1. Niger has come a long way since the democratically held presidential elections in December 1999 ended the period of political instability that resulted from the April 1999 coup d’etat. Much progress has been achieved in reinforcing political stability and national peace, as evidenced by the Peace Flame ceremony in September 2000, which marked the formal end of the Tuareg rebellion in the north. Economic performance and program implementation under the Poverty Reduction and Growth Facility (PRGF) arrangement approved in December 2000 have also been broadly satisfactory. Moreover, government policies have benefited from the adoption of the poverty reduction strategy paper (PRSP) in January 2002. Assistance under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC Initiative) has financed poverty-related projects initiated by President Tandja since Niger reached the HIPC Initiative decision point in December 2000.
2. This progress reflects the authorities’ strong ownership of the PRGF-supported program, despite recurrent sociopolitical tensions, limited institutional capacity, and problems in mobilizing adequate and timely external aid. The authorities’ program for 2003 aims at strengthening the track record of policy implementation, achieving further progress in the implementation of the PRSP, and reaching the completion point under the enhanced HIPC Initiative. The attached letter of intent (LOI) and memorandum of economic and financial policies (MEFP), which were prepared in the context of the fifth review of the PRGF arrangement, present the progress achieved in meeting these objectives and complement the authorities’ progress report on the PRSP implementation (IMF Country Report No. 03/384; see the related joint staff assessment (IMF Country Report No. 03/387)).
II. Recent Economic Developments
A. Background and Sociopolitical Environment
3. Niger’s sociopolitical environment remains fragile, with a continuation in early 2003 of the social tensions that surfaced in 2002 (IMF Country Report No. 03/110). The authorities have, however, continued to engage in a proactive policy dialogue with the labor unions and the private sector. In this context, they paid one month of salary arrears in May 2003 (out of five months of remaining salary arrears). Political activities are also gearing up for the local, presidential, and parliamentary elections that are scheduled to take place in 2004. The National Assembly has debated the adoption of a new electoral code for the contesting of these elections. Finally, to prevent a resurgence of the internal conflicts that have adversely affected Niger’s stability, a National Strategy for the Prevention and Management of Conflicts was also approved by the government, civil society, political parties, and the unions in April 2003.
B. Economic and Financial Developments in the First Half of 2003
4. In the wake of a satisfactory macroeconomic performance in 2002 (Table 2, Figure 2, and Box 1), activity has continued to be buoyant in all sectors of the economy, particularly in the construction and trade sectors, and together with the onset of a favorable rainy season, has supported the economic environment underlying the program for 2003. Further progress in the resolution of the crisis in Côte d’lvoire has also alleviated concerns about a possible deterioration in economic performance. Inflation, on a 12-month, period-average basis, declined sharply from 2.7 percent in December 2002 to -0.9 percent in August 2003, reflecting prudent macroeconomic policies and an abundant supply of food products following the good harvest at end-2002.
|Sep. 30, 2000||Oct-Dec.||Jan-Mar.||Apr.-Jun||Jul-Sep.||Oct-Dec||Jan.-Mar.||Apr.-Jun.||Jul.-Sep||Oct-Dec.|
|(In millions of SDRs)|
|Total transactions (net)||8.23||6.86||8.41||-1.19||7.45||-1.20||-1.97||10.64||-1.97||2.90||-1.81||-10.21||-10.75||-11.46||-11.17|
|Charges and interest||0.23||0.63||0.05||0.23||0.05||0.24||0.04||0.23||0.03||0.25||0.59||0.55||0.36||0.47||0.42|
|Total Fund credit outstanding||48.30||56.76||71.75||72.71||71.75||79.24||78.28||76.34||87.22||85.29||88.43||87.21||77.55||67.17||56.18||45.33|
|Outstanding purchases under PRGF||48.30||56.76||71.75||72.71||71.75||79.24||78.28||76.34||87.22||85.29||88.43||87.21||77.55||67.17||56.13||45.33|
|(In percentage of quota, unless otherwise indicated)|
|Total Fund credit outstanding||73.40||86.26||109.04||110.51||109.04||120.43||118.96||116.02||132.55||129.61||134.40||132.54||117.86||102.08||85.37||68.88|
|Outstanding purchases under PRGF||73.40||86.26||109.04||110.51||109.04||120.43||118.96||116.02||132.55||129.61||134.40||132.54||117.86||102.08||85.37||68.88|
|Quota (in millions of SDRs)||65.80|
|Est.||Rev Est.||Prog.||Rev. Prog||Proj.|
|(Annual percentage change, unless otherwise indicated)|
|National income and prices|
|GDP at constant prices||-0.6||-1.4||7.1||3.0||3.0||4.0||4.0||4.1|
|Consumer price index|
|End of period||-1.9||4.7||3.2||0.6||0.6||2.2||0.4||1.2|
|Terms of trade (deterioration)||9.3||-12.7||10.0||-1.0||0.4||-0.7||-0.1||1.5|
|Nominal effective exchange rate (depreciation)||-1.6||-3.1||0.4||1.4||1.4||…||…||…|
|Real effective exchange rate (depreciation -)||-6.3||-2.6||2.2||2.1||2.1||…||…||…|
|Gross official reserves (in months of imports)||1.0||2.1||2.8||3.1||2.5||3.2||2.5||2.6|
|Total expenditure and net lending 1/||9.9||-8.0||14.6||8.7||13.2||22.7||9.6||5.7|
|Of which: current expenditure||8.1||-6.7||9.5||2.4||2.8||5.6||3.2||3.4|
|Money and credit|
|Domestic credit 2/||6.3||-8.1||2.3||10.9||10.9||6.0||9.0||4.7|
|Credit to the government (net) 2/||7.8||-30.1||4.9||3.8||3.7||1.9||4.5||0.5|
|Credit to the economy 2/||-1.5||22.1||-2.5||7.1||7.1||4.1||4.5||4.2|
|Net domestic assets 2/||9.1||-5.5||-0.5||5.7||5.9||6.0||12.2||3.0|
|Money and quasi money||-5.5||8.9||-32.8||9.0||-0.4||8.7||13.7||12.8|
|Interest rate (money market, in percent; end of period)||5.0||5.0||5.0||5.0||5.0||5.0||…||…|
|(In percent of GDP, unless otherwise indicated)|
|Total revenue 3/||8.8||8.6||9.3||10.6||10.6||10.6||10.6||11.1|
|Total expenditure and net lending||18.7||16.7||17.2||10.7||18.4||19.7||19.2||19.3|
|Of which: current expenditure||12.4||11.2||11.0||6.5||10.7||10.5||10.5||10.3|
|Primary budget balance 4/||-8.3||-6.5||-6.1||-5.0||-6.3||-7.9||-7.5||-7.5|
|Basic balance (excluding grants) 3/5/||-4.8||-3.0||-3.4||-1.7||-1.8||-2.1||-2.0||-1.4|
|Overall balance (commitment basis, excluding grants) 6/||-9.9||-8.1||-7.9||-6.5||-7.7||-9.1||-8.6||-8.2|
|Overall balance (commitment basis, including grants) 6/||-5.4||-3.5||-3.2||-2.3||-2.8||-5.7||-5.2||-4.4|
|Gross domestic savings||3.9||3.5||4.4||4.2||4.0||6.2||5.1||5.7|
|External current account balance|
|Excluding grants for budgetary assistance||-7.5||-7.9||-6.6||-6.7||-8.4||-8.5||-8.8||-8.0|
|Including grant for budgetary assistance 7/||-6.5||-6.2||-4.8||-5.5||-7.2||-8.5||-8.8||-8.0|
|External public debt (end of period) 8/||83.6||90.2||86.9||74.4||76.4||75.0||68.4||70.2|
|Debt-service ratio (before debt relief) in percent of:|
|Exports of goods and services 9/||23.3||24.7||27.5||28.4||28.0||24.4||22.1||12.4|
|Government revenue 9/||42.0||51.1||50.0||43.9||43.7||37.2||36.1||21.1|
|(In billions of CFA francs)|
|GDP at current market prices||1,242.6||1,280.4||1,426.0||1,512.8||1,512.8||1,613.2||1,580.4||1,669.8|
|Government payments arrears (reduction -)||49.1||-112.0||-17.0||-35.5||-33.4||-18.0||-18.0||-15.0|
|Overall balance of payments 10/||-42.9||-26.7||-28.6||-29.8||-43.0||-87.7||-85.5||-56.4|Figure 1.Niger: Exchange Rate Indices, January 1993 - June 2003
Source: IMF, Information Notice System.
Figure 2.Niger: Selected Economic Indicators, 1997-2004 1/
Sources: Nigerien authorities; and staff estimates and projections.
1/ Dashed line corresponds to original projections under the PRGF arrangement approved in December 2000 (IMF Country Report No. 01/15). Solid line corresponds to actual data until 2002 and current projections for 2003-04.
Box 1.Niger: Economic and Financial Developments in 2002
Most recent data on Niger’s performance at end-2002 confirm the thrust of the evaluation presented at the time of the fourth PRGF arrangement review (IMF Country Report No. 03/110; Table 2). Six of the eight indicative targets were observed at end-December 2002, compared with a preliminary assessment that five targets would be reached. In light of new budgetary revenue data (linked to taxes on foreign-financed projects), the indicative target on revenue was observed. Thus, only the indicative targets on the wage bill and net credit to government were not met, for reasons explained in IMF Country Report No. 03/110, paragraphs 12 and 15.
The revised budgetary outcome at end-2002 remains in line with estimates in IMF Country Report No. 03/110, except for a revision of foreign-financed projects (Table 4). Data on public projects executed outside the budget have been provided for the period 1999-2002. Thus, although the 2002 basic budget deficit remains slightly below its target at 1.8 percent of GDP, the overall deficit (on a commitment basis, excluding grants) has been revised from 6.5 percent of GDP to 7.7 percent of GDP. The financing of the deficit was complicated by a shortfall in net external budgetary financing of 0.4 percent of GDP and a reduction of domestic payments arrears that exceeded its target of 1.6 percent of GDP by 0.6 percentage point. The resulting 1 percentage point increase in the domestic financing requirement of the budget was reflected in increases of 0.4 percent of GDP and 0.6 percent in nonbank financing and net bank credit to the government, respectively. As the overshooting of bank financing was mainly linked to a greater reduction of domestic payments arrears in cash, it did not detract from the satisfactory performance achieved in 2002 in fiscal adjustment and the restoration of sound public finances.
New estimates of the balance of payments and cross-border flows of national banknotes within the West African Economic and Monetary Union (WAEMU) franc zone have led to a widening of the external current account deficit in 2002 (excluding grants for budgetary assistance) from a previously estimated 6.7 percent of GDP to 8.4 percent of GDP and a sharp downward revision of the net foreign assets of the Central Bank of West African States (BCEAO) at end-2002 (Tables 3 and 6). The worsening of the current account deficit results from an 11 percent revaluation of the overall level of imports, mainly consumption goods. Revised monetary data indicate a contraction of broad money of 0.4 percent, as opposed to the expansion estimated at 9 percent in IMF Country Report No. 03/110. The decline in net foreign assets amounted to 6.3 percent of beginning-of-period broad money, while the increase in bank indebtedness of the government remained equivalent to 3.7 percent of beginning-of-period broad money. The continuing recovery of economic activities was accompanied by a 15 percent growth of credit to the economy.
