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Statement by the IMF Staff Representative

Author(s):
International Monetary Fund
Published Date:
July 2008
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1. This statement summarizes developments in Senegal since the issuance of the staff report. Over the past few weeks, the following information has become available, which does not change the thrust of the staff appraisal.

2. Recent indications point to a risk of higher inflation. CPI inflation remained high in the past two months. It slightly exceeded 5 percent year-on-year in April and reached 6 percent in May, with food prices contributing three-fourths of the increase. This could delay the envisaged return to the historical inflation trend by 2009.

3. A continued surge in oil prices could significantly affect Senegal—s balance of payments but the impact on the budget would be limited. Using the May 2008 WEO projections, the current account deficit could deteriorate by about 1¾ percent of GDP compared to the staff report (see Table). If the authorities decided not to pass through the higher oil bill to consumers by raising prices of electricity and butane gas, the overall fiscal deficit would rise by about 0.2 percent of GDP. The WEO food price projections for 2008 have remained unchanged.

Senegal: BoP and Budgetary Impact of Higher Oil Prices
20072008
Est.Projections
Staff ReportLatestChange
WEO oil price assumption (US$/barrel)71.195.5116.521.0
(Percent of GDP)
Net oil imports6.97.59.21.7
Overall budget balance 1/-3.5-4.9-5.1-0.2
Revenue and grants23.423.523.90.4
Total expenditure26.928.529.10.6

Changes compared to the staff report assume no increase in prices of electricity and butane gas or any other compensatory measures.

Changes compared to the staff report assume no increase in prices of electricity and butane gas or any other compensatory measures.

4. All structural conditions for the first program review are now in place. With a two-month delay, the authorities completed, at end-May 2008, the submission of the Treasury accounts for 2004 and 2005 to the audit court.

5. The authorities have informed staff that another step has been taken to curtail nonpriority spending in 2008. They have blocked commitment authorizations in the SIGFIP expenditure tracking system, which would enable them to enforce the administrative orders of the Prime Minister and Minister of Finance on the reduction in nonpriority spending (paragraph 23 of the staff report).

6. The authorities have launched tenders to issue government securities in the regional financial market. The auctions seek to raise CFAF 40 billion in treasury bills with maturities of p to two years and CFAF 60 billion in ten-year bonds. If successful, they would allow the prompt settlement of the payment delays carried over from 2007 and help remove a drag on the private sector.

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