Senegal Staff Report for the 2008 Article IV Consultation, First Review Under the Policy Support Instrument, and Request for Waiver of Assessment Criterion and Modification of Assessment Criteria—Informational Annex
Author: International Monetary Fund
Publication Date:
02 Jul 2008
eISBN:
9781451834086
Language:
English
Keywords:
ISCR; CR; IMF staff representative; representative; statement; deficit; debt; current account; balance of payments; government finance statistics; CFT system; CFA franc; Government finance statistics; Balance of payments statistics; Government debt management; West Africa
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Senegal’s staff report for the 2008 Article IV Consultation highlights the rapidly rising energy and food prices, and the high inflation in 2007 that put pressure on the fiscal and external accounts. Senegal’s macroeconomic policies were being pursued under an economic program supported by the IMF’s Policy Support Instrument (PSI), which was approved in November 2007. Executive Directors observed scope for improving the targeting of the existing measures while minimizing economic distortions so that they remained consistent with macroeconomic stability and debt sustainability.

Abstract

Senegal’s staff report for the 2008 Article IV Consultation highlights the rapidly rising energy and food prices, and the high inflation in 2007 that put pressure on the fiscal and external accounts. Senegal’s macroeconomic policies were being pursued under an economic program supported by the IMF’s Policy Support Instrument (PSI), which was approved in November 2007. Executive Directors observed scope for improving the targeting of the existing measures while minimizing economic distortions so that they remained consistent with macroeconomic stability and debt sustainability.

Senegal: Relations with the Fund (As of April 30, 2008)

I. Membership Status: Joined: August 31, 1962; Article VIII as of June 1, 1996.

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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VI. Projected Payments to Fund:

(SDR Million; based on existing use of resources and present holdings of SDRs):

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VII. Implementation of HIPC Initiative:1

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VIII. Implementation of MDRI Assistance:

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IX. Safeguards Assessments:

The Central Bank of West African States (BCEAO) is the common central bank of the countries of the West African Economic and Monetary Union, which includes Senegal. The most recent safeguards assessment of the BCEAO was completed on November 4, 2005. The assessment indicated progress has been made in strengthening the bank—s safeguards framework since the 2002 assessment and identified some areas where further steps would help solidify it.

The BCEAO now publishes a full set of audited financial statements and improvements have been made to move financial reporting closer to International Financial Reporting Standards (IFRS). Furthermore, an internal audit charter has been put in place, mechanisms for improving risk management have been established, and follow-up on internal and external audit recommendations has been strengthened.

The results of continuous safeguards monitoring indicate that while certain vulnerabilities remain in internal control systems and legal structure, there has been some progress in other areas, including through: (i) improving the external audit process by adopting a multi-year audit program; (ii) establishing an audit committee; (iii) expanding disclosures on financial positions of WAEMU countries with the Fund in the notes to the annual financial statements; and (iv) further strengthening of the effectiveness of the internal audit function.

X. Exchange System:

Senegal is a member of the West African Economic and Monetary Union (WAEMU). The exchange system, common to all members of the union, is free of restrictions on the making of payments and transfers for current international transactions. The union—s common currency, the CFA franc, had been pegged to the French franc at the rate of CFAF 1 = F 0.02. Effective January 12, 1994, the CFA franc was devalued and the new parity set at CFAF 1 = F 0.01. Effective December 31, 1998, the parity was switched to the euro at a rate of CFAF 655.96 = €1.

The authorities confirmed that Senegal had not imposed measures that could give rise to exchange restrictions subject to Fund jurisdiction. They will inform the Fund if any such measure is introduced.

Aspects of the exchange system are also discussed in the recent report on economic developments and regional policy issues of the WAEMU.

XI. Article IV Consultations:

With the approval of Senegal—s PSI, the country is on a 24-month Article IV consultation cycle following the completion of this year—s Article IV consultation. The 2006 Article IV consultation was completed by the Executive Board on January 29, 2007 (IMF Country Report No. 7/335). In concluding the Article IV consultation, Executive Directors stressed that renewed efforts at macroeconomic stabilization and deepening of structural reforms would be critical to improve the economy—s resistance to shocks, address problems in budgetary discipline and fiscal transparency, and move toward the Millennium Development Goals. Directors welcomed the authorities— intention to lower fiscal deficits over the medium term in order to contain the external current account deficit and prevent debt distress and arrears, and they urged prompt elimination of domestic payment arrears. They called for early efforts to improve policy credibility and fiscal governance and transparency, stressing that such improvements would be crucial for ensuring continued international support to Senegal. Regarding the role of the private sector, Directors urged speedy implementation of the authorities—action plan for improving the business environment and reducing the cost of doing business, which would be crucial for enhancing growth prospects. Directors also observed that the financial sector could make a greater contribution to the economy through improved access to credit and enhanced soundness.

