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—Debt Sustainability Analysis
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International Monetary Fund. European Dept.
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Publication Date:
18 Jan 2023
eISBN:
9798400229336
ISBN:
9798400229336
Language:
English
Keywords:
debt indicator; exports threshold; debt vulnerability; distress assessment; dynamics equation; Debt sustainability; Public and publicly-guaranteed external debt; Global
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Abstract

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Title page

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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—DEBT SUSTAINABILITY ANALYSIS

December 6, 2022

Approved By

Costas Christou (AFR), Guillaume Chabert (SPR), Marcello Estevão, and Abebe Adugna (IDA)

Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA).

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Niger’s risk of external and overall public debt distress is assessed “moderate"—unchanged from the previous DSA.1 A series of shocks, namely, intensified conflict in the Sahel region, severe climate-related shocks, and an acute food crisis, amid the recovery from the COVID-19 pandemic, required higher borrowing with the debt level further elevated due to the recent currency depreciation against the dollar, increasing debt vulnerabilities compared to the previous DSA. While debt indicators remain below their thresholds under the baseline scenario due to the reliance on concessional financing and prospective robust growth, the remaining space to absorb shocks is limited. Sustainability should be buttressed by the envisaged implementation of the government’s reform program, including efforts to boost domestic revenue mobilization, and the onset of crude oil exports via a new pipeline, as well as prudent public debt management. In the medium and long run, mitigating fiscal risks from SOEs, prioritizing concessional borrowing, and strengthening private-sector development to support economic diversification would be key to strengthening Niger’s debt sustainability.

Public Debt Coverage

1. The coverage of the public sector in the DSA is in line with the fiscal accounts and the previous DSA (Text Table 1). It covers the central government but excludes local governments and the social security fund. There are no extra budgetary funds. State guarantees extended to the private and public sectors for external borrowing are included. Publicly-guaranteed private debt is limited to the guarantee issued to the China National Petroleum Company (CNPC) for a loan to finance the refinery SORAZ to cover the government’s minority stake.2 SOEs do not directly borrow abroad, benefitting instead from on-lending by the central government, which is captured in the debt statistics at the stage where the central government borrows the funds. This includes the electricity (NIGELEC), water (SPEN), and telecom (Niger Telecom) companies, and the ABK, a public administrative entity set up for implementing the Kandadji dam project. Given the lack of reliable data, the DSA cannot explicitly account for domestic SOE debt. The authorities are working with the World Bank in the context of the Sustainable Development Policy Financing (SDFP) to improve the availability and quality of financial information for SOEs. The authorities have published the certified financial statements for 2019 and 2020 of the ten largest SOEs on the official website of the Ministry of Finance. They, with the World Bank’s support, will regularly prepare from 2023 onwards—and publish online—an annual portfolio report covering the largest SOEs that would present financial information and operational performance (including procurement activities, implementation of investment projects, debt, guarantees, human resources). External debt is defined on a currency basis.3

Text Table 1.

Niger: Coverage of Public-Sector Debt and Design of Contingent Liability Stress Test

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2. The contingent liability tailored stress test is calibrated to account for debt coverage gaps (Text Table 1). First, the coverage shock is kept at 0 percent of GDP for other elements of the general government not captured in the baseline stock of debt since: (i) the authorities indicated that the strong financial position of the social security fund (CNSS) removes material fiscal risks; (ii) the authorities confirmed the absence of extra-budgetary funds; and (iii) local governments solely contract short-term debt with the domestic banking sector, which is small in size. Second, the contingent liabilities shock from SOE debt is set at the default value of 2 percent of GDP to reflect risks associated with their domestic borrowing. Third, public-private partnerships (PPPs) signed under the new PPP law of May 2018 do not involve government financing—e.g., the renovation of the Niamey airport was fully privately financed in exchange for a 30-year concession to operate it. Projects under the previous PPP law are akin to installment payments and are reflected in debt statistics to the extent that they are implemented but not yet paid. A contingent liability stress test for PPPs is hence not incorporated at this time. Taking into account the relatively low levels of credit to the economy, the default value of 5 percent of GDP for financial market contingent liability risks appears adequate.

