## cr18372

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**Canonical URL:** [cr18372](https://www.imf.org/-/media/files/publications/cr/2018/cr18372.pdf)

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### Executive summary — context, program performance, and outlook
- Context:
  - Niger faces development challenges aggravated by terrorist incursions, low uranium export prices, and climate change.
  - GDP grew by 5 percent in the past two years.
  - GDP is projected to average 7 percent over the next five years thanks to reforms, substantial donor support, several large-scale projects, and a one-time boost from the projected commencement of crude oil exports in 2022.
  - Donors stepped up support; government has a strong parliamentary majority but popular discontent limits policy space.
- Program performance and structural reform implementation:
  - Program implementation broadly satisfactory; all quantitative targets for end-March and end-June 2018 met except clearing of domestic payment arrears.
  - TSA: 85 percent of eligible account balances transferred; plan to complete by end-2018.
  - New PPP legislation submitted to Parliament and promulgated.
  - Bankification: cash payments to large customs and tax offices discontinued; bankification whitepaper unfinished (proposed reset SB for end-December 2018).
  - Tax exemptions: whitepaper provided; delay in furnishing data on newly-granted discretionary exemptions missed end-June benchmark; end-September benchmark met via consolidation into the General Tax Code and discontinuation of corporate income tax exemptions in the mining code.
  - Domestic payment arrears: arrears stood at 0.8 percent of GDP at end-June 2018; government committed to clear 0.8 percent of GDP in arrears by year-end; June PC on arrears missed by 0.1 percent of GDP; authorities requested a waiver.
- Recent 2018 developments and outlook:
  - Real GDP growth should reach 5.2 percent in 2018.
  - Inflation fell from 5.4 percent in April to 3.1 percent in October 2018.
  - 2017 current account deficit revised up to 16.2 percent of GDP.
  - WAEMU pooled reserves: 4.3 months of union imports.
  - Fiscal consolidation ahead of schedule in H1 2018: basic balance deficit and overall balance deficit improved; basic balance expected 2.8 percent of GDP and overall balance 4.4 percent of GDP in 2018.
  - Revenues rose a third in H1 2018 vs. same period in 2017 due largely to one-off factors.
- Projections:
  - Growth: average ~7 percent over next five years; 6.5 percent in 2019; 11 percent in 2022 when crude oil exports scheduled to commence.
  - Inflation: expected below 3 percent WAEMU ceiling during 2019; projected around 2 percent going forward.
  - Current account: set to widen and peak at 23 percent of GDP in 2020; projected below 14 percent of GDP in 2023.
  - Fiscal trajectory: overall deficit targeted to decline from 4.5 percent of GDP in 2019 to 3 percent of GDP in 2020, and to 2 percent of GDP in 2023 onward.
- Financing request:
  - Authorities request increase of access to IMF resources of CFAF 15.5 billion (0.3 percent of GDP).
  - Staff supports conclusion of the third review (disbursement of SDR 14.1 million) and augmentation of access from 75 percent of quota (SDR 98.7 million) to 90 percent of quota (SDR 118.44 million).

### 2019 draft budget, revenue measures, and revenue administration
- 2019 draft budget and fiscal stance:
  - Measures estimated to generate yield of 1 percent of GDP while avoiding outright tax hikes on the general public.
  - 2019 revenues programmed at 15.9 percent of GDP.
  - Fiscal deficits for 2019 largely unchanged from projected 2018 outturns due to likely 2018 overperformance.
- Key revenue measures (IMF staff estimates — totals preserved exactly):
  - Telecommunication tax (TATTIE): CFAF 23.4 billion; 0.41 percent of GDP
  - Tax arrears collection: CFAF 15.0 billion; 0.26 percent of GDP
  - VAT threshold and presumptive taxation: CFAF 5.8 billion; 0.10 percent of GDP
  - Integrating telecom regulator: CFAF 5.2 billion; 0.09 percent of GDP
  - Banking tax in lieu of VAT (TAFI): CFAF 5.0 billion; 0.09 percent of GDP
  - Marking of petroleum products: CFAF 3.0 billion; 0.05 percent of GDP
  - Total: CFAF 57.4 billion; 1.01 percent of GDP
- Additional tax-policy measures described in draft budget:
  - Partial reinstatement of tax on incoming international phone calls (TATTIE) with discount for 4G license purchasers.
  - Substituting banking tax (TAFI) for VAT on banking services (WAEMU directive).
  - Simplifying taxation of small businesses by raising VAT threshold and expanding presumptive taxation.
  - Molecular marking of petroleum products to begin January 2019.
  - Intensifying tax arrears collection; collections expected to double vs. 2018, yielding CFAF 15 billion (0.3 percent of GDP).
  - Legislation to reduce exemptions to be submitted to Parliament by end-June 2019 (proposed SB).
- Tax-administration and administrative reforms (selected SBs and dates):
  - Link IT systems (ASYCUDA and SISIC) operational by end-March 2019 (proposed SB).
  - Renew performance plans for DGI and DGD (proposed SB for end-January 2019).
  - Provide whitepaper on tax-exemption streamlining and quarterly tallies of newly-granted discretionary exemptions (whitepaper provided; data delayed; further cuts planned; proposed SB end-June 2019).
  - Specialized unit set up to monitor/enforce exemptions.

### Expenditure policy, spending quality, and social programs
- Spending quality and tracking:
  - Program budgeting since 2018; move toward multi-year budgeting; request for PIMA.
  - 2019 draft budget revisits spending programs with scrutiny; targeted retrenchments implemented; no general wage increase for government employees.
  - From mid-2019, a system will monitor execution of main social spending programs and share findings with IMF staff (proposed SB for end-June 2019).
  - Priority social programs: education, health, cash transfers, school lunch programs.
- Fiscal transparency commitments:
  - On-line publication of the 2019 draft budget.
  - Commitment to publish a citizens’ budget, preliminary budget outcomes, and budget audits on a timely basis.
- Observations on spending structure:
  - Number of spending units: 36 ministries, 12 other spending units, and around 150 public administrative establishments and SOEs — appears excessive; resource allocation across ministries should be analyzed for efficiency gains.

### Debt, debt sustainability analysis (DSA), and financing strategy
- Debt metrics and DSA outcomes:
  - New DSA rates Niger’s risk of external and overall debt distress as “moderate.”
  - Present value ratios reported:
    - External public debt-to-exports: 135 percent.
    - Total public debt-to-GDP: 39.5 percent.
  - PPG debt (numerical table snapshots):
    - PPG debt stood at CFAF 2,115 billion in June 2018; external debt 72 percent of total.
    - Selected public debt snapshots:
      - Dec-16: Public debt contracted and disbursed 1,793 (39.8 percent of GDP); Total PPG debt 1,871 (41.5 percent of GDP).
      - Dec-17: Public debt contracted and disbursed 1,986 (41.0 percent of GDP); Total PPG debt 2,027 (41.9 percent of GDP).
      - Jun-18: Public debt contracted and disbursed 2,087 (40.6 percent of GDP); Total PPG debt 2,115 (41.2 percent of GDP).
  - External debt by currency share as of June 2018: USD 24%; EUR 31%; XOF 26%; CNY 9%; Other 10%.
- DSA projections and stress tests (selected exact outcomes and scenarios):
  - Under baseline, PPG external debt expected to increase from 34 to 36.6 percent of GDP over 2018–21, then fall to 28.5 percent by 2038.
  - PV of external debt-to-exports ratio breaches thresholds under the export shock stress test: PV of total public indicator peaks at 253 percent in 2021 before receding.
  - Commodity price shock is the most extreme stress test; vulnerability stems from narrow export base concentrated on uranium and oil.
  - Alternative delay scenarios:
    - If uranium resumes in 2025 but crude oil delayed to 2023: PV external debt-to-exports would breach threshold through an extra year to 2023 under export shock.
    - Extreme scenario with pipeline not completed over DSA horizon: breach prolonged through 2033 but external debt distress rating remains “moderate.”
  - Key macro projections (selected exact figures):
    - Real GDP growth (percent): 2018: 5.2; 2019: 6.5; 2022: 11.0; 2023: 6.8.
    - Non-interest current account deficit (percent of GDP): 2018: 18.7; 2019: 20.6; 2020: 22.8; 2022: 14.1; 2023: 13.3.
    - Government revenues excluding grants (percent of GDP): 2018: 16.4; 2019: 15.9; 2022: 18.7; 2023: 19.1.
    - Gross external financing need (Million U.S. dollars): 2018: 1,407.5; 2019: 1,549.8; 2020: 1,659.6; 2022: 1,311.6; 2038: 2,911.1.
- Debt-policy commitments and safeguards:
  - Authorities prioritize concessional borrowing and stay within program limit on contracting new external debt.
  - Inter-Ministerial Committee on Public Debt and Budgetary Support fully functional; public debt management centralized at the Treasury with a front-middle-back office structure.
  - Proposed continuous performance criterion: once domestic arrears cleared within 2018 budget, arrears stock subject to a close-to-zero ceiling from January 2019.
  - Safeguards assessment at BCEAO completed April 2018 found a continuing strong control environment.

### Big investment projects — composition, costs, and macro implications
- Overview and general implications:
  - Large projects (oil pipeline and refinery development, Dangote cement, Kandadji dam, MCC projects) present opportunities for higher medium-term growth and diversification but raise balance of payments pressures during construction due to high imports.
  - Key policy priorities: assure higher local content, control production and cost data (especially in petroleum operations), constrain exemptions, and revenue mobilization measures to secure sustainable spill-overs.
- Oil sector projects (exact figures preserved):
  - CNPC current production: about 20,000 b/d from Agadem fields for refining in SORAZ.
  - Agreements to further develop oil fields for additional capacity up to 100,000 b/d at estimated cost of US$3.5 billion (37.5 percent of 2018 GDP).
  - Construction of a 2,000 km pipeline with terminal refurbishment to Benin (US$2 billion, 21.3 percent of 2018 GDP); two thirds of pipeline in Niger.
  - Macroeconomic impact during 3-year construction period: local content about 5 percent, yearly growth effect ~0.5 percentage points of GDP.
- Dangote Cement:
  - Integrated cement complex producing 4,500 ton/day; estimated cost US$322 million (3.5 percent of 2018 GDP); construction scheduled 2019–2021.
- Kandadji dam:
  - World Bank leading CFAF 155 billion (3 percent of GDP) dam project over 3 years.
- Millennium Challenge Corporation (MCC):
  - Niger qualified for US$437 million over 2018–2023 (4.6 percent of 2018 GDP); implementation starting 2019.

### Program monitoring, performance criteria, structural benchmarks, and disbursements
- Program monitoring and review schedule:
  - Program monitored semi-annually; fourth and fifth reviews expected at or after end-April 2019 and at or after end-October 2019.
  - Performance assessed against end-December 2018 PCs and indicative targets and structural benchmarks for fourth review.
- Quantitative targets and examples (March–December 2018 and March–December 2019 tables summarized):
  - 2018 examples (billions CFAF): Net domestic financing end-Mar Prog. 46.1; Actual 70.6; Adjusted criteria examples shown in table.
  - Change in domestic payment arrears targets: -15.0; -30.0; -45.0; -64.7 (table shows adjustments and met/not met statuses).
  - 2019 continuous PCs: Accumulation of external payments arrears ceiling 0.0; Stock of outstanding domestic payment arrears on government obligations: 5.0 (ceiling values in table).
  - PV of new public and publicly-guaranteed external debt contracted from Jan 1, 2019: 225.0 (ceiling shown in table).
- Recurrent and prior structural benchmarks (selected with exact timings):
  - Prior Action: Submit 2019 draft budget to National Assembly and make communication setting aside CFAF 17.1 billion in authorized spending (status: Prior Action).
  - SBs: end-January 2019 — establish 2019 performance plans for DGD and DGI; end-March 2019 — link IT systems; end-June 2019 — submit legislation cutting back exemptions; end-June 2019 — tracking system for major social programs; end-September 2019 — draft legislation on asset-declaration requirements for high-ranking officials.
- Proposed disbursements under the ECF arrangement (exact schedule):
  - SDR 14.1 — Executive Board Approval — January 23, 2017.
  - SDR 14.1 — First review — December 15, 2017.
  - SDR 14.1 — Second review — June 1, 2018.
  - SDR 14.1 — Third review — October 31, 2018.
  - SDR 33.84 — Fourth review — April 30, 2019.
  - SDR 14.1 — Fifth review — October 31, 2019.
  - SDR 14.1 — Sixth and last review — January 8, 2020.
  - SDR 118.44 — Total.
- Technical Memorandum of Understanding (TMU) and reporting:
  - TMU dated Niamey, November 21, 2018; defines PCs and ITs for Q2-2018 to Q1-2020 and data-reporting requirements.
  - Reporting deadlines (selected exact timings): monthly government finance data within six weeks after end of each month; monetary sector within eight weeks; disaggregated CPI within two weeks; monthly effective external debt service within four weeks.