|Est.||Est.||Est.||Rev. Est.||Prog.||Rev. Prog||Proj.|
|Current account balance|
|Incl. grants for budgetary assistance||-79.1||-67.9||-83.4||-108.4||-137.3||-138.9||-133.7|
|Excl. grants for budgetary assistance||-101.3||-93.6||-101.9||-126.9||-137.3||-138.9||-133.7|
|Balance on goods||-33.9||-43.3||-59.6||-84.0||-84.9||-93.5||-96.1|
|Of which: reexports||26.1||36.7||36.7||39.7||38.5||42.1||44.6|
|Other products 1/||64.2||79.1||75.5||92.2||78.5||100.0||104.6|
|Services and income (net)||-78.9||-77.3||-78.7||-79.7||-85.4||-82.9||-79.1|
|Of which: interest on external public debt||-19.6||-24.1||-21.2||-21.2||-17.2||-16.1||-9.6|
|Unrequited current transfers (net)||33.7||52.7||55.0||55.3||33.0||37.4||41.5|
|Of which: grants for budgetary assistance 2/||22.2||25.7||18.6||18.6||0.0||0.0||0.0|
|HIPC assistance initiative||0.1||8.1||10.3||10.3||11.0||10.7||13.8|
|Capital and financial account||57.3||43.6||53.6||65.4||49.6||53.5||77.3|
|Private capital transfers||1.3||1.5||1.5||1.5||1.5||1.5||1.5|
|Acquisition/disposal of nonproduced,|
|Public sector (net)||19.3||12.4||26.3||31.8||11.4||7.3||20.2|
|Loans for budgetary assistance 3/||26.3||30.4||44.2||44.2||0.0||0.0||0.0|
|Commercial banks’ net foreign assets||6.8||-17.1||-0.8||-0.8||0.0||-2.1||-5.1|
|HIPC assistance 5/||0.0||0.0||0.0||0.0||4.5||4.4||1.2|
|Errors and missions||-16.6||-9.2||0.0||-5.9||0.0||0.0||0.0|
|Net foreign assets (Central Bank of West African States)||-20.4||-17.3||-3.7||9.5||-4.0||0.0||-10.0|
|Of which: net use of Fund resources||6.7||6.9||12.4||12.4||8.2||8.2||-1.0|
|Rescheduling obtained 6/||157.7||41.6||33.5||33.5||26.4||26.1||9.1|
|Change in arrears||-115.6||0.0||0.0||0.0||0.0||0.0||0.0|
|Residual financing gap||0.0||0.0||0.0||0.0||0.0||0.0||10.2|
|Balance on goods and services||-101.1||-109.6||-129.1||-154.0||-162.1||-169.3||-178.4|
|Total HIPC Initiative assistance||0.1||8.1||10.3||10.3||19.1||18.3||28.9|
|of which: assistance delivered on stock-of-debt operation 7/||…||…||…||…||3.5||3.2||13.9|
|External current account balance|
|Including grants for budgetary assistance (in percent of GDP)||-6.2||-4.8||-5.5||-7.2||-8.5||-8.8||-8.0|
|Excluding grants for budgetary assistance (in percent of GDP)||-7.9||-6.6||-6.7||-8.4||-8.5||-8.8||-8.0|
|Petroleum price (U.S. dollars per barrel)||28.2||24.3||24.9||25.0||28.0||26.5||23.5|
|Exchange rate (CFA francs per U.S. dollar, annual average)||710.1||732.4||694.8||694.8||611.0||577.0||…|
|(In billions of CFA francs)|
|Settlement of reciprocal debts 2/||0.0||0.0||8.3||8.4||3.0||3.0||…|
|Annexed budgets/special accounts||3.5||3.2||4.1||4.1||4.0||4.0||4.5|
|Total expenditure and net lending||214.3||245.6||258.6||278.1||317.4||304.7||322.1|
|Total current expenditure||143.8||157.4||161.1||161.8||170.1||166.9||172.7|
|Wages and salaries||51.8||50.4||55.4||55.3||57.3||57.3||60.1|
|Goods and services||41.1||43.2||45.2||45.5||44.7||43.7||48.1|
|Of which: HIPC Initiative resources||0.0||0.0||0.0||0.0||0.0||0.0||3.0|
|Subsidies and transfers||24.0||28.1||30.1||30.3||41.0||40.0||44.0|
|Of which: HIPC Initiative resources||0.0||0.3||1.9||1.9||1.7||1.7||3.0|
|Annexed budget/special accounts||5.3||10.3||8.1||8.1||8.5||8.5||8.9|
|Capital expenditure and net lending||70.5||88.1||97.5||116.3||147.3||137.7||149.5|
|Of which: HIPC Initiative resources||0.0||7.9||9.4||9.8||17.3||16.6||22.9|
|Overall balance (commitment basis, excl. grants)||-104.2||-112.8||-98.5||-117.2||-146.3||-137.0||-137.0|
|Change in payments arrears||-112.0||-17.0||-35.5||-33.4||-18.0||-18.0||-15.0|
|Domestic arrears (net)||3.6||-17.0||-35.5||-33.4||-18.0||-18.0||-15.0|
|External arrears (net)||-115.6||0.0||0.0||0.0||0.0||0.0||0.0|
|Overall balance (cash, excl. grants)||-216.2||-129.8||-134.0||-150.6||-164.3||-155.0||-152.0|
|HIPC Initiative assistance||0.1||8.1||10.3||10.3||11.0||10.7||13.8|
|Debt relief obtained||157.7||25.0||18.8||18.8||21.6||21.6||1.6|
|HIPC Initiative assistance 4/||0.0||0.0||0.0||0.0||4.5||4.4||1.2|
|Debt under discussion||…||16.6||14.7||14.7||9.3||8.9||8.8|
|Of which: IMF (net)||6.7||6.9||12.9||12.9||9.1||8.3||-1.0|
|Privatization receipts (net)||8.5||5.0||-3.0||-3.0||0.0||0.0||0.0|
|Financing gap (+) 5/||0.0||0.0||0.0||0.0||65.3||59.3||57.3|
|Loans for budgetary assistance||0.0||0.0||0.0||0.0||30.5||33.3||…|
|Grants for budgetary assistance||0.0||0.0||0.0||0.0||34.8||25.9||…|
|Residual financing gap||0.0||0.0||0.0||0.0||0.0||0.0||10.2|
|(In percent of GDP)|
|Total expenditure and net lending||16.7||17.2||17.1||18.4||19.7||19.2||19.3|
|Overall balance, commit, basis, excl. grants||-8.1||-7.9||-6.5||-7.7||-9.1||-8.6||-8.2|
|Overall balance, cash basis, excl. grants||-16.9||-9.1||-8.9||-10.0||-10.2||-9.8||-9.1|
|Basic fiscal balance 6/||-3.0||-3.4||-1.7||-1.8||-2.1||-2.0||-1.4|
|Current budget balance||-2.6||-1.7||-0.1||-0.1||0.1||0.0||0.7|
|(In billions of CFA francs, unless otherwise indicated)|
|Basic fiscal balance 6/||-38.7||-48.9||-26.2||-27.8||-34.4||-31.9||-24.0|
|Total HIPC Initiative assistance 7/||0.0||8.1||10.3||10.3||19.1||18.3||28.9|
|Wage bill (in percent of tax revenue)||50.4||40.1||38.5||38.3||35.4||36.2||33.9|
|Stock of domestic payments arrears||132.2||115.2||79.7||81.8||61.7||63.8||48.8|
|GDP at market prices||1,280||1,426||1,513||1,513||1,613||1,586||1,670|
|March 2003||June 2003||Sep.2003||Dec 2003|
|Special accounts revenue||0.8||0.6||1.9||1.4||2.9||4.0||4.0|
|Settlement of reciprocal debts||0.0||0.0||0.0||0.0||1.0||3.0||3.0|
|Total expenditure and net lending||64.3||57.9||139.7||125.9||229.4||317.4||304.7|
|Total current expenditure||38.0||34.8||80.7||78.4||125.5||170.1||166.9|
|Wages and salaries||14.1||14.0||28.4||28.4||42.8||57.3||57.3|
|Materials and supplies||9.3||6.5||20.6||17.3||32.6||44.7||43.7|
|Subsidies and transfers||8.8||6.5||18.5||15.8||30.2||41.0||40.0|
|Special account expenditure||1.5||1.9||3.8||4.0||6.2||8.5||8.5|
|Capital expenditure and net lending||26.3||23.1||58.9||47.5||103.9||147.3||137.7|
|Overall balance (commitment basis)||-27.4||-19.8||-59.5||-50.1||-104.8||-146.3||-137.0|
|Change in payments arrears||-3.0||-3.9||-3.0||-6.9||-12.0||-18.0||-18.0|
|Overall balance (cash basis)||-30.4||-23.7||-62.5||-57.0||-116.8||-164.3||-155.0|
|Treasury bills held in WAEMU 1/||0.0||0.0||0.0||0.0||0.0||0.0||0.0|
|Financing gap (+)||11.1||3.3||11.1||3.3||44.0||65.3||59.3|
|African Development Bank||3.4||3.3||3.4||3.3||3.4||11.8||10.5|
|Basic budget balance|
|Incl. revenue of reciprocal debts settlement||-7.4||-1.7||-15.7||-14.3||-27.2||-34.4||-31.9|
|Excl. revenue of reciprocal debts settlement||-7.4||-1.7||-15.7||-14.3||-28.2||-37.4||-34.9|
|Total budgetary aid, including IMF||11.1||3.3||21.2||12.8||58.4||79.7||72.9|
|(In billions of CFA francs)|
|Net foreign assets||-1.3||33.1||37.6||24.4||17.6||-10.7||-20.8||41.6||26.5||41.5|
|Central Bank of West African States (BCEAU)||2.5||19.7||23.4||10.2||-4.6||-24.4||-31.3||27.4||10.2||20.2|
|Net domestic assets||104.4||103.9||111.7||112.0||122.1||139.0||150.6||120.7||128.7||133.4|
|Net bank claims on government||43.0||48.0||53.1||53.1||62.2||87.5||95.3||55.9||59.2||59.9|
|Of which: statutory advances||25.8||32.2||33.1||33.1||33.1||33.1||33.1||26.4||33.1||25.2|
|Credit to the economy||68.6||66.0||75.8||75.8||75.3||74.3||78.0||82.0||82.0||88.5|
|Other items, net||-7.2||-10.1||-17.2||-16.9||-15.4||-22.9||-22.7||-17.2||-12.5||-15.1|
|Of which revaluation account||0.0||0.0||0.0||0.0||0.0||0.0||0.0||0.0||0.0||0.0|
|Money and quasi money||103.2||137.0||149.3||136.4||139.65||128.3||129.8||162.3||155.1||174.9|
|Currency outside banks||32.2||49.9||52.3||39.3||35.54||23.3||24.3||57.8||47.5||56.1|
|Private deposits with ONTE (postal savings institution)||1.6||1.6||1.7||1.7||1.7||2.7||2.7||1.7||1.7||2.0|
|Deposits with banks||69.5||85.5||95.2||95.4||102.4||102.4||102.8||102.8||105.9||113.5|
|(Annual change, in percent of beginning-of-period broad money, unless otherwise indicated)|
|Net foreign assets||14.4||33.3||33.3||-6.3||-5.0||-25.7||-33.1||2.7||1.5||9.7|
|Net domestic assets||-5.5||-0.5||5.7||5.9||1.4||19.8||28.3||6.0||12.2||3.0|
|Net bank claims on the government||-30.1||4.9||3.5||3.7||6.1||25.3||31.0||1.9||4.5||0.5|
|Of which: statutory advances||-4.9||6.2||0.7||0.7||0.0||0.0||0.0||-4.5||0.0||-5.1|
|Credit to the economy||22.1||-2.5||7.1||7.1||0.0||0.7||0.6||4.1||4.5||4.2|
|Other items, net||2.6||-2.8||-5.2||-4.9||1.1||-4.4||-4.3||0.0||3.2||-1.7|
|Money and quasi money||8.9||32.8||9.0||-0.4||2.4||-5.9||-4.8||8.7||13.7||12.8|
|Velocity of circulation of money (GDP/broad money)||12.6||10.4||10.1||11.1||11.0||12.1||12.1||9.9||10.2||9.5|
|Credit to the economy (Change from beginning of year, in percent)||43.8||3.8||14.8||14.8||-0.7||-2.0||2.9||8.1||8.1||8.0|
5. The broadly satisfactory track record of Niger in policy implementation has continued in 2003. All quantitative performance criteria and indicative targets at end-March 2003 were observed, while preliminary data indicate that six of the eight quantitative indicative targets at end-June 2003 were met (Appendix V, Attachment I, Table 1). The target on budgetary revenue was not met, mainly as a result of smaller revenue transfers from the West African Economic and Monetary Union (WAEMU) in the wake of the crisis in Côte d’Ivoire, and the ceiling on domestic bank financing was not observed because of a shortfall in external financing disbursements and a greater-than-envisaged substitution of bank financing for nonbank financing. The authorities have also continued to comply with all continuous performance criteria since end-March 2003, but progress in and timeliness of structural reforms has been more mixed.
6. The basic budget deficit (on a payment order basis, excluding grants) was limited at end-March 2003 to CFAF 1.7 billion (0.1 percent of GDP), compared with a ceiling of CFAF 7.4 billion (0.5 percent of GDP; Table 5),1 because budgetary revenue slightly exceeded the program target and government spending was strictly controlled. The wage bill, in particular, was kept in line with the indicative target of CFAF 14.1 billion, and some nonpriority spending was postponed. Finally, the recourse to domestic bank financing remained within the program ceiling despite a greater-than-programmed reduction of domestic payments arrears (CFAF 3.9 billion, instead of the programmed CFAF 3.0 billion).2
7. The financial constraints on budget execution became increasingly binding in the second quarter of 2003, and the government kept the basic budget deficit (on a payment order basis, excluding grants) at CFAF 14.3 billion (0.9 percent of GDP), below the limit of CFAF 15.7 billion (1.0 percent of GDP). Continuing compression of spending compensated for a revenue shortfall of CFAF 4.3 billion and contributed to this outcome, which reflects the resolve of the authorities to keep the program on track. Both tax and nontax revenue fell below their programmed levels, mainly as a result of external factors, such as the closing of the border with Nigeria during the latter’s presidential elections and smaller-than-programmed revenue transfers from the WAEMU; delays in the implementation of a license fee on reexport activities was another cause of the revenue shortfall. The compression of expenditure restricted basic spending in the first half of the year to CFAF 90.1 billion, compared with CFAF 95.9 billion in the program.
8 The composition of the financing of the budget deficit was, however, different from the one envisaged under the program at end-June 2003, and the recourse to domestic bank financing exceeded the program ceiling by CFAF 15.1 billion (1 percent of GDP). This outcome was caused primarily by a shortfall in net external financing, a greater-than-programmed reduction in domestic payments arrears, and an unprogrammed reduction in nonbank financing (MEFP, para. 13). After adjusting for the shortfall in net external financing, the indicative target on net bank financing was overshot by CFAF 7.6 billion, but the net domestic indebtedness of the government increased only marginally because of the concurrent reduction in nonbank domestic debt (including domestic payments arrears). Consequently, and in light of the corrective measures to be undertaken in the second half of 2003, the staff has considered the breach of the indicative targets on revenue and domestic bank financing as relatively minor and not a threat to the objectives of the annual program.
9. Monetary developments in the first half of 2003 were characterized by a 5.9 percent contraction of broad money (Table 6). This was caused primarily by a sharp reduction of net foreign assets, equivalent to 25.7 percent of beginning-of-period broad money, which, in term, reflected a shortfall in external assistance and strong import activity. Domestic credit was higher than projected, in particular the government’s recourse to bank financing.3 Monetary policy at the regional level has remained prudent; the Central Bank of West African States (BCEAO) lowered its key interest rates by 1 percentage point on July 7, 2003, thereby maintaining their premium over key euro-zone rates (MEFP, para. 14).
C. Structural Reforms in the First Half of 2003
10. Institutional capacity limitations and delays in technical assistance have resulted in a slower-than-envisaged implementation of the structural reform agenda (Box 2). Measures related to the three structural benchmarks of the program that were outstanding at end-June 2003 were, however, completed by September 8, 2003 as prior actions for Executive Board consideration of the fifth review under the PRGF arrangement. These benchmarks included the strengthening of external debt management, the closing of the 2001 budgetary accounts, and the completion of a study on the remuneration of the petroleum sector operators. The installation of a new debt-management and recording software in the Ministry of Finance, as well as the related personnel training, was completed on September 8, 2003. The benchmark on the 2001 budgetary accounts was observed on August 26, 2003 with the issuance of a declaration of conformity regarding the 2001 Budget Review Law by the Chamber of Accounts and Budgetary Discipline. Finally, the study on the remuneration of petroleum sector operators was submitted to the government on August 15, 2003.
Box 2.Niger: Structural Conditionality Under the PRGF Arrangement
Coverage of structural conditionality in the current program
The structural areas covered by conditionality in the 2003 program include the following: (i) the continuous implementation of the petroleum product pricing system; (ii) introduction and use of a new debt-management and recording software; (iii) completion of an actuarial study of the National Retirement Pension Fund; (iv) completion of a financial audit of the wage bill; (v) computerization of the regional treasury offices for the implementation of the new government charter of public accounts; and (vi) preparation of a medium-term expenditure framework for two key social sectors. The continuous implementation of the petroleum product pricing system will contribute substantially to the attainment of the revenue targets for 2003 and beyond. The strengthening of the External Debt-Service Unit will allow for improved debt management. The computerization of the regional treasury offices for the implementation of the new government charter of public accounts will allow the government to record and monitor budgetary operations more efficiently, while the medium-term expenditure framework will make it possible to improve budget preparation.
Relevant structural measures not included in the current program
Reforms related to the strengthening of the financial sector and the privatization of public enterprises are the main responsibility of the World Bank and are not included as structural conditions under the current program. The Fund’s Executive Board has expressed support for efforts to strengthen the financial sector.
Status of structural conditionality included in earlier programs
Niger’s past track record of structural reform implementation was not very satisfactory as a result of weaknesses in its implementation capacity and several interruptions related to the two coups d’état that have taken place since 1995. The main areas of reform in the last program, supported by the Enhanced Structural Adjustment Facility (ESAF) arrangement (1996-98), included civil service reforms to control the wage bill, the privatization of public enterprises, the restructuring of the banking sector, and governance actions related to the transparency of budgetary operations and the need to clear domestic payments arrears. During the first two years of the current Poverty Reduction and Growth Facility (PRGF) arrangement, structural conditionality focused on strengthening the budgetary execution and reporting processes, as well as improving governance, and the track record of reform implementation has improved.
Structural areas covered by HIPC Initiative completion point conditionality
Key conditions for reaching a floating completion point under the enhanced HIPC Initiative include the following measures regarding governance that are of relevance to the PRGF-supported program: (i) ensuring full budgeting of poverty reduction programs financed by the HIPC Initiative assistance, and publishing semiannual reports on the execution of these programs; and (ii) submitting budget review laws (loi de règlement) to the National Assembly and the corresponding treasury accounts to the Supreme Court’s Chamber of Accounts and Budgetary Discipline for fiscal years 1998-2000. The authorities’ track record in fulfilling these key conditions has been satisfactory.
Structural areas covered by World Bank lending and conditionality
A two-tranche Public Expenditure Adjustment Credit (PEAC I) was approved by the World Bank Board in November 2001 to support the fiscal management and structural reform programs in the period 2001-02 and was fully disbursed in amounts of US$30 million in December 2001 and US$40 million in August 2002, The PEAC I focused on the following policy areas: (i) public sector reforms, particularly public expenditure and budget management reforms, procurement reform and domestic arrears reduction; (ii) social sector reforms, particularly key reforms in education and health; (iii) financial sector reforms; and (iv) privatization and regulatory reforms. A follow-up operation, the PEAC II, is currently under preparation and scheduled for presentation to the World Bank Board on October 23, 2003. The financial sector reform program, which targets the restructuring and consolidation of the commercial banking sector, as well as of the insurance, pension, and microfinance sectors, will be supported by a forthcoming World Bank financial sector technical assistance project.