Background on Debt

3. Niger’s public and publicly guaranteed (PPG) debt stood at 51.3 percent of GDP at end-2021 (Text Figure 1). External public debt, after the significant decline following the debt relief granted in the context of the HIPC and Multilateral Debt Relief Initiatives in 2006, has risen gradually since 2012 as Niger developed natural resource projects and other large-scale public investments. Domestic debt started to rise from 2015 as the country has increased debt issuance in the regional market. Since the onset of the COVID-19 pandemic, the outstanding PPG debt has increased at a faster pace than recent years (from 39.8 percent of GDP in 2019 to 51.2 percent of GDP in 2021) as the widened fiscal deficit, which is exacerbated by pressing security spending and sluggish revenue, was financed mainly by external donor support. Slow growth associated with a decline in agricultural production in 2021 and the recent depreciation of the regional currency (CFAF) against the dollar, which is pegged to euro, further increased the debt level relative to GDP. Debt service follows a similar pattern, with a large share of the amortization on domestic debt reflecting its shorter maturity. Since the onset of the pandemic, Niger has benefited from the G20 Debt Service Suspension Initiative (DSSI) and the IMF’s Catastrophe Containment and Relief Trust (CCRT).4 In 2021, the SDR allocation (US$180 million, equivalent to 1.2 percent of GDP) was on lent in CFAF from the regional central bank (BCEAO) to WAEMU member countries, which is recorded as domestic debt for the purpose of the DSA. With the on-lending substituting short-term domestic bond issuance, domestic debt service moderately declined in 2021.

4. PPG external debt makes up 65.2 percent of Niger’s total debt stock in 2021. Multilateral creditors represent the lion’s share (around four fifths) of external debt, with Niger borrowing most from the World Bank (IDA) followed by the BOAD and African Development Bank (AfDB). Official bilateral debt represents around one fifth of external debt. External debt exposed to exchange rate risk is relatively low (around one third of external debt) given the CFAF’s peg to the euro. External debt is generally on concessional terms, with an average effective interest rate of 1.0 percent in 2022 and remaining maturity of 20.9 years at end-2021.

Text Figure 1.
Text Figure 1.

Niger: Public and Publicly-Guaranteed Debt, 2007–21

Citation: IMF Staff Country Reports 2023, 028; 10.5089/9798400229336.002.A003

Sources: Nigerien authorities, and IMF staff estimates.Note: Domestic debt includes debt associated with commercial PPPs from 2017. In 2021 they stood at 0.6 percent of GDP.

5. Domestic debt consists mostly of short- and medium-term Treasury securities, predominantly held by banks domiciled in Niger or in the rest of the West African Economic and Monetary Union (WAEMU). Outstanding Treasury securities remained almost flat in 2020 and 2021 despite larger financing needs amid the pandemic due to a debt reprofiling operation5 and the on-lending of the SDR allocation. The average remaining maturity of Niger’s domestic debt is 5.2 years while the average weighted interest rate stood at 5.3 percent at end-2021.

6. The estimation and analysis of private external debt is complicated by data issues and requires further follow-up. The regional central bank (BCEAO) faces challenges in the compilation of private external debt stock statistics. Efforts to gather information on the coverage and composition of private external debt will continue, with technical support from the IMF’s Statistics Department.

Underlying Assumptions

7. The baseline scenario is predicated on macroeconomic assumptions reflecting recent economic developments, as well as ongoing and new policy measures (Text Table 2). After the decline in agricultural production in 2021, growth is set to recover in 2022 and be boosted afterwards by the expected start of oil exports through the new pipeline, whose construction is assumed to be completed by the last quarter of 2023. While the food crisis, which is exacerbated by recent global commodity price increases, weigh on food and other imports in the short run, natural resource exports relative to GDP are expected to be ramped-up in coming years. Through the government’s minority stake to the project, the oil exports are expected to increase oil-related revenue in coming years. Compared to the previous DSA, revenue projections are upwardly revised reflecting higher commodity prices, while the primary fiscal balance assumes a more gradual fiscal adjustment path in the near term, accommodating additional priority spending in education, infrastructure and the strengthening of social safety nets as well as security. Growth in the long run is projected at 6.0 percent in line with the previous DSA assumption and pre-pandemic average (5.9 percent over 2011-19). Long-run growth is supported by still high projected population growth and is in part explained by the catch-up process given the country’s low level of development. Delays in the construction of the oil pipeline represent the main downside risk, as it will impact growth and worsen the fiscal and external position. While the long-term oil and uranium prices are assumed to remain at high levels in line with the current ones, there are risks of commodity price declines that would have adverse effects on exports and revenue, thereby deteriorating debt indicators. Addressing constraints in the business environment and financial development, through improvements to tax policy and revenue administration as well as new mechanisms to support financial intermediation, is critical to enhancing private sector development and reducing informality, thereby supporting stronger and more resilient growth. Ongoing reforms in the education and social protection systems are expected to improve human capital and contribute to the long-run growth. Although inflation is somewhat higher than the previous DSA due to domestic food price increases linked to the bad harvest and the global commodity price increases, it is relatively contained. The exchange rate peg is expected to keep inflation moderate over the medium and long term.