### Risks, staff appraisal, and authorities’ requests
- Main risks:
  - Downside: implementation challenges, deteriorating regional security, adverse commodity price shocks that could breach external debt-to-exports limits, weather volatility affecting agriculture.
  - Upside: successful reforms, donor funds, and large investment projects could stimulate private-sector development.
  - Staff emphasized Niger’s limited space to absorb shocks despite WAEMU pooled reserves.
- Staff appraisal and recommendations:
  - Staff supports conclusion of the third ECF review, waiver for temporary non-observance of end-June 2018 PC on domestic arrears clearance, and increase of access from 75 percent to 90 percent of quota.
  - Policy priorities: fiscal consolidation, revenue mobilization (measures worth 1 percent of GDP), improve spending quality with emphasis on social programs, financial deepening, governance reforms, and SOE reforms.
- Authorities’ requests (explicit):
  - Waiver for non-compliance with end-June 2018 target on clearance of domestic payment arrears.
  - Approval of the third review and disbursement of SDR 14.1 million.
  - Augmentation of access under the ECF from 75 percent to 90 percent of quota (SDR 19.74 million; CFAF 15.5 billion; 0.3 percent of GDP) to be added to proposed disbursement available as of April 30, 2019.

*Source: cr18372, IMF staff report, November 21, 2018.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Niger faces development challenges aggravated by terrorist incursions, low uranium export prices, and climate change.
- GDP grew by a respectable 5 percent in the past two years.
- GDP is projected to average 7 percent over the next five years thanks to reforms, substantial donor support, several large-scale projects, and a one-time boost from the projected commencement of crude oil exports in 2022.
- Donors are stepping up support; the government enjoys a strong parliamentary majority but popular discontent (low living standards, limited jobs, tax hikes, arrests) limits policy space.

### Program performance and implementation
- Program implementation has been broadly satisfactory.
- All quantitative targets for end-March and end-June 2018 were met, except the clearing of domestic payment arrears; catching up with the end-December 2018 target remains within reach.
- Structural reform agenda is advancing reasonably well, with mixed compliance on structural benchmarks:
  - Treasury Single Account (TSA): 85 percent of eligible account balances transferred; plan to complete by end-2018.
  - New PPP legislation submitted to Parliament and promulgated.
  - Bankification: cash payments to large customs and tax offices discontinued, but the whitepaper on bankification remains unfinished (proposed reset SB for end-December 2018).
  - Tax exemptions: whitepaper provided; delay in furnishing data on newly-granted discretionary tax exemptions led to missing the end-June benchmark, but end-September benchmark met through consolidation into the General Tax Code and discontinuation of corporate income tax exemptions in the mining code.
  - All recurrent SBs on budget monitoring, commitment and cash planning, and debt management respected.
- Domestic payment arrears:
  - Arrears stood at 0.8 percent of GDP at end-June 2018.
  - Government committed to clear 0.8 percent of GDP in arrears by year-end.
  - June PC on arrears missed by 0.1 percent of GDP; authorities request a waiver for temporary non-observance.

### Recent economic developments (2018)
- Real GDP growth should reach 5.2 percent in 2018, supported by construction and services despite an oil refinery maintenance halt.
- Favorable rains bode well for the 2018 crop season, predominantly affecting 2019 growth.
- Inflation fell from 5.4 percent in April to 3.1 percent in October 2018 as one-off price factors unwound.
- The 2017 current account deficit was revised up to 16.2 percent of GDP.
- WAEMU pooled reserves: 4.3 months of union imports (strengthened after euro bond placements by Côte d’Ivoire and Senegal).
- Financial deepening: broad money and private sector credit outpaced nominal GDP growth.
- Fiscal consolidation ahead of schedule in first half of 2018:
  - Basic balance deficit and overall balance deficit improved more than envisaged.
  - Both deficits expected to end 2018 lower than in 2017: basic balance at 2.8 percent of GDP and overall balance at 4.4 percent of GDP, respectively—driven by overperforming revenues and conservative expenditure execution.
  - Revenues rose a third in first half of 2018 vs. same period in 2017, largely due to one-off factors (sale of telecom licenses, an oil contract signing bonus, surge in non-cash revenues from government contribution to donor-funded projects).
  - Underlying cash revenue performance remained more muted, highlighting the need to better mobilize cash revenues.

### Outlook and projections
- Growth prospects:
  - Average annual growth of around 7 percent over the next five years, contingent on reforms and large-scale projects.
  - Growth expected to rise to 6.5 percent in 2019 (good harvest, start of large projects, private investment related to hosting the African Union summit).
  - Growth projected to jump to 11 percent in 2022 when crude oil exports are scheduled to commence.
- Inflation:
  - Expected to return below the 3 percent WAEMU ceiling during 2019.
  - Projected to settle at around 2 percent going forward, as Niger-specific temporary effects fade and the CFA franc peg anchors monetary policy.
- Current account:
  - Set to widen and peak at 23 percent of GDP in 2020 as large projects and growth increase imports while uranium export slump continues; artisanal gold exports only partially offset.
  - Projected to be below 14 percent of GDP in 2023 and to improve thereafter.
- Fiscal trajectory:
  - Government intends to continue fiscal consolidation.
  - Overall deficit targeted to decline from 4.5 percent of GDP in 2019 to 3 percent of GDP in 2020, and to 2 percent of GDP in 2023 and onward.
  - With sustained foreign financing, government would start repaying domestic debt from 2020 to free bank financing for the private sector.

### Fiscal policy and revenue mobilization
- 2019 program priorities: further consolidation, revenue mobilization, higher spending quality, and more emphasis on social programs.
- 2019 draft budget broadly in line with the program and a step toward meeting the WAEMU deficit norm in 2020.
- Revenue outlook:
  - 2019 headline fiscal revenues will decline as 2018 one-off factors expire.
  - Underlying revenue performance programmed to strengthen by around 1 percent of GDP in 2019 through tax policy and tax administration measures.
  - 2019 revenues programmed at 15.9 percent of GDP, which would be 1.5 percent of GDP stronger than in 2017.
- Expenditure policy: emphasis on rationalization and higher spending quality to accommodate social and development priorities; additional measures likely necessary in the 2020 budget to meet WAEMU convergence criteria.

### Debt and financing
- New debt sustainability framework: Niger’s risk of external and overall debt distress rated “moderate.”
- Present value ratios:
  - External public debt-to-exports: 135 percent.
  - Total public debt-to-GDP: 39.5 percent.
- Indicators expected to deteriorate slightly in near term as donor pledges are absorbed, but projected to improve longer term.
- Authorities prioritize concessional borrowing and stay within program limit on contracting new external debt.
- Inter-Ministerial Committee on Public Debt and Budgetary Support fully functional; public debt management centralized at the Treasury with a front-middle-back office structure.
- Proposed continuous performance criterion: once domestic arrears cleared within 2018 budget, arrears stock subject to a close-to-zero ceiling.

### Risks
- Downside risks:
  - Implementation challenges.
  - Deteriorating regional security conditions.
  - Adverse commodity price shocks could breach external debt-to-export limits.
  - Weather volatility affecting agricultural output.
- Upside potential:
  - Successful reforms, donor funds, and large investment projects could trigger a virtuous cycle of private-sector development.
- Staff highlighted Niger’s limited space to absorb shocks despite pooled WAEMU reserves and diversification efforts.

### Program financing request and staff view
- Moderate fiscal and external financing gaps likely to emerge in 2019, driven by adverse shocks that are difficult to offset in tightening regional bond markets.
- Authorities request an increase of access to IMF resources of CFAF 15.5 billion (0.3 percent of GDP).
- Staff supports conclusion of the third review, which will result in the disbursement of SDR 14.1 million, and the authorities’ request for an augmentation of access from 75 of quota (SDR 98.7 million) to 90 percent of quota (SDR 118.44 million).

*Source: EXECUTIVE SUMMARY (cr18372), IMF staff report, November 21, 2018.*

### 17.      The 2019 draft budget comes with strong revenue measures. It mostly steers clear of

### 17.      The 2019 draft budget comes with strong revenue measures. It mostly steers clear of

### Revenue measures and fiscal stance
- The 2019 draft budget is estimated to generate a yield of 1 percent of GDP through measures that avoid outright tax hikes on the general public.
- Measures include:
  - partially reinstating the tax on incoming international phone calls;
  - substituting a banking tax for the VAT on the sector in line with WAEMU requirements;
  - bringing the receipts of the telecom regulator on budget;
  - simplifying taxation of small businesses by raising the VAT threshold and expanding presumptive taxation;
  - stepping up the fight against petroleum smuggling with molecular marking of products;
  - intensifying tax arrears collection;
  - higher rates for presumptive taxes on small businesses to bring the informal sector into the tax net.
- Owing to likely overperformance in 2018, fiscal deficit targets for 2019 remain largely unchanged from projected outturns for 2018.

Key revenue estimates (IMF staff estimates)
- Telecommunication tax (TATTIE): CFAF 23.4 billion; 0.41 percent of GDP
- Tax arrears collection: CFAF 15.0 billion; 0.26 percent of GDP
- VAT threshold and presumptive taxation: CFAF 5.8 billion; 0.10 percent of GDP
- Integrating telecom regulator: CFAF 5.2 billion; 0.09 percent of GDP
- Banking tax in lieu of VAT (TAFI): CFAF 5.0 billion; 0.09 percent of GDP
- Marking of petroleum products: CFAF 3.0 billion; 0.05 percent of GDP
- Total: CFAF 57.4 billion; 1.01 percent of GDP

### Administrative reforms and tax-exemption rationalization
- Authorities will proceed with administrative reforms in customs and tax departments, drawing on IMF technical assistance.
- Planned actions:
  - linking up IT systems (proposed SB for end-March 2019, MEFP ¶16);
  - regular meetings at director level;
  - renewing performance plans for 2019 (proposed SB for end-January 2019, MEFP ¶16).
- Further reforms include transaction-price valuation of imports; better follow-up on non-filers, defaulters, and audit findings; risk-based inspection regimes emphasizing post-clearance controls; fuller utilization of new IT systems.
- Rationalizing tax exemptions:
  - legal basis for all exemptions moved into the tax code as part of the 2019 draft budget law;
  - initial cuts made, but more substantive further cuts planned (proposed SB for end-June 2019, MEFP ¶16);
  - authorities not yet ready to specify a target revenue gain; target to be set in the context of the fourth program review once analytical work advances;
  - a specialized unit has been set up for better monitoring and enforcement to guard against fraud and misuse of exemptions.

### Improving spending quality and social spending tracking
- Supporting tools implemented: program budgeting since 2018; better coordinated public investment program; bundling of food security and rural development projects under the 3N Initiative; TSA for better cash management.
- Government plans to move toward multi-year budgeting and has requested a PIMA from the IMF to boost investment-project selection quality.
- Budgets have become more realistic, reducing the need to sequester authorized spending.
- The 2019 draft budget revisits spending programs with scrutiny on administration, goods and services, investment, and subsidies and transfers; targeted retrenchments implemented. Proposed security allocation was included in the expenditure streamlining exercise.
- Tracking social expenditure:
  - From mid-2019, a system will monitor execution of main social spending programs, check progress against program-budget performance targets, and share findings with IMF staff (proposed SB for end-June 2019, MEFP ¶18).
  - Priority programs: education, health, cash transfers, school lunch programs.
  - Staff recommended a review of social programs thereafter to form the basis for efficiency-enhancing reforms.
- Observations on spending composition:
  - The number of spending units—36 ministries, 12 other spending units, and around 150 public administrative establishments and SOEs—appears excessive from an economic point of view.
  - Allocation of resources across ministries should be analyzed for further efficiency gains.
- Fiscal transparency measures:
  - On-line publication of the 2019 draft budget;
  - Commitment to publish a citizens’ budget, preliminary budget outcomes, and budget audits on a timely basis.

