## _cr12109 — Executive Summary (IMF staff report excerpt)

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### Program request and staff recommendation
- Authorities request a three-year arrangement under the Extended Credit Facility (ECF) in the amount equivalent to SDR 78.96 million (120 percent of quota), covering 2012–Q1 2015.
- Staff recommends approval of a new three-year ECF arrangement based on the authorities’ policy intentions.

### Macro outlook, recent developments, and vulnerabilities
- Growth and production:
  - GDP growth for 2011 estimated at about 2½ percent (revised down from 4 percent).
  - Real GDP growth projected to be about 13½ percent in 2012 and around 7 percent per year over the medium term.
  - Non-resource GDP projected to expand by about 6 percent per year.
  - Ongoing mining investments projected to double uranium exports by 2016.
  - Domestic oil production came onstream in late 2011; exports of petroleum products started in January 2012.
- Food and inflation:
  - Almost half of the population may be affected by food shortages in the report year.
  - Domestic food aid program costs estimated at CFAF 110 billion (3¼ percent of GDP).
  - Cereal deficit estimated at 692,000 metric tons (about 20 percent of production); Temporary Response Plan targets 750,000 vulnerable people.
  - Consumer price inflation: 1½ percent (end-of-period) in 2011; projected 4½ percent (end-of-period) in 2012 assuming a normal harvest; projected to hover around 2 percent in 2013 and thereafter assuming normal harvests.
- External and monetary:
  - Current account deficit projected to decline from about 28½ percent of GDP in 2011 to some 10½ percent of GDP in 2016.
  - Broad money growth in 2011 estimated at 6½ percent.
  - Balance of payments pressures increased late in 2011 following devaluation rumors in the CFA franc zone.
- Vulnerability to shocks (empirical results):
  - Climatic and external shocks explain 60 percent of real GDP fluctuations.
  - Exchange rate shocks explain more than 50 percent of consumer price variance.
  - Oil price shocks take three years to become a significant driver of consumer price fluctuations and are persistent for about seven to eight years.
  - A one-standard deviation climatic shock has an immediate large impact on output in year 1; effect vanishes after four to five years.
  - A positive one-standard deviation aid shock expands output in the first three years, peaking in year 2.

### Fiscal strategy, public finances, and financing needs
- Medium-term fiscal stance and targets:
  - Government intends to cap the overall fiscal deficit (commitment basis) at about 12½ percent of GDP while seeking grants and concessional loans.
  - Authorities intend to keep the basic fiscal deficit below 1.5 percent of GDP during the program period; basic fiscal deficit projected to decline to less than 1 percent of GDP in 2012 (from 4 percent in 2011).
  - For 2012, overall fiscal deficit projected to remain unchanged at 11½ percent of GDP.
- Revenue and expenditure projections:
  - Total revenue projected to rise by about 3½ percentage points of GDP to more than 19 percent of GDP in 2014.
  - Total revenue in 2012 projected to rise by more than 2¼ percent of GDP.
  - Total expenditure in 2012 projected to rise by a similar amount; discontinuation of fuel subsidy (equivalent to 1.2 percent of GDP) allows a 19 percent increase in social spending; recruitment of 4,000 teachers in 2012.
- External financing needs and donor support:
  - Gross external financing needs in 2012 projected at some CFAF 462 billion (up from CFAF 357 billion budgeted in 2011).
  - Project aid and sectoral assistance (including aid to relieve food shortages) projected at CFAF 366 billion in 2012.
  - Budget aid for 2012 projected at CFAF 79 billion, including CFAF 30 billion from the World Bank, CFAF 26 billion from the European Union, and CFAF 23 billion from other donors.
  - Remaining financing gap of some CFAF 17 billion (also cited as CFAF 16.7 billion elsewhere) could be covered by the IMF under the ECF.
- Reserve build-up and cash management:
  - Authorities plan a build-up of reserves at the BCEAO in 2012 of about CFAF 37 billion (about 1 percent of GDP); freely available government reserves at end-2011 stood at CFAF 20 billion.
  - Program envisages rebuilding government deposits at the central bank to facilitate budget execution and enhance resilience.

### Natural resources management and associated policies
- Governance and transparency:
  - 2010 Constitution clause requires publication of all new exploration and exploitation contracts in mining.
  - Niger declared EITI compliant in March 2011.
  - Interministerial Committee for oversight to be reactivated in 2012 to improve information flow and policy consistency.
- Institutional and capacity measures:
  - Complete by end-2012 a strategic study on the role of the state in the natural resource sector; discuss conclusions with IMF staff before new initiatives.
  - Review the petroleum and mining tax regimes and Investment Code in 2012; comprehensive review to begin in 2012 with World Bank collaboration.
  - Strengthen capacity to negotiate contracts and conduct tax audits; seek outside expertise in 2012 for contract negotiation and tax audits, including hiring firms to help negotiate uranium prices for 2013.
- Policy on nonconcessional borrowing:
  - Nonconcessional borrowing to be permitted only for well-assessed, high-yield commercial and infrastructure projects that generate sufficient government revenue to cover related debt service.
  - Program initially sets a zero ceiling on medium-term nonconcessional borrowing; staff may propose a non-zero ceiling at first review if justified by project information and financing terms.
  - Space for nonconcessional borrowing to be reassessed regularly using updated debt sustainability analyses.

### Public financial management, tax, and customs reforms
- PFM reform program (2012–14) prepared with World Bank support; reflects IMF FAD recommendations.
- Budget execution and treasury measures for 2012 include:
  - Expedite quarterly expenditure authorizations for line ministries based on cash management and commitment plans.
  - Limit use of exceptional expenditure procedures.
  - Close irregular and dormant government bank accounts as step toward a single treasury account.
  - Compile comprehensive quarterly budget reports and prepare sectoral medium-term expenditure plans.
- Tax and customs administration reforms:
  - Three-year reform programs adopted in 2010; to be updated in 2013.
  - 2012 priorities: strengthen controls of tax exemptions and VAT credits; step up audits of mining and petroleum companies (initially with auditing firm support).
  - Customs to use product valuation data from pre-inspection company; contract includes installation of scanners.
- Tax policy actions:
  - Interim tax measure: effective January 1, 2012, impôt minimum forfaitaire rate increased from 1 percent to 2 percent for commercial activities and service providers.
  - Excise duties extended to coffee and tourism vehicles rated 13 hp or above.
  - End of ISB exemption for some mobile telephone companies anticipated to increase revenue.
  - Interim revision of Investment Code in first half of 2012 to exclude exemptions to already-established telecommunication companies when introducing new technologies (Council of Ministers adoption structural benchmark for end-June).

### Financial sector and private sector development
- Financial sector context and objectives:
  - Private sector bank credit as a percent of GDP well below sub-Saharan Africa averages; access to longer-term credit and use of bank accounts limited.
  - A comprehensive five-year financial sector development plan completed February 2012 (drawing on 2008 FSAP).
  - Financial sector strategy objectives (to be achieved by 2016) include portfolio risk reduction, stress tests, enhanced supervision of MFIs, promoting credit to rural sector and SMEs, phone-banking and electronic banking, and facilitating housing finance via legal reforms.
- Prudential status (end-November 2011):
  - Six out of ten commercial banks did not meet minimum liquidity standards.
  - Two banks did not meet capital requirements.
  - One bank exclusively Nigerien-owned; remaining banks are subsidiaries of regional/foreign institutions.
- Business climate:
  - Niger ranked 173 out of 183 countries in the World Bank’s Doing Business Indicators (2011).
  - 2012 reforms: reorganize National Council of private investors; revise Investment Code; introduce trade-facilitating measures; prepare PPP framework.

