The World Bank Niger First Resilient and Private Sector-Led Growth DPF (P178423) Program Information Document (PID) Concept Stage | Date Prepared/Updated: 19-Jul-2022| Report No: PIDC34067 Page 1 of 7 The World Bank Niger First Resilient and Private Sector-Led Growth DPF (P178423) BASIC INFORMATION A. Basic Project Data OPS TABLE Country Project ID Project Name Parent Project ID (if any) Niger P178423 Niger First Resilient and Private sector-led Growth DPO (P178423) Region Estimated Board Date Practice Area (Lead) Financing Instrument WESTERN AND CENTRAL Nov 30, 2022 Macroeconomics, Trade Development Policy AFRICA and Investment Financing Borrower(s) Implementing Agency REPUBLIC OF NIGER Ministry of Planning Proposed Development Objective(s) The development objective of this DPO is to (1) strengthen the economic and social resilience to shocks; and (2) improve the business environment by strengthening electricity and broadband coverage and enhancing the social impact of tax exemptions. Financing (in US$, Millions) FIN_SUMM_PUB_TBL SUMMARY Total Financing 200.00 DETAILS -NewFin3 Total World Bank Group Financing 200.00 World Bank Lending 200.00 Decision The review did authorize the preparation to continue Page 2 of 7 The World Bank Niger First Resilient and Private Sector-Led Growth DPF (P178423) B. Introduction and Context Country Context 1 Niger is a landlocked, low-income, fragile country which has experienced relatively robust but volatile economic growth in the past decade. The real gross domestic product (GDP) averaged 6.2 percent over 2010-19. Over this period, more than two thirds of the growth came from private consumption and private investment also contributed 20 percent. The economy is highly dependent on agriculture despite an increasingly important service sector1 and remains vulnerable to external shocks, climate change-related shocks and natural disasters2. This is reflected in a robust but volatile growth trajectory prior to recent crises: the annual growth rates ranged between 2.4 percent and 10.5 percent. However, growth was associated with limited improvements in productivity.3 Volatile GDP growth, coupled with a high population growth (averaging 3.9 percent over 2010-19), resulted in a slow pace of poverty reduction. Per capita income grew at less than 2 percent per annum during 2010-19. With a per capita GDP of US$579 (current US dollars) in 2021, Niger is in the lower 15th percentile of the world’s income distribution, below its peers in the sub-region. Over 40 percent of the population is living in extreme poverty, with an aggravated gender disparity.4 2 Niger’s geographical location and export structure makes it vulnerable to multi-dimensional shocks, which have been increasingly frequent and intense. After the 2020 COVID-19 pandemic and global economic downturn, the country has continued to be shaken by natural disasters, a worsened security situation, and indirectly by the war in Ukraine. Agriculture output, especially cereal production, in 2021 was severely affected due to a short rainy season, and subsequent floods and pest infestations. Bordering Mali, Burkina Faso and Nigeria, deteriorating regional security has been affecting the country including areas with important agricultural activities. In 2021, the country experienced 335 violent events, causing significant economic disruptions.5 It is estimated that 2.6 million people (10 percent of the population) were at risk of food insecurity in 2021, which is expected to rise to 4.4 million (18 percent of the population) between June-August 2022.6 Since early 2022, the global food price increase has hit household real incomes, aggravating the food insecurity situation, and hampering the post-pandemic recovery. 3 The multi-faceted crises dampened private consumption and investment and further weakened net exports, leading to a prolonged growth deceleration. Private consumption and investment have long served as main drivers of growth. Due to the combined impacts of the health, security and climate shocks, the average contribution of private consumption to growth plummeted to -1.2 ppts over 2020-21, from 4.3 ppts over 2011-19. Contribution of private investment to growth over the same period also dropped to 0.9 ppt from an average 1.3 ppts over 2011-19 and has been 1 As of 2021, the agriculture sector accounted for 34 percent of the total value added and the service sector accounted for 39 percent. 2 According to the World Bank 2022 Climate Change Development Report, Niger is one of the most vulnerable countries to climate change effects. Significant GDP losses are expected from the combined effects of six impact channels (rainfed crop yields, livestock yields, heat-labor productivity, human health-productivity, flooding damages, and road and bridges damages). By 2050, annual GDP compared to a medium-growth baseline would be reduced by 2.2 percent -under the wet and optimistic climate scenarios- and by 11.9 percent (Niger) under the dry and pessimistic climate scenarios. The poverty rate will increase between additional 2 and 8 percent of the population. 