Niger - Agricultural Services Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-5683-NIR MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 12.9 MILLION TO THE REPUBLIC OF NIGER FOR AN AGRICULTURAL SERVICES PROJECT MARCH 31. 1992 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = CFA Franc (CFAF) US $ 1.00 = CFAF 272 WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY - ii - REPUBLIC OF NIGER AGRICULTURAL SERVICES PROJECT Credit and Project Summary Borrower: Republic of Niger Beneficiaries: Farmers and herders, and in general the country's rural population Amount: SDR 12.9 million (US$ 18.0 million) Terms: Standard IDA terms, with 40 years maturity On-lending Terms: Proceeds of the Credit would be passed on by Government in grant form to Ministry of Agriculture and Livestock. Financing Plan: Government $ 1.8 million IDA $18.0 million TOTAL $19.8 million Economic Rate of Return: Not applicable Staff Appraisal Report: No. 10119-NIR Ma"os: IBRD 23273 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF NIGER FOR AN AGRICULTURAL SERVICES PROJECT 1. The following memorandum and recommendation on a proposed development credit to the Republic of Niger for SDR 12.9 million (US$18.0 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with 40 years maturity and would help finance the first phase of a long-term program aimed at improving agricultural services to farmers and herders. Government will finance US$1.8 million or 9% of project costs. I. Country Policies and Bank Group's Assistance Strategy Background 2. Economic Structure. Niger is a country of over 7.5 million inhabitants with a real per capita GDP estimated at $261 in 1991, making it one of the poorest countries in the world. Its social indicators are among the lowest in the Sahelian countries and the world. Since 1965, real per capita incomes have declined by an average of 2 percent per annum, with an average 1 percent growth of GDP and a rapidly rising population (3.2-3.4 percent per annum). Niger faces many constraints to its long term development: (i) a slim natural resource base (fragile and degrading arable land, low rainfall and periodic drought, and sustained neglect); (ii) very weak human resources; (iii) overdependence on a single export - uranium; and (iv) previously interventionist economic policies which impeded broad based development and exports. 3. The economy is natural resource based. It consists of agriculture (20 percent of GDP), livestock (13 percent), and uranium mining (5 percent). Like other Sahelian countries, GDP growth is highly volatile since cereal production depends on unreliable rainfall patterns. The formal sector comprises a relatively inefficient public sector (Government and public enterprises) and a small modern private sector in rapid decline (the result of a lack of competitiveness of the Nigerien economy, stiff and often "fraudulent" competition from neighboring countries, and the deepening recession). The informal sector (about 135,000 micro and small enterprises) consists of the rural economy, small- scale artisanal and service activities, and influential traditional traders. It is closely integrated with the economy of northern Nigeria, and increasingly southern Algeria. Uranium exports have accounted for 80 percent of Niger's export revenues during 1975-89 and 66 percent in 1990-91 (largely due to the decline in world market prices). A uranium price boom in the late 1970s caused rapid GDP growth and permitted heavy external borrowing to finance a major expansion of public enterprises and public sector investment in large and often economically inefficient projects. In the early 1980s, a dramatic fall in uranium export earnings and the failure of Government to curb public spending in a timely fashion left Niger with a budget deficit of 10 percent of GDP, a balance of payments deficit of 22 percent of GDP, a portfolio of uneconomic investments, and a rapidly rising debt service. 4. Economic Performance and Adjustment in the 1980s and 1990. Faced with an economic crisis, in 1982 the Government launched a macroeconomic stabilization and adjustment program. This was supported by the IMF with a series of Standby Agreements beginning in 1983, followed by a Structural Adjustment Facility (SAF) in 1987 and an Enhanced Structural Adjustment Facility (ESAF) in 19881/. IDA has supported these efforts with a Structural Adjustment Credit (SAL) in 1986, a Public Enterprise Sectoral Adjustment Credit (PESAP) in 1987, and an operation under the IDA debt reduction facility in 1990 (para.8). Niger also rescheduled its external debt with the Paris Club every year between 1982 and 1986, and in 1988 and 1991 and with the London Club in 1983-85 and 1989. 1/ Niger's eligibility for the ESAF program lapsed in 1991. 2 5. The stabilization and adjustment program focused on reducing internal and external deficits, improving public resource management, restructuring the public enterprise sector, and reducing excessive government control in the economy. The public investment program was refocussed towards rehabilitation of existing assets and the social sectors. Performance under these programs was mixed. In the public enterprise sector, several public enterprises were liquidated or privatized, and the largest ones have been the subject of restructuring programs. Progress had been made in reducing the sector's demand for public resources such that the budgetary subsidies declined by 60 percent between 1981 and 1988. Progress towards economic liberalization has been. achieved by scrapping various state monopolies, easing or eliminating price controls and import restrictions, liberalizing cereals marketing and abolishing export taxes on agro-pastoral products. 6. Since 1984-85, the economic situation has deteriorated due to a 47 percent decline in uranium earnings, worsening terms of trade and the effects of the rapid macroeconomic adjustment in Nigeria. Nominal GDP growth averaged only 1.4 percent per annum in 1985-88 and 1.2 percent in 1988-90, and has fluctuated widely during the period, reflecting the variability of rainfall and the resulting volatility of rural sector production which averaged 1.8 percent growth in 1985-91. The modern sector (including mining, manufacturing, and commerce) has declined at an average annual rate of 2.8 percent, while services (principally government) increased by 7.5 percent per annum in 1988-1990. Gross domestic savings have stagnated at an average of 6.8 percent of GDP during 1988- 1990. Fixed capital investment has declined from a record high of 28 percent of GDP in 1980 to about 11 percent in 1990. Private investment fell from about 10 percent of GDP in 1980 to 3.9 percent in 1990. Foreign direct private investment (2 percent of GDP in 1980) has been negative since 1984 as foreign companies have disinvested. Key macroeconomic indicators are presented in Schedule E and summarized in Table 1 below. Table 1: Key Economic Indicators (Percent except as indicated) Fourth year Est. Proj. PFP projections/targets(*) 1988 1989 1990 1991 1992/1 1991 1992 In Constant Prices GDP Growth 6.0 -.39 -1.9 1.9 2.4 3.2* 3.2* Private Consumption P.C. 0.8 -1.7 -7.5 -5.3 -1.2 0.0 0.6 Export Growth 0.3 -13.1 1.0 -5.0 2.2 Import Growth -8.7 -3.7 15.0 -21.7 -7.0 In Current Prices Investment/GDP 11.5 12.8 11.4 8.5 8.2 10.6 10.7 Domestic Savings/GDP 13.0 2.7 4.9 6.7 8.4 3.8 3.9 Terms of Trade -10.2 -9.3 -11.5 -7.5 -8.5 na na Stock of Debt (bn cfaf) 402 330 332 335 332 na na (in US $ millions) 1,349 1,034 1,219 1,187 1,177 na na Debt Service (%GNFS)/2 47.6 48.0 37.0 39.1 29.9 40.1 39.3 Current Account/GDP/3 -9.5 -10.6 -12.3 -6.4 -8.8 -9.4* -9.4* GDP (in US$ million) 2331 2122 2527 2308 2364 na na GDP Deflator -4.2 1.0 3.6 -7.2 0.0 2.0* 2.0* 1/Bank preliminsry estimates 2/Before rescheduling 3/Excluding grants 7. Export receipts declined by 33 percent between 1980 and 1990 (1991 was a particularly poor year in part due to political upheaval) with uranium exports (66 percent of total exports in 1990) down by 40 percent. The other main exports of livestock and cowpeas declined dramatically in 1984/85 due to extended drought, but by 1989 and 1990 had recovered to early-80s levels. Imports, largely of capital goods, declined by 35 percent in real terms in the 1980s, reflecting the stagnation of economic activity and the loss of export earnings. As a result of falling imports, the balance of payments improved during 1982- 3 1990, with the current account deficit (excluding official transfers) declining from 22 to 12 percent of GDP. 8. Major progress was made during 1989 and 1990 to reduce Niger's debt burden. As a. result of debt forgiveness by official creditors, Niger's total outstanding debt decreased by 23 percent in 1989 (in dollar terms). In December 1990, Niger became the first country to use the IDA debt reduction facility in an amount of US$ 10 million. These funds, combined with co-financing from France and Switzerland, led to the elimination of about 95 percent of Niger's total outstanding commercial debt. The operation is part of a broader debt strategy which is expected to lead to a decline in the ratio of debt service (before rescheduling) to exports from 48 percent in 1989 to 38 percent in 1993 and 20 percent by 1998. In 1991, this ratio was within the targeted level at 39 percent, but preliminary projections indicate that for 1993-1995 this ratio is likely to increase again, largely due to declines in export values. 9. Social Indicators. All social indicators paint a grim picture but are unreliable for determining trends. Overall food security and nutritional status are closely linked to weather patterns, which, since the last major drought in 1984/85, have been relatively favorable with crop production above average. However, with declining per capita incomes, poverty and malnutrition levels have at best remained constant and more likely have worsened in the 1980s. Malnutrition poses a serious problem for children and pregnant and nursing women: an estimated 25 percent of children aged 12-23 months and 22 percent of children aged. 24-25 months are chronically malnourished. 