IMF Executive Board Approves US$1.51 billion Under the Extended Fund Facility and Extended Credit Facility, and US$324 million Under the Resilience and Sustainability Facility for Senegal
June 26, 2023
- The IMF Executive Board approved today an Extended Credit Facility (ECF) and an Extended Fund Facility (EFF) in the amount of US$1.51 billion with Senegal, in addition to a Resilience and Sustainability Facility (RSF) in the amount of US$324 million.
- The EFF/ECF-supported program will help meet Senegal’s protracted balance of payment needs and address macroeconomic imbalances. Policy priorities under the EFF/ECF program include reducing debt vulnerabilities by embarking on a growth-friendly fiscal consolidation, strengthening governance, and delivering a more inclusive and job-rich growth.
- The RSF aims to tackle longer-term structural challenges related to climate change and the implementation of climate policies. The RSF will support Senegal's climate change mitigation objectives, accelerate the country’s climate change adaptation, and support work to mainstream climate change considerations into the budget process.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) today approved a 36-month Extended Credit Facility (ECF) and Extended Fund Facility (EFF) of SDR 1.132 billion (about US$1.51 billion)with Senegal. The Executive Board also approved an Arrangement Under the Resilience and Sustainability Facility (RSF) of about SDR 242.7 million (about US$324 million). The EFF/ECF-supported program will provide critical help to address macroeconomic imbalances by reducing debt vulnerabilities, strengthening governance, and delivering a more inclusive and job-rich growth. The RSF arrangement aims to tackle longer-term structural challenges related to climate change through the implementation of appropriate climate policies.
The Executive Board’s decision enables an immediate disbursement equivalent to SDR 161.8 million (about US$216 million) under the EFF/ECF.
The Senegalese economy has been severely impacted by different shocks including the rising food and energy prices, tightening financial conditions, weaker external demand, and the US dollar appreciation. The country is also facing multiple challenges, including heightened regional insecurity, and growing socio-political tensions ahead of the presidential elections next year. As a result, 2022 was a challenging year. Growth decelerated to 4.0 percent, inflation accelerated to 9.7 percent, and the fiscal and current account deficits widened.
Despite these challenges, the authorities are committed to embarking on a growth-friendly fiscal consolidation to contain the budget deficit at 3 percent of GDP by 2025. They intend to undertake additional revenue measures and to improve spending efficiency including by a progressive phasing-out of energy subsidies. These efforts should help rebuild fiscal buffers and put public debt on a downward trajectory over the medium term. The authorities are also committed to strengthening the governance, transparency, and anti-corruption frameworks.
Medium-term growth prospects appear more favorable with the oil and gas production set to start in early 2024. However, risks to the outlook remain high and heavily tilted to the downside, including lower global growth, tighter financial conditions, more intense and prolonged war in Ukraine, and further US dollar appreciation. Further risks include natural disasters related to climate change, a deterioration of the regional security situation and a degradation of the socio-political tensions ahead of the presidential elections.
At the conclusion of the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director, and Acting Chair, made the following statement:
“Despite the progress achieved under the previous Fund-supported programs, Senegal’s public finances and external stability have been severely strained by the sequence of adverse external shocks and regional security concerns. In response, the authorities are implementing a growth-friendly fiscal consolidation strategy aimed at safeguarding debt sustainability, strengthening governance, and promoting inclusive growth, supported by Extended Fund Facility/Extended Credit Facility arrangements. To address long-term challenges of climate change, the authorities are also implementing a comprehensive reform agenda under the Resilience and Sustainability Facility (RSF) arrangement that supports the country’s climate change mitigation and adaptation goals.
Reducing growing debt vulnerabilities requires a steadfast implementation of the fiscal consolidation strategy anchored on commitments to reach a fiscal deficit of 3 percent of GDP by 2025. On the revenue side, the implementation of the medium-term revenue strategy should be accelerated to enhance revenue mobilization, notably through the streamlining of VAT exemptions and broadening the tax base. On the spending side, a gradual elimination of untargeted energy subsidies is a priority, which should be accompanied by measures to strengthen existing social safety nets. Prudent debt management and enhanced oversight of SOEs borrowing and public-private partnership operations are crucial to mitigate risks to debt sustainability.
