## 1nerea2019001

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---

### Executive summary — context, recent developments, and program performance
- Context
  - Niger faces development challenges aggravated by terrorist incursions, low uranium export prices, and climate change.
  - GDP growth picked up to 6.5 percent last year and should average above 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.
  - The government enjoys a strong parliamentary majority but rising external security threats complicate implementation and human development efforts.

- Recent economic developments
  - Real GDP growth rose to 6.5 percent in 2018, supported by bountiful harvests, surging artisanal gold production, and strong activity in construction and services.
  - Inflation eased to below 3 percent following the unwinding of a late-2017 food price spike (2018 annual average of 2.7 percent).
  - Financial deepening remains limited; private credit barely keeps pace with economic growth (private sector credit expanded by 6.9 percent for the year on average, less than the 9.2 percent increase in nominal GDP).
  - Current account deficit was 18.2 percent of GDP in 2018, predominantly financed by donors and FDI.
  - Niger has recourse to WAEMU’s pooled foreign reserves, equivalent to 4.3 months of union imports at end-2018.

- Fiscal developments and public debt
  - Fiscal consolidation continued: the fiscal deficit fell from 5.7 percent of GDP in 2017 to 4.1 percent of GDP in 2018, with a fiscal effort of 1 percent of GDP as measured by the improvement in the basic balance.
  - Cash revenues stagnated as a percent of GDP; administrative reforms yielded an estimated 0.6 percent of GDP; revenue losses of 0.9 percent of GDP reflected abolition of a major telecom tax and declines in resource-related revenues; a one-off boost to non-tax revenues was 0.3 percent of GDP.
  - Clearance of domestic payment arrears progressed little: CFAF 43.6 billion (0.8 percent of GDP) remained at end-2018, only CFAF 10.8 billion (0.2 percent of GDP) less than 12 months earlier.
  - Public debt ratio at end-2018 was 53.8 percent of GDP after historical data revisions upward by 3.8 percent of GDP due to inclusion of previously omitted external loans.

- Program performance
  - Program implementation broadly satisfactory: all quantitative targets for end-December 2018 and end-March 2019 were met except clearing all domestic payment arrears at end-December and the continuous domestic arrears target for 2019.
  - Three of four performance criteria (PCs) and all indicative targets (ITs) at end-December 2018 were met; no external payment arrears were incurred; contracting of new external public debt remained below program ceiling; net domestic budget financing target observed with a wide margin.
  - Clearance of domestic arrears missed by 0.9 percent of GDP; authorities committed to a major paydown financed through an additional bond emission, a funding authorization in a supplementary budget for arrears clearance, and a revised treasury plan to clear remaining arrears by October (prior action).
  - Structural reforms advanced: the Treasury Single Account was rolled out; cash payments of tax and custom duties discontinued; a white paper on further bankification of fiscal payments furnished.
  - Preparation of 2019 performance plans for customs and tax administrations was delayed but formalization and refinement of plans is a prior action.

### Outlook, projections, and risks
- Growth outlook
  - Slight slowdown to 6.3 percent likely in 2019 as agricultural production normalizes.
  - Growth projected to average 7.3 percent annually over the next five years, driven by large projects and donor-financed activity.
  - Growth would jump to some 12 percent in 2022 when the crude oil export pipeline is projected to become operational.

- External sector and inflation
  - Current account deficit projected to widen from 18.2 percent of GDP in 2018 to a peak of 22.4 percent of GDP in 2020 due to import-intensive construction of large projects.
  - By 2024, current account deficit expected to narrow to about 12 percent of GDP as projects come on stream and exports rise.
  - Inflation should remain comfortably below the WAEMU’s 3 percent convergence criterion throughout the projection period.

- Risks and debt sustainability
  - Downside risks: implementation challenges and deteriorating security conditions could undermine results.
  - Upside possibilities: reforms, scaled-up donor support, and start of large projects could produce a stronger-than-projected virtuous cycle.
  - Public debt dynamics: the macroeconomic framework implies a cumulative reduction of public debt relative to GDP of some 10 percentage points over the next five years.
  - New public DSA: all indicators remain well below applicable thresholds in the baseline; Niger is rated “moderate” for risk of debt distress.
  - The PBG operation would likely bring the debt-to-exports indicator to applicable thresholds through 2021 before export base strengthens with projected crude oil exports in 2022; other indicators would remain benign.
  - Staff supports conclusion of the fourth review, which will result in the disbursement of SDR 33.84 million.

---

### Oil export pipeline: macroeconomic significance, scenarios, and quantified comparisons (Box 1)
- Current constraints and proposed project
  - Local refinery capacity: 20,000 barrels per day.
  - Proposed pipeline capability: up to 185,000 barrels per day.
  - Initial expansion of production capacity to 90,000 barrels per day.
  - Project timeline in baseline: project construction expected to start this year and take three years to complete.
  - Project cost: US$5.7 billion for the pipeline and further oil-field development.

- Baseline expected macroeconomic impact
  - Exports and production expected to start in 2022 and reach full capacity by 2025.
  - Real GDP growth boost: would boost real GDP growth to some 12 percent in 2022.
  - Export receipts and budget revenues peak in 2025 at 9 and 2 percent of GDP, respectively (using WEO international oil price projections).
  - Expansion will draw large imports during construction but substantially benefit external and domestic balances once exports flow.

- Risks and precautions
  - Risks: negotiating transit route through Benin and elevated regional security risks; risk of implementation delays, including for debt.
  - Fiscal caution: fiscal policy should avoid spending future oil receipts before they materialize.

- Quantified scenario comparisons (periods implied by table headings)
  - Real GDP growth, %
    - Baseline: 6.1, 8.1, 5.8, 5.9
    - Indefinite delay: 6.1, 5.6, 6.3, 6.2
  - Exports of goods and services, % GDP
    - Baseline: 16.4, 23.5, 23.6, 22.4
    - Indefinite delay: 16.4, 16.1, 16.3, 17.4
  - Budget revenues, % GDP
    - Baseline: 16.9, 19.8, 20.8, 21.6
    - Indefinite delay: 16.9, 18.6, 19.6, 20.8
  - PV Public debt, % GDP
    - Baseline: 42.0, 33.8, 29.4, 27.7
    - Indefinite delay: 42.0, 36.0, 30.7, 27.7
  - PV External debt, % exports of goods and services
    - Baseline: 157.9, 104.5, 100.8, 94.8
    - Indefinite delay: 157.9, 163.9, 156.3, 126.7

---

### Debt sustainability, policy-based guarantee (PBG) and reprofiling issues
- DSA outcomes and vulnerabilities
  - Total PPG debt: 53.8 percent of GDP at end-2018 (revision of historical debt stock increased previous DSA figures by about 5.1 percent of GDP).
  - PPG external debt share: 65 percent of total debt stock in 2018.
  - Baseline: none of Niger’s PPG external debt indicators breach thresholds; export shock scenarios breach PV of external debt-to-exports ratio (peaks at 273 percent in 2021).
  - Debt-carrying capacity: rated “medium.”

- PBG / debt reprofiling proposal
  - Authorities requested a PBG operation to allow borrowing up to US$500 million (5.2 percent of GDP) supported by US$50 million in IDA funds to back a World Bank guarantee.
  - Intended effect: retire T-bills and obligations held by regional banks, lengthen maturities, and lower interest bill.
  - Staff caution: substitution of foreign for domestic debt would worsen external debt sustainability indicators (e.g., PV of external debt-to-exports) and needs careful stakeholder discussion on benefits, costs, risks, viability, and design to preserve Niger’s “moderate” rating.
  - From October 1, 2019 onward, the ceiling on domestic financing will be reduced by the amount of borrowing under the World Bank's PBG operation; the ceiling on PV of new PPG external debt will be raised by the amount of borrowing under the PBG up to CFAF 140 billion.

- Contingent liability and coverage notes (DSA)
  - Public sector coverage: central government; includes specified public enterprises and state guarantees; excludes local governments, CNSS, and extra budgetary funds.
  - CNPC loan (2008): US$880 million (9.5 percent of GDP); guaranteed portion US$352 million (3.8 percent of GDP); outstanding US$161 million (1.7 percent of GDP) at end-December 2018.

---

### Revenue mobilization measures and estimated yields (IMF staff estimates / budget measures)
- Specific revenue measures and IMF staff yield 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 (FATI): 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 2019–2020 revenue measures and targets
  - Partial reinstatement of TATTIE expected to yield CFAF 23.4 billion (0.4 percent of GDP).
  - Substitution of TAFI for VAT on banking services expected to generate CFAF 5 billion (0.1 percent of GDP).
  - Drive to collect tax arrears: reduction of the stock of arrears deemed collectable by 40 percent, equivalent to CFAF 30 billion (0.6 percent of GDP) envisaged for 2019.
  - Molecular marking of petroleum products expected to generate at least CFAF 3 billion (0.05 percent of GDP) once implemented.
  - Integrating ARCEP receipts into the general budget expected to yield CFAF 5.2 billion (0.1 percent of GDP).
  - Revenue boost expected in 2022 of some 2 percent of GDP from expected start of crude-oil exports.

---

### Public financial management, arrears, and treasury measures
- Domestic payment arrears (prior actions and commitments)
  - Prior action: schedule an additional emission of government paper of at least CFAF 30 billion to finance arrears clearance.
  - Request the National Assembly to authorize funding of some CFAF 56 billion for arrears clearance in a cabinet-approved supplementary budget for 2019.
  - Provide IMF staff with proof of arrears payments of at least CFAF 30 billion.
  - Commitment to keep the stock of arrears below CFAF 25 billion throughout the third quarter of 2019 (adjusted ceiling) and below CFAF 5 billion throughout the fourth quarter of 2019.

- Treasury Single Account (TSA) and debt management unit
  - TSA implementation advanced: almost all accounts of public entities in commercial banks closed; need to transfer accounts of entities granted derogation as soon as possible.
  - Authorities committed to establish a dedicated debt management unit in the Treasury with a modern front-middle-back office structure to start operating by end-December 2019 (proposed SB).

- Reporting and monitoring
  - Detailed monthly data on domestic financing and arrears to be provided monthly, within six weeks after end of each month (reporting requirements in the TMU).
  - Authorities to compile arrears and float data monthly and share with IMF staff.

---

### Public expenditure, procurement, and public investment management
- Program budgeting introduced in 2018; to be refined for the 2020 budget (better attributing overhead costs and outcome indicators).
- Double authorization framework (AE/CP) for expenditures to be rolled out for selected ministries with the 2020 budget.
- Improve efficiency of public investment program: require investment proposals be evaluated before selection committee consideration; fuller integration of PPPs into public investment plan recommended.
- Public procurement targets: raise share of competitive awards from around two-thirds currently to the WAEMU norm of 95 percent; backlog of procurement audits being addressed and IT system upgraded.
- PPPs: Mandate of the Inter-Ministerial Committee on Public Debt and Budget Support expanded to cover PPPs; PPP fiscal risks to be covered in quarterly reports.

---

### Natural resource sector: composition, outlook, and policy recommendations (Annex IV)
- Current composition and recent change
  - Uranium, oil, and gold currently accounts for 8 percent of GDP and half of export receipts.
  - Uranium output volumes and export receipts halved since their peak in 2012.
  - Gold: one formal company produced 1.3 tons of gold in 2017 with an export value of 0.5 percent of GDP; unofficial artisanal estimates range from 4 to 10 tons.

- Oil sector potential and numbers
  - Absent a pipeline, production constrained to around 20,000 barrels per day.
  - If pipeline via Benin is realized, Niger would become a crude oil exporter from 2022 producing around 100,000 barrels per day.
  - Investment requirements: US$2.1 billion for the pipeline and US$3.6 billion for additional production capacity.
  - Estimated impact of expansion: real GDP level could rise by 12 percent; annual export receipts by about US$1 billion; direct fiscal revenues by some 2 percent of GDP (could reach 4 percent of GDP within the decade if oil price is US$70 instead of US$60).

- Policy recommendations for the resource sector
  - Strengthen natural resource governance to formalize the artisanal sector and reduce illicit untaxed exports.
  - Strengthen capacity to monitor operations, ensure transparency and compliance with tax regulations, and exert firmer control of fiscal arrangements.
  - Promote local content and strengthen the business environment to support domestic suppliers and human capital formation.
  - Manage macroeconomic ramifications: consider adding to savings to reduce domestic debt or use additional revenues for prioritized spending while avoiding pro-cyclicality.

---

### Structural reforms, private sector development, and financial sector
- Private sector and employment
  - Local formal private sector accounts for less than 10 percent of GDP.
  - Formalizing the economy and growing the local formal private sector are key to lifting living standards and creating jobs.
  - Authorities to initiate a broad push with a priority list of concrete and attainable measures; timebound consultations with private sector and donors recommended.

- Financial deepening and inclusion
  - Private sector credit at 14 percent of GDP is feeble.
  - Priority financing vehicles: leasing, warrantage, regional BCEAO lending scheme, and FISAN for rural lending; donor-supported lending at Maison de l’Entreprise hampered by co-financing requirements.
  - Positive development: fully functional credit bureau.
  - Microfinance sector largely dysfunctional; adds 0.7 percent of GDP to credit to the private sector; recommendations to resuscitate the sector via donor round table, consolidation, financial literacy, and stronger supervision.

- Electricity and infrastructure
  - Access to reliable electricity is a major concern; tariff increases and audit findings should support urgent reform and accountability of the state electricity company.
  - Consumer prices are now at par with those in the U.S., yet power cuts are pervasive even in the capital city.

- Informal sector and formalization measures
  - Causes: difficult-to-control borders, poor enforcement, small size of businesses, lack of accreditation services, difficult contract enforcement, limited access to credit.
  - Recommendations: tilt costs and benefits to encourage formalization (access to special financing vehicles, revived agency for standards and norms, simplified customs procedures); enforce measures on informal firms above a certain size; widen the tax base.

---

### Governance, anti-corruption, and fiscal transparency
- Corruption prevalence and business impact
  - "Corruption in Niger is pervasive, with 86 percent of survey respondents characterizing it as “widespread.”"
  - Customs administration: 87.4%; Tax administration: 84.5%; Police: 83.3%; Public procurement: 82.2%; other institution percentages reported in source.

- Reforms and gaps
  - Niger party to UN, AU, and ECOWAS anti-corruption conventions; HALCIA established in 2011 and strengthened in 2016.
  - AML/CFT framework substantially strengthened; Niger in process of rejoining EITI.
  - Remaining gaps: institutional and legal deficiencies, weak implementation, need to strengthen HALCIA independence, and improvements in rule of law (contract enforcement).

- Asset declaration reform (agreed priorities)
  - Authorities preparing legislation on asset declaration in consultation with the Fund’s Legal Department (SB for end-September 2019).
  - Key elements to include: remit of officials, classes of assets (including family/associates), deadlines, fines, risk-based verification, and publication.

