IMF Executive Board Completes First Review Under the Policy Coordination Instrument for Senegal
July 17, 2020
- The Covid-19 pandemic is taking a heavy toll on the economy with growth projected at 1.1 percent in 2020 compared to 5.3 percent in 2019.
- The authorities have taken significant actions to contain the pandemic and mitigate its economic fallout, supported by additional financing from Senegal's development partners and participation in the G20 and Paris Club-supported Debt Service Suspension Initiative.
- Effective and transparent implementation of measures to address the crisis is the key challenge in the near term.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the first review under the Policy Coordination Instrument (PCI) for Senegal.
The PCI for Senegal was approved on January 10, 2020 (see Press Release No. 20/6) to support the second phase of the authorities’ national development strategy “Plan Senegal Emergent.” It is articulated around three main pillars: achieving high, sustainable, and inclusive growth; consolidating macroeconomic stability through prudent fiscal policy, including through increasing revenues and spending efficiency, and sound debt management; and managing the oil and gas sector in a sustainable and transparent manner.
The Covid-19 pandemic has significantly altered the outlook envisaged at the time of the PCI’s approval, ending a period of buoyant growth averaging about 6 ½ percent over the last 6 years. Containment measures, lower external demand, reduced remittances, and the sudden stop of travel and tourism are taking a significant toll on the economy. GDP growth is now projected at 1.1 percent for 2020 compared to 5.3 percent in 2019, with significant uncertainty and downside risks on the strength of the recovery.
The authorities have taken significant actions to contain the pandemic and mitigate its economic fallout, supported by additional financing from Senegal’s development partners and participation in the G20 and Paris Club Debt Service Suspension Initiative. The IMF disbursed SDR 323.6 million (about US$ 442 million, 100 percent of quota) under the Rapid Financing Instrument and Rapid Credit Facility in April to help Senegal meet the urgent balance of payment needs stemming from the pandemic.
Staff and the authorities agreed on a revised 2020 budget reflecting the Covid-19 response with substantially higher health spending, targeted support to the vulnerable, and significant economic stabilization measures. The fiscal deficit will temporarily increase to 6.1 percent of GDP and is expected to decline back to 3 percent of GDP by 2022, in line with regional fiscal convergence criteria, as the situation normalizes.
Program implementation has been good with all but one quantitative target met as of end-December 2019, and good progress achieved on structural reforms. PCI quantitative targets for end-June and end-December 2020 are being recalibrated to reflect the impact of the pandemic, and reform objectives are being streamlined to allow the authorities to focus on the crisis.
At the conclusion of the Board discussion on the first PCI for Senegal, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair made the following statement:
“The Covid 19 pandemic is taking a heavy toll on Senegal’s economy. Lower external demand, a sudden stop of travel and tourism, declining remittances and the effects of domestic containment measures are weighing on activity. The near term outlook is subdued and highly uncertain. A gradual recovery is expected in the second half of 2020 and 2021 while downside risks prevail.
“The authorities have acted promptly to mitigate the impact of the pandemic by increasing health spending and providing targeted support to vulnerable households and firms. The authorities’ commitment to ensure full transparency and accountability of the emergency spending and financing under the Debt Service Relief Initiative is welcome and will support social cohesion and help mobilize external financial support. As the crisis continues to unfold, they should expand their support to the poorest and the informal sector, including small and medium sized enterprises.
“The temporary fiscal expansion in the revised 2020 budget should help finance the health response, protect livelihoods and support activity. Once conditions normalize, a well anchored and sound medium term fiscal policy will be key for debt sustainability and regional stability. In this context, the authorities’ commitment to return to a 3 percent of GDP deficit by 2022 is welcome.
“Policy implementation under the Policy Coordination Instrument has been good, notwithstanding the difficult circumstances. To pave the way for a strong and inclusive recovery going forward, the authorities should continue to focus on improving the business environment and boost private sector investment while pursuing ongoing reforms to enhance debt management, revenue mobilization and public financial management. Moreover, the slowdown exacerbates risks to financial stability which require close monitoring as the banking sector has a vital role to play in financing the recovery.”
