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Niger and the IMF
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Niger
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I. Introduction
1. In 1996, Niger adopted a structural adjustment program in support of which the International Monetary Fund approved, on June 12, 1996, a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) in an amount equivalent to SDR 57.96 million. In addition, on March 20, 1997, the World Bank approved a public sector adjustment credit in an amount equivalent to SDR 21.6 million. Under this program, the government has pursued policies designed to stabilize the macroeconomic environment and revive economic activities. The progress achieved in implementing these policies made it possible for Niger to enter into a second annual arrangement under the ESAF, covering the period April 1, 1997-March 31, 1998.
2. Real GDP growth over the past two years has averaged 3.4 percent, a rate that was insufficient to raise GDP per capita. Inflation, as measured by the consumer price index for Niamey, has averaged about 4 percent. The external position, however, improved to some extent, with the current account deficit (excluding official transfers) falling from 11 percent of GDP in 1995 to an average of 9.6 percent in 1996 and 1997. The improvement reflected increased exports and a leveling off in the growth of aggregate demand resulting from a relative strengthening in government finances. Indeed, the overall budget deficit (on a commitment basis and excluding grants) was reduced by nearly 1 percentage point of GDP to 7.5 percent in 1997 because of higher budgetary revenue collection and a sustained control over government spending.
3. The government has eliminated price controls and restrictions on trade; it has also simplified the customs tariff system. In addition, measures were taken to restrict public sector employment and improve the allocation of human resources among the various governmental departments. A program was established for the privatization of public enterprises with World Bank assistance. This program includes the privatization of 12 enterprises, the liquidation of 3, and the restructuring of 8 others during the 1997-99 period.
4. This policy framework paper reviews recent economic developments in Niger and the results achieved since 1996. It also discusses the objectives and policies of the government for the three-year period from 1998 to 2001, together with the financing requirements of the reform program. A summary of the main reforms that are being contemplated and a timetable for implementation, together with a table on the external financing requirements over the three-year period is attached.
5. The results posted since the reform program began in 1996 have been less favorable than expected. Real GDP increased by 3.4 percent in 1996 and 1997, compared with an expected rate of 4.5 percent, owing to adverse weather conditions. Agricultural production shrank by about 2 percent in 1997, and there was a corresponding grain deficit equivalent to 10 percent of domestic demand. An attendant rise in retail prices was successfully contained through grain imports and the distribution of food aid in the areas affected by the drought conditions. Thus, at end-December 1997, inflation1 was held to a rate of 4.1 percent, fairly close to the rate recorded in the previous year.
6. The fiscal deficit (on a commitment basis, excluding grants) amounted to CFAF 77 billion (7.5 percent of GDP) for the 12-month period ended March 31, 1998, compared with the targeted deficit of CFAF 102 billion (8.8 percent of GDP). Revenue was 0.6 percentage points of GDP less than the expected CFAF 103.2 billion (9 percent of GDP). This shortfall was largely due to the delayed implementation of administrative measures designed to improve the effectiveness of revenue collection. Shortfalls in customs revenue (of approximately 8 percent) reflected the delayed revision of the official prices for tax-exempt sales of petroleum products; delayed reimbursement for revenue losses under the solidarity levy scheme (PCS) of the West African Economic and Monetary Union (WAEMU) Commission; poor cooperation between the import verification company and the customs services; and strikes in the transport sector and fuel shortages that disrupted shipments of imports from the coast to Niger. Income tax revenue also fell short of projections, mainly because of difficulties encountered in implementing the new tax schedule for wages and salaries (IUTS), the downward revision of salaries resulting from the application of the new salary scale, and the operating deficits posted by the mining companies in 1996.
7. Total expenditure and net lending for the year ended March 1998 (CFAF 177 billion) slightly exceeded projections (CFAF 169.1 billion). Recurrent expenditures were maintained within the limits set by the government through strict control on expenditure commitments. Capital expenditures were lower than projected, owing to shortfalls in external financing. Such shortfalls also explain a net accumulation of external payment arrears of some CFAF 2 billion over the year to March 31, 1998. However, domestic payments arrears were sharply reduced with external financial assistance specifically targeted at clearing arrears to suppliers in the social services (education and health) sectors, and through settlement of cross debts between central government and public utilities. The overall budgetary deficit (on a cash basis) as of March 31, 1998 of some CFAF 99 billion (about 9 percent of GDP) was largely financed with external resources. Bank financing amounted to CFAF 23.2 billion (22 percent of the deficit), and the government also redeemed part of the treasury bills issued in 1995.