- Fiscal transparency measures
  - Proposed legal requirements for publication of key documents: timely budget outturns, draft and approved budgets (including supplementary ones), a citizen budget, major conventions with foreign investors, PPP contracts, and tender awards.
  - Make the Government Gazette available online free of charge.

---

### Demographics, human capital, and labor market implications
- Demographics
  - 3.9 percent one of the highest population growth rates.
  - High fertility rates (chart data: 7.2; 6.3; 6.1; 6.1; 5.9; 4.8; 4.6; 2.4) linked to low per-capita income and low per-capita real GDP growth.
  - Policy levers: lifting women’s education levels and lowering child mortality are effective channels to lower fertility.

- Labor market
  - Rapid population growth exacerbates challenge of providing formal sector jobs for growing labor market entrants; formal employment creation projections shown in source series.

---

### Technical Memorandum of Understanding (TMU) — performance criteria, reporting, and monitoring highlights
- Quantitative performance criteria and reporting
  - Net Domestic Financing of the Government: definition and quarterly targets; adjustments for shortfalls in external budget support; reporting monthly within six weeks after end of each month.
  - Stock of Domestic Payment Arrears: continuous ceiling set at CFAF 25 billion from date of completion of the fourth review to September 30, 2019; starting October 1, 2019 reduced to CFAF 5 billion through end of arrangement.
  - Present Value of new public and publicly-guaranteed external debt: ceiling with PV calculated using a 5 percent discount rate; exclusions and reporting requirements specified.
  - Short-term external debt: government will not accumulate or guarantee new external debt with an original maturity of less than one year.

- Data and reporting requirements (selected)
  - Monthly reporting deadlines vary by series: e.g., monetary and financial data end-month + 8 weeks; external debt stock and repayment end-month + 6 weeks; provisional TOFE end-month + 6 weeks; CPI end-month + 2 weeks.
  - Authorities to provide detailed monthly and quarterly government finance, debt, and balance of payments information as specified.

- Program monitoring and structural benchmarks
  - Recurrent benchmarks: release quarterly budget allocations in the first month of each quarter; prepare quarterly commitment plan consistent with cash plan; prepare quarterly debt management reports; hold at least quarterly meetings of Inter-Ministerial Debt Management Committee.
  - Prior actions for June–December 2019 include arrears repayment measures, establishing tracking system for major social programs (End-June 2019), publishing financial inclusion strategy and holding donor round table (End-June 2019), and submitting draft legislation on asset declaration (End-September 2019).

- Program timing and disbursements
  - Proposed disbursements under the ECF arrangement (SDR): total SDR 118.44 with specific tranches including SDR 33.84 for completion of the fourth review.

---

### Capacity development strategy (Annex I) and staff recommendations
- Strategy priorities for FY20
  - Continue to prioritize revenue mobilization (tax policy and administration).
  - Strengthen budget preparation and execution in context of program budgeting, including public investment management assessment and public expenditure review.
  - Support capacity to manage natural resource revenues ahead of large projected increase in oil output.
  - Improve macroeconomic and financial statistics, especially nexus of government finance and monetary statistics in rolling out the TSA.

- Main risks and mitigation
  - Human resource constraints: bunching of TA delivery, over-centralization, high turnover of senior staff.
  - Mitigation: greater use of training opportunities offered by the Fund’s Institute for Capacity Development and Afritac West.

- Staff appraisal and recommendations
  - Program implementation under the ECF remains broadly satisfactory amid challenging circumstances.
  - Staff encourages finalizing performance plans for revenue administrations, pushing ahead with fiscal structural reforms (especially reduction of tax exemptions), continuing broader structural reform agenda, and strengthening debt management and fiscal transparency.

---

*Source: IMF staff report text (1nerea2019001 — Executive Summary, Sections 1, 6, 14, 15, 16, 25, 27, Annexes I and IV, and Technical Memorandum of Understanding; Niamey, June 13, 2019).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Niger faces development challenges aggravated by terrorist incursions, low uranium export prices, and climate change.
- GDP growth picked up to 6.5 percent last year and should average above 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.
- The government enjoys a strong parliamentary majority but rising external security threats complicate implementation and human development efforts.

### Recent economic developments
- Real GDP growth rose to 6.5 percent in 2018, supported by bountiful harvests, surging artisanal gold production, and strong activity in construction and services.
- Inflation eased to below 3 percent following the unwinding of a late-2017 food price spike.
- Financial deepening remains limited; private credit barely keeps pace with economic growth.
- Current account deficit was 18.2 percent of GDP in 2018, predominantly financed by donors and FDI.
- Niger has recourse to WAEMU’s pooled foreign reserves, equivalent to 4.3 months of union imports at end-2018.

### Fiscal developments and public debt
- Fiscal consolidation continued: the fiscal deficit fell from 5.7 percent of GDP in 2017 to 4.1 percent of GDP in 2018, with a fiscal effort of 1 percent of GDP as measured by the improvement in the basic balance.
- Cash revenues stagnated as a percent of GDP, but administrative reforms yielded an estimated 0.6 percent of GDP; revenue losses of 0.9 percent of GDP reflected abolition of a major telecom tax and declines in resource-related revenues; a one-off boost to non-tax revenues was 0.3 percent of GDP.
- Clearance of domestic payment arrears progressed little: CFAF 43.6 billion (0.8 percent of GDP) remained at end-2018, only CFAF 10.8 billion (0.2 percent of GDP) less than 12 months earlier.
- Public debt ratio at end-2018 was 53.8 percent of GDP after historical data revisions upward by 3.8 percent of GDP due to inclusion of previously omitted external loans.
- Authorities consider a Policy Backed Guaranteed (PBG) operation that would allow borrowing up to US$500 million (5.2 percent of GDP) with a partial guarantee; staff cautions substitution of foreign for domestic debt must not jeopardize the moderate external debt distress rating in the DSA.

### Program performance
- Program implementation broadly satisfactory:
  - All quantitative targets for end-December 2018 and end-March 2019 were met except clearing all domestic payment arrears at end-December and the continuous domestic arrears target for 2019.
  - Three of four performance criteria (PCs) and all indicative targets (ITs) at end-December 2018 were met; no external payment arrears were incurred; contracting of new external public debt remained below program ceiling; net domestic budget financing target observed with a wide margin.
  - Clearance of domestic arrears missed by 0.9 percent of GDP; authorities committed to a major paydown financed through an additional bond emission, a funding authorization in a supplementary budget for arrears clearance, and a revised treasury plan to clear remaining arrears by October (prior action).
  - Structural reforms advanced: the Treasury Single Account was rolled out; cash payments of tax and custom duties discontinued; a white paper on further bankification of fiscal payments furnished.
  - Preparation of 2019 performance plans for customs and tax administrations was delayed but formalization and refinement of plans is a prior action.

### Outlook and projections
- Growth outlook:
  - Slight slowdown to 6.3 percent likely in 2019 as agricultural production normalizes.
  - Growth projected to average 7.3 percent annually over the next five years, driven by large projects and donor-financed activity.
  - Growth would jump to some 12 percent in 2022 when the crude oil export pipeline is projected to become operational.
- External sector:
  - Current account deficit projected to widen from 18.2 percent of GDP in 2018 to a peak of 22.4 percent of GDP in 2020 due to import-intensive construction of large projects.
  - By 2024, current account deficit expected to narrow to about 12 percent of GDP as projects come on stream and exports rise.
- Inflation should remain comfortably below the WAEMU’s 3 percent convergence criterion throughout the projection period.

### Risks and debt sustainability
- Downside risks: implementation challenges and deteriorating security conditions could undermine results.
- Upside possibilities: the combination of reforms, scaled-up donor support, and the start of large projects could produce a stronger-than-projected virtuous cycle.
- Public debt dynamics:
  - The macroeconomic framework implies a cumulative reduction of public debt relative to GDP of some 10 percentage points over the next five years.
  - New public DSA: all indicators remain well below applicable thresholds in the baseline; Niger is rated “moderate” for risk of debt distress.
  - The PBG operation would likely bring the debt-to-exports indicator to applicable thresholds through 2021 before export base strengthens with projected crude oil exports in 2022; other indicators would remain benign.
  - A discussion among stakeholders on benefits, costs, risks, viability, and design of the PBG operation is needed.

### Policy discussion and priorities
- Priority policy areas:
  - Improve public finances, mobilize revenues, and improve spending quality.
  - Reinforce implementation of revenue-enhancing reforms and formalize performance plans for revenue administrations (prior action).
  - Continue pursuit of fiscal consolidation under difficult circumstances: security-related spending has added at least 2 percent of GDP since 2011; weak commodity prices have cut revenues by about 1½ percent of GDP since 2014.
  - Authorities determined to meet WAEMU convergence criterion of 3 percent of GDP for the overall fiscal deficit in 2020; prospective crude oil revenues expected to allow further deficit reduction from 2022.
- Specific revenue measures (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 (FATI): 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

### Program decision and staff view
- Staff supports conclusion of the fourth review, which will result in the disbursement of SDR 33.84 million.

*Executive Summary, 13 June 2019*

### 14.      Risks to the baseline outlook are tilted to the downside (Annex V). In economic terms, an

### 1nerea2019001 - 14. Risks to the baseline outlook are tilted to the downside (Annex V)

### Risks to baseline outlook
- Security deterioration could reduce growth and strain public finances; authorities prioritize adequate security spending and efforts to raise spending efficiency.
- Disappointing implementation of large projects, especially the pipeline for crude oil exports, could cloud the outlook.
- Upside scenario: a comprehensive big-bang effort to jumpstart the private sector could trigger a virtuous cycle beyond baseline projections.

### Program issues and fiscal framework
- Principal program objective: sound public finances as the linchpin for macroeconomic stability.
- 2019 budget and commitment to reduce the fiscal deficit to no more than 3 percent of GDP in 2020 provide the guiding framework.
- Staff view: reaching the 2020 target requires stepped-up fiscal effort, building a strong revenue base, fully implementing ongoing reforms, and streamlining exemptions.
- Risk: domestic payment arrears hurt the private sector and undermine government credibility; authorities note practical challenges of timely fund-raising in local markets.
- Debt reprofiling in the context of the PBG could usher in more stable funding.
- Two-pronged fiscal strategy agreed: step up revenue mobilization and raise spending quality.
- Caution: excessive fiscal pressure on the local formal private sector risks undermining economic performance.
- Tax base concern: "a mere 550 large and medium-size enterprises registered with tax authorities" — urgent need to broaden the tax base.

### Box 1. Macroeconomic significance of the oil export pipeline (findings and scenarios)
- Current constraints:
  - Local refinery capacity: 20,000 barrels per day.
  - Transport logistics limit crude output and exports of refined petroleum products.
- Proposed pipeline:
  - Capability: up to 185,000 barrels per day.
  - Initial expansion of production capacity to 90,000 barrels per day.
  - Project timeline in baseline: project construction expected to start this year and take three years to complete.
  - Project cost: US$5.7 billion for the pipeline and further oil-field development.
- Expected macroeconomic impact (baseline projections):
  - Exports and production expected to start in 2022 and reach full capacity by 2025.
  - Real GDP growth boost: would boost real GDP growth to some 12 percent in 2022.
  - Export receipts and budget revenues peak in 2025 at 9 and 2 percent of GDP, respectively (using WEO international oil price projections).
  - Expansion will draw large imports during construction but substantially benefit external and domestic balances once exports flow.
- Risks and precautions:
  - Project carries risks: negotiating transit route through Benin and elevated regional security risks; risk of implementation delays, including for debt.
  - Indefinite postponement would substantially alter projections for real GDP growth, exports, budget revenues, and public debt indicators; fiscal policy should avoid spending future oil receipts before they materialize.
- Quantified scenario comparisons (periods implied by table headings):
  - Real GDP growth, %  
    - Baseline: 6.1, 8.1, 5.8, 5.9  
    - Indefinite delay: 6.1, 5.6, 6.3, 6.2
  - Exports of goods and services, % GDP  
    - Baseline: 16.4, 23.5, 23.6, 22.4  
    - Indefinite delay: 16.4, 16.1, 16.3, 17.4
  - Budget revenues, % GDP  
    - Baseline: 16.9, 19.8, 20.8, 21.6  
    - Indefinite delay: 16.9, 18.6, 19.6, 20.8
  - PV Public debt, % GDP  
    - Baseline: 42.0, 33.8, 29.4, 27.7  
    - Indefinite delay: 42.0, 36.0, 30.7, 27.7
  - PV External debt, % exports of goods and services  
    - Baseline: 157.9, 104.5, 100.8, 94.8  
    - Indefinite delay: 157.9, 163.9, 156.3, 126.7

### Public financial management
- Progress since mid-2016 Inter-Ministerial Committee on Public Debt and Budget Support: better control over contracting debt, but revisions to debt data and persistent arrears indicate room for improvement.
- Authorities committed to establish a dedicated debt management unit in the Treasury with a modern front-middle-back office structure in line with IMF technical assistance advice by year-end (proposed SB for end-December 2019).
- Given rising use of PPPs and opacity of SOEs’ internal debt, authorities agreed to widen the remit of the inter-ministerial committee to cover associated fiscal risks.
- Clarification: only four PPP conventions signed since March 2018; all structured as build-operate-transfer (BOT) with little fiscal risk.
- TSA implementation is advanced: almost all accounts of public entities in commercial banks closed; need to strengthen Treasury’s banking functions and transfer accounts of three entities granted derogation as soon as possible.
- Authorities to investigate a gap of around 1 percent of GDP between entities’ initial commercial bank balances and amounts received in the TSA.

### Revenue mobilization
- Revenue mobilization essential for fiscal consolidation and space for priority spending; staff urged acceleration of administrative measures to establish a strong base for the 2020 budget.
- Legislating a reduction of tax exemptions by end-June 2019 SB has drifted out of reach; a committee will present proposals in June and legal changes will be part of the 2020 budget law (SBs proposed to be reset for end-June 2019 and end-September 2019).
- Authorities see scope to improve management of exemptions, especially guarding against leakage of tax-exempt imports into the domestic market.
- Revenue boost expected in 2022 of some 2 percent of GDP from expected start of crude-oil exports.
- Ongoing reforms of tax and customs administrations (highlights):
  - Establishment of a dedicated vehicle to collect tax arrears; staff urged faster reduction of arrears stock following quantitative targets in performance plan for tax administration.
  - Molecular marking of petroleum products planned from end-2019 to fight smuggling.
  - Implementation of the WTO valuation regime for imports with IMF technical assistance; significant revenue gains already realized and further potential once valuation database is built.
  - Linked IT systems of tax and customs administrations; expected significant results when the tax intelligence unit ramps up risk-based cross-checking.
  - Performance plans for tax and customs administrations finalized (prior action); indicators agreed include increasing number of fiscally active taxpayers and widening application of transaction valuation of imports.

