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2. The government requests, on an exceptional basis, flexibility in the
application of the policy of the IMF Executive Board that requires a progress
report on the implementation of the strategy outlined in the poverty reduction
strategy paper (PRSP) one year after its presentation to the Board. The
government aimed for a conclusion of the fourth review within less than
one year from the presentation of its PRSP on February 8, 2002, and, therefore,
intended to prepare the progress report in the context of the fifth review
under the PRGF arrangement and the enhanced Initiative for Heavily Indebted
Poor Countries (HIPC Initiative) completion point. However, problems in
finalizing the economic and financial program for 2003 have delayed the
Board consideration of the fourth review beyond February 8, 2003, and,
because of a limited institutional capacity, the government has not been
able to complete the progress report for this review. Expediting further
the preparation of the progress report would hamper its quality, while
delaying the fourth review and the related disbursement would affect severely
the country. Consequently, the government requests that the fourth review
proceed without consideration of the PRSP progress report; it also commits
to finalizing the progress report by end-June 2003, so that it can be
presented as soon as possible thereafter to the Executive Boards of the
IMF and the World Bank.
3. Program implementation at end-September 2002 was satisfactory as a
result of the government's commitment and steps taken in connection with
the third program review (see my letter of intent of August 8, 2002).
This performance enabled Niger to continue the successful implementation
of the economic recovery program and the poverty reduction strategy that
the government undertook at the end of 1999. All performance criteria
and benchmarks at end-September 2002 were met, except for the continuous
quantitative criterion on nonaccumulation of new external payments arrears
and the quantitative benchmark in respect of the wage bill.
4. Despite the government's efforts to avoid external payments arrears,
problems in reconciling repayment schedules and monitoring debt service
payments led to temporary and small accumulations of external
payments arrears vis-à-vis certain creditors, including the World
Bank, in September 2002. These arrears were corrected as soon as they
were identified. To avoid their recurrence, the government has enhanced
internal monitoring of external debt-service payments and accelerated
efforts to strengthen the External Debt-Service Unit. To this effect,
the Commonwealth secretariat will provide technical assistance in May
2003 to (i) prepare for the installation by end-June 2003 of the Secretariat's
new debt-management and recording software, CS-DRMS 2000+; and (ii) reinforce
the institutional capacity of the External Debt-Service Unit. Accordingly,
and in light of the corrective steps that have been taken, the government
is requesting a waiver for nonobservance of the continuous performance
criterion on nonaccumulation of external payments arrears. As for the
wage bill, the overrun of its target is attributable to an initial underestimation
of the decision to start paying in January 2002 the salary increases related
to automatic advancement that had been frozen since March 1999. The government
adjusted the level of the wage bill in the program for 2003 and took steps,
as detailed in the attached memorandum, to gain more effective control
over it.
5. Economic and financial developments at end-2002 remained positive.
The GDP growth rate is estimated at 3 percent, and inflation declined
to 2.7 percent on average for the year, owing in part to a bumper crop
related to a second consecutive year of favorable rainfall levels. The
external current account deficit (excluding official transfers) did not
deteriorate as much as programmed and is estimated to have reached 6.7
percent of GDP. In the budget area, the government maintained its expenditure
regulation system to achieve the program targets, and successfully carried
out budget reforms involving the implementation of a new budget nomenclature
and a new charter of public accounts. These budgetary reforms stretched
to the limit the institutional capacity and delays were observed in achieving
other structural reforms, such as the privatization of NIGELEC, Niger's
electricity supply company. However, the government has taken steps to
correct these delays by the end of the first half of 2003.
6. Niger's economic and financial outlook in 2003 will depend on a resolution
of the crisis in Côte d'Ivoire, which began in September 2002, and
on developments in the international situation—particularly in petroleum
product prices. Although the impact of the crisis in Côte d'Ivoire
on Niger was limited in 2002, the government remains concerned that a
persistent crisis might affect negatively Niger. It is closely monitoring
developments, while participating actively in initiatives to resolve this
crisis. The implications of the crisis are still difficult to quantify,
and Niger's economic and financial program for 2003 was designed under
the assumptions of a crisis resolution by end-March and a relatively optimistic,
albeit prudent macroeconomic framework. The macroeconomic targets for
the 2003 program will be reassessed in connection with the midterm review
of the program. Regarding the potential impact of an increase in international
prices for petroleum products, the government intends to continue to implement
the formula for setting domestic prices of these products in a flexible,
automatic and transparent way.
7. The government's efforts are intended to consolidate in 2003 the progress
made since end-1999, particularly in fiscal adjustment, and to accelerate
the implementation of the poverty reduction strategy. The economic and
financial program includes the following macroeconomic objectives for
2003: (i) a real GDP growth rate of 4.0 percent; (ii) a containment of
inflation (on a 12-month, end-of-period basis) to less than 3 percent;
and (iii) a current account deficit of the balance of payments (excluding
official transfers) of 8.5 percent of GDP. To restore economic activity,
the government will also implement structural reforms, including the restructuring
of the financial system.
8. The 2003 budget law is consistent with program targets and confirms
the willingness of the authorities to pursue their fiscal adjustment policy
while continuing the reduction of domestic payments arrears and intensifying
their fight against poverty. The basic fiscal deficit (on a commitment
basis, excluding grants for budgetary assistance) is therefore limited
to CFAF 34.4 billion, that is, 2.1 percent of GDP. The projected substantial
increase in capital expenditure (almost 50½ percent) reflects an
accelerated implementation of the poverty reduction strategy, supported
by an increase in resources released under the enhanced Heavily Indebted
Poor Countries (HIPC) Initiative.
9. The government is counting on the IMF's continued support to meet
the program objectives, and seeks completion of the fourth review under
the PRGF and approval of its program for the third year. In this context,
the government of Niger requests an increase in the disbursement related
to the fourth review to SDR 11.84 million and a corresponding reduction
in the disbursement under the fifth review to SDR 5.08 million, thereby
maintaining the annual total of SDR 16.92 million in 2003. This adjustment
would enable the authorities to more effectively address the deterioration
envisaged in the balance of payments during the first half of 2003 owing
to the impact of the crisis in Côte d'Ivoire and the absence of
adequate balance of payments assistance for the first half of year.
10. The government also requests additional IMF interim assistance under
the HIPC Initiative up to September 30, 2003. It is understood that the
Fund, together with the government of Niger, will conduct the two midterm
reviews—the first is scheduled to be completed by September 30,
2003, and the second to be completed by March 30, 2004, at the end of
the third year of the program—in order to assess program implementation.
As in the past, the government consents to the Fund's publication of this
letter of intent, the memorandum of economic and financial
policies for 2003, the technical memorandum of understanding,
and the staff report.
11. The government considers that the reforms and measures described
in the attached memorandum are such as to permit achievement
of the program targets for 2003. It is prepared to take any additional
steps that may be required for that purpose. Moreover, the government
of Niger will, on its own initiative or at the Managing Director's request,
consults with the International Monetary Fund on the adoption of any measure
that may prove necessary.
Sincerely yours,
/s/
Hama Amadou
Minister of Finance and Economy, a.i.
Ministry of Finance and Economy
Niamey, Niger |
Niger
Memorandum of Economic and Financial Policies
March 28, 2003
I. Introduction
1. The discussions under the fourth review of Niger's three-year
economic and financial program, covering the period October 2000 to September
2003, took place in Niamey on November 7-21, 2002 and in Washington on
February 6-10, 2003. International Monetary Fund (IMF) support under
the Poverty Reduction and Growth Facility (PRGF) was approved on December 14,
2000, in the amount of SDR 59.2 million. The approval on the same
date of the decision point under the enhanced Heavily Indebted Poor Countries
Initiative (HIPC Initiative) has enabled Niger to receive additional assistance
from the international community. This assistance is estimated at approximately
1.2 percent of GDP in 2003, or nearly US$32 million. It will increase
upon approval of the HIPC Initiative completion point, which is expected
in the third quarter of 2003. It has been earmarked for the implementation
of the government's poverty reduction strategy, as presented to the IMF
Executive Board in the poverty reduction strategy paper (PRSP) in February 2002.
