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INTERNATIONAL MONETARY FUND

IMF Country Report No. 19/27

SENEGAL

STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION AND SEVENTH REVIEW UNDER THE POLICY SUPPORT INSTRUMENT AND REQUEST FOR MODIFICATION OF ASSESSMENT CRITERIA—DEBT SUSTAINABILITY ANALYSIS—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR SENEGAL

January 2019

In the context of the Staff Report for the 2018 Article IV Consultation and Seventh Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria—Debt Sustainability Analysis, the following documents have been released and are included in this package:

  • A Press Release including a statement by the Chair of the Executive Board and summarizing the views of the Executive Board as expressed during its January 15, 2019 consideration of the staff report on issues related to the Article IV Consultation and the IMF arrangement.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on January 15, 2019, following discussions that ended on October 31, 2018 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 27, 2018.

  • An Informational Annex prepared by the IMF staff.

  • A Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.

  • A Statement by the Executive Director for Senegal.

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*

  • Selected Issues

  • *Also included in Staff Report

© 2019 International Monetary Fund

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.

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INTERNATIONAL MONETARY FUND

SENEGAL

STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION AND SEVENTH REVIEW UNDER THE POLICY SUPPORT INSTRUMENT AND REQUEST FOR MODIFICATION OF ASSESSMENT CRITERIA

December 27, 2018

Executive Summary

Article IV issues. Senegal’s main challenge is sustaining high GDP growth rates while maintaining fiscal sustainability and improving the business environment to create jobs for the fast-growing population. The second phase of the Plan Sénégal Emergent (PSE) covering 2019-23 sets out a comprehensive reform agenda to achieve these objectives. Fiscal reforms should aim to increase revenues, strengthen public financial management (PFM), and improve the composition and quality of spending. Structural reforms to facilitate private investment and competitiveness would provide durable sources of growth, while development of a fiscal framework for oil and gas aligned with international best practice would ensure that these natural resources provide high economic and social returns. Further progress on improving the business environment will require simplifying tax administration and reforms to facilitate SME access to finance, and further develop the Special Economic Zones (SEZs). Policies to address gender and inequality issues would contribute to poverty reduction and well-distributed growth.

Fiscal sustainability. Pre-election spending pressures are building, and energy subsidies continue to weigh on the budget, requiring strong measures in the last quarter of 2018 to stay within the annual fiscal financing envelope, in a context of weak revenue collection. The 2019 budget is in line with the WAEMU fiscal deficit convergence criterion of 3 percent of GDP, but efforts are needed to ensure ambitious revenue projections are met and energy subsidies reduced. Important progress has been made to strengthen budget implementation and to contain “below-the-line” financing, but continued progress on fiscal policy and revenue administration reforms is needed to ensure that borrowing is consistent with financing needs in the approved budget and that tax revenues are increased to the WAEMU 20 percent of GDP target over the medium term. Implementation of a debt management strategy that increases the proportion of domestic debt and prioritizes access to concessional debt whenever possible is essential to fiscal sustainability.

Program implementation. Performance under the PSI-supported program has been broadly satisfactory, with all end-June 2018 assessment criteria and indicative targets met, except for the indicative target on the share of public contracts subject to a single tender. Performance on reforms was mixed with two prior actions met and two of the six structural benchmarks (SBs) set for the PSI 7th review missed.

Staff recommends completion of the seventh PSI review.

Approved By

Dominique Desruelle and Maria Gonzalez

A staff team consisting of Messrs. Lazare (head), Leichter and Versailles (all AFR), Mr. Reynaud (FAD), Mr. Yehoue (SPR), Ms. Sancak (resident representative) and Messrs. Ba and Fame (local economists) conducted the discussions in Dakar October 18–31, 2018