Resolute implementation of structural reforms, including by enhancing social safety nets, strengthening governance and transparency, improving the business environment, and addressing weaknesses in the financial sector will promote a more inclusive and private sector-led growth. Empowering the anti-corruption agency (OFNAC) and strengthening the asset declaration system for public officials will be critical to strengthen the anti-corruption frameworks. Urgent actions are also needed to address deficiencies in the AML/CFT framework to avoid possible negative macroeconomic and reputational repercussions and to exit from the FATF’s grey list.
Tackling climate change challenges will be critical for Senegal’s long-term macroeconomic resilience. The RSF-supported policy reforms should focus on mitigation measures to protect against costal erosion, enhance water management to strengthen agriculture, and help integrate climate change considerations into the budget process. The authorities should take full advantage of the synergies with the World Bank, the Global Center on Adaptation, and other development partners and catalyze further private climate financing.”
Table 1. Senegal: Selected Economic and Financial Indicators
|
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
2027 |
||||
|
IMF CR 22/197 |
Act. |
IMF CR 23/20 |
Est. |
IMF CR 23/20 |
Proj. |
Projections |
|||||
|
National income and prices |
|||||||||||
|
GDP at constant prices |
1.3 |
6.1 |
6.5 |
4.7 |
4.0 |
8.3 |
5.3 |
10.6 |
7.4 |
4.8 |
5.1 |
|
Of which: Non-hydrocarbon GDP |
1.3 |
6.1 |
6.5 |
4.7 |
4.0 |
6.0 |
5.3 |
6.0 |
6.0 |
6.0 |
6.0 |
|
GDP deflator |
1.5 |
2.4 |
1.8 |
6.6 |
8.6 |
3.1 |
3.2 |
2.0 |
2.0 |
2.0 |
2.0 |
|
Consumer prices (annual average) |
2.5 |
2.2 |
2.2 |
8.5 |
9.7 |
3.5 |
5.0 |
2.0 |
2.0 |
2.0 |
2.0 |
|
External sector |
|||||||||||
|
Exports, f.o.b. (CFA francs) |
-7.1 |
26.4 |
26.3 |
13.1 |
24.6 |
25.5 |
15.7 |
25.6 |
8.7 |
5.9 |
8.1 |
|
Imports, f.o.b. (CFA francs) |
-6.1 |
18.2 |
17.1 |
23.1 |
42.4 |
8.7 |
2.0 |
0.7 |
4.7 |
6.1 |
9.1 |
|
Export volume |
-4.7 |
3.6 |
12.4 |
-8.0 |
-5.8 |
21.5 |
17.5 |
27.1 |
10.0 |
5.7 |
5.9 |
|
Import volume |
2.8 |
3.3 |
11.3 |
4.5 |
7.8 |
11.4 |
6.8 |
3.5 |
8.4 |
5.4 |
7.7 |
|
Terms of trade ("–" = deterioration) |
6.8 |
6.6 |
6.8 |
4.4 |
0.2 |
5.8 |
3.2 |
1.7 |
2.3 |
-0.6 |
0.7 |
|
Nominal effective exchange rate |
2.9 |
1.0 |
1.0 |
… |
… |
… |
… |
… |
… |
… |
… |
|
Real effective exchange rate |
3.6 |
-1.9 |
-1.9 |
… |
… |
… |
… |
… |
… |
… |
… |
|
Money and Credit |
|||||||||||
|
Broad money |
12.3 |
15.6 |
14.5 |
14.5 |
22.5 |
11.9 |
20.0 |
… |
… |
… |
… |
|
Net domestic assets, of which |
16.5 |
13.7 |
11.1 |
16.2 |
22.0 |
13.5 |
23.1 |
