IMF Staff Completes Review Mission to Senegal

IMF News, September 19, 2017

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A staff team from the International Monetary Fund (IMF), led by Mr. Ali Mansoor, visited Dakar from September 7-19, 2017 as part of the fifth review of the IMF’s Policy Support Instrument (PSI) approved in June 2015.
The fifth review under the PSI is tentatively scheduled to be taken up by the IMF Executive Board in December 2017.

Public debt has continued to rise and debt service is expected to increase from 24 percent of revenue in 2014 to 30 percent in 2017.
Continued fiscal consolidation is required to ensure debt sustainability over the medium term.
The pace of fiscal consolidation is programmed to slow down slightly in 2018, with a deficit of CFAF 367 billion (3.5 percent of GDP) to provide space to implement projects financed with concessional resources.
If recommended measures are implemented in 2018, they are expected to help reduce debt service to 2014 levels over the next 10 years.

Domestic revenue mobilization is required, particularly by:
- rolling back exemptions with low socio-economic impact;
- curtailing own-financed investment projects that have not been vetted by the project bank;
- strictly limiting net Treasury financing to budgetary operations of the current year.
To ensure the 2018 relaxation does not lead to excessively high debt service, it will be important to:
- curtail tax exemptions;
- integrate quasi-fiscal revenues into the budget;
- ensure the evaluation of all new domestically-financed investment projects.
Authorities committed to measures to eliminate additional borrowing needs beyond the budgetary fiscal deficit by:
- restructuring the Post Office;
- implementing civil service pension fund reform;
- subjecting comptes de dépôts to budgetary rules.

PSI program implementation remains broadly satisfactory.
The quantitative targets for end-June 2017 were met, except for the indicative target on tax revenue, explained by a shortfall in petroleum revenues.
There is significant progress with implementation of the three structural benchmarks on revenue administration and public financial management.

To maintain medium-term growth momentum, reforms to the SEZ framework need to be extended to promote SME development and mobilize foreign direct investment for globally competitive production.
The mission welcomes authorities’ proposals to use the G-20’s Compact with Africa to extend and accelerate SEZ reforms aimed at rules-based economic governance and a transparent tax regime.
Specific SEZ tax recommendations:
- Replace the 50-year tax holidays in the SEZ with income taxes of 15 percent that cannot be exempted.
- Subject all SEZ investors to the VAT, with a rapid refund regime for exporters.
Expected SEZ outcomes:
- Relaxed controls over who invests in the zone to make it easier for small and medium-sized enterprises to emerge from the informal sector.
- Support under the Compact with Africa to tackle SEZ bottlenecks in infrastructure, particularly electricity.

The team met with the Prime Minister, the ministers or senior government officials responsible for the economy, finance and planning, the civil service, industry and mines, investment promotion, the BCEAO National Director, other senior government officials and development partner representatives.
The team thanked the authorities for their hospitality and the close working relationship and climate of openness throughout the discussions.

IMF Communications Department — End-of-Mission press release dated September 19, 2017