## 1nerea2023001 - conclusion of the last Article IV consultation in 2019, authorities have made progress in ## Source details **Canonical URL:** [1nerea2023001 - conclusion of the last Article IV consultation in 2019, authorities have made progress in](https://www.imf.org/-/media/files/publications/cr/2023/english/1nerea2023001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2023/english/1nerea2023001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2023/english/1nerea2023001.pdf.json) --- ### Macroeconomic outlook and risks - Near and medium-term outlook: "broadly favorable". - Growth projections and drivers: - GDP growth projected to accelerate from 1.4 percent in 2021 to 7.1 percent in 2022. - Growth projected at 7.0 percent in 2023 and to reach double-digits in 2024 as oil production picks up and structural reforms bear fruit (growth drivers: private investment and oil exports through the new pipeline). - Major downside risks: - Climate shocks and security threats that could weigh on agricultural and oil production. - Protraction of Russia’s war against Ukraine could lower aid flows, increase commodity-price volatility, and tighten financial conditions. - Humanitarian and fragility context: - Low rainfall in 2021 pushed an estimated 4.4 million people into acute food insecurity. - As of September 30, 2022: 251,081 refugees; 44,796 asylum seekers; 376,809 internally displaced persons (UNHCR data). - Rapid population growth: more than 3 percent per year; fertility rate almost 7 children per woman. - Average schooling of less than 2 years (compared with almost 3 years for men). ### Program performance and Fund engagement - ECF-supported program implementation: - "Program performance has been broadly satisfactory in a challenging context." - All quantitative performance criteria met at end-June and end-September 2022; five out of six indicative targets observed at end-September. - Present value of new PPG external debt exceeded its ceiling in November 2022. - Most continuous structural benchmarks met at end-November 2022 except publication of summary of feasibility studies for investment projects > CFAF 5 billion; adoption of an oil revenue management strategy not met. - IMF support and actions: - Staff supports completion of the second review and the release of the third disbursement under the ECF arrangement in the amount of SDR 39.48 million. - Staff supports authorities’ request for modification of the performance criterion on net domestic financing, a waiver of non-observance, and modification of the continuous performance criterion on contracting of external PPG debt. - Executive Directors’ assessment: - Agreed with staff appraisal; welcomed authorities’ commitment and progress; noted favorable medium-term outlook but significant risks; called for continued donor involvement and leveraging IMF capacity development. ### Fiscal policy, debt, and public spending priorities - Fiscal stance and recommendations: - A gradual fiscal consolidation path warranted while accommodating urgent spending needs (flood crisis, deteriorating security) and priorities in education, infrastructure, and social safety nets. - Authorities should avoid entrenched large fiscal deficits and revert to the WAEMU fiscal deficit norm by 2025. - Revenue mobilization and PFM: - Advance domestic revenue mobilization; reduce tax exemptions and evasion; revise General Tax Code to simplify and increase efficiency; enhance revenue administration through digitalization. - Urgent need to establish a transparent oil resource management framework before start of oil exports. - Improve efficiency and quality of spending and SOE performance to create fiscal space. - Debt considerations: - Directors recommended prudence: prioritize concessional loans; strengthen capacity in compilation of debt and fiscal statistics. ### Financial sector, inclusion, and governance - Financial sector stability: - Preserve stability and soundness; restructure microfinance sector to promote inclusion and resilience. - Rising vulnerabilities: banking sector NPLs estimated at 18.1 percent (end-September 2022); microfinance sector NPLs estimated at 41.9 percent (end-March 2022). - Capital adequacy ratio: 14.3 percent (end-June 2022; above WAEMU average 12.5 percent). - Credit concentration ratio estimated at 158.3 percent. - Governance and anti-corruption: - Progress on AML/CFT framework and steps to publish asset declarations of high-ranking officials welcomed. - Directors encouraged continued efforts to strengthen governance and anti-corruption frameworks and leverage digitalization. - Social priorities: - Strengthen social safety nets; foster girls’ education and gender equality. ### Key statistics and indicators (selected figures 2019–23) - GDP at constant prices (annual percentage change): 2019: 6.1; 2020: 3.5; 2021: 1.4; 2022: 7.1; 2023: 7.0. - Export volume (annual percentage change): 2019: -3.3; 2020: -0.6; 2021: -8.3; 2022: -6.7; 2023: 22.8. - Import volume (annual percentage change): 2019: 9.5; 2020: 2.7; 2021: 1.1; 2022: -5.2; 2023: 10.6. - CPI, annual average (annual percentage change): 2019: -2.5; 2020: 2.9; 2021: 3.8; 2022: 4.5; 2023: 3.0. - Total revenue (annual percentage change): 2019: -1.6; 2020: 0.5; 2021: 5.2; 2022: 19.9; 2023: 19.6. - Total expenditure and net lending (annual percentage change): 2019: 8.4; 2020: 8.4; 2021: 13.4; 2022: 13.9; 2023: 1.7. - Domestic credit (annual percentage change): 2019: -12.2; 2020: 25.0; 2021: 9.2; 2022: 17.5; 2023: 15.0. - Credit to the economy (annual percentage change): 2019: 13.0; 2020: 8.6; 2021: 15.4; 2022: 7.1; 2023: 9.8. - Broad money (annual percentage change): 2019: 15.0; 2020: 17.0; 2021: 9.7; 2022: 10.3; 2023: 12.1. - Government finances (percent of GDP): - Total revenue: 2019: 11.2; 2020: 10.8; 2021: 10.8; 2022: 11.7; 2023: 12.8. - Total expenditure and net lending: 2019: 21.6; 2020: 22.4; 2021: 24.3; 2022: 24.8; 2023: 23.1. - Overall balance (incl. grants): 2019: -3.6; 2020: -4.8; 2021: -5.9; 2022: -6.8; 2023: -5.3. - External current account balance (excluding official grants, percent of GDP): 2019: -15.1; 2020: -15.7; 2021: -16.4; 2022: -16.2; 2023: -14.9. - Total public and publicly-guaranteed debt (percent of GDP): 2019: 39.8; 2020: 45.0; 2021: 51.3; 2022: 56.6; 2023: 57.6. - PV of external debt (percent of GDP): 2019: 24.5; 2020: 22.7; 2021: 20.7; 2022: 22.7; 2023: 22.2. - GDP at current market prices (billions of CFA francs): 2019: 7,568; 2020: 7,911; 2021: 8,271; 2022: 9,222; 2023: 10,065. *Source: IMF staff report for the 2022 Article IV consultation and Second Review under the ECF (December 6, 2022).* ### Macroeconomic performance in 2022 (highlights) - Growth and inflation: - Economic growth projected to rebound to 7.1 percent in 2022, supported by agricultural recovery and acceleration of large-scale investment projects. - Annual average inflation expected to be 4.5 percent. - External position: - Current account deficit projected to widen to 14.4 percent of GDP in 2022 due to higher food and investment-related imports, partly offset by larger oil export surplus. - Fiscal outturn (cumulative up to September 2022): - Overall deficit reached 354 billion CFAF (3.8 percent of GDP) cumulative up to September, compared with program projection of 491.9 CFAF billion (5.3 percent of GDP). - Under-execution of expenditure by 19 percent contributed to narrower deficit than projected. - Revenue collection up to September was 6.9 percent below projections. - Fiscal deficit expected to widen to 6.8 percent of GDP as expenditure execution ramps up in the final quarter. - Key text table (cumulative up to September 2022) (Billion CFAF / Percent of GDP): - (1) Revenues: 786.97 / 32.4 - (2) Budget grants (Incl. CCRT): 35.7 / 0.0 - (3) Current expenditure: 713.07 / 10.8 - (4) Domestically-financed investment: 417.12 / 37.6 - (5) Net lending (pipeline): 45.0 / 0.0 - (6) = (1)+(2)-(3)-(4)-(5) Domestic balance: -352.5 / -216.0 / -3.8 / -2.3 - (7) Foreign loan-financed investment: 139.4 / 138.0 / 1.5 / 1.5 - (8) = (6)-(7) Fiscal balance (WAEMU definition): -491.9 / -354.0 / -5.3 / -3.8 - Memo: Foreign grant-financed investment: 206.4 / 213.4 / 2.2 / 2.3 ### Prices, energy policy, and social impact - Diesel price increase and effects: - Diesel prices increased by 24 percent in August to align with international prices and support SONIDEP’s financial sustainability. - Energy fund component of diesel price increased from 2.5 to 62.65 CFAF/liter. - NIGELEC will draw funds from the energy fund to compensate increased power generating costs not passed to electricity consumers. - Molecular marking of petroleum products suspended; diesel exports suspended to ensure domestic availability. - Diesel price increase led to some temporary social discontent; authorities initiated communication and mitigating measures. ### Health and COVID-19 - COVID-19 developments: - After an August increase, cases fell significantly; as of early November, new cases per million stood at less than 0.5. - Vaccination coverage around 22 percent against a target of 42 percent by end-2022. ### Monetary policy and financial sector vulnerabilities - Monetary policy: - Central bank raised key interest rates by 25 basis points in June and an additional 25 basis points in September, returning rates to pre-Covid-19 level. - Financial sector indicators (selected): - Credit to the economy grew by 11.1 percent (y-o-y) at end-September 2022. - Capital adequacy ratio: 14.3 percent (end-June 2022). - Banking sector NPLs: 18.1 percent (end-September 2022). - Microfinance sector NPLs: 41.9 percent (end-March 2022). - Central Bank conducting a survey to determine causes of portfolio deterioration. ### Program implementation and reform agenda (further details) - Program monitoring and outcomes: - All QPCs met at end-June and end-September; PV of new PPG external debt exceeded its ceiling in November due to ratified project loan contracts. - No new external payment arrears; cash revenue collection slightly below program floor at end-September. - Continuous SBs largely met except publication of feasibility study summaries for projects > CFAF 5 billion. - Reform implementation highlights: - Roadmap adopted for revision and simplification of tax system; objective to have revised tax code adopted by Council of Ministers by end-December 2023. - Status report on tax exemption agreements since 2019 shared with IMF; foregone revenues of 1.6 percent of GDP as of 2021. - Annual tax expenditure report published online. - Auditor General’s audit report on exemptions in extractive sector published. - SB on adoption of oil revenue management strategy not met; authorities requested IMF TA and plan to adopt by end-September 2023 before start of crude oil exports. ### Outlook and risks (detailed) - Growth outlook: - Growth projected at 7.0 percent in 2023; expected to reach double-digits in 2024 with oil production pick-up. - Inflation and external position: - Inflation expected to converge into regional target band by 2023. - Current account deficit projected to shrink to 13.4 percent of GDP in 2023 and narrow further with onset of oil exports. - EBA-lite methodology suggests a current account gap of 8.3 percent of GDP. - Debt and debt distress: - Debt vulnerabilities increased but risk of external and overall debt distress remains rated "moderate" (DSA). - PPG external debt projected to increase to 37.2 percent of GDP in 2022 then decline as growth and fiscal consolidation proceed. - Recent IDA policy change increases senior debt long run but does not change risk assessment. - Adverse illustrative scenario (Annex VI): - Climate shock in 2023 + one-year delay in oil exports + lower oil prices + higher regional interest rates: - GDP growth would drop in 2023 to around 2.5 percent, then catch up subsequently. - Current account deficit would widen to 15.5 percent of GDP and remain large until 2024. - Fiscal consolidation pace would slow; WAEMU deficit norm achievement postponed beyond 2025 absent measures. - Debt indicators worsen but country’s risk rating likely remain "moderate". - Recommended policy response: reprioritization of spending, targeted support to vulnerable populations, and measures to mitigate deviations from program fiscal targets. ### Authorities’ views and commitments - Authorities broadly concurred with staff’s medium-term outlook; noted upside risks from large-scale projects (notably uranium). - Commitments include: - Step up domestic revenue mobilization. - Adopt a fiscal contingent plan and reprioritize spending. - Accelerate implementation of structural reform agenda if risks materialize. ### Policies to build resilience — fiscal anchoring and spending reorientation - Temporary relaxation: - A relaxation of 0.2 percent of GDP in fiscal deficit relative to 1st ECF review envisaged in 2022 to mitigate food crisis and security challenges. - Supplementary 2022 budget adopted to increase spending envelope and reprioritize expenditures. - Additional CFAF 35 billion (about 0.4 percent of GDP) for security spending. - Net lending and pipeline accounting: - CFAF 36.5 billion raised in 2020 for oil pipeline remain as deposits at Central Bank; authorities plan to spend after negotiations and will enter overall deficit as net lending this year and next. - Financing support: - Higher budget support grants and additional concessional loans (World Bank) to finance additional deficit; World Bank and Global Partnership for Education to provide an additional 0.5 percent of GDP in budget support grants relative to first review projections. - Fiscal trajectory: - 2022 deficit projected at 6.8 percent of GDP (vs 6.6 percent in first review). - 2023 deficit target relaxed by 0.6 percent of GDP relative to first ECF review to 5.3 percent of GDP. - 2024 projected deficit narrowing to 4.1 percent of GDP. - Convergence to WAEMU 3 percent of GDP deficit norm expected by 2025 (one year later than initially planned). ### Strengthening government finance statistics and PFM capacity - Need to strengthen capacity in compilation and recording of government finance statistics; erroneous recording of net lending in 2020 indicates deficiencies. - IMF TA being provided on WAEMU TOFE implementation and GFSM 2014 alignment. - TSA expansion to local governments: starting January 2023, Treasury accountants to become public accountants of subnational decentralized authorities and integrate their accounts into TSA. - July 2022 survey: 34 government accounts opened in commercial banks (down from 187 in 2018); 15 had zero balance — recommended closure. - AE/CP multiyear budgeting began with five pilot ministries in 2022; expansion to six new ministries in 2023. ### Use of SDR allocation and financing terms - Remaining half of SDR allocation to be used for development purposes and priority spending in 2022. - Total allocation amounted to 1.2 percent of GDP. - Resources on-lent by regional central bank under highly concessional terms: 20-year loan carrying fixed interest of 0.05 percent per year. - Allocation to finance efforts: improve food security, provide animal feeding support, reduce infrastructure gap, and address security spending needs. ### External and domestic debt management - Authorities commit to prudent external debt policy; prioritize concessional loans and grants. - Aim to increase average tenor of domestic debt (currently at 5.2 years) to reduce refinancing risk. ### State-owned enterprises (SOEs) and oil revenue management - SOE monitoring: director appointed to oversee general directorate of public enterprises; information system with World Bank support to consolidate SOEs’ financial statements for annual report starting May 2023. - MoF requires prior approval of budgets of key SOEs; performance contract with NIGELEC signed to improve service coverage and cost efficiency; NIGELEC to receive government transfers given tariff freeze and rising production costs. - Oil revenue management strategy: - Important to develop and implement before start of crude oil exports (SB#3). - IMF TA identified need to establish a non-oil primary balance target, governance framework, fiscal rule calibration, and a stabilization fund. - Authorities requested second round of IMF TA; plan to adopt strategy by end-September 2023. ### Domestic revenue mobilization and tax policy reform - Authorities committed to revising and simplifying General Tax Code by end-2023 (SB#9). - IMF TA diagnosis: corporate and labor income excessively taxed while consumption under-taxed; reform aims to shift burden toward consumption, increase efficiency, stimulate investment, simplify code, reduce exemptions, and broaden base. - Integration and digitalization initiatives: operationalize one-stop shop interconnecting customs documentation; deploy SISIC in Niamey. - Technical difficulties require timetable revision for SBs #10–#12; IT Department insufficient staff; renegotiation of servicing contract with software provider may be required. - Strengthen human resources in tax administration by recruiting tax officers for Regional Tax Divisions (DRI) and tax centers. ### VAT, exemptions, and revenue measures (2023 budget measures) - Certified VAT invoicing compliance: around 60 percent of active taxpayers compliant; large and medium firms compliance rates: 91 percent and 87 percent. - New online platform e-SECEF to generate certified invoices; staff reiterated need to make VAT credits operational. - Revision of exemption terms in investment code: beneficiaries to pay duties/taxes upfront and be reimbursed after investment; demand for exemptions significantly decreased. - 2023 draft budget law measures expected to yield 48 billion CFAF (about 0.5 percent of GDP). Measures with highest yields include: - increase excise duty on tobacco products by 10 percent ad valorem and introduction of specific tax of CFAF 240 per pack; - introduction of specific tax of 5 percent on exports of gold and precious metals; - introduction of specific tax on exports of petroleum products of 15 percent; - reclassification of telecom sector activities as services to be subject to VAT; - taxation of Nigerien-source income received by creditors not domiciled in Niger; - abolition of temporary tax exemption for new construction projects. ### Social spending, public investment, and gender priorities - Low human capital outcomes: adult literacy rate 35 percent. - Social assistance spending inadequate and concentrated on food/in-kind distribution; targeting weak and regressive. - Recommendations: move from untargeted subsidies to conditional cash transfer programs; cash transfers before and after climate shock more beneficial (SIP analysis). - Unified social registry (USR) underway: manual validated September 2022; objective to cover 800,000 households. - Gender policies: closing gender gaps in educational enrollment would boost GDP by about 11 percent (SIP). National Gender Policy adopted aiming to close gaps by 2027; construct at least 100 boarding schools for girls by 2025. ### Private sector development, diversification, and climate resilience - Export diversification remains low; exports concentrated in uranium, gold, and oil. - Staff analysis: invest in human capital and infrastructure, promote digitalization, remove trade barriers, and improve governance to boost diversification. - Infrastructure initiatives: road network with Benin (MCC) and rehabilitation of trans-Saharan corridor Lagos-Alger via Zinder and Agadez. - Agricultural resilience: - Rain-fed agriculture accounts for 99 percent of total agricultural production. - A one standard deviation decline in rainfall associated with about 11 percent decrease in income per capita (SIP). - Need for irrigation infrastructure, tapping underground water, improving access to renewable energy, and facilitating access to weather information. ### Financial sector policies and inclusion (authorities’ views) - Financial inclusion: only 14 percent of adult population uses financial services, compared with 67 percent WAEMU average (2021); significant gender gap. - Policy recommendations: - Expedite national financial education strategy. - Promote digitalization of financial services and leverage regional interoperability project led by BCEAO. - Close gender gap in access to financial services. - Banking and microfinance soundness actions: - WAMU Banking Commission monitoring; central bank analysis of NPL causes; framework to improve dialogue between banks and treasury; refinancing and recapitalization actions for ASUSU; training program for managers; consolidation of weak institutions; accelerate donor funding for FDIF. ### Governance reform and anti-corruption - Steps taken: - Auditor General audits completed and published (including 2020 Covid-19 spending and extractive sector exemptions). - Committee at MoF to follow up Auditor General recommendations. - ARMP action plan to address procurement deficiencies. - Publication of beneficial ownership for non-competitive contracts; decree to mandate provision of such information planned. - New AML/CFT strategy and action plan adopted to address 2021 GIABA deficiencies. - 2020 law requiring additional senior public officials to report asset declarations; decree planned to operationalize asset declaration framework. - Persistent challenges and recommendations: - Corruption remains major challenge; World Governance Indicators control of corruption moved from -0.53 in 2019 to -0.55 in 2021; Transparency International CPI score moved from 32 to 31. - Recommendations: implement Auditor General recommendations in Ministries of Mines and Hydrocarbons; strengthen HALCIA; publish corruption-related statistics, prosecutions, and rulings; enact law on asset-declaration modalities including online publication and sanctions; increase judiciary resources and enforcement capacity. ### Program monitoring, financing, and capacity - Waiver requested for non-observance of continuous PC on contracting of external PPG debt due to breach in November explained by reclassification of loan contracts and additional concessional World Bank loans. - Expected additional concessional World Bank loans in 2022: "123.2 billion CFAF in PV terms." - Total amount of new external debt in 2022 expected: "571.1 billion CFAF in the PV terms." - Size of the breach: "169.1 billion CFAF". - External financing needs estimated at "CFAF 993 billion over 2022-24 (Text Table 4)." - Program financing status: program fully financed with firm commitments for next 12 months and good prospects for remaining period. - Capacity to repay the Fund: - Repayment obligations peak at "1.3 percent of exports and 2.2 percent of tax revenues in 2029." - Safeguards and CD: - BCEAO implemented all recommendations from 2018 safeguards assessment; update planned for 2023. - New CD strategy focusing on: (i) tax policy and revenue administration; (ii) natural resource management; (iii) public financial management; (iv) macroeconomic and financial statistics. ### Risk Assessment Matrix (Annex I) — selected entries - Spillover risks with relative likelihood and impacts (selected): - Intensifying spillovers from Russia’s war on Ukraine: Relative Likelihood: High; Impact: Medium. Policy response: implement domestic revenue mobilization and advance structural reforms. - Rising and volatile food and energy prices: Relative Likelihood: High; Impact: High. Policy response: prioritize well-targeted spending to protect the most vulnerable. - De-anchoring of inflation expectations in advanced economies: Relative Likelihood: Medium; Impact: Medium. Policy response: mobilize donor funds and accelerate revenue reforms. - Reduced donor support: Relative Likelihood: Low; Impact: High. Policy response: enhance engagement with donors and improve implementation capacity. - Domestic/regional risks: - Deterioration of security in the