… |
… |
… |
… |
|
Credit to the government (net) |
15.4 |
2.4 |
6.0 |
9.0 |
12.8 |
4.9 |
-0.9 |
… |
… |
… |
… |
|
Credit to the economy (net) |
1.2 |
12.7 |
4.3 |
8.7 |
13.6 |
10.0 |
15.1 |
… |
… |
… |
… |
|
Central government operations |
|||||||||||
|
Revenue |
20.2 |
19.4 |
19.5 |
21.0 |
19.9 |
21.3 |
21.5 |
21.8 |
23.3 |
23.7 |
23.7 |
|
Grants |
2.3 |
0.9 |
0.9 |
1.4 |
0.8 |
1.7 |
1.6 |
1.2 |
1.2 |
1.2 |
1.2 |
|
Total expenditure |
26.6 |
25.7 |
25.8 |
27.2 |
26.6 |
26.2 |
26.4 |
25.7 |
26.3 |
26.7 |
26.8 |
|
Net lending/borrowing (including grants) |
-6.4 |
-6.3 |
-6.3 |
-6.2 |
-6.6 |
-4.9 |
-4.9 |
-3.9 |
-3.0 |
-3.0 |
-3.1 |
|
Primary fiscal balance |
-4.4 |
-4.3 |
-4.3 |
-3.9 |
-4.4 |
-2.7 |
-2.2 |
-1.5 |
-0.7 |
-0.7 |
-0.8 |
|
Savings and investment |
|||||||||||
|
Current account balance (official transfers included) |
-10.1 |
-13.3 |
-11.2 |
-15.7 |
-19.9 |
-11.0 |
-13.3 |
-6.1 |
-4.2 |
-3.8 |
-3.7 |
|
Gross domestic investment |
35.2 |
38.0 |
35.4 |
43.0 |
46.8 |
41.4 |
42.5 |
36.4 |
34.7 |
32.6 |
32.5 |
|
of which: Central Government |
7.0 |
6.8 |
6.9 |
5.9 |
5.5 |
6.0 |
5.7 |
7.3 |
7.2 |
7.3 |
7.3 |
|
Gross national savings |
25.0 |
24.7 |
24.3 |
27.3 |
26.9 |
30.4 |
29.2 |
30.3 |
30.4 |
28.8 |
28.7 |
|
of which: Central Government |
6.3 |
4.9 |
4.9 |
7.1 |
6.2 |
5.1 |
5.0 |
5.5 |
6.7 |
6.5 |
6.5 |
|
Public sector debt |
|||||||||||
|
Total public debt |
69.2 |
73.2 |
73.3 |
75.1 |
76.6 |
73.7 |
77.7 |
73.2 |
70.4 |
69.5 |
68.7 |
|
Domestic public debt 1 |
14.8 |
16.1 |
16.1 |
16.8 |
20.2 |
19.3 |
18.5 |
16.8 |
15.2 |
15.7 |
16.4 |
|
External public debt |
54.4 |
57.1 |
57.2 |
58.2 |
56.4 |
54.4 |
59.3 |
56.5 |
55.1 |
53.8 |
52.3 |
|
Total public debt service (percent of revenue) |
27.3 |
28.4 |
28.6 |
25.8 |
30.7 |
31.2 |
32.5 |
26.1 |
29.9 |
32.1 |
32.2 |
|
Memorandum items: |
|||||||||||
|
Gross domestic product (CFAF billions) |
14,101 |
15319.0 |
15,288 |
17092.7 |
17,268 |
19093 |
18,770 |
21,176 |
23,202 |
24,806 |
26,596 |
|
of which non-hydrocarbon (CFAF billions) |
14,101 |
15319.0 |
15,288 |
17092.7 |
17,268 |
18700 |
18,767 |
20,171 |
21,875 |
23,727 |
25,656 |
|
Gross domestic product (USD billions) |
24.5 |
27.6 |
27.6 |
… |
… |
… |
… |
… |
… |
… |
… |
|
Share of hydrocarbon in total GDP (percent) |
… |
… |
… |
… |
… |
2.1 |
0.0 |
4.7 |
5.7 |
4.4 |
3.5 |
|
National currency per U.S. dollar (average) |
575 |
554.2 |
554 |
… |
… |
… |
… |
… |
… |
… |
… |
|
WAEMU gross official reserves (billions of $US) |
… |
… |
… |
… |
… |
… |
… |
… |
… |
||
|
(percent of broad money) |
… |
… |
… |
… |
… |
… |
… |
… |
… |
||
|
(months of WAEMU imports of GNFS) |
… |
… |
… |
… |
… |
… |
… |
… |
… |
||
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