Niger - Country Assistance Strategy

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 17114 NIR MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ONA COUNTRY ASSISTANCE STRATEGY OF THE WORLD BANK GROUP FOR THE REPUBLIC OF NIGER October 16, 1997 Country Department 13 Africa Region 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.  DATE OF LAST CAS May 9, 1994 CURRENCY EQUIVALENTS Currency Unit = CFA Franc (CFAF) US$1.00 = CFAF 591 (October 8, 1997) WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS AfDB African Development Bank CAS Country Assistance Strategy EU European Union GDP Gross Domestic Product HIPC Heavily Indebted Poor Countries IDA International Development Association IFC International Finance Corporation IMF International Monetary Fund MIGA Multilateral Investment Guarantee Agency NGO Non-Governmental Organization PFP Policy Framework Paper PSAC Public Sector Adjustment Credit lEMOA Union Economique et Monetaire Ouest Africaine (West African Economic Monetary Union) UNDP United Nations Development Programme FISCAL YEAR January 1 - December 31 Vice President: Jean-Louis Sarbib Country Director: Theodore Ahlers Technical Manager: Charles P. Humphreys Resident Representative: Edward Brown  FOR OFFICIAL USE ONLY REPUBLIC OF NIGER COUNTRY ASSISTANCE STRATEGY Table of Contents Pafe No. I. EXECUTIVE SUMMARY II. ECONOMIC AND SOCIAL PERFORMANCE Poverty ................................................................................................2 Growth ...............................3 Political Developments ...............................4 III. EXTERNAL ENVIRONMENT Rainfall ................................4 Uranium Prices ...............................4 Aid Dependence ................................4 Nigeria ...............................5 IV. NIGER'S DEVELOPMENT OBJECTIVES AND POLICIES Objectives and Policies ...............................5 Sources of Growth ........................... ..6 V. BANK GROUP'S COUNTRY ASSISTANCE STRATEGY Implementation of Previous CAS .7 Objectives and Strategy .8 Instruments .13 Annexes Annex Al Niger at a Glance Annex B 1 Selected Indicators of Bank Portfolio Performance and Management Annex B2 Bank Group Program Summary, FYI 998-2000 Annex B3 Summary of Non-Lending Services Annex B4 Key Economic Indicators Annex B5 Poverty and Social Indicators Annex B6 IDA Credits in the Operations Portfolio Annex B7 CAS Program Matrix Annex B8 CAS Summary of Development Priorities 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 authonzation.   MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A COUNTRY ASSISTANCE STRATEGY OF THE WORLD BANK GROUP FOR THE REPUBLIC OF NIGER I. EXECUTIVE SUMMARY 1. Niger is one of the poorest countries in the world with some 60 percent of its population living on less than a dollar a day. Social indicators are correspondingly low as indicated by data on child mortality, life expectancy, literacy and primary school enrollment. Nigeriens are, moreover, much poorer than they were 30 years ago--GDP growth has been negligible while the population has more than doubled. Finally, given Niger's extremely poor natural resource base and low levels of human capital investment, growth prospects are not good. Sound economic management has been further complicated by political instability throughout much of the 1990s. 2. The past efforts of both the government and multilateral and bilateral development institutions have failed to reach their objectives--as witnessed by slow economic growth and increased poverty. This performance is mirrored in the IDA portfolio where more than half of closed projects have been rated unsatisfactory. 3. The government is fully aware of the country's poor economic performance, increasing poverty and daunting development challenges. An economic reform was adopted at the end of 1995 and implemented satisfactorily through mid-1997. Broad poverty reduction, private sector development and capacity building programs have also been prepared. Implementation experience with past programs has, however, been episodic and weak implementation capacity is further strained by unresolved political tensions. 4. The ultimate goal of Bank assistance to Niger--reducing the number of poor people--is not likely to be achievable during the CAS period. Even though medium-term growth projections (2-3 percent per year) are nearly ten times the 30-year average they are still lower than population growth and will lead to an increase in both the number and proportion of poor in the population. Significant improvement in the well-being of the Nigerien population will depend on major long-term investments in human capital, a reduction in the population growth rate, and regional, rather than national, growth opportunities. Given this assessment, Bank assistance would take a long-term view, recognize that Niger will require external assistance for the foreseeable future, and focus on three things:  -2 - * investing in Niger's most important resource--its people--through expansion of basic education and health coverage, * improved management of Niger's scarcest resource--water--through investment to increase access to safe water and improve water use in agriculture, and * promotion of open economic policies and regional linkages to take advantage of external growth opportunities. 5. Implementation of the proposed strategy would be seen first in the allocation of the Bank's own resources, in particular an increase in resources allocated to non-lending services in the above three areas. Over time this strategy would also be reflected in the composition of lending. Proposed lending in the FY98-00 period would be US$200-250 million in the base case. Lending triggers for either an increase or decrease in lending would be based on portfolio performance--the percentage of projects rated as satisfactory with regard to development objectives and the disbursement ratio. Meeting annual fiscal targets as set in the PFP would constitute an additional trigger for adjustment lending of about one third of the lending program. 6. Key issues for discussion include: * role of the World Bank in a country as poor as Niger and with such limited growth prospects -focus on human capital development, -sustainability of even concessional borrowing, -recurrent cost financing, * importance of reducing population growth, and * portfolio implementation as the key lending trigger. H. ECONOAIC AND SOCIAL PERFORMANCE Poverty 7. Niger is one of the poorest countries in the world. It ranks last in the world in the UNDP's human development index. One out of five children die before the age of five, which is double the average for low-income countries. Four out of five adults are illiterate, two and a half times the average for low-income countries. Fewer than one out of three children attend primary school, less than one-third the average for low-income countries. Per capita income is estimated at US$200 and more than 60 percent of the population lives on less than a dollar a day. A detailed profile of poverty is provided in the Niger Poverty Assesment distributed to the Executive Directors in June 1996. 