### Program modalities, conditionality, and monitoring
- ECF arrangement design and scheduling:
  - Requested amount: SDR 78.96 million (120 percent of quota); to be disbursed in seven equal installments of SDR 11.28 million each.
  - First disbursement: SDR 11.28 million upon Executive Board approval (March 16, 2012).
  - Subsequent scheduled disbursements (amount and exact condition/date preserved):
    - SDR 11.28 — Observance of the June 30, 2012 performance criteria, and completion of the first review under the agreement — November 1, 2012
    - SDR 11.28 — Observance of the December 31, 2012 performance criteria, and completion of the second review under the agreement — May 1, 2013
    - SDR 11.28 — Observance of the June 30, 2013 performance criteria, and completion of the third review under the agreement — November 1, 2013
    - SDR 11.28 — Observance of the December 31, 2013 performance criteria, and completion of the fourth review under the agreement — May 1, 2014
    - SDR 11.28 — Observance of the June 30, 2014 performance criteria, and completion of the fifth review under the agreement — November 1, 2014
    - SDR 11.28 — Observance of the December 31, 2014 performance criteria and completion of the sixth review under the agreement — March 10, 2015
  - Proposed arrangement effective March 2012 with semi-annual reviews; proposed first review: November 2012; second review: May 2013.
- Quantitative performance criteria, continuous PCs, and indicative targets:
  - Performance criteria at end-June and end-December 2012; continuous PCs and indicative targets for end-March and end-September 2012.
  - Indicative target excerpts (cumulative from December 31, 2011) preserved as in source:
    - Net domestic financing of the government: -8.4-8.4-35.6-45.0
    - Reduction in domestic payment arrears of government obligations: -1.9-4.8-7.2-10.0
    - Basic budget balance (commitment basis, excl. grants): 5.012.5-14.8-23.6
    - Total revenue: 116.4275.6440.5606.0
    - Spending on poverty reduction: 58.2139.8243.2335.2
  - Continuous quantitative PCs include zero tolerances on accumulation of external payments arrears and on new nonconcessional external debt with maturities of 1 year or more (entries preserved as 0.00.00.00.0).
- Structural benchmarks (selected, exact dates preserved):
  - Compile comprehensive quarterly budget reports (submit to Fund staff within 6 weeks) — Quarterly.
  - Complete an inventory of bank accounts held by government entities and agencies — 30-June-12.
  - Give all known importers a tax identification number (TIN) and submit report on implementation — 30-June-12.
  - Adoption by Council of Ministers of Investment Code revision to exclude exemptions to already-established telecom companies — 30-Sept-12.
  - Close irregular and dormant bank accounts — 30-Sept-12.
  - Complete interface between Directorate General of the Budget and Directorate General of the Treasury and Government Accounting — 31-Dec-12.
- Reporting and transparency commitments:
  - Government to provide extensive monthly, quarterly, and annual data per Technical Memorandum of Understanding (Niamey, December 20, 2011) with specified reporting lags (many within six weeks; some within four or eight weeks as specified).
  - Government commits to provide any draft contracts in mining and petroleum sectors involving financial participation or guarantee of the government; any new information on mining and petroleum sectors; and any study or official report on Niger's economy within two weeks of publication.

### Key macro-fiscal numbers (selected figures preserved verbatim from tables)
- National program duration: "three-year arrangement under the Extended Credit Facility (ECF) covering 2012 – Q1 2015"
- Financial operations (Billions of CFA francs, 2011–16 sequence preserved):
  - Total revenue: "363.6   385.6 445.0 606.0 693.0 771.0 870.0 963.2"
  - Tax revenue: "343.0   361.8 423.6 539.8 657.0 732.2 830.0 921.2"
  - Total expenditure and net lending: "609.9   584.1 770.9 994.7 1152.1 1276.6 1391.2 1512.8"
  - Capital expenditure and net lending: "309.1   217.7 350.5 582.4 658.5 720.2 767.6 835.3"
  - Overall balance (commitment): "-246.3  -198.5 -325.9 -388.7 -459.1 -505.6 -521.2 -549.6"
  - Basic balance: "-100.9    -80.8 -119.1 -23.7 -57.0 -59.4 -37.4 -31.7"
  - Overall balance (cash): "-260.2  -210.9 -333.9 -398.7 -474.1 -520.6 -536.2 -564.6"
- Natural resources revenue (Billions of CFA francs, 2011–16 sequence):
  - "43.6 45.5 55.4 129.5 162.6 188.4 237.3 257.7"
  - Of which uranium revenue: "43.6 45.5 55.4 70.4 91.1 115.8 163.7 175.3"
  - Non-natural resources revenue: "320.0   340.1 389.6 476.5 530.4 582.6 632.7 705.4"
- IMF program cashflows (SDR millions, selected sequences preserved):
  - Net use of IMF credit: "3.2 -0.6 18.4 17.1 15.7 3.8 -5.0 -4.8 -8.0 -11.1 -15.0 -15.8 -14.7 -10.2"
  - Disbursements: "3.3 0.0 22.6 22.6 22.6 11.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0"
  - Repayments and repurchases: "0.1 0.6 4.2 5.5 6.9 7.5 5.0 4.8 8.0 11.1 15.0 15.8 14.7 10.2"

### Staff appraisal and policy recommendations (key judgments)
- Program balances expanding development spending with maintaining debt sustainability; public investment expansion should be financed primarily from higher domestic revenue and concessional project financing.
- Rapid progress needed in strengthening tax and customs administration and implementing tax reforms.
- Nonconcessional loans may be needed for some large projects but should be limited to well-assessed, high-yield projects generating sufficient revenue to cover debt service.
- Program plans a significant build-up of government reserves at the central bank in 2012 to enhance budget flexibility and resilience.
- Staff highlights Niger’s exceptional vulnerability to exogenous shocks; this vulnerability may rise as natural resource exports gain importance.
- Staff recommends capacity-building assistance from international financial institutions and donors given administrative capacity constraints.

### Key commitments and safeguards
- Letter of Intent dated "February 28, 2012" requests approval of the three-year ECF arrangement and first disbursement and commits the government to consult with the IMF on additional measures and to provide timely information per the Technical Memorandum of Understanding.
- Government commits not to introduce or increase restrictions on payments and transfers for international current transactions without IMF prior approval and to adhere to reporting obligations specified in the TMU.

*Source: Executive Summary and selected excerpts from IMF staff report and Memorandum of Economic and Financial Policies (February 28, 2012; March 2012).*

### Executive Summary ......................................................................................................

### _cr12109 - Executive Summary

### Key points and program request
- The authorities are requesting approval of a three-year arrangement under the Extended Credit Facility (ECF), in the amount equivalent to SDR 78.96 million (120 percent of quota), in support of their economic and financial program for 2012–Q1 2015.
- Based on the authorities’ policy intentions, the staff recommends approval of a new three-year ECF arrangement.

### Background
- A democratically-elected government took office in April 2011 following a military coup in early 2010.
- The new government adopted an ambitious medium-term development program to use rising natural resource revenue to finance public investment in infrastructure, agriculture, health care, and education, and is preparing comprehensive plans for financial and private sector development.
- The program builds on the government’s medium-term development strategy and draws on lessons of the Ex Post Assessment (Executive Board, December 2, 2011).

### Recent developments and medium-term outlook
- Economic growth and agriculture:
  - GDP growth for 2011 is now estimated to be about 2½ percent, down from the 4 percent projection during the Article IV consultation.
  - Economic activity recovered in late 2010 but slowed in the second half of 2011 due to a downturn in agricultural production following less-than-normal rainfall.
- Food insecurity:
  - Almost half of the Nigerien population may be affected by food shortages in the year of the report.
  - Domestic food aid program costs are estimated at CFAF 110 billion (3¼ percent of GDP).
  - Box 1: The cereal deficit is estimated at 692,000 metric tons (about 20 percent of production). A government-led “Temporary Response Plan for Vulnerable People, 2011-12” targets the immediate needs of 750,000 vulnerable people.
- Inflation and prices:
  - Consumer price inflation remained stable in 2011 at 1½ percent (end-of-period).
  - CPI inflation is projected to accelerate to 4½ percent (end-of-period) in 2012 assuming a normal harvest, then fall in 2013.
- Fiscal and monetary developments:
  - Fiscal policy remained on track in 2011; the target for the basic fiscal deficit (4¼ percent of GDP) was achieved.
  - Broad money growth in 2011 is estimated at 6½ percent.
  - Rapid expansion of bank credit to the private sector (mining and telecommunication sectors) accompanied a steady decline in net foreign assets of the banking system.
  - Balance of payments pressures increased late in 2011 following devaluation rumors in the CFA franc zone.
- Natural resource outlook and growth projections:
  - Ongoing mining investments are projected to lead to a doubling of uranium exports by 2016.
  - Domestic oil production came onstream in late 2011; exports of petroleum products started in January 2012.
  - Real GDP growth is projected to increase to about 13½ percent in 2012 and remain at around 7 percent per year over the medium term.
  - The current account deficit is projected to decline from about 28½ percent of GDP in 2011 to some 10½ percent of GDP in 2016.
  - Assuming normal harvests, inflation is projected to hover around 2 percent in 2013 and the years thereafter.

