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Cablegate: Govt of Niger Fy09 Budget Increases 28 Percent

VZCZCXRO6150
RR RUEHMA RUEHPA
DE RUEHNM #1181/01 3641355
ZNR UUUUU ZZH
R 291355Z DEC 08
FM AMEMBASSY NIAMEY
TO RUEHC/SECSTATE WASHDC 4786
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHFR/AMEMBASSY PARIS 0768
RUCPDOC/USDOC WASHDC
RUEHLMC/MCC WASHDC
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 02 NIAMEY 001181

DEPT FOR AF/W, AF/EPS, AND EEB/IFD

PARIS FOR AF WATCHER

SIPDIS

E.O. 12958: N/A
TAGS: ECON PGOV EFIN EINV ETRD EAID NG
SUBJECT: GOVT OF NIGER FY09 BUDGET INCREASES 28 PERCENT

NIAMEY 00001181 001.2 OF 002


1. Summary: On Friday, November 14, 2008, the National Assembly
approved the Government of Niger's proposed budget of USD 1.532
billion for 2009, representing an increase of 28.41 percent over the
2008 budget and including significant additional spending for
capital projects. The 2009 budget increase is funded in part with a
special one-time payment of $257 million received in June 2008 as a
"signing bonus" upon conclusion of a petroleum exploration and
development agreement between the Government of Niger and China's
state oil firm. Investment expenditure will account for 52 percent
of 2009 spending. Top budget priorities are education, health, and
agriculture. End summary.

-----------------
Budget Parameters
-----------------

2. Assumptions: Agriculture remains the main engine of growth, and
increased domestic food production is a GON priority. Investment in
roads and electric generation and transmission are designed to
support the performances of manufacturing and service industry.
Other macroeconomic considerations are as follows:

-- GDP growth of 4.9 percent, down from 5.5 percent in 2008;
-- Inflation rate at 5 percent, down from 9.1 percent; and
-- Value Added Tax (VAT) rate of 19 percent unchanged from 2008.

-------
Revenue
-------

3. The 2009 budget projects government revenue of USD 1.53 billion,
representing a 28 percent increase over the previous year. Internal
domestic revenue is budgeted to increase by 26 percent to USD 903.3
million while external revenue, including development assistance and
debt, will increase 31 percent to USD 629.3 million.

4. The increase in domestic revenue is largely the result of
payments received from China as a "signing bonus" for the 2008
agreement on petroleum exploration and development, and increased
revenue from uranium mining. The budget also anticipates new fiscal
measures, including additional taxes on gambling, lotteries, and
duty stamps, which were developed by the Ministry of Economy and
Finance in concert with donors as part of the strategy of
mobilization of internal resources. In mid-2008, in response to
dramatic increases in food prices but without prior discussion with
donors or the Ministry of Economy and Finance, the GON suspended VAT
and import duty on basic foods, including rice and powdered milk;
these charges are to be reinstated. In the final budget, USD 10
million of non-fiscal receipts from mining were re-allocated to a
Special Treasury Account for Funds for Priority Investments to bring
the balance of that Fund to USD 31 million. The budget does not
clarify how the Fund is to be spent, but it is separate from the
capital budget.

Revenue USD (millions at 480 CFA = 1 USD)

EXTERNAL (32 percent increase from 2008)
Donations 377.5
Loans on Projects 185.8
Program Loans 65.8

INTERNAL (26 percent increase from 2008)
Real Estate Sales 0.8
Fiscal Revenue 600.8
Non-Fiscal Revenue 254.0
Exceptional Revenue 37.9

Total 1,532.6

------------
EXPENDITURES
------------

5. A large increase in the capital budget (49 percent higher than
2008) reflects the government's decision to finally begin
construction of the large hydroelectric and irrigation dam at
Kandadji, which has been in the planning stages for years. Most
funding for the multi-year project will be in the form of
multilateral loans. Additional new programs funded in the 2009
budget include: reform of the National Postal Service and
establishment of a separate postal banking system to be called
FINAPOSTE; creation of an agricultural bank; and reform of the
microfinance sector. Consistent with the budget priority of

NIAMEY 00001181 002.2 OF 002


improved education, the budget for the Ministry of Secondary and
Higher Education, Research, and Technology increases by almost 22
percent over the previous year budget. Payments for goods and
services increase by 23 percent, while expenditures for subsidies
increase by only 8 percent.

Expenditure USD (millions)

National Debt Service 109.4
Employee Salaries and Benefits 194.4
Goods and Services Purchases 180.4 Subsidies and
Transfers 234.6 Capital Projects 803.3


Total 1,522.1

Allen

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