### Quality and efficiency of government spending
- Resource envelope remains tight; priority on high quality and efficiency of spending to make room for vital security spending.
- Reforms and measures:
  - Program budgeting introduced in 2018; to be refined for the 2020 budget by better attributing overhead costs to programs and outcome indicators.
  - Double authorization framework (AE/CP) for expenditures to be rolled out for selected ministries with the 2020 budget; voting three-year spending plans with annual confirmations.
  - Improve efficiency of public investment program; apply requirement that investment proposals be evaluated before selection committee consideration; fuller integration of PPPs into public investment plan recommended.
  - Public procurement targets: raise share of competitive awards from around two-thirds currently to the WAEMU norm of 95 percent; backlog of procurement audits being addressed and IT system upgraded.
  - Authorities agreed to bring PPP fiscal risks under the Inter-Ministerial Committee and cover them in quarterly reports; staff counseled to reduce recourse to unsolicited PPP offers and contract awards without competition where appropriate.

### Public sector efficiency
- Reforms underway:
  - Functional review of ministries and preparation of a biometric database for civil servants and government employees.
  - Governance reform of SOEs and public administrative entities: performance audits conducted and being evaluated by the Ministry of Finance to inform governance improvements (financial oversight, board selection, auditing, financial information processing).
  - Authorities will address proliferation of government agencies in the context of a review of government functions; staff suggested interim measures while the review is underway.
  - Review of effectiveness of social support programs ongoing; authorities instituting a tracking mechanism for major social programs (SB for end-June 2019) to strengthen program effectiveness (e.g., school lunches).

### Private sector development
- Local formal private sector accounts for less than 10 percent of GDP; informal and government sectors deliver bulk of GDP growth.
- Formalizing the economy and growing the local formal private sector are seen as key to lifting living standards and creating jobs; complementary efforts to reduce population growth are noted in the Social and Economic Development Plan 2017-21.
- Authorities and staff agree a critical mass of structural reforms could jolt the private sector into higher gear; leadership needed to frame an effective strategy.
- Authorities to initiate a broad push with a priority list of concrete and attainable measures; timebound consultations with private sector and donors recommended to pin down agenda and commitments.
- Staff cautioned to consolidate existing dialogue platforms rather than create new ones.

### Priorities and constraints for structural reforms
- Limited financial resources and human capacity necessitate a focused approach; where sectoral prioritization is needed, low-hanging fruits include value chain extensions, agricultural productivity, import-substituting activities, and the natural resource sector. High local content, fair fiscal contributions, and contained incentives would maximize benefits from FDI.
- Main obstacles and reform priorities:
  - Access to financing:
    - Private sector credit at 14 percent of GDP is feeble.
    - Recommendations: enhance financial intermediation, encourage banks to extend more credit, make new financing vehicles fully operational and promote them better.
    - Specific instruments not yet used in practice: leasing and warrantage; regional BCEAO lending scheme and FISAN for rural lending not ready; donor-supported lending at Maison de l’Entreprise hampered by co-financing requirements.
    - Positive development: fully functional credit bureau.
  - Microfinance:
    - Sector largely dysfunctional; adds 0.7 percent of GDP to credit to the private sector.
    - Recommendations: resuscitate microfinance via donor round table for financing, consolidate institutions, financial literacy programs, build capacity in microfinance institutions; regulator should step up screening and supervision of MFIs.
  - Electricity:
    - Access to reliable electricity a major concern; tariff increases and audit findings should support urgent reform and accountability of state electricity company for reliable service delivery and financial sustainability; donors to help expand access.
    - Note: consumer prices now at par with those in the U.S., yet power cuts are pervasive even in the capital city.
  - Informal sector:
    - Causes: difficult-to-control borders, poor enforcement, small size of businesses, lack of accreditation services, difficult contract enforcement, limited access to credit.
    - Recommendations: tilt costs and benefits to encourage formalization (access to special financing vehicles, revived agency for standards and norms, simplified customs procedures); enforce adequate measures on informal firms above a certain size; widen the tax base to level the playing field and reduce burden on current formal firms.

*Source: IMF staff report text (1nerea2019001 - section 14 and related passages).*

### 27.      Weak governance takes a toll on Niger’s private sector. Corruption in Niger is pervasive,

### 27. Weak governance takes a toll on Niger’s private sector

### Corruption prevalence and business impact
- "Corruption in Niger is pervasive, with 86 percent of survey respondents characterizing it as “widespread.”"
- Customs and tax administrations are perceived as the worst offenders, followed by the police and public procurement.
- Corruption ranks fourth among obstacles for businesses.
- IMF staff analysis finds a large negative effect of bribery on sales and productivity growth, especially for young firms and exporters.
- Perception of corruption prevalence (percent of respondents) reported across public institutions:
  - Customs administration: 87.4%
  - Tax administration: 84.5%
  - Police: 83.3%
  - Public procurement: 82.2%
  - Gendarmerie: 78.7%
  - Education: 78.2%
  - Municipalities: 77.0%
  - Treasury: 74.1%
  - Justice: 71.3%
  - Health: 64.4%
  - Other: 41.7%

### Reforms undertaken and remaining gaps
- Niger is party to the anti-corruption conventions of the UN, the AU, and ECOWAS.
- HALCIA (anti-corruption agency) established in 2011 and further strengthened in 2016.
- The Ministry of Justice instituted a complaint hotline in 2011.
- Government adopted a new anti-corruption strategy in the year prior to the report.
- AML/CFT framework has been substantially strengthened.
- Niger is in the process of reversing its withdrawal from the Extractive Industry Transparency Initiative (EITI) and is on track to rejoin by year end.
- Remaining gaps and challenges:
  - Institutional and legal framework deficiencies persist.
  - Implementation remains a major challenge.
  - The independence of HALCIA needs to be strengthened.
  - Deficiencies in the rule of law—particularly in contract enforcement—require more progress.

### Asset declaration reform (agreed priorities)
- The constitution mandates asset disclosure of high-ranking officials, but missing subordinate legislation and weak enforcement mean only the declaration of the President’s personal assets is current and publicly available.
- Authorities are preparing legislation on asset declaration in consultation with the Fund’s Legal Department (SB for end-September 2019).
- Staff indicated key elements to include:
  - Defining a reasonable remit of government officials subjected to asset declaration requirements.
  - Laying out the classes of assets to be declared, including those held by close family members and associates.
  - Setting clear deadlines for submission of declarations and fines for non-compliance.
  - Risk-based verification and comprehensive publication of declarations.

### Strengthening implementation and indirect anti-corruption measures
- Implementation-focused measures agreed:
  - Review funding of key institutions, such as the audit court.
  - Encourage better follow-through by tracking cases.
  - Raise profile of anti-corruption agencies by better publicizing their work (e.g., posting HALCIA’s annual reports on its website).
- Reforms to reduce opportunities for corruption by limiting discretionary contacts and streamlining procedures:
  - Promote competitive procurement.
  - Improve governance of SOEs and extractive industries.
  - Scale back discretionary exemptions.
  - Bankification of fiscal payments and establishing a TSA.
  - Risk-based inspection regimes at customs.
  - More online automation and simplification of administrative processes.

### Fiscal transparency and accountability measures
- Expanding fiscal transparency to empower civil society and improve accountability.
- Steps taken and proposed:
  - Publication of the 2019 draft budget submitted to Parliament (first step).
  - Introduce legal requirements for publication of key documents: budget outturns on a timely basis, draft and approved budgets (including supplementary ones), a citizen budget, major conventions with foreign investors, PPP contracts, and tender awards.
  - Make the Government Gazette available online free of charge.

### Program modalities, timing, and conditionality
- Authorities request a 3-month extension of the program to April 2020 and a re-phasing of disbursements to retain semi-annual spacing for final reviews and allow more time to complete key reforms (including domestic arrears clearance and debt management).
- Test date for completion of the sixth program review to be pushed back to December 2019.
- New quantitative PCs, SBs, and ITs proposed for end-December 2019 in line with third-review projections.
- A new SB is proposed for end-December 2019.
- Proposed quantitative PC and ITs for March-December 2019 appear in Table 2 of the MEFP; existing and proposed SBs for June to December 2019 are in Tables 4 and 6; revised disbursement schedule is in Table 7 of the MEFP.
- Specific program actions and adjustments:
  - Authorities propose a plan to clear domestic payment arrears and to guard against their re-emergence.
  - Adoption of performance plans for tax and revenue administrations as prior actions.
  - Request and staff support for (i) a waiver for non-observance of the periodic PC on the arrears stock ceiling at end-December 2018 and on the continuous PC on domestic arrears for 2019 in light of corrective action under the prior action, (ii) a modification of the continuous PC on the arrears stock ceiling going forward, and (iii) a modification of the adjuster to the PC on the domestic financing ceiling for end-June 2019.
  - Request and staff support for introducing a new capped upward and downward adjuster to the PCs on the domestic financing ceiling and the contracting of external debt ceiling, respectively, to accommodate debt reprofiling under a potential Policy Based Guarantee operation with the World Bank.

### Debt service capacity and risks
- Niger’s capacity to repay the IMF remains adequate but subject to risk; program measures seek to mitigate these risks.
- Projected repayment peaks:
  - 1.5 percent of tax revenues in 2025.
  - 1.4 percent of exports in 2021.
- Key risks to repayment capacity: security developments, climatic shocks, and implementation capacity.
- The program remains fully financed.

### Staff appraisal and recommendations
- Program implementation under the ECF remains broadly satisfactory amid challenging circumstances.
- Performance:
  - All periodic quantitative targets for end-December 2018 and end-March 2019 were met, except the end-December target and the continuous PC on clearing domestic payment arrears.
  - Authorities committed to clear all remaining arrears by the third quarter of 2019, with a large down-payment in June 2019, and to avoid incurring new ones.
- Structural reforms have advanced reasonably well, albeit with some delays.
- Staff encourages:
  - Finalizing performance plans for revenue administrations to build capacity for better revenue mobilization.
  - Pushing ahead with the full breadth of fiscal structural reforms, especially the reduction of tax exemptions.
  - Continuing to implement the broader structural reform agenda, with priority on addressing remaining legislative gaps and ensuring effective implementation of frameworks for good governance and the fight against corruption.
- Additional points:
  - Niger’s recent growth performance is encouraging, supported by several large-scale private-sector or donor-financed projects.
  - Prospective oil-export pipeline could be an important boon if it captures local content and generates budget resources.
  - Niger needs external, non-debt creating support to address security challenges; such support would benefit the region.
- Staff supports authorities’ requests for:
  - (i) a waiver for the non-observance of the performance criterion on domestic payment arrears clearance at end-December 2018 and of the continuous performance criterion for 2019, considering corrective actions;
  - (ii) the proposed modifications to performance criteria;
  - (iii) the conclusion of the fourth ECF review;
  - (iv) the extension of the ECF arrangement.
- It is proposed that the next Article IV Consultation be held on the 24-month cycle.

*Source: IMF staff report (chapter text).*

### 3.9 percent one of the highest population growth rates.

### 1nerea2019001 - 3.9 percent one of the highest population growth rates.

### Demographics and labor market challenges
- 3.9 percent one of the highest population growth rates.
- This exacerbates the challenge of providing formal sector jobs for the growing wave of labor market entrants.
- Chart data (as presented) lists fertility figures: 7.2; 6.3; 6.1; 6.1; 5.9; 4.8; 4.6; 2.4.
- Labor Market Entrants and Formal Employment Creation (presented in thousands) show time series from 2001…2029 for change of formal employment and labor market entrants (sources: World Bank; ILO; IMF staff estimates).

### Fertility, income, and human capital
- Statement: High fertility is associated with low per-capita income, as well as low per-capita real GDP growth.
- Graphical relationships shown:
  - Fertility vs log of per-capita GDP, PPP (2010): Fertility plotted against log pcGDP indicating negative association.
  - Fertility vs Years of Schooling for Women (2010): Fertility declines with higher years of schooling for women.
- Policy-relevant findings noted in text:
  - Lifting women’s education levels is one way of lowering fertility rates.
  - Lower child mortality is also effective.

### Key macroeconomic and fiscal indicators (selected)
- GDP at current prices (CFA francs, billions): 4,511; 4,726; 5,135; 5,163; 5,600; 5,571; 6,056; 6,527; 7,402; 8,011; 8,721 (series as presented).
- GDP at constant prices (annual percent change): 4.9; 4.9; 5.2; 6.5; 6.5; 6.3; 6.0; 5.6; 11.9; 6.1; 6.8 (series as presented).
- Consumer price index (annual average): 0.2; 0.2; 3.3; 2.7; 2.4; 1.6; 2.5; 2.0; 2.0; 2.0 (series as presented).
- Total revenue (percent of GDP): 14.3; 14.4; 16.4; 16.7; 15.9; 16.0; 17.2; 17.8; 19.3; 19.7; 19.9 (series as presented).
- Total expenditure and net lending (percent of GDP): 26.3; 26.8; 28.5; 29.2; 28.4; 28.9; 28.4; 27.6; 28.1; 28.0; 27.7 (series as presented).
- Basic balance (excl. grants, percent of GDP): -4.2; -5.0; -2.8; -4.0; -2.8; -3.0; -1.1; -1.0; -0.7; -0.9; -0.7 (series as presented).
- Overall balance (commitment basis, incl. grants, percent of GDP): -6.1; -5.7; -4.4; -4.1; -4.5; -4.1; -3.0; -2.7; -2.4; -2.3; -2.0 (series as presented).

### External sector and balance of payments (selected)
- Current account balance (percent of GDP): -15.5; -15.7; -19.2; -18.2; -21.1; -19.8; -22.4; -19.4; -14.5; -12.9; -11.8 (series as presented).
- Current account balance, excluding grants (percent of GDP) (memorandum): -17.4; -18.5; -21.2; -20.9; -23.6; -22.8; -24.8; -21.6; -16.4; -14.9; -13.7.
- Exports, f.o.b. (percent of GDP): 13.6; 14.8; 14.3; 13.1; 14.7; 13.9; 13.8; 13.6; 19.5; 20.6; 22.7 (series as presented).
- Exports (CFA francs, billions) shown in levels and components (Uranium; Oil; Other products) with multi-year series (see tables for values).
- Balance on goods, services, and income (percent of GDP): -19.2; -20.8; -23.2; -23.4; -25.4; -25.2; -27.4; -24.0; -18.7; -17.1; -16.3 (series as presented).

