IMF Executive Board Completes Fifth Review Under the Policy Support Instrument (PSI)

IMF News, December 18, 2017

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The Executive Board completed the fifth review of Senegal’s economic performance under a program supported by the Policy Support Instrument (PSI).
The PSI supports the authorities’ macroeconomic reforms designed to advance the Plan Sénégal Emergent (PSE), the authorities’ strategy to increase growth and reduce poverty while preserving macroeconomic stability and debt sustainability.
The PSI was approved on June 24, 2015 and extended by one-year to June 24, 2019. The Board’s decision was taken on a lapse of time basis.
Footnote: The PSI is an instrument of the IMF designed for countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring and endorsement of their policies. The PSI helps countries design effective economic programs that, once approved by the IMF's Executive Board, signal to donors, multilateral development banks, and markets the Fund's endorsement of a member's policies.

Growth is expected to exceed 6 percent in 2017 for the third year in a row.
Inflation remains low.
Fiscal deficit:
- Projected to reach 3.7 percent of GDP in 2017.
- Debt has grown faster than the fiscal deficit would imply as the Treasury has financed the deficits of the Post Office and Civil Service Pension, as well as expenditures from past years’ appropriations.
Current account deficit:
- Projected to increase to 7.8 percent of GDP in 2017 due to higher oil prices and slightly slower export growth, reversing a decreasing trend over the past several years.

Overall assessment: satisfactory.
Compliance with quantitative targets:
- All end-June 2017 assessment criteria and indicative targets were met, except for the indicative target on tax revenue which was missed due to lower-than projected oil-related revenues.
Structural benchmarks (SBs) for this review:
- Of the three SBs set for this review, two were met.
- Further progress is needed on the third SB to make the platform to share information between the tax and customs departments fully operational to improve revenue collection.

The outlook for the Senegalese economy remains on the whole positive.
Policy priorities to sustain high growth:
- Continue implementing the structural reform program.
- Accelerate implementation of reforms to improve the business environment and attract private investment.
Role of Special Economic Zone:
- The new Special Economic Zone could play a catalytic role by leading by example in terms of good governance.
Other reform needs:
- Further progress is needed on implementing measures to facilitate small and medium enterprise access to credit and, more broadly, the transition of the informal sector to the formal sector.
Sources of external risk:
- Spillover from regional security threats.
- Tightening of regional and global financial market conditions.

Short-term challenge:
- Find fiscal space for investment in infrastructure to facilitate private sector development and for social spending without undermining debt sustainability.
Immediate policy actions recommended:
- Contain financing needs for Treasury operations through reforms of the Post Office, Civil Service Pensions and the comptes de dépôt.
Medium-term requirements:
- Continue to support the Plan Sénégal Emergent (PSE) by raising tax revenues to the WAEMU convergence criterion level following the GDP rebasing, which will entail improvements in tax policy and revenue administration.
Debt management:
- While Senegal remains at low risk of debt distress, debt indicators have deteriorated, requiring strong progress on fiscal and structural reforms.
- Senegal needs to continue to manage its debt prudently, including exercising caution with non-concessional debt.

IMF Press Release No. 17/509, December 18, 2017