IMF Executive Board Completes Second Review Under Policy Coordination Instrument for Senegal

  • Despite the challenges posed by the COVID-19 pandemic, performance on end-June PCI objectives has been broadly satisfactory and the program remains on track.
  • With a broad-based recovery starting in the second half of 2020 and favorable perspectives for end-year agricultural production, the contraction initially expected for the full year will likely be avoided. This momentum should carry over to 2021, with growth projected at about 5 percent.
  • The 2021 budget approved in December 2020 balances support for the recovery and a gradual fiscal consolidation aimed at returning to the regional deficit anchor of 3 percent of GDP by 2023.
  • Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the second review under the Policy Coordination Instrument (PCI) for Senegal.[1] The Executive Board’s decision was taken without a meeting. [2]

    The PCI for Senegal was approved on January 10, 2020 (see Press Release No. 20/06 ). The program supports the authorities’ development objectives under the “Plan Senegal Emergent” and focuses on three main pillars: (i) achieving inclusive and private sector-led growth; (ii) consolidating macroeconomic stability through prudent fiscal policy and sound debt management; and (iii) managing prospective oil and gas revenues in a sustainable and transparent manner.

    Although the pandemic has remained fairly contained in Senegal, its economic impact has been severe through the first half of 2020. Strong fiscal and monetary policy support have helped bolster the health system and cushion the economic shock but led the projected 2020 fiscal deficit to increase from 3 to about 6 ½ percent of GDP. The IMF disbursed US$442 million (100 percent of quota) under the RCF/RFI in April to support the pandemic response. Drawing lessons from the crisis, the authorities have adjusted their economic development plan for 2021-23 to build a more resilient and inclusive economy, including by upgrading the social safety net.

    The 2021 budget approved in December 2020 envisages a consolidation of about 1½ percent of GDP, underpinned by the withdrawal of COVID-19 stimulus, implementation of the authorities’ Medium-Term Revenue Strategy, and further current spending rationalization. In line with regional understandings, the authorities are committed to return to the WAEMU fiscal deficit target of 3 percent of GDP by 2023, which would help contain debt vulnerabilities. Public debt remains at moderate risk of debt distress with limited space to absorb shocks in the near term.

    Reforms to gradually reduce tax expenditures, enhance budget execution transparency and monitor fiscal risks are advancing. The authorities are also finalizing the revised legal framework for PPPs and the legal framework for the management of hydrocarbon revenue, which should be aligned with international best practices.

    Senegal: Selected Economic and Financial Indicators, 2019-241

    2019

    2020

    2021

    2022

    2023

    2024

    Prel.

    Proj.

    Proj.

    Projections

    National income and prices

    GDP at constant prices 1

    5.3

    -0.7

    5.2

    6.0

    11.9

    8.7

    Of which: Non-hydrocarbon GDP

    5.3

    -0.7

    5.2

    6.0

    7.3

    7.2

    Of which: Hydrocarbon GDP

    44.0

    Of which: Non-agriculture GDP

    5.8

    -1.4

    5.3

    6.2

    12.6

    9.0

    GDP deflator

    1.7

    2.1

    1.7

    1.7

    1.5

    1.8

    Consumer prices

    Annual average

    1.0

    2.0

    2.0

    2.0

    1.5

    1.5

    End of period

    0.6

    1.4

    2.6

    1.7

    1.3

    1.7

    External sector

    Exports, f.o.b. (CFA francs)

    12.3

    -5.1

    8.9

    15.0

    67.7

    16.1

    Imports, f.o.b. (CFA francs)

    4.7

    1.5

    4.6

    9.7

    19.3

    8.7

    Export volume

    12.8

    -2.5

    13.0

    12.7

    88.4

    15.6

    Import volume

    9.0

    9.4

    7.9

    10.1

    14.7

    7.8

    Terms of trade (“-” = deterioration)

    3.7

    4.8

    -0.5

    2.5

    -14.4

    -0.4

    Nominal effective exchange rate

    -1.3

    Real effective exchange rate

    -2.1

    Broad money

    8.2

    9.4

    9.1

    8.6

    Net domestic assets

    7.5

    8.8

    5.3

    5.1

    Credit to the government (net)

    1.7

    7.5

    1.5

    1.5

    Credit to the economy (net)

    6.1

    1.9

    5.0

    4.8

    Government financial operations

    Revenue

    20.2

    21.1

    20.6

    20.9

    21.7

    21.9

    Grants

    1.6

    3.2

    2.2

    2.3

    1.9

    1.7

    Total expenditure

    24.0

    27.6

    25.5

    24.9

    24.7

    24.9

    Net lending/borrowing (Overall Balance)

    excluding grants

    -5.5

    -9.7

    -7.1

    -6.3

    -4.9

    -4.7

    including grants

    -3.8

    -6.5

    -4.9

    -4.0

    -3.0

    -3.0

    Net lending/borrowing (excl. one-off operations.)

    -3.1

    -6.4

    -4.8

    -4.0

    -3.0

    -3.0

    Primary fiscal balance

    -1.9

    -4.3

    -2.7

    -1.9

    -0.9

    -0.9

    Savings and investment

    Current account balance (official transfers included)

    -7.5

    -10.9

    -10.7

    -10.6

    -4.6

    -3.6

    Current account balance (official transfers excluded)

    -7.7

    -12.3

    -11.2

    -11.3

    -5.0

    -3.8

    Gross domestic investment

    31.7

    30.7

    33.9

    34.3

    35.7

    33.5

    Government 2

    7.3

    8.8

    9.2

    8.3

    8.9

    9.4

    Nongovernment

    24.4

    21.9

    24.8

    26.0

    26.8

    24.2

    Gross national savings

    24.1

    19.8

    23.2

    23.7

    31.1

    29.9

    Government

    6.6

    6.6

    6.7

    7.0

    9.1

    10.3

    Nongovernment

    17.6

    13.2

    16.5

    16.6

    22.0

    19.6

    Total public debt 3

    64.1

    67.6

    68.2

    68.1

    63.7

    61.0

    Domestic public debt 4

    10.9

    12.2

    12.7

    13.9

    14.3

    15.3

    External public debt

    53.2

    55.3

    55.5

    54.3

    49.5

    45.7

    Total public debt service 3

    Percent of government revenue

    22.9

    23.7

    24.2

    27.1

    24.6

    28.5

    Sources: Senegal authorities; and IMF staff estimates and projections.

    1 Based on new national accounts rebased to 2014.

    2 Reflects reclassification of public investment.

    3 Starting in 2017 debt level, debt service and government revenue include preliminary data covering the broader public sector.

    4 Domestic debt includes government securities issued in local currency and held by WAEMU residents.


    [1] The PCI is available to all IMF members that do not need Fund financial resources at the time of approval. It is designed for countries seeking to demonstrate commitment to a reform agenda or to unlock and coordinate financing from other official creditors or private investors. (see https://www.imf.org/en/About/Factsheets/Sheets/2017/07/25/policy-coordination-instrument ).

    [2] The Executive Board takes decisions without a meeting (based on lapse-of-time procedures) when it is agreed by the Board that a proposal can be considered without convening formal discussions.

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