10. The adult literacy rate in Niger is among the lowest in the world. The current primary enrollment rate at 29 percent (and 120-130 children in some classes) is dismal by any standards. Women and girls hold relatively low status in society (despite the existence of a Ministry of Women's Affairs and the fact that women's groups have been playing a very active role in the democratization process). As a result, girls account for less than one-third of primary school enrollment. Early evidence on the effects of the economic reform programs on the rural poor suggests that there has been little discernible improvement at the household level. Climatic factors (e.g. rainfall patterns) remain the critical variable for subsistence farming, while the agricultural services provided by the Government have not been able to keep up with increasing demand. The social effects of Niger's economic problems are most visible at the urban level, where population growth and a shrinking modern sector have caused rising unemployment (and social disturbances). The rapid growth of the informal sector is both a result and a mitigating factor in the process. Rapid population growth (3.2-3.4 percent) compounds these problems and poses a large environmental threat through deforestation and pressure on land. 11. Recent Economic Developments. The Nigerien economy remains in severe recession. It has experienced stagnation and sharp decline in some sectors in 1991 due to political instability and the competition of imports from Nigeria. In 1990, real GDP declined by 1.9 percent because of poor harvests. However, real GDP in 1991 is estimated to have increased by almost 2 percent due to a 20 percent increase in agricultural production caused by good weather conditions (declining prices resulting from more liberalized markets negated the impact of this growth on GDP). The growth rate was also constrained by a 7 percent decline in uranium export earnings as well as nominal decreases in both traditional and modern sector activities (-6.8% and -4.8% respectively). Capital goods imports declined and the external current account deficit decreased to 6.4 percent of GDP in 1991 due to a 26 percent decline in imports stemming from low Public Investment Program implementation. Lower public and private investment led to a decline in gross investments as a percentage of GDP from 11% in 1990 to 8.5% in 1991, well below the rate necessary merely to replace existing assets. Because of previous delays in implementing the adjustment program and the unstable political environment, public transfers declined by 22 percent from their 1990 level, resulting in lower imports and an overall balance of payments deficit of about 1.4 percent of GDP in 1991, up from the deficit of about .1 percent recorded in 1990. On the fiscal side, revenue performance remained weak in 1991, with budgetary tax revenues falling to 7.9 percent of GDP. The civil 4 service wage bill rose 7 percent, while priority operations and maintenance items were cut. The current budget deficit declined due to lower public expenditures but domestic financing increased (through central bank borrowing and the build up of domestic arrears) from -US$8.8 million to US$11.3 million. 12. Other Recent Developments. 1990 was characterized by increasing pressure on the Government through strikes and anti-government demonstrations, particularly by labor unions, university student organizations, and nascent opposition parties demanding fundamental changes in the political system. In addition, the situation in the North of the country was difficult. At the end of 1990, the Government committed itself to the introduction of multi-party democracy and to holding a National Conference. Political turmoil visibly slowed the adjustment program which finally halted in 1991 as both the Government and the country-at-large focussed their energies on preparing the National Conference. The National Conference, held between end-July and early November 1991, elected a transitional Prime Minister and an interim parliament (the Haut Conseil de la Republique) to govern for 15 months until national elections. The Conference transfixed Nigeriens and paralyzed national decision-makers (chiefly at the macro-economic level). Debate on the issues opened up --a major and positive development-- but when it ended, it left the Transitional Government with a virtually impossible mandate: promises to keep and no resources to pay. The mandate is contained in a "cahier des charges" outlining a set of often irreconcilable policies and programs which are to guide the Transitional Government. Of particular concern for further stabilization and adjustment efforts are the decisions to leave intact both the wage bill and the number of civil servants. Although the Conference also decreed that a National Solidarity Tax could be imposed to help cover the government deficit, neither the sum nor the target for this tax was specified. So far, the Transitional Government has been blocked in its efforts to get the country moving again, the public finance situation is very severe (salary payments to civil servants are two months behind schedule), and special interests appear to be increasingly controlling the debate. The fragility of the situation was underlined in early March by a military mutiny, followed by various civilian strikes, in part to protest the attempt by the military to destabilize the emerging democratic institutions. Growth Prospects and Medium Term Economic Outlook 13. Niger's economy remains relatively undiversified with only one major export commodity, uranium and limited natural resources. Growth is thus highly dependent upon rainfall patterns in the absence of widespread irrigation, and the price of uranium. In the face of such constraints and uncertainties, Niger's macroeconomic prospects continue to depend critically on the Government's ability to design and implement an economic reform program which would open up potential new areas of growth and which donors can support. Potential sources of growth, other than uranium, include: in agriculture - subsistence cereals, export crops (such as cowpeas), higher value vegetables, livestock products, small-scale artisanal products such as artifacts and agricultural implements; small-scale manufacturing for the regional market; construction; tourism and ancillary products and services; and small-scale mining. Much of Niger's growth potential lies in taking better advantage of its geo-economic position vis & vis Nigeria, through trade and factor market integration. Workers' remittances from the coastal countries could also represent an increasingly important source of income. 14. Almost two years of turmoil and change have brought the fourth year 1990-93 PFP largely off track in terms of targeted economic growth and structural reform. For comparative purposes, Table 1 shows the three key macroeconomic targets, as well as other projections of the PFP. Niger attained its objectives for two of the three key targets in 1991, maintaining an inflation rate of 2 percent or less (actual -7.2 percent), and a current account deficit as a percentage of GDP of 9.4 percent or less (actual 6.4 percent). While low inflation rates resulted largely from the decline in the price of uranium and liberalization of agricultural prices, the low current account deficit was related to the atypically low import levels in 1991 and could creep upwards again as economic 5 activity resumes. Examination of the third target and other PFP projections demonstrates the distance which lies between the current situation and that originally envisioned for indicators of economic growth such as exports (-5.0 percent growth compared to the projected 1.8 percent increase), change in real consumption per capita (-5.3 percent compared to a projected 0 percentage change), and investment as a percentage of GDP (8.5 percent compared to a projected 10.6 percent). Although economic performance in 1992 is projected to be higher than in 1991 due to resumption of normal economic activities following the National Conference and commercialization of the end-1991 agricultural yields, it still falls short of the targets and projections outlined in the PFP. In the absence of an operational PFP and a medium-term economic program, it is not possible to establish reliable parameters for medium-term growth. Once the Transitional Government has proven its ability to succeed in stabilizing public finances, and has defined a medium-term structural economic reform agenda, the parameters of future growth will become clearer. Nevertheless, regardless of the actions of the present government, growth will continue to be constrained by uranium prices, a shrinking modern sector, and limited formal financial intermediation. 15. With advice from the IMF, Niger is currently defining an emergency economic and financial recovery program (PREF) that is geared in large measure to dealing with the immediate and pressing fiscal crisis. IDA has been consulting closely with the Government and the IMF and has been providing technical support to the Government to ensure that structural and key long-term development issues are addressed in the program. Once stabilization is under control, it may be possible to agree on a new PFP within 12 to 18 months. Central Development Issues 16. Niger's overarching development objective is to reverse the current trends of declining levels of per capita income and social welfare in the face of one of the poorest natural and human resource bases in Africa. Achieving this will take a long time and require sustained but carefully conceived (in terms of sectors) assistance from the international community. To realize its growth potential, Niger needs to address a number of difficult issues. There are two major sets of issues. These are: (i) to improve the efficiency of resource use in the public and private sectors through policy reform; and (ii) to promote long term development through investment in critical sectors, notably human resources (education in particular) and agriculture/natural resource management. Over the next several months, it implies controlling the wage bill and launching civil service reforms, moving on education, trade reforms, and reviving the financial sector. 17. Public Resource Management. Enhancing the efficiency of resource use and directing resources towards priority sectors requires improved public resource management. Key issues are: (a) improving domestic resource mobilization (Niger's tax ratio at 8 percent of GDP, is among the lowest in Africa due to a shrinking formal sector tax base); (b) restructuring current expenditures. Operations and maintenance outlays are underfunded, as are primary education and basic health care. Priority has been given to paying the civil service wage bill, which has increased by about 7 percent yearly from 1988-1991, at the expense of all other expenditure categories. Civil service reform including a reduction of the wage bill and civil service downsizing will be necessary to ensure that resources are available to recruit in priority areas (health and education); and (c) improving public investment to increase the investment rate, which has stagnated since 1984, and ensure that investment is redirected towards the social sectors and to the maintenance and rehabilitation of existing infrastructure in preference to new works. 