### Structural reforms and private-sector development
- Priority: build a stronger private sector to support economic development.
- Progress and challenges:
  - Dedicated team efforts have improved World Bank “Doing Business” indicators since 2014 and FDI has recently picked up.
  - Remaining challenges: frequent power outages, insufficient access to finance, competition from the informal economy, underfunded judiciary, absence of a proper VAT refund system.
- Recommendations:
  - Deepen dialogue with the private sector;
  - Foster entrepreneurship via support for vehicles such as the business incubator CIPMEN;
  - Ensure high local content and develop an adequately educated workforce for large projects.
- Financial sector:
  - Financial system appears stable but shallow: private-sector credit equals 16.1 percent of GDP; deposits equal 14.4 percent of GDP.
  - Microfinance setback: ASUSU placed under receivership in May 2018.
  - Credit bureau largely dysfunctional due to IT platform problems.
- Financial deepening measures:
  - Bankifying fiscal payments; phasing-out cash payments for tax and customs nearing completion;
  - Salaries of government workers to be digitalized from January 2019;
  - Commission on bankification to provide a whitepaper by year-end (proposed reset SB for end-December 2018, MEFP ¶22);
  - Clarified tax treatment of leasing and a decree to facilitate warrantage;
  - New strategy for financial inclusion and a round table to secure financing (proposed SB for end-June 2019, MEFP ¶23);
  - Mobile banking highlighted as an important opportunity;
  - BCEAO implementing a union-wide support instrument for lending to SMEs.
- SOEs and public administrative entities:
  - Results from five audits expected in 2019;
  - Plans for restructuring and improved governance, including stronger selection of board members and emphasis on financial and technical expertise;
  - Staff encouraged minimum requirements for independent directors on boards;
  - Audits to serve as a launching pad for initiating mergers among the 150 public administrative entities.
- Anti-corruption, governance, and AML/CFT:
  - HALCIA now refers cases directly to the judiciary; specialized courts for corruption and money laundering established;
  - Awareness campaign underway to disseminate the new anti-corruption strategy; HALCIA produces annual reports and will include case-tracking and publish them on HALCIA’s website;
  - Authorities to strengthen the asset-declaration regime by submitting legislation establishing implementation framework for Constitutional obligations, focusing on high-level officials and introducing sanctions for non-compliance (proposed structural benchmark for end-September 2019, MEFP ¶24);
  - Rejoining the Extractive Industries Transparency Initiative (EITI) remains a goal;
  - Niger will act on recommendations from the National Risk Assessment required by the 2012 FATF standard.
- Gender and demographic objectives:
  - PDES 2017-2021 targets: reduce fertility from 7.3 children per women in 2015 to 5.63 in 2021; decline population growth from 3.85 percent to 3.06 percent, with better education of girls as a key avenue.
  - Staff advocated rapid reform implementation; ongoing awareness campaign includes religious and traditional leaders.

### Augmentation of access to Fund resources and financing gaps
- Authorities seek augmentation of access under the ECF-supported program:
  - CFAF 15.5 billion (0.3 percent of GDP; SDR 19.74 million; 15 percent of quota) to be added to the proposed disbursement under the fourth ECF review to close external and fiscal financing gaps likely in 2019.
  - Debt sustainability and capacity to repay the Fund would remain intact.
- Reasons for financing gaps:
  - Security outlays still around 3.5 percent of GDP (compared to less than 2 percent of GDP in 2011);
  - Struggling uranium sector reducing fiscal revenues;
  - Net donor support increasing less strongly than anticipated despite reaching a record high of 11.2 percent of GDP;
  - Outlays for food security exceed predictions.
- Government efforts to contain the gap:
  - Mobilizing revenue and compensating for expiring one-off effects of 2018; revenues expected to slightly top second ECF review projections;
  - Holding down domestically-financed non-interest spending by cutting administrative expenses and streamlining programs;
  - Limits to further large reductions in spending without jeopardizing key social programs—food security spending alone accounts for 4.5 percent of GDP.
- Regional bond market constraints:
  - Treasury plans revised by 0.2 percent of GDP relative to second ECF review;
  - Regional financing conditions eased mid-2018 but tightened again with recent under-subscriptions and rising yields;
  - Large redemptions looming next year imply unprecedented issuance needs even if augmentation granted;
  - Financing particularly strained in first half of year due to disbursement of budget support skewed toward year end;
  - Proposed augmentation to be added in full to the proposed disbursement available as of end-April 2019.

### Program modalities, risks, and staff appraisal
- Program monitoring:
  - Performance assessed semi-annually;
  - Prior action on submission of a 2019 budget to Parliament broadly in line with program objectives and issuance of a cabinet communication to set excess spending aside has been met;
  - A prior commitment control (PC) on domestic payment arrears clearance for end-June 2018 was missed, but authorities committed to be back on track by end-December 2018;
  - Proposed quantitative performance criteria and indicative targets for March-September 2019 appear in Table 2 of the MEFP;
  - With committed clearance of all domestic payment arrears by end-2018, a continuous PC replaces the quarterly reduction target to guard against reemergence of arrears;
  - For the fourth review, program performance to be assessed against end-December 2018 PCs and indicative targets, and all applicable structural benchmarks (SBs).
- Capacity to repay and risks:
  - Niger should have sufficient capacity to repay the Fund, including when repayments peak at 1.5 percent of tax revenues in 2024-25 and at 1.3 percent of exports in 2021 (Table 8).
  - Key risks: security developments, climatic shocks, implementation capacity.
- Safeguards:
  - Safeguards assessments conducted at the regional central bank (BCEAO); most recent assessment completed in April 2018 found a continuing strong control environment.
- Staff appraisal highlights:
  - Implementation of the ECF-supported program continued satisfactorily; all quantitative targets for end-March and end-June met except clearance of domestic payment arrears;
  - Several large-scale projects should lift annual average GDP growth over the next five years to some 7 percent versus a historic long-term average of around 5.5 percent;
  - Need to secure adequate local content and fair fiscal contribution from large projects;
  - The 2019 draft budget is an important step toward meeting the WAEMU convergence criterion of a fiscal deficit of no more than 3 percent of GDP;
  - Revenue measures amounting to 1 percent of GDP plus steps to improve revenue administration should help substitute for favorable one-off 2018 factors and strengthen underlying performance;
  - Steps to improve spending quality and emphasize social expenditure are welcome but need to be built upon in coming years;
  - In the new debt sustainability framework, Niger retains a “moderate” rating for debt distress; vulnerability to commodity price shocks underscores need to strengthen and diversify exports;
  - Structural reform program for 2019 focuses on financial deepening, better governance, and reforms of SOEs and public administrative entities;
  - Efforts to improve “Doing Business” readings should be supplemented with stepped-up regular dialogue with the private sector;
  - Government efforts to keep girls in school longer support educational outcomes and national gender equality and demographic objectives.

*IMF staff report excerpt.*

### 42.      Staff supports the authorities’ requests for a waiver for the temporary non-observance of

### 42. Staff supports the authorities’ requests for a waiver for the temporary non-observance of

### Waiver requests and rationale
- Staff supports the authorities’ requests for:
  - a waiver for the temporary non-observance of the end-June 2018 performance criterion on domestic payment arrears clearance;
  - the conclusion of the third ECF review; and
  - the increase of access to IMF resources from 75 percent to 90 percent of quota.
- Rationale:
  - Despite the government’s own efforts and strong donor support, financing gaps in the wake of adverse shocks would be difficult to fill with additional borrowing on regional markets.
  - SM/18/56, paragraph 26 provides a fuller discussion.

### Program policies and implementation
- The attached Letter of Intent (LOI) and Memorandum of Economic and Financial Policies (MEFP) set out appropriate policies to achieve the 2019 program objectives.
- Staff judgement: the policy package in the LOI/MEFP is considered appropriate to meet the program’s objectives for 2019.

### Key fiscal and macro-financial context (selected findings from the unit)
- Financing environment and needs:
  - Regional markets are unlikely to readily fill financing gaps that may arise from adverse shocks.
  - Strong donor support and government efforts have mitigated but not eliminated financing risks.
- Operational steps requested:
  - Temporary waivers and increased access to IMF resources to cover near-term financing shortfalls and permit program continuity.

### Key numeric items referenced explicitly in the text
- end-June 2018 (performance-criterion date)
- third ECF review
- increase of access from 75 percent to 90 percent of quota

*Source: IMF staff.*

### Annex I. Big Investment Projects

### Annex I. Big Investment Projects

### Overview
- Niger stands to benefit from several large projects, including in its hitherto undeveloped natural resource sector.
- Some projects have been delayed but are now ready for implementation; others are forthcoming.
- Projects related to hosting the African Union summit in Niamey in July 2019 are already underway, including extensive refurbishment of the airport and the construction of several hotels under PPP arrangements.

### Oil sector projects
- CNPC current production and refining:
  - CNPC has been producing about 20,000 b/d from the Agadem oil fields for refining in the national refinery (SORAZ) in Zinder, some 600 km away, with products used for domestic consumption and export.
- New development agreements and capacities:
  - Government signed agreements with CNPC to further develop the oil fields for an additional capacity of up to 100,000 b/d, at an estimated cost of US$3.5 billion (37.5 percent of 2018 GDP).
  - Construction of a 2,000 km-long pipeline with terminal refurbishment to Benin, of which two thirds in Niger, for crude oil exports (US$2 billion, 21.3 percent of 2018 GDP).
- Management and financing:
  - The pipeline will be managed by companies set up by CNPC for this purpose in the two transit countries with possible minority participation of the host governments.
  - CNPC is to finance these oil sector projects under terms and conditions that are still under negotiations but are likely to resemble those of the 2007 Production Sharing Agreement based on the Petroleum Code in force at the time.
- Expected macroeconomic impacts:
  - During the 3-year construction period, the growth-enhancing local content is about 5 percent, providing a yearly growth effect of around 0.5 percentage points of GDP.
  - Growth effects will be higher when production commences in 2022, but benefits for national income will be more muted and depend on additional fiscal proceeds and domestic spill-offs.
  - In the longer term, further new concessions in the Agadem fields have been given to other oil companies, and their production could feed into the export pipeline.
- Key economic risks and considerations:
  - Macroeconomic returns critically depend on production and cost sharing agreements and transfer pricing for oil sector investments.
  - Control of production and cost data on petroleum operations is a central policy challenge.

### Dangote Cement
- Project description and capacity:
  - Nigerian Dangote conglomerate is initiating works on an integrated and self-standing cement factory complex based on local raw materials; it will consist of a clinker plant, a cement factory, and a coal-fired power plant, for a total cement production of 4,500 ton/day.
- Cost and timeline:
  - Estimated cost of US$322 million (3.5 percent of 2018 GDP).
  - Construction, with limited local content, is scheduled for 2019-2021.
- Expected outcomes:
  - Cement production will eventually cover domestic needs and should allow for a cutback of imports and some exports.

### Kandadji dam
- Project lead and financing:
  - World Bank leading the CFAF 155 billion (3 percent of GDP) dam construction project over 3 years, with co-financing by other donors.
- Expected benefits:
  - Additional electricity supply.
  - Hopes that the dam, together with other smaller irrigation projects, will stimulate formal agricultural production and strengthen national food security.

### Millennium Challenge Corporation (MCC) projects
- Financing and timeline:
  - Niger qualified for US$437 million-worth of MCC investment over 2018-2023 (4.6 percent of 2018 GDP), with project implementation starting in earnest in 2019.
- Project focus and expected impact:
  - Investment projects were selected mainly in agriculture and integrated social sectors, with a view to hold up local content.
  - Overall growth and poverty relief of these projects may be relatively more significant than for the big investments.

