FIRST REVIEW UNDER THE POLICY SUPPORT INSTRUMENT AND REQUEST FOR MODIFICATION OF ASSESSMENT CRITERIA—PRESS RELEASE; AND STAFF REPORT
In the context of the First Review under the Policy Support Instrument (PSI) and request for modification of assessment criteria, the following documents have been released and are included in this package:
A Press Release.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on lapse of time basis, following discussions that ended on September 16, 2015, with the officials of Senegal on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on December 1, 2015.
A Debt Sustainability Analysis Update prepared by the staffs of the IMF and the International Development Association (IDA).
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Senegal*
Memorandum of Economic and Financial Policies by the authorities of Senegal*
Technical Memorandum of Understanding*
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
FIRST REVIEW UNDER THE POLICY SUPPORT INSTRUMENT AND REQUEST FOR MODIFICATION OF ASSESSMENT CRITERIA
December 1, 2015
The macroeconomic outlook remains favorable insofar as reforms are accelerated to open up economic space, particularly to SMEs and FDI. Economic growth is projected at 5.1 percent in 2015 and 5.9 percent in 2016. Inflation remains low and is expected to stay within the 1–2 percent range over the medium term. The current account improved in the first half of 2015 partly owing to lower oil prices.
Program performance through September was broadly satisfactory. All end-June assessment criteria were met but the end-June indicative target on tax revenue was missed because of a shortfall in customs revenue. This shortfall was due to higher than anticipated tax expenditure, the January 2015 introduction of the ECOWAS common external tariff, and lower oil prices. Continued rationalization and better control of public expenditure helped meet the fiscal deficit target despite the shortfall in revenue. All structural benchmarks were met. In line with the Fund’s new debt limits policy, the authorities request the removal of the nonconcessional external debt assessment criteria.
Discussions focused on mitigating risks related to tax revenue shortfalls and accelerating structural reforms to sustain the growth momentum. Meeting the fiscal deficit targets for 2015 and 2016 requires continued revenue raising efforts, streamlining of public consumption and raising the efficiency of public investment. Achieving the Plan Senegal Emergent (PSE) growth targets requires creating economic space for SMEs and FDI. This means accelerating reforms in the energy sector, tackling rent seeking, and improving the business environment.
Staff supports the authorities’ request for the completion of the first PSI review.
Roger Nord (AFR) and Peter Allum (SPR)
Discussions were held in Dakar, September 3–16, 2015. The mission comprised Messrs. Ali Mansoor (head), Alexei Kireyev (advance team and post-mission staff visit lead), Salifou Issoufou (all AFR); Andrea Presbitero (SPR); and João Jalles (FAD). Mr. Boileau Loko, resident representative, and Mr. Saidou Ba, local economist, participated in the discussions. The mission was assisted by Ms. Bintou Wane, local administrative assistant. The mission met with the Prime Minister, Mr. Dionne; the Minister of Finance and Economic Planning, Mr. Ba; the Minister of Energy, Mr. Sall; the Minister of Tourism and Transport, Mme. Ndoye Seck; the National Director of the Central Bank, Mr. Camara; other senior officials; and development partners.
RECENT DEVELOPMENTS AND OUTLOOK
A. Fiscal Policies
B. Financial Sector Policies
C. Structural Reforms
1. Tax Expenditure
2. Reforms of the Energy Sector
3. Reforms Required to Achieve PSE Growth Targets
1. Recent Developments: High Frequency Indicators
2. Recent Developments
3. Near and Medium-Term Projections
1. Selected Economic and Financial Indicators, 2013–20
2. Balance of Payments, 2014–20 (in Billions of CFAF)
3. Balance of Payments, 2013–20 (in Percent of GDP)
4. Central Government Operations, GFSM 2001 Classification, 2014–20 (in Billions of CFAF)
5. Central Government Operations, GFSM 2001 Classification, 2014–20 (in Percent of GDP)
6. Monetary Survey, 2012–16
7. Financial Soundness Indicators, 2008–14
8. Quantitative Assessment Criteria and Indicative Targets for 2015–16
9. Structural Benchmarks for 2015 and 2016
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
Front Matter Page
FIRST REVIEW UNDER THE POLICY SUPPORT INSTRUMENT AND REQUEST FOR MODIFICATION OF ASSESSMENT CRITERIA—DEBT SUSTAINABILITY ANALYSIS UPDATE
December 1, 2015
Roger Nord and Peter Allum (IMF), and John Panzer and Mark Thomas (IDA)
Prepared by the staffs of the International Monetary Fund and the International Development Association
Senegal remains at low risk of debt distress, consistent with the Staff Report of December 2014 (Country Report No. 15/2) and the last Debt Sustainability Analysis (DSA) update in June 2015 (Country Report No. 15/273).1 All debt burden indicators are well below their respective thresholds and only the debt service-to-revenue ratio shows two spikes that breach the threshold under stress scenarios, due to Eurobond rollover. However, these breaches are small and temporary reflecting the bullet payments, and the debt service ratio follows afterwards a stable path, even considering additional non-concessional borrowing to reimburse the Eurobonds. The public DSA does not point out significant weaknesses, but it highlights the critical role for fiscal consolidation and reforms to break with the past to generate the sustained growth required to preserve debt sustainability.