Statement by Mr. Raghani, Executive Director for Niger, Mr. Bah, Advisor to the Executive Director, and Mr. Diakite, Advisor to the Executive Director January 8, 2020

Fifth Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Niger

Abstract

Fifth Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Niger

I. Introduction

Our Nigerien authorities would like to thank staff for the constructive discussions held in October-November 2019 in Niamey under the fifth review of the ECF-supported program. They also would like to thank the Executive Board and Management for their support to the implementation of Niger’s economic and financial reforms. Niger, like other countries in the Sahel region, is experiencing recurrent and intensified terrorist attacks with a heavy toll on the population, economic activity and public finances. Despite the difficult environment resulting from these attacks and the recent border closure with Nigeria, the program’s implementation has been steadfast with satisfactory outcomes.

Niger’s authorities remain committed to consistently implement their ECF program and achieve its objectives, notably the strengthening of fiscal and debt sustainability, achieving sustained and more inclusive growth while substantially reducing poverty. In this respect, the authorities are also mindful of the daunting challenges facing their country particularly the deadly terrorist attacks, adverse climate change, high population growth and volatility in their export commodity prices in an environment of limited resources and capacity. To address these challenges, the authorities are determined to pursue sound policies and far-reaching structural reforms with the increased support of the Fund and the international community.

II. Performance under the ECF Arrangement

The authorities’ continued efforts in implementing the program have led them to meet all quantitative performance criteria and indicative targets set for end-June 2019. Structural reforms related to the reduction of tax exemptions advanced very well and the tracking system for social spending was put in place. Moreover, the governance reforms are being rolled out gradually. Regarding the performance targets set for September 2019, efforts have been intensified to catch up encountered delays and further strengthen the revenue base for 2020. Based on the satisfactory program implementation and its good performance, our authorities are requesting Board’s approval for the completion of the fifth review. Given the latest fiscal developments, they are also requesting the modification of the continuous performance criterion on contracting of new external public debt and the end-December 2019 performance criterion on domestic budget financing. Going forward, the authorities of Niger will continue demonstrating their solid program ownership in order to achieve its objectives despite the difficult security environment and heavy capacity constraints.

III. Recent Economic Developments

The steadfast implementation of the ECF-supported program has helped the authorities to preserve Niger’s macroeconomic stability and pursue prudent policies and reforms in spite of the tense security situation and exogenous shocks the country is experiencing. In 2019, growth is estimated to have reached 6.3 percent driven mainly by the construction of large-scale projects in infrastructures, the hosting of the 12th Extraordinary Africa Union Summit and the good agricultural harvest. The good crop production has helped to bring inflation far below the WAEMU convergence criterion of 3 percent. However, the current account deficit, widened at 19.4 percent of GDP owing to weak commodity exports and increased imports in the context of large infrastructure projects. This current account deficit is largely financed by foreign direct investors and donors.

On the fiscal front, the authorities have pursed their multi-year consolidation efforts. As a result, the fiscal deficit for 2019 is expected to be reduced at 3.9 percent of GDP from 4.1 percent of GDP in 2018 and 6.1 percent of GDP in 2016. Increased domestic revenue mobilization added to budget support from donors coupled with efforts to reign in expenditure helped achieve this good performance.

IV. Outlook and Risks

Niger’s economic outlook is favorable on account of the government’s increased efforts in implementing large public investments, the construction of the pipeline for crude oil exports. Based on this, real GDP growth should attain 7 percent over the medium-term. The authorities remain confident that the pipeline construction will transform the economy of Niger and neighboring countries as well. They are also mindful that risks to the outlook may stem form security threats in the Sahel region, slowdown of global growth, and delays in donors’ assistance. To mitigate these risks, the authorities will spare no effort to continue implementing the required policies and reforms.

V. Policies and Reforms for 2020

Niger’s policies and reforms under the ECF-supported program will continue to aim at safeguarding macroeconomic stability, enhancing conditions for a higher and more inclusive growth, and strengthening the economy’s competitiveness while judiciously and profitably exploiting the oil reserves.

1. Fiscal policy

The authorities remain committed to prudent fiscal policies to comply with the WAEMU convergence criterion for a deficit of no more than 3 percent of GDP. The budget for 2020 submitted to Parliament aims at a deficit of 2.7 percent of GDP. Efforts in this regard will focus on collection of tax arrears, enforcement of performance plans for tax and customs administrations, increased cooperation between tax and customs administrations, streamlining of tax exemptions and introduction of VAT machines, higher tax on re-exports and updating low valuation of transport services. Under the Fund’s technical assistance, the government intends to review the tax system and make it easier to enforce. To further reinforce the Treasury single account (TSA) implementation, remaining entities to comply with the TSA requirements have been instructed to close their accounts with commercial banks and transfer balances to the TSA, and the results will be subject of in-depth analysis. On the expenditure side, the authorities will further improve the quality of spending and continue to strengthen program budgeting. In this context, the tracking system for the social programs and the recommendations of the PIMA technical mission will be effectively implemented to raise spending efficiency.