8. During the 12-month period to March 31, 1998, broad money contracted and the net foreign assets of the banking sector deteriorated. Net domestic assets rose, reflecting not only credit expansion to the government but also a resumption of bank lending to the private sector. The contraction in the money supply (down 8 percent between end-December 1996 and end-March 1997) was due to a marked decline in currency in circulation (down 36 percent), which was partially offset by an increase in bank deposits. The increase in bank deposits is explained to some extent by the renewed confidence of depositors in the banking system. The apparent decline in currency in circulation, however, may be related essentially to the difficulties inherent in determining currency in circulation for any particular member country of a monetary union.
9. In the external sector, the deficit in the current account of the balance of payments (excluding official transfers) was equivalent to 10 percent of GDP in 1997. Exports, particularly of uranium, increased slightly, and imports rose moderately.
10. The government has endeavored to make up for lost time in the implementation of major structural reforms. Initial delays were due to administrative difficulties, insufficient coordination, and a lack of financial resources available for conducting the necessary preliminary studies. In November 1997, the government negotiated a protocol with the World Bank that spells out the stages of a revised privatization program. Under this program, calls for bids for the sale of the dairy products company (OLANI) and the cement company (SNC) were issued in December 1997. The sale of these companies were concluded in March and April 1998, respectively. A protocol was signed with the private sector for the establishment of a new private company responsible for managing the storage facilities of the petroleum importing company (SONIDEP), and a regulatory framework governing petroleum products imports was adopted. In addition, a consultant was recruited to conduct a study of the planned restructuring of SONIDEP. The calls for bids relative to the recruitment of consortia for the privatization of the water company (SNE), the telecommunications company (SONITEL), and the electricity company (NIGELEC) have been issued, and the award process was scheduled to have been completed by end-July 1998.
11. Reform of the civil service got under way with the revision of the salary scale and the redeployment of certain personnel within the internal revenue department and the health sector. In addition, a civil service census was completed, which led to the dismissal of 319 government employees whose status was irregular. An action plan has been prepared for the harmonization of the civil service roster and payroll files, which was scheduled to have been completed by end- July 1998.
12. In 1998, the government has continued its efforts to increase revenue, in particular by implementing a series of measures designed to improve the effectiveness of collection and to reinforce fiscal administration. The measures included: (i) property tax reform and the reinforcement of procedures for collecting property taxes; (ii) the establishment of a large-taxpayer unit; (iii) the introduction of a single taxpayer identification number; (iv) the start of controls by the value-added tax (VAT) audit unit; (v) the establishment of two additional revenue offices in various sections of Niamey; (vi) the completion of an inventory of tax arrears and the cancellation of uncollectible tax arrears; and (vii) the harmonization of penalties for noncompliance with the tax code.
13. In the first half of 1998, the government implemented a series of actions aimed at better controlling and reducing tax and customs duty exemptions: (i) a review of procedures for tax exemptions granted under the petroleum and mining codes, as well as under the provisions of the tax regime for the uranium sector, whose recommendations will be implemented in 1998; (ii) the establishment of a system of treasury checks to pay duties on imports externally financed through government procurement contracts, or nongovernmental organizations (NGOs); (iii) the elimination of all ad hoc exemptions; (iv) the elimination of exemptions from duties and taxes on all imports of lubricants and spare parts of a specified unit value; and (v) the systematic nonrenewal of exemptions granted under the investment code, and the decision to exclude all privatized enterprises from exemptions under this code.
14. The government has entered into bilateral debt rescheduling agreements with all the Paris Club creditors. Periodic payments are made to a special account set up at the Bank of France to enable Niger to meet the remaining external debt obligations. However, negotiations with a number of non-Paris Club bilateral creditors have not yet been successfully concluded. The authorities experienced difficulties in making the down payments required by these creditors as a prerequisite for debt-restructuring or debt-refinancing agreements. The same difficulties have been experienced with respect to some multilateral creditors. As a result, a net accumulation of external payments arrears of CFAF 1.8 billion was recorded during the period from April 1, 1997 to March 31, 1998, instead of the projected reduction of CFAF 18 billion.
15. The government's medium-term program seeks to achieve sustainable economic growth and a significant decline in poverty. The program is based on the implementation of prudent budgetary and monetary policies, together with structural reforms to increase agricultural production, develop human resources, and rehabilitate basic infrastructures. The government believes that implementation of these policies will help to: (i) raise the growth rate of real GDP to 4.5 percent a year during 1998-2001, which would allow for an increase in real per capita income; (ii) maintain the rate of inflation at 3 percent; and (iii) reduce the deficit in the current account of the balance of payments (excluding official transfers) from 10 percent of GDP in 1997 to 7.5 percent of GDP by 2001.
