Approved by: Prepared by the staff of the International Development Association (IDA) and the Manuela Francisco and Abebe Adugna (IDA) International Monetary Fund (IMF) 1. and Annalisa Fedelino and Fabian Valencia (IMF). NIGER: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS Risk of external debt distress Moderate Overall risk of debt distress Moderate Granularity in the risk rating Limited space to absorb shocks Application of judgment No Niger’s risk of external and overall public debt distress is assessed as “moderate”—unchanged from the previous DSA published in July 2023.2 However, the military takeover of July 2023 changed the political equilibrium in Niger and strained the relationship with traditional development partners, exacerbating pre-existing debt vulnerabilities linked to intensified conflict in the Sahel and extreme weather events. Debt indicators remain below their thresholds under the baseline scenario, except for one single year breach in the external debt service-to-revenue ratio, which is discounted from the analysis. This is primarily attributed to the decline of new financing and the economic rebound following the lifting of sanctions and the commencement of crude oil exports in 2024. The space to absorb shocks is assessed to be limited, which underscores the importance of preserving buffers. Special attention should be paid to the evolution of risks, in particular those linked to crude oil price volatility, a deterioration in the security situation and vulnerability to climate change, as they may impact debt sustainability if they were to materialize. Given high levels of uncertainty, prudent debt policies should still be pursued, and fiscal consolidation remains an imperative in the face of heightened vulnerabilities. In the short term, it is essential to fully implement the arrears clearance plan to ensure fiscal stability, rebuild public trust, and support the economic recovery. At the same time, it is crucial to continue to prioritize external financing in the form of concessional and semi-concessional loans and grants and avoid overreliance on high-cost domestic borrowing to finance the budget. In the medium and long-term, continuous efforts should be made to entrench sound macroeconomic policies, implement 1 This DSA was prepared based on the Guidance Note on the Bank-Fund Debt Sustainability Framework for Low Income Countries, 2017. 2 Niger’s debt-carrying capacity remains rated “medium” with a composite indicator value of 2.87 based on the April 2024 IMF’s World Economic Outlook (WEO) and the 2022 World Bank’s Country Policy and Institutional Assessment (CPIA). 1 >>> reforms, enhance debt management practices, improve public investment management, and increase public spending efficiency, in order to buttress debt sustainability amid greater economic uncertainty. Given Niger’s vulnerabilities to climate change, it is crucial to build resilience through adaptation investments and policies, while maintaining fiscal prudence. 1. Niger’s public and public guaranteed (PPG) debt primarily covers the central government (Text Table 1). State and local government entities do not borrow directly on their own, and the social security fund and extra-budget funds are not covered by the DSA. 3 State guarantees extended to the private and public sectors for external borrowing are included. Publicly guaranteed private debt includes only the guarantee issued to the China National Petroleum Company (CNPC) for a loan to finance the SORAZ refinery to cover the government’s minority stake.4 SOEs do not directly borrow abroad, benefitting instead from on-lending by the central government, which is captured in debt statistics. 5 The availability of reliable data on domestic SOE debt is limited. With the World Bank’s support, the authorities have published the certified financial statements for 2019 and 2020 of the ten largest SOEs on the official website of the Ministry of Finance, but coverage and timeliness should be expanded. Most of external debt is defined on a currency basis due to limitations on the availability of residence information of WAEMU debt holders.6 Subsectors of the public sector Check box 1 Central government X 2 State and local government 3 Other elements in the general government 4 o/w: Social security fund 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) X 8 Non-guaranteed SOE debt 1 The country's coverage of public debt The central government, central bank, government-guaranteed debt Default Used for the analysis Reasons for deviations from the default settings 2 Other elements of the general government not captured in 1. 0 percent of GDP 0.0 3 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 3.0 4 PPP 35 percent of PPP stock 0.0 5 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5.0 Total (2+3+4+5) (in percent of GDP) 8.0 1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%. 3 National Council for the Safeguard of the Homeland (CNSP) created a solidarity fund in October 2023 for the purpose of combating terrorism and insecurity. It is reported that this fund is financed by levies on hydrocarbons, telecommunications, and transport fees, among others, voluntary financial and in-kind contributions are also expected from companies, NGOs, and the diaspora. 4 CNPC extended a US$880 million (7.0 percent of GDP) loan for the construction of the SORAZ refinery in 2008, of which US$352 million (2.8 percent of GDP) is guaranteed by the government. The outstanding stock of US$30.7 million at end-2023 with repayments continuing until 2024 is included in the baseline stock of debt. 5 This includes the electricity (NIGELEC), water (SPEN), and telecom (Niger Telecom) companies, and the ABK, a public administrative entity set up for implementing the Kandadji dam project. 6 Except for creditors whose residency can be tracked, for which debt is defined on residency basis. As an example, West African Development Bank (BOAD) debt is classified as external debt. 2 >>> 2. The contingent liability tailored stress test is calibrated to account for debt coverage gaps (Text Table 1). First, the coverage shock is kept at 0 percent of GDP for other elements of the general government not captured in the baseline stock of debt since: (i) the authorities indicated that the strong financial position of the social security fund (CNSS) removes material fiscal risks; and (ii) local governments solely contract short-term debt with the domestic banking sector, which is small in size. Second, although the repayment of debt service arrears on government securities alleviated some of the liquidity pressures in the banking system, an additional 1 percent of GDP shock was imposed on top of the default value of 2 percent of GDP for the contingent liabilities shock from SOE debt to reflect the potential bank recapitalization needs resulting from remaining vulnerabilities. Third, public-private partnerships (PPPs) signed under the current PPP law do not involve government financing. A contingent liability stress test for PPPs is hence not incorporated currently. Considering the relatively low levels of credit to the economy, the default value of 5 percent of GDP for financial market contingent liability risks appears adequate. 