Niger: Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for Waiver and Modification of Performance Criteria Informational Annex

Niger’s Fourth Review Under the Poverty Reduction and Growth Facility and Request for Waiver and Modification of Performance Criteria are examined. Economic growth in 2006 has been satisfactory at 4.8 percent, owing to a good harvest for the second year in a row, and strong mining, telecommunications, and construction activities. Inflation has been low, and food security improved, partly because of continued donor support. The fiscal deficit in 2006 has been smaller than programmed because of underspending and exceptional mining receipts.


Niger’s Fourth Review Under the Poverty Reduction and Growth Facility and Request for Waiver and Modification of Performance Criteria are examined. Economic growth in 2006 has been satisfactory at 4.8 percent, owing to a good harvest for the second year in a row, and strong mining, telecommunications, and construction activities. Inflation has been low, and food security improved, partly because of continued donor support. The fiscal deficit in 2006 has been smaller than programmed because of underspending and exceptional mining receipts.

appendix I. niger: Relations with the Fund

(As of March 31, 2007)

I. Membership Status: Joined: 04/24/1963; Article VIII

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Financial Arrangements:

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VI. Projected Payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs):

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VII. Implementation of HIPC Initiative:

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Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

VIII. Implementation of MDRI assistance:

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The Multilateral Debt Relief Initiative (MDRI) provides 100 percent debt relief to eligible member countries that are qualified for the assistance. The debt relief covers the full stock of debt owed to the Fund as of end-2004, which remains outstanding at the time the member qualifies for such debt relief. The MDRI is financed by bilateral contributions and the Fund’s own resources, as well as the resources already disbursed to the member under the HIPC Initiative (see Section VII above).

IX. Safeguards Assessments:

“The Central Bank of West African States (BCEAO) is the common central bank of the countries of the West African Economic and Monetary Union, which includes Niger. The most recent safeguards assessment of the BCEAO was completed on November 4, 2005. The assessment indicates that progress has been made in strengthening the bank’s safeguards framework since the 2002 safeguards assessment.

The BCEAO now publishes a full set of audited financial statements and improvements have been made to move financial reporting closer to International Financial Reporting Standards (IFRS). Furthermore, an internal audit charter has been put in place, mechanisms for improving risk management and risk prevention have been established and follow-up on internal and external audit recommendations has been strengthened.

The new assessment identified a number of areas where further steps would help solidify the progress made. The main recommendations relate to improvements in the external audit process (including the adoption of a formal rotation policy), further enhancement of the transparency of the financial statements by fully adopting IFRS, and further strengthening of the effectiveness of the internal audit function. The status report of the implementation of recommendations, received from the bank in March 2007, indicates that some progress has been achieved.

X. Exchange Arrangements:

Niger is a member of the West African Economic and Monetary Union (WAEMU) and has no separate legal tender. 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 WAEMU’s common currency, the CFA franc, was originally 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 March 30, 2007, the rate of the CFA franc in SDR terms was SDR 1 = CFAF 743.79. Effective January 1, 2007, the exchange arrangement of the WAEMU countries has been reclassified to the category of conventional pegged arrangement from the category of exchange arrangement with no separate legal tender. The new classification is based on the behavior of the common currency, whereas the previous classification was based on the lack of a separate legal tender. The new classification thus only reflects a definitional change, and is not based on a judgment that there has been a substantive change in the exchange regime or other policies of the currency union or its members.

XI. Article IV Consultation:

Niger is on the 24-month consultation cycle. The latest Article IV consultation discussions were held in Niamey in September/October 2006. The Executive Board concluded the consultation on December 20, 2006.

XII. Technical Assistance:

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XIII. Resident Representative:

Mr. Pierre Laporte has been Resident Representative in Niger since December 2005.

appendix ii. Niger: Relations with the World Bank Group

(As of April 30, 2007)

A. Partnership in Niger’s Development Strategy

1. Niger’s first Poverty Reduction Strategy Paper (PRSP) was adopted in January 2002 and centered on four strategic pillars: (i) a macroeconomic framework ensuring economic and financial stability while promoting 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 PRS was based on a thorough poverty diagnosis and key development challenges. The Government reconfirmed the main thrust of the PRSP through four progress reports. Bank and Fund staff prepared a Joint Staff Advisory Note (JSAN) which was discussed at the IMF Board in December 2006 and distributed to the Bank’s Board on January 11, 2007. The Government has been using the PRSP to improve coordination of development efforts in the country, including donor-supported activities.