11. As envisaged under the program, budgetary reforms in early 2003 focused on ensuring the effective implementation of the new budget nomenclature and charter of public accounts. To this end, extensive training programs and monitoring took place. Progress in the implementation of the new public procurement code was not as satisfactory, as delays in technical assistance prevented the finalization of the necessary decrees.
12. Progress in strengthening the financial sector continued with the restructuring of the Banque Commerciale du Niger (BCN) and the Islamic Bank of Niger for Commerce and Investment (BINCI). The government also entered into discussions with potential investors in the context of the privatization of the Credit du Niger (CDN), but no understandings had been reached by end-June 2003. The financial audit of microfinance institutions started in the second quarter of 2003, and further progress was achieved with the completion of most studies on the restructuring of the National Post and Savings Institution (ONPE), including the revamping of postal activities and the creation of a financial services branch, which will become operational in 2004. Finally, the terms of reference for an actuarial audit of the National Social Security Fund (CNSS) were completed in June 2003, but an agreement with the International Labor Office (ILO) to conduct this audit has not yet been finalized.
13. Parastatal reforms were affected by further delays in the establishment of the Multisector Regulatory Agency (MRA) and in the privatization of the electricity and petroleum product companies (NIGELEC and SONIDEP, respectively). The recruitment of sectoral directors for the MRA was, however, initiated in July 2003, and the authorities launched a request for an expression of interest in SONIDEP in mid-July 2003, with a view to achieving irreversible progress in its privatization by year’s end. A difficult international environment and problems in completing the second prequalification step launched in November 2002 have also delayed the privatization of NIGELEC and forced the government to embark on a revision of the privatization strategy for this parastatal, with assistance from the World Bank.
III. Policy Discussions
14. While acknowledging that the basic budget deficit had been kept within the ceilings of the program, the staff expressed some concern about budget execution in the first half of 2003. The staff noted, in particular, the government’s recourse to expenditure payments without prior commitments (payments sans ordonnancements préalables, or PSOPs) and the different composition of budget financing. In explaining recent budgetary developments, the authorities stressed the difficulties they had encountered in early 2003. These difficulties included a legal action in the Constitutional Court regarding the 2003 Budget Law and, in the second quarter of 2003, weaknesses in revenue collection, delays in external assistance disbursements, and a greater requirement for domestic bank financing. The authorities linked most of these difficulties to external factors, to which they have reacted by compressing nonpriority expenditure while preserving the priority sectors of the PRSP. They highlighted their commitment to the program and the success of their efforts to keep the budget on track. In the circumstances, and given the need to keep the momentum of the Poverty Reduction Strategy, the staff concluded that fiscal policy in the first half of 2003 had been broadly appropriate; however, they urged the authorities to seek better coordination of foreign aid and strengthen institutional capacity, in order to ensure improved monitoring and program implementation on the financing side.
15. The constitutional challenge to the 2003 Budget Law was resolved through the approval by the National Assembly of an amendment to the Organic Law governing public finances. The amended law takes into account the new budget nomenclature and the new charter of public accounts, and ratifies the integration of the investment and recurrent budgets. The court had declared unconstitutional the ordinance that the government issued at end-2002 to introduce these modifications, with a view to expediting the implementation of these budgetary reforms in the 2003 budget law. Pending the resolution of these legal issues, the government could not release the 2003 budget appropriations, and a large amount of expenditure was executed through PSOPs.4 The authorities stressed that they had reverted to normal budgetary procedures as soon as the constitutionality of the 2003 budget law had been confirmed. They also restored transparency of budget execution by regularizing the PSOPs through proper ex post recording of the related budgetary commitments. The staff welcomed the restoration of usual procedures for executing the budget but regretted the additional pressures created by the regularization of the PSOPs on the limited institutional capacity.
16. The shortfall in revenue at end-June 2003 reflected mainly the indirect impact of the lyoirien crisis and the closing of the Nigerian border during the Nigerian presidential elections. The revenue transfers from the WAEMU budget (projected at CFAF 7.4 billion, or 0.5 percent of GDP, in 2003) were assumed to be effected evenly over the year. Because of delays in Côte d’Ivoire’s contributions to the WAEMU budget, the WAEMU Commission had only transferred CFAF 1.3 billion to Niger at end-June 2003, and the authorities expect a shortfall in these transfers of CFAF 3.4 billion for the year as a whole. The authorities also pointed to the temporary closings of the Nigerian border and a lower-than-programmed execution rate of the budget to explain the weakness of other revenue,5 as well as the delay in implementation of the new license fee on tobacco reexports. With their decision to strengthen further tax and customs administration and to implement the license fee on tobacco reexports, the authorities were confident that the annual target on revenue (excluding WAEMU transfers) remained achievable.
17. While the shortfall of revenue could be compensated for in the remainder of the year by postponing nonpriority expenditure, the shortfall in external financing and a greater-than-programmed reduction in domestic debt resulted in an overshooting of net bank credit of CFAF 15.1 billion at end-June 2003. The authorities noted that external financing operations of the budget (excluding project financing and HIPC Initiative assistance) amounted to a net outflow of CFAF 18.0 billion in the first half of 2003, compared with CFAF 8.7 billion in the program. This shortfall in external assistance reflects mainly procedural delays in the disbursement of a European Union (EU) grant in return for the settlement of external payments arrears (CFAF 8.5 billion) with the European Investment Bank (EIB) in June 2003.6 The resulting greater domestic financing requirement was exacerbated by a greater reduction in domestic payments arrears (CFAF 3.9 billion) and a reduction in nonbank domestic debt (CFAF 3.0 billion). The overshooting of the domestic payments arrears target resulted from the earlier-than-programmed clearing of one month of salary arrears (out of the five remaining months), or about CFAF 3.2 billion, as explained above. While acknowledging that total domestic debt of the government was only marginally affected by the shift from nonbank to bank financing, the staff highlighted the need to better monitor the reduction of domestic payments arrears and the stock of domestic debt, in particular deposits held by treasury correspondents at the treasury; the authorities shared this view. The staff also reiterated its recommendation to fill the position of director of debt, which has been vacant for the past two years.
18. The 2003 program revisions were discussed together with the preparation of the 2004 budget law. The macroeconomic framework underlying this budget is based on the following: real GDP growth of 4.1 percent; a containment of inflation, on a 12-month, end-of-period basis, at 1.2 percent, and an external current account deficit (excluding grants for budgetary assistance) limited to 8 percent of GDP. The prudent economic and financial policies to be implemented in 2004 will support the attainment of these objectives. Fiscal policy, in particular, will aim at consolidating the progress achieved in restoring public finances, supporting the economic recovery, and implementing the Poverty Reduction Strategy, drawing from the lessons of the first progress report of the PRSP implementation. Preliminary budget figures targeted a reduction of the basic deficit to 1.4 percent of GDP, with an increase of revenue to 11.1 percent of GDP and a containment of expenditure, excluding foreign-financed capital outlays, at 12.5 percent of GDP. Capital expenditure was set to increase to 6.8 percent of GDP, mainly as a result of the provision of full assistance under the HIPC Initiative. Taking into account a further reduction of domestic payments arrears, the overall budget deficit was capped at 9.1 percent of GDP. With no domestic financing envisaged and the equivalent of 8.5 percent of GDP in expected net foreign financing,7 a financing gap of 0.6 percent of GDP remained for the 2004 budget, which the authorities expected to fill through additional bilateral assistance and a new arrangement with the Fund. The remainder of the current PRGF supported program, if extended as requested through mid-2004, would be financed. The staff expressed broad agreement with the envisaged fiscal stance for 2004 and encouraged the authorities to seek financing assurances to fill the remaining gap. While highlighting their intent to maintain the control over expenditure in line with available financing, the authorities agreed to review and, if necessary, revise the 2004 budget to close the financing gap in the context of the sixth review of the PRGF arrangement and possible future discussions on a new PRGF arrangement.
IV. Revised Program for 2003
19. In light of the recent economic developments and the good macroeconomic perspectives for the rest of the year, the revisions of the 2003 program were limited to addressing expected shortfalls totaling CFAF 9.4 billion, or 0.6 percent of GDP, in budgetary support from the WAEMU and aid disbursements of the donor community. The revised program remains consistent with the PRSP and the initial objectives of the program (see IMF Country Report No. 03/110, paras 23-36). As explained in the MEFP, the buoyancy of economic activities in early 2003 is likely to be accompanied in the second half of the year by a moderate boost in rural sector output as a result of good weather. The macroeconomic framework for 2003 thus maintains a growth objective of 4.0 percent and projects a greater reduction of the inflation rate, on a 12-month, end-of-period basis, to 0.4 percent at end-December 2003. The external current account deficit, excluding grants for budgetary assistance, would widen slightly in nominal terms to reach 8.8 percent of GDP (Table 3). These objectives are to be pursued through the continued implementation of sound economic and financial policies aimed at preserving the momentum of adjustment and achieving the convergence criteria of the WAEMU (Box 3).
Box 3.Niger and Waemu’s Convergence, Stability, Growth, and Solidarity Pact
Following the signing of the WAEMU Treaty in 1994, the introduction of the Convergence, Stability, Growth and Solidarity Pact in December 1999 has provided a regional framework that aims at promoting WAEMU macroeconomic stability through multilateral surveillance and achievement of convergence criteria, and good governance, as well as enhanced solidarity among the member countries. During the transitional period from the date of entry into force of the pact to December 31, 2002, member countries committed themselves to developing three-year convergence programs, with a view to ensuring compliance with the latter date.
The pact is based on the observance by member states of a set of convergence indicators pertaining to the public finances, the real sector, the balance of payments, and the common currency. Indicators viewed as essential are known as convergence criteria. There are four primary and four secondary convergence criteria, supplemented by a host of other indicators (tableau de bord) recommended by the Council of Ministers of the WAEMU.
Niger’s strained financial and economic situation made it difficult for the country to meet the convergence criteria by end-December 2002. Achievement of these goals is likely to remain an ambitious undertaking for the near future. At end-2002, Niger had met only the primary criterion for the average inflation rate, which was 0.3 percentage point below the target. The country has, however, made substantial progress toward meeting the convergence criteria over the period 1999-2002 and is expected to observe three criteria in 2003, as indicated below. The authorities aim at a further gradual convergence over the next few years, but the criteria on die basic balance, the external current account deficit, and the tax revenue are not likely to be met by 2005.
|Basic fiscal balance (as percent of GDP)||≥0||-4.8||-1.8||-2.0|
|Domestic and external debt (as percent of GDP)||≤70||99.5||85.3||76.1|
|Annual average inflation rate (in percent)||≤3||-2.3||2.7||-0.7|
|Nonaccumulation of domestic and external payments arrears||√||X||X||√|
|Wage bill (as percent of revenue)||≤35||50.3||38.2||36.2|
|Domestically financed investment (as percent of tax revenue)||≥20||17.0||18.7||22.3|
|External current account deficit, excl. grants (as percent of GDP)||≤5||-7.5||-8.4||-8.8|
|Tax revenue (as percent of GDP)||≥17||8.1||9.6||10.0|
A. Fiscal Policy
20. The revised budgetary program for 2003 aims at a slight tightening of the fiscal stance, with the annual basic budget deficit to be limited to 2.0 percent of GDP, compared with an initial ceiling of 2.1 percent of GDP (Tables 4-5, Figure 3, and Box 4). The shortfall in WAEMU revenue transfers (0.2 percent of GDP) will be offset by a freeze in nonpriority expenditure equivalent to 0.3 percent of GDP, mainly in domestically financed investment projects. The foreign-financed investment program was also revised downward by about 5 percent to reflect the lower execution rate in the first half of 2003 and donor community concerns about absorption capacity. On the financing side, the shortfall in budgetary assistance of 0.4 percent of GDP will be attenuated by savings on debt-service obligations resulting from the appreciation of the CFA franc (Figure 1). The remaining gap will be financed through greater recourse to domestic financing (0,1 percent of GDP), Taking into account the reduction of domestic payments arrears, the overall stock of domestic debt is targeted to be reduced by 0.9 percent of GDP, compared with 1.0 percent in the original program.
Figure 3.Niger: Selected Fiscal Indicators, 1997-2004 1/
Sources: Nigerien authorities; and staff estimates and projections.
1/ Dashed line corresponds to original projections under the PRGF arrangement approved in December 2000 (IMF Country Report No. 01/15). Solid line corresponds to actual data until 2002 and current projections for 2003-04.
2/ Overall budget balance, excluding foreign-financed capital expenditure.
3/ Total revenue minus current expenditure.
Box 4.Niger: Revised Budgetary Program for 2003
(In billions of CFA francs)
|Annexed budgets and special accounts||8.5||8.5||0.0|
|Capital expenditure on own resources||35.4||32.6||-2.8|
|Capital expenditure on external financing||111.9||105.1||-6.7|
|Overall budget balance (payment order basis)||-146.3||-137.0||9.3|
|Variation of domestic payments arrears||-18.0||-18.0||0.0|
|Variation of external payments arrears||0.0||0.0||0.0|
|Overall budget balance (cash basis)||-164.3||-155.0||9.3|
21. Although the recourse to domestic financing will be limited to 0.1 percent of GDP for the year as a whole, it will be much higher in the period preceding the disbursements of external aid at the end of 2003. Of budgetary assistance (excluding IMF financing) estimated at 3.7 percent of GDP for the year as a whole, 85 percent is expected to be disbursed in the fourth quarter, compared with only 33 percent in the original program. To alleviate the severe budget constraint in the period preceding these disbursements of aid, the government has reached an agreement with the BCEAO to postpone the programmed reduction of central bank advances, which was equivalent to almost 0.4 percent of GDP in 2003, until January 2004. It will also issue treasury bills on the regional financial market in October 2003 for an amount equivalent to 0.4 percent of GDP. The resulting higher indebtedness to the banking sector at end-2003 would be partially compensated for by a substantial accumulation of deposits at year’s end that will allow for a smoother budget execution in 2004.
B. Monetary Policy and Financial Sector Issues
22. The monetary and credit policies that are conducted at the regional level will continue to be prudent, focusing on containing inflationary pressures while ensuring an appropriate level of foreign exchange reserves. For Niger, the revised program projects a broad money growth of 13.7 percent in 2003, following a contraction of 0.4 percent in 2002.8 As a percentage of beginning-of-period money supply, net foreign assets would grow by 1.5 percent, with a substantial rebuilding of reserves in the second half of 2003. On the same basis, net domestic assets would increase by 12.2 percent, reflecting 4.5 percent growth rates for both net credit to the government and credit to the economy.
23 The monetary authorities also intend to continue their close monitoring of the banking sector and step up their surveillance activities. The strengthening of the financial sector will continue with the completion of the restructuring of the BCN and BINCI, efforts to privatize the CDN, the finalization of the audits of the microfmance institutions, and the final preparations for the restructuring of ONPE.
C. Structural Reforms
24. In addition to strengthening the financial sector, the authorities are aiming at increasing the momentum of structural reforms in the remainder of 2003. Except for the postponement of the privatization of NIGELEC to 2004, the structural reform program has not been modified (Box 2). It remains focused, in the area of public finances, on strengthening budget and treasury management, with particular emphasis on external debt management. Additional reforms under the purview of the World Bank will aim at implementing the public procurement code and achieving irreversible progress in the privatization of SONIDEP.