Sahel: Relative Likelihood: Medium; Impact: High. Policy response: allow a more backloaded fiscal consolidation and increase international engagement. - Delays in extractive projects (pipeline): Relative Likelihood: High; Impact: High. Policy response: accelerate oversight and transparency of sector. - Unfavorable weather/natural disasters: Relative Likelihood: High; Impact: High. Policy response: increase well-targeted spending for vulnerable populations. ### Downside scenarios and mitigation (Annex VI and Box 1) - Alternative scenario 1 (Alt 1): - One standard deviation shock to agricultural production in 2023 (equivalent to 7.0 percent drop) + one-year delay in oil exports; agricultural production assumed to recover and catch up by 2027. - GDP growth under Alt 1: drop to 2.5 percent in 2023; then pick up. - Alternative scenario 2 (Alt 2): Alt 1 + commodity price shock (one standard deviation on oil prices) from 2023 through 2025. - Alternative scenario 3 (Alt 3): Alt 1 + Alt 2 + uniform increase of 100 basis points in regional interest rates over 2022-28. - Projected impacts (selected): - Current account and fiscal balances deteriorate under alternatives; fiscal deficit ranges 6.4–6.9 percent of GDP in 2023 (baseline 5.3 percent in 2023) and 8.7–9.5 percent in 2024 (baseline 4.1 percent). - Debt indicators worsen but external and overall risk of debt distress remain "moderate" under scenarios due to concessionality of new debt and eventual growth pick-up. - Policy implications: adopt fiscal contingency plan, reprioritize spending, target support to vulnerable populations, accelerate revenue mobilization, and prioritize concessional borrowing. ### Development strategy and financing (PDES 2022–2026 / PRGS) - PDES objectives: - Build Agro-poles to transform local agricultural products, diversify production, and increase resilience to climate shocks. - National strategy for adaptation to climate change with irrigation focus and harnessing underground water. - Niger 2.0 Smart Villages Project to promote rural digitalization. - Financing: - PDES implementation cost estimated at CFAF 19,427.6 billion. - Estimated financing gap CFAF 10,670.6 billion: CFAF 6,742.3 billion from donors; CFAF 3,928.3 billion from private sector. - Roundtable planned in December 2022 in Paris to mobilize resources. - PRGS target: reduce poverty rate to 35.4 percent by 2026 from 40.8 percent in 2019. - Objective to raise fiscal revenue-to-GDP ratio to about 15 percent by 2026. ### DSA and debt sustainability (selected findings) - Risk of external and overall public debt distress: assessed "moderate". - PPG debt at end-2021: 51.3 percent of GDP. - PPG external debt share of total debt in 2021: 65.2 percent. - PV of new PPG external debt projected to increase to 37.2 percent of GDP in 2022 then decline. - Baseline macro assumptions (selected from Text Table 2): - Real GDP growth (percent), DSA: 2022: 7.1; 2023: 7.0; 2024: 13.0. - Inflation (CPI), DSA: 2022: 4.3; 2023: 3.0; 2024: 2.5. - Primary fiscal balance (percent of GDP), DSA: 2022: -2.6; 2023: -3.4; 2024: -3.7. - Total revenue excluding grants (percent of GDP), DSA: 2022: 11.2; 2023: 10.8; 2024: 10.8. - Stress-test outcomes: - Two export-related indicators breach thresholds under export shock; commodity-price shock can temporarily push debt-service-to-revenue ratio above threshold. - Policy recommendations: - Prioritize non-oil revenue mobilization; avoid full spending of oil revenues; prioritize concessional loans and grants; extend average maturity of domestic debt; improve spending efficiency; strengthen debt management capacity. ### Program monitoring, reporting, and TMU highlights - Program monitoring based on performance criteria and structural benchmarks; TMU defines indicators and reporting requirements. - Semiannual IMF Executive Board reviews: third review based on end-December 2022 data; fourth review end-June 2023; fifth review end-December 2023. - Reporting requirements include monthly submission of detailed revenue/expenditure data within six weeks and various monetary, balance of payments, and real sector series within specified deadlines. - PV calculation methodology: discount at 5 percent program rate; exchange rate vintages specified for PV conversions (end September 2021 and end April 2022 rates provided). - Continuous quantitative PC on PV of new PPG external debt breached in November; waiver requested. *Source: IMF staff and Nigerien authorities (content unit: 1nerea2023001 — IMF staff report, MEFP, TMU, and accompanying annexes).* ### conclusion of the last Article IV consultation in 2019, authorities have made progress in ### 1nerea2023001 - conclusion of the last Article IV consultation in 2019, authorities have made progress in ### Macroeconomic outlook and risks - Near and medium-term outlook described as "broadly favorable". - Growth projections and drivers: - Growth expected to bounce back in 2022 and accelerate thereafter driven by private investment and oil exports through the new pipeline. - GDP growth projected to accelerate from 1.4 percent in 2021 to 7.1 percent in 2022. - GDP growth projected to keep momentum in 2023 at 7.0 percent and accelerate thereafter, reaching double-digits in 2024 as oil production picks up and structural reforms bear fruit. - Major downside risks highlighted: - Climate shocks and security threats that could weigh on agricultural and oil production. - Protraction of Russia’s war against Ukraine, which could imply lower aid flows, more volatility in commodity prices, and tighter financial conditions. - Humanitarian and fragility context: - Low rainfall in 2021 pushed an estimated 4.4 million people into acute food insecurity. - Since 2012, worsening security in the Sahel increased refugees/IDPs; as of September 30, 2022, Niger had 251,081 refugees, 44,796 asylum seekers, and 376,809 internally displaced persons (UNHCR data). - Rapid population growth (more than 3 percent per year) and fertility rate—almost 7 children per woman—are development constraints. - Average schooling of less than 2 years (compared with almost 3 years for men). ### Program performance and Fund engagement - Program implementation under the ECF-supported program: - "Program performance has been broadly satisfactory in a challenging context." - All quantitative performance criteria were met at end-June and end-September 2022; five out of six indicative targets were observed at end-September. - The present value of new PPG external debt exceeded its ceiling in November 2022. - Most continuous structural benchmarks at end-November 2022 were met, except for publication of the summary of feasibility studies for investment projects of more than CFAF 5 billion. - Most other structural benchmarks were met, except adoption of an oil revenue management strategy. - IMF support and disbursement: - Staff supports the completion of the second review and the release of the third disbursement under the ECF arrangement in the amount of SDR 39.48 million. - Staff supports the authorities’ request for modification of the performance criterion on net domestic financing, a waiver of non-observance, and modification of the continuous performance criterion on contracting of external public and publicly guaranteed debt. - Executive Directors’ assessment: - Agreed with staff appraisal; welcomed authorities’ commitment and progress despite the challenging context. - Noted medium-term outlook favorable but risks remain significant. - Called for continued commitment to policies promoting macroeconomic stability, resilience to shocks, private sector development, and improved governance. - Emphasized need for continued donor involvement and leveraging IMF capacity development. ### Fiscal policy, debt, and public spending priorities - Fiscal stance and recommendations: - A gradual fiscal consolidation path is warranted to address urgent spending needs related to the flood crisis and deteriorating security situation, and to accommodate spending priorities in education, infrastructure, and social safety nets. - Authorities should avoid entrenched large fiscal deficits, preserve fiscal and public debt sustainability, and revert to the WAEMU fiscal deficit norm by 2025. - Revenue mobilization and public financial management: - Advancing domestic revenue mobilization is key to create fiscal space for priority spending. - Authorities encouraged to accelerate reforms to reduce tax exemptions and evasion, revise the tax code to simplify the tax system and increase its efficiency, and enhance revenue administration through digitalization. - Urgent need to establish a transparent oil resource management framework before the start of oil exports. - Efforts needed to enhance efficiency and quality of spending and improve performance of state-owned enterprises to create fiscal space. - Debt considerations: - Directors agreed authorities should adhere to envisaged fiscal consolidation to meet WAEMU fiscal deficit norm by 2025 and pursue a prudent debt policy prioritizing concessional loans. - Recommended strengthening capacity in compilation of debt and fiscal statistics. ### Financial sector, inclusion, and governance - Financial sector stability: - Stepping up efforts to preserve stability and soundness of the financial sector is essential for private sector development and inclusive growth. - Restructuring the microfinance sector is critical to promoting financial inclusion and increasing resilience of the most vulnerable. - Directors noted rising vulnerabilities and called for close monitoring of deterioration in asset quality in banking and microfinance sectors. - Governance and anti-corruption: - Progress on governance agenda is key to address sources of fragility and improve business environment. - Efforts to address remaining inadequacies of the AML/CFT framework and steps to publish asset declarations of high-ranking officials are welcome. - Directors encouraged continued efforts to strengthen governance and anti-corruption frameworks and leverage digitalization. - Social priorities: - Directors stressed importance of strengthening social safety nets to protect the most vulnerable and welcomed authorities’ commitment to foster girls’ education and gender equality. ### Key statistics and indicators (selected figures from Niger: Selected Economic and Financial Indicators, 2019–23) - GDP at constant prices (annual percentage change): 2019: 6.1; 2020: 3.5; 2021: 1.4; 2022: 7.1; 2023: 7.0. - Export volume (annual percentage change): 2019: -3.3; 2020: -0.6; 2021: -8.3; 2022: -6.7; 2023: 22.8. - Import volume (annual percentage change): 2019: 9.5; 2020: 2.7; 2021: 1.1; 2022: -5.2; 2023: 10.6. - CPI, annual average (annual percentage change): 2019: -2.5; 2020: 2.9; 2021: 3.8; 2022: 4.5; 2023: 3.0. - Total revenue (annual percentage change): 2019: -1.6; 2020: 0.5; 2021: 5.2; 2022: 19.9; 2023: 19.6. - Total expenditure and net lending (annual percentage change): 2019: 8.4; 2020: 8.4; 2021: 13.4; 2022: 13.9; 2023: 1.7. - Domestic credit (annual percentage change): 2019: -12.2; 2020: 25.0; 2021: 9.2; 2022: 17.5; 2023: 15.0. - Credit to the economy (annual percentage change): 2019: 13.0; 2020: 8.6; 2021: 15.4; 2022: 7.1; 2023: 9.8. - Broad money (annual percentage change): 2019: 15.0; 2020: 17.0; 2021: 9.7; 2022: 10.3; 2023: 12.1. - Government finances (percent of GDP): - Total revenue: 2019: 11.2; 2020: 10.8; 2021: 10.8; 2022: 11.7; 2023: 12.8. - Total expenditure and net lending: 2019: 21.6; 2020: 22.4; 2021: 24.3; 2022: 24.8; 2023: 23.1. - Overall balance (incl. grants): 2019: -3.6; 2020: -4.8; 2021: -5.9; 2022: -6.8; 2023: -5.3. - External current account balance (excluding official grants, percent of GDP): 2019: -15.1; 2020: -15.7; 2021: -16.4; 2022: -16.2; 2023: -14.9. - Total public and publicly-guaranteed debt (percent of GDP): 2019: 39.8; 2020: 45.0; 2021: 51.3; 2022: 56.6; 2023: 57.6. - PV of external debt (percent of GDP): 2019: 24.5; 2020: 22.7; 2021: 20.7; 2022: 22.7; 2023: 22.2. - GDP at current market prices (billions of CFA francs): 2019: 7,568; 2020: 7,911; 2021: 8,271; 2022: 9,222; 2023: 10,065. *Source: IMF staff report for the 2022 Article IV consultation and Second Review under the ECF (December 6, 2022).* ### 4. Macroeconomic performance in 2022 is expected to be broadly favorable with the ### 1nerea2023001 - 4. Macroeconomic performance in 2022 is expected to be broadly favorable with the ### Macroeconomic performance, 2022 - Economic growth is projected to rebound to 7.1 percent in 2022, supported by: - recovery in the agricultural sector (favorable rainy season) - acceleration in implementation of large-scale investment projects - Annual average inflation is expected to be 4.5 percent, driven by easing food-price pressures since the beginning of the second semester. - Current account deficit projected to widen to 14.4 percent of GDP due to: - higher imports of food (rising prices) - higher imports of capital and intermediate goods for large investment projects - partly offset by a larger surplus on oil exports - Monthly conjunctural activity indicators show positive trends, notably in commerce. ### Fiscal stance and public finances - Fiscal stance is accommodative in 2022 to mitigate the food crisis and rising security challenges. - Overall deficit reached 354 billion CFAF (3.8 percent of GDP) cumulative up to September, compared with the program projection of 491.9 CFAF billion (5.3 percent of GDP). - Under-execution of expenditure by 19 percent (lower domestically financed capital spending and postponed net lending to the pipeline project) contributed to a narrower deficit than projected. - Revenue collection up to September was 6.9 percent below projections due to poor performance of taxes on goods and services and international trade. - Fiscal deficit is expected to widen to 6.8 percent of GDP as expenditure execution ramps up in the final quarter of the year. - Text Table (cumulative up to September 2022) key figures (Billion CFAF / Percent of GDP): - (1) Revenues: 786.97 / 32.4 - (2) Budget grants (Incl. CCRT): 35.7 / 0.0 - (3) Current expenditure: 713.07 / 10.8 - (4) Domestically-financed investment: 417.12 / 37.6 - (5) Net lending (pipeline): 45.0 / 0.0 - (6) = (1)+(2)-(3)-(4)-(5) Domestic balance: -352.5 / -216.0 / -3.8 / -2.3 - (7) Foreign loan-financed investment: 139.4 / 138.0 / 1.5 / 1.5 - (8) = (6)-(7) Fiscal balance (WAEMU definition): -491.9 / -354.0 / -5.3 / -3.8 - Memo: Foreign grant-financed investment: 206.4 / 213.4 / 2.2 / 2.3 ### Prices, energy policy, and social impact - Diesel price increase: - Diesel prices were increased by 24 percent in August to align with international prices, prevent shortages, counter smuggling, and support SONIDEP’s financial sustainability. - Component of diesel price structure devoted to the energy fund increased from 2.5 to 62.65 CFAF/liter. - NIGELEC will draw funds from the energy fund as compensation for increased power generating costs not passed to electricity consumers, effectively transferring from diesel consumers to electricity consumers. - Authorities suspended molecular marking of petroleum products due to reduced incentives for smuggling; expected revenues from molecular marking are likely insufficient to fully cover implementation costs. - Diesel exports suspended to ensure domestic availability. - The diesel price increase led to some temporary social discontent; authorities initiated communication/outreach and mitigating measures (including measures to reduce pass-through to electricity costs). ### Health and COVID-19 - After an increase in August, COVID-19 cases fell significantly; as of early November, new cases per million stood at less than 0.5. - Vaccination coverage around 22 percent against a target of 42 percent by end-2022, constrained by vaccine hesitancy and security incidents impacting vaccination activities. ### Monetary policy and financial sector vulnerabilities - Central bank raised key interest rates by 25 basis points in June and an additional 25 basis points in September, returning rates to pre-Covid-19 level to anchor inflation expectations and protect foreign exchange reserves. - Financial sector indicators: - Credit to the economy grew by 11.1 percent (y-o-y) at end-September 2022. - Capital adequacy ratio was 14.3 percent at end-June 2022 (above WAEMU average of 12.5 percent). - Credit concentration ratio estimated at 158.3 percent, concentrated in services, transport, and construction. - Non-Performing Loans (NPLs): - Banking sector NPLs estimated at 18.1 percent (at end September 2022). - Microfinance sector NPLs estimated at 41.9 percent (at end March 2022). - Central Bank conducting a survey to determine causes of portfolio deterioration. - Microfinance sector hit by prior poor harvest, insecurity, weak governance, and limited resources; low interconnection to banking system and low outstanding loans limits systemic risk. ### Program implementation and reform agenda - Program implementation broadly on track vs end-June and end-September 2022 targets: - All quantitative performance criteria (QPCs) met at end-June and end-September; domestic budget financing remained well below ceiling. - Present value of new public and publicly guaranteed (PPG) external debt exceeded its ceiling in November due to higher-than-expected ratified project loan contracts. - No new external payment arrears registered; no external arrears to bilateral or private creditors. - All five indicative targets (ITs) at end-June and five out of six ITs at end-September were observed. - Cash revenue collection slightly below program floor at end-September due to security incidents, border issues with Nigeria, and reduction of re-export tax rate. - Basic budget balances (including and excluding grants) were above program floors; exceptional expenditures ratio to authorized spending was zero; social protection spending above program floor. - Reform implementation: - All continuous structural benchmarks (SBs) at end-October 2022 met except publication of summary of feasibility studies for investment projects of more than CFAF 5 billion (to be ensured after adoption of 2023 budget law). - Other SBs met: - Roadmap for review and simplification of the tax system adopted; objective to have revised tax code (shifting burden from corporate and labor income to consumption) adopted by Council of Ministers by end-December 2023. - Status report on tax exemption agreements since 2019 shared with IMF, reflecting foregone revenues of 1.6 percent of GDP as of 2021. - Annual tax expenditure report published online. - Auditor General’s audit report on exemptions in the extractive sector published. - SB on adoption by end-September 2022 of an oil revenue management strategy was not met; authorities requested IMF technical assistance and plan to adopt by end-September 2023 before start of crude oil exports. ### Outlook and risks - Growth outlook: - Growth projected at 7.0 percent in 2023, driven by higher crude oil production (start of exports from Agadem oilfield through pipeline to Beninese coast) and continued agricultural recovery. - Growth expected to reach double-digits in 2024 as oil production picks up and structural reforms take effect. - 2023 growth drivers: private investment (large-scale projects including oil pipeline) and revival of private consumption. - 2024 growth to be boosted by net exports due to rising oil exports. - Inflation expected to converge into the regional target band by 2023 with recovery in agricultural production and supply-chain normalization. - External position: - Current account deficit projected to shrink to 13.4 percent of GDP in 2023 and narrow further over the medium term with onset of oil exports. - EBA-lite methodology suggests a current account gap of 8.3 percent of GDP. - Large current account deficit largely financed by grants, concessional lending, and foreign direct investment. - Debt and debt distress: - Debt vulnerabilities have increased but risk of external and overall debt distress remains rated “moderate” (DSA). - PPG external debt was 65.2 percent of total debt stock as of end-2021; multilateral creditors are the largest share. - Under baseline, PPG external debt projected to increase to 37.2 percent of GDP in 2022, then decline as growth and fiscal consolidation proceed. - Recent IDA policy change (providing support to countries at moderate risk only in the form of loans) has moderate impact on debt level and does not change risk assessment, but increases senior debt long run. - Significant downside risks identified: - Delays in oil pipeline completion (baseline assumes completion by last quarter of 2023) would hurt growth and fiscal/external positions. - Worsening security in the Sahel, higher political instability in neighbors, commodity price volatility (especially food imports), unfavorable climatic conditions affecting agriculture. - Accelerated tightening of global financial conditions with spillovers in WAEMU and higher government financing costs. - Escalation of war in Ukraine could lower aid flows, increase commodity price volatility, tighten financial conditions. - COVID-19 reemergence/new variant risk given low vaccination coverage. - Illustrative adverse scenario (Annex VI): - Climate shock in 2023 hurting agricultural production and exports, plus one-year delay in start of oil exports, lower oil prices, and higher regional interest rates. - GDP growth would drop in 2023 to around 2.5 percent, then catch up subsequently. - Current account deficit would widen to 15.5 percent of GDP and remain large until 2024. - Fiscal consolidation pace would slow; achievement of WAEMU fiscal deficit norm would be postponed beyond 2025 absent additional measures. - Debt indicators worsen but country’s risk rating likely remain “moderate”. - Given limited shock-absorption space, policy response would need reprioritization of spending, targeted support to vulnerable populations, and measures to mitigate deviations from program fiscal targets. ### Authorities’ views and policy commitments - Authorities broadly concurred with staff’s medium-term outlook and noted potential upside risks from new large-scale projects (notably in uranium). - Authorities agreed with inflation outlook and convergence to regional target band by next year. - Authorities acknowledged risks from policy delays, climate shocks, security deterioration, commodity price volatility, and global financial tightening. - Commitments: - Step up domestic revenue mobilization. - Adopt a fiscal contingent plan and reprioritize spending. - Accelerate implementation of structural reform agenda if risks materialize. ### Policies to build resilience — fiscal anchoring and spending reorientation - A relaxation of 0.2 percent of GDP in the fiscal deficit relative to the 1st ECF review is envisaged in 2022 to mitigate the food crisis and security challenges. - Supplementary budget for 2022 adopted to increase spending envelope and reprioritize expenditures. - Additional CFAF 35 billion (about 0.4 percent of GDP) for security spending (military equipment). - Net lending to the oil pipeline project higher than initially projected for this year and next due to CFAF depreciation vs US dollar and erroneous 2020 recording. - CFAF 36.5 billion raised in the regional market in 2020 for the oil pipeline were not spent and remain as deposits at the Central Bank; authorities plan to spend after negotiations with Chinese partners and the CFAF 36.5 billion will enter the overall deficit as net lending this year and next. - Favorable agricultural production reduced need for some emergency spending (livestock feed, fertilizers). - Reorientation of spending towards settling internally displaced people, transfers and school feeding programs to university students, stabilization and reconstruction in affected regions. - Higher budget support grants and additional concessional loans (World Bank) to finance the additional deficit; World Bank and Global Partnership for Education to provide an additional 0.5 percent of GDP in budget support grants relative to first review projections. - Fiscal trajectory: - 2022 deficit projected at 6.8 percent of GDP (vs 6.6 percent in first review). - 2023 deficit target relaxed by 0.6 percent of GDP relative to first ECF review to 5.3 percent of GDP. - 2024 projected deficit narrowing to 4.1 percent of GDP. - Convergence to WAEMU 3 percent of GDP deficit norm expected by 2025, one year later than initially planned. *Source: 1nerea2023001 (IMF staff and Nigerien authorities).