### Discussions for a new ECF-supported program
- Program objectives:
  - Maintain macroeconomic stability while increasing resilience to shocks.
  - Strengthen public finance and debt management.
  - Put in place a transparent legal and supervisory framework for the mining and petroleum sectors.
  - Support private and financial sector development.

- Main elements of the authorities’ program (from Letter of Intent and MEFP):
  - Create fiscal space for rising development spending while maintaining external debt sustainability; consider nonconcessional borrowing only for well-assessed, high-yield commercial and infrastructure projects that will generate sufficient government revenue to cover debt service related to the projects.
  - Rebuild government deposits at the central bank to facilitate budget execution and enhance resilience to exogenous shocks.
  - Strengthen public finance and debt management through improvements in budget execution and treasury management; measures to strengthen domestic revenue; and a reform of the institutional framework for debt management. The authorities are to strengthen their technical and analytical debt management capacities.
  - Establish a sound, transparent supervisory and legal framework for the natural resource sector.
  - Improve the business environment, including reforms aimed at sustaining the stability of the financial sector and increasing access to financial services.

A. The Government’s Medium-Term Growth Strategy
- The government’s strategy (President’s development program and General Policy Declaration of June 16, 2011) rests on:
  - Substantial increases in public investment in infrastructure, agriculture, health, and education.
  - Measures to face rising security threats in the region.
  - A comprehensive program for financial and private sector development.
- The Sustainable Development and Inclusive Growth Strategy (new poverty reduction strategy) is to be completed by end-2012.

B. Fiscal policy
- Fiscal framework and targets:
  - The government intends to cap the overall fiscal deficit (commitment basis) at about 12½ percent of GDP while seeking grants and concessional loans to cover financing needs.
  - Total revenue is projected to rise by about 3½ percentage points of GDP to more than 19 percent of GDP in 2014, aided by rising oil receipts and strengthened domestic revenue.
  - The revenue increase will permit substantial increases in development outlays and efforts to attract foreign financing for infrastructure.
- 2012 budget specifics:
  - Total revenue in 2012 is projected to rise by more than 2¼ percent of GDP, reflecting new oil receipts, strengthened tax and customs administration, and expiry of costly profit tax exemptions.
  - Total expenditure in 2012 is projected to rise by a similar amount. Discontinuation of the fuel subsidy (equivalent to 1.2 percent of GDP) allows a 19 percent increase in social spending; the public wage bill will increase to accommodate the recruitment of 4,000 teachers in 2012.
  - The overall fiscal deficit in 2012 is projected to remain unchanged from 2011, at 11½ percent of GDP.
  - The basic fiscal deficit is projected to decline to less than 1 percent of GDP in 2012, from 4 percent in 2011.
- Central bank reserves and resilience:
  - The authorities plan a build-up of reserves at the BCEAO in 2012 of about CFAF 37 billion (about 1 percent of GDP). At end-2011, freely available government reserves at the BCEAO stood at CFAF 20 billion.
  - Higher reserves are intended to facilitate expenditure planning and strengthen capacity to support the poorest during adverse conditions.
- Fiscal stabilization:
  - Over time, the authorities will consider introducing a fiscal stabilization mechanism to address fluctuations in natural resource revenue, particularly when new petroleum and uranium projects come onstream (currently envisaged for 2015).

Box 2. Update on Oil Production and Pricing (summarized facts)
- Crude production from Agadem started towards the end of 2011; crude is pumped to the Soraz refinery at Zinder.
- About one third of refined products are for the domestic market; SONIDEP handles marketing.
- In November 2011 crude was priced at $67 a barrel for a three-month period; refined products were fixed at CFAF 336 per liter for gasoline and CFAF 340 for diesel for six months, after which prices will be set by a formula linked to world market prices.
- New domestic refined-product prices are about 14 percent to 17 percent below equivalent import prices; the implicit subsidy is projected in 2012 at about CFAF 4 billion a year (less than 0.1 percent of GDP). This replaces the explicit special indirect tax cuts of CFAF 33 billion in 2011 (1¼ percent of GDP), except for the subsidy on imported lamp oil.
- Starting in 2015, Niger could produce and export an additional 60,000 barrels of crude a day, sustained for 3–5 years given available reserves, then gradually declining over 50 years; export via the Chad-Cameroon pipeline would require a 600 km connection.

*Source: Executive Summary, _cr12109 - Executive Summary.*

### 18.      The government’s medium-term fiscal framework is based on the assumption of

### _cr12109 - 18. The government’s medium-term fiscal framework is based on the assumption of

### Medium-term fiscal framework and external financing
- The framework assumes a steady rise in foreign financing in the coming years.
- Budget aid from multilateral and bilateral donors in 2012–14 is assumed to remain roughly stable at the level realized in 2011.
- Authorities expect a substantial increase in external financing for public infrastructure projects, including transportation, electricity generation, and agricultural irrigation.
- Gross external financing needs in 2012 are projected at some CFAF 462 billion, up from a budgeted CFAF 357 billion in 2011.
- Project aid and sectoral assistance (including aid to relieve food shortages) are projected at CFAF 366 billion in 2012.
- Budget aid for 2012 is projected at CFAF 79 billion, including:
  - CFAF 30 billion from the World Bank
  - CFAF 26 billion from the European Union
  - CFAF 23 billion from other multilateral and bilateral donors
- The remaining financing gap of some CFAF 17 billion could be covered by the IMF under the ECF.

### Vulnerability to shocks (Box 3: Niger’s Vulnerability to Shocks)
- Empirical results:
  - Climatic and external shocks explain 60 percent of real GDP fluctuations in Niger.
  - A one-standard deviation climatic shock has an immediate and large impact on output in the first year, with the effect vanishing after four to five years.
  - A positive one-standard deviation aid shock leads to an expansion of output in the first three years, with the highest effect occurring during the second year.
- Inflation and shock drivers:
  - Exchange rate shocks explain more than 50 percent of consumer price variance.
  - A one standard deviation positive shock to the exchange rate (a depreciation) triggers a strong but short-lived increase in inflation.
  - Oil price shocks take three years to become a significant driver of consumer price fluctuations and are persistent, lasting about seven to eight years before fading away.
  - Climatic shocks have a relatively small impact on consumer prices, possibly due to mitigating and administrative measures in case of drought.
- Note: This box is based on a working paper under preparation by Mesmin Koulet-Vickot (IMF African Department).

### Nonconcessional borrowing policy and debt management stance
- Authorities and staff agreed nonconcessional borrowing would be warranted only for well-assessed, high-yield commercial and infrastructure projects that generate sufficient government revenue to cover related debt service.
- As projects meeting this requirement were not fully documented, the program plans a zero ceiling on medium-term nonconcessional borrowing.
- Staff intends to propose a non-zero ceiling at the time of the first review if justified by information on new projects and financing terms.
- The space for nonconcessional borrowing will be regularly reassessed using updated debt sustainability analyses.

### Strengthening public finance and debt management
- A comprehensive action plan for public finance management reforms in 2012–14 was prepared with World Bank support and reflects IMF FAD recommendations in 2011 on budget and treasury management; tax and customs administration; and tax policy.
- Budget execution and treasury management measures for 2012 include:
  - Expediting quarterly expenditure authorizations for line ministries based on cash management and commitment plans.
  - Limiting the use of exceptional expenditure procedures.
  - Closing irregular and dormant government bank accounts as a step towards establishing a single treasury account.
  - Improving monitoring of the expenditure chain and compiling comprehensive quarterly budget reports.
  - Preparing sectoral medium-term expenditure plans following the three-year medium-term expenditure framework used for the 2012 budget.
- Tax and customs administration reforms:
  - Three-year reform programs adopted in 2010 aim to broaden the tax base, improve compliance, reduce exemptions, and strengthen risk management; programs to be updated in 2013.
  - 2012 priorities: strengthen controls of tax exemptions and VAT credits; step up audits of mining and petroleum companies (initially with auditing firm support).
  - Customs administration to apply existing control mechanisms more actively and better use product valuation data from a trade pre-inspection company; contract includes installation of scanners.
- Tax policy:
  - Key medium-term objective: bring tax exemptions under the Investment Code in line with best practices.
  - Authorities plan to revise the code in 2012 to exclude extending exemptions to already-established telecommunication companies when they introduce new technologies.
  - A comprehensive review of the code will begin in 2012 in collaboration with the World Bank.
- Debt management institutional changes:
  - Overhaul planned for 2012: concentrate all debt management activities at the Debt Directorate.
  - Strengthen technical and analytical debt management capacities at the Debt Directorate.
  - As of January 2012, all proposals for new government loans or guarantees are subject to approval by the National Debt Management Committee.