16. To achieve the growth target, it will be necessary to increase the ratio of investment to GDP from approximately 10 percent in 1996 to 14 percent by 2001. The higher level of investment will be increasingly financed by domestic savings, which are expected to rise by 4 percentage points of GDP to about 7 percent by 2001.
17. The structural reforms are designed to: (i) enhance tax revenue collection and reinforce fiscal administration; (ii) restore budgetary orthodoxy and increase the efficiency of government spending; (iii) accelerate the privatization and restructuring of public enterprises and the reform of the civil service; (iv) promote private sector activity; (v) support rural development and the management of natural resources; and (vi) improve the quality of, and access to, education and health services, and increase the efficiency of investment in the transport sector.
IV. Macroeconomic and Structural Policies
Fiscal policy
18. The government will implement tight fiscal policies designed to maintain overall demand at a level compatible with available resources and regional balance of payments objectives. Accordingly, the overall deficit of the government's financial operations (on a commitment basis, excluding grants) will be reduced from 7.5 percent of GDP in 1997 to 4.6 percent of GDP by 2001.
19. Total revenue will increase by 3 percentage points of GDP to 11.8 percent from 1997 to 2001. To achieve this goal, it will be necessary to continue to simplify the direct taxation system, to broaden the tax base through a wider coverage of collections, notably in the informal sector, to improve mobilization of domestic revenue, and to step up the fight against tax evasion. Achieving these goals will be facilitated by (i) better monitoring of imports through the extension of the program of imports surveillance to five new regional customs offices; (ii) improvement in the effectiveness of customs inspection units and the establishment of two additional customs posts in Niamey; (iii) rigorous control of reexports through the escorting of goods in transit and through the surveillance of movements of goods by customs offices and the mobile customs units; (iv) restoration of trust between customs authorities and economic operators, in particular through promotion of taxpayer awareness of customs rules and procedures; (v) control and reduction of exemptions through strict application of the customs code and better control of the final destination of exempted goods; (vi) intensified cooperation between tax authorities and local political and administrative authorities through the sensitization of the latter to the importance of raising revenue; (vii) establishment of decentralized units for collecting income taxes; and (viii) increased audits and collection operations across the country by the unit for large taxpayers and the VAT audit unit.
20. In line with the government's top priority of reducing poverty, adequate budgetary appropriations will be earmarked for social sectors, which will require tight control of lower-priority expenditures. However, emphasis will also be placed on the provision of adequate human and material resources to the internal revenue departments and of counterpart funds necessary to support the investment effort. The restructuring of government spending will take account of the recommendations of the ongoing public expenditure review. On the basis of these trends, total expenditures are projected to reach CFAF 238 billion (16.4 percent of GDP) by 2001, assuming an annual increase of 10 percent over the period 1998-2001, resulting mainly from the growth in capital expenditures. The restructuring of spending in favor of the social sectors, the internal revenue department, and investment will require a firm grip on the wage bill. The government's objective is to reduce the share of tax revenue absorbed by the wage bill from 56 percent in 1997 to less than 40 percent by 2001. Accordingly, the government has decided that, apart from the integration into the civil service of elements of the former armed rebellion, there will not be any net recruitment into the civil service. This decision will mean that, in the medium term, the staff needed to raise primary school enrollment will have to be recruited at the local government level.
21. The management of government finance is beset by difficulties in maintaining control over budgetary operations and by liquidity pressures on the Treasury, both of which lead to the accumulation of domestic and external payments arrears. The government believes that putting its finances in good order is a precondition for the success of the medium-term program. Accordingly, in 1997, it initiated a program aimed at overhauling the management of public finance, of which the following measures have already been implemented: (i) the elimination of all exceptional procedures, notably the so-called advance payments (outside all budgetary procedures); (ii) the establishment of a mechanism to keep expenditure in line with available resources; (iii) the initiation of a financial audit of the Treasury; and (iv) the preparation of Treasury accounts for 1988-97 and year-end expenditure audits for 1991-97.
22. The government has also conducted an audit of domestic arrears as a first step for preparing a plan for settlement, and it has identified preliminary measures for preventing the future accumulation of domestic arrears. Based on preliminary results of the audit, domestic payments arrears validated by the Treasury are expected to amount to about CFAF 29 billion, and additional claims that still require validation could amount to CFAF 89 billion. The authorities plan to settle all validated domestic payments arrears over the 1998-2000 period. Part of the stock of payments arrears will be settled in cash, and the balance through appropriate mechanisms to be negotiated with suppliers and creditors. The government's efforts to place its finances on a sound footing require concrete measures to prevent the accumulation of new payments arrears.