### Monetary and financial indicators (selected)
- Broad money (annual percent change): 8.7; -4.9; 12.0; -2.1; 7.4; 8.4; 5.0; 8.9; 17.7; 16.8; 13.6 (series as presented).
- Net foreign assets (BCEAO and commercial banks) and net domestic assets series presented in monetary survey tables (billions of CFA francs).
- Credit to the economy (percent of GDP): 18.3; 18.9; 20.3; 16.5; 21.5; 17.0; 17.6; 18.4; 18.3; 19.1; 19.8 (series as presented).
- Financial soundness indicators (Dec. 2012–Jun. 2018): Regulatory capital to risk-weighted assets: 17.5; 16.2; 16.2; 13.5; 13.9; 12.5; 16.8; 13.3 (series as presented). Gross NPLs to total loans: 17.1; 16.4; 17.6; 15.5; 17.7; 19.0; 18.8; 19.0 (series as presented).

### Fiscal operations and financing (selected)
- Table highlights (billions of CFA francs): Total revenue—643.8; 680.8; 842.8; 862.4; 889.8; 894.0; 1,040.6; 1,160.8; 1,426.1; 1,574.3; 1,739.4 (series as presented).
- Total expenditure and net lending (billions of CFA francs): 1,187.9; 1,267.1; 1,462.9; 1,505.3; 1,592.8; 1,608.9; 1,720.9; 1,799.7; 2,079.4; 2,239.4; 2,419.0 (series as presented).
- Capital expenditure and net lending (billions of CFA francs): 556.6; 600.2; 764.8; 798.2; 836.2; 856.3; 938.4; 934.7; 1,048.1; 1,101.1; 1,175.4 (series as presented).
- External financing (financing flows, billions CFAF): Grants and loans series shown; amortization, disbursements, and debt-relief entries presented in tables.

### Indicators of capacity to repay the Fund
- Fund obligations and outstanding IMF credit schedules presented (SDR millions and CFAF billions) with multi-year series (e.g., Outstanding IMF credit based on existing and prospective drawings SDR millions: 160.6; 201.1; 203.6; 184.5; 162.7; 137.5; 111.4; 78.9; 52.7; 30.5; 13.8).

### Policy implications and priorities (as indicated by the material)
- Address rapid population growth and high fertility to reduce pressure on formal-sector job creation.
- Promote women's education as a key channel to lower fertility rates.
- Reduce child mortality as another effective channel to lower fertility.
- Continue fiscal consolidation to narrow overall balance (commitment basis) toward less negative percent-of-GDP outcomes.
- Strengthen external financing and reserves management given large current account deficits (including reliance on grants).

*Source: IMF staff estimates and projections; World Bank; ILO (as presented in the source content).*

### Annex I. Capacity Development Strategy Note

### Annex I. Capacity Development Strategy Note

### Strategy
- 1. The strategy for Niger in FY20 broadly extends the previous strategy. (1) It continues to prioritize revenue mobilization as a key program objective by strengthening both tax policy and revenue administration, including simplifying tax policy in line with administrative capacity. (2) It puts more emphasis on strengthening budget preparation and execution in the context of the introduction of program budgeting, with greater attention to quality control, including a public investment management assessment and public expenditure review. (3) The strategy will support Niger’s capacity to manage natural resource revenues in light of the large projected increase in oil output. (4) It also continues to support improving macroeconomic and financial statistics, especially the nexus of government finance and monetary statistics in the context of rolling-out the treasury single account.

### Overall Priorities Going Forward
- Tax policy and revenue administration
  - Objective: Domestic revenue mobilization. This objective would be helped by simplifying tax policy in line with revenue administration.
- Public financial management and debt management
  - Objective: Strengthen budget preparation, execution and control, including expenditure quality. This objective would be helped by a broad public expenditure review.
- Natural resource revenue management
  - Objective: Strengthen the capacity to management natural resource revenues in view of the impending increase in oil output.
- Macroeconomic and financial statistics
  - Objective: Improve national accounts, government finance statistics and balance of payments.

### Main Risks and Mitigation
- The authorities welcome technical assistance (TA) from the Fund and have exhibited a strong determination to absorb and implement this assistance.
- Absorption faces human resource constraints accentuated by:
  - a bunching of TA delivery,
  - an over-centralization of the reform effort,
  - high turnover of senior staff.
- Mitigation:
  - The authorities could make greater use of training opportunities offered by the Fund’s Institute for Capacity Development and by Afritac West, the regional center for TA and training.

### Authorities’ Views
- The authorities welcome Fund TA and thought it appropriately targeted.
- They welcome diagnostic TA from HQ and appreciate ongoing operational TA from Afritac West.
- They have expressed a concern that the TA mission timetable is over-crowded at times.

*Source: Annex I. Capacity Development Strategy Note.*

### Annex IV. Economic Significance of the Natural Resource Sector

### Annex IV. Economic Significance of the Natural Resource Sector

### Sectoral developments
- Current composition and recent change
  - Uranium, oil, and gold currently accounts for 8 percent of GDP and half of export receipts.
  - Uranium mining long dominated but faces an uncertain future: output volumes and export receipts have halved since their peak in 2012.
  - The loss of budgetary revenues from the resource sector has been particularly pronounced.
- Uranium
  - Niger is the world’s fourth largest producer; substantial foreign investment since the early 1970s.
  - Sector under pressure from prolonged weak international demand and prices following the Fukushima nuclear accident in 2011.
  - Consequences: investments delayed, operations in one of Niger’s three mines suspended, development of a new mine put on ice, mines started incurring losses.
  - Indications of recently recovering prices give cautious hope.
- Oil
  - Production commenced in 2011; CNPC developed a field and built a refinery (government owns just under half).
  - Absent a pipeline for crude exports, production is constrained to around 20,000 barrels per day, serving the local market with modest refined-product exports.
  - MOUs and some conventions signed in late 2018 for an export pipeline via Benin; if realized, Niger would become a crude oil exporter from 2022 producing around 100,000 barrels per day.
  - Investment requirements: US$2.1 billion for the pipeline and US$3.6 billion for additional production capacity, likely borne almost entirely by CNPC.
  - Estimated impact of expansion: the level of real GDP could rise by 12 percent, annual export receipts by about US$1 billion, and direct fiscal revenues by some 2 percent of GDP.
- Gold
  - One formal company produced 1.3 tons of gold in 2017 with an export value of 0.5 percent of GDP but negligible budget revenues.
  - Much production is artisanal and underreported; unofficial estimates range from 4 to 10 tons (compared to 28 tons in Burkina Faso and 40 tons in Mali).
  - World Bank estimates artisanal sector employment between 100,000 to 500,000 people, with large revenue benefits for local jurisdictions.
  - Annex projections adopt a more conservative stance regarding gold.

### Macroeconomic implications
- Recent weakening and fiscal effects
  - Resource sector’s economic contribution weakened in recent years following the decline in export prices, especially for uranium.
  - Decline in direct budget revenues from the resource sector by 2 percent of GDP from 2014 to 2018.
  - The decline in resource sector revenues has contributed to Niger’s lackluster revenue performance, plausibly adding up to 10 percent of GDP to Niger’s domestic debt since 2014.
- Medium-term outlook and sensitivities
  - Anticipated expansion in crude oil production and exports, plus a projected recovery in uranium prices, could generate a strong positive contribution.
  - Under cautious assumptions, the resource sector could:
    - add some 12 percent to overall growth in 2022-23,
    - more than double export receipts by 2024,
    - raise budget revenues by some 2 percent of GDP.
  - Sensitivity to price assumptions: with international oil price around US$70 instead of US$60 per barrel projected through the medium term, the fiscal revenue yield from higher oil exports could reach 4 percent of GDP within the decade.

### Resource sector management and policy recommendations
- Governance and formalization
  - Need to strengthen natural resource governance to formalize the artisanal sector, reduce illicit untaxed exports, and strengthen budget receipts.
  - Natural Resource Governance Institute rates Niger within the top third of 89 countries reviewed but still as weak, noting a large gap between legal framework and practice.
  - WAEMU directives lay out principles not yet fully transposed.
  - Mining Code revised in 2017 to address artisanal gold, but control mechanisms established have yet to be implemented.
  - Important step: Niger rejoining the EITI as early as this year (as stated in the source).
- Ensuring adequate national benefits
  - Two channels to ensure Niger benefits adequately:
    - Through the budget: strengthen capacity to monitor operations, ensure transparency and compliance with tax regulations, and exert firmer control of fiscal arrangements, especially tax exonerations.
    - Through local content: strengthen the business environment to support domestic suppliers and human capital formation to provide skilled labor needed.
  - Emphasized risk: maximize benefits so that national income—not just GDP—receives the boost.
- Managing macroeconomic ramifications of expansion
  - Authorities must consider options for additional budget revenues:
    - Add to savings and thereby reduce domestic debt; or
    - Use additional revenues to finance spending—decisions required on what kind of spending and at what pace.
  - Strengthen oversight and transparency of the sector; strengthen resource management to contain pro-cyclicality of the fiscal position, adjust fiscal plans, and improve spending quality.
  - Create conditions to foster private sector growth and increase non-resource revenue over the medium run.

### Key numeric highlights (as reported)
- Resource sector share: 8 percent of GDP; half of export receipts.
- Uranium: output volumes and export receipts halved since peak in 2012.
- Direct budget revenues from resource sector declined by 2 percent of GDP from 2014 to 2018.
- Possible macro impacts of oil expansion:
  - Real GDP level could rise by 12 percent.
  - Annual export receipts could rise by about US$1 billion.
  - Direct fiscal revenues could rise by some 2 percent of GDP (could reach 4 percent of GDP within the decade if oil price is US$70 rather than US$60).
- Oil production constraints and potential:
  - Current constrained production: around 20,000 barrels per day.
  - Potential production if pipeline realized from 2022: around 100,000 barrels per day.
  - Investment needs: US$2.1 billion (pipeline) and US$3.6 billion (additional production capacity).
- Gold:
  - Formal company production in 2017: 1.3 tons; export value 0.5 percent of GDP.
  - Unofficial artisanal estimates: 4 to 10 tons.
  - Artisanal sector employment: between 100,000 to 500,000 people.

*Source: Annex IV. Economic Significance of the Natural Resource Sector (Niger). International Monetary Fund.*

### 6.      Considering the prior actions—reducing domestic payment arrears together with

### 6.      Considering the prior actions—reducing domestic payment arrears together with 

### Program requests and decisions
- Government requests:
  - (i) a waiver for the non-observance of the end-December 2018 performance criterion on domestic payment arrears clearance;
  - (ii) a waiver for the non-observance of the continuous performance criterion on keeping domestic arrears below the CFAF 5 billion ceiling in 2019;
  - (iii) modification of the continuous performance criterion on the stock of domestic arrears from the date of completion of the fourth review onward and modification of the arrears adjuster to the domestic financing performance criterion at end-June 2019;
  - (iv) completion of the fourth program review;
  - (v) disbursement of the fifth tranche of SDR 33.84 million under the ECF arrangement;
  - (vi) a 3-month extension of the ECF arrangement through April 22, 2020 and the rephasing of disbursements as detailed in Table 7 of the MEFP.
- Performance criteria, indicative targets, and structural benchmarks for 2019 are set out in Tables 2, 4, and 6 of the MEFP.

### Recent economic and financial developments (key figures and facts)
- Real GDP growth:
  - Estimated 6.5 percent in 2018, driven by agriculture, construction and service sector.
- Inflation:
  - 2018 annual average of 2.7 percent.
- External current account:
  - Overall deficit of 2.3 percent of GDP.
  - WAEMU pooled reserves currently standing at 4.3 months of union imports.
- Financial deepening:
  - Private sector credit expanded by 6.9 percent for the year on average, less than the 9.2 percent increase in nominal GDP.
- Fiscal outcomes:
  - Overall fiscal balance declined from 5.7 percent of GDP in 2017 to 4.1 percent of GDP in 2018.

### Performance under the ECF-supported program
- Compliance through end-March 2019:
  - All performance criteria (PCs) and all indicative targets (ITs) through end-March 2019 were met, except the clearance of domestic payment arrears.
  - Domestic financing PC was respected, as were ITs on revenues, basic fiscal balances, social spending, and exceptional spending.
- Arrears clearance:
  - Plan to eliminate domestic payment arrears by end-2018 stalled and was delayed into June 2019 due to intermittently tight financing conditions.
- Structural agenda:
  - Progressed well overall, with some slippages due to breadth of reforms and limited capacity.
  - Salary payments of contractual civil servants bankarized since January 2019; salaries of other civil servants bankarized since March 2019.
  - Almost all bank accounts of pertinent public entities transferred to the Treasury Single Account (TSA) as envisaged.
  - Electronic interconnection between tax and customs administration established within the March 2019 deadline.
  - Finalization of the 2019 performance plans for customs and tax administration is a prior action for this review.
  - Delays in preparation of legislation to reduce tax exemptions.

### Macroeconomic framework and outlook (2019 and medium-term)
- Growth outlook:
  - Real GDP growth should average at least 7 percent annually over the next five years.
  - Growth projected to diminish slightly to 6.3 percent in 2019 as agricultural production normalizes after the surge in 2018.
- Inflation:
  - Likely to remain moderate, below the WAEMU norm.
- External position:
  - Expected to move further into deficit as large projects increase imports; should improve over the medium term when crude oil exports commence.
- Financial sector:
  - Private sector credit and broad money growth projected to outpace nominal GDP growth as financial sector deepens.
- Public debt trajectory:
  - Public debt projected to decline from 54 percent of GDP currently to 43 percent of GDP by 2024.
  - Niger expected to preserve its “moderate” rating for public debt distress risk.

### Fiscal policies and revenue measures for 2019–2020
- Budget stance:
  - Follow the budget adopted by the National Assembly in December 2018, except:
    - Hold back CFAF 17.1 billion (0.3 percent of GDP) in appropriations unless revenues overperform program targets;
    - Allow some largely deficit-neutral reshuffling in the June 2019 supplementary budget to account for higher foreign aid and military spending needs.
  - Unused 2018 budget allocations cancelled.
- Revenue measures and expected yields:
  - Partial reinstatement of TATTIE (tax on incoming international calls), expected to yield CFAF 23.4 billion (0.4 percent of GDP).
  - Substitution of TAFI (financial sector tax) for VAT on banking services expected to generate CFAF 5 billion (0.1 percent of GDP).
  - Revenue gains from better taxing the informal sector expected to be at least CFAF 5.8 billion (0.1 percent of GDP); includes 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 ARCEP receipts into the general budget expected to yield CFAF 5.2 billion (0.1 percent of GDP).
- Tax administration reforms and targets:
  - Drive to collect tax arrears: reduction of the stock of arrears deemed collectable by 40 percent, equivalent to CFAF 30 billion (0.6 percent of GDP), envisaged for 2019.
  - Molecular marking of petroleum products expected to generate at least CFAF 3 billion (0.05 percent of GDP) once implemented.
  - Formal communication of the 2019 performance plans for DGI and DGD is a prior action for this review; plans include indicators tracking the breadth of DGI’s tax base.
  - Link between ASYCUDA and SISIC established to facilitate cross-checks; DGI to post a live database of fiscally active tax identification numbers.
  - Streamlining tax exemption regime: proposals for reductions with substantial revenue impact to be provided to IMF staff (SB proposed to be reset for end-June 2019); legislation to be submitted as part of the 2020 draft budget law (SB proposed to be reset for end-September 2019).
  - Implementation of transaction valuation of imports to be stepped up and IT system adjusted to require valuation checks; shift to more risk-based inspection regime with emphasis on post-clearance audits.