The government is fully committed to maximize the benefits expected from the use of public- private partnership (PPPs). The PPP related to the domestic fuel product pipeline will be finalized based on a cost-benefit analysis and renegotiations with the private partner in the construction of this infrastructure. The government being committed to this project will also request technical assistance from the Fund and the World Bank in assessing the results of the analysis with a view to better contain fiscal risks. The authorities plan to publish all PPPs contracts before entering in contractual obligations with private partners.

Efforts to further increase the performance of public entities and enterprises will be accelerated not only to improve the quality of service delivery but also to reduce fiscal risks. In this regard, financial oversight and governance of public entities and enterprises will be strengthened and their performance contracts as well.

2. Debt policy and Management

Niger’s debt policy will continue to be prudent to ensure debt sustainability. In this context, the authorities will rely mainly on concessional loans. To further improve the debt management, the responsibilities of the Inter-Ministerial Committee of Public Debt and Budgetary Support have been extended to cover PPPs, debt of SOEs and public administrative entities and local governments as well. The compliance with procedures for debt-financed projects will be validated by this Committee whose 2019 annual report is expected to be published in early 2020. Given that donors’ frontloaded support has resulted in signing conventions worth CFAF 100 billion which is more than the amount previously programmed, the authorities are requesting a modification of the performance criterion on the ceiling on the contracting of new external public debt. This will enable the execution of public investments deemed essential to Niger’s development.

3. Management of the Oil Revenues

The oil production starting in 2022 will have a large impact on Niger’s economy. The increase in fiscal revenue in particular is projected to be around 2 percent of GDP. The authorities are mindful of the need for a well-designed management framework to mitigate potential risks associated with oil exporter status. They will carefully consider contractual arrangements signed with foreign investors, put in place an appropriate framework for resource management and governance and implement a sound fiscal policy to meet the country’s development needs given the volatility associated with natural resource revenues. They plan to use the expected revenues from oil production through well planned projects to spur the country’s development and ensure economic diversification beyond the oil industry.

4. Structural Reforms

The authorities are determined to pursue implementing their structural reforms’ agenda to promote a vibrant private sector, deepen financial inclusion, improve governance and transparency while addressing climate change and demographic challenges. Regarding the promotion of a strong private sector, they will increase their efforts to further improve the business environment which is essential for the diversification of the non-oil sector and job creation. The government will bring together all stakeholders to adopt a time-bound reforms whose implementation will be monitored. In the same vein, access to credit, training, and partnership with foreign investors will be encouraged.

On financial inclusion, a needed framework for mobile banking and payments has been adopted and gaps related to interconnectivity and infrastructure will be addressed. Moreover, the authorities plan to implement the new microfinance strategy based on the recommendations of the donor round table including the re-structuring plan.

Niger, a landlock country with limited capacities is facing significant climate change and demographic challenges. To address these challenges, the government is implementing its Plan de Developpement Economique et Social (PDES) covering the period 2017–2021. Based on the good progress made so far, the authorities will put further emphasis on the updated National Gender Policy, and awareness campaigns on girl’s education and vocational training. As for climate change, a sustained assistance from the international community is necessary to help Niger mitigate the adverse effects of drought and enhance its resilience strategy.

With respect to governance and transparency, it is important to note that the government is expecting a favorable response to its application to rejoin the Extractive Industry Transparency Initiative (EITI). It is also committed to publish on EITI’s web site all-natural resource contracts. The anti-corruption agency namely HALCIA will receive electronic filing of complaints after increasing its staff and enhancing its website. Moreover, efforts to further improve the asset declaration regime and the AML/CFT framework will be pursued including the implementation of an action plan drawn from the July 2019 national risk assessment report. The government is committed to comply with legal requirements for the publication through an official gazette and online free of charge, of key documents including, draft and approved budgets, conventions with foreign investors, PPPs contracts and tender awards.

VI. Conclusion

Our Nigerien authorities are strongly committed to ensure the success of their ECF-supported program. In this respect, they are hopeful that their continued efforts in a very difficult environment including the tense security situation, the border closure with Nigeria and volatile commodity prices, will be fully accompanied through increased external assistance. Based on the successful implementation of the ECF arrangement, on their behalf, we would appreciate the Executive Board’s completion of the fifth review as well as its approval of the request for modification of performance criteria.