The government is preparing a progress report on the implementation of
the strategy in 2002, to be finalized by end-June 2003 and submitted to
the IMF Executive Board in connection with the fifth review of the PRGF
program and the completion point under the HIPC Initiative.
2. The third review under the three-year program was completed by
the IMF Executive Board in August 2002, and Niger obtained the fourth
drawing of SDR 8.46 million under the PRGF arrangement, bringing
total disbursements to date to SDR 33.84 million. This third review led
to revisions in the program for 2002 in order to take into account economic
and financial developments in 2001 and in the first quarter of 2002. The
revised 2002 program thus aimed at maintaining real GDP growth in the
range of 2½ percent to 3 percent, following the exceptional
growth of 7.1 percent recorded in 2001; reducing the average annual
inflation rate from 4 percent in 2001 to about 3 percent in
2002; and containing the external current account deficit (excluding grants
for budgetary assistance) at 8.6 percent of GDP.
3. This memorandum of economic and financial policies (MEFP), prepared
in the context of the fourth review of the three-year program, describes
the satisfactory results obtained in program implementation as at September
30, 2002 and presents the government's economic and financial program
for 2003. Tables 1 through 4 set forth the program
performance criteria and indicative targets for 2002 and 2003.
II. Recent Developments
A. Performance Under the Program at End-September 2002
4. The government's program for 2002 was implemented in a sociopolitical
environment that was more difficult than anticipated. This hardening
of the political environment was the outgrowth of the recovery in economic
activity and the partial rehabilitation of public finances since 1999.
The good performance in this regard led to greater demands on the part
of the various social partners and the public administration itself. In
2002, these demands were reflected primarily in (i) the active protest
of business operators against the extension of the prepayment of the corporate
income tax to reexport activities, a new tax measure taken under the 2002
Budget Law; (ii) numerous strikes called by labor unions in the private
sector, with a view to obtaining income tax relief; and (iii) the mutiny
of some army officials in August 2002.
5. In response to these pressures, the government initiated a process
of dialogue and negotiation with the social partners, and established
a committee in charge of reviewing the status of the armed forces.
The government's initiation of constructive dialogue does not alter its
endorsement of the three-year program and its poverty reduction strategy,
but it has required greater flexibility in policy making with a view to
addressing certain social demands and enhancing program ownership by the
population. It will also necessitate a strengthening of the government's
exchanges of views and information with the international community, in
order to ensure the latter's support for the government's decisions. The
negotiations with economic agents and labor unions thus led to measures
to reduce direct taxes, such as the tax on business profits and the income
tax on wages and salaries, which were incorporated into the 2003 Budget
Law and offset by new revenue-enhancing tax measures. Furthermore, the
recommendations of the committee on the armed forces resulted in moderate
additional expenditure in the 2003 budget in order to improve conditions
in the armed forces. This dialogue process has also enabled the government
to heighten the understanding of the social partners as regards the government's
persistent financial problems and, consequently, to reduce their demands.
In this context, the government announced the possibility of delays in
making wage payments in the fourth quarter of 2002. It did in fact delay
the payment of September 2002 wages until early October, but it has
avoided any wage payment delays since then.
6. Niger's performance in implementing its economic and financial
program was largely satisfactory at end-September 2002. All the program
performance criteria and benchmarks as of that date were observed, with
the exception of the continuous performance criterion on the nonaccumulation
of external payments arrears and the benchmark on the wage bill. This
positive overall result is attributable for the most part to (i) the
strengthening of fiscal discipline, beginning with the first quarter of
2002 following the fiscal slippages observed at end-2001; and (ii) the
measures taken to reduce and reallocate expenditure in the second half
of the year, with a view to maintaining the fiscal targets for 2002 despite
the shortfall in external financing and the appearance of new unavoidable
expenditures (MEFP of August 8, 2002). Implementation of the special
program financed by the resources freed up by the HIPC Initiative, which
is an important element of the poverty reduction strategy, also proceeded
satisfactorily.
7. As for structural reforms, significant progress was made in the
budgetary area in particular, including observance of the structural
benchmark for end-September 2002 on the introduction of a new budget
nomenclature and a new government charter of public accounts, and their
use in preparing the 2003 Budget Law. The structural reform program
was nonetheless affected by limited institutional capacity, which
contributed to additional delays in the implementation of some other reforms.
Accordingly, the planned strengthening in debt management could not be
introduced, owing to delays in the mobilization of the technical assistance
planned to this end. Similarly, problems in monitoring the implementation
of reforms supported by the World Bank led to delays in the introduction
of the multisectoral regulatory agency (MRA) and the expected privatization
operations. The continuing weaknesses of the institutional capacity are
a reflection in particular of the problems experienced by the government
in recruiting, motivating, and retaining high-quality supervisory personnel.
However, the government continues to regard institutional capacity building
as a priority and will request the active support of the international
community in addressing this issue at the donors' forum that will take
place in mid-2003. The government has also taken steps, in consultation
with the World Bank, to reinvigorate the structural reform program and
achieve concrete results in the introduction of the MRA, the privatization
of NIGELEC (electricity supply company) and SONIDEP (petroleum distribution
company), and the strengthening of the banking system by end-June 2003.
8. The prudent fiscal policy pursued by the government since the
first quarter of 2002 was maintained throughout the year, making it possible
to observe the end-September 2002 performance criteria on the basic
budget deficit (overall deficit excluding foreign-financed capital expenditure)
and on the net government position vis-à-vis the banking system. Thanks
to enhanced control of current expenditure, the basic budget deficit,
on a payment order basis and excluding revenue resulting from the settlement
of reciprocal debts between the government and enterprises, was thus limited
to CFAF 22 billion, as against the ceiling of CFAF 26.4 billion
set forth in the revised program. Similarly, the government's net position
vis-à-vis the banking system improved by CFAF 3.0 billion,
compared with an expected deterioration of CFAF 1.5 billion.
9. Fiscal revenue of CFAF 121.7 billion slightly exceeded the revised
program's quantitative benchmark for end-September 2002 (CFAF 120.8 billion).
The shortfalls observed in petroleum taxation receipts, business profit
taxes, and taxes on goods and services were more than offset by sizable
receipts from taxes on international trade, the statistical tax on reexports,
and transfers from the West African Economic and Monetary Union (WAEMU).
10. The regulation of budgetary expenditure made it possible to limit
total expenditure, excluding foreign-financed capital expenditure, to
CFAF 135.3 billion, compared with a ceiling of CFAF 138.9 billion.
This performance reflects a strict control of current expenditure,
excluding interest payments and wages, to CFAF 58.4 billion, compared
with a ceiling of CFAF 65.4 billion in the revised program.
However, this gain was partially offset by an overrun of CFAF 3.5 billion—beyond
the ceiling of CFAF 15.8 billion—in domestically financed
capital expenditure. Wage payments also exceeded the indicative target
under the program by CFAF 1.0 billion and totaled CFAF 41.3 billion.
This overspending is largely attributable to an underestimation of the
financial impact of the measure to lift the freeze on the payment of salary
increases linked to automatic advancement and, to a lesser extent, to
the regularization of promotions to positions within the hierarchy that
entitle the incumbents to bonuses. For 2002 as a whole, the wage bill,
despite exceeding the annual target by 0.1 percent of GDP, amounted to
only 38.5 percent of tax receipts and 3.7 percent of GDP, as against 50.4 percent
and 4.1 percent, respectively, in 2000. Despite this satisfactory
performance in containing the wage bill while regularizing the financial
impact of the automatic increases that were frozen between March 1999
and December 2001, the government is still vigilant in monitoring the
evolution of the wage bill and in guarding against an overshooting of
the target, like in 2002. In 2003 it will adopt measures aimed at improving
control over the wage bill, thereby confirming its commitment to meet
as soon as possible the convergence criterion of the WAEMU (wage bill
not to exceed 35 percent of tax receipts).