3. Niger’s public and publicly guaranteed (PPG) debt is estimated at 56.6 percent of GDP at end-2023 (Text Figure 1). Niger’s PPG debt stock has been rising in recent years, leading to a corresponding increase in debt service. The political crisis and ensuing sanctions in 2023 pushed public debt to a peak of 56.6 percent of GDP, primarily through the accumulation of debt service arrears (around 5.4 percent of GDP). Other factors have contributed to a longer upwards trend in Niger’s PPG debt, including higher security spending, large-scale public investments, and fiscal pressures during the COVID- 19 pandemic and the response to a severe drought in 2021. Previously, wider deficits were mainly financed by external donor support, but prospects for financing from traditional partners are uncertain after the military takeover. Sources: Nigerien authorities, and IMF staff estimates. 3 >>> 4. PPG external debt makes up 57.4 percent of Niger’s total debt stock in 2023 . Multilateral creditors represent the largest share (around four fifths) of external debt, with Niger borrowing mostly from the World Bank (IDA) followed by the IMF and BOAD. Official bilateral debt represents around 12 percent of external debt. Exposure to exchange rate risk is relatively low given that most external debt is denominated in CFAF or Euros, and CFAF is pegged to the Euro. External debt is generally on concessional terms, with an average effective interest rate of 1.06 percent in 2023 and remaining maturity of 19 years at end-2023. However, this financing structure is subject to significant changes, despite the projected return of financing from multilateral institutions in the near term, 7 as the suspension of financing from some traditional bilateral partners is likely to persist for the foreseeable future. 5. Domestic debt consists mostly of short- and medium-term Treasury securities, predominantly held by banks domiciled in Niger or in the rest of the West African Economic and Monetary Union (WAEMU). The average remaining maturity of Niger’s domestic debt is 6 years while the average weighted interest rate stood at 5.13 percent at end-2023. Niger lost its access to the WAEMU regional market after the military takeover and the imposition of sanctions, which led to the accumulation of domestic debt service arrears (around 4 percent of GDP at end-2023). However, Niger has regained access to the regional securities market in April 2024, with an issuance of close to CFAF 458 billion in securities (the proceeds of this issuance were used to repay overdue domestic debt service obligations). The financing costs have increased relative to trends observed before the military coup, primarily due to the BCEAO’s higher policy rate (from 2 percent in 2022 to 3.5 percent by December 2023), and higher risk premium faced by member countries of the Alliance of Sahelian States (AES) on recent issuances even before the announcement of the decision to leave ECOWAS. The DSA considers these developments and has increased the cost of domestic financing accordingly. 6. The estimation and analysis of private external debt is complicated by data limitations and requires further follow-up. The BCEAO faces challenges in the compilation of private external debt stock statistics. Efforts to gather information on the coverage and composition of private external debt will continue, with technical support from the IMF’s Statistics Department. 7. The baseline scenario is predicated on macroeconomic assumptions reflecting recent economic developments, including the ramifications of the military takeover in July last year (Text Table 2). Growth of 2023 is estimated at 2.4 percent, compared to 7 percent in the previous DSA, mainly because of sanctions and the impact of political instability on trade, investment, private and public consumption, as well as a relatively unfavorable agriculture season. A brisk rebound is expected in 2024 to 10.6 percent due to the start of crude oil exports and the lifting of sanctions. The baseline projections incorporate the economic effects of leaving ECOWAS. Growth in the early 2030s stands around 6 percent because of the development of new uranium production, and gradually falls to reach 5.5 percent in 2038. Average growth over 2030-2044 is projected at 5.7 percent, slightly lower than the previous DSA assumption and pre-pandemic average (5.9 percent over 2011-19) and considers historical patterns of 7 The structure of World Bank financing has changed. Under IDA19, IDA regular loans and grants were the main facilities. However, with the starting of IDA20, IDA 50 years loans become the main facility. 4 >>> climate-related shocks on growth. Long-run growth is supported by high projected population growth and is in part explained by the catch-up process given the country’s low level of development. The baseline scenario also includes climate-related investments planned by the authorities. 8. The macroeconomic framework maintains the assumption of a fiscal consolidation that would reach the WAEMU deficit convergence criterion of 3 percent of GDP by 2025 . The increase in government revenues projected for 2024 is weaker when compared to the previous DSA but still significant, driven by the lifting of sanctions, economic recovery, and the start of crude oil exports. The authorities are implementing new tax administration measures––primarily focusing on strengthening tax enforcement, fighting tax fraud and corruption, collecting tax arrears, and managing human resources within tax agencies––which are likely to yield only a modest net impact. 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030-44 Real GDP growth (percent) Current DSA 1.4 11.9 2.4 10.6 7.4 6.1 6.4 6.0 6.0 5.7 ECF 3rd review 1.4 11.9 7.0 13.0 7.0 6.2 6.0 6.0 6.0 6.0 ECF 2nd review 1.4 7.1 7.0 13.0 7.9 6.1 6.0 6.0 6.0 6.0 Inflation (CPI) Current DSA 3.8 4.2 3.7 4.4 3.6 3.2 2.0 2.0 2.0 2.0 ECF 3rd review 3.8 4.2 2.7 2.5 2.0 2.0 2.0 2.0 2.0 2.0 ECF 2nd review 3.8 4.5 3.0 2.5 2.0 2.0 2.0 2.0 2.0 2.0 Primary fiscal balance (percent of GDP) Current DSA -5.0 -5.5 -4.0 -2.5 -1.1 -1.2 -1.3 -1.4 -1.5 -1.5 ECF 3rd review -3.8 -2.0 -1.3 -1.3 -1.3 -1.3 -1.2 -1.2 -1.2 -1.1 ECF 2nd review -3.8 -2.1 -1.4 -1.4 -1.3 -1.3 -1.3 -1.3 -1.3 -1.1 Total revenue excluding grants (percent of GDP) Current DSA 10.8 10.1 8.7 9.4 10.6 11.0 11.4 11.9 12.2 13.1 ECF 3rd review 10.8 10.1 11.2 13.5 14.1 14.6 14.7 14.8 15.2 16.0 ECF 2nd review 10.8 11.7 12.8 14.8 14.9 15.0 15.2 15.2 15.3 16.3 Exports of goods and services (percent of GDP) Current DSA 15.5 12.0 11.9 17.7 20.6 20.1 18.4 17.5 16.7 16.1 ECF 3rd review 15.5 11.9 15.7 22.6 21.8 21.5 20.3 20.5 21.0 20.9 ECF 2nd review 15.5 15.2 16.5 26.6 25.2 24.5 24.9 24.0 23.4 20.1 Oil export price (US dollars per barrel) Current DSA 65.8 91.5 76.6 77.2 72.6 69.3 66.9 65.2 64.1 75.3 ECF 3rd review 65.8 91.5 69.5 65.5 63.6 62.1 60.8 59.6 60.8 71.5 ECF 2nd review 65.9 93.3 81.2 76.2 72.4 69.6 67.4 68.8 70.2 80.8 Uranium price (Thousands of CFAF per kg) Current DSA 45.0 52.0 75.0 76.0 71.2 75.7 79.1 82.0 83.4 83.4 ECF 3rd review 46.9 49.7 76.2 68.3 71.2 75.7 76.1 76.9 76.9 76.9 ECF 2nd review 46.9 70.6 80.4 80.2 79.7 79.2 78.7 78.7 78.7 78.7 Source: IMF staff calculations. 