Statement by the IMF Staff Representative

This paper examines the completion point document for Senegal’s Enhanced Initiative for Heavily Indebted Poor Countries. Senegal could reach the completion point on the basis of a full poverty reduction strategy and sound macroeconomic policies, as well as specific structural and social reforms set out in the decision point document. Major reforms have been advancing in the energy and groundnut sectors and in the postal and pension systems, and institutional improvements in public financial management toward better controls and transparency have been made and are continuing.

Abstract

This paper examines the completion point document for Senegal’s Enhanced Initiative for Heavily Indebted Poor Countries. Senegal could reach the completion point on the basis of a full poverty reduction strategy and sound macroeconomic policies, as well as specific structural and social reforms set out in the decision point document. Major reforms have been advancing in the energy and groundnut sectors and in the postal and pension systems, and institutional improvements in public financial management toward better controls and transparency have been made and are continuing.

This statement provides additional information that has become available since the circulation of the staff report. The information pertains to performance under the PRGF supported program since the first review under the arrangement. The thrust of the staff appraisal remains unchanged.

  • Economic developments strengthened in the second half of 2003. For the year as a whole, real GDP growth, at 6.5 percent, has recovered from the weather-induced low rate of 1.1 percent in the preceding year. Consumer price inflation was virtually absent. The external current account deficit (including current official transfers) widened to 6.3 percent of GDP in 2003 from 5.9 percent in 2002, reflecting high food imports and a temporary weakness of some exports.

  • Fiscal policy remained appropriate and was broadly in line with the program targets. The overall fiscal deficit (including grants) widened to 1.4 percent of GDP, from 0.1 percent in 2002, mainly owing to higher current spending under an emergency rural program, a programmed rise in capital expenditure, and higher HIPC-related spending. Compared with the program, the overall fiscal deficit exceeded the target by 0.1 percent of GDP, but less than projected at the time of the first review of the program.

  • Overall performance under the program was broadly satisfactory in 2003. Five out of the six quantitative performance criteria at end-December 2003 were observed: the exception was the floor on the surplus of the basic fiscal balance (program definition), which, as anticipated at the time of the first review, was not attained. Of the eight quantitative indicative targets at end-December, six were observed. Following initial delays in some structural reforms, the authorities have speeded up the reform process since the final months of 2003, and there has been satisfactory progress with the submission of executed government budgets to the audit court, the tender process for an independent power producer (IPP), and the privatization of the groundnut company SONACOS.

  • The program for 2004 is consistent with the objectives of the PRGF arrangement and the PRSP. The fiscal stance in 2004 emphasizes pro-growth and pro-poor spending. Priority is given to finishing the reform agenda geared to increasing the capacity for efficient public service delivery and to protecting public finances in the longer run. Consequently, reform efforts will focus on further strengthening public expenditure management and eliminating critical deficiencies in several parastatals. As part of the government’s private sector-related reforms, a strategy for financial sector development will be defined.

  • Regarding public debt management, where some shortcomings had become evident in 2003, the government has taken crucial steps to monitor closely the amounts and the terms of new external borrowing, also by public agencies and enterprises. Moreover, it will upgrade the institutional capacity of debt monitoring, which will allow semiannual debt sustainability analyses and quarterly surveillance of debt management by public entities.

  • At end-Mach 2004, the government finalized the first year progress report on the implementation of their poverty reduction strategy. The report and the joint staff assessment will be submitted for consideration by the Executive Boards of the Fund and the IDA in May 2004.

Senegal: Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Completion Point Document
Author: International Monetary Fund