D. Poverty Reduction Strategy Implementation
25. The implementation of the Poverty Reduction Strategy in 2002 and the first half of 2003 has been satisfactory, as highlighted in the first progress report of the authorities (IMF Country Report No. 03/384). On the one hand, the report focuses on the good macroeconomic performance in 2001-02, the overall success of the poverty projects sponsored by the presidency and financed through HIPC Initiative assistance, and the finalization of important sectoral strategies, such as for rural development. It also emphasizes the continuing participatory approach used in 2002 to facilitate the dissemination of the document and its ownership by the population, and highlights the positive outcome of a donors’ forum in Niamey in early June 2003. On the other hand, it recognizes the delays in strengthening human and institutional capacity, the resulting difficulties in monitoring and evaluating the strategy implementation, and the postponement of a public expenditure review and a household consumption survey to be used in updating the poverty analysis and improving the medium-term expenditure framework. It also acknowledges some mixed outcomes in poverty reduction, particularly in the health sector, and presents corrective actions that the authorities intend to take in the near future.
V. External Sector Issues and HIPC Initiative Completion Point
26. The authorities remain committed to implementing a prudent external debtmanagement policy. They have strengthened external debt management through the installation of new software and intend to transfer all debt-management responsibilities within the Nigerien Treasury. The authorities have also monitored debt obligations more closely and avoided the recurrence of temporary external payments arrears. Finally, they have made a request to the African Solidarity Fund (FSA) for a subsidy to bring into line with program requirements the grant element of an undisbursed US$10.0 million loan agreement of the OPEC Fund that they signed on May 22, 2002 for the construction of technical and vocational schools.9
27. The authorities are committed to achieving the completion point under the enhanced HIPC Initiative by the end of 2003. In the context of the debt sustainability analysis for the completion point, the authorities have completed, in collaboration with the Fund and the World Bank, the reconciliation of the stocks of external debt at end-1999 and end-2002. Although no new debt-relief agreement was signed in the first half of 2003, the amount of debt relief already obtained from creditors amounts to approximately 80 percent of the total debt relief required at end-December 2002 under the HIPC Initiative decision point in net present value terms (NPV) (Table 7). The government has also made satisfactory progress toward meeting the thirteen trigger conditions for the floating completion point, but four conditions in the health and education sectors have not yet been observed, mainly as a result of weak institutional capacity and implementation problems. The authorities have taken corrective measures, in collaboration with the World Bank.
|Has Begun to|
|Has Begun to|
|International Monetary Fund (IMF)||yes||yes||yes||Approval by Board on December 13, 2000.|
|International Development Association (IDA)||yes||yes||yes||Approval by Board on December 20, 2000.|
|African Development Bank (AIDS)/African Development Fund(AfDF)||yes||yes||yes||Approval by Board in March 2001.|
|Arab Bank for Economic Development in Africa (BADEA)||yes but limited||yes||yes||Approval by the Board in March 2001|
|International Fund for Agricultural Development (IFAD)||yes||yes||no||Approval by Board in April 2001|
|European Union (EU)/European Investment Bank (EIB)||yes||yes||yes|
|Islamic Development Bank (IsDB)||yes||yes||yes||Approval by the Board on July 22, 2002.|
|West African Development Bank (BOAD) and West African Economic and Monetary Union (WAEMO)||yes but limited||yes||yes||Agreement signed on October 9, 1999|
|Economic Community of West African States (ECOWAS)||no||no||no||Has not responded to authorities request.|
|OPEC Fund||yes||yes||yes||Agreement of February 26, 2002.|
|Conseil de l’entente||no||no||no||Has not responded to authorities request|
|Paris Club creditors||Paris Club agreement of January 25, 2001.|
|France||yes||yes||yes||Excludes postal and hospital debts, which were rescheduled under different terms. Agreement signed in April 2003.|
|Non-Paris Club bilateral creditors|
|Algeria||no||no||no||Agreement finalized; to be approved by Algerian Parliament.|
|China||yes but limited||yes||yes||Agreement was signed on June 5, 2001 for the partial write-off or debt stock (US$18 million).|
|Kuwait||yes||yes||yes||Agreement of June 3, 2003.|
|Libya||no||no||no||Libya has agreed in general to participate in the Initiative.|
|Saudi Arabia||no||no||no||Agreement on a rescheduling of arrears payments in 1999 that will allow debt relief negotiations to resume|
|Taiwan Province of China||no||no||no|
|United Arab Emirates||no||no||no|
|Agreement to Provide HIPC Relief||Agreement to Provide Interim Assistance||Ilas Begun to Deliver Interim Assistance||Participated in IDA Buyback||Original Creditor Holding Claim|
|One Belgian creditor||no||no||no||1991||Short-term loan in arrears since 1999|
|(represented 0.4% of total debt in NPV terms at the decision paint)||(@ 18 cents)||Paid back fully in 2002 No debt relief granted.|
28. The NPV of debt, after traditional debt relief, increased by 21 percent between 1999 and 2002, from US$972.7 million to US$1,176.3 million, but remained equivalent to 51 percent of GDP (Table 8).10 The enhanced HIPC Initiative debt relief reduces the NPV of debt at end-2002 to US$595.1 million, equivalent to 206 percent of exports. This outcome exceeds the decision point projection of an NPV of debt equivalent to 185 percent of exports at end-2002. Nearly half of the NPV projection overshooting is explained by exchange and discount rate variations, with the remainder resulting from higher-than-envisaged borrowing. Taking into account additional bilateral relief beyond the enhanced HIPC Initiative requirements granted by some Paris Club creditors (in particular France, the United Kingdom, and the United States), the NPV of debt at end-2002 is reduced further to 199 percent of exports. These figures highlight not only the need to maintain prudent economic debt policies but also the dependency of Niger on appropriate support from the donor community, both in terms of grant financing and the level of debt concessionality.
|Nominal Debt||NPV of Debt After|
|Nominal Debt||NPV of Debt After|
|African Development Bank (AfDB)||135.7||68.8||157.0||88.4|
|Arab Bank for Economic Development in Africa (OADEA)||29.5||29.0||31.2||31.3|
|West African Development Bank (BOAD)||0.0||0.0||4.2||3.3|
|Economic Community of west African States (ECDWAS)||1.2||1.2||1.5||1.5|
|European Union (EU)||39.4||27.5||41.1||30.9|
|Council de l’Entente||4.2||4.2||4.4||4.4|
|International Fund for Agricultural Development (IFAD)||32.0||16.7||37.2||21.4|
|Islamic Development Bank (IsDB)||40.6||36.0||43.8||40.1|
|West African Economic and Monetary Union (UEMOA)||12.5||12.5||13.1||13.1|
|Bilateral and commercial||533.0||395.0||442.4||379.3|
|Other official bilateral||251.7||194.6||230.9||188.9|
|Taiwan Province of China||77.5||69.4||85.0||63.1|
|United Arab Emirates||4.7||3.9||5.1||4.4|
29. The authorities are requesting an extension of the current program to end-June 2004. This extension of the program will allow Niger to draw the full amount under the arrangement, After taking into account the final disbursement of SDR 8.44 million under the PRGF arrangement, the projected financing gap of the balance of payments in 2004 is estimated at CFAF 57.2 billion, for which financing intentions of CFAF 47.1 million have been identified. The remaining gap would be filled by additional bilateral donor financing and disbursements under a new PRGF arrangement to be negotiated in 2004. In light of the satisfactory track record of policy implementation under the PRGF arrangement and the balance of payments needs for 2004, the staff supports the authorities’ request for an extension of the arrangement to end-June 2004.
VI. Program Monitoring
30. Program execution during the remainder of 2003 will be based on the performance criteria, indicative targets, and structural benchmarks that are detailed in Tables 1 and 2 of the MEFP and defined in the attached technical memorandum of understanding. Two modifications have been made to the original program. First, because of the delay in considering the fifth review under the PRGF arrangement, it is proposed to set performance criteria for end-December 2003 that will serve as the basis for evaluating program implementation in the context of the sixth review under the arrangement. Second, because treasury bills are issued by the government on the financial market, the performance criterion on the variation of net bank credit to the government has been replaced for December 2003 by a performance criterion on net domestic financing, in line with program practices among WAEMU countries. The structural performance criterion on the continuous implementation of the petroleum product pricing system continues to apply, but the structural benchmark at end-December 2003 on the computerization of regional treasury offices will be applied to only two offices, following the conclusions of a stocktaking mission of the authorities in all regional offices. The seventh disbursement under the PRGF arrangement, in an amount equivalent to SDR 8.44 million, will be made available on or after May 1, 2004, subject to end-December 2003 performance criteria and the completion of the sixth review under the PRGF arrangement (scheduled to be completed by May 31, 2004).
VII. Staff Appraisal
31 Despite sociopolitical tensions and external shocks, the authorities have been successful in maintaining the momentum of their structural adjustment program while embarking on the implementation of their Poverty Reduction Strategy. They should be commended for a broadly satisfactory track record of program implementation since December 2000. Despite the adverse external shocks of the crisis in Côte d’Ivoire and several closings of the border with Nigeria, as well as a tense social climate, recent macroeconomic performance has been favorable and looks set to improve for the third straight year. The staff welcomes this positive economic outlook.
32. The authorities have demonstrated their commitment to the program, which was fully on track at end-March 2003, with all performance criteria and indicative targets met. Program implementation at end-June 2003 remained broadly satisfactory, except for the nonobservance of the indicative targets on net bank credit to the government and budgetary revenue. The staff is of the view that the nonobservance of these targets is relatively minor and that appropriate measures have been taken to correct these outcomes.
33. The revised program for 2003 maintains the broad objectives of the original program, namely, the consolidation of the fiscal adjustment process begun in 2000 and the imparting of greater momentum to the Poverty Reduction Strategy. The staff welcomes the tightening of the fiscal stance to address shortfalls in WAEMU revenue transfers and external aid disbursements. However, the staff urges the authorities to monitor closely program implementation, with a view to avoiding budgetary slippages in the period preceding the substantial disbursements of external aid at end-2003. Particular attention should be paid to a coordinated execution of the revised budget and the evolution of nonbank financing, including the variation of domestic payments arrears, in the second half of 2003, as well as a rebuilding of treasury deposits at end-December.
34. Progress in the area of structural reforms has been mixed and impaired by a limited institutional capacity. The authorities are encouraged to give a new momentum to, and achieve the objectives of, the structural reform program for 2003. The further strengthening of debt management should be a priority in the context of reaching the HIPC Initiative completion point. The effective implementation of the public procurement code, the establishment of an operational multisector regulatory agency, and the privatization of SONIDEP are other important objectives to attain by end-2003. The authorities should finalize rapidly a new strategy for the privatization of NIGELEC, in collaboration with the World Bank, and liquidate the Credit du Niger if their efforts to privatize it are not successful soon. Finally, the authorities are also encouraged to develop a technical assistance program with a view to strengthening the institutional capacity.
35. The staff commends the authorities for the finalization of their first progress report on the implementation of the PRSP. In this context, the authorities are urged to continue their satisfactory implementation of the Poverty Reduction Strategy, while correcting the weaknesses identified in the report. They should, in particular, improve the poverty analysis through a household survey, strengthen the monitoring and evaluation system, and revise the medium-term expenditure framework and macroeconomic projections beyond 2005.
36 The staff recommends the completion of the fifth review under the PRGF arrangement and the extension of the arrangement to end-June 2004.
(As of August 31, 2003)
I. Membership Status: Joined: 04/24/1963; Article VIII
II. General Resources Account:
|Fund holdings of currency||57.24||86.99|
|Reserve position in Fund||8.56||13.01|
|Net cumulative allocation||9.41||100.0|
IV. Outstanding Purchases and Loans:
|Enhanced Structural Adjustment Facility (ESAF)|
V. Financial Arrangements:
|Poverty Reduction and Growth Facility (PRGF)||12/22/2000||12/21/2003||59.20||45.68|
VI. Projected Obligations to Fund (SDR Million; based on existing use of resources and present holdings of SDRs; and without HIPC Assistance):
Projected Obligations to Fund (SDR Million; and with Board-approved HIPC Assistance)
VII. Implementation of HIPC Initiative:
|Commitment of HIPC assistance||framework|
|Decision point date1||12/14/00|
|Assistance committed (NPV terms)2||End-1999|
|Total assistance (US$ million)||521.00|
|Of which: Fund assistance (US$ million)||27.80|
|(SDR equivalent in millions)||21.56|
|Completion point date||Floating|
|Delivery of Fund assistance (SDR million)|
|Amount applied against member’s obligations (cumulative)||0.80|
VIII. Safeguards Assessments:
The Central Bank of the West African States (BCEAO) is the common central bank of the west African states, which includes Niger. An on-site safeguards assessment of the BCEAO proposed specific remedies to alleviate vulnerabilities that were identified by staff. Although Fund staff and BCEAO authorities disagreed on the initial modalities of the recommendations, the following specific understandings were subsequently reached regarding the key remedies:
Financial reporting framework. The Fund staff recommended that the BCEAO formally adopt International Accounting Standards (IAS) and publish a complete set of financial statements, including detailed explanatory notes. It was agreed between the BCEAO and Fund staff that the BCEAO will strive to improve its financial and accounting reporting by aligning its practices with those recommended by the IAS, as adopted internationally by other central banks.
Internal controls system. The staff noted that the absence of oversight of the bank’s governance, financial reporting, and internal control practices by an entity external to the management of the BCEAO represented a significant risk. It was agreed between the BCEAO and Fund staff that, after seeking the opinion of the external auditor (commissaire controleur), the BCEAO staff will propose to the BCEAO Board of Directors that it adopt a resolution whereby the external auditor will be required to apprise the Board of Directors, during its annual review and approval of the financial statements, of the state and quality of internal controls within the bank.
Based on the 2002 financial statements, the staff noted that the BCEAO has improved the explanatory notes to the financial statements and further changes are scheduled for the next fiscal year, with a view toward a graduate alignment with IAS accounting to the extent applicable to central banks by 2005. The external auditor has apprised the Board of Directors of the BCEAO of the quality of internal controls in June 2003, and the financial statements for the year 2001 were published on the bank’s website. The staff will continue its follow up on the progress of the BCEAO in implementing the proposed recommendations as part of the ongoing safeguard-monitoring process.
IX. Exchange Arrangements:
Niger is a member of the West African Economic and Monetary Union (WAEMU). The exchange system, common to all members of the WAEMU, is free of restrictions on the making of payments and transfers for current international transactions. The union’s common currency, the CFA franc, is pegged to the French franc. On January 12, 1994, the CFA franc was devalued by 50 percent in foreign currency terms, and the exchange rate was adjusted from CFAF 50 = F 1 to CFAF 100 = F 1. Effective December 31, 1998, the parity was switched to the euro at a rate of CFAF 655.96 = EUR 1. On August 31, 2003, the rate of the CFA franc in SDR terms was SDR 1 = CFAF 826.79.
X. Article IV Consultation:
Niger is on the standard 24-month consultation cycle, and the last Article IV consultation discussions were held in Niamey in November 2001. The staff report (IMF Country Report No. 02/35) was discussed by the Executive Board and the consultation concluded on February 8, 2002.
XI. Technical Assistance:
|Dept.||Type of Assistance||Time of Delivery||Responsibility|
|FAD||Staff||June 2000||Fiscal review of data and improvement of budgetary procedure|
|FAD||Staff||February 2001||Tax and customs administration|
|FAD||Staff||April 2001||Public accounting, public expenditure process, and budget classification|
|FAD||Resident expert||April 2001 to date||Budget preparation, public accounting, and automation of budget execution|
|FAD||Resident expert||June 2001 to date||Assistance for tax and customs administration|
|FAD||Staff||May 2002||Public accounting and fiscal operations table|
|FAD||Staff||January 2003||Multisector statistical mission|
XII. Resident Representative:
The position is vacant.