Text Table 2.

Niger: Key Macroeconomic Assumptions, 2019–42

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Source: IMF staff calculations.

8. The framework assumes a fiscal consolidation path that would reach the WAEMU deficit norm by 2025. The current acute food crisis has led the authorities to implement emergency spending measures. Moreover, rising insecurity due to terrorism across the Sahel has increased security-related spending. Nonetheless, reigniting fiscal consolidation is essential to maintain fiscal sustainability. Emphasis should be placed on revenue-enhancing measures, including strengthening tax collection, eliminating tax exemptions, and enhancing the efficiency of the tax system, and on unwinding emergency spending, while protecting priority social and infrastructure spending given the large development needs. The completion of the new pipeline is expected to boost revenue, supporting convergence to the WAEMU norm of three percent deficit target by 2025. Compared to the previous DSA, the medium- and long-term exports and revenue projections are upwardly revised mostly reflecting higher global commodity prices over the projection period.

9. The authorities aim to maintain limited reliance on domestic financing for years to come, with a view to extending maturities, reducing roll-over risk, and creating space for banks to lend to the private sector. Concessional and semi-concessional financing from external donors, including IDA loans under the new financing terms, remain the main sources of financing.6 The share of domestic sources in total budgetary financing was 42 percent in 2021, excluding the on-lending of the SDR allocation, in line with the pre-COVID level (2013-19 average: 36 percent). Over the medium term, the share of domestic financing is projected to stabilize at around 40 percent. The nominal increase in the domestic debt issuance is assessed feasible given the current smooth access to the regional market and investors’ appetite and space in their balance sheets to absorb additional issuances. In the very long run, highly concessional donor support is assumed to gradually decline as a percent of GDP as the domestic financial market deepens.

10. The terms of foreign and domestic borrowing are assumed to shift gradually to lower concessionality and longer maturities, while the near-term financial conditions in the regional debt market are affected by the tightening of global financial conditions. For foreign debt, new disbursements are expected to be covered by external funding sources based on historical financing patterns. In the longer run, the weights of external creditors are adjusted so that external borrowing moves very gradually toward less concessional financing and toward commercial loans. For domestic borrowing, debt instruments are assumed to gradually shift from T-bills to medium- and long-term bonds. While maintaining broadly favorable conditions, the current DSA assumes a spillover of tighter global financing conditions to the regional market. The average interest rate on government bonds is assumed at 5.7, 6.2, and 6.6 percent for bonds maturing in 1 to 3, 4 to 7 years and over 7 years, respectively, in line with the prevailing yield curve in 2022. The interest rate on T-bills is set to 5.3 percent.

11. The DSA’s toolkit to assess the realism of the macroeconomic forecast does not raise red flags in light of historical experience and comparisons with peers.

  • a. Drivers of debt dynamics (Figure 3). The evolution of total public debt is dominated by developments of the primary fiscal deficit and real GDP growth. In contrast to the past five years, the contribution of growth projections to debt dynamics dominates the unfavorable contribution of the primary deficit. The rise of the public debt ratio is consequently arrested, and it stabilizes at around 45 percent of GDP. External public debt is projected to peak at 37.2 percent of GDP in 2022, and decline to 24.1 percent in 2042, entailing a similar pattern to total public debt. As shown in the lower right chart of Figure 3, unexpected changes in residuals and primary deficits were chiefly responsible for past forecast errors for total public debt, whereas the current account and FDI drove the errors in external debt (upper right chart of Figure 3).