11. The government actively pursued its policy to reduce domestic
payments arrears in 2002, and the end-September performance criterion
was exceeded by CFAF 3.5 billion (equivalent to 0.2 percent
of GDP). This solid performance stems for the most part from the implementation
in August 2002 of the third phase of the operation to settle wage arrears
in exchange for public land in the amount of CFAF 3.6 billion. In addition,
the arrears of the National Center for University Works (CNOU) were eliminated
in the amount of CFAF 4.6 billion—of which CFAF 2 billion in cash
payments and CFAF 2.6 billion in claims forgone on the part
of CNOU creditors. However, as indicated above in the context of its negotiations
with labor unions, the government accumulated, on an exceptional and temporary
basis, CFAF 1.85 billion in wage arrears at end-September 2002, which
were cleared in early October 2002.
12. External financing was broadly in line with the revised program
projections at end-September 2002. As for domestic financing, a higher-than-expected
level of nonbank financing (the operation of settling wage arrears in
exchange for public land, as well as the waiver of claims by CNOU creditors)
enabled the government to limit its recourse to bank financing and to
achieve a net position vis-à-vis the banking sector that was lower
by CFAF 3.0 billion at end-September 2002 than at end-December
2001.
13. The satisfactory fiscal performance at end-September 2002 was
nevertheless marked by the failure to observe the continuous performance
criterion on the nonaccumulation of external payments arrears, owing
to temporary lags in the payments to certain creditors, including the
World Bank. Despite the efforts made, institutional weaknesses persist
in the area of external debt management. On the one hand, coordination
difficulties between the External Debt Service Unit and the Nigerien Treasury
prevented effective monitoring of the timely settlement of all of the
government's external debt-service obligations. On the other hand, the
planned strengthening of the External Debt-Service Unit did not progress
as expected, owing to delays in marketing the French version of the Commonwealth
Secretariat's debt management software (CS-DRMS) and in obtaining technical
assistance for its implementation. In response to the failure to observe
the continuous performance criterion on the nonaccumulation of external
payments arrears, the government introduced a monthly monitoring system
on external debt payments—a system designed so as to prevent in
the future any delays or defaults in external debt-service payments. Likewise,
in view of the continuing problems with observing the program's structural
benchmark on strengthening the External Debt-Service Unit, the government
approached its partners again at end-2002, particularly the Commonwealth
Secretariat, regarding the implementation of the new debt-management software
(initially scheduled for end-June and then set for end-December 2002 in
the revised program). Thus, three senior staff received CS-DRMS training
in Douala in Cameroon in October 2002. A regional seminar on debt analysis
and the CD-DRMS software was also organized by the Agence Internationale
de la Francophonie and the Commonwealth Secretariat during the period
March 24-28, 2003, in Niamey. Furthermore, a technical assistance mission
is scheduled to arrive in Niger in May 2003 to install the software by
end-June 2003 and to advise on an institutional framework for improved
debt management.
14. Monetary developments from December 2001 to September 2002 for
the most part mirrored the decrease in net foreign assets of the Central
Bank of West African States (BCEAO), despite a sizable disbursement in
external assistance recorded during the third quarter. The increase
in the net foreign assets of commercial banks was not sufficient to offset
the decrease in those of the BCEAO, leading to a drop in the level of
net foreign assets in the whole banking sector. That decline, combined
with the improvement in the government's net position, accounted for the
contraction of the money supply by 2.3 percent during the first nine months
of 2002.
B. Developments at End-2002
15. The external shock of the crisis since mid-September 2002
in Côte d'Ivoire, as well as the risk of economic and social destabilization
in the other WAEMU countries, has been and remains a major concern of
the Nigerien government. Economically, Côte d'Ivoire is Niger's
second-largest trading partner after France and accounts for 15 percent
and 1½ percent of Niger's imports and exports, respectively. Imports
from Côte d'Ivoire consist primarily of mass consumer goods, semifinished
goods, and petroleum products. Onions account for some 85 percent of Niger's
exports to Côte d'Ivoire. There are almost 1 million nationals of
Niger residing in Côte d'Ivoire, and their remittances to Niger,
although sizable, are underestimated in the country's balance of payments.
16. The crisis in Côte d'Ivoire had a limited impact on Niger
in the last quarter of 2002. The most perceptible signs of the crisis
were found in the customs receipts recorded in the last quarter of the
year. Few of Niger's nationals residing in Côte d'Ivoire returned
home, and Niger's dependence on the port of Abidjan as a source of its
imports and outlet for its exports is quite limited. The disruption of
trade channels with Côte d'Ivoire nevertheless resulted in shortages
of certain products, such as personal care products, but the increases
in their prices did not prevent a substantial reduction in inflation at
the end of the year. In addition, onion exports declined in the last quarter
of 2002, but the impact of the conflict threatens to assume greater significance
in 2003 if it is not resolved rapidly and if new markets are not found.
17. Niger's real economic growth in 2002 is estimated at 3 percent,
slightly higher than the initial projection of 2.7 percent. For the
second consecutive year, the rainfall level was satisfactory and well
distributed over time and space, making it possible to increase agricultural
production from the previous year's level (1.0 percent). The construction
and public works sector was particularly dynamic, thanks to the recovery
in public and private investment. The inflation rate (on a 12-month, end-of-period
basis) declined from 3.2 percent in December 2001 to 0.6 percent
in December 2002. This performance is attributable to a pronounced
drop in the cost of fresh produce, which accounts for 25 percent
of the index, despite a significant increase in the last quarter of 2002
in the prices of certain products traditionally imported from Côte
d'Ivoire.
18. The external current account deficit is estimated to have been
limited to 6.7 percent of GDP (excluding grants for budgetary assistance)
in 2002, as against a projection of 8.6 percent of GDP. The lower
level of exports resulting from declines in the export volumes of onions
and cowpeas was offset by lower-than-projected imports of capital goods
and petroleum products. Taking into account capital and financial operations,
the accumulation of net foreign assets of the BCEAO is estimated at CFAF 3.7 billion.
19. Preliminary monetary survey data at end-December 2002 indicate
money supply growth of 9.0 percent in 2002, slightly exceeding the
increase of 8.3 percent projected in the revised program. This reflects
a smaller improvement in net foreign assets of the banking system and
a more sizable increase in domestic credit. The increase in net foreign
assets was limited to 3.3 percent of the beginning-of-period money stock,
as against a forecast of 8.4 percent. These assets are estimated at CFAF 37.6
billion at end-December 2002, largely owing to an increase in net
foreign assets of the BCEAO. As regards net domestic assets, their increase
in 2002 represented 5.7 percent of the beginning-of-period money
stock, compared with a projected decrease of 0.2 percent. The larger-than-expected
increase in domestic credit, which shows both a deterioration in the net
government position and an increase in credit to the economy, explains
the increase in net domestic assets. The deterioration in the net government
position reflects a greater-than-anticipated recourse to the BCEAO, as
statutory advances to the government amounted to CFAF 33.1 billion
at end-2002, compared with the program's projected decline to CFAF 22.2
billion. Credit to the economy increased with the recovery in economic
activity and grew by almost 15 percent in 2002, largely benefiting
the manufacturing, construction and public works, trade, and services
sectors.