(As of October 10, 2003)
Partnership in Niger’s development strategy
1. Niger’s poverty reduction strategy paper (PRSP), which was adopted in January 2002, presents a thorough poverty diagnosis and identifies key development challenges. The government reconfirmed the main thrust of the PRSP through a progress report that was validated via a national workshop in July 2003 and will be discussed at the Bank and Fund Boards in late 2003. The PRSP outlines a sound strategy for poverty reduction centered around four strategic pillars: (i) a macroeconomic framework ensuring economic and financial stability while promoting sustained and sustainable economic growth; (ii) the development of productive sectors, especially in rural areas; (iii) the development of basic social services; and (iv) the promotion of good governance and the strengthening of human and institutional capacities. The government has begun using the PRSP to improve coordination of development efforts in the country, including donor-supported activities. To that end, a donors’ forum was held in Niamey on June 7-8, 2003. At this forum, donors reaffirmed their endorsement of the PRSP as a strategic anchor for their assistance, and agreed on a progressive shift from project to program financing, and the need for further coordination and harmonization of policies and procedures. In this regard, the signing of a protocol relating to coordination among all donors supporting the education sector is a positive outcome and a great step forward.
2. The IMF is in the lead in helping Niger maintain macroeconomic stability through a three year Poverty Reduction Growth Facility (PRGF) arrangement approved in December 2000. The PRGF arrangement addresses fiscal imbalances and issues relevant to macroeconomic stability and economic growth. The PRGF arrangement’s structural conditionality has addressed areas related to budgetary and debt management, petroleum pricing, utilization of Initiative for Heavily Indebted Poor Countries (HIPC Initiative) resources, pension reforms, and transparency in public finances (preparation of budget review laws).
3. The Bank leads the policy dialogue on structural reforms relevant to economic growth and poverty reduction, including privatization and regulatory reforms, education, health and rural development. The Bank and Fund share joint responsibility in supporting financial sector and public expenditure reforms. The Bank and the Fund have also jointly assisted the government in the preparation of the PRSP and the first progress report assessing its implementation. They have also been providing assistance to Niger for reaching the completion point under the enhanced HIPC Initiative.
IMF-World Bank collaboration in specific areas
Common objectives and joint support for Niger’s PRSP and HIPC Initiative processes have increased collaboration between Fund and Bank in recent years. The Bank and Fund teams are closely coordinating their policy advice to the authorities and work closely together in the determination of structural conditionality. In general, the Bank leads the policy dialogue on key structural aspects of Niger’s reform program while the Fund is in the lead on policy dialogue on macroeconomic, particularly fiscal elements of the reform (see Table 1).
|Area||Specialized Advice from|
|Specialized Advice from|
|Fiscal policy, debt management, arrears reduction, monetary policy, economic statistics||Arrears reduction, debt management, study on the sources of growth, PRSP macroeconomic framework||Fund: PRGF performance criteria and benchmarks, Bank: PEAC II support for reforms. Jointly: PRSP progress report, HIPC completion point.|
|Budgetary and public expenditure reforms||Preparation of budget laws, computerization of budget management, account closure, tax administration, treasury reform||Framework and steps in budget preparation, budget execution in priority sectors, treasury allocation plan, medium-term expenditure framework (MTEF), account closure and auditing, public expenditure reviews (PERs), procurement code||Fund: PRGF benchmarks, technical assistance (TA) on tax and treasury reforms. Bank: PEAC II support for reforms: budget preparation, program budgets and MTEF (general and in education and health sectors), PER/Country Financial Accountability Assessment (CFAA), Country Procurement Assessment Report (CPAR). PHRD Grant support for budgetary reforms.|
|Civil service reform and privatization||Civil service wage bill, National Retirement Pension Fund||Decentralization, public sector reforms||Fund: Benchmarks on wage bill and Retirement Pension Fund in PRGF.|
Bank: Stocktaking study on fiscal aspects of decentralization, Community Action Program (CAP).
|Social sector reforms/poverty monitoring||Utilization of HIPC resources||Household survey and poverty analysis; reforms in education, health; support for community-driven development (CAP); support to strategy for addressing population growth||Bank: New lending in health and education. PEAC II support for health and education sector reforms. CAP. Analytical and Advisory Activities (AAA) on poverty and social development issues.|
Jointly: PRSP progress report, HIPC completion point
|Privatization and private sector development||Petroleum pricing||Development and implementation of privatization and regulatory reform, financial sector reform||Fund: PRGF performance criteria on petroleum pricing.|
Bank: PEAC II support for privatization and regulatory reforms. Privatization and regulatory reform project, private irrigation project, and financial sector project
|Rural development||Rural development strategy, agricultural export promotion, irrigation||Bank: Project support (water sector, private irrigation, agricultural export promotion); AAA, support for formulation of rural development strategy; PEAC II support for rural development.|
Jointly: PRSP progress report.
Areas in which the Bank leads
4. Privatization and regulatory reform. Privatization and regulatory reforms in Niger, supported by a Bank credit, have experienced delays in recent months, after having gained important momentum in 2000 and 2001. Currently, the Bank is assisting the authorities in the privatization of SONIDEP (petroleum) and NIGELEC (electricity) and in establishing a Multi-Sector Regulatory Agency (ARM). The Bank’s policy dialogue with the government on structural reforms is also being conducted in the context of adjustment operations (Public Expenditure Adjustment Credit I, PEAC I, and the Second Public Expenditure Adjustment Credit, PEAC II, scheduled for Board presentation in late October 2003). The Fund is also a key partner in this policy dialogue and has included elements of the public enterprise reform agenda, such as the continuous implementation of a petroleum pricing system, as structural benchmarks for the PRGF arrangement.
5. Rural development. The Bank is providing support for developing and implementing a comprehensive rural development strategy, which aims at mitigating vulnerability and stimulating income generation, especially in rural areas. A draft rural development strategy has been recently completed. Bank assistance in this sector is provided through two ongoing (Private Irrigation and Agro-Pastoral Export Promotion) and one new (Community Action Program) investment projects. Decreasing the dependence of the vast majority of Niger’s population on rain-fed subsistence agriculture is a key objective of this strategy. Bank support in this area emphasizes the promotion of small-scale irrigated agriculture, livestock, farm and nonfarm income-generating activities and cereal bank construction. In addition, PEAC II contains a measure (prior action) to ensure allocation of an adequate level of budgetary resources to the rural development sector in Niger’s fiscal-year (FY) 04 budget.
6. Social sector reforms. Improvement of access for the poor to social services is one of the strategic pillars in the PRSP. The Bank supports this objective through ongoing and new lending operations, which combine project assistance with program support, as well as analytical work, notably on population, gender, and poverty. There has also been close collaboration between the Bank and the government in the design and implementation of reforms in the education and health sectors, such as the introduction of decentralized recruitment of teachers (“volunteer teachers”) and health workers on a contractual basis. This contractual recruitment program has helped address issues of human resource shortages and supply-side constraints while keeping payroll costs sustainable. PEAC II supports the continuation of the contractual recruitment program. The Bank has also assisted the government in the preparation of a ten-year development plan in the education sector that is based on the PRSP and includes a medium-term expenditure framework for the basic education sector. It has also provided assistance and played a key role in Niger’s eligibility for participation in the Education for All—Fast-Track Initiative. In the health sector, the Bank has worked with the government on the preparation of the Strategic Orientations for Health Sector Development for 2001-11. The PEAC II has a specific measure related to the allocation of adequate budgetary resources to the education and health sectors in Niger’s FY 04 budget.
7. Poverty monitoring. The Bank worked closely with the government in preparing a poverty profile that served as the basis for the PRSP poverty diagnosis. While this diagnosis has been judged as thorough and comprehensive by the joint staff assessment (JSA), it is based on household survey data from 1993. Updating the existing database is therefore an important concern of the government. A nationwide census has been completed recently, and preparations for a new household survey are under way. The Bank, together with other donors, is also advising the authorities on strengthening institutional arrangements for the monitoring and the evaluation of poverty in the context of the PRSP. In addition, the Bank is preparing a poverty assessment, to be completed in FY 04, as a contribution to the government’s efforts to update and strengthen the knowledge base on poverty and social development.
Areas where Bank and Fund share the lead
8. Poverty reduction strategy. Together with other external development partners, the Bank and Fund have jointly provided assistance to the government in the preparation of the PRSP. Since its completion, both institutions have jointly advised the authorities on the refinement and implementation of the strategy. The first progress report on the implementation of the PRSP has been prepared with the assistance of the Bank and the Fund.
9. Debt sustainability. The Bank and Fund are partners in supporting the government’s efforts to reach the HIPC completion point, scheduled for late 2003. The need to build technical and institutional capacity for managing Niger’s external debt has been stressed by the Fund and the Bank. Measures to strengthen the external debt unit have figured as a structural benchmark under the PRGF.
10 Budgetary and public expenditure reforms. Strengthening public finances is a prerequisite for success of Niger’s broader reform agenda. The Bank and Fund share the lead in this area. Both institutions have played key roles in helping the government reduce domestic and external arrears. While the Fund is leading the dialogue on revenue-enhancing measures, the Bank is concentrating its efforts on budgetary reforms, in particular in the area of public expenditure. The Fund is also making key contributions to improving budgetary processes: a number of important measures, such as preparation of budget review laws and computerization of budgetary expenditure, have been included as structural benchmarks in the PRGF arrangement. The Bank has supported budgetary reforms through PEAC I. Consolidation and deepening of these reforms are currently supported by PEAC II. Several measures, such as the issuance of a circular on budget preparation, the establishment of a cash allocation plan, the closing of budgetary accounts, the preparation of bidding documents for the privatization of SONIDEP, and the issuance of circulars on the implementation of the procurement code are up-front actions undertaken by the government in the context of the ongoing PEAC II. In addition, the Bank intends to help strengthen Niger’s fiduciary framework through analytical work on public finance issues, in particular a Public Expenditure Management and Country Financial Accountability Assessment (PER/CFAA) and a Country Procurement Assessment Report (CPAR), both to be completed in FY 04.
11. Financial sector reform. Key elements of the reform agenda in Niger’s financial sector are as follows: (i) restructuring of the banks that remain under government control (the CDN and the CPCT); (ii) restructuring of the Islamic Trade and Investment Bank (BINCI), (iii) restructuring of the National Postal and Savings Office (ONPE), which involves the reorganization of the postal branch and the creation of a financial services affiliate of the Post Office and a National Savings Fund (CNE); (iv) an actuarial audit of the social security fund (CNSS); (v) reform of the insurance sector; and (vi) promotion and supervision of the microfinance sector and reforming of the social security system. The Bank has been playing a lead role in these reforms through its forthcoming financial sector technical assistance credit. This project, and in particular the studies on CDN and CPCT, have been prepared in close consultation with the Fund.
12. Civil service reform and decentralization. The reform and modernization of the civil service is an important element of Niger’s PRSP, yet there has been little progress in this area so far. The authorities are currently making an effort to put in place an integrated civil service database. By allowing a more transparent and effective management of the civil service, this database should improve control over the wage bill. Controlling the wage bill is important for maintaining fiscal balance, as recognized by the PRGF arrangement, which has set quantitative benchmarks for the wage bill. Planning for the implementation of the legal framework for political decentralization of 1996 has recently gained momentum, and local elections are scheduled for late 2003. However, important concerns regarding this reform remain, such as the lack of capacity at the local level and the fiscal implications of decentralization. To help the government address some of these concerns, the Community Action Program will help build capacities in rural communities in planning, implementing, and monitoring microdevelopment projects.
Areas in which the Fund leads
13. Macroeconomic management. The main objectives of Niger’s macroeconomic program, as stated in the PRSP, is to ensure economic and financial stability while promoting sustainable and robust growth. The Fund is supporting this program through its PRGF framework by providing financial and technical assistance, as well as through dialogue on macroeconomic policy reforms. The program has made satisfactory progress since approval of the PRGF arrangement in 2000 by achieving most of its benchmarks and overall positive fiscal performance. In the context of the macroeconomic framework underlying the PRSP, the Bank has provided technical assistance in building capacity in the Ministry of Finance and Economy to monitor economic performance and macroeconomic modeling.
14. Fiscal policy. Fiscal consolidation is a key objective of the PRGF and is supported by a number of performance criteria and benchmarks. Increasing budgetary revenue in order to progressively lower the government’s reliance on external assistance is particularly important, given Niger’s low level of revenues, compared with the region. In terms of expenditures, the Fund is mainly concerned with overall budget envelopes, while the Bank focuses on inter- and intrasectoral allocations, in particular in the key sectors of education, health, and rural development.
15. Monetary policy. The Fund leads the policy dialogue on monetary policy, which is set by the regional monetary authorities (BCEAO). The PRGF arrangement includes quantitative benchmarks for net bank credit to the government.
World Bank Group strategy
16. The Bank’s new Country Assistance Strategy (CAS) for the period 2003 to 2005 was approved by the Bank Board in January 2003. Its main objective is to support the implementation and further refinement of the PRSP. The strategic focus of the CAS is based on the four pillars of Niger’s poverty reduction strategy. The CAS outlines a lending and non lending program that, in line with the Bank’s comparative advantage, will selectively provide assistance in areas relevant to these PRSP priorities.
17. As of September 30, 2003, the World Bank lending portfolio in Niger consisted of eigth IDA operations, with a total commitment of US$245 million, out of which US$187 million was undisbursed. The CAS includes a base-case IDA lending program of US$238 million for FY 03 to FY 05. The Bank’s nonlending program for the CAS period is designed with a view to further assisting Niger in refining its Poverty Reduction Strategy and building capacity for a gradual transition toward programmatic lending.
|Total disbursements (active and closed operations) to date||938.8|
|Operation||Original Principal||Disbursed||Closing Date|
|Health II||40.00||36.09||Dec 2003|
|Privation/Regulatory Reform||18.60||9.22||Dec 2003|
|Agro-Pastoral Export Promotion||10.35||4.94||Oct 2005|
|Water Sector||48.00||6.44||Dec 2006|
|Private Irrigation||38.72||1.96||Dec 2007|
|Community Action Program||35.00||--||June 2007|
|Multisectoral STI/HIV/Aids Support||25.00||--||June 2008|
|Basic Education||30.00||--||Dec 2007|
18. The CAS outlines the Bank’s Analytical and Advisory Activities (AAA) for the coining years. The AAA program will help the government refine the PRSP by designing policy responses to issues raised in the joint staff assessments of the PRSP and PRSP progress report, such as poverty analysis, gender, population growth, and sources of growth. The AAA program also aims at reinforcing public sector capacity in pursuit of the PRSP’s objectives and in preparing Niger for the transition to consolidated programmatic lending. In support of these objectives, sector work on population and rural development is being completed. Others are ongoing, including a Public Expenditure Review/CFAA, a Poverty Analysis (FY 04), and a CPAR (FY 04) or planned, Development Policy Review (FY 05).
19. The Bank is committed to enhancing external partnerships in the framework of the government’s current efforts to mobilize and coordinate donor support for PRSP implementation. Besides the strong partnership with the Fund, the Bank is collaborating with a number of donors in different areas, including the European Union, the African Development Bank (AfDB), the United Nations Development Program (UNDP), and key bilateral donors involved in development issues in Niger.