XII. Financial Sector Assessment Program (FSAP) and Report on the Observance of Standards and Codes (ROSC) Participation:

A joint team of the World Bank and the International Monetary Fund conducted a mission under the FSAP program in November 2000 and January 2001. The Financial System Stability Assessment (FSSA) was issued in August 2001 (IMF Country Report No. 01/189). An FSAP update was undertaken in June 2004, focusing on development issues (in particular nationwide supply of basic financial services and access of SMEs to credit), in line with the priorities defined in the PRSP (IMF Country Report No. 05/126). A regional FSAP for the WAEMU was undertaken in the second half of 2007.

A ROSC on the data module, based on a September 2001 mission, was published on December 2, 2002. An FAD mission conducted a ROSC on the fiscal transparency module in January 2005.

XIII. Technical Assistance:

A. AFRITAC West

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B. Headquarters

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XIV. Resident Representative

Stationed in Dakar since July 24, 1984. The position has been held by Mr. Alex Segura-Ubiergo since September 22, 2006.

XV. Anti Money Laundering / Combating the Financing of Terrorism

The onsite visit for Senegal—s AML/CFT evaluation took place in July/August 2007 in the context of ECOWAS Inter-Governmental Action Group Against Money Laundering (GIABA). The report was adopted in early May 2008 by the GIABA Plenary held in Accra, Ghana. The report highlights several areas of weaknesses in the AML/CFT system, confirmed by the score of 12 Non-Compliant and 17 Partially Compliant ratings out of the 40+9 FAF AML/CFT recommendations. Table 2 annexed to the Report contains recommendations of the areas which the authorities should address in order to strengthen the AML/CFT system. Following the AML/CFT assessment to be carried out in July/August 2008, the authorities should address the shortcomings identified in the report in order to strengthen the Senegal AML/CFT framework.

XVI. Fourth Amendment of the Articles of Agreement and the Eleventh Quota Review

The authorities have indicated their agreement with the Fourth Amendment of the Articles of Agreement. The increase in Senegal—s quota under the Eleventh General Review of Quotas was completed on February 11, 1999.

Senegal—Work Program of World Bank and International Monetary Fund,

March 2008–June 2009

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Senegal: Statistical Issues

1. Overall, the macroeconomic database is comprehensive and adequate for surveillance and program monitoring. However, there are weaknesses in data on national accounts, production, international trade, and social indicators. The authorities are strongly committed to improving the quality and availability of economic, financial and social indicators, partially relying on technical assistance from the Fund and other international organizations. A Report on the Observance of Standards and Codes—Data Module, a Detailed Assessment Using the Data Quality Assessment Framework (DQAF), and a Response by the Authorities were published on the IMF website on December 2, 2002.

2. The country has begun the process of regional harmonization of statistical methodologies within the framework of the West African Economic and Monetary Union (WAEMU). It participates in the General Data Dissemination System (GDDS), and its metadata were posted on the Fund—s Dissemination Standards Bulletin Board on September 10, 2001. The metadata are due for updating, including on priority areas for data improvement. In May 2006, a STA mission evaluated dissemination practices against Special Data Dissemination Standard (SDDS) requirements for coverage, periodicity and timeliness and helped the authorities develop an action plan to fill identified gaps.

Real sector statistics

3. The compilation of the national accounts generally follows the System of National Accounts, 1993. Despite staff—s professionalism, the lack of adequate financial resources has constrained efforts to collect and process data. Data sources are deficient in some areas, particularly the informal sector. Owing to financial constraints, surveys of business and households are not conducted regularly and annual input-output tables and institutional sector accounts are not compiled. However, efforts are being made to improve data collection procedures, strengthen the coordination among statistical agencies, and reduce delays in data dissemination.

4. A regional advisor in real sector statistics covering the West AFRITAC countries, including Senegal, was posted for one year beginning December 2005, with a first assessment visit in March 2006 covering real sector statistics. Progress reported by the advisor includes: i) completion of national accounts for 1980–2004 with 1999 as the base year; ii) dissemination of the 1980–2003 series in hard copy and on the internet; iii) production of accounts by institutional sector; and iv) production of national accounts according to schedule. The authorities plan to start production of quarterly national accounts in view of the country—s intention to subscribe to the SDDS. The West AFRITAC mission of March–April 2007 assisted with training to support compilation of the quarterly accounts. According to the work program, the first series of quarterly national accounts should be produced by the end of 2008.

