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.

Abstract

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.

The following information has become available since the issuance of the staff report for the Fourth Review under the Poverty Reduction and Growth Facility. It does not change the thrust of the staff appraisal.

Priority Investment Fund

  • As anticipated in the Staff Report, parliament approved on May 15 the priority investment fund in the amount equivalent to 1.5 percent of GDP financed by the exceptional mining revenue received in late 2006. The fund will finance investment for national security, rural development, infrastructure, and other development-related investments. At the request of the authorities, the Memorandum of Economic and Financial Policies has been corrected to reflect this new development.

  • The authorities have informed the staff that the specific sectoral allocation remains to be finalized, and will be reviewed with the staff during the fifth review mission, envisaged for September 2007. While the staff report anticipated that the investment expenditures will be carried out in 2008 and beyond, some spending could take place already in the latter part of 2007, subject to discussions during the fifth review.

  • In case additional security expenditure is needed before the review to confront insecurity in the Northern mining regions, it will be offset by savings in other budget lines, or by using the budgetary reserve.

Loan Concessionality

As mentioned in the Staff Report, the authorities requested from the African Fund for Guarantee and Economic Cooperation (FAGACE) a subsidy to bring down from 1.75 percent to 1 percent, for a maximum duration of 10 years, the effective interest rate on the bilateral loan for which the degree of concessionality was about 42 percent and in breach of the performance criteria under the arrangement, which stipulated a 50 percent grant element. The authorities confirmed to staff that this subsidy was approved by the FAGACE on May 22, 2007. The subsidy would have the economic effect of bringing the grant element of the loan to about 46 percent.