6 18. Debt and Aid Flows. In addition to the debt reduction initiatives, Niger will need to continue to benefit from rescheduling on Toronto-like terms by all official creditors. Maintaining external development assistance on which Niger is heavily dependent (averaging about 17 percent of GDP during 1985-89), is necessary to sustain investment and economic activity. As a resource poor country, Niger will continue to require substantial aid flows to support sectoral development and, if resumed, its macro-economic adjustment efforts. The principal factors determining access to aid flows will be absorptive capacity for investments and the designing and implementation of a credible adjustment program as a basis for non-project assistance. The coming year will determine whether Niger is able to move back towards a credible adjustment program. 19. Private Sector Development. The private sector should become one of the principal sources of sustained growth. The informal sector is highly integrated with the economy of northern Nigeria, is relatively diversified, and appears to have largely adjusted to the economic changes in Nigeria (such as the depreciation of the naira during 1987-91). The magnitude of informal sector activity in Niger is imperfectly understood since most trade with Nigeria takes place unofficially.2/ The formal private sector is relatively small and declining (contributing to 12 percent of GDP), with a few large companies and a number of medium scale enterprises. It contributes, however, a disproportionate level of government revenue. Policy constraints, such as labor legislation, as well as high cost structure have made adjustment to a changing economic environment ever more difficult for the formal sector and have contributed to its contraction. To a lesser degree, the lack of appropriate sequencing of the removal of trade restrictions by the Government has led to an inflow of goods from neighboring countries (often fraudulently--i.e. non-payment of tariffs and taxes) against which Nigerien products cannot compete. The contraction and collapse of the formal private sector in Niger is likely to have severe repercussions not just on issues such as employment but also on government revenue. Already in 1990 and 1991, there was a decline by almost CFAF 4 billion each year in taxes paid by the five largest private industrial/trading enterprises. 20. The principal issue with respect to the private sector is to create a policy environment which would: enable the informal sector to participate more fully in the modern economy; promote regional integration by increasing commodity trade and factor movement with neighboring countries; reduce constraints (mainly administrative) to private sector activity; and address private sector concerns pragmatically. Niger's adjustment efforts to date have included economic liberalization reforms, but further actions are needed in this area including tailoring reform measures to Niger's very specific and unusual circumstances (landlocked; over 2,500 Km of porous borders; and weak capacity to effectively monitor a wide-range of concurrent actions). 21. Financial Sector. Niger's financial sector is in crisis due largely to the virtual collapse of the public sector financial institutions which dominated the banking system. A small private banking sector is in relatively good health but serves a market restricted to the major cities. Weak management and government interference led to poor financial performance and to the liquidation of the agricultural credit bank (CNCA) in 1988, to the bankruptcy of the housing finance institution (Credit du Niger), and to the liquidation of the Development Bank of Niger (BDRN) in 1990. BDRN was Niger's main commercial bank: it held about 50 percent of total deposits and extended more than 65 percent of short term credit. The international banking collapse of BCCI in 1991 resulted in the closure of its branch in Niger which represented one of the few remaining functioning and liquid Banks in the country. The Government is currently trying to have this Bank 2/ In particular, very little is known about migration to the coastal countries and the importance of remittances in household budgets. Migration to Nigeria has traditionally provided a safety valve when natural or economic crises occur and may well represent an important source of investment capital for the informal. sector. 7 reopened with the assistance of the African Development Bank (through the Nigeria Trust Fund it administers) and BCEAO. Improving the performance of the financial sector will require: improving further, WAMU-wide banking sector policies; pursuing the recovery of BDRN bad debts with vigor; and ensuring that the capital structure of the newly established bank (SONIBANK) is predominantly private. Reforms are also needed to encourage the development of private financial systems to make financial markets more competitive and responsive. The banking sector crisis has left the rural sector with little access to formal credit and savings. In order to promote efficient financial intermediation in this sector, private and community-based financial systems need to be promoted. 22. Uranium sector. Although the role of the uranium sector has diminished during the 1980s, this sector remains of crucial importance to the economy as it accounts for about 8 percent of GDP, 66 percent of export proceeds, and some 15 percent of Government revenue. But major efficiency gains and cost reductions are needed. The cost of production, including the indirect subsidies paid by the two uranium mining companies to the public electricity and transport companies, is higher than the negotiated contract price, which itself is almost three times the spot market price. Areas of cost savings are wages and salaries, electricity, transportation, hospital administration and mining town management fees, and debt reduction consistent with Niger's overall debt management strategy. An IDA mission in November 1991 outlined several elements of a strategy to reduce costs and the Transitional Government is including this in its emergency economic and financial recovery program. These cost savings will unavoidably have trickle down effects on the Government budget and several parastatals and will need to be dealt with in the context of overall public resource management. 23. Human Resources Development. Niger ranks among the bottom five countries in the world for all social indicators. Improving significantly the situation underlined by these indicators is a sine qua non condition of development. Significant and sustained improvement is crucial for both long term growth within Niger and, in the absence of employment opportunities at home, to improve the chances for migrants to find gainful employment in the coastal countries. The key issues in the development of human resources are: (i) to lower the growth rate of population from its current level of 3.2-3.4 percent; (b) to improve the coverage of primary health care; and (c) to increase the level and quality of basic education. 24. Reversing the decline in per capita income will require slowing the rate of growth of population, which on present trends will rise to 11 and 31 million by 2000 and 2030 respectively from its current 7.5 million. Population pressures are evident both in urban areas and in arable rural areas where population densities have doubled in the last 25 years to as high as 44 inhabitants per KM2. Food production in Niger will be unable to keep pace with the growing population as cultivation expands into more and more marginal areas and as fallow cycles are further reduced. The rapid rate of population growth will also erode the delivery of services in education and health unless increased resources are made available for these sectors. It is quite likely that women, who already suffer from less access to education, will bear a disproportionate burden of these pressures. Reducing fertility rates is also essential to improve the health and economic status of women. The Government is aware of the importance of population efforts, and is currently preparing a Population Action Program with support from several multilateral agencies including IDA. Family planning will be given a major thrust through expanding public sector family planning delivery channels and developing alternative channels to service delivery using community- based distribution and encouraging private sector and NGO agents. 25. In the health sector, the principal issues are to reduce infant and maternal mortality, reduce the incidence of endemic diseases (such as malaria), improve infant and child nutrition levels which have been falling, and to better understand the extent and magnitude of AIDS, a sleeping threat in the Sahelian countries. Safe motherhood programs, an integral part of IDA's health strategy, should result in increased life expectancy from the low level of 45 years (1988). Improvement in these areas will also help reduce fertility rates, and ultimately 8 slow down population growth rates. Although stated government policy favors preventive medicine and primary health care over higher cost curative medicine, actual expenditure in the health sector does not reflect these priorities. A key element in restructuring government expenditure will therefore need to be to redirect expenditures towards basic health care services. The Transitional Government has stated its support for increasing the resources devoted to health, but will need to stabilize its fiscal situation before being able to satisfactorily meet this objective. Encouragement and support should also be given to private sector and non-government delivery of primary health care. 26. The education sector in Niger is in crisis. The crisis affects the quality, quantity, structure and financing of education. The overwhelming issue is to raise significantly the level of primary school enrollment in the face of constrained resources (physical--current 120-1.30 pupils in some classes, financial, and institutional) and a rapidly growing school age population. Both supply - i.e. physical access to primary schools, and demand - family attitudes and preferences, contribute to the very low rate of female enrollment, especially in the rural areas. Increasing female enrollment is critical to improve equity, enhance the productivity of women, reduce fertility and mortality rates, and promote key development objectives in family welfare (e.g. nutrition). Expanding the primary education system must therefore go in parallel with specific efforts to promote female enrollment and encourage parents to send girls to school. Previous Government strategy aimed to increase primary enrollment from 29 percent in 1989 (of which girls account for only one third) to 40 percent in 1995/96, with the ultimate goal of universal primary education. In order to meet such targets, the number of pupils enrolled would need to increase by about 60 percent bewtween 1989 and 1995. While the Transitional Government has adopted the overall objective of increasing primary school enrollment, the detailed targets and means of achieving these goals are currently the subject of much debate. The Government intends, in the very near future, to convene the contending groups to build a consensus on how these daunting problem can be addressed. The principal instruments would be: (i) increasing the efficiency of resource use by lowering unit costs; (ii) increasing the flow of resources to primary education; and (iii) improving the quality and relevance of the education system. 