Statement by Laurean W. Rutayisire, Executive Director for Niger

This paper discusses key findings of the Third Review Under the Extended Credit Facility (ECF) for Niger. Program implementation to date is satisfactory and all quantitative performance criteria at end-June 2009 were met. The revenue performance is strong and domestic arrears repayment higher than anticipated. All indicative targets at end-September were observed, confirming these trends. On the structural front, the authorities have implemented measures to strengthen debt management, improve budget monitoring, and enhance the business environment.


This paper discusses key findings of the Third Review Under the Extended Credit Facility (ECF) for Niger. Program implementation to date is satisfactory and all quantitative performance criteria at end-June 2009 were met. The revenue performance is strong and domestic arrears repayment higher than anticipated. All indicative targets at end-September were observed, confirming these trends. On the structural front, the authorities have implemented measures to strengthen debt management, improve budget monitoring, and enhance the business environment.

I – Introduction

My Nigerien authorities would like to express their deep appreciation to the Executive Board, Management and Staff for their continued support and fruitful policy dialogue in the context of Niger’s ECF-supported program. My authorities are strongly determined to pursue their reform efforts and sound policies to achieve the objectives of the current ECF-supported program. Niger’s economic performance under the ECF has been on track, and all quantitative performance criteria at end-June 2009 were met.. Based on my authorities’ strong commitment to the program and the Niger’s good track record, I would like to request the support of the Executive Board for the completion of the third review under the ECF-supported program.

The impact of the global financial turmoil on the Nigerien economy was relatively limited. However, due to the 2009 political crisis key development partners have suspended their budget support until the resolution of the crisis. Strongly determined to solve the crisis and create conducive environment for reform implementation and sustained growth, the authorities have started negotiating with main opposition parties in December 2009. In the context of a dearth external support, my authorities determined to meet the program’s fiscal objectives, have not only aligned the pace of spending execution with available resources but have also improved the efficiency of tax administration.

II - Recent Economic Developments and Performance under the ECF-Supported


Reflecting the sharp fall in agricultural production due to the poor weather, the real GDP substantially fell down in 2009. However, activity in the mining, transport, construction and telecommunication has continued to be buoyant. The non-agriculture sector’s expansion is expected to reach 5.3 percent. Inflation declined to -3.1 percent in December 2009 from 14 percent in December 2008 thanks to the reduction in world food and fuel prices and to the excellent 2008/09 crop harvest. The current account deficit increased due to the strong import flows linked to ongoing projects in the oil and uranium sectors. This increase was largely financed by the foreign direct investments. In spite of the shortfall in external budgetary financing, 2009 fiscal objectives were observed, helped in particular by a strong revenue performance.

Tax revenue exceeded program targets by more that 1 percent of GDP. This favorable record is the result of combined effect of broadening the revenue base and making the tax administration more efficient. Net domestic arrears reduction was also higher than projected. The authorities implemented a prudent management of public expenditure that kept current expenditure within program objectives. This policy led also to a basic budgetary deficit below program’s target. In the face of the uncertain external financing, the authorities used budgetary regulation to ensure that budget execution remains in line with program objectives notably aligning on a quarterly basis, the budget execution with available resources. This mechanism, has allowed the domestic financing of the deficit to remain below the program’s indicative target. With regard to structural reforms, the authorities implemented measures needed to strengthen debt management, improve budget monitoring and enhance the business environment. In addition, it is worth noting that end-September data indicated that all quantitative targets were also met.

III - Economic Outlook and Policy Measures for 2010

Niger’s economic outlook for 2010 appears broadly favorable. The continued expansion of telecommunications, transport and mining sectors in addition to the strong return of agricultural production will result in an economic growth of 5 percent. The current account deficit would remain stable in the wake of increases in uranium exports and continued imports flows for the mining sector. Inflation is projected at around 2 percent based on a good average harvest and stability in world prices of food and fuel.

On the medium-term, the start of oil and the increase in uranium production scheduled in 2012 and 2014 respectively will help strengthen Niger’s macroeconomic prospects. Between 2012 and 2016, exports are projected to double and mining as a share of GDP will triple. Moreover, following the start of oil production, oil imports will be reduced by half by 2012. On the fiscal front, these encouraging developments should lead by 2015 to a significant increase in annual fiscal revenues. Furthermore, Niger’s debt outlook is also favorable with a low risk of debt distress. The Niger’s DSA conducted by Staff has shown that in the long-term, the present value of external debt is expected to stabilize below 25 percent of GDP and 105 percent of total exports.

My Nigerien authorities are strongly committed to pursue their reform agenda and implement sound policies in order to promote strong and sustainable economic growth and expedite poverty reduction.

Fiscal policy

In the fiscal sector, my authorities intend to continue their efforts to further improve tax administration and broaden the tax base with a view to increase revenues. In this context, the public expenditure will focus on education with the integration into the civil service of 8000 contractual employees as well as on health and infrastructure sectors. Priority will also be intended to activities supporting the private sector, the state’ s involvement in the exploitation of the Agadem oil field and the restructuring of the banking system. Based on continued efforts to increase revenue collection and subdued expenditure, the overall fiscal deficit for 2010 is projected to narrow at 1.7 percent of GDP. My authorities are hopeful that the external support will resume in 2010 to help finance the budget.