2. At a donors’ forum in Niamey on June 7 and 8, 2003, 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. The forum resulted in the signing of a protocol agreement by all donors to coordinate their aid to the education sector. The third (2004) and the fourth (2005) PRSP Progress Reports were transmitted to IMF and World Bank in July and October 2006. Comments provided by IMF, EU, UNDP and WB in December 2005 were incorporated.

3. Following delays in launching the preparation of analytical background papers, the Government’s second PRSP is expected to be finalized in May 2007. The PRSP Secretariat visited Washington in early March 2007 for technical discussions on the second PRSP draft and benefited from global knowledge on PRSP and advice for improving the quality of the document from Bank staff together with IMF, UNDP, EU, UNECA and Belgium counterparts. Based on comments received, the government has updated the PRS and held a national validation workshop in early April to discuss the strategy with parliamentarians, representatives from donor agencies, civil society and local government representatives from various regions of Niger. The second PRSP is built around three strategic pillars (against four for the previous one) and includes all the main objectives of the first PRS. The three pillars are: (i) improvement of revenue; (ii) improvement of human capital and equity; (iii) promotion of a sound environment for the management of development. Furthermore, the cross-cutting issues of population growth and decentralization, which had not been part of PRSP I, are addressed in the PRSP II. A donors Round Table for the financing of the revised PRS is scheduled in Brussels in June 2007. The Bank-administered PRS Trust Fund is helping to finance activities to finalize the 2nd PRSP and a separate trust fund is financing activities to integrate gender issues in the strategy.

B. Areas in Which the Bank Leads

4. Privatization and regulatory reform. Key utility sectors, such as telecommunications and water supply have been liberalized and privatized with support from an IDA credit. However, the privatization of the electricity company (NIGELEC) has been delayed mainly due to the difficulty in finding private companies ready to invest US$60-100 million required for expansion and rehabilitation of the power system. The privatization of the wholesale petroleum product distribution company (SONIDEP) has failed in part because of difficulties in finding sound foreign private partners interested in investing in Niger. With the Bank’s assistance, the authorities revisited their objectives and approach to the private provision of infrastructure as they seek to enhance corporate governance for selected state-owned companies (NIGELEC, SONIDEP) and create a Government unit to implement the necessary reforms. The Fund is also a key partner in the policy dialogue in this area, for example, through the continuous implementation of a petroleum pricing system.

5. Rural development. The Bank has provided support to Niger to develop and implement a comprehensive rural development strategy. This strategy aims at mitigating vulnerability and stimulating income generation and is centered on three pillars: (i) improving the access of rural populations to economic opportunities; (ii) protecting rural populations against risks and improving food security and managing natural resources sustainability; and (iii) enhancing the capacity of public institutions and rural organizations to improve the management of the rural sector. An action plan covering the 14 programs of the rural development strategy has been adopted by Decree in October 2006. The transition to a budget-program approach for the rural sector was finally completed with the adoption in October 2006, by Decree, of a rural sector MTEF regrouping four line ministries. Bank assistance in this sector is provided through ongoing operations directly linked to the rural strategy, including: the Private Irrigation Project II, which aims at increasing production and profitability of high-value, irrigated crops by private, smallholder farmers with simple, low-cost technologies; the Emergency Locust Project aimed at reducing Niger’s vulnerability to future desert locust infestations by supporting improved strategies for prevention early warning systems, reactions, and mitigation at both the national and regional levels; and the Community Action Program, which supports decentralized local financing mechanisms for village groups and communes, as well as promotes an integrated community-based ecosystem management. Bank support also the RDS through the series of Rural and Social Reform Credit (RSRCs), IDA’s Development Policy Credit to Niger, the first one was approved in June 2006. More specifically, the RSRCs will help the government to: (i) improve local governance of natural resources through further decentralization of land administration; (ii) reduce household vulnerability to food insecurity and improve the country’s capacity to manage and prevent food crisis; and (iii) increase contribution of irrigation to agriculture GDP.