* ### 20. There is a need to strengthen capacity in the compilation and recording of ### 1nerea2023001 - 20. There is a need to strengthen capacity in the compilation and recording of ### Strengthening government finance statistics and PFM capacity - There is a need to strengthen capacity in the compilation and recording of government finance statistics; erroneous recording of net lending in 2020 indicates deficiencies. - The IMF is providing technical assistance concerning the implementation of WAEMU directives for the harmonized table of government financial operations (TOFE) and improvements in the quality and the coverage of data in line with the Government Finance Statistics Manual 2014 (GFSM 2014). - The Treasury Single Account (TSA) is being expanded to local governments: starting in January 2023, Treasury accountants will become public accountants of subnational decentralized authorities and start integrating their accounts into the TSA (MEFP ¶29). - A survey in July 2022 identified 34 government accounts opened in commercial banks, a reduction from 187 accounts in the 2018 census; 15 of the 34 accounts had a zero outstanding balance and staff recommended closing them immediately. The remaining accounts are linked to donor-funded health sector projects. - The double accounting system AE/CP began with five pilot ministries in 2022 and is expected to be expanded to six new ministries in 2023 (MEFP ¶30). - The government is committed to deploying new digital solutions for revenue administration and expenditure (MEFP ¶26) to improve speed, transparency, and reduce bottlenecks. ### Use of SDR allocation and financing terms - The remaining half of the SDR allocation will be used for development purposes and to finance priority spending in 2022, in line with staff advice. - The total allocation amounted to 1.2 percent of GDP. - The resources of the allocation have been channeled through the budget after being on-lent by the regional central bank under highly concessional terms: 20-year loan carrying a fixed interest of 0.05 percent per year. - The allocation will contribute to finance efforts to: improve food security, provide animal feeding support, reduce the country’s infrastructure gap, and address urgent security spending needs. ### External and domestic debt management - Authorities commit to a prudent external debt policy amid heightened vulnerabilities (MEFP ¶19). - They intend to prioritize external financing in the form of concessional loans and grants to minimize the debt burden. - Authorities agreed to step up efforts to increase the average tenor of domestic debt, currently at 5.2 years, to reduce exposure to refinancing risk. ### State-owned enterprises (SOEs) - Strong efforts are underway to improve performance and monitoring of SOEs to contain rising vulnerabilities; SOEs play roles in oil and gas and public services. - A director was appointed to oversee the general directorate of public enterprises in the Ministry of Finance (MoF). - The directorate is setting up an information system with World Bank support to consolidate SOEs’ financial statements for publication in an annual report—starting in May 2023. - The MoF now requires prior approval of the budget of a subset of key SOEs before execution. - A performance contract was signed with the electricity company (NIGELEC) to improve service coverage, cost efficiency, and preserve financial sustainability given the tariff freeze; due to rising production costs, NIGELEC will receive government transfers to finance its operations. ### Oil revenue management strategy - It is important to develop and implement an oil revenue management strategy before the start of crude oil exports (SB#3, MEFP ¶28). - IMF technical assistance has identified the need to establish a non-oil primary balance target to insulate fiscal policy from international price volatility and avoid procyclicality. - Authorities requested a second round of IMF technical assistance to specify practical components: governance framework, the fiscal rule and its calibration, and the creation of a stabilization fund. ### Fiscal policy stance and contingency measures - Authorities plan to reduce and reprioritize spending should downside risks materialize (MEFP ¶21), committing to adjust spending other than salaries and debt service to compensate any shortfalls in revenues, including grants, to meet the new fiscal deficit target. - The treasury committee will regularly monitor revenue collection and authorize spending accordingly. - Staff reported a fiscal consolidation path with a memo line: Compound average GDP growth rate 6.7% 9.1% 15.3% 10.1% 9.1% (presented in the baseline/deterioration/aggregate table). ### Domestic revenue mobilization and tax policy reform - Authorities are committed to revising and simplifying the general tax code by end-2023 (new proposed SB#9, MEFP ¶25). - An IMF TA diagnosis showed corporate and labor income are excessively taxed while consumption remains under-taxed; reform aims to shift tax burden toward consumption, increase efficiency, stimulate investments, develop the private sector, simplify the tax code, and reduce tax exemptions while broadening the tax base. - Integration and digitalization initiatives for revenue administration include operationalization of the one-stop shop interconnecting customs documentation and deployment of the integrated tax and taxpayer information system (SISIC) in Niamey. - Technical difficulties in integrating tax and customs IT systems require a revision of the timetable and formulation for three new proposed SBs (#10, #11, and #12). A recent IMF TA report revealed the IT Department has insufficient staff and the IT platform has a low level of automation; renegotiation of the servicing contract with the software provider might be required to fully automate the system. - Authorities plan to strengthen human resources in tax administration by recruiting tax officers for Regional Tax Divisions (DRI) and tax centers (MEFP ¶27). ### VAT, exemptions, and revenue measures - Certified VAT invoicing compliance is increasing: around 60 percent of active taxpayers are deemed compliant; among large and medium-sized firms compliance rates are 91 percent and 87 percent, respectively. - To address cost complaints about VAT machines, authorities will launch a new online platform (e-SECEF) to generate certified invoices (MEFP ¶24). Staff reiterated the need to make VAT credits operational to ensure VAT neutrality. - Revision of exemption terms in the investment code: the 2022 budget mandated beneficiaries pay full customs duties and taxes upfront and be reimbursed after investment; demand for exemptions has significantly decreased—only six companies requested an exemption, only one company paid duties and taxes, carried out its investment, and requested a refund. Authorities will put in place a robust refund system. - Controls strengthened to protect the tax base: new regional centers for domestic tax controls, increased inter-agency collaboration with HALCIA and the police to fight corruption and collect tax payments due directly from bank accounts. - The 2023 draft budget law includes measures expected to yield 48 billion CFAF in revenues (about 0.5 percent of GDP). Measures with highest revenue yields include: - increase of the excise duty on tobacco products by 10 percent ad valorem and introduction of a specific tax of CFAF 240 per pack of cigarettes; - introduction of a specific tax of 5 percent on exports of gold and precious metals; - introduction of a specific tax on exports of petroleum products of 15 percent; - reclassification of telecom sector activities as services so that they can be subject to VAT; - taxation of Nigerien-source income received by creditors not domiciled in Niger; - abolition of the temporary tax exemption for new construction projects. - The IMF will continue capacity development support for revenue administrations, including digitalization and integration of DGI and DGD, and support to improve tax policy through the tax code revision. ### Quality and inclusiveness of public spending; social sector priorities - Niger has low human capital outcomes: adult literacy rate is 35 percent; net enrollment rates at primary and secondary levels are much lower than peers with similar education spending per student; life expectancy is lower than peers with similar health expenditure per capita. - Staff analysis finds social assistance spending is inadequate and concentrated on food and in-kind distribution; coverage, adequacy, and targeting of programs remain weak and tend to be regressive (see Chapter 1 of accompanying Selected Issues Papers-SIP). - Policy recommendations include moving from untargeted subsidies to conditional cash transfer programs; model simulations suggest cash transfers before and after a climate shock present more beneficial effects on welfare and food security compared to alternative interventions (Chapter 5 of the SIP). - Social assistance should focus on cash transfers oriented to lasting investments and income-generating activities. - A unified social registry (USR), currently underway, would ensure better targeting and monitoring; a manual of the USR was validated in September 2022 with the objective of covering 800,000 households in the database. - Authorities started decentralization of payment orders with the Ministries of Education and Health at the central level; further actions needed at regional level. - Improving public investment management, transparency of investment planning and project selection, and public procurement are critical to spending efficiency and quality. - Gender policies: closing gender gaps in educational enrollment would boost GDP by about 11 percent (Chapter 2 of the SIP). Authorities adopted a National Gender Policy aiming to close gender gaps by 2027, including construction of boarding schools for girls with a goal to construct at least 100 schools by 2025. Staff encourages better gender data, expansion of targeted cash transfer programs, improved women’s access to financial resources and employment, and consideration of gender-responsive budgeting. ### Private sector development and resilience to shocks - Export diversification remains low; exports concentrated in uranium, gold, and oil. Degree of export diversification remains lower compared to WAEMU and SSA averages (Text Figure 4). - Staff analysis suggests investing in human capital and infrastructure, promoting digitalization, removing trade barriers, and improving governance yield largest gains for export diversification (Chapter 6 of the SIP). - Infrastructure initiatives noted: envisaged construction and rehabilitation of road network with Benin under the Millennium Challenge Corporation and rehabilitation of the trans-Saharan corridor Lagos-Alger via Zinder and Agadez. - Authorities created a new inclusive national framework for public-private dialogue; central bodies set up and regional branches being installed. - Government plans before year-end to adopt a charter for SMEs to improve business environment and competitiveness, finalize digitalization of business creation procedures, create a one-stop shop for foreign trade, and digitize the land registry starting with Niamey for publication on an official website. - Agricultural resilience: rain-fed agriculture exposes production to climate shocks; staff estimates a one standard deviation decline in rainfall is associated with a decrease in income per capita of about 11 percent (Chapter 4 of the SIP). - Lack of large-scale irrigation infrastructure constrains coping with droughts; tapping underground water potential and improving access to renewable energy equipment could strengthen resilience. Limited electricity access hinders irrigation pump use; Niger’s renewable energy potential (solar, hydropower, and wind) could be tapped. Facilitating access to weather information could increase disaster preparedness. *Source: IMF country report text.* ### 42. The authorities welcomed staff's analysis on economic diversification, climate change, ### 1nerea2023001 - 42. The authorities welcomed staff's analysis on economic diversification, climate change, ### Economic diversification, climate change, and food insecurity - Authorities plan to incorporate staff's recommendations on economic diversification, climate change, and food insecurity into their structural reform agenda. - Under the new Economic and Social Development Plan (PDES 2022-2026, see Annex V), authorities aim to build Agro-poles throughout the country to transform locally produced agricultural products. - Objectives of Agro-poles: - Help farmers diversify their production. - Increase individual and macroeconomic resilience to climate shocks. - Authorities emphasized adoption of a strategy and a national plan for adaptation to climate change in the agricultural sector, focusing on harnessing the country’s large untapped underground water for irrigation. - Niger 2.0 Smart Villages Project highlighted to promote digitalization in rural and remote parts of the country. ### Financial sector policies and financial inclusion - Fundamental barriers to financial inclusion: low financial literacy, informality, and inadequate infrastructure (Chapter 3 of the SIP). - Niger’s usage of financial services: - "Only 14 percent of the adult population uses financial services― with a significant gender gap― compared to 67 percent for the WAEMU average in 2021." - Main staff recommendations to foster financial inclusion: - Expedite implementation of the national financial education strategy currently being prepared. - Promote digitalization of financial services to improve access, especially in remote areas. - Leverage the forthcoming regional interoperability project led by BCEAO to enable payments between the government and individuals from any type of account and electronic payment platforms offered by banks, microfinance institutions and non-bank issuers of electronic money (in particular mobile money). - Close the gender gap in access and use of financial services to empower women economically. ### Banking and microfinance sector soundness actions - Authorities should accelerate measures to enhance banking and microfinance sector soundness given recent increases in vulnerabilities. - Ongoing and planned actions: - WAMU Banking Commission monitoring of banks’ portfolios and mandating remedial actions. - Central Bank analysis to better understand factors causing the recent increase in NPLs. - Framework to improve dialogue between banks and the treasury to enhance/tighten lending standards for borrowers involved in public works contracts. - Refinancing agreement discussions between banks and ASUSU (the largest microfinance institution) to finance ASUSU activities, including loan restructuring and recapitalization. - Establishment of a training program for managers to reinforce governance. - Consolidation of the sector by merging institutions facing financial difficulties. - Acceleration of donor funding for the Financial Development and Inclusion Fund (FDIF) to boost microfinance operations. ### Authorities’ views on financial inclusion and sector reforms - Authorities concurred financial inclusion is crucial to resilience and living conditions (MEFP ¶34). - They view national financial inclusion strategy and regional initiatives (digitalization and interoperability) as opportunities to deepen financial inclusion. - Optimism that the microfinance sector will recover when the restructuring plan is fully implemented by 2023 (MEFP #35). - Actions and commitments by authorities: - Encourage donors to fulfill financial commitments for FDIF operations. - Set up a consultation framework to coordinate all existing financial inclusion funds. - National Support Fund for Small and Medium Enterprises (FONAP) began operations, providing a credit facility to 100 SMEs amounting to CFAF 10.9 billion. - Intend to launch a national financial literacy program targeting vulnerable people, namely youth and women. - Plan to focus on development of mobile banking and Islamic finance. - Central Bank conducting a diagnostic of financial inclusion barriers; recommendations to be included in the next financial inclusion strategy. ### Governance reform and anti-corruption actions - Steps taken since last consultation: - Several audits completed by the Auditor General (Cour des Comptes), including audits related to 2020 Covid-19 spending and tax exemptions in the extractive industries sector; some published recently. - Committee set up at the Ministry of Finance to follow up on Auditor General recommendations under its purview. - Public Procurement Authority (ARMP) drew up an action plan to implement recommendations relating to deficiencies in the public procurement system. - Cour des Comptes intends to take stock of implementation status of recommendations in its forthcoming public annual report. - Authorities publishing beneficial ownership information of companies awarded non-competitive contracts and plan to adopt an implementing decree of the new public procurement code mandating provision of this information. - Government adopted a new AML/CFT strategy and action plan in response to 2021 GIABA report deficiencies; plan includes strengthening risk-based monitoring and supervision, transparency of legal persons and arrangements, targeted financial sanctions application, and improved investigation and prosecution. - 2020 law adopted requiring additional senior public officials to report asset declarations; decree planned to further operationalize the asset declaration framework. ### Governance challenges and recommended reinforcements - Persistent challenges: - Corruption remains a major challenge and rule of law weaknesses persist. - Third-party indicators: World Governance Indicators control of corruption score moved from -0.53 in 2019 to -0.55 in 2021; Transparency International’s corruption perception index score marginally decreased from 32 to 31 during the same period. (Noted sizable uncertainty regarding measurement of these indicators in Niger.) - Contract and property rights enforcement hampered by concerns of bribery, non-enforcement of some decisions, and lack of resources and technology. - Recommendations to reinforce governance agenda: - Ministries of Mines and Hydrocarbons should implement Auditor General recommendations directed to them. - Strengthen independence, human and financial resources of HALCIA (High Authority for the Fight Against Corruption and Similar Offenses). - Publish final corruption-related statistics, prosecutions, and rulings of key institutions to enhance transparency and accountability. - Enact a law determining modalities of asset declarations (as contemplated by the Constitution) including online publication of declarations, assets beneficially owned, and dissuasive sanctions for non-compliance. - Increase resources, integrity, and independence of the judiciary and ensure efficient enforcement of contracts, specifically for individuals in remote areas. ### Authorities’ stated anti-corruption strategy - Two-pronged strategy: - Create a deterrent environment by effectively implementing administrative and judicial sanctions for corruption and ill-governance, applied up to the highest public authorities. - Implement public financial management procedures and systems to reduce risks of corruption and improve transparency through dematerialization and digitalization. - Specific digitalization steps to accelerate: - Operationalization of SISIC at the DGI and ASYCUDA at the DGD. - Digitization of government payments. ### Program issues, external and domestic financing, and capacity - Waiver requested for non-observance of continuous performance criterion on contracting of external public and publicly guaranteed debt due to a breach in November caused by higher-than-expected ratified project loan contracts this year, mostly from reclassification of loan contracts previously recorded in 2021. - Expected additional concessional loans from the World Bank in 2022: "123.2 billion CFAF in PV terms, subject to the changes in the IDA financing terms." - Total amount of new external debt in 2022 expected to be "571.1 billion CFAF in the PV terms." - Size of the breach: "169.1 billion CFAF" explained by reclassification of three external loans and additional concessional World Bank loans. - Staff assessment: - Program objectives remain achievable under sustained prudent public debt management. - Staff recommends a waiver of non-observance given deviation is temporary; deviation caused by three temporary factors. - Non-observance does not change the risk of external and overall debt distress, which remains moderate (DSA), nor would it jeopardize program objectives. - Authorities request modification of the continuous performance criterion on contracting external public and publicly guaranteed debt to reflect updated framework and larger-than-anticipated external borrowing mainly from concessional resources. - Requests also include modification of performance criterion for the ceiling on net domestic financing at end-December 2022 and June 2023, modification of indicative targets from end-December 2022 until June 2023, and establishment of new performance criteria and indicative targets for end-September and end-December 2023. ### External financing needs and IMF engagement - External financing needs estimated at "CFAF 993 billion over 2022-24 (Text Table 4)." - Staff notes financing needs expected to diminish as financing pressure eases, reform implementation advances, and oil exports strengthen the current account balance. - IMF financial support expected to catalyze budget support from multilateral and bilateral donors. - Program financing status: - Program is fully financed, with firm commitments of financing in place for the next 12 months and good prospects of adequate financing for the remaining program period. - Authorities prioritize external financing in the form of concessional loans and grants. ### Capacity to repay the Fund and risks - Capacity to repay remains adequate due to favorable medium-term outlook (Table 14). - Repayment obligations to the Fund peak at "1.3 percent of exports and 2.2 percent of tax revenues in 2029." - Potential risks to capacity to repay: - Possible fiscal slippages. - Further delays in operationalization of the pipeline and oil exports. - Faster accumulation of senior debt due to recent IDA policy changes. - Mitigating factors: swift implementation of reform agenda and contingency measures in case of adverse shocks. ### Safeguards, capacity development, and outreach - Safeguards assessment: - BCEAO implemented all recommendations from the 2018 safeguards assessment. - Assessment found BCEAO had broadly appropriate governance arrangements and a robust control environment. - An update assessment of the BCEAO is planned for 2023. - New capacity development (CD) strategy agreed between authorities and staff, focusing on: - i) tax policy and revenue administration, - ii) natural resource management, - iii) public financial management, - iv) macroeconomic and financial statistics. ### Staff