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Table 1. Senegal: Selected Economic and Financial Indicators, 2019–251 |
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2019 |
2020 |
2021 |
2021 |
2022 |
2023 |
2024 |
|
|
Prel. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
|
|
(Annual percentage change) |
|||||||
|
National income and prices |
|||||||
|
GDP at constant prices 1 |
5.3 |
1.1 |
4.0 |
6.0 |
12.2 |
8.1 |
6.0 |
|
Of which: Non-hydrocarbon GDP |
5.3 |
1.1 |
4.0 |
6.0 |
7.3 |
7.2 |
7.3 |
|
Of which: Hydrocarbon GDP |
… |
… |
… |
… |
… |
28.1 |
-16.1 |
|
Of which: Non-agriculture GDP |
5.8 |
0.9 |
4.1 |
6.2 |
12.9 |
8.3 |
6.0 |
|
GDP deflator |
1.7 |
2.5 |
1.7 |
0.8 |
4.2 |
1.6 |
1.5 |
|
Consumer prices |
|||||||
|
Annual average |
1.0 |
2.0 |
2.0 |
1.9 |
1.5 |
1.5 |
1.5 |
|
End of period |
0.6 |
2.5 |
0.9 |
2.8 |
0.4 |
2.4 |
0.7 |
|
External sector |
|||||||
|
Exports, f.o.b. (CFA francs) |
12.3 |
-11.9 |
12.7 |
21.6 |
76.4 |
13.3 |
8.6 |
|
Imports, f.o.b. (CFA francs) |
4.7 |
-8.2 |
12.1 |
15.8 |
20.5 |
9.2 |
9.4 |
|
Export volume |
12.7 |
-6.3 |
12.7 |
17.1 |
101.7 |
11.1 |
5.8 |
|
Import volume |
9.0 |
0.8 |
16.1 |
11.6 |
14.7 |
7.7 |
7.5 |
|
Terms of trade ("–" = deterioration) |
3.7 |
3.2 |
3.6 |
0.1 |
-16.8 |
0.6 |
0.9 |
|
Nominal effective exchange rate |
-1.3 |
… |
… |
… |
… |
… |
… |
|
Real effective exchange rate |
-4.5 |
… |
… |
… |
… |
… |
… |
|
(Changes in percent of beginning-of-year broad money) |
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|
Broad money |
8.2 |
8.4 |
8.0 |
… |
… |
… |
… |
|
Net domestic assets |
7.5 |
7.1 |
2.0 |
… |
… |
… |
… |
|
Credit to the government (net) |
1.7 |
7.5 |
1.4 |
… |
… |
… |
… |
|
(Percent of GDP, unless otherwise indicated) |
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|
Government financial operations |
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|
Revenue |
20.2 |
21.0 |
20.0 |
20.6 |
21.1 |
21.3 |
22.0 |
|
Grants |
1.6 |
3.5 |
2.5 |
2.4 |
2.0 |
1.7 |
1.7 |
|
Total expenditure |
24.0 |
27.1 |
24.5 |
23.7 |
24.1 |
24.3 |
25.0 |
|
Net lending/borrowing (Overall Balance) |
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|
excluding grants |
-5.5 |
-9.6 |
-7.0 |
-5.4 |
-4.9 |
-4.7 |
-4.7 |
|
including grants |
-3.8 |
-6.1 |
-4.5 |
-3.0 |
-3.0 |
-3.0 |
-3.0 |
|
Net lending/borrowing (excl. SENELEC op.) |
-3.1 |
-6.1 |
-4.5 |
-3.0 |
-3.0 |
-3.0 |
-3.0 |
|
Primary fiscal balance |
-1.9 |
-4.0 |
-2.6 |
-1.0 |
-1.1 |
-1.1 |
-1.0 |
|
Savings and investment |
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|
Current account balance (official transfers included) |
-7.7 |
-8.8 |
-10.2 |
-11.0 |
-3.9 |
-3.9 |
-4.5 |
|
Current account balance (official transfers excluded) |
-7.8 |
-10.5 |
-11.0 |
-11.7 |
-4.3 |
-4.1 |
-4.7 |
|
Gross domestic investment |
31.7 |
29.7 |
32.5 |
34.6 |
35.7 |
33.8 |
33.6 |
|
Government 2 |
7.3 |
8.7 |
8.3 |
8.4 |
9.2 |
9.7 |
9.7 |
|
Nongovernment |
24.4 |
21.0 |
24.2 |
26.2 |
26.6 |
24.1 |
23.9 |
|
Gross national savings |
24.0 |
20.9 |
22.3 |
23.6 |
31.8 |
29.9 |
29.1 |
|
Government |
6.6 |
7.3 |
6.2 |
6.7 |
8.8 |
10.0 |
10.6 |
|
Nongovernment |
17.4 |
13.6 |
16.0 |
16.8 |
22.9 |
19.9 |
18.5 |
|
Total public debt 3 |
64.1 |
68.6 |
70.4 |
70.5 |
64.5 |
62.3 |
61.3 |
|
Domestic public debt 4 |
10.9 |
11.0 |
12.8 |
13.6 |
14.1 |
15.7 |
16.9 |
|
External public debt |
53.2 |
57.7 |
57.6 |
56.8 |
50.4 |
46.6 |
44.3 |
|
Total public debt service 3 |
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|
Percent of government revenue |
23.0 |
23.7 |
22.4 |
28.0 |
24.7 |
29.6 |
24.2 |
|
Memorandum items: |
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|
Gross domestic product (CFAF billions) |
13,815 |
14,307 |
15,123 |
16,164 |
18,890 |
20,753 |
22,341 |
|
of which non-hydrocarbon (CFAF billions) |
13,815 |
14,307 |
15,123 |
16,289 |
17,681 |
19,174 |
20,990 |
|
Gross domestic product (USD billions) |
23.6 |
… |
… |
… |
… |
… |
… |
|
Share of hydrocarbon in total GDP (%) |
… |
… |
… |
… |
6.4 |
7.6 |
6.0 |
|
National Currency per U.S. Dollar (Average) |
586 |
… |
… |
… |
… |
… |
… |
|
Sources: Senegal authorities; and IMF staff estimates and projections. |
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1 Based on new national accounts rebased to 2014. |
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2 Reflects reclassification of public investment. |
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3 Starting in 2017 debt level, debt service and government revenue include preliminary data covering the broader public sector. |
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4 Domestic debt includes government securities issued in local currency and held by WAEMU residents. |
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