8 Poverty has increased steadily over the last 30 years. Real GDP per capita has declined by more than 2 percent a year over this period. Adult literacy has hardly changed since the 1960s. Primary school enrollment rates more than doubled from 1965 to 1980  - 3 - but have largely stagnated since. Child mortality fell by one quarter from 1965 to 1980 but has risen since. The population has increased from 3.8 million to 9.3 million over the last 30 years and, at the current population growth rate of 3.3 percent, will double again in 20 years. 9. The burden of poverty falls disproportionately on women. Rural households headed by women are poorer than those headed by men even after controlling for other differences. The female literacy rate is half the male rate. Mother's age at first birth is falling and maternal mortality is high. Although women are a major segment of the agricultural labor force, they have limited access to land, credit and basic services. Growth 10. Overall economic performance has been dismal since the 1960s. GDP has hardly grown--the 30-year real growth rate is 0.3 percent--while the population has more than doubled. Agricultural GDP has actually declined over the same period. Over the last 30 years there have been only two relatively brief occasions when GDP growth was positive for more than two consecutive years. The first was the 1977-80 uranium boom and the second was the 1993-96 period when rainfall was relatively favorable and the CFAF was devalued. 11. Poor economic and social performance is mirrored in weak implementation of development projects. Almost half of completed IDA-financed projects, and three- quarters of those closed in the last five years, have had unsatisfactory outcomes. Weak institutional capacity has been evidenced in slow procurement, inadequate counterpart funding, and ineffective financial management. Intensive efforts to improve portfolio performance in FY97 by both the government and the Bank (supervision resources were more than doubled) have had some effect; the number of problem projects has declined and the disbursement ratio on investment projects increased from 16 to 30 percent. 12. Progress on stabilization and economic reform has been episodic. Niger abandoned its economic reform efforts in the early 1990s with consequent disarray in public finances. Critical problems were low revenue mobilization due in large measure to tax evasion, an unaffordable wage bill (at one point the wage bill exceeded revenue collection), and public enterprise mismanagement. The government adopted a stabilization and reform program in December 1995 and has executed it satisfactorily through the beginning of 1997. Public finance management in 1996 was particularly encouraging as it began to address long-standing problems. In particular, the government raised revenue collection by 16 percent in one year, cut the wage bill by more than 30 percent, and launched a major privatization program, including for the water, power and telecommunications utilities.  -4 - Political Developments 13. A long period of political instability following the National Conference in 1991 and political deadlock in 1995 between the President, Prime Minister, and Head of Parliament (each from different political parties) culminated in a military coup in January 1996. General Ibrahim Mainassara Bare, head of the regime installed following the military coup, won presidential elections in July 1996 amidst charges of electoral fraud. Legislative elections in November 1996 were boycotted by opposition parties. The unresolved political situation constitutes a major risk for sound economic management. Although there is a broad consensus on the reforrn agenda of fiscal stabilization, privatization and market liberalization (the current opposition parties were in power when the reform program was adopted in December 1995), privatization and wage bill issues are highly political and have become a focus of government opposition. HI. EXTERNAL ENVIRONMENT Rainfall 14. The Nigerien economy and the well-being of the population is highly vulnerable to variation in annual rainfall. In normal years, only one percent of the land area receives more than 600 mm of rain and only 10 percent receives more than 3 50 mm. Late or inadequate rains, therefore, rapidly lead to crises. GDP growth has been negative in 10 of the last 30 years largely as a result of inadequate rainfall. Long-term trends are, moreover, not encouraging; average rainfall has been decreasing steadily for the last 30 years. Uranium Prices 15. Uranium accounts for about 7 percent of GDP, 50 percent of export earnings, and 9 percent of government revenue. Niger's negotiated contract price has been declining steadily for a decade and is likely to continue to do so since it remains significantly higher than the world spot price. Aid Dependence 16. Niger is highly dependent on official development assistance and is likely to remain so. Prior to the suspension of several aid programs following the 1996 coup, aid flows were about US$50 per capita and were the equivalent of about a quarter of GDP. Public investment, in particular, is almost entirely dependent on aid flows. Failure either to make progress on governance issues or to maintain the good public finance performance of 1996, would result in considerably reduced aid flows.  -5 - Nigeria 17. Niger has few resources beyond the resourcefulness of its population. Significant improvement in their well-being will depend on regional rather than national developments. Sustained growth in the economy of Nigeria probably represents the single most important opportunity for Niger. Ties are already very strong; three quarters of the Nigerien population lives within 200 kilometers of the Nigerian border, the first language of half the population is the same as that of northern Nigeria, approximately half of Niger's exports, excluding uranium, are to Nigeria, and the naira is the primary currency of about 10 percent of the population. Similar opportunities may be presented by growth in the UEMOA coastal countries. IV. NIGER'S DEVELOPMENT OBJECTIES AND POLICIES Objectives and Policies 18. The poor economic performance, increasing poverty, and daunting development challenges facing Niger are fully recognized by the government, as indicated in the President's preface to the Economic Recovery Program (Programme de relance economique), approved by Parliament in July 1997. The economic and social development objectives of the government's program are explicitly defined as: - stabilization of the macroeconomic framework, * reinforcement of national capacity in economic management, * promotion of the private sector and development of small and medium-size enterprises, * reduction of poverty and underemployment by stimulating growth and developing labor intensive works, * organization of rural producers to actively participate in development activities and contribute to the definition of rural development policies, * stimulation of investment in productive activities to increase incomes and employment, and * improving the living standards of the population. 19. The government's strategy to achieve these objectives focuses on five elements: * strengthening the tax system, * increasing the efficiency of public expenditure, including public enterprise and civil service reform, * promoting private sector activity, * sustaining rural development and natural resource management, and * strengthening the education, health and transportation sectors.  -6 - The strategy is detailed in the Economic Recovery Program and three recently prepared program documents concerning poverty reduction (Programme cadre national de lutte contre la pauvrete), private sector development (Programme cadre national de promotion du secteurprivJ), and capacity building (Programme cadre de renforcement des capacitis de gestion de l'economie et depromotion de bonne gouvernance). The overall strategy is summarized in the government's Policy Framework Paper distributed to the Executive Directors in July 1997. 20. The government's three year program targets growth of 4-5 percent, inflation of 3 percent, a current account deficit of 9 percent, budgetary revenue of 11 percent of GDP, budgetary expenditure of 16 percent of GDP, a 20 percent increase in primary school enrollment rates and 30 percent increase in female enrollment rates, a 30 percent increase* in basic health care coverage, and attaining minimum quality standards on 60 percent of the priority road network. The government's policy matrix distributed with the PFP in July 1997 summarizes the key measures planned to meet these objectives. Sources of Growth 21. Niger's growth prospects are extremely limited given its underdeveloped human resource base and very limited natural resource base. In the short run, an increase in public investment for infrastructure rehabilitation and settlement of domestic private sector arrears, both of which are dependent on a full resumption of aid flows, is likely to be the main source of growth. 22. Over the medium term, the mining and petroleum sectors could become a significant source of growth. Gold exploration has yielded encouraging results and major foreign firms are considering investment in Niger. Petroleum exploration is underway and oil has been discovered near the border with Chad. Construction of the proposed Chad- Cameroon pipeline would increase the prospects for commercially viable production. Use of the resources generated from possible gold and petroleum production will be key for determining their long-run effect on the economy and poverty reduction. No growth in the uranium sector is envisaged but a restructuring of the industry could stabilize production at current levels. 23. While there are some opportunities for increased production of higher value crops, agriculture is not expected to be a major source of growth. Exports of onions, cowpeas, peppers, tomatoes, and livestock to regional markets from Nigeria to CMte d'Ivoire offer good growth prospects, but rainfed cereal production and traditional livestock production, which constitute the bulk of the sector, offer very limited prospects given soil and rainfall conditions. Basic small-scale soil and water management infrastructure can contribute to stabilizing agricultural production and thus make a major contribution to the food security of rural households. Overall, annual growth rates are closely linked to rainfall and will likely continue to vary widely. Poor soils, limited rainfall, and growing population  - 7 - pressure, however, will likely limit sustained average agriculture growth to 2 percent or less per year. 24. The constraints to growth and poverty reduction are daunting--a harsh natural environment and poor resource base, weak human resource development, high population growth, and a possibly unstable political situation. V. BANK GROUP' S COuNTRY ASSISTANCE STRATEGY Implementation of Previous CAS 25. The previous CAS, discussed by the Executive Directors in May 1994, set five objectives: * restore order in public finances, deepen policy reforms and strengthen competitiveness, capacity building and governance, * promote human resource development, employment creation, and poverty alleviation, - promote private sector development, support agriculture and infrastructure development, develop mineral resources, - ensure environmentally sustainable development, and * accelerate implementation of the existing portfolio. Only limited progress has been made in achieving these objectives, both because of the innate challenge posed by such broad objectives for Niger and because of the continuing political instability which severely hampered economic management and attention to development issues since the early 1990s. 26. The strategy has shown some success on the macro front and in project implementation. Despite the failure to implement the program negotiated with the Bank and IMF in 1994, Niger was able to manage the effects of the CFAF devaluation, maintain a real depreciation, and thus partially restore competitivity. Moreover, the public finance crises of 1994-95 were followed by dramatically improved budgetary performance in 1996. As noted above, intensive efforts by both the government and the Bank in FY97 have led to a reduction in the number of problem projects and an increase in the disbursement ratio on investment credits. Little progress was made on other fronts, however, although new efforts in health and education offer some promise for the future. Past performance is clearly mirrored in the IDA portfolio, where four out of five credits closed in the last five years have been unsatisfactory in achieving their development objectives. 