Prepared by World Bank staff. Questions may be addressed to Ms. Antoinette Sayeh, Country Director for Niger, at 473-4719; or Emmanuel Pinto Moreira, Country Economist for Niger, at 458-1834.
|2000 Article IV consultation and three-year Poverty Reduction and Growth Facility (PRGF) arrangement (2000-03) discussions||July 2000|
|Continuation of 2000 Article IV consultation discussions and finalization of three-year PRGF arrangement and preliminary Initiative for the Heavily Indebted Poor Countries (HIPC Initiative) decision point document||September 2000|
|Executive Board consideration of 2000 Article IV consultation report, request for PRGF arrangement, preliminary and final HIPC Initiative decision point documents, and interim poverty reduction strategy paper (PRSP)||November-December 2000|
|First review mission under the PRGF arrangement||May 2001|
|Finalization of the first review under the PRGF arrangement||June 2001|
|Executive Board consideration of first review under the PRGF arrangement||August 2001|
|Second review mission under the PRGF arrangement, discussion of second year of PRGF arrangement, and 2001 Article IV consultation discussions||November 2001|
|Executive Board consideration of second review under the PRGF arrangement, second year of PRGF arrangement, full PRSP, joint staff assessment, and Article IV consultation for 2001||February 2002|
|Staff visit||March 2002|
|Third review mission under the PRGF arrangement||May 2002|
|Executive Board consideration of third review under the PRGF arrangement.||August 2002|
|Fourth review mission under the PRGF arrangement and discussions of third||November 2002|
|year of PRGF arrangement||February 2003|
|Executive Board consideration of fourth review under the PRGF arrangement and third year of PRGF arrangement||April 2003|
|Staff visit||May 2003|
|Fifth review mission under PRGF arrangement and enhanced HIPC Initiative completion point discussions||June-July 2003|
|Staff visit||November 2003|
|Executive Board consideration of fifth review under the PRGF arrangement, first progress report on the implementation of the PRSP, JSA, and enhanced HIPC Initiative completion point document||November 2003|
|Sixth review mission under the PRGF arrangement and 2004 Article IV consultation discussions||March 2004|
|Executive Board consideration of sixth review under the PRGF arrangement and Article IV consultation for 2004||May 2004|
|Date of latest Observation||Current||June 2003||June 2003||June 2003||June 2003||Aug. 2003||Aug. 2003||Dec. 2002||Dec. 2002||June 2003||Dec. 2002||Dec 2002|
|Date received||Current||Sep. 2003||Sep. 2003||Sep. 2003||Sep. 2003||Sep. 2003||Sep. 2003||June 2003||June 2003||Sep. 2003||June 2003||June 2003|
|Frequency of data||Daily||Monthly||Monthly||Monthly||Monthly||Variable||Monthly||Annually||Annually||Monthly||Annually||Quarterly|
|Frequency of reporting||Monthly||Variable||Variable||Variable||Variable||Variable||Monthly||Variable||Variable||Variable||Variable||Variable|
|Source of update||EIS/FIN 1/||BCEAO 2/||BCEAO 2/||BCEAO 2/||BCEAO 2/||BCEA0 2/||Statistics directorate||BCEA0 2/||BCEA0 2/||Ministry of Finance||Ministry of Finance||Ministry of Finance|
|Mode of reporting||On-line||Staff||Staff||Staff||Staff||Staff||Staff|
|Frequency of Publication||Monthly||Monthly||Monthly||Monthly||Monthly||Monthly||Monthly||Annually||Annually||Monthly||Annually||Annually|
(Translated from French)
Niamey, October 21, 2003
Mr. Horst Köhler
International Monetary Fund
Washington, DC. 20431
Dear Mr. Köhler:
1. On behalf of the government of Niger, I am pleased to send you the memorandum of economic and financial policies (MEFP) prepared in the context of the fifth review of the government of Niger’s three-year program, which is supported by the IMF under the Poverty Reduction and Growth Facility (PRGF). The memorandum describes progress made in the implementation of the 2003 program at end-March 2003, the preliminary results achieved at end-June 2003, and the updated targets for the remainder of this year, as well as the policies to be carried out to achieve these targets.
2. Program implementation at end-March 2003 was satisfactory as a result of the measures introduced in the context of the fourth review of the PRGF arrangement and the government’s firm resolve to follow through with the reforms (see my letter of intent of March 28, 2003). All performance criteria and indicative targets were met as of that date. Performance at end-June 2003 remained largely satisfactory, although the indicative targets relating to budgetary revenue and the net bank credit to government could not be met, owing mainly to the impact of the crisis in Côte d’Ivoire and to delays in external assistance disbursements. The revisions of the 2003 program take these external factors into account, while maintaining the main objectives of the initial program. The government of Niger has also continued to comply with the continuous performance criteria of the program since the completion of the fourth review. Finally, as prior actions to the Fund’s Executive Board consideration of the fifth review of the program, the government completed the measures related to the three structural benchmarks that had not been previously observed at end-June 2003. These measures concerned the strengthening of the foreign debt unit with the installation of a new debt-management software (completed on September 8, 2003), the submission of a study on the remunerations of the petroleum product sector operators (done on August 15, 2003), and the closing of the 2001 budgetary accounts through the issuance, by the Chamber of Accounts and Budgetary Discipline, of a general declaration of compliance of the 2001 Budget Review Law (Loi de règlement) obtained on August 26, 2003.
3. In view of recent economic and financial developments, the good overall macroeconomic performance of 2002 is expected to continue in 2003. Economic activity has been sustained during the first half of 2003, and a good rainy season through September provides ample justification for maintaining the initial projection of 4 percent for the real growth rate of GDP in 2003. Similarly, inflation, on a 12-month, end-of-period basis, will remain largely below the envisaged 2.2 percent limit, owing to its deceleration from 0.6 percent in December 2002 to -2.4 percent in June 2003. Finally, the external current account deficit (excluding official transfers) should be limited to 8.8 percent of GDP, as against an initial estimate of 8.5 percent of GDP.
4. The economic and financial program for 2003 has, nevertheless, been revised to take into account a loss of CFAF 9.4 billion, or 0.6 percent of GDP, in budgeted resources, a loss associated with delays in external budgetary assistance disbursements (CFAF 6 billion) and a shortfall in transfers from the West African Economic and Monetary Union (WAEMU), as a consequence of the Côte d’Ivoire crisis (CFAF 3.4 billion). To address this situation, the budgetary program envisions a tightening of the budgetary policy and a continuation of strict spending restraint, while maintaining the impetus for implementation of the poverty reduction strategy. Moreover, the government will have recourse to the regional financial market and issue treasury bills, which will relieve the government’s difficult cash position, pending major disbursements of external budgetary assistance in the fourth quarter of 2003. Monetary policy will remain prudent and banking supervision vigilant. Finally, the government intends to accelerate implementation of its structural reform program in 2003, particularly in terms of strengthening the financial system and the privatizing of the Nigerien petroleum product company (SONIDEP).
5. The government is counting on the IMF’s continued support to meet its objectives under the program and seeks completion of the fifth review under the PRGF. The government also requests an extension of the current PRGF arrangement from December 21, 2003 to June 30, 2004 to enable Niger to receive the final disbursement envisioned under the PRGF arrangement. To this effect, the government intends to continue pursuing prudent macroeconomic policies in 2004 and has prepared a 2004 Budget Law that aims at consolidating progress in fiscal adjustment and is consistent with the objectives of the Poverty Reduction Strategy. It is understood that the Fund, together with the government of Niger, will conduct the sixth review of the program, to be based on performance under the program at end-December 2003 and completed by May 31, 2004. As in the past, the government consents to the Fund’s publication of this letter of intent, the MEFP, the technical memorandum of understanding, and the staff report. The government believes that the policies set forth in the attached MEFP are adequate to achieve the objectives of its program, and it will take any further measures that may become appropriate for this purpose. Niger will consult with the Fund on the adoption of these measures in advance of revisions to the policies contained in the MEFP and in conformity with the rules of the Fund’s policies on such consultation.
Ali Badjo Gamatié
Minister of Finance and Economy
Attachments: Memorandum of economic and financial policies
Technical memorandum of understanding
APPENDIX V ATTACHMENT I Memorandum of Economic and Financial Policies
(Translated from French)
October 21, 2003
1. The discussions under the fifth review of Niger’s economic and financial program took place in Niamey during July 4-18, 2003. International Monetary Fund (IMF) support for this three-year program under the Poverty Reduction and Growth Facility (PRGF) was approved on December 14, 2000 in an amount equivalent to SDR 59.2 million, of which SDR 45.7 million has been disbursed to date. The program has also taken into account foreign debt-service relief since Niger reached the decision point under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC Initiative) in December 2000. The resources made available under the HIPC Initiative have been earmarked for implementation of the government’s Poverty Reduction Strategy (PRS), which was submitted to the IMF Executive Board in the poverty reduction strategy paper (PRSP) in February 2002.
2. This memorandum of economic and financial policies (MEFP) was prepared in the context of the fifth review under the PRGF arrangement and completes the MEFP of March 28, 2003. It presents a review of the implementation of Niger’s annual program for 2003, which was considered by the IMF Executive Board on April 21, 2003. The memorandum sets out the satisfactory results obtained in the implementation of the program as at March 31 and June 30, 2003, as well as the revised economic and financial policies and reforms the government will pursue through December 2003. Tables 1 and 2 cover the program performance criteria and indicative targets for 2003.
|Date||Status on September 15, 2003|
|Structural performance criterion|
|Continuous implementation of the pricing system for petroleum products adopted on August 1, 2001||2003||Observed.|
|Transmittal to the IMF staff of a draft final budget law for 2001, together with the declaration of conformity established by the Audit Court, and transmittal of the fiscal-year 2001 accounts to the audit court||December 2002||Completed as prior action on August 26, 2003.|
Transmittal of draft final budget law and budgetary accounts for 2001 done on January 29, 2003; declaration of conformity established by the Audit Court on August 26, 2003.
|Strengthening of the external debt service unit through the introduction of a new debt-management and recording software and training of staff||End-June 2003||Completed as prior action on September 8, 2003.|
|Transmittal to the government of a study prepared by an independent consulting firm on the remuneration of the petroleum sector operators||End-June 2003||Completed as prior action on August 15, 2003.|
|Completion of an actuarial audit of the National Retirement Pension Fund||End-September 2003|
|Completion of a financial audit of the wage bill||End-September 2003|
|Preparation of a medium-term expenditure framework for two key social sectors||End-December 2003|
|Computerization of two regional treasury offices for the implementation of the government’s new charter of public accounts||End-December 2003|
3. The memorandum also complements the first progress report on the implementation of the PRS from January 2002 to June 2003, which was finalized and validated by the government at end-July 2003. The progress report stresses the satisfactory implementation of the four pillars of the PRS: (i) a stable macroeconomic framework; (ii) the development of the productive sectors; (iii) improved access by the poor to quality social services; and (iv) the promotion of good governance, the strengthening of human and institutional capacity, and decentralization. It points out, in particular, the good macroeconomic performance of Niger in 2002; the success in the execution of President Tandja’s Special Poverty Reduction Program projects, which are financed by the HIPC Initiative; and the finalization of major sectoral strategies, such as for rural development and health. The report also presents the positive results of the forum organized by the government with Niger’s development partners on June 7-8, 2003 to develop a new partnership and ensure a better coordination of aid to Niger. Finally, the report indicates the priority actions to be undertaken by the government to make up for delays, mainly in the areas of institutional capacity building, analysis of sources of growth, review of government spending, updating of the poverty profile, and finalization of a tracking and evaluation system for the implementation of the PRSP.
II. Implementation of the Program in 2003
A. Economic and Financial Performance at End-March 2003
4. Following a good overall macroeconomic performance in 2002, thanks in part to favorable weather conditions, a good harvest, and satisfactory macroeconomic management, economic developments in early 2003 continued to be encouraging. According to a recent survey of the economy, the industrial sector, especially the energy subsector, registered robust activity in the first months of 2003, due to the extension of electricity and water connections to a number of rural localities under the President’s Special Poverty Reduction Program. The construction and public works (BTP) sector and overall trade activities were also buoyant. Prudent policies by the Central Bank of West African States (BCEAO), the grain surplus at end-2002, and the government’s sale of cereal products at moderate prices in the underproducing zones helped bring down inflation, on a 12-month, end-of-period basis, from 0.6 percent in December 2002 to zero percent in March 2003.
5. The pace of economic recovery of 2002 has been maintained through 2003, despite some domestic social tensions, several closures of the border with Nigeria, and the political crisis in Côte d’Ivoire. The impact of this crisis on economic activity in Niger did not, however, produce the significant negative impact that had been anticipated at end-2002. The migratory flows into Niger and the drop in economic activity were both limited and temporary, thanks to the rapid restoration of peace in Côote d’Ivoire, which led to a restoration of economic and business ties in the subregion, and the opening of new supply and export markets for Niger. However, Côte d’Ivoire’s delay in making its 2003 contributions to the Commission of the West African Economic and Monetary Union (WAEMU) budget will not allow the commission to effect the full amount of planned transfers to Niger in 2003, namely, CFAF 7.4 billion or the equivalent of 0.5 percent of GDP, under the common external tariff compensation arrangements.
6. Against this overall positive economic environment in early 2003, the government has continued its satisfactory performance in implementing the PRGF-supported program (Tables 1 and 2). All performance criteria and indicative targets at end-March 2003 were met. With regards to public finances, the basic fiscal deficit was brought down to CFAF 1.7 billion, compared with a ceiling of CFAF 7.4 billion in the program. The improvement in the basic budget deficit is the result of strict control on spending (excluding foreign-financed projects), which was kept at CFAF 39.8 billion, compared with the programmed CFAF 44.3 billion. This strict control on spending demonstrates the government’s resolve to keep the program on track and to avoid budgetary slippages in a context of delays in the envisaged disbursements of external aid. Bank financing at end-March 2003 was also kept within the program ceilings, despite a larger reduction in domestic payments arrears.
7 Budget execution in the first quarter was disrupted by the dispute as to whether the 2003 Budget Law and the amendment by decree of the Organic Law of end-2002 regulating public finances were in conformity with the Constitution. This amendment of the Organic Law aimed at taking into account the new budget nomenclature and charter of public accounts, while ratifying the merging of the capital budget with the recurrent budget. The fact that no budgetary appropriations could be released during the debate caused the government to resort to the special procedure of payments without prior commitments (called PSOPs) to effect spending. This procedure made the government operate essentially on the basis of cash transactions during the first quarter, thereby generating suspense accounts, that are temporary treasury accounts, which, in turn, required subsequent budgetary regularization.
8. Although the PSOPs were the only practical solution to keep the government running until a decision was handed down by the Constitutional Court, the government was aware that such payments did not fulfill its objectives of fiscal transparency and orthodox management of public finances. Following the Constitutional Court’s decisions, the government had the National Assembly adopt the Organic Law on Public Finance on April 1, 2003 before appropriations were made under the 2003 Budget Law. It also restored normal budget execution procedures and properly posted the PSOPs that were effected in early 2003.
9. During the first quarter of 2003, broad money rose by 2.4 percent, with an increase in net domestic assets of 7.4 percent and a drop in the net foreign assets of the banking system of 5.0 percent as a percent of beginning-of-period broad money The increase in domestic credit reflects essentially the evolution of the net government position within the banking system. Net credit to the government increased to CFAF 9.1 billion under the program ceiling, following the drawing of deposits set up at the BCEAO and the repurchase of CFAF 1.5 billion of government securities from a bank in Burkina Faso. The net foreign assets of the central bank fell by almost CFAF 14.8 billion, or about 10.9 percent of beginning-of-period broad money, while the net external position of the commercial banks rose by CFAF 8 billion as a result of the receipt of funds on behalf of foreign economic operators recently established in Niger. The decline in the foreign assets of the central bank was mainly due to the negative net external financing of the budget during the first half of the year and payments for imports at the request of commercial banks.