23. As a first step in this direction, the authorities plan to address the issue of the accumulation of new arrears on utilities by conducting, in collaboration with the water, electricity, and telephone companies, a detailed assessment of actual consumption levels of the central government. Conducting this assessment will require that a comprehensive survey is undertaken of all the installations to ensure that they are being used only for official purposes and that the corresponding bills are legitimate. Following this inventory, the government intends to provide adequate budget appropriations to cover actual government consumption and take appropriate measures to monitor and reduce waste. Utility companies will need to improve their billing systems so as to avoid unnecessary delays. The government will ensure that the administrative and financial divisions of the various ministries process utility bills within prescribed time limits and are subject to administrative sanctions in case of nonobservance of these limits.
24. These measures will be supplemented by the following steps: (i) a reduction in, and reinforced management of, expenditure for official travel and medical evacuations; (ii) improved management and redefinition of the criteria for granting scholarships to students, as well as transfers and subsidies to the national television (ORTN), the university, the National School of Administration (ENA), and INRAN (an agricultural research institute), which together absorb over 50 percent of total subsidies; and (iii) measures to ensure strict application of the system of expenditure control and regulation (see para. 21).
25. In addition to implementing these specific measures, the government recognizes that, in order to prevent the accumulation of payments arrears, it is absolutely necessary to subject nearly all government expenditures to regular budgetary procedures, including strict recording of expenditure at the various stages of the government spending cycle. To this end, the government will continue its evaluation of current budgetary procedures, placing particular emphasis on increasing the effectiveness of expenditure controls in the chain of spending.
26. The government will continue to ensure that the most vulnerable segments of society are protected from any adverse effects of the adjustment process. To this end, it will establish a safety net that will make it possible to: (i) ensure food security; (ii) support applicants for the departure scheme from the civil service; and (iii) expand the food-for-work program to rural areas. Other programs will be devised in collaboration with NGOs to enhance the fight against poverty.
27. These actions will be reinforced by efforts to increase primary school enrollment, mitigate illiteracy, and increase health coverage. The combination of these actions should improve social services in Niger, whose social indicators are among the lowest in the world. The government is aware that the success of its efforts, even if supported by external assistance, depends on its ability to mobilize domestic resources. It will therefore take steps to better organize and equip the revenue collection departments, in terms of both personnel and material resources, to help them achieve better results.
28. An appropriate level of well-designed and targeted investment will be needed to produce a rate of economic growth that will generate a sustainable per capita income growth and thereby contribute to reducing poverty. The public investment program (PIP) must focus on the rehabilitation of economic infrastructure and the development of human capital. Thus, the public investment program for 1997-99, amounting to an estimated CFAF 259 billion, has earmarked 23 percent of its funds for education and health, 30 percent for infrastructure and water, 30 percent for rural development, and the balance for other sectors. For 1998, 21 percent of the total of CFAF 101.7 billion is earmarked for education and health, 30 percent for infrastructure and water, 35 percent for rural development, and the balance for other sectors.
29. The PIP encompasses only those projects for which financing has already been secured, which will ensure timely implementation. The government is determined to improve project planning and execution by (i) providing domestic counterpart funds in a timely manner; (ii) accelerating the process of awarding public contracts; and (iii) using labor-intensive techniques for certain investment projects. But the successful implementation of this program also depends on the normalization of Niger's financial relations with its development partners. The authorities will therefore take appropriate measures to discharge all external payments arrears, either by paying off these obligations on a cash basis or by negotiating refinancing arrangements in line with the government's actual ability to pay.
Monetary and credit policy
30. Monetary policy and banking supervision will continue to be conducted by the Central Bank of West African States (BCEAO) within the framework of regional arrangements and the franc zone, of which Niger is a member. The regional monetary authorities will continue to pursue a monetary policy consistent with the objectives of low inflation and appropriate increases in official reserves. Niger's economic program projects a rate of growth of money supply that will be in line with nominal GDP growth. The increase in private sector credit will partly be facilitated by a reduction in net lending to the government, consistent with the expected improvement in its financial position.
31. There has been a steady improvement in the soundness of commercial banks throughout 1996 and 1997. The prudential ratios set by the Regional Banking Commission are met by the major banks in Niger, which together account for 78 percent of all deposits and almost 82 percent of all private lending. The provisions for bad loans and nonperforming claims maintained by these banks are considered adequate by the Regional Banking Commission. The monetary authorities will continue to exercise intensified oversight and monitoring of the banking sector. They will also continue to rely on the indirect monetary policy instruments introduced in October 1993 by the BCEAO, with a view to achieving the regional balance of payments objectives. They will, in particular, continue to work toward the development of the regional money market that should play a key role in the effective use of the BCEAO's indirect monetary instruments.