### Public expenditure, procurement, and public investment management
- Public investment and budgeting:
  - Inter-ministerial selection committee to consider proposals only if properly vetted.
  - Program budgeting introduced in 2018 to sharpen program targets and apportion the wage bill across programs.
  - Double authorization framework (AE/CP) to be piloted in selected ministries starting with the 2020 budget.
- Public procurement:
  - Target to raise competitive purchases from around two-thirds to the WAEMU norm of 95 percent.
  - Backlog of procurement audits to be addressed; procurement audits to cover entities receiving large subsidies/transfers (e.g., CAIMA and OPVN).
- Institutional consolidation:
  - Government will strive to consolidate and streamline administrative entities following a functional review.
- PPPs:
  - PPPs to be strictly controlled to contain fiscal risks and ensure value for money; new projects outside the public investment plan only on an exceptional basis.
  - Mandate of the Inter-Ministerial Committee on Public Debt and Budget Support expanded to cover PPPs; government to furnish copies of all conventions to IMF staff.

### Debt and cash management measures
- Domestic payment arrears (prior action and commitments):
  - Prior action: schedule an additional emission of government paper of at least CFAF 30 billion to finance arrears clearance.
  - Request the National Assembly to authorize funding of some CFAF 56 billion for arrears clearance in a cabinet-approved supplementary budget for 2019.
  - Provide IMF staff with proof of arrears payments of at least CFAF 30 billion.
  - Prepare and share with IMF staff an updated treasury plan consistent with the PC on arrears reduction in the second half of 2019.
  - Treasury to compile arrears and float data on a monthly basis with a one-month lag and share with IMF staff.
  - Commitment to keep the stock of arrears below CFAF 25 billion throughout the third quarter of 2019 (adjusted ceiling for the continuous PC on domestic arrears) and below CFAF 5 billion throughout the fourth quarter of 2019.
- TSA implementation:
  - Accounts of public administrative entities with derogations (notably ARCEP) to be transferred from commercial banks to the TSA before end-September 2019.
  - Accounts of CAIMA and OPVN to be transferred before end-2019.
  - Government analyzing gap of some CFAF 60 billion (1.2 percent of GDP) between initial balances of transferred accounts and amounts received by the TSA; final report to be shared with IMF staff by end-September 2019.
- Institutional arrangements:
  - Inter-Ministerial Committee on Public Debt and Budgetary Support to continue quarterly meetings and broaden remit from mid-2019 to cover PPPs, debt of major SOEs and public administrative entities, and local governments.
  - Quarterly debt management reports to be prepared and shared with IMF staff.
  - Consolidation of public debt management in a dedicated Treasury unit with front-middle-back office structure; all legal and organizational arrangements to be in place for the unit to start operating by year end (proposed SB for end-December 2019). The unit will serve as secretariat for the Technical Committee on Public Debt and Budget Support.

### Additional public sector efficiency and governance reforms
- Civil service and SOE reforms:
  - Review of human resource management processes and a functional review of ministries underway.
  - Preparation of a biometric database for civil servants and government employees underway.
  - Performance audits of five large SOEs and public administrative entities completed; action plan being developed to improve governance framework, including financial oversight, board member selection, auditing, and processing of financial information.

*Attachment I. Memorandum of Economic and Financial Policies of the Government of Niger.*

### 15.      Reaching the fiscal objective for 2020 will make budget preparation challenging. Every

### 15.      Reaching the fiscal objective for 2020 will make budget preparation challenging. Every

### Fiscal objective and budget preparation
- Objective: reduce the budget deficit to at most 3 percent of GDP as per WAEMU requirements.
- Policy approach: start a broad consultative process early to build consensus around difficult measures required to meet the objective.

### Structural reforms — private sector development
- Developing a strong private sector is indispensable for lasting increases in living standards and job creation.
- Government plans:
  - Kick off a concerted effort on an existing consultation platform later this year to develop a stronger private sector in partnership with the private sector and donors.
  - Put a critical mass of concrete, measurable, and time-bound reforms on the table; challenge private sector and donors to present parallel commitments.
  - Monitor implementation and use subsequent consultation rounds to correct course and extend the agenda.
  - Strengthen incentives for the local private sector to formalize.

### Financial deepening and financial inclusion
- Priority financing vehicles to be developed to full potential:
  - leasing
  - warrantage
  - the regional financing scheme under the BCEAO
  - lending co‑financed through the Maison de l’Entreprise
- Mobile banking and payments: framework in place; actions needed include popularization, improved interconnectivity, and addressing infrastructure gaps.
- Reducing domestic financing for the budget to free bank lending capacity to the private sector.
- Microfinance: revive the sector; implement the new microfinance strategy swiftly after the donor round table; address legacy issues in the microfinance sector.

### Governance and anti-corruption measures
- Multiple tracks to improve governance and fight corruption:
  - Strengthen implementation of legal and institutional framework; review funding of key institutions such as the audit court; encourage better follow-through by tracking cases; better publicize anti-corruption agencies’ work (e.g., post HALCIA’s annual reports on its website).
  - Improve asset declaration regime for high-level government officials by:
    - strengthening legal obligations and improving compliance;
    - aligning with good international practice on remit, list of assets to be declared, plugging loopholes, deadlines for submission, sanctions for non-compliance, and publication of declarations.
    - Timing: associated legal changes to be submitted to the National Assembly or issued by decree by end-September 2019 in line with the SB.
  - Redouble effort to rejoin the Extractive Industry Transparency Initiative (EITI) with a target date of end-2019.
  - Adopt the National Risk Assessment Report for AML/CFT (required by the 2012 FATF standard) and act upon its recommendations.
- Broader reforms with positive governance side effects include:
  - competitive procurement
  - scaling-back discretionary exemptions
  - bankification of fiscal payments
  - establishing a TSA
  - risk-based inspection regimes at customs
  - simplification of administrative procedures

### Fiscal transparency and public communication
- Prepare a fiscal transparency package.
- Continue respecting legal requirements for publication of key documents:
  - budget outturns on a regular and timely basis
  - draft and approved budgets, including supplementary ones
  - a citizen budget
  - major conventions with foreign investors
  - PPP contracts
  - tender awards
- Make the Government Gazette available online and free of charge.
- Publication of the 2019 budget as submitted to the National Assembly noted as a first step.

### Demographic and gender policy actions
- Government committed to addressing demographic challenges to attain PDES 2017-2021 objectives.
- Actions:
  - Leverage updated National Gender Policy and the decree on the Education of Girls.
  - Step up awareness campaigns geared toward religious leaders and the public.
  - Invite donors to expand projects in gender and demographics.
- Note synergies between social protection spending and demographic/gender objectives (example: expanded school lunch program to keep girls in school longer, discouraging early marriage and childbearing).

### Program monitoring, waivers, and requests
- Government requests:
  - Waiver for non-observance of end-December 2018 target on clearance of domestic payment arrears.
  - Waiver for continuous performance criterion on keeping arrears below the CFAF 5 billion ceiling in 2019.
  - Modification of the continuous performance criterion on the stock of domestic arrears from the date of completion of the fourth review onward and the arrears adjuster to the domestic financing performance criterion at end-June 2019.
  - Approval of the fourth review under the arrangement.
  - Disbursement of SDR 33.84 million.
  - Extension of the ECF arrangement through April 22, 2020 to retain semi-annual spacing of program targets and allow more time for reform implementation.
- Monitoring framework:
  - Based on performance criteria (Tables 2) and structural benchmarks (Tables 4 and 6).
  - Authorities to provide IMF staff with statistical data and information identified in the Technical Memorandum of Understanding and other requested information.
  - Program will be monitored through semiannual reviews; fifth and sixth reviews expected at or after end-October 2019 and April 8, 2020, respectively.

### Key quantitative performance criteria and targets (selected exact figures from Tables)
- Table 1 (March–December 2018) highlights (Billions CFA Francs):
  - Net domestic financing of the government, without IMF net financing: 46.1; 70.6; 140.4; 123.8 (presented as program/actual/status across periods).
  - Adjustment for shortfall in external budget support: 0.0; 0.0; 8.3; 0.0.
  - Adjustment for shortfall/excess of arrears clearance in 2018: -3.3; -7.4; -9.5; -43.7.
  - Adjusted net domestic financing criteria examples: 42.8; -1.3; Met; 63.2; 27.0; Met; 139.2; 114.8; Met; 80.1; 69.0; Met.
  - Change in domestic payment arrears of government obligations: -15.0; -30.0; -45.0; -64.7.
  - Adjusted domestic payment arrears of government obligations examples: -4.7; -1.4; Not met; -19.7; -12.3; Not met; -34.7; -25.2; Not met; -54.4; -10.7; Not met.
  - External budget support (memorandum items): 0.0; 23.2; 23.0; 26.7; 8.4; 60.1; 146.9; 156.8.
  - Basic budget balance (commitment basis, excl. grants), floor examples: -61.2; 12.4; Met; -123.5; -6.3; Met; -169.7; -101.9; Met; -210.0; -204.4; Met.
  - Basic budget balance (incl. budget grants), floor examples: -61.2; 35.6; Met; -100.5; 20.4; Met; -132.4; -41.8; Met; -100.3; -78.8; Met.
  - Total fiscal revenue, floor examples: 172.7; 192.2; Met; 369.5; 440.0; Met; 567.0; 657.8; Met; 803.3; 862.4; Met.
  - Spending on poverty reduction, floor examples: 108.0; 115.3; Met; 237.9; 300.1; Met; 345.9; 368.9; Met; 538.4; 557.7; Met.
  - Ratio of exceptional expenditures on authorized spending (percent), ceiling examples: 5.0; 4.4; Met; 5.0; 2.8; Met; 5.0; 2.5; Met; 5.0; 1.5; Met.

- Table 2 (March–December 2019) highlights (Billions CFA Francs):
  - Net domestic financing of the government, without IMF net financing: 69.7; 74.0; 113.1; 21.9.
  - Adjusted net domestic financing of the government, without IMF net financing: 69.7; 29.0; Met.
  - External budget support (memorandum items): 0.0; 16.0; 28.2; 28.2; 160.1.
  - Stock of outstanding domestic payment arrears on government obligations (continuous PC): 5.0; 43.0; Not met; 5.0; 25.0; 5.0.
  - Present Value (PV) of new public and publicly-guaranteed external debt contracted from January 1, 2019: 225.0; 11.9; Met; 225.0; 225.0; 225.0.
  - Basic budget balance (commitment basis, excl. grants), floor examples: -56.1; -51.0; Met; -99.0; -124.7; -157.9.
  - Basic budget balance (incl. grants), floor examples: -56.1; -43.0; Met; -70.8; -96.5; -39.4.
  - Total fiscal revenue, floor examples: 195.2; 205.6; Met; 417.6; 652.1; 889.8.
  - Spending on poverty reduction, floor examples: 150.7; 152.2; Met; 301.4; 452.2; 602.9.
  - Ratio of exceptional expenditures on authorized spending (percent), ceiling: 5.0; 3.2; Met; 5.0; 5.0; 5.0.

### Recurrent structural benchmarks (selected)
- Quarterly measures to improve budget and cash flow management and debt management:
  - Release the quarterly budget allocation in the first month of each quarter.
  - Prepare a quarterly commitment plan consistent with the cash plan.
  - Prepare quarterly debt management reports validated by the National Public Debt Management Committee.
  - Hold at least quarterly meetings of the Inter-Ministerial Debt Management Committee and publish decisions, list of newly approved loans, and the view taken by the Ministry of Finance in quarterly debt management reports.
  - Provide Fund staff with a tally of newly granted tax exemptions (not met for 2019Q1 in Table 3).

- Other recurrent and one-off structural benchmarks:
  - Reduce still-to-be-transferred balances for TSA implementation to less than 10 percent of level established in BCEAO study and digitalize Treasury’s banking services (End-December 2018: Met).
  - Link the IT systems of DGI and DGD and make access to pertinent information operational (End-March 2019: Met).
  - Provide IMF staff with a whitepaper on the bankification of fiscal payments, including action plan (End-December 2018: Met).
  - Discontinue tax and customs duty payments to the DME and the twenty largest customs offices in cash by issuing a circular (End-December 2018: Met).
  - Proposed/reset measures: provide IMF staff with concrete proposals for reductions of tax exemptions with substantial revenue impact (End-June 2019); submit legislation on reducing tax exemptions to the National Assembly (End-September 2019).
  - New: establish debt management unit inside the Treasury with front-middle-back office structure to start operating by end-2019 (End-December 2019).

- Specific prior actions and benchmarks (June–December 2019):
  - Reduce domestic payment arrears and strengthen the framework by:
    - schedule an additional emission of government paper of at least CFAF 30 billion to finance arrears clearance;
    - request the National Assembly to authorize funding of some CFAF 56 billion for arrears clearance via a cabinet-approved supplementary budget for 2019;
    - provide IMF staff with a tally of arrears payments of at least CFAF 30 billion;
    - prepare and share an updated treasury plan consistent with the PC on arrears reduction in the second half of 2019.
  - Establish tracking system for major social programs, including spending and progress toward meeting objectives (End-June 2019).
  - Publish new strategy on financial inclusion and hold donor round table (End-June 2019).
  - Submit draft legislation on asset declaration requirements for high-ranking government officials and introduce sanctioning non-compliance with asset-declaration requirements (End-September 2019).

### Proposed disbursements under the ECF arrangement (Table 7)
- Scheduled amounts and conditions (SDR):
  - SDR 14.1 — Executive Board Approval of the ECF Arrangement — January 23, 2017.
  - SDR 14.1 — Observance of continuous and end-June 2017 performance criteria, and completion of the first review — December 15, 2017.
  - SDR 14.1 — Observance of continuous and end-December 2017 performance criteria, and completion of the second review — June 1, 2018.
  - SDR 14.1 — Observance of continuous and end-June 2018 performance criteria, and completion of the third review — December 10, 2018.
  - SDR 33.84 — Observance of continuous and end-December 2018 performance criteria, and completion of the fourth review — April 30, 2019.
  - SDR 14.1 — Observance of continuous and end-June 2019 performance criteria, and completion of the fifth review — October 31, 2019.
  - SDR 14.1 — Observance of continuous and end-December 2019 performance criteria, and completion of the sixth and last review — April 8, 2020.
  - Total SDR 118.44.

