IMF Executive Board Completes the Fourth Review Under the Policy Coordination Instrument and the First Reviews Under the Stand-By Arrangement and the Arrangement Under the Standby Credit Facility, and Concludes the 2021 Article IV Consultation for Senegal

January 10, 2022

Washington, DC: Today, the Executive Board of the International Monetary Fund (IMF) completed the Fourth Review under the Policy Coordination Instrument (PCI) [1] and the First Reviews Under the Stand-by Arrangement (SBA) [2] , and the Arrangement under the Standby Credit Facility (SCF). [3] The completion of the reviews enables the release of SDR 129.4 million (about US$180 million), bringing total disbursements under the arrangements to SDR 258.8 million (about US$360 million).

Senegal’s three-year PCI was approved on January 10, 2020 and is built around three pillars: (i) achieving inclusive and private-sector-led growth, (ii) consolidating macroeconomic stability through prudent fiscal policy and sound debt, and (iii) managing oil and gas revenues in a sustainable and transparent manner (see Press Release No. 20/06 ).

Senegal’s 18-month SCF/SBA arrangements, for a total amount of 140 percent of quota, were approved on June 7, 2021 to help support the authorities’ COVID-19 crisis response, catalyze additional concessional financing, and strengthen the external position of the WAEMU (see Press Release No. 21/259 ). The authorities are delivering on their commitments regarding the transparency of COVID-19 spending; they have published detailed budget execution reports, a special audit of the COVID-19 fund and an audit on the regularity of COVID-19 procurement procedures. The final report by the Audit Court on the 2020 budget and COVID-19 spending execution is expected by March 2022.

The Executive Board also concluded the 2021 Article IV consultation [4] with Senegal.

A strong economic recovery is underway since mid-2020, driven by industrial production and the services sector, and 2021 growth has been revised upwards from 3 ½ to about 5 percent. The recovery is expected to continue in 2022 and beyond, with a further temporary boost from oil and gas production in 2023–24.

The second 2021 supplementary budget incorporates additional exceptional spending related to the use of about two/thirds of Senegal’s SDR allocation (0.9 percent of GDP) to support the recovery and strengthen social protection and the health sector including domestic vaccine production. This, together with additional spending on energy subsidies, will bring the 2021 deficit to 6.3 percent of GDP. Senegal’s public sector debt is projected to reach 73 percent of GDP in 2021 before gradually declining to under 60 percent of GDP. The 2021 current account deficit is projected to widen to 10.6 percent of GDP and decline to about 5 percent of GDP over the medium term. The financial system remained resilient during the pandemic, in part owing to the regional central bank’s (BCEAO) accommodative stance, including additional liquidity provision to banks.

The outlook points to sustained stronger activity, as the impact of the pandemic is abating, but is subject to significant uncertainty and risks are tilted to the downside. These include repeated COVID-19 outbreaks, a deteriorating regional security situation, delays in the start of oil and gas production, and a rapid rise of global interest rates.

Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, issued the following statement:

“The COVID-19 pandemic interrupted a decade of high growth and development progress in Senegal. It caused severe hardship for many households, although the impact on the Senegalese economy was mitigated by the authorities’ forceful response. Senegal’s economy is now on track for a robust recovery.

“The outlook is favorable provided risks and rising vulnerabilities are well-managed. Risks are tilted to the downside, including the protracted impact from the pandemic, higher oil prices, a volatile regional security environment, slower reform implementation, and delays in the start of oil and gas production. Public debt has risen continuously in recent years and risks to debt sustainability need to be carefully monitored.

“The authorities’ reform agenda, supported by the Policy Coordination Instrument, the Stand-By Arrangement and the arrangement under the Standby Credit Facility, remains appropriate to achieve the program objectives of strong and inclusive growth while maintaining macroeconomic stability and containing risks to debt sustainability.

“Fiscal policy should remain anchored by a credible, revenue-based consolidation towards a fiscal deficit of 3 percent of GDP by 2024, in line with WAEMU commitments. The communication and implementation of the medium-term revenue mobilization strategy and steps to limit fuel subsidies while protecting the vulnerable are essential in this regard.

“Achieving more inclusive growth will also require further improving the business environment, enhancing the social safety net, broadening access to quality education, and addressing youth unemployment. The SDR allocation provides additional policy space to support the health sector and economic recovery. Ongoing reforms to improve public financial management will help strengthen spending efficiency and transparency, particularly for SDR-related spending.