### Natural resources management
- High priority given to transparency in exploration, exploitation and trading activities; 2010 Constitution clause requires publication of all new exploration and exploitation contracts in the mining sector.
- Niger declared EITI compliant in March 2011.
- Planned steps:
  - Complete by end-2012 a strategic study on the role of the state in the natural resource sector to analyze options for state involvement and supervision; discuss conclusions with IMF staff before new initiatives.
  - Review the tax regime (including exemptions) for the natural resource sector contained in the petroleum and mining codes.
  - Reactivate in 2012 the Interministerial Committee for oversight of the natural resource sector to improve information flow and policy consistency.
  - Strengthen capacity to negotiate contracts and conduct tax audits in the natural resource sector over the medium term; IMF technical assistance requested.
  - Seek outside expertise in 2012 for contract negotiation and tax audits, including hiring reputable firms to help negotiate uranium prices for 2013 and conduct comprehensive fiscal audits of mining companies.

### Financial sector reforms and private sector development
- Financial intermediation is low by international standards:
  - Private sector bank credit as a percent of GDP is well below sub-Saharan Africa averages.
  - Use of bank accounts by the general public is uncommon.
  - Access to longer-term bank credit is limited; microfinance institutions have limited market penetration.
- A comprehensive five-year development plan for the financial sector was completed in February 2012, drawing on the 2008 FSAP and including:
  - Legal framework improvements (including mortgages and guarantees), loan recovery simplification, judicial system measures, training for bank employees, and a publicity campaign to increase public engagement with the financial sector.
  - Donor assistance sought to finance longer-term bank credits to SMEs.
- Financial sector strategy objectives (to be achieved by 2016) include:
  - Increase stability and transparency through portfolio risk reduction, stress tests, and enhanced supervision of MFIs.
  - Deepen the financial sector by promoting credit to the rural sector and SMEs, developing new financial products (including agricultural risk insurance), introducing phone-banking and electronic banking, and providing technical assistance on accounting and business planning.
  - Facilitate housing finance via legal reforms to land titles and mortgages, strengthening mortgage guarantee frameworks, and improving land registry efficiency.
  - Reinforce capacity through training and public awareness on payment systems.
- Banking sector prudential status as of end-November 2011:
  - Six out of the ten commercial banks did not meet minimum liquidity standards.
  - Two banks did not meet capital requirements.
  - Of the ten banks, one has exclusively Nigerien ownership; the remaining banks are subsidiaries of regional and other foreign institutions.
- Business climate reforms:
  - Niger ranked 173 out of 183 countries in the World Bank’s Doing Business Indicators (2011).
  - 2012 plans: reorganize the National Council of private investors; revise the Investment Code; introduce trade-facilitating measures; prepare a framework for public-private partnerships.
- Governance measures:
  - Government replaced a large number of public administration officials in response to corruption allegations.
  - Plans to strengthen application of public procurement regulations.

### Program modalities, conditionality, and risks
- Proposed three-year program supported by access to SDR 78.96 million (120 percent of quota), to be disbursed in seven installments.
- Proposed arrangement effective in March 2012 with semi-annual reviews.
- Program evaluation and conditionality for 2012:
  - Performance criteria (PCs) at end-June and end-December 2012.
  - Continuous PCs.
  - Indicative targets for end-March and end-September 2012.
  - Structural benchmarks in areas critical for program success.
- Structural conditionality for 2012 takes account of government reform timeframes; many measures are well advanced.
- Program conditionality in natural resource management and financial sector development could be considered for the second year; World Bank intends conditionality on business climate measures in development policy operations under preparation.
- Risks:
  - Niger’s capacity to repay the IMF is assessed as adequate, though program implementation has downside risks.
  - Fiscal policy implementation could be affected by unexpected shocks, including weather-related shocks and sharp declines in uranium and petroleum prices.
  - Worsening regional security could affect growth and investment prospects.
  - Given Niger’s recent move from low risk to moderate risk of debt distress, preventing further deterioration of debt sustainability indicators is important.

### Staff appraisal (key judgments and recommendations)
- The 2012–14 program builds on the growth strategy adopted in 2011 and EPA recommendations; many planned reforms, particularly in public financial management and the financial sector, are in an advanced stage of preparation.
- Authorities’ reform orientation supports prospects for significant progress, but administrative capacity constraints may delay implementation of reforms and the public investment program—underscoring the need for stepped-up capacity-building assistance from international financial institutions and donors.
- Fiscal stance balances expanding development spending with maintaining debt sustainability:
  - Public investment expansion should be financed primarily from higher domestic revenue (including from natural resources) and concessional project financing.
  - Rapid progress needed in strengthening tax and customs administration and implementing tax reforms.
  - Program envisages steps to ensure inclusion only of high-return projects in the investment program.
- Nonconcessional loans may be needed for some large projects but should be limited to well-assessed, high-yield projects that generate sufficient revenue to cover debt service.
- The program plans a significant build-up of government reserves at the central bank in 2012 to provide more flexibility in budget execution and bolster resilience to exogenous shocks.
- Niger remains exceptionally vulnerable to exogenous shocks; this vulnerability may rise as natural resource exports gain importance.

*Source: IMF staff report content provided in the supplied PDF excerpt.*

### 43.      Effective exploration of natural resources requires an overhaul of the

### _cr12109 - 43.      Effective exploration of natural resources requires an overhaul of the

### Natural resource sector: supervisory and legal framework
- Recommendation: Overhaul the supervisory and legal framework for the natural resource sector.
- Objectives of the new framework:
  - Clarify the future role of the state in natural resource projects.
  - Ensure optimal revenue collection from this sector.
  - Ensure full transparency in regulation.
- Implementation planning:
  - Authorities plan to "flash out reform proposals in 2012."
  - IMF staff: ready to provide technical assistance.

### Economic diversification, financial sector, and business climate
- Staff welcomes authorities’ plans to develop the financial sector and improve the business climate; these reforms are described as "mutually reinforcing."
- Rationale:
  - Ongoing investments in the natural resource sector will significantly increase exports and government revenue, but direct employment effects are expected to remain limited.
  - Rapid progress in reforms developing the financial sector and improving the business climate is deemed "crucial to diversifying the economy outside the traditional sectors and creating private sector jobs in sufficient numbers to absorb the rising supply of labor in Niger."

### Policy recommendation: ECF arrangement
- Based on authorities’ policy intentions, staff recommends approval of the authorities’ request for a new three-year ECF arrangement.

### Key program and financing parameters (selected figures preserved verbatim from source)
- Requested ECF arrangement amount: "SDR 78.96 million (120 percent of Niger’s quota)"
- First disbursement under the arrangement: "SDR 11.28 million"
- Proposed scheduled disbursements under the ECF Arrangement, 2012–15 (each line shows condition and date exactly as in source):
  - SDR 11.28 — Executive Board approval of the three-year ECF arrangement — March 16, 2012
  - SDR 11.28 — Observance of the June 30, 2012 performance criteria, and completion of the first review under the agreement — November 1, 2012
  - SDR 11.28 — Observance of the December 31, 2012 performance criteria, and completion of the second review under the agreement — May 1, 2013
  - SDR 11.28 — Observance of the June 30, 2013 performance criteria, and completion of the third review under the agreement — November 1, 2013
  - SDR 11.28 — Observance of the December 31, 2013 performance criteria, and completion of the fourth review under the agreement — May 1, 2014
  - SDR 11.28 — Observance of the June 30, 2014 performance criteria, and completion of the fifth review under the agreement — November 1, 2014
  - SDR 11.28 — Observance of the December 31, 2014 performance criteria and completion of the sixth review under the agreement — March 10, 2015