27. The key lessons from this experience are the need for realistic objectives, simplicity, and greater attention to implementation issues. First, faced with Niger's  -8 - enormous needs, we have frequently set unrealistic objectives for IDA-financed operations. We need to set ambitions objectives but assure that they are realistic, i.e., it needs to be very clear how the activities undertaken are expected to yield the outcomes sought. We have begun to make progress on this front as demonstrated, for example, by the ongoing Education and Public Sector Adjustment operations. Second, in attempting to respond to the challenges facing Niger and the complexity of its problems, we have frequently supported operations that are too complex. Simple and relatively straightforward operations, such as the Public Works and Employment project, have succeeded while more complex operations have consistently faced implementation problems. Finally, in retrospect, we have frequently underestimated implementation difficulties. This applies to both lending and non-lending services and is closely linked to realistic objectives and simple designs. Our implementation experience has demonstrated the importance of ownership, by both beneficiaries and the government, and of innovative delivery mechanisms which permit the attainment of ambitious objectives without undue strain on the human and financial resources of the central government. Objectives and Strategy 28. Reduction in the number of poor people in Niger is the goal of Bank assistance to Niger. This goal is not likely to be achievable in the medium term. A sustained reduction in the number or even proportion of poor is likely to be attainable only in the long run after major human capital investments and further economic integration with Nigeria and the UEMOA coastal countries. 29. Given the above analysis, extensive national consultations during the CAS preparation process, the government's own development strategy and the Poverty Assessment, Bank assistance would focus on three core areas: * human capital development, particularly investment in education and health, to build on Niger's most important resource--its people, * improved management of Niger's scarcest resource--water, and * promotion of open economic policies and regional linkages to take advantage of external growth opportunities, as well as potential new opportunities in the mining and petroleum sectors. All Bank assistance activities would be explicitly assessed against their contribution in the above three areas. The broad objectives during the CAS period are to: * expand the coverage of basic education and health services, * increase access to safe drinking water and promote sustainable water management in agriculture, and * foster a favorable business climate, including further development of links with Nigeria.  - 9- 30. The most basic needs of the Nigerien population are far from being met. The Poverty Assessment showed that most of the poor live in rural areas and that poverty is strongly associated with large family size, a lack of education, owning no livestock, and (in rural areas) having a woman as household head. Inadequate water supplies, food security, education and roads were the most frequently cited issues in the extensive regional consultation process undertaken as part of CAS preparation. The inability of the central government to provide adequate services and the extreme unlikelihood of its mobilizing sufficient resources to sustain expanded coverage in the future has two major implications for the Bank strategy. First, all Bank assi tance must incorporate both greater direct beneficiary involvement, particularly from women, and innovative delivery mechanisms, ranging from private health facilities and community-hired teachers to recruitment of female service providers. Second, if cost-effective and replicable delivery mechanisms can be found, IDA lending should provide financing over the long term for human capital formation, including recurrent expenditure in health and education. Human Capital Development 31. As in many countries, labor is the main asset of the poor in Niger. The poor health and education status of the vast bulk of the population is both a direct indicator of well- being and a key constraint on increasing returns to labor. The low level of literacy and primary school enrollment, for example, severely limits the poor's ability to respond to future opportunities, ranging from technological improvements in agriculture to migration. 32. Population growth represents one of Niger's most important and most difficult development issues. Reduction of the population growth rate is essential for an eventual reduction in poverty in Niger. Rapid population growth and high fertility put an immense strain on both national and household resources. Bank support for family planning services has been relatively ineffectual and the ongoing Population Project will close at the end of 1997 with many of its ambitious development objectives unmet. In part this reflects implementation difficulties, but the fundamental problem remains a lack of consensus on key issues. In particular, the Bank's view on the importance of the population issue and the priority of family planning and reproductive health is not shared by a large part of the political, social, and religious establishment. The Bank will attempt to increase attention to the population issue through both its lending program and its analytical and communication efforts. This will require addressing a broad range of issues surrounding reproductive health, including prenatal care, child survival, containment of the spread of HIV/AIDS and other sexually transmitted diseases, female genital mutilation, as well as the p;ovision of family planning services. The ongoing Health Services Development Project provides a vehicle for addressing these issues, but its success in this area will require strong complementary efforts in communications, education for girls, and female literacy. Communication efforts will focus on increasing the understanding of the implications of continued rapid population growth at all levels of society, including the highest political authorities, strengthening the commitment to reproductive health issues, and delivering key messages about personal and national choices in this critical area.  -10- 33. Education sector experience provides a good example of both the problems posed and the proposed approach for future Bank assistance in the social sectors. At the currently targeted rate of increase in primary school enrollment, it would take about 40 years for Niger to attain the current average gross enrollment rate for low income countries. This is inadequate and will severely restrict the opportunities for another two generations of Nigeriens. More ambitious targets are necessary but they, in turn, will require innovation in delivery mechanisms. For example, the availability of teachers is one of the largest constraints on primary school enrollment, yet the fiscal cost of hiring large numbers of additional teachers as central government civil servants is totally unsustainable. The Bank strategy in the education sector is to increase the coverage of the education system by supporting the development of community and private schools, improved quality of schooling, and alternative mechanisms for provision of education services. The objective for the CAS period is to create a solid basis for education policy reforms and test new approaches. 34. In this context, the Bank will help the government to increase access to primary education and the first cycle of secondary education, increase the proportion of girls attending school, and encourage the participation of the non-public sector in education. Under projects financed by other donors and the ongoing IDA-financed basic education project, pilot efforts to engage community-hired teachers have shown great promise. A dialogue with all concerned parties, ranging from the teachers' union to parents, is being initiated to launch a major increase in primary school enrollment, particularly of girls, through local schools with community-hired teachers, private schools, and NGO-operated schools. The Bank would initially support such efforts by facilitating the dialogue among concerned groups and funding pilots which, if successful, would lead to a major program of matching grants or locally adapted vouchers supporting both the capital and recurrent costs of expanded basic education. 35. Health sector assistance will focus on support for implementation of the government's Health Sector Development Plan which seeks to improve the quality and coverage of basic health services; increase the availability of affordable, essential generic drugs; strengthen and decentralize sector management; mobilize central government, community, and user resources to finance health services; and expand capacity through partnerships with communities, NGOs, private providers, civil society, and academia. Decentralization of services, involvement of non-governmental providers, and regular beneficiary involvement are already features of the health project launched in FY97. The Bank strategy emphasizes acceleration of program implementation through capacity building efforts at all levels and direct operational support to health districts. 36. Food security and improved nutrition present a major challenge. The problem is fundamentally one of income and the prospect for increased income among the rural poor is not good. Rural development operations will continue to pilot actions to enhance sustainable income and food security, such as the ongoing Natural Resource Management and Small Rural Operations projects. Given the limited growth prospects, increased resources will be devoted to the identification of nutrition interventions, including  innovative delivery mechanisms, to have a more direct impact on nutritional status. Emergency operations will continue to be led by other donors. 37. Traditional social safety nets would not be a priority of Bank assistance. Since poverty is so widespread in Niger, Bank assistance would target rural areas and women, which, in fact, constitute the majority of the population. Similarly, the traditional notion of a government-provided social safety net is not operationally relevant for Niger. Many government activities financed under the safety net rubric are transfer payments required for the social sustainability of reform efforts, such as severance packages for public employees, but which do not focus on the poorest part of the population. Water Management 38. Water is Niger's scarcest resource and the most frequently cited problem in the regional CAS consultations. Bank involvement in water issues has been substantial but divided along traditional sectoral lines. A major focus of the new CAS would be to increase the resources devoted to water management and to approach water issues in a concerted cross-sectoral manner. 39. Improved rural infrastructure, particularly concerning water, is an essential element of the human resource development strategy, as well as that for agricultural growth. Access to clean water is probably the single most important determinant of health in Niger. The time devoted by women and girls to gathering water and transporting goods is a major constraint on their participation in other economic activities, as well as in literacy and education programs. 40. Water and soil management infrastructure, such as small-scale irrigation schemes, village water catchments, and soil water management devices are important for reducing the dependency of agriculture on rainfall variation. They provide both some prospects for growth, such as private irrigation, and an important contribution to enhancing food security. Open Economic Policies and Regional Linkages 41. Poverty will not be reduced in Niger without widespread and sustained growth. Given the extremely limited natural resource base and the long-term nature of social infrastructure investments, it is essential that the government foster increased economic flexibility and openness to make the most of existing and future opportunities. Such flexibility will depend on sound public finance management, effective removal of obstacles to private investment, and promotion of regional economic linkages. 42. As discussed in the FY97 Public Sector Adjustment Credit (PSAC), sound public finance management is a prerequisite for dealing with Niger's long term development issues. Both private sector growth and expanded coverage of basic social services require credible public finance management to assure the availability of resources for essential state functions, such as security and a functioning judiciary, and to avoid the economic and  -12- social disruption of arrears on civil servant salaries and government supplies. Achieving the revenue mobilization, wage bill, and privatization targets set under the PSAC and PFP would constitute a trigger for additional adjustment lending. Macro targets would continue to be set in the context of IMF-supported programs, and reviewed annually in PFP discussions. Bank assistance would focus on efficient public expenditure and revenue mobilization through annual public expenditure reviews and analytical work on the management of potential new mining and petroleum revenues. 