9. Tightened financial conditions, compounded by ramifications of the military takeover, are assumed to deteriorate financing terms in the short run. Over time, foreign borrowing is expected to shift towards less concessional sources, while domestic financing will move towards longer maturities. Regarding external debt, the DSA assumes that the structure of creditors will change with the 5 >>> persistence of the suspension of financing from some traditional development partners. In the longer run, external borrowing moves, albeit gradually, toward less concessional financing and commercial loans. For domestic borrowing, the DSA revised upward assumptions of the average interest rate on government bonds in 2024 to 10, 10.2, and 10.6 percent for bonds maturing in 1 to 3, 4 to 7 years and over 7 years, respectively, and the interest rate on T-bills is set to 9.8 percent. Moreover, debt instruments are assumed to gradually shift from T-bills to longer maturity bonds in the medium term. 10. The DSA incorporates the authorities’ plan of fully clearing debt service arrears accumulated as a result of sanctions in 2024. The DSA includes end-December 2023 domestic and external debt service arrears estimated at CFAF 395.2 billion (3.9 percent of GDP) and CFAF 70.5 billion (0.7 percent of GDP), respectively. With the ongoing implementation of the arrear’s clearance plan, domestic and external arrears have decreased to CFAF 108.4 billion (0.9 percent of GDP) and CFAF 64.5 billion (0.6 percent of GDP) as of May 15, 2024. (Text Table 3). The authorities have elaborated and started implementing an arrears clearance plan to clear all debt service arrears by end-2024, which the DSA fully incorporates. 2023 2024 Creditors Principal Interest Total Principal Interest Total 2 Multilateral 30.3 14.2 44.5 14.7 7.0 21.7 Bilateral 16.1 2.4 18.5 23.5 4.4 27.8 Paris Club 5.0 0.8 5.8 6.5 2.2 8.7 Non-Paris Club 11.1 1.6 12.7 17.0 2.2 19.2 Commercial 4.7 2.8 7.6 9.4 5.6 15.0 Total 51.1 19.4 70.5 47.6 17.0 64.5 Sources: Nigerien authorities; and IMF staff calculations 1/ Estimates of the authorities as of May 15, 2024. 2/ The total arrears to the WB (estimated at 27.2 billion CFAF or 0.2 percent of GDP) has been cleared at the end of April 2024. 11. The DSA includes disbursements related to the arrangement under the Resilience and Sustainability Facility (RSF) with a revised schedule relative to program approval. The RSF is expected to disburse in tranches contingent upon the completion of each reform measure. Resources provided by the RSF would serve as a cost-effective alternative to domestic financing, thereby expanding fiscal space. As a Group A country, Niger continues to benefit from the interest rate cap of 2.25 percent.8 Disbursements under the RSF arrangement have been rephased to be aligned with the ECF arrangement. 12. The DSA’s toolkit to assess the realism of the macroeconomic forecast does not raise red flags considering historical experience and comparisons with peers. 8 The interest rate cap was approved by the Executive Board on a lapse of time basis on May 18, 2023: “Resilience and Sustainability Trust―Introduction of Interest Rate Cap (SM/23/120).” 6 >>> a. Drivers of debt dynamics (Figure 3). During 2019 – 2023, a large amount of total public debt has been accumulated due to primary fiscal deficits. The accumulation of arrears in 2023 has pushed public debt to its highest level (56.6 percent of GDP). From 2024 to 2028, the contribution of GDP growth to debt dynamics is projected to dominate the unfavorable contribution of the primary deficit, which will support the downward trend of public debt to GDP ratio to 42.9 in 2044. External public debt peaked at 33.5 percent of GDP in 2021 and is estimated to decline to 22.7 percent in 2044 Compared to the previous DSA, the upward trajectory of GDP growth was interrupted by the military takeover and subsequent sanctions, accompanied by arrears accumulation and an increase in financing costs. All factors have contributed to a higher overall trajectory of public debt. Conversely, the trajectory of PPG external debt is projected to be lower due to a reduction of external financing, with a number of traditional development partners suspending their financial support. b. Realism of planned fiscal adjustment (Figure 4). The projected three-year fiscal adjustment in the primary balance (3 percentage points of GDP) lies in the top quartile of the distribution of past adjustments to the primary fiscal deficit for a sample of LICs. The expected adjustment is justified by revenue increases driven by the economic recovery, the lifting of sanctions, and the start of crude oil exports. On the spending side, the allocation of resources will be guided by new priorities with a focus on security and social spending (including health, education, food security, and social safety nets). c. Consistency between fiscal adjustment and growth (Figure 4). The low growth rate observed in 2023 was primarily due to political instability and sanctions and should be treated as an outlier. The projected growth path for 2024 to 2025 is primarily attributed to the start of oil exports and ensuing spillover effects across the economy (notably in the transport sector), as well as increased production in the agricultural sector and the implementation of irrigation projects, and the recovery linked to the lifting of sanctions. Consequently, the impact of fiscal consolidation on growth is likely to be muted. d. Consistency between public investment and growth (Figure 4). The tool shows a decline of the shares of public and private investments in GDP compared to the previous DSA. This change reflects lower capital expenditure projections linked to tighter financing conditions. 13. Niger’s debt-carrying capacity remains rated “medium”. The methodology relies on a composite indicator (CI) combining the CPIA score, external conditions as captured by global growth, and country-specific factors. Based on data from the April 2024 WEO vintage, the calculations give a CI value of 2.87, reflecting positive contributions from the CPIA (46 percent) but also international reserves (56 percent), and country and global real growth rates (6 and 14 percent, respectively) (Text Table 4). This score falls within the medium debt-carrying capacity thresholds defined as 2.69 < CI ≤ 3.0 5. 7 >>> Components Coefficients (A) 10-year average values CI Score components Contribution of (B) (A*B) = (C) components CPIA 0.385 3.426 1.32 46% Real growth rate (in percent) 2.719 5.861 0.16 6% Import coverage of reserves (in percent) 4.052 39.392 1.60 56% Import coverage of reserves^2 (in percent) -3.990 15.517 -0.62 -22% Remittances (in percent) 2.022 0.912 0.02 1% World economic growth (in percent) 13.520 2.909 0.39 14% CI Score 2.87 100% CI rating Medium Debt Carrying Capacity Medium Classification based on Classification based on Classification based on the two Final current vintage the previous vintage previous vintages Medium Medium Medium Medium 2.865 2.881 2.875 APPLICABLE APPLICABLE EXTERNAL debt burden thresholds TOTAL public debt benchmark PV of total public debt in PV of debt in % of percent of GDP 55 Exports 180 GDP 40 Debt service in % of Exports 15 Revenue 18 Source: IMF staff calculations. The CI cutoff for medium debt-carrying capacity is 2.69 < CI ≤ 3.05. 