## _cr15342

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---

### Mission and institutional engagement
- Discussions held in Niamey during September 14-28.
- Mission comprised Mr. Gueye (head), Mr. Lopes, Mr. Barry, Ms. Nyankiye, Mr. Ntamatungiro (Resident Representative) and Mr. Abdou (local Economist) (all AFR).
- Meetings with the President, the Prime Minister, Ministers of Economy and Finance, Trade, Petroleum, and Energy, National Director of BCEAO, other senior officials, civil society, private sector, and development partners.
- World Bank team joined the mission while finalizing discussions on the Development Policy Operation.
- Approved by David Robinson (AFR) and Peter Allum (SPR).

### Social indicators and vulnerabilities
- Poverty rate: declined from 51 percent in 2005 to 40.8 percent in 2011.
- Literacy rate: increased from 36.5 percent in 2005 to 61.5 percent in 2014.
- Child mortality: decreased from 172.7 children per thousand of live births in 2005 to 95.8 children per thousand of live births in 2015.
- Population growth: 3.9 percent per annum.
- Security shocks: escalation in Boko-Haram attacks since early-February 2015, resulting in estimated 200,000 refugees from Nigeria and internally displaced people, adding to 37,000 UN-monitored refugees from Mali and tens of thousands of returnees from Libya.
- Food programs:
  - Total cost in 2014 estimated at CFAF 146 billion (3.7 percent of GDP): 72,370 tons freely distributed and 82,320 tons sold at subsidized prices; plus 30,781 tons distributed by international donors.
  - Authorities project total cost in 2015 at CFAF 179 billion (4.3 percent of GDP).

### Recent economic developments
- Real GDP growth:
  - Accelerated from 4.6 percent in 2013 to 6.9 percent in 2014; projected to ease to 4.4 percent in 2015.
- Inflation:
  - Negative at end-2014; 12-month inflation 1.3 percent at end-September 2015; WAEMU convergence criterion referenced as “three percent”.
- Fiscal deterioration in 2014:
  - Basic balance stood at 6.6 percent of GDP in 2014, a deterioration of 4.5 percent of GDP relative to 2013.
  - Overall fiscal deficit (commitment basis, including grants) deteriorated to 8.3 percent of GDP in 2014 compared to 2.6 percent in 2013.
  - Stock of domestic arrears at end-December 2014: CFAF 100.4 billion (2.5 percent of GDP). End-December 2014 arrears outstanding: CFAF 61.5 billion paid off by end-June 2015.
- Capital spending and financing:
  - Execution of externally financed investment: 13.9 percent of budgeted amount in 2014 and 27 percent at end-June 2015.
  - Regional bond issuance: CFAF 93 billion in 2014 (compared to CFAF 25 billion in 2013); CFAF 121 billion scheduled in 2015, of which CFAF 63 billion was issued at end-June 2015.
- Monetary aggregates:
  - Broad money increased by 26 percent in 2014; slowed to 18 percent growth at end-August 2015.
  - Domestic credit grew by around 15 percent in 2014; credit to the private sector 12-month rate 13.4 percent at end-June 2015.
- External sector:
  - Widening deficit in 2014 due to deterioration in terms of trade and increased imports for public investment.
  - Current account expected to deteriorate further in 2015 by close to 1.5 percentage points of GDP.
  - External position described as comfortable with net accumulation of international reserves in 2014.
- Institutional change: merger of Ministry of Finance and Ministry of Planning into Ministry of Economy and Finance in early September to strengthen program implementation.

### Medium-term outlook and risks
- Projected 2016-20 average real GDP growth: 6.9 percent.
- Projected medium-term inflation: around 1.8 percent.
- Growth drivers:
  - Steady agricultural production aided by increased irrigation.
  - Increased fuel production at SORAZ refinery.
  - Infrastructure projects: four highway interchanges, rail loop project, cement plant in Kao, electrical and thermal power plant in Gorou Banda.
  - Beginning of oil pipeline construction expected in late 2016.
- Downside risks:
  - Persistence or intensification of armed hostilities.
  - Further declines in oil and uranium prices.
  - Droughts or floods.
  - Lack of capacity for policy implementation.
  - Medium-term debt sustainability depends on significant fiscal consolidation beyond the current arrangement.
- Upside risk: rebound of uranium and oil prices would significantly increase fiscal space.

### Program performance under the ECF arrangement
- Continuous performance criteria on contracting or guaranteeing of non-concessional external debt, short-term external debt, and non-accumulation of external arrears: met at end-December 2014 and end-June 2015.
- Performance criteria on domestic financing: missed on both test dates due to shortfall in budgetary support and adverse security impacts on revenue and spending.
- End-December 2014: PC on domestic arrears repayment missed by CFAF 68 million (1.7 percent of GDP); met at end-June 2015 after major arrears settlement efforts.
- Indicative targets for revenue collection and the basic fiscal balance: missed at both test dates.
- Indicative target on priority poverty spending: missed at end-December 2014 but observed at end-June 2015.
- Authorities’ corrective actions: strengthening revenue mobilization (MEFP, ¶ 24, 27-36), settling domestic arrears (MEFP, ¶ 16), reinforcing public financial management (MEFP, ¶ 38).

### Revised 2015 budget, revenue losses, and offsets
- Second revised budget approved on October 12, 2015 to address revenue losses and additional humanitarian, security, and social spending; government provided additional CFAF 26 billion for upcoming elections.
- Agreed revised macroeconomic framework for 2015 targets the basic balance deficit at 5.5 percent of GDP (excluding grants): relaxation of 1.8 percent of GDP compared to original program and consolidation of 1.1 percent of GDP compared to end-2014.
- Revenue losses incorporated in revised framework: CFAF 17.3 billion (mostly from shortfalls in income tax and VAT collections, royalties from the mining sector, and oil-related taxes due to lower SORAZ production and exports).
  - Note: “The losses in the oil and mining sector were estimated at CFAF 37 billion. However, internal efforts from other sectors brought net losses to CFAF 17.3 billion.”
- Additional nontax revenue from signature oil exploration bonus: CFAF 15 billion.
- Internal offsets: accelerated recovery of tax arrears and reinstated ad-valorem taxation.

### 2015 spending adjustments and financing (selected figures)
- Net additional spending incorporated: 1.1 percent of GDP for security, humanitarian areas, and elections (0.6 percent of GDP for elections).
- Reprioritization and delayed investment projects: net savings of 0.4 percent of GDP.
- Government expanded election commitment from CFAF 18 billion to CFAF 26 billion in 2015.
- Text Table 1: Revision to the 2015 Fiscal Program (selected figures)
  - Additional needs: 129.1 CFAF billion — 3.1 percent of GDP
  - Loss in revenue: 17.3 CFAF billion — 0.4 percent of GDP
  - Additional spending: 55.0 CFAF billion — 1.3 percent of GDP
    - Security expenditure: 41.5 CFAF billion — 1.0 percent of GDP
    - Food security: 4.6 CFAF billion — 0.1 percent of GDP
    - Election: 26.0 CFAF billion — 0.6 percent of GDP
    - Net other spending: -17.1 CFAF billion — -0.4 percent of GDP
  - Reduction of arrears: 56.8 CFAF billion — 1.4 percent of GDP
  - Identified Financing: 56.9 CFAF billion — 1.4 percent of GDP
    - Additional domestic financing (excluding IMF): 57.6 CFAF billion — 1.4 percent of GDP
    - Others: -0.7 CFAF billion — 0.0 percent of GDP
  - New financing gap: 72.2 CFAF billion — 1.7 percent of GDP
  - Additional financing sources: 58.6 CFAF billion — 1.4 percent of GDP
    - Budget support: 58.6 CFAF billion — 1.4 percent of GDP
      - Grant: 39.6 CFAF billion — 0.9 percent of GDP
      - Loan: 19.0 CFAF billion — 0.5 percent of GDP
  - Residual financing gap: 13.6 CFAF billion — 0.3 percent of GDP
  - Augmentation under the ECF: 13.6 CFAF billion — 0.3 percent of GDP

### Arrears clearance and cash management (2015)
- Government prioritizes reducing stock of arrears to limit adverse economic impacts, reduce banks’ NPLs, and ensure critical service provision.
- At end-June 2015, cash payments to clear domestic arrears had exceeded the end-June PC by a large margin.
- Full-year payments projected at CFAF 63.8 billion.
- Government plans to issue securities payable over five years to clear remaining end-2014 arrears stock, estimated at around CFAF 40 billion.
- Commitment to adequate budgetary provisions for security and other spending pressures in 2016 and subsequent budgets and to strengthen cash management under the new TSA framework.

### Financing support and ECF augmentation request (2015)
- Government requested augmentation of access under the ECF: 25 percent of quota augmentation (CFAF 13.6 billion) to help cover the residual financing need of CFAF 72.2 billion.
- Donors pledged additional budgetary support of CFAF 58.6 billion (1.4 percent of GDP):
  - France: CFAF 19.7 billion (of which CFAF 6.6 billion are grant)
  - European Union: CFAF 19.7 billion
  - Nigeria: CFAF 13.4 billion (note: Nigeria has provided a total of CFAF 20.4 billion in budget support, but CFAF 7 billion was already included in the budget)
  - World Bank: CFAF 6 billion

### 2016 budget and fiscal stance (selected)
- 2016 commitment basis overall fiscal deficit (including grants) projected at 7½ percent of GDP (compared to WAEMU convergence criterion of a deficit no higher than 3 percent of GDP).
- Basic balance targeted to improve by 1.8 percent of GDP to a deficit of 3.7 percent of GDP in 2016.
- Externally financed capital expenditures envisaged to increase to 9.4 percent of GDP (from 7.9 percent in 2015).
- Domestically financed capital expenditures projected to decline slightly by 1.1 percent.
- 2016 commitment basis basic deficit in CFAF: CFAF 168.9 billion; financing plan highlights:
  - Budgetary support: CFAF 97.3 billion (includes CFAF 38 billion grant from EU, CFAF 6.5 billion from France, and CFAF 10 billion other donors).
  - Concessional loans: CFAF 42.8 billion (World Bank CFAF 35 billion; African Development Bank CFAF 7.8 billion).
  - Net issuance of Treasury bonds limited to CFAF 110 billion.
  - Use of deposits from the BCEAO limited to no more than CFAF 38 billion.
- 2016 financing projections:
  - Total financing needs: CFAF 602.2 billion.
  - External financing expected to meet CFAF 520.7 billion, comprising Loans: CFAF 268.5 billion; Grants: CFAF 252.2 billion (fully met by existing pledges).
  - Budget support projected at CFAF 97.3 billion, of which CFAF 54.5 billion will be grants:
    - European Union: CFAF 38 billion
    - Agence Française de Développement: CFAF 6.5 billion
    - Other multilateral and bilateral donors: CFAF 10 billion
  - Concessional loans totaling CFAF 42.8 billion:
    - World Bank: CFAF 35 billion
    - African Development Bank: CFAF 7.8 billion
  - Budgetary provisions for security spending: CFAF 189.1 billion — 4.5 percent of GDP.

### Revenue, spending, and fiscal consolidation measures for 2016
- Revenue:
  - Tax administration measures expected to yield 0.2 percent of GDP.
  - Customs taxes expected to yield 0.2 percent of GDP through modernization efforts.
- Spending:
  - Targeted reduction of 1.7 percent of GDP in domestically financed spending:
    - 0.9 percent of GDP from primary current spending.
    - 1.1 percent of GDP in capital spending.
  - Wage bill expected to remain constant in nominal terms, implying a reduction of 0.4 percentage points of GDP.
  - Goods and services expenditures projected to decline by 0.9 percent of GDP.
  - Externally financed investments expected to increase by 1.5 percentage points of GDP.
- Budget priorities for 2016:
  - Security of property and persons; urban, village, and rural water supply; continuation of the 3N initiative and food security; infrastructure and energy; education and health.

### Structural reforms and public financial management (selected)
- Treasury Single Account (TSA):
  - 2012 inventory updated at end-February 2015.
  - TSA conceptual plan adopted in September 2015; implementation by end-September 2016 starting with consolidation of public agencies’ accounts.
  - TSA steering committee created by ministerial order in July 2015 and operational.
  - BCEAO authorized opening of the TSA account in its books; memorandum of understanding and account-closing order being processed.
  - Inventory findings as of December 31, 2014: accounts rose from 1,954 in 2012 to 2,735; total net credit balance CFAF 83.5 billion; government-opened accounts 1,452 with total balance CFAF 51 billion.
- Harmonization with regional standards via implementation of the 2012 budget organic law; AFRITAC West and FAD technical assistance provided.
- Medium-Term Expenditure Framework (MTEF) Committee reactivated.
- Quarterly budget execution reports prepared regularly; quarterly allocations released before the end of the first week of the quarter (target had been first four weeks).
- Debt management:
  - June 18, 2015 Prime-Ministerial decree elevates Inter-Ministerial Debt Management Committee, now chaired by the Prime Minister.
  - With merger of ministries, loan agreements require signatures of the Minister of Economy and Finance and initiating line Minister.
- Exceptional spending: 1.1 percent at end-December 2014 and 1.8 percent at end-June 2015 (benchmark 5 percent).

### Public debt, DSA findings, and debt management actions
- Public debt trajectory:
  - Public debt-to-GDP ratio projected to rise from 27.1 percent of GDP at end-2013 to an estimated 52.1 percent in 2016.
  - Total public and publicly guaranteed debt (Table): 2012: 26.1; 2013: 27.1; 2014: 37.7; 2015 (Est.): 35.8; 2016 (Proj.): 42.3; 2020 (Proj.): 50.2.
- Key DSA points:
  - Updated DSA suggests a moderate risk of debt distress.
  - Baseline external debt ratios remain below policy-dependent thresholds throughout 2015−35, except a one-off spike in 2016 related to SORAZ refinancing.
  - Stress tests indicate PV of debt-to-exports and PV of debt-to-GDP can breach thresholds under adverse scenarios (financing terms shock, FDI shock, one-time 30 percent nominal depreciation in 2016).
- Specific debt items and planned actions:
  - SORAZ refinancing loan of CFAF 437.4 billion (Exim–Bank–China) did not materialize; authorities considering more concessional refinance options.
  - Chinese master facility loan of US$1 billion expected to be disbursed after 2018 would enable further public investment but keep debt-to-GDP ratio high.
  - Authorities cancelled planned issuance of ‘Sukuk’ bonds (3.6 percent of GDP) and another non-concessional loan under consideration from Islamic Development Bank.
  - Recently accumulated domestic arrears projected at CFAF 40 billion at end-2015 that the government plans to securitize.
- Debt management capacity:
  - 2012 debt management performance report identified gaps in completeness and timeliness of central government debt records.
  - Recent steps: quarterly debt management reports published; June 18, 2015 decree to improve coverage and quality of debt statistics.
  - Planned: draft medium-term external borrowing plan before end-June 2016 (investment strategy, priority projects, sources, uses, debt management strategy).
  - National Public Debt Management Committee to issue opinions on new borrowings or guarantees; its review to be prerequisite for Council of Ministers approval.
- Policy recommendation: contain debt accumulation, prioritize concessional financing, strengthen the Inter-Ministerial Debt Committee, and align borrowing to project viability.

### Natural resources and oil sector management
- Oil sector pressures:
  - Decline in oil prices reduced refining and distribution margins at SORAZ and increased borrowing/input costs due to CFA franc depreciation vs U.S. dollar.
  - Sale price ex-CNPC to SORAZ: US$70 → US$57 per barrel in March 2015 → US$50 per barrel as of June 2015.
  - Measures under consideration: raise ex-SORAZ price to SONIDEP while reducing distribution margins, refinance US$880 million loan on concessional terms.
- Pipeline and export plans:
  - Niger aims to become a crude oil exporter by end-2017.
  - Pipeline route Niger-Chad-Cameroon selected; cost estimated at about US$850 million.
  - CNPC potential 55 percent share in NOTCO; Niger provisioned CFAF 2.5 billion in the 2016 budget for NOTCO capital contribution.
  - Work on pipeline construction expected to start in 2016, exports to begin at end-2017.
  - Staff stressed need to consider debt sustainability when defining pipeline financing options.
  - For DSA, staff assumed government participation limited to 15 percent of NOTCO capital; residual financed from 2017 budget and other financing mainly FDI reflected as private debt.
- Institutional strengthening:
  - April government approved energy code and texts for creation/organization of the Energy Sector Regulatory Authority.
  - SOPAMIN and Ministry of Petroleum: strengthen supervisory role and accounting expertise; prepare official lists of mining and petroleum operations and permits.
- Extractive sector transparency:
  - EITI report for 2011 published November 2013; subsequent years to be produced.
  - Operators required to arrange upfront security deposit with a local bank to guarantee signing bonus payments as of publication date of mining permit in the government official journal.

### Banking sector, financial inclusion, and business environment
- Financial depth and access:
  - Broad money (M2) to GDP: 28 percent in 2014 (among the lowest globally) versus 36.7 percent average in sub-Saharan Africa.
  - Less than 1.5 percent of the population having a bank account or access to credit.
- Banking system:
  - As of end-June 2015, 11 out of 12 banks observed prudential requirements.
  - Capital adequacy ratios significantly exceed regulatory threshold of 8 percent (end-June 2015).
  - Gross non-performing loans high; banks on average well provisioned and highly profitable.
  - Deterioration in asset quality in 2015 related to two banks with state participation being restructured.
  - Regional bank affiliates focus on trade financing and not expanding network to remote areas.
  - Growing exposures to public sector infrastructure projects partly financed by domestic banks via bond issuance.
  - Nonbanking sector, particularly microfinance, is growing with limited supervision capacity.
- Financial sector reforms:
  - National Financial Sector Development Strategy (SNDSF) 2014–19 adopted.
  - National Strategy for Financial Inclusion (NSFI–2016–20) adopted July 2015; overall cost CFAF 34 billion for 2016–20.
  - Steering committee for SNDSF to be in place before end-February 2016 (structural benchmark).
  - Credit bureau development: service contract with Creditinfo Volo signed August 31, 2015; preliminary creditworthiness tests in September 2015; credit rating operations started in October 2015.
- Business environment:
  - Doing Business Index 2015: Niger ranked 168th of 189 countries.
  - Reforms: Presidential National Investment Council, one-stop shop for business start-up, new investment code, permanent advisory committee.
  - Remaining constraints: infrastructure, institutional framework, free circulation of goods, reports of non-transparent practices.

