Niger - Public Sector Adjustment Credit

Report No. PIC4568 Project Name Niger-Public Sector Adjustment Credit (@) Region Africa Sector Public Sector Management Project ID NEPA1974 Implementing Agency Government of Niger Ministry of Economy, Finance and Planning Date PID Prepared January 21, 1997 Projected Appraisal Date February 1997 Projected Board Date March 27, 1997 Country Background 1. Since the end of the uranium boom in the early 1980s, Niger's economic performance has been weak despite the adoption of a number of adjustment programs. Amidst short cycles of recovery and downturns, real GDP declined by about one-half of one percent per annum during 1983-1993, and poverty increased significantly over the same period. This poor economic performance was the outcome of not only external factors--a decline in the demand and price of uranium exports and recurrent droughts--but also the result of the real appreciation of the CFA franc until 1994, inefficient economic management, low levels of national saving and investment, and weak human resources. Country's Adjustment Program 2. In 1994, to reverse the downward economic trend of recent years, the Government resumed its adjustment effort through a combination of external and internal measures designed to generate steady economic growth with low inflation. The January 1994 adjustment of the parity of the CFA franc was a key element of this strategy. The broad objectives of the Government's medium-term economic and financial adjustment program are to make further progress in stabilizing public finances and to foster an economic environment conducive to sustainable growth and poverty reduction. This strategy aims at preserving the competitiveness gains resulting from the CFA franc devaluation through strict fiscal and monetary policies as well as accelerated structural reforms to provide a greater role for the private sector. Project Objectives 3. The principal goal of the proposed adjustment credit is to assist the Government in further stabilizing public finances and deepening the scope of reforms implemented during the 1980s under previous adjustment programs. The reform measures fall into two categories: fiscal policy and public enterprise privatization. On the fiscal side, the proposed credit will assist the authorities in their continuing efforts to expand the tax base, simplify the tax system and improve collection through a substantial strengthening of the tax administration. This revenue policy will be accompanied by a significant reduction in the wage bill  as well as a reallocation of expenditures towards supplies and maintenance for essential public services. It will also include the rapid and orderly settlement of payments arrears (both domestic and external) in order to rebuild private sector confidence. 4. The credit will also support the government's public enterprise privatization program through: (i) preparation of sector strategies and the regulatory framework for the public utilities and the petroleum company; and (ii) completion of valuation and preparation of solicitation documents for some enterprises. Prior to Board presentation, the Government will submit to IDA a Letter of Development Policy outlining this adjustment program. Project Implementation 5. The Government has established a High Interministerial Committee to oversee the design and implementation of the adjustment program. The program is implemented and monitored by three separate government technical committees in charge of public finances, civil service reform and public enterprise privatization and restructuring. Implementation of measures initiated for this credit would be monitored by IDA in connection with a subsequent adjustment operation scheduled for FY98, and in the context of IDA's overall Country Assistance Strategy. Project Costs and Financing 6. A credit equivalent to US$ million would be disbursed in one tranche and would follow the Bank's new simplified disbursement procedures for structural adjustment operations. Environmental Impact 7. No negative environmental impact is expected from the proposed project. Poverty Category 8. The proposed credit will contribute to poverty reduction by supporting policies designed to accelerate broad-based income growth and increase the availability and quality of basic social services. The restructuring of public expenditures will contribute to improved access to basic preventive health and education services nationwide and clean water in urban centers. The economic reform program, in particular PE privatization, would indirectly benefit the poor by improving the environment for economic growth and thereby increasing job opportunities. The positive economic impacts of more efficient electricity and telecommunications services and lower electricity and petroleum prices will reduce these primary factor costs, thereby improving Niger's competitiveness and growth prospects. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 - 2 -  Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by the Public Information Center week ending January 31, 1997. - 3 -