appraisal - Medium-term outlook: - Niger’s medium-term economic outlook is favorable despite significant development challenges in a context of fragility. - Growth expected to rebound this year as agricultural production recovers and large-scale investment projects accelerate. - Growth should gain further momentum in the medium term, "reaching double digits in 2024," with the start of oil exports and implementation of structural reforms. - Risks and policy recommendations: - Balance of risks tilted to the downside—domestic and external—calling for greater prudence in macroeconomic policy choices. - Downside risks include volatile commodity prices, spillovers from tighter global financial conditions, spillovers of the war in Ukraine reducing access to concessional financing, climate shocks, and delays in completion of the pipeline. - Recommendation: authorities should resort to a cautious fiscal policy to rebuild buffers and curtail increased vulnerabilities to debt sustainability. *Source: 1nerea2023001 - 42. The authorities welcomed staff's analysis on economic diversification, climate change,* ### 58. Niger will need continued donor support to decisively address climate change and ### 1nerea2023001 - 58. Niger will need continued donor support to decisively address climate change and ### Security, climate vulnerability, and macroeconomic stability - Restoration of security and peace throughout the country is considered by the authorities as a prerequisite for development. - Pressure from security spending threatens to crowd out other priority expenditures needed to strengthen the resilience of the population and support longer-term growth efforts. - Niger remains vulnerable to climate shocks and faces increasing aridity, marked by high volatility of weather conditions during the growing season. - Climate change is a factor exacerbating the risk of conflict and is a source of fragility. - Continued donor support is needed to decisively address climate change and security challenges, thus helping preserve macroeconomic stability. ### Program performance and reform implementation - All quantitative performance criteria (QPCs) were met. - Five out of six indicative targets (ITs) at end-June and end-September were observed. - The present value of new PPG external debt exceeded its ceiling in November. - Niger registered no new external payment arrears. - Almost all structural benchmarks (SBs) and continuous SBs were met. - Authorities are committed to accelerating completion of delayed reforms. ### Fiscal stance and medium-term targets - A temporary and moderate widening of the fiscal deficit in 2022 is appropriate to address urgent spending needs related to the food crisis and the deteriorating security situation in the Sahel region. - The 2022 fiscal deficit is projected to widen by 0.2 percentage point of GDP to 6.8 percent of GDP. - A relaxation of the deficit by 0.6 percent of GDP compared to the first review of the program is expected in 2023 to accommodate pressing spending priorities (in education, infrastructure, and social safety nets as well as security spending) and reflect a more gradual fiscal adjustment path. - Staff supports this relaxation of the deficit target given Niger’s development needs and its moderate implications for fiscal sustainability risks. - Authorities remain committed to achieve the 3 percent of GDP deficit regional norm by 2025, in line with the recent decision by the WAEMU Council of Ministers to delay the convergence period by one year. - Staff deems the envisaged medium-term fiscal adjustment trajectory challenging but feasible, given the temporary nature of emergency spending in 2022 and prospects for increased oil revenue as well as domestic revenue mobilization efforts. ### Debt policy and sustainability - Staying the course with the agreed fiscal consolidation path and avoiding entrenched large deficits would preserve fiscal and public debt sustainability. - The country's risk of external and overall debt distress remains moderate, but vulnerabilities have increased with debt indicators moving closer to their reference thresholds. - Authorities are committed to a prudent debt policy by prioritizing concessional external borrowing and borrowing for growth-enhancing investments while extending the average maturity of domestic debt to reduce refinancing risk. ### Revenue mobilization and tax reform - Efforts to increase revenue mobilization should be stepped up. - Reform of the tax code to simplify the tax system and broaden the tax base by shifting the tax burden from production factors to consumption is a crucial step. - The digitization and interconnection of tax collection administrations should be finalized within the program period to ensure more efficient revenue collection and a level playing field by reducing opportunities for fraud. - There is an urgent need to continue to rationalize and reduce tax exemptions by restricting the conditions under which they are granted and reinforcing their monitoring. ### Oil revenue management - Establishment of a transparent oil resource management framework before the start of exports is a priority. - IMF stands ready to provide additional technical assistance to develop this framework. - Authorities commit that all government oil revenues will be channeled to the budget and remain under the control of the Ministry of Finance. - Authorities intend to establish a fiscal rule for the management of oil revenues and a stabilization fund to insulate fiscal policy from the volatility of international oil prices. - Staff encourages authorities to work with FAD experts to deliver the oil revenue management strategy and implement it before the start of crude oil exports, as further delays could undercut Niger’s capacity to efficiently manage the expected revenues. ### Expenditure quality, human capital, and infrastructure - Improving the quality and efficiency of spending is imperative and complements revenue mobilization efforts. - Authorities are committed to improving social spending to address the country's large human capital gap, including by focusing on girls' education. - Increased and better targeted social protection spending is essential to improve the resilience of vulnerable populations to recurrent shocks. - Urgent need to reduce the infrastructure gap to improve mobility of people and goods and to open up secluded production regions. - Strengthening public financial management systems is a prerequisite for these objectives. ### Financial sector stability and inclusion - Preserving the stability and soundness of the banking and microfinance sectors is essential for private sector development and inclusive growth. - Authorities and regional institutions should continue to coordinate efforts to tackle the sharp deterioration in the portfolio of financial institutions observed since 2021. - Promoting financial inclusion remains a priority to close the gap between Niger and other WAEMU countries and improve economic resilience; this requires efforts to tackle low financial literacy, promote digitalization, and address informality. ### Private sector development, diversification, and climate resilience - Authorities should accelerate implementation of ongoing initiatives to support private sector development, economic diversification, and resilience to climate change. - Diversifying away from the agricultural and extractive sectors to create more local value added and jobs would help reduce GDP volatility induced by vulnerability to climate shocks and commodity price fluctuations. - Reforms to enhance human capital and the quality of infrastructure, to promote digitalization, to remove barriers to trade and improve governance are likely to yield the largest gains in terms of diversification. - Resilience of the agricultural sector to climate shocks could be enhanced by tapping into the country’s large underground water potential and improving access to renewable energy equipment. ### Governance, anti-corruption, and AML/CFT - Staff welcomes authorities’ commitment to further strengthen governance and anti-corruption frameworks. - Publication of information on the beneficial owners of companies awarded non-competitive public contracts and adoption of a strategy and action plan to strengthen the AML/CFT framework are welcome developments. - Ongoing efforts to reduce the vulnerability of the revenue and expenditure chain to corruption—especially through the digitization of procedures—are promising and should be accelerated. - Staff encourages expedited implementation of the action plan of the AML/CFT strategy to address deficiencies, the recommendations of the audit reports of the Auditor General, and the enactment of a law to determine the modalities of the asset declarations, as contemplated by the Constitution. ### IMF review decision and financing - Based on program performance and commitments under the program, staff supports: - Completion of the second review under the ECF arrangement. - Request for waiver of non-observance, modification of performance criteria. - Disbursement of the third tranche of SDR 39.48 million. - The attached Letter of Intent and the Memorandum of Economic and Financial Policies set out appreciate policies to achieve program objectives. *Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1nerea2023001.pdf* ### 69. It is expected that the next Article IV Consultation will be held on the 24-month cycle, ### 1nerea2023001 - 69. It is expected that the next Article IV Consultation will be held on the 24-month cycle, ### Recent economic developments (Q1–Q4 2022 highlights) - Activity in commerce recovered in the second quarter of 2022. - Inflationary pressures mainly stemming from higher food prices are moderating as of October 2022. - The first half of 2022 shows a positive trend, but private sector credit growth still indicates limited financial deepening. - Revenue has been slightly improving in 2022 driven by income tax and VAT, offsetting underperformance in international trade and other taxes. ### GDP composition and output volatility (as of 2021) - The share of the extractive industries in GDP remained low and declined further in response to relatively lower international prices. - Agriculture and livestock sectors continue to dominate economic activity. - GDP growth is highly volatile and driven by the impact of climate shocks on agriculture. - Per capita GDP growth is fickle and relatively modest due to high population growth. ### Medium-term outlook (2017–27 projections and key narratives) - Growth is expected to bounce back in 2022 and pick up thereafter as oil production increases. - Inflation should converge back to the regional target band by end-2023. - The current account deficit is projected to narrow with higher oil exports. - After three years of fiscal expansion, the onus is on growth-friendly consolidation of public accounts over 2023–25. - Public debt will remain contained while debt service indicators gradually decline over the medium-term. ### Tax performance and fiscal trends (2018–22) - The pandemic worsened revenue collection. - Receipts for income taxes have recovered to pre-pandemic levels, but taxes on goods and services have not. - The reduction in tariffs in the cited year to mitigate the impact on food prices and the delay in the oil pipeline contributed to these trends. ### Social spending and social protection (latest available) - Signs of inefficiencies in education spending at both primary and secondary levels, with a large distance to the frontier. - Life expectancy and health expenditure per capita lag behind peers. - Social assistance spending is low and concentrated in food distribution. - Coverage for social protection programs is low, particularly for labor market and social insurance. - Targeting of social protection programs tends to be regressive; the top quintiles receive a larger share of benefits than the bottom. ### Selected macroeconomic indicators and projections (Table 1 — selected entries) - GDP at constant prices: 2020 = 3.5; 2021 = 1.4; 2022 (Proj.) = 6.5; 2023 = 6.9; 2024 = 7.1; 2025 = 0.4; 2026 = 7.2; 2027 = 7.0 (values presented as in source sequence). - Oil production (thousand barrels per day): 2020 = 17; 2021 = 17; subsequent year entries include 16, 49, 28, 25, 10, 21, 10 (as presented). - Consumer price index, annual average: 2020 = 2.9; 2021 = 3.8; 2022 = 2.5; 2023 = 5.3; 2024 = 4.5; 2025 = 2.0; 2026 = 3.0; 2027 = 3.0. - External current account balance (excluding official grants, percent of GDP): 2020 = -15.7; 2021 = -16.4; 2022 = -18.0; 2023 = -16.7; 2024 = -16.2; 2025 = -13.2; 2026 = -14.8; 2027 = -14.9. - Total public and publicly-guaranteed debt (percent of GDP): 2020 = 45.0; 2021 = 51.3; 2022 = 49.8; 2023 = 54.1; 2024 = 56.6; 2025 = 48.2; 2026 = 53.8; 2027 = 57.6. - Overall balance (commitment basis, incl. grants, percent of GDP): 2020 = -4.8; 2021 = -5.9; 2022 = -5.4; 2023 = -6.6; 2024 = -6.8; 2025 = -4.2; 2026 = -4.7; 2027 = -5.3. ### Central government financial operations (Table 2 & Table 3 — selected entries) - Total revenue (billions of CFA francs): 2020 = 852; 2021 = 897; 2022 (Proj.) = 1,070; 2023 = 1,075; 2024 = 1,075; 2025 = 1,329; 2026 = 1,287; 2027 = 1,286. - Total expenditure and net lending (billions of CFA francs): 2020 = 1,769; 2021 = 2,006; 2022 = 2,113; 2023 = 2,206; 2024 = 2,286; 2025 = 2,315; 2026 = 2,308; 2027 = 2,325. - Total revenue (percent of GDP): 2020 = 10.8; 2021 = 10.8; 2022 = 11.5; 2023 = 11.8; 2024 = 11.7; 2025 = 12.7; 2026 = 13.0; 2027 = 12.8. - Total expenditure and net lending (percent of GDP): 2020 = 22.4; 2021 = 24.3; 2022 = 22.7; 2023 = 24.3; 2024 = 24.8; 2025 = 22.1; 2026 = 23.2; 2027 = 23.1. - Overall balance (percent of GDP): see previous section. ### Monetary sector and credit (Table 4 — selected entries) - Net foreign assets (billions of CFA francs): 2020 = 560; 2021 = 701; 2022 (Proj.) = 1,172; 2023 = 483; 2024 = 576; 2025 = 763; 2026 = 964; 2027 = 847. - Net domestic assets (billions of CFA francs): 2020 = 957; 2021 = 963; 2022 (Proj.) = 1,773; 2023 = 1,485; 2024 = 1,259; 2025 = 2,174; 2026 = 1,818; 2027 = 1,572. - Domestic credit (annual percentage change): 2020 = 25.0; 2021 = 9.2; 2022 = 17.9; 2023 = 21.0; 2024 = 17.5; 2025 = 16.3; 2026 = 17.7; 2027 = 15.0. - Credit to the private sector (percent of GDP, memorandum): 2020 = 11.7; 2021 = 13.0; 2022 = 11.5; 2023 = 13.4; 2024 = 12.5; 2025 = 11.7; 2026 = 14.0; 2027 = 12.6. - Broad money (annual percentage change): 2020 = 17.0; 2021 = 9.7; 2022 = 14.9; 2023 = 19.3; 2024 = 10.3; 2025 = 15.6; 2026 = 12.5; 2027 = 12.1. ### Balance of payments (Tables 5 & 6 — selected entries) - Current account balance (billions of CFA francs): 2020 = -1,047; 2021 = -1,164; 2022 = -1,519; 2023 = -1,399; 2024 = -1,329; 2025 = -1,207; 2026 = -1,309; 2027 = -1,346. - Exports, f.o.b. (billions of CFA francs): 2020 = 642; 2021 = 672; 2022 = 752; 2023 = 836; 2024 = 765; 2025 = 1,154; 2026 = 1,116; 2027 = 996. - Imports, f.o.b. (billions of CFA francs): 2020 = 1,422; 2021 = 1,565; 2022 = 1,880; 2023 = 1,810; 2024 = 1,757; 2025 = 1,942; 2026 = 1,962; 2027 = 1,921. - Current account balance (percent of GDP): 2020 = -13.2; 2021 = -14.1; 2022 = -16.3; 2023 = -15.4; 2024 = -14.4; 2025 = -11.5; 2026 = -13.2; 2027 = -13.4. - Exports of goods and services (percent of GDP): 2020 = 16.6; 2021 = 15.5; 2022 = 14.8; 2023 = 14.8; 2024 = 15.2; 2025 = 17.3; 2026 = 16.6; 2027 = 16.5. ### Financial soundness indicators (Table 7 — selected entries) - Regulatory capital to risk-weighted assets: 2016 = 13.9; 2017 = 16.8; 2018 = 13.3; 2019 = 12.3; 2020 (Dec.) = 14.8; 2021 (Jun.) = 14.9; 2021 (Dec.) = 14.6; 2022 (Jun.) = 14.3. - Gross NPLs to total loans: 2016 = 17.7; 2017 = 18.8; 2018 = 19.0; 2019 = 17.0; 2020 = 15.1; 2021 = 16.1; 2022 = 20.9 (selected chronology preserved). - Provisioning rate: 2016 = 66.5; 2017 = 66.1; 2018 = 65.9; 2019 = 59.0; 2020 = 58.2; 2021 = 51.5; 2022 = 36.4. - Liquid assets to total assets: 2016 = 30.0; 2017 = 29.2; 2018 = 29.9; 2019 = 27.0; 2020 = 28.6; 2021 = 30.3; 2022 = 27.8. ### Public debt, debt service, and external borrowing (Tables 9–11 — selected entries) - Total public debt (US$ million, end of period 2021): Total = 7,317; External = 4,773; Domestic = 2,544. - Total public debt (percent of GDP, 2021): 51.3 percent. - Debt-service ratio as percent of exports of goods and services (Table 1): 2020 = 5.5; 2021 = 7.7; 2022 = 12.4; 2023 = 12.6; 2024 = 12.1; 2025 = 10.4; 2026 = 12.1; 2027 = 11.0. - Schedule of disbursements under the three year ECF Arrangement, 2021–24 (Table 8): - SDR 39.48 (30 percent) — Executive Board Approval of the ECF Arrangement — December 8, 2021. - SDR 39.48 (30 percent) — Observance of December 31, 2021 performance criteria, and completion of the first review — April 29, 2022. - SDR 39.48 (30 percent) — Observance of June 30, 2022 performance criteria, and completion of the second review — October 31, 2022. - SDR 19.74 (15 percent) — Observance of December 31, 2022 performance criteria, and completion of the third review — April 28, 2023. - SDR 19.74 (15 percent) — Observance of June 30, 2023 performance criteria, and completion of the fourth review — October 31, 2023. - SDR 19.74 (15 percent) — Observance of December 31, 2023 performance criteria, and completion of the fifth review — April 30, 2024. - SDR 19.74 (15 percent) — Observance of June 30, 2024 performance criteria, and completion of the sixth review — October 31, 2024. - SDR 197.4 (150 percent) — Total. ### Indicators of capacity to repay the Fund (Table 11 — selected entries) - Fund obligations based on existing and prospective credit (SDR millions, selected years): 2022 = 5.0; 2023 = 25.2; 2024 = 26.1; 2025 = 38.1; 2026 = 42.9; 2027 = 50.9; 2028 = 55.1; 2029 = 62.7; 2030 = 52.1; 2031 = 39.5; 2032 = 31.6; 2033 = 13.8; 2034 = 5.9. - Outstanding IMF credit based on existing and prospective drawings (SDR millions): 2022 = 364.8; 2023 = 379.1; 2024 = 392.5; 2025 = 354.4; 2026 = 311.5; 2027 = 260.7; 2028 = 205.6; 2029 = 142.9; 2030 = 90.8; 2031 = 51.3; 2032 = 19.7; 2033 = 5.9; 2034 = 0.0. - Net use of IMF credit (SDR millions): 2022 = 62.9; 2023 = 14.3; 2024 = 13.4; 2025 = -38.1; 2026 = -42.9; 2027 = -50.9; 2028 = -55.1; 2029 = -62.7; 2030 = -52.1; 2031 = -39.5; 2032 = -31.6; 2033 = -13.8; 2034 = -5.9. _Italic: Source — Nigerien authorities and IMF staff calculations as presented in the supplied content._ ### Annex I. Risk Assessment Matrix ### Annex I. Risk Assessment Matrix ### Spillover Risks - Intensifying spillovers from Russia’s war on Ukraine - Relative Likelihood: High - Impact if realized: Medium - Recommended Policy Response: - Implement domestic revenue mobilization to create fiscal space. - Advance structural reforms, including public debt management measures, to enhance the resilience to external shocks. - Additional note: Even higher commodity prices, tighter financial conditions, lower aid flows, and other adverse spillovers, despite the direct trade link is limited. - Rising and volatile food and energy prices - Relative Likelihood: High - Impact if realized: High - Recommended Policy Response: - Prioritize well-targeted spending to protect the most vulnerable and accelerate implementation of the support plan for populations vulnerable to food, nutritional and pastoral insecurity. - Impact detail: Negative impact on inflation and access to food from rising food prices. Slightly positive impact from rising oil prices on the balance of payments and fiscal position. - De-anchoring of inflation expectations in advanced economies leading to further tightening of global financial conditions - Relative Likelihood: Medium - Impact if realized: Medium - Recommended Policy Response: - Intensify efforts to mobilize donor funds and access to concessional financing to contain debt vulnerabilities. - Accelerate the implementation of reforms to foster domestic revenue mobilization. - Impact detail: Rise in risk premia and financing costs for frontier markets with adverse spillovers for the WAEMU regional sovereign bond market. - Reduced donor support - Relative Likelihood: Low - Impact if realized: High - Recommended Policy Response: - Enhance engagement with traditional and new donors. - Enhance implementation capacity to ensure high return from the projects financed by donors. - Impact detail: Negative impact on development projects and on social safety nets and program execution. ### Domestic/Regional Risks - Deterioration of security situation in the Sahel and neighboring countries - Relative Likelihood: Medium - Impact if realized: High - Recommended Policy Response: - Allow for a more backloaded fiscal consolidation path as needed to accommodate high priority security spending in response to developments on the ground. - Increase engagement with neighboring countries and the international community on security issues. - Impact detail: Deterioration in growth and balance of payments because of disruption of economic activity and reduced FDI. Negative impact on the fiscal position due to reduced fiscal intake and higher security expenditures. - Delays in the realization of extractive industry projects - Relative Likelihood: High - Impact if realized: High - Recommended Policy Response: - Accelerate efforts to enhance oversight and transparency of the sector. - Impact detail: Significant impact on medium-term economic activity, current account, and fiscal position as well as debt sustainability. - Unfavorable weather conditions/natural disasters - Relative Likelihood: High - Impact if realized: High - Recommended Policy Response: - Increase well-targeted spending, including transfers to vulnerable populations, while restraining other current expenditure. - Impact detail: Reduction in agricultural output, increased food insecurity, and inflationary pressures. ### Risk Matrix Definitions and Quantifications - The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). - Relative likelihood categories (staff’s subjective assessment): - “low” indicates a probability below 10 percent - “medium” indicates a probability between 10 and 30 percent - “high” indicates a probability between 30 and 50 percent - Timing labels: - “Short term (ST)” indicates the risk could materialize within 1 year - “Medium term (MT)” indicates the risk could materialize within 3 years - Non-mutually exclusive risks may interact and materialize jointly. - The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. *Annex I. Risk Assessment Matrix — IMF staff.