### Program extension, disbursements, and staff recommendations
- Authorities requested augmentation and extension of the ECF arrangement through December 31, 2016 to respond to larger BOP needs in 2015 and provide policy framework through elections.
- Staff recommendation and requests (November 13, 2015):
  - Staff recommends completion of the sixth and seventh reviews.
  - Staff supports waivers for nonobservance of the PCs on net domestic financing and domestic arrears repayments at end-December 2014, and net domestic financing at end-June 2015.
  - Staff supports authorities’ request for an augmentation of access of 62.5 percent of quota, and an extension of the arrangement under the ECF up to December 31, 2016.
  - Purpose: help meet larger BOP needs in 2015, catalyze donor support, and provide a framework for policy implementation during the election period.
- Disbursement schedule highlights (SDR millions):
  - SDR 11.28 — Executive Board Approval — March 16, 2012.
  - SDR 11.28 — 1st review — March 28, 2013.
  - SDR 11.28 — 2nd review — March 31, 2014.
  - SDR 11.28 — 3rd review — March 31, 2014.
  - SDR 5.64 — 4th review — December 17, 2014.
  - SDR 5.64 — 5th review — December 17, 2014.
  - SDR 39.005 — combined 6th and 7th reviews — November 30, 2015.
  - SDR 12.34 — 8th review — May 31, 2016.
  - SDR 12.34 — 9th review — November 30, 2016.
  - Total: SDR 120.085.
  - Note: 2015 schedule includes a 25 percent quota augmentation proposed at completion of combined 6th and 7th reviews.

### Program performance: quantitative outcomes (selected)
- Real GDP (annual % change, selected):
  - 2012: 11.8; 2013: 4.6; 2014: 6.5; 2015 (Est.): 6.9; 2016 (Proj.): 4.6; 2020 (Proj.): 8.0.
- Oil production (thousand barrels per day): 2012: 13; 2013: 18; 2014: 18; 2015 (Est.): 17; 2016 (Proj.): 20; 2020 (Proj.): 60.
- Consumer price index (annual average): 2012: 0.5; 2013: 2.3; 2014: -0.8; 2015 (Est.): -0.9; 2016 (Proj.): 1.6.
- Broad money growth (percent): 2012: 31.2; 2013: 10.1; 2014: 10.0; 2015 (Est.): 25.7; 2016 (Proj.): 7.7; 2020 (Proj.): 6.2.
- Government finances — selected fiscal balances (percent of GDP):
  - Basic balance (excl. grants): 2012: -1.7; 2013: -2.1; 2014: -15.2; 2015 (Est.): -6.6; 2016 (Proj.): -3.7; 2019 (Proj.): 0.7; 2020 (Proj.): 0.5.
  - Overall balance (commitment basis, incl. grants): 2012: -1.1; 2013: -2.6; 2014: -16.7; 2015 (Est.): -8.3; 2016 (Proj.): -6.6; 2020 (Proj.): -2.2.
  - Total public and publicly guaranteed debt (percent of GDP): 2012: 26.1; 2013: 27.1; 2014: 37.7; 2015 (Est.): 35.8; 2016 (Proj.): 42.3; 2020 (Proj.): 50.2.
- Monetary survey (Money and quasi-money, Billions of CFAF): 2012: 802.5; 2013: 883.5; 2014: 1,110.7; 2015 (Est.): 1,290.5; 2016 (Proj.): 1,453.8; 2020 (Proj.): 1,959.8.
- Current account balance (Billions of CFAF): 2012: -521.0; 2013: -568.4; 2014: -642.1; 2015 (Est.): -1,147.7; 2016 (Proj.): -743.1; 2020 (Proj.): -749.9.
- Reserves and balance of payments: Official reserves CFAF 112.7 billion at end-2014; expected to fall to CFAF 40 billion in 2015.

### Structural benchmarks, prior actions, and monitoring
- Examples of prior actions and benchmarks (2014–2016):
  - Finalize pipeline path study — Prior Action: Met.
  - Publish formal annual borrowing plan — End-December 2014: Not Met.
  - Census of Accounts for TSA — End-March 2015: Met.
  - Adopt design of TSA — End-September 2015: Met.
  - Operationalize customs electronic transit — End-September 2015: Partially met (six interconnected offices).
  - Establish legal framework for closure of public accounts consolidated under TSA — End-June 2016 (proposed).
  - Migration to SYDONIA World — End-January 2016 (proposed).
  - Completion of civil service staff and salary audits — End-December 2016 (proposed).

### Staff appraisal, policy priorities, and recommendations
- Staff appraisal:
  - Niger continues to deliver strong growth with favorable medium-term prospects despite challenges.
  - Main challenge: allocate resources to inclusive growth to reduce unemployment and poverty while managing security spending and leveraging natural resources.
- Key policy recommendations:
  - Preserve fiscal and debt sustainability while reducing development gaps: strengthen fiscal framework, reduce fiscal deficits over the medium term.
  - Strengthen revenue mobilization and tax/customs administration; implement PFM reforms (TSA, MTEF, quarterly reporting).
  - Reduce domestic arrears cycle: strengthen cash management via TSA, limit exceptional spending.
  - Manage natural resource revenues with strong institutions and transparent frameworks; ensure commodity price cycle management and spending efficiency.
  - Contain debt accumulation: promote sound debt management, draft medium-term debt management strategy, and align borrowing to priority projects with value-for-money.
  - Advance financial sector development and inclusion; speed up implementation of SNDSF and NSFI; strengthen microfinance supervision.
  - Safeguard program during election cycle; ensure fiscal stance not influenced by elections.

### Conclusion and authorities’ request
- Medium- and long-term outlook improved by expected returns from natural resource development.
- Recent achievements in macroeconomic stability, poverty reduction, and social indicators noted.
- Remaining challenges: sustained growth, poverty reduction, and development objectives.
- Authorities’ requests (November 13, 2015 Letter of Intent):
  - Waivers for nonobservance of end-December 2014 and end-June 2015 performance criteria.
  - Completion of the sixth and seventh reviews under the ECF.
  - Increase in access of 62.5 percent of quota and a one-year extension of the program up to December 31, 2016.
  - Disbursement under the sixth and seventh reviews of SDR 39.005 million.
  - Agreement to consult IMF staff before adopting additional measures or policy changes and authorization to publish LOI, MEFP, and TMU.

*Source: IMF staff report for Niger (September mission) — _cr15342 - 37.5 percent of quota divided evenly between the eighth and ninth reviews_*

### 37.5 percent of quota divided evenly between the eighth and ninth reviews

### 37.5 percent of quota divided evenly between the eighth and ninth reviews

### Mission and institutional engagement
- Discussions were held in Niamey during September 14-28.
- Mission comprised Mr. Gueye (head), Mr. Lopes, Mr. Barry, Ms. Nyankiye, Mr. Ntamatungiro (Resident Representative) and Mr. Abdou (local Economist) (all AFR).
- The mission met with the President, the Prime Minister, the Ministers of Economy and Finance, Trade, Petroleum, and Energy, the National Director of the regional central bank, Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), other senior officials and representatives of civil society, the private sector, and development partners.
- A World Bank team joined the mission while finalizing discussions on the Development Policy Operation.
- Approved by David Robinson (AFR) and Peter Allum (SPR).

### Context: social indicators and vulnerabilities
- Poverty rate declined from 51 percent in 2005 to 40.8 percent in 2011.
- Literacy rate increased from 36.5 percent in 2005 to 61.5 percent in 2014.
- Child mortality decreased from 172.7 children per thousand of live births in 2005 to 95.8 children per thousand of live births in 2015.
- Population growth: 3.9 percent per annum.
- Security shocks: escalation in attacks by Boko-Haram since early-February 2015, resulting in estimated 200,000 refugees from Nigeria and internally displaced people, adding to the 37,000 UN-monitored refugees from Mali and tens of thousands of returnees from Libya.
- Food programs: total cost in 2014 estimated at CFAF 146 billion (3.7 percent of GDP); composition included 72,370 tons freely distributed and 82,320 tons sold at subsidized prices; plus 30,781 tons distributed by international donors. Authorities project total cost in 2015 at CFAF 179 billion (4.3 percent of GDP).

### Recent economic developments, outlook, and risks
- Real GDP growth: accelerated from 4.6 percent in 2013 to 6.9 percent in 2014; projected to ease to 4.4 percent in 2015.
- Inflation: negative at end-2014; 12-month inflation 1.3 percent at end-September 2015; WAEMU convergence criterion referenced as “three percent”.
- Fiscal deterioration in 2014:
  - Basic balance stood at 6.6 percent of GDP in 2014, a deterioration of 4.5 percent of GDP relative to 2013.
  - Overall fiscal deficit (commitment basis, including grants) deteriorated to 8.3 percent of GDP in 2014 compared to 2.6 percent in 2013.
  - Stock of domestic arrears at end-December 2014: CFAF 100.4 billion (2.5 percent of GDP). End-December 2014 arrears outstanding: CFAF 61.5 billion paid off by end-June 2015.
- Capital spending and financing:
  - Execution of externally financed investment: 13.9 percent of budgeted amount in 2014 and 27 percent at end-June 2015.
  - Regional bond issuance: CFAF 93 billion in 2014 (compared to CFAF 25 billion in 2013); CFAF 121 billion scheduled in 2015, of which CFAF 63 billion was issued at end-June 2015.
- Monetary aggregates:
  - Broad money estimated to have increased by 26 percent in 2014; slowed to 18 percent growth at end-August 2015.
  - Domestic credit grew by around 15 percent in 2014; credit to the private sector 12-month rate 13.4 percent at end-June 2015.
- External sector:
  - Widening deficit in 2014 due to deterioration in terms of trade and increased imports for public investment.
  - Current account expected to deteriorate further in 2015 by close to 1.5 percentage points of GDP.
  - External position described as comfortable with net accumulation of international reserves in 2014.
- Institutional change: merger of Ministry of Finance and Ministry of Planning into Ministry of Economy and Finance in early September to strengthen program implementation.

### Outlook and risks (medium term)
- Projected 2016-20 average real GDP growth: 6.9 percent.
- Projected medium-term inflation: around 1.8 percent.
- Growth drivers: steady agricultural production aided by increased irrigation; increased fuel production at SORAZ refinery; infrastructure projects (four highway interchanges, rail loop project, cement plant in Kao, electrical and thermal power plant in Gorou Banda); beginning of oil pipeline construction expected in late 2016.
- Downside risks:
  - Persistence or intensification of armed hostilities.
  - Further declines in oil and uranium prices.
  - Droughts or floods.
  - Lack of capacity for policy implementation.
  - Medium-term debt sustainability depends on significant fiscal consolidation beyond the current arrangement.
- Upside risk: rebound of uranium and oil prices would significantly increase fiscal space.

### Program performance under the ECF arrangement
- Continuous performance criteria on contracting or guaranteeing of non-concessional external debt, short-term external debt, and non-accumulation of external arrears were met at end-December 2014 and end-June 2015.
- Performance criteria on domestic financing missed on both test dates due to shortfall in budgetary support and adverse security impacts on revenue and spending.
- At end-December 2014, the PC on domestic arrears repayment was missed by CFAF 68 million (1.7 percent of GDP); met at end-June 2015 after major arrears settlement efforts.
- Indicative targets for revenue collection and the basic fiscal balance were missed at both test dates; indicative target on priority poverty spending missed at end-December 2014 but observed at end-June 2015.
- Authorities undertaking corrective actions: strengthening revenue mobilization (MEFP, ¶ 24, 27-36), settling domestic arrears (MEFP, ¶ 16), reinforcing public financial management (MEFP, ¶ 38).

### Structural reforms and public financial management (selected)
- Treasury Single Account (TSA):
  - 2012 inventory of public entities’ bank accounts updated at end-February 2015.
  - Conceptual plan for TSA adopted in September 2015; implementation by end-September 2016 starting with consolidation of public agencies’ accounts.
  - TSA steering committee created by ministerial order in July 2015 and operational.
  - BCEAO authorized opening of the TSA account in its books; memorandum of understanding and account-closing order being processed.
- Harmonization with regional standards via implementation of the 2012 budget organic law:
  - AFRITAC West and Fiscal Affairs Department provided technical assistance in May–June 2015 and August 2015.
  - Study on investment budgeting using commitment authorizations and payment allocations finalized.
  - Medium-Term Expenditure Framework (MTEF) Committee reactivated.
- Budget execution:
  - Quarterly budget execution reports being prepared regularly.
  - Quarterly allocations now released before the end of the first week of the quarter (target had been first four weeks).
- Debt management:
  - June 18, 2015 Prime-Ministerial decree elevates Inter-Ministerial Debt Management Committee, now chaired by the Prime Minister.
  - With merger of ministries, loan agreements will require signatures of the Minister of Economy and Finance and the initiating line Minister.
- Exceptional spending remained low: 1.1 percent at end-December 2014 and 1.8 percent at end-June 2015 (benchmark 5 percent).

### Near-term fiscal policy and priorities (summary lead-ins)
- Policy discussions emphasized adjusting to a more sustainable fiscal stance in the 2015-16 fiscal program while safeguarding growth-inducing medium-term policies.
- Areas highlighted for corrective action include revenue mobilization, arrears settlement, and reinforcement of public financial management.

*Source: IMF staff report for Niger (September mission) — _cr15342 - 37.5 percent of quota divided evenly between the eighth and ninth reviews_*

### 15. Spending pressures and revenue losses from the deteriorating security situation have

### _cr15342 - 15. Spending pressures and revenue losses from the deteriorating security situation have

### Revised 2015 budget and fiscal framework
- The second revised budget approved on October 12, 2015, aims to make up for revenue losses while accommodating additional humanitarian, security, and social spending; the government also provided an additional CFAF 26 billion for the upcoming elections.
- The agreed revised macroeconomic framework for 2015 targets the basic balance deficit at 5.5 percent of GDP (excluding grants).
  - This represents a relaxation of 1.8 percent of GDP compared to the original program and a consolidation of 1.1 percent of GDP compared to end-2014.
- The revised 2015 budget assumes that financing commitments from the international community will materialize in 2015.

### Revenue losses and offsets (2015)
- Revenue losses incorporated in the revised framework: CFAF 17.3 billion (mostly from shortfalls in income tax and VAT collections, royalties from the mining sector, and oil-related taxes due to lower SORAZ production and exports).
  - Note in source: "The losses in the oil and mining sector were estimated at CFAF 37 billion. However, internal efforts from other sectors brought net losses to CFAF 17.3 billion."
- Additional nontax revenue reflected from a signature oil exploration bonus: CFAF 15 billion.
- Internal efforts to contain revenue loss include accelerated recovery of tax arrears and reinstated ad-valorem taxation (replacing predetermined value per container).

### Spending adjustments and composition (2015)
- Net additional spending incorporated: 1.1 percent of GDP for security, humanitarian areas, and elections (0.6 percent of GDP for elections).
- Reprioritization and delayed investment projects resulted in net savings of 0.4 percent of GDP.
- Government expanded election resources commitment from CFAF 18 billion to CFAF 26 billion in 2015 due to potential external support delays.

### Text Table 1: Revision to the 2015 Fiscal Program (selected figures)
- Additional needs: 129.1 CFAF billion — 3.1 percent of GDP
- Loss in revenue: 17.3 CFAF billion — 0.4 percent of GDP
- Additional spending: 55.0 CFAF billion — 1.3 percent of GDP
  - Security expenditure: 41.5 CFAF billion — 1.0 percent of GDP
  - Food security: 4.6 CFAF billion — 0.1 percent of GDP
  - Election: 26.0 CFAF billion — 0.6 percent of GDP
  - Net other spending: -17.1 CFAF billion — -0.4 percent of GDP
- Reduction of arrears: 56.8 CFAF billion — 1.4 percent of GDP
- Identified Financing: 56.9 CFAF billion — 1.4 percent of GDP
  - Additional domestic financing (excluding IMF): 57.6 CFAF billion — 1.4 percent of GDP
  - Others: -0.7 CFAF billion — 0.0 percent of GDP
- New financing gap: 72.2 CFAF billion — 1.7 percent of GDP
- Additional financing sources: 58.6 CFAF billion — 1.4 percent of GDP
  - Budget support: 58.6 CFAF billion — 1.4 percent of GDP
    - Grant: 39.6 CFAF billion — 0.9 percent of GDP
    - Loan: 19.0 CFAF billion — 0.5 percent of GDP
- Residual financing gap: 13.6 CFAF billion — 0.3 percent of GDP
- Augmentation under the ECF: 13.6 CFAF billion — 0.3 percent of GDP

### Arrears clearance and cash management (2015)
- Government prioritizes reducing the stock of arrears to limit adverse economic impacts, reduce banks’ NPLs, and ensure critical service provision.
- At end-June 2015, cash payments to clear domestic arrears had exceeded the end-June PC by a large margin.
- Full-year payments projected at CFAF 63.8 billion.
- Government plans to issue securities payable over five years to clear remaining end-2014 arrears stock, estimated at around CFAF 40 billion.
- Commitment to make adequate budgetary provisions for security and other spending pressures in the 2016 and subsequent budgets and to strengthen cash management under the new TSA framework.

### Other 2015 fiscal measures
- Civil service wage control measures based on an internal audit of recent wage bill increases (audit launched in August 2015); hiring a high-capacity international audit firm could be envisaged.
- Reallocation of spending by delaying investment projects from FY16 through the medium term.

### Financing support and augmentation request (2015)
- Government requested augmentation of access under the ECF: 25 percent of quota augmentation (CFAF 13.6 billion) to help cover the residual financing need of CFAF 72.2 billion.
- Donors pledged additional budgetary support of CFAF 58.6 billion (1.4 percent of GDP) to close financing gap:
  - France: CFAF 19.7 billion (of which CFAF 6.6 billion are grant)
  - European Union: CFAF 19.7 billion
  - Nigeria: CFAF 13.4 billion (note: Nigeria has provided a total of CFAF 20.4 billion in budget support, but CFAF 7 billion was already included in the budget)
  - World Bank: CFAF 6 billion

### The 2016 budget and fiscal policy stance
- 2016 budget aims to tackle development challenges while adjusting toward fiscal sustainability; includes flagship investment projects and measures to strengthen human capital and infrastructure.
- Externally financed capital expenditures envisaged to increase to 9.4 percent of GDP (from 7.9 percent in 2015).
- Domestically financed capital expenditures projected to decline slightly by 1.1 percent (in line with addressing fiscal imbalances and preserving debt sustainability).
- 2016 commitment basis overall fiscal deficit (including grants) projected at 7½ percent of GDP (compared to WAEMU convergence criterion of a deficit no higher than 3 percent of GDP).
- Basic balance targeted to improve by 1.8 percent of GDP to a deficit of 3.7 percent of GDP in 2016.

