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IMF Country Report No. 23/28

NIGER

2022 ARTICLE IV CONSULTATION, SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUESTS FOR A WAIVER OF NON-OBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR NIGER

January 2023

In the context of the article IV consultation and Second ECF review, the following documents have been released and are included in this package:

• A Press Release including a statement by the Chair of the Executive Board and summarizing the views of the Executive Board as expressed during its December 21, 2022, consideration of the staff report on issues related to the Article IV Consultation and the IMF arrangement.

• The Staff Report prepared by a staff team of the IMF for the Executive Board's consideration on December 21, 2022, following discussions that ended on November 2, 2022, with the officials of Niger on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on December 6, 2022.

• An Informational Annex prepared by the IMF staff.

• A Debt Sustainability Analysis prepared by the staff[s] of the IMF and the World Bank.

• A Statement by the Executive Director for Niger.

The documents listed below have been or will be separately released.

• *Selected Issues

The IMF's transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities' policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

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© 2023 International Monetary Fund

Press Release

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PR22/455

IMF Executive Board Completes the Second Review Under the Extended Credit Facility (ECF), Approves US$ 52.6 Million Disbursement, and Concludes the 2022 Article IV Consultation with Niger

FOR IMMEDIATE RELEASE

• Despite an expected rebound in growth this year and an acceleration over the near term, Niger continues to face daunting development challenges, while being exposed to a deteriorating security situation in the Sahel and recurrent climate shocks.

• Program performance has been broadly on track. Overall macroeconomic performance is satisfactory, and the implementation of the structural reform agenda is gaining momentum, including on governance-related issues.

• Key priorities to build resilience to shocks include improving domestic revenue mobilization and spending quality and creating an enabling environment for economic diversification and private sector development.

Washington, DC – December 21, 2022: Today, the Executive Board of the International Monetary Fund (IMF) concluded the 2022 Article IV Consultation¹ and completed the Second Review of the Extended Credit Facility (ECF) arrangement for Niger. The completion of the review enables the disbursement of SDR 39.48 million (about US$ 52.6 million), bringing total disbursements under the arrangement to SDR 118.44 million (about US$ 157.8 million). Niger's three-year ECF arrangement for SDR 197.4 million (about US$ 275.8 million at the time of program approval or 150 percent of quota) was approved on December 8, 2021 (see press release PR21/366). The arrangement is expected to catalyze additional bilateral and multilateral financial support.

The Executive Board also concluded the 2022 Article IV consultation with Niger. Since the conclusion of the last Article IV consultation in 2019, authorities have made progress in adopting a number of key policy recommendations and have advanced their reform agenda. Nonetheless, despite a positive macroeconomic outlook, the country continues to face daunting development challenges against a backdrop of fragility, which are exacerbated by a decade of conflict in the Sahel and exposure to climate shocks.

Following the Executive Board discussion, Ms. Sayeh, Deputy Managing Director and Acting Chair, issued the following statement:

“Niger's near and medium-term economic outlook remains broadly favorable with growth expected to bounce back this year and accelerate thereafter driven by private investment and oil exports through the new pipeline. Steadfast implementation of the authorities' structural reform agenda aimed at strengthening human capital, addressing the sources of fragility, and diversifying the country's production base by promoting private sector development, would create the conditions for sustained and shock-resilient long-term growth and poverty reduction.

Program performance has been broadly satisfactory in a challenging context. All quantitative performance criteria were met at end-June and end-September 2022, and five out of six indicative targets were observed at end-September. Nonetheless, the present value of new PPG external debt exceeded its ceiling in November 2022. The implementation of the authorities' structural reform agenda is also broadly on track.

A gradual fiscal consolidation path is warranted to address urgent spending needs related to the food crisis and the deteriorating security situation in the Sahel region as well as to accommodate pressing spending priorities in education, infrastructure, and social safety nets. The authorities should however avoid entrenched large fiscal deficits to preserve fiscal and public debt sustainability and revert to the WAEMU fiscal deficit norm by 2025.

Advancing the domestic revenue mobilization agenda is key to create the needed fiscal space for priority spending. The authorities are therefore encouraged to accelerate reforms to reduce tax exemptions and evasion, revise the tax code to simplify the tax system and increase its efficiency, and enhance revenue administration through digitalization. It is also urgent to establish a transparent oil resource management framework before the start of oil exports. Efforts to enhance the efficiency and quality of spending and improve the performance of state-owned enterprises to create fiscal space for priority social and investment spending are also needed.