20. In the overall context of the crisis in Côte d'Ivoire,
the government maintained strict fiscal discipline during the last quarter
of 2002. According to preliminary data available on budget execution
in 2002, budget receipts amounted to CFAF 160.0 billion, compared
with the target of CFAF 160.4 billion. This sound revenue performance,
in conjunction with the regulation and effective control over expenditure
before November 21, 2002, the final date for commitments, made it
possible to limit the basic deficit at end-December 2002 to CFAF 26.2
billion, slightly below the revised program target. The deterioration
in the net government position vis-à-vis the banking system reflects
a shortfall in net foreign financing at end-2002 and a greater-than-projected
reduction in domestic payments arrears.
21. These preliminary indications of satisfactory financial performance
were complemented at end-2002 by the introduction of the new harmonized
government budget nomenclature and charter of public accounts, which were
adopted by decrees dated July 26, 2002. These wide-ranging reforms
will enhance transparency and good governance in public finances, as well
as fiscal management overall. Despite limited resources, these efforts
were undertaken successfully within the deadlines established by the staffs
of the Budget Directorate and the Nigerien Treasury. They included not
only the development of new software for the expenditure process and government
accounting, but also steps to improve the information technology system
at the Ministry of Finance and Economy, as well as staff training. The
2003 Budget Law could thus be prepared using the new classification, and
it will be executed in keeping with the new charter of public accounts.
The Directorate-General of the Budget and the Treasury will devote the
first half of 2003 to supplementary training activities and to the ongoing
monitoring of the implementation of these new tools, so as to ensure their
proper use by the staff concerned.
22. Most of the other structural reforms suffered implementation
delays in 2002, attributable for the most part to problems of institutional
capacity and insufficient monitoring. The government is determined
to correct these delays in 2003. Nevertheless, four structural benchmarks
of the program were not observed at end-December:
Strengthening of the External Debt Unit through the introduction
of the new debt-management software. As indicated above, corrective
measures have been adopted, and the system is expected to become operational
by end-June 2003 with the help of technical assistance from the Commonwealth
Secretariat.
Submission to the Audit Court of the 2001 budgetary accounts and
preparation of the 2001 draft Final Budget Law with its certificate
of conformity. The draft Final Budget Law and the 2001 budgetary accounts
were transmitted on January 29, 2000, to the Audit Court which
is to issue the certificate of conformity before end-April 2003.
The terms of references of a study on the medium-term financial
projections of the National Retirement Fund were completed in January
2003, and the selection of a consultant to prepare the study will be
made before end-April 2003. The study is expected to be finalized by
end-September 2003.
The submission to the government of an independent firm's study
on the compensation of the stakeholders in the petroleum sector included
in the formula for determining petroleum prices was not completed by
end-2002. The selected consultant is expected to convey the results
of the study to the government in June 2003.
23. As regards the other structural reforms, principally supported
by the World Bank, there have been the following developments:
The in-depth reform of the government procurement system led to
the preparation of a government procurement code and its ratification
by the National Assembly in October 2002. Enforcement of this new framework
will require a six-month transitional period to allow for the adoption
of the implementing regulations on the preparation of various standard
bidding documents. Alongside the adoption of the implementing provisions,
short-term technical assistance will be used to build capacity at the
central procurement committee.
The privatization of NIGELEC through a concession arrangement has
been delayed, owing to the insufficient number of companies listed for
the prequalification exercise initiated in April 2002. A new prequalification
profile based on less restrictive criteria was issued on November 19,
2002, and two prequalification applications have been registered.
The prior studies for the privatization of SONIDEP through the opening
up of its capital began in July 2002 and were discussed in the interministerial
committee in November 2002. The committee approved the option of privatizing
by opening the majority of capital to professionals in the oil sector
and private sector operators; it requested an additional study on the
valuation of SONIDEP. Since that time, and with a view to speeding up
the privatization process, the government has consulted the World Bank
on the possibility of simply opening the majority of capital to the
private sector, which could occur in the first half of 2003.
The process of hiring an outside firm to help set up a MRA was initiated
in February 2002 and led to the selection of the SNC Lavalin Consortium
in November 2002. Moreover, the government has appointed the Chairman
of the MRA in March 2003, in order to ensure that he can monitor
the performance of the consultant's work in 2003.
Concerning the strengthening of the financial sector, progress was
made in a number of areas in 2002. First, the financial situation of
the Banque Commerciale du Niger (BCN) was normalized following the release
in October 2002 by the Libyan Arab Foreign Bank of CFAF 1.5 billion,
representing the capital share granted to it by the government of Niger
as nominee. The procedures for lifting the bank's temporary management
under the BCEAO have been initiated in early 2003. Second, following
the two studies on the financing of housing and local governments, the
government decided to divest itself of 90 percent of the capital in
Crédit du Niger (CDN) before the end of the first half of 2003
and to freeze the activities (other than loan collection) of the Caisse
de Prêts aux Collectivités Territoriales (CPCT), pending
improvement in market conditions that could ultimately lead to a reorganization
of local governments. Third, as regards the restructuring of the Banque
Islamique du Niger pour le Commerce et l'Investissement (BINCI), no
significant progress was made in 2002 because of delays in reaching
agreement with the major shareholders (DMI-Geneva and the Islamic Development
Bank). Fourth, in the area of neighborhood financial intermediation,
the financial and organizational audit of the major microfinance institutions,
which was scheduled to begin in early September 2002, finally started
in March 2003. Likewise, the actuarial audit of the National Social
Security Fund (CNSS) could not be carried out in 2002, but will be conducted
in 2003 with support from the International Labor Office (ILO). Lastly,
the implementation of the restructuring of the National Postal and Savings
Office (ONPE) has been postponed to the first quarter of 2003, owing
to delays in completing the studies on the restructuring of postal activities
and the creation of a postal financial services branch.
III. Policies and Measures to Be Implemented in 2003
24. The government's program for 2003 reflects (i) further progress in
achieving the objectives included in the three-year economic and financial
program supported by the IMF under the PRGF; (ii) implementation
of regional integration efforts; and (iii) sustained implementation of
the policy orientations set forth in the Declaration of General Government
Policy and the poverty reduction strategy paper adopted in January 2002.
The government will be pursuing the following objectives:
In the economic sphere, the government will be promoting the revitalization
of the economy through increased public investment and continuing the
reduction in domestic payments arrears.
In the social sphere, the government will aim at improving the standard
of living and well-being of the population by implementing the poverty
reduction strategy, on the one hand, and, on the other hand, by enforcing
the rule of law and continuing its dialogue with the social partners.
In the financial sphere, the government will be pursuing a fiscal
policy aimed at maintaining expenditure at a level compatible with available
resources, continuing the adjustment of public finances, and contributing
to regional objectives for revitalizing the macroeconomic framework.
25. The 2003 program is being carried out in an uncertain regional
climate caused by the social and political crisis in Côte d'Ivoire.
The government of Niger has thus initiated studies on the potential
economic, financial, and social impact of a protracted crisis beyond the
first half of 2003. As matters now stand, Niger's relative distance and
its ability to diversify its sources of supply and export markets have
prompted the government to base the 2003 program on moderately positive
macroeconomic prospects. Should economic and financial developments prove
to be more negative than expected, the Nigerien government will consult
with the IMF on the changes to be made in the program. In the period prior
to such a consultation, the government will consider a number of adjustment
measures to address this external shock, such as an enhanced control of
budgetary expenditure, use of the budget reserve, recourse to the regional
market for government securities and bonds, and the use of food security
stocks.