14. Besides the six standardized stress tests, there are two tailored stress tests applied: • One tailored stress test combines contingent liabilities of a one-time debt shock (equivalent to 8 percent of GDP) to capture a scenario reflecting both contingent liabilities from SOEs (equal to 3 percent of GDP) and a need for bank recapitalization (equal to the indicated standard level of 5 percent of GDP). • The second tailored stress test is a commodity price shock. 9 The scenario captures the impact of a sudden one standard deviation decline in the price of the commodities the country exports. 9 Under the debt sustainability framework, countries with commodity exports accounting for at least 50 percent of total exports of goods and services over the previous three-year period are subject to the stress test. Commodities accounted for 53 percent of Niger exports of goods and services over the period 2021-23. 8 >>> 15. External debt is projected to fall sharply in 2024 and continue to decrease gradually, with public and private debt both declining in the medium term (Table 1). Under the baseline scenario, the ratio of PPG external debt to GDP is projected to experience a sharp decline from 32.5 percent in 2023 to 28.7 percent in 2024. This is attributed to sanctions preventing Niger from borrowing externally in the first quarter of 2024, coupled with a continued funding squeeze, plus the rebound in GDP growth. At the same time, all external arrears are assumed to be cleared in 2024. We anticipate higher growth and fiscal adjustment would support a downward trend in the PPG external debt-to-GDP ratio to 22.7 percent in 2044. Total external debt would gradually decline to 32.5 percent of GDP in 2044. The non-interest current account deficit remains the main driver of these dynamics. The goods and services deficit would be reduced due to oil exports through the new pipeline. Once the non-interest current account deficit, net FDI, and endogenous debt dynamics are accounted for, remaining drivers of external debt dynamics, such as other components of the capital account, reserve accumulation, valuation adjustments, as well as price and exchange rate changes, are subsumed into the residual. 16. The risk of external debt distress is assessed as moderate. However, liquidity risk is significant (Figure 1). The present value (PV) of the debt-to-GDP ratio and PV of the debt-to-exports ratio are expected to slightly increase over the projection period, but still remain well below the thresholds. The debt service-to-exports ratios is forecasted to decline as exports strengthen, particularly with the anticipated increase in oil exports. However, the debt service-to-revenue ratio is projected to remain elevated in 2024, breaching the established threshold. This is attributed to the political crisis, persistent security challenges, large amount of arrears clearance, and the delayed impact of reforms on domestic revenue mobilization. The debt service-to-revenue ratio will fall back under threshold from 2025 onward and this breach is discounted from the analysis because of its “single short -lived” nature. In the medium and long term, revenues from oil and continued domestic revenue mobilization efforts are expected to facilitate a steady decline in the debt service-to-revenue ratio. However, there is a significant rise in liquidity risk due to the suspension of financing by traditional partners, particularly funding from the European Union. Despite these challenges, Niger has resumed access to drawing on the West African Economic and Monetary Union's (WAEMU) pooled external reserves after the sanctions were lifted. 17. Stress tests indicate that three indicators will breach the thresholds under exports or one- time depreciation shocks (Figure 1). Two export-related indicators (the PV of PPG external debt-to- exports ratio and debt service-to-exports ratio) exceed their thresholds under the export shock scenario, reflecting a relatively small export base relative to external financing. The debt service-to-revenue ratio will breach the threshold in 2024-2025 under one-time depreciation shock. In accordance with the LIC-DSF guidance, stress scenarios are formulated by subtracting the standard deviation from the lower value of the historical average and baseline projection. This scenario cautions against over-optimism that might arise from solely relying on the projected high growth in exports under the baseline scenario, particularly attributable to crude oil exports. 18. The granularity assessment suggests that the space to absorb shocks is limited (Figure 5). After excluding the short-lived breaches, the debt service-to-revenue ratio still falls into categories of 9 >>> “limited space” in 2025, and the situation improves over the medium term. This result should be treated with caution, because in the short term, suspension of loans by certain partners may be accompanied by a significant increase of liquidity risk and a negative impact on the economy. Moreover, Niger may be forced to turn to financing from less concessional sources, which will increase debt vulnerabilities in the medium term. 19. Public sector debt is projected to decline gradually in the medium and long run (Table 2). The economy is projected to recover swiftly in 2024 after the lifting of sanctions. Additionally, higher oil revenues following the start of oil exports will further support the downward trend of public sector debt. In the medium and long run, improved domestic revenue mobilization, higher spending efficiency, and better expenditure control, coupled with export diversification fostered by private sector growth, are expected to contribute to stabilizing the primary deficit. Gradual shifts toward lower concessionality and longer maturities over the medium and long term would marginally increase interest costs, while the extension of maturities would reduce rollover risks. All these factors would contribute to the decline of public sector debt to 42.9 percent of GDP by 2044.10 20. The PV of the public debt-to-GDP ratio remains below the benchmark in the baseline and stress testing scenarios (Figure 2). The PV of public debt-to-GDP ratio is well below the benchmark of 55 percent of GDP in 2023 and is projected to gradually decline over the projection period under the baseline scenario. Commodity price shock is the most extreme stress scenario; however, the public debt- to-GDP ratio will be still under the threshold under this most extreme stress scenario. 