Niger
2008 Article IV Consultation and First Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for Waivers and Modification of Performance Criteria: Staff Report; Staff Supplement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Niger
Author:
International Monetary Fund
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Publication Date:
18 Feb 2009
eISBN:
9781451828825
Language:
English
Keywords:
ISCR; CR; PRGF arrangement; Niger; AFRITAC W; investment climate; investment ratio; balance of payments; growth in Niger; mining revenue; Budget planning and preparation; Mining sector; Oil
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The staff report for Niger’s 2008 Article IV Consultation, first review under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and request for Waivers and Modification of Performance Criteria is discussed. The authorities initially suspended taxes on critical foodstuffs but also relied on targeted interventions for vulnerable groups, which made it possible to end the tax suspensions in September. They also froze the retail price of petroleum products, in effect suspending part of the tax on fuel.

Abstract

The staff report for Niger’s 2008 Article IV Consultation, first review under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and request for Waivers and Modification of Performance Criteria is discussed. The authorities initially suspended taxes on critical foodstuffs but also relied on targeted interventions for vulnerable groups, which made it possible to end the tax suspensions in September. They also froze the retail price of petroleum products, in effect suspending part of the tax on fuel.

I. Background

1. Niger’s main challenge continues to be boosting economic growth to sustainably reduce poverty. The landlocked country, heavily dependent upon drought-prone subsistence agriculture, ranks 174th out of 177 countries on the United Nations Human Development Index. The population is not only among the poorest but also one of the fastest growing in the world (3.3 percent a year). The main source of income for the 80 percent of the population who live in rural areas is subsistence agriculture, traditional cattle raising, and fishing, which account for over 40 percent of GDP. The incidence of poverty is estimated at 62.1 percent; it is higher in rural areas (65.7 percent) than in Niamey (27.1 percent) and other urban centers (55.5 percent).1

2. Since 2000, political stability has been restored; the authorities have followed prudent macroeconomic policies, supported by three successive PRGF arrangements; and GDP growth (averaging 4.4 percent per year) has kept ahead of population growth, except during two devastating droughts. During the previous PRGF arrangement (2005–2008), which expired in May 2008, significant progress was achieved in macroeconomic stability, revenue mobilization, expenditure management, and restoration of creditworthiness (Country Report # 08/211).2 Debt relief from the Heavily Indebted Poor Countries (HIPC) and the Multilateral Debt Relief Initiative (MDRI) granted in 2004–06 and prudent borrowing policies have greatly relieved the debt burden and increased fiscal space (see Table 2). Critical factors required to achieve higher growth and reduce poverty, in line with the Poverty Reduction Strategy for 2008–12, are (i) continued prudent macroeconomic management; (ii) improvements in the investment climate; and (iii) considerable external assistance on very concessional terms.

II. Recent Developments and Performance Under the Program

3. Macroeconomic performance was satisfactory in 2007, although growth decelerated. It slowed to 3.3 percent in 2007 as the harvest returned to normal after two years of exceptional growth and averaged 5.8 percent for 2005–07. Since 2000, when political stability was restored, average GDP growth in Niger has been higher than in the WAEMU zone as a whole, although lower than in sub-Saharan Africa (see table below). GDP growth was supported by significant increases in the investment ratio, which rose from an average of 13.7 percent of GDP in 2000–04 to 23.4 percent in 2005–2007.

4. Growth accelerated in 2008, to an expected 5.9 percent, supported by major investments in mining and petroleum and an agricultural campaign that benefited from good rains. However, power distribution has been disrupted by shortages in Nigeria, the source of most of the electricity used in Niger, which slowed industrial activity in early 2008; the authorities have contracted with Chinese suppliers to put in place new power plants to alleviate the problem, at a moderate cost to the capital budget.

uA01fig01

On average, Niger tends to grow faster than WAEMU but slower than Sub-Saharan Africa.

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

uA01fig02

The investment ratio is increasing strongly.

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

Source: IMF REO

5. As a result of higher world prices for food and fuel, inflation accelerated to 15 percent in the first eight months of 2008, from 4.7 percent at end-2007. However, inflation is moderated in the last months of the year as a result of the ongoing weakening of worldwide economic activity and the decline in commodity prices on world markets since mid-2008, combined with the good harvests in Niger and the neighboring countries. Inflation, on a 12-month basis, is projected to reach 8.5 percent at the end of 2008 but is expected to decline below 3 percent by end-2009.

6. Niger meets most of the convergence criteria of the WAEMU (see table below). However, it does not meet the targets on the external current account deficit, and the basic fiscal balance, although both balances are sustainable given the high volume of foreign aid. It also does not meet the tax revenue target of 17 percent of GDP, which is very ambitious for a country at Niger’s stage of development.

Performance on WAEMU Convergence Criteria was Satisfactory, 20071

(Percent, unless otherwise indicated)

article image

IMF staff estimates. Bold numbers indicate that the criteria was met.

7. Budget performance was satisfactory in 2007 and the first half of 2008. In 2007, both tax and nontax revenue3 performed well. Despite a strong increase in current expenditures4 and domestically-financed public investment, the basic budget deficit remained moderate and below target (at 0.9 percent of GDP). The reduction of domestic arrears, which has been ongoing since 2001, was broadly on track at 0.7 percent of GDP.5 Public expenditures on education, health, and the rural sector amounted to 9 percent of GDP (marginally below the level of 2006). In the first half of 2008 the basic budget deficit, excluding an exceptional petroleum signature bonus received in June (US$300 million or CFAF 123.4 billion, 5.3 percent of GDP, see below) was lower than programmed, as revenue was in line with the program and domestically-financed expenditure remained well below programmed level. Nontax revenue increased massively in June 2008, with the payment of a signature bonus following the signing of a petroleum production sharing contract (PSC) with China National Oil and Gas Exploration and Development Corporation (CNODC), a subsidiary of the China National Petroleum Corporation (CNPC).

8. In 2007, the external current account deficit excluding grants widened to 11.1 percent of GDP, despite the increase in the export price of uranium, Niger’s main export, and a further increase in the deficit is expected in 2008, to about 12.3 percent of GDP.6 The large increase in imports of equipment and petroleum products, as well as the increase in services and payment of income abroad, more than offset the higher export revenue from uranium. In the years ahead, the structure of the balance of payments is likely to be modified significantly as a result of two large oil and mining projects announced in 2008, which will imply a major increase in foreign direct investment and a corresponding widening of the current account deficit. First, as mentioned earlier, in June 2008, the government approved a PSC with CNODC for the exploration and exploitation of petroleum in the Agadem block. Second, the French mining company AREVA confirmed its commitment to develop the large Imourarem uranium mine over the next few years, with an investment of about €1 billion (Box 1).

Fiscal Performance in the First Semester of 2008 was Satisfactory January to June 2008

(Billions of CFAF)

article image

Country Report (CR).

9. Credit to the economy was buoyant in 2007 and in the first eight months of 2008, reflecting loans to the mining, telecommunication, and transportation sectors. Boosted by the disbursement late in 2007 of external budget support and the collection of exceptional government revenue (sale of a new telecom license to a foreign operator), the net foreign assets of the central bank attributed to Niger increased in 2007 by 43 percent, and the net claims of the central bank on the government fell. Net foreign assets increased further in the first eight months of 2008. The banks’ nonperforming loans, net of provisions, reached 10.7 percent of net total credit at the end of 2007, with a gradual increase since 2004, but the trend reversed in 2008, with preliminary end-June 2008 data indicating a decline in this ratio to 7.2 percent. Broad money grew by 23 percent in 2007 and is expected to continue to increase at about this rate in 2008.

uA01fig03

Banks are profitable, but portfolio quality needs careful monitoring 2002-2008 1/

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

Source: BCEAO.1/2008 figures displays values as of June 2008.

Large Investment Projects

Three very large investments are planned over the next five years: (i) the development of the Imourarem uranium mine; (ii) the exploitation of petroleum in the Agadem field and construction of a refinery; and (iii) the construction of the Kandadji dam and the related irrigation and hydropower developments.

Imourarem: Although the formal negotiations have not yet reached closure, the French mining company AREVA confirmed in early 2008 its commitment to develop the large Imourarem uranium mine over the next few years, with an investment of about €1 billion. This would increase uranium production by about 5,000 tons around 2015; taking into account other, smaller, investments production would then reach 9,600 tons, more than tripling the current level.

Agadem: A production-sharing contract with China National Oil and Gas Exploration and Development Corporation (CNODC) was approved in June 2008. The project has three components: the development of the Agadem oil field to extract reserves estimated at 324 million barrels, the construction of a mini-refinery in Zinder with a capacity of 20,000 barrels per day, and a 580 km pipeline linking the Agadem field to the refinery. The estimated cost is about US$ 1.3 billion. The refinery will be organized as a corporation, with a government capital participation of 40 percent. Production is scheduled to begin in early 2012. Since the capacity of the refinery exceeds the local consumption (7, 000 barrels per day), much of the production will be exported. The operator will also conduct further exploration and if sufficient new discoveries are made, exports of crude through a new pipeline is envisaged.