Stepping up efforts to preserve the stability and soundness of the financial sector is essential for private sector development and inclusive growth. In particular, restructuring the microfinance sector remains critical to promoting financial inclusion and increasing the resilience of the most vulnerable to shocks.

Progress on the governance agenda is key to address the country's sources of fragility and improve the business environment. Efforts to address remaining inadequacies of the AML/CFT framework and steps taken to publish the asset declarations of high-ranking officials are welcome. Building resilience to climate shocks in the agricultural sector and fostering export diversification are also critical for long-term inclusive growth.”

Executive Board Assessment²

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the Nigerien authorities' commitment and progress in implementing reforms under the ECF-supported program, despite the challenging context. While the medium-term outlook is favorable, driven by rising oil exports, the risks remain significant, including from climate shocks, security threats, and protraction of Russia's war against Ukraine. In this context, Directors called for continued commitment to policies that would promote macroeconomic stability and build resilience to shocks, while implementing reforms targeted at developing the private sector and improving governance. Continued donor involvement and leveraging the IMF's capacity development support will be key in assisting these efforts.

Directors agreed that a more gradual fiscal consolidation trajectory is appropriate to support Niger's daunting development needs and urgent spending priorities. However, they agreed that the authorities should adhere to the envisaged fiscal consolidation path to meet the WAEMU fiscal deficit norm by 2025 and pursue a prudent debt policy by prioritizing concessional loans. They also recommended strengthening capacity in the compilation of debt and fiscal statistics.

Directors emphasized the importance of advancing the authorities' revenue mobilization agenda, notably the revision of the tax code to broaden the tax base and the implementation of measures to reduce tax exemptions and evasion. They also stressed that developing a transparent framework for the management of oil revenues before the start of exports is crucial to ensure proper management of these resources.

Directors encouraged the authorities to accelerate efforts to enhance the efficiency and quality of spending and improve the performance of state-owned enterprises to create fiscal space for priority social and investment spending and improve the delivery of public services. They stressed the importance of strengthening social safety nets to protect the most vulnerable and welcomed the authorities' commitment to foster girls' education and gender equality.

Directors noted rising vulnerabilities in the financial sector and called for close monitoring of the deterioration in asset quality in the banking and microfinance sectors.

Directors underscored the importance of advances in the implementation of the structural reform agenda to promote the development of the private sector. Building resilience to climate shocks in the agricultural sector and fostering export diversification and financial inclusion are key to boost long-term inclusive growth. Directors also encouraged continued efforts to strengthen governance and anti-corruption frameworks and leverage digitalization and encouraged further efforts in these areas.

It is expected that the next Article IV consultation with Niger will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.

^{Table 1.}

Niger: Selected Economic and Financial Indicators, 2019-23

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

^{Table 1.}

Niger: Selected Economic and Financial Indicators, 2019-23

	2019	2020	2021	2022	2023
	(Annual percentage change)
National income and prices
GDP at constant prices	6.1	3.5	1.4	7.1	7.0
Export volume	-3.3	-0.6	-8.3	-6.7	22.8
Import volume	9.5	2.7	1.1	-5.2	10.6
CPI, annual average	-2.5	2.9	3.8	4.5	3.0
CPI, End-of-period	-2.3	3.1	4.9	4.8	3.0
Government finances
Total revenue	-1.6	0.5	5.2	19.9	19.6
Total expenditure and net lending	8.4	8.4	13.4	13.9	1.7
Current expenditure	2.3	12.4	9.1	13.9	1.8
Capital expenditure	13.8	5.3	12.9	12.9	-4.3
	(Annual percentage change)
Domestic credit	-12.2	25.0	9.2	17.5	15.0
Credit to the government (net)	-89.5	565.5	-24.6	103.6	37.7
Credit to the economy	13.0	8.6	15.4	7.1	9.8
Broad money	15.0	17.0	9.7	10.3	12.1
	(Percent of GDP)
Government finances
Total revenue	11.2	10.8	10.8	11.7	12.8
Total expenditure and net lending	21.6	22.4	24.3	24.8	23.1
Current expenditure	9.6	10.3	10.7	11.0	10.2
Capital expenditure	12.0	12.1	13.1	13.2	11.6
Overall balance (incl. grants)	-3.6	-4.8	-5.9	-6.8	-5.3
Gross fixed capital formation	29.9	31.1	31.7	34.2	33.5
Non-government investment	19.3	20.5	20.6	22.9	23.7
Government investment	10.6	10.5	11.1	11.2	9.8
External current account balance
Excluding official grants	-15.1	-15.7	-16.4	-16.2	-14.9
External current account balance (incl. grants)	-12.3	-13.2	-14.1	-14.4	-13.4
Total public and publicly-guaranteed debt	39.8	45.0	51.3	56.6	57.6
Public and publicly-guaranteed external debt	26.5	31.6	33.5	37.2	36.7
PV of external debt	24.5	22.7	20.7	22.7	22.2
Public domestic debt	13.3	13.4	17.8	19.4	20.9
	(Billions of CFA francs)
GDP at current market prices	7,568	7,911	8,271	9,222	10,065