21. Niger’s risk of external and overall debt is rated “moderate”, and debt is deemed sustainable. The moderate debt distress rating arises from the fact that no indicator for PPG external or public debt breaches its threshold under the baseline scenario (except for one single year breach in the external debt service-to-revenue ratio). Debt remains sustainable as: (i) most debt indicators remain on steady downward trajectories and overall public debt sustainability remains solid; (ii) although economic growth has been negatively affected by political instability and sanctions imposed by ECOWAS during 2023, a strong rebound is expected in 2024 due to the lifting of sanctions and the start of crude oil exports, which support the medium- and long-term growth; (iii) Niger has regained access to WAEMU’s pooled external reserves after the sanctions were lifted, which could delink the ability to service foreign debt from exports at the national level and keep liquidity risks low. In line with the Fund Debt Limits Policy (DLP), a debt limit on the new PPG external borrowing is embedded in program conditionality under the ECF arrangement and is calibrated to build an adequate buffer to avoid a downgrade of the risk of debt distress. 10 Niger secured a new loan of US$400 million equivalent from CNPC-NP Niger, a resident corporation, which is a subsidiary of the China National Petroleum Corporation (CNPC). The loan is denominated in CFA francs, with a 12-month maturity (extendable to 16 months) and a 7 percent interest rate. The loan repayment is tied to oil export proceeds, with CNPC-NP withholding 80 percent of Niger's anticipated share (25.36 percent of total oil exports via the pipeline). This loan is class ified as domestic debt in the DSA. 10 >>> External debt service arrears are below 1 percent of GDP qualifying as a de minimis case, and therefore they do not affect the risk rating consideration. 22. Special attention should be paid to the evolution of risks, as they may impact debt sustainability if they were to materialize. A deterioration of the security situation could further affect economic activity. In addition, fiscal space could be compromised due to a tightening of global and regional financing conditions. Donor support may remain subdued, which could lead to delays in capital spending, including key investment projects. Persistence of political tensions with Benin could disrupt crude oil production and exports through the port of Seme (Benin) undermining the expected economic outcomes. External risks encompass commodity price volatility and the effects of an escalation of regional conflicts (e.g., conflict in the Middle East). The materialization of the above risks can negatively impact Niger’s debt sustainability by decreasing the exports and revenue, while further increasing the financing costs. Moreover, increased reliance on high-cost domestic financing caused by the ongoing external funding squeeze poses significant rollover risk in short and medium term. However, these risks do not alter staff's assessment of the debt sustainability risk ratings, given the ongoing economic recovery and the resumption of financing from various sources. These risks can be mitigated by implementing the appropriate policies as recommended below. 23. Moreover, Niger continues to suffer from vulnerability to climate change and natural disasters, which will put pressure on debt sustainability. Considering the long-term nature of the climate related risks, several of the conclusions drawn in the 2023 DSA's climate alternative scenario remain applicable (IMF Country Report 23/254). The scenario included lower GDP growth, mainly driven by a decrease in agricultural production compared to the baseline and resulting in negative effects on exports and government revenue. It also considered additional fiscal expenditure for investment projects to implement adaption policies with the fiscal deficit being larger than in the baseline scenario, while the positive effect of these policies will materialize in later years and the adverse consequences of climate change are assumed to be only partially mitigated. The resulting higher fiscal deficit would lead to an accumulation of external and domestic debt, leading to higher debt indicators, but remaining below the respective thresholds. 24. The authorities need to pursue prudent debt policies in the face of heightened vulnerabilities. The ongoing withdrawal of some traditional creditors poses risks around debt financing. Recent data indicates that AES countries are facing a higher premium to access the regional capital market. The authorities should review the prospects of donor financing and devise strategies to regain access to concessional financing and grants. Moreover, it is essential to fully implement the arrears clearance strategy. Clearing accumulated external and domestic debt service arrears is crucial to ensure fiscal stability, rebuild public trust, and support the economic recovery. 25. Continuous efforts should be made to entrench sound macroeconomic policies, implement economic reforms, and enhance debt management practices, in order to buttress debt sustainability amid greater economic uncertainty. • Domestic revenue mobilization by enhancing revenue administration, reducing tax exemptions, and broadening the tax base. Although additional oil revenues are expected, they should not be 11 >>> fully spent, thereby contributing to fiscal consolidation under appropriate legal and fiscal framework for oil revenue management. The oil revenue management strategy would help in this regard. • Fiscal risks and spending quality. Adequate project evaluation and attention to good governance practices should be pursued when executing infrastructure investments. Efficiency of public spending should be increased amid limited resources. • Economic diversification. Horizontal policies to foster diversification, including developing the local private sector, tackling informality, accumulating human capital through education, are of paramount importance. • Financing. Restoring financing capacity and finding new financing sources is essential. However, with elevated interest rates in the regional market, Niger should avoid over reliance on high-cost domestic borrowing to finance the budget. External financing in the form of concessional and semi- concessional loans and grants should continue to be prioritized. To avoid liquidity shortfalls and minimize the associated financing costs, the overall volumes of debt to be issued should be executed consistently with the annual and quarterly borrowing plan. Integration with the cash flow plan will be essential. 26. The authorities broadly agreed with staff’s assessment of the overall and external debt distress risk but questioned some of assumptions underlying the DSA exercise. They reiterated their commitment to conduct prudent fiscal policies to ensure debt sustainability. The Nigerien authorities emphasized that since they have already started repaying debt service arrears, liquidity pressures in financial sector were alleviated and therefore, they do not consider the additional 1 percent of GDP shock for contingent liabilities as necessary. The authorities also believe that the assumptions regarding high interest rates on local debt issuance in the WAEMU market were overly conservative, although they agreed that the assumptions were broadly aligned with the recent observed financing costs. They also suggested keeping the long-term real GDP growth projection at 6 percent instead of revising it down to 5.5 percent. 