32. In order to foster financial savings and ensure the efficient allocation of credit, interest rates will continue to be set by market forces. The government will take steps to clear Treasury arrears vis-à-vis the Office National des Postes et de l'Epargne (ONPE), commercial banks, and financial institutions within the framework of their respective restructuring plans; priority will be given to those in which a majority of the equity capital is controlled by the state, including Crédit du Niger (CDN) and Caisse de Prêts des Collectivités Territoriales (CPCT). In addition, the authorities will continue to improve the existing legal framework to further banking activities. The government will also need to divest itself of its equity holdings in these banks, in order to enable them to operate in an environment of unfettered competition.
External sector policy
33. During the next two years, the government will revise the simplified customs tariff introduced in 1994, in line with the timetable agreed by the WAEMU countries for moving to a common external tariff (CET) by January 1, 2000. The maximum rate of customs duty will be lowered from the current 30 percent to 25 percent effective January 1, 1999, and further to 20 percent by 2000. In addition, the 5 percent statistical tax applied in Niger, on top of existing custom duties, will be reduced to 1 percent by end-1999. With the technical support of the World Bank, the government has estimated the revenue loss resulting from this measure. At the government's request, a technical assistance mission from the IMF will provide further assistance in assessing the loss in customs revenue that may be caused by this reform and identify offsetting measures. Particular emphasis will be placed on further reducing exemptions and streamlining the domestic revenue system, with a view to enhancing domestic revenue collection and preventing the CET's implementation from causing net revenue losses. The government will also take steps to phase out tariff and nontariff obstacles to intraregional exchanges, and harmonize the domestic indirect taxation system in line with the requirements within the WAEMU. The government recognizes the need to normalize relations with external creditors and is determined to reduce the stock of external arrears. Niger will make all necessary efforts to remain current on its obligations to Paris Club creditors and make all payments to the Special Account established under the 1996 Agreed Minutes. In addition, no new external arrears will be accumulated on debt not subject to rescheduling.
B. Structural and Sectoral Policies
34. For the period 1998-2001, structural and sectoral policies will entail further deregulation of the economy, the withdrawal of the state from production activities, the development of human resources, and the promotion of the private sector, with the aim of creating the conditions for a strong and sustainable economic growth, and promoting job creation.
Promotion of the private sector
35. During this period, the government will intensify efforts to promote the private sector by continuing to improve the competitive framework and the institutional and legal environment for private sector activities. In this context, the government will continue to rely on market mechanisms in determining prices and in promoting competition among economic operators in all sectors of activity. One critical objective of the authorities will be to protect the competitiveness of the Nigerien economy by fostering stable prices and input costs for businesses. In this respect, the government intends to set an example by adopting a cautious wage policy in the civil service, which should have a ripple effect on the public enterprises and the rest of the modern sector of the economy. The authorities will seek to promote the development of financial intermediation, not only in the commercial banking sector but also in the expanding sector of decentralized financial systems (microfinance). With regard to the latter, the government will also concentrate on strengthening the supervision of their activities and financial soundness. With respect to the regulatory framework, the authorities will take an active part in the ongoing efforts to harmonize and modernize commercial law within the framework of the Organization for the Harmonization of Commercial Law in Africa (OHADA). They will also take further steps to improve the functioning of the judicial system by reinforcing in particular those measures designed to ensure the impartiality of the courts and accelerate the speed with which cases are brought before the courts.
Privatization program and reform of the parastatal sector
36. In 1996, the government launched the reform of the public enterprise sector to improve its financial situation and efficiency, as well as to expand private sector activity. The government program2 for 1998-2001 provides for the privatization of nine enterprises: SNE, NIGELEC, SONITEL, OFEDES, Abattoir, ONAHA, SONIDEP, RINI, and SPEHG, together with the restructuring of eight others; in addition, one enterprise-ONT-which has no prospects of becoming viable, will be liquidated during the same period. The program also includes the implementation of a scheme to lay off the personnel of the enterprises to be privatized, the clearance of government arrears to these enterprises, and the implementation of measures designed to ensure regular payment for the provision of services to the government (water, electricity, and telephone).
37. During the period 1998-99, the government will pursue the privatization program by implementing the following measures: (i) adoption of a regulatory framework applicable to the water, electricity, and telecommunications sectors; (ii) issuance of calls to bid for the leasing/concession contract for SNE and the concession contract for NIGELEC; (iii) finalization of the privatization of the management of Abattoir de Niamey; (iv) sale of the majority of shares in SONITEL; and (v) transfer of the management of the storage facilities of SONIDEP to the private sector. In addition, the government will take steps to privatize other enterprises included in the privatization program: OFEDES, RINI, ONAHA, and SPEHG.