27. Poverty Reduction. Because Niger ranks among the poorest countries in the world, it needs to focus on improving access to health, education, employment, and credit for the large section of the population which is likely to fall below a "poverty line". In addition, a key determinant of poverty--food insecurity-- must play an important role in agricultural strategy. At present, efforts to alleviate poverty translate into an increased role for NGOs which work effectively at the community level, allowing for small-scale private sector projects (as in the Pilot Private Irrigation Project being developed), promoting labor intensive projects (such as the Public Works and Employment Project - Nigetip - developed with IDA and other donor support), increasing access to health care for vulnerable populations such as women and children, and increasing overall access to primary education. In light of the current fiscal crisis, the above measures imply a transfer of resources from the comparatively privileged civil service sector towards vital development sectors (health, education and agriculture). The fiscal crisis coupled with the declining economy may also suggest that short-term options to target the poor need to be explored. IDA's program of assistance is designed to support and complement government efforts to reduce poverty. 28. Agriculture and Natural Resource Management. Subsistence agriculture and livestock are the foundation of Niger's rural economy. Rapid population growth, shrinking growing areas and degradation of arable land may culminate in a crisis of unmanageable proportions in agriculture. In sum, the natural resource base is threatened by environmental degradation, thus undermining the livelihood of 85 percent of Niger's population. Priority objectives in the rural sector are to slow down or reverse present environmental trends, maintain existing levels of per capita production to help achieve food security, and provide a modest source of economic growth. Like most countries in Africa, the key issues are: (i) environmental management; (ii) food security; (iii) the incentive structure for farmers; and (iv) delivery of public services. 9 29. The trends induced by the growing population coupled with periodic droughts include: more extensive agricultural exploitation resulting in deteriorating land management; declining fallow periods and yields; movement into marginal areas; encroachment by agriculturalists in traditional livestock areas; soil erosion; watershed degradation; and pressure on woodland resources for household energy. Priority needs to be given to improved natural resource management under the primary responsibility of local populations. Existing rules of land use which do not ensure security of land tenure, are a major impediment to improved natural resource management. Work is currently underway to prepare a "Rural Code" which is designed to establish a legal and social framework for determining land use patterns and rights. However, the adoption and introduction of such a global instrument may take a number of years. In the interim, short and medium term actions can be taken to improve land tenure and to increase the willingness of farmers to invest in resource management. Specifically, legislation should be enacted to cover grazing, cultivation, water, and forest resource rights, and to improve conflict resolution between agriculturalists and pastoralists. Techniques to improve water harvesting, soil stabilization and natural fertilization need to be disseminated. 30. Despite the reforms that have already been introduced to liberalize the cereals market, further reforms are needed to improve the incentive structure facing farmers and pastoralists. The continued existence of agricultural parastatals (e.g. RINI - rice milling and OPVN - food stock manager), the lack of adequate pricing information for farmers, and political interference in local structures (such as cooperatives) have slowed down the development of an enabling environment in the rural economy. Cooperative reform should focus on eliminating political and administrative interference and on training for cooperative management. In the irrigated sector, continued efforts should be made to encourage the private and cooperative sectors by reducing the role of the state in managing irrigation schemes. Better dissemination of market and pricing information is needed, and official prices for cotton will need to continue to be adjusted to fluctuations in world market prices. In addition, the development of autonomous rural associations, capable of channeling savings and extending loans for viable operations needs to be promoted and encouraged. 31. Agricultural Services. Government services need to be improved to be more responsive to the needs of farmers and livestock owners. With assistance from IDA, the national agricultural research system is being strengthened to improve research priority setting, research programming, budgeting and financial management as well as research staff planning and training. Research priorities should be directed towards farming systems and natural resource management and away from single crop productivity research. The link between research and extension services must be significantly improved for dissemination of research results. Agricultural services at the regional and sub-regional level are starved of resources and cannot provide even a basic level of service to farmers. 32. Institutional development. At the policy level, the scarcity of reliable data, poor coordination, and the absence of a proper policy-making process hinder the design, implementation, and monitoring of reform packages. For example, the budget is not used as a policy instrument, and sector ministries do not, generally, have the required planning and programming capabilities. Although national expertise is often available (university, research centers), it is rarely used systematically. Implementation performance under investment, economic management and adjustment projects has been mixed. Recent Project Completion Reports on The Economic and Financial Management Improvement Project (Cr. 1493) and SAL I (Cr.1660 and A-12) concluded that while overall project objectives were met, the short-term objectives such as introducing debt management systems, preparation of economic indicators (including National Accounts), introducing a methodology for a three-year Public Investment-Program, etc met with more success than longer-term objectives of institutional development (e.g. training, improvement of capacity for policy analysis, streamlining of budgetary processes, strengthening of the capacity to monitor program and project implementation, and building up capacity and procedures for coordinating activities). In addition, the recent emergence of new actors in the policy dialogue has not been matched by commensurate improvements in their 10 analytical capacity. These factors point to the need for a comprehensive institutional development strategy, for which IDA is prepared to support the Government. Bank Group Assistance Strategy Past IDA Assistance 33. Since 1985, the principal objectives of IDA strategy for Niger have been to support the Government's efforts to adjust to the economic difficulties engendered by the slump in uranium prices, improve the management of public resources, liberalize economic activity and strengthen the basis for long-term growth. IDA has supported the Government's reform program through adjustment and investment operations which focussed on sectoral expenditure programs and policy reform. IDA investment projects also supported long-term growth in priority areas (such as primary education, preventive health care and agricultural research), and maintenance and rehabilitation of existing assets. Adjustment lending (SAL I and the Public Enterprise Sectoral Adjustment Program -- PESAP) have represented 46 percent of IDA commitments in Niger during FY86-91 (Table 2 below). The adjustment program supported by the PESAP, has highlighted the difficulties in deepening the reform process. Reforms which affect powerful and vocal interests in the public and private sectors and/or result in social dislocations (e.g. unemployment resulting from liquidation of unprofitable enterprises, privatizations, restructuring, etc.) have been more difficult to achieve. 34. Project lending has financed a full range of projects in infrastructure, education, health, agriculture (rainfed, irrigated, and livestock), industry and energy. Since 1980, the commitment of IDA resources for investment projects has steadily increased, averaging 1-2 projects per year, and, as of mid-FY92, there are twelve ongoing projects with undisbursed commitments of about US$105 million. In education, some progress has been made in supporting a redirection of public resources towards primary education, and establishing the basis for more rapid growth in primary school enrollment ratios. In infrastructure, implementation of physical investment programs has been successful. Project implementation in most other sectors (agriculture, health, industrial finance) has been less satisfactory, in terms of physical progress and development of sustainable, replicable systems. Disbursements under the ongoing Health project (Cr. 1668) have been slow due to weak financial management; weak sector management, planning and coordination; and insufficient commitment to sector reform on the part of the previous government. Remedial action has been taken. The Transitional Government has also expressed strong commitment to improve project execution and has recently demonstrated this commitment by revamping project management. 