6. Education sector. Within the framework of the Fast Track Initiative (FTI), government has prepared a ten-year development plan in the education sector (PDDE) for 2003-2013 in collaboration with the Bank and other donors. The key objectives of the government program, which focuses mainly on primary education, are: (i) increasing access to both formal and non-formal basic education, in particular for children in rural areas, girls, and the poor; (ii) improving the quality and relevance of education; and (iii) developing capacities for the strategic and operational management of the sector at both the central and regional levels and increasing responsibilities assumed at the community level. The preparation of a post-primary education program is also underway and will help to define a strategic framework to ensure sustainable expansion of the secondary and other segments of the system as a response to the growing demands from the primary education leavers. The Bank’s Basic Education Project (US$30 million) supports improved access of the poor to primary education services. In addition, the Rural and Social Reform Credit (RSRC-I) is helping the government to (i) implement reforms to increase access of the population to basic education of acceptable quality; (ii) improve personnel management and budget allocations to the education sector; and (iii) foster governance and accountability through information sharing and empowering the community in the education sector. In the context of the FTI, the Bank facilitated the establishment of a Pooled Fund supplied by several donors to finance the PDDE. This Pooled Fund is currently frozen following findings of an audit which revealed mismanagement of resources. Government, in earlier 2007, agreed with donors on fiduciary corrective measures to address this issue allowing the resumption of funding by external partners for this sector.

7. Health sector. The Bank has worked with government on the preparation of the Strategic Orientations for Health Sector Development. In 2002, government adopted a ten-year health policy strategy (2002-2011). Its main objectives are to further improve access to health services facilities (from 47 percent in 2000 to 80 percent in 2011) and to reduce the incidence of infectious diseases, by promoting new approaches, including preventative behaviors. To make this strategy more operational, government adopted a five-year development plan for the sector in January 2006 and the Bank approved a US$35 million IDA credit for the Institutional Strengthening and Health Sector Support project to support a Sector Wide Approach Project (SWAP) that also covers reproductive health and malaria services. Through the_RSRC operations, the Bank is also working with government to consolidate and enhance health sector reforms, notably: (i) strengthening human resources management at the regional level; (ii) improving budget execution to ensure sufficient resources are available to finance priority spending in the health sector; and (iii) reforming the cost-recovery scheme to improve health care accessibility. The Bank has also provided to Niger a US$25 million IDA Credit for a multi-sector HIV/AIDS project approved in April 2003.

8. Population. Niger’s ability to reduce poverty levels and to meet the MDGs is constrained by its high rate of population growth, estimated at 3.3 percent per annum. Aware of the need to manage demographic dynamics, the Government created in March 2007, a new Ministry of Population and Social Reform. The government also adopted in February 2007 a National Population Policy.1 At the government’s request, a multi-sector demographics operation was prepared and negotiated by the Bank to address the challenge of rapid population growth. The Project will be presented to Bank’s Board in June 2007. As part of the project, the Government would launch a communication and sensitization strategy to build national consensus on issues related to improving the status and protection of women and to reduce fertility rates. In addition, the RSRC series will also promote the: (i) launch of information and awareness campaigns on premature marriage and family planning; and (ii) implementation of action plans to improve the status of women, including organizing a national forum to build consensus.

9. Poverty monitoring. The Bank worked closely with government to prepare a poverty profile that served as the basis for the PRSP poverty diagnosis. While this diagnosis was considered thorough and comprehensive by the Joint Staff Advisory Note (JSAN), it outdated, based on household survey data from 1993. Updating the existing database is a priority for the Government which recently completed a nationwide census. Preparation of a new household survey, to be partially funded by the government and the Bank, was launched in April 2007 and is expected to be completed in May 2008. A Demographic and Health survey is being finalized and the 2005 Bank-financed Core Welfare Indicators Survey (CWIQ) was completed in May 2006 with a validation workshop held in Niamey. It provides updated social indicators which are needed for the PRSP update and assessment of progress towards PRSP targets.

10. The Bank, together with other donors, is also advising the authorities on strengthening institutional arrangements for monitoring and evaluating poverty trends in the context of the PRSP, especially by enhancing the capacity of the National Statistics Institute (INS). In that context, under the RSRC I, the legal framework required for INS functioning was strengthened last December 2006 with the adoption of personnel status by a Bill signed by the Minister of Finance and Economy following the appointment by Decree of the INS Board President. With this new legal framework, the INS now has an autonomous personnel payroll scheme in place and the authority to select and hire technical staff without MEF approval. Finally, the INS is preparing a multi-year statistical development plan (2008-2012) to program its activities in the medium term and secure the requisite financing.

