Press Release No. 21/353

IMF Staff Completes Mission for the 2021 Article IV Consultation and Reviews under the Policy Coordination Instrument, Stand-By Credit Facility and Stand-By Arrangement for Senegal

December 1, 2021

• The IMF team has reached a staff-level agreement with the authorities on economic and financial policies that could support approval of the fourth review under the Policy Coordination Instrument (PCI) and the first review under the Stand-By Credit Facility (SCF) and Stand-By Arrangement (SBA).
• A revenue-based fiscal consolidation to reduce the budget deficit to 3 percent of GDP by 2024 will preserve space for priority spending and investment and keep public debt on a downward trajectory.
• Maintaining macroeconomic stability, improving public service delivery, gradually phasing out energy subsidies, stepping up investment in education and social protection as well as accelerating reforms aimed at overcoming key constraints to private sector development will support strong, inclusive, and job-rich growth.

Washington DC : A staff team from the International Monetary Fund (IMF), led by Ms. Corinne Deléchat, conducted a hybrid mission from October 22 to November 20, 2021 to conduct the 2021 Article IV consultation, the fourth review under the PCI and the first review of the 18-month financing arrangements under the SCF and SBA.

At the conclusion of the mission, Ms. Deléchat issued the following statement:

“The IMF team has reached staff-level agreement with the Senegalese authorities on economic and financial policies that could support approval of the fourth review under the PCI and the first review of the 18-month financing arrangements under the SCF and SBA. Consideration by the IMF’s Executive Board is tentatively planned for January 2022. Upon completion of the Executive Board review, Senegal would have access to SDR 129.4 million (equivalent to about US$180 million), bringing the total IMF financial support under the SCF and SBA arrangements to SDR 258.8 million (about US$360 million).

“Senegal’s economic rebound through September 2021 was stronger than envisaged, even as the country faced a third wave of the pandemic in the third quarter, on the back of solid industrial and services production and continued policy support. GDP growth for 2021 is revised up from 3 ½ to 5 percent. Average inflation is projected at 2 ½ percent, largely reflecting elevated food prices. Budget execution through September was broadly in line with the revised 2021 budget. The authorities have adopted a second supplementary budget to incorporate notably spending related to the SDR allocation and higher energy subsidy needs. On the SDR-related spending, they have decided to spend two-thirds of the allocation in 2021 on unmet obligations, the health sector, domestic vaccine production, and additional cash transfers to vulnerable households. These exceptional priority expenditures will bring the 2021 fiscal deficit to 6.3 percent of GDP.

“Performance under the program has remained satisfactory. All but one end-June 2021 performance criteria and indicative targets were met. The share of single-sourced procurement contracts exceeded the program ceiling. On the structural front, six out of eight structural benchmarks were met. The authorities also made progress on their commitment to accountability and transparency regarding the 2020 Covid-19 related spending. The report of the Fonds Force COVID-19 monitoring committee is now available online. The report on procurement procedures related to COVID-19 spending by the Public Procurement Regulatory Authority (ARMP) will be published by mid-December. The special report of the Audit court is advancing and is now expected to be published at end-March 2022.

“Senegal’s medium-term outlook is favorable, but uncertainty remains elevated and risks are tilted to the downside. GDP growth is projected to accelerate to 5 ½ percent in 2022, and to peak at about 10 percent in 2023-24 with the onset of oil and gas production before stabilizing at around 6 percent over the medium term. The 2022 draft budget focuses on expanding priority social spending and targets a deficit of 4.8 percent of GDP. To contain rising debt vulnerabilities, the IMF team highlighted the importance of boosting domestic revenue mobilization through resolute implementation of the medium-term revenue strategy, reining in fuel and electricity subsidies, and enhancing the efficiency of public spending to achieve the objective of returning to the WAEMU fiscal deficit norm of 3 percent of GDP by 2024. The authorities intend to adopt the institutional and legal framework for the management of oil and gas revenues before end-2021.

“The IMF team welcomed the authorities’ ongoing efforts to strengthen social safety nets, including through institutionalizing the social protection scheme and expanding the beneficiary registry. It encouraged the authorities to embrace digital payments, which are more reliable and faster, for the cash transfer program. The authorities also plan to foster private sector development, including through facilitating access to cheap and reliable electricity while promoting greener energy, facilitating access to credit and to land, improving the provision of public services through digitalization and reducing labor market skills mismatches. They envisage sector-specific support to promote industrialization and job creation, though domestic production of staple foods and pharmaceuticals. It will be important that such support is well-targeted, transparent about the objectives and the scope, and regularly evaluated with regards to cost and benefits to address operational challenges. Finally, the authorities are stepping-up efforts to align the AML/CFT framework with international standards.

“The IMF team wishes to thank the authorities for the close cooperation and frank discussions. The team met with his Excellency President Macky Sall; Minister of Finance and Budget Abdoulaye Daouda Diallo; Minister of Economy, Planning and International Cooperation Amadou Hott; Governor of the BCEAO Tiémoko Meyliet Kone; First President of the Court of Auditors Mamadou Faye; General Director of the Public Procurement Regulatory Authority Saër Niang; and other senior government and BCEAO officials. Staff also had productive discussions with development partners and representatives of the private sector as well as civil society.”