35. Poor implementation performance is a general reflection of weak administrative capacity and inadequate inter and intragovernmental coordination coupled with the difficulty to identify economically sound projects (para. 31). The single IFC investment (a Wheat Milling company) is, for example, performing poorly and is currently being restructured. 36. The composition of IDA Lending from FY86-91 is shown in Table 2 below. 11 Table 2: Composition of IDA Lending, FY86-91 US$ million % Agriculture 29.2 9.7 Human Resources 46.2 15.3 (Education) (18.4) (6.1) (Health) (27.8) (9.2) Energy 31.5 10.4 Infrastructure 50.0 16.5 (Transport) (30.0) (9.9) (Public Works and Employment) (20.0) (6.6) Adjustment Lending 140.0 46.3 (SAL) (60.0) (19.8) (PESAP) (80.0) (26.5) Technical Assistance 5.5 1.8 Total Commitments 302.4 100.0 Country Strategy and Priorities 37. Development prospects in Niger are severely constrained by climate and resources. Further, important dynamic elements of the economy are either not monetized or unreported. It is, therefore, important to recognize that productive investment opportunities are difficult to identify and that structural reform is a long-term process. What would appear necessary is that this recognition be translated into realistic expectations to ensure success, an important factor in sustaining efforts. It is also necessary to monitor more rigorously, so that progress is not only recorded in documents and indicators but is seen on the ground; to develop better knowledge of private sector constraints, so that private actors are both willing and able to provide investment and productive opportunities, once price and trade restrictions are relaxed; and to better understand and appreciate the dynamics of the social and cultural environment and its impact on the development process. IDA's past involvement both at the macro and sectoral level provides a good knowledge base on which to build a strategy capable of providing assistance under difficult and uncertain circumstances. 38. IDA's strategy in Niger aims at reversing the downward trends in per capita incomes and at improving social indicators. Long-term poverty alleviation, human resource development, food security, improved nutritional status and reversal in environmental degradation are major objectives. The low absolute levels of per capita income, coupled with the fact that the bulk of the population live by subsistence agriculture or livestock, mean that poverty alleviation will depend in large measure on broad-based growth and actions, the expansion of basic services and to a lesser degree on directed programs of assistance (the impact of broad-based programs on groups disproportionately at risk -- women, for instance -- will, however, be carefully taken into account). IDA's strategy is based on three major building blocks: (i) building public and private sector institutions to promote private sector based growth; (ii) increasing efficiency of public resource management; and (iii) addressing long-term human capital and natural resources issues. 39. Proposed Lending Program. Given the current level of uncertainty but also the importance of the role IDA can play in Niger, the lending program is designed to respond to two major constraints: (i) preserve IDA's ability to respond quickly and flexibly to the evolving country situation, by matching improved performance with increased involvement; and (ii) prudent commitment of IDA resources to ensure their maximum developemnt impact. The proposed lending has been structured around three key (packages) options: a "core" program; an "expanded core" program; and a "full" program. Under the core and expanded core programs, there would be no adjustment lending. 40. The "core" program. The core program lending corresponds to the current situation. It would total US$124 million during FY92-96 for seven operations. 12 It would limit lending to to key sectors and to selected operation with a long- term dimension and long-lead times. The respective operations would be designed to have the minimum feasible size and to be insulated from the current vagaries of the budget situation. These sectors include: population and human resources (primary education); agriculture (agricultural services, pilot private irrigation, and natural resources management); infrastructure (water supply) and capacity building. 41. A Population Project scheduled for Board presentation in FY92 would assist Government to implement its national population program (which is also crucial to the slow down of environmental degradation) and continue activities to promote primary health started under the first Health project. The project would strengthen delivery of national health and family planning, promote family welfare and women's status and reinforce capacity for population policy analysis and research. The project would go beyond previous efforts by targeting both urban and rural areas and providing support for participation by both NGOs and community groups. A Primary Education project would continue support for primary education initiated under an ongoing project. 42. A Natural Resources Management project is under preparation and would build on the experience of ongoing projects with important environmental components such as the Small Rural Operations and the Household Energy Project and complement the proposed Population project. IDA would also support further reforms in the agriculture sector including giving local communities autonomy to manage natural resources, improving land tenure in certain areas (grazing land and bottomlands), and introducing the Rural Code. Institutional changes will be aimed at further improving government services (primarily research and extension) and cooperative development. The Pilot Private Irrigation project which has been appraised would support recent government initiatives to promote smaller scale private ownership and management of irrigated agriculture, away from the larger public sector managed schemes. Financing under the project would be channeled to beneficiaries through an NGO that has had much better success in rural/agricultural credit schemes (including loan recoveries) than any public or private commercial bank. Project management and execution would be undertaken by a private entity. The Second Water Supply project would aim to provide basic service to the poorest segments of the population. It would also aim to tackle inefficiencies in the water supply system, improve the maintenance of existing water supply infrastructure and contribute to slowing down the alarming spread of water-borne diseases. Finally, an Institutional Development project would seek to support activities designed to improve economic management and policy analysis capacity; streamline and restructure key economic agencies; improve the budget process; and support improvement in accounting and auditing. 43. The factors which would trigger a move to the "expanded core" are: (i) control of the fiscal situation (revenue mobilization at targets forecast in the Government's emergency program for the next four months; non-accumulation of new arrears and putting in place a plan to eliminate existing arrears; freeze of the wage bill); and (ii) progress toward a viable medium-term framework (addressing structural issues on efficiency of expenditures in education; making progress on recovery of BDRN bad debts; and putting in place a plan to downsize civil service). 44. "Expanded" core. The expanded core program would total US$167 million for eight projects. This in practice would entail adding to the "core" program one operation in the infrastructure sector Transportation Rehabilitation and increasing the sizes of the operations in the core program (primary education, pilot private irrigation, and water supply). The Transport Rehabilitation project aims to tackle badly needed rehabilitation and maintenance. The Project has been appraised and most conditions for negotiations fulfilled. The project would have significant budget implications (e.g. road maintenance fund). Also the project requires substantial cofinancing. Niger has large arrears outstanding to some of the potential cofinanciers. The project can be put in place only if most of the financing required can be assured. A satisfactory resolution of the arrears situation will be essential for the project to be advanced. Should the criteria for the full program be satisfied, the size and 13 scope of the operation would be increased and it would be converted into a sector project covering several sector-wide policy issues. Agreement on a PFP would trigger a move to the full program (following paragraph). 45. "Full" Program. Lending would total US$355 million for 13 operations which represents the upper limit for lending that IDA would be able to undertake in Niger. The lending program would include three adjustment operations -- of which one Education Secal. New investment operations would include a Transport Sector Project. The size and scope of other operations would also be increased. About 31 percent of the "full program" allocation would be non-project resources. 46. The Education Sector Adjustment Project which was appraised in July 1989 addresses public resource and policy issues. This hybrid would help ensure that sufficient resources flow to primary education by reducing unit costs and by slowing the growth of public financed secondary and tertiary education. Specific efforts are also being made to ensure increasing enrollment of girls in the primary education system. The program also includes a functional literacy component directed towards women, based on pilot programs tested by UNICEF. Finally the project supports policies and investments to consolidate and restructure vocational and professional training programs to adapt them to market demands. These changes are necessary to make the education system a better and more equitable instrument of development. Further processing of the project has however been stymied over the past two and a half years as a result of opposition from the two social groups most affected by the reforms, i.e. university students and teachers, to the project's provisions for double shifting in primary education (a practice commonly used in most African countries) and the rationalization of the awards of scholarships. With the possible exception of the debate on the democratization process, the project has spurred the widest public debate ever witnessed in Niger. Lives have been lost as a result of the confrontations that have been involved. As mentioned earlier, the Government plans to convene soon a major consultation with social partners on the state of education in Niger. IDA will closely follow the debates and on that basis will review the opportunity for the size and the nature of the project. 