* ### 7. Main risks and mitigation. Absorption capacity is limited due to human resource ### 1nerea2023001 - 7. Main risks and mitigation. Absorption capacity is limited due to human resource ### Main risks and mitigation - Absorption capacity is limited due to human resource constraints accentuated by: - a bunching of CD delivery, - over-centralization of reform efforts, - high turnover of senior staff. - Need for better coordination and communication among different branches of government. - Authorities could make greater use of training opportunities offered by: - the Fund’s Institute for Capacity Development, - AFRITAC West, the regional center for CD and training. ### Authorities’ views - Authorities welcome Fund capacity development activities and thought it was appropriately targeted. - They welcome diagnostic CD from HQ and appreciate ongoing operational CD support from AFRITAC West. ### Priorities by Department i) FAD — Priorities and objectives - Revenue administration - Revenue mobilization remains the key program priority. - CD support would provide recommendations to broaden the tax base and improve the quality of revenue collection, while not hurting private sector dynamism with excessive administrative measures. - Support might be needed to: - improve the management of the taxpayer registration, - complete the digitalization and interconnexion of DGI and DGD. - Support is also needed to strengthen capacity for natural resource revenue management and establish robust tax and customs revenue forecasting models. - Tax Policy - Focus on broadening the tax base and removing tax exemptions through a simplification of the General tax code and a shift of the tax burden from corporate and labor income to consumption. - Authorities expressed interest in TA on assessing the socio-economic impacts of tax expenditures and modernizing land and property registration. - Public financial management - Priority to develop an oil revenue management strategy and establish a robust institutional and operational framework, in line with international best practices and adapted to Niger's capacities, to ensure efficient and transparent management of oil revenues. - Support needed to increase efficiency and transparency in the expenditure chain and strengthen budget preparation and execution in the context of program budgeting. - Authorities would like TA on fiscal risks assessment (macro risks related to PPP, SOEs, ...). - Follow-up missions to monitor advice from the public investment management assessment (PIMA) and progress on TSA and cash management could be helpful. ii) MCM — Priorities - Debt management - Further TA is needed to strengthen the country’s capacity to manage public debt, including DSA analysis and to prepare a public debt plan that is consistent with the broader investment strategy and fiscal planning. iii) STA — Priorities - Strengthen macroeconomic and financial statistics - Strengthening government finance statistics according to GFSM 2014 standards, and the improvement of balance of payment statistics as well as national accounts remain priorities. ### Niger’s Development Strategy (Annex V) — key elements and financing - Niger adopted in June 2022 its new Poverty Reduction and Growth Strategy (PRGS)—the Economic and Social Development Plan (PDES)—covering the period 2022-2026. - Formulation was inclusive, with participation of private sector, civil society organizations and trade unions; discussions held in all regions. - Preparation benefited from technical support from development partners including the World Bank, the African Development Bank, and the UNDP. - PRGS aligns with African Union's Agenda 2063 and the United Nations' Sustainable Development Goals (SDGs). - One key PRGS target: reduce the poverty rate to 35.4 percent by 2026 from 40.8 percent in 2019. - PRGS structure: - Three strategic axes and sixteen specific programs: - (i) human capital development, inclusion, and solidarity (six programs), - (ii) consolidation of governance, peace, and security (six programs), - (iii) structural transformation of the economy (four programs). - PRGS aligned with authorities' program priorities supported by the Extended Credit Facility (ECF). - Emphasizes strengthening macroeconomic stability and building foundation for inclusive, job-creating, and resilient growth. - Objective of raising the fiscal revenue-to-GDP ratio to about 15 percent of GDP by 2026. - Public spending improvements to enhance human capital and transformative public investments. - Promotion and revitalization of the private sector to diversify production base. - Cross-cutting themes: good governance and fight against corruption, reduction of gender inequalities, resilience to climate change. - Implementation cost and financing gap: - Implementation cost estimated at CFAF 19,427.6 billion (twice the country’s projected 2022 GDP and approximately 6 times the state budget planned for 2023). - Estimated financing gap based on resources already identified: CFAF 10,670.6 billion, of which: - CFAF 6,742.3 billion would come from donors, - CFAF 3,928.3 billion are expected from the private sector. - Authorities are relying on the ECF arrangement to catalyze support; a round table to be organized in December 2022 in Paris to mobilize technical and financial resources. ### Downside Scenario (Annex VI) — exposures, scenarios, and impacts - Key risk factors listed: - (i) worsening security situation in the Sahel and spillovers from neighboring countries, - (ii) climate-related shocks (drought or floods) causing volatility in agricultural production and GDP, - (iii) further delay in construction of the oil pipeline to the Beninese coast leading to postponement of start of crude oil exports and expected revenues, - (iv) sharp and protracted decline in international oil prices due to a recession in advanced and emerging economies, - (v) further tightening of regional monetary policy in response to the European Central Bank. - Agricultural context note: - Rainfed agricultural production accounts for 99 percent of total agricultural production according to authorities’ estimates. Box 1 — Alternative Scenarios and assumptions - Alternative scenario 1 (Alt 1) - Assumes a shock of one standard deviation to agricultural production growth in 2023 (equivalent to a 7.0 percent drop in agricultural production) combined with a one-year delay in the start of oil exports through the new pipeline project. - Agricultural production assumed to gradually recover thereafter and catch up to the baseline level in 2027. - Alternative scenario 2 (Alt 2) - Incorporates Alt 1 assumptions with an additional shock (one standard deviation) on oil prices (as projected in the WEO) from 2023 through 2025. - Alternative scenario 3 (Alt 3) - Includes shocks of Alt 1 and Alt 2 plus assumption of a tightening of monetary policy over the entire projection period (2022-28) in the form of a uniform increase of 100 basis points in the interest rates of debt securities issued by Niger on the WAEMU regional financial market. - Other key assumptions: - The elasticity of non-oil revenues to GDP is equal to 1. - No additional fiscal policy response is assumed in terms of adjustment of the expenditure path compared to the baseline apart from the increase in domestic interest payments under the assumption of monetary policy tightening. - Additional financing needs resulting from larger fiscal deficits are met by increasing debt issuance in the regional financial market. Projected macroeconomic impacts (selected) - GDP growth - Under Alt 1: GDP growth would slow sharply in 2023 to 2.5 percent from 7.3 percent in the baseline; then pick up to 7.6 percent in 2024 but remain well below the baseline performance of 13.0 percent. Growth would peak at 16.1 percent in 2025 and converge to the baseline by 2028. - Note: Real GDP growth rates of Alt 2 and 3 in 2023 and 2024 are almost identical to those of Alt 1, at 1.5 and 7.1 percent, respectively. Footnote indicates 15.9 percent in the cases of Alt 2 and Alt 3 for the 2025 peak in one note. - Current account (CA) balance (percent of GDP) - Baseline: 13.3 percent (2023) and 6.5 percent (2024). - Alt 1 (one-year delay): deteriorates to 14.8 percent (2023) and 19.0 percent (2024). - Alt 2 and Alt 3 (with depressed oil prices): worsen to 15.4 percent (2023) and 20.2 percent (2024). - CA deficit starts narrowing steeply in 2025 under alternative scenarios and converges to baseline by 2028. - Fiscal balance (percent of GDP) - Simulated alternative scenarios: fiscal deficit ranges between 6.4 and 6.9 percent of GDP in 2023 (baseline projection 5.3 percent of GDP in 2023). - Further deteriorates in 2024 to between 8.7 and 9.5 percent of GDP (baseline 4.1 percent of GDP in 2024). - Speed of fiscal adjustment would accelerate only from 2025 onwards under delay, with convergence to WAEMU fiscal deficit norm reached only by 2027 in Alt 1; deadlines further extended in Alt 2 and Alt 3. - Debt vulnerabilities - External and overall risk of debt distress remain rated at “moderate” under all alternative scenarios due to high concessionality of new debt and rapid pick-up in growth, though: - Two debt indicators (the PPG debt service-to-exports ratio and the PPG debt service-to-revenue ratio) would get closer to breach their respective thresholds in 2023. ### Policy implications and mitigation measures - Shorter-horizon (immediate) actions given limited space to absorb shocks: - Adopt a fiscal contingency plan—for the next fiscal year—with technical assistance from IMF to mitigate fiscal risks associated with various shocks. - Reprioritize spending, including reduction in non-essential current expenditure and possibly postponement of certain non-emergency capital expenditure. - Reallocate part of savings from rationalization of non-priority expenditure to support most vulnerable populations—through targeted interventions, including cash transfers. - Accelerate domestic revenue mobilization efforts, particularly exploiting quick wins from reducing tax exemptions. - Pursue a prudent external debt policy by prioritizing concessional loans and grants. - If regional financial market conditions deteriorate, seek additional financing from development partners and consider increasing access to IMF resources to deal with potential food crisis from agricultural shocks. - Longer-term measures: - Improve agriculture resilience to climate shocks (Chapter 4 of the SIP). - Enhance economic diversification (Chapter 6 of the SIP). - Strengthen human capital and close the gender gap (Chapter 2 of the SIP). *Source: IMF staff and Nigerien authorities (content unit: 1nerea2023001 - 7. Main risks and mitigation).* ### 6. The government reform agenda for the rest of 2022 and the medium term is ### 6. The government reform agenda for the rest of 2022 and the medium term is ### MEFP purpose and commitments - The Memorandum of Economic and Financial Policies (MEFP) supplements and updates the MEFP signed on June 10, 2022. - Program objectives remain focused on: - consolidating macroeconomic stability; - strengthening domestic revenue mobilization; - improving public expenditure effectiveness, with emphasis on social spending and poverty reduction; - promoting good governance. - The government will consult with the IMF on additional measures and on revisions to policies contained in the MEFP, in accordance with IMF consultation policies. - Information required to monitor the economic situation and implement program policies will be provided in a timely manner as agreed in the attached TMU, or at the IMF’s request. - The government authorizes the IMF to publish the Fund staff report, this letter of intent, the MEFP, and the TMU on the IMF website. ### Recent shocks, responses, and strategic initiatives - Security and climate shocks: - Persistent security tensions along the tri-border area despite lull in Diffa Region and left bank of the Niger River. - 2021 harvest declined nearly 40 percent compared to its average over the past ten years due to climatic shocks. - International spillovers from the February 2022 war in Ukraine: higher basic commodity, agricultural input, and energy prices, and higher interest rates. - Natural disaster response: - Heavy rains between June and October 2022 caused nearly 200 deaths and more than 327,000 victims with losses; government provided temporary relocation and distributions of food, water, blankets, etc. - Development planning and climate strategy: - Adoption of Economic and Social Development Plan (PDES) 2022-2026 (Decree No. 2022-448/PRN/MP of June 10, 2022) structured around three pillars: (i) human capital, inclusion, solidarity; (ii) governance, peace, security; (iii) structural transformation. - PDES total cost estimated at CFAF 19,437.6 billion, including: - CFAF 8,757.0 billion to be mobilized by the government; - CFAF 6,742.3 billion expected from technical and financial partners; - CFAF 3,928.3 billion to be financed by the private sector. - Roundtable on financing of the Plan planned in Paris in December 2022. - New national strategy for adaptation to climate change aligned with revised NDC; objectives include sustainable exploitation of agro-ecosystems, improved agronomic/economic/environmental performance, and increased resilience to climatic shocks. ### Macroeconomic outlook and 2022 projections - Real GDP growth in 2022 expected to rebound to 7.1 percent driven by: - agricultural production increase by 10 percent due to milder climate conditions; - secondary sector expansion by 4.7 percent driven by gold production increase of 18.8 percent; - tertiary sector growth expected to accelerate to 6.3 percent driven by transportation, trade, hotel, and restaurant sectors. - Inflation: - Average annual inflation expected at 4.5 percent in 2022, above the WAEMU upper convergence band limit. - Current account: - Current account deficit expected to widen to 14.4 percent of GDP in 2022 due to increased capital and intermediate goods imports and food import orders following the 2021 harvest drop. - Money and monetary aggregates: - Money supply in 2022 expected to rise to CFAF 1,835 billion, or 19.9 percent of GDP, an increase of 10.3 percent compared to 2021. - Increase reflects rise in net domestic claims by 17.5 percent and deterioration in net foreign assets by 17.8 percent. - Net domestic claims improved by 7.1 percent due to increased lending to individuals, trade, construction, and manufacturing. - Financial sector indicators (end-2021 / 2022 observations): - Capital adequacy ratio: 14.3 percent at end-December 2021 (WAEMU regional average 12.5 percent). - Ratios of liquid assets to total assets and to deposits: 26.5 percent and 42.4 percent, respectively. - Non-performing loans (microfinance sector): 41.9 percent at end-March 2022. - Bank non-performing loans: 21.2 percent in 2021, declining to 18.1 percent as of September 30, 2022. - Credit concentration ratio: 158.3 percent. - Share of credit allocated to agriculture: 1.86 percent. - Risk sharing ratio: 45 percent in 2021 and 35 percent in 2022. ### Fiscal policy measures and sectoral expenditures in 2022 - Fiscal expansion aims to mitigate food crisis and security shock effects and lay foundation for accelerated growth. - Adjustments to the 2022 budget package: - Resources: inclusion of additional support mobilized from partners. - Expenditures include: - transfers to households experiencing food insecurity via free/low-cost grain distribution operations; - investments in agricultural and livestock sector, including purchase of fertilizer and livestock feed, financing of irrigated crop program; - replenishment of the food reserve; - defense and domestic security expenditures due to tri-border security deterioration; - support for recovery, stabilization, and peacekeeping activities; - urgent expenditures in education and health sectors. - Energy policy action: - Diesel export suspended as of June 2022 and supplies rationed; pump price of diesel increased by 24 percent to align with neighboring countries and curb speculation. - Diesel price rise helped reduce demand pressure (which had more than doubled between February and June 2022), maintain electricity prices through increased energy reserve, and strengthen hydrocarbons sector financial equilibrium. - Oil pipeline construction: - Pipeline to Benin 51 percent complete at end-August 2022. - Infrastructure expected to be placed in service and oil export operations to begin during the second half of 2023. - Model expects nearly full exploitation of the reserve and pipeline by 2024. ### Program performance and structural reforms (ECF-supported program) - Performance criteria and indicative targets: - Government met all program performance criteria at end-June and end-September 2022. - Government's net domestic financing cap: CFAF 385 billion in June 2022 (adjusted) — actual CFAF 182.4 billion in June 2022. - No external arrears recorded. - New public and publicly guaranteed external debts ratified: CFAF 212 billion (June) and CFAF 334.7 billion (September 2022), below ceiling of CFAF 402 billion; ceiling exceeded in November 2022 due to higher-than-expected project loan ratifications. - Net domestic financing cap at end-September 2022: 515.7 billion (adjusted) — actual 312.1 billion. - Indicative targets for basic budget balances (including and excluding grants), exceptional expenditures, and social expenditures were met at end-June and end-September 2022. - Cash revenue was above the June 2022 ceiling but slightly below the September 2022 ceiling due to security incidents and reduction in re-export tax rate impacting export revenue. - Structural benchmarks: - All end-June 2022 structural benchmarks met; most end-September benchmarks met. - Road map adopted for revision and simplification of tax system; status report on tax exemption agreements since 2019 shared with the IMF. - Report on tax expenditures published in annexes of the 2023 budget law. - New oil revenue management strategy benchmark postponed to end-September 2023 due to need for additional IMF technical assistance. - Integration of DGI and DGD information systems: benchmarks reformulated into four structural benchmarks with revised timeframes to account for capacity needs. - Continuous structural benchmarks largely met: publication of status of newly granted/renewed tax exemptions; public procurement plans, tender notices, and final award results published on public procurement portal. - Publication of summaries of feasibility studies for investment projects > CFAF 5 billion to be made when 2023 budget is adopted by parliament. ### Macroeconomic framework for 2023 and the medium term - Growth and inflation projections: - Real GDP growth in 2023 projected at 7.0 percent, supported primarily by start of crude oil exports from Agadem field. - Growth expected to rise to 13.0 percent in 2024 with nearly full-capacity oil production before decelerating thereafter. - Inflation expected to return to 3.0 percent in 2023 and decline further thereafter. - Current account and exports: - Launch of oil exports via Niger-Benin pipeline expected to increase total exports and reduce the current account deficit. - Crude oil exports expected to reach full capacity volume in 2024; uranium capital projects expected to further increase exports in medium term. - Stabilization of imported food prices and accelerated agricultural production should help reduce current account deficit in 2023 and beyond. - Public finances and debt policy: - Overall fiscal deficit expected to narrow to 5.3 percent of GDP in 2023 from 6.8 percent of GDP in 2022 due to oil receipts, improved domestic revenue mobilization, and rationalization of public expenditure. - Continued consolidation in the medium term expected to allow compliance with WAEMU convergence criterion of 3 percent of GDP for overall fiscal deficit. - Government will pursue prudent borrowing policy emphasizing concessional resources and projects with strong growth potential, in line with WAEMU ceiling of 70 percent of GDP. - Roundtable in December 2022 in Paris planned to mobilize additional resources prioritizing concessional loans and grants to finance PDES 2022-2026. - Institutional capacities for public debt management and monitoring to be strengthened to limit liquidity risks and risk of debt distress. - Debt sustainability indicators expected to improve in medium term, particularly with start of oil pipeline activities. - Regional monetary policy stance: - Regional central bank tightened monetary conditions during 2022 to limit inflationary expectations and ensure reserve stability. - June 2022: BCEAO Monetary Policy Committee raised key interest rates by 25 basis points. - September 2022: policy rates raised again to pre-pandemic levels; minimum bid rate for liquidity injection tenders raised from 2.25 percent to 2.50 percent; marginal lending window rate increased. _This summary is drawn from the Memorandum of Economic and Financial Policies of the Government of Niger (MEFP) attached to the IMF staff report._ ### 4.25 percent to 4.50 percent. ### 4.25 percent to 4.50 percent. ### Fiscal framework and 2022–2023 budget stance - The fiscal framework for 2022 is fully financed; the Inter-ministerial Committee for Fiscal Regulation will release funds taking into account the pace of revenue and grant mobilization to keep the deficit within the limit of 6.8 percent of GDP. - The proposed 2023 budget aims to balance public-finance sustainability and support for economic recovery; it includes measures to expand the tax base, limit tax evasion, and promote formalization and private sector development. Key revenue and tax measures in the 2023 budget: - Measures to expand the tax base, limit tax evasion, and increase revenue: - About twenty measures, including reorganization of management of certain taxes (income tax, or ISB; investment income tax, or IRCM; vehicle registration tax; VAT) and creation of new taxes (specific taxes on tobacco and cigarettes, gold and precious metals, and petroleum products). - Estimated impact: CFAF 46 billion. - Measures to ease the tax burden on businesses: - Elimination of the incoming international call termination fee (TATTIE); taxation of investment income when the recipient is domiciled outside Niger; exemption from the alternative minimum tax for the first two years of operation; easing conditions for granting the tax compliance certificate (ARF); reduction in the business tax for companies inactive during the year; reorganization of the apprenticeship tax (TAP). - Expected revenue reduction: CFAF 3.4 billion. - Measures to consolidate previous tax reforms: - Proposals include (i) exemption from the ISB withholding tax under certain conditions for purchases made for commercial purposes; (ii) elimination of the VAT liability of certain businesses based on floor space; (iii) more flexible approach to penalties for non-compliance; elimination of the two-year exemption for income-producing properties; temporary five-year exemption for companies building headquarters remains pending assessment. - Reinforcements to 2019 and 2022 budget law reforms on land registration and advertising. - Expected revenue increase: 5.4 billion CFA francs. - Measures to reorganize certain tax procedures: - Eliminate referral to the Minister of Finance to accelerate administrative handling of tax disputes. - Reduce administrative response time to disputes from three to two months and set three months for judicial appeals. - Limit settlements to penalties and additional charges. - No immediate financial impact; expected to speed up and reduce taxpayer procedure costs. Customs and excise measures: - Customs exemptions to develop agriculture, industry, and transport; exemptions for (i) imports of agricultural equipment, (ii) imports of new vehicles used to transport merchandise and passengers, and (iii) exports of local industrial products from taxes and levies other than community contributions. - Anticipated net revenue reduction: CFAF 0.8 billion. - Introduction of excise taxes and the TSR and VAT on electronic cigarettes: - Expected yield: 1 billion CFA francs. ### Tax administration, digitalization, and automation - Objectives: simplify tax and customs procedures, expand the tax base, strengthen controls, accelerate automation and digitalization of revenue collection. Planned measures and reforms: - Extension of the certified electronic invoicing system (SECEF) to all taxpayers delivering goods and/or services via the free online platform e-SECEF, including taxpayers not subject to VAT. - Reduced sanctions for SECEF offenses and revised dispute procedures: - Align the 15 percent pre-payment for referral to the Minister of Finance with that for referral to CARFI to reduce arbitration. - Reduce dispute response delay to two months (instead of three months) and limit legal recourse time to three months. - Limit transactions to penalties and surcharges. - Strengthening customs controls and anti-fraud measures: - Authenticate certificates of origin for community products; improve vehicle classification for residual values; revise performance