A. Macroeconomic Framework
26. The macroeconomic objectives targeted by the program in 2003 are
as follows: (i) a real GDP growth rate of 4 percent; (ii) an
inflation rate (on a twelve-month, end-of-period basis) of less than 3
percent; and (iii) an external current account deficit (excluding
grants for budgetary assistance) that is contained to 8.5 percent
of GDP. The economic growth projections assume normal climatic conditions
that will permit good harvests as well as a continuation of the trends
observed since 1999, thanks to the impetus from the promotion of the private
sector and the resumption of investment, in particular the rehabilitation
and construction of public infrastructures. The economic and financial
policies that the government will be implementing in 2003 in order to
achieve these objectives thus aim at enhancing the integration of the
national economy into the regional economy through the WAEMU and the Economic
Community of West African States (ECOWAS).
B. Fiscal Policy
27. The 2003 Budget Law approved by the National Assembly on December 16,
2002 closely reflects the budgetary objectives of the three-year program
and the poverty reduction strategy paper adopted in September 2000
and January 2002, respectively. It was prepared using the new budget
nomenclature and incorporates in a single budget all the government's
current and capital expenditure. Considering the economic and financial
climate, which is characterized by the persistence of cash-flow pressures
and the scarcity of external resources, the budget aims not only at continuing
the fiscal adjustment process under way since the new government came
to power, but also accelerating the implementation of the poverty reduction
strategy. This acceleration will be made possible by the larger amounts
of funds available in 2003 under the HIPC Initiative and by the substantial
increase in the investment program in the social sectors.
28. Taking into account the normal rate of execution of budgeted
capital expenditure and a number of adjustments made since its promulgation,
the 2003 Budget Law seeks to stabilize the basic budget deficit at 2.1
percent of GDP. This maintenance of the basic deficit at the level
envisaged for 2002 in fact constitutes an improvement in the basic balance,
when the exceptional revenues from clearing reciprocal debts between the
government and enterprises are excluded. The 2003 budget also aims at
restoring budgetary saving to a slightly positive level; this was among
the objectives of the three-year program and results in part from reclassifications
of expenditure in accordance with the new nomenclature. The anticipated
increase in foreign-financed investment and investment financed by HIPC
Initiative resources, from 4.8 percent of GDP in 2002 to 6.9 percent in
2003, will thus boost total capital expenditure and the overall deficit
(on a payment order basis and excluding grants) to 9.1 percent of GDP
in 2003. The 2003 reduction in domestic payments arrears has been defined
in light of foreseeable financing; targeted at 1.1 percent of GDP, it
will increase the deficit on a cash basis to 10.2 percent of GDP.
The net external financing of this deficit, excluding budgetary assistance,
is estimated at 6.1 percent of GDP, stemming from project financing, external
debt amortization, and debt relief, including proceeds under the HIPC
Initiative. Domestic financing takes into account the agreements on eliminating
the statutory advances from the BCEAO and the requirements of a prudent
monetary policy, and has been limited to 0.2 percent of the GDP in 2003.
The remaining financing requirement amounts to 4.0 percent of GDP and
is covered by anticipated budgetary assistance from Niger's development
partners, principally the World Bank (US$30 million), the European
Union (€39 million), the African Development Bank (SDR 15 million),
and certain bilateral partners, such as France and Belgium.
29. The adjustments to the 2003 Budget Law, which will take the form
of a revised Budget Law, take into account recent developments since it
was prepared and adopted, but do not significantly modify the financing
requirement. The adjustments primarily (i) update the level of
the wage bill in light of the actual spending in 2002 and the initial
underestimation of the budgetary impact of the automatic salary increases,
which were frozen from March 1999 to December 2001 (0.1 percent of GDP);
(ii) incorporate the measures to improve the situation within the
armed forces in goods and services instead of wages, as initially envisaged
(0.1 percent of GDP); (iii) establish a budgetary reserve and more sizable
government deposits in order to address, should the need arise, any unforeseen
consequences of the crisis in Côte d'Ivoire (0.1 percent of GDP);
(iv) integrate measures aimed at offsetting these identified additional
expenditures; and (v) reflect revenue from new settlement operations of
reciprocal debts (0.2 percent of GDP).
30. The budgetary revenue target, excluding receipts from clearing
reciprocal debts between the government and enterprises, is CFAF 168.1
billion in 2003, or 10.4 percent of GDP, and equivalent to an increase
of 0.4 percentage point of GDP over the 2002 level. This objective,
which is in line with the initial objectives of the three-year program
despite the tax relief measures negotiated with social partners, relies
on ongoing improvements in the tax and customs administration and on new
revenue-enhancing tax measures. Reducing the formalities required for
the incorporation of businesses and the rate of the corporate income tax
(BIC), which is reduced from 42.5 percent to 35 percent, will enable
Niger to move closer to regional averages for tax rates and will promote
investment. In addition, the tax burden on wages and salaries has been
eased by introducing a 5 percent exemption for the calculation of the
taxable income and making tax bracket adjustments that will be implemented
gradually in 2003 and 2004. To offset these tax relief measures and achieve
the revenue target of 10.4 percent of GDP, the following measures
have been adopted: (i) an increase in the individual income tax on industrial
and commercial profits and in the income tax on noncommercial profits
(BNC) from 30 percent to 35 percent, thereby harmonizing the BIC and BNC
rates; (ii) the introduction of a tax on lottery winnings and an
increase in the rate of the tax on lottery receipts; (iii) an extension
of the collection of prepayments of the corporate income tax to reexport
activities and introduction of a flat-rate fee for authorizing such activities
in respect of tobacco and cigarettes; (iv) the application of the VAT
to rice, replacing the temporary 10 percent import levy that was not in
line with WAEMU community directives; (v) application of excise duties
to coffee instead of tea; (vi) a broadening of the tax base by adjusting
the rate schedule for the comprehensive business license; (vii) the introduction
of a special tax for environmental protection; and (viii) the introduction
of measures to improve the collections of miscellaneous revenue, such
as mining receipts.
31. These tax measures are accompanied by the continuing reform of
the tax and financial administration with a view to enhancing the efficiency
of resource mobilization. The Directorate-General of Customs will,
in 2003, expand its activities to improve its coverage of the national
territory and strengthen the fight against customs fraud, in particular
as regards petroleum products. The Directorate-General of Taxes will continue
to strengthen its capacities in all areas, be it management, auditing,
or collections. Concomitantly with communications and taxpayer information
operations, the action plan for 2003 is focused principally on the following:
- Strengthening the tax administration of major enterprises through
the creation of a Large Enterprise Directorate (DGE) in Maradi to deal
with enterprises whose turnover exceeds CFAF 50 million.
- Strengthening the tax administration of small and medium-sized
enterprises (SMEs) through the creation of an SME Directorate in
Niamey, which will supervise enterprises situated in Niamey that are
subject to taxation on the basis of actual income and are not covered
by the DGE (approximately 1,000 firms).
- Strengthening the tax administration of sole proprietorships.
With the creation of the SME Directorate, the activities of the Niamey
tax centers will be limited to working with the comprehensive business
license and real property taxes. This situation should enable them to
improve the yield of these taxes considerably (collections currently
are no greater than 25 percent of the amounts assessed). In addition,
computerization of these tax centers will also play a part in improving
their performance.
- Broadening the tax base. The activities to be carried out in
2003 in order to continue strengthening the auditing of enterprises
will consist of (i) increasing the number of auditors in the DGE inspection
unit; (ii) assigning staff to the investigation unit; and (iii) revising
the reporting requirement that makes it possible to carry out inquiries
and cross-checks at enterprises.
- Reducing the scope of exemptions. Most of the major
enterprises in Niger come under one kind or another of special exemption
arrangement (investment code, mining code, individual agreement, etc.).
Auditing these arrangements will be intensified in 2003, in particular
through the establishment of a joint taxes/customs team to monitor the
actual destination of exempted goods. At the same time, work will be
continued on revising the list of products eligible for exemptions and
on adopting the WAEMU investment code, so as to reduce the tax benefits
of the existing code.