47. The Municipal Infrastructure project would strengthen institutional capacity and support policy changes at the local government level. Such policy and administrative reforms are needed to support the Government's stated policies of decentralization and will involve clarifying financial relationships with the central government to give greater autonomy and greater proportion of available resources to local governments. 48. Adjustment Programs supported by IDA and cofinancing resources would be intended to prevent the most harmful effects of disorderly adjustment. By sustaining non-durable imports at minimum acceptable levels, by promoting investment and expenditure in the social sectors and improving the conditions for economic activity, adjustment programs help cushion the poorest segments of society. With political and social difficulties standing in the way of bold action on economic adjustment, the prospects of adjustment lending in the next 18 months may not be promising. It is currently envisaged that a proposed second Structural Adjustment Credit (SAL II) could focus on public resource management, the financial sector, trade and private sector incentives, and, if appropriate, efforts to restructure the uranium sector. During the design of SAL II, specific attention will be given to components that are aimed at protecting the poorest groups in Niger in collaboration with the Bank/UNDP Social Dimensions of Adjustment Program. Programs of Special Emphasis 49. The Programs of Special Emphasis (PSEs) are an integral part of IDA's assistance program in Niger. Food Security issues are addressed through IDA's agricultural strategy which is aimed at improving rural sector productivity through research and extension, assessing the adequacy of early warning systems, identifying vulnerable groups, analyzing household coping strategies and assessing emergency preparedness. IDA will continue to focus on cereals and food aid policy, while deferring to other donors to provide food aid in response to 14 short term food crises due to drought or other natural causes. The ESW program includes sector work to further investigate food security issues (para. 50 below). Women in Development issues are being addressed in the ongoing and proposed education, population and agricultural services operations which include specific elements to improve female access to education, health facilities and agricultural services. The ongoing Small Rural Operations project also includes environmental management and productivity components designed for women's groups. Environmental issues are tackled on several fronts: natural resource management is an integral part of IDA agricultural strategy and is prominent in the ongoing Household Energy and Small Rural Operations projects. The Population Project is aimed at slowing population growth, critical for long term sustainable natural resource use. The proposed Natural Resources Management Project has been discussed above. A country environmental strategy paper (CESP) has recently been prepared. During its preparation, extensive consultations were undertaken with the donor community and the Government. The paper attempts to identify more clearly the appropriate role for IDA beyond the Population and Natural Resources Management projects as well as the role for the donor community. Further, it proposes a framework within which environmental issues can be tackled (including external assistance) and identifies areas in which there are gaps in our knowledge. The paper will shortly be circulated to donors and the Government for formal review, eventually leading to discussions as to its implementation. International Finance Corporation 50. Given the present difficulties of the modern sector in Niger, there are limited opportunities for large scale IFC investment in the medium term. A lack of more extensive involvement by the IFC in Niger results from a combination of natural constraints and a lack of transparency in the functioning of the judicial system. However, initiatives such as the African Development Facility (APDF) and the Africa Enterprise Fund (AEF) for which four investment inquiries have been received from Niger, offer opportunities for the IFC to support the development of small and medium scale enterprises. IFC's strategy will also be to support large and medium scale projects as investment opportunities arise. A possibility lies in petroleum exploration and exploitation based on good prospects for oil in the Agadem Basin in north-eastern Niger. Investment would consist of drilling and the infrastructure necessary to export the oil to Nigeria. Nevertheless, prospects for IFC support depend, in a large measure, on a concrete demonstration of the effective and neutral functioning of the judicial system, particularly as it relates to the enforcement of contracts where private foreign investment is concerned. Economic and Sector Work 51. In light of the evolving situation in Niger (transition to democratic rule, emergence of new leadership, etc), the ESW program for FY 92-95 is designed: to improve IDA's analytical base and consequently the underpinning of the country strategy; and as the core of a "policy options" exercise to serve new leaders. It seeks to support five key areas: (i) public resource management; (ii) capacity building; (iii) private sector development; [iv) agricultural growth and environment; (v) medium and long term social and human resource development. A Public Expenditure Review (FY 92) aimed at determining the medium term expenditure profile for both recurrent and investment expenditure has recently been completed. Elements of it were recently discussed with Government technical staff. The Review also takes into account the ripple effect on public finances of the expected decline in uranium earnings. A Food Security Study (FY 92) which covers issues such as cereals marketing, incentives and private sector growth opportunities is in the final stages of completion. The ESW on the environment (CESP) has been discussed above. A Retrospective Review of Public Enterprise Restructuring and Privatization and Private Sector Development is in progress and should be completed by end FY92. A study on Cross-Border Trade will be initiated early in FY 93 and will aim at providing IDA and the Government with a better understanding of the non-monetized sector of the economy and border trade with Nigeria and Algeria much of which goes unrecorded. An Institutional Development Study (Phase I) will be initiated in early FY 93 and will aim at analyzing the institutions involved in the design and implementation of economic 15 policy, the lack of coordination between ministries and bottlenecks in decision- making. The objective would be to develop proposals as to how these issues can be addressed and capacity for undertaking reforms improved. A Poverty Assessment will be undertaken in FY 93. In the human resource development sector work will be undertaken on health financing (FY 93) and labor markets (FY 95). In the context of preparation of the Population Project work was undertaken on alternative delivery channels for family planning. This work will be deepened in the future (FY 94) as lessons become available from the project. A WID Assessment will be undertaken in FY 94 as will an Informal Productive Sector Review. A Country Economic Memorandum will be prepared in FY 94 and the Second phase of the Institutional Development Study will be undertaken in FY 95. Collaboration with the IMF, Donors and Non-Government Organizations 52. The PFP was the principal vehicle for IDA/IMF collaboration and provided the umbrella for donor assistance. But in view of the fact that the Fourth Year PFP is now off-track, IDA and the IMF have since mid-FY92 been collaborating through parallel missions to assist the Government reestablish financial order and in its efforts at putting together its "emergency program". IDA will work closely with the IMF to ensure consistency in policy reform proposals made to the Government. It will carry out this work both formally (through parallel missions, when appropriate ) and informally (through periodic exchange of views on specific reform measures). IDA will liase closely with the IMF in monitoring the progress the Government is making in meeting its macro-financial targets in the context of its emergency program. IDA will continue to promote donor cooperation at both the overall macroeconomic level and the specific sector level. The lending program, which potentially includes three adjustment operations, is designed to provide cofinancing vehicles for the transfer of non- project resources under the Special Program of Assistance (SPA). IDA will take the lead in organizing donors' meetings in the context of the SPA to mobilize resources to support the adjustment programs, should adjustment resume, and will work with the UNDP in preparing future sectoral Round Tables. Through Public Investment Reviews (PIRs), IDA will aim to ensure that projects financed by other donors respect the criteria established under the adjustment program. 53. The role and impact of Non-Government Organizations (NGOs) in Niger has been more limited than in many sub-Saharan countries. This was the result of past Governments' control and the political nature of many organizations (e.g., the cooperatives, the Samariya, Women's Association of Niger). This slowed down the creation of grassroots domestic NGOs. The democratization process has however given rise to the creation of many genuinely independent local NGOs covering such important areas as the environment. In number, the international NGOs are well represented (about forty). IDA is actively seeking to cooperate more fully with NGOs particularly in the design of sub-projects under the Small Rural Operations project and the proposed Population Project. In the Private Irrigation Project the credit component will be executed by an NGO. In other critical areas, such as family planning activities and primary health care, the role of NGOs is an explicit element in the IDA dialogue. 