### 2016 revenue, spending, and financing projections
- Revenue:
  - Tax administration measures expected to yield 0.2 percent of GDP.
  - Customs taxes expected to yield 0.2 percent of GDP through modernization efforts.
- Spending:
  - Targeted reduction of 1.7 percent of GDP in domestically financed spending:
    - 0.9 percent of GDP from primary current spending.
    - 1.1 percent of GDP in capital spending.
  - Wage bill expected to remain constant in nominal terms, implying a reduction of 0.4 percentage points of GDP.
  - Goods and services expenditures projected to decline by 0.9 percent of GDP (mainly due to drop from 2015 one-off spending for election preparation).
  - Externally financed investments expected to increase by 1.5 percentage points of GDP (re-phased from 2015).
  - Budgetary provisions for security spending: CFAF 189.1 billion — 4.5 percent of GDP.
- Financing:
  - Total financing needs estimated at CFAF 602.2 billion.
  - External financing expected to meet CFAF 520.7 billion, comprising:
    - Loans: CFAF 268.5 billion
    - Grants: CFAF 252.2 billion (fully met by existing pledges)
  - Budget support projected at CFAF 97.3 billion, of which CFAF 54.5 billion will be grants:
    - European Union: CFAF 38 billion
    - Agence Française de Développement: CFAF 6.5 billion
    - Other multilateral and bilateral donors: CFAF 10 billion
  - Concessional loans totaling CFAF 42.8 billion:
    - World Bank: CFAF 35 billion
    - African Development Bank: CFAF 7.8 billion

### Strengthening revenue administrations (customs and tax)
- Customs:
  - Revision of the General Customs Code expected to be adopted in early 2016.
  - Reorganization of the General Customs Administration underway; two regional administrations at Diffa and Agadez already in place.
  - Information processing improvements: single network server by end-January 2016; extension of electronic transit system; migration from ASYCUDA++ to ASYCUDA World.
  - Shared network connection with Benin, Togo, and Burkina Faso expected by end-December 2015.
  - Development of a 49-hectare parking and inspection site near the border with Nigeria to improve tracking of re-exports.
- Tax administration:
  - Simplification and adaptation of fiscal legal framework and harmonization with SYSCOA underway.
  - Settlement of disputes under CARFI advancing, with a recent one-time plan to clear tax arrears.
  - Reorganization includes restructuring of Department of Small-and-Medium-Sized Businesses into Department of Medium-Sized Businesses (DME) to improve taxpayer database management.
  - Improvements resulted in decline of default rates and rise of spontaneous reporting rates, notably for VAT.
  - Review of tax audit process: joint customs and tax team, creation of regional investigation and research teams at eight regional offices.
  - Computerized System for the Monitoring of Taxes and Taxpayers (SISIC) underway; tenders to be finalized by early 2016 and implementation by end-March 2017.

### Civil service payroll and personnel controls (cost savings)
- Measures to contain staff payroll include:
  - Integrated administrative database of government employees to bring payroll under control by end-2016.
  - Ongoing audit of civil service salaries.
  - Preparation of a list of civil service jobs and skills to improve HR management by end-June 2016.
  - Introduction of a performance appraisal system via reform of civil service staff regulations before end-2016, supported by a biometric census of government employees before end-2016.

### Management of natural resources
- Oil sector pressures:
  - Decline in oil prices has reduced refining and distribution margins at SORAZ and increased borrowing and input costs due to CFA franc depreciation against the U.S. dollar.
  - Declining oil prices could delay oil sector projects and fiscal revenue materialization.
- Measures to strengthen oil sector finances:
  - Technical committee proposed actions impacting revenue and cost, including revision of pricing mechanism.
  - Sale price ex-CNPC to SORAZ revised from US$70 per barrel to US$57 per barrel in March 2015 and to US$50 per barrel as of June 2015.
  - Authorities exploring raising ex-SORAZ price to SONIDEP while reducing distribution margins to keep pump price unchanged, and refinancing the US$880 million loan to build the refinery on concessional terms.
- Pipeline and export plans:
  - Niger aims to become a crude oil exporter by end-2017.
  - Pipeline route Niger-Chad-Cameroon selected; cost estimated at about US$850 million.
  - CNPC could participate with 55 percent share in Niger Oil Transportation Company (NOTCO); remainder split among Niger, Chad, and private investors (15 percent each).
  - Niger provisioned CFAF 2.5 billion in the 2016 budget for its NOTCO capital contribution.
  - Work on pipeline construction expected to start in 2016, with exports to begin at end-2017.
  - Staff stressed need to consider debt sustainability when defining pipeline financing options.
  - Source footnote: for DSA, staff assumed government participation limited to 15 percent of NOTCO capital; residual financed from 2017 budget and other financing mainly FDI reflected as private debt.
- Institutional strengthening:
  - Authorities seek to strengthen policy formulation, transparency, and supervision in natural resource sector.
  - 2014 technical assistance aimed at enhancing predictability of public spending given commodity price volatility; follow up missions scheduled by FAD.
  - Strengthening supervisory role and accounting expertise of SOPAMIN and the Ministry of Petroleum prioritized.
  - In April, government approved the energy code and texts for creation/organization of the Energy Sector Regulatory Authority.
  - Ministry of Mines and Ministry of Petroleum to jointly prepare official lists of mining and petroleum operations and permits.

### Debt management and outlook
- Public debt trajectory and risks:
  - Public debt-to-GDP ratio projected to rise from 27.1 percent of GDP at end-2013 to an estimated 52.1 percent in 2016.
  - SORAZ refinancing loan did not materialize; authorities considering options to refinance on more concessional terms.
  - Chinese master facility loan of US$1 billion expected to be disbursed after 2018 would enable further scaling up of public investment and keep debt-to-GDP ratio high over medium term.
  - Authorities cancelled planned issuance of ‘Sukuk’ bonds (3.6 percent of GDP) and another non-concessional loan under consideration from Islamic Development Bank due to debt accumulation and investment efficiency concerns.
- Domestic arrears and securitization:
  - Recently accumulated domestic arrears projected at CFAF 40 billion at end-2015 that the government plans to securitize; securitization would add to the debt stock.
- Staff assessment:
  - Updated DSA suggests a moderate risk of debt distress, warranting caution in financing large projects and emphasis on debt sustainability considerations.

*Sources: Nigerien authorities; and IMF staff estimates.*

### 29. Niger has weak debt management capacity, but steps to strengthen further the debt

### 29. Niger has weak debt management capacity, but steps to strengthen further the debt management framework were identified

### Debt management: capacity, recent steps, and planned actions
- The 2012 debt management performance report identified significant gaps in completeness and timeliness of central government debt records, and quality of debt data covering the central government.
- Recent actions:
  - Quarterly report on debt management has been published regularly over the last year.
  - Decree of the Prime Minister of June 18, 2015 aims to improve coverage and quality of debt statistics by strengthening coordination of debt operations.
- Planned actions and commitments:
  - Government will draft a medium-term external borrowing plan (Table 12) before end-June 2016, including:
    - its investment strategy and a list of priority investment projects;
    - the sources of financing;
    - the use of financing;
    - the debt management strategy.
  - A summary of the government’s external borrowing program is shown in Table 14.
  - The government is planning to review contracted debts that have not yet been disbursed.
- Authorities expressed strong commitment to fiscal discipline, in particular on debt management (MEFP, ¶ 39, 40, 41).

### Business environment: progress and remaining bottlenecks
- Rankings and indicators:
  - Doing Business Index 2015: Niger ranked 168th of 189 countries (MEFP, ¶ 56).
- Recent reforms and institutional changes:
  - Presidentialy chaired National Investment Council to serve as a platform for public-private dialogue.
  - One-stop-shop for setting up new businesses with minimal bureaucracy.
  - New investment code and support office to assist investors.
  - Permanent advisory committee on ways to improve the business environment.
- Remaining constraints:
  - Need for improved infrastructure, institutional framework, and broader dissemination of business opportunities.
  - Important bottlenecks precluding free circulation of goods and reports of non-transparent practices by the business community.
  - Authorities acknowledge need for greater private sector participation in the reform process and plan to reform customs governance to ensure free circulation of goods (MEFP, ¶ 57).

### Key infrastructure and financial access indicators
- Text Table 2 (selected indicators):
  - Paved roads in Km (Nigerien authorities): 97.5 (2012); 167.8 (2014)
  - Access to electricity rate in percent: 14.4 (2012); 27.5 (2014)
  - Fixed telephone and mobile subscription in percent: 32.0 (2012); 45.0 (2014); 61.0 (2012); 72.3 (2014)
  - M2 to GDP (%): 22.6 (2012); 27.4 (2014); 39.3 (2012); 36.7 (2014)
  - Sources: Nigerien authorities; and World Bank.
- Financial depth and access:
  - Broad money (M2) to GDP: 28 percent in 2014 (among the lowest globally) versus 36.7 percent average in sub-Saharan Africa.
  - Less than 1.5 percent of the population having a bank account or access to credit.
  - Account penetration rate improved between 2011 and 2014 but remains among the lowest in SSA (Text Figure 3).

### Banking system status, risks, and policy responses
- System performance and risks:
  - As of end-June 2015, 11 out of 12 banks observed prudential requirements.
  - Capital adequacy ratios significantly exceed regulatory threshold of 8 percent (end-June 2015).
  - Gross non-performing loans are high; banks are on average well provisioned and highly profitable (Table 6).
  - Deterioration in asset quality in 2015 appears related to two banks with state participation that are being restructured.
  - Many banks are affiliates of regional banks, focused on trade financing and not expanding network to remote areas.
  - Growing exposures to the public sector engaged in infrastructure projects partly financed by domestic banks through issuance of bonds.
  - Nonbanking sector, particularly microfinance, is growing with limited supervision capacity.
- Impact of security situation:
  - Disruption of commerce along the southern border has eliminated formerly profitable commercial credit lines.
  - Business affected by risks of personal aggression and property destruction.
  - Government accumulation of arrears to some clients contributes to loan payment difficulties.
  - Banks are consolidating operations in less vulnerable areas and activities.
- Reforms and strategies:
  - National Financial Sector Development Strategy (SNDSF) covering 2014–19 aims at expanding access to financial services.
  - Government decision in 2014 to create a steering committee (structural benchmark for end-February 2016) to coordinate implementation and support from development partners.
  - National Strategy for Financial Inclusion (NSFI–2016–20) prioritizes lending to small economic operators, particularly women, young people, and disenfranchised groups.
  - Builds on the 2012 National Strategy for the Microfinance Sector (SNSM).

### Program extension, balance of payments needs, and risks
- Program extension and augmentation:
  - Authorities requested augmentation and extension of the ECF arrangement through December 31, 2016 to respond to larger BOP needs in 2015 and provide a policy framework through the election period.
  - Larger BOP needs result from:
    - the cost of hosting and assisting influx of refugees and internally displaced people due to military action against Boko-Haram’s activities in the region;
    - reduction of FDI resulting from higher security risks.
  - Permanent part of these shocks to be tackled by internal adjustment through fiscal consolidation.
  - Eighth and ninth reviews to be based on proposed PCs and structural benchmarks for end-December 2015 and end-June 2016, respectively (Tables 8-12).
  - Agreement on indicative targets for end-March 2016 and projections for end-September and end-December 2016.
- IMF repayment capacity:
  - Niger’s capacity to repay the IMF remains adequate (Table 13).
  - Obligations to the Fund would peak in 2022 at just 1.4 percent of tax revenue or 0.3 percent of GDP.
- Implementation risks:
  - Key risk: persistence or intensification of armed hostilities, which could aggravate budgetary pressures and prevent fiscal consolidation.
  - With the 2016 presidential elections, importance of ensuring fiscal stance and other policies are not influenced by the election cycle.
- Regional central bank safeguards:
  - BCEAO is the common central bank of WAEMU; latest safeguard assessment completed in December 2013 found a strong control environment and enhanced governance.
  - Implementation of the 2010 Institutional Reform of the WAEMU led to establishment of an internal audit committee and progress to strengthen capacity with external expertise.
  - BCEAO committed to fully comply with international financial reporting standards for the audit of FY 2015.
  - Assessment recommended selecting a second experienced audit firm for joint external audits, which was done in 2015.

### Staff appraisal: outlook, priorities, and recommendations
- Growth and outlook:
  - Nigerien economy continues to deliver strong growth with favorable medium-term prospects despite challenges.
  - Main challenge: devote adequate resources to inclusive growth to reduce unemployment and poverty while managing security spending and leveraging a growing natural resource sector.
- Food security:
  - Enhancing food security could increase economic resilience and macroeconomic stability.
  - Government food programs are welcomed, but more implementation of the PDES and the 3N initiative is needed, including increasing investment in crop irrigation networks.
  - Budget should include adequate provisions to tackle food insecurity given supply vulnerabilities and related repeated shocks.
- Fiscal and debt sustainability:
  - Preserving fiscal and debt sustainability while reducing development gaps and addressing security spending requires further strengthening of the fiscal framework.
  - Reducing fiscal deficits over the medium term is critical.
  - Government commitment to contain borrowing, enhance tax collection, and control spending is welcomed, including full implementation of initiatives to strengthen tax and customs administration (PFM reforms).
  - Steps to accelerate public financial management reforms: implement institutional mechanism of the 2012 budget law and prepare plans for effective implementation of budget programs.
  - To break the cycle of domestic arrears, strengthen cash management through establishment of the Treasury Single Account and limiting exceptional spending.
- Natural resource management:
  - Establishing strong institutions and policy frameworks to manage natural resource revenues is a key priority.
  - Fiscal framework must manage commodity price cycles, ensure efficiency of spending, and respond to needs for infrastructure and social spending to create employment and reduce poverty.
  - Continued efforts to enhance transparency and strengthen supervision in the oil sector are crucial.
  - Recent efforts to review the pricing mechanism are welcome, but more governance strengthening in the oil sector is needed.
- Financial sector development:
  - Advancing financial sector development can support inclusive growth.
  - Decree to implement the financial sector development strategy and launch of the financial inclusion strategy are important; staff encourages speeding up implementation.
  - Staff encourages improvements to the national microcredit program and strengthened supervision to foster inclusive growth.
- Investment and debt management guidance:
  - Given rapid increase in external and domestic borrowing, government should contain debt accumulation and promote sound debt management and efficient public investment.
  - Investment spending should be scaled up cautiously to ensure value for money and contain debt vulnerabilities.
  - Recent institutional reforms to improve coordination provide an opportunity to strengthen debt management and investment efficiency.
  - Staff urges authorities to speed up the medium-term debt management strategy to guide the annual borrowing plan and to align investment spending closely to PDES implementation and improve its management.

*Source: IMF staff report text as provided in the content unit.*

### 46. Staff recommends the completion of the sixth and seventh reviews. Based on the

### _cr15342 - 46. Staff recommends the completion of the sixth and seventh reviews. Based on the

### Staff recommendation and program adjustments
- Staff recommends the completion of the sixth and seventh reviews.
- Staff supports waivers for the nonobservance of the performance criteria on:
  - net domestic financing and domestic arrears repayments at end-December 2014, and
  - net domestic financing at end-June 2015.
- Rationale: corrective actions taken to strengthen revenue, pay off domestic arrears, and to align program performance with program objectives by starting in 2016 to take steps to address fiscal imbalances.
- Staff supports the authorities’ request for:
  - an augmentation of access of 62.5 percent of quota, and
  - an extension of the arrangement under the ECF up to December 31, 2016.
- Purpose of augmentation and extension: help meet larger BOP needs in 2015, catalyze additional donor support, and provide a framework for policy implementation during the election period.

### Recent economic developments and outlook (selected indicators and projections)
- Real GDP (annual % change, selected years shown in Table 1):
  - 2012: 11.8
  - 2013: 4.6
  - 2014: 6.5
  - 2015 (Est.): 6.9
  - 2016 (Proj.): 4.6
  - 2020 (Proj.): 8.0
- Non-resources GDP at constant prices:
  - 2012: 9.1
  - 2013: 4.2
  - 2014: 6.8
  - 2015 (Est.): 7.4
  - 2016 (Proj.): 4.7
- Oil production (thousand barrels per day):
  - 2012: 13
  - 2013: 18
  - 2014: 18
  - 2015 (Est.): 17
  - 2016 (Proj.): 20
  - 2020 (Proj.): 60
- Consumer price index (annual average):
  - 2012: 0.5
  - 2013: 2.3
  - 2014: -0.8
  - 2015 (Est.): -0.9
  - 2016 (Proj.): 1.6
- Broad money growth (percent):
  - 2012: 31.2
  - 2013: 10.1
  - 2014: 10.0
  - 2015 (Est.): 25.7
  - 2016 (Proj.): 7.7
  - 2020 (Proj.): 6.2

### Government finances — levels and fiscal balances (selected figures from Tables 1–3)
- Total revenue (percent of GDP, Table 1 and Table 3):
  - 2012: 26.7 (Table 1) / 15.2 (Table 3) — note differing definitions/rows in source tables
  - 2013: 15.7 (Table 1) / 17.0 (Table 3)
  - 2014: 19.9 (Table 1) / 19.1 (Table 3)
  - 2015 (Est./Proj.): 13.6 (Table 1) / 18.0 (Table 3)
  - 2016 (Proj.): 4.5 (Table 1) / 18.7 (Table 3)
  - 2020 (Proj.): 14.3 (Table 1) / 21.3 (Table 3)
- Total expenditure and net lending (percent of GDP, Table 3):
  - 2012: 22.3
  - 2013: 27.8
  - 2014: 43.6
  - 2015 (Est.): 31.9
  - 2016 (Proj.): 32.2
  - 2020 (Proj.): 26.9
- Basic balance (excluding grants) (percent of GDP, Table 1 and Table 3):
  - 2012: -1.7
  - 2013: -2.1
  - 2014: -15.2
  - 2015 (Est.): -6.6
  - 2016 (Proj.): -3.7
  - 2019 (Proj.): 0.7
  - 2020 (Proj.): 0.5
- Overall balance (commitment basis, including grants) (percent of GDP):
  - 2012: -1.1
  - 2013: -2.6
  - 2014: -16.7
  - 2015 (Est.): -8.3
  - 2016 (Proj.): -6.6
  - 2020 (Proj.): -2.2
- Total public and publicly guaranteed debt (percent of GDP):
  - 2012: 26.1
  - 2013: 27.1
  - 2014: 37.7
  - 2015 (Est.): 35.8
  - 2016 (Proj.): 42.3
  - 2020 (Proj.): 50.2
- Government financial operations (Table 2, selected levels in Billions of CFA francs):
  - Total revenue 2014: 543.0
  - Total revenue 2015 (Est.): 628.5
  - Total revenue 2016 (Proj.): 753.3
  - Total expenditure and net lending 2014: 799.2
  - Total expenditure and net lending 2015 (Est.): 1,030.3
  - Overall balance (commitment) 2014: -256.2
  - Overall balance (commitment) 2015 (Est.): -401.8
  - Overall balance (commitment) 2016 (Proj.): -968.1