43. The Bank would support private sector growth through non-lending services, pilot operations, and infrastructure investment designed to reduce the obstacles to private investment. Increased analytical work and related non-lending services would focus on regional economic linkages, increased public-private consultation, potential growth in the mining and petroleum sectors, and actions to improve the business climate, including judicial reform. Lending would include pilot operations to help entrepreneurs such as the recent Private Irrigation Project and continued support for privatization. Infrastructure investment lending would support state divestiture in the transport and utilities sectors while providing and maintaining basic infrastructure, particularly in the road sector, where private financing is not available. 44. Given the importance of stronger regional economic linkages for the future of Niger, the Bank would initiate focused analytical work on such links, particularly with regard to Nigeria which accounts for the bulk of Niger's cross-border trade, financial flows and migration. The work would focus on identifying concrete actions to simplify, facilitate and encourage investment flows, financial transactions, labor flows, and commerce between the two countries. Economic Scenario 45. The CAS base case economic scenario projects annual GDP growth of 2-3 percent over the next decade. While this is considerably higher than the growth rate for any other 10-year period since independence, it is lower than the population growth rate and will lead to an increase in both the number and proportion of poor people in Niger. 46. The economic scenario in the government's PFP constitutes the high case with annual growth of 4-5 percent; such growth may be achievable during the CAS period if rainfall is favorable, there is a rapid increase in aid flows for infrastructure rehabilitation, and mining prospects are realized rapidly. 47. If the government were to abandon or fail to implement successfully its economic reform program, the resources for increased human capital investment would not be available and domestic arrears could rapidly constrain economic activity. Under such circumstances, growth in any given year would still depend highly on rainfall, but growth over an extended period would continue at the trend rate of 0-1 percent per annum.  - 13 - Instruments 48 Improvedportfolio implementation is the most important instrument available to implement the above strategy. An undisbursed portfolio of $130 million in 10 operations covering the education, health, infrastructure, and rural development sectors constitutes a powerful, and immediately available, instrument to initiate concrete action. Sector missions will review all existing operations to review development objectives and identify changes leading to enhanced effectiveness, beginning with an agriculture sector portfolio review in October/November 1997. Annual country portfolio reviews, managed by the Resident Mission, will identify and monitor progress on generic issues such as procurement, financial management, and partnership with NGOs. 49. Economic and sector work will focus broadly on the long-term human resource issues, effective public expenditure including use of potential mining revenues, sources of growth, and regional economic linkages (see Annex B3). In addition to basic analytical work, a key objective of Bank non-lending services will be to promote the dissemination of information, improved government communication, and public debate on development issues in Niger, including the constraint on income growth and poverty reduction imposed by the high population growth rate. The complementary, direct communication role of the Bank will be particularly important in the existing sociopolitical context of Niger and Resident Mission resources for communication and outreach will be strengthened accordingly. 50. New lending during the FY98-00 period is likely to be constrained by absorptive capacity. In addition to possibly increased lending for education and basic infrastructure, particularly for water and roads, widespread use of the proposed adaptable lending instruments is envisaged for small innovative pilot operations to explore new sources of growth in agriculture and other sectors and eventually for adaptable program loans in the social sectors (see Annex B2). Subject to meeting macro targets set out in annual PFPs, about one third of the lending program could take the form of adjustment lending. The base case three-year lending program would be in the range of US$200-250 million, which is in line with the present normative IDA allocation. 51. Given Niger's long-term need for external resources to finance both investment and recurrent costs, but its limited capacity to deliver public services, lending would evolve over the longer run increasingly toward programmed budget support, and away from both traditional projects and quick-disbursing adjustment credits. Achieving this shift in the long run will depend on the success of ongoing and planned work on public expenditure management and allocation. The resulting increased flexibility in the provision of funds would both focus attention on the importance of improving public finance management and provide an instrument to allow the Bank to help finance the delivery of needed public services by groups outside central government, including local communities. The success of pilots envisaged during this CAS period will determine the feasibility and speed of a shift toward such flexible budget support.  -14- 52. Provided it continues to implement IMF-and IDA-supported programs, Niger could reach the HIPC Debt Initiative decision point in 1999. Preliniinary debt sustainability analysis, based on data from the Bank's Debt Reporting System, indicates that Niger's public external debt at end-1996 was about US$1.4 billion in nominal terms or about 0.8 billion in present value terms. The net present value of external debt represents about 270 percent of exports. It is expected that the debt profile will improve after debt relief under existing mechanisms, including the Paris Club. IDA represents about 28 percent of the net present value of existing external debt and its share is likely to increase during the FY98-00 period. A detailed debt sustainability would be undertaken jointly by the authorities, the Bank, and the IMF near the decision point. Lending Triggers 53. Given the proposed focus on human resource development and Niger's overwhelming needs, the primary trigger for increased lending would be execution of the existing portfolio. Preparation of new loans would be accelerated and IDA lending increased by up to 50 percent above the current allocation (US$200-250 million) if 80 percent of ongoing projects are rated satisfactory on attainment of development objectives and the disbursement rate on investment loans is above 25 percent. Conversely, new lending would be slowed by up to 50 percent if satisfactory development objective ratings fall below 60 percent and the disbursement rate falls below 20 percent. All adjustment lending and high case investment lending would also be conditional on meeting public finance targets set out in annual PFPs. CAS Development Indicators 54. Initial success in attaining the proposed objectives over the three-year CAS period would be measured by the following intermediate indicators: * increased access to primary education as measured by increased total and girls admissions to the first year of primary school, * increased basic health care coverage as measured by an increase in the percent of the population living within 5 kilometers of a health center, * increased percentage of households with access to safe water, * attainment of minimum quality standards on 60 percent of the priority road network, and * attainment of annual PFP revenue and expenditure targets. IFC and MIGA Activities 55. IFC has no outstanding investments in Niger but has recently conducted two missions to identify new investment opportunities. Possible areas for future involvement include enterprises in the process of being privatized, capital market development, and small manufacturing enterprises. In addition, IFC staff will participate in the proposed  - 15 - mining sector review. IFC and Bank staff will continue to coordinate closely on privatization and business climate issues. 56. Niger has not yet completed its MIGA membership requirements and is thus no yet eligible for MIGA coverage. Given the potential importance of MIGA membership for encouraging private sector investment, the government will be encouraged to accelerate completion of the remaining requirements. Cooperation with Other Institutions 57. Close cooperation among Niger's external partners is essential to enhance aid effectiveness, particularly in an environment as challenging and complex as Niger. The Bank will continue to coordinate closely with all other multilateral and bilateral development institutions, especially through local consultation among field office staff. The benefits of such coordination are clearly seen in the large role played by the EU and UNDP in the regional consultations contributing to elaboration of the government's poverty strategy and this CAS; the close coordination with key bilateral partners on privatization issues; parallel IDA, IMF, AMB and EU missions to review the economic reform program; and a close working relationship with the IMF on macro and key structural issues. The Resident Mission will remain the focal point for donor coordination and, as part of its expanded outreach activities, will promote more systematic sharing of information among donors and greater interaction with visiting Bank missions. James D. Wolfensohn President By: Gautam S. Kaji Washington, DC October 16, 1997   Annex Al Page 1of 2 Niger at a glance Sub- POVERTY and SOCIAL Saharan Low- __ Niger Africa Income Development diamond* Population mid-1996 (millions) 9.3 600 3,229 L8fe expedancy GNP per capita 1996 (US$) 200 490 500 GNP 1996 (billions US$) 1.9 294 1,601 Average annual growth, 1990-96 Population (%) 3.3 2.7 1.7 GNP Gross Labor force(%) 2.9 2.6 1.7 Groms per piar Most recent estimate (latest year available since 1989) capita enrollment Poverty: headcount index (% of population) 63 Urban population (% of total population) 23 31 29 Life expectancy at birth (years) 47 52 63 Infant mortality (per 1, 000 live births) 119 92 69 Access to safe water Child mainutrdtion (% of children under 5) Access to safe water (% of populaton) 57 47 53 Illiteracy (% of population age 15+) 86 43 34 Gross primary enrollment (% ofschool-age populaton) 30 72 105 Niger Male .. 78 112 Low-income group Female .. 65 98 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1975 1985 1995 1996 _ Economic ratios GDP (billions US$) 1.0 1.4 1.9 2.0 Gross domestic investmentGDP 14.3 15.3 7.2 9.4 Openness of economy Exports of goods and services/GDP 19.2 21.0 17.1 16.0 Gross domestic savings/GDP 2.6 6.1 1.5 3.8 Gross national savings/GDP 7.7 9.7 -1.9 0.8 Current account balance/GDP -1.7 -8.5 -3.3 -2.4 Interest payments/GDP 0.2 2.9 2.4 1.6 Savings investment Total debt/GDP 10.6 83.9 86.9 79.6 Total debt service/exports 4.6 33.8 17.6 36.4 Present value of debtGDP .. .. .. 40.3 Present value of debt/exports .. .. .. 270.0 Indebtedness 197545 1986-96 1995 1996 1997-05 (average annual growth) Niger GOP 2.2 0.8 2.6 3.3 2.7 GNP per capita 0.5 -0.2 -1.0 1.0 -0.5 Low-income group Exports of goods and services -3.7 -2.8 3.0 . ., STRUCTURE of the ECONOMY 1975 1985 1995 1996 (% of GDP) Growth rates of output and investment I%) Agriculture 50.3 36.7 40.2 39.2 100 T Industry 11.0 20.9 17.3 17.8 Manufacturing 5.6 7.1 6.5 6.6 50 - Services 38.7 42.3 40.8 41.1 9239 94 95 9s Private consumption 86.6 78.8 84.5 84.9 s5o General govemment consumption 10.8 15.0 14.1 11.3 GDI GDP Imports of goods and services 31.0 30.1 22.8 21.6 1975-85 1986-96 1995 1996 1 (average annual growth) Growth rates of exports and imports (%) Agriculture 2.6 .. 1.1 0.8 1 7 Industry 6.3 .. 2.5 6.6 Manufacturing .. .. 4.2 4.4 Services 0.0 .. 3.4 4.0 91 9 9s 96 Private consumption 7.2 0.1 .. -1O / General govemment consumption 0.4 1.7 Gross domestic investment -8.6 -2.7 .. .. -20 l Imports of goods and services 3.7 -52 .. .- Exports Imports Gross national product 1.6 0.8 Note: 1996 data are preliminary estimates. Figures in italics are for years other than those specified. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.  Annex Al Page 2 of 2 Niger PRICES and GOVERNMENT FINANCE 1975 1985 1995 1996 - Domestic prices Inflation (%) (% change) 40 Consumer prices 9.1 -0.9 10.9 5.3 Implicit GDP deflator -2.2 -1.9 5.4 4.8 20 + Govemment finance o (X of GDP) S 94 ss 96 Current revenue .. 10.8 7.2 7.8 -20 Current budget balance .. 0.0 -4.0 -1.3 - GDP def. -Q--CPI Overall surplusideficit .. -8.3 -8.6 -5.4 TRADE 1975 1985 1995 1996 (millions US$) Export and import levels (mill. US$) Total exports (fob) 139 251 280 281 450 Uranium .. 