54. In conclusion, IDA strategy seeks to be flexible and responsive to the needs and situation of Niger. It is designed to maintain activities essential for long-term development, even under difficult circumstances and to increase the scope and size of the lending program to respond to improvements in performance. Performance criteria and triggers are specified in paragraphs 39 to 48. Implementation of this strategy will require careful monitoring and supervision. IDA's assistance, however, goes beyond the activities described above to include such unquantifiable elements as direct technical assistance by Bank staff to Niger in critical areas of economic design as well as donor mobilization. II. The Agricultural Services Project 55. Rationale for IDA Involvement. The project is an integral part of IDA's sector development strategy (for sector background please refer to the first section of this report, para. 28-31, and 42) and constitutes a five-year time 16 slice of a long-term national program. It will complement the Agricultural Research Project approved by the Board in April 1990 (Credit 2122-NIR) and a Natural Resource Management Project which is being prepared. IDA's considerable experience in agricultural extension and lessons learned from similar projects in the region have been taken in account during project preparation. 56. Project Objectives. The proposed project seeks to improve in a sustainable way incomes of the rural population, to diminish rural poverty, to increase food security, and to improve environmental management. The capacity of self- management of the rural population would also be improved by functional literacy and numeracy training. 57. Project Description. The project objectives would be achieved by (a) efficient organization of extension services, provided with adequate human and physical resources, at the farm, regional and national levels; (b) regular and continuous training of responsible officials at each level by means of a system of fortnightly, monthly and annual training sessions, including training courses held outside Niger or conducted by external participants; (c)strengthening of the linkages between extension and national and regional agricultural research in order to find solutions to farmers' problems; (d) strengthening of relations between crop, livestock and environment services so as to ensure effective extension support for the agricultural, livestock and environmental protection programs; (e) functional literacy and numeracy training both for men and women, including stepped-up promotion of participation by women to enable them to play a more active role in rural development and to assume progressively a greater role in village activities and management. The project, to be carried out over five years would provide financing for vehicles, equipment, modest civil works, incremental operating costs, training, short-term technical assistance, and independent audit of project accounts. The total cost of the project is estimated at US$ 19.8 million with a foreign exchange component of US$ 10.0 million (50%). A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank group operations in Niger are given in Schedules C and D respectively. The Table of Economic Indicators is at Schedule E. A map and the Staff Appraisal Report, No. 10119-NIR dated March 31, 1992, are also attached. 58. Project Implementation. The project will be implemented under the responsibility of the Ministry of Agriculture and Livestock. The Secretary General of this Ministry will supervise and coordinate the project execution. In this task he will be assisted by a Project Coordinator and by a Monitoring and Evaluation Unit created under his office. The day-to-day project execution will be the responsibility of the Directors of Agriculture and Livestock who will each appoint their respective Assistant Directors as responsible for extension and field project implementation. Their principal role will be the supervision of the project implementation at the departmental and district levels. The Ministry of Hydraulics and Environment will be associated in project execution by its Department of Environment, and the Ministry of National and Higher Education by its Directorate of Adult Literacy Training. Coordination at the highest level will be insured by a coordinating committee composed of the representatives of all interested ministries. 59. Project Sustainability. The project represent a first time-slice of a long term (15-20 years) endeavor and it is not expected that the Government would be able to finance the project recurrent expenditure at project completion. It is, however, expected that because of the very high ERR of similar projects (preliminary results of analytical studies of the Kenya and Burkina Faso extension projects) and because of the simultaneous implementation of an Agricultural Research Project and the planned implementation of a Natural Resources Management Project, the cumulative benefits to the rural population and to the Government would be more than adequate to enable the Government to finance all recurrent costs amounting to about FCFA 375 million per year at the completion of the whole program, that is in about 15-20 years. 17 60. Lessons Learned from Previous IDA Involvements. The Bank has to date financed three projects in rainfed agriculture (Dosso, Maradi I and II); two irrigation projects (Namarigoungou and Irrigation Rehabilitation); two projects in forestry (Forestry I and II); one project in livestock, one Small Rural Operations Project (on-going), and one Agricultural Research Project (on-going). The major lessons learned from the four completed projects in the rainfed subsector were: (a) a single technical package is not widely applicable because of heterogenous soils and localized rainfall patterns; (b) areas with good production potential do exist but they are localized and of small size; (c) establishment of more integrated mixed farming systems is needed in order to avoid further deterioration of natural resources; (d) participation of the rural population in decision-making, project implementation and maintenance is of crucial importance, and self-help endeavors and decentralization should be encouraged; (e) services and advice provided to farmers should be upgraded; and (f) sufficient time is needed to reach sustainable performance under projects aimed chiefly at institution building. 61. In the irrigation subsector, the performance under the completed Namarigoungou Project was less than satisfactory in terms of ERR (ex-post ERR of only 3%) but good in terms of institution-building objectives. The Project Performance Audit Report stressed the low economic rate of return inherent in large scale approach adopted under the project. It also highlighted the project's success in (a) institution building; (b) in the introduction of improved agricultural technologies; (c) in the establishment of cooperatives that function satisfactorily; and (d) the high recovery (about 100%) of 0 & M costs and agricultural credit through project cooperatives. The experience under the ongoing Irrigation Rehabilitation Project is satisfactory regarding crop production and high paddy yields. But the experience has also demonstrated that (a) public irrigation schemes are expensive and yield lower benefits partly because of their exclusive focus on rice; (b) there is a need to emphasize small scale private schemes for growing diverse products and which permit partial or full recovery of investment costs; and (c) state-controlled cooperative organizations are prone to political and bureaucratic meddling, and hence unsustainable. 62. Wherever appropriate, the lessons learned and experience gained under the above projects and under the pilot operation were taken into account in the design of the project and all agencies interested in the project were fully involved in the project preparation and formulation. 63. Agreed Actions. The Government has agreed on the following actions: (a) as conditions of effectiveness: (i) a detailed procurement plan with timetables would be submitted to IDA for comment and approval, (ii) the central Coordinating Committee would be established; (iii) the accounting and financial management system would be in place; and (iv) auditors would be appointed for a period of three years. (b) as covenants: (i) a detailed program of cooperation between INRAN, the National Research Institute, and the Directorates of Agriculture and Livestock will be submitted to IDA for comments and approval not later than March 31 of each year; (ii) a yearly training program would be prepared during an annual training workshop organized well before the planting season and would be submitted to IDA for comments and approval not later than March 31 of each year; (iii) a yearly joint project review would be held not later than October 30 of each year; to assess project results and to assess Government's compliance with its obligations under the project, a joint mid-term review would be held not later than October 31, 1994; (iv) the mopeds for the use of VEWs, supervisors and M&E agents would be the property of the local government which would be responsible for the maintenance of the vehicles and for their insurance; (v) the yearly work-program and budget would be submitted to IDA for comments and approval not later than March 31 each year; (vi) the project accounts would be audited annually as discussed in para. 4.06 of Staff Appraisal Report; and (vii) progress reports would be submitted to IDA every six months. 64. Environmental Impact. The main thrust of the work of the crop, livestock and environment protection extension services to be supported under the project will be increasing land productivity. This will be realized primarily by 18 improved cultural practices and improved herd management, i.e., low-cost (often zero cash cost) and low-risk measures such as soil conservation, water harvesting, contour planting, zero tilling, composting, alley-cropping, agro- forestry and better integration of crops and livestock, as well as more efficient application of chemical fertilizers and pesticides. Adoption of these measures will both increase land productivity and arrest soil degradation. It is thus anticipated that the proposed project would be environmentally positive. 65. Program Oblectives Categories. Poverty in Niger is primarily a rural phenomenon. Sustained agricultural growth promoted by the project would be of prime importance in alleviating rural poverty and enhancing food security. The project would make a special effort in reaching women farmers so as to improve the productivity of their activities in farming as well as in child health care and nutrition. 