Kandadji: The project, managed by an agency reporting to the Prime Minister, is part of a program aiming at protecting the ecosystem of the entire Niger Valley and developing its economic potential. Its main function will be to regulate water flow for the benefit of areas downstream. It involves construction of a dam and a power generating plant, and the development of irrigated areas. The overall investment, excluding the hydro electrical plant, is estimated at CFAF 140 billion (about $280 million). It is financed by the government budget and loans from a number of multilateral agencies, including the African Development Bank, the Islamic Development Bank, the OPEC Fund, the Arab Bank for Economic Development in Africa (BADEA), the Kuwaiti Fund, the Saudi Fund, the West African Development Bank (BOAD), all at concessional terms. The related borrowing agreements have already been signed or are close to finalization. The construction of the dam will begin in 2009 and be completed in 2014. Equipping the power plant and constructing the high tension power line are planned for 2011-2014, and are expected to be financed through a combination of public and private resources under a public-private partnership. The development of irrigated areas would proceed at about 1,000 ha to 2, 000 ha per year, up to a maximum of 45,000 ha.

10. Despite some improvements in some key social indicators, Niger is unlikely to reach the MDGs by 2015 (see Figure 1). Partly as a result of the allocation of more resources to the social sectors, the primary school enrollment increased from 37 percent in 2002 to 62 percent in 2007, and child mortality fell significantly from 1998 to 2006.

Figure 1.
Figure 1.

Niger: selected MDG Indicators

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

Source: Nigerien authorities.

11. Except for a small slippage in the reduction of domestic arrears, the program to June 2008 is on track. The quantitative performance criterion (PC) on domestic financing for end-June 2008 was met, but the reduction of domestic arrears fell short of the CFAF 7 billion target by CFAF 1.2 billion; the target was reached in July 2008. The basic budget balance indicative target for June was met, on the basis of provisional data. The end-September 2008 structural performance criterion on defining the modalities for the repayment of frozen savings deposits at the former National Post Office was not met on time, but this measure was implemented in early December.

III. Medium-Term Outlook and Policy Discussions

12. The policy discussions for the Article IV consultations focused on the challenges and opportunities to sustain healthy growth over the medium term, while preserving a viable balance of payments and a sustainable debt position. The authorities’ strategy over the past two years yielded macroeconomic stability and reasonable growth. Progress was achieved in reforms aiming at public finance management (both on revenue mobilization and expenditure management) and strengthening the financial sector. However, the challenge of making a significant dent in poverty is daunting. The PRSP indicates that cutting poverty levels by half by 2015 would require a sustained annual GDP growth rate of 7 percent, which currently does not seem achievable. The discussions covered the following themes: (i) growth prospects over the medium term in comparison to the PRSP objectives; (ii) assessment of the real exchange rate, international competitiveness, and debt sustainability; (iii) food security and short- and medium-term policy responses to the higher prices of food and fuel; (iv) the public finance implications of developments in the mining and petroleum sectors; (v) financial sector reform and the cost of doing business; and (vi) the possible impact of the international financial crisis. Policy discussions related to the program review focused on (i) the budget for 2009; (ii) the implementation of public finance management and tax policy reforms; and (iii) structural reforms related to the financial sector and the cost of doing business.

A. Medium-Term Macroeconomic Framework and Growth Prospects

13. Staff expects GDP growth to average 5 percent for the next five years, which is below the high growth scenario in the PRSP (7 percent). It is based on a pick up in agricultural growth and mining, and implementation of large investment projects in mining, petroleum, and irrigation (Box 1). The downturn in industrial countries is not expected to affect exports and growth in the short term, because the main export, uranium, is sold on long-term contracts, and other exports, mainly cattle and foodstuff, are sold on the regional market. However, (Box 2), the downturn could have effects on mining exploration and therefore on growth and government revenue in the medium term.

14. As they are implemented, these large investments are expected to sustain activity, boost the construction and transportation sectors, and increase current account deficits. However, in the medium term, the effect on the current account would be reversed as exports increase and import needs shrink. Meanwhile, tax and nontax revenue would increase.

15. The PSC signature bonus collected in 2008 will allow higher spending; the authorities intend to spend the bonus in the remaining months of 2008 and in 2009, mainly on investments and goods and services for priority PRSP sectors, because the PRSP is underfinanced. Staff agreed with this accelerated use of the resources, which will be allocated to rural development, roads, electricity generation, and government participations in the refinery and a modern slaughterhouse. The World Bank is also in broad agreement with these allocations. While the outlays are broadly in line with PRSP priorities, staff urged further improvements in the coordination between the ministry of finance and the PRSP unit in order to address effectively the needs of the social sectors and remove infrastructure bottlenecks.

16. In 2012 new oil revenue and increased revenue from uranium will push the revenue-GDP ratio to about 14.3 percent of GDP, allowing a stepping up of expenditure, while eliminating the basic fiscal deficit. Because the additional mineral revenues are expected to be a relatively modest 3 percent of GDP annually over 20 years, staff did not recommend that a fund for future generations be established, but instead encouraged the authorities to formulate a medium-term expenditure plan aligned with PRSP priorities. The authorities agreed that anchoring the budget decisions in a multi-year framework is indeed essential. Although steps towards that goal have been taken with the preparation of such frameworks for key sectors, they judged that further efforts are needed, and requested Fund technical assistance to help integrate the budget preparation process with the PRSP in a multi-year framework. Over the long run, the government overall deficit, including grants, should remain moderate, in the range of 2 to 3 percent of GDP, which is equivalent to the flow of concessional loans, expected to finance approximately one third of the investment effort. This is consistent with the sustainable debt path (Supplement on Debt Sustainability Analysis, Box 1).

17. Staff discussed in detail the revised balance of payments projections and the new debt sustainability analysis (DSA), which is more favorable because of new refined petroleum exports after 2012. The current account deficit of the balance of payments is expected to widen substantially in 2009-2011 as a result of a large increase in imports financed by foreign direct investments in the uranium and petroleum sectors, but to decline sharply from 2012. The new DSA, presented in the supplement to this staff report, shows an improvement in the NPV of debt-to-exports indicator, which in the baseline scenario reaches only 95 percent in 2028 (see text figure). Moreover, under all but two of the stress tests, the indicators remain below the policy thresholds; the two scenarios where the thresholds are broken are somewhat unrealistic, as foreign direct investment is cut, without curtailing the corresponding imports. On the basis of this analysis, Niger remains rated at moderate risk of debt distress, despite the improvement in debt indicators. The authorities remain committed to maintaining a prudent debt policy, with careful attention to the terms of new borrowing (MEFP, paragraph 27).

18. The main risks to the growth and balance of payments scenarios are that (i) adverse weather would undermine agriculture; (ii) adverse developments in the world economy could push down mineral prices (Box 2); and (iii) political instability and insurgency in the North could intensify.

19. Staff and authorities also discussed the policy responses to rising food and fuel prices in the first half of the year (Box 3). The comprehensive arrangements to help vulnerable groups through targeted interventions were commendable. These arrangements made it possible to end in September the suspension of taxes on sensitive food products introduced earlier in the year. As for petroleum products, while the recent decline in international prices allowed the government to stabilize retail prices without much loss in revenue, staff noted that the authorities should be ready to adjust retail prices upward to protect the revenue target if the recent decline of world prices should reverse.

20. Staff discussed the prospects for scaled-up aid which the authorities are keen to obtain to fund their ambitious PRSP. Staff presented the preliminary results of staff simulations developed in a Selected Issues Paper, which suggest that a sustained increase of aid of 5 percent of GDP would lead to an increase in growth of about 1-2 percent per year after 4 years, and a reduction in the poverty level by about 25 percent by 2015, though that is still below the MDG target (Box 4).7 Higher growth could be accompanied by relatively moderate appreciation of the real exchange rate (3-5 percent), suggesting that for Niger the risk of Dutch disease would be manageable and not a deterrent to aid scaling up. The case for scaling up for Niger is compelling: The country, which has had a satisfactory macroeconomic management track record since 2000, is among the poorest in the world, its development indicators are similarly poor, and the 10 percent of GDP of aid it currently receives is well below that of several other sub-Saharan African countries with better development indicators.

Niger and the World Financial Crisis

The impact of the world financial crisis on Niger is expected to be limited in the short term, because uranium is sold on long-term contracts. In fact, in the short run, the country would actually benefit from a decline in oil prices. However, if the downturn is steeper or more prolonged than expected, it could seriously affect mining exploration and mining revenues.

The two major mining and oil projects that have started in 2008, to bring the Imourarem uranium field into production in 2014 and the Agadem oil field in 2012, are proceeding, and there is currently no indication that they are being slowed down. However, smaller mining exploration activity may be slowed or delayed. The export price of uranium is negotiated annually with the parent of the Nigerien operating companies, and the downturn in the spot price will likely lead to a stabilization of the export price next year, after sharp increases in 2007 and 2008. The decline in the international petroleum price has a favorable impact on import costs and the budget, but, if prices remain depressed for many years, the Agadem field might be less profitable.