  • b. Realism of planned fiscal adjustment (Figure 4). The projected three-year fiscal adjustment in the primary balance (1.9 percentage points of GDP) lies around the top quartile of the distribution of past adjustments to the primary fiscal deficit (2 percentage points of GDP) for a sample of LICs. The expected adjustment is justified in light of the recovery from the current multiple shocks, the improvements in non-oil revenue mobilization through expanding tax base and reducing tax expenditure, and the revenue boost from the start of crude-oil exports, as well as the unwinding of emergency support measures.

  • c. Consistency between fiscal adjustment and growth (Figure 4). The projected growth path for 2022 to 2023 is driven by the recovery in agricultural production, the resumption of all infrastructure projects, and the onset of the oil export through a new pipeline. The fiscal stance in 2022 is moderately favorable for growth as the emergency spending measures continue to support the economy hit by the food crisis and security situation. In 2023, the onset of the oil exports through a new pipeline contributes to higher growth and higher oil-related revenues, and therefore the impact of consolidation on growth is likely to be muted.

  • d. Consistency between public investment and growth (Figure 4). The tool shows a similar share of public investment in GDP in the previous and the current DSAs. Private investment is expected to scale up in the projected years.

Country Classification and Determination of Stress Test Scenarios

12. Niger’s debt-carrying capacity remains rated “medium". The methodology relies on a composite indicator (CI) combining the CPIA score,7 external conditions as captured by global growth, and country-specific factors. Based on data from the October 2022 WEO vintage, the calculations give a CI value of 2.90, reflecting positive contributions from the CPIA (45 percent) but also international reserves (62 percent), and country and global real growth rates (6 and 14 percent, respectively) (Text Table 3). This score falls within the medium debt-carrying capacity thresholds defined as 2.69 < CI = 3.05.

13. Besides the six standardized stress tests, there are two tailored stress tests applied:

  • One tailored stress test combines contingent liabilities of a one-time debt shock (equivalent to 7 percent of GDP) to capture a scenario reflecting both contingent liabilities from SOEs (equal to the indicated standard level of 2 percent of GDP) and a need for bank recapitalization (equal to the indicated standard level of 5 percent of GDP).

  • The second tailored stress test is a commodity price shock.8 The scenario captures the impact of a sudden one standard deviation decline in the price of the commodities the country exports.

Text Table 3.

Niger: Composite Indicator and Thresholds

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Source: IMF staff calculations. The CI cutoff for medium debt-carrying capacity is 2.69 < CI ≤ 3.05.

External Debt Sustainability Analysis

14. External debt is projected to fall gradually, with public and private debt both declining in the long run, while the external debt level has risen compared to the previous DSA (Table 1). Under the baseline scenario, the PPG external debt-to-GDP ratio is expected to rise to 37.2 percent in 2022 owing to significant foreign borrowing to finance Niger’s economic and social development agenda, as well as the depreciation of the regional currency pegged to euro against the dollar. It will follow a downward trajectory to settle at 24.1 percent at the end of the projection period in 2042 as higher growth materializes and fiscal adjustment is implemented. These ratios are higher than in the previous DSA (see the upper left chart of Figure 3, PPG external debt-to-GDP ratio was projected to be 32.2 percent 2022 and 17.9 percent in the long run in the previous DSA) reflecting the marginally loosened fiscal path in the near term and recent currency depreciation against the dollar, as well as the new IDA financing terms. The effects are relatively contained in the PV terms thanks to higher concessionality of additional borrowing. Total external debt displays a similar pattern—steadily declining to 30.7 percent of GDP in 2042. The non-interest current account deficit remains the main driver of these dynamics. The goods and services deficit is projected to remain significant in 2022 reflecting heightened food imports and imports related to the large projects, such as the Kandadji dam, a cement factory, a uranium mine, the oil export pipeline, and MCC-funded investments in agriculture, while it will be reduced thanks to the oil exports through the new pipeline. Output from these projects is expected to improve the current account sharply in subsequent years when they come on stream. Once the non-interest current account deficit, net FDI, and endogenous debt dynamics are accounted for, remaining drivers of external debt dynamics, such as other components of the capital account, reserve accumulation, valuation adjustments, as well as price and exchange rate changes, are subsumed into the residual.