32. The government intends to enhance the tax adjustment effort through
the pursuit of a prudent expenditure policy. Budgetary expenditure
other than externally financed investment will be limited to 12.7 percent
of GDP in 2003, or CFAF 206 billion, compared with 12.3 percent of GDP
in the revised 2002 program. Given the drop in external interest payments
as a result of debt-relief agreements signed in 2002, this slight increase
corresponds to an increase of about 0.9 percent of GDP in domestically
financed capital expenditure and current expenditure other than debt service
and wages. It thus permits the government to continue to implement the
poverty-reduction strategy through an increase in social spending, as
well as to strengthen activities in the areas of security (Ministries
in charge of Justice, the Interior, and the Armed Forces), improve the
operations of the public authorities (National Assembly and Office of
the Prime Minister), contribute to a number of important cultural and
social activities, and finance certain investment projects for which external
assistance could not be lined up (such as the rehabilitation of 50 kilometers
of sewer lines in Niamey).
33. The extent of the implementation of the poverty reduction strategy
is measured nonetheless in the context of capital expenditure, where the
envisaged execution of foreign-financed projects will increase by 55 percent
in 2003 to 6.9 percent of GDP. On the one hand, the resources freed
by the HIPC Initiative will increase from 0.6 percent of GDP in 2002 to
1.1 percent of GDP in 2003. They will continue to be allocated entirely
to meeting the objectives of the strategy and hence, make it possible
to intensify the activities carried out with success since 2000. A new
program covering 1,000 classrooms, 1,000 basic health centers, and 1,000
wells will be initiated and complemented by projects involving dams and
weirs, rural roads, and support for livestock farming through the development
of local veterinary services. The programming, execution, monitoring,
and sustainability of these projects will continue to require the involvement
and participation of the local population. On the other hand, the share
of capital expenditure devoted to the social sectors (education, health,
and water resources), excluding those financed by the HIPC Initiative,
will represent nearly one-half of the total in 2003, compared with a share
of one-third in 2002. Education-related projects will thus increase by
nearly 50 percent, health projects double, and water projects increase
by a factor of four. Programs to finance rural development and the productive
sectors will remain stable, representing 1.2 percent of GDP in 2003, while
road infrastructure projects will decline by one-third in 2003 following
the completion of the Niamey-Dosso road project. The government will take
all steps necessary to ensure that this ambitious capital budget is executed
and to accelerate poverty reduction in Niger.
34. The wage policy to be followed in 2003 will remain prudent, and
measures to keep it under control will be continued. No net civil
service recruiting is planned, no adjustments have been made in base wages
and benefits, and two months of wage payments arrears will be settled
in 2003. The 2003 wage bill is, hence, projected to amount to 3.5 percent
of GDP, or 35 percent of tax receipts in line with WAEMU criteria
and compares favorably to the over 50 percent of tax receipts in
2000, taking into account the habitual rise in personnel costs and the
final settlements to be paid in connection with the unfreezing of the
automatic raises that were blocked between March 1999 and December 2001.
Nevertheless, in light of the slippages observed in 2002 and to ensure
better control over the wage bill, the government has decided to implement
the following measures: (i) conduct a financial audit of government
personnel expenditure in 2003; (ii) strengthen the management of
the civil service by improving the monitoring of promotions and transferring
complete responsibility for managing the civil service master file to
the Ministry of the Civil Service; (iii) complete a study on the
decision to start paying in January 2002 the salary increases that are
linked to automatic advancement and had been frozen between March 1999
and December 2001; and (iv) use more extensively the banking system for
paying wages, so as to limit banknote handling and cash payments, which
were used for almost 80 percent of wage payments until 2002. The government
thus anticipates that its control over the wage bill will be improved
and the bill will be financially rehabilitated by end-2003. In addition,
in 2003 it will relaunch the civil service reforms aimed at modernizing
the administration and controlling staffing levels and the wage bill.
Other activities planned for 2003 will improve the preparations for the
envisaged decentralization of the government and study the problems of
recruitment, motivation, career management, and training as raised by
the implementation of the poverty reduction strategy. In this vein, the
government will require support from the international community to help
it devise a sustainable and comprehensive civil service policy.
35. The reduction in domestic payments arrears will be continued
in 2003, with CFAF 18 billion allocated to this end. This amount,
which will be revised upward in the event budgetary assistance exceeds
projections, will allow a reduction of the stock of domestic arrears to
less than CFAF 62 billion (or 3.8 percent of GDP) by end-2003, thereby
bringing the nominal stock of identified arrears down to half its end-2000
level. The 2003 objective includes a reduction of two months' wage arrears
of CFAF 6.7 billion as well as operations to eliminate reciprocal
debts between the government and its partners in the amount of CFAF 3
billion. Wage arrears will thus be reduced from CFAF 45.3 billion
at end-1999 to less than CFAF 12 billion at end-2003. The government will
also examine the feasibility of clearing additional wage arrears by granting
land. The rest of the reduction in payments arrears envisaged for 2003
will relate first to small-claims holders (claims lower or equivalent
to CFAF 5 million) and creditors from sectors related to the privatization
program.
36. The continuation of administrative reforms aimed at improving
the expenditure process and the Nigerien Treasury will seek to ensure
the successful implementation of the new budget nomenclature and the new
government charter of public accounts, particularly during the first half
of 2003. Teams have been put in place to monitor these reforms and
to ensure the reliability and timeliness of the budget and account entries
relating to the 2003 Budget Law. Concomitantly, several steps will be
taken to improve the quality of expenditure, budget preparation, and the
automation of services. The computerization of the regional treasury offices
will be the subject of a study in the last semester of 2003 that will
aim for an effective implementation by end-December 2003. Operations to
implement the government procurement code will be complemented by an improved
computerization of the expenditure process. Similarly, the budget preparation
process will be strengthened by developing a methodology and suitable
timetable. The actual preparation of the budget will be improved by conducting
a review of public expenditure, principally in cooperation with the World
Bank and the European Union, and by preparing a medium-term budgetary
expenditure framework by the end of the year.
C. Monetary and Financial System Issues
37. The BCEAO will continue in 2003 to pursue a prudent regional
monetary policy aimed at supporting the objectives of economic growth
and price stability in the WAEMU, while ensuring a high degree of coverage
of currency issues by external reserves. Such prudence is all the
more necessary because the crisis that started in Côte d'Ivoire
on September 19, 2002 has not yet been fully resolved and its impact on
socioeconomic developments throughout the region remains uncertain. In
this regard, the BCEAO will strengthen its surveillance of the banking
system and its monitoring of economic and financial developments in the
region, including the absorption of statutory advances to governments
in the region. In the context of intensifying its auditing activities,
the BCEAO adopted a new directive on combating money laundering in September
2002, and the member states have committed themselves to enforcing it.
In these circumstances, Niger's indicative monetary program, adopted during
the fourth quarter of 2002, envisaged money supply growth of about 6.1 percent
in 2003. This projection reflected an improvement in the BCEAO's net foreign
assets and a 4.3 percent reduction in domestic credit, largely because
the net government position vis-à-vis the monetary system would improve
through the reduction in statutory advances from the BCEAO over the course
of the year (CFAF 5.9 billion). This amount represents the coverage
of overruns over the ceiling on assistance to the government, or CFAF 4.1 billion,
and the coverage of the BCEAO's consolidation of the outstanding balance
of statutory advances to the government of Niger.
38. In view of the economic and financial developments at end-December
2002 and the finalization of the budget program, the 2003 monetary program
has been modified, and the expansion of the money supply is now projected
at 8.7 percent, a rate slightly exceeding that of the growth of GDP. The
revised program takes into account a slight deterioration in the 2003
balance of payments and a projected deterioration in the net government
position following the payment of external arrears to the European Investment
Bank (EIB). Net foreign assets are projected to rise by only CFAF 4 billion
to CFAF 41.6 billion at end-December 2003, an increase of 11 percent.