The financial crisis is not expected to affect the activity of the Nigerien banking system, because the banks rely only very modestly on resources from their parent companies abroad. As for major investments, the crisis may slow expansion of the mobile telecom network, which relies heavily on financing from foreign parent companies; but it should have no effect on the Kandaji dam project, which is funded by multilateral agencies, or the expansion of electricity production and transmission, which is mostly funded from the budget and bilateral export agencies.

Niger: Policy Response to Rising Food and Fuel Prices

  • The response of the authorities to rising food and fuel prices has been two-pronged. First, they suspended taxes on imported food and fuel, beginning in March with the VAT and import duties on rice, and a number of excise taxes on fuel. Then in June the tax suspension measures were extended to import duties on milk and the excise on edible oil, also the taxable basis for import taxes on sugar and flour was reduced. The cost of the measures for food products was estimated at 0.6 percent of GDP.

  • At the same time, the authorities reinforced the wide-ranging targeted food security operations they have carried out for a number of years, which are funded partly by donors, such as (i) nutritional programs; (ii) programs of food for work and cash for work; (iii) food distribution to vulnerable populations at moderate prices and free distribution in the lean season; and (iv) funding and setting up cereal banks. Food was distributed at moderate prices in July and August, peaking during the September Ramadan period; moderate-price distribution totaled 24,000 tons and free distribution about 16,000 tons. These distributions were carried out by the Office des Produits Vivriers du Niger (OPVN), which has a network of cereal storage facilities throughout the country, using the national security stock, which must now be replenished, and special imports.

  • The comprehensiveness of these targeted programs and the prospects for an excellent harvest starting in late September convinced the authorities at the end of September to reimpose the taxes on food products, thus saving the equivalent of 0.25 percent of GDP.

  • The amount of deferred taxes on petroleum products plunged in November, and the deferment is expected to end in December, given the decline in international prices.

The Macroeconomic Impact of Scaled-up Aid in Niger

As stated at the G8 summit in Gleneagles in 2005, there is a need to scale-up aid to low-income countries in order to reduce poverty and make significant progress toward meeting the 2015 Millennium Development Goals (MDGs). A Special Issues Paper outlines a simple macroeconomic framework to assess the effect of aid on growth and apply it to Niger. In particular, it analyzes the growth impact of aid through its effect on physical and human capital accumulation, taking into account the effect of aid on domestic demand and the real exchange rate.

Results from the model simulation suggest that if foreign aid as a share of GDP were to be permanently increased from a level equivalent to 10 percent of GDP in 2007 to 15 percent in 2008, annual economic growth would accelerate by more than 1 percentage point (see figures below), without generating significant risks for macroeconomic stability. In this scenario, by 2020 Niger’s income per capita would be an estimated 12.5 percent higher than it would be without increased foreign aid.

Such an augmentation in aid would make it possible to cut poverty reduction 25 percent by 2015, though Niger would still be well below the MDG poverty reduction objective (MDG 1). Indeed, the model implies that Niger requires an increase of aid of almost 20 percent of GDP to reach MDG 1. However, such an increase would fuel inflation (by about 10 percentage points in 2009–10). Foreign assistance would be more efficient in boosting income per capita and reducing poverty if the execution capacity of the public administration is improved to better manage the increased expenditures funded by scaled-up aid.

uA01bxfig01

Aid Contribution to Output Growth Rate (%)

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

uA01bxfig02

GDP Per Capita

(2007 CFAF)

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

uA01fig04

The fiscal position is sound, 2005-2012

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

Sources: Nigerien authorities; and IMF staff estimates and projections.
uA01fig05

The current challenges are sustaining growth and reining in inflation

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

Sources: Nigerien authorities; and IMF staff estimates and projections.
uA01fig06

External debt is sustainable…

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

uA01fig07

…but remains sensitive to borrowing terms.

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

Source: IMF staff estimates and projections.

B. Exchange Rate Assessment and International Competitiveness

21. The present level of the real effective exchange rate appears consistent with fundamentals and should not be a hindrance to growth (see Box 5 and Selected Issues Paper). Its appreciation of 23.8 percent since 2001 is consistent with macro-equilibrium, in view of the favorable movement of Niger’s terms of trade in recent years, reflecting higher prices for uranium. Moreover, projected increases in foreign direct investment, and the prospects for petroleum production are likely to lead to a further appreciation of the equilibrium real exchange rate in the next few years. For 2000-08 total exports of Niger in U.S. dollars are projected to have risen by 214 percent, partly because the export price of uranium doubled in 2007-08. This compares with an increase in world exports of 170 percent for the same period. The favorable prospects suggest that over the next five years Niger could continue to increase its share of world exports.

uA01fig08

Niger’s Share in World Exports (%)

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

Source: IMF WEO.

22. Staff also reviewed competitiveness indicators, such as productivity growth and the ranking of Niger on the “cost of doing business” (see below) and argued that while the exchange rate seems to be aligned with fundamentals, other indicators of competitiveness highlight the need for Niger to improve the business climate and productivity, including through improved training of the labor force, better access to finance, reduction in the cost of doing business, and improved transport infrastructure.

23. The authorities agreed with the exchange rate assessment, and also recognized the need to improve the business climate and lowering the cost of doing business to attract investment and diversify the economy.

C. Food Security

24. Staff reviewed with the authorities the monitoring and emergency intervention mechanisms in place to protect vulnerable groups and regions against food shortages. The mechanisms are comprehensive, as described in Box 3, but need continued donor support. The authorities are committed to disburse before end-year the related budgetary allocations (MEFP, paragraph 6).

Assessing External Competitiveness in Niger

Niger’s real exchange rate (RER) in 2007 is assessed using three CGER approaches: (i) macroeconomic balance (MB); (ii) external sustainability; (ES), and (iii) equilibrium real exchange rate (ERER). These three methods yield estimates ranging from a modest undervaluation (8 percent) to a very slight overvaluation (2 percent). These results indicate that the RER does not hinder competitiveness. In addition, the staff has analyzed other indicators of competitiveness.

Macroeconomic Balance (MB) and the underlying current account (UCA). The MB approach estimates a current account norm of–9.6 percent, compared with the underlying current account of –8.1 percent, indicating an undervaluation of about 8 percent.

External Sustainability (ES). The ES approach estimates the current account balance-to-GDP ratio that would stabilize the net foreign asset-to-GDP ratio at a benchmark chosen because of the sustainability of its component. Taking into account projected FDI over the next five years, portfolio investment, external debt set at a prudent margin below the policy-dependent threshold, and a target level of reserves, the benchmark was set at–86 percent of GDP. Based on estimated elasticities, the Nigerien real exchange rate would need to depreciate by just 2 percent to bring the underlying current account deficit down to the level needed to stabilize the NFA-to-GDP ratio at this level.

Equilibrium Real Exchange Rate (ERER). Three alternative econometric methods were used to estimate the equilibrium real exchange rate index. The significant determinants are external terms of trade, productivity relative to trading partners, and government consumption. The ERER shows a slight undervaluation of between 0.7 and 3.7 percent in 2007.

uA01bx05fig01

The CFAF appreciates against the U.S. dollar.

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

uA01bx05fig02

… but the real effective exchange rate is aligned with fundamentals

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

Source: Nigerien authorities and IMF staff estimates and projections.

Niger export performance since 2000 has been relatively favorable, with the average export growth in U.S. dollars of 7.8 percent in the 1999-2004 period and 18.3 percent in 2004-2007, boosted by higher uranium prices. While survey-based indicators show improvement in the business climate, there is still room for further improvements and in particular to reduce the cost of doing business. These evolutions do not point towards an overvaluation.

uA01bx05fig03

Niger’s Share in World Exports (%)

Citation: IMF Staff Country Reports 2009, 059; 10.5089/9781451828825.002.A001

Source: IMF WEO.

D. Budget for 2009, Public Finance Management, and Taxation Issues

25. The authorities discussed with the staff the 2009 budget submitted to Parliament, which takes into account the improved fiscal outlook resulting from the July signature bonus and projected revenue for 2009 (MEFP, paragraphs 17 to 22). While the staff had put forward the option of phasing the additional expenditure financed by the bonus over the next few years, the authorities decided to allocate the additional resources entirely to the 2009 budget to finance the development of priority sectors, as called for in the PRSP. However, the actual rate of execution of the domestically-financed expenditure investment will likely imply that some of the funds will be spent in 2010. As a result, the basic budget deficit for 2009 is now targeted at 5.4 percent of GDP, compared with 2.7 percent of GDP in the program approved in May 2008 (CR/08/211). However, over the two-years 2008-09, the basic budget deficit as a percent of GDP is reduced from an average of 3.7 percent in the original program to 3 percent. Parliament approved the budget law on November 14.

26. The original program tax revenue target of 12.3 percent of GDP in 2009 has been revised downward to 11.5 percent, mainly due to an upwards revision of GDP as a result of inflation; several tax components such as mining profit taxes and royalties are not closely related to current-year GDP.8 Tax revenue targets for 2010 and 2011 have also been revised downwards relative to the initial program (CR/08/211), because of more prudent projections of mining revenue. However, the efforts underway to strengthen tax administration should reinforce the non-mining components of tax revenue.