15. The PPG external debt indicators remain below their thresholds throughout the projection period under the baseline scenario, but the remaining margins for some indicators are small (Figure 1). The present value (PV) of debt-to-GDP is projected to follow a gradual downward trend over the projection period. The PV-to-exports ratio remains slightly below the threshold in 2022 while it is projected to decline as exports strengthen due to the prospective oil exports via a new pipeline. With the G20 DSSI and the IMF’s CCRT phasing out, both debt service-to-exports and -revenue ratios are only marginally lower than the respective thresholds in 2022 but expected to enter a downward trajectory in the medium- and long-run.

16. Stress tests indicate that two export-related indicators (the PV of PPG external debt-to-exports ratio and debt service-to-exports ratio) exceed their thresholds under the export shock, and the commodity price shock temporarily brings the debt service-to-revenue ratio above its threshold (Figure 1). Reflecting a relatively small export base relative to its external financing, the PV of debt- and debt service-to-exports ratios are vulnerable to export shocks. Going forward, fiscal revenue will be more vulnerable to commodity price fluctuations, as the economy will increasingly rely on oil-related revenues (expected to climb to 3.8 percent of GDP in 2024) in coming years. Moreover, the PV of debt-to-GDP and - exports ratios would increase later in the projected period under the historical scenario. The historical scenario includes large shocks such as droughts and floods, the evolution of macroeconomic variables following structural changes in the last ten years, large financing needs during the initial stages of extractive industries’ projects and political instability after the 2011 military coup, somewhat overstating its severity.

17. The granularity assessment suggests that the space to absorb shocks is limited while the situation may become less tight in the medium- and long-run (Figure 5). Under tests to qualify the moderate risk of external debt distress assessment, the PV of debt-to-exports ratio and debt service-to-revenue ratio currently indicate limited space in 2022 with particularly small space relative to the thresholds for the latter indicator. The limited policy space implies pressing needs to implement policy measures to buttress debt sustainability. Over the medium-term, policy space is expected to open-up as exports pick up and revenue mobilization reforms bear fruit. The downward trajectory of the PV of debt-and debt service-to-exports ratios hinge on the new pipeline project, whereas the debt service-to-revenue ratio is driven by revenue mobilization reforms.

Public Debt Sustainability Analysis

18. Public sector debt is projected to decline gradually in the medium- and long-run (Table 2). After a sizable increase compared to pre-pandemic levels, public debt is projected to decline to and stabilize at around 45.3 percent of GDP in the long run mainly because of the resumption of economic growth and fiscal consolidation, aided by higher oil revenues. In the medium and long run, improved domestic revenue mobilization, higher spending efficiency, and better expenditure control, coupled with export diversification fostered by private sector growth, are expected to contribute to stabilizing the primary deficit. Gradual shifts toward lower concessionality and longer maturities over the medium- and long-run would marginally increase interest costs, while the benefit of the extension of maturities lies in reducing roll over risks.

19. The PV of the public debt-to-GDP ratio remains below the benchmark in the baseline, though not in the event of an adverse commodity price shock or under the historical scenario (Figure 2). The PV of public debt-to-GDP ratio is well below the benchmark of 55 percent of GDP in 2022 and is projected to gradually decline over the projection period under the baseline scenario. A commodity price shock would set the PV of debt and debt-service ratios on a diverging path in the absence of compensating fiscal and other policy measures.

Risk Rating and Vulnerabilities

20. Niger’s risk of external and overall debt is rated “moderate", and debt is deemed sustainable. The moderate debt distress rating arises from the fact that no indicator for PPG external or public debt breaches its threshold under the baseline scenario. Debt remains sustainable as: (i) debt indicators remain on steady downward trajectories and overall public debt sustainability remains solid; (ii) medium- and long-term growth outlooks are favorable, supported by the recovery from the multiple shocks, strengthening of the export base due to the onset of crude oil exports in 2023, and implementation of revenue mobilization measures in the medium run; (iii) liquidity risk remains low since, as a member of the WAEMU, Niger can draw on the currency union’s pooled external reserves, delinking the ability to service foreign debt from exports at the national level; and (iv) Niger is expected to continue to benefit from significant financial assistance from donors over the next years to address development and security challenges it faces. In line with the Fund Debt Limits Policy (DLP), a debt limit on the new PPG external borrowing is embedded in program conditionality and is calibrated to build an adequate buffer to avoid a downgrade of the risk of debt distress.