“While the financial system remained resilient during the pandemic, long-standing weaknesses will need to be addressed, including deficiencies in the AML/CFT framework, and reforms to promote financial inclusion should be accelerated.”

Executive Board Assessment [5]

Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for the forceful response to the pandemic and the progress of reforms achieved under the Fund-supported programs. Directors concurred that growth fundamentals remain strong, though risks are tilted to the downside. They urged steadfast implementation of the authorities’ reform agenda to set the foundations for strong, inclusive, and sustainable growth.

Directors cautioned that fiscal policy should remain anchored by the WAEMU convergence criterion of 3 percent of GDP by 2024. In a context of narrowing fiscal space amid rising public debt, they agreed that a revenue-based medium-term fiscal consolidation would be essential to support macroeconomic stability, contain debt vulnerabilities, and bolster the WAEMU’s external stability. In addition, containing energy subsidies is key to create fiscal space and accommodate other priority spending. In this regard, Directors welcomed that the 2022 budget already includes an increase in social spending. They encouraged the authorities to prioritize concessional borrowing and stressed that enhanced public debt management would help maintain debt sustainability.

Directors welcomed the progress on governance measures regarding COVID-19 related spending. They highlighted the need to continue to implement public financial management reforms to improve spending transparency and efficiency, including by reducing recourse to single-source procurement. While Directors noted that a higher share of the SDR allocation could have been used to contain fiscal risks, they emphasized the importance of ensuring transparency and accountability of SDR-related spending.

Directors welcomed the authorities’ structural reform agenda. They concurred that accelerating its implementation and achieving more inclusive growth will require measures aimed at improving the business environment, enhancing the social safety nets, broadening access to quality education, and addressing youth unemployment.

Directors noted the potential positive impact of the onset of oil and gas production on growth. They encouraged the authorities to finalize the fiscal framework for managing oil and gas receipts ahead of the preparation of the 2023 budget and to communicate revenue projections transparently.

Directors agreed that the financial system remains overall sound. They encouraged decisive steps to improve financial inclusion, address remaining pockets of vulnerabilities, and limit fiscal risks from troubled financial institutions. Directors also highlighted the importance of addressing deficiencies in the AML/CFT framework to avoid negative economic repercussions.

It is expected that the next Article IV consultation with Senegal will take place within 24 months, in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.



[1] The PCI is a non-financing tool open to all members of the International Monetary Fund (IMF). It enables them to signal commitment to reforms and catalyze financing from other sources. The establishment of the PCI is part of the Fund’s broader effort to strengthen the global financial safety net—a network of insurance and loan instruments that countries can draw on if confronted with a crisis.

[2] In an economic crisis, countries often need financing to help them overcome their balance of payments problems. Since its creation in June 1952, the IMF’s SBA has been the workhorse lending instrument for emerging and advanced market countries. The SBA was upgraded in 2009 along with the Fund’s broader toolkit to be more flexible and responsive to member countries’ needs. Conditions were streamlined and simplified, and more funds were made available up front. The reform also enables broader high access on a precautionary basis.

[3] The SCF provides financial assistance to low-income countries (LICs) with short-term balance of payments needs. The SCF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of LICs, including in times of shocks or crisis.

[4] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[5] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://0-www-imf-org.library.svsu.edu/external/np/sec/misc/qualifiers.htm.

 

 

2019

2020

2021

2022

2023

2024

2025

2026

EBS/21/44

Est.

EBS/21/44

Proj.

EBS/21/44

Proj.

Projections

National income and prices

GDP at constant prices 1

4.4

1.5

1.5

3.7

5.0

5.5

5.5

9.5

10.3

5.4

5.5

Of which: Non-hydrocarbon GDP

4.4

1.5

1.5

3.7

5.0

5.5

5.5

5.9

6.0

6.0

6.0

Of which: Hydrocarbon GDP

137.1

-3.1

-2.4

Of which: Non-agriculture GDP

4.4

-0.8

-0.8

3.8

5.1

5.6

5.5

10.2

11.2

6.1

6.0

GDP deflator

1.9

2.3

2.3

1.9

2.5

2.1

2.3

2.0

1.8

1.9

1.9

Consumer prices

Annual average

1.0

2.5

2.5

2.0

2.5

2.0

2.5

1.5

1.5

1.5

1.5

End of period

0.6

2.4

2.4

2.2

3.6

1.7

1.5

0.8

2.1

1.0

1.9

External sector

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

15.5

-10.5

-7.1

6.4

17.1

16.2

9.6

20.4

33.8

4.8

2.3

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

6.2

-6.7

-6.1

11.5

12.7

6.7

8.1

11.5

12.9

6.5

4.1

Export volume

18.8

-7.2

-1.7

2.8

-1.5

15.2

7.9

29.0

39.2

5.6

3.4

Import volume

3.9

3.9

1.0

3.5

3.9

13.0

8.6

11.4

7.6

8.0

4.2

Terms of trade ("–" = deterioration)