27. Staff encouraged the authorities to continue to improve the budget preparation process and coordination between the budget directorate and the PRSP coordinating unit. It also underscored the need to provide resources for the future recurrent costs implied by the large public investment projects now underway. Other areas where progress is needed are better information to the public on budgetary outcomes9 and further strengthening of control and audits, particularly at the levels of the Audit Court (Cour des Comptes) and the Directorate General of Procurement. The authorities agreed and have identified measures to be implemented in 2009 (MEFP, paragraph 26).

28. The authorities are strengthening debt management through the revamping of the Public Debt Directorate, which is now tasked to prepare periodic analysis of recent borrowing, debt trends, and debt sustainability analyses (MEFP, paragraph 27).

29. Authorities and staff agreed that reform of corporate taxation is an important element of the program to improve the business climate and promote growth. The authorities expressed their intention to implement in 2009 several reforms related to the VAT reimbursement to exporters and the profit tax (MEFP, paragraph 23), including reduction of the corporate profit tax rate from 35 percent to 30 percent (payable in 2010 on 2009 profits), at a cost of 0.15 percent of GDP. This will be a structural PC, which is justified because it is key to improve the investment climate, attract foreign direct investment, and promote economic diversification. Studies will also be conducted as a basis for reform of the tax on investment income, the real estate tax, and tax concessions in the investment code (MEFP, paragraphs 24 and 25). The authorities request that the original PC for end-December 2008 concerning full reimbursement of VAT credits to all exporting enterprises be modified10 and shifted to end-2009, out of concerns that taxpayers would take undue advantage of the reform if it is not well prepared. The staff concurs with this request. Another important measure to reinforce the investment climate is the reduction of the registration fees for new businesses at the courts registrar, which is a structural benchmark for end-2009.

E. Public Finance and the Mining and Petroleum Sectors

30. Staff discussed the institutional and fiscal arrangements for the large mining projects (like the Imourarem project) and petroleum production. The broad framework is established by the Investment Code, the Mining Law of 2006, the Petroleum Law of 2007, and a new law for large mining projects approved by the National Assembly in 2008. Concerning the petroleum production sharing contract (PSC) signed with CNODC, the authorities stated that the government share amounts to 20 percent of the interest in the Agadem block. The government will also take a participation of 40 percent (US$40 million) in the capital of the company established to operate the refinery.11 The necessary allocation is included in the draft budget law for 2009. The authorities confirmed that 15 percent of the royalties will be allocated to the budget of municipalities of the producing region, as the Petroleum Code requires.

31. Staff emphasized the importance of transparency in the petroleum sector. It strongly encouraged the authorities to inform the public on the key elements of the PSC, although the full publication is barred by a confidentiality agreement with the investor. The authorities are committed to ensure that the sale of petroleum to the refinery and the sale of refined products to the public be done on commercial terms, with no subsidies to the refinery (MEFP, paragraph 28). The definition of the pricing mechanism for the refinery output could be an area for future conditionality.

F. Financial Sector Reform and the Cost of Doing Business

32. Financial sector reforms were assessed, in the context of the FSAP for Niger, conducted in September 2008. While the banking system is relatively sound and profitable, financial intermediation is still underdeveloped and the deposit-to-GDP ratio is among the lowest in the WAEMU. Staff and authorities discussed in detail the FSAP recommendations (Box 6). The authorities intended to promote housing and agricultural credit (MEFP, paragraph 29). They were also envisaging the establishment of an agricultural bank, but staff encouraged them to review all the options before deciding on the most effective way to proceed, because experience with specialized banks in the region has been unsatisfactory. The authorities are preparing to submit before February 2009 to the regional Banking Commission a request for a banking license for the restructured FINAPOSTE, which is to takeover the financial activities formerly carried out through the national post office. The authorities have also defined in early December the terms for the repayment of the saving deposits frozen by the former National Post Office, with a small delay in relation to the end-September target, which is a performance criterion under the program.

The cost of doing business is relatively high in Niger

Doing Business Ranking Averages

Niger and Comparator Groups

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Source: World Bank—Doing Business 2009 (ranking among 181 countries).

World Bank definition.

33. Progress in reducing the cost of doing business has been achieved in recent years on property registration, payment of taxes, and contract enforcements; however, Niger lags behind the WAEMU average in many dimensions (see text table below). The authorities confirmed their commitment to steadfast efforts to improve the business environment, and in 2009 will reduce the fee for registering a new enterprise (MEFP, paragraph 30).

Summary of FSAP Main Recommendations 1

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1 ST: short term; MT: medium term.

IV. Program Monitoring

34. The program is monitored against quantitative performance criteria and indicative targets listed in the original program (Appendix I, Tables 1a and 1b) and structural performance criteria and structural benchmarks (Appendix I, Table 2). The two structural performance criteria for 2009 (elimination of the ceiling on the reimbursement of VAT credits to exporters and the reduction of the corporate tax rate) are critical to meeting the program’s objective of improving the business environment to foster growth and reduce poverty. The next review of the program is expected to be completed by end-May 2009.

V. Staff Appraisal

35. Niger’s economic performance has been favourable so far in 2008, with an acceleration of growth, high investment, and progress in economic diversification. The outlook for economic growth in 2009 remains favourable despite the current downturn in industrial countries as the significant investment underway in a number of sectors, including mining, transportation, irrigation and telecommunication are expected to support economic activity. While economic prospects for 2009 are still positive, if prolonged, the downturn in the world economy could deter future mining exploration, and therefore dampen medium-term growth. In this climate of uncertainty, continued, and possibly increased, foreign financed investment and budgetary aid in support of priority sectors are essential for Niger to achieve its growth objectives and secure steady improvement in social indicators. As the scaling up simulations suggest, aid increase as envisaged in the Gleneagles scenario would not adversely impact macroeconomic stability. But growth must also be supported by comprehensive efforts to make the economy more competitive; improvements in the investment climate and reductions in the cost of doing business would attract investment and promote economic diversification. This is all the more necessary in a world environment were private investment financing is becoming scarcer and more costly.

36. While the international downturn is now bringing a correction of the earlier sharp rise in food and fuel prices, the authorities are to be commended for responding to the food crisis in the first half of 2008 by firming up already comprehensive mechanisms of targeted interventions in favour of vulnerable groups, and for having maintained costly tax suspensions only for a limited period. It is important that the targeted assistance mechanisms continue to be well funded, and that the government promptly releases its own contributions to these arrangements, supplementing those of the donor community.

37. The authorities program for 2009 appropriately focuses on better management of the public finances, closely aligning the budget to PRSP priorities, streamlining company taxation to improve the investment climate, and furthering reforms of the financial sector. Allocation of the exceptional resources from the petroleum sector to infrastructure and the social sectors is appropriate, and the basic budget deficit over the two years 2008-2009 is lower than in the original program. The comprehensive actions taken to strengthen public financial management are welcome. Efforts must now focus on casting the budget preparation in a medium-term framework, with a careful integration of the recurrent costs implied by the expansion of public investment. The reform in corporate taxation planned for 2009 is necessary to improve the investment climate, attract FDI, and diversify the economy.

38. The efforts to reinforce debt management are welcome; the authorities remain attentive that the debt contracted for ambitious infrastructure projects, including a major dam on the Niger river, are at largely concessional terms and consistent with debt sustainability.

39. Deepening financial intermediation is crucial to support economic activity. While the authorities are keen to promote credit to housing and agriculture, it is important to avoid establishing narrowly-based institutions that could carry excessive risks.

40. Given the strength of the program and the corrective actions taken by the authorities, the staff recommends Board approval of the authorities’ request for a waiver for the non observance of two PCs, modification of PCs, and completion of the first review under the PRGF arrangement.

41. Staff recommends that the next Article IV consultation be held under the 24 month consultation cycle, subject to the Board decision on consultation cycles (Decision No. 12794-(02/7) dated July 15, 2002, as amended).

Table 1.

Niger: Selected Economic and Financial Indicators, 2006-13

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

Commitment basis per payment orders issued.

Including budget reserve.

Percent of beginning-of-period broad money stock.

Total revenue, excluding grants, minus total expenditure, excluding foreign-financed investment projects.

After HIPC and MDRI debt relief starting in 2006.

Table 2a.

Niger: Financial Operations of the Central Government, 2006-13

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Sources: Nigerien authorities; and staff estimates.

Multilateral Debt Relief Initiative stock estimates including cancellation of debt treated under the HIPC Initiative, shown on accrual basis.

Table 2b.

Niger: Financial Operations of the Central Government, 2006-13

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

Multilateral Debt Relief Initiative stock-of-debt operation, including cancellation of debt treated under the HIPC Initiative.

Table 3.

Niger: Monetary Survey, 2006-12

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Sources: BCEAO; and IMF staff estimates and projections.
Table 4.

Niger: Balance of Payments, 2006-13

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

Multilateral Debt Relief Initiative stock-of-debt operation, including cancellation of debt treated under the enhanced HIPC initiative.

Table 5.

Niger: Millennium Development Goals, 1990-20071

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Sources: Nigerien authorites; and World Bank, World Development Indicators (2008).

Figures in italics refer to periods other than those specified.