21. The authorities’ sustained commitment to sound macroeconomic policies and economic reforms, as well as further progress on debt management, will be all the more important given the currently limited space to absorb shocks, thereby buttressing debt sustainability amid the current multiple shocks. Progress in the following areas will be key:

  • Domestic revenue mobilization. Niger’s public debt relative to domestic revenues compares unfavorably to other WAEMU countries or Sub-Saharan Africa reflecting its limited revenue base. Although additional oil revenues are expected in coming years, they should not be fully spent, thereby contributing to fiscal consolidation. In this context, non-oil revenue mobilization by reducing tax exemptions and broadening the tax base is of fundamental importance. Limited space to absorb shocks, along with the risk of further spillover of global financial conditions to the regional market, increase the urgency of the prompt implementation of revenue mobilization measures.

  • Fiscal risks and spending quality. Possible mismanagement of large investments by SOEs have the potential to eventually add to government debt. While Niger is in dire need to build up its infrastructure, adequate project evaluation and attention to good governance practices should not fall by the wayside. More generally, authorities should try to make the most of limited resources by increasing the efficiency of public spending, which remains low in Niger.

  • Economic diversification. A narrow economic base and a low level of economic development generally are at the root of difficulties with mobilizing revenues and securing strong sustainable growth. Horizontal policies to foster diversification, including developing the local private sector, tackling informality, accumulating human capital through education, are of paramount importance.

  • External borrowing. Until export prospects are more certain, Niger should continue to prioritize external financing in the form of concessional loans and grants. Favoring euro-denominated debt, given the CFAF’s peg to the currency, can also help reduce the exchange rate risk.

  • Domestic borrowing. Dedicated market communication will be needed to increase the average tenor of issuances and thereby reduce refinancing vulnerabilities. These efforts should be complemented by the implementation of a structural program of swaps of securities close to their maturity with securities of longer maturities.

  • Financing plan. To avoid liquidity shortfalls and minimize the associated financing costs, the overall volumes of debt to be issued, should be executed consistently with the annual borrowing plan. Integration with the annual cash flow plan would be essential.

A. Authorities’ Views

22. The authorities agreed with the conclusions of the DSA. They were pleased that Niger’s moderate rating for debt distress is maintained despite the consecutive shocks, including intensified conflict in the region, severe climate-related shocks, and an acute food crisis. In this context, they noted the role of sound macroeconomic policies and the positive contributions of concessional financing as well as prospective robust growth to contain debt vulnerabilities.

23. The authorities reiterated that the onset of oil exports through the new pipeline will scale up exports and increase oil-related revenue with possible further upside risks to the outlook. They also emphasized that ongoing reforms regarding non-oil domestic revenue mobilization will bear fruit in coming years, buttressing debt sustainability. Moreover, they noted strong growth potential of the country, which would be further strengthened under the new development strategy.

Figure 1.
Figure 1.

Niger: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2022–33

Citation: IMF Staff Country Reports 2023, 028; 10.5089/9798400229336.002.A003

Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2032. Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most extreme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department.

Figure 2.
Figure 2.

Niger: Indicators of Public Debt Under Alternative Scenarios, 2022–33

Citation: IMF Staff Country Reports 2023, 028; 10.5089/9798400229336.002.A003

Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections.Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2032. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.

Figure 3.
Figure 3.

Niger: Drivers of Debt Dynamics—Baseline Scenario

Citation: IMF Staff Country Reports 2023, 028; 10.5089/9798400229336.002.A003

1/ Difference between anticipated and actual contributions on debt ratios.2/ Distribution across LICs for which LIC DSAs were produced.3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation.

Figure 4.
Figure 4.

Niger: Realism Tools

Citation: IMF Staff Country Reports 2023, 028; 10.5089/9798400229336.002.A003

Figure 5.
Figure 5.

Niger: Qualification of the Moderate Category, 2022–331/

Citation: IMF Staff Country Reports 2023, 028; 10.5089/9798400229336.002.A003

Sources: Country authorities; and staff estimates and projections.1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent.

Table 1.

Niger: External Debt Sustainability Framework, Baseline Scenario, 2019–42

(In percent of GDP, unless otherwise indicated)

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Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ The CCRT debt relief is reflected in the exceptional financing. 5/ Current-year interest payments divided by previous period debt stock. 6/ Defined as grants, concessional loans, and debt relief. 7/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 8/ Assumes that PV of private sector debt is equivalent to its face value. 9/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.