Agricultural policy
38. The government has made rural development the central element in its economic and social program. Agriculture, which accounts for 38 percent of GDP (1997), is the sole source of income for the majority of the population. The government will adopt a comprehensive rural development strategy for sustained agricultural growth and food security. This strategy will need to be endorsed by operators from the rural sector so that it can be based on a national consensus. It will comprise the following: (i) the design and implementation of new techniques to improve productivity in traditional agriculture; (ii) the promotion of nontraditional crops for export; (iii) the promotion of the livestock sector; (iv) continuation of institutional and sectoral reforms; and (v) improved water management, in particular the development of small-scale irrigation. The government will update and adopt the program for developing the irrigation subsector in 1999. This strategy will seek to fully harness the vast groundwater potential of Niger by encouraging private investment in small, irrigated plots, using technology that is inexpensive and reliable in terms of ecological impact.
39. The role of the government in the sector will be refocused on its vital tasks, in particular the establishment of an environment conducive to private initiative and the reinforcement of rural organizations and the capability of producer groups. As a result, the government will devise a program for restructuring the principal institutions in the agricultural sector within a context of decentralization and with the actual participation of users, with a view to making agricultural services (agricultural extension and research, in particular) less expensive and more effective and bringing them closer to users. The PIP for rural development will be limited to the priorities set forth in a strategy that targets "growth poles." The government will also encourage private sector initiatives by promoting enhanced property rights, equitable access to water, and a legal framework fostering the emergence of independent associations of farm operators.
Environmental policy
40. In Niger, poverty, rapid population growth, and the environment are inextricably linked. The country's capacity for food production is under stress. Soils and vegetation are deteriorating, water resources are declining, and biodiversity is threatened. In urban areas, water supply and sanitation are inadequate for the majority of the population, resulting in a high incidence of illness and infant mortality. The government has underscored the need to address these problems and improve the management of Niger's natural resources. Accordingly, by December 1998 the government will adopt the plan that emerged from the national forum of April 1998, the National Environmental Plan for Sustainable Development. In addition, the government, with the assistance of the World Bank, will implement a program of construction and rehabilitation of priority urban infrastructure (see para. 44).
Civil service reform
41. In addition to the actions taken on the expenditure side to establish control of the wage bill (see para. 20), the civil service must be rationalized and the number of staff on the payroll streamlined to increase the efficiency of public administration. The government has launched a civil service reform program that includes: (i) reform of remuneration and promotion procedures, including a review of benefits and the introduction of a job management system; and (ii) rationalization of staffing, including implementation of staff relocation programs in priority sectors, decentralization of budgetary positions, and introduction of an integrated personnel and payroll database, as well as of a departure incentive scheme. For the period 1998-2001, the government has decided that the amounts budgeted for all government recruitment, including for education (excluding, however, volunteer teachers), health, and internal revenue units, will not exceed the savings realized from departures other than voluntary departures. In the education sector, financing requirements for recruiting volunteer teachers, the cost of which is appreciably lower than that of paying teachers with government employee status (see para. 48), will be met by reducing the appropriations for higher-education scholarships, secondary education allocations, and private education subsidies.
Transportation and urban infrastructure policy
42. In order to reduce transportation costs and strengthen its competitiveness, Niger will continue its efforts to increase the overall efficiency of the transportation sector and liberalize all of that sector's activities. The government intends to gradually shift the maintenance of the road system to private sector contractors in order to focus only on planning, programming, budgeting, and supervision activities. The Directorate of Equipment will be converted into a privately managed rental equipment company. In order to ensure financing for road maintenance, the government also envisages the creation of a Road Maintenance Fund in 1998, which would be funded by fees paid by road users. The Road Laboratory, which is responsible for the geotechnical supervision of roadwork, will be transformed into an autonomous and financially viable agency. The Public Works Administration will be restructured to reflect these changes.