12 >>> PV of Debt-to GDP Ratio PV of Debt-to-Exports Ratio 60 400 350 50 300 40 250 30 200 150 20 100 10 50 Most extreme shock is Exports Most extreme shock is Exports 0 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Debt Service-to-Exports Ratio Debt Service-to-Revenue Ratio 30 30 25 25 20 20 15 15 10 10 5 5 Most extreme shock is Exports Most extreme shock is One-time depreciation 0 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Baseline Historical scenario Most extreme shock 1/ Threshold Customization of Default Settings Borrowing Assumptions for Stress Tests* Size Interactions Default User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Tests Terms of marginal debt Combined CLs Yes Avg. nominal interest rate on new borrowing in USD 1.4% 1.4% Natural Disasters n.a. n.a. USD Discount rate 5.0% 5.0% Commodity Prices 2/ No No Avg. maturity (incl. grace period) 29 21 Market Financing n.a. n.a. Avg. grace period 6 6 Note: "Yes" indicates any change to the size or * Note: All the additional financing needs generated by the shocks under the stress tests are interactions of the default settings for the stress tests. assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal "n.a." indicates that the stress test does not apply. debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2034. Stress tests with one-off breaches are also presented (if any), while these one- off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one- off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 13 >>> PV of Debt-to-GDP Ratio 60 50 40 30 20 Most extreme shock is Commodity price 10 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 450 160 400 140 350 120 300 100 250 80 200 60 150 100 40 Most extreme shock is Commodity price Most extreme shock is Commodity price 50 20 0 0 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Baseline Most extreme shock 1/ Public debt benchmark Historical scenario Borrowing Assumptions for Stress Tests* Default User defined Shares of marginal debt External PPG medium and long-term 23% 23% Domestic medium and long-term 28% 28% Domestic short-term 49% 49% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 1.4% 1.4% Avg. maturity (incl. grace period) 29 29 Avg. grace period 6 6 Domestic MLT debt Avg. real interest rate on new borrowing 4.8% 4.8% Avg. maturity (incl. grace period) 3 3 Avg. grace period 2 2 Domestic short-term debt Avg. real interest rate 4% 4.0% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2034. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 14 >>> 1/ Gross Nominal PPG External Debt Debt-creating Flows Unexpected Changes in Debt (Percent of GDP; DSA Vintages) (Percent of GDP) (Past 5 years, Percent of GDP) Current DSA 60 80 Residual 20 Previous DSA proj. 50 70 DSA-2019 40 Interquartile range Price and 15 (25-75) 60 exchange 30 rate 20 50 10 Real GDP 10 growth Change in PPG debt 40 3/ 0 5 30 Nominal -10 interest rate -20 20 0 Current Median -30 10 account + FDI -40 -5 0 Change in -50 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 PPG debt 3/ 5-year 5-year Distribution across LICs 2/ historical projected Contri bution of unexpected change change -10 cha nges Public Debt 1/ Gross Nominal Public Debt Debt-creating Flows Unexpected Changes in Debt (Percent of GDP; DSA Vintages) (Percent of GDP) (Past 5 years, Percent of GDP) Current DSA Residual 40 Previous DSA proj. 30 DSA-2019 30 Interquartile range 80 Other debt 25 (25-75) creating flows 70 20 Real Exchange 20 60 rate depreciation 10 50 15 Real GDP Change in debt growth 0 40 10 30 Real interest -10 rate 5 20 -20 Primary deficit 0 10 Median -30 0 -5 Change in 5-year 5-year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Contribution of unexpected Distribution across LICs 2/ debt historical projected changes change change -10 Sources: Country authorities; and staff estimates and projections. 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 15 >>> 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 14 Distribution 1/ 14 2 12 Projected 3-yr adjustment 12 3-year PB adjustment greater than 2.5 percentage points of GDP in approx. top In percentage points of GDP 10 quartile 10 8 In percent 8 6 6 4 4 2 2 0 0 1 More -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 2018 2019 2020 2021 2022 2023 2024 2025 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is GDP growth paths under different fiscal multipliers (left-hand side scale). found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (% of GDP) (percent, 5-year average) 24 9 22 8 20 7 18 16 6 14 5 12 4 10 8 3 6 2 4 1 2 0 0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Gov. Invest. - Prev. DSA Gov. Invest. - Current DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Current DSA Contribution of government capital Sources: Country authorities; and staff estimates and projections. 16 >>> PV of Debt-to-GDP Ratio PV of Debt-to-Exports Ratio 45 200 Threshold 40 180 (1-X)*Threshold 160 (1-Y)*Threshold 35 140 30 120 25 100 20 80 15 60 10 40 5 20 0 0 2025 2030 2033 2024 2026 2027 2028 2029 2031 2032 2034 2035 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Debt Service-to-Exports Ratio Debt Service-to-Revenue Ratio 16 30 14 25 12 20 10 8 15 6 10 4 5 2 0 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Threshold Baseline Limited space Some space Substantial space Sources: Country authorities; and staff estimates and projections. 1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. 17 >>> Actual Projections Average 9/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2044 Historical Projections External debt (nominal) 1/ 56.7 56.9 56.2 50.1 47.4 45.7 44.7 44.3 44.1 43.9 43.7 43.3 42.8 42.2 32.5 49.6 44.8 Definition of external/domestic debt Currency-based of which: public and publicly guaranteed (PPG) 33.5 33.0 32.5 28.7 27.6 27.0 26.9 27.3 27.9 28.3 28.7 28.9 29.0 28.9 22.7 27.3 28.1 Is there a material difference between the Yes two criteria? Change in external debt 4.5 0.1 -0.7 -6.1 -2.7 -1.7 -1.0 -0.4 -0.2 -0.2 -0.2 -0.4 -0.5 -0.6 -0.8 Identified net debt-creating flows 6.2 8.0 4.3 -0.6 -0.3 1.0 1.9 0.9 1.5 0.5 0.4 0.7 1.0 1.3 4.0 6.5 0.7 Non-interest current account deficit 13.4 15.7 13.9 6.1 3.7 4.5 5.1 4.1 4.7 3.6 3.5 3.8 4.0 4.3 6.4 12.9 4.3 Deficit in balance of goods and services 16.9 18.3 15.8 7.5 4.3 4.7 5.0 3.8 4.2 3.1 2.9 3.2 3.3 3.5 5.2 15.5 4.1 Exports 15.5 12.0 11.9 17.7 20.6 20.1 18.4 17.5 16.7 18.0 17.7 17.4 17.2 17.0 14.0 Debt Accumulation Imports 32.4 30.3 27.7 25.2 25.0 24.9 23.4 21.3 20.9 21.1 20.7 20.6 20.5 20.5 19.3 5.0 60.0 Net current transfers (negative = inflow) -4.5 -3.5 -2.7 -2.5 -2.1 -1.8 -1.7 -1.6 -1.6 -1.5 -1.4 -1.3 -1.3 -1.2 -0.8 -3.6 -1.6 of which: official -2.4 -1.4 -1.0 -0.6 -0.5 -0.5 -0.5 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.3 -0.2 Other current account flows (negative = net inflow) 1.1 0.9 0.8 1.1 1.5 1.6 1.8 1.9 2.0 2.0 2.0 2.0 2.0 2.0 2.0 1.1 1.8 4.0 50.0 Net FDI (negative = inflow) -3.7 -6.2 -5.5 -1.9 -1.1 -1.2 -0.9 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -4.4 -1.1 Endogenous debt dynamics 2/ -3.5 -1.5 -4.1 -4.8 -3.0 -2.3 -2.4 -2.2 -2.2 -2.1 -2.1 -2.1 -2.0 -2.0 -1.4 3.0 40.0 Contribution from nominal interest rate 0.5 0.5 0.5 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Contribution from real GDP growth -0.7 -6.5 -1.2 -5.2 -3.3 -2.7 -2.7 -2.5 -2.5 -2.4 -2.4 -2.4 -2.4 -2.3 -1.7 2.0 30.0 Contribution from price and exchange rate changes -3.4 4.5 -3.3 … … … … … … … … … … … … Residual 3/ -1.7 -7.9 -5.0 -5.5 -2.3 -2.7 -2.9 -1.3 -1.7 -0.7 -0.6 -1.1 -1.5 -1.9 -4.8 -4.6 -2.0 of which: exceptional financing 4/ 0.0 0.0 -0.7 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 20.0 Sustainability indicators 0.0 10.0 PV of PPG external debt-to-GDP ratio ... ... 