evaluation criteria for civil service bureau chiefs and inspectors and expand evaluations. - Molecular marking of petroleum products suspended after fraud reduction and low cross-border price incentives; discussions between SONIDEP and the contractor are ongoing. - Simplified ARF (tax compliance certification) procedures: - ARF now valid for one month but usable for all taxpayer requirements (instead of a single purpose). - Stamp fee reduced from CFAF 10,000 to CFAF 1500. - Support for creation of community business support centers (Centres de Gestion Agréés, CGA) as stock corporations rather than associations. - Modifications to registration and stamp taxes to reduce taxpayer burden. Digital revenue and expenditure solutions (WAEMU automation project and related): - Deployment of the DGI electronic payment terminal. - Implementation of a DGTCP website platform (experimental) to facilitate payment of non-tax revenue. - Deployment of a remote clearing system via SICA-WAEMU. - Automatic bank debits via SICA-WAEMU. - Deployment of prepaid cards for social spending. - Deployment of the e-Treasury platform and related solutions: - E-Tresor to connect SISIC and ASYCUDA to support DGTCP processing of securities issued by DGI and DGD and credits for DGD release of goods. - E-Pay for digital payment (magnetic cards and mobile money) of taxes and contributions. - E-Banking to improve terms for depositors such as specialized administrative agencies. Human resources and organizational reforms for tax administration: - Recruitment of several hundred new DGI staff to support newly created regional tax directorates (DRI) and local tax offices (CDI) to expand geographic coverage and increase tax collection. ### Structural benchmarks and tax-law reforms - Reform of the CGI to simplify the tax system and shift the tax burden toward consumption in accordance with IMF technical assistance recommendations: - Structural benchmark: prepare and transmit to the National Assembly a proposed law amending the CGI (Structural benchmark for end-December 2023). - Continued integration of DGI and DGD digital platforms with specified structural benchmarks: - Issue a decree regulating taxpayer registration and management of the taxpayer registry between administrations, including sanctions for “tax incivism” (Structural benchmark for end-March 2023). - Fully automate the priority process relating to the taxpayer registry (Structural benchmark for end-March 2024). - Complete automation of activities relating to the exchange control unit, the VAT declarations inquiries unit, the customs permits inquiries unit, the automobile inquiries unit, and the disputes inquiries unit (Structural benchmark for end-June 2024). - Complete full automation of priority processes relating to corporate balance sheets (Structural benchmark for end-September 2024). ### Public financial management reforms and Treasury Single Account (TSA) - Deployment of new digital solutions intended to reduce processing times, increase transparency, and stimulate activity (see digitalization measures above). - Expansion of TSA coverage to subnational governments beginning in 2023: - Treasury accounting officers to perform accounting officer functions for subnational governments; required to report to the Court of Audit and integrate subnational accounts into the TSA. - DGTCP inventory of public and publicly held entities’ accounts completed in July: only 34 accounts remained opened with commercial banks in 2022 (down from 187 accounts identified in the 2018 inventory); of these 34 accounts, 15 accounts with zero balances should be closed. ### Public expenditure quality, decentralization, and human-capital priorities - Prioritize education and social spending and improve targeting for efficiency and equity. - Decentralization of the authorization function began in 2022 and is to continue at regional level; pilot phase revealed personnel and capacity deficits but training and technical assistance are strengthening ministries’ capacities. - Multiyear budgeting using commitment authorizations (AE) and payment appropriations (CP): - Began with five pilot ministries in 2022; expansion to six additional ministries in 2023 to reach 11 ministries in total. - Six additional ministries: Ministry of National Education; Ministry of Public Health, Population, and Social Affairs; Ministry of Finance; Ministry of Planning; Ministry of Technical Education; Ministry of Environment and Desertification Action. - Expected to improve long-term planning of investment programs and projects. Public sector capacity and wage bill management: - Planned hires to address shortages and retirements in health, education, public finance, and mining sectors. - Amendment of the general civil service law to modernize human resources management and career development. - Implementation of an individual performance evaluation system for civil servants. - Finalization of the biometric census of all civil servants and government employees to control the wage bill and manage workforce flows. ### Oil revenue management and extractive-sector governance - Commit to elaborating and instituting an oil revenue management strategy prior to the start of crude oil exports via the Niger-Benin pipeline; expected elements: - Adopt an effective budget rule consistent with WAEMU convergence criteria to preserve sustainability and anchor public debt. - Create a stabilization or savings fund to smooth price and revenue fluctuations. - Improve quality of oil revenue forecasts. - Strengthen budget preparation and execution procedures considering oil revenue issues. - Ensure transparency in oil revenue management. - A second IMF Fiscal Affairs Department (FAD) technical assistance mission is expected to support formulation of this strategy. ### Financial inclusion, microfinance, and private sector development - National Financial Inclusion Strategy (SNFI) implementation broadly on track. - Governance texts for the National Support Fund for SMEs and Medium-Size Industries (FONAP) adopted; FONAP executive secretariat functioning. - Framework for consultation among SNFI working groups instituted. - “100 Champion SMEs” project instituted with CFAF 10.9 billion in funding to strengthen SME capacities. - Four windows of the Financial Inclusion Development Fund (FDIF) scheduled to open during first quarter 2023. - Plans to launch a financial education program in all regions to accelerate inclusion of vulnerable populations (women and youths); focus on digitization and development of Islamic finance. - Microfinance sector restructuring: - Adopt an administrative order to improve governance of decentralized financial systems (DFS). - Sign memorandum of understanding with creditor banks for recapitalization of ASUSU. - Strategy for strengthening microfinance networks under development; circular on good governance distributed to all DFSs; ARSM developed a training program for DFS executives. - Once FDIF is operational, DFSs will have access to refinancing solutions. ### Governance, transparency, and anti-corruption measures - Continue strengthening governance and anti-corruption framework: - Improve transparency in public financial management and reduce vulnerability to corruption in public expenditure. - Systematically prosecute public officials accused of corruption and embezzlement. - Publish information on beneficial owners of legal entities awarded non-competitive contracts on the Public Contracts Regulatory Authority website (Continuous structural benchmark, starting in January 2023). - Issue a decree prescribing content of financial disclosures by senior public officials for publication by the Court of Audit (planned before end-2023); publication in the new format should occur no later than end-2023. - Adopted a new AML/CFT strategy and detailed action plan to correct GIABA mutual evaluation deficiencies. - Established a monitoring committee to support implementation of Court of Audit recommendations on COVID-19 expenditures in 2020 and tax expenditures benefiting extractive industries. *IMF staff summary as presented in the source PDF.* ### 37. The program monitoring will be based on the performance criteria (Table 1) and ### 1nerea2023001 - 37. ### Program monitoring and review schedule - The program monitoring will be based on the performance criteria (Table 1) and structural benchmarks (Tables 2 and 3). Indicators and reporting requirements are set out in the Technical Memorandum of Understanding (TMU). - Authorities will submit data and statistics to the IMF as set out in the TMU, as well as any other information considered useful or requested by the IMF for monitoring purposes. - The program will be monitored in the form of semiannual reviews by the IMF Executive Board. - Review timing and associated expected disbursements: - Third program review based on performance criteria and data through end-December 2022. - Fourth review will cover performance criteria and data through end-June 2023. - Fifth review will cover performance criteria and data through end-December 2023. - Expected disbursements available after April 28, 2023, October 31, 2023, and April 30, 2024, respectively. - The semiannual reviews will be based on performance criteria at end-June and end-September and on the indicative benchmarks at end-March and end-September. ### Key quantitative targets and selected outcomes (Table 1 — highlights) - Ceiling on net domestic financing of the government, without IMF net financing (cumulative from beginning of year) — selected projected and actual figures recorded in Table 1: - Proj./Actual/Status entries include values such as 371.4; 271.3; 90.5; 106.1; 149.1; 182.6; 385.0; 310.15; 515.7; 312.1; 337.3; 297.5. - Adjustments and memorandum items: - Adjustment for shortfall in external budget support: values shown include 0.0; 15.6; 26.8; 30.0. - Adjustment for payments of domestic obligations (arrears and float): values include 75.5. - External budget support (memorandum item) — selected entries: 213.5; 229.4; 15.6; 29.4; 26.8; 48.7; 215.4; 348.7. - External budget grants (memorandum item) — selected entries: 21.0; 32.4; 82.0; 131.6. - Continuous quantitative performance criteria (ceiling): - Accumulation of new external payments arrears: 0.0 (status: Met across reported periods). - Present Value (PV) of new public and publicly-guaranteed (PPG) external debt contracted from the beginning of the relevant calendar year — selected entries: 346.0; 216.3; 402.0; 187.1; 212.0; 334.7; 402.0; 575.0. - Note: The continuous quantitative performance criterion on the PV of new PPG external debt was breached in November and a waiver of non-observance has been requested by the authorities (footnote 8). - Indicative targets (cumulative from beginning of year) — selected entries: - Basic budget balance (commitment basis, excl. grants), floor — entries include -484.6; -481.2; -87.8; -78.1; -182.0; -279.4; -102.3; -298.8; -388.2; -216.0; -473.9; -553.2. - Basic budget balance (commitment basis, incl. budget grants), floor — entries include -340.0; -322.2; -73.3; -78.1; -156.3; -258.3; -253.9; -355.8; -391.9; -421.6. - Cash revenue, floor — entries include 846.4; 853.6; 222.3; 221.7; 469.0; 471.0; 481.2; 715.6; 719.6; 710.9; 986.5; 986.5. - Floor on social spending — entries include 80.0; 261.0; 18.0; 42.9; 45.0; 56.8; 76.5; 76.5; 78.5; 90.0; 100.0. - Ratio of exceptional expenditures on authorized spending (percent), ceiling — 5.0; 0.7 (Met); 5.0; 5.0; 5.0. ### Continuous structural benchmarks (Table 2 — selected measures, timetables, and status) - Measure 1: Provide Fund staff on a semi-annual basis, starting in March 2022, with a tally of newly granted or renewed tax exemptions with their details and expiration dates. - Rationale: Protect revenue base and improve domestic revenue mobilization. - Timetable: Continuous, monitored on a bi-annual basis. - Status: Met for September 2022. - Measure 2: Publish procurement plans, tender notices and final contract award results on the Public Procurement Portal, starting in March 2022. - Rationale: Improve public expenditure management. - Timetable: Continuous, monitored on a bi-annual basis. - Status: Met for September 2022. - Measure 3: Produce a feasibility study for any investment project of more than CFAF 5 billion, the summary of which will be published on the website of the Ministry of Planning, prior to its inclusion in the Plan d’Investissement de l’Etat from the 2023 budget, starting in January 2023. - Rationale: Improve the efficiency of public spending. - Timetable: Continuous, monitored on an annual basis. - Status: Not met for July 2022. Comment: The timetable has been modified to an annual basis. - Measure 4: Publish information on the Public Procurement Portal on the beneficial owners of companies awarded non-competitive contracts, with the exception of contracts relating to defense or security, starting in January 2023. - Rationale: Improve public expenditure management. - Timetable: Continuous, monitored on a bi-annual basis. - (Status field blank in source for this item.) ### Structural benchmarks (Table 3 — selected measures, dates, and status) - 1. Adopt a road map, with technical assistance from the IMF, for the revision and simplification of the current tax system. - Rationale: Improve domestic revenue mobilization and the business environment. - Date: End-June 2022. - Status: Met. - 2. Share with the IMF a status report of existing agreements, showing for each agreement the amounts of exemptions by tax type since the beginning of 2019, expiration dates, and available information on projected exemptions for 2022. - Date: End-June 2022. - Status: Met. - 3. Adopt an oil revenue management strategy with technical assistance from the IMF. - Rationale: Enhance governance and transparency of oil revenue allocation. - Date: End-September 2022. - Status: Not met. Comment: The deadline has been extended at end September 2023. - 4. Publish the annual tax expenditure report online. - Date: End-September 2022. - Status: Met. - 5. Publish the audit by Auditor General (Cour des Comptes) on exemptions in the extractive sector. - Date: End-December 2022. - Status: Met. Comment: The report was published ahead of schedule (May 2022). - 6. Continue the process of interconnecting all DGD and DGI IT systems by adopting an administrative order on taxpayer registration and management of the taxpayer registry between the two administrations, including sanctions for failure to comply with tax obligations, according to the recommendations of the IMF technical assistance mission. - Date: End-March 2023. - 7. Digitize all expenditure orders issued in the context of budget execution. - Date: End-September 2023. - 8. Digitize all expenditure authorizations (AD). - Date: End-December 2023. - 9. Adoption of the revised, simplified General Tax Code (CGI) by the Council of Ministers in accordance with the recommendations of IMF staff. - Date: End-December 2023. - 10. Fully automate priority processes relating to the taxpayer databases and customs declarations (DGD and DGI IT interconnection). - Date: End-March 2024. - 11. Automate activities relating to the exchange control unit, the VAT declarations inquiries unit, the customs permit inquiries unit, the automobile inquiries unit, and the disputes inquiries unit (DGD and DGI IT interconnection). - Date: End-June 2024. - 12. Complete the full interconnection of all DGD and DGI IT systems by fully automating the priority processes relating to corporate balance sheets. - Date: End-September 2024. ### Technical Memorandum of Understanding (TMU) — definitions and data/reporting highlights - The TMU defines the performance criteria and indicative targets of Niger’s program under the Extended Credit Facility (ECF) arrangement for the period Q4-2022 to Q4-2023. Performance criteria and indicative targets for December 2022 through December 2023 are set out in Table 1 of the MEFP attached to the Letter of Intent of November 30, 2022. Structural benchmarks are outlined in Tables 2 and 3. - Definitions and key numeric parameters: - Present value (PV) of new public and publicly guaranteed external debt contracted discounts at a five percent annual rate the future payment stream, except for loans with a negative grant element, in which case the PV is set equal to the value of the loan. - Domestic payment arrears include committed and authorized fiscal year expenditures that are not paid within 90 days. - The ceiling on net domestic financing of the budget will be adjusted if the amount of disbursements of external budgetary assistance falls short of forecasts; the quarterly ceiling will be raised pro tanto, up to a maximum of CFAF 30 billion (footnote 2). - The ceiling on domestic financing of the budget will be increased by the reduction in the float from 2021 of CFAF 115 billion. Starting in 2023, this adjustment will be capped at a maximum of CFAF 75 billion (footnote 3). - The floor on basic budget balance including budget grants will be adjusted if the amount of disbursements of external budgetary grants falls short of forecasts; the quarterly ceiling will be decreased pro tanto, up to a maximum of CFAF 30 billion (footnote 6). *Source: Attachment II. Technical Memorandum of Understanding and Tables 1–3 in the MEFP (Niger).* ### 8. The 2022 and 2023 quarterly targets respectively concern the cumulative amounts since the ### 1nerea2023001 - 8. The 2022 and 2023 quarterly targets respectively concern the cumulative amounts since the ### Adjustments to the ceiling on net domestic financing - The ceiling on net domestic financing of the government will be subject to adjustment if disbursements of external budgetary support net of external debt service, external arrears payments, and net financing from the IMF fall short of program projections. - If disbursements of external budgetary support fall short of the projected amounts at the end of each quarter, the corresponding quarterly ceilings will be raised pro tanto, up to a maximum of CFAF 30 billion. - The ceiling on net domestic financing will also be adjusted for payments of the float related to previous year's expenditure: - For 2022, the ceiling will be increased by the reduction in the float from 2021 of CFAF 115 billion. - Starting in 2023, this adjustment will be capped at a maximum of CFAF 75 billion. ### Reporting requirement on domestic financing - Detailed data on domestic financing of the government will be provided monthly, within six weeks after the end of each month. ### New external payment arrears on government debt — definition and commitment - Government debt: outstanding debt contracted or guaranteed by the government. - External arrears: obligations not paid on due dates, taking into account contractual grace periods, if any. - The government undertakes not to accumulate new external payment arrears on its debt (including Treasury bills and bonds issued in CFAF on the WAEMU regional financial market), except for external payment arrears arising from debt being renegotiated with external creditors, including Paris Club and other bilateral official creditors. ### Reporting requirement on external payment arrears - Data on the stock, accumulation, and repayment of external payment arrears will be provided monthly, within six weeks after the end of each month. ### Present value (PV) of new public and publicly-guaranteed external debt — definitions and scope - Contract: debt is deemed contracted or guaranteed when signed by the government, adopted by parliament by law, and ratified by the President of the Republic. For program monitoring, external debt is deemed contracted or guaranteed on the date of ratification of the contract. - Guarantee: arises from any explicit legal obligation of the government to service a debt in the event of nonpayment by the debtor (payments in cash or kind). - External debt definition: debt contracted or serviced in a currency other than CFAF, except borrowing from the West African Development Bank (BOAD), which is considered external debt despite being local-currency-denominated. - Performance criterion (PC): a ceiling applying to the present value of all new external debt (concessional or non-concessional) contracted or guaranteed by the government, including commitments contracted or guaranteed for which no value has been received. - Exemptions: (a) Short-term supplier or trade-related credit with a maturity of up to three months; (b) rescheduling agreements; and (c) IMF disbursements. ### Currency denomination and exchange rates for PV calculation - For program purposes, the value in CFAF of new external debt of 2022 and that of 2023 is respectively calculated using the exchange rates for end September 2021 and end April 2022 in the IMF’s International Financial Statistics (IFS) database. - Exchange Rates (end September 2021): - CFAF/SDR 798.1337 - U.S. Dollar/SDR 1.408871 - Euro/SDR 1.216747 - Japanese Yen/SDR 157.6668 - U.K. Pound Sterling/SDR 1.048658 - U.A.E. Dirham/SDR 5.174080 - Exchange Rates (end April 2022): - CFAF/SDR 836.6272 - U.S. Dollar/SDR 1.3443 - Euro/SDR 1.27543 - Japanese Yen/SDR 174.625 - U.K. Pound Sterling/SDR 1.0695 - U.A.E. Dirham/SDR 4.93696 ### PV calculation methodology and reference rates - PV Calculation: discount all projected disbursements and debt service payments (principal and interest) using a program discount rate of 5 percent and account for loan conditions, including projected disbursements, maturity, grace period, payment schedule, front-end fees and management fees. The PV is calculated using the IMF “DSA template,” based on loan amount and the above parameters. - For loans with grant element zero or less than zero, the PV is set equal to the nominal value. - Reference rate for variable-rate debt: - Program reference rate for the six-month USD Secured Overnight Financing Rate (SOFR) is 0.04 percent and remains fixed for the program duration. - Fixed spreads over six-month USD SOFR (remain fixed for program duration): 1. Spread of six-month Euro LIBOR over six-month USD SOFR is -56.4 basis points. 2. Spread of six-month JPY LIBOR over six-month USD SOFR is -9.0 basis points. 3. Spread of six month GBP Sterling Overnight Interbank Average (SONIA) over six-month USD SOFR is 2.5 basis point. 4. For interest rates on currencies other than Euro, JPY, and GBP, the spread over six-month USD SOFR is 15 basis points. 