43. In 1996, the government abolished the monopoly that the national transportation company (SNTN) had on mining freight and decided to restructure the company. The regulations governing access to the profession of transporter/carrier are flexible and the transport rates have been liberalized; nevertheless, the tour de rôle system (queuing system) introduced by the road transport union (STRN) to allocate domestic passenger traffics and freight is anticompetitive and contributes to the artificial inflation of transport rates. The government is committed to discouraging the application of this system and to continuing negotiations with the unions concerned, with a view to establishing a framework ensuring the desired degree of flexibility for passengers. In addition, the government intends to revise, in collaboration with the government of Benin, the regulatory framework governing operations of the joint Benin-Niger institution (OCBN) that manages the Nigerien transit traffic through Benin. Privatization and abolition of the monopoly status of the OCBN, as well as the timetable for implementation of these measures, are being negotiated with the government of Benin. Finally, the government intends to abolish the restrictions on shippers' choices of maritime transport and restructure the Nigerien Shippers' Council (CNUT) by December 31, 1998.
44. In the urban sector, the government will implement, with World Bank assistance, a program of construction and rehabilitation of priority urban infrastructure. These labor-intensive works will be executed by local private contractors and consultants to improve the management of urban infrastructure. The focus will be on the following: (i) in the major cities, laying the groundwork for transferring to the local government the management, operation, and supervision of urban infrastructure rehabilitation and maintenance; (ii) improving management by the local authorities through subcontracting and increased emphasis on planning and programming; (iii) preparing the new legal status of the larger urban communities; and (iv) enhancing the mobilization of local financial resources.
Reform of the mining sector
45. Uranium remains Niger's principal source of exports as it accounts for over 50 percent of export earnings. However, its share in GDP and government revenue has declined steadily since the mid-1980s as a result of the stagnation in export volumes and fall in export prices. Given the unfavorable medium-term outlook for the world uranium market, the government should restructure the sector in order to restore the competitiveness of Nigerien uranium. Moreover, in order to lessen the dependence of the mining sector on uranium, the authorities intend to conduct strategic studies in regions with strong mineral potential and to promote the development of other mineral resources, such as gold, phosphates, and oil.
Strategies for the development of human resources
46. For the 1998-2001 period, the fundamental objective in the area of human resource development is to improve the living standards and the well-being of the population by reducing the gap between the supply of, and the demand for, basic health and education services. This approach gives priority to improving the quality of, and access to, these services, fighting poverty, and promoting family planning and women's programs.
Education
47. In view of the poor achievements in primary education in Niger, the government will seek to: (i) improve access to education and stimulate demand for schooling, in order to increase the enrollment rate from about 30 percent in 1997 to 38 percent by 2002, and to increase the proportion of girls in school from 39 percent to at least 42 percent during the same period; (ii) to reduce disparities among regions and between urban and rural areas by giving priority to neglected areas in the implementation of the program to accelerate classroom construction, as well as in the deployment of teachers; (iii) consolidate the positive results obtained in reducing the repetition rate in the first grade of the primary cycle, which at present falls between 2 percent to 15 percent; and (iv) reduce the repetition rate in the last primary grade from 37 percent to 20 percent.
48. To achieve these objectives, and given the constraints on public resources, the government is considering increasing access to basic education: (i) by enlisting the services of volunteer teachers, whose remuneration would be less than that of civil service teachers; and (ii) by making more efficient use of resources through the extension of double-shift classes in urban areas where students are in excess supply, and through multigrade teaching in rural areas where there are few pupils. The status of volunteer teachers will be regulated outside the civil service framework, and in the medium term they will be managed by local authorities. With respect to improving the quality of education, the ratio of textbooks to students for the main subjects will have to reach 1: 2; and continuing education for teachers will consist of on-the-job training, in particular for volunteer teachers. In addition, outlays for teaching and learning materials will be increased to ensure that classes are adequately equipped and school supplies are available to students. To revitalize primary education, the government will set up a management committee in each school composed of the parents' association, teachers, and pupils. In order to stimulate demand in certain areas, social marketing campaigns will be conducted in collaboration with the opinion leaders in these areas.
49. The government also intends to strengthen the post-primary education system by increasing its cost-effectiveness and improving its quality. The policy of rationalizing the administration of scholarships will be pursued by reducing each year the budgetary allocations for scholarships available for higher education and the allocations granted to students in secondary education; the savings being used to finance the hiring of volunteer teachers over the period 1998-2001. A strategy for higher education is being developed and will be submitted for nationwide discussion during the academic year 1999/2000. At the same time, discussion is under way on the strategy for secondary education, which should increase the rate of transition from primary to secondary school, which has dropped steadily in recent years. The strategy paper in question should be discussed during the academic year 1998-99.