Public finance statistics

5. Government finance statistics are compiled by the Ministry of Economy and Finance from customs, tax, and treasury directorate sources. Data last reported to STA for electronic redissemination and publication in the 2007 Government Finance Statistics Yearbook were for fiscal year 2001. Higher frequency data are not updated for redissemination in IFS, but the ministry compiles and disseminates quarterly government financial operations tables (TOFE) in their own publications. However, the authorities do not have a good handle on domestic arrears data and other payment delays because of weaknesses in the treasury computerization system.

6. An AFR team worked with the authorities in February 2004 to improve fiscal reporting in the context of the last PRGF-supported program. The team focused on (i) public accounts that are outside of the direct purview of the treasury; (ii) the treatment of correspondents— accounts in the TOFE; and (iii) ensuring consistency between treasury and banking system information concerning government transactions. The proposed changes are now being implemented. They will improve the presentation of government financial operations and are the first step toward bringing the TOFE more in line with the extended WAEMU TOFE. Other steps will include implementing the WAEMU fiscal directives that are being revised.

7. A regional advisor in government finance statistics conducted several technical assistance missions aimed at improving the consistency of fiscal reporting and migrating to the methodologies of the Government Finance Statistics Manual 2001. The regional advisor also supported efforts to resume reporting of annual and higher frequency data for publication in International Financial Statistics (IFS) and electronic dissemination of the GFS Yearbook.

Monetary and financial statistics

8. Preliminary monetary data are compiled by the national agency of the Central Bank of West African States (BCEAO) and officially released (including to the IMF) by BCEAO headquarters. The authorities are now reporting monetary data to STA on a regular basis, with a reduction in the lag from about six months to about three to four months. There has also been an improvement in the timeliness of reporting interest rate and depository corporation data. An area-wide page for the WAEMU zone was introduced in the January 2003 issue of IFS.

9. In 2005, the BCEAO made substantial revisions to the estimates of banknotes in circulation in member states resulting from cross-border banknote movement. These revisions were due to changes in the method to estimate currency in circulation in the WAEMU countries. The revised method, based on updated sorting coefficients (“coefficients de tri”), has been applied retroactively from December 2003.

10. In August 2006, as part of the authorities—efforts to implement the statistical methodology recommended in the Monetary and Financial Statistics Manual, the BCEAO reported to STA test monetary data for June 2006 for all member countries using Standardized Report Forms (1SR-central bank, 2SR-other depository corporations, and 5SR-monetary aggregates). In response to STA—s comments, the BCEAO has recently provided a revised 1SR and indicated that 2SR is being revised.

External sector statistics

11. Balance of payments statistics are compiled by the Senegalese national agency of the BCEAO. With STA support over the past few years, several steps have been taken to address certain shortcomings, including: (i) implementation of the Balance of Payments Manual, fifth edition; (ii) modification and simplification of related surveys for companies and banks; (iii) improvement in the computerization of procedures; and (iv) significant strengthening of staff training. Nevertheless, further steps could be taken to enhance the quality and coverage of the balance of payments statistics.

12. Although definitive balance of payments statistics can now be provided with a delay of less than one year, there are significant delays in reporting the data to STA. At this time, balance of payment statistics up to the year 2004 and international investment position data up to 2005 have been communicated to STA.

Senegal: Table of Common Indicators Required for Surveillance

(As of May 12, 2008)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC published in November 2002 and based on the findings of the mission that took place in September 2001 for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning (respectively) concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), not observed (NO), or not available (NA).

Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation of source data, and revision studies.

1

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence, these two amounts cannot be added.

2

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

3

The Multilateral Debt Relief Initiative (MDRI) provides 100 percent debt relief to eligible member countries that are qualified for the assistance. The debt relief covers the full stock of debt owed to the Fund as of end-2004 which remains outstanding at the time the member qualifies for such debt relief. The MDRI is financed by bilateral contributions and the Fund—s own resources, as well as the resources already disbursed to the member under the HIPC Initiative (see Section VII above).

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Cover IMF Staff Country Reports
Senegal: Staff Report for the 2008 Article IV Consultation, First Review Under the Policy Support Instrument, and Request for Waiver of Assessment Criterion and Modification of Assessment Criteria: Staff Report; Staff Supplement; Staff Statement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Senegal
Author: International Monetary Fund
Volume/Issue:
Volume 2008: Issue 209
Publisher:
International Monetary Fund
ISBN:
9781451834086
ISSN:
1934-7685
Pages:
101
DOI:
https://doi.org/10.5089/9781451834086.002