### Economic implications and policy challenges
- Opportunity and challenges:
  - Big projects present an opportunity for higher medium-term economic growth and diversification.
  - They pose a challenge for growth and balance of payments projections, particularly during the construction phase.
  - Imports of goods and services are expected to be very high for complex and integrated projects built by private foreign investors.
  - Economic risks are substantial for a country with limited technical capacity.
- Key policy priorities and recommendations:
  - Assure a higher share of local content during construction and production phases.
  - Control production and cost data on petroleum operations.
  - Focus on exemption constraint and revenue mobilization for sustainable spill-offs to the benefit of the poor population.
  - Macroeconomic returns depend on production and cost sharing agreements, transfer pricing, and the management of tax and customs exemptions, including under the Investment and the Public/Private Partnership Codes, which may include discretionary elements.

*International Monetary Fund — Annex I. Big Investment Projects, cr18372*

### 11.      Regarding public finances, the goal is to comply with the WAEMU deficit criterion by

### 11.      Regarding public finances, the goal is to comply with the WAEMU deficit criterion by

### Public finances — medium-term targets and assessments
- Fiscal deficits will gradually decline to:
  - 4.5 percent of GDP in 2019
  - 3.0 percent in 2020
  - 2.7 percent in 2021
- WAEMU’s one-year derogation for meeting the deficit convergence criterion will give Niger time to implement projects for which substantial donor financing was pledged at the December 2017 round table.
- Public debt is projected to remain on a sustainable path, gradually declining to some 43 percent of GDP by 2023.
- Niger will preserve its “moderate” rating for debt distress.

### Request for IMF augmentation and rationale
- The Government requests an augmentation of access under the ECF arrangement from 75 percent to 90 percent of quota (SDR 19.74 million), to be added to the proposed disbursement available as of April 30, 2019.
- Motivations and financing gaps:
  - External and fiscal financing gaps likely to emerge in 2019.
  - Adverse shocks: tense security situation, unfavorable uranium export prices, donor financing not increasing as foreseen, high needs for social spending.
  - Government would face difficulties to raise the additionally required CFAF 15.5 billion in the regional bond market.

### Fiscal program for 2019 — overall framework
- Built around fiscal consolidation via revenue mobilization and expenditure restraint, plus measures to raise spending quality.
- Overall and basic deficits for 2019:
  - Overall deficit: 4.5 percent of GDP
  - Basic deficit: 2.8 percent of GDP
- Measures worth 1 percent of GDP will boost underlying revenues.
- Expenditure declines as a percentage of GDP through targeted retrenchments and no general wage increase for government employees.

### 2019 draft budget and budget execution safeguards
- Draft budget submitted to Parliament is broadly in line with the fiscal program.
  - Spending authorizations are CFAF 17.1 billion (0.3 percent of GDP) higher; corresponding allocations will be released only if revenues overperform the program.
  - A communication will set aside CFAF 17.1 billion in spending, specifying affected programs and ministries (prior action for completion of the third ECF-review).
  - Government ready to hold back more allocations if revenues fall short.
- Spending allocations will be released in the first month of each quarter after consideration by the Inter-Ministerial Budget Regulation Committee, in line with the recurrent structural benchmark.

### Revenue measures and tax policy changes (2019 draft budget)
- Partial reinstatement of the tax on incoming international calls, TATTIE, with a discount for companies that purchase a 4G license; expected yield: CFAF 23.4 billion (0.4 percent of GDP).
- Substituting a dedicated financial sector tax, TAFI, for the VAT on banking services; expected yield: CFAF 5 billion (0.1 percent of GDP). This implements a WAEMU directive.
- Better taxing the informal sector; expected revenue gains of at least CFAF 5.8 billion (0.1 percent of GDP) via raising the VAT threshold, subjecting more small businesses to lump sum taxation, raising lump sum taxes, and subjecting VAT under-reporters to a turnover tax.
- Integrating receipts of ARTP into the general budget; expected yield: CFAF 5.2 billion (0.1 percent of GDP).

### Tax administration reforms and revenue measures
- Collecting tax arrears: expected collections to double compared to 2018, yielding an additional CFAF 15 billion (0.3 percent of GDP).
- Molecular marking of petroleum products to begin in January 2019; expected to generate at least CFAF 3 billion (0.05 percent of GDP).
- Performance plans for DGI and DGD:
  - Compliance with 2018 plans to be closely scrutinized; enhanced plans for 2019 proposed as structural benchmarks for end-January 2019.
  - Plans to include at least five indicators, numerical quarterly targets, and assigned responsibilities at the functional level.
- Linkage of IT systems (ASYCUDA and SISIC) to be operational from March 2019 (proposed structural benchmark for end-March 2019) to provide access to tax identification numbers and filings.
- Streamlining and improved administration of tax exemptions:
  - Legislation to reduce revenue forgone from exemptions to be submitted to parliament in June (proposed structural benchmark for end-June 2019).
  - Targeted revenue gains to be agreed with IMF staff ahead of time.
  - Operations of a special unit in DGD to improve management of exemptions will be ramped up.
- Continued implementation of transaction valuation of imports and a more risk-based inspection regime at DGD with emphasis on post-clearance audits.

### Expenditure side and spending quality (2019 and beyond)
- 2019 draft budget delivers a first installment in raising spending quality; program budgeting in second year supports this.
- 2019 incorporates targeted expenditure cuts across programs with no sector sacrosanct.
- Share of social spending will start to rise in 2019:
  - Examples: scale up the school lunch program and the cash transfer program; monitor progress in coverage.
- Four major avenues for government efficiency improvements beyond 2019 draft budget:
  - Civil service reform: new civil service law by end-2019 emphasizing performance-based management; biometric census tender closed in November 2018; unified database targeted mid-2019.
  - Audits of five major public administrative entities and state-owned enterprises to be completed by end-2018; development of concrete reform plans thereafter; new legislation to strengthen supervisory boards.
  - Closer monitoring and tracking of main social programs; a tracking system to be put in place by mid-year and results shared with IMF staff (proposed structural benchmark for end-June 2019).
  - Increased reliance on PPPs within new legal PPP framework, focusing on build-operate-transfer projects free of government financial contributions or guarantees; publish conventions for PPPs and other large private investment projects signed since beginning of 2018 on the Ministry of Finance’s website.

### Debt and cash management commitments
- Avoid re-emergence of domestic payment arrears after their clearance at end-2018:
  - From 2019 onward, the stock will be subject to a close-to-zero ceiling (proposed continuous performance criterion from January 2019).
- TSA implementation:
  - All remaining eligible accounts to be transferred by end-2018, overperforming the associated structural benchmark.
  - Opening of new accounts by public entities at banks strictly forbidden; compliance monitored; banks and public entities sanctioned for violations.
  - Remaining tasks: upgrade TSA account structure, operationalize Treasury’s banking unit, digitalize Treasury banking services, upgrade electronic interfaces between Treasury and the BCEAO.
- Inter-Ministerial Committee on Public Debt and Budgetary Support:
  - Preserve upgraded functionality; quarterly meetings to continue; validate compliance with procedures for project selection; report decisions on newly-approved loans in quarterly debt management reports per recurrent structural benchmarks.
- Consolidation of public debt management into a dedicated unit at the Treasury with a front-middle-back office structure remains an objective; recent organizational change attaching debt management to the Directorate of Financial Operations and Reforms is an interim step.

### Fiscal transparency and communication
- Draft budget published when submitted to parliament (break with the past).
- Additional steps:
  - Preparation and publication of a citizen budget in January 2019.
  - Publication of preliminary budgetary outcomes for 2018 in the first quarter of 2019.
  - Presentation of audited accounts to Parliament in late 2020.

### Structural reforms — private sector, financial sector, governance, and demographics
- Private sector development:
  - Continue efforts to improve Doing Business indicators and tackle other impediments (monitor power outages, communication services quality, customs clearance times, export certificates, VAT refunds).
  - Review and possibly consolidate government institutions and programs promoting the private sector.
- Deepening the financial system and bankification:
  - Bankify government activities: cash payments at DGD almost completely phased out; DGI close behind.
  - Salaries of civil servants and government workers planned to be paid via bank transfers or mobile money from January 2019.
  - Whitepaper on bankification to be provided by end-December 2018 (proposed reset structural benchmark for end-December 2018).
- Financial inclusion:
  - Microfinance sector setback: largest institution put under receivership in May 2018; restructuring plan under preparation.
  - ARSM using new tools to consolidate the sector.
  - Government to present a new financial inclusion strategy and convene a donor round table to secure financing in the first half of 2019 (proposed structural benchmark for end-June 2019).
  - Push ahead with mobile banking infrastructure in coordination with telecommunications sector.
- Governance and anti-corruption:
  - HALCIA to publish annual reports on its website going forward, including list of cases and tracking through the judicial system; fund to help finance HALCIA will be established as mandated by law.
  - Legal framework for asset declarations to be clarified by submitting draft legislation in consultation with IMF staff covering high-ranking government officials and strengthening enforcement with sanctions for non-compliance (proposed structural benchmark for end-September 2019).
  - Government to redouble effort to rejoin the Extractive Industry Transparency Initiative (EITI), if possible still in 2018.
  - Niger will act upon recommendations of the National Risk Assessment required by the 2012 FATF standard on AML/CFT.
- Demographic and gender initiatives:
  - Leverage updated National Gender Policy and decree on the Education of Girls; step up awareness campaigns geared toward religious leaders and the public.
  - Invite donor community to expand projects in gender and demographics.
  - Linkages between social protection spending and demographic outcomes (e.g., expanded school lunch program to keep girls in school longer).

### Program monitoring and requests
- Government requests:
  - A waiver for non-compliance with the end-June 2018 target on the clearance of domestic payment arrears.
  - Approval of the third review under the arrangement and disbursement of SDR 14.1 million.
  - Augmentation of access from 75 percent to 90 percent of quota to be added to the proposed disbursement available as of April 30, 2019 under the ECF arrangement.
- Monitoring arrangements:
  - Program monitoring based on performance criteria (Tables 1 and 2) and structural benchmarks (Tables 4 and 6).
  - Authorities will provide IMF staff with statistical data and information identified in the attached Technical Memorandum of Understanding, and any other information IMF staff may request for monitoring purposes.

*cr18372 - 11.      Regarding public finances, the goal is to comply with the WAEMU deficit criterion by*

### 28.      The program will be monitored through semiannual reviews. The fourth and fifth

### cr18372 - 28.      The program will be monitored through semiannual reviews. The fourth and fifth

### Program monitoring schedule
- The program will be monitored through semiannual reviews.
- The fourth and fifth program reviews are expected to take place:
  - at or after end-April 2019; and
  - at or after end-October 2019.

### Quantitative performance criteria and indicative targets (March – December 2018)
- Table headline: Niger: Quantitative Performance Criteria and Indicative Targets (March – December 2018) (Billions CFA Francs).
- A. Quantitative performance criteria and indicative targets (Ceiling on the cumulative from beginning of year)
  - Net domestic financing of the government, without IMF net financing:
    - End-Mar. 2018 Prog.: 46.1; Actual: 70.6; Status: 140.4 123.8 (table layout shows values across columns)
  - Adjustment for shortfall in external budget support: 0.0
  - Adjustment for shortfall/excess of arrears clearance in 2018: -3.3 ... -7.4
  - Adjusted net domestic financing criteria:
    - Values shown include 42.8 -13.2 Met; 63.2 47.6 Met; 140.4 123.8
  - Change in domestic payment arrears of government obligations:
    - Targets: -15.0 -30.0 -45.0 -64.7
    - Adjustment for overperformance in 2017: 10.3
    - Adjusted domestic payment arrears of government obligations:
      - -4.7 -1.4 Not met; -19.7 -12.3 Not met; -45.0 -64.7
- Memorandum items:
  - External budget support: 0.0 23.2 23.0 26.7 68.4 146.9
- B. Continuous quantitative performance criteria (Ceiling)
  - Accumulation of external payments arrears: 0.0 0.0 Met 0.0 0.0 Met 0.0 0.0
  - New external debt contracted or guaranteed by the government with maturities of less than 1 year: 0.0 0.0 Met 0.0 0.0 Met 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 0.0 Met 0.0 0.0 Met 0.0 ...
  - Present Value (PV) of new public and publicly-guaranteed external debt contracted from January 1, 2018: n.a. ... 75.4 n.a. ... 225.0
- C. Indicative Targets (cumulative for each fiscal year)
  - Basic budget balance (commitment basis, excl. grants), floor:
    - -61.2 12.0 Met; -123.5 -6.7 Met; -169.7 -210.0
  - Basic budget balance (commitment basis, incl. budget grants), floor:
    - -61.2 35.2 Met; -100.5 20.0 Met; -132.4 -100.3
  - Total fiscal revenue, floor: 172.7 192.2 Met; 369.5 440.0 Met; 567.0 803.3
  - Spending on poverty reduction, floor: 108.0 115.3 Met; 237.9 300.1 Met; 345.9 538.4
  - Ratio of exceptional expenditures on authorized spending (percent), ceiling: 5.0 4.4 Met; 5.0 2.8 Met; 5.0 5.0
- Sources: Nigerien authorities; and IMF staff estimates and projections.
- Note: The terms in this table are defined in the TMU. (Footnotes preserved in table notes in source.)