*Source: IMF staff and Nigerien authorities (Attachment II. Technical Memorandum of Understanding; Niamey, June 13, 2018).*

### 1.      This technical memorandum of understanding defines the performance criteria and

### Technical memorandum of understanding: Niger ECF arrangement (Q2-2018 to Q1-2020)

### Definitions
- "Government" refers to the central government of the Republic of Niger; excludes political subdivisions, public entities, or central bank with separate legal personality.
- "Debt" follows paragraph 8 of the Guidelines on Public Debt Conditionality in Fund Arrangements (Decision No. 15688-(14/107), December 5, 2014): a current contractual liability requiring future payments in assets or services. Primary forms: (i) loans (including deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, official swap arrangements); (ii) suppliers’ credits; (iii) leases (debt equals the present value at inception of lease payments expected during the agreement, excluding operation/repair/maintenance payments). Arrears, penalties, and judicially awarded damages arising from failure to make payments that constitute debt are debt.
- Present value (PV) of new public and publicly-guaranteed external debt discounts future payments at a five percent annual rate, except loans with negative grant element (PV set equal to loan value). PV calculation is based on loan amount contracted in a given year, independent of disbursement timing.
- Domestic payment arrears: domestic payments owed by the government but not paid; include committed and authorized fiscal year expenditures not paid within 90 days. External payment arrears: external payments due but not paid.
- "Government obligation" is any financial obligation of the government accepted as such by the government (including any government debt).

*Definitions note: the public sector for PV of external debt includes government and specified public enterprises: Société Nigérienne d’Electricité (Nigelec); Société de Construction et de Gestion des Marchés (Socogem); Société Nigérienne des Produits Pétroliers (Sonidep); Société Nigérienne des Télécommunications (Sonitel); Société de Patrimoine des Mines du Niger (Sopamin); Société propriétaire et exploitante de l’Hotel Gaweye (SPEG).*

### A. Quantitative Performance Criteria

Net Domestic Financing of the Government
- Definition: sum of (i) net bank credit to the government; (ii) net nonbank domestic financing, including government securities issued in CFAF on the WAEMU regional financial market and not held by resident commercial banks, proceeds from sale of government assets, and privatization receipts.
- Net bank credit equals 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 Treasury deposits (including regional offices) with commercial banks. Government deposits with commercial banks are excluded insofar as they finance externally financed capital expenditure.
- Government debt to the banking system includes central bank assistance (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).
- BCEAO calculates net bank credit and the amount of Treasury bills and bonds issued in CFAF on the WAEMU regional market.
- Net nonbank domestic financing includes: (i) change in stock of government securities (Treasury bills and bonds) issued in CFAF on the WAEMU regional market and not held by resident commercial banks; (ii) change in balance of Treasury correspondents’ deposit accounts; (iii) change in balance of various deposit accounts at the Treasury; (iv) change in stock of claims on the government forgiven by the private sector. Nigerien Treasury calculates net nonbank financing.
- Quarterly targets for 2018 and 2019 are based on change between end-December 2017 and end-December 2018 levels, respectively, and the date selected for the performance criterion or indicative target.

Adjustments to the ceiling on net domestic financing
- If disbursements of external budgetary support net of external debt service and external arrears payments (including ECF disbursements) fall short of program projections, the ceiling will be adjusted.
- If disbursements of external budgetary support fall short of projected amounts at end of each quarter, corresponding quarterly ceilings will be raised pro tanto, up to a maximum of CFAF 30 billion.
- From October 1, 2019 onward, the ceiling on domestic financing will be reduced by the amount of borrowing under the World Bank's Policy Based Guarantee operation.
- For 2018 only: ceiling on net domestic financing will be adjusted one-for-one for deviations from programmed domestic payment arrears clearance; upward adjustment capped at CFAF 30 billion.
- From end-June 2019, the ceiling will be increased/reduced by the reduction/increase in the stock of outstanding domestic payment obligations since end-2018, excluding the supplementary period adjustment. Domestic payment obligations stood at CFAF 95.8 at end-2018. This adjuster will be reduced by any external budget support in excess of program amount as quantified in the memorandum item of the PC table and capped at CFAF 50 billion.

Reporting requirement
- Detailed data on domestic financing of the government: monthly, within six weeks after end of each month.

Stock of Domestic Payment Arrears
- 2018: reduction of domestic payment arrears equals difference between stock at end-2017 and stock on the reference date.
- 2019: continuous ceiling on stock of outstanding domestic payment arrears. Ceiling set at CFAF 25 billion from date of completion of the fourth review to September 30, 2019, inclusive; starting October 1, 2019 reduced to CFAF 5 billion through end of arrangement period.
- CAADIE and the Treasury responsible for calculating stock of domestic payment arrears and recording repayment.
- Data on stock, accumulation (including change in Treasury balances outstanding), and repayment of domestic arrears on government obligations: monthly, within six weeks after end of each month.

Adjustments
- Programmed arrears clearance in 2018 adjusted one-for-one for any shortfall (excess) relative to programmed arrears clearance for end-2017. Adjusted target shall not be negative.
- For evaluating performance against end-December 2018 target, domestic payment arrears clearance includes arrears’ reduction during the supplementary budget period.
- For evaluating targets in 2019, stock of outstanding domestic arrears assessed excluding arrears’ reduction during the supplementary period.

External Payment Arrears
- Government undertakes not to accumulate external payment arrears on its debt (including Treasury bills and bonds issued in CFAF on the WAEMU regional financial market), except arrears arising from debt being renegotiated with external creditors, including Paris Club creditors.
- Data on stock, accumulation, and repayment of external payment arrears: monthly, within six weeks after end of each month.

Short-Term External Debt of the Central Government
- Performance criterion: government will not accumulate or guarantee new external debt with an original maturity of less than one year.
- Applies to debt as defined in paragraph 8 of the Guidelines on Public Debt Conditionality and to any obligation contracted or guaranteed for which no value has been received.
- Exclusions: short-term loans related to imports; short-term securities issued in CFAF on the regional financial market.
- Details on all external government debt and guarantees: provided monthly, within six weeks after end of each month.

Present Value of Public and Publicly-Guaranteed External Debt
- Definition reiterates paragraph 8(a) of the Guidelines (debt forms and treatment of leases and arrears).
- Guarantee of a debt: any explicit legal obligation of the government to service a debt in event of nonpayment by debtor (payments in cash or kind).
- External debt for program purposes: debt denominated, or requiring repayment, in a currency other than the CFA franc; includes debt contracted among WAEMU member countries and with WAEMU financial institutions.
- Performance criterion (PC): ceiling on PV of all new external debt (concessional or non-concessional) contracted or guaranteed by central government, including commitments contracted or guaranteed for which no value received.
- Exclusions to PC: (a) short-term supplier or trade-related credit with maturity up to three months; (b) rescheduling agreements; (c) IMF disbursements.
- Applicable contractual date: debt deemed contracted or guaranteed at date of effectiveness of contract, including approval where required by Niger government members with authority.
- Currency denomination for program purposes: value in CFAF of new external debt of 2018 calculated using the average exchange rate for January 2018 in IMF’s IFS database.
- PV calculation: discount projected disbursements and debt service (principal and interest) using program discount rate of 5 percent; take account of loan conditions (projected disbursements, maturity, grace period, payment schedule, front-end fees, management fees). PV calculated using the IMF “DSA template” based on loan amount and parameters. For loans with grant element zero or less than zero, PV set equal to face value.

Adjustment
- Ceiling on PV of new PPG external debt will be raised by amount of borrowing under the World Bank's Policy Based Guarantee operation up to CFAF 140 billion from October 1, 2019 onward.

Reporting requirement
- Authorities will inform IMF staff of any planned external borrowing and conditions before loans are contracted or guaranteed and will consult with staff on potential debt management operations.

### B. Quantitative Targets (Fiscal and Expenditure Definitions)
- Total revenue: indicative target; includes tax, nontax, and special accounts revenue; excludes proceeds from settlement of reciprocal debts between government and enterprises.
- Basic fiscal deficit: difference between (i) total tax revenue (paragraph 36) and (ii) total fiscal expenditure excluding externally financed investment expenditure but including HIPC-financed expenditure.
- WAEMU definition: basic fiscal deficit equals basic balance described under paragraph 37 plus budgetary grants.
- Floor on poverty-reducing expenditure: indicative target; comprises all budget lines included 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 target is assessed.

Reporting requirements
- Basic budget revenue and expenditures: monthly, within six weeks after end of each month.
- UPL expenditures: quarterly, within six weeks after end of each quarter.
- Exceptional expenditure: quarterly, after six weeks after end of the quarter.

### Additional information for program monitoring — Government Finance
- Authorities will forward to IMF staff:
  - Detailed monthly estimates of revenue and expenditure, including priority expenditure, payment of domestic and external arrears, and breakdown of customs, DGI, and Treasury revenue.
  - The Table of Government Financial Operations with comprehensive monthly data on domestic and external financing of the budget, and changes in arrears and Treasury balances outstanding; monthly, within six weeks after end of each month.
  - Comprehensive monthly data on net nonbank domestic financing: (i) change in stock of government securities (Treasury bills and bonds) issued in CFAF on WAEMU regional financial market and not held by resident commercial banks; (ii) change in balance of various deposit accounts at the Treasury; (iii) change in stock of claims on the government forgiven by the private sector.
  - Quarterly data on expenditure for UPL lines (statement of appropriations approved, disbursed, and used).
  - Quarterly reports on budget execution, including rate of execution of poverty-reducing expenditure and use of appropriations by line ministries (National Education, Public Health, Equipment, Agriculture, Livestock).
  - Monthly data on Treasury balances outstanding, by reference fiscal year, with breakdown of maturities of more than and less than 90 days.
  - Monthly data on effective debt service (principal and interest) compared with the programmed maturities provided within four weeks after end of each month.
  - List of external loans contracted in process of negotiation and projected borrowing in next six months, including financial terms and conditions.

*Source: Content unit 1nerea2019001 — Technical memorandum of understanding for Niger’s ECF arrangement.*

### 43.      The authorities will provide the following information each month, within eight weeks

### 1nerea2019001 - 43.      The authorities will provide the following information each month, within eight weeks

### Monetary and Financial Data — Monthly and Quarterly Reporting Requirements
- Consolidated balance sheet of monetary institutions and, where applicable, the consolidated balance sheets of individual banks.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 8 weeks
- Monetary survey (provisional data).  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 8 weeks
- Borrowing and lending interest rates.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 8 weeks
- Customary banking supervision indicators for banks and nonbank financial institutions (where applicable, these same indicators for individual institutions may also be provided).  
  - Frequency: Quarterly (prudential indicators)  
  - Reporting deadline: End-quarter + 8 weeks

### Balance of Payments and External Sector
- Any revision of balance of payments data (including services, private transfers, official transfers, and capital transactions) whenever they occur.  
  - Frequency: Variable  
  - Reporting timing: At the time of the revision.
- Preliminary annual balance of payments data.  
  - Frequency: Annual  
  - Reporting deadline: End-year + 6 months
- External debt: Stock and repayment of external arrears.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 6 weeks
- Breakdown of all new external loans signed and projected borrowing, including the financial terms and conditions.  
  - Reporting deadline: End-month + 6 weeks
- Table on the monthly effective service of external debt (principal and interests), compared with the programmed maturities.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 4 weeks

### Real Sector Reporting
- Disaggregated monthly consumer price indexes.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 2 weeks
- The national accounts.  
  - Frequency: Annual  
  - Reporting deadline: End-year + 6 months
- Any revision of the national accounts.  
  - Frequency: Variable  
  - Reporting deadline: 8 weeks after the revision

### Government Finance and Treasury Reporting (Selected Items)
- Net government position vis-à-vis the banking system.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 6 weeks
- Complete monthly data on net nonbank domestic financing: (i) change in the stock of government securities (Treasury bills and bonds) issued in CFAF on the WAEMU regional financial market and not held by resident commercial banks; (ii) change in the balance of various deposit accounts at the Treasury; (iii) change in the stock of claims on the government forgiven by the private sector.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 6 weeks
- Provisional TOFE, including a breakdown of revenue (DGI, DGD and DGTCP) and expenditure, including the repayment of domestic wage and nonwage arrears, as at end-1999, and the change in Treasury balances outstanding.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 6 weeks
- Data on Treasury balances outstanding (RAP), by reference fiscal year (total and RAP at more than 90 days).  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 6 weeks
- Monthly statement of Treasury correspondents’ deposit accounts.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 6 weeks
- Table of fiscal expenditure execution, unified list expenditure, and HIPC-financed expenditure; Treasury accounts trial balance.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 6 weeks
- Monthly statement of the balances of accounts of the Treasury and of other public accounts at the BCEAO.  
  - Frequency: Monthly  
  - Reporting deadlines: End-month + 6 weeks (provisional); End-month + 10 weeks (final)
- Petroleum products pricing formula, petroleum products tax receipts, and pricing differentials.  
  - Frequency: Monthly  
  - Reporting deadline: End-month + 6 weeks
- Execution of the investment budget.  
  - Frequency: Quarterly  
  - Reporting deadline: End-quarter + 6 weeks

### Structural Reforms and Other Data
- Any study or official report on Niger’s economy.  
  - Reporting timing: Within two weeks after its publication
- Any decision, order, law, decree, ordinance, or circular with economic or financial implications.  
  - Reporting timing: Upon its publication or, at the latest, when it enters into force
- Any draft contract in the mining and petroleum sectors, including production and sales volumes, prices, and foreign investment.  
  - Reporting timing: Upon publication/availability
- Any agreement with private sector stakeholders having economic or financial repercussions for the government, including in the natural resources sector.  
  - Reporting timing: Upon publication/availability

### Data Adequacy, Statistical Practices, and Institutional Notes (selected)
- National accounts: Compiled annually by the National Institute of Statistics (INS) in accordance with SNA93; rebasing to 2015 and migration to SNA 2008 underway; INS plans to start publishing quarterly national accounts in 2020.
- CPI: National harmonized consumer price index with 2014 as base year using weights from ECVMA (2011, updated 2014).
- Government finance statistics: Monthly compilation by the Ministry of Finance with a one- to four-month lag; Niger currently produces the 1998 TOFE based on GFSM 1986 but migrating toward Directive nº10/2009/CM/UEMOA and GFSM 2001.
- Monetary and financial statistics: Monthly MFS compiled and disseminated by BCEAO; migration to SRFs completed in August 2016; BCEAO transmits SRF-based MFS to the IMF since November 2016.
- Financial Sector Surveillance: BCEAO compiles FSIs for deposit takers quarterly; data used internally but not yet approved for publication on IMF’s FSI website.
- External sector statistics: Since 2011 BOP and IIP compiled in BPM6; balance of payments and IIP statistics now available on BCEAO website and in IFS and BOPSY.