Table 6.

Niger: Proposed Scheduled Disbursements Under the PRGF Arrangement, 2008–11

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Source: IMF.

In addition to the generally applicable conditions under the PRGF arrangement.

Appendix I—Letter of Intent

Niamey, December 3, 2008

Mr. Dominique Strauss-Kahn

Managing Director

International Monetary Fund

Washington, D.C. 20431

Dear Mr. Strauss-Kahn:

1. The government is continuing to implement the policies and reforms envisaged in the PRGF-supported program which was approved at end-May 2008. By end-October 2008, all the quantitative and structural performance criteria were met, with the exception of two: the quantitative criterion on the reduction of domestic arrears by end-June 2008, for which I request a waiver, as corrective steps have already been taken; and the structural criterion on the adoption before end-September of the procedures for repayment of the frozen deposits of the former National Post and Savings Office (ONPE). Those procedures were established in early December 2008, and therefore I also request a waiver for this criterion.

2. With regard to the structural benchmarks, the adoption of the medium-term expenditure framework for infrastructure and transport, planned for end-November 2008, was postponed to end-June 2009, in view of the need for technical assistance in this area.

3. Economic activity during 2008 was favorable, and GDP growth in 2008 is expected to be driven by an excellent harvest and by activity in the mining, telecommunications, and construction sectors. Consumer prices continued to rise until end-July 2008, with a sharp increase in food prices, but prices stabilized thereafter. The government has made significant efforts to support the most vulnerable segments of the population, with free distribution of foodstuffs, moderate-priced sales, and nutritional programs undertaken by the food security mechanism, which receives lender support.

4. Basic budgetary expenditure in the first nine months of 2008, excluding externally financed investment, remained below program objectives, whereas revenue greatly exceeded the projections, thanks also to nonrecurring revenue derived from the conclusion of an oil agreement. As a result, the fiscal deficit and domestic financing were smaller than anticipated in the program.

5. The government of Niger requests completion of the first review of the PRGF-supported program. The program for the last part of 2008 and for 2009 aims at enhancing the efficiency of public expenditure, mobilizing domestic resources, and strengthening the financial system and the business environment. This program, the main components of which are described in the attached memorandum on economic and financial policies, is aligned with the objectives of the Accelerated Development and Poverty Reduction Strategy for 2008-12, which was adopted in October 2007.

6. As in the past, the government consents to the publication by the International Monetary Fund of this letter of intent, the memorandum on economic and financial policies, the technical memorandum of understanding, and the IMF staff report. The government believes that the policies set out in the attached MEFP are sufficient to ensure attainment of the objectives of its program and will take any additional measures that may be necessary to that end. Niger will consult the IMF on the adoption of such measures and prior to any change in the policies set out in the MEFP, in accordance with IMF policies on such consultations.

Sincerely yours,

/S/

Ali Mahaman Lamine Zeine Minister of Economy and Finance

Attachments:

Memorandum on Economic and Financial Policies

Technical Memorandum of Understanding

Appendix I—Attachment I Memorandum of Economic and Financial Policies of the Government of Niger for 2008-09

I. Macroeconomic Framework for 2008 and 2009

1. Economic trends in the first nine months of 2008 saw an upsurge in food and fuel prices until August, reflecting the fact that international prices had been rising sharply since the latter months of 2007. Beginning in August 2008, however, the prices of cereals and other food products began to decline, because the harvest has begun well, thanks to highly favorable rainfall. In the 12 month to August 2008, inflation measured on the basis of the consumer price index reached 15 percent, but the index fell slightly between July and August. The prices of cereal prices on domestic markets began to decline in August and September. To soften the impact of the price increases, in March and in June the government adopted tax relief measures on sensitive foodstuffs. Thus in March, the VAT and customs duties in rice were suspended; in June the suspension of customs duties was extended to include milk, excise taxes on edible oil were also suspended, while reference values for customs taxation purposes for sugar and wheat flour were reduced (by 17 percent). However, the impact of these measures on price levels has been disappointing. Accordingly, in August the government decided to carry out direct imports of rice and sugar to offer for sale at reduced prices throughout the country through the national agency OPVN (Niger Foodstuffs Office), (3000 tons for each product). The government’s actions were combined with the interventions made by the national food security system in using the strategic (buffer) stock; sales were made at reduced prices in June-July (15,000 tons of cereals), as were free targeted distributions amounting to approximately 14,000 tons. These interventions made it possible to discontinue the suspension of import duties and taxes in mid-September. In light of the good harvest, the price index may decline by approximately 3 percent between August and the end of the year, bringing inflation by year-end on a year on year basis to approximately 8.5 percent. The GDP deflator is projected to increase by 8.3 percent between 2007 and 2008. For 2009, the consumption index is expected to increase at an annual average rate of 2.5 percent and the GDP deflator by 2.2 percent.

2. GDP growth at constant prices in 2008 is expected to reach 5.9 percent based on the latest estimates, compared to 3.3 percent in 2007, thanks to an 11.6 percent increase in value added in agriculture, substantial growth in construction and public works, and favorable performance by industry and services. Conversely, mining production is expected to remain stable. The investment GDP ratio is expected to remain at a high level, of about 26.3 percent, reflecting sizable investments in the sectors of telecommunications, energy, and mines.

3. In 2009, GDP growth may attain 4.5 percent; investment should be supported by a set of key initiatives in the agriculture, mining, roads, and energy sectors. These include the initiation of work on the Kandadji dam, the rehabilitation and development of irrigation systems, the development of a new coal mine in Tahoua, and the related construction of an electricity power station, the launching of investments for the full development of the Imourarem uranium mine and of the Agadem oil field, further prospecting in Agadem, and work on an oil refinery and a pipeline of approximately 580 kilometers connecting the oil field to the refinery.

4. The external current account deficit is projected to increase to 11 percent of GDP in 2008 (9.1 percent in 2007) in spite of a 25 percent increase in uranium exports, on account of the upward revision of export prices, which more than compensates for a decline in volumes. Exports of agricultural products are also rising sharply, thanks to a good harvest. Imports in value terms are expected to increase by approximately 21 percent, because of a substantial upturn in prices of hydrocarbons and rice during a big part of the year, as well as the significant increase in capital goods reflecting the growth in private and public investment. The anticipated rise in direct investment and external project financing for projects should lead to a slight upturn in net foreign assets of the central bank.

5. In 2009 the current account deficit is expected to increase further to 24 percent of GDP, because of higher imports related to the execution of investments in the mining, petroleum, telecommunications, energy, and services sectors. At the same time, export volumes for uranium and gold are projected to pick up again. The current account will be largely financed by private direct investment, estimated at approximately 13 percent of GDP.

6. The national buffer stock of cereals, currently standing at 12,000 tons after the sales in recent months, will be brought back to 50,000 tons by March 2009, through purchasing operations financed through budget appropriations scheduled for 2007 and 2008 (CFAF 2.2 billion) but not yet disbursed, and support from donors and lenders. The national system for the management and prevention of food crises, constituted by the OPVN, the food crisis unit (CCA), and the early warning system (SAP), will continue to play a key role in efforts to combat food insecurity, with support from donors and international organizations, through the nutrition program, targeted free distributions, cash-for-work programs, and the creation of cereal banks. To ensure that this role can be effectively discharged, the continuous support of donors is necessary, coupled with contributions from the national budget. The budget appropriations in the amount of CFAF 2.2 billion in favor of the national food security system will be disbursed in December 2008.

II. Program Implementation and Fiscal Outlook for the Remainder of 2008

7. During the first nine months of 2008, program implementation has been satisfactory—however, two performance criteria were not observed in timely fashion although corrective measures were rapidly adopted. Thus, at end-June 2008 the reduction in domestic arrears amounted to CFAF 5.8 billion against a programmed amount of CFAF 7 billion, but further reductions were made in July (CFAF 2.9 billion). The other quantitative performance criteria and indicators for end-June were all met. Steps are being taken to ensure that the target of CFAF 15 billion for the reduction of arrears at year-end is achieved. The programming of this reduction has already been completed; inter alia, it includes the full settlement of Treasury arrears dating from 2004 to 2006, the repayment of arrears to private suppliers, and additional repayments of the arrears of embassies and to international organizations. The performance criterion regarding the establishment of procedures for repaying the frozen deposits of the former ONPE (National Postal and Savings Office) before end-September 2008 was not complied with, but the necessary regulations have been adopted in early December.

8. During the first nine months of the year, revenues comfortably overshot the program target, chiefly reflecting the collection at end-June of a signing bonus for a petroleum production sharing contract (CFAF 123.4 billion, equivalent to 5.5 percent of GDP). The revenue target for end-June was achieved, even without taking into account these exceptional revenues. On the expenditure side, outlays remained below projections in the first six months of the year.

