, 164.6, 130.8, 98.9. - PV of public sector debt-to-revenue ratio (selected): 185.1, 244.8, 251.9, 250.2, 242.7, 214.6, 191.3, 148.2, 110.0. - Debt service-to-revenue and grants ratio (in percent) sample series: 23.9, 16.6, 29.3, 31.1, 36.8, 38.2, 37.8, 33.5, 31.6, 18.2, 11.5. - Debt service-to-revenue ratio (in percent) sample series: 35.4, 21.8, 38.1, 40.8, 47.3, 48.2, 47.0, 40.5, 36.8, 20.7, 12.8. - Primary deficit that stabilizes the debt-to-GDP ratio series (selected): 3.3, -0.3, 0.6, 0.2, 2.0, 2.5, 2.1, 2.6, 1.2, 0.3, 0.8. ### Sensitivity analysis and stress tests (2016–36) - PV of debt-to-GDP ratio (baseline and scenarios) sample values: - Baseline: 24, 25, 26, 27, 27, 27, 28, 22 (selected years). - A1 (historical averages): 24, 24, 24, 25, 26, 28, 34, 42. - A2 (less favorable loan terms): 24, 27, 29, 30, 31, 32, 36, 35. - B6 (one-time 30 percent nominal depreciation in 2017): 24, 36, 37, 38, 39, 39, 40, 32. - PV of debt-to-exports ratio (selected series): - Baseline: 142, 144, 145, 145, 123, 117, 112, 100. - A1: 142, 134, 135, 135, 118, 118, 139, 189. - A2: 142, 150, 158, 163, 141, 138, 145, 155. - B6: 142, 143, 145, 144, 122, 116, 111, 99. - PV of debt-to-revenue ratio (selected series): - Baseline: 160, 157, 156, 153, 142, 135, 129, 102. - A1: 160, 146, 145, 143, 136, 137, 159, 194. - A2: 160, 164, 170, 172, 163, 159, 167, 159. - B6: 160, 224, 223, 218, 202, 193, 183, 145. - Debt service-to-exports ratio (selected series): - Baseline: 12, 12, 12, 12, 7, 7, 8, 9. - A1: 12, 12, 11, 11, 7, 8, 13. - A2: 12, 12, 11, 12, 8, 8, 9, 13. - B6: 12, 19, 18, 18, 12, 12, 13, 14. - Debt service-to-revenue ratio (selected series): - Baseline: 13, 13, 12, 12, 7, 7, 8, 9. - A1: 13, 13, 12, 12, 7, 8, 13. - A2: 13, 13, 12, 13, 8, 9, 11, 13. - B6: 13, 19, 18, 18, 12, 12, 13, 14. - Bound tests and scenarios described: - B1: Real GDP growth at historical average minus one standard deviation (2017–2018). - B2: Export value growth at historical average minus one standard deviation (2017–2018). - B3: US dollar GDP deflator at historical average minus one standard deviation (2017–2018). - B4: Net non-debt creating flows at historical average minus one standard deviation (2017–2018). - B5: Combination of B1–B4 using one-half standard deviation shocks. - B6: One-time 30 percent nominal depreciation relative to the baseline in 2017. - A2 assumption: interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity periods are the same as in the baseline. - Memorandum item: Grant element assumed on residual financing (i.e., financing required above baseline): 29, 29, 29, 29, 29, 29, 29, 29, 29. ### Probability of debt distress and stress-test notes - Figures indicate probability assessments and most extreme stress tests through 2016–2036 (most extreme stress test defined as the test yielding the highest ratio on or before 2026). - Most extreme shocks referenced in figure notes: - In figure b: One-time depreciation shock. - In figure c: Exports shock. - In figure d: One-time depreciation shock. - In figure e: Exports shock. - In figure f: One-time depreciation shock. *Source: Country authorities; and IMF staff estimates and projections as presented in the provided document.* ### 1. Our Nigerien authorities greatly appreciate Fund’s continuous support to the ### cr1759 - 1. Our Nigerien authorities greatly appreciate Fund’s continuous support to the ### Recent developments and outlook - Macroeconomic environment: benign overall but challenged by exogenous shocks including low international prices for uranium and petroleum products, security issues, and the economic downturn in Nigeria. - Real GDP: improved markedly in 2016 compared to the previous year though growth was “slower-than-anticipated pace.” - Inflation: remains subdued and well below the regional target. - Trade shock: exports and re-exports were down by 30.1 percent. - Fiscal response in 2016: authorities froze planned non-priority expenditures while safeguarding salaries, debt service payments, and security spending. - Growth projections and drivers: - Growth is projected to rise to 5.2 percent in 2017. - Growth is projected to average 5.4 percent during 2017-19. - Main driver: expansion of irrigated agriculture under the national food security program (3N Initiative). - Risks: - Downside risks: security issues and persistent weak commodity prices. - Upside possibilities: rebound in uranium and oil prices or a recovery in the Nigerian economy. ### Article IV policy consultation — human capital, gender, and disaster risk - Authorities’ commitments and priorities: - Pursue reforms in the context of the 2016-2019 development plan. - Increase income-earning opportunities for women, mitigate adverse impact of natural disasters, and reap the potential demographic dividend. - Provide vocational education and finance to women to increase economic participation. - Scale up investment in human capital to fully reap the demographic dividend. - Strengthen disaster risk management framework, incorporating staff recommendations from the Article IV report and Selected Issues paper. ### Policies and reforms under the new ECF arrangement (2017–20) — objectives and scope - Program objectives: - Maintain macroeconomic stability. - Create fiscal space for infrastructure development, elevated security needs, and enhanced social spending. - Build on past progress in budget management, debt management, customs and tax administrations, and the business climate. - Accelerate diversification, improve social indicators, and reduce poverty. - Anchor: reforms are aligned with the authorities’ Economic Development Document (EDD). ### Fiscal policy and debt management - Revenue mobilization and tax administration: - Emphasis on broadening the tax base to create fiscal space for infrastructure, security, and social spending. - Strengthen efficiency of tax and customs administrations and improve tax collection to reduce dependence on volatile natural resource revenue. - Specific measures: finalization of electronic inter-connection of all customs offices; deployment of ASYCUDA World Software to all main offices; introduction of tax identification numbers for all importers. - With Fund technical assistance: include more enterprises into the large enterprises Directorate; streamline tax exemptions; align fiscal advantages in sector-specific codes with customs and tax codes. - Plan for a thorough evaluation and audit of SOEs to clarify financial linkages and limit exemptions. - Expenditure policy: - Outlays to reflect EDD priorities: public infrastructure, health, and education. - Current primary expenditures expected to stabilize. - Wage bill reduction: expected to decline by 0.3 percent owing to control measures. - Other containment measures: curtail water, electricity and telephone consumption; eliminate ghost workers; continue arrears clearance. - Investment spending: domestically financed capital spending is projected at 6.5 percent of GDP, which is 1.2 percent of GDP higher compared to 2016. - Debt and PPPs: - Deficit of the basic balance is projected at 4.9 percent of GDP in 2017. - Authorities aim for the deficit to converge to the 3 percent of GDP convergence criterion over the medium term. - Work on a new PPP framework to address fiscal risks and safeguard debt sustainability; Fund technical assistance to be pivotal. ### Financial sector policy - System characteristics: financial system still shallow but banking system well capitalized. - Strategies and targets: - Implement National Financial Sector Development Strategy (NFSDS) and National Strategy for Financial Inclusion. - Government objective: make available through 2021, CFAF 35 billion in credits to small businesses, particularly those run by women and young entrepreneurs. - Donor assistance to be mobilized for the microfinance program at a Round Table to be held in 2017. - Continue divestiture from the banking system; discussions underway with private entities interested in government stakes remaining in banks. ### Natural resource management - Objectives: enhance management of natural resource endowments and bolster sector contribution to development. - Main directions: - Strengthen ties between investors and local banks to ensure contract signing bonuses are paid when mining permits are granted. - Diversify mineral export base away from uranium and oil; grant exploration permits for coal, limestone, and gold. - With technical assistance from France: enhance capacities for evaluation, projection, and control of mining revenue. - Revamp institutions for regulation, negotiation, and implementation of contracts. ### Business environment and economic diversification - Progress and indicators: - World Bank Doing Business ranking: moved from 176th place in 2014 to 150th in the World Bank 2017 Doing Business report. - Achievements: shortened time and procedures to start a business; improved access to credit information via a credit bureau; creation of a specialized commercial court for easier contract enforcement. - Planned actions: - Further improve competitiveness by addressing barriers in dealing with construction permits, getting credit, and paying taxes. - Strengthen enabling environment to support economic diversification. ### Conclusion and request - Assessment: - Despite severe shocks, policy implementation helped maintain macroeconomic stability. - The predecessor ECF arrangement aided coping with declines in international mineral prices, security challenges, and negative spillovers from Niger’s main trading partner. - Structural bottlenecks remain: infrastructure gap, narrow export base, gender inequality, high poverty. - Role of continued Fund engagement: - Continued ECF engagement will provide an appropriate anchor for policies in the government’s Economic Policy Paper for 2016-20. - Fiscal program aims to create room for key infrastructure outlays and social spending. - Structural reforms under the program are expected to improve macroeconomic stability, resilience, and pave the way for economic diversification, sustained growth, and poverty reduction. - Request: authorities seek Directors’ support for a new arrangement under the Extended Credit Facility. *Source: cr1759 — IMF staff report.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2017/cr1759.pdf_