3 The labor productivity has been low and volatile, averaging at 2 percent between 2000 and 2019, despite an acceleration since 2010. Niger Country Economic Memorandum (2022). 4 The impact of climatic shocks appears to be more significant for female headed households, as women have less access than men to resources (such as land, credit, agricultural inputs, training and extension services that would enhance their capacity to adapt to climate change. A higher gender disparity would keep the fertility rate high and trap the economy in a low-level equilibrium by delaying the demographic transition, holding up wealth accumulation and adding to pressure the human capital investments. 5 In the most conflict-affected area, such as parts of Tillabéri, Diffa, Tahoua, and Maradi, conflicts and violent events have prevented access to farms and affected the production and transportation of crops, especially cereal and fodder. 6 Food Crisis Prevention Network (information as of Jul 15, 2022): https://www.food-security.net/en/visualise/. Page 3 of 7 The World Bank Niger First Resilient and Private Sector-Led Growth DPF (P178423) surpassed by public investment in recent years. Due to limited economic and trade diversification, net exports rarely contribute to growth while its negative contributions have been increasingly significant. As a result, real GDP growth decelerated to 3.6 percent in 2020 and 1.3 percent in 2021, representing a 0.3 percent and 2.3 percent contraction in per capita income in 2020 and 2021, respectively. The private sector is key to innovation, improving productivity, economic diversification and structural transformation, as well as the main source of job creation. It is crucial to address the physical, regulatory and institutional binding constraints to a healthy and booming private sector in order to accelerate the post- crisis economic recovery. 4 The macroeconomic policy framework is adequate for the proposed operation. While the economy remains vulnerable to multiple risks, the macroeconomic and structural policies being pursued by the authorities should help growth to gradually recover over the medium term. Economic and policy performance under the first IMF Extended Credit Facility (ECF) review has been broadly satisfactory7. Growth averaged 6.1 percent during 2017–19 and is expected to recover in the near-to-medium term, averaging at 8.2 percent. Debt management is assessed as sound and well-structured and public debt is sustainable, with the risk of overall and external debt distress assessed as moderate, according to the ongoing pre-mission 2022 DSA. Commitment to fiscal consolidation (reverting to the WAEMU fiscal deficit target of 3 percent of GDP by 2024) coupled with monetary policy anchored by WAEMU and private investment in key sectors should further support medium-term growth. In addition, the Bank is coordinating with the IMF to strengthen the dialogue with the government around macro stability and structural reforms including the management of oil revenues. Relationship to CPF 5 The proposed DPF series is well aligned with the World Bank Group (WBG) identified priorities in Niger. The DPF’s focus on strengthening economic governance in growth enabling sectors and building economic and social resilience is well aligned with the CPF focus on boosting rural productivity and incomes, strengthening human capital and social protection, better governance for jobs, service delivery and growth. Specifically, it will support the achievement of the CPF Objective 1 (Increased rural production), Objective 5 (Improved social protection system), and Objective 6 (Streamlined regulatory framework for private sector & export development), and Objective 7 (improved access to digital economy). Moreover, low rural productivity and poor governance are identified as prominent binding constraints to growth in the 2017 SCD, while improving productivity in agriculture is considered a priority for poverty reduction. Addressing low agricultural productivity implies addressing some of the consequences that flow from it, including food insecurity. C. Proposed Development Objective(s) The Program Development Objective (PDO) is to: (1) strengthen economic and social resilience to shocks; and (2) improve the business environment by strengthening electricity and broadband coverage and enhancing the social impact of tax exemptions. Key Results 7 A three-year ECF arrangement was approved in December 2021. The 36-month arrangement includes access set at SDR 197.4 million (equivalent to about US$278.5 million or 150 percent of quota). The envelope is SDR 80 million higher than the predecessor program. The new program aims to buttress macroeconomic stability, enhance governance and transparency, while