### Macro-fiscal highlights and projections (selected numerical items preserved)
- National program duration: "three-year arrangement under the Extended Credit Facility (ECF) covering 2012 – Q1 2015"
- Financial operations (selected lines, Billions of CFA francs):
  - Total revenue (2011–16 sequence in Table 2 header area): "363.6   385.6 445.0 606.0 693.0 771.0 870.0 963.2"
  - Tax revenue (same sequence): "343.0   361.8 423.6 539.8 657.0 732.2 830.0 921.2"
  - Total expenditure and net lending (same sequence): "609.9   584.1 770.9 994.7 1152.1 1276.6 1391.2 1512.8"
  - Capital expenditure and net lending (same sequence): "309.1   217.7 350.5 582.4 658.5 720.2 767.6 835.3"
  - Overall balance (commitment) (same sequence): "-246.3  -198.5 -325.9 -388.7 -459.1 -505.6 -521.2 -549.6"
  - Basic balance (same sequence): "-100.9    -80.8 -119.1 -23.7 -57.0 -59.4 -37.4 -31.7"
  - Overall balance (cash) (same sequence): "-260.2  -210.9 -333.9 -398.7 -474.1 -520.6 -536.2 -564.6"
- Natural resources revenue (Billions of CFA francs, 2011–16 sequence in Table 2 memorandum): "43.6 45.5 55.4 129.5 162.6 188.4 237.3 257.7"
  - Of which uranium revenue (same sequence): "43.6 45.5 55.4 70.4 91.1 115.8 163.7 175.3"
  - Non-natural resources revenue (same sequence): "320.0   340.1 389.6 476.5 530.4 582.6 632.7 705.4"
- Memorandum: "Natural resources revenue 43.6 45.5 55.4 129.5 162.6 188.4 237.3 257.7"
- IMF disbursements and repayment schedule (selected summary from Table 8 and related lines):
  - Net use of IMF credit (SDR millions) (multi-year sequence): "3.2 -0.6 18.4 17.1 15.7 3.8 -5.0 -4.8 -8.0 -11.1 -15.0 -15.8 -14.7 -10.2"
  - Disbursements (SDR millions, selected sequence): "3.3 0.0 22.6 22.6 22.6 11.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0"
  - Repayments and repurchases (SDR millions, multi-year sequence): "0.1 0.6 4.2 5.5 6.9 7.5 5.0 4.8 8.0 11.1 15.0 15.8 14.7 10.2"

### Governance and program commitments
- Letter of Intent (dated "February 28, 2012") requests approval of the three-year ECF arrangement and the first disbursement and states government commitments:
  - Program objectives: "stable and sustainable macroeconomic position, enhanced growth prospects, transparent natural resources management, and a stronger financial sector."
  - Government commits to consult with the IMF on additional measures if necessary and to provide timely information as agreed under the Technical Memorandum of Understanding.

*Source: Excerpt from IMF staff report and attached Letter of Intent (February 28, 2012).*

### 3.      In line with our commitment to transparency, we hereby request that the staff report,

### _cr12109 - 3.      In line with our commitment to transparency, we hereby request that the staff report,

### Introduction
- Program: new three-year Extended Credit Facility (ECF) arrangement.
- Policy anchors: Accelerated Development and Poverty Reduction Strategy (DPRS) for 2008–2012, Program of the President of the Republic, and Statement of General Government Policy.
- Program emphases:
  - maintaining macroeconomic stability and increasing resilience to shocks;
  - strengthening tax revenue efforts and improving budget execution;
  - enhancing transparency in the mining and petroleum sectors;
  - improving debt management;
  - supporting private and financial sector development.
- Initiative: discussions on preparing a Sustainable Development and Inclusive Growth Strategy.

### Performance under the 2008–2011 program and recent economic developments
- Previous ECF expired on June 1, 2011; initial satisfactory performance with all performance criteria and indicative targets for the first three reviews observed.
- Program implementation interrupted by the military coup of February 2010, preventing conclusion of remaining reviews.
- Macroeconomic drivers 2008–11:
  - Large swings in agricultural production; poor harvest in 2009 caused a severe food crisis and contraction in trade and services.
  - Recovery began in second half of 2010; activity buoyant in first half of 2011 due to large investments in oil and mining.
  - Exports improved; current account deficit widened because of surge in imports of capital goods related to mining and oil financed by FDI.
  - Inflation: rose sharply in 2008; declined in 2009–2010 and remained moderate in 2011 despite disappointing harvest in second half of 2011.
- Fiscal performance:
  - Basic fiscal balance improved through 2010; deficit widened slightly in 2011.
  - Total revenue increased substantially, largely owing to customs and tax administrations’ performance.
  - Nearly all PFM program benchmarks were met.
  - Wages and goods and services restrained to allow higher spending on health, education, and social protection.
  - Gradual reduction in longstanding domestic arrears.

### Macroeconomic framework and program objectives
- Growth outlook:
  - With startup of new petroleum project, real GDP projected to expand by 13.4 percent in 2012.
  - Real GDP growth projected at about 7 percent per year through 2014.
  - Non-resource GDP projected to expand by about 6 percent per year.
  - Oil and mining exports could increase by 7 percentage points of GDP from 2011 to 2014.
  - Current account deficit projected to narrow from 28.3 percent of GDP in 2011 to 12.5 percent in 2015.
  - Inflation expected to accelerate to 4.5 percent in 2012 due to food shortages, then fall to below 3 percent in coming years.
- Risks:
  - Vulnerabilities include recurrent weather-related food crises, commodity price fluctuations, and a deteriorating regional security situation.

### Fiscal policy and external financing
- Medium-term fiscal policy objectives:
  - Maintain debt sustainability while creating room for increased development spending.
  - Strengthen government cash balances to increase budget resilience to shocks.
  - Intend to keep the basic fiscal deficit below 1.5 percent of GDP during the program period.
- Revenue and expenditure projections:
  - Enhanced domestic revenue efforts and increased natural resource revenue would raise annual revenue by 3.6 percent of GDP from 2011 through 2014.
  - Domestically financed capital expenditure expected to increase by 3.2 percent of GDP over the same period.
- 2012 projections and policy actions:
  - Basic fiscal deficit of 0.7 percent of GDP projected for 2012.
  - Build-up of cash reserves at the central bank (BCEAO) of about CFAF 37 billion.
  - Revenue expected to rise by about 2.3 percentage points of GDP starting in 2011 due to enhanced mobilization.
  - Domestically financed capital expenditure planned to increase from 3.7 percent of GDP in 2011 to 6.5 percent in 2012.
  - Externally financed capital expenditure execution to be accelerated from 7.3 percent of GDP to 10.8 percent, with identified sufficiently concessional financing.
  - Petroleum subsidy (différé) eliminated effective January 1, 2012.
  - Social spending to increase by 19 percent in comparison with 2011.
- External budget financing for 2012:
  - Expected mobilization of about CFAF 79 billion in grants and concessional loans from World Bank, European Union, and other donors.
  - Remaining financing gap of CFAF 16.7 billion could be covered by the IMF.

### Public financial management
- Ministry of Finance to implement the public financial management program (action plan for 2011–2014) prepared with World Bank support and IMF technical assistance.
- Action plan organized around 10 strategic pillars to:
  - modernize legal framework;
  - increase resource mobilization;
  - improve budget preparation, execution, and reporting;
  - enhance cash and debt management;
  - strengthen public procurement practices.

### Budget preparation/execution and cash management
- Continued alignment of the budget with DPRS priorities.
- Use of three-year medium-term expenditure frameworks (MTEF) for 2011 and 2012 budgets; phased sectoral MTEFs beginning 2013.
- Strengthen administrative, parliamentary, and jurisdictional oversight of the budget in 2012 and medium term.
- Actions to improve execution, cash flow, and reporting in 2012:
  - Compile comprehensive quarterly budget reports on a commitment, payment order, and payment basis, to be submitted to Fund staff within a period of 6 weeks (structural benchmark for each quarter).
  - Complete the interface between the Directorate General of the Budget and the Directorate General of the Treasury and Government Accounting to improve monitoring of the expenditure chain (structural benchmark for end-December).
  - Expedite procedures for release of budget allocations so they are available to line ministries at the beginning of each quarter.
  - Establish quarterly cash and commitment plans aligned with procurement plans and update them monthly.
  - Limit expenditure not authorized in advance to a maximum of 5 percent of committed expenditure, except debt service payments and fiscal expenditures related to exemptions (structural benchmark for each quarter).
  - Complete an inventory of bank accounts held by government entities and agencies (structural benchmark for end-June).
  - Close irregular and dormant bank accounts (structural benchmark for end-September) as a step toward a Treasury single account.