B. Economic and Financial Performance at End-June 2003
10 Economic activity was sustained during the first half of the year, and inflation, on a 12-month, end-of-period basis, fell further to -2.4 percent at end-June 2003. The good economic performance was realized against a backdrop of continuing sociopolitical tensions. The government continued the dialogue with social partners and partially reduced the social tensions by clearing one month of salary arrears to civil servants in May 2003. The budgetary constraint was further tightened by the delay in external aid disbursements. Nevertheless, the government reimbursed CFAF 8.5 million in external payments arrears to the European Investment Bank in June 2003, with the payment of the penalties and late interest settled at end-July 2003. The government has undertaken to honor all of its external financial commitments in an effort to ensure achievement of all the objectives of the program.
11. Based on preliminary information, six of the eight quantitative indicative targets for end-June 2003 were met. Only the indicative targets on budgetary revenue and the net government position within the banking system were not met. Also three structural benchmarks were not observed at end-June 2003; the measures related to these benchmarks were, however, completed by September 8, 2003, as the prior actions for the consideration of the fifth review under the arrangement by the IMF Executive Board.
Strengthening the debt directorate by installing a new external debt-management software. A technical assistance mission from Pole-Dette and the Bank of Central African States (BEAC) visited Niamey from August 25 to September 8, 2003 to install the new debt-management and recording software from the Commonwealth Secretariat, supplied by the Agence Intergouvernementale de la Francophonie. The government also envisages the reinforcement of debt services and the transfer of the management of the debt to the national treasury.
Transmission of the treasury’s operating accounts for 2001 to the Chamber of Accounts and Budgetary Discipline and preparation of a draft 2001 Budget Review Law (Loi de réglement), together with its certificate of conformity. A draft Budget Review Law was approved by the Council of Ministers on June 18, 2003 and transmitted on July 10, 2003 to the Audit Office, which drew up the certificate of conformity on August 26, 2003.
Transmission to the government of a study undertaken by an independent consultancy firm on the remunerations of operators in the petroleum product sector, which are factored into the formula for determining petroleum product prices. The consultancy firm Sidibé and Associates was selected to undertake the study and it submitted on August 15, 2003 its report to the government for comments, after having discussed the document with concerned stakeholders.
12. Provisional budget execution figures at June 30, 2003 indicate that the government managed to limit the basic budget deficit to CFAF 14.3 billion, compared with a projected target of CFAF 15.7 billion. This result reflects the strict control and compression of expenditure to offset lower-than-expected revenue and delays in foreign aid disbursements. A CFAF 4.3 billion shortfall in fiscal revenue resulted from a shortfall in projected transfers from WAEMU, several strikes by tax administration staff, and lags in enacting certain tax measures, such as the fee charged for tobacco reexport licenses. These losses were more than offset by restrictions on expenditure, which held basic expenditure to CFAF 90.1 billion, compared with planned outlays of CFAF 95.9 billion. Execution of the foreign-financed investment program was also weaker than expected, resulting in an overall (payment-order basis) deficit of CFAF 50.1 billion, compared with a CFAF 59.5 billion program ceiling.
13. Despite the improvement in the basic deficit and additional savings resulting from the deferment of expenditure associated with the reform of public enterprises (CFAF 1 billion), the nonadjusted indicative ceiling on the government’s net position vis-à-vis the banking sector was exceeded by CFAF 15.1 billion. This was the result of a CFAF 9.6 billion shortfall in (nonproject) net foreign financing, the CFAF 3.9 billion overshooting of the target for reducing domestic payment arrears; and an unscheduled reduction in nonbank domestic debt of CFAF 3 billion, principally due to movements on correspondent bank and third-party accounts. Even after taking into account the projected adjustment factor for shortfalls in net foreign financing (capped at CFAF 7.5 billion at end-June 2003), the indicative target for net bank credit to the government was still exceeded by CFAF 7.6 billion. This overshooting of the bank financing target adjusted for the shortfall in foreign assistance is not the result of any slippage in fiscal operations in relation to revenue and expenditure, but rather the product of a reduction in government debt to the nonbank sector. Nevertheless, the government remains wary of the increase in its overall indebtedness to banks. It has embarked on a study of nonbank domestic borrowing trends, with a view to exercising greater control over them, and it has decided to keep closer tabs on changes in domestic payments arrears, while maintaining tight control over expenditure in order to prevent possible fiscal slippages in the period ahead.
14. Provisional monetary figures at June 30, 2003 show a decline of approximately 5.9 percent in broad money since the beginning of the year. There was a drop in net foreign assets of the banking system, equivalent to 26 percent of end-2002 broad money, and a 20 percent increase in net domestic assets associated with the increase in the government’s net position. The shortfall in net foreign financing of the budget and a high level of commercial transactions with the rest of the world explain the decline in net foreign assets. With respect to monetary policy, on July 7, 2003, the BCEAO revised its discount and repurchase rates downward, from 6.5 percent to 5.5 percent and from 6 percent to 5 percent, respectively. The reasons for this decision were the following: (i) the downward trend in central bank lead rates internationally, (ii) the economic situation within the WAEMU, whose economic growth rate in 2003 was reduced to 1.9 percent from an initial projection of 3 percent; and (iii) a low inflation rate.
C. Structural Reform in the First Half of 2003
15. Largely as a result of limited institutional capacity, there was no significant progress in the area of structural reforms during the first half of 2003, With respect to budgetary reform, efforts were focused on the effective application of the new budget nomenclature and the government charter of accounts. The ownership of these tools will be consolidated by continued training and by making the information technology available to the units concerned. However, the implementation of the new government procurement code through the preparation and adoption of the necessary regulations was delayed, mainly as a result of limited institutional capacity and difficulties in obtaining technical assistance in that area. At the same time, some progress was made in establishing the Multisectoral Regulatory Agency (ARM), with the initiation of the recruitment of the sectoral managers on July 14, 2003.
16. The privatization of the state-owned power company, NIGELEC, was hindered by an unfavorable international environment and the questioning of the adopted strategy by the two potential investors, who indicated, in particular, that they did not wish to fully finance the investment program associated with the privatization (US$ 100 million for restoring and expanding the network). The second launching of prequalification announcements in November 2002 permitted the two operators to register their demands, previously expressed in April 2002. The interministerial committee responsible for monitoring the privatization has begun talks with the World Bank on a new privatization scheme involving the two candidates. The draft decree on implementation of the electricity code was finalized by the Ministry of Mining and Energy.
17 Regarding SONIDEP, the government monopoly for petroleum product imports and distribution, the proposed privatization strategy transfers 51 percent of the capital, in batches, to the highest bidder in a field of professional, national, and international candidates An advertisement for expressions of interest was published on July 21, 2003. The bidding package has been finalized and made available to interested operators on October 20, 2003.
18 The following achievements were registered in the financial sector reform:
With respect to the privatization of Credit du Niger (CDN), the government has initiated talks with potential private shareholders, and a proposal regarding this transaction will be prepared and submitted for the Banking Commission’s approval.
A memorandum of understanding on the financial restructuring of the Banque International du Niger pour le Commerce et l’Industrie (BINCI) was signed in April 2003 by the shareholders and has entered the first phase of implementation. The Dar Al Maal Al Islami (DMI) has already paid US$2.5 million into the BINCI account and used its claims in its partner current account with BINCI to offset previous losses, estimated at CFAF 998 million. The Islamic Development Bank (IsDB), for its part, opened a line of credit of US$5 million to be used for oil imports and envisaged a second line of credit intended for imports of essential goods. Finally, regarding the government’s contribution, the frozen deposits of public agencies and companies (offices et societés d’économie mixte) were earmarked for offsetting prior losses, and a contribution of CFAF 300 million will be made in the form of an allocation of a plot of land to the BINCI. In addition to the second line of credit, the IsDB envisages financing the computerization of the BINCI.
The restructuring of the National Postal and Savings Office (ONPE), including the establishment of subsidiaries of its postal and financial services, is continuing. The study on restructuring the postal sector conducted by SOFREPOST started on February 10, 2003 and will last 12 months. By June 17, 2003, 8 of the 12 progress reports included in the study had been prepared. The preparation of the report on the creation of the financial services subsidiary spearheaded by TECSULT started on March 10, 2003, and will last nine months. Of the eight progress reports prepared, two provisional reports were submitted by June 17, 2003.
The audits of micro finance institutions began on April 15, 2003, and the firms in charge of auditing the eight autonomous funds and the 43 funds in the Micro Business Project Network, supervised by the German Technical Cooperation (GTZ), submitted their progress reports on June 10, 2003.
The terms of reference of the actuarial study on the National Social Security Fund (CNSS) were prepared, but the signing of the contract with the International Labor Organization (ILO), which will be in charge of the study, is pending.
III. Revised Program for 2003
A. Macro economic Framework
19. In view of the economic trends and good rainfall recorded to date, the 4 percent economic growth targeted for 2003 in the initial program has been retained and may even be exceeded. The 2003 rainy season started off very well, with early and sustained rainfall above the normal level since June, The rainfall index is moving from normal to above normal in most of the agricultural areas. At end-June 2003, 48 percent of the regions had already sown their crops, which usually occurs around end-July, and no pest outbreak was reported. The recovery of the rural sector will also benefit from a greater resort to irrigated crops, as envisaged in the PRS. This will permit, along with developments in the construction and public works sector, sustained growth in the rest of the economy, such as in commerce and transport. Inflation should remain well below the 2.2 percent ceiling of the initial program and be kept at 0.4 percent on a year-on-year basis. The GDP deflator has also been revised downward, limiting the growth in nominal GDP to 4.9 percent, compared with the 6.6 percent level envisaged in the initial program. Finally, the current account deficit of the balance of payments (excluding grants) has been revised slightly upwards to 8.8 percent of the revised GDP in 2003.
B. Fiscal Policy
20. The budget program has had to be revised to take into account the following factors: (i) a CFAF 6.0 billion shortfall, equivalent to 0.4 percent of GDP in projected budget support disbursements in 2003; (ii) significant delays in the disbursement of part of this external assistance, which will not materialize until the fourth quarter; and (iii) a likely shortfall of CFAF 3.4 billion in WAEMU compensatory transfers (reversements compensatoires). The external assistance shortfall partly reflects appreciation of the CFA franc vis-à-vis the SDR and the U.S. dollar, but it is mainly the result of the deferment of CFAF 8.9 billion in European Union (EU) assistance. Only the fixed tranche corresponding to the first year of the EU’s new three-year assistance program for Niger will actually be disbursed in 2003. The variable portion is due to be disbursed in 2004.
21. The government of Niger has decided to address these shortfalls by tightening fiscal policy. They will keep the basic deficit down to CFAF 31.9 billion, or 2.0 percent of GDP, compared with CFAF 34.4 billion in the initial program. This outcome will be accomplished by freezing nonpriority expenditure (except for externally financed projects) in the amount of CFAF 4.8 billion and by saving approximately CFAF 1.1 billion in interest on the foreign debt on account of appreciation of the CFA franc. On the revenue side, the target has been lowered to CFAF 167.8 billion, reflecting the loss of WAEMU revenue. This new revenue target remains somewhat ambitious, given the lags that have already occurred and the delays in budget execution. Nevertheless, tax administration has been strengthened, and the government will ensure that all the tax measures contained in the 2003 Budget Law are implemented. In view of the outcome of the first half of 2003, the execution of the externally financed investment program was revised downward, nonetheless, an 11 percent increase in investment spending is expected for the year.
22 While a tighter fiscal stance will limit the domestic financing requirement, it will have to be complemented by financial operations to ensure that the state budget is financed in the period prior to the actual disbursement of external assistance in the last quarter of 2003. Taking into account the CFAF 2.5 billion improvement in the fiscal basic balance, and additional savings from debt-servicing operations of approximately CFAF 2.1 billion, the additional domestic financing needed to offset the external assistance shortfall has been limited to CFAF 1.4 billion, resulting in a total amount of domestic financing of CFAF 3.6 billion for 2003, compared with the CFAF 2.2 billion envisaged in the initial program. However, because of the late disbursement of external assistance in the last quarter of 2003, budget execution will require substantial domestic financing in the interim. Given that the government’s deposits in the banking system are insufficient to cover this bridge financing requirement, and that the government does not intend to finance its program by accumulating domestic arrears, it has negotiated a postponement to January 2004 of the implementation of the agreement to refund part of the statutory advances due to the BCEAO (a reduction of CFAF 5.9 billion in the financing requirement). Furthermore, the government intends to tap the regional financial market and issue treasury bills, initially for CFAF 5 billion.
C. Monetary and Financial Sector Issues
23. Assuming that Niger’s commercial banks underwrite all the treasury bills issued and that disbursements of external assistance replenish government deposits (thereby restoring their end-2002 level), the government’s net position in the banking system would amount to CFAF 59.2 billion, compared with an initial projection of CFAF 55.9 billion. As a percentage of broad money at the beginning of the year, net domestic assets of the banking system would increase by 12.2 percent in 2003. Factoring in a buildup of net foreign assets at the end of the year as a result of external assistance disbursements, the money supply would increase by 13.7 percent in the year. While this growth of broad money is higher than the 8.7 percent initially anticipated, the actual level of broad money at end-2003 will be lower than that initially targeted because of revised end-2002 monetary data, which show a 0.4 percent fall in broad money in 2002, whereas the initial program is based on an increase in broad money of 9 percent in 2002. Thus, the projected expansion of broad money in 2003 is still compatible with the monetary policy targets of the BCEAO which are geared to consolidating the WAEMU’s external reserves and keeping inflation at a level compatible with that of the anchor currency.
D. External Debt and the HIPC Initiative
24. The government will continue its prudent foreign borrowing policy. To that end, it has filed a request for an African Solidarity Fund subsidy (requête de bonification) to increase to 50 percent the grant element of the (not yet disbursed) US$10 million OPEC Fund loan for the reform of higher education.
25 Debt-service management will be further bolstered, between now and end-2003, by the introduction of new administrative arrangements in the treasury and supplementary training in the use of new software. The effectiveness of this tool will be enhanced by its integration into the public expenditure and accounting system.
26. With a view to reaching the completion point under the HIPC Initiative as soon as possible, the government has completed its work, with IMF and World Bank staff, on reconciliation of the foreign debt at end-1999 and end-2002. This work did not result in any change in the estimate of the total stock of external debt outstanding at end-1999. For end-2002, the stock of external debt is estimated at US$1.8 billion in nominal terms, equivalent to 76 percent of GDP. The net present value of this debt is US$1.2 billion, which, with relief under the HIPC Initiative, can be lowered to US$595 million, equal to 206 percent of exports, a level slightly higher than the decision point estimates. Work on the debt sustainability analysis is being completed.
27. In addition, nine of the thirteen conditions needed to reach the completion point were met, and progress is being made on the remaining four conditions: the carrying out of a study on the impact of health spending on the poor; the completion of a plan for supplying local health centers with medicines; an analysis of the barriers to school enrollment; and the lowering of the repetition rates in the second grade from 37 percent in 1999/2000 to 15 percent. The government has taken measures aimed at accelerating the observance of the remaining four conditions and justifying its request for waivers to reach the completion point. In particular, the terms of reference of a beneficiary incidence study of health spending have been finalized; the consolidation of recent studies on barriers to education is being undertaken; a review of the policy on medicine distribution has been initiated; and the repetition rate at the end of primary schooling will be progressively lowered, thanks to a better management of the education system and school enrollment before the last year of the primary school cycle.
28 Within the HIPC Initiative, the amount of debt relief already obtained from creditors was approximately 80 percent of the total debt relief, in net present value terms, at end-December 2002. During the first half of 2003, no new debt relief agreements were signed. The government continues to approach the Economic Community of West African States (ECOWAS) Fund and the Conseil de l’Entente to secure their participation and contribution to the HIPC Initiative. Also, it continues to pursue contacts with the bilateral creditors who are not members of the Paris Club, in some cases to finalize the HIPC Initiative agreements (Algeria and China) and in other cases to obtain their effective participation (Saudi Arabia, United Arab Emirates, Iraq, Libya, and Taiwan Province of China). Three Paris Club creditors (France, the United Kingdom, and the United States) have decided to grant debt relief beyond their required contribution under the HIPC Initiative, canceling the remaining debt service due after the application of the flow under Cologne terms.