### Monetary sector and financial soundness (selected items)
- Monetary survey (Table 4, Billions of CFA francs):
  - Money and quasi-money:
    - 2012: 802.5
    - 2013: 883.5
    - 2014: 1,110.7
    - 2015 (Est.): 1,290.5
    - 2016 (Proj.): 1,453.8
    - 2020 (Proj.): 1,959.8
  - Net foreign assets (BCEAO + commercial banks) 2012: 431.4 (net foreign assets total)
- Broad money (percent change):
  - 2012: 31.2
  - 2013: 10.1
  - 2014: 25.7
  - 2015 (Est.): 7.7
- Financial soundness indicators (Table 6, percent unless indicated):
  - Regulatory capital to risk-weighted assets:
    - 2008: 4.0
    - 2012: 16.7
    - 2014: 16.1
    - 2015 (Jun): 15.6
  - Gross NPLs to total loans:
    - 2008: 16.0
    - 2012: 17.1
    - 2014: 15.5
    - 2015 (Jun): 19.7
  - Provisioning rate (percent):
    - 2008: 50.3
    - 2012: 54.6
    - 2014: 61.5
    - 2015 (Jun): 68.3

### Balance of payments (selected figures, Table 5)
- Current account balance (Billions of CFA francs):
  - 2012: -521.0
  - 2013: -568.4
  - 2014: -642.1
  - 2015 (Est.): -1,147.7
  - 2016 (Proj.): -743.1
  - 2020 (Proj.): -749.9
- Exports, f.o.b. (Billions of CFA francs):
  - 2012: 736.8
  - 2013: 784.6
  - 2014: 709.3
  - 2015 (Est.): 809.2
  - 2016 (Proj.): 698.0
  - 2020 (Proj.): 1,444.0
- Imports, f.o.b. (Billions of CFA francs):
  - 2012: 971.4
  - 2013: 996.9
  - 2014: 1,121.9
  - 2015 (Est.): 1,500.3
  - 2016 (Proj.): 1,206.3
  - 2020 (Proj.): 1,702.5
- Overall balance (Billions of CFA francs):
  - 2012: 152.3
  - 2013: 46.3
  - 2014: 112.7
  - 2015 (Est.): 56.1
  - 2016 (Proj.): 40.0
  - 2020 (Proj.): 89.7
- Memorandum items:
  - Current account (in percent of GDP):
    - 2012: -14.6
    - 2013: -15.3
    - 2014: -16.2
    - 2015 (Est.): -27.3
    - 2020 (Proj.): -11.7
  - Net foreign assets (months of imports):
    - 2012: 3.4
    - 2013: 3.6
    - 2014: 4.2

### Program performance, quantitative criteria, and targets (Tables 7–9; selected outcomes)
- March–December 2014 (Table 7, Billions CFA francs, cumulative):
  - Net domestic financing of the government:
    - Prog. End-March 2014: 0.2; Actual: 66.6; Status: 0.3? (table shows 0.2 prog / 66.6 actual / 0.3? formatting in source)
    - Adjusted criteria listed as 15.2, 66.6 — status: Not Met
  - Reduction in domestic payment arrears of government obligations (minimums):
    - End-March 2014 Prog.: -1.3; Actual: -8.4; Status: Met
    - End-December 2014 Prog.: -10.0; Actual: 57.7; Status: Not Met
  - Basic budget balance (commitment basis, excl. grants) cumulative:
    - Prog.-End-December 2014: -161.6; Actual: -261.8; Status: Not Met
  - Total revenue cumulative:
    - Prog.-End-December 2014: 753.3; Actual: 714.2; Status: Not Met
- March–December 2015 (Table 8, Billions CFA francs, cumulative):
  - Net domestic financing of the government:
    - End-March 2015 Prog.: 19.6; Actual: 44.4
    - End-June 2015 Prog.: 41.3; Actual: 123.9
    - End-December 2015 Prog.: 201.0; Projected: 130.7
    - Adjusted criteria: 32.2 and 44.4 — status: Not Met
  - Reduction in domestic payment arrears of government obligations:
    - End-March 2015 Prog.: -1.8; Actual: 0.0; Status: Not Met
    - End-June 2015 Prog.: -3.5; Actual: -28.8; Status: Met
    - End-December 2015 Prog.: -38.8; Actual: -63.8
  - Basic budget balance (commitment basis, excl. grants) cumulative:
    - End-December 2015 Prog.: -155.5; Actual: -224.9; Status: Not Met
  - Total revenue cumulative:
    - End-December 2015 Prog.: 564.6; Actual/Proj.: 785.7
  - Spending on poverty reduction:
    - End-December 2015 Prog.: 312.0; Actual/Proj.: 442.8; Status: Met
- Proposed quantitative targets March–December 2016 (Table 9, Billions CFA francs):
  - Net domestic financing of the government:
    - End-March 2016 Prog.: 67.7
    - End-June 2016 Prog.: 99.7
    - End-September 2016 Prog.: 109.5 (for information)
    - End-December 2016 Proj.: 100.4 (for information)
  - Reduction in domestic payment arrears of government obligations:
    - End-March 2016 Prog.: 10.3
    - End-June 2016 Prog.: 20.6
    - End-December 2016 Proj.: -10.0
  - New external debt contracted or guaranteed by the government on concessional terms (ceiling):
    - 800.0 (cumulative ceiling for 2016 dates shown)

### Structural benchmarks, prior actions, and implementation status (Tables 10–11)
- Prior actions and structural benchmarks 2014 (Table 10, selected):
  - Finalize the study to select the path of the pipeline — Prior Action for the second and third review — Met.
  - Launch an international tender for the selection of the company that will build the pipeline — End-September 2014 — Not Met.
  - Publish a formal annual borrowing plan detailing the government’s planned external borrowing for the year — End-December 2014 — Not Met.
  - Introduce quarterly reporting of debt management activities to the National Public Debt Management Committee — Quarterly starting with June 2014 — Met.
  - Approve decree to implement the financial sector reform plan — End-December 2014 — Met.
- Structural benchmarks 2015 (Table 11, selected):
  - Census of Accounts for the TSA — End-March 2015 — Met.
  - Adopt the design of the TSA — End-September 2015 — Met.
  - Put in place the one stop shop for the investment code — End-September 2015 — Met.
  - Limit expenditure not authorized in advance to a maximum of 5 percent of committed expenditure (quarterly) — Met in March and June 2015.
  - Operationalize the customs electronic transit — End-September 2015 — Not met (operational between six interconnected customs offices; extension pending completion of interconnection project).

*Source: Niger — IMF staff report (selected tables and figures from the provided PDF).*

### introduction of the investment

### introduction of the investment

### Proposed structural benchmarks and fiscal management measures
- Improve the management of investments through the implementation of the program budgeting system. Timetable: End-September 2015 Met.
- Prepare a comprehensive procurement plan to match a commitment plan and a cash plan. Timetable: Annually. Rationale: Improve budget management, avoid the backloading of spending toward the end of the year.
- Establish the legal framework for the closure of public accounts to be consolidated under the TSA. Timetable: End-June 2016. Rationale: Improve cash flow management.
- Introduce quarterly reports on debt management activities to be submitted to the National Public Debt Management Committee. Timetable: Quarterly. Rationale: Improve debt management.
- Establish a steering committee for implementation of the financial sector development plan. Timetable: End-February 2016. Rationale: Improve the business climate.
- Limit expenditures executed through exceptional procedures to a maximum of 5 percent of authorized spending, with the exception of debt service payments and budget expenditure associated with exemptions. Timetable: Quarterly. Rationale: Improve budget and cash flow management.
- Completion of the civil service staff and salary audits. Timetable: End-December 2016. Rationale: Improve the management of salaries and grants.
- Migration to SYDONIA World. Timetable: End-January 2016. Rationale: Improve revenue collection.
- Prepare a borrowing plan. Timetable: End-June 2016. Rationale: Improve debt management.

### Indicators of capacity to repay the Fund (2015–26) — key figures
- Fund obligations based on existing credit (Principal, SDR millions): 2.9 (2015), 5.0 (2016), 4.8 (2017), 5.8 (2018), 7.8 (2019), 11.6 (2020), 11.3 (2021), 10.2 (2022), 7.9 (2023), 4.5 (2024), 0.0 (2025), 0.0 (2026).
- Charges and interest on existing credit (SDR millions): 0.0 for 2015–2018; 0.1 (2019); 0.1 (2020); 0.1 (2021); 0.0 thereafter.
- Total obligations based on existing and prospective credit (SDR millions): 2.9 (2015), 5.0 (2016), 4.8 (2017), 5.8 (2018), 8.0 (2019), 11.9 (2020), 20.5 (2021), 23.1 (2022), 20.8 (2023), 17.3 (2024), 12.8 (2025), 3.7 (2026).
- Total obligations in CFAF billions: 2.4 (2015), 4.1 (2016), 4.0 (2017), 4.8 (2018), 6.6 (2019), 9.8 (2020), 17.0 (2021), 19.1 (2022), 17.1 (2023), 14.3 (2024), 10.6 (2025), 3.1 (2026).
- Percent of exports of goods and services (total obligations): 0.3 (2015), 0.5 (2016), 0.4 (2017), 0.4 (2018), 0.5 (2019), 0.6 (2020), 1.0 (2021), 1.0 (2022), 0.9 (2023), 0.7 (2024), 0.5 (2025), 0.1 (2026).
- Percent of quota (total obligations): 4.5 (2015), 7.5 (2016), 7.3 (2017), 8.8 (2018), 12.2 (2019), 18.0 (2020), 31.2 (2021), 35.0 (2022), 31.5 (2023), 26.3 (2024), 19.4 (2025), 5.6 (2026).
- Outstanding IMF credit based on existing prospective drawings (SDR millions): 107.8 (2015), 127.5 (2016), 122.7 (2017), 116.9 (2018), 109.1 (2019), 97.5 (2020), 77.2 (2021), 54.3 (2022), 33.7 (2023), 16.4 (2024), 3.7 (2025), 0.0 (2026).
- Percent of exports of goods and services (outstanding IMF credit): 11.3 (2015), 12.5 (2016), 10.2 (2017), 7.7 (2018), 6.7 (2019), 5.1 (2020), 3.7 (2021), 2.5 (2022), 1.5 (2023), 0.7 (2024), 0.1 (2025), 0.0 (2026).
- Percent of quota (outstanding IMF credit): 163.8 (2015), 193.8 (2016), 186.4 (2017), 177.7 (2018), 165.9 (2019), 148.2 (2020), 117.4 (2021), 82.6 (2022), 51.2 (2023), 25.0 (2024), 5.6 (2025), 0.0 (2026).
- Net use of IMF credit (SDR millions): 36.1 (2015), 19.7 (2016), -4.8 (2017), -5.8 (2018), -7.8 (2019), -11.6 (2020), -20.3 (2021), -22.9 (2022), -20.6 (2023), -17.3 (2024), -12.7 (2025), -3.7 (2026).
- Disbursements (SDR millions): 39.0 (2015), 24.7 (2016), 0.0 (2017–2026).
- Repayments and repurchases (SDR millions): 2.9 (2015), 5.0 (2016), 4.8 (2017), 5.8 (2018), 7.8 (2019), 11.6 (2020), 20.3 (2021), 22.9 (2022), 20.6 (2023), 17.3 (2024), 12.7 (2025), 3.7 (2026).

Memorandum items (selected):
- Exports of goods and services (CFAF billions): 785.8 (2015), 842.6 (2016), 997.3 (2017), 1,261.8 (2018), 1,354.9 (2019), 1,585.6 (2020), 1,719.9 (2021), 1,816.5 (2022), 1,911.8 (2023), 2,036.1 (2024), 2,170.8 (2025), 2,310.1 (2026).
- External debt service (CFAF billions): 106.6 (2015), 203.7 (2016), 383.5 (2017), 379.6 (2018), 203.7 (2019), 216.0 (2020), 384.4 (2021), 391.7 (2022), 419.5 (2023), 439.1 (2024), 456.0 (2025), 465.9 (2026).
- Nominal GDP (CFAF billions): 4,203.8 (2015), 4,513.1 (2016), 4,897.3 (2017), 5,363.6 (2018), 5,825.9 (2019), 6,419.2 (2020), 6,894.9 (2021), 7,403.8 (2022), 7,949.5 (2023), 8,528.4 (2024), 9,148.1 (2025), 9,817.0 (2026).
- Tax revenue (CFAF billions): 724.6 (2015), 793.9 (2016), 870.0 (2017), 988.8 (2018), 1,083.7 (2019), 1,220.9 (2020), 1,322.1 (2021), 1,400.4 (2022), 1,534.8 (2023), 1,635.4 (2024), 1,778.0 (2025), 2,024.5 (2026).
- Quota (SDR millions): 65.8 for 2015–2026.

### Government external borrowing program (2015 and 2016) — summary
- Source of debt financing (CFAF billions) — Total projections for 2016: 80.0 (signed), 440.4 (to be signed), 520.4 (total), 279.6 (projections).
- Concessional debt (2016 projections): 80.0 (signed), 440.4 (to be signed), 520.4 (total), 279.6 (projections).
  - Multilateral debt: 1: 74.2 (signed), 174.4 (to be signed), 248.6 (total), 187.6 (projections).
  - Bilateral debt: 5.8 (signed), 266.0 (to be signed), 271.8 (total), 11.7 (projections).
  - To be identified: 80.3.
- Non Concessional: 0 0 0 0 0.
- Utilization of the amount borrowed (CFAF billions) — Total: 80.0 (signed), 440.4 (to be signed), 520.4 (total), 279.6 (projections).
  - Budgetary assistance: 0.0 (signed), 78.5 (to be signed), 78.5 (total), 48.5 (projections).
  - Infrastructure (Road, Bridge,...): 0.0 (signed), 235.8 (to be signed), 235.8 (total), 40.0 (projections).
  - Water and Energy: 5.8 (signed), 17.1 (to be signed), 22.8 (total), 80.4 (projections).
  - Agriculture: 23.1 (signed), 26.5 (to be signed), 49.6 (total), 64.5 (projections).
  - Social (Education, Health, ...): 7.6 (signed), 82.5 (to be signed), 90.2 (total), 25.9 (projections).
  - Others (food security, Women empowerment, ...): 43.5 (signed), 0.0 (to be signed), 43.5 (total), 20.3 (projections).
- Notes: IMF financing is excluded (CFAF 32.2 billion in 2015 and CFAF 20.4 billion in 2016). There is a CFAF 235.8 billion road construction loan under negotiation with the Turkish government, which may not be finalized in 2015. In 2016 there are discussions with some donors to finance various projects for which a provision of CFAF 80.3 billion is made (CFAF 40 billion in road construction, CFAF 20 billion in education, and CFAF 20.3 billion for other projects).

### Disbursements under the ECF arrangement (2012–16) — schedule and conditions
- SDR 11.28 — Executive Board Approval of the ECF Arrangement — March 16, 2012.
- SDR 11.28 — Observance of June 30, 2012 performance criteria, and completion of the first review under the arrangement — March 28, 2013.
- SDR 11.28 — Observance of December 31, 2012 performance criteria, and completion of the second review under the arrangement — March 31, 2014.
- SDR 11.28 — Observance of June 30, 2013 performance criteria, and completion of the third review under the arrangement — March 31, 2014.
- SDR 5.64 — Observance of December 31, 2013 performance criteria, and completion of the fourth review under the arrangement — December 17, 2014.
- SDR 5.64 — Observance of June 30, 2014 performance criteria, and completion of the fifth review under the arrangement — December 17, 2014.
- SDR 39.005 — Observance of December 31, 2014 and June 30, 2015 performance criteria, and completion of the combined sixth and seventh reviews under the arrangement — November 30, 2015.
- SDR 12.34 — Observance of December 31, 2015 performance criteria, and completion of the eighth review under the arrangement — May 31, 2016.
- SDR 12.34 — Observance of June 30, 2016 performance criteria, and completion of the ninth review under the arrangement — November 30, 2016.
- Total: SDR 120.085.
- Note: In 2015, the disbursement schedule includes a 25 percent quota augmentation of the arrangement under the ECF, which is proposed to be approved at the completion of the combined sixth and seventh reviews.

### Letter of Intent — program context and requests (November 13, 2015)
- Security and program impact:
  - Boko-Haram terrorist attacks and regional security deterioration increased strains on socio-economic stability, required troop deployments, and created an influx of refugees and displaced persons.
  - Expected budgetary support could not be mobilized, increasing the use of domestic financing; performance criteria of net domestic financing and net reduction in domestic arrears at end-December 2014, and net domestic financing at end-June 2015, were not met.
- Macroeconomic performance:
  - Real GDP growth: 6.9 percent in 2014 (from 4.6 percent in 2013); projected at 4.4 percent in 2015.
  - Inflation: average annual rate of -0.9 percent in 2014; expected average annual rate of 0.8 percent in 2015.
- Government corrective actions and reform priorities:
  - Corrective measures in the supplementary budget for 2015 and the budget for 2016; stepped-up structural reforms in tax administration, public financial management, debt and natural resources management, financial sector reform, and business climate.
  - Recent reorganization of the Ministries of Finance and Planning into one single Ministry of the Economy and Finance to improve institutional coordination.
  - Commitment to prepare annual external borrowing plans reflecting investment project preparation stages and to improve the Inter-Ministerial Committee on Debt Management.
- Requests to the IMF:
  - Waivers for the nonobservance of end-December 2014 and end-June 2015 performance criteria and completion of the intended sixth and seventh reviews.
  - Completion of the sixth and seventh reviews under the ECF, an increase in access of 62.5 percent of quota, a one year extension of the program up to December 31, 2016, and a disbursement under the sixth and seventh reviews of SDR 39.005 million.
  - Agreement to consult with IMF staff before adopting additional measures or policy changes.
  - Authorization for publication of the LOI, the MEFP, and the TMU following completion of the sixth and seventh reviews.