### Debt Sustainability Analysis — Key Findings and Policy Implications
- Risk ratings:
  - Risk of external debt distress: Moderate
  - Overall risk of debt distress: Moderate
- Debt-carrying capacity: Rated “medium.”
- Observations:
  - All thresholds are observed in the baseline, but the PV of PPG external debt-to-exports ratio breaches its threshold under stress test scenarios.
  - Niger has limited space to accommodate negative shocks and remains vulnerable to adverse developments of its exports.
- Policy recommendations and program conditions:
  - Continue implementing the government reform program: fiscal consolidation; structural reforms, including revenue mobilization efforts; contain expenditures and improve spending quality; and timely completion of several large-scale projects, in particular the construction of a pipeline for crude oil exports.
  - Strengthen debt management by broadening the coverage of public debt, prioritizing concessional borrowing, and strengthening private-sector development to support economic diversification and mitigate risks associated with commodity price fluctuations.

*Prepared by the staffs of the International Monetary Fund and the International Development Association. (June 13, 2019).*

### 1.      The coverage of the public sector in the DSA is in line with fiscal accounts (Text Table 1). It

### 1nerea2019001 - 1.      The coverage of the public sector in the DSA is in line with fiscal accounts (Text Table 1). It

### Coverage of the public sector and contingent liability stress test design
- Coverage: central government; excludes local governments, the social security fund (CNSS), and extra budgetary funds. State guarantees for external borrowing to private and public sectors are included.
- Publicly-guaranteed private debt: limited to the guarantee issued to the China National Petroleum Company (CNPC) for the construction of the refinery SORAZ.
  - CNPC extended a US$880 million (9.5 percent of GDP) loan in 2008; US$352 million (3.8 percent of GDP) is guaranteed by the government.
  - Outstanding stock of US$161 million (1.7 percent of GDP) at end-December 2018 is included in the baseline and expected to be fully repaid by 2023.
- SOEs: do not directly borrow from abroad but benefit from debt contracted by central government and on-lent to them (includes NIGELEC, SPEN, Niger Telecom, and ABK). Domestic debt of SOEs is excluded due to data constraints; authorities working with the World Bank to improve SOE financial information.
- External debt defined on a currency basis.
- Niger’s DSA follows a hybrid approach: financing from BOAD, the regional development bank, is considered as foreign despite being local-currency-denominated.

- Contingent liability tailored stress test calibration (Text Table 1):
  - Default shock of 0 percent of GDP for other elements of general government not captured in baseline stock of debt, justified because:
    - authorities indicated strong financial position of CNSS removes material fiscal risks;
    - authorities confirmed absence of extra-budgetary funds;
    - local governments solely contract short-term debt with domestic banking sector.
  - Contingent liabilities shock from SOE debt: default value of 2 percent (reflects risks associated with domestic borrowing by SOEs).
  - PPPs: no contingent liability shock (PPPs signed under May 2018 PPP law well below 3 percent-of-GDP limit and PPPs under previous law already counted in baseline public debt).
  - Financial market shock: default minimum value of 5 percent of GDP retained given small size and depth of financial sector.
  - Aggregate total (2+3+4+5): 7.0 (percent of GDP) in Text Table 1.

### Background — Evolution and composition of debt
- Total PPG debt: 53.8 percent of GDP at end-2018 (Text Figure 1). Revision of historical debt stock data increased previous DSA figures by about 5.1 percent of GDP.
- External debt history: dropped from an average of 70 percent of GDP during 2000–05 to 14.7 percent of GDP in 2006 after HIPC relief; hovered 20–25 percent thereafter before increasing markedly from 2015.
- Domestic debt: declining trend since 2000; averaged 4 percent of GDP over 2008–14, then rose from 2015. Domestic debt includes commercial PPPs in 2017 (4.7 percent of GDP) and 2018 (4.2 percent of GDP).
- Debt service: principal and interest on domestic debt surpassing debt service on PPG external borrowing from 2016.
- PPG external debt share: 65 percent of total debt stock in 2018.
- External creditors: multilateral creditors dominant (World Bank/IDA and BOAD largest); official bilateral debt dominated by China and France (AFD).
- External debt characteristics at end-2018: average weighted interest rate of 1.6 percent and remaining maturity of 21 years.
- Domestic debt composition and rates:
  - Domestic debt consists mostly of short and medium-term Treasury securities; stock includes commercial PPPs contracted before 2018 law.
  - Average weighted interest rate on domestic debt was 6.4 percent in 2018.

### Data gaps and follow up
- Estimation and analysis of private external debt complicated by data issues; BCEAO does not compile external debt stock statistics. IMF Statistics Department to provide technical support to gather coverage and composition of private external debt.

### Macroeconomic forecast and baseline assumptions (Text Table 3)
- Fiscal framework: assumes fiscal consolidation to meet WAEMU deficit target of 3 percent of GDP by 2020; fiscal deficit projected to average 2 percent of GDP from 2024 onward.
- Major project timing assumptions:
  - Commencement of crude-oil exports: 2022.
  - Resumption of Imouraren uranium site activity: 2025.
- Growth: annual economic growth projected to average 7 percent over 2018-24.
- Inflation: projected to remain at 2 percent in the longer-term.
- Revenue mobilization: improvements expected via implementation of performance plans, collection of tax arrears, consolidation of tax exemptions, anti-smuggling, computerization, and improved tax-customs cooperation.
- Financing assumptions:
  - Gradual shift from domestic funding to foreign sources.
  - Domestic debt ratio projected to decline from 17.8 percent of GDP in 2019 to 5.4 percent of GDP in 2029.
- Composition of borrowing:
  - External: new disbursements covered by historical financing patterns; long-term shift toward less concessional and commercial loans.
  - Domestic: shift from T-bills to medium- and long-term bonds.
  - Assumed average interest rates on domestic bonds: 6.25 percent for 1–3 year bonds, 6.5 percent for 4–7 year bonds, 7.5 percent beyond 7 years. Interest rate on T-bills set to 6 percent.
- Historical funding note: Niger obtained US$12.7 billion pledged by official bilateral and multilateral donors for PDES 2017–2021; private investors committed US$10.3 billion.

- Key macro assumption table excerpts (DSA 2019 vs Previous DSA):
  - Real GDP growth (percent): DSA 2019 — 4.9 (2016-2017), 7.0 (2018-2024), 6.0 (2025-2039). Previous DSA — 4.9, 6.7, 6.0.
  - Inflation (CPI): DSA 2019 — 0.2 (2016-2017), 2.1 (2018-2024), 2.0 (2025-2039). Previous DSA — 1.3, 1.8, 2.0.
  - Primary fiscal balance (percent of GDP): DSA 2019 — -4.9 (2016-2017), -1.7 (2018-2024), -1.2 (2025-2039). Previous DSA — -4.9, -1.9, -1.3.
  - Total revenue excluding grants (percent of GDP): DSA 2019 — 14.3 (2016-2017), 18.1 (2018-2024), 21.1 (2025-2039).
  - Exports of goods and services (percent of GDP): DSA 2019 — 16.9 (2016-2017), 19.2 (2018-2024), 23.0 (2025-2039).
  - Oil export price (US dollars per barrel): DSA 2019 — 42.8 (2016-2017), 50.7 (2018-2024), 57.4 (2025-2039).
  - Uranium price (Thousands of CFAF per kg): DSA 2019 — 54.2 (2016-2017), 44.1 (2018-2024), 43.9 (2025-2039).

### Realism checks and public investment consistency
- Drivers of debt dynamics: prices and exchange rates expected to negatively contribute to external debt accumulation relative to historical experience; projected real GDP growth contribution to debt reduction revised upward; fiscal consolidation expected to reduce primary deficit contribution to debt accumulation.
- Forecast errors: for PPG external debt mainly driven by unexpected price changes and the residual; for public debt driven by unexpected changes in primary deficit and prices. Niger’s past forecast errors lie within LIC interquartile ranges.
- Realism of planned fiscal adjustment: projected 3-year fiscal adjustment in primary balance of 1.5 percentage points of GDP lies below the top quartile (above 2 percentage points) of past LIC adjustments.
- Public investment: expected to remain around 15 percent of GDP over the medium term with similar contribution to growth as prior DSA.

### Country classification and stress test selection
- Debt-carrying capacity: rated “medium” using April 2019 WEO vintage; CI value 2.94, falls in 2.69 < CI ≤ 3.05.
  - CI components (contributions): CPIA 44 percent; international reserves 33 percent; country real growth 6 percent; world real growth 16 percent.
- Stress tests used: six standardized stress tests plus a tailored commodity price shock stress test. Niger does not qualify for the market financing shock stress test.
- Commodity price shock stress test: relevant due to narrow export base.

### Debt sustainability outcomes and stress-test results
- Baseline external debt projections:
  - PPG external debt: expected to increase from 35 to 37.1 percent of GDP over 2018-21, then decline to 26.4 percent of GDP by 2039.
  - Non-interest current account deficit: main driver of external debt dynamics; goods and services balance likely deteriorates short-term due to imports tied to construction boom before 2019 AU summit; medium-term deficits tied to large investment projects (Kandadji dam, cement factory, oil export pipeline, MCC-funded agricultural investments).
  - PV of debt-to-GDP ratio: expected to hover around 24 percent of GDP in the longer term.
- Threshold breaches under stress tests:
  - Baseline: none of Niger’s PPG external debt indicators breach thresholds.
  - Export shock stress test: PV of external debt-to-exports ratio peaks at 273 percent in 2021 and breaches its applicable threshold, signaling a moderate risk of external debt distress.
  - Other breaches: the export shock breach is mirrored under stress test combining adverse shocks to current transfers-to-GDP and FDI-to-GDP ratios (breach in 2020 and 2021), the stress test combining five standardized stress tests in 2020–21, and the tailored commodity price shock stress test over 2010-21.
  - For the PPG external debt service-to-exports ratio: one-off breach from the export shock scenario can be ignored for debt distress ratings.

### Key statistics (exact figures highlighted in text and tables)
- PPG debt at end-2018: 53.8 percent of GDP.
- Revision of historical debt stock: about 5.1 percent of GDP upward revision.
- CNPC loan (2008): US$880 million (9.5 percent of GDP); guaranteed portion US$352 million (3.8 percent of GDP); outstanding US$161 million (1.7 percent of GDP) at end-December 2018.
- Domestic debt ratio projected: 17.8 percent of GDP in 2019 → 5.4 percent of GDP in 2029.
- Domestic bond interest rate assumptions: 6.25 percent (1–3 years), 6.5 percent (4–7 years), 7.5 percent (beyond 7 years); T-bill interest rate: 6 percent.
- Average weighted interest rate on external debt (end-2018): 1.6 percent; remaining maturity: 21 years.
- Average weighted interest rate on domestic debt (2018): 6.4 percent.
- PPG external debt share of total debt (2018): 65 percent.
- PPG external debt levels (Text Table 2): PPG External Debt — 2018: CFAF 1,808 (35.0 percent of GDP); Multilateral — CFAF 1,394 (27.0 percent of GDP); IMF — CFAF 282.5; World Bank — CFAF 412.3; BOAD — CFAF 54.7; Official Bilateral — CFAF 323 (6.3 percent of GDP); China within Non-Paris Club — CFAF 192 (2.3 percent of GDP).
- Domestic debt figures (Text Table 2, 2018): Domestic debt — CFAF 778 (18.8 percent of GDP); Tbills and bonds — CFAF 679 (13.2 percent of GDP); Bank loans — CFAF 90 (0.4 percent of GDP); Domestic arrears — CFAF 20 (0.8 percent of GDP); Other — CFAF 214 (4.5 percent of GDP).
- Total PPG debt (2018): CFAF 2,780 (53.8 percent of GDP).
- CI Score (WEO April 2019 vintage): 2.94 — CI rating: Medium.
- Export shock outcome: PV of external debt-to-exports ratio peaks at 273 percent in 2021.

*Source: IMF staff summary of the DSA material in the provided content unit.*

### 16.      Niger’s “moderate” rating for debt distress is preserved in an alternative scenario where

### 16.      Niger’s “moderate” rating for debt distress is preserved in an alternative scenario where

### A. Alternative scenario: indefinite delay of crude oil exports
- If the crude oil pipeline construction is not completed over the DSA horizon and the expected boost to exports does not materialize, the PV of PPG external-debt-to-exports ratio remains below its debt threshold applicable under the baseline scenario, so that the rating of external debt distress would remain “moderate.”
- The scenario involves lower economic growth in 2022 and subsequent years, lowered government revenue, and less space for expenditure increases.
- Text Figure 2: Niger: PV of PPG External-Debt-to-Exports Ratio Under Indefinite Delay of Crude Oil Exports (sources: Nigerien authorities; and IMF staff estimates and projections).

### B. Total public debt sustainability
- Public sector debt is projected to decline gradually, driven by both PPG external and domestic debt dynamics (Table 2).
- Public debt is expected to recede with the government’s commitment to fiscal consolidation and meeting the WAEMU deficit target by 2020.
- The primary deficit is projected to decline over time with the improvement of domestic revenue mobilization, enhancement of spending quality, and continued expenditure control, further helped by favorable automatic debt dynamics.
- 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).
- 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.

### C. Debt-reprofiling / Policy-Based Guarantee (PBG) scenario
- The authorities requested a Policy-Based Guarantee (PBG) operation with the World Bank to reduce roll-over risk, which is being carefully assessed.
- The request is to set aside US$50 million in IDA funds for Niger to support a World Bank guarantee for borrowing from foreign commercial banks up to US$500 million, equivalent to 5.2 percent of GDP.
- These proceeds would retire one-for-one T-bills and obligations currently held by commercial banks in other WAEMU countries.
- The operation would substantially lengthen maturities and also lower the government’s interest bill.
- However, the substitution of foreign debt for domestic debt will worsen indicators of external debt sustainability.
- The need to carefully assess the associated benefits, costs, risks, and viability in close consultation with all stakeholders is underscored to ensure compatibility with maintaining Niger’s “moderate” rating for external debt distress.

### D. Risk rating and vulnerabilities
- Niger’s debt sustainability analysis finds a moderate risk of external and overall debt distress, mirroring results from the previous DSA, with current external and public debt trajectories remaining very close to those of the previous DSA (Figure 3).
- The baseline scenario 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 shows Niger has limited space to absorb shocks: the PV of debt-to-exports ratio resides in the “limited space” region over 2019–21; remaining indicators are in the “some space” region.
- Debt sustainability is contingent on the reforms built into the baseline being implemented:
  - Commitment to fiscal consolidation and steadfast implementation of structural reforms are instrumental to contain debt accumulation and preserve macroeconomic stability.
  - Baseline presumes large projects are successfully completed on time, especially the construction of the crude-oil pipeline for exports.
  - Diversification and economic transformation supported by private-sector development and financial deepening are crucial for expanding the export base and mitigating risks associated with commodity price fluctuations.
  - Identified weaknesses call for strengthening debt management and sticking to a prudent borrowing strategy that prioritizes concessional borrowing.
  - Public-sector debt coverage should be broadened to monitor borrowing by SOEs and local governments and fiscal risks associated with PPPs.