-4.8

7.4

1.7

-3.8

9.6

6.8

2.0

-6.8

-8.4

0.6

-1.0

Nominal effective exchange rate

-1.3

Real effective exchange rate

-1.8

Broad money

8.2

12.4

12.3

6.2

15.3

8.6

13.0

Net domestic assets, of which

7.4

14.4

16.4

7.6

9.3

10.7

11.1

Credit to the government (net)

1.7

15.4

15.4

2.3

7.0

4.0

7.1

Credit to the economy (net)

6.1

1.2

1.2

5.9

3.7

7.9

5.1

Government financial operations

Revenue

20.4

20.0

20.0

20.2

20.4

21.0

21.0

21.4

21.7

22.9

23.8

Grants

1.6

2.3

2.3

1.9

1.5

2.1

1.8

1.8

1.6

1.5

1.5

Total expenditure

24.3

26.4

26.4

25.7

26.7

25.2

25.7

25.1

24.7

25.9

26.9

Net lending/borrowing (Overall Balance)

excluding grants

-5.5

-8.7

-8.7

-7.4

-7.9

-6.3

-6.6

-5.5

-4.6

-4.5

-4.5

including grants

-3.9

-6.4

-6.4

-5.4

-6.3

-4.2

-4.8

-3.7

-3.0

-3.0

-3.0

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

-3.1

-6.3

-6.3

-5.1

-6.0

-4.0

-4.5

-3.7

-3.0

-3.0

-3.0

Primary fiscal balance

-1.9

-4.3

-4.3

-3.3

-4.2

-2.1

-2.6

-1.6

-1.0

-1.0

-1.0

Savings and investment

Current account balance (official transfers included)

-8.1

-10.5

-10.0

-11.3

-10.6

-10.5

-9.4

-7.2

-4.0

-4.4

-4.4

Current account balance (official transfers excluded)

-8.4

-11.9

-11.5

-11.8

-10.8

-11.1

-9.8

-7.6

-4.3

-4.6

-4.6

Gross domestic investment

31.9

30.6

32.9

32.4

33.7

33.1

32.4

34.4

31.9

30.8

29.4

Government 2

6.3

6.9

6.9

7.1

7.7

7.6

8.0

7.7

7.7

7.8

7.9

Nongovernment

25.7

23.8

26.0

25.3

26.0

25.6

24.4

26.8

24.2

22.9

21.5

Gross national savings

23.8

20.2

22.8

21.1

23.1

22.6

23.0

27.3

27.9

26.4

25.1

Government

6.7

5.7

4.8

5.7

4.8

6.2

5.0

4.7

4.9

5.6

6.0

Nongovernment

17.1

14.5

18.0

15.4

18.3

16.5

18.0

22.6

23.0

20.8

19.1

Total public debt 3

63.8

68.7

68.8

70.9

73.0

69.9

71.6

67.7

63.1

61.5

60.0

Domestic public debt 4

11.0

14.6

14.7

14.0

15.1

13.3

14.4

14.3

13.6

14.6

15.0

External public debt

52.8

54.1

54.0

56.9

57.9

56.6

57.2

53.4

49.5

46.8

45.0

Total public debt service 3

Percent of government revenue

22.1

25.4

25.5

20.4

25.3

23.8

26.9

26.6

26.2

27.3

29.9

Memorandum items:

Gross domestic product (CFAF billions)

13,655

14,185

14,185

14,998

15,273

16,159

16,485

18,415

20,668

22,200

23,857

of which non-hydrocarbon (CFAF billions)

13,655

14,185

14,185

14,998

15,273

16,159

16,485

18,008

19,481

20,970

22,615

Gross domestic product (USD billions)

23.3

24.7

24.7

Share of hydrocarbon in total GDP (%)

2.2

5.7

5.5

5.2

National Currency per U.S. Dollar (Average)

586

574.8

575

Sources: Senegal authorities; and IMF staff calculations.

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.

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