### Memorandum of Economic and Financial Policies — introduction and recent developments
- Program alignment:
  - MEFP updates the fourth and fifth reviews (November 2014) and aligns with the 2012–2015 Program de Développement Economique et Social (PDES) and Stratégie de Développement Durable et de la Croissance Inclusive (SDDCI, Niger 2035).
  - Program priorities: (i) maintaining macroeconomic stability; (ii) improving budget execution and limiting domestic payments arrears; (iii) improving debt management; (iv) improving transparency in the mining and oil sectors; (v) supporting private and financial sector development.
- Recent economic developments (selected):
  - Growth drivers: agriculture, construction, and services.
  - 2014: Real GDP growth 6.9 percent; inflation -0.9 percent.
  - 2015: Preliminary growth 4.4 percent; inflation expected 0.8 percent.
  - Current account: 16.2 percent of GDP in 2014; expected to widen by 1.5 percentage points to 17.7 percent of GDP in 2015 due to declines in oil and uranium volumes and prices and higher imports for security and infrastructure.
  - Official reserves: CFAF 112.7 billion at end-2014; expected to fall to CFAF 40 billion in 2015.
  - 2014 budget execution: tax revenues fell by almost CFAF 32 billion (0.8 percent of GDP) relative to program target; external investment expenditure shortfall by 2 percentage points of GDP; budgetary support mobilized CFAF 75 billion vs. projected CFAF 116 billion; resulting financing gap filled by greater domestic financing and net accumulation of domestic payments arrears of CFAF 57.7 billion (1.5 percent of GDP); stock of domestic payments arrears at end-2014: CFAF 100.4 billion (2.5 percent of GDP).
  - 2015 financial pressures: Boko-Haram attacks intensified in February 2015; estimated 200,000 incoming Nigerian refugees and displaced nationals; at end-June 2015, Treasury accumulated domestic payments arrears of CFAF 32.7 billion; government paid off CFAF 61.5 billion of the CFAF 100.4 billion arrears outstanding at end-December 2014.
  - Monetary developments: money supply growth exceeded 25 percent in 2014 driven by net foreign assets growth of 34 percent; at end-June 2015, money supply was 6 percent higher than end-December 2014 (annualized deceleration of 12 percent compared to end-2014); lending to private sector grew 7.6 percent compared to end-2014; government net position vis-à-vis banking system moved from net creditor CFAF 76.9 billion (end-2014) to net debtor CFAF 8.4 billion (end-June 2015), partly due to use of deposits CFAF 86.4 million from delayed budgetary support.
- Program implementation status:
  - End-December 2014: continuous performance criteria on non-accumulation of external arrears and non-contracting of non-concessional and short-term external loans or guarantees were met; quantitative performance criteria on net domestic financing and reduction in domestic arrears were not met; indicative targets for revenues, basic fiscal balance, and priority poverty spending were not observed.
  - End-June 2015: all performance criteria met except the criterion on net domestic financing of the government; indicative target for spending on poverty reduction was met.

*Source: IMF staff estimates, Nigerien authorities, Letter of Intent and Memorandum of Economic and Financial Policies (November 13, 2015).*

### 7. Structural Reforms are advancing (Table 3). The quarterly reports on budget execution, as

### _cr15342 - 7. Structural Reforms are advancing (Table 3). The quarterly reports on budget execution, as

### Structural reforms and budget execution
- Quarterly reports on budget execution and on debt management are prepared regularly.
- Budget allocations for each quarter are released before the end of the first week of the quarter (target was the first four weeks), contributing to an improvement in the budget execution rate, particularly in 2015.
- A Prime Minister circular limiting ministries’ expenditures without prior authorization contributed to a decline in the ratio of exceptional expenditures to total expenditures: 1.1 percent at end-December 2014 and 1.8 percent at end-June 2015 (benchmark: 5 percent).
- Decree on implementation of the financial sector reform plan issued in December 2014.
- Decree creating a one-stop shop for the Investment Code approved in April 2015; shop managers appointed in September 2015.
- Significant progress in 2015 on: oil pipeline construction project; establishment of the Treasury Single Account (TSA); improvement of debt management; strengthening of customs administration.

### Oil pipeline project (Niger-Chad-Cameroon route)
- Niger-Chad-Cameroon route chosen; drafting of statutory instruments has progressed.
- Route is less expensive than the Niger-Benin route.
- July 2015 decision: construction and management to be entrusted to a joint venture operating under Nigerien law (Niger Oil Transportation Corporation (NOTCO)).
- Financial structure not finalized.
- Proposed capital stakes: Nigerien government, Chadian partners, and local private partners combined could hold 45 percent (15 percent each) and China National Petroleum Company (CNPC) 55 percent.
- Ongoing negotiations among Niger, Chad, and CNPC on form of participations (CNPC prefers a holding company; Niger and Chad prefer direct shareholding), creation of the pipeline management company Chad-Cameroon, and pipeline size to accommodate potential new oil fields in Chad.
- No call for tenders for the pipeline project has been made.

### Treasury Single Account (TSA)
- At end-February 2015, Treasury updated 2012 inventory of bank accounts held by public entities.
- Inventory findings as of December 31, 2014:
  - Number of accounts rose from 1,954 in 2012 to 2,735 as of December 31, 2014.
  - Sonibank, the International Bank for Africa (BIA) Niger, and the Bank of Africa Niger accounted for 84 percent of the total number of accounts.
  - Total net credit balance for all accounts equal to CFAF 83.5 billion.
  - Out of 2,735 accounts, 1,452 were directly opened by the government and autonomous government agencies, with a total balance of CFAF 51 billion.
- With AFRITAC West technical assistance, government adopted a TSA roadmap in September; implementation to take place before end-September 2016.
- Technical committee for TSA monitoring established by Minister of Finance order on July 22, 2015.
- Authorization for opening a single account obtained from Central Bank authorities.
- Required TSA legislation (account management agreement between government and the BCEAO and order for closing all relevant accounts) are being prepared.

### Debt management and institutional coordination
- Prime Minister decree of June 18, 2015 reorganized the Interministerial Committee on Debt Management and Budgetary Support Negotiation.
- Interministerial Committee now chaired by the Prime Minister; technical committee established and supported by a permanent secretariat.
- Prime Minister installed government’s new debt management entities on August 8, 2015.
- Ministerial reorganization merged Ministry of Planning and Ministry of Finance into Ministry of Economy and Finance to strengthen institutional coordination and facilitate drafting and regular publication of annual external borrowing plans.

### Customs reform and administration
- Implementation delayed but progress in 2015:
  - UNCTAD conducted five missions in Niamey with World Bank funding to support migration to ASYCUDA World.
  - First phase (migration of interconnected customs offices) to be completed before end-January 2016.
  - Customs Administration launching call for tenders for firm to computerize and interconnect other customs units to extend electronic customs transit beyond six interconnected offices (four in Niamey, plus Torody and Gaya).
  - Working toward deployment of intermediate application for exemptions management, strengthening of electronic transit system, and cooperation protocols with transit countries.
- 2015 marked first implementation of a performance contract between the Minister of Finance and the General Customs Administration.

### Public financial management and budget law implementation
- Continued efforts to harmonize budget practices with regional standards via implementation of the 2012 Organic Budget Law.
- General Budget Administration benefited from WAEMU assistance, study visit to Mali, and two IMF technical assistance missions: AFRITAC West (May 25-June 5, 2015) and Fiscal Affairs Department (FAD) in August 2015.
- Training, comprehensive diagnosis, and recommendations to prepare the 2017 budget in commitment authorizations and payment allocations.
- Recommended actions include:
  - Reactivation of the Medium-Term Expenditure Framework (MTEF) Committee.
  - Coordination of the MTEF to account for development strategies and budgetary priorities.
  - Fiscal decentralization.
  - Study on improving investment budgeting by fully applying budgetary procedures on commitment authorizations and payment allocations.

### Financial sector development and inclusion
- Adoption of the Financial Sector Development Strategy for 2014–2019 on November 14, 2014, aimed at:
  - (i) improving the stability and transparency of the sector;
  - (ii) deepening financial intermediation in all sectors of the economy;
  - (iii) strengthening the regulatory and legal system;
  - (iv) strengthening supervision of the financial sector.
- Government receiving World Bank technical assistance for strategy implementation.
- July 2015 adoption of a National Strategy for Financial Inclusion (NSFI), complementing the 2012 National Strategy for the Microfinance Sector (NSMS), aimed at enabling Nigeriens excluded from traditional banking, especially women and young people, to gain access to diversified, innovative, high-quality, and low-cost financial services.

### Fiscal policy for the rest of 2015
- Initial 2015 budget aimed to support investment and limit current expenditures; first supplemental budget accounted for deterioration of security situation.
- Initial macroeconomic framework targets (excluding grants and net lending):
  - Basic deficit expected to be equal to 3.7 percent (when grants included: 1.8 percent).
  - Compared to projections for end-2014: 4.1 percent and 2 percent, respectively.
  - Actual figures for end-2014: 6.6 percent and 4.9 percent.
- Second supplementary budget prepared to make spending tradeoffs to pay domestic arrears and provide additional security and humanitarian expenses estimated at 1.1 percent of GDP.
- Government faced additional pressure to timely fund elections preparation budget due to delay in donor budget support.

### 2015 second supplementary budget (adopted October 12, 2015)
- Basic balance deficit targeted at 5.5 percent of GDP (relaxation of basic balance by 1.8 percentage points of GDP compared to the program).
- Components of the relaxation:
  - Negative impact of security and humanitarian shocks on revenues and spending: 1.5 percent of GDP.
  - Additional allocations for organization of the elections: 0.6 percent of GDP.
  - Government’s additional fiscal efforts: 0.4 percent of GDP (net).
- Election financing:
  - Government contribution initially set at CFAF 18 billion, compared to total budget requested by CENI of CFAF 38.8 billion.
  - Given delays in external support, government committed budget allocations to the CENI of CFAF 26 billion in 2015, in addition to CFAF 8 billion already provisioned in the initial budget.

### Arrears reduction and financing
- High priority assigned to clearance of arrears by paying cash, subject to available financing.
- At end-June 2015, government exceeded with a wide margin the performance criterion on reduction of arrears.
- Projected net reduction of CFAF 63.8 billion for end-2015, to be funded through government resources.
- Government will issue securities payable over five years to clear remaining stock of arrears from 2014, which at end-June 2015 was projected to around CFAF 40 billion.
- Avoiding new arrears requires adequate provisions for security and social sector spending and rigorous application of budget execution procedures and closing deadlines per the Minister of Finance circular in 2014.

### Revenue measures and adjustments
- Revenue losses from oil sector (falling prices and technical closures) and mining sector (falling prices) to be partially offset by internal revenue efforts:
  - (i) Strengthening fiscal control and exemptions management.
  - (ii) Recovery of tax arrears through cancellation of penalties and a 30 percent rebate for taxpayers who agree to pay outstanding balances.
- Customs: end to unwarranted exemptions and reinforcement of taxation based on the transactional value.
- Initial budget included CFAF 49 billion in exceptional revenue; CFAF 15 billion already collected as an oil signature bonus.
- Remaining CFAF 34 billion linked to sale of a 3G license; related capital spending will be neutralized until revenue materializes.
- Minister of Economy and Finance will inform the IMF when this CFAF 34 billion amount is received.

### Expenditure prioritization and payroll control
- Measures to better prioritize expenditures and control rapid rise in payroll costs include:
  - Termination or postponement of certain investment projects totaling CFAF 41 billion.
  - Administrative review in August of civil servants with monthly earnings in excess of CFAF 300,000 expected to yield substantial budget savings.

### Supplemental financing needs for 2015
- Supplemental financing needs: CFAF 129.1 billion (3.1 percent of GDP).
- Expected coverage:
  - Net additional budgetary support: CFAF 58.6 billion (1.4 percent of GDP) expected from:
    - France: CFAF 19.7 billion (one-third of which in the form of grants).
    - European Union: CFAF 19.7 billion.
    - Nigeria: CFAF 20.4 billion less CFAF 7 billion already provisioned in the initial budget.
    - World Bank: CFAF 6 billion.
  - Additional domestic financing primarily reflects securitization for settlement of portion of domestic arrears: roughly CFAF 40 billion (1 percent of GDP).
  - Expected budgetary support from Kingdom of Saudi Arabia of CFAF 18 billion which, if materialized in 2015, will be used to boost Treasury deposits with the BCEAO.

### IMF support request
- Government to submit a request for increased access to the ECF: increase in access equal to 25 percent of Niger’s IMF quota in 2015 to close the residual financing gap.

### Economic outlook for 2015–16
- Macroeconomic outlook for rest of 2015 and 2016 favorable but subject to domestic and external risks.
- Preliminary 2015 estimates reflect continued dynamism in services, construction and public works, and a successful 2015/16 harvest aided by regular rainfall.
- These trends expected to more than offset negative impacts from temporary SORAZ refinery shutdown and drop in export mineral prices.
- 2016 outlook assumptions: increased SORAZ production; continuation of major construction projects including four interchanges in Niamey (including second and third interchanges), rail loop project, cement plant in Kao, electrical and thermal power plant in Gorou Banda; startup of other major road projects; beginning of oil pipeline construction; improved security conditions.
- Real GDP growth should be around 5 percent in 2016.
- Inflation expected to remain subdued; average annual rate of 1.6 percent.
- Risks: climate shocks; price shocks for refined petroleum and uranium exports; persistence of conflict with Boko-Haram; delay of pipeline construction project.

### External sector outlook for 2016
- Current account (excluding transfers) expected to deteriorate less than previously expected due to delays in import-heavy mega-projects (Imouraren uranium mine, Agadem oil field, crude oil export pipeline to Chad, Niamey-Dosso-Cotonou rail line).
- Exports will grow only slightly given continued weakness in uranium, oil and gold prices.
- Imports related to security shocks should not increase from 2015 levels as long as security conditions do not further deteriorate.
- Projected reduction in external assistance expected to be offset by a pickup in foreign direct investment; balance of payments expected to record a small overall surplus and net international reserves to increase further.

### Fiscal policy for 2016
- Draft 2016 budget (sent to National Assembly in October 2015) aligned with macroeconomic framework agreed with IMF staff.
- Macroeconomic framework includes a basic deficit of 3.7 percent of GDP for 2016, a reduction by 1.8 percentage points of GDP compared to 2015.
- Basic fiscal deficit in CFAF: CFAF 168.9 billion; financing plan includes:
  - Budgetary support: CFAF 97.3 billion (includes CFAF 38 billion in grant funding from the European Union, France (CFAF 6.5 billion), and other donors (CFAF 10 billion)).
  - Concessional loans: CFAF 42.8 billion from World Bank (CFAF 35 billion) and African Development Bank (CFAF 7.8 billion).
  - Net issuance of Treasury bonds limited to CFAF 110 billion.
  - Use of deposits from the BCEAO limited to no more than CFAF 38 billion.
- Revenues projected to rise from 18.4 percent of GDP in 2015 (excluding exceptional revenues of 0.4 percent of GDP) to 18.6 percent in 2016.
  - Increase reflects tax revenue yield of CFAF 69.3 billion from strengthened tax and customs administration.
  - Tax revenues rising from 17.2 percent of GDP in 2015 to 17.6 percent of GDP in 2016, including:
    - CFAF 26 billion increase for the Customs Administration.
    - CFAF 43.3 billion increase for the General Tax Administration (CFAF 17.6 billion from taxes on goods, services and CFAF 21.1 billion from income taxes; remainder from other tax revenues).
- Recruitment outcomes: 310 new revenue agents joined the Ministry of the Economy and Finance after a competitive admission process in 2015; they will be assigned on a priority basis to units responsible for collection.
- Nontax revenues expected to decline by CFAF 48.8 billion in 2016 due to non-repetition of exceptional revenues recorded in 2015.

*International Monetary Fund — _cr15342 (excerpt provided)*

### 25. Fiscal consolidation will entail better control of current expenditures, more efficient

### 25. Fiscal consolidation will entail better control of current expenditures, more efficient investment spending, while safeguarding expenditures on priority sectors.

### Fiscal consolidation — key fiscal outcomes and priorities
- Current expenditures will decrease by 0.7 percentage point of GDP to 15.1 percent of GDP, despite an increase in interest payments (of 0.2 percent of GDP).
- Reduction drivers:
  - Control of primary current expenditures, notably purchases of goods and services and payroll costs.
  - Full impact of administrative controls undertaken in 2015, continued in 2016 via overall control on civil servants numbers and salaries.
  - Decline in goods and services spending reflects that the bulk of election expenditures took place in 2015.
- Investment spending:
  - Domestically financed investment spending will decline by 1.1 percent of GDP along with Treasury bond issues to finance such investments.
  - Externally financed investments will increase by 1.5 percentage points of GDP owing to deferred expenditures initially planned for 2015.
- Budget priorities for 2016:
  - (i) security of property and persons;
  - (ii) urban, village, and rural water supply systems;
  - (iii) continuation of the 3N initiative and food security;
  - (iv) infrastructure and energy; and
  - (v) education and health.
- Budgetary stance is underscored by the expectation of an improved security environment.

### Structural reforms — scope for 2015–2016
- Reform focus areas:
  - Domestic revenue mobilization;
  - Strengthening of public financial management, debt, and natural resource management;
  - Strengthening of the financial sector;
  - Improvement of the business climate.

### Revenue mobilization — governance and administration
- Accountability and performance management:
  - Performance contracts between the Minister of Economy and Finance and top officials of: DGB, DGTCP, DGI, and DGD were put into place in 2015.
  - Revenue authorities responsible for implementing reform plans and meeting specific revenue objectives.
- Customs Administration reforms (paragraphs 28–30):
  - Reforms underway include:
    - Revision of the General Customs Code (to be adopted following enrichment and validation workshops).
    - Drafting of a procedural manual expected to be completed before end of the first quarter of 2016.
    - Transition to the Common External Tariff of ECOWAS started on April 10, 2015.
    - Reorganization of the General Customs Administration (order signed in August 2015).
    - Creation of two regional administrations at the ports of entry in Diffa and Agadez, and three full-service offices at principal mining and oil production sites (SORAZ refinery office opened in February 2015).
  - Information processing and IT modernization measures:
    - Adoption of an information technology development plan; call for tenders for network design and computer equipment procurement.
    - Installation of a single network server for customs offices by the end of January 2016.
    - Extension of the electronic transit system to main customs posts once the single network is completed.
    - Migration from ASYCUDA++ to ASYCUDA World in progress, with World Bank financing and UNCTAD technical assistance; migration to take effect before end-January 2016 at six interconnected offices and before end-September 2016 at other customs posts.
    - Introduction of computer tracking of exemptions and management of donor-financed project tax calculations (software installed in July 2015).
  - Customs facilitation and anti-fraud program measures:
    - Completion of a study on merchandise release process with WCO and MCC (workshop in July 2015; MCC to assist implementation).
    - Consideration of advance customs clearance after migration to ASYCUDA World planned for end-2016.
    - Secure customs documents via declaration forms that cannot be falsified before end-December 2015.
    - Strengthen administrative cooperation with Benin, Togo, and Burkina Faso through network connection before end-December 2015.
    - Adopt risk-based inspection planning and reinforce inspection teams before end-December 2015.
    - Increase tracking of exemptions with migration to SYDONIA World.
    - Better tracking of re-exports to Nigeria, supported by development of a 49-hectare parking site on the border with Nigeria.
  - Estimated impact of customs reforms: CFAF 97 billion.
  - Fiscal prudence: government reined in revenue ambitions until revenue materializes; customs revenue increased by 26 billion in the 2016 budget.