9. The supplementary budget approved at end-May was in line with program projections. This supplementary budget allocates the bulk of the nonrecurring revenues to priority expenditures. These nonrecurring revenues originate from the sale of mining assets and of a telecom license (respectively CFAF 12 and CFAF 32 billion) and were collected at end-2007 but not included in the initial budget for 2008; nonrecurring dividends of uranium enterprises collected in early 2008 (CFAF 15 billion); upward revision of tax receipts on the same enterprises; and budgetary assistance from the WAEMU and the BCEAO, for a total of CFAF 76 billion (3.7 percent of GDP). The supplementary budget also took into account the revenue shortfall attributable to the suspension of duties and taxes on rice and milk, the excise tax on oils, and the reduction of the taxable base on sugar and flour, estimated at CFAF 11.3 billion.

10. For the whole of 2008, tax receipts are forecast at CFAF 256 billion (11.6 percent of GDP, as in 2007) as against CFAF 260 billion in the program (including revenues for the account of local governments and Community institutions), while nontax receipts are projected at CFAF 25 billion, excluding the one-time signing bonus, compared to CFAF 30 billion under the program. The shortfall in tax receipts is primarily due to the exemptions on food products, which was extended beyond the three months initially planned. The shortfall in nontax receipts is attributable to lower-than-anticipated dividends from a mining company.

11. Domestically financed expenditures are projected to remain in line with program forecasts, with the exception of a government participation in the capital of the new refinery company to be established before year-end (CFAF 19 billion) and a supplementary transfer to OPVN of CFAF 11 billion (funded through the signing bonus) for interventions to purchase cowpeas, after the good harvest, in order to take advantage of the favorable developments on the international market for this product. The remainder of the bonus will be used in 2009 in accordance with the 2009 budget’s specifications. In 2008, the basic budget surplus, which excludes externally funded investment, is expected to record a deficit of 0.6 percent of GDP. Externally funded investments should be slightly below initial forecasts (CFAF 142 billion, as against CFAF 154 billion).

12. External budgetary assistance is expected to reach CFAF 38.9 billion in 2008, as against CFAF 80.8 billion under the initial program. The shortfall is attributable to the delays in finalizing a new program with the AfDB, lower-than-anticipated disbursements related to EU assistance, in addition to a delay in the disbursement of budgetary assistance for 2008 from the World Bank and France. The year will record a substantial increase in central government deposits at the central bank, on account of the signing bonus. Discussions will be held with the central bank to amend the two agreements of July 2006 for the consolidation of the advances to the Treasury.

13. With respect to strengthening fiscal management, the most significant progress in 2008 has to do with the establishment of the pilot unit (salle pilote), which is expected to accelerate expenditure commitment procedures for all ministries; the general directorate for the supervision of public procurement will be strengthened by raising its staffing levels; heightened supervision will be exercised over flows of imports to ports and the collection of port revenues will increase. The interconnection between customs border offices and regional customs offices is in progress, thanks to substantial assistance from the EU, which should facilitate efforts to improve imports monitoring. It is, however, necessary to strengthen the human and physical resources of the general directorate of customs (DGD) and of the general directorate of taxes (DGI) (recruitment, training, vehicles, office space) through adequate budget funding. For this purpose, the 2009 budget law allocates additional resources for these directorates.

14. Data on budget outturn for 2008—including figures on the unified list of priority expenditures and on the President’s Special Program—will be published by end-March 2009 on a website or in a government publication to allow for a higher degree of transparency in expenditure management (structural benchmark). The end-year Treasury accounts (comptes de gestion) for 2006 were examined by the Audit Office and the 2006 budget review law (loi de règlement) has been adopted by the National Assembly.

15. The reform of the financial system has continued with the launching of the privatized Crédit du Niger, which is designed to provide housing credit; the commencement of operations of the microfinance regulatory agency; and the rehabilitation of certain microfinance networks. With reference to the postal bank Finaposte, the mobilization of capital in the amount of CFAF 5 billion will be completed shortly, and its licensing as a banking institution will be rapidly requested from the regional Banking Commission. The government has defined in early December the modalities for the repayment of the frozen deposits of the former ONPE, which amount to CFAF 4.8 billion.

16. The expansion of credit to the economy maintained its momentum during the first six months of the year (20 percent increase), thanks to the demand for credit, primarily from the mining and telecommunication sectors; the expansion of the money supply was 3 percent. Over the entire year, growth in credit to the economy is projected at 22 percent and growth in the money supply is projected at 24 percent. The foreign assets of the central bank increased substantially in the first half of the year, reflecting the receipt of the signing bonus in June; they may increase by CFAF 100 billion over the year as a whole.

III. The 2009 Program

A. The 2009 Budget and Fiscal Reforms

17. The budget for 2009 is primarily designed to support the Accelerated Development and Poverty Reduction Strategy (SDRP) for 2008-12 and to use the resources from the signing bonus collected in 2008 to strengthen priority sectors. The preparation of the 2009 budget was strengthened thanks to closer cooperation with the permanent secretariat of the SDRP and the action plans for priority sectors. Taking account of the utilization of the bonus, the basic budget deficit should amount to CFAF 134 billion (5.4 percent of GDP). Total revenues, which are expected to attain CFAF 284 billion excluding the bonus (12.2 percent of GDP) in 2008, are expected to rise to CFAF 305 billion (12.2 percent of GDP) in 2009, including CFAF 288 billion in tax receipts. Tax receipts are projected to rise from 11 percent of GDP in 2008 to 11.6 percent of GDP in 2009. The highest growth should involve the VAT, registration taxes for government contracts, and profit taxes. Customs receipts are also forecast to increase by approximately 5 percent.

18. Nontax receipts are expected to reach CFAF 14.1 billion, including substantial dividends from SOPAMIN, which should turn a profit of around CFAF 14 billion in 2008.

19. The total amount of domestic expenditures, excluding externally funded capital expenditure, is provisionally established at CFAF 438 billion (17.6 percent of GDP), compared to CFAF 422 billion in 2008 (18.1 percent of GDP), with current expenditure amounting to 12.8 percent of GDP (12.9 percent of GDP in 2008), including 0.6 percent of GDP for the organization of elections. The increase in personnel-related outlays (8 percent of GDP) reflects recruitments in education and health. Domestically funded capital expenditure, including HIPC resources, should reach CFAF 120 billion, equivalent to 4.8 percent of GDP (5.2 percent of GDP in 2008) reflecting a reasonable rate of execution of budget appropriations. This is attributable to sizable allocations for rural roads and highways, irrigation, the Kandadji dam, medical equipment, as well as for electricity, in an effort to reduce the country’s dependence on external supplies (CFAF 10 billion).

20. Externally funded projects are expected to grow noticeably and to reach CFAF 213 billion in 2009 (8.6 percent of GDP) as against CFAF 142 billion (6.1 percent of GDP) anticipated in 2008, reflecting the planned disbursements of the Global Fund for AIDS, Tuberculosis and Malaria, the US Millennium Challenge Account, the acceleration of the road and agricultural development program, and the start of work on the Kandadji dam.

21. External budget assistance is expected to amount to CFAF 91.7 billion, including assistance in respect of a new structural adjustment program of the AfDB, as well as an IDA disbursement in the amount of US$40 million initially scheduled for December 2007. On the basis of these projections, domestic financing of the budget is projected to amount to CFAF 65 billion, chiefly accounted for by the utilization of deposits at the Central Bank created as a result of the signing bonus received in June 2008.

22. Domestic arrears will be reduced by CFAF 15 billion, on the basis of a program designed to settle in priority the arrears to the private sector, the suppliers to the embassies, the arrears to the international organizations, the rents, and the arrears on investments.

23. Major reforms of the tax system will take place in 2009, as envisaged in the initial program, to simplify the system and to eliminate those features that hamper the development of the private sector. Regarding the reimbursement of VAT credits to exporters, during 2009 the Tax Directorate (DGI) will review its technical and institutional aspects and assess the impact of the full reimbursement. Before end-2009 the provisions of article 34 of the tax code pertaining to the reimbursement of VAT export credits will be reformulated, in order to eliminate any ceiling to these reimbursements to exporting firms, while ensuring that no reimbursement is effected on domestic sale (performance criterion for end-December 2009). The rate of the profit tax will be reduced from 35 to 30 percent before end-December 2009 (performance criterion), to be applied to profits reported for FY 2009 and following years (performance criterion) Effective January 1, 2009, the profit tax (ISB) withholding at customs will be lowered from 7 to 5 percent for those taxpayers lacking a tax identification number (NIF), to ensure alignment with the rules set forth in the WAEMU directive.

24. A review of the IRVM (impôts sur les revenus des valeurs mobilières—tax on investment income) will be carried out in 2009, with a view to standardize the rates, and to align them to the UEMOA guidelines. Similarly a review of the real estate tax (taxe immobilière) will be carried out in 2009 to prepare its simplification.

25. Furthermore, other reforms are currently under consideration with a view to further simplify corporate and personal income taxes. Discussions on the reform of the investment code have been initiated. The purpose of this reform will be to eliminate non essential tax advantages, whereas the ordinary tax code should eliminate the penalizing impact on investors resulting from the VAT on capital goods, and allow accelerated amortization instead of the five-year exemption on the profit tax. In the meantime, the tax advantages set forth in the investment code should be strictly limited in time, without extension, in order to limit tax losses.