### Tax and customs administration
- Continue reform of revenue agencies; directorates general of taxes and customs to implement and update three-year strategies in 2013.
- Objectives: broaden tax base, improve taxpayer compliance, reduce exemptions, strengthen risk management.
- Directorate General of Taxes focus:
  - Improve monitoring of large taxpayers and SMEs;
  - Enhance quality and scope of audit program, including more effective control of VAT credits.
- Directorate General of Customs focus:
  - Processing of pre-shipment data and ex-post controls.
- Enhance synergies between tax and customs through systematic data exchanges and joint controls.
- 2012 specific efforts — Tax administration:
  - Strengthen tax controls by increasing audits of mining and petroleum companies, including with external experts.
  - Strengthen control of tax exemptions and VAT credits.
- 2012 specific efforts — Customs administration:
  - Strengthen control of exemptions.
  - Compare valuations in customs declarations with those assessed by the pre-shipment inspection company.
  - Increase penalties for noncompliance with pre-inspection by the pre-shipment inspection company.
  - Enhance ex-post controls, including site visits and verifying warehouse inventories.
  - All known importers to be given a tax identification number (TIN); code for operators without a TIN reserved exclusively for occasional operators (submission of a report on implementation will be a structural benchmark for end-June).
  - Taxpayers without a TIN required to present a bank guarantee or make a cash payment to obtain customs clearance.

### Tax policy
- Reforms under way in early 2012:
  - Effective January 1, 2012, impôt minimum forfaitaire rate increased from 1 percent to 2 percent for commercial activities and service providers.
  - Excise duties extended to coffee and tourism vehicles rated 13 hp or above in accordance with WAEMU Directives.
  - Restrictions imposed on profit tax (ISB) credits linked to cattle exports.
  - Business license tax (patente synthétique) reformed to increase revenue.
  - End of ISB exemption for some mobile telephone companies expected to positively impact tax revenue.
- Investment Code review:
  - Comprehensive review in 2012 with World Bank collaboration; timetable partly dependent on transposition of new WAEMU guidelines.
  - Review to consider floors on capitalization of externally financed companies and a withholding tax on interest payments.
  - Interim measure: revise Code in first half of 2012 to exclude exemptions to already-established telecommunication companies when they introduce new technologies (adoption by Council of Ministers will be a structural benchmark for end-June).

### Public debt management
- Strengthening measures:
  - Minister of Finance is sole authority to sign agreements financially obligating the government unless delegated.
  - Medium-term debt strategy formulated.
  - Continue publishing semi-annual reports on new debt contracted or under negotiation and projected borrowing program for next six months.
  - Include key public enterprises in scope of analyses and supervision.
  - Enhance capacities of the Debt Directorate to manage all external and domestic debt (including CAADIE-managed domestic debt).
  - Strengthen National Debt Management Committee role: all proposals for new loans and guarantees (including in natural resources sector) to be submitted for review by January 2012.
- Debt policy stance:
  - Pursue prudent external debt policy in light of World Bank and IMF Debt Sustainability Analysis indicating risk of debt overhang.
  - Minimize government guarantees and carefully assess impact of new borrowing on debt sustainability.
  - Seek external financing in grants and highly concessional loans; consult IMF staff to ensure grant element of loans is at least 35 percent.
  - Non-concessional borrowing may be considered only for well-assessed, high-yield commercial and infrastructure projects that generate sufficient government revenue to cover related debt service.
  - IMF staff to be informed when negotiation of non-concessional borrowing project begins; feasibility studies and profitability assessments to be provided.

### Financial sector
- Reforms 2008–2011:
  - Minimum capital requirement for banks increased to CFAF 5 billion in compliance with monetary authorities’ regulations.
  - License of Crédit du Niger (CDN) revoked; liquidator appointed.
  - Shareholding structure of BIA, BIN, and BOA modified.
  - Creation of Banque Agricole du Niger (BAGRI) expanded banking network.
- Next steps:
  - Financial sector development strategy produced with World Bank and donors, aligned with 2008 IMF-WB FSAP recommendations.
  - Strategy to be discussed with IMF staff prior to ratification by Council of Ministers and adoption of implementation timetable.

### Mining and petroleum issues
- Transparency and accountability measures:
  - 2010 Constitution requires publication of all new mining exploration and exploitation contracts in the Journal officiel.
  - Niger declared compliant with the Extractive Industries Transparency Initiative (EITI) in March 2011.
  - Second EITI report reconciling mining and petroleum revenues for 2007, 2008, and 2009 published January 2011; report covering 2010 under preparation.
  - Reforms have improved governance indicators compiled by the World Bank.
- 2012 oversight and study:
  - Strengthen public oversight through Interministerial Committee for natural resources assessment to ensure information flows and coordination among government representatives in each natural resource company.
  - Undertake a study on overall petroleum and mining strategy and policy, including maximizing government petroleum resources and structure of government oversight; study to be completed by end-December 2012 and conclusions discussed with IMF staff before launching initiatives.
- SOPAMIN review:
  - Review role and responsibilities of state-owned mining company (SOPAMIN); consider whether a separate state-owned company is needed to manage government holdings in mining.
  - SOPAMIN’s mandate to remain limited to existing activities and not expanded to include exploration and trading.
  - Starting in 2013, SOPAMIN’s operations will be financed with a separate budget allocation.

*Memorandum of Economic and Financial Policies of the Government of Niger for 2012-Q1 2015*

### 25.      In the medium term, we plan to strengthen our capacity to negotiate agreements

### _cr12109 - 25.      In the medium term, we plan to strengthen our capacity to negotiate agreements

### Natural resource management: capacity building and audits
- Plan to strengthen capacity to negotiate agreements and conduct tax audits of natural resource companies; support requested from technical partners, including the IMF and the World Bank, and assistance requested under the IMF’s Topical Trust Fund for natural resource wealth management.
- Acknowledgement that it will take several years to build technical capacity to negotiate contracts and conduct tax audits in the mining sector.
- 2012 intentions:
  - Obtain professional assistance in the negotiation of uranium prices for 2013 (expected to begin in December 2012).
  - Conduct a comprehensive tax audit of the mining companies.

### Legal and fiscal framework for extractive sectors
- 2012 measures:
  - Review of the Petroleum and Mining Codes and related tax provisions to align legal framework and tax regime with best practices, with particular attention to the design of exemptions.
- Medium-term plan:
  - Devote a separate chapter of the income tax code to mining operations, setting out all tax procedures.

### Petroleum production, refining, and exports
- Country recently became an oil producer; government will closely monitor Soraz refinery’s price structure to ensure project viability and government profitability.
- In cooperation with the refinery co-investor, enter agreements to export the remainder of production on commercial terms.
- The state-owned petroleum distribution company (SONIDEP) will be responsible for exporting petroleum products in 2012.

### Improvement of the business climate (policy measures)
- Recent measures implemented:
  - Reduction of corporate tax rate from 35 percent to 30 percent.
  - Reduction of fees for registering new businesses.
  - Elimination of the ceiling on the reimbursement of VAT credits to all exporters.
- Planned consolidating actions:
  - (i) Further simplify procedures for creating new businesses by improving operations of the Centre de formalités des entreprises.
  - (ii) Establish special courts for international trade litigation.
  - (iii) Continue reform of the judiciary.
  - (iv) Continue fighting corruption.
- Government action plan for 2012 (discussed with World Bank representatives and private investors) includes:
  - Revamping activities of the Conseil national des investisseurs privés (CNIP).
  - Revising the Investment Code.
  - Reducing the number of documents required for imports.
  - Preparing public-private partnership frameworks for the transport, energy and water sectors.

### Program monitoring, reviews, and safeguards on external restrictions
- Program monitoring in 2012 based on performance criteria and benchmarks (Table 1) and structural benchmarks (Table 2).
- Government to provide IMF staff with statistical data and information listed in the Technical Memorandum of Understanding and any other requested information.
- Government commitments during program period:
  - Not introduce or increase restrictions on payments and transfers for international current transactions without IMF prior approval.
  - Not introduce or modify any multiple-currency practices.
  - Not conclude bilateral payment agreements incompatible with Article VIII of the IMF’s Articles of Agreement.
  - Not introduce or strengthen import restrictions for balance of payments reasons.
- Semi-annual reviews included in the program:
  - First review: November 2012.
  - Second review: May 2013.