Expressed as a percentage of the beginning-of-period money stock, net
domestic credit is expected to increase by 6 percent, as a 4.1 percent
expansion in credit to the economy and an increase in the government's
net position vis-à-vis the banking system of 1.9 percent will more
than offset a 4.5 percent decrease in statutory advances.
D. Structural Reforms
39. In addition to the administrative reforms pursued in the budget
area and described above, the government seeks to accelerate the structural
reform program. The government is committed to achieving concrete
results by end-June 2003 in the following areas: (i) the establishment
of the multisectoral regulatory agency; (ii) the privatization of
NIGELEC and SONIDEP; (iii) the restructuring and privatization of
the CDN; (iv) the implementation of the decision to freeze CPCT activities
(except for loan collection); (v) the implementation an agreement
on BINCI between the government of Niger and the other shareholders; and
(vi) the restructuring of the ONPE, including the establishment of
its postal and financial services subsidiaries. The government, in consultation
with the World Bank, will take all steps necessary to ensure that these
reforms are carried out on schedule. Additional reforms, to be implemented
in the second half of 2003, will also be discussed with the World Bank
in the context of its forthcoming budgetary support for Niger and the
effective implementation of its credit to strengthen the financial system.
IV. External Debt
40. The government continues to follow a prudent policy as regards
external borrowing. In this context, it places special emphasis on
seeking grants and concessional loans. The government is continuing its
discussions with the OPEC Fund to renegotiate the terms of the US$10 million
loan, that do not meet the required grant element under the program supported
by the PRGF. The government remains committed to refraining from drawing
on this loan for as long as the grant element of 50 percent is not achieved.
41. In the context of the HIPC Initiative, the amount of debt relief
obtained by the government from its creditors at end-December 2002 represents
approximately 80 percent of total relief in net present value (NPV)
terms. During the year, the government signed three new debt-relief
agreements with the OPEC Fund, the Islamic Development Bank (IsDB), and
the Kuwait Fund for Arab Economic Development (KFAED), for total debt
relief of US$46 million in NPV terms. In addition, in late 2002, the European
Commission conveyed to the government its modalities for debt relief in
the context of the interim period, thereby taking upon itself the payment
of certain maturities falling due in 2002 and 2003. Its contribution for
the two years consequently amounts to €3.8 million in nominal terms.
In addition, the government is contacting the ECOWAS Fund and the Conseil
de l'Entente in order to obtain their participation in and contribution
to the HIPC Initiative. Also, it is contacting the bilateral non-Paris
Club creditors to either finalize agreements for securing HIPC Initiative
relief (Algeria and China) or gathering their effective participation
(Saudi Arabia, United Arab Emirates, Iraq, Libya, and Taiwan Province
of China). In this context, the government will propose the use of the
IDA debt-buyback mechanism, which would enable these creditors to repurchase
their debt at a significant discount and cancel all interest arrears.
This discount would correspond to the creditor's contribution under the
HIPC Initiative.
42. Virtually all measures pertaining to Niger's access to the HIPC
Initiative completion point have been implemented. The remaining measures
relate to the increase in the immunization rate for children aged 12 to
24 months, the reduction in grade repetition at the sixth grade, and the
pilot beneficiary incidence analysis on the impact of public spending
on the poor. The government has taken steps to achieve these aforementioned
conditions and hopes to be able to reach the completion point during the
third quarter of 2003, at the same time as the submission of the fifth
review of the three-year program, and after more than a year of implementation
of the poverty reduction strategy. In order to carry out a new analysis
of the external debt burden, which will serve as the basis for the HIPC
Initiative completion point document, the government has already sent
to their creditors letters requesting a reconciliation of the figures
at end-December 2002.
V. Program Monitoring
43. Monitoring of the 2003 program will be based on quarterly quantitative
performance criteria and indicative targets (evaluated beginning December
31, 2002), one structural performance criterion and several structural
benchmarks for 2003, and a review. The quantitative performance criteria
and indicative targets are specified in Table 3
and defined in the attached technical memorandum of understanding;
the structural criteria and benchmarks are defined in Table
4. The quantitative performance criteria and indicative targets include
(i) a ceiling on net bank credit to the government; (ii) a ceiling
on the basic budget deficit (on a commitment basis, excluding grants and
excluding receipts from the settlement of reciprocal debts between the
government and enterprises); (iii) a reduction in the government's outstanding
domestic payments arrears; (iv) the nonaccumulation of new external payments
arrears by the government; (v) a limit on new nonconcessional external
borrowing or loan guarantees at maturities of more than one year contracted
or guaranteed by the government; and (vi) a limit on new short-term
external borrowing to finance imports. Variables (i) to (iii) constitute
performance criteria under the program for end-March and end-September
2003, and indicative targets at end-June and end-December 2003. Variables
(iv) to (vi) represent continuous performance criteria. In addition, quarterly
indicative targets are set for revenue (excluding receipts from the settlement
of reciprocal debts) and the wage bill. The quarterly ceilings on net
bank credit to the government will be adjusted on the basis of the gap
between projected net amounts of exceptional external assistance and the
amounts actually received, within the limits set out in Table
3.
44. The 2003 program also includes a structural performance criterion
on the continuous implementation of the pricing formula for petroleum
products, as well as a number of structural benchmarks as set forth in
Table 4. These include (i) introduction
and use of a new debt-management and recording software by end-June 2003;
(ii) completion of a study on the remuneration of the petroleum sector
operators by end-June 2003; (iii) completion of an actuarial study
of the National Retirement Pension Fund by end-September 2003; (iv) completion
of a financial audit of the wage bill by end-September 2003; (v) computerization
of the regional treasury offices for the implementation of the new government
charter of public accounts by end-December 2003; and (vi) preparation
of a medium-term expenditure framework for two key social sectors by end-December
2003.
45. The government will continue to comply with the statistical reporting
requirements set out in the technical memorandum of understanding.
Niger
Technical Memorandum of Understanding
Niamey, March 28, 2003
1. This technical memorandum of understanding provides the definitions
of the quantitative performance criteria and indication targets for the
third year of Niger's program supported under the Poverty Reduction and
Growth Facility (PRGF). The quantitative performance criteria and indicative
targets for March, June, September and December 2003 are set out in Table
3 attached to the government's memorandum of economic
and financial policies (MEFP) dated March 28, 2003. This technical
memorandum also sets out the 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, at some future
point(s) in time; these payments will discharge 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 lessee 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 lessor retains the title to the property. For the purpose
of the 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 that cover 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 (e.g., payment on
delivery) will not give rise to debt. The external debt excludes treasury
bills and bonds issued in CFA francs on the regional financial
market of the West African Economic and Monetary Union (WAEMU).
(b) Government refers to the central government of the Republic
of Niger; it does not include any political subdivision, the central
bank, or any government-owned entity with a separate legal personality.
(c) External payments arrears are external payments due but
not paid. Domestic payments arrears are domestic payments due
(following the expiration of a 60-day grace period, excluding obligations
with a specific grace period and for which this grace period applies)
but not paid.
(d) Government obligation is any financial obligation of the
government verified as such by the government (including any government
debt).
II. Quantitative Performance Criteria
A. Net Bank Credit to Government
Definition of the performance criterion
3. Net bank credit to the government is defined as the balance
of the government's claims and debts vis-à-vis national banking institutions.
Government claims include the cash holdings of the Nigerien Treasury,
deposits with the central bank, deposits with commercial banks, and secured
obligations. Government debt to the banking system includes funding from
the central bank (essentially IMF assistance and refinancing of secured
obligations), government securities held by the central bank, funding
from commercial banks (including government securities held by commercial
banks), and deposits with the postal checking system.
4. Government securities held outside the Nigerien banking system are
not included in the net bank credit to government.