22.3 18.9 17.9 17.3 17.1 16.9 17.1 17.4 17.8 18.1 18.4 18.5 15.9 PV of PPG external debt-to-exports ratio ... ... 187.1 106.4 86.7 86.1 92.9 96.5 102.8 96.8 100.7 103.9 106.8 108.9 113.0 -1.0 0.0 PPG debt service-to-exports ratio 9.4 15.7 19.6 14.0 8.5 7.7 7.9 8.3 8.5 7.4 6.5 6.4 6.4 6.3 8.5 2024 2026 2028 2030 2032 2034 PPG debt service-to-revenue ratio 13.5 18.7 26.8 26.2 16.6 14.1 12.7 12.2 11.6 10.7 9.0 8.8 8.6 8.3 8.6 Gross external financing need (Million of U.S. dollars) 1696.7 1792.4 1855.7 1292.1 952.1 1141.7 1450.4 1234.9 1513.7 1262.5 1266.2 1474.8 1665.1 1887.7 6266.8 Rate of Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 1.4 11.9 2.4 10.6 7.4 6.1 6.4 6.0 6.0 6.0 6.0 6.0 5.9 5.9 5.5 5.4 6.6 GDP deflator in US dollar terms (change in percent) 7.0 -7.4 6.2 3.7 3.0 2.7 1.8 1.9 2.0 2.0 2.0 2.0 2.1 2.1 2.5 0.0 2.3 Effective interest rate (percent) 5/ 1.1 0.9 1.0 0.8 0.8 0.8 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.9 1.0 0.9 0.8 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 1.2 -19.8 7.9 70.7 28.8 6.3 -0.9 2.8 2.9 16.8 6.3 6.5 6.6 6.8 5.9 3.9 13.9 of which: Private Growth of imports of G&S (US dollar terms, in percent) 7.6 -3.3 -0.6 4.5 9.6 8.4 2.1 -1.9 6.2 9.1 5.8 7.8 7.7 8.0 7.8 5.3 6.1 60 Grant element of new public sector borrowing (in percent) ... ... ... 45.1 43.6 44.7 44.4 51.1 44.0 41.2 39.9 39.1 38.5 38.0 32.0 ... 42.7 Government revenues (excluding grants, in percent of GDP) 10.8 10.1 8.7 9.4 10.6 11.0 11.4 11.9 12.2 12.5 12.8 12.7 12.7 12.9 13.9 11.2 11.8 50 Aid flows (in Million of US dollars) 6/ 1547.7 1435.0 656.0 948.8 1017.5 1102.3 1153.2 1179.8 1206.9 1190.8 1208.6 1234.3 1256.7 1293.8 2212.8 Grant-equivalent financing (in percent of GDP) 7/ ... ... ... 4.1 3.5 3.3 3.0 3.0 2.6 2.3 2.1 2.0 1.9 1.9 1.5 ... 2.7 40 Grant-equivalent financing (in percent of external financing) 7/ ... ... ... 72.3 66.9 66.7 63.4 63.6 54.7 51.9 50.8 51.4 51.0 51.8 50.8 ... 58.6 Nominal GDP (Million of US dollars) 14,923 15,458 16,813 19,278 21,333 23,253 25,186 27,209 29,420 31,808 34,391 37,184 40,203 43,468 94,891 Nominal dollar GDP growth 8.4 3.6 8.8 14.7 10.7 9.0 8.3 8.0 8.1 8.1 8.1 8.1 8.1 8.1 8.1 5.3 9.0 30 Memorandum items: 20 PV of external debt 8/ ... ... 46.0 40.2 37.8 36.1 35.0 34.0 33.4 33.0 32.8 32.5 32.2 31.8 25.7 In percent of exports ... ... 386.1 226.8 182.9 179.1 189.8 193.8 200.5 183.4 185.1 186.1 187.0 187.2 183.3 10 Total external debt service-to-exports ratio 10.7 17.5 21.9 14.3 8.8 7.9 8.1 8.5 8.7 7.5 6.6 6.5 6.5 6.3 8.5 PV of PPG external debt (in Million of US dollars) 3749.6 3639.1 3819.6 4029.9 4306.5 4601.0 5040.0 5543.5 6132.2 6739.0 7379.6 8038.8 15060.2 0 (PVt-PVt-1)/GDPt-1 (in percent) -0.7 0.9 1.0 1.2 1.2 1.6 1.7 1.9 1.8 1.7 1.6 1.1 2024 2026 2028 2030 2032 2034 Non-interest current account deficit that stabilizes debt ratio 9.0 15.6 14.6 12.2 6.4 6.2 6.1 4.5 4.9 3.9 3.7 4.2 4.5 4.9 7.2 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ The CCRT debt relief is reflected in the exceptional financing. 5/ Current-year interest payments divided by previous period debt stock. 6/ Defined as grants, concessional loans, and debt relief. 7/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 8/ Assumes that PV of private sector debt is equivalent to its face value. 9/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 18 >>> Actual Projections Average 7/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2044 Historical Projections Public sector debt 1/ 51.3 50.6 56.6 52.5 49.9 48.8 48.2 47.9 47.7 45.9 42.9 40.2 48.0 Definition of external/domestic of which: external debt 33.5 33.0 32.5 28.7 27.6 27.0 26.9 27.3 27.9 28.9 22.7 27.3 28.1 Currency-based debt of which: local-currency denominated Change in public sector debt 6.4 -0.7 6.0 -4.1 -2.6 -1.1 -0.6 -0.3 -0.2 -0.4 -0.3 Is there a material difference Identified debt-creating flows 6.5 1.4 1.2 -2.9 -2.1 -1.0 -0.7 -0.5 -0.5 -0.4 -0.3 3.0 -0.9 Yes between the two criteria? Primary deficit 5.0 5.5 4.0 2.5 1.1 1.2 1.3 1.4 1.5 1.5 1.3 4.2 1.5 Revenue incl. grants 18.2 14.8 10.4 12.2 12.8 12.9 13.0 13.1 13.1 13.7 14.7 16.2 13.2 of which: grants 7.3 4.7 1.7 2.8 2.2 1.9 1.6 1.2 0.9 0.8 0.8 Public sector debt 1/ Primary (noninterest) expenditure 23.1 20.3 14.4 14.8 13.9 14.1 14.3 14.6 14.6 15.2 16.0 20.5 14.7 Automatic debt dynamics 1.5 -4.1 -2.8 -5.4 -3.2 -2.2 -1.9 -1.9 -1.9 -1.9 -1.6 of which: local-currency denominated Contribution from interest rate/growth differential -1.2 -6.9 -1.9 -5.3 -2.9 -2.0 -2.0 -1.9 -1.9 -1.9 -1.5 of which: foreign-currency denominated of which: contribution from average real interest rate -0.6 -1.5 -0.7 0.1 0.7 0.9 1.0 0.8 0.8 0.7 0.8 of which: contribution from real GDP growth -0.6 -5.4 -1.2 -5.4 -3.6 -2.9 -2.9 -2.7 -2.7 -2.6 -2.3 60 Contribution from real exchange rate depreciation 2.8 2.8 -0.9 ... ... ... ... ... ... ... ... 50 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Debt relief (HIPC and other) 2/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Residual -0.1 -2.2 4.7 -1.3 -0.8 -0.2 0.1 0.2 0.2 0.0 -0.1 0.7 -0.2 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 3/ ... ... 46.2 42.7 40.2 39.2 38.4 37.5 36.9 35.6 36.1 2024 2026 2028 2030 2032 2034 PV of public debt-to-revenue and grants ratio … … 443.2 348.7 314.9 302.8 294.6 286.2 282.1 259.9 245.5 Debt service-to-revenue and grants ratio 4/ 38.9 50.0 35.4 111.5 105.0 110.7 106.4 104.8 105.9 69.5 57.4 Gross financing need 5/ 10.9 11.8 7.7 16.2 14.5 15.5 15.1 15.2 15.3 11.0 9.7 Key macroeconomic and fiscal assumptions Real GDP growth (in percent) 1.4 11.9 2.4 10.6 7.4 6.1 6.4 6.0 6.0 5.9 5.5 5.4 6.6 Average nominal interest rate on external debt (in percent) 1.5 1.4 1.4 1.2 1.2 1.2 1.1 1.1 1.0 1.2 1.5 1.5 1.1 Average real interest rate on domestic debt (in percent) 2.2 0.7 -0.2 2.0 4.0 4.7 5.2 4.6 4.7 4.6 4.4 3.2 4.4 Real exchange rate depreciation (in percent, + indicates depreciation) 9.2 9.9 -2.8 … ... ... ... ... ... ... ... 