214 145 137 400 t ' Livestock products .. 25 43 47 350 t Il. . Manufactures .. 0 0 0 250 I II Total imports (cif) . .. 350 342 200 Food . 18 28 150 Fuel and energy 26 2418 21 b00 . Capital goods .. .. 64 5 Export price index (1987=100) .. .. .. 9 91 92 93 94 95 96 Import price index (1987=100) .. .Exports Imports Terms of trade (1987= 100) .. BALANCE of PAYMENTS 1975 1985 1995 1996 1 (millions USS) Current account balance to GDP ratio (%) Exports of goods and services 162 298 317 314 o Imports of goods and services 235 473 431 430 90 11 92 93 94 95 9| Resource balance -73 -175 -114 -116 -1 Net income -9 -42 40 -29 -2 l Net current transfers .. .. -2 3 -29 3 Current account balance, before official capital transfers -18 -123 -60 -49 Financing items (net) 24 126 58 33 T Changes in net reserves -6 -3 2 16 I - l Memo: _ _ _ __ Reserves including gold (mill. US$) 50 140 99 102 Conversion rate (locallUS$) 214.3 449.3 499.2 511.6 EXTERNAL DEBT and RESOURCE FLOWS 1975 198115 1995 1996 (millions US$) 1 Composition of total debt, 1995 (mill. USS) Total debt outstanding and disbursed 112 1,208 1,633 1,581 IBRD 0 0 0 0 G IDA 18 147 598 611 F 72 133 Total debt service 8 107 58 118 I IBRD 0 0 0 0 601 IDA 0 1 8 9 Composition of net resource flows Official grants 87 178 165 98 E Official creditors 24 60 18 31 507 Private creditors -1 -7 -24 -4 Foreign direct investment 23 -9 1 0 D 52 Portfolio equity 0 0 0 0 267 World Bank program Commitments 0 17 7 67 A-IBRD E-Bilateral Disbursements 2 22 24 34 B - IDA D - Other mulblateral F - Private Principal repayments 0 0 3 5 C -IMF G - Short-term Net flows 2 22 21 29 Interest payments 0 1 5 4 Net transfers 2 20 16 24 Development Economics  An=a B1 Page 1 of 1 Niger - Selected Indicators of Bank Portfolio Performance and Management Loidicator 1995 1996 1997 1998 Portfolio Assessment Number of Projects under implementation' 12 10 12 10 Average implemnentation period (years)b 4.93 5.01 4.22 3.74 Percent of problern projects" C by number 41.67 10.00 16.67 20.00 by amount 39.82 8.82 21.03 25.25 Percent of projects at risk"d by number 55.56 66.67 40.00 40.00 by amount 60.96 69.37 42.62 42.62 Disbursement ratio (/o)' 16.84 16.31 30.18 2.10 Portfolio Management CPPR durng the year (yes/no) no yes yes yes Supervision resources (total US$ thousands) 588.03 545.30 891.91 87.30 Average Supervision (US$/project) 49.00 54.53 74.33 8.73 Memorandum item Since FY80 Last five FYs Projects evaluated by OED by number 20 4 by amount (US$ millions) 360.9 78.9 Percent rated U or HU by number 40 75 by amount 62 77 a. As shown in the Annual Report on Portfolio Performance (except for current FY) b. Average age of projects in the BanWs country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defmed under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: investment projects only.  Annex B2 Page 1 of 3 Niger - Bank Group Program Summary, FY 1998-2000 Proposed IBRD/IDA Base-Case Lending Program, FY 1998-2000' Strategic rewards' Implementahion" FY Project US$"M (HIMIL) risks (fML) 1998 PRIVATE SECTOR DEV. 15.0 H H TRANSP. INFRA. REHAB 24.0 M M PUBLIC FINANCE REFORM 30.0 H H Subtotal 69.0 1999 POST PRIMARY EDUC. 30.0 H M PUBLIC FINANCE TA 10.0 M M WATER II 35.0 H M AGRIC. PILOT 5.0 M H Subtotal 80.0 2000 AGRICULTURE 20.0 M M SAL II 30.0 H H BASIC EDUCATION 30.0 H M Subtotal 80.0 Total, FY 1998-2000 229.0 a. This table presents the proposed program for the next three fiscal years. b. For each project, indicate whether the strategic rewards and implementation risks are expected to be high (H), moderate (NO, or low (L).  International Development Association FOR OFFICIAL USE ONLY IFOR1 EXECUTIVE For consideration on EXIRECUTIVES Tuesday, November 11, 1997 DIRECTORS' MEETING IDA/R97-127/1 FROM: Vice President and Secretary October 31, 1997 NIGER - Country Assistance Strategy (Corrigendum) The attached replaces Annex B2, page 2, of the Country Assistance Strategy for Niger (IDA/ R97-127 distributed on October 22, 1997), which contained typographical errors. Distribution: Executive Directors and Alternates President's Executive Conmmittee Senior Management, Bank, IFC and MIGA This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   Annex B2 Page 2 of 3 Niger - IBRD/IDA Lending Program Past Current Planned' Category 1995 1996 1997 1998 1999 2000 2001 Commitments (US$m) 16.8 26.7 90.0 69.0 80.0 80.0 80.0 Sector (%O)b Agriculture 40.5 0.0 0.0 0.0 6.2 25.0 0.0 Education 0.0 0.0 0.0 43.5 37.5 37.5 0.0 Environment 0.0 100.0 0.0 0.0 0.0 0.0 31.2 Multisector 0.0 0.0 33.3 0.0 12.5 37.5 31.3 Popultn, FIlth & Nutn 0.0 0.0 44.4 0.0 0.0 0.0 37.5 Public Sector Mgmt. 0.0 0.0 0.0 21.7 0.0 0.0 0.0 Transportation 0.0 0.0 0.0 34.8 0.0 0.0 0.0 Urban Development 59.5 0.0 22.2 0.0 43.8 0.0 0.0 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Lending instrument (%) Adjustment loansc 0.0 0.0 33.3 43.5 0.0 37.5 37.5 Specific investment loans and others 100.0 100.0 66.7 56.5 100.0 62.5 62.5 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Disbursements (US$m) Adjustment loansc 4.9 0.0 29.0 0.0 0.0 0.0 0.0 Specific investment loans and others 22.3 22.8 33.9 6.7 28.0 28.3 22.4 Repayments (US$m) 2.8 3.2 5.7 1.5 0.0 0.0 0.0 Interest (US$m) 4.7 3.8 4.9 .9 0.0 0.0 0.0 a Ranges that reflect the base-case (i.e., most likely) Scenario. for IDA countries, planned commitments are not presented by FY but as a three-year-total range; the figures are shown in brackets. A footnote indicates if the pattern of IDA lending has unusual characteristics (e.g., a high degree of frontloading, backloading, or lumpiness). For blend countries, planned IBRD and IDA commitments are presented for each year as a combined total. b For future lending, rounded to the nearest 0 or 5%. To convey the thrust of country strategy more clearly, staff may aggregate sectors. ' Structural adjustment loans, sector adjustment loans, and debt service reduction loans. Note: Disbursement data is updated at the end of the first week of the month.   Annex B2 Page 2 of 3 Niger - IBRD/IDA Lending Program Past Current Planned' Category 1995 1996 1997 1998 1999 2000 2001 Conmnitments (US$m) 16.8 26.7 90.0 69.0 80.0 80.0 0.0 Sector (%/)b Agriculture 40.5 0.0 0.0 0.0 6.2 25.0 0.0 Education 0.0 0.0 0.0 0.0 37.5 37.5 0.0 Environment 0.0 100.0 0.0 0.0 0.0 0.0 0.0 Multisector 0.0 0.0 33.3 0.0 0.0 37.5 0.0 Popultn, Hlth & Nuta 0.0 0.0 44.4 0.0 0.0 0.0 0.0 Public Sector Mgmt. 0.0 0.0 0.0 65.2 12.5 0.0 0.0 Transportation 0.0 0.0 0.0 34.8 0.0 0.0 0.0 Urban Development 59.5 0.0 22.2 0.0 43.8 0.0 0.0 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Lending instrument (