### E. Authorities’ views
- Authorities broadly agreed with the thrust of the DSA and acknowledged the importance of diversifying the export base by raising the value-added content of existing exports, while noting challenges posed by informal trade of agricultural products and minerals.
- Developing manufacturing agro-industries and modernizing existing value chains would allow exporting transformed products instead of low value-added primary commodities.
- Authorities highlighted the mitigating role of Niger’s access to WAEMU’s pooled international reserves and concurred that the timely completion of the crude-oil pipeline is instrumental for supporting public finances and better underpinning debt sustainability.
- Authorities intend to further strengthen debt management by establishing a dedicated debt management unit within the Treasury with a modern front-middle-back office structure by the end of 2019.

- On tailoring the contingent liabilities stress test:
  - They affirmed staff that the stock of PPPs contracted under the 2018 PPP law stood at a mere CFAF 33 billion (0.6 percent of GDP). Corroboration documentation would be provided.
  - They noted differences in recording of PPPs concluded under the previous PPP law, which the DSA counts toward in the debt stock as installment payment plans, but the authorities so far do not in the debt management reports. They agreed to include a section discussing PPP arrangements in their quarterly debt reports, including associated fiscal risks.
  - They argued that the contingent liabilities stress test shock for SOE borrowing should be less than 2 percent of GDP. They noted the World Bank report estimate of 25 percent of GDP covers the entire stock of liabilities of SOEs (including taxes owed to the central government, on-lending from the central government, and other cross-debts) which they consider part of the public sector and therefore should be disregarded in the DSA.
  - They agreed on the need to improve data on SOE debt to separate out debt to banks and arrears to suppliers, and underscored that SOEs are generally unable to contract external debt due to small size and poor capacity to produce reliable financial statements.
  - They explained that although the law allows local governments to contract debt directly, in practice borrowing is well contained as it requires approval by the municipal council and the Ministry of Finance and is limited to short-term debt with the domestic banking sector.
  - Authorities assured staff they remain firmly committed to keep Niger’s “moderate” rating for external debt distress.

*Source: IMF Staff DSA text for Niger (provided content).*

### 25.      The authorities also communicated that they may wish to conduct a debt reprofiling

### 25.      The authorities also communicated that they may wish to conduct a debt reprofiling operation

### Description of the proposed operation
- The operation involves repaying T-bills and obligations currently held by regional banks (recorded as domestic debt in this DSA as they are denominated in CFAF) with funds raised from foreign banks.
- The operation would be supported by a Policy Based Guarantee from the World Bank.

### Staff assessment and DSA implications
- Staff stressed that this operation would deteriorate the DSA indicator for external PPG debt relative to exports.
- Figures and stress-test framework in the DSA illustrate vulnerability under alternative scenarios:
  - PV of PPG external debt-to-exports ratio baseline path shows values such as 156.5, 160.2, 159.9, 155.0, 109.4, 107.4, 103.4, 101.0, 89.2 across projection years (excerpted from the DSA tables and figures).
  - Thresholds and stress-test outcomes presented include:
    - Threshold values: 1.8% (threshold lines shown), 100% (threshold label).
    - Public and external debt stress-test thresholds cited in figures: 1.8%, 100%, and public debt benchmark values such as 47%, 32%, 21% in graphic labels.
  - Sensitivity tables indicate breaches (bold values) for multiple indicators under alternative scenarios and bound tests (e.g., PV of debt-to-exports, debt service-to-revenue), with explicit scenario labels: A1, B1–B6, C1–C4.

### Authorities' assurances and risk classification
- The authorities assured staff that they would tailor the operation so that Niger’s risk rating for external debt distress would remain at “moderate.”
- Figure 5 ("Qualification of the Moderate Category, 2019–30") and associated notes specify the calibration for the “moderate” risk category:
  - For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent.
  - For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent.
  - Graphic legends show categories labeled "Some space", "Substantial space", "Limited space", and "Threshold", and charted trajectories for:
    - Debt service-to-revenue ratio (2019–30)
    - PV of debt-to-exports ratio (2019–30)
    - PV of debt-to-GDP ratio (2019–30)
    - Debt service-to-exports ratio (2019–30)

### Key baseline and projection metrics referenced in the DSA
- External debt (nominal) and PPG components (selected years and excerpts):
  - External debt (nominal) series (excerpt): 65.3, 65.6, 62.5, 63.3, 62.1, 60.9, 56.9, 55.7, 54.1, 48.7, 38.0, 53.9, 55.2 (as presented in the table head).
  - Of which: public and publicly guaranteed (PPG) (excerpt): 33.5, 35.3, 35.0, 36.5, 37.1, 37.1, 35.3, 35.1, 34.7, 32.9, 26.4, 25.3, 35.0.
- Identified net debt-creating flows (selected excerpt): 9.2, 7.7, 4.7, 9.4, 10.0, 8.7, 2.4, 4.5, 3.4, 3.5, 2.9, 6.8, 5.1.
- Non-interest current account deficit (selected excerpt): 15.4, 15.6, 18.1, 19.1, 21.8, 18.8, 13.9, 12.4, 11.2, 10.7, 9.7, 18.9, 13.8.
- PV of PPG external debt-to-GDP ratio (excerpt): 24.5, 26.2, 26.4, 26.3, 24.9, 24.7, 24.4, 23.6, 19.2 (as tabulated).
- PPG debt service-to-exports ratio (excerpt): 3.3, 3.2, 4.5, 12.1, 11.5, 12.7, 8.9, 8.4, 7.6, 6.6, 6.8.
- PPG debt service-to-revenue ratio (excerpt): 3.7, 3.9, 4.2, 12.4, 11.0, 12.1, 10.5, 9.9, 9.0, 7.4, 6.8.
- Gross external financing need (Million of U.S. dollars) (excerpt): 999.9, 1055.6, 1300.4, 1438.5, 1612.0, 1591.4, 1382.4, 1344.4, 1302.4, 1697.7, 3175.3.
- Real GDP growth (in percent) (excerpt): 4.9, 4.9, 6.5, 6.3, 6.0, 5.6, 11.9, 6.1, 6.8, 5.9, 6.1.
- Nominal GDP (Million of US dollars) (excerpt): 7,610; 8,136; 9,300; 9,713; 10,672; 11,567; 13,203; 14,347; 15,718; 23,299; 51,506.
- Grant element of new public sector borrowing (in percent) (excerpt): 38.3, 36.6, 36.8, 36.6, 36.6, 36.2, 35.4, 35.4 (as shown in table excerpts).
- Government revenues (excluding grants, in percent of GDP) (excerpt): 14.3, 14.4, 16.7, 16.0, 17.2, 17.8, 19.3, 19.7, 19.9, 20.8, 21.6.

### Scenario and stress-test framework notes from the DSA figures and tables
- Stress-test conventions:
  - "The most extreme stress test is the test that yields the highest ratio in or before 2029."
  - "Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals."
  - Commodity price shock magnitudes are based on the IMF research department commodity prices outlook.
  - All additional financing needs generated by shocks under stress tests 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.
- Tailored tests and bound tests presented include:
  - Tailored tests: Combined contingent liabilities, Natural Disasters, Commodity price, Market Financing.
  - Bound tests: Real GDP growth, Primary balance, Exports, Other flows, One-time 30 percent nominal depreciation, Combination of B1–B5.
- Sensitivity tables (Tables 3 and 4) present projected indicator series for:
  - PV of debt-to-exports ratio, PV of debt-to-GDP ratio, Debt service-to-exports ratio, Debt service-to-revenue ratio, PV of Debt-to-Revenue Ratio, Debt Service-to-Revenue Ratio, PV of Debt-to-GDP Ratio, with thresholds indicated (e.g., 40, 180, 15, 18 as threshold lines in tables/figures).

*Source: Statement and DSA tables and figures as presented in the IMF DSA excerpts for Niger (text and tables provided).*

### Introduction

### Introduction

### Recent Economic Developments, Program Performance and Outlook

- Macroeconomic performance in 2018:
  - Real GDP growth: 6.5 percent in 2018, up from 4.9 percent in 2017.
  - Main growth drivers: agriculture, gold extraction, construction, and services.
  - Average inflation: 2.7 percent (below the 3 percent WAEMU convergence criterion).
  - Credit to private sector growth: 6.9 percent.

- Fiscal developments:
  - Overall deficit reduced from 5.7 percent of GDP in 2017 to 4.1 percent of GDP in 2018.
  - Fiscal consolidation drivers: controls on current expenditures and transition from loans to grants for externally-financed investments.
  - Revenue performance affected by low contribution of natural resources and elimination of a telecommunication tax.
  - Domestic resource mobilization measures: introduction of performance plans for tax and customs administrations, elimination of some tax exemptions, taxation of the informal sector.

- External sector:
  - Current account deficit widened from 15.7 percent of GDP in 2017 to 18.2 percent of GDP in 2018.
  - Overall balance of payments deficit: 2.3 percent of GDP.
  - Financing: largely by donors’ assistance and foreign direct investments.
  - Currency arrangement: Niger uses the CFA franc pegged to the Euro as a WAEMU member.

- Debt sustainability:
  - New public debt sustainability analysis: risks of debt distress rated as moderate.

- Program performance:
  - Implementation of the ECF-supported program broadly on track.
  - All quantitative performance criteria and indicative targets for end-December 2018 and end-March 2019 were met except for clearance of domestic payments arrears.
  - Domestic arrears clearance delayed by tight regional financial market conditions and pressing security spending needs; clearance process resumed in June 2019 following issuance of bonds for CFA 30 billion.
  - Supplementary budget measures: about CFA 56 billion envisaged to clear domestic arrears and implement policy measures to prevent recurrence.
  - Institutional response: plan to create a debt management unit at the Treasury to ensure integration of cash and debt management.
  - Structural benchmarks: good progress despite capacity limits; advanced formalization of performance plans between tax and customs administrations and progress in streamlining discretionary exemptions.

- Medium-term outlook:
  - Growth forecast: expected to reach at least 7 percent over the next five years.
  - Growth drivers: renovation of major infrastructure, construction of the crude oil pipeline with Benin (expected to boost exports and fiscal revenue), and public works for hosting the African Union Summit in July 2019.

### Policies for the Remainder of 2019 and the Medium Term

- Overarching priorities:
  - Maintain macroeconomic stability, increase fiscal revenue, improve quality of public expenditure and debt management, promote private sector development, strengthen governance, and foster girls’ education.

- Fiscal policy targets and projections:
  - Target fiscal deficit: reduce to 3.0 percent in 2020.
  - Medium-term fiscal deficit projection: progressively reduced to 2 percent of GDP.
  - Public debt projection: decrease from 53.8 percent of GDP in 2018 to 43.3 percent of GDP by 2024.
  - Policy stance: continued fiscal consolidation, boost domestic revenue mobilization, increase efficiency of public spending, and allocate oil export revenues to priority spending.

- Revenue measures (tax policy and administration):
  - Partial reinstatement of the tax on international calls.
  - Implementation of VAT on banking services.
  - Broadening of the tax base to cover the informal sector, notably through lump sum taxation.
  - Reduce tax burden on the formal private sector.
  - Continue streamlining tax exemptions and collecting tax arrears.
  - Molecular marking of petroleum products to tackle fraud.
  - Implementation and formal communication to the Fund of performance plans for tax and customs administrations (prior action met).
  - Transaction valuation of imports to be implemented.
  - Committee established to work on reducing exemptions via review of various codes; related legislation to be submitted to the National Assembly and included in the 2020 budget.

- Public expenditure management and investment:
  - Continue program budgeting (introduced in 2018) to improve outcomes and services from public spending.
  - Improve quality of public investment through inter-ministerial selection committee that will only consider duly appraised projects.
  - Monitor fiscal risks associated with Public Private Partnerships (PPPs) and ensure highest returns for Niger.
  - Public financial management reforms to improve public procurement by increasing share of competitive bidding to reach the WAEMU norm.
  - Accelerate procurement audits, including audits of public administrative agencies receiving important subsidies and transfers.

- Social spending and safety nets:
  - Strengthen safety nets through cash transfer programs and school lunch.
  - Establishment of a tracking system of social spending to increase efficiency and scale up programs.

### Debt Management

- Institutional and operational improvements:
  - Reinforce institutional coordination for debt management by enhancing effectiveness of the Inter-Ministerial Committee on Public Debt and Budgetary Support.
  - Good progress on implementing the Single Treasury Account (TSA); transfer of all eligible accounts from commercial banks to be completed by end-September 2019.
  - Strengthen banking functions of the Treasury.

### Financial Sector

- Financial inclusion and financing mechanisms:
  - Promote new financing mechanisms such as leasing and warrantage, the financing mechanism developed by the regional central bank BCEAO, and co-financing through the “Maison de l’Entreprise”.
  - Implement strategy for rehabilitating the microfinance sector and addressing legacy issues, including organizing a roundtable envisaged by the authorities.

### Structural Reforms and Governance

- Private sector development and business environment:
  - Pursue structural reforms to improve the business environment, ensure private sector development, and foster job creation.
  - PDES 2017-21 focuses on the private sector as a main driver for accelerating medium- to long-term growth.
  - Revitalize consultation platforms with the private sector and donors to propose a critical mass of concrete, measurable and time-bound reforms.
  - Continue efforts to improve Niger’s position in the World Bank’s “Doing Business”.

- Governance and anti-corruption measures:
  - Strengthen institutional and legal framework for governance and the fight against corruption.
  - Review funding and effectiveness of essential institutions such as the audit court and ensure publication of their work.
  - Work with the Fund to improve the process of asset declarations of civil servants according to best international practices; authorities plan to submit legal framework revisions to the National Assembly or adopt by decree by end-September 2019.
  - Rejoin the EITI initiative by the end of 2019.
  - Implement recommendations of the recent National Risk Assessment Report under the 2012 FATF standard on AML/CFT.

- Demographic and gender policies:
  - Address demographic challenges in compliance with PDES objectives.
  - Act on the basis of the National Gender Policy and the Decree on Education of Girls to advance public awareness on gender and demographic issues.
  - Continued support from the international community seen as critical for project implementation in these areas.

### Conclusion and Requests to the IMF

- Authorities’ commitment:
  - Firm determination to achieve objectives of the ECF-supported program.
  - Good program performance and continued efforts to preserve macroeconomic stability amid difficult security context.

- Requests to IMF Directors:
  - Support for completion of the fourth review and the extension and rephasing of the ECF arrangement.
  - Approval of requests for waiver of nonobservance of a performance criterion and modification of performance criteria.

*Source: Introduction (1nerea2019001) — IMF country document.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1nerea2019001.pdf_