3.4 ... Inflation rate (GDP deflator, in percent) 3.1 4.0 3.5 3.9 3.4 2.9 2.0 2.0 2.0 2.1 2.5 1.8 2.4 Growth of real primary spending (deflated by GDP deflator, in percent) 9.9 -1.6 -27.4 13.2 1.1 7.8 8.0 7.8 6.0 7.4 5.9 2.9 7.1 Primary deficit that stabilizes the debt-to-GDP ratio 6/ -1.4 6.3 -2.0 6.6 3.7 2.2 1.9 1.8 1.7 1.9 1.6 1.0 2.5 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank, government-guaranteed debt. Definition of external debt is Currency-based. 2/ The CCRT debt relief is included in the primary deficit. 3/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 4/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 5/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 6/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 7/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 19 >>> Projections 1/ 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 PV of debt-to GDP ratio Baseline 19 18 17 17 17 17 17 18 18 18 18 19 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2044 2/ 19 23 26 29 32 36 40 44 48 51 54 56 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 19 19 20 20 19 20 20 20 21 21 21 21 B2. Primary balance 19 19 19 19 19 20 20 21 21 21 21 22 B3. Exports 19 24 31 30 30 29 29 29 29 28 27 26 B4. Other flows 3/ 19 19 20 20 20 20 20 20 20 20 20 20 B6. One-time 30 percent nominal depreciation 19 22 19 19 19 19 20 20 21 21 22 22 B6. Combination of B1-B5 19 25 25 24 24 24 24 24 24 24 24 24 C. Tailored Tests C1. Combined contingent liabilities 19 19 19 19 19 19 20 20 21 21 21 21 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 19 19 19 19 19 19 19 20 20 20 20 19 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 40 40 40 40 40 40 40 40 40 40 40 40 PV of debt-to-exports ratio Baseline 106 87 86 93 97 103 97 101 104 107 109 112 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2044 2/ 106 109 128 156 183 213 221 249 274 297 318 339 0 106 83 80 82 82 85 77 78 79 80 81 82 B. Bound Tests B1. Real GDP growth 106 87 86 93 97 103 97 101 104 107 109 112 B2. Primary balance 106 90 93 103 109 118 112 117 121 124 127 130 B3. Exports 106 182 319 341 351 367 339 345 345 340 334 331 B4. Other flows 3/ 106 94 101 109 112 119 111 115 117 119 120 121 B6. One-time 30 percent nominal depreciation 106 87 76 82 86 92 87 91 95 98 101 105 B6. Combination of B1-B5 106 155 107 188 194 205 191 197 199 201 201 204 C. Tailored Tests C1. Combined contingent liabilities 106 92 94 102 109 117 111 115 119 123 125 128 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 106 96 100 107 111 116 108 111 114 115 117 118 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 180 180 180 180 180 180 180 180 180 180 180 180 Debt service-to-exports ratio Baseline 14 9 8 8 8 8 7 7 6 6 6 6 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2044 2/ 14 9 9 10 11 11 11 10 12 14 15 17 0 14 9 8 8 8 8 7 6 5 4 3 2 B. Bound Tests B1. Real GDP growth 14 9 8 8 8 8 7 7 6 6 6 6 B2. Primary balance 14 9 8 8 9 9 8 7 7 7 7 7 B3. Exports 14 14 18 20 21 21 19 16 20 25 24 24 B4. Other flows 3/ 14 9 8 8 9 9 8 7 7 8 7 8 B6. One-time 30 percent nominal depreciation 14 9 8 8 8 8 7 6 6 6 5 6 B6. Combination of B1-B5 14 12 13 14 14 15 13 11 14 13 13 13 C. Tailored Tests C1. Combined contingent liabilities 14 9 8 8 8 9 8 7 7 7 7 7 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 14 9 8 9 9 9 8 7 7 7 7 7 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 15 15 15 15 15 15 15 15 15 15 15 15 Debt service-to-revenue ratio Baseline 26 17 14 13 12 12 11 9 9 9 8 8 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2044 2/ 26 17 16 15 15 16 15 14 17 19 20 23 0 26 17 14 13 12 11 10 8 7 5 4 2 B. Bound Tests B1. Real GDP growth 26 18 16 15 14 13 12 10 10 10 9 10 B2. Primary balance 26 17 14 13 13 12 11 9 9 10 9 10 B3. Exports 26 17 16 15 15 14 13 11 13 16 15 15 B4. Other flows 3/ 26 17 14 13 13 12 11 9 10 10 10 10 B6. One-time 30 percent nominal depreciation 26 21 18 16 15 14 13 11 11 9 9 9 B6. Combination of B1-B5 26 18 17 15 15 14 13 11 13 12 12 12 C. Tailored Tests C1. Combined contingent liabilities 26 17 14 13 13 12 11 9 9 9 9 9 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 26 20 17 15 14 13 12 10 10 10 9 9 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 18 18 18 18 18 18 18 18 18 18 18 18 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 20 >>> Projections 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 PV of Debt-to-GDP Ratio Baseline 43 40 39 38 38 37 36 36 36 36 36 36 A. Alternative Scenarios A1. Key variables at their historical averages in 2018-2038 1/ 43 43 45 46 46 47 48 49 50 51 53 54 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 43 44 47 47 47 48 48 49 50 51 51 52 B2. Primary balance 43 44 47 46 44 43 42 41 41 40 40 39 B3. Exports 43 45 51 50 49 48 47 46 45 44 43 42 B4. Other flows 2/ 43 42 42 41 40 40 39 39 38 38 37 37 B6. One-time 30 percent nominal depreciation 43 43 40 38 36 34 33 31 30 29 28 28 B6. Combination of B1-B5 43 44 43 42 40 39 39 38 37 37 37 36 C. Tailored Tests C1. Combined contingent liabilities 43 47 46 45 43 42 41 41 40 39 39 39 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 43 43 45 47 49 50 51 51 52 53 54 54 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Public debt benchmark 55 55 55 55 55 55 55 55 55 55 55 55 PV of Debt-to-Revenue Ratio Baseline 349 315 303 295 286 282 275 266 265 265 260 265 A. Alternative Scenarios A1. Key variables at their historical averages in 2018-2038 1/ 349 338 342 348 352 360 362 362 371 380 381 397 0 111.5477 58.03256 59.36545 62.9369 54.75045 49.84817 45.70094 37.56662 32.51208 27.89801 24.68925 24.46103 B. Bound Tests B1. Real GDP growth 349 341 354 355 356 361 361 359 365 372 373 386 B2. Primary balance 349 347 363 350 338 330 318 306 302 299 291 294 B3. Exports 349 355 396 384 372 365 353 341 335 327 314 314 B4. Other flows 2/ 349 327 326 317 307 303 294 285 283 280 273 277 B6. One-time 30 percent nominal depreciation 349 342 316 297 277 263 247 231 224 218 209 208 B6. Combination of B1-B5 349 342 334 319 307 301 290 279 276 274 268 272 C. Tailored Tests C1. Combined contingent liabilities 349 372 354 342 330 322 311 299 296 293 286 289 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 349 380 391 407 405 404 394 379 386 392 391 405 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 112 105 111 106 105 106 100 86 81 75 70 73 A. Alternative Scenarios A1. Key variables at their historical averages in 2018-2038 1/ 112 108 116 113 112 115 109 95 91 85 81 86 0 111.5477 58.03256 59.36545 62.9369 54.75045 49.84817 45.70094 37.56662 32.51208 27.89801 24.68925 24.46103 B. Bound Tests B1. Real GDP growth 112 112 127 127 130 136 133 120 117 113 109 116 B2. Primary balance 112 105 128 133 127 130 119 101 95 87 81 84 B3. Exports 112 105 111 108 106 107 101 87 85 81 75 79 B4. Other flows 2/ 112 105 111 107 105 106 100 86 82 76 71 75 B6. One-time 30 percent nominal depreciation 112 101 108 102 101 101 96 83 78 72 67 70 B6. Combination of B1-B5 112 104 112 122 114 119 111 95 89 82 76 80 C. Tailored Tests C1. Combined contingent liabilities 112 105 142 123 128 125 114 99 93 84 78 81 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 112 120 135 141 146 151 145 129 126 121 116 123 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 2/ Includes official and private transfers and FDI. 21 >>>