Press Release No. 14/190 April 30, 2014

Press Release: Conclusion of the IMF Mission to Senegal for the Seventh Review of the PSI

April 30, 2014

An International Monetary Fund (IMF) mission led by Hervé Joly visited Senegal from April 16 to 30, 2014 to conduct the seventh review under the three-year Policy Support Instrument (PSI) approved in December 2010. The members of the mission met with the President of the Republic, the ministers of economy and finance, energy, oversight of the Plan Sénégal Emergent (PSE), representatives of the Central Bank of West African States (BCEAO), other senior government officials, and representatives of the private sector, civil society, and the development partners.

At the conclusion of the visit, the mission issued the following statement:

“Early estimates by the authorities suggest that GDP growth was weaker than forecast in 2013 (about 3.5 percent compared to the expected 4 percent). This is indicative of low levels of production in the agricultural sector as well as difficulties in the industrial sector and in the extractive industries. In contrast, activity was particularly buoyant in the telecommunications and construction sectors. Inflation stood at 0.7 percent on average in 2013 amid softer agricultural commodity prices in the international market. The external current account deficit deteriorated (about 10 percent of GDP) largely as a result of a significant decline in gold prices. Credits to the economy increased sharply while the money supply grew by 8 percent.

“A more favorable international environment, improvement in the socio-political situation in the subregion, a strong rebound in agricultural production and in the mining and industrial sectors in 2014 as well as stepped up public investment efforts (including related to implementation of the PSE) are expected to boost GDP growth to 4.9 percent. Inflation is expected to remain very subdued.

“All quantitative assessment criteria and indicative targets for the program at end-2013 were met, including the budget deficit target, despite significant revenue shortfalls. Several factors account for these shortfalls, notably, lower-than-expected economic activity and inflation levels, SENELEC’s (Société National d'Éléctricité du Sénégal) financial situation which resulted in the accumulation of significant tax arrears, and VAT revenue shortfalls following the abolition of VAT withholding by public agencies in the context of the 2013 reform of the General Tax Code. The implementation of reforms has lagged behind in recent months, and some structural measures have either not been met or are pending implementation.

“Discussions between the authorities and the mission focused, first of all, on the PSE. The mission noted that the PSE provides a good diagnostic assessment of Senegal’s strengths and weaknesses. It is also a very ambitious strategy, aimed at doubling the country’s growth potential through a substantial investment and reform effort. The mission commends Senegal’s highest authorities on having taking ownership of the program, which augurs well for its implementation. The mission underscored the need for increased efficiency of investment spending. In that regard, the success of the PSE will require strong reforms to improve the business environment and a deep reform of the state. The latter will also be needed to finance higher public investment.

“Discussions also explored the fiscal outlook for 2014 and stepping up of the pace of reform. The fiscal outlook has deteriorated since the last review, owing to revenue mobilization problems (see above). Further, implementation of the PSE calls for additional investment spending. The authorities, who have reaffirmed their objective of continued reduction of the budget deficit in 2014, identified with the mission a number of measures aimed at reducing the tax revenue shortfall and making savings on less productive spending. The outstanding structural measures are expected to be implemented in the weeks ahead.

“Discussions on the seventh review of the PSI are quite far advanced and are expected to be concluded in the upcoming weeks.”