5. The net bank credit to government is calculated by the Central Bank
of West African States (BCEAO), whose figures are those deemed valid within
the context of the program. The scope of the net bank credit to government
as defined by the BCEAO includes all central government administrations.
The targets are based on the variation of stock in net bank credit to
the government from December 31, 2002 to the date considered for the performance
criterion or benchmark.
Adjustment
6. The ceiling on net bank credit to the government will be subject
to adjustment if disbursements of external budgetary assistance (excluding
IMF financing and the assistance to be provided under the Initiative for
Heavily Indebted Poor Countries, but including traditional debt relief),
net of debt-service obligations (excluding IMF repayment obligations)
and payments of external arrears, exceed or fall short of program forecasts.
In the event of disbursements in excess by more than CFAF 3.0 billion,
the ceiling will be adjusted downward pro tanto by the amount of the excess
disbursements beyond these CFAF 3.0 billion, unless they are
used to absorb domestic payments arrears. In contrast, if at the end of
each quarter disbursements are less than the programmed amounts, the ceiling
will be raised pro tanto by the amount of the shortfalls up to the limit
(on a noncumulative basis) of CFAF 7.5 billion at end-March and end-June
2003, and 15.0 billion CFAF at end-September and end-December 2003. The
amount of external assistance provided is calculated from end-December
2002 onward.
7. If HIPC Initiative assistance is granted to Niger, the debt-service
savings will be transferred to a central bank account and used to finance
new poverty reduction programs that have been approved in the budget law
and are in line with the poverty reduction strategy paper (PRSP).
Reporting requirement
8. Detailed data on net bank credit to government will be provided monthly
within six weeks following the end of each month.
B. Basic Budget Balance
9. The basic budget balance is defined as the difference between total
revenue, excluding grants and revenue from the settlement of reciprocal
debts between the government and enterprises, and total expenditure, excluding
externally financed capital expenditures (including investment expenditures
financed by resources freed up as a result of the HIPC Initiative assistance).
The performance criterion and indicative targets are based on the cumulative
basic budget balance since end-December 2002.
Reporting requirement
10. This information will be provided to the IMF monthly within six weeks
following the end of each month.
Adjustment
11. If the amount of external assistance is higher than scheduled in
the revised program, the performance criterion and indicative targets
will be adjusted pro tanto up to CFAF 3.0 billion.
C. Reduction of Domestic Payments Arrears on Government
Obligations
Definition of the performance criterion
12. Domestic payments arrears on government obligations are reduced
through the payment of these obligations as defined under 2c and 2d above.
The government undertakes not to accumulate any new domestic payments
arrears on government obligations, except for arrears on obligations other
than government debt, in which case the government undertakes not to accumulate
beyond six months. The Centre d'Amortissement de la Dette Intérieure
de l'Etat (CADIE - the government domestic debt amortization center) keeps
and updates the inventory of domestic payments arrears on government obligations
and maintains records of their repayments.
Reporting requirement
13. Data on the outstanding balance, accumulation, and repayment of domestic
payments arrears on government obligations will be provided monthly within
six weeks following the end of each month.
D. Nonaccumulation of External Payments Arrears
Definition of the performance criterion
14. Government debt is outstanding debt owed or guaranteed by
the government. Under the program, the government undertakes not to accumulate
external payments 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 creditors, including Paris Club creditors.
15. In addition, the government undertakes to attempt in good faith and
without delay to sign agreements that would confirm the preliminary understandings
reached on the settlement of its external payments arrears before the
consideration by the Executive Board of the IMF, on December 14, 2000,
of the authorities' request for a new three-year arrangement under the
Poverty Reduction and Growth Facility.
Reporting requirement
16. Data on the outstanding balance, accumulation, and repayment of external
payments arrears will be provided monthly within four weeks following
the end of each month.
E. External Nonconcessional Loans Contracted or Guaranteed
by the Government of Niger
Definition of the performance criterion
17. The government will not contract or guarantee external debt with
original maturity of one year or more with a grant element of less than
50 percent. Nonconcessional external debt is defined as all debt
with a concessionality level of less than 50 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 ten-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.
18. 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 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
19. Details on any external government debt will be provided monthly
within four weeks following the end of each month. The same requirement
applies to guarantees extended by the central government.
F. Short-Term External Debt of the Central Government
Definition of the performance criterion
20. The government will not contract or guarantee 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
21. Details on any external government debt will be provided monthly
within four weeks following the end of each month. The same requirement
applies to guarantees extended by the central government.
III. Indicative Targets
A. Definitions
22. 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.
23. The civil service wage bill is another indicative target of the program.
Wage bill data are provided by the budgetary accounts and exclude the
salaries paid for the reinstatement of former rebellion members, the medical
and training indemnities, the contributions from the budget to the national
retirement fund, and the wage refunds. The wage bill includes cash vouchers.
B. Reporting Requirement
24. This information will be provided to the IMF monthly within six weeks
following the end of each month.
IV. Additional Information for Program-Monitoring Purposes
A. Public Finances
25. The government will report to IMF staff the following:
- detailed monthly estimates of revenue and expenditure, including social
expenditure and the payment of domestic and external arrears;
- complete monthly data on domestic budgetary financing, to be provided
monthly within six weeks following the end of each month;
- 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; and
- monthly data on debt service, to be provided within four weeks following
the end of each month.
B. Monetary Sector
26. The government will provide the following information within eight
weeks following the end of each month:
- consolidated balance sheet of monetary institutions and, as appropriate,
the balance sheets of selected individual banks;
- the monetary survey, eight weeks after the end of each month, for
provisional data;
- borrowing and lending interest rates; and
- customary banking supervision indicators for bank and nonbank financial
institutions. As needed, indicators for individual institutions may
also be provided.
C. Balance of Payments
27. The government will provide 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 following
the end of the year concerned.
D. Real Sector
28. The government will provide the following information:
- disaggregated monthly consumer price indices, monthly within two weeks
following the end of each month;
- preliminary national accounts, no later than six months after the
end of the year; and
- any revision in the national accounts.
E. Structural Reforms and Other Data
29. The government will provide the following information:
- any study or official report on Niger's economy, within two weeks
following 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.
F. Summary of Main Data Requirements
|
| Type of Data |
Tables |
Frequency |
Reporting Lag |
|
| Real sector |
National accounts |
Annual |
Six months |
| |
Revisions of national accounts |
Irregular |
Eight weeks following revision |
| |
Consumer price indexes,
disaggregated |
Monthly |
End of month + two weeks |
| Public finances |
Net government position |
Monthly |
End of month + six weeks |
| |
Table of indicators, including
breakdown of revenue, expenditure, and repayment of domestic wage
and nonwage arrears |
Monthly |
End of month + six weeks |
| |
Provisional table of government
operations (TOFE) |
Monthly |
End of month + six weeks |
| |
Investment expenditure
execution |
Quarterly |
End of quarter + eight weeks |
| |
Petroleum products pricing
formula, tax receipts, and pricing differentials |
Monthly |
End of month + four weeks |
| Monetary and financial
data |
Monetary survey |
Monthly |
End of month + six weeks
(provisional) |
| |
|
|
End of month + ten weeks
(final) |
| |
Consolidated balance sheet
of monetary institutions and, as appropriate, balance sheets of certain
individual banks |
Monthly |
End of month + eight weeks |
| |
Borrowing and lending interest
rates |
Monthly |
End of month + eight weeks |
| |
Banking supervision ratios |
Quarterly |
End of quarter + eight weeks |
| Balance of payments |
Balance of payments |
Annual |
Six months |
| |
Revised balance of payments data |
Irregular |
When revisions occur |
| External debt |
Outstanding external payments
arrears and repayments |
Monthly |
End of month + four weeks |
| |
Terms of new external loans |
|
End of month + four weeks |
|
|