E. Structural Reforms
29. The government will adopt the measures needed to attain the objectives of the structural reforms program for 2003, with the exception of privatization of the state-owned power company, NIGELEC, for which a new strategy is required. Thus, for the remainder of 2003, the program will focus on (i) continuation of budget-related administrative reforms; (ii) privatization of SONIDEP; and (iii) strengthening of the financial system, especially by privatizing CDN and restructuring the ONPE. Furthermore, the ARM should become operational by end-2003, with technical support from SNC Lavalin Consultants.
IV. Program Monitoring
30. Program implementation for 2003 will continue to be monitored using the quantitative performance criteria, quantitative indicative targets, and structural performance criteria and benchmarks specified in Tables 1 and 2 and defined in the attached technical memorandum of understanding (TMU). Given the expected recourse to the regional financial market, the performance criteria on the net bank credit to government have been replaced by a performance criterion on net domestic financing. The government of Niger will continue to comply with the statistical reporting requirements set out in the TMU.
APPENDIX V ATTACHMENT II Technical Memorandum of Understanding
(Translated from French)
INTERNATIONAL MONETARY FUND
Niamey, October 21, 2003
1. This technical memorandum of understanding provides the definitions of the quantitative performance criteria and indicative targets for the third year of Niger’s program under the Poverty Reduction and Growth Facility (PRGF) arrangement. The quantitative performance criteria and indicative targets for March, June, September, and December 2003 are set out in Table 1 attached to the government’s memorandum of economic and financial policies (MEFP) dated October 21, 2003. This technical memorandum also sets out the data-reporting requirements for monitoring the program.
I. Definition of Terms
2. For the purpose of this technical memorandum, the following definitions of “debt,” “government,” “payments arrears,” and “government obligations” will be used:
(a) As specified in point 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted by the Executive Board of the IMF on August 24, 2000, debt will be understood to mean a current, that is, not contingent, liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take a number of forms, the primary ones being as follows: (i) loans, that is, advances of money to the obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans, and buyers’ credits) and temporary exchanges of assets that are equivalent to fully collateralized loans, under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements); (ii) suppliers’ credits, that is, contracts where the supplier permits the obligor to defer payments until some time after the date on which the goods are delivered or services are provided; and (iii) leases, that is, arrangements under which property is provided that the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of the guideline, the debt is the present value (at the inception of the lease) of all tease payments expected to be made during the period of the agreement, excluding those payments that cover the operation, repair, or maintenance of the property. Under the definition of debt set out above, arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt. The external debt excludes treasury bills and bonds issued in CFA francs on the regional financial market of the West African Economic and Monetary Union (WAEMU).
(b) Government refers to the central government of the Republic of Niger; it does not include any political subdivision, the central bank, or any government-owned entity with a separate legal personality.
(c) External payments arrears are external payments due but not paid. Domestic payments arrears are domestic payments due (following the expiration of a 60-day grace period, excluding obligations with a specific grace period and for which this grace period applies) but not paid.
(d) Government obligation is any financial obligation of the government verified as such by the government (including any government debt).
II. Quantitative Performance Criteria
A. Net Domestic Financing of the Government
Definition of the performance criterion
3. For December 2003, the quantitative performance criterion on net bank credit to the government will be replaced by a performance criterion on net domestic financing of the government, defined as the sum of (i) net bank credit to the government, as defined below; (ii) net nonbank domestic financing of the government, including the proceeds from the sale of government assets net of the cost of structural reforms to which these proceeds are earmarked, and (iii) for the purpose of the performance criterion, government treasury bills and bonds issued in CFA francs on the regional financial market of the WAEMU.
4. Net bank credit to the government is defined as the balance of the government’s claims and debts vis-à-vis national banking institutions. Government claims include the cash holdings of the Nigerien Treasury, deposits with the central bank, deposits with commercial banks, and secured obligations. Government debt to the banking system includes funding from the central bank (essentially IMF assistance and refinancing of secured obligations), government securities held by the central bank, funding from commercial banks (including government securities held by commercial banks), and deposits with the postal checking system. Government securities held outside the Nigerien banking system are not included in the net bank credit to the government.
5. The scope of the net bank credit to the government as defined by the BCEAO includes all central government administrations. The targets are based on the variation of stock in net bank credit to the government from December 31, 2002 to the date considered for the performance criterion or indicative target.
6. The net bank credit to the government and the net amounts of government treasury bills and bonds issued in CFA francs on the regional financial market of the WAEMU are calculated by the BCEAO, and nonbank financing is calculated by the Nigerien Treasury, whose figures are those deemed valid within the context of the program.
7. The ceiling on net domestic financing of the government will be subject to adjustment if disbursements of external budgetary assistance (excluding IMF financing and the assistance to be provided under the Initiative for Heavily Indebted Poor Countries (HIPC Initiative), but including traditional debt relief), net of debt-service obligations (excluding IMF repayment obligations) and payments of external arrears, exceed or fall short of program forecasts. In the event of disbursements in excess of more than CFAF 3.0 billion, the ceiling will be adjusted downward pro tanto by the amount of the excess disbursements beyond the CFAF 30 billion, unless they are used to absorb domestic payments arrears. In contrast, if at the end of each quarter disbursements are less than the programmed amounts, the ceiling will be raised pro tanto by the amount of the shortfalls up to the limit (on a noncumulative basis) of CFAF 7.5 billion at end-March and end-June 2003, CFAF 15.0 billion at end-September 2003, and CFAF 7.0 billion at end-December 2003. The amount of external assistance provided is calculated from end-December 2002 onward.
8. If HIPC Initiative assistance is granted to Niger, the debt-service savings will be transferred to a central bank account and used to finance new poverty reduction programs that have been approved in the budget law and are in line with the poverty reduction strategy paper (PRSP).
9. Detailed data on domestic financing to government will be provided monthly within six weeks following the end of each month.
B. Basic Budget Balance
10. The basic budget balance is defined as the difference between total revenue, excluding grants and revenue from the settlement of reciprocal debts between the government and enterprises, and total expenditure, excluding externally financed capital expenditures (including investment expenditures financed by resources freed up as a result of the HIPC Initiative assistance). The performance criterion and indicative targets are based on the cumulative basic budget balance since end-December 2002.
11. This information will be provided to the IMF monthly within six weeks following the end of each month.
12. If the amount of external assistance is larger than scheduled in the revised program, the performance criterion and indicative targets will be adjusted pro tanto up to CFAP 3.0 billion.
C. Reduction of Domestic Payments Arrears on Government Obligations
Definition of the performance criterion
13. Domestic payments arrears on government obligations are reduced through the payment of these obligations as defined under paragraphs 2c and 2d above. The government undertakes not to accumulate any new domestic payments arrears on government obligations, except for arrears on obligations other than government debt, in which case the government undertakes not to accumulate arrears beyond six months. The Centre d’Amortissement de la Dette Intérieure de l’Etat (CADIE – the government domestic debt-amortization center) keeps and updates the inventory of domestic payments arrears on government obligations and maintains records of their repayments.
14. Data on the outstanding balance, accumulation, and repayment of domestic payments arrears on government obligations will be provided monthly within six weeks following the end of each month.
D. Nonaccumulation of External Payments Arrears
Definition of the performance criterion
15. Government debt is outstanding debt owed or guaranteed by the government. Under the program, the government undertakes not to accumulate external payments arrears on government debt (including treasury bills and bonds issued in CFA francs on the WAEMU regional financial market), with the exception of external payments arrears arising from government debt being renegotiated with creditors, including Paris Club creditors.
16. In addition, the government undertakes to attempt in good faith and without delay to sign agreements that would confirm the preliminary understandings reached on the settlement of its external payments arrears before the consideration by the Executive Board of the IMF, on December 14, 2000, of the government’s request for a new three-year arrangement under the PRGF.
17. Data on the outstanding balance, accumulation, and repayment of external payments arrears will be provided monthly within four weeks following the end of each month.
E. External Nonconcessional Loans Contracted or Guaranteed by the Government of Niger
Definition of the performance criterion
18. The government will not contract or guarantee external debt with original maturity of one year or more with a grant element of less than 50 percent. Nonconcessional external debt is defined as all debt with a concessionality level of less than 50 percent. To calculate the level of concessionality for loans with a maturity of at least 15 years, the discount rate to be used is the ten-year average commercial interest reference rate (CIRR), calculated by the IMF on the basis of the rates published by the OECD; for loans of less than 15 years, the six-month average CIRR is to be used.
19. This performance criterion applies not only to debt as defined in point 9 of the Guidelines on Performance Criteria with Respect to Foreign Dept adopted on August 24, 2000, but also to commitments contracted or guaranteed for which value has not been received. However, this performance criterion does not apply to financing provided by the Fund, to debt rescheduling in the form of new loans, and to treasury notes and bonds issued in CFA francs on the WAEMU regional financial market.
20. Details on any external government debt will be provided monthly within four weeks following the end of each month. The same requirement applies to guarantees extended by the central government.
F. Short-Term External Debt of the Central Government
Definition of the performance criterion
21. The government will not contract or guarantee external debt with original maturity of less than one year. This performance criterion applies not only to debt as defined in point 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted on August 24, 2000, but also to commitments contracted or guaranteed for which value has not been received. Excluded from this performance criterion are short-term, import-related trade credits and short-term treasury notes issued in CFA francs on the regional financial market.
22. Details on any external government debt will be provided monthly within four weeks following the end of each month. The same requirement applies to guarantees extended by the central government.
III. Indicative Targets
23. Total revenue is an indicative target for the program. It includes tax, nontax, and special accounts revenue, but excludes revenue from the settlement of reciprocal debts between the government and enterprises.
24. The civil service wage bill is another indicative target of the program. Wage bill data are provided by the budgetary accounts and exclude the salaries paid for the reinstatement of former rebellion members, the medical and training indemnities, the contributions from the budget to the national retirement fund, and the wage refunds. The wage bill includes cash vouchers.
B. Reporting Requirement
25. This information will be provided to the IMF monthly within six weeks following the end of each month.
IV. Additional Information for Program-monitoring Purposes
A. Public Finances
26. The government will report to IMF staff the following:
detailed monthly estimates of revenue and expenditure, including social expenditure and the payment of domestic and external arrears;
complete monthly data on domestic budgetary financing, to be provided monthly within six weeks following the end of each month;
quarterly data on implementation of the public investment program, including details on financing sources, to be provided quarterly within eight weeks following the end of each quarter; and
monthly data on debt service, to be provided within four weeks following the end of each month.
B. Monetary Sector
27. The government will provide the following information within eight weeks following the end of each month:
the consolidated balance sheet of monetary institutions and, as appropriate, the balance sheets of selected individual banks;
the monetary survey, eight weeks after the end of each month, for provisional data;
borrowing and lending interest rates; and
customary banking supervision indicators for bank and nonbank financial institutions (as needed, indicators for individual institutions may also be provided).
C. Balance of Payments
28. The government will provide the following information:
any revision to balance of payments data (including services, private transfers, official transfers, and capital transactions) whenever they occur; and
preliminary annual balance of payments data, within six months following the end of the year concerned.
D. Real Sector
29. The government will provide the following information:
disaggregated monthly consumer price indices, monthly within two weeks following the end of each month,
preliminary national accounts, no later than six months after the end of the year; and
any revision in the national accounts.
E. Structural Reforms and Other Data
30. The government will provide the following information:
any study or official report on Niger’s economy, within two weeks following its publication; and
any decision, order, law, decree, ordinance, or circular with economic or financial implications, upon its publication or, at the latest, when it enters into force.
F. Summary of Main Data Requirements
|Type of Data||Tables||Frequency||Reporting Lag|
|Real sector||National accounts||Annual||Six months|
|Revisions of national accounts||Irregular||Eight weeks following revision|
|Consumer price indexes, disaggregated||Monthly||End of month + two weeks|
|Public finances||Net government position in the banking sector||Monthly||End of month + six weeks|
|Table of indicators, including breakdown of revenue, expenditure, and repayment of domestic wage and nonwage arrears||Monthly||End of month + six weeks|
|Provisional table of government operations (TOFE)||Monthly||End of month + six weeks|
|Investment expenditure execution||Quarterly||End of quarter + eight weeks|
|Petroleum product pricing formula, tax receipts, and pricing differentials||Monthly||End of month + four weeks|
|Monetary and financial data||Monetary survey||Monthly||End of month + six weeks for provisional data, and + ten weeks for final data|
|Consolidated balance sheet of monetary institutions and, as appropriate, balance sheets of certain individual banks||Monthly||End of month + eight weeks|
|Borrowing and lending interest rates||Monthly||End of month + eight weeks|
|Banking supervision ratios||Quarterly||End of quarter + eight weeks|
|Balance of payments||Balance of payments||Annual||Six months|
|Revised balance of payments data||Irregular||When revisions occur|
|External debt||Outstanding external payments arrears and repayments||Monthly||End of month + four weeks|
|Terms of new external loans||End of month + four weeks|
The basic budget balance is defined as the overall balance, excluding foreign-financed investment expenditure.
The stock of pending bills, which at end-2002 was larger than previously estimated, was settled in early 2003.
Net bank credit to the government at end-June 2003 includes the repurchase by the Central Bank of West African States (BCEAO) of CFAF 1.5 billion of government securities from a Burkina Faso bank. These securities result from the transfer to the government on July 1, 1994 of CFAF 25.9 billion in liabilities of two liquidated Nigerian banks. As of July 1, 2003, the remaining stock of these securities amounted to CFAF 6.3 billion, of which CFAF 3.3 billion was held in the WAEMU outside Niger.
The government did not execute a monthly budget based on one-twelfth of the last voted budget appropriations, mainly because the 2003 budget was cast in the new budget nomenclature and using 2002 year allocations set in the old nomenclature would have created difficulties in regularizing spending.
Indirect taxes on government purchases are withheld on payments at the source and recorded as revenue.
All arrears to the EIB refer to end-1999 amounts due but not paid and do not constitute a breach of the program’s continuous performance criterion on the nonaccumulation of external payments arrears. Their clearance had been under discussion with the EU and the EIB since the Board approval of the PRGF arrangement in December 2000. Based on understandings reached with the EU and EIB, and pending further discussions that took place in early 2003 on the treatment of penalty interest, the government froze in an account of the Central Bank of West African States (BCEAO) CFAF 8.5 billion from an EU grant disbursed in late 2002 for the settlement of these arrears. Timing issues and a reduction of the related disbursement from CFAF 6.4 billion to CFAF 4.1 billion of additional EU financing played a role in the authorities’ decision to postpone the clearance of these arrears to 2003.
The World Bank, the AfDB, and the European Union have already defined their level of budgetary assistance to Niger for 2004.
Compared with the original program presented in EBS/03/39, money growth will be much higher, but its level at end-2003 will be lower (CFAF 155.1, billion, as against CFAF 162.3 billion) as a result of the large downward revision of broad money and net foreign assets data at end-2002.
Based on the government’s commitment not to draw on this loan until its terms are brought in line with the program requirements, the Fund Executive Board granted the government a waiver in respect of the nonobservance of the performance criterion on minimum external-debt concessionality in the context of the third PRGF review (IMF Country Report No. 02/192; Appendix V, Attachment I, para. 40).
In nominal terms, the stock of debt increased from US$1,601.7 million to US$1,739.5 million over the period, but the ratio of debt to GDP declined from 84 percent to 76 percent.
Decision was approved in principle by the Fund.
Net present value (NPV) terms at the decision point under the enhanced framework.