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

View Table

^{Table 1.}

Niger: Selected Economic and Financial Indicators, 2019-23

	2019	2020	2021	2022	2023
	(Annual percentage change)
National income and prices
GDP at constant prices	6.1	3.5	1.4	7.1	7.0
Export volume	-3.3	-0.6	-8.3	-6.7	22.8
Import volume	9.5	2.7	1.1	-5.2	10.6
CPI, annual average	-2.5	2.9	3.8	4.5	3.0
CPI, End-of-period	-2.3	3.1	4.9	4.8	3.0
Government finances
Total revenue	-1.6	0.5	5.2	19.9	19.6
Total expenditure and net lending	8.4	8.4	13.4	13.9	1.7
Current expenditure	2.3	12.4	9.1	13.9	1.8
Capital expenditure	13.8	5.3	12.9	12.9	-4.3
	(Annual percentage change)
Domestic credit	-12.2	25.0	9.2	17.5	15.0
Credit to the government (net)	-89.5	565.5	-24.6	103.6	37.7
Credit to the economy	13.0	8.6	15.4	7.1	9.8
Broad money	15.0	17.0	9.7	10.3	12.1
	(Percent of GDP)
Government finances
Total revenue	11.2	10.8	10.8	11.7	12.8
Total expenditure and net lending	21.6	22.4	24.3	24.8	23.1
Current expenditure	9.6	10.3	10.7	11.0	10.2
Capital expenditure	12.0	12.1	13.1	13.2	11.6
Overall balance (incl. grants)	-3.6	-4.8	-5.9	-6.8	-5.3
Gross fixed capital formation	29.9	31.1	31.7	34.2	33.5
Non-government investment	19.3	20.5	20.6	22.9	23.7
Government investment	10.6	10.5	11.1	11.2	9.8
External current account balance
Excluding official grants	-15.1	-15.7	-16.4	-16.2	-14.9
External current account balance (incl. grants)	-12.3	-13.2	-14.1	-14.4	-13.4
Total public and publicly-guaranteed debt	39.8	45.0	51.3	56.6	57.6
Public and publicly-guaranteed external debt	26.5	31.6	33.5	37.2	36.7
PV of external debt	24.5	22.7	20.7	22.7	22.2
Public domestic debt	13.3	13.4	17.8	19.4	20.9
	(Billions of CFA francs)
GDP at current market prices	7,568	7,911	8,271	9,222	10,065

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

Title page

NIGER

STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION, SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUESTS FOR A WAIVER OF NON-OBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA

December 6, 2022

EXECUTIVE SUMMARY

Context and recent developments. Niger's political landscape is broadly stable, but the country continues to face daunting development challenges against a backdrop of fragility, which are exacerbated by a decade of conflict in the Sahel and exposure to climate shocks. Low rainfall in 2021, pushed an estimated 4.4 million people into acute food insecurity this year. Russia's war in Ukraine added to food, petroleum, and fertilizer price pressures. Economic growth is projected to accelerate from 1.4 percent in 2021 to 7.1 percent this year, driven by private investment and the recovery in agriculture. While debt vulnerabilities have increased, the updated DSA deems debt as sustainable, and the risk of external and overall debt distress is still rated “moderate".