11. In addition, the Bank has financed the revision of the 2001 Participatory Poverty Assessment (PPA) as a contribution to government’s efforts to update and strengthen the knowledge base on poverty and social development.

C. Areas Where Bank and Fund Share the Lead

12. Poverty reduction strategy. Together with other external development partners, the Bank and Fund have jointly provided assistance to government in the preparation and updating of its PRSP. Since its completion, both institutions have jointly advised the authorities on the refinement and implementation of the strategy. The four progress reports on the implementation of the PRSP have been prepared with the assistance of the Bank and the Fund and other development partners.

13. Debt sustainability. In April 2005, the Executive Boards of the Bank and Fund endorsed a joint framework for debt sustainability analysis (DSA) in low income countries. A joint Bank/Fund DSA under this framework was completed in December 2006. The DSA indicates that Niger’s risk of debt distress is moderate thanks to significant debt reduction achieved in the context of the HIPC Initiative and the Multilateral Debt Relief Initiative (MDRI). Niger is receiving 100 percent debt cancellation from the IMF and IDA under the MDRI, which will free up some US$30 million per year over the next decade. The results of the DSA show however that Niger’s debt situation: i) would worsen significantly in the event of shocks or weaker economic performance; and ii) is particularly sensitive to the terms and composition of external financing. Hence, the authorities need to pursue sound macroeconomic policies and reforms, with particular focus on growth-enhancing measures, and prudent debt policies. The urgent need to build technical and institutional capacity for debt management has been stressed by the Bank and the Fund. Several measures aiming to strengthen the external debt unit were implemented as structural benchmarks under the previous PRGF. Bank and Fund staff’s have also supported the external evaluation of the use of HIPC resources under the President Special Program. As agreed with the Bank’s Public Expenditure Reform operation (PERCG), the government integrated HIPC resources into the human development sectoral expenditures included in the 2006 Budget Law and is in the process of expanding this to rural development expenditures following completion of the rural sector MTEF in June 2006 and the elaboration of sector Program Budget.

14. 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 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 and cash management system. 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 previous PRGF arrangement. In 2004, the Bank prepared jointly with government, EU and France a comprehensive assessment of Niger’s Public Expenditure Management Systems and Capacities (Public Expenditure Management and Financial Accountability Review: PEMFAR). The Bank has supported budgetary reforms through four adjustment operations (PEAC I, PEAC II, PERCG and the ongoing RSRC I). Consolidating and deepening these reforms (based on the PEMFAR priority action plan) was a critical objective of the RSRC I. The Country Procurement Assessment Report (CPAR) was updated in 2004.

15. Financial sector reform. government launched a comprehensive financial sector reform program in 2002. Supported by the Financial Sector Technical Assistance Loan approved in February 2004, the program covers the regulatory and legal environment, the banking sector, micro-finance, postal financial services and social security. Some progress has already been realized. Two commercial banks, BCN and BINCI and three insurance companies were restructured and recapitalized. Audits of all major micro-finance institutions have been completed. Restructuring plans for the post office have been designed and staff reduction has started. In the next two to three years, measures will be taken to improve the legal and judicial environment (modification of legislation for the issuing of land titles, improvement of the legal framework for the taking of guarantees, training of magistrates, etc.). The Housing Bank (CDN) should be either privatized or liquidated by end December 2006 but the government will request a waiver and propose a new deadline acceptable to IDA by end-April 2007; the Community Lending Bank (CPCT) should be restructured. Micro-finance institutions will be restructured on the basis of the results of the audits, and the supervisory unit at the Ministry of Finance and Economy will be strengthened with the creation of a Microfinance Institutions Regulation Authority by Decree on April 06, 2007. The post office was split into two entities in 2005, NigerPost, for pure mail transactions, and FinaPoste, a financial services affiliate. Finally, an actuarial audit was conducted of the CNSS, the social security institution.

16. 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 previous PRGF arrangement, which had set quantitative benchmarks for the wage bill. The planning for the implementation of the legal framework for the political decentralization of 1996 has recently gained momentum. Following the first local elections of July 2004, the government needs support with reforms to strengthen capacity at the local level and deal with the fiscal implications of decentralization. To help government address some of these concerns, the Community Action Program and the forthcoming Local Urban Infrastructure Development Project (planned for FY08) will help build capacities in rural communities in planning, implementing, and monitoring micro-development projects.