5. Where the variable rate is linked to a benchmark other than the six-month USD SOFR, a spread reflecting the difference between the benchmark rate and the six-month USD SOFR (rounded to the nearest 50 basis points) will be added. ### Reporting requirement on planned external borrowing - Authorities will inform IMF staff of any planned external borrowing and the conditions before loans are contracted or guaranteed and will consult with staff on any potential debt management operations. ### Indicative targets — definitions and adjustments - Cash revenue (indicative target): includes tax, nontax, and special accounts revenue, but excludes proceeds from the settlement of reciprocal debts between the government and enterprises and non-cash revenue. - Basic fiscal balance: difference between (i) total revenue (cash revenue as defined and non-cash revenue) and (ii) total fiscal expenditure excluding externally financed investment expenditure but including HIPC-financed expenditure. - Two indicative targets on basic fiscal balance are set: one including budget grants and the other excluding budget grants. - If disbursements of external budgetary grants are lower than projected at the end of each quarter (as quantified in the performance criteria table), the corresponding quarterly floor of the basic budgetary balance, including budgetary grants, will be reduced on a pro rata basis, up to a maximum of CFAF 30 billion. - Social spending (indicative target) definition: expenditures from Government's own resources allocated to social sectors and those directly benefiting poor households, children, young people and women in vulnerable situations, the elderly, the disabled, victims of armed conflict and trafficking, refugees or displaced persons and the unemployed. These expenditures will be coded in the budget, according to the recommendations of UNICEF, to facilitate tracking. - Vulnerability definition: the risk that individuals may fall into poverty, face food insecurity or be physically and financially unable to meet their basic needs. - Limit on expenditures paid through exceptional procedures (without prior commitment), excluding debt service and expenditures linked to tax exemptions: 5 percent of total authorized expenditures during the quarter for which the target is assessed. ### Codification of social spending activities - Budget Activities Codes: - Non-Social 00 - Social-Health 11 - Social-Education 12 - Social-Social Protection 13 - Social-Nutrition 14 - Social- Hydraulics/Sanitation 15 - Social-Others 19 ### Reporting requirements for fiscal and social data - Information on basic budget revenue and expenditures: monthly, within six weeks after the end of each month. - Information on social expenditures: quarterly, within six weeks after the end of each quarter. - Information on exceptional expenditure: quarterly, after six weeks after the end of the quarter. ### Additional information for program monitoring — Government Finance Authorities will forward the following to IMF staff: - Detailed monthly estimates of revenue and expenditure, including priority expenditure, the payment of domestic and external arrears, and a breakdown of customs, DGI, and Treasury revenue. - The Table of Government Financial Operations with comprehensive monthly data on domestic and external financing of the budget, and changes in arrears and Treasury balances outstanding. These data are to be provided monthly, within six weeks after the end of each month. - Comprehensive monthly data on net nonbank domestic financing: - (i) 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. - Quarterly data on social expenditure (statement of appropriations approved, disbursed, and used). - Quarterly reports on budget execution, including the rate of execution of poverty-reducing expenditure and the use of appropriations by line ministries (National Education, Public Health, Equipment, Agriculture, Livestock). - Monthly data on Treasury balances outstanding, by reference fiscal year, with a breakdown of maturities of more than and less than 90 days. - Monthly data on effective debt service (principal and interest) compared with the programmed maturities provided within four weeks after the end of each month. - List of external loans contracted in process of negotiation and projected borrowing in the next six months, including the financial terms and conditions. ### Additional information for program monitoring — Monetary Sector Authorities will provide the following each month, within eight weeks following the end of each month: - Consolidated balance sheet of monetary institutions and, where applicable, the consolidated balance sheets of individual banks. - Monetary survey, within eight weeks following the end of each month, for provisional data. - Borrowing and lending interest rates. - Customary banking supervision indicators for banks and nonbank financial institutions (where applicable, these same indicators for individual institutions may also be provided). ### Additional information for program monitoring — Balance of Payments Authorities will provide IMF staff with: - Any revision of balance of payments data (including services, private transfers, official transfers, and capital transactions) whenever they occur. - Preliminary annual balance of payments data, within six months after the end of the reference year. ### Additional information for program monitoring — Real Sector Authorities will provide IMF staff with: - Disaggregated monthly consumer price indexes, within two weeks following the end of each month. - The national accounts, within six months after the end of the year. - Any revision of the national accounts. *International Monetary Fund — Extract from program documentation.* ### 35. The authorities will provide IMF staff with the following information: ### 35. The authorities will provide IMF staff with the following information: ### Requested information (timing) - Any study or official report on Niger’s economy, within two weeks after its publication. - Any decision, order, law, decree, ordinance, or circular with economic or financial implications, upon its publication or, at the latest, when it enters into force. - Any draft contract in the mining and petroleum sectors, including production and sales volumes, prices, and foreign investment. - Any agreement with private sector stakeholders having economic or financial repercussions for the government, including in the natural resources sector. ### Summary of Data to be Reported — Key series, frequency, and deadlines - Real sector - National accounts. Frequency: Annual. Reporting deadline: End-year + 6 months. - Revisions of the national accounts. Frequency: Variable. Reporting deadline: 8 weeks after the revision. - Disaggregated consumer price indexes. Frequency: Monthly. Reporting deadline: End-month + 2 weeks. - Government finance - Net government position vis-à-vis the banking system. Frequency: Monthly. Reporting deadline: End-month + 6 weeks. - Complete monthly data on net nonbank domestic financing: (i) change in the stock of government securities (Treasury bills and bonds) issued in CFAF on the WAEMU regional financial market and not held by resident commercial banks; (ii) change in the balance of various deposit accounts at the Treasury; (iii) change in the stock of claims on the government forgiven by the private sector. Frequency: Monthly. Reporting deadline: End-month + 6 weeks. - Provisional TOFE, including a breakdown of revenue (DGI, DGD and DGTCP) and expenditure, including the repayment of domestic wage and nonwage arrears, as at end-1999, and the change in Treasury balances outstanding. Frequency: Monthly. Reporting deadline: End-month + 6 weeks. - Data on Treasury balances outstanding (RAP), by reference fiscal year (total and RAP at more than 90 days). Frequency: Monthly. Reporting deadline: End-month + 6 weeks. - Monthly statement of Treasury correspondents’ deposit accounts. Frequency: Monthly. Reporting deadline: End-month + 6 weeks. - Execution of the investment budget. Frequency: Quarterly. Reporting deadline: End-quarter + 6 weeks. - Table of fiscal expenditure execution, unified list expenditure, and HIPC-financed expenditure. Frequency: Monthly. Reporting deadline: End-month + 6 weeks. - Treasury accounts trial balance. Frequency: Monthly. (Reporting deadlines below for Treasury/external accounts). - Monthly statement of the balances of accounts of the Treasury and of other public accounts at the BCEAO. Frequency: Monthly. Reporting deadlines: provisional: End-month + 6 weeks; final: End-month + 10 weeks. - Petroleum products pricing formula, petroleum products tax receipts, and pricing differentials. Frequency: Monthly. Reporting deadline: End-month + 6 weeks. - Monetary and financial data - Monetary survey / Consolidated balance sheet of monetary institutions and, where applicable, consolidated balance sheets of individual banks. Frequency: Monthly. Reporting deadline: End-month + 8 weeks. - Borrowing and lending interest rates. Frequency: Monthly. Reporting deadline: End-month + 8 weeks. - Banking supervision prudential indicators. Frequency: Quarterly. Reporting deadline: End-quarter + 8 weeks. - Balance of payments / External sector - Balance of payments. Frequency: Annual. Reporting deadline: End-year + 6 months. - Balance of payments revisions. Frequency: Variable. Reporting deadline: At the time of the revision. - 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. ### Relations with the Fund — Financial and program data (selected figures as of September 30, 2022) - Quota: 131.60 (SDR Million) — 100.00 percent. - IMF's Holdings of Currency (Holdings Rate): 106.50 (SDR Million) — 80.92 percent. - Reserve Tranche Position: 25.23 (SDR Million) — 19.18 percent. - SDR Department net cumulative allocation: 189.07 (SDR Million) — 100.00 percent. - SDR holdings: 203.78 (SDR Million) — 107.78 percent. - Outstanding purchases and loans (SDR Million; %Quota) - RCF Loans: 83.66 — 63.57 percent. - ECF Arrangements: 250.09 — 190.03 percent. - Latest financial commitments (selected) - ECF: Approved Dec 08, 2021 — Expiration Dec 07, 2024 — Amount Approved: 197.40 (SDR Million) — Amount Drawn: 78.96 (SDR Million). - Previous ECF: Approved Jan 23, 2017 — Expiration Oct 28, 2020 — Amount Approved: 118.44 — Amount Drawn: 118.44 (SDR Million). - Outright RCF loan: Commitment Apr 14, 2020 — Drawn/Expired Apr 16, 2020 — Amount Approved: 83.66 — Amount Drawn: 83.66 (SDR Million). - Overdue obligations and projected payments to Fund (SDR Million; forthcoming by year) - Principal: 2022: 8.41; 2023: 25.22; 2024: 26.06; 2025: 38.09; 2026: 42.89. - Charges/Interest: 0.00 (for reported years). - Total: 2022: 8.41; 2023: 25.22; 2024: 26.06; 2025: 38.10; 2026: 42.89. ### Implementation of HIPC, MDRI, and CCR (selected figures) - HIPC (Enhanced Framework) - Decision point date: Dec 2000. - Assistance committed by all creditors (US$ Million): 663.10. - Of which: IMF assistance (US$ million): 42.01 (SDR equivalent in millions): 31.22. - Completion point date: Apr 2004. - Disbursement of IMF assistance (SDR Million): Assistance disbursed to the member: 31.22. Interim assistance: 6.68. Completion point balance: 24.55. Additional disbursement of interest income: 2.74. Total disbursements: 33.96. - MDRI-eligible debt (SDR Million): 77.55. - Financed by: MDRI Trust: 59.82; Remaining HIPC resources: 17.73. - Delivery date: January 2006 — GRA: N/A — PRGT: 77.55 — Total: 77.55. - Catastrophe Containment and Relief (CCR) — Date of Board Decision / Amount Committed / Amount Disbursed (SDR million) - Apr 13, 2020 — 5.64 — 5.64. - Oct 02, 2020 — 5.64 — 5.64. - Apr 01, 2021 — 9.54 — 9.54. - Oct 06, 2021 — 5.03 — 5.03. - Dec 15, 2021 — 5.75 — 5.75. ### Non-financial relations and statistical assessment (selected) - Exchange rate arrangement: WAEMU conventional peg; common currency CFA franc pegged at CFAF 655.957 = EUR 1. - Niger accepted obligations of Article VIII, Sections 2, 3, and 4 with effect from June 1, 1996. - Safeguard assessment: BCEAO quadrennial safeguards assessment completed in 2018. Assessment findings: strong control environment since 2013; governance arrangements broadly appropriate; IFRS adopted beginning with the 2015 financial statements; a 2016 external quality review found broad conformity with international standards; risk management framework established in 2014 progressing; BCEAO implemented all recommendations provided in the 2018 assessment. An update assessment is planned for 2023. - Data adequacy for surveillance: "Data provision has some shortcomings but is broadly adequate for surveillance." - National accounts: rebased with assistance of AFRITAC West; quarterly GDP estimates planned for release in December 2023; national accounts compiled on annual basis with 2015 as base year. - CPI: compiled by INS based on WAEMU/AFRISTAT methodology; weights from 2011 ECVMA; price update in 2014. - Government finance statistics: monthly GFS compiled by MOF with a one- to four-month lag; currently produces the 1998 TOFE based on GFSM 1986; authorities working toward implementing Directive nº10/2009/CM/UEMOA which implies migrating to GFSM 2001; Niger does not report GFS data to STA. - Monetary and financial statistics: MFS compiled and disseminated by BCEAO; migration to SRFs completed in August 2016; BCEAO transmits Niger’s SRF-based MFS to IMF’s Statistics Department for IFS publication. - Balance of payments / IIP: compiled in conformity with BPM6 since 2011; backlog of unpublished BOP and IIP statistics caught up and available on BCEAO website and in IFS and BOPSY; Niger participated in CDIS since 2012. ### Technical assistance and resident representation (selected) - Resident Representative: Mr. Rasmane Ouédraogo, since July 2021. - Technical assistance (2019 to October 2022) — examples with dates: - FAD Revenue Administration: 14-Nov-22 to 18-Nov-22; 14-Nov-22 to 25-Nov-22; 14-Nov-22 to 02-Dec-22; multiple other missions in 2022 and earlier. - STA Government Finance: 14-Nov-22 to 25-Nov-22. - FAD Public Financial Management: 01-Nov-22 to 20-Nov-22; 03-Oct-22 to 25-Oct-22. - FAD LTX visit on Improving macroeconomic risk analysis: 12-Sep-22 to 23-Sep-22. - FAD Preparation of an oil revenue management strategy: 14-Jun-22 to 27-Jun-22. - MCM Assets & Liability Management: 09-Mar-21 to 21-Mar-21; 11-Nov-19 to 20-Nov-19. - STA National Acct. & Prices: 25-Jan-21 to 05-Feb-21; 21-Oct-19 to 25-Oct-19. ### Debt sustainability assessment (selected findings) - Niger’s risk of external and overall public debt distress is assessed "moderate" — unchanged from the previous DSA. - Shocks noted: intensified conflict in the Sahel region, severe climate-related shocks, an acute food crisis, and recovery from the COVID-19 pandemic required higher borrowing; currency depreciation against the dollar increased debt vulnerabilities. - Under the baseline scenario, debt indicators remain below thresholds due to reliance on concessional financing and prospective robust growth, but "the remaining space to absorb shocks is limited." - Policy priorities to buttress sustainability: implementation of the government’s reform program, efforts to boost domestic revenue mobilization, onset of crude oil exports via a new pipeline, prudent public debt management, mitigating fiscal risks from SOEs, prioritizing concessional borrowing, and strengthening private-sector development to support economic diversification. - Niger’s debt-carrying capacity: rated "medium" with composite indicator value of 2.90 (based on October 2022 WEO vintage and CPIA 2021 vintage). *Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA). (December 6, 2022)* ### 1. The coverage of the public sector in the DSA is in line with the fiscal accounts and the ### 1nerea2023001 - 1. The coverage of the public sector in the DSA is in line with the fiscal accounts and the ### Coverage of public sector debt (scope and data gaps) - Central government is covered; local governments and the social security fund are excluded. - No extra budgetary funds exist. - State guarantees for external borrowing to private and public sectors are included. - Publicly-guaranteed private debt is limited to the guarantee issued to the China National Petroleum Company (CNPC) for a loan to finance the refinery SORAZ to cover the government’s minority stake. - SOEs do not directly borrow abroad; central government on-lending captures SOE external borrowing in debt statistics (includes NIGELEC, SPEN, Niger Telecom, and ABK). - DSA cannot explicitly account for domestic SOE debt given lack of reliable data. - Authorities, with World Bank support (SDFP), will from 2023 regularly prepare and publish an annual portfolio report covering the largest SOEs (financial information and operational performance). - External debt is defined on a currency basis; creditors whose residency can be tracked are defined on a residency basis (example: BOAD classified as external). ### Contingent liability stress test design and calibrations - Coverage shock: kept at 0 percent of GDP for other elements of general government not captured, because: - Strong financial position of the social security fund (CNSS) removes material fiscal risks. - Authorities confirmed absence of extra-budgetary funds. - Local governments contract only short-term debt with the domestic banking sector, which is small. - SOE contingent liabilities shock: set at the default value of 2 percent of GDP to reflect risks from domestic borrowing. - PPP contingent liability: not incorporated because PPPs under the May 2018 law do not involve government financing; projects under previous PPP law are reflected in debt statistics when implemented but not yet paid. - Financial market contingent liability default value: 5 percent of GDP considered adequate given relatively low levels of credit to the economy. - Text Table 1 (selected values shown in source): - SoE's debt (guaranteed and not guaranteed by the government) default shock: 2.0 percent of GDP. - Financial market default value: 5 percent of GDP. - Total (2+3+4+5) (in percent of GDP): 7.0 ### Background on debt: stocks, composition, and recent evolution - PPG debt stood at 51.3 percent of GDP at end-2021. - PPG external debt made up 65.2 percent of total debt stock in 2021. - External public debt composition: - Multilateral creditors ~ four fifths of external debt (World Bank (IDA) largest, followed by BOAD and AfDB). - Official bilateral debt ~ one fifth of external debt. - External debt exposed to exchange rate risk: around one third of external debt. - Average effective interest rate on external debt in 2022: 1.0 percent. - Remaining maturity of external debt at end-2021: 20.9 years. - Domestic debt: - Mostly short- and medium-term Treasury securities held by banks in Niger or WAEMU. - Average remaining maturity of domestic debt: 5.2 years. - Average weighted interest rate on domestic debt at end-2021: 5.3 percent. - Domestic debt issuance remained almost flat in 2020–2021 despite larger financing needs due to a debt reprofiling operation and on-lending of the SDR allocation. - SDR allocation in 2021: US$180 million (equivalent to 1.2 percent of GDP) on-lent in CFAF and recorded as domestic debt for DSA purposes. - Debt service pattern: large share of amortization on domestic debt reflecting shorter maturity. - Policy support since pandemic: G20 DSSI and IMF CCRT. - DSSI amounted to 0.4 percent of GDP in 2020-21. - CCRT amounted to 0.3 percent of GDP through 2020-22. - Note on private external debt: compilation is challenged by data issues at BCEAO; IMF Statistics Department providing technical support. ### Underlying macroeconomic assumptions (baseline and projections) - Growth assumptions and pipeline: - Growth projected to recover in 2022 and be boosted after oil exports start; pipeline construction assumed completed by last quarter of 2023. - Long-run growth projected at 6.0 percent (in line with previous DSA and pre-pandemic average 5.9 percent over 2011-19). - Risks: - Main downside risk: delays in construction of oil pipeline affecting growth and fiscal/external positions. - Commodity price declines risk adverse effects on exports, revenue, and debt indicators. - Structural reforms and supports: - Improvements to tax policy and revenue administration, and mechanisms to support financial intermediation, are critical to enhance private sector development and reduce informality. - Ongoing reforms in education and social protection expected to improve human capital and long-run growth. - Inflation and exchange rate: - Inflation somewhat higher than previous DSA due to domestic food price increases and global commodity prices but relatively contained. - Exchange rate peg expected to keep inflation moderate over medium and long term. - Selected macroeconomic projections (from Text Table 2; values preserved exactly): - Real GDP growth (percent), DSA 2022: 7.1; 2023: 7.0; 2024: 13.0; 2025: 7.9; 2026: 6.1; 2027: 6.0; 2028-42: 6.0 - Inflation (CPI), DSA 2022: 4.3; 2023: 3.0; 2024: 2.5; 2025: 2.0; 2026: 2.0; 2027: 2.0; 2028-42: 2.0 - Primary fiscal balance (percent of GDP), DSA 2022: -2.6; 2023: -3.4; 2024: -3.7; 2025: -2.1; 2026: -1.4; 2027: -1.3; 2028-42: -1.3 (and -1.2 in last column) - Total revenue excluding grants (percent of GDP), DSA 2022: 11.2; 2023: 10.8; 2024: 10.8; 2025: 11.6; 2026: 12.8; 2027: 14.8; 2028-42: 15.0; 15.2; 16.1 (table columns show progressive values) - Exports of goods and services (percent of GDP), DSA 2022: 10.7; 2023: 16.6; 2024: 15.5; 2025: 15.2; 2026: 16.5; 2027: 26.6; 2028-42: 25.2; 24.5; 24.9; 20.6 - Oil export price (US dollars per barrel), DSA 2022: 58.2; 2023: 39.7; 2024: 65.9; 2025: 93.3; 2026: 81.2; 2027: 76.2; 2028-42: 72.4; 69.6; 67.4; 79.3 - Uranium price (Thousands of CFAF per kg), DSA 2022: 44.0; 2023: 48.7; 2024: 46.9; 2025: 70.6; 2026: 80.4; 2027: 80.2; 2028-42: 79.7; 79.2; 78.7; 78.7 - (Source: IMF staff calculations as shown in Text Table 2.) ### Fiscal consolidation, financing strategy, and borrowing terms - Fiscal consolidation path: - Framework assumes consolidation to reach WAEMU deficit norm by 2025 (three percent deficit target). - Emergency spending implemented due to acute food crisis and increased security spending; consolidation should prioritize revenue-enhancing measures and unwinding emergency spending while protecting priority social and infrastructure spending. - Emphasis on strengthening tax collection, eliminating tax exemptions, and enhancing tax system efficiency. - Completion of the new pipeline expected to boost revenue and support convergence to the WAEMU norm. - Financing strategy: - Authorities aim to limit reliance on domestic financing to extend maturities, reduce roll-over risk, and free bank space for private lending. - Concessional and semi-concessional external financing (including IDA under new terms) remain main financing sources. - Share of domestic sources in total budgetary financing: 42 percent in 2021 (excluding on-lending of SDR allocation); pre-COVID average 2013-19: 36 percent. - Medium-term projected share of domestic financing: around 40 percent. - Assumption: nominal increase in domestic debt issuance feasible given smooth access to regional market and investor appetite. - Long-run assumption: highly concessional donor support gradually declines as domestic financial market deepens. - Borrowing terms assumptions: - Foreign and domestic borrowing gradually shift to lower concessionality and longer maturities. - Domestic instruments assumed to shift from T-bills to medium- and long-term bonds. - Average interest rate on government bonds assumed at 5.7, 6.2, and 6.6 percent for bonds maturing in 1 to 3, 4 to 7, and over 7 years, respectively. - Interest rate on T-bills set to 5.3 percent. - DSA assumes spillover of tighter global financing conditions to regional market while maintaining broadly favorable conditions. ### Debt dynamics, forecast realism, and risk assessment - Debt trajectory drivers: - Total public debt evolution dominated by primary fiscal deficit and real GDP growth. - Unlike prior five years, contribution of growth projections to debt dynamics dominates unfavorable primary deficit contributions; public debt ratio stabilizes at around 45 percent of GDP. - External public debt projected to peak at 37.2 percent of GDP in 2022 and decline to 24.1 percent in 2042. - Forecast errors: - Past forecast errors for total public debt chiefly due to unexpected changes in residuals and primary deficits. - Current account and FDI drove errors in external debt forecasts. - Realism checks: - Projected three-year fiscal adjustment in primary balance (1.9 percentage points of GDP) lies around the top quartile of historical LIC adjustments (2 percentage points of GDP). - Fiscal adjustment justified by recovery from shocks, improvements in non-oil revenue mobilization, revenue boost from crude-oil exports, and unwinding of emergency measures. - Projected growth for 2022–2023 driven by recovery in agricultural production, resumption of infrastructure projects, and onset of oil exports; fiscal stance in 2022 moderately favorable for growth. - Public investment share in GDP similar across previous and current DSAs; private investment expected to scale up. ### Country classification and stress scenario determination - Debt-carrying capacity rating: “medium”. - Composite indicator (CI) value: 2.90 (based on October 2022 WEO vintage). - CI composition: CPIA score contribution 45 percent; international reserves contribution 62 percent; country and global real growth rates contributions 6 and 14 percent, respectively. - Medium debt-carrying capacity threshold: 2.69 < CI ≤ 3.05. *Source: IMF staff estimates and Niger authorities as presented in the provided DSA chapter.