26. With respect to public finance management, in 2009 efforts will focus on: (i) strengthening financial controls, by increasing the number of controllers and their training; to support the decentralization process, it is envisaged to appoint one financial controller for each region; (ii) strengthening the DGCMP (General Directorate for the Supervision of Public Procurement), and lowering the threshold for contracts subject to its supervision from CFAF 300 million to CFAF 100 million; (iii) expediting the reporting of information between decentralized budget offices (centres de sous ordonnancement) in the regions and the general budget directorate. The updating of action plans of the development and poverty reduction strategy (SDRP), which will be completed in November 2008, and the updating of the medium-term expenditure frameworks (MTEFs) for priority sectors will make it possible to strengthen the preparation of the 2010 budget in a medium-term framework. Thus, the presentation memorandum for the 2010 Budget Law will include projections for the main budgetary revenue and expenditure aggregates for the period 2010-2012 (structural benchmark). Technical assistance from the IMF will be requested to assist in the preparation of a comprehensive MTEF. The MTEF for the infrastructure and transport sectors is currently being prepared with assistance from the World Bank.

B. Debt Management

27. As envisaged under the initial program, the authorities have strengthened the Debt Directorate with external assistance. Semiannual reports on recent borrowing, and prospective debt trends resulting from planned borrowing agreements, have begun to be produced since the first such report in October 2008. Loan disbursements should accelerate in 2009–10 reflecting the finalization of the loan agreements for the construction of the Kandadji dam, which during its initial phase will result in approximately US$210 million of new drawings. Close attention will be paid to the terms of these loans, which will in no circumstances have a grant element lower than 35 percent (continuous performance criterion); the authorities will endeavor to obtain terms implying a grant element higher than this floor. The Debt Directorate is in a position to conduct the periodic analysis of debt sustainability. Thanks to the favorable trends in exports, the debt ratio over the next 20 years is expected to remain well within the accepted thresholds (150 percent for the NPV ratio of debt-exports, and 40 percent for the NPV ratio of debt-GDP). However, these ratios are highly sensitive to the terms of borrowing, thus requiring heightened vigilance over borrowing terms.

C. Management of Petroleum Resources

28. The government has entered into an oil production sharing contract and it has granted an operating permit (permis d’ exploitation) to the firm CNPC pertaining to the Agadem block, and it has signed an agreement with the same company to construct a 20,000 barrel per day refinery in Zinder as well as a pipeline of approximately 580 kilometers from the oil field to the refinery. The refinery and the pipeline should be in operation by 2012. The refinery will be managed by a company in which the state will hold a 40 percent equity stake.

Domestic consumption will absorb about one third of output, and the remainder will be exported. A petroleum products purchase contract (contrat d’enlèvement) is scheduled to be signed with the national company SONIDEP (Société Nigérienne des Produits Pétroliers). The sale of crude oil to the refinery and the sale of refined products will be made on a commercial basis. The government will offer no guarantees for any loans which the refinery company may take out to finance the investment.

D. Money, Credit, and the Financial System

29. In 2009, the expansion of credit to the economy should hold steady, reflecting the continuation of major investment projects. The foreign assets of the central bank may decline, following the sharp upturn in 2008, and the growth in the money supply may reach 18 percent. The strengthening of the financial system will continue. Efforts are being made to strengthen housing credit, the specialty of Crédit du Niger, and credit for agriculture. Regarding credit for agriculture, further analysis is needed to identify the most effective options for increasing the supply of credit to the sector, in light of the difficulties which the agricultural banks have experienced in other countries of the subregion. In order to promote housing credit, steps will be taken to expedite real estate titling, through rapid strengthening of land registry services. Microfinance networks will be further strengthened through support from donors and the State. The newly established Microfinance Regulation Agency will play a key role in supervising and strengthening the sector.

E. Other Structural Reforms

30. Concerted efforts will be made to achieve further improvements in the business climate. The numbers of procedures and days necessary to create a business have been considerably reduced in recent years. However, the cost of setting up a business remains high, primarily on account of fees for enrollment in the Register of Commerce at the courts; the government has pledged to reduce these fees by end-June 2009 (structural benchmark).

IV. Program Monitoring

31. Program monitoring is based on semiannual and continuous quantitative performance criteria, structural performance criteria, quantitative and structural benchmarks (Tables 1 and 2) as well as standard continuous PCs. The performance criteria and benchmarks are presented in the TMU. The quarterly ceilings on domestic financing, net of the position in the IMF, will be adjusted upward in the event of a shortfall in external budgetary assistance (net of external debt service) in relation to program forecasts, for up to a maximum of CFAF 30 billion. It is also requested that the performance criterion on the net domestic financing of the government for end-December 2008 be modified to take into account the signature bonus, and that the performance criterion on the reimbursement of VAT credits be modified and set for end-2009. The second, third, and fourth program review will be conducted with the IMF respectively by end-May 2009, end-November 2009, and end-May 2010.

Table 1a.

Niger: Quantitative Performance Criteria and Indicative Targets, January 1, 2008-December 31, 2008

(Billions of CFA francs)

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Note: The terms in this table are defined in the TMU.

Performance criteria for program indicators under A and B; indicative targets otherwise.

The ceiling on domestic financing of the budget will be adjusted if the amount of disbursements of external budgetary assistance, as defined in footnote 4, falls short of program forecasts. if disbursements are less than the programmed amounts, the ceiling will be raised protanto, up to a maximum of CFAF 30 billion at the end of each quarter of 2008.

Minimum.

External budgetary assistance (including traditional debt relief, HIPC Initiative assistance, but excluding net financing from the IMF) less external debt service and payments of external arrears.

Excluding ordinary credit for imports or debt relief.

Excluding debt relief obtained in the form of rescheduling or refinancing.

Minimum, defined as the difference between total revenue, excluding grants and revenue from the settlement of reciprocal debts between the government and enterprises, and total expenditures, excluding externally financed capital expenditures.

Minimum. Excluding (i) revenue from the settlement of reciprocal debts between the government and Nigerien enterprises; and (ii) revenue from the privatization of public enterprises that is included in financing.

Table 1b.

Niger: Quantitative Performance Criteria and Indicative Targets, January 1, 2009-December 31, 2009

(Billions of CFA francs)

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Note: The terms in this table are defined in the TMU.

Performance criteria for program indicators under A and B; indicative targets otherwise.

The ceiling on domestic financing of the budget will be adjusted if the amount of disbursements of external budgetary assistance, as defined in footnote 4, falls short of program forecasts. If disbursements are less than the programmed amounts, the ceiling will be raised pro tanto, up to a maximum of CFAF 30 billion at the end of each quarter of 2008.

Minimum.

External budgetary assistance (including traditional debt relief, HIPC Initiative assistance, but excluding net financing from the IMF) less external debt service and payments of external arrears.

Excluding ordinary credit for imports or debt relief.

Excluding debt relief obtained in the form of rescheduling or refinancing.

Minimum, defined as the difference between total revenue, excluding grants and revenue from the settlement of reciprocal debts between the government and enterprises, and total expenditures, excluding externally-financed capital expenditures.

Minimum. Excluding (i) revenue from the settlement of reciprocal debts between the government and Nigerien enterprises; and (ii) revenue from the privatization of public enterprises that is included in financing.

Table 2.

Niger: Structural Performance Criteria and Structural Benchmarks for the Program September 2008-December 2009

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Appendix I—Attachment II Technical Memorandum of Understanding

Niamey, December 3, 2008

1. This technical memorandum of understanding defines the performance criteria and indicative targets for Niger’s program under the Poverty Reduction and Growth Facility (PRGF) for the period 2008-11. The performance criteria and indicative targets for end-December 2008 and for 2009 are set out in Table 1 of the government’s Memorandum of Economic and Financial Policies (MEFP) dated December 3, 2008 and attached hereto. This technical memorandum of understanding also sets out 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, according to a specific schedule; these payments will discharge the obligor of 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 lease holder 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 lease grantor retains the title to the property. For the purpose of this guideline, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement, excluding those payments necessary for 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 (for example, payment on delivery) will not give rise to debt.

  • (b) Government refers to the central government of the Republic of Niger; it does not include any political subdivision, public entity, or central bank with a separate legal personality.

  • (c) External payment arrears are external payments due but not paid. Domestic payment arrears are domestic payments due but not paid. They include (i) arrears outstanding at end-1999 identified by the audit conducted by the Ministry of Finance in 2005; (ii) the reste à payer at the Treasury related to the budgetary years 2004, 2005 and 2006, remaining due at December 31, 2007.

  • (d) Government obligation is any financial obligation of the government accepted as such by the government (including any government debt).

II. Quantitative Performance Criteria

A. Net Domestic Financing of the Government

Definition

3. Net domestic financing of the government is defined as the sum of (i) net bank credit to the government, as defined below; (ii) net nonbank domestic financing of the Government, including government securities issued in CFA francs on the WAEMU regional financial market and not held by resident commercial banks, proceeds from the sale of government assets, and privatization receipts net of the cost of structural reforms to which these proceeds are earmarked.