### General Tax Administration (DGI) reforms and performance
- Legal and outreach reforms:
  - Strengthening legislative mechanisms and harmonization with SYSCOA to combat fraud related to underreporting disposals of real estate assets.
  - Strengthening and modernizing partnership with civil society and the private sector; workshops to promote public awareness of the tax code; simplification of tax legislation, especially income tax.
  - Establishment of the Comité Arbitral de Recours Fiscaux (CARFI); legal framework sent to the Minister of the Economy and Finance following private sector consultation.
- Organizational reforms (administrative order No. 0157 adopted April 29, 2015):
  - Better breakdown of matters handled by DGI services; thresholds established for large, medium-sized, and small businesses and for VAT application (as established under the 2013 budget law).
  - Appointment of managers for newly created services is underway.
  - Improved management of enterprises database producing: decline in default rate for taxes and rise in self-reporting rates, particularly for VAT.
  - Continued objectives for the Department of Medium-Sized Enterprises (DME):
    - Improve taxpayer database management;
    - Strengthen monitoring and reminders to taxpayers to reduce default rate to a standard of around 10 percent (compared to 21 percent at the end of the first quarter of 2015 and 42 percent at end-2014).
- Tax audit reorganization and IT:
  - New organizational chart to incentivize investigation units and establish risk-based auditing.
  - Joint customs and tax team auditing 40 taxpayer files.
  - Creation of regional investigation and research teams at eight regional offices for better territorial coverage.
  - Decentralization of tax audits, with Tax Audit Department adopting a strategic role.
  - Pilot project under DME; plan for full computerization via SISIC.
    - DGI contracted a company for computerization and development of its information system before end-March 2017.
    - Contracting of another company for personnel training in the new system (selection expected before February 2016).

### Internal control, treasury, and asset management
- Internal control and audit strengthening:
  - Capacity building in human resources to improve internal control and audit.
  - Strengthening partnership between DGTCP and the Court of Auditors to better monitor collectors and publish procedural manuals.
  - Pilot programs to improve operational efficiency in Large Enterprises Unit at “Niamey 2” center and “Niamey 3” revenue office; plans to extend to all DGI offices.
- DGTCP actions to increase collection:
  - Inventory of potential nontax domestic revenue sources and creation of dedicated units to recover funds for the state budget.
  - Update of dormant/inactive accounts to establish the TSA.
  - Reduction of balances on provisional budget imputation accounts, catch-up on overdue annual financial statements, and better monitoring of domestic payment arrears and outstanding balances.
- State asset management (DGPE and DEPPE):
  - Reform of inventory procedures via adoption of a basic decree on physical accounting, new classification procedures, new guidelines, establishment of an interministerial committee for on-site inventories, and recruitment of a firm to prepare a procedural manual.
  - DEPPE conducted inventory of all companies in which the state holds a stake; government-appointed board representatives now required to submit reports for monitoring.

### Public Financial Management — action plan and measures
- Continued implementation of WAEMU 2009 directives on public financial management; DGB preparing a road map to be completed before end-March 2016.
- Strengthening budgetary procedures and regular publication of budget execution reports.
  - Niger’s budget executed within a centralized system; decentralization towards major line ministries accounting for roughly 80 percent of public spending is underway.
  - Draft regulations being prepared for effective implementation of the 2012 organic law before the 2017 deadline.
  - Quarterly budget execution reports and status of pro-poor expenditures to continue; draft 2014 budget execution review law adopted by the government in October 2015.
- Limitation of expenditures without prior authorization to a maximum of 5 percent of authorized expenditures (linked largely to official missions abroad and medical evacuations); ministries to comply with this benchmark.
- Measures to accelerate budget execution and improve public investment management:
  - Key instruments adopted:
    - Decree No. 2015-353 of July 10, 2015, on institutional framework for evaluation and selection of public investment projects.
    - Decree No. 2015-226 of April 27, 2015, on competencies assigned to study and programming departments and definition of investment managers’ profile.
    - Circular No. 01279 of July 10, 2015, of the Prime Minister on foreign loan contracting and agreements.
  - Government efforts to ensure:
    - Compliance with supplementary period commitments;
    - Sectoral ministry involvement in procurement plans and flexible appropriations commitment plans to enable realistic cash flow plans for the Treasury;
    - Regular end-of-quarter meetings between DGB and sectoral ministries to prepare release of appropriations.
- Wage bill containment and human resources management measures (to enhance productivity and control payroll):
  - Establishment of an integrated database of staff, payroll, and wage bill to bring wage bill under control before end-2016.
  - Auditing of civil service salaries launched, to be completed by end-2016.
  - Establishing a database of civil service positions and required skills before end-June 2016.
  - Introduction of a performance appraisal system via reform of civil service staff regulations before end-2016.
  - Establishment of forward planning of staffing and definition of line managers before end-June 2016.
  - Undertaking a biometric census of government employees before end-2016.
  - Terms of reference for the audit of salaries and savings prepared and sent to the World Bank for technical and financial assistance under the capacity-building project.
- Implementation of a Treasury Single Account (TSA):
  - Framework adopted in September 2015; implementation aimed by end-September 2016.
  - An implementation committee has been put in place.
- Improving cash flow management:
  - Quarterly cash flow plans to be prepared regularly and sent to the IMF.
  - Weekly cash management meetings by the cash management committee chaired by the Minister of the Economy and Finance.
  - Upstream control of commitments based on expenditure priorities and resources to avoid accumulation of payments arrears.

*Source: Excerpt from IMF document _cr15342 (section 25–38), Niger.*

### 39. Well aware of the rate of growth in Niger’s external public debt, the government is in

### _cr15342 - 39. Well aware of the rate of growth in Niger’s external public debt, the government is in

### Public debt management and institutional reforms
- Government is strengthening institutional measures for better debt management to address the rate of growth in Niger’s external public debt.
- Measures adopted to improve coordination at the stage of loan agreements to eliminate risks of over-indebtedness.
- Decree of June 18, 2015, on processes for monitoring debt and implementing the government’s debt policy and the mobilization of budgetary support aims to:
  - Improve public debt management.
  - Eliminate the risk of noncompliance with the criterion on new non-concessional loan agreements.
  - Contain the impact of new borrowing on the sustainability of public debt.
- In accordance with the IMF’s new debt limits policy, the government will draft a medium-term external borrowing plan before end-June 2016, to include:
  - (i) the investment strategy and a list of priority investment projects consistent with the PDES;
  - (ii) the sources of financing;
  - (iii) the uses of financing; and
  - (iv) the debt management strategy, taking into account considerations of debt viability and fiscal and external sustainability.

### Debt restructuring, monitoring, and approvals
- Government actions to preserve debt sustainability:
  - Cancelled plan to issue “SUKUK” bonds.
  - Cancelled another non-concessional borrowing from the Islamic Bank for Development.
  - Postponed loan agreements until donor funds are obtained to subsidize the effective rate down to concessional levels (footnote: these loans include a syndicated loan in the amount of CFAF 88 billion, contracted in April 2015, for the implementation of infrastructure programs).
- National Public Debt Management Committee (recently reinforced) will:
  - Issue opinions on any new agreements on government borrowing or guarantees, including financing for the natural resources sector.
  - Provide detailed analysis of the viability of public debt.
  - Have its review of borrowing agreements be a prerequisite for approval by the Council of Ministers.
- Government will continue to provide IMF staff with detailed quarterly reports on:
  - Outstanding public debt;
  - New commitments and borrowing (including disbursements);
  - Public debt service.

### Stock clearance and specific debt cases
- Rigorous actions planned to clear the stock of debt:
  - Plan to restructure certain contracted debts that have not yet been disbursed.
  - Action informed by AFRITAC West report indicating significant contracted stock with unmet terms for mobilization.
- Specific planned review:
  - Review of the US$1 billion loan contracted with the Export-Import Bank of China (approved by the National Assembly in June 2014) intended for major infrastructure and high-yield industrial projects; continuing delays in implementation of conditions for entry into force noted.

### Prudent borrowing policy and constraints
- Government commitment to a prudent debt policy permitting investment financing while ensuring debt sustainability:
  - Continue to limit guarantees and carefully assess the impact of any new borrowing on debt sustainability.
  - Intend to finance investment projects with concessional resources and limit borrowing to high-yield, properly evaluated projects.
  - If concessional resources are insufficient to finance high-yield projects, government will consult with IMF staff to examine possibility of modifying the financial program to include non-concessional borrowing, contingent on compatibility with debt sustainability.
- Recognized risk:
  - Debt obligations continue to grow very rapidly along with significant borrowing costs.
  - This pace could pose major risks to the banking system given important ongoing issuance plans for Treasury bonds and Treasury bills.

### Natural resource management: mining and transparency
- Policy to expand mineral export base and improve transparent management of natural resources:
  - Encourage exploration of resources beyond oil and uranium (e.g., coal, limestone, gold).
  - Grant exploration permits for a broader range of materials to diversify partnerships and expand mineral export base.
- To ensure signing bonus payments, operators must arrange an upfront security deposit with a local bank covering certain financial obligations, including the signing bonus; required as of publication date of the mining permit in the Niger government official journal.
- Uranium sector:
  - Niger signed mining agreements with companies in the AREVA group; decree authorizing signing of new agreements approved October 10, 2014; agreements signed July 17, 2015.
  - Low uranium prices mean fiscal impact of the new agreements will only be marginal.
  - Progress on Nigerien participation in management and adoption of a new formula for calculation of prices.
  - SOPAMIN’s role expanded to better protect Niger’s interests, increase oversight on environmental and income-sharing practices, and ensure dividends are fully transferred to the Treasury.
- Extractive Industries Transparency Initiative (EITI) report on tax revenues for the 2011 fiscal year published in November 2013; reports for subsequent years will be produced.
- Ministry of Mines and Ministry of Oil to prepare updated inventories of mining and petroleum operations and publish inventories indicating granted permits.

### Petroleum sector developments and reforms
- Pressures from lower oil prices and decline in CFA franc against U.S. dollar:
  - Oil refining input costs increased due to CFA franc depreciation against U.S. dollar combined with lower international crude and derivative prices.
  - SORAZ experiencing major losses; government and partners adjusted prices.
  - Reduction in crude oil sale price from CNPC to SORAZ from US$70 per barrel to US$57 per barrel in March 2015 and to US$50 per barrel as of June 2015.
  - Technical Committee proposed increasing transfer price charged by SORAZ to SONIDEP while reducing distribution margins to keep pump price unchanged.
  - Fuel prices in Niger are still lower compared with sub-region peers except Benin and Nigeria.
- Production and supply disruptions in 2015:
  - Expected average daily output in 2015: 14,000 barrels per day.
  - 2015 budget projection: 19,000 barrels per day.
  - Full capacity: 20,000 barrels per day.
  - SORAZ experienced a technical stoppage in mid-August 2015 that lasted for a month and a half; SONIDEP resorted to imports to meet local demand.
- Government measures to improve oil industry management:
  - Technical Committee proposals to review output prices at each production stage to improve refinery cost-effectiveness while minimizing government revenue losses.
  - Exploring measures with SORAZ to reduce operating costs.
  - Intends to pursue hiring more Nigerien personnel at SORAZ and refinancing of the SORAZ construction loan under less burdensome terms (US$880 million).
- Oil pipeline project and export prospects:
  - Negotiations for pipeline construction to start crude oil exports by end-2017 progressing.
  - Discovery of additional reserves in Agadem oil field allowing production of 80,000 barrels per day, of which 60,000 barrels per day would be destined for export over an estimated time horizon of 25 years.
  - Chinese partner CNPC studies resulted in selection of transport route via pipeline running from Niger to Chad and Cameroon.
  - Negotiations with Chad are advanced and expected to establish the National Oil Transportation Company (NOTCO) for construction and management of the pipeline.
  - Specific arrangements for Niger’s participation are being worked out to ensure external viability.
  - Construction work could begin in 2016.
  - Discussions underway regarding the Chad-Cameroon section of the pipeline.

### Institutional and regulatory energy/extractive sector measures
- In April 2015 government approved the energy code and texts concerning creation and organization of the Energy Sector Regulatory Authority.
- Ministry of Mines and Ministry of Oil will prepare and publish updated inventories of mining and petroleum operations.

### Financial sector status and reforms
- Financial depth:
  - Broad money to GDP ratio was 28 percent in 2014, compared to 36.7 percent for countries in sub-Saharan Africa.
- Banking sector:
  - Well capitalized overall; prudential requirements met by 10 of the 11 banks.
  - The bank not meeting requirements is under receivership under the Banking Commission with restricted credit operations and ordered to strengthen its capital base.
- Financial sector development strategy (2014–19):
  - Government prioritizes implementation with technical and financial partner support.
  - Action plan will cover 2014–19.
  - Steering committee to be put in place before February 2016 (structural benchmark) attached to the Ministry of the Economy and Finance; committee will coordinate reforms with Ministry of the Economy and Finance, BCEAO, and the Professional Association of Banks.
- National Strategy for Financial Inclusion (NSFI):
  - Adopted in July 2015.
  - Overall cost for five years (2016–20): CFAF 34 billion to be financed in part by donors.
  - Priority beneficiaries: small economic operators excluded from traditional banking, especially women, young people, and disenfranchised segments lacking access to basic financing.
- Credit bureau development:
  - Process within WAEMU started.
  - On August 31, 2015, APBEF and APSFD signed service contract with Creditinfo Volo.
  - Preliminary creditworthiness tests conducted in September 2015; credit rating operations started in October 2015.
- Banking privatization progress:
  - Privatization underway or finalized in three banks: BIA; Regional Solidarity Bank (BRS); Agricultural Bank (BAGRI).
  - BIA restructuring via acquisition of government shares by Central People’s Bank of Morocco (BCP) Group.
  - BRS: 44 percent acquired by West African Development Bank (BOAD), 56 percent by Orabank group (ORAGROUP).
  - BAGRI: temporary BCEAO intervention lifted on April 1, 2014, after nine months; new board and executive director appointed.
  - Government progressing in talks with BOAD and selected local and foreign private investors regarding transfer of the 65 percent stake it holds in BAGRI.

### Business climate and private sector development
- Government commits to promoting a dynamic private sector to drive diversification and sustainable growth; created a national private investment council to facilitate dialogue.
- Measures taken to improve business climate include:
  - Opening the Business Center—Maison de l’Entreprise—to ease business start-up.
  - Decrees establishing a standard model of corporate bylaws for limited liability companies (January 2014) and transposing OHADA Uniform Act provisions (July 2014).
  - Adoption in June 2015 of the law governing regulation of credit bureaus for WAEMU countries.
  - Strengthening cross-border trade via two executive orders in December 2014 on documents for imports/exports and on public transport of goods, inspections, and redress mechanisms.
  - Creation in December 2015 of the Niamey mediation and arbitration center and Council of Ministers adoption of a law on organization and jurisdiction of trade tribunals to strengthen contract compliance and dispute resolution.
  - Priority action plan adopted November 2014–March 2015 and CNIP adoption on January 29, 2015, of the 2015 Roadmap for Improvement of the Business Climate to pursue reforms affecting the 10 Doing Business indicators.

### Program monitoring and IMF engagement
- Semi-annual monitoring by the IMF Executive Board will continue based on quantitative monitoring indicators (Tables 1, 2, and 3) and structural benchmarks (Tables 4, 5, and 6) as defined in the Technical Memorandum of Understanding (TMU).
- Forthcoming semi-annual reviews will be based on:
  - Performance criteria at end-December 2015 and end-June 2016.
  - Indicative targets at end-March 2016.
  - Reviews expected to be completed by end-May 2016 and end-November 2016 respectively.
  - Indicative targets set for information at end-September and end-December 2016.
- Authorities will provide IMF staff with statistical data and information described in the TMU and any other information requested.
- During the program period, the government shall refrain from:
  - Introducing or increasing restrictions on payments and transfers related to current international transactions without prior IMF approval.
  - Introducing or amending multiple currency practices.
  - Entering into bilateral agreements that do not comply with Article VIII of the IMF’s Articles of Agreement.
  - Introducing or enhancing restrictions on imports for balance of payments reasons.

*Source: _cr15342 - 39. Well aware of the rate of growth in Niger’s external public debt, the government is in*

### 59. Given the corrective actions taken, the progress in the implementation of the

### _cr15342 - 59. Given the corrective actions taken, the progress in the implementation of the

### Program requests and review schedule
- Government requests approval of:
  - the sixth and seventh reviews under the arrangement;
  - waivers of nonobservance of the performance criteria for end-December 2014 and end-June 2015;
  - extension of the ECF to end-December 2016;
  - an increase in access under the ECF for 2015 and 2016;
  - the disbursement of SDR 39.005 million.
- Test date of the eighth program review: end-December 2015.
- Ninth review will be based on performance criteria at end-June 2016.