### Quantitative performance criteria and indicative targets (March – December 2019)
- Table headline: Niger: Quantitative Performance Criteria and Indicative Targets (March – December 2019) (Billions CFA Francs).
- A. Quantitative performance criteria and indicative targets (Ceiling on the cumulative from beginning of year)
  - Net domestic financing of the government, without IMF net financing:
    - Values presented include 69.7 74.0 113.1 21.9
  - Adjustment for shortfall in external budget support: ...
  - Adjusted net domestic financing criteria: ... (not quantified in table)
- Memorandum items:
  - External budget support: 0.0 28.2 28.2 160.1
- B. Continuous quantitative performance criteria (Ceiling)
  - Accumulation of external payments arrears: 0.0 0.0 0.0 0.0
  - Stock of outstanding domestic payment arrears on government obligations: 5.0 5.0 5.0 5.0
  - Present Value (PV) of new public and publicly-guaranteed external debt contracted from January 1, 2019: 225.0 225.0 225.0 225.0
- C. Indicative Targets (Cumulative from beginning of year)
  - Basic budget balance (commitment basis, excl. grants), floor: -56.1 -99.0 -124.7 -157.9
  - Basic budget balance (commitment basis, incl. budget grants), floor: -56.1 -70.8 -96.5 -39.4
  - Total fiscal revenue, floor: 195.2 417.6 652.1 889.8
  - Spending on poverty reduction, floor: 150.7 301.4 452.2 602.9
  - Ratio of exceptional expenditures on authorized spending (percent), ceiling: 5.0 5.0 5.0 5.0
- Sources: Nigerien authorities; and IMF staff estimates and projections.
- Note: The terms in this table are defined in the TMU. (Footnotes preserved in table notes in source.)

### Recurrent structural benchmarks and structural reforms (June 2018 – September 2019)
- Tables 3–6 summarize recurrent structural benchmarks for the program.
- Recurrent benchmarks (June – September 2018) included:
  - Release the quarterly budget allocation in the first month of each quarter based on the proposal of the regulation committee. Timetable: Quarterly. Progress: Met for Q2. Rationale: Improve budget and cash flow management.
  - Prepare a quarterly commitment plan consistent with the corresponding cash plan. Timetable: Quarterly. Progress: Met for Q2. Rationale: Improve budget and cash flow management.
  - Prepare quarterly debt management reports to be validated by the National Public Debt Management Committee. Timetable: Quarterly. Progress: Met for Q2. Rationale: Improve debt management.
  - Hold at least monthly meetings of the Inter-Ministerial Debt Management Committee. Publish its decisions, a list of newly approved loans, and the view taken by the Ministry of Finance in the quarterly debt management reports. Timetable: Quarterly from Q3 onward. Rationale: Safeguard control over the contracting of new public debt.
- Recurrent benchmarks (December 2018 – September 2019) added:
  - New: Provide Fund staff with a tally of newly granted tax exemptions. Timetable: Quarterly. Rationale: Protect revenue base.
  - Prepare a revised borrowing plan. Timetable: At end-June 2019. Rationale: Improve debt management.
- Selected structural benchmark progress (June–September 2018) from Table 5:
  - Provide IMF staff with a whitepaper on the streamlining of tax exemption and monthly data on newly-granted discretionary tax exemptions. Timetable: End-June. Progress: Not met, white paper provided, data provided with delay.
  - Send legislation overhauling tax and customs exemptions to the National Assembly. Timetable: End-September. Progress: Met.
  - Regarding TSA implementation, establish and share with Fund staff a timetable for account closures reducing still-to-be-transferred balances to less than 10 percent of the level established in the BCEAO study; implement new TSA account structure at the BCEAO. Timetable: End-June. Progress: Met.
  - Send to the National Assembly a new law on public private partnership (PPP) consistent with investment code and 2012 budget law. Timetable: End-June. Progress: Met.
  - Discontinue tax and customs duty payments to the DGE and the ten largest customs offices in cash by issuing a circular; transform bankification plan into a whitepaper. Timetable: End-June. Progress: Not met, only cash payments ended.

### Prior actions and additional structural benchmarks (December 2018 – September 2019)
- Prior Action:
  - Submit to the National Assembly a draft 2019 budget broadly in line with this MEFP and make a communication to government setting aside CFAF 17.1 billion in authorized spending. Status: Prior Action. Rationale: Ensure sound public finances.
- Fiscal policy and revenue administration benchmarks:
  - New: Assess compliance with 2018 performance plans of DGD and DGI, take corrective actions as needed, and establish 2019 performance plans for DGD and DGI with at least five indicators and quarterly targets. Timetable: End-January 2019. Rationale: Support revenue generation.
  - Link the IT systems of DGI and DGD and make the access to pertinent information operational. Timetable: End-March 2019. Rationale: Support revenue generation.
  - New: Submit legislation that cuts back exemptions to the National Assembly. Timetable: End-June 2019. Rationale: Support revenue generation.
- Public financial management:
  - Regarding TSA implementation, reduce still-to-be-transferred balances of public administration and public entities to less than 10 percent of the level established in the BCEAO study; digitalize Treasury’s banking services. Timetable: End-December 2018. Rationale: Improve liquidity management and expenditure control.
- Other structural reforms:
  - Reset from end-June 2018: Provide IMF staff with a whitepaper on the bankification of fiscal payments, including action plan for next steps. Timetable: End-December 2018. Rationale: Improve governance and promote financial deepening.
  - Discontinue tax and customs duty payments to the DME and the twenty largest customs offices in cash by issuing a circular. Timetable: End-December 2018. Rationale: Improve governance and promote financial deepening.
  - New: Establish tracking system for major social programs, including spending and progress toward meeting objectives. Timetable: End-June 2019. Rationale: Improve effectiveness of social protection.
  - New: Publish new strategy on financial inclusion and hold donor round table. Timetable: End-June 2019. Rationale: Improve access to financing and the business environment.
  - New: Submit to parliament draft legislation in consultation with IMF staff on asset declaration requirements for high-ranking government officials and introduce sanctioning non-compliance with asset-declaration requirements. Timetable: End-September 2019. Rationale: Improve governance and transparency.

### Proposed disbursements under the ECF arrangement (2017–20)
- Table headline: Niger: Proposed Disbursements Scheduled Under the ECF Arrangement, 2017–20.
- Disbursement schedule (Amount (Millions) / Conditions Necessary for Disbursement / Date Available):
  - SDR 14.1 — Executive Board Approval of the ECF Arrangement — January 23, 2017.
  - SDR 14.1 — Observance of continuous and end-June 30, 2017 performance criteria, and completion of the first review under the arrangement — December 15, 2017.
  - SDR 14.1 — Observance of continuous and end-December 31, 2017 performance criteria, and completion of the second review under the arrangement — June 1, 2018.
  - SDR 14.1 — Observance of continuous and end-June 30, 2018 performance criteria, and completion of the third review under the arrangement — October 31, 2018.
  - SDR 33.84 — Observance of continuous and end-December 31, 2018 performance criteria, and completion of the fourth review under the arrangement — April 30, 2019.
  - SDR 14.1 — Observance of continuous and end-June 30, 2019 performance criteria, and completion of the fifth review under the arrangement — October 31, 2019.
  - SDR 14.1 — Observance of continuous and end-September 30, 2019 performance criteria, and completion of the sixth and last review under the arrangement — January 8, 2020.
  - SDR 118.44 — Total.
- Note: With respect to previously completed reviews, the date indicated refers to the date of the Executive Board meeting. Source: International Monetary Fund.

### Attachment II. Technical Memorandum of Understanding (TMU) — scope and definitions
- Location and date: Niamey, November 21, 2018.
- Purpose: Defines the performance criteria and indicative targets of Niger’s program under the Extended Credit Facility (ECF) arrangement for the period Q2-2018 to Q1-2020. Performance criteria and indicative targets for 2018 and for 2019 are set out in Tables 1 and 2 of the MEFP attached to the Letter of Intent of November 21, 2018. Structural benchmarks appear in Tables 3 to 6. The TMU also sets out data-reporting requirements for program monitoring.
- Definitions provided:
  - Government: the central government of the Republic of Niger; excludes any political subdivision, public entity, or central bank with separate legal personality.
  - Debt: a current (not contingent) liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, requiring the obligor to make one or more payments in the form of assets (including currency) or services, according to a specific schedule. Primary forms include (i) loans (including deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, official swap arrangements); (ii) suppliers’ credits; and (iii) leases (PV at inception of lease). Arrears, penalties, and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are debt.
  - Present value (PV) of new public and publicly-guaranteed external debt contracted: discounts at a five percent annual rate the future payment stream, except for loans with a negative grant element, in which case the PV is set equal to the value of the loan. The calculation of the PV is based on the loan amount contracted in a given year, independent of when disbursements take place.
  - Domestic payment arrears: domestic payments owed by the government but not paid; include committed and authorized fiscal year expenditures that are not paid within 90 days.
  - External payment arrears: external payments due but not paid.
  - Government obligation: any financial obligation of the government accepted as such by the government (including any government debt).

### TMU: Quantitative performance criterion — Net domestic financing of the government
- Definition:
  - Net domestic financing of the government is the sum of:
    - (i) net bank credit to the government;
    - (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:
  - 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.

*International Monetary Fund — Attachment II. Technical Memorandum of Understanding (Niamey, November 21, 2018).*

### 5.      Government debt to the banking system includes assistance from the central bank

### 5.      Government debt to the banking system includes assistance from the central bank

### Scope and definitions of domestic financing
- 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 BCEAO definition of net bank credit to the government includes all central government administrations.
- 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;
  - (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.

### Targets and adjustment mechanisms
- 2018 and 2019 quarterly targets are based on the change between the end-December 2017 and end-December 2018 levels, respectively, and the date selected for the performance criterion or indicative target.
- Adjustment for shortfalls in external budgetary support:
  - 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 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 30 billion.
- 2018-only adjustment for domestic payment arrears clearance:
  - For 2018, the ceiling on net domestic financing will be adjusted up (down) one-for-one for arrears clearance in excess (in deficit) of programmed levels.
  - The upward adjustment is capped at CFAF 30 billion.
  - The adjusted target on domestic payment arrears clearance shall not be negative.

### Reporting requirements (domestic financing and arrears)
- Detailed data on domestic financing of the government will be provided monthly, within six weeks after the end of each month.
- For domestic payment arrears:
  - For 2018, reduction equals the difference between the stock of arrears at end-2017 and the stock of arrears on the reference date.
  - For 2019, there is a continuous ceiling on the stock of outstanding domestic payment arrears.
  - The Centre d’amortissement de la dette intérieure de l’Etat (CAADIE) and the Treasury calculate the stock of domestic payment arrears and record repayments.
  - 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.
  - Programmed arrears clearance in 2018 will be adjusted up (down) one-for-one for any shortfall (excess) relative to programmed arrears clearance programmed for end-2017.
  - For evaluating performance against the end-December 2018 target, domestic payment arrears clearance includes arrears’ reduction during the supplementary budget period.
  - For evaluating performance against targets in 2019, the stock of outstanding domestic arrears will be assessed excluding the arrears’ reduction during the supplementary period.
- External payment arrears reporting:
  - Data on the stock, accumulation, and repayment of external payment arrears will be provided monthly, within six weeks after the end of each month.