66. Benefits. The project, with its broad range of activities, will greatly contribute to the improvement of living conditions of a large number of rural families and to the agricultural sector overall. About 46% of the rural population (330,000 families) would be reached by improved extension services. The main benefits are expected to be (a) increased production and productivity of both the crop and livestock sector, (b) increased autonomy and self-reliance of villages due to functional literacy and numeracy training which will provide villages with a core group of functional literates able to manage the affairs of the village and (c) more skilled human resources due to the continuing training programs for farmers, herders and government staff. Additional benefits would be improved management of natural resources, improved integration of livestock with agriculture, and agricultural research better focussed to farmer and herder needs. 67. Risks. The risks are: (a) the possible inability of extension and research services to produce workable solutions to farmers' and herders' problems; (b) problems of inter-agency coordination; and (c) the possible failure of Government and/or donors to sustain the long-term commitment required to achieve durable improvements in the effectiveness of agricultural support services. To minimize these risks, the lessons learned during the pilot project implementation have been built into the project design. Financial and management capabilities will be strengthened and annual reviews of work plans and budgets, as well as the mid- term implementation review and close Bank supervision, will provide an adequate number of opportunities for program review and long-term commitment building. 68. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Lewis T. Preston President Attachments Washington, D.C. March 31, 1992 19 Schedule A NIGER AGRICULTURAL SERVICES PROJECT ESTIMATED COSTS AND FINANCING PLAN Estimated Costs a/ -------(US$ million)------- Local Foreign Total Extension - Agric. & Livestock 6.8 7.0 13.8 - Environment 0.4 0.5 0.9 Sub-total Extension 7.2 7.5 14.7 On-Farm Research 0.1 0.0 0.1 Monitoring and Evaluation 0.2 0.2 0.4 Functional Literacy 0.9 0.3 1.2 Refinancing of PPF 0.8 0.7 1.5 Base Costs 9.2 8.7 17.9 Physical Contingencies 0.2 0.5 0.7 Price Contingencies 0.4 0.8 1.2 Total Project Costs 9.8 10.0 19.8 A/ Net of identifiable taxes and duties Financing Plan: Local Foreign Total -------(US$ million)------- Government 1.8 0 1.8 IDA 8.0 10.0 18.0 Total 9.8 10.0 19.8 20 Schedule B Page 1 of 2 REPUBLIC OF NIGER AGRICULTURAL SERVICES PROJECT PROCUREMENT METHODS Total Proiect Element ICB LCB Other N.B.F. Cost --------------- US$ million-------------- 1. WORKS 1.1 Construction Trg. 0.9 0.9 Shelters (0.9) (0.9) 1.2 Construction Literacy Centers 0.1 1/ 0.1 2. GOODS 2.1 Equipment, Furniture, Materials 0.3 0.1 0.2 0.6 (0.3) (0.1) (0.2) (0.6) 2.2 Vehicles 4.0 0.4 0.1 4.5 (4.0) (0.4) (0.1) (4.5) 3. TRAINING 0.9 0.9 (0.9) (0.9) 4. CONSULTANCIES 4.1 Accounting/Audit 0.3 0.3 (0.3) 2/ (0.3) 5. MISCELLANEOUS 5.1 Refinancing PPF 1.5 1.5 (1.5) (1.5) 5.2 Incremental Recurrent Costs 9.3 1.7 3/ 11.0 (9.3) (9.3) Total 4.3 1.4 12.3 1.8 19.8 (4.3) (1.4) (12.3) (18.0) Note: Figures in parentheses are the respective amounts financed by the IDA Credit. N.B.F.: Not Bank-Financed. 1/ Contribution of communities 2/ US$15,100 will be in the form of a sole source contract for set-up of accounting system and one follow-up mission by the accountant who set up the Niger SRO accounting system which the Extension Unit has been using under PPF and SRO funding. 3/ Contribution of Government and communities. 21 Schedule B Page 2 of 2 DISBURSEMENTS % of Proposed IDA Expenditures Allocations Financed Categtory of Expenditures US$ million by IDA Civil Works (excluding construction 0.8 100% of functional literacy centers) Vehicles, Equipment, 4.3 100% Materials, Furniture Consultants' Services 0.3 100% Training 0.9 100% Operating Costs a/ 8.5 100% Refunding of Project 1.5 100% Preparation Advance Unallocated 1.7 TOTAL 18.0 Estimated IDA Disbursements b/ IDA Fiscal Year 93 94 95 96 97 98 ---------------------(US$ million)---------------------- Annual 4.5 3.0 3.0 3.6 3.2 0.7 Cumulative 4.5 7.5 10.5 14.1 17.3 18.0 A/ Incremental operating costs arising under the Project on account of salaries of local contractual staff, travel allowances, office supplies and equipment, vehicles and fuel, excluding, however, all expenditures incurred in connection with the maintenance and insurance of the motorcycles and mopeds. ]/ The projections deviate from the standard profile for agricultural projects in Niger, i.e., disbursements higher than the profile in the first year, due to the refinancing of the PPF (US$1.5 million), and the opening of the special account. 22 Schedule C NIGER AGRICULTURAL SERVICES PROJECT Timetable of Key Project Processing Events (a) Time taken to prepare: 42 months (b) Prepared by: Government with IDA assistance (c) First IDA mission: October 1987 (d) Appraisal mission departure: May 19, 1991 (e) Negotiations: February 1992 (f) Planned Date of Effectiveness: (g) List of Relevant PCRs and PARs: Forestry PAR No. 4569 Irrigation PAR No. 6275 Dosso Agricultural Development PCR No. 7333 Second Maradi Rural Development PCR No. 8920 Document name: NIGER.CSS March 31, 1992 23 Schedule D Page 1 ot 2 Run Time: 03/17/92 at 12.27.36 Status Of Bank Group Operations in NIGER PFD8R25 - Sumary Statement Of Loans and IDA Credits (LOA data as of 2/30/92 - MIS data as of 03/17/92) Amount in US$ million (less cancellations) Loan or Fiscal Undis- Closing Credit No. Year Borrower Purpose Bank IDA bursed Date Credits 27 Credits(s) closed 273.37 C15110-NIG 1985 NIGER POWER ENGINEERING 7.50 .29 12/31/91(R) C18180-NIG 1985 NIGER IRRIGATION REHAS. 9.30 .49 1231/91(R) C18680-NIG 1988 NIGER HEALTH 27.80 15.62 06/30/93 C17060-IG 1986 NIGER TRANSPORT.SECTOR CRE 15.00 .73 06/30/93 CAO310-NIG(S) 1987 NIGER P.E.SECTOR ADJUSTMEN 20.00 1.02 09/30/90(R) C17400-NIG 1987 NIGER PRIM EDUC DEV 18.40 9.03 08/30/9,4 C18330-NIG(S) 1987 NIGER P.E.SECTOR ADJUSTUEN 60.00 7.01 09/30/90(R) C18380-NIG 1988 NIGER P.E.INST.OEVELOPMENT 5.50 1.48 06/30/92 C18800-NIG 1988 NIGER ENERGY 31.50 25.35 12/31/94 C18900-NIG 1988 NIGER SMALL RURAL OPERATIO 9.30 4.34 05/30/96 C21220-NIG 1990 NIGER AGRIC. RESEARCH 19.90 19.61 12/31/95 C22090-NIG 1991 NIGER PUBLIC WKS & EI 20.00 16.71 12/31/94 TOTAL number Credits - 12 244.20 101.68 TOTAL*** 517.57 of which repaid 10.32 TOTAL held by Bank & IDA 507.25 Amount sold of which repaid TOTAL undisbursed 101.68 Notes: * Not yet effective Not yet signed ** Total Approved, Repayments, and Outstanding balance represent both active and inactive Loans and Credits. (R) indicates ftrmaliy revised Closirg Date. (S) Indicates SAL/SECAL Loans and Credits. The Net Approved and Bank Repayments are historical value, all others are market value. The Signing, Effective, and Closing dates are based upon the Loan Department off ical data and are not taken from the Task Budget file. 24 Schedule D Page 2 of 2 REPUBLIC OF NIGER SUMMARY OF IFC INVESTMENTS As of Febrntar, 29 9.192 OrtginaL CrQss Courf eens Fiscat Type of 06 [uI !gg 1982 Les 4ouifs du Food processgi 2.1 0.2 2.3 SaheL Less: repayrmss, write-*ffs cocelations end *xchamge adjust,mns(.5)i tLL mecCol7altment hetc by bFC 2.6 IFC/AP2ICA I ?rch 1r92 NICER.S!it 8 Lotus/c:skindic 3-12-92 NIGER: Key Macroeconomic Indicators 1985 1986 1987 1988 1989 1990/5 1991 1992/8 Eat Eat Eat Proj Proj REAL GROWTH RATE (%) GDP 3.7 3.9 -2.9 6 -0.4 -1.9 1.9 2.1 GOP per capita 0.6 0.7 -5.8 2.8 -3.4 -4.8 -1.2 0.3 Private consumption -3.5 3.8 -4.8 0.2 -1.1 -7.5 -6.2 -1.2 per capita DEBT SERVICE Debt service (3) 141.9 178.3 218.9 203.1 170.2 150.0 142.0 110.1 o/w interest 64.0 66.1 85.8 72.2 83.4 38.8 38.7 38.9 Debt service/XGNFS /1 40 48.7 48.8 47.8 48.0 37.0 39.1 29.9 Debt service/GDP 9.8 9.0 9.6 9.0 8.0 5.9 8.2 4.7 RATIOS TO GDP Gross Investment 14.3 10.1 12.6 11.5 12.8 11.4 8.5 8.2 Domestic Savings NA NA NA 13.0 2.7 4.9 8.7 8.4 Public Investment NA NA NA NA NA 7.5 4.8 8.2 Private Investment/2 4.4 0.2 0.4 3.0 0.8 3.9 3.8 4.4 Government Revenue 11.4 11.1 10.3 10.4 10.8 10.1 8.6 10.6 Government Expenditure 21.3 19.7 19.9 21.1 21.4 22.1 15.8 18.3 Overall Deficit (-)/3 Ln including grants -6.7 -4.4 -8.2 -5.1 -7.5 -5.2 -1.2 -7.2 excluding grants -9.4 -9.2 -13.8 -9.2 -11.9 -10.8 -5.1 -10.8 GOP Deflator -2.1% 1.9% -0.3% -4.2% 1.0% 3.8% -7.2% 0.0% Real Effective ExRate/4 -5.6% -6.8% -9.1% -5.7% -7.6% NA NA NA Export Growth Rate(fob) -15.2% 2.0% 8.8% -11.2% -10.6% -6.7% -7.3% -3.3% Exports (fob)/GDP 17.2% 16.8% 18.7% 18.3% 14.5% 13.3% 13.0% 12.3% Import Growth Rate(cif) 14.2% -17.1% 6.0% -5.0% -2.8% 9.1% -26.7% 8.9% Imports (cif)/GDP 23.4% 18.4% 20.1% 18.8% 18.2% 19.5% 16.3% 18.3% Current Account -219.6 -187.0 -221.5 -214.5 -226.9 -299 -147 -207 Deficit in dollars Current Account/GDP including transfers -4.0% -1.9% -3.6% -2.8% -4.2% -4.9% -0.3% -3.O% excluding transfers -16.2% -9.4% -10.0% -9.6% -10.8% -12.3% -8.4% -8.8% Gross Reserves (months of imports) 3.9 5.6 6.3 8.9 5.8 5.8 5.9 5.8 ( 1/ before rescheduling. Figures include results of 1990 official debt cancellation 2/ Does not includes changes in stocks. Includes household investment. 3/ on cash basis 4/ weights based on the relative consumer price index 5/ based on preliminary GDP data provided by authorities, other data are projections 8/preliminary World Bank estimate a Projections as contained in 1990-1993 PFP, with exception of GOP and fiscal data. ALGERIA 113YA lhis map has seen prepare ny The World Bank's staf enxsiely for the convenience of readers MAL NIGER and is exclusiely for the intermat se of The World Bonk CN-AD Group.The denominotons used amey ord the boundores shown au. on this map do not nptly on the po of The Wdd Bank Grop, 7 Pay judgement on the legat NIGERIA sf0fus of nny femfory or any z endorsement or occeptance of sch bonories. CENTRAL AFRICAN , CAMEROON RE Gulf of Guine NIGER AGRICULTURE SERVICES PROJECT 20° ARRONDISSEMENTS ADDED UNDER CURRENT PROJECT ARRONDISSEMENTS REACHED UNDER THE PILOT PROJECT AND CONTINUED UNDER CURRENT PROJECT AR AGADEZ PAVED ROADS EARTH ROADS --- • RIVERS Arlit im 0 Bil-r SELECTED TOWNS DEPARTMENT CAPITALS NATIONAL CAPITAL ARRONDISSEMENT BOUNDARIES ALZ DEPARTMENT BOUNDARES In Gall INTERNATIONAL BOUNDARIESDW DWI-A o 56 100 150 20 250 16-- 16 K1iLOMETERS I MILES I t L\JA o Koo ziioina 'I 1 um C HAD g_-p . .Ngvigmi Tilla e.. .Goure Te. C.L. z 3: 111\ EAtr15 N -,-[ FAS N lG E R lA CAMEROON BENINJ 112