Outlook and risks. GDP growth is projected to keep momentum in 2023 at 7.0 percent and accelerate thereafter, reaching double-digits in 2024 as oil production picks up and the implementation of the structural reform agenda bears fruit. The outlook is subject to significant downside risks. Climate shocks and security threats could weigh on agricultural and oil production. An escalation of the war in Ukraine could imply lower aid flows, more volatility in commodity prices, and further tightening of financial conditions that could result in greater damage to the Nigerien economy.

Program performance. Program implementation remains broadly on track against end-June and end-September 2022 targets. Most quantitative performance criteria (QPCs) and indicative targets (ITs) were met. Domestic budget financing remained well below the targeted ceiling. Nonetheless, the present value of new public and publicly guaranteed (PPG) external debt exceeded its ceiling in November. Niger does not have any new external arrears to bilateral or private creditors. The implementation of the authorities' reform agenda is broadly on track. Most continuous SBs at end-November 2022 were met, except for the publication of the summary of feasibility studies for investment projects of more than CFAF 5 billion. In addition, most other SBs were met, except for the adoption of an oil revenue management strategy.

Policy discussions. Discussions for the Article IV consultation and the Second Review under the ECF focused on policies to build resilience to shocks and address state fragility by: i) anchoring fiscal policy and preserving macroeconomic stability, ii) improving domestic revenue mobilization, iii) enhancing quality of public spending, while prioritizing investments in human capital and infrastructure, iv) strengthening debt management and reducing debt vulnerabilities, v) bolstering financial sector stability and fostering financial inclusion, vi) boosting private sector development and economic diversification, and vii) strengthening governance and anti-corruption frameworks. Niger continues to be supported by extensive IMF capacity development (CD).

Staff views. Staff supports the completion of the second review and the release of the third disbursement under the ECF arrangement in the amount of SDR 39.48 million, as well as the authorities' request for modification of the performance criterion on net domestic financing, for a waiver of non-observance and for modification of the continuous performance criterion on the contracting of external public and publicly guaranteed debt. Staff is of the view that the non-observance does not jeopardize the program objectives.

Approved By

Costas Christou (AFR) and Guillaume Chabert (SPR)

Contents

• CONTEXT

• ECONOMIC DEVELOPMENTS, PROGRAM PERFORMANCE, AND OUTLOOK

• A. Recent Developments

• B. Program Implementation

• C. Outlook and Risks

• POLICIES TO BUILD RESILIENCE

• A. Anchoring Fiscal Policy to Preserve Macroeconomic Stability

• B. Improving Domestic Revenue Mobilization

• C. Enhancing the Quality of Public Spending and Inclusiveness

• D. Developing the Private Sector and Building Resilience to Shocks

• E. Financial Sector Policies

• F. Advancing the Governance Reform Agenda to Address the Sources of Fragility

• PROGRAM ISSUES, STATISTICAL ISSUES, CAPACITY DEVELOPMENT AND OUTREACH

• STAFF APPRAISAL

• FIGURES

• 1. Recent Economic Developments

• 2. GDP Composition and Output Volatility

• 3. Medium-Term Outlook, 2017-27

• 4. Tax Performance, 2018–22

• 5. Social Spending, Latest Available

• TABLES

• 1. Selected Economic and Financial Indicators, 2020-27

• 2. Financial Operations of the Central Government, 2020–27 (In billions of CFA francs)

• 3. Financial Operations of the Central Government, 2020–27 (In percent of GDP)

• 4. Monetary Survey, 2020–27

• 5. Balance of Payments, 2020–27 (In billions of CFA francs, unless otherwise indicated)

• 6. Balance of Payments, 2020–27 (In percent of GDP)

• 7. Indicators of Financial Soundness, 2016–21

• 8. Schedule of Disbursements under the Three Year ECF Arrangement, 2021–24

• 9. Decomposition of Public Debt and Debt Service by Creditor, 2021-24

• 10. Summary Table of Projected External Borrowing Program

• 11. Indicators of Capacity to Repay the Fund, 2022–34

• ANNEXES

• I. Risk Assessment Matrix

• II. Implementation Sta tus of Key Recommendations from the 2019 Article IV Consultation

• III. External Sector Assessment

• IV. Capacity Development Strategy Note

• V. Niger's Development Strategy

• VI. Downside Scenario

• APPENDIX

• I. Letter of Intent

  • I. Memorandum of Economic and Financial Policies of the Government of Niger

  • II. Technical Memorandum of Understanding