Efforts to further strengthen the budget process will be intensified under the public financial management reform. In this regard, the legislation governing budget preparation will be revised with a view to ensure that the legislation is consistent with the new WAEMU community directives. To further improve the budget execution, the use of fast-track expenditure procedures will be strictly limited in accordance to regulations. The computerization of the decentralized budget offices will help to broaden the monitoring of expenditures to appropriations. Moreover, the authorities remain committed to ensure a broad-based dissemination of quarterly execution of poverty-reducing spending.

With regard to improving the revenue collection, my authorities are engaged in implementing measures to enhance control over the tax base, reduce taxpayer noncompliance, strengthen and modernize tax system. In collaboration with the World Customs Organization, the authorities are updating the 2009-11 action plan for the customs with a view to facilitate trade flows by modernizing customs controls, use of scanners and risk analysis. Exemptions for imports related to oil, mining projects as well as those granted under the investment code, and other conventions will continue to be scrutinized.

Debt Sustainability

My authorities welcome Niger’s DSA conducted by Staff and agree with their findings and recommendations. In particular, they share the view that a prudent debt policy and an enhanced public financial management are key to preserve Niger’s debt sustainability and ensure the efficient use of available fiscal pace. They remain committed to prudent debt management, which is essential in their efforts to make the investments needed to accelerate the country’s development notably through a judicious exploitation of its natural resources. To further strengthen the public debt management system, the authorities intend to enforcer the provision making the Ministry of economy and Finance the sole entity empowered to sign agreements on behalf of the state and obligating it financially. The National Public debt management Committee (CNGDP) will be consulted on every domestic or foreign borrowing project or request for public guarantees with a view to take in to examine and take into account the impact of any new borrowing on public debt sustainability. Moreover, given the recent change in IMF policy on public debt limits, the CNGDP’ s prerogatives will be extended to cover the full range of public enterprises, public entities and public offices. In order to meet the objectives set out in the debt management reform, the authorities are requesting a technical assistance from the Fund.

Financial Sector Reform

Reform in the financial sector will be pursued to enable the sector to fully support economic growth. In this context and given the need to strengthen the balance sheets of banks operating in Niger, efforts are underway to meet before end-December 2010, the requirement for minimum capital set by the regional banking commission. In order to help banks to accommodate the rising demand for medium-term and long-term credits, negotiations for new credit facilities are underway with multilateral institutions. Some banks are also planning to issue bonds in the medium-term to lengthen the maturity of their resources. In addition, the authorities are implementing their commitments regarding Finaposte with the repayment of accounts of CNE depositors and the conversion of half of the government deposits with the CCP into time deposits. The authorities have also reached an agreement on the new capital structure for Crédit du Niger. Mindful of the need to promote the social housing, the authorities are finalizing a study of the strategy for financing a social housing for which a preliminary authorization has been obtained from the banking commission.

Management of Mining and Petroleum Resources

My Nigerien authorities are strongly committed to implement transparent management policy of the country’s mining and petroleum resources with a view to boost the economic growth and alleviate poverty. To this end, significant progress has been made in the process of Niger’s participation in the Extractive Industries Transparency Initiative (EITI). In particular, a report reconciling mining and petroleum revenues for 2005 and 2006 has been completed, validated by the Committee for Dialogue in October 2009 and largely published including in the local newspaper. Preparations for the report on 2007 and 2008 are ongoing and the report will be approved by the end of the first quarter of 2010. The authorities intend also to annex, the certified accounts of Société du Patrimoine des Mines du Niger and Nigrepétrole to the draft budget law forwarded each year to the National Assembly. In addition, the authorities intend to put in place a unified revenue framework accounting for all oil and mining revenues paid to public entities and ensure that public investment in the mining sector is fully reflected in budget documents.

Improvement of Business Environment

The authorities are mindful on the need to further improving Niger’s business environment in order to increase domestic and foreign private investment and foster economic diversification. In this regard, they continue to press ahead with structural reforms needed to promote a vibrant private sector beyond the mining exploitation and sustain strong economic growth. With the 2010 budget law, measures intended to simplify and modernize the tax system have been put in place. The corporate income tax rate is reduced to 30 percent from 35 percent. Stamp duty on enrollment in the Register of Commerce was reduced. The ceiling on VAT credit repayment for all exporters was abolished. The authorities plan also to adopt during the first half of 2010 the new General Tax Code that incorporates all the laws governing the tax system.

IV – Conclusion

My Nigerien authorities have demonstrated a good track record in implementing sound polices, pursuing structural reforms and enhancing transparency in mineral resources management. They have demonstrated strong determination to meet all the objectives agreed under the ECF-supported program. Based on these performances, my authorities would like to request the Board’s support for the completion of the third review. They are also hopeful that the international community will continue supporting their efforts to further preserve macroeconomic stability, increase economic growth and reduce poverty.