Table 2.

Niger: Public Sector Debt Sustainability Framework, Baseline Scenario, 2019–42

(In percent of GDP, unless otherwise indicated)

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Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government plus extra budgetary funds, central bank, government-guaranteed debt. Definition of external debt is Currency-based. 2/ The CCRT debt relief is included in the primary deficit. 3/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 4/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 5/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 6/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 7/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.

Table 3.

Niger: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2022–33

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Sources: Country authorities; and staff estimates and projections.

A bold value indicates a breach of the threshold.

Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Includes official and private transfers and FDI.

Table 4.

Niger: Sensitivity Analysis for Key Indicators of Public Debt, 2022–33

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Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.

Includes official and private transfers and FDI.

1

Niger’s debt-carrying capacity remains rated “medium” with a composite indicator value of 2.90 based on the October 2022 WEO vintage and CPIA 2021 vintage.

2

CNPC extended a US$880 million (7.0 percent of GDP) loan for the construction of SORAZ refinery in 2008, of which US$352 million (2.8 percent of GDP) is guaranteed by the government. The outstanding stock of US$65.5 million (0.8 percent of GDP) at end-2021 is included in the baseline stock of debt.

3

Most of the external debt is defined on a currency basis, except for the creditors whose residency can be tracked, that are defined on residency basis. As an example, the West African Development Bank (BOAD) is classified as external.

4

The DSSI amounted to 0.4 percent of GDP in 2020-21, whereas the CCRT to 0.3 percent of GDP through 2020-22.

5

The government carried out a debt reprofiling operation in January 2020, in which it borrowed CFAF 148 billion (1.9 percent of GDP) commercially from abroad to repay domestic debt. The loan was contracted in January 2020 with Deutsche Bank for a total amount of euro 225 million with the maturity of 10 years and interest rate of 5.25 percent, of which euro 179 million (1.5 percent of GDP) have been drawn. It was used to repay a set of five Treasury bills and one Treasury bond.

6

Concessional financing is defined as the one with grant element (GE) exceeding 35 percent of the face value.

7

The CPIA score is 3.4 in 2021.

8

Under the debt sustainability framework, countries with commodity exports accounting for at least 50 percent of total exports of goods and services over the previous three-year period are subject to the stress test. Commodities accounted for 75.0 percent of Niger exports of goods and services over the period 2018-20.

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Niger: 2022 Article IV Consultation and 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
Author:
International Monetary Fund. European Dept.
Volume/Issue:
Volume 2023: Issue 028
Publisher:
International Monetary Fund
ISBN:
9798400229336
ISSN:
1934-7685
Pages:
138
DOI:
https://doi.org/10.5089/9798400229336.002
  • <sup><xref rid="RA003textfig01" ref-type="fig">Text Figure 1.</xref></sup>
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    Text Figure 1.

    Niger: Public and Publicly-Guaranteed Debt, 2007–21

  • <sup><xref rid="RA003fig01" ref-type="fig">Figure 1.</xref></sup>
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    Figure 1.

    Niger: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2022–33

  • <sup><xref rid="RA003fig02" ref-type="fig">Figure 2.</xref></sup>
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    Figure 2.

    Niger: Indicators of Public Debt Under Alternative Scenarios, 2022–33

  • <sup><xref rid="RA003fig03" ref-type="fig">Figure 3.</xref></sup>
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    Figure 3.

    Niger: Drivers of Debt Dynamics—Baseline Scenario

  • <sup><xref rid="RA003fig04" ref-type="fig">Figure 4.</xref></sup>
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    Figure 4.

    Niger: Realism Tools

  • <sup><xref rid="RA003fig05" ref-type="fig">Figure 5.</xref></sup>
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    Figure 5.

    Niger: Qualification of the Moderate Category, 2022–331/

Text Figure 1.

Niger: Public and Publicly-Guaranteed Debt, 2007–21
Figure 1.

Niger: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2022–33
Figure 2.

Niger: Indicators of Public Debt Under Alternative Scenarios, 2022–33
Figure 3.

Niger: Drivers of Debt Dynamics—Baseline Scenario
Figure 4.

Niger: Realism Tools
Figure 5.

Niger: Qualification of the Moderate Category, 2022–331/