### Key quantitative performance criteria and indicative targets (selected table entries preserved verbatim)
- Table 1 (March 2014 - December 2014) — selected entries (Billions CFAF):
  - Net domestic financing of the government: 0.26 6.6 0.39 7.3 0.57 2.25 4.5 129.3
  - Adjusted criteria: 15.2 66.6 Not Met 15.3 97.3 Not Met 15.5 72.2 Not Met 69.5 129.3 Not Met
  - Reduction in domestic payment arrears of government obligations: -1.3 -8.4 Met -2.5 -9.5 Met -3.8 -4.2 Met -10.0 57.7 Not Met
  - External budgetary assistance — Budget support (memorandum item): 29.1 6.6 62.0 13.9 89.9 48.1 116.4 75.2
  - Continuous criteria (accumulation of external payments arrears): 0.0 0.0 Met (all periods)
  - C. Indicative Targets — Total revenue: 178.9 135.9 Not Met 357.6 303.3 Not Met 522.8 523.4 Met 753.3 714.2 Not Met
  - C. Indicative Targets — Spending on poverty reduction: 120.1 70.2 Not Met 236.0 206.4 Not Met 363.3 329.3 Not Met 507.6 489.9 Not Met

- Table 2 (March 2015 - December 2015) — selected entries (Billions CFAF):
  - Net domestic financing of the government: 19.64 44.4 41.3 123.9 201.0 130.7
  - Adjusted criteria: 32.2 44.4 Not Met 56.3 123.9 Not Met ...... 
  - Reduction in domestic payment arrears of government obligations: -1.8 0.0 Not Met -3.5 -28.8 Met -38.8 -63.8
  - Memorandum item — Budget support: 12.6 0.0 26.2 0.0 6.6 160.4
  - New external debt contracted or guaranteed by the government on concessional terms (ceiling): 520.4
  - Continuous criteria (accumulation of external payments arrears): 0.0 0.0 Met (end-March, end-September, end-December 2015)
  - C. Indicative Targets — Basic budget balance (commitment basis, excl. grants): -25.9 -77.2 Not Met -55.9 -118.0 Not Met -155.5 -224.9
  - C. Indicative Targets — Basic budget balance (commitment basis, incl. grants): -17.6 -77.2 Not Met -38.4 -118.0 Not Met -149.0 -142.9
  - C. Indicative Targets — Total revenue: 193.9 168.0 Not Met 388.9 355.1 Not Met 564.6 785.7
  - C. Indicative Targets — Spending on poverty reduction: 114.3 114.4 Met 231.4 232.3 Met 312.0 442.8

- Table 3 (March 2016 - June 2016) and projections (Billions CFAF):
  - Net domestic financing of the government: 67.7 99.7 109.5 100.4
  - Reduction in domestic payment arrears of government obligations: 10.3 20.6 11.6 -10.0
  - Memorandum item — Budget support: 0.0 15.2 39.5 97.3
  - New external debt contracted or guaranteed by the government on concessional terms (ceiling): 800.0 800.0 800.0 800.0
  - Continuous criteria (accumulation of external payments arrears): 0.0 0.0 0.0 0.0
  - C. Indicative Targets — Basic budget balance (commitment basis, excl. grants): -73.0 -128.0 -147.5 -168.8
  - C. Indicative Targets — Basic budget balance (commitment basis, incl. grants): -73.0 -118.9 -124.7 -114.3
  - C. Indicative Targets — Total revenue: 174.9 384.4 602.5 841.0
  - C. Indicative Targets — Spending on poverty reduction: 77.8 200.6 317.1 449.9

### Structural benchmarks, prior actions, and progress
- Table 4. Prior Actions and Structural Benchmarks, 2014 — examples:
  - Finalize the study to select the path of the pipeline. Prior Action for the second and third review: Met.
  - Launch an international tender for the selection of the company that will build the pipeline. End-September 2014: Not Met.
  - Publish a formal annual borrowing plan. End-December 2014: Not Met.
  - Introduce quarterly reporting of debt management activities to the National Public Debt Management Committee. Quarterly starting with June 2014: Met.
  - Limit expenditure not authorized in advance to a maximum of 5 percent of committed expenditures (except debt-service and exemptions). Quarterly: Met.
  - Establish a Treasury Single Account. End-June 2014: Not met.
  - Approve the decree to implement the financial sector reform plan. End-December 2014: Met.

- Table 5. Structural Benchmarks, 2015 — examples:
  - Census of Accounts for the TSA. End-March 2015: Met.
  - Adopt the design of the TSA. End-September 2015: Met.
  - Put in place the one stop shop for the investment code. End-September 2015: Met.
  - Limit expenditure not authorized in advance to 5 percent of committed expenditure. Quarterly: Met in March and June.
  - Operationalize the custom electronic transit. End-September 2015: Partially met, operational between the six interconnected custom offices and the other offices will be after completion of the custom interconnection project.
  - Finalize a study on the introduction of the investment budgeting in commitment authorization and payment credit. End-September 2015: Met.
  - Prepare a comprehensive procurement plan to match a commitment plan and a cash plan. Annually: (rationale noted).

- Table 6. Proposed Structural Benchmarks, 2016 — examples:
  - Establish the legal framework for the closure of public accounts to be consolidated under the TSA. End-June 2016.
  - Introduce quarterly reports on debt management activities to be submitted to the National Public Debt Management Committee. Quarterly.
  - Establish a steering committee for implementation of the financial sector development plan. End-February 2016.
  - Limit expenditures executed through exceptional procedures to a maximum of 5 percent of authorized spending. Quarterly.
  - Completion of the civil service staff and salary audits. End-December 2016.
  - Migration to SYDONIA World. End-January 2016.
  - Prepare a borrowing plan. End-June 2016.

### Disbursements under the ECF arrangement (Table 7, 2012-16)
- Disbursements to date and proposed scheduled disbursements (Amount in Millions, SDR):
  - SDR 11.28 — Executive Board Approval of the ECF Arrangement — March 16, 2012.
  - SDR 11.28 — Observance of June 30, 2012 performance criteria, and completion of the first review — March 28, 2013.
  - SDR 11.28 — Observance of December 31, 2012 performance criteria, and completion of the second review — March 31, 2014.
  - SDR 11.28 — Observance of June 30, 2013 performance criteria, and completion of the third review — March 31, 2014.
  - SDR 5.64 — Observance of December 31, 2013 performance criteria, and completion of the fourth review — December 17, 2014.
  - SDR 5.64 — Observance of June 30, 2014 performance criteria, and completion of the fifth review — December 17, 2014.
  - SDR 39.005 — Observance of December 31, 2014 and June 30, 2015 performance criteria, and completion of the combined sixth and seventh reviews — November 30, 2015.
  - SDR 12.34 — Observance of December 31, 2015 performance criteria, and completion of the eighth review — May 31, 2016.
  - SDR 12.34 — Observance of June 30, 2016 performance criteria, and completion of the ninth review — November 30, 2016.
  - SDR 120.085 — Total.

- Note: In 2015, the disbursement schedule includes a 25 percent quota augmentation of the arrangement under the ECF, proposed to be approved at the completion of the combined sixth and seventh reviews.

### Technical Memorandum of Understanding — definitions and measurement notes (selected)
- Government: the central government of the Republic of Niger; excludes political subdivisions, public entities, or central bank with separate legal personality.
- Debt: as specified in paragraph 9 of the Guidelines on Public Debt Conditionality in Fund Arrangements, Decision No. 15688-(14/107) of the Executive Board; includes loans, suppliers' credits, and leases (present value at inception), and arrears, penalties, and judicially awarded damages that arise from failure to make payment under a contractual obligation that constitutes debt.
- 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).
- Net domestic financing of the government defined as sum of:
  - (i) net bank credit to the government;
  - (ii) net nonbank domestic financing of the government, including government securities issued in CFAF on the WAEMU regional financial market and not held by resident commercial banks, proceeds from the sale of government assets, and privatization receipts.
- Net bank credit to the government equals the balance of government claims and debts vis-à-vis national banking institutions; government claims include cash holdings of the Nigerien Treasury, secured obligations, deposits with the central bank, and deposits of the Treasury (including regional offices) with commercial banks. Government deposits with commercial banks are excluded insofar as they are used solely to finance externally financed capital expenditure.
- Government debt to the banking system includes assistance from the central bank (excluding net IMF financing under the ECF arrangement and the CFAF counterpart of the 2009 General SDR Allocation), assistance from commercial banks (including government securities held by the central bank and commercial banks), and deposits with the CCP (postal checking system).

*Source: International Monetary Fund.*

### 5. The scope of net bank credit to the government as defined by the BCEAO includes all

### _cr15342 - 5. The scope of net bank credit to the government as defined by the BCEAO includes all

### Scope of net bank credit and net nonbank domestic financing
- Net bank credit to the government (as defined by the BCEAO) includes all central government administrations.
- The BCEAO calculates:
  - Net bank credit to the government; and
  - The amount of Treasury bills and bonds issued in CFAF on the WAEMU regional financial market.
- Net nonbank domestic financing (calculated by the Nigerien Treasury) includes:
  - (i) the change in the stock of government securities (Treasury bills and bonds) issued in CFAF on the WAEMU regional financial market and not held by resident commercial banks;
  - (ii) the change in the balance of Treasury correspondents’ deposit accounts;
  - (iii) the change in the balance of various deposit accounts at the Treasury; and
  - (iv) the change in the stock of claims on the government forgiven by the private sector.

### Targets, adjustments, and ceilings
- 2015 quarterly targets are based on the change between the end-December 2014 level and the date selected for the performance criterion or indicative target.
- 2016 quarterly targets are based on the change between end-December 2015 and the level at the date selected for the performance criterion or indicative target.
- Adjustment:
  - The ceiling on net domestic financing of the government will be subject to adjustment if disbursements of external budgetary support net of external debt service and external arrears payments, including disbursements under the ECF arrangement, fall short of program projections.
  - If, at the end of each quarter of 2015, disbursements of external budgetary support fall short of the projected amounts at the end of each quarter, the corresponding quarterly ceilings will be raised pro tanto, up to a maximum of CFAF 15 billion. The same principle applies for each quarter of 2016.

### Reporting requirements (timing and frequency)
- Detailed data on domestic financing of the government: monthly, within six weeks after the end of each month.
- Data on the stock, accumulation, and repayment of domestic arrears on government obligations: monthly, within six weeks following the end of each month.
- Data on the stock, accumulation, and repayment of external payments arrears: monthly, within six weeks following the end of each month.
- Details on all external public sector debt and guarantees granted by the central government: monthly, within six weeks after the end of each month. Ministry of Finance to forward list of loans in process of negotiation and semiannual reports on external debt contracted or in process of negotiation and projected borrowing program for the next six months.

### Arrears: definitions and responsibilities
- Reduction of domestic payments arrears:
  - Defined as the difference between the stock of arrears at end-2014 and the stock of arrears on the reference date in 2015; and between the stock of arrears at end-2015 and the stock of arrears on the reference date in 2016.
  - CAADIE and the Treasury are responsible for calculating the stock of domestic payments arrears on government obligations and recording their repayment.
- External payments arrears:
  - Government undertakes not to accumulate external payments arrears on its debt (including Treasury bills and bonds issued in CFAF on the WAEMU regional financial market), except arrears arising from debt being renegotiated with external creditors, including Paris Club creditors.

### External nonconcessional borrowing and short-term debt rules
- Concessionality requirement:
  - Government and listed public enterprises will not contract or guarantee external debt with original maturity ≥ one year and grant element < 35 percent.
  - Grant element definition: difference between PV of debt and its nominal value, expressed as a percentage of nominal value. PV is calculated by discounting the future debt-service stream at a discount rate of 5 percent.
- Coverage and exclusions:
  - Performance criterion applies to debt as per the relevant IMF Guidelines and also to obligations contracted or guaranteed for which no value has been received; excludes IMF financing and debt rescheduling in the form of new loans.
  - Guarantee arises from any explicit legal obligation of the government to service a debt in the event of nonpayment by the debtor.
  - External debt for this criterion is debt borrowed or serviced, or requiring repayment, in a currency other than the CFA franc (including debt among WAEMU countries).
  - Public sector includes government and the following public enterprises: (i) Nigelec; (ii) Socogem; (iii) SPEN; (iv) Sonichar; (v) Sonidep; (vi) Sonitel; (vii) Sopamin; and (viii) SPEG.
- Short-term external debt:
  - Government will not contract or guarantee new external debt with original maturity < one year. Exclusions: short-term loans related to imports and short-term securities issued in CFA franc on the regional financial market.

### Quantitative targets and fiscal definitions
- Total revenue (indicative target): includes tax, nontax, and special accounts revenue; excludes proceeds from settlement of reciprocal debts between government and enterprises.
- Basic fiscal deficit: difference between (i) total tax revenue (as defined) and (ii) total fiscal expenditure excluding externally financed investment expenditure but including HIPC-financed expenditure.
- Basic fiscal deficit, WAEMU definition: basic balance defined above increased by budgetary grants.
- Floor on poverty-reducing expenditure (indicative target): comprises all budget lines included in the Unified Priority List (UPL) of poverty-reducing and HIPC-financed expenditure.

### Additional information for program monitoring (data to be provided to IMF staff)
- Government finance (monthly unless noted):
  - Detailed monthly estimates of revenue and expenditure, including priority expenditure, payment of domestic and external arrears, breakdown of customs, DGI, and Treasury revenue.
  - Table of Government Financial Operations (TOFE) with comprehensive monthly data on domestic and external financing, changes in arrears, and Treasury balance outstanding.
  - Comprehensive monthly data on net nonbank domestic financing (elements listed above).
  - Quarterly data on expenditure for UPL lines (statement of appropriations approved, disbursed, and used).
  - Quarterly reports on budget execution, including rate of execution of poverty-reducing expenditure and use of appropriations by line ministries (National Education, Public Health, Equipment, Agriculture, Livestock).
  - Monthly Treasury trial balance and monthly data on Treasury balances outstanding by reference fiscal year with maturities broken down > and < 90 days.
  - Monthly data on effective debt service (principal and interest) compared with programmed maturities provided within four weeks after the end of each month.
  - List of external loans contracted or in process of negotiation and projected borrowing in the next six months, including financial terms and conditions.
- Monetary sector (monthly, within eight weeks after month-end unless noted):
  - Consolidated balance sheet of monetary institutions and, where applicable, balance sheets of individual banks.
  - Monetary survey (provisional within eight weeks; final within ten weeks).
  - Borrowing and lending interest rates.
  - Banking supervision prudential indicators (quarterly, end-quarter + 8 weeks).
- Balance of payments:
  - Any revision of BOP data whenever they occur; preliminary annual BOP data within six months after the end of the reference year.
- Real sector:
  - Disaggregated monthly consumer price indexes within two weeks following the end of each month.
  - National accounts within six months after the end of the year and any revisions.
- Structural reforms and other data:
  - Any study or official report on Niger's economy within two weeks after publication.
  - Any decision/order/law/decree/ordinance/circular with economic or financial implications upon publication or when it enters into force.
  - Any draft contract in mining and petroleum sectors involving direct financial participation or guarantee of the government.
  - Any new information on mining and petroleum sectors, including production and sales volumes, prices, and foreign investment.
  - Any agreement with private sector stakeholders having economic or financial repercussions for the government, including in the natural resources sector.

### Summary of key reporting timeframes (selected)
- Disaggregated consumer price indexes: monthly, end-month + 2 weeks.
- Net government position vis-à-vis the banking system: monthly, end-month + 6 weeks.
- Complete monthly data on net nonbank domestic financing: monthly, end-month + 6 weeks.
- Provisional TOFE: monthly, end-month + 6 weeks.
- Monthly data on Treasury balances outstanding (RAP): monthly, end-month + 6 weeks.
- Monthly statement of Treasury correspondents’ deposit accounts: monthly, end-month + 6 weeks.
- Execution of the investment budget: quarterly, end-quarter + 8 weeks.
- Table of fiscal expenditure execution, unified list expenditure, and HIPC-financed expenditure: quarterly, end-quarter + 6 weeks.
- Monetary survey (final): monthly, end-month + 10 weeks.
- Consolidated balance sheet of monetary institutions: monthly, end-month + 8 weeks.
- Monthly table on the effective service of external debt vs programmed maturities: monthly, end-month + 4 weeks.

### Debt Sustainability Analysis (DSA) update — key findings and assumptions
- Previous DSA: December 2014; Niger’s risk of debt distress assessed as moderate.
- Vulnerabilities to debt situation: export shock, FDI shortfalls, less favorable financing conditions, large depreciation of exchange rate, lack of fiscal consolidation.
- Medium-term outlook dominated by two large natural resource projects expected on stream: late 2017 (oil exporting) and 2020 (uranium).
- Historical and projected debt metrics noted in the update:
  - Public external debt exposure increased to 22.6 percent of GDP at end–2013 and projected to reach 33 percent of GDP at end–2015 due to government financing of natural resource projects.
  - The SORAZ refinancing loan of CFAF 437.4 billion from Exim–Bank–China is reflected in the updated DSA in 2016 and will bring the debt ratio to GDP to 41.6 percent in that year.
  - Historical loan references: Yuan 650 million loan in 2011 for Azelik uranium mine participation; state guarantee of 40 percent of a US$880 million loan to SORAZ.
- Policy and projection assumptions:
  - Revenue projections revised downward to reflect lower oil prices and weaker than programmed revenue collection in 2014.
  - Revenue expected to increase significantly after 2017 (crude oil export project) and in 2020 (uranium project).
  - Government aims to maintain a lower but high level of public investment with a positive basic fiscal balance; current expenditures to increase in 2015 but gradually contained after 2016.
  - Average GDP growth: revised upward in 2013 and 2014 and downward in the medium term; almost unchanged in the long term relative to the last DSA.
  - The update assumes conservative growth in exports of goods and services to reflect low oil prices, a more gradual crude oil export increase after 2017, and lower uranium production in the medium and long term.
- Country policy rating:
  - Niger is a medium policy performer; World Bank CPIA averaged 3.45 during 2012–14.
- External debt burden thresholds (Text Table 1) used in DSA:
  - PV of debt in % of Exports: 150
  - PV of debt in % of GDP: 40
  - PV of debt in % of Revenue: 250
  - Debt service in % of Exports: 20
  - Debt service in % of Revenue: 20

*Prepared by the Staffs of the International Monetary Fund and the World Bank. November 13, 2015.*

### 5. The further deterioration of the security situation in Niger has created a financing gap

### 5. The further deterioration of the security situation in Niger has created a financing gap

### Financing gap and proposed financing sources
- The 2015 budget faces a financing gap envisaged to be filled through a proposed ECF augmentation and additional donor support.
- Baseline scenario adjustments for 2015 include lower revenues, additional spending, and more domestic financing to accommodate the worsening security situation.
- Potential additional donor financing in 2015 considered in the DSA:
  - CFAF 19.7 billion budgetary grant from EU.
  - CFAF 6.5 billion budgetary grant and CFAF 13.1 billion budgetary loan from France and AFD.
  - CFAF 13.4 billion of budgetary grant from Nigeria.
  - An ECF access augmentation, up to 25 percent of quota, requested by the authorities to support BOP needs.
- The DSA also takes into account a proposed one–year extension of the current arrangement under the ECF that would provide 37.5 percent of quota IMF financing during 2016.

### Role of external grants, loans, and capital flows
- Reliance on external grants and loans to finance the current account deficit is projected to decline gradually as natural resource revenues increase.
- The current account deficit is expected to be financed by:
  - debt–creating flows and FDI,
  - significant flows of project grants,
  - private capital flows.

### Macroeconomic outlook and risks
- The macroeconomic outlook remains subject to various risks, including:
  - frequent weather–related shocks,
  - fluctuations in commodity prices (recent decline of oil prices and continued weakness of uranium prices),
  - deterioration of the security situation in the region (Mali and Libya in the north and Nigeria in the south).
- These shocks may delay implementation of natural resource sector projects and increase fiscal costs and economic vulnerability.