4. Net bank credit to the government is equal to the balance of the government’s claims and debts vis-à-vis national banking institutions. Government claims include cash holdings by the Nigerien Treasury, deposits with the central bank and commercial banks, and secured obligations. Government debt to the banking system includes debt vis-à-vis the central bank (excluding net financing from the IMF’s Poverty Reduction and Growth Facility (PRGF), but including government securities) and to commercial banks (including government securities held by commercial banks), and deposits with the postal checking system.

5. The scope of the net bank credit to the government as defined by the BCEAO includes all central government administrations. Net bank credit to the government and the 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 the net nonbank financing of the government is calculated by the Nigerien Treasury, whose figures are those deemed valid within the context of the program.

6. Nonbank net domestic financing includes (i) the change in the amount of government bonds issued in the regional WAEMU market and not held by Niger’s commercial banks; (ii) the change in the deposits of Treasury correspondents; (iii) the change in “comptes de consignations” at the Treasury.

7. The 2008 quarterly targets are based on the change in stock between end-December 2007 and the date considered for the performance criterion or the indicative target. Those for 2009 are based on the change in stock between end-December 2008 and the date considered for the performance criterion or the indicative target.

Adjustment

8. The ceiling on net domestic financing will be subject to adjustments if disbursements of external budgetary support less external debt service and arrears payments, including disbursements under the PRGF, fall short of projected amounts. For 2008, external budget support is calculated from end-December 2007, and for 2009 from end-December 2008.

9. If disbursements fall short of projected external budgetary assistance for each quarter in 2008 and 2009, the corresponding quarterly ceilings on net domestic financing will be raised pro tanto, up to a maximum of CFAF 30 billion.

Reporting requirement

10. Detailed data on domestic financing to government will be provided monthly within six weeks after the end of each month.

B. Reduction of Domestic Payments Arrears

Definition

11. Domestic payments arrears comprise (i) arrears identified at end-1999 on the basis of the audit conducted by the Ministry of Finance in 2005; (ii) the reste àpayer(RAP) at the Treasury for budget years 2004, 2005, 2006 outstanding at end-2007. The stock of arrears will be reduced to the minimum of the amounts indicated in Table 1 annexed to the MEFP. The quarterly objectives for 2008 and 2009 are based on the changes in the stock of arrears from end-December 2007, and from end-December 2008, respectively, and the date selected for the performance criterion or indicative target. The stock of RAP at end-2008 for the 2008 budget year will not exceed the stock of RAP outstanding at end-2007 for the 2007 budget year; any excess will be considered an increase in arrears, that will be deducted from the reduction of arrears as defined as the beginning of this paragraph. Similarly, the stock of RAP at end-2009 for the 2009 budget will not exceed the stock of RAP at end-2008 for the 2008 budget year.

12. The Centre d’Amortissement de la Dette Intérieure de l’Etat (CADDIE) and the Treasury are responsible for calculating the stock of domestic arrears, and recording their repayments.

Reporting requirement

13. Monthly data on the outstanding balance, accumulation (including changes in the reste à payer at the Treasury), and repayment of domestic payments arrears on government obligations will be provided monthly within six weeks following the end of each month.

C. Reduction of External Payments Arrears Definition

14. Government debt is outstanding debt owed or guaranteed by the government. For the program, the government undertakes not to accumulate external 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 external creditors, including Paris Club creditors.

Reporting requirement

15. Data on the outstanding balance, accumulation, and repayment of external payments arrears will be provided monthly within six weeks following the end of each month.

D. External Nonconcessional Loans Contracted or Guaranteed by the Government of Niger

Definition

16. The government will not contract or guarantee external debt with original maturity of one year or more with a grant element of less than 35 percent. Nonconcessional external debt is defined as all debt with a concessionality level of less than 35 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 10-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. The Ministry of Finance will communicate regularly to Fund staff the list of loans under negotiations, and, in case of objections, the Fund staff will have to express any objections within two weeks.

17. 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 by the Executive Board 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.

Reporting requirement

18. Details on any external government debt will be provided monthly within six weeks after the end of each month. The same requirement applies to guarantees extended by the central government.

E. Short-Term External Debt of the Central Government Definition of the performance criterion

19. The government will not accumulate or guarantee new 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.

Reporting requirement

20. Details on any external government debt will be provided monthly within six weeks following the end of each month. The same requirement applies to guarantees extended by the central government.

III. Quantitative Targets

A. Definitions

21. 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.

22. The basic fiscal deficit is defined as the difference between: (i) total fiscal revenue as defined in paragraph 23; and (ii) total fiscal expenditure excluding foreign financed investment (but including HIPC-financed investment).

23. This information will be provided to the IMF monthly within six weeks after the end of each month.

IV. Additional Information for Program-Monitoring Purposes

A. Public Finances

24. The government will report to IMF staff the following:

  • detailed monthly estimates of revenue and expenditure, including priority expenditure, the payment of domestic and external arrears, and a breakdown of customs, DGI, and Treasury revenue;

  • the table of government financial operations with comprehensive monthly data on domestic and external financing, and the changes in arrears (arrears outstanding at end-1999) and reste à payer (RAP) at the Treasury. These data are to be provided monthly within six weeks following the end of each month;

  • quarterly data on expenditures of the unified priority list, and data on expenditures on HIPC resources and the President’s Special Program, on a payment order basis;

  • 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;

  • monthly data on the balances of the accounts of the Treasury and of other public accounting officers at the BCEAO;

  • monthly data on the reste à payer at the Treasury, by reference fiscal year with an itemization of maturities of more than, and less than, 120 days;

  • monthly data on effective debt service (principal and interest) compared with the planned schedules. These data are to be provided within four weeks after the end of each month.

B. Monetary Sector

25. 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 within eight weeks after the end of the month (provisional data);

  • borrowing and lending interest rates; and

  • customary banking supervision indicators for bank and nonbank financial institutions (if necessary, the same indicators for individual institutions may also be provided).

C. Balance of Payments

26. The government will provide IMF staff with 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 after the end of the year concerned.

D. Real Sector

27. The government will provide IMF staff with the following information:

  • disaggregated monthly consumer price indices, monthly within two weeks following the end of each month;

  • national accounts, within six months after the end of the year; and

  • any revision in the national accounts.

E. Structural Reforms and Other Data

28. The government will provide the following information:

  • any study or official report on Niger’s economy, within two weeks after 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.

Summary of Main Data Requirements

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1

See Accelerated Development and Poverty Reduction Strategy 2008-2012, issued in August 2007 (Country Report (CR) No. 08/167).

2

The 2005-08 PRGF arrangement expired on May 31, 2008. The final review was completed on May 28, 2008, when the Executive Board also approved a successor three-year arrangement effective on June 2, 2008.

3

Nontax revenue were boosted by the sale of a telecom licence.

4

Including purchases of military equipment, which are classified as consumption expenditures.

5

The stock of domestic arrears is estimated at 6.6 percent of GDP at end-2007. Most of these arrears were accumulated before the restoration of political stability with the 1999 presidential election.

6

In early 2008 the main shareholder of the two uranium operating companies reached an agreement with the government increasing by 37.5 percent the export price of uranium for 2008 (following a 50 percent increase in 2007).

7

While the simulation has been carried out assuming that all additional aid is in the form of grants, the impact on growth would be only marginally lower if part of the aid was in the form of concessional loans.

8

For the same reason, and also because of the temporary suspension of taxes on sensitive foodstuff, the target for 2008 as a whole was revised from 11.5 percent of GDP to 11.0 percent of GDP.

9

Publication of the 2008 budget outcome by end-March 2009 has been set as a new structural benchmark.

10

The authorities explained that the principle of reimbursement of VAT credit to exporters is already included in the tax code, but is subject to a ceiling (Article 34, section 1, title 2 of the tax code). Therefore the PC is now formulated as an elimination of that ceiling, rather than the taking of a new decree establishing the principle of the reimbursement of VAT credits to all exporters.

11

The construction of the refinery would be financed by the capital and a loan from Exim Bank of China at 3.5 percent interest. The government will not guarantee the loan, although the service of the loan will reduce the dividends to the shareholders.

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Cover IMF Staff Country Reports
Niger: 2008 Article IV Consultation and First Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for Waivers and Modification of Performance Criteria: Staff Report; Staff Supplement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Niger
Author:
International Monetary Fund
Volume/Issue:
Volume 2009: Issue 059
Publisher:
International Monetary Fund
ISBN:
9781451828825
ISSN:
1934-7685
Pages:
97
DOI:
https://doi.org/10.5089/9781451828825.002

On average, Niger tends to grow faster than WAEMU but slower than Sub-Saharan Africa.

The investment ratio is increasing strongly.

Banks are profitable, but portfolio quality needs careful monitoring 2002-2008 1/
Figure 1.

Niger: selected MDG Indicators

Aid Contribution to Output Growth Rate (%)

GDP Per Capita

(2007 CFAF)

The fiscal position is sound, 2005-2012

The current challenges are sustaining growth and reining in inflation

External debt is sustainable…

…but remains sensitive to borrowing terms.

Niger’s Share in World Exports (%)

The CFAF appreciates against the U.S. dollar.

… but the real effective exchange rate is aligned with fundamentals

Niger’s Share in World Exports (%)