Security problems to trim Niger 2013 growth to 5.8 pct - IMF

Tue Sep 17, 2013 1:41pm EDT

* Economy had been seen growing 6.2 percent

* Islamist attack on Areva uranium mine halted production for a month

* Increased military spending could undermine efforts to tackle budget deficit

By Daniel Flynn

NIAMEY, Sept 17 (Reuters) - Niger's economy will grow by 5.8 percent this year, slightly less than previously forecast, as security problems weigh on the crucial uranium mining sector, the International Monetary Fund said.

The IMF's resident representative in Niger, Ahmed Zorome, said increased military spending after May suicide attacks by Islamists could also cause some budgetary slippage despite government efforts to reduce a substantial budget deficit.

An Islamist suicide attack on a uranium mine operated by France's Areva in the northern town of Arlit on May 23 shut down production for more than a month. Uranium accounts for more than 40 percent of exports from Niger, the world's fourth largest producer.

The IMF had previously forecast Niger's 3.6 trillion CFA franc ($7.3 billion) economy would grow by 6.2 percent this year, after a 11.4 percent leap in 2012 on the back of rising oil production. China's CNPC started pumping oil from its Agadem bloc in Niger in late 2011.

"Growth expectations for the economy have been revised down to around 5.8 percent this year, against the backdrop of the attack on the uranium mine," Zorome said in an interview.

"It is not the only reason but the security context is not very conducive to growth," he said.

Niger, which ranks bottom in the world in U.N. human development index, deployed some 680 troops to neighbouring Mali as part of a French-led military intervention that destroyed an Islamist enclave this year. The troops now form part of a U.N. peacekeeping mission as France winds down its presence.

President Mahamadou Issoufou's government is making a concerted effort to increase tax revenues and tackle corruption, Zorome said. Niger improved 21 places on graft watchdog Transparency International's index of corruption perceptions in 2012, to rank in 113th place from 174 countries.

But, at around 16.5 percent of gross domestic product (GDP), government tax revenues remain among the lowest in West Africa and well below spending, running at around 27 percent of GDP on average according to IMF figures.

A large informal economy and low levels of disposable income due to poverty makes it difficult for the government to capture tax revenues, Zorome said.

"It is quite possible that for the current year some slippages may also come from security expenditures given that the country had to upgrade its defences against urban terrorism," Zorome said.

"It has a substantial negative impact on the budget deficit," he added.

High military spending already widened the budget deficit by one percentage point of GDP more than forecast last year, he said.

However, the start of oil production in 2011 in a joint partnership between CNPC and the Niger state offered hope for an improvement in government finances. Production is running at around 16,500 barrels per day, Zorome said.

"The oil industry has picked up nicely and if it keeps on that trend it will become a major contributor to the budget and also to the ability of the country to invest in productive infrastructures, like roads, schools, and telecommunications," he said. ($1 = 491.3900 CFA francs) (Additional reporting by Abdoulaye Massalatchi; Editing by Joe Bavier)

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