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© 2006 International Monetary Fund
July 2006
IMF Country Report No. 06/258
Niger: Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Waiver of Performance Criteria—Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Niger
In the context of the second review under the three-year arrangement under the Poverty Reduction and Growth Facility and request for a waiver of performance criteria, the following documents have been released and are included in this package:
the staff report for the Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Waiver of Performance Criteria, prepared by a staff team of the IMF, following discussions that ended on March 17, 2006, with the officials of Niger on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 5, 2006. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
a Press release summarizing the views of the Executive Board as expressed during the June 19, 2006 Executive Board discussion of the staff report that completed the review and request.
a statement by the Executive Director for Niger.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Niger*
Memorandum of Economic and Financial Policies by the authorities of Niger*
Technical Memorandum of Understanding by the authorities of Niger *
*Also included in Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
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Front Matter Page
INTERNATIONAL MONETARY FUND
NIGER
Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Waiver of Performance Criteria
Prepared by the African Department
(In consultation with other departments)
Approved by Jean A. P. Clément and Anthony Boote
June 5, 2006
Discussions on the second review under the Poverty Reduction and Growth Facility (PRGF) arrangement were held in Niamey during March 3–17, 2006. The mission team comprised Messrs. Rogers (head), Sacerdoti, Farah, and Fontaine, and Ms. Kim (all AFR). The team was assisted by Mr. Laporte, the Fund’s Resident Representative in Niger. Mr. Turbat, the World Bank’s Resident Representative in Niger, also participated in the discussions.
The mission met with the Prime Minister, Mr. Amadou; the Minister of Finance and Economy, Mr. Zeine; the National Director for the Central Bank of West African States (BCEAO), Mr. Soumana; and other senior government officials, as well as donor representatives.
The Executive Directors approved the PRGF arrangement in January 2005 in an amount equivalent to 10 percent of quota. The first review was concluded in November 2005, at which time Directors approved an augmentation of access under the PRGF arrangement to SDR 26.32 million, or 40 percent of quota to provide additional resources for the government’s food relief program. Upon completion of the second review, a disbursement in the amount of SDR 5.875 million would become available.
In January 2006, Executive Directors approved debt relief under the Multilateral Debt Relief Initiative (MDRI) in the amount of SDR 77.6 million, including Heavily Indebted Poor Countries (HIPC) relief of SDR 17.7 million. In March and April 2006 the IDA and the African Development Fund (ADF) provided respectively debt relief to Niger under the MDRI in the amounts of SDR 506 million and SDR 54.4 million.
All quantitative performance criteria were observed, although two out of five structural performance criteria were not met. In the attached letter (Appendix I) the government reports on recent developments, sets forth objectives and policies for 2006, and requests waivers and completion of the review.
Niger is a member of the West African Economic and Monetary Union (WAEMU) and shares a common fixed exchange rate and external tariffs with other members. The BCEAO conducts monetary and exchange rate policies at the regional level. Relations with the Fund and World Bank are summarized in Appendices II and III, respectively.
Contents
Executive Summary
I. Recent Developments and Performance under the Program
II. Report on Policy Discussions
A. Macroeconomic Framework for 2006
B. Fiscal Policy and Food Security
C. Revenue Administration and Expenditure Management
D. Petroleum Product Pricing
E. Debt Sustainability and the Implications of the MDRI
F. The PRSP, and Structural Reforms
III. Macroeconomic, Humanitarian, and Program Risks
IV. Staff Appraisal
Tables
1. Proposed Schedule of Disbursements Under the PRGF Arrangement, 2005–08
2. Selected Economic and Financial Indicators, 2004–08
3. Financial Operations of the Central Government, 2004–08
4. Balance of Payments, 2004–08
5. Actual and Projected Payments to the Fund, 2004–14
6. Monetary Survey, 2003–06
7. Millennium Development Goals
Box
1. The Food Security Situation in Niger
Appendices
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies of the Government of Niger for 2006
Attachment II. Technical Memorandum of Understanding
II. Relations with the Fund
III. Relations with the World Bank Group
IV. Table of Common Indicators Required for Surveillance
EXECUTIVE SUMMARY
After a severe drought in 2004, a strong recovery by the agriculture sector in late 2005 improved macroeconomic performance. Real growth rebounded to 7 percent in light of a record agriculture harvest late in the year. Falling food prices helped ease inflationary pressures by end-year. However, food insecurity remains a serious concern; an estimated 1.8 million people remain vulnerable to food shortages due to losses of livestock and high level of indebtedness incurred during the 2004–05 drought.
The program’s fiscal targets for end-December 2005 were met, owing to higher revenue and also because of underspending on food security. The latter reflected the limited time available before year-end to commit external budget support disbursed late in the year. On structural measures, although two of five performance criteria were missed, all related measures have since been implemented except for the number of taxpayer audits. The performance criterion pertaining to the domestic pricing mechanism for petroleum products was observed; however, retail fuel prices were unchanged during August–December 2005, as government deferred petroleum-based taxes and margin payments to the state-owned petroleum company to stabilize domestic prices in the face of a volatile world market.
Discussions focused on the 2006 macroeconomic framework, food security needs, implementation of priority investment projects, and domestic petroleum pricing policy. Real growth is projected to fall to 3½ percent as agricultural output returns to trend. Inflation is forecast to be about 1 percent on an end-period basis, reflecting the recent decline in food prices. The cost of food security is estimated at 2.7 percent of GDP, of which about half is to be covered by additional donor pledges announced in a conference held in Niamey in March 2006. The balance would be covered by identified budgetary resources. The authorities requested support from donors for investment projects to strengthen food security over the medium term. While donors did not commit additional resources, they urged the authorities to include these projects in the revised poverty reduction strategy paper (PRSP) to be finalized by the end of the year. Domestic resources will finance some components of these projects in 2006.
The revised fiscal program provides for food security needs. The fiscal deficit is targeted to be 1.4 percent of GDP above the original program, reflecting higher spending on food security. The higher financing requirement is covered by domestic financing (including carry over of unspent resources from 2005) and flow debt relief provided by the Fund under the Multilateral Debt Relief Initiative (MDRI). The revised program includes a number of new measures, including those to strengthen fiscal revenue, and a more precise policy for domestic petroleum pricing.
Staff supports the authorities’ request for waivers for the nonobservance of two structural performance criteria and the completion of the review, given the strength of the revised program and the government’s commitment to its timely implementation.
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Press Release No. 06/136
FOR IMMEDIATE RELEASE
June 19, 2006
International Monetary Fund
Washington, D.C. 20431 USA
