Niger - Public Sector Adjustment Credit

 ICRR 10230 Report Number : ICRR10230 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: C2939 Project ID : P001974 Project Name : Public Sector Adjustment Credit Country : Niger Sector : Public Sector Management Adjustment L/C Number : C2939 Partners involved : Prepared by : Asita R. De Silva, OEDCR Reviewed by : Hernan Levy, OEDST Group Manager : Ruben Lamdany, OEDCR Date Posted : 12/01/1998 2. Project Objectives, Financing, Costs and Components : The project was approved in March 1997 and closed on schedule in March, 1998. Objectives :The project aimed to help restore macro-economic stability and induce private sector growth . Given a poor record of policy reform in the past, the loan targeted a few key actions in public finance and public enterprises, rather than the full array of policy issues comprising Niger's adjustment program . Specific actions were to: (i) simplify the tax system, strengthen tax administration, and widen the tax base; (ii) reduce the share of the wage bill, subsidies, and transfers in current expenditure in favor of basic education, health, and road maintenance; and (iii) begin implementation of the privatization program. Financing: IDA: US$30 million. Costs and Components: One tranche balance of payments support with all actions taken prior to effectiveness . 3. Achievement of Relevant Objectives : Despite political and social instability, the government showed strong commitment to the reform program and all measures taken prior to credit effectiveness were sustained . GDP was adversely affected by drought in parts of the country, but grew by 3.4% in 1997 - the first time since 1980 that growth has been positive for 5 years in a row. Revenue : Total fiscal revenue in 1997 increased by 15%. However, at 8.4% of GDP, it was lower than the expected level of 9.8% due to short-falls in customs and income tax revenues . Expenditure: Progress was made in rationalizing the civil service salary system and the wage bill was reduced by 11% in 1997; non-wage current expenditure in health and education increased . Expenditure on subsidies and transfers increased, however, and spending on road maintenance was below targets . Privatization: The privatization program accelerated in late 1997. Two enterprises were privatized; three were liquidated; eight are in the process of restructuring; the import monopoly for petroleum products was removed; consultants to help privatize the water, telecom, and electricity utilities were recruited. 4. Significant Achievements : Good progress was made in the public finance component : the wage bill was reduced; allocation to the social sectors was increased; total fiscal revenues were increased . The project helped launch Niger's privatization program. 5. Significant Shortcomings : There were delays in implementing the program in the second half of 1997 because of (i) government preoccupation with security and socio-political issues (especially problems with labor unions ); and (ii) a lack of cooperation and coordination between various government agencies implementing the program . The design of the operation should have included provisions for communicating the objectives and benefits of the program to a broad array of stakeholders to help build a consensus on the reform program . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Partial Modest  Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : (i) One-tranche operations with concrete up -front policy actions are appropriate interventions when the track record of reform is limited and where only a limited information base on the country exits; (ii) in an environment of weak institutional capacity and political instability, a gradual, step by step approach (starting with a few reforms in the most critical areas) is likely to be most effective; (iii) obtaining and maintaining broad support for an adjustment program among civil society is important to ensure its eventual success . 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR is of satisfactory quality . The Borrower provided a good, detailed contribution to the ICR . There is no aide-memoire of the ICR mission.