### External debt contracting and concessionality rules
- Government and listed public enterprises undertake not to contract or guarantee external debt with original maturity ≥ one year and a grant element < 35 percent.
- Concessional debt definition for program purposes:
  - A debt is concessional if it includes a grant element of at least 35 percent.
  - Grant element = (present value (PV) of debt − nominal value) expressed as a percentage of nominal value.
  - PV at contracting is calculated by discounting future debt-service payments using a discount rate of 5 percent.
- The performance criterion applies to debt as defined in paragraph 8 of the Guidelines on Public Debt Conditionality in Fund Arrangements and to any obligation contracted or guaranteed for which no value has been received, except financing provided by the IMF and debt rescheduling in the form of new loans.
- Guarantee definition: any explicit legal obligation of the government to service a debt in the event of nonpayment by the debtor (payments in cash or kind).
- External debt defined as debt denominated, or requiring repayment, in a currency other than the CFA franc; applies to debt contracted among WAEMU members and WAEMU financial institutions.
- Public sector coverage for this performance criterion 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);
  - (vi) Société propriétaire et exploitante de l’Hotel Gaweye (SPEG).
- Reporting requirement: details on all external public-sector debt and government guarantees will be provided monthly, within six weeks after the end of each month; Ministry of Finance to forward list of loans in process of negotiation and semiannual reports on external debt contracted or in process and the borrowing program for the next six months.

### Short-term external debt
- The government will not accumulate or guarantee new external debt with original maturity < one year.
- This performance criterion excludes short-term loans related to imports and short-term securities issued in CFAF on the regional financial market.
- Reporting: details on all external government debt monthly, within six weeks after the end of each month.

### Present value (PV) of public and publicly-guaranteed external debt (performance criterion)
- Debt definition consistent with paragraph 8(a) of the Guidelines on Public Debt Conditionality.
- Debt instrument forms included: loans, suppliers’ credits, leases; arrears, penalties, and judicially awarded damages arising from failure to make payment under contractual obligations that constitute debt are debt.
- External debt defined as debt contracted or serviced in a currency other than the franc of the Financial Community of Africa (CFAF).
- The performance criterion is a ceiling applying to the present value of all new external debt (concessional or non-concessional) contracted or guaranteed by the central government, including commitments contracted or guaranteed for which no value has been received.
- Exemptions: (a) short-term supplier or trade-related credit with maturity up to three months; (b) rescheduling agreements; (c) IMF disbursements.
- Applicable contractual date: external debt is deemed contracted or guaranteed at the date of effectiveness of the contract, including its approval where required.
- Currency denomination for program purposes: value in CFAF of new external debt of 2018 is calculated using the average exchange rate for January 2018 in the IMF’s International Financial Statistics (IFS) database.
- PV calculation: discount all projected disbursements and debt service payments (principal and interest) using a program discount rate of 5 percent, account for loan conditions (disbursements, maturity, grace period, payment schedule, front-end fees, management fees); use IMF “DSA template”; for loans with grant element zero or less than zero, PV is set equal to face value.
- Reporting: authorities will inform IMF staff of any planned external borrowing and the borrowing conditions before loans are contracted or guaranteed.

### Quantitative targets and fiscal definitions
- Total revenue (indicative target) includes tax, nontax, and special accounts revenue, excluding proceeds from settlement of reciprocal debts between government and enterprises.
- Basic fiscal deficit = total tax revenue (as defined) − total fiscal expenditure excluding externally financed investment expenditure but including HIPC-financed expenditure.
- WAEMU definition of basic fiscal deficit = basic balance (above) plus budgetary grants.
- Floor on poverty-reducing expenditure (indicative) comprises all budget lines in the Unified Priority List (UPL) of poverty-reducing and HIPC-financed expenditures.
- Limit on expenditures paid through exceptional procedures (without prior commitment), excluding debt service payments and expenditures linked to tax exemptions = 5 percent of total authorized expenditures during the quarter for which the target is assessed.
- Reporting:
  - Basic budget revenue and expenditures: monthly, within six weeks after the end of each month.
  - UPL expenditures: quarterly, within six weeks after the end of each quarter.
  - Exceptional expenditure information: quarterly, after six weeks after the end of the quarter.

### Additional information for program monitoring (data and deadlines)
- Government Finance (monthly unless noted):
  - Detailed monthly estimates of revenue and expenditure, including priority expenditure and payment of domestic and external arrears.
  - Table of Government Financial Operations with comprehensive monthly data on domestic and external financing, changes in arrears, and Treasury balances—monthly, within six weeks after end of each month.
  - Comprehensive monthly data on net nonbank domestic financing (components listed above)—monthly, within six weeks.
  - Quarterly data on expenditure for UPL lines.
  - Quarterly reports on budget execution including execution rate of poverty-reducing expenditure.
  - Monthly data on Treasury balances outstanding, by reference fiscal year, breakdown of maturities > and < 90 days.
  - Monthly data on effective debt service (principal and interest) compared with programmed maturities provided within four weeks after the end of each month.
  - List of external loans in process of negotiation and projected borrowing in next six months, including financial terms and conditions.
- Monetary Sector (monthly, within eight weeks after end of each month):
  - Consolidated balance sheet of monetary institutions and, where applicable, consolidated balance sheets of individual banks.
  - Monetary survey (provisional data).
  - Borrowing and lending interest rates.
  - Customary banking supervision indicators for banks and nonbank financial institutions (quarterly, end-quarter + 8 weeks).
- Balance of Payments:
  - Any revision of balance of payments data whenever they occur.
  - Preliminary annual balance of payments data within six months after end of reference year.
- Real Sector:
  - Disaggregated monthly consumer price indexes within two weeks following end of each month.
  - National accounts within six months after end of year; any revisions thereafter.
- Structural reforms and other data:
  - Any study or official report on Niger’s economy within two weeks after publication.
  - Any decision, order, law, decree, ordinance, or circular with economic or financial implications upon publication or at latest when it enters into force.
  - Any draft contract in the mining and petroleum sectors, including production and sales volumes, prices, and foreign investment.
  - Any agreement with private sector stakeholders having economic or financial repercussions for the government, including in the natural resources sector.

### Summary of key reporting deadlines (selected)
- Monthly data on domestic financing, arrears, and many government finance indicators: End-month + 6 weeks.
- Monthly effective service of external debt compared with programmed maturities: End-month + 4 weeks.
- Monetary data (consolidated balance sheets, monetary survey, interest rates): End-month + 8 weeks.
- Disaggregated consumer price indexes: End-month + 2 weeks.
- Preliminary annual balance of payments: End-year + 6 months.
- National accounts: Annual, End-year + 6 months.
- Treasury accounts trial balance: Monthly, provisional End-month + 6 weeks; final End-month + 10 weeks.

*International Monetary Fund staff and Nigerien authorities as described in the source document.*

### 1.      The coverage of the public sector is in line with the previous DSA. It includes the central, state

### cr18372 - 1.      The coverage of the public sector is in line with the previous DSA. It includes the central, state

### Coverage of the public sector
- Coverage includes the central, state and local governments, the social security fund and extra budgetary funds, the central bank, and state guarantees extended to the public and private sectors (Text Table 1).
- State and local governments are not holding debt although they are able to directly borrow.
- Authorities confirmed the absence of extra budgetary funds and external borrowing by the social security fund (CNSS).
- Private external debt guaranteed by the government is limited to the guarantee issued to CNPC (China) for the construction of the refinery SORAZ.
- Government-guaranteed SOE debt mainly consists of loans contracted by:
  - electricity (NIGELEC),
  - water (SPEN),
  - telecom (Niger Telecom) companies with Exim Bank China,
  - and borrowing from the World Bank by ABK (public administrative entity for Kandadji dam).
- External debt is defined on a currency basis.

### Contingent liability stress test design and coverage
- Stress tests reflect uncertainty about vulnerabilities associated with non-guaranteed SOE debt and financial market risks (Text Table 1).
- Financial market shock: default value of 5 percent of GDP (minimum) due to the small size and depth of the financial sector in Niger.
- Contingent liabilities shock from SOE debt: default value of 2 percent (to reflect risks associated with non-guaranteed SOE debt currently excluded from baseline due to data constraints).
- Coverage expansion planned as Ministry of Finance collects and processes SOE financial statements, with expected launch of a survey of financial indicators in 2019.
- PPP exposure: new PPP law adopted in May 2018 expected to contain PPP-related risks by integrating PPPs into the budget cycle and requiring parliamentary approval and value-for-money scrutiny.
- Debt stock of PPP arrangements contracted under the previous regime: CFAF 214.6 billion (4.5 percent of GDP) at end-December 2017; expected to be fully repaid by 2033.

- Text Table 1 numerical defaults used for contingent liability stress test design:
  - Other elements of the general government not captured in 1.: 0.0 percent of GDP
  - SoE's debt (guaranteed and not guaranteed by the government): 2.0 percent of GDP
  - PPP: 0.0 percent of PPP stock (35 percent of PPP stock default; note: country-specific value set at 0.0 with new PPP law)
  - Financial market (the default value of 5 percent of GDP is the minimum value): 5.0 percent of GDP
  - Total (2+3+4+5) (in percent of GDP): 7.0

- Footnote on SORAZ/CNPC loan:
  - CNPC extended a USD 880 million (CFAF 486.7 billion, 9.3 percent of GDP) loan for SORAZ in 2008, of which USD 352 million (CFAF 194.7 billion, 3.7 percent of GDP) is guaranteed by the government.
  - Outstanding stock of CFAF 28.3 billion at end-June 2018 scheduled to be fully repaid by 2019.
  - Baseline stock of debt includes SORAZ debt.

### Background — Evolution and composition of public debt
- Niger’s PPG debt stood at CFAF 2,115 billion in June 2018, with external debt accounting for 72 percent of the total (latest government publication).
- Multilateral creditors represent the lion’s share; Niger borrows most from the World Bank (IDA).
- Bilateral debt dominated by China and France (AFD).
- Around three-quarters of external debt is foreign-currency denominated with relatively low exchange-rate risk given CFAF’s peg to the euro.
- Average weighted interest rates:
  - External debt: 1.6 percent (due to concessional borrowing)
  - Domestic debt: 6 percent

- Text Table 2: Public and Publicly-guaranteed Debt, 2016–June 2018 (CFAF bln; percent of GDP)
  - Dec-16:
    - A. Public debt contracted and disbursed (B+C): 1793 | 39.8
    - B. Public External debt: 1292 | 28.7
      - Multilateral: 1051 | 23.3
      - Bilateral: 242 | 5.4
        - Paris Club: 46 | 1.0
        - Non-Paris Club: 196 | 4.3
    - C. Public Domestic debt: 501 | 11.1
      - Tbills and Bonds: 422 | 9.4
      - Domestic arrears: 44 | 1.0
      - Other: 34 | 0.8
    - D. Publicly-guaranteed external debt (SORAZ): 78 | 1.8
    - Total PPG debt (A+ D): 1871 | 41.5

  - Dec-17:
    - A. Public debt contracted and disbursed (B+C): 1986 | 41.0
    - B. Public External debt: 1405 | 28.7
      - Multilateral: 1177 | 24.9
      - Bilateral: 228 | 4.8
        - Paris Club: 54 | 1.1
        - Non-Paris Club: 174 | 3.7
    - C. Public Domestic debt: 581 | 12.3
      - Tbills and Bonds: 519 | 11.0
      - Domestic arrears: 37 | 0.8
      - Other: 26 | 0.5
    - D. Publicly-guaranteed external debt (SORAZ): 41 | 0.9
    - Total PPG debt (A+ D): 2027 | 41.9

  - Jun-18:
    - A. Public debt contracted and disbursed (B+C): 2087 | 40.6
    - B. Public External debt: 1493 | 29.1
      - Multilateral: 1232 | 24.0
      - Bilateral: 262 | 5.1
        - Paris Club: 59 | 1.1
        - Non-Paris Club: 203 | 3.9
    - C. Public Domestic debt: 593 | 11.6
      - Tbills and Bonds: 541 | 10.5
      - Domestic arrears: 35 | 0.7
      - Other: 17 | 0.3
    - D. Publicly-guaranteed external debt (SORAZ): 28 | 0.5
    - Total PPG debt (A+ D): 2115 | 41.2

- External debt by currency share as of June 2018:
  - USD: 24%
  - EUR: 31%
  - XOF: 26%
  - CNY: 9%
  - Other: 10%

- Data limitations:
  - Estimation and analysis of private external debt complicated by data issues; BCEAO does not yet compile external debt stock statistics.
  - IMF Statistics Department technical support planned to gather private external debt coverage and composition.