Health
50. The government prepared a development plan for the health sector (PDS) for the period 1994-2000 containing the objectives, strategies, and actions necessary to ensure its effective implementation. The main components of the PDS are designed to: (i) increase the quality and coverage of basic health services, with particular focus on implementing and supporting the health district system (one of the principal objectives of the PDS is to increase health coverage from 32 percent in 19943 to 45 percent by 2000); (ii) improve the availability and accessibility of essential generic drugs for the entire population by restructuring and strengthening the pharmaceutical sector; (iii) improve the effectiveness and efficiency of the health sector by strengthening and decentralizing the management of the sector's resources (human, financial, and physical); and (iv) expand and maximize the sector's capacities by enhancing and optimizing the capacities of the various partners in the health sector to implement national or decentralized district-based programs. To support the PDS, the government will implement a series of measures and reforms, the most important of which are detailed in attached Table 1. First, the government will update the computerized personnel database of the Ministry of Public Health in light of the results of the civil service census and of the sector's first personnel redeployment; subsequently, it will continue implementation of the personnel redeployment plan for the health sector. Second, the government will implement the recommendations of the public expenditure review for the health sector and conduct an annual internal review of government spending in the sector. Third, the authorities will increase non-salary recurrent expenditure by 5 percent in real terms each year and, within this category, increase by 8 percent each year expenditures for operating and maintaining transport and technical equipment, as well as for maintaining physical infrastructure; they will ensure realistic budgetary allocations for electricity, water, and telephone services by taking account of the expansion of the sector. Finally, the government will recruit 260 employees in 1998 and a maximum of 260 agents each year for the period 1999-2000 on the basis of annual reviews of personnel needs conducted in consultation with the World Bank.
51. The ongoing process of regional integration, in accordance with the 1994 Treaty establishing the WAEMU and the gradual phasing in of the principal WAEMU institutions, particularly the Regional Banking Commission, exerts an increasingly marked influence on the design and implementation of the fiscal and monetary policies of the member countries. The Nigerien government participates actively in the work of the WAEMU and the efforts being made to achieve the main regional objectives within the prescribed time limits, consistent with the directives set by the conference of heads of states in May 1996. These objectives are the harmonization of tariffs and indirect taxation (see para. 33), the adoption of a Community Investment Code, the establishment of a regional financial market, and the harmonized liberalization of foreign exchange control and capital movements within the WAEMU and with the rest of the world. Niger will accordingly be able to take advantage of its location at the crossroads between the WAEMU and Nigeria, which is its leading economic partner in the subregion.
52. Implementation of the government's program will require a concerted effort by various administrative units and more effective coordination of the principal reforms by a technical committee under the Minister of Finance, Privatization, and Economic Reforms. This committee, which consists of a number of senior representatives of each department, meets on a regular basis to review progress in the execution of the government's reform program; it then submits a detailed monthly report to the Interministerial Committee, which is responsible for preparing and monitoring economic and financial programs. In the period ahead, appropriate steps will be taken to enhance the effectiveness of the technical committee, including through the assignment of specific responsibilities to the members and the provision of adequate working conditions.
53. Niger continues to receive technical assistance from its bilateral and multilateral development partners, in particular as regards fiscal reforms, improvement in core statistics, and national accounts. The government is seeking technical assistance to develop the capacity to identify and evaluate projects, and to improve statistical methods and macroeconomic forecasting methodology and techniques.
54. Its improved ability to compete internationally since the devaluation of the CFA franc, together with the measures taken to liberalize trade, should enable Niger to continue to strengthen its external position over the medium term. Prospects for the external sector are, however, dominated by developments in the uranium industry, where the opportunities for expansion remain limited. This situation highlights the importance of diversifying exports through growth in the export of livestock, hides, leather, and other agricultural products. The growth of imports is likely to remain moderate in the medium term, as the improved competitiveness of regional industries limits the demand for imports of consumer goods and for certain intermediate goods from outside the WAEMU. As a result, the authorities expect the current account deficit of the balance of payments (excluding official transfers) to decline from the equivalent of 10 percent of GDP in 1997 to approximately 9.5 percent of GDP by 2001.
55. The residual external financing requirements for the period 1998-2001 have been estimated at CFAF 194.5 billion, including CFAF 131.5 billion for 1998/99 (July-June). The government has indicated that the requirements for the latter period could be met by funding from institutions in the amount of CFAF 53.6 billion. The European Union and bilateral partners plan to provide funding in the amount of CFAF 38.3 billion, of which CFAF 20 billion is expected to be provided by the Paris Club creditors that granted Niger debt relief in 1996. The government continues to seek comparable treatment from its non-Paris Club bilateral creditors, but with little success. Debt relief expected from the latter creditors is estimated at CFAF 40.3 billion. The government recognizes in the circumstances, the importance of making every effort to normalize its financial relations with all the lending agencies by settling, through all appropriate mechanisms, the external payments arrears stemming from the recent financial difficulties.