D. Areas in Which the Fund Leads

17. Macroeconomic management. The main objectives of Niger’s macroeconomic program, as stated in the PRSP, are 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 first PRGF arrangement in 2000 by achieving most of its benchmarks and overall positive fiscal performance. A second PRGF was approved in January 2005 and two reviews were successfully completed to date. 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; elaborate MTEF and Program Budget in key sectoral ministries (Education, Health and Rural Development); and macroeconomic modeling.

18. 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 regional partners in WAEMU. In terms of expenditures, the Fund is mainly concerned with overall budget envelopes, while the Bank focuses on inter and intrasectoral allocations and protection of key expenditure items in education, health and rural development.

19. Monetary policy. The Fund leads the policy dialogue on monetary policy, which is set by the regional monetary authorities (BCEAO).

E. World Bank Group Strategy

20. The Bank’s most recent Country Assistance Strategy (CAS) covered the period 2003 to 2005 and was approved by the Bank’s Board in January 2003. It supports the implementation of the PRSP. A new CAS is under preparation and Board presentation is planned in FY08.

21. As of April 25, 2007, the World Bank lending portfolio in Niger consisted of nine IDA active operations, with a total commitment of US$286.4 million, of which US$95.4 million is undisbursed. IDA assistance has helped reduce the volatility in ODA by compensating short-term declines in assistance from other partners. IDA has also been responsive to regional exogenous shocks that have implications for Niger. For instance, an Africa Emergency Locust Project (AELP) aiming at fighting the locust’s infestation in West Africa was delivered in FY05 and a Niger Avian Influenza Control and Human Pandemic Preparedness and Response Activities program is under preparation. A health sector SWAP and RSRC I were delivered in FY 06. IDA assistance to Niger in FY07 was 100% on non-repayable grant terms. Additional IDA Financing of US$10 million (Grant) was provided for the water sector project in July 2006. In FY07, the Bank will have delivered two additional projects, RSRC II (US$50 million IDA Grant) and the Multi-sector Demographic Project (US$10 million IDA Grant), both slated for Board presentation in June 2007. Within a medium-term framework, and building on the previous three budget support operations as well as ongoing investment projects in agriculture, education, and health, the RSRC series focuses on helping Government overcome policy constraints and institutional bottlenecks in: (i) public sector management; (ii) growth and agricultural development; and (iii) human development, including demographic growth and gender issues. Going forward, the RSRC series will shift to support the accelerated and shared growth agenda, in particular to support policy reforms in the area of infrastructure and private sector development.

Table 1:

Niger Status of World Bank Portfolio (all IDA)

(In millions of U.S. dollars, as of April 30, 2007)

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22. The Bank’s AAA program helps the government in areas such as poverty analysis, gender, population growth, sources of growth, and the Millennium Development Goals (MDGs). The AAA program also aims at reinforcing public sector capacity in pursuit of the PRSP’s objectives and in preparing Niger to transition to consolidated programmatic lending. In support of these objectives, sector work on population, rural development, public expenditure management and financial accountability review (PEMFAR), CPAR, and Participatory Poverty Assessment have been completed. A Country Economic Memorandum (CEM) focusing on accelerating growth and achieving the MDGs in Niger was prepared in FY06 and finalized with comments from the government of Niger and is expected to be disseminated by end June 2007. To help the government reduce vulnerability to food insecurity and develop a comprehensive social protection strategy, the Bank is preparing a sector work on food security and social protection for Niger. Finally, the Bank is preparing a Public Expenditure Tracking Survey (PETS), initially in the education, health and rural development sectors. The objectives of the PETS is to improve the efficiency of public spending in social sectors and enhance the social sector outcomes by tracking leakages, execution rate, and delays of public spending as well as document the arrays of administrative procedures.

23. The Bank is committed to enhancing external partnerships and donor harmonization within the framework of the government’s efforts to mobilize and coordinate donor support under the PRSP. In addition to 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.


Déclaration du Gouvernement en matière de Politique de Population (DGPP).

Niger: Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for Waiver and Modification of Performance Criteria: Staff Report; Staff Statement and Supplements; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Niger
Author: International Monetary Fund