Press Release No. 10/212

Press Release: IMF Completes Third and Final Review under Senegal’s ESF Arrangement, Approves US$47.7 Million Disbursement and Completes Fifth Review under PSI

May 24, 2010

The Executive Board of the International Monetary Fund (IMF) completed the third and final review of Senegal’s performance under an economic program supported by an Exogenous Shock Facility (ESF) arrangement. The approval enables Senegal to draw the remaining amount equivalent to SDR 32.36 million (about US$47.7 million), bringing total disbursements under the ESF arrangement to SDR 121.35 million (about US$178.8 million). The Executive Board also approved waivers for the nonobservance of the performance criteria on the basic fiscal balance and nonconcessional external debt.

The ESF arrangement for Senegal was approved on December 19, 2008 (see Press Release No. 08/334) to help the country meet a larger balance of payments need brought about by higher food and energy prices. On June 19, 2009, the Executive Board approved a financial increase under the ESF arrangement by SDR 72.81 million (about US$107.3 million) to SDR 121.35 million (about US$178.8 million) and an extension of the arrangement from 12 to 18 months to help finance the balance-of-payments impact of the global economic crisis (See Press Release No. 09/223).

The Executive Board has also completed the fifth review under the Policy Support Instrument (PSI) for Senegal. The three-year PSI for Senegal was approved on November 2, 2007 (see Press Release No. 07/246) to support the country's economic reform efforts. It is aimed at consolidating macroeconomic stability, increasing the country's growth potential, and reducing poverty. The Executive Board also approved a waiver for the nonobservance of the assessment criterion on the basic fiscal balance.

Following the Executive Board discussion on Senegal, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:

“Following food and fuel price shocks in 2008, economic activity slowed further in 2009 because of the global economic downturn and domestic shocks, including temporary electricity shortages. While some uncertainties about the economic outlook persist, recent indicators suggest that economic growth may have bottomed out. Growth is projected to gradually recover. Consumer price inflation, which was negative in the second half of 2009 due to international price developments and the absence of domestic demand pressures, is expected to return to its long-run trend.

“The government is envisaging medium-term fiscal consolidation and continuing to fully normalize relations with the private sector. While the risks of debt distress are low, the temporary fiscal stimulus will need to be gradually reduced to reach the deficit target consistent with debt sustainability. The government is committed to a swift and transparent settlement of remaining extrabudgetary spending and agency debt. This should support the economic recovery and allow more space for the government to pursue its objectives of raising growth-enhancing public investments and sheltering priority spending.

“It will be important to continue with structural reforms to help achieve the objective of raising growth. Further public financial management reforms are needed to make expenditure planning and control more effective. Investment projects should be selected and prioritized based on rigorous economic cost-benefit analysis to raise the productivity of government spending. The energy sector reform plan needs to be fully and promptly implemented to limit fiscal and economic risks. Sustained efforts are also required to enhance the financial sector’s contribution to the economy.”