Press Release No. 22/162

IMF Staff Reaches Staff-Level Agreement on Senegal’s Policy Coordination Instrument, Stand-By Credit Facility, Stand-By Arrangement, and Request for Augmentation

May 19, 2022

• The IMF team has reached a staff-level agreement with the Senegalese authorities on economic and financial policies that could support approval of an augmentation of access under the Stand-By Arrangement (SBA) and Stand-By Credit Facility (SCF) and on completing the fifth review under the Policy Coordination Instrument (PCI) and the second reviews under the SBA and SCF.
• Senegal is hit by soaring global fuel and food prices compounded by the war in Ukraine. Cushioning their impact on the economy without exacerbating debt vulnerabilities would require reprioritizing spending and reining in energy subsidies, combined with well-targeted support for the most vulnerable.
• Increased IMF financial support will help the authorities cope with these exogenous shocks and will provide additional resources to meet urgent socio-economic needs while catalyzing other donor support.

Washington DC: A staff team from the International Monetary Fund (IMF), led by Mr. Edward Gemayel, conducted discussions during April 19-22 in Washington DC and May 5-17 in Dakar, on augmentation of access under the SBA and SCF arrangements and the fifth review under the PCI and the second reviews under the SBA and SCF.

At the conclusion of the mission, Mr. Gemayel issued the following statement:

“Following productive discussions, the IMF team reached a staff-level agreement with the Senegalese authorities on economic and financial policies that could support approval of an augmentation of access under the SBA and SCF arrangements and on completing the fifth review under the PCI and the second reviews under the SBA and SCF. Upon completion of the review, SDR161.8 million (about US$216.8 million) will be made available to Senegal. Consideration by the IMF’s Executive Board, following management’s approval, is expected in late June 2022.

“The economy entered 2022 with strong growth momentum. However, soaring global fuel and food prices caused by the war in Ukraine combined with the economic slowdown in Senegal’s main trading partners partly due to the Ecowas sanctions against Mali are projected to slow real GDP growth to about 5 percent in 2022 (compared to an initial projection of 5.5 percent). Inflation is expected to reach 5.5 percent, driven by higher food and energy prices.

“The authorities have adopted a supplementary budget to incorporate additional spending for energy subsidies, public wages, cash transfers, and security. These new spending pressures will bring the fiscal deficit to 6.2 percent of GDP compared to 4.8 percent of GDP in the initial budget. The authorities and the IMF team agreed on a set of policy measures to avoid budgetary slippages and to ensure that the fiscal deficit will still converge to 3 percent of GDP by 2024.

“The government made progress in implementing their IMF-supported program. All but one end-December 2021 performance criteria were met. Tax revenues fell short of the program target, partly due to weak implementation of the package of tax measures adopted in the first supplementary budget in 2021. One of three indicative targets were met. The share of single-sourced procurement contracts continued to exceed the program ceiling. IMF staff underscored the importance of limiting such a practice to ensure better value for money in public spending and welcomed the authorities’ commitment to update the procurement code to reduce recourse to single-sourced procurement. On the structural front, four out of eight structural benchmarks were met. The special report of the Audit court regarding the COVID-19 related spending has encountered delays and is now expected to be completed by July 2022.

“With limited fiscal space, the government needs to better target its support to the population and enhance revenue mobilization to preserve debt sustainability. In this regard, the IMF team commended the authorities for the focus on strengthening and expanding the national social registry, which will enhance the government’s capacity to better respond to future shocks with more targeted measures. It encouraged the authorities to accelerate efforts to finalize a credible roadmap to gradually unwind energy subsidies. It considered that a more resolute implementation of the medium-term revenue strategy is needed to boost domestic revenues.

“The IMF team welcomed ongoing steps to align the AML/CFT framework with international standards and the authorities’ renewed attention on food security. It encouraged the authorities to finalize the fiscal framework for managing oil and gas receipts ahead of the preparation of the 2023 budget and to communicate revenue projections transparently. The authorities and IMF staff concurred on the need to speed up the post office group restructuring.

“The IMF team wishes to thank the authorities and other counterparts for their excellent cooperation and candid, and constructive discussions during the mission and reaffirms the IMF’s support to Senegal.

“The team met with his Excellency President Macky Sall; Minister of Finance and Budget, Mr. Abdoulaye Daouda Diallo; Minister of Economy, Planning and International Cooperation, Mr. Amadou Hott; Minister of Commerce and Small and Medium Enterprises, Ms. Assome Aminata Diatta; Minister of Agriculture and Rural Equipment, Mr. Moussa Baldé, National Director of the BCEAO, Mr. Ahmadou Al Aminou Lo; General Director of the Public Procurement Regulatory Authority, Mr. Saër Niang; and other senior government and BCEAO officials. Staff also had productive discussions with development partners.”