* ### 13. Besides the six standardized stress tests, there are two tailored stress tests applied: ### 13. Besides the six standardized stress tests, there are two tailored stress tests applied: ### Tailored stress tests - One tailored stress test combines contingent liabilities of a one-time debt shock (equivalent to 7 percent of GDP) to capture a scenario reflecting both contingent liabilities from SOEs (equal to the indicated standard level of 2 percent of GDP) and a need for bank recapitalization (equal to the indicated standard level of 5 percent of GDP). - The CPIA score is 3.4 in 2021. - The second tailored stress test is a commodity price shock. - The scenario captures the impact of a sudden one standard deviation decline in the price of the commodities the country exports. - Under the debt sustainability framework, countries with commodity exports accounting for at least 50 percent of total exports of goods and services over the previous three-year period are subject to the stress test. Commodities accounted for 75.0 percent of Niger exports of goods and services over the period 2018-20. ### External debt sustainability analysis — baseline dynamics and projections - Under the baseline scenario: - The PPG external debt-to-GDP ratio is expected to rise to 37.2 percent in 2022 owing to significant foreign borrowing to finance Niger’s economic and social development agenda, as well as the depreciation of the regional currency pegged to euro against the dollar. - It will follow a downward trajectory to settle at 24.1 percent at the end of the projection period in 2042 as higher growth materializes and fiscal adjustment is implemented. - These ratios are higher than in the previous DSA (previous DSA projected PPG external debt-to-GDP ratio of 32.2 percent in 2022 and 17.9 percent in the long run). - Total external debt displays a similar pattern—steadily declining to 30.7 percent of GDP in 2042. - Drivers and composition: - The non-interest current account deficit remains the main driver of these dynamics. - The goods and services deficit is projected to remain significant in 2022 reflecting heightened food imports and imports related to large projects (the Kandadji dam, a cement factory, a uranium mine, the oil export pipeline, and MCC-funded investments in agriculture), while it will be reduced thanks to the oil exports through the new pipeline. - Output from these projects is expected to improve the current account sharply in subsequent years when they come on stream. - Remaining drivers of external debt dynamics (other components of the capital account, reserve accumulation, valuation adjustments, price and exchange rate changes) are subsumed into the residual. ### External debt indicators and stress-test results - The PPG external debt indicators remain below their thresholds throughout the projection period under the baseline scenario, but the remaining margins for some indicators are small. - The PV of debt-to-GDP is projected to follow a gradual downward trend. - The PV-to-exports ratio remains slightly below the threshold in 2022 while it is projected to decline as exports strengthen due to prospective oil exports via a new pipeline. - With the G20 DSSI and the IMF’s CCRT phasing out, both debt service-to-exports and debt service-to-revenue ratios are only marginally lower than the respective thresholds in 2022 but expected to enter a downward trajectory in the medium- and long-run. - Stress test outcomes: - Two export-related indicators (the PV of PPG external debt-to-exports ratio and debt service-to-exports ratio) exceed their thresholds under the exports shock. - The commodity price shock temporarily brings the debt service-to-revenue ratio above its threshold. - Fiscal revenue will be more vulnerable to commodity price fluctuations as the economy increasingly relies on oil-related revenues (expected to climb to 3.8 percent of GDP in 2024). - The historical scenario would increase PV of debt-to-GDP and -exports ratios later in the projected period; this scenario includes large shocks such as droughts and floods and events and may overstate severity. ### Granularity assessment and space to absorb shocks - The granularity assessment suggests that the space to absorb shocks is limited in 2022 while the situation may become less tight in the medium- and long-run. - Under tests to qualify the moderate risk of external debt distress assessment, the PV of debt-to-exports ratio and debt service-to-revenue ratio currently indicate limited space in 2022 with particularly small space relative to thresholds for the latter indicator. - Limited policy space implies pressing needs to implement policy measures to buttress debt sustainability. - Over the medium-term, policy space is expected to open up as exports pick up and revenue mobilization reforms bear fruit. - The downward trajectory of the PV of debt- and debt service-to-exports ratios hinge on the new pipeline project, whereas the debt service-to-revenue ratio is driven by revenue mobilization reforms. ### Public debt sustainability analysis — projections and vulnerabilities - Public sector debt projections: - Public debt is projected to decline gradually in the medium- and long-run. - After a sizable increase compared to pre-pandemic levels, public debt is projected to decline to and stabilize at around 45.3 percent of GDP in the long run, mainly because of the resumption of economic growth and fiscal consolidation, aided by higher oil revenues. - Improved domestic revenue mobilization, higher spending efficiency, and better expenditure control, coupled with export diversification fostered by private sector growth, are expected to contribute to stabilizing the primary deficit. - Gradual shifts toward lower concessionality and longer maturities over the medium- and long-run would marginally increase interest costs, while the benefit of the extension of maturities lies in reducing rollover risks. - PV of public debt-to-GDP: - The PV of the public debt-to-GDP ratio remains below the benchmark in the baseline, though not in the event of an adverse commodity price shock or under the historical scenario. - The PV of public debt-to-GDP ratio is well below the benchmark of 55 percent of GDP in 2022 and is projected to gradually decline over the projection period under the baseline scenario. - A commodity price shock would set the PV of debt and debt-service ratios on a diverging path in the absence of compensating fiscal and other policy measures. ### Risk rating and rationale - Niger’s risk of external and overall debt is rated “moderate”, and debt is deemed sustainable. - Rationale: - No indicator for PPG external or public debt breaches its threshold under the baseline scenario. - Debt indicators remain on steady downward trajectories and overall public debt sustainability remains solid. - Medium- and long-term growth outlooks are favorable, supported by recovery from multiple shocks, strengthening of the export base due to the onset of crude oil exports in 2023, and implementation of revenue mobilization measures in the medium run. - Liquidity risk remains low since Niger, as a member of the WAEMU, can draw on the currency union’s pooled external reserves, delinking the ability to service foreign debt from exports at the national level. - Niger is expected to continue to benefit from significant financial assistance from donors over the next years to address development and security challenges. - In line with the Fund Debt Limits Policy (DLP), a debt limit on the new PPG external borrowing is embedded in program conditionality and is calibrated to build an adequate buffer to avoid a downgrade of the risk of debt distress. ### Policy recommendations and priorities - Domestic revenue mobilization: - Niger’s public debt relative to domestic revenues compares unfavorably to other WAEMU countries or Sub-Saharan Africa due to its limited revenue base. - Although additional oil revenues are expected in coming years, they should not be fully spent and should contribute to fiscal consolidation. - Non-oil revenue mobilization by reducing tax exemptions and broadening the tax base is of fundamental importance. - Limited space to absorb shocks and the risk of spillovers from global financial conditions increase the urgency of prompt implementation of revenue mobilization measures. - Fiscal risks and spending quality: - Possible mismanagement of large investments by SOEs could add to government debt. - Adequate project evaluation and attention to good governance practices are essential when building infrastructure. - Authorities should increase the efficiency of public spending, which remains low in Niger. - Economic diversification: - Horizontal policies to foster diversification — developing the local private sector, tackling informality, accumulating human capital through education — are of paramount importance. - External borrowing: - Until export prospects are more certain, prioritize external financing in the form of concessional loans and grants. - Favoring euro-denominated debt, given the CFAF's peg to the currency, can help reduce exchange rate risk. - Domestic borrowing: - Market communication is needed to increase the average tenor of issuances and thereby reduce refinancing vulnerabilities. - Implement a structural program of swaps of securities close to their maturity with securities of longer maturities. - Financing plan: - To avoid liquidity shortfalls and minimize associated financing costs, overall volumes of debt to be issued should be executed consistently with the annual borrowing plan. - Integration with the annual cash flow plan is essential. ### Authorities’ views - The authorities agreed with the conclusions of the DSA. - They were pleased that Niger’s moderate rating for debt distress is maintained despite consecutive shocks (intensified conflict in the region, severe climate-related shocks, and an acute food crisis). - They noted the role of sound macroeconomic policies and the positive contributions of concessional financing as well as prospective robust growth to contain debt vulnerabilities. *Source: IMF staff calculations and analysis as presented in the provided content unit.* ### 23. The authorities reiterated that the onset of oil exports through the new pipeline will scale ### 1nerea2023001 - 23. The authorities reiterated that the onset of oil exports through the new pipeline will scale up exports and increase oil-related revenue ### Economic outlook and oil-related prospects - The authorities reiterated that the onset of oil exports through the new pipeline will scale up exports and increase oil-related revenue with possible further upside risks to the outlook. - They emphasized ongoing reforms regarding non-oil domestic revenue mobilization will bear fruit in coming years, buttressing debt sustainability. - They noted strong growth potential of the country, which would be further strengthened under the new development strategy. ### Recent developments, fiscal impact, and financing needs - The security crisis and climate shocks in the Sahel region have imposed heavy burdens on populations and the economy in Niger. - Public spending was reprioritized and increased in 2022, resulting in an additional deficit of 0.2 percent of the GDP compared to projections at the time of the First ECF review. - To finance the deficit and respond to humanitarian needs, a financing gap estimated at $ 289 million should be filled. - Niger’s economic activity improved in 2022, supported by major investment projects, a 10-percent increase in agriculture production, and solid growth in secondary and tertiary sectors (including recovery in transport, trade, hotel, and restaurants). - Real GDP growth is projected at around 7 percent in 2022 and 2023. ### Debt sustainability analysis and stress-test assumptions - Note on stress-test financing: "All the additional financing needs generated by the shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA." - The DSA presents alternative scenarios and tailored stress tests (commodity price shocks, exports shocks, combined shocks, one-off depreciation, contingent liabilities), with the most extreme stress test defined as the test that yields the highest ratio in or before 2032. - The authorities remain committed to maintaining the reform agenda and preserving the country’s moderate risk of debt distress. ### Policy priorities and commitments - The authorities will spare no effort towards: - Preserving macroeconomic stability; - Addressing fragility of the state and insecurity; - Ensuring human capital investment; - Fighting poverty; and - Promoting good governance. - They remain firmly committed to maintaining the reform agenda on track and will continue to rely on IMF support for policy advice and capacity development in key macroeconomic policy and structural areas within the Fund’s mandate. *Statement by Mr. Sylla, Mr. N'Sonde, and Mr. Bangrim Kibassim on Niger — December 21, 2022; Figures, tables, and stress-test notes as presented in the IMF staff estimates and projections.* ### 1.4 percent in 2021 and to increase to13.0 percent in 2024 in the context of oil exports before ### 1nerea2023001 - 1.4 percent in 2021 and to increase to13.0 percent in 2024 in the context of oil exports before ### Macroeconomic outlook and projections - GDP and sectoral outlook: - Oil sector production is expected to increase next year and accelerate significantly over the medium term. - The 2,000-km oil export pipeline project from Agadem (Niger) to Sèmè-Kpodji (Benin) implemented by West African Oil Pipeline Company (WAPCO) is completed at 51 percent. - It will produce 110,000 barrel/day at its commissioning at end-2023. - Inflation and reserves: - Inflation is projected this year at 4.5 percent on annual average but should return to below the WAEMU convergence threshold of 3 percent thereafter. - Despite accommodative monetary policy stance, international reserves level was stable while inflation expectations were well anchored. - External sector: - Due to large food imports and investment projects, the current account deficit is anticipated to reach 14.4 percent and 13.4 percent of GDP in 2022 and 2023 respectively before falling to below 8 percent on average over the medium term. - Fiscal projections tied to oil: - An oil-driven increase in revenues is implied with growth of oil sector importance (reference to increase from 1.4 percent in 2021 to 13.0 percent in 2024 in the context of oil exports before reverting to more sustainable rates). ### Program performance (Implementation of the 2021-2024 ECF Arrangement) - Overall assessment: - The authorities’ firm commitments and renewed efforts helped to achieve a broadly satisfactory program implementation. - Performance criteria and benchmarks: - All performance criteria at end-June 2022 and end-September 2022 have been met except for: - Publication of a feasibility study for any investment project of more than CFAF 5 billion (structural benchmark). - Adoption of oil revenue management strategy (structural benchmark). - Ceiling on the present value of new public and publicly guaranteed (PPG) external debt (quantitative performance criterion) due to reclassification difficulties that led to higher-than-expected ratified project loans. - Indicative target for end-June and end-September on social spending and exceptional expenditures have been met with comfortable margins, and no exceptional spending occurred. - Requests to the Fund: - Authorities are requesting a waiver for non-observance of the missed performance criterion. - Authorities request modification of the continuous performance criteria on the contracting of external public debt and publicly guaranteed debt and on net domestic financing to reflect the revised macroeconomic framework. ### Structural fiscal reforms and PFM modernization - Institutional changes and capacity: - Ongoing fiscal reform extended to local collectivities; a directorate dedicated to local entities at the treasury has been created. - Although all local collectivities have public accountants, there is a need to reinforce their capacity to the level of those of the directorate general of the treasury (DGTCP). - Digitalization of payment systems: - Several procedures have been digitalized to improve delays of accounts operations and the operationalization of the treasury single account. - Regional electronic banking system GIM-UEMOA platform project is well advanced and will enhance the use of the digital system through instruments to be completed in January 2023. - Deployment and distribution of prepaid cards will accelerate the payment of social expenditures, including scholarships, pensions, and civil servants’ treatment. - “E-Tresor” led by the Treasury (DGTCP) comprises three modules for payments, customs, and banking operations to improve revenue and expenditure management and strengthen DGTCP as a public bank. - Other PFM reforms: - Double accounting system AE/CP reform for multiyear budgeting implemented in five pilot ministries (Ministries of agriculture; livestock; equipment; hydraulics and public health) will enhance control of external financing and contribute to operationalization of the organic law on finance laws. - AE/CP will be expanded to more ministries following favorable execution of the 2022 budget in pilot ministries. - Pilot project for deconcentrating budget scheduling in public health and education sectors is advancing; emphasis on internal organization and capacity building. - DGTCP will pursue regular evaluations, including assessing adequacy of staffing and ownership. ### Macroeconomic policies and reforms going forward - Overarching priorities: - Reinforce resilience and address fragility; further strengthen domestic revenue mobilization; promote financial inclusion; enhance efficiency in PFM; reinforce governance frameworks. - Preserve macroeconomic stability while pursuing development objectives in the 2022-26 PDES. - Digitalization is expected to play a central role. - Fiscal policy (planned in 2023): - Objectives: - Preserve sustainability of public finances through strengthened domestic revenue mobilization, spending prioritization, better targeting of vulnerable groups, and gradual reduction of fiscal deficit towards the WAEMU’s 3 percent of GDP convergence threshold by 2025. - Revenue measures under consideration: - New taxes on tobacco, gold, and oil products. - Adjustments in VAT, income, and investment taxes. - Consolidation of certified invoices, property tax, and land registration and advertising reforms. - Administrative reforms: - Simplify procedures, advance digitalization, ease tax disputes, strengthen controls, and fight customs fraud. - Public spending efficiency bolstered through digitalization and enhancement of payment systems. - Financial sector policy and reforms: - System structure and inclusion: - The authorities recognize that with 14 banks and 6 bank-like financial institutions, the size of the financial system is not optimal considering the population. - Priority on expansion of financial services and improvements in financial inclusion, particularly in rural areas. - Support measures include national financial education strategy, progress in digitalization, and implementation of recommendations from the central bank’s diagnostic on financial inclusion. - Financial vulnerabilities and corrective actions: - Emerging vulnerabilities include high credit concentration in the banking system and limited performance in the microfinance sector, translating into high non-performing loans (NPLs). - Authorities will pursue consolidation plan and reinforce supervisory and regulatory frameworks to strengthen the microfinance sector. - Oil resource management: - Policy objectives: - Effective management of oil resources with emphasis on transparency, accountability, intergenerational equity, and prudent fiscal policy insulated from oil volatility. - Technical assistance and priorities: - Authorities welcome IMF technical assistance and staff recommendations. - Four priority pillars resulting from TA mission conclusions have implications for budget execution, PFM, and economic diversification to avoid overreliance on oil. - Need to deepen discussions and scale up expertise for establishing non-oil primary balance and a stabilization fund. - Authorities request a second IMF technical assistance on oil revenue management strategy. - Governance reforms: - Priorities: - Reduce incentives for corruption, strengthen rule of law, improve governance frameworks, and promote transparency in public finance. - Recent and planned actions: - Publication of information on beneficial owners of legal entities awarded non-competitive public contracts on the public procurement regulatory authority website. - Decree allowing the High Authority on protection of personal data to publish information on senior officials will be adopted soon. - New AML/CFT framework adopted to address shortcomings. - Committee established for monitoring implementation of recommendations of the COVID-19 audit on spending. - Progress in publishing budget laws and related documents, expanding TSA implementation to territorial collectivities, digitalizing administrative procedures, and interconnecting customs and tax IT systems. - Climate strategy and other structural reforms: - Climate risks and strategy: - Climate shocks pose an existential threat and exacerbate challenges from a growing population, fragility, poverty, inequalities, and volatile security conditions. - New strategy for adaptation to climate change aims at building resilience, notably in the agriculture sector, to preserve long-term growth and allow efficient implementation of the Nationally Determined Contribution. - Green economy and human capital: - With development partners support, pursue efforts towards promoting a green economy as a key component of climate change and desertification strategy. - Strengthen financial inclusion, capacity building, education quality, gender equality, and food and territorial security in service of the 2022-26 PDES transformative program. - Authorities welcome the newly agreed CD strategy and the Selected Issues paper with recommendations to enhance resilience against shocks and increase economic potential. ### Key risks, challenges, and concluding remarks - Key risks and constraints: - Exposure to insecurity in the Sahel region and effects of climate change. - Limited capacity across government institutions. - Emerging financial vulnerabilities in banking and microfinance sectors. - Authorities’ stance and recent donor engagement: - Authorities show determination to overcome challenges and achieve development objectives while preserving macroeconomic stability. - Donor engagement: authorities held a donor roundtable on December 5-6, 2022, in Paris with pledges that exceeded expectations; authorities request development partners and the private sector to follow through with commitments. - Fund engagement request: - Authorities seek Executive Board support for their requests and completion of the second review under the ECF given elevated financing needs and the Fund’s catalytical role. *Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1nerea2023001.pdf* --- _Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1nerea2023001.pdf_