### Macroeconomic forecast and financing assumptions
- Baseline scenario assumptions reflect recent developments and expected policy effects (Text Table 3).
- Fiscal consolidation assumed to meet WAEMU deficit target of 3 percent of GDP by 2020.
- Commencement of crude-oil exports and resumption of Imouraren uranium activities pushed back by two and four years to 2022 and 2025 respectively (to account for pipeline construction delays and unfavorable uranium prices).
- Medium and long-run real GDP growth expected higher relative to previous DSA due to booming construction sector and completion of Kandadji dam and MCC-related activities.
- Revenue projections reduced somewhat but revenue mobilization expected to strengthen via tax measures, arrears collection, consolidation of exemptions, fight against petroleum smuggling, and customs/tax administration overhaul.
- Inflation: expected somewhat higher over medium term due to transitory shocks in 2018; longer-term projections largely unchanged.

- Financing and borrowing composition assumptions:
  - Short and medium term: gradual shift from domestic to foreign funding; benefit from donor pledges from December 2017 roundtable.
  - Very long run: domestic financing expected to increase as reforms take effect.
  - Foreign borrowing: new disbursements covered by historical patterns; long-term shift toward less concessional and commercial loans.
  - Domestic borrowing instruments assumed to shift from T-bills to medium- and long-term bonds.
  - Assumed average interest rates on domestic debt:
    - Bonds maturing in 1 to 3 years: 6.25 percent
    - Bonds maturing in 4 to 7 years: 6.5 percent
    - T-bills: 6 percent

- Donor pledges from PDES 2017-2021 roundtable:
  - Official bilateral and multilateral donors pledged USD 12.7 billion
  - Private investors committed USD 10.3 billion

- Key macroeconomic assumptions (2016-2017; 2018-2023; 2024-2038) — DSA 2018 vs. Previous DSA:
  - Real GDP growth (percent):
    - DSA 2018: 4.9 | 6.9 | 6.0
    - Previous DSA: 5.0 | 6.2 | 5.1
  - Inflation (CPI):
    - DSA 2018: 1.3 | 1.7 | 2.0
    - Previous DSA: 1.5 | 2.0 | 2.0
  - Primary fiscal balance (percent of GDP):
    - DSA 2018: -4.9 | -2.0 | -1.3
    - Previous DSA: -6.0 | -1.4 | 0.4
  - Total revenue excluding grants (percent of GDP):
    - DSA 2018: 14.3 | 17.4 | 19.7
    - Previous DSA: 15.7 | 19.2 | 21.9
  - Exports of goods and services (percent of GDP):
    - DSA 2018: 16.7 | 19.0 | 25.6
    - Previous DSA: 17.4 | 21.4 | 23.9
  - Oil export price (US dollars per barrel):
    - DSA 2018: 45.4 | 59.5 | 60.2
    - Previous DSA: 44.6 | 42.7 | 54.3
  - Uranium price (Thousands of CFAF per kg):
    - DSA 2018: 54.2 | 37.5 | 71.2
    - Previous DSA: 58.2 | 61.2 | 75.3

### Realism tools and assessment of baseline assumptions
- Realism tools flag deviations from historical experience reflecting strengthened macroeconomic performance.
  - Drivers of debt dynamics:
    - Updated debt stock data through end-2017 show Niger took on less external public debt than previously expected.
    - Prices and exchange rates expected to negatively contribute to external debt accumulation relative to historical experience.
    - Projected contribution of real GDP growth to public debt reduction is higher than past five years due to upward revision of medium- and long-run growth.
    - Continued fiscal consolidation expected to curb primary deficit contribution to public debt more than in past.
    - For PPG external debt, past forecast errors driven by unexpected current account, FDI, price changes, and residual.
    - For public debt, unexpected changes in primary deficit and residual mainly accounted for past forecast errors.
    - Niger's unexpected changes in debt are within the interquartile range for LICs for both public and PPG external debt.
  - Realism of planned fiscal adjustment:
    - Projected 3-year fiscal adjustment in primary balance (3 percentage points of GDP) lies at the lower end of the top quartile of past adjustments (above 2.5 percentage points of GDP) in LIC sample.
    - Realism of adjustment premised on authorities’ commitment to boost revenue mobilization, clear domestic arrears, and contain expenditures.
  - Consistency between fiscal adjustment and growth:
    - Tool flags potentially overoptimistic growth given pronounced fiscal consolidation.
    - Baseline expects real GDP growth of 5.2 and 6.5 in 2018 and 2019 respectively, driven by construction and services ahead of AU summit and donor-financed investments (Kandadji dam, oil export pipeline).
  - Consistency between public investment and growth:
    - Similar contribution of public investment to growth across previous and current DSAs.
    - Public investment expected to remain at around 15 percent of GDP in the medium term.

### Country classification and stress test scenarios
- Debt-carrying capacity:
  - Classified “medium” per October 2018 WEO vintage.
  - CI value: 2.92 (falls within medium debt-carrying capacity thresholds: 2.69 < CI ≤ 3.05).
  - CI components and contributions:
    - CPIA: coefficient 0.385; 10-year average 3.388; contribution 1.30 (45%)
    - Real growth rate (percent): coefficient 2.719; 10-year average 5.625; contribution 0.15 (5%)
    - Import coverage of reserves (percent): coefficient 4.052; 10-year average 40.208; contribution 1.63 (56%)
    - Import coverage of reserves^2 (percent): coefficient -3.990; 10-year average 16.167; contribution -0.65 (-22%)
    - Remittances (percent): coefficient 2.022; 10-year average 0.000; contribution 0.00 (0%)
    - World economic growth (percent): coefficient 13.520; 10-year average 3.579; contribution 0.48 (17%)
    - CI Score: 2.92 (100%); CI rating: Medium
- Default stress-testing framework:
  - Six standardized stress tests plus tailored commodity price shock stress test.
  - Niger does not qualify for market financing shock stress test.
  - Commodity price shock: sudden one standard deviation decline in commodity export prices used to assess sensitivity.
  - Note: Niger’s moderate risk rating of external and overall public debt distress remains robust to larger customized price shocks including up to two standard deviations.

### External debt sustainability (key findings and scenarios)
- Projection summary:
  - External debt projected to fall gradually; public and private debt both decline in the long run.
  - Under baseline, PPG external debt expected to increase from 34 to 36.6 percent of GDP over 2018-21, then fall to 28.5 percent of GDP by 2038.
  - Non-interest current account deficit is main driver of external debt dynamics; goods and services balance likely to deteriorate short term due to high imports for construction ahead of 2019 AU summit.
  - Medium term: large investment projects (Kandadji dam, cement factory, oil export pipeline) and MCC-funded agricultural investments expected to entail higher current account deficits.
  - After accounting for non-interest current account deficit, net FDI and endogenous debt dynamics, remaining drivers (capital account components, reserves accumulation, valuation adjustments, price and exchange rate changes) subsumed into the residual.

- Baseline threshold compliance:
  - None of Niger’s PPG external debt indicators breaches thresholds under the baseline scenario.
  - PV of debt-to-GDP expected to hover around 24 percent of GDP in longer term.
  - PV of debt-to-exports ratio peaks and then declines with commencement of crude-oil exports and resumption of Imouraren uranium.
  - Debt service-to-exports and debt service-to-revenue ratios decline sharply in 2020 with full amortization of CNPC debt, pick up in 2021 due to principal repayment on IMF and IDA loans, then decrease gradually.
  - Baseline debt paths close to historical scenario; longer-term projections point to rapidly accumulating debt if key macroeconomic variables kept at historical averages.

- Stress test outcomes and risks:
  - PV of external debt-to-exports ratio breaches applicable threshold under the export shock stress test scenario, signaling a moderate risk of external debt distress.
    - The PV of total public indicator peaks at 253 percent in 2021 before receding below its prescribed threshold, aided by anticipated large boost to oil exports.
  - Threshold also breached under:
    - Stress test combining adverse shocks to current transfers-to-GDP and FDI-to-GDP ratios (only in 2020 and 2021).
    - Stress test combining the five standardized stress tests in 2021.
    - Tailored commodity price shock stress test over 2019-21.
  - Vulnerability source: narrow export base concentrated on uranium and oil, creating structural vulnerability to commodity price shocks and unstable export revenues.

- Alternative delay scenarios:
  - If uranium resumes in 2025 but crude oil exports delayed to 2023 (from 2022):
    - PV external debt-to-exports ratio would breach its threshold through only an extra year to 2023 under the export shock stress test, then decline as in baseline.
  - Extreme scenario: pipeline construction not completed over DSA horizon and expected export boost does not materialize:
    - Breach prolonged through 2033, but PV external debt-to-exports ratio remains below its debt threshold applicable under baseline, so external debt distress rating remains “moderate”.
  - If crude oil exports commence in 2022 and uranium delayed one year to 2026:
    - Threshold respected under export shock stress test from 2022 onwards.
  - If uranium recovery postponed after 2038:
    - PV external debt-to-exports ratio remains below threshold applicable under baseline; breach under the export shock stress test ends in 2022 as in baseline though indicator stays close to threshold.

*International Monetary Fund*

### 15.      Public sector debt is projected to build up somewhat in the medium term, driven by foreign

### 15.      Public sector debt is projected to build up somewhat in the medium term, driven by foreign

### Medium-term projections and drivers
- Public sector debt is projected to build up somewhat in the medium term, driven by foreign borrowing before declining over the longer term (Table 2).
- Public debt is expected to increase with the spending of donor funds, but should recede with the government’s commitment to fiscal consolidation and meeting the WAEMU fiscal convergence criterion by 2020.
- The primary deficit is expected to decline over time with:
  - improvement of domestic revenue mobilization,
  - enhancement of spending quality,
  - continued expenditure control,
  - and further helped by favorable automatic debt dynamics.

### Stress tests and baseline comparison
- The PV of public debt-to-GDP ratio breaches its benchmark neither under the baseline, nor the stress test scenarios (Figure 2 and Table 4).
- Public debt indicators in the baseline scenario remain below their levels suggested in the historical scenario.
- The commodity price shock emerges as the most extreme stress test among all alternative scenarios, emphasizing the vulnerability of the public debt path to commodity price fluctuations.

### Risk rating and vulnerabilities
- Niger’s debt sustainability analysis finds a moderate risk of external and overall debt distress.
- The baseline indicates a sustainable debt path for both PPG external debt and public debt, but prescribed thresholds are breached in the event of a negative shock to export growth or commodity prices.
- A granular assessment of the moderate risk rating shows Niger has limited space to absorb shocks (Figure 5):
  - The debt service-to-revenue ratio is well below its threshold, such that only shocks in the upper quartile of the observed distribution of shocks, i.e. larger than 35 percent of the threshold, would push the ratio above its prescribed limit.
  - The occurrence of the median shock suffices to downgrade Niger’s risk rating to “high” by pushing the PV of debt-to-exports ratio above its threshold in 2020 and 2021.
  - Remaining indicators are sensitive to shocks larger than the median, albeit to different degrees:
    - Such shocks would push the PV of debt-to-GDP ratio above its threshold from 2020 onward.
    - The debt service-to-exports ratio would breach its threshold in 2018 and 2019 only.