### Quantitative targets and indicative figures (as presented)
- Program table excerpts (cumulative from December 31, 2011) — numeric entries preserved as in source:
  - Net domestic financing of the government: -8.4-8.4-35.6-45.0
  - Reduction in domestic payment arrears of government obligations: -1.9-4.8-7.2-10.0
- Memorandum item:
  - Budget support (excluding IMF financing): 0.00.060.579.2
- Continuous quantitative performance criteria (selected lines):
  - Accumulation of external payments arrears: 0.00.00.00.0
  - New external debt contracted or guaranteed by the government with maturities of less than 1 year: 0.00.00.00.0
  - New nonconcessional external debt contracted or guaranteed by the government and public enterprises with maturities of 1 year or more: 0.00.00.00.0
- Indicative targets (Cumulative from December 31, 2011) — numeric entries preserved:
  - Basic budget balance (commitment basis, excl. grants): 5.012.5-14.8-23.6
  - Total revenue: 116.4275.6440.5606.0
  - Spending on poverty reduction: 58.2139.8243.2335.2

### Structural benchmarks (Table 2: January 1, 2012–December 31, 2012)
- Compile comprehensive quarterly budget reports on a commitment, payment order, and payment basis, to be submitted to Fund staff within a period of 6 weeks — Quarterly — Improve budget and cash management.
- Limit expenditure not authorized in advance to a maximum of 5 percent of committed expenditure, with the exception of debt-service payments and fiscal expenditure related to exemptions — Quarterly — Improve budget and cash management.
- Complete an inventory of bank accounts held by government entities and agencies — 30-June-12 — Improve cash management.
- Give all known importers a tax identification number (TIN) and reserve the code for operators without a tax identification number exclusively for occasional operators, and submit a report on the implementation of this measure — 30-June-12 — Increase tax revenue.
- Adoption by the Council of Ministers of a revision of the Investment Code to exclude the possibility of granting exemptions to already-established telecommunication companies when they introduce new technologies — 30-Sept-12 — Increase tax revenue.
- Close irregular and dormant bank accounts — 30-Sept-12 — Improve cash management.
- Complete the interface between the Directorate General of the Budget and the Directorate General of the Treasury and Government Accounting to improve monitoring of the expenditure chain — 31-Dec-12 — Improve budget and cash management.

### Technical Memorandum of Understanding: definitions and reporting
- Document location and date: Niamey, December 20, 2011.
- Definitions provided for program purposes include:
  - Government: central government of the Republic of Niger (excludes political subdivisions, public entities, or central bank with separate legal personality).
  - Debt: as per Guidelines on Performance Criteria with Respect to External Debt in Fund Arrangements (Decision No. 6230-(79/140) of the IMF Executive Board, as amended effective December 1, 2009) — current, not contingent, contractual liability requiring scheduled payments.
  - External payments arrears: payments due but not paid. Domestic payments arrears: domestic payments owed by the government but not paid; include authorized fiscal year expenditure not paid within 90 days.
  - Government obligation: any financial obligation of the government accepted as such by the government (including any government debt).
- Quantitative performance criteria and reporting requirements (selected highlights):
  - Net domestic financing of the government detailed definitions and scope; monthly data to be provided within six weeks after end of each month.
  - Reduction of domestic payments arrears: difference between stock at end-2011 and stock on reference date; CAADIE and the Treasury to calculate and record repayment; monthly data within six weeks after end of each month.
  - External nonconcessional loans contracted or guaranteed by the public sector: government and listed public enterprises will not contract or guarantee external debt with original maturity of one year or more and grant element less than 35 percent; concessionality calculated using OECD CIRRs with specified averaging and margins; monthly details on all external public sector debt within six weeks after end of each month; Ministry of Finance to forward list of loans in process of negotiation and semiannual reports on external debt contracting and borrowing program.
  - Short-term external debt of the central government: government will not accumulate or guarantee new external debt with original maturity of less than one year (exclusions: short-term import-related loans and short-term securities issued in CFAF on the regional financial market).

*Source: _cr12109 - 25.      In the medium term, we plan to strengthen our capacity to negotiate agreements (PDF chapter/section).*

### 24.      Details on all external government debt will be provided monthly, within six weeks

### 34.      The government will provide the following information:

### _cr12109 - 34.      The government will provide the following information:

### Government information and transparency obligations
- The government will provide the following information:
  - 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 involving the direct financial participation or guarantee of the government;
  - Any new information on 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 — real sector, government finance, monetary, external
- Real sector
  - National accounts. Annual. Reporting: End-year + 6 months
  - Revisions of the national accounts. Variable. Reporting: 8 weeks after the revision
  - Disaggregated consumer price indexes. Monthly. Reporting: End-month + 2 weeks
- Government finance
  - Net government position vis-à-vis the banking system. Monthly. Reporting: End-month + 6 weeks
  - Complete monthly data on net nonbank domestic financing, including:
    - (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 Treasury correspondents’ deposit accounts;
    - (iii) change in the balance of various deposit accounts at the Treasury; and
    - (iv) change in the stock of claims on the government forgiven by the private sector. Monthly. Reporting: End-month + 6 weeks
  - Provisional TOFE, including a breakdown of revenue (DGI, DGD, and Treasury) and expenditure, including the repayment of domestic wage and nonwage arrears as at end-1999, and the change in Treasury balances outstanding. Monthly. Reporting: End-month + 6 weeks
  - Data on Treasury balances outstanding (RAP), by reference fiscal year (total and RAP at more than 90 days). Monthly. Reporting: End-month + 6 weeks
  - Monthly statement of Treasury correspondents’ deposit accounts. Monthly. Reporting: End-month + 6 weeks
  - Execution of the investment budget. Quarterly. Reporting: End-quarter + 8 weeks
  - Table of fiscal expenditure execution, unified list expenditure, and HIPC-financed expenditure. Quarterly. Reporting: End-quarter + 6 weeks
  - Treasury accounts trial balance. Monthly. Reporting: End-month plus 6 weeks
  - Monthly statement of the balances of accounts of the Treasury and of other public accounts at the BCEAO. Monthly. Reporting: End-month plus 2 weeks
  - Petroleum products pricing formula, petroleum products tax receipts, and pricing differentials. Monthly. Reporting: End-month + 4 weeks
- Monetary and financial data
  - Monetary survey. Monthly. Reporting: End-month + 6 weeks (provisional); End-month + 10 weeks (final)
  - Consolidated balance sheet of monetary institutions and, in applicable cases, balance sheets of individual banks. Monthly. Reporting: End-month + 8 weeks
  - Borrowing and lending interest rates. Monthly. Reporting: End-month + 8 weeks
  - Banking supervision prudential indicators. Quarterly. Reporting: End-quarter + 8 weeks
- Balance of payments and external debt
  - Balance of payments. Annual. Reporting: End-year + 6 months
  - Balance of payments revisions. Variable. Reporting: At the time of the revision
  - Stock and repayment of external arrears. Monthly. Reporting: End-month + 6 weeks
  - Breakdown of all new external loans contracted and projected borrowing, including financial terms and conditions. Reporting: End-month + 6 weeks
  - Table on the monthly effective service of external debt (principal and interest) compared with programmed maturities. Monthly. Reporting: End-month + 4 weeks

### IMF relationship, arrangements, and financial data (selected figures)
- Membership and IMF resources (as of February 2012)
  - Quota: 65.80 (SDR Million) 100.00 percent of quota
  - IMF holdings of currency: 57.17 (SDR Million) 86.89
  - Reserve position: 8.64 (SDR Million) 13.13
- SDR Department
  - Net cumulative allocation: 62.94 (SDR Million) 100.00
  - Holdings: 54.27 (SDR Million) 86.22
- Outstanding Purchases and Loans
  - ECF arrangements: 36.45 (SDR Million) 55.39 percent of quota
- Latest financial arrangements (dates and amounts)
  - ECF: Jun 2, 2008 – Jun 1, 2011. Amount Approved (SDR Million): 23.03. Amount Drawn (SDR Million): 13.16
  - PRGF: Jan 31, 2005 – May 31, 2008. Amount Approved (SDR Million): 26.32. Amount Drawn (SDR Million): 26.32
  - PRGF: Dec 22, 2000 – Jun 30, 2004. Amount Approved (SDR Million): 59.20. Amount Drawn (SDR Million): 59.20
- Projected Payments to Fund (SDR million; based on existing use of resources and present holdings of SDRs)
  - Forthcoming 2012 Principal: 4.21; Charges/Interest: —; Total: 4.22
  - Forthcoming 2013 Principal: 5.50; Charges/Interest: 0.01; Total: 5.51
  - Forthcoming 2014 Principal: 6.91; Charges/Interest: 0.07; Total: 6.98
  - Forthcoming 2015 Principal: 7.47; Charges/Interest: 0.05; Total: 7.53
  - Forthcoming 2016 Principal: 4.96; Charges/Interest: 0.04; Total: 4.99
- HIPC and MDRI implementation
  - Assistance committed by all creditors (US$ million): 663.10
  - Of which: IMF assistance (US$ million): 42.01 (SDR equivalent in millions): 31.22
  - Decision point date: Dec. 2000; Completion point date: Apr. 2004
  - Assistance disbursed to the member (SDR million): 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: Financed by MDRI Trust: 59.82 (SDR million); Remaining HIPC resources: 17.73