laying the foundations for stronger and more inclusive growth. The first review has been approved by the IMF Executive Board on June 29, 2022, allowing the disbursement of about US$53 million or 30 percent of Niger’s quota. The second review is planned in the second half of the year will be used also to prepare a new Article IV repo rt and to update the DSA. Page 4 of 7 The World Bank Niger First Resilient and Private Sector-Led Growth DPF (P178423) 6 The proposed measures in pillar 1 are expected to strengthen the country’s and households’ resilience to shocks including climatic shocks and natural disasters through the approval of a new disaster risk management (DRM) law the expansion of the share of beneficiaries of cash transfers in the Government’s Support plan and the adoption of the social registry. The reforms supported in Pillar 2 are expected to increase the number of people with access to electricity and to broadband internet while higher social investments by mining and oil companies will lay the basis for a stronger private-sector led growth. D. Concept Description 7 The reforms supported by this DPF series will contribute to laying the foundations for a resilient, sustainable and inclusive economic growth. The reform program is structured around two pillars and the prior actions focus on the most critical measures of the government’s reform program. Being selective is important considering the country context with significant capacity constraints and the fragile, conflict and violent (FCV) environment. • Pillar 1. Strengthening economic and social resilience to shocks The reforms under this pillar will focus on strengthening the national disaster risk management framework, expanding the social protection system with improved responsiveness to food security shocks, and the management of vital water resources. • Pillar 2 Improve the business environment by strengthening electricity and broadband coverage and and enhancing the social impact of tax exemptions. The reforms under this pillar will focus on ensuring affordable and sustainable energy provision, wider and innovative telecommunication services via increased market participation and competition and strengthened fiscal management of extractive sectors. . E. Poverty and Social Impacts, and Environmental, Forests, and Other Natural Resource Aspects Poverty and Social Impacts 8 Overall, the policy and institutional reforms supported under the proposed DPF will likely have poverty- reducing effects in the medium term. Favorable impacts are expected from the reforms are expected from the reforms on cash transfers for food security shocks and targeted social protection under RSU (PA#2), and cheaper electricity (PA#4). The strengthening of the institutional framework of DRM (PA#1) and the improvement of water groundwater resources (PA#3) will enhance the resilience of the economy and the households in the event of disasters. A sustainable energy provision (PA#5) and an expanded market participation in the telecommunication sector (PA#6) will boost the private sector-led development and benefit the poor through job creation. Further, strengthened monitoring over the extractives sector (PA#7) will help establish an enabling environment for sound economic governance and sustained growth. Environmental, Forests, and Other Natural Resource Aspects 1. Niger has a comprehensive legal and regulatory framework to ensure management of environmental and social risks and negative impacts of any form of investment on land, water, natural resources (including forests, pasturelands, and fisheries) and ecosystem services. The framework sets a clear step-by-step procedure aimed at identifying, for different categories of project, specific mitigating measures. The protection of the environment is a priority expressed in several texts, including the 2010 Constitution which stipulates that "the State ensures the assessment and control of the Page 5 of 7 The World Bank Niger First Resilient and Private Sector-Led Growth DPF (P178423) impacts of any development project and program on the environment". The national Environmental Impact Assessment (EIA) system, which sets the basic rules for environmental protection and has been the subject of several reinforcement actions in recent years, is currently well established and makes it possible to guarantee at some extent the treatment of the environmental and social impacts of new projects. . CONTACT POINT World Bank Paolo Di Lorenzo Senior Economist Borrower/Client/Recipient REPUBLIC OF NIGER Implementing Agencies Ministry of Planning Abdou Rabiou Minister of Planning abdou.rabiou@gouv.ne FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Task Team Leader(s): Paolo Di Lorenzo Approved By APPROVALTBL Country Director: Clara Ana Coutinho De Sousa 05-Aug-2022 Page 6 of 7 The World Bank Niger First Resilient and Private Sector-Led Growth DPF (P178423) Page 7 of 7