### Conditions for sustainability and policy implications
- Debt sustainability is contingent on the reforms built into the baseline being implemented.
- Key policy and structural priorities identified:
  - Commitment to fiscal consolidation and steadfast implementation of structural reforms to contain debt accumulation and preserve macroeconomic stability.
  - Successful and timely completion of Niger’s large investment projects, as presumed in the baseline.
  - Economic diversification supported by private-sector development and financial deepening to expand the export base and mitigate commodity price risks.
  - Strengthening of debt management and adherence to a prudent borrowing strategy that prioritizes concessional borrowing.

*Source: IMF staff report excerpt (cr18372).*

### 20.      The authorities broadly agreed with the assumptions and results of the DSA and made a few

### cr18372 - 20.      The authorities broadly agreed with the assumptions and results of the DSA and made a few

### Authorities' assessment and observations
- The authorities "broadly agreed with the assumptions and results of the DSA and made a few observations."
- Noted that the envisaged commencement of crude-oil exports would further increase Niger’s reliance on oil.
- Acknowledged the importance of diversifying the export base, mostly at the intensive margin, by raising the value-added content of existing exports.
- Emphasized that developing manufacturing industries and modernizing existing value chains would allow exporting transformed products instead of low value-added primary commodities.
- Highlighted the mitigating role of Niger’s access to WAEMU’s pooled reserves.
- Questioned the default size of "2 percent of GDP" used in the contingent liability stress test tailored to capture SOE debt, citing:
  - Their assessment of a negligible risk associated with SOE borrowing from the domestic banking system.
  - The limited number of SOEs able to borrow abroad (due to their small size and poor capacity to produce reliable financial statements).
  - The inclusion of government-guaranteed external debt of major SOEs in the analysis.
- Committed to extend public sector coverage by providing the end-December 2017 debt stocks of major SOEs vis-à-vis the banking sector for the next review.

### Policy recommendations and implied priorities
- Diversify the export base by increasing the value-added content of existing exports.
- Develop manufacturing industries and modernize value chains to shift exports from low value-added primary commodities to transformed products.
- Continue to leverage access to WAEMU’s pooled reserves as a mitigating factor for external vulnerabilities.
- Reassess contingent liability stress-test calibration for SOE debt given the perceived low domestic banking exposure and limited external borrowing capacity of SOEs.
- Improve public sector debt coverage and transparency by providing end-December 2017 debt stocks for major SOEs vis-à-vis the banking sector.

### Key projections and indicators (selected, as reported)
- External debt (nominal), selected years (In percent of GDP):
  - 2015: 61.4
  - 2016: 64.4
  - 2017: 62.5
  - 2018: 61.0
  - 2019: 60.6
  - 2020: 60.2
  - 2021: 59.3
  - 2022: 55.8
  - 2023: 54.2
  - 2028: 49.2
  - 2038: 36.6
- Gross external financing need (Million of U.S. dollars):
  - 2015: 1028.6
  - 2016: 967.5
  - 2017: 1073.5
  - 2018: 1407.5
  - 2019: 1549.8
  - 2020: 1659.6
  - 2021: 1637.8
  - 2022: 1311.6
  - 2023: 1380.3
  - 2028: 1550.3
  - 2038: 2911.1
- Key macroeconomic assumptions — Real GDP growth (in percent), selected years:
  - 2015: 4.3
  - 2016: 4.9
  - 2017: 4.9
  - 2018: 5.2
  - 2019: 6.5
  - 2020: 6.0
  - 2021: 5.6
  - 2022: 11.0
  - 2023: 6.8
  - 2028: 6.0
  - 2038: 6.1
- Non-interest current account deficit (In percent of GDP), selected years:
  - 2015: 20.4
  - 2016: 15.5
  - 2017: 16.2
  - 2018: 18.7
  - 2019: 20.6
  - 2020: 22.8
  - 2021: 18.9
  - 2022: 14.1
  - 2023: 13.3
  - 2028: 11.0
  - 2038: 9.9
- Net FDI (negative = inflow), selected years (In percent of GDP):
  - 2015: -6.8
  - 2016: -3.5
  - 2017: -3.7
  - 2018: -5.3
  - 2019: -6.9
  - 2020: -9.1
  - 2021: -6.7
  - 2022: -5.9
  - 2023: -5.5
  - 2028: -5.4
  - 2038: -5.4
- Government revenues (excluding grants, in percent of GDP), selected years:
  - 2015: 17.9
  - 2016: 14.3
  - 2017: 14.4
  - 2018: 16.4
  - 2019: 15.9
  - 2020: 16.9
  - 2021: 17.6
  - 2022: 18.7
  - 2023: 19.1
  - 2028: 19.4
  - 2038: 20.3
- Aid flows (in Million of US dollars), selected years:
  - 2015: 748.0
  - 2016: 799.0
  - 2017: 863.9
  - 2018: 1003.0
  - 2019: 1153.9
  - 2020: 1248.9
  - 2021: 1186.1
  - 2022: 1232.9
  - 2023: 1258.4
  - 2028: 1609.3
  - 2038: 3184.4

### Contingent liabilities and stress-test settings
- The DSA used a default contingent liability stress-test parameter of "2 percent of GDP" to capture SOE debt exposure; authorities considered this "rather large" relative to observed SOE borrowing risks.
- Staff analysis included government-guaranteed external debt of major SOEs.
- Stress-test framework notes:
  - The most extreme stress test is defined as "the test that yields the highest ratio in or before 2028."
  - Commodity price shocks are calibrated using the commodity prices outlook prepared by the IMF research department.
  - Additional financing needs generated by stress-test shocks are assumed to be covered by PPG external MLT debt in the external DSA; default terms of marginal debt are based on baseline 10-year projections.

### Authorities' data commitment
- The authorities "expressed their commitment to extend public sector coverage by providing the end-December 2017 debt stocks of major SOEs vis-à-vis the banking sector for the next review."

*Statement by Mr. Raghani, Mr. Bah, and Mr. Diakite on Niger Executive Board Meeting December 10, 2018*

### Introduction

### Introduction

### Acknowledgement and program purpose
- Nigerien authorities express gratitude to Staff, Management and the Executive Board for financial support and constructive policy dialogue under the ECF-supported program.
- Program seen as main vehicle to: strengthen macroeconomic stability; improve public financial management; support private sector development; address demographic and poverty issues.

### Performance under the Program and request for augmentation of access
- Despite adverse conditions (low uranium export prices, climate change, terrorist attacks, capacity constraints), authorities report steadfast implementation and broadly satisfactory outcomes.
- Under the third program review:
  - All performance criteria set for end-June 2018 were attained except the clearing of domestic payments arrears (delayed due to a tightened regional financial market).
  - Authorities request a waiver for non-observance of that performance criterion.
  - All indicative targets for end-June 2018 were reached.
  - Three structural benchmarks were achieved; good progress made on the remaining two; prior action attached to the review fulfilled.
- Authorities request:
  - Executive Board completion of the third review.
  - Waiver of non-observance of one performance criterion.
  - Augmentation of access to Fund resources from 75 to 90 percent of quota to deal with external shocks and allocate more resources to health and education to address fiscal and external financing gaps arising from security tensions and disappointing uranium export proceeds.
  - Rationale: augmentation necessary to finance key social programs that would not be financed otherwise amid tightening financial conditions.

### Recent economic developments and outlook
- Growth:
  - Economy projected to grow in 2018 as expected under the ECF-supported program.
  - Buoyant construction and services activity expected to lead growth to reach more than 5 percent against 4.9 percent in 2017.
  - Growth in 2019 is projected to reach 6.5 percent and could remain at this level over the medium term.
- Inflation:
  - Inflation decreased to 3.1 percent in October from 5.4 percent in April.
  - Decrease occurred despite increases in tax and administrative prices, government purchases for strategic food supplies, and higher prices for imports.
- Fiscal position:
  - Fiscal consolidation progressing; authorities achieved fiscal targets on revenue, domestic financing and budget deficit.
  - Domestic payments arrears substantially reduced; clearance of all arrears by end-2018 is within reach.
- External sector:
  - External current account deficit for 2018, based on revised 2017 data, expected to be larger than anticipated.
  - Niger, as a WAEMU member, benefits from the union’s pooled reserves currently covering more than four months of the union’s imports.

### Policies and reforms for the remainder of 2018 and the medium-term
- Overall objectives:
  - Authorities committed to implementing policies and reforms scheduled for 2019 and beyond to meet ECF-supported program objectives.
  - Policy focus: boost revenue base; raise quality of spending; improve public debt management; deepen the financial system; develop a strong private sector to increase job creation.
  - Risks acknowledged: deterioration of security conditions and vagaries of weather.
  - Positive growth prospects linked to start of large-scale projects in mining and infrastructure and projects tied to the July 2019 African Union Summit.

- Fiscal policy:
  - Fiscal consolidation to continue through intensive revenue mobilization and necessary spending restraint to achieve overall and basic deficits targets of 4.5 percent and 2.8 percent of GDP respectively.
  - 2019 budget submitted to Parliament is consistent with the ECF-supported program.
  - Tax policy measures to enhance revenue mobilization include:
    - raising the VAT threshold;
    - partially reinstating the tax on incoming international calls;
    - integrating receipts of the telecommunication regulator in the budget;
    - better taxing the informal sector.
  - Additional measures: stepped-up collection of tax arrears; streamlining tax exemptions; closer monitoring of performance plans for DGI and DGD.
  - Public expenditure focus: containment and quality improvement, with a rising share of social spending.
  - Efficiency measures include:
    - civil service reform supported by the World Bank;
    - audit of five major public entities and state-owned enterprises;
    - close monitoring of social programs;
    - increased reliance on public-private partnerships within the new legal PPP framework, focusing on build-operate-transfer projects without government financial contributions or guarantees.
  - Commitment to avoid re-emergence of domestic arrears, finalize Treasury Single Account implementation, and upgrade the electronic interface between the Treasury and BCEAO.
  - Social spending: scale up school lunch and cash transfer programs to address chronic food insecurity and natural disasters; move from program budgeting toward multi-year budgeting; request Fund assistance through a Public Investment Management Assessment (PIMA).
  - Transparency commitments: publish the draft budget submitted to Parliament and budgetary outcomes for 2018 in the first quarter of 2019; present audited accounts to Parliament by the end of 2020.

- Debt policy and management:
  - Authorities broadly agree with recent debt sustainability analysis indicating Niger’s risk of external and overall public debt distress is moderate.
  - Recognition of limited space to accommodate negative shocks due to vulnerability of uranium and oil exports.
  - Commitment to improve debt sustainability and resilience by strengthening and diversifying production and export base; development of manufacturing and start of oil exports noted as helpful.
  - Prudent borrowing policy to continue with upgraded functionality of the Inter-Ministerial Committee on Public debt and Budgetary Support.
  - Creation of a dedicated unit at the Treasury to consolidate management of all public debt.

- Financial sector development:
  - Increase development of financial sector to ensure broad-based financial inclusion while maintaining stability.
  - Ensure continued compliance with prudential requirements by banks.
  - Accelerate phasing out of cash payments at DGD and DGI.
  - As of January 2019, pay salaries of civil servants and government workers via bank transfer and mobile money.
  - Encourage use of BCEAO support instruments for lending to SMEs.
  - Plan to convene a donor round table in 2019 to fund implementation of new financial inclusion strategy.

- Structural reforms:
  - Aim to develop a strong private sector to create jobs and sustain economic activity.
  - Continue reforms to improve the business environment and Niger’s indicators in the World Bank’s Doing Business.
  - Strengthen institutional and legal frameworks against corruption.
  - Steps to rejoin the Extractive Industry Transparency Initiative in 2019.
  - Continue implementing FATF standards regarding AML/CFT and recommendations from the completed National Risk Assessment.
  - Address demographic challenges within PDES 2017-2021 framework, leveraging National gender policy and Decree on Education of Girls; increase public awareness on demographic challenges and seek continued international support.

### Conclusion
- Authorities reaffirm strong commitment to sound policies and reforms to foster broad-based and inclusive economic growth.
- Continue efforts to achieve program objectives and reduce economic vulnerability to shocks.
- Authorities request Executive Board support for completion of the third review, waiver for non-observance of one performance criterion, and augmentation of access to IMF resources.

*IMF document: "Introduction" (cr18372).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18372.pdf_