### Press release highlights and program objectives (Press Release No. 12/90 — March 16, 2012)
- IMF Executive Board approved a new three-year ECF arrangement equivalent to SDR 78.96 million (about about US$120.97 million) with an immediate disbursement equivalent to SDR 11.28 million (about US$17.28 million).
- Program aims:
  - Maintain macroeconomic stability while increasing resilience to shocks;
  - Strengthen public finance and debt management;
  - Put in place a transparent legal and supervisory framework for the mining and petroleum sectors;
  - Support private and financial sector development.
- Recent and projected economic developments:
  - Start-up of a new petroleum project: GDP projected to expand by 13.4 percent in real terms in 2012.
  - Authorities intend to keep the basic fiscal deficit below 1.5 percent of GDP during the program period.
- Key policy recommendations and program elements:
  - Step up efforts to seek grants and concessional financing for large infrastructure investment and other projects; non-concessional loans should only be contracted for well-assessed, high-yield projects.
  - Significant build-up of government reserves at the central bank to provide flexibility in budget execution and bolster resilience.
  - Structural reforms to strengthen budget execution, reduce the number of tax exemptions, modernize tax and customs administration, strengthen and develop the financial system, and improve the business climate.

### Fiscal policy and public finance measures
- Medium-term fiscal policy objectives:
  - Create fiscal space for rising development spending while maintaining debt sustainability.
  - Rebuild government deposits at the central bank to facilitate budget execution and enhance resilience to exogenous shocks.
- 2012 budget specifics and targets:
  - Authorities intend to keep the basic fiscal deficit below 1.5 percent of GDP during the program period.
  - For 2012, the Budget approved by parliament projects a basic fiscal deficit of less than 1 percent of GDP, from 4 percent in 2010.
  - The overall deficit for 2012 is projected to remain unchanged at 11.5 percent of GDP.
  - Revenue is projected to increase by about 2.3 percent of GDP mainly from receipts from oil production, and measures to strengthen tax and customs administration.
  - Expenditure will increase by about 2.3 percent of GDP.
  - Government discontinued the subsidy on fuel products.
  - Authorities secured CFA francs 20 billion by end-2011, representing more than half of the needed reserve amount earmarked of about 1% of GDP at the BCEAO.
- Public finance and debt management reforms:
  - Action plan (with World Bank) to strengthen public finance and debt management.
  - Budget execution and treasury management reforms beginning in 2012, including limiting recourse to exceptional expenditure procedures, submission of quarterly authorizations for line ministries based on cash management and commitment plans, closing irregular and dormant government bank accounts, improving monitoring of expenditure chain, and compiling quarterly budget reports.
  - Migration from GFSM 1986 to GFSM 2001; progress in aligning fiscal data with WAEMU harmonized framework (TOFE).
  - Exploring centralization of debt activities under a single debt Directorate; National Debt Management Committee operational.

### Natural resource management — transparency and capacity building
- Constitutional and institutional measures:
  - Clause in the 2010 Constitution requiring publication of new exploration and exploitation contracts in the mining sector.
  - Niger declared compliance with the Extractive Industries Transparency Initiative (EITI) standards.
  - Interministerial Committee for natural resources assessment to ensure information flows and coordination; to be reactivated to enhance policy coordination.
- Capacity and oversight measures:
  - Strategic study on the role of the state in the natural resource sector to be conducted (scope: role/options for state involvement or supervision).
  - With IMF technical assistance, strengthen authorities’ capacity to negotiate contracts and conduct tax audits in the sector.
  - Near-term plan to hire reputable firms to help negotiate uranium prices for 2013 and conduct tax audits.
  - Government intends to undertake a study on overall strategy and policy in the petroleum and mining sector, including policy to maximize government’s petroleum resources and structure of government oversight; study to be completed by end-December 2012.
  - Comprehensive review of the Investment Code planned in 2012 (in collaboration with the World Bank) with a medium-term objective to bring the Investment Code into line with best practices.

### Financial sector reforms and private sector development
- Financial sector development plan:
  - Completed a comprehensive five-year development plan for the financial sector, drawing on 2008 FSAP recommendations.
  - Plan aims to increase financial sector stability, enhance financial sector deepness, simplify recovery of loans, and improve legal framework.
- Private sector and investment climate reforms:
  - Medium-term reform plan (with World Bank and private sector) to make Niger more attractive to invest.
  - 2012 reforms include revision of investment code and preparation of a framework for public-private partnerships.
- Employment and youth priorities:
  - High priority to actions aimed at removing obstacles to job-creation initiatives.

### Statistical issues and data adequacy (as of February 2012)
- General assessment:
  - Data provision has some shortcomings, but is broadly adequate for surveillance.
  - Niger participates in WAEMU harmonization of statistical methodologies with support from WAEMU Commission and AFRITAC West.
- National accounts:
  - Compiled annually by the National Institute of Statistics (INS) in accordance with SNA93; new base year 2006 finalized in 2009; national accounts for 2007 finalized in 2011; work on 2008 has just started.
  - National accounts rely mainly on administrative sources; household and informal sector surveys are not up-to-date.
- Price statistics:
  - INS compiles and publishes a harmonized CPI for Niamey monthly since early 1998; CPI rebased in 2008.
- Government finance statistics:
  - Monthly GFS compiled by Ministry of Economy and Finance (MEF) with a one- to four-month lag; data limited to central government (general budget, special funds, treasury special accounts) and not social security administration.
  - Progress in adopting the harmonized TOFE; strategy approved to migrate from GFSM 1986 to GFSM 2001.
- Monetary data:
  - Based on Guide to Money and Banking Statistics in IFS (1984 Guide); preliminary monetary data compiled by national agency of BCEAO and released by BCEAO headquarters; reporting lag reduced from about six months to about three months.
- Balance of payments:
  - Compiled in conformity with BPM5; national agency of BCEAO compiles and disseminates BOP statistics; BCEAO headquarters delineates methodology and computes international reserves managed on behalf of participating countries.

### Table of common indicators required for surveillance (selected publication and frequency metadata)
- Exchange Rates: Current; Frequency of Data: Daily (D); Frequency of Reporting: M; Frequency of Publication: M
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation: Nov. 2011; Date Received: Feb. 2012; Frequency of Data: M; Frequency of Reporting: I; Frequency of Publication: M
- Reserve/Base Money: Nov. 2011; Feb. 2012; M; I; M
- Broad Money: Nov. 2011; Feb. 2012; M; I; M
- Central Bank Balance Sheet: Nov. 2011; Feb. 2012; M; I; M
- Consolidated Balance Sheet of the Banking System: Nov. 2011; Feb. 2012; M; I; M
- Interest Rates: Nov. 2011; Feb. 2012; I; I; M
- Consumer Price Index: Jan. 2012; Feb. 2012; M; M; M
- Revenue, Expenditure, Balance and Composition of Financing – General Government: Dec. 2011; Feb. 2011
- Revenue, Expenditure, Balance and Composition of Financing – Central Government: Dec. 2011; Feb. 2011; M; I; I
- Stocks of Central Government and Central Government-Guaranteed Debt: Dec. 2010; Dec. 2011; A; I; I
- External Current Account Balance: Dec. 2010; Dec. 2011; A; I; A
- Exports and Imports of Goods and Services: Dec. 2010; Dec. 2011; A; I; A
- GDP/GNP: Dec. 2011; Dec. 2012; A; I; A
- Gross External Debt: Dec. 2010; Dec. 2011; A; I; A

*Source: IMF staff report and informational annex (March 2, 2012) and IMF Press Release No. 12/90 (March 16, 2012).*

### Conclusion

### Conclusion

### Policy intentions and reform commitments
- "My authorities’ policy intentions reflect broadly the need to make significant breakthroughs in poverty reduction with the view to improving the living standards for the population."
- "To that end, they are fully determined to implement the reform measures described in the three-year-ECF program, which drew mainly on their development strategy."

### Implementation progress
- "Already, several reform measures are at an advance stage of preparation, indicating my authorities’ commitment to the reform process."
- "Based on their good track record of policy implementation over the two last programs and taking into account their commitment to pursue needed reforms, I would appreciate Directors’ support for my Nigerien authorities’ request for a three-year program under Extended Credit Facility."

*Source: _cr12109 - Conclusion*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12109.pdf_