Press Release No. 19/346

IMF Staff Concludes a Staff-Level Agreement with Senegal Under the Policy Coordination Instrument

September 23, 2019

• The new program aims to achieve sustainable and inclusive growth driven by the private sector.
• The medium-term economic outlook remains favourable.
• The government intends to maintain the budget deficit target at 3% in 2019 and beyond, while ensuring the settlement of its outstanding obligations to the private sector.

An International Monetary Fund (IMF) staff team, led by Ms. Corinne Deléchat, visited Dakar from September 12 to 23, 2019 to conduct discussions with the Senegalese authorities on a three-year programme supported by the Policy Coordination Instrument (PCI).

At the end of this visit, Ms. Deléchat issued the following statement:

“The IMF mission and Senegalese authorities reached an agreement on a set of macroeconomic policies and structural reforms that could facilitate the approval of a new program under the PCI. The approval of this program will be submitted to the IMF Executive Board for consideration by mid-December 2019. The PCI is an instrument introduced by the IMF in 2017 to support countries that can benefit from IMF support under a program, but that do not need financial resources from the IMF. The program will support the implementation of the second phase of the Emerging Senegal Plan (Plan Sénégal Émergent – PSE II) and aims, in particular, to achieve sustainable and inclusive growth driven mainly by the private sector and to strengthen macroeconomic stability through maintaining fiscal sustainability and prudent debt management. Through this program, the authorities also aim to establish sustainable and transparent management of the recent hydrocarbon discoveries.

“The medium-term economic outlook remains favourable. Growth is expected to increase from 6% in 2019 to 7% in 2020-21, driven by private investment, before gaining new momentum with the start of commercial production of hydrocarbons in 2022. Inflation is expected to remain low over the medium term. The current account deficit is expected to increase until 2021 as a result of imports needed for the construction of hydrocarbon projects and a decline is expected once oil and gas production and exports begin.

“In line with WAEMU convergence objectives, the government intends to maintain the budget deficit target at 3% in 2019 and beyond, while ensuring the settlement of its outstanding obligations to the private sector. The 2019 fiscal framework also includes a one-off operation to clear unpaid obligations to the state-owned electricity company. Short-term measures have been deployed to increase the rate of revenue collection and to meet the objectives of the supplementary budget law of July 2019. The preparation of the 2020 budget is based on continued efforts to increase revenue mobilization and to streamline the government's operating expenses, taking into account the need to meet the government's financial commitments for earlier years.

“The first pillar of the PCI supports the government's strategy to accelerate private sector development for strong and inclusive growth through the: (i) modernization of infrastructure and strengthening of human capital; (ii) improvement of the business environment by upgrading the legal framework, particularly by the reform of the labor code; (iii) facilitation of access to property rights and modernization of commercial law; and (iv) broadening of access to funding for private companies, particularly for small and medium enterprises. Additionally, the government has set itself the objective of reducing economic and social disparities between urban and rural areas and increasing economic opportunities for women and youth.

“Fiscal policy will aim to maintain the sustainability of public finances and medium-term debt sustainability (Pillar II). Compliance with the WAEMU objectives of maintaining the budget deficit at 3% of GDP and increasing the tax collection to a minimum of 20% of GDP are in line with PCI objectives. A Medium-Term Revenue Strategy aiming to widen the tax base is being developed. It will allow boosting domestic resource mobilization, which is essential for financing the second phase of PSE.

“The third pillar of government reform supported by the PCI aims to establish a sustainable and transparent governance framework for newly-discovered hydrocarbon resources. The government intends to implement a management framework in line with best practices.

“The mission met with His Excellency, Mr. Macky Sall, President of the Republic, the Minister of Finance and Budget, Mr. Abdoulaye Daouda Diallo, the Minister of Economy, Planning and Cooperation, Mr. Amadou Hott, the Minister of Oil and Energy, Mr.  Mouhamadou Makhtar Cissé, BCEAO National Director, Mr. Ahmadou Lo, as well as other senior officials, and development partners and representatives from the private sector.

“The team would like to thank the authorities for their warm hospitality, the quality of the accomplished work, as well as their excellent collaboration and constructive dialogue throughout the discussions.”