### External DSA: debt accumulation and stress tests
- Debt exposure increased significantly since 2009 due to government involvement in financing natural resource sector projects.
- Increase in debt ratio from 22.6 percent in 2013 to 33 percent of GDP in 2015, mainly due to external loans for infrastructure and social needs.
- The refinancing loan for the SORAZ refinery (CFAF 437.4 billion) expected to be disbursed in 2014 had not materialized at the time of the update.
- Assumption: authorities will seek replacement of existing private non–concessional funding of the refinery (40 percent guaranteed by the State) by concessional terms.
- External public debt accumulation is expected to rise in the medium term reflecting natural resource investments before declining in the long run.
- Baseline: external debt ratios remain below policy–dependent thresholds throughout 2015−35, except a one–off spike in debt service ratios in 2016 related to refinancing the SORAZ guarantee.
- Baseline assumption on EximBank of China credit line (US$1 billion facility):
  - US$50 million disbursed in 2018.
  - US$100 million in 2019.
  - US$100 million in 2020.
  - Remaining US$750 million equally disbursed in following years (2018–25 period).
- Stress-test results:
  - Most extreme shock: PV of debt–to–exports and PV of debt–to–GDP ratios breach thresholds; PV of debt–to–revenue remains under threshold.
  - Financing terms shock and non debt creating flows (FDI) shock lead to PV of debt–to–exports ratio breaching threshold.
  - One–time 30 percent nominal depreciation in 2016 does not deteriorate PV debt–to–exports ratio but causes PV debt–to–GDP ratio to breach threshold between 2022 and 2030.

### Public DSA: domestic debt and fiscal scenarios
- Domestic debt evolution:
  - Domestic debt at 4.6 percent of GDP at end–2013.
  - Increased to 8.8 percent of GDP at end–2014.
  - Projected to reach 10.2 percent at end–2015.
  - Increase driven by issuance of regional bonds: CFAF 93.3 billion in 2014 and CFAF 120 billion in 2015.
  - Net accumulation of domestic arrears of 1.5 percent of GDP at end–2014; most paid by end–June 2015; remaining balance about CFAF 40 billion intended to be securitized at end–2015.
  - Baseline assumes average bond issuance of about CFAF 90 billion a year after 2016 and projects domestic public debt to fall to 2.6 percent of GDP in 2035.
- Public debt under adverse fiscal scenario:
  - Fixed primary balance scenario (primary fiscal balance remains at 2015 deficit of 6.5 percent of GDP) leads to continued public debt accumulation.
  - PV of debt–to–GDP ratio would reach 77 percent in 2035, above policy–dependent threshold of 56 percent.
  - Under permanently lower GDP growth shock, PV of debt–to–GDP reaches maximum of 48.5 percent in 2026, below threshold.
- Terms of regional bonds:
  - 6.25 percent interest rate, 5 years maturity, 1 year grace period.
  - 2014 issuance: CFAF 93.3 billion (CFAF 19 billion taken by domestic banks, CFAF 74.3 billion by WAEMU banks).
  - 2015 issuance: CFAF 120 billion (CFAF 18 billion bought by local banks).
  - Authorities intend to issue less new regional bonds (CFAF 110 billion in 2016) per baseline.

### Private external debt dynamics
- Identified private debt flows linked to large oil and uranium projects are included in the DSA.
- Contracts incorporated:
  - loan by the SORAZ refinery (60 percent privately owned),
  - part of FDI financing the Niamey–Cotonou railroad,
  - Imouraren uranium project.
- Stock of external private debt estimated at 28 percent of GDP in 2014 and projected to stabilize just above 20 percent of GDP over the long run.
- Baseline assumes some direct and portfolio investments will come as debt to the private sector, representing 20.7 percent of GDP in 2035.

### Conclusion and policy recommendations
- Assessment: Niger remains subject to a moderate risk of debt distress.
- Compared with the previous DSA, recent terms of trade and security shocks lower fiscal revenue and export receipts, deteriorate fiscal and external balances, and increase short–term borrowing, including from the IMF.
- In the baseline, external and public debt indicators remain below policy–dependent thresholds over the projection period, but certain alternative scenarios (e.g., refinancing of SORAZ, loans under Chinese master facility, increased regional borrowing) could cause PV of debt–to–exports ratio to breach thresholds.
- Vulnerabilities: adverse shocks on exports, terms of new loans, FDI inflows, and large exchange rate depreciation.
- Policy recommendations:
  - Strengthen debt management and prevent recurrence of non–concessional borrowing through active role of the new Inter–Ministerial Debt Committee (decree signed June 18, 2015).
  - Ensure any loans under the Chinese master facility are used for high–yield infrastructure projects that generate sufficient government revenue to cover associated debt service.
  - Build buffers over the medium term to cope with exogenous shocks.
  - Strengthen revenue administration and expenditure prioritization to align with short–term and long–term spending needs.
- The Nigerien authorities agreed with DSA conclusions, provided inputs on actual debt stock, debt service to 2035, and master facility disbursement profile, and are committed to implementing staff recommendations to strengthen debt management.

*Source: IMF staff DSA update (section 5).*

### 6.3 percent interest rate, 5 years maturity and 1 year grace period).

### 6.3 percent interest rate, 5 years maturity and 1 year grace period

### Indicators and projections of public and PPG external debt (2015–35)
- Figures present baseline, historical scenario, and most extreme shock outcomes for:
  - PV of debt-to-GDP ratio, PV of debt-to-exports ratio, PV of debt-to-revenue ratio.
  - Debt service-to-exports ratio, Debt service-to-revenue ratio, Debt service-to-revenue ratio (figure f).
  - Rate of debt accumulation; Grant-equivalent financing (% of GDP); Grant element of new borrowing (% right scale).
- The most extreme stress tests by indicator:
  - Figure b: One-time depreciation shock.
  - Figure c: Exports shock.
  - Figure d: One-time depreciation shock.
  - Figure e: Exports shock.
  - Figure f: One-time depreciation shock.

### Baseline debt sustainability results (Table 1a — External, 2012–35)
- External debt (nominal) series (selected years): 2012: 49.1; 2013: 48.8; 2014: 54.9; 2015: 68.1; 2016: 70.8; 2017: 76.6; 2018: 75.7; 2019: 75.5; 2020: 70.9; 2025 average: 55.0; 2035 average: 55.0.
- Public and publicly guaranteed (PPG) external debt: 2012: 21.0; 2013: 22.6; 2014: 27.0; 2015: 33.0; 2016: 41.6; 2017: 43.0; 2018: 43.7; 2019: 44.7; 2020: 44.5; 2025 average: 48.1; 2035 average: 35.1.
- Change in external debt (selected): 2012: -0.7; 2013: -0.3; 2014: 6.0; 2015: 13.2; 2016: 2.6; 2017: 5.8.
- Identified net debt-creating flows (selected): 2012: -1.6; 2013: 3.9; 2014: 3.7; 2015: 7.6; 2016: 6.3; 2017: 2.5.
- Non-interest current account deficit (selected): 2012: 14.4; 2013: 15.2; 2014: 16.0; 2015: 15.2; 2016: 6.4; 2017: 17.0; 2018: 17.9; 2019: 16.1; 2020: 12.6; 2025 average: 12.1; 2035 average: 11.0.
- Exports (selected): 2012: 21.7; 2013: 23.2; 2014: 20.0; 2015: 18.7; 2016: 18.7; 2017: 20.3; 2018: 23.5; 2019: 23.2; 2020: 24.6; 2025 average: 23.6; 2035 average: 25.6.
- PV of external debt (selected): 2015: 42.6; 2016: 53.5; 2017: 52.2; 2018: 58.2; 2019: 57.6; 2020: 59.8; 2025 average: 58.5; 2035 average: 45.2.
- PV of PPG external debt (selected): 2015: 14.7; 2016: 18.3; 2017: 23.0; 2018: 24.5; 2019: 25.6; 2020: 27.0; 2025 average: 27.6; 2035 average: 25.2.
- PV of PPG external debt in percent of exports (selected): 2015: 73.7; 2016: 98.1; 2017: 123.1; 2018: 120.6; 2019: 109.0; 2020: 116.2; 2025 average: 111.9; 2035 average: 98.7.
- PV of PPG external debt in percent of government revenues (selected): 2015: 81.7; 2016: 98.3; 2017: 123.4; 2018: 127.7; 2019: 127.3; 2020: 131.7; 2025 average: 129.7; 2035 average: 118.1.
- Debt service-to-exports ratio (in percent) (selected): 2015: 3.4; 2016: 5.1; 2017: 5.3; 2018: 9.5; 2019: 35.5; 2020: 21.9; 2025 average: 17.3; 2035 average: 8.6.
- PPG debt service-to-exports ratio (in percent) (selected): 2015: 0.4; 2016: 2.4; 2017: 2.3; 2018: 6.4; 2019: 27.4; 2020: 5.3; 2025 average: 4.4; 2035 average: 4.1.
- PPG debt service-to-revenue ratio (in percent) (selected): 2015: 0.5; 2016: 3.2; 2017: 2.6; 2018: 6.4; 2019: 27.4; 2020: 5.6; 2025 average: 5.2; 2035 average: 4.7.
- Total gross financing need (Billions of U.S. dollars) (selected): 2015: 0.2; 2016: 0.6; 2017: 0.6; 2018: 0.8; 2019: 1.2; 2020: 0.9; 2025 average: 0.9; 2035 average: 2.1.
- Non-interest current account deficit that stabilizes debt ratio: 15.1; 15.5; 10.0; 3.8; 15.3; 10.3; 13.5; 10.3; 10.3; 10.6; 9.7.

Key macro assumptions (select):
- Real GDP growth (in percent) series (selected): 2012: 11.8; 2013: 4.6; 2014: 6.9; 2015: 6.0; 2016: 3.8; 2017: 4.4; 2018: 5.0; 2019: 6.9; 2020: 7.7; 2025 average: 6.7; 2035 average: 5.1.
- Effective interest rate (percent) (selected): 2012: 0.4; 2013: 0.4; 2014: 0.4; 2015: 1.2; 2016: 1.1; 2017: 1.1; 2018: 1.2; 2019: 1.1; 2020: 1.0; 2025 average: 1.0; 2035 average: 1.1.
- Growth of exports of G&S (US$ terms, in percent) (selected): 2012: 13.4; 2013: 14.3; 2014: -7.6; 2015: 12.3; 2016: 12.8; 2017: -16.9; 2018: 7.8; 2019: 19.5; 2020: 27.7; 2025 average: 7.4; 2035 average: 7.5.
- Grant-equivalent financing (in percent of GDP) (selected): 2015 onward: 8.2; 11.0; 6.1; 5.9; 5.6; 4.9; 3.8; 3.0; 3.5.
- Grant-equivalent financing (in percent of external financing) (selected): 71.0; 51.0; 51.6; 64.6; 65.7; 63.8; 63.8; 56.0; 58.0; 58.6.

Memorandum items:
- Nominal GDP (Billions of US$) (selected): 2012: 7.0; 2013: 7.5; 2014: 8.0; 2015: 7.1; 2016: 7.7; 2017: 8.4; 2018: 9.3; 2019: 10.1; 2020: 11.2; 2025: 16.0; 2035: 32.0.
- PV of PPG external debt (Billions of US$) (selected): 2015: 1.1; 2016: 1.3; 2017: 1.8; 2018: 2.1; 2019: 2.4; 2020: 2.7; 2025 average: 3.0; 2035 average: 5.1; 2035 listed: 7.9.

### Baseline results for public sector debt (Table 1b, 2012–35)
- Public sector debt (selected): 2012: 26.1; 2013: 27.1; 2014: 35.8; 2015: 43.1; 2016: 52.1; 2017: 53.5; 2018: 52.8; 2019: 51.9; 2020: 50.2; 2025 average: 52.8; 2035 average: 37.7.
- Change in public sector debt (selected): 2012: -2.9; 2013: 1.1; 2014: 8.7; 2015: 7.3; 2016: 9.0; 2017: 1.4.
- Primary deficit (selected): 2012: 1.0; 2013: 2.5; 2014: 8.1; 2015: 1.9; 2016: 2.8; 2017: 6.5; 2018: 6.5; 2019: 3.5; 2020: 1.6; 2025 avg: 1.3; 2035 avg: 1.3.
- Revenue and grants (selected): 2012: 21.2; 2013: 25.2; 2014: 23.6; 2015: 24.8; 2016: 24.2; 2017: 23.6; 2018: 24.3; 2019: 24.4; 2020: 24.7; 2025 avg: 24.0; 2035 avg: 23.5.
- Grants (selected): 2012: 6.1; 2013: 8.2; 2014: 5.6; 2015: 6.1; 2016: 5.6; 2017: 4.4; 2018: 4.2; 2019: 3.9; 2020: 3.4; 2025 avg: 2.3; 2035 avg: 2.2.
- PV of public sector debt (selected): 2015: 23.5; 2016: 28.5; 2017: 33.6; 2018: 35.1; 2019: 34.7; 2020: 34.2; 2025 avg: 33.3; 2035 avg: 37.1; 2035 listed: 27.9.
- Gross financing need (selected): 2015: 1.2; 2016: 4.1; 2017: 7.6; 2018: 9.9; 2019: 13.4; 2020: 6.8; 2025 avg: 5.2; 2035 avg: 4.9.
- PV of public sector debt-to-revenue and grants ratio (in percent) (selected): 2015 onward: 99.6; 115.0; 138.6; 148.7; 142.8; 140.4; 134.7; 154.7; 118.4.

Key fiscal and macro assumptions (select):
- Average nominal interest rate on forex debt (in percent) (selected): 2012: 0.0; 2013: 0.0; 2014: 0.0; 2015: 1.4; 2016: 1.4; 2017: 1.7; 2018: 1.7; 2019: 1.6; 2020: 1.6; 2025 avg: 1.5; 2035 avg: 1.9.
- Grant element of new external borrowing (in percent) (selected): 2015 onward: 38.9; 34.5; 34.2; 35.6; 34.7; 34.9; 35.4; 33.3; 28.2.

### Sensitivity analysis highlights (Tables 2a and 2b)
- PV of debt-to-GDP ratio (selected projections, percent):
  - Baseline (2015–2020): 18, 23, 25, 26, 27, 28; 2025: 32; 2035: 25.
  - A2 (new public sector loans on less favorable terms): 21, 8, 26, 29, 30, 33, 34, 43, 40 (see table for full series).
  - Bound test B6 (one-time 30 percent nominal depreciation in 2016): shows elevated ratios (e.g., 35 in 2035 for the PV of debt-to-GDP series).
- PV of debt-to-exports and PV of debt-to-revenue ratios show large sensitivity to shocks in exports, growth, and depreciation; many scenarios push indicators well above baseline.
- Debt service-to-exports and debt service-to-revenue ratios increase substantially under adverse scenarios, notably under large depreciation and lower export value scenarios.
- Table 2b (public debt sensitivity) examples:
  - PV of Debt-to-GDP Ratio (baseline): 28, 34, 35, 35, 34, 33, 37, 28.
  - Alternative A2 (primary balance unchanged from 2015): elevated PV and debt service metrics (e.g., Debt Service-to-Revenue Ratios rising to 77 in later years under A2).
- Memorandum: Grant element assumed on residual financing is 30 (applied across projection years where noted).

### Recent macroeconomic developments and outlook (statement by Niger authorities, Nov 30, 2015)
- Growth and inflation:
  - Average growth 2013–2015: 5.3 percent.
  - 2014 growth: 6.9 percent; 2015 projected growth: 4.4 percent (mainly due to lower agricultural output).
  - Inflation: -0.9 percent in 2014; projected about 2.3 percent in 2015.
  - Medium-term projected annual GDP growth: 6.9 percent over 2016–20 (authorities concur with staff).
- External and monetary developments:
  - Credit to the economy: +10.4 percent in 2014; +13.4 percent at end-June 2015.
  - External current account deterioration due to declining petroleum and mineral prices and strong US dollar; imports for infrastructure increased, contributing to deterioration of 0.9 and 1.5 percent of GDP in 2014 and 2015 respectively.
- Security and shocks:
  - Increased security-related spending and refugee assistance strained the budget, causing nonobservance of net domestic financing and net reduction in arrears performance criteria (end-December 2014 and end-June 2015).
  - Authorities request waivers for nonobservance and an extension of the ECF arrangement to December 31, 2016 with an augmentation of access of 62.5 percent of quota.

### Policy measures, priorities, and commitments
- Fiscal policy (A):
  - 2015 fiscal framework adjusted to cover security-related spending and arrears; basic balance relaxed by 1.8 percent of GDP relative to the original program.
  - 2016 target: basic fiscal deficit of 3.7 percent of GDP (down from 5.5 percent in 2015).
  - Revenue target increase: from 17.2% in 2015 to 17.6% of GDP in 2016.
  - Revenue measures (Box 1 measures summarized by authorities): revision of customs code; migration to ASYCUDA; reinforcement of tax audits and tax registration; establishment of a single interconnection server linking offices; better control of exemptions and limitation of tax exoneration loopholes at customs.
  - Expenditure compression: reduce domestically financed spending by 1.7 percent of GDP via phasing out/postponing projects, better prioritization, and measures to contain wage bill.
- Management of natural resources (B):
  - Encourage mining operators to explore mineral resources beyond oil and uranium.
  - Requirement for upfront security deposit with a local bank for mining permit signings to secure signing bonus payments.
  - New formula for uranium price calculation and increased Nigerien participation in mining enterprises.
  - Oil sector adjustments: reduction in crude oil sale prices, proposals to reduce refinery operating costs; objective to become a crude oil exporter by 2017 with prior actions including pipeline negotiations and financing arrangements.
  - Priority on transparency: strengthen supervisory and accounting functions of SOPAMIN; regulatory steps already initiated.
- Debt management (C):
  - Authorities cancelled planned issuance of Sukuk bonds and another nonconcessional loan.
  - Plan to draft a medium-term borrowing plan before June 2016.
  - Emphasis on strengthening fiscal framework and arrears clearance to avoid debt distress.
- Business and financial sector reforms:
  - Authorities committed to removing constraints to private sector development (progress in Doing Business Index acknowledged).
  - Financial sector reforms to improve depth and access are being pursued (see referenced paragraph 35).

*Source: IMF Staff Report and Niger authorities' statement (excerpts and tables from the provided PDF content).*

### Conclusion

### _cr15342 - Conclusion

### Medium- and long-term outlook
- Niger’s medium and long term outlook have improved significantly in light with the expected returns from the development of the natural resource sector.

### Recent achievements
- Important achievements have been made over the recent years in terms of macroeconomic stability, poverty reduction and other social indicators.

### Remaining challenges
- However, considerable challenges still lay ahead, in particular, the need to achieve sustained growth, reduce poverty and achieve development objectives.

### Authorities' actions and priorities
- My authorities are taking steps to address these challenges, in particular, by paying close attention to the implementation of structural reforms in the areas of public finance management and natural resources management.

### Request to Directors
- Based on the strong commitment shown and the corrective actions taken by the authorities, I would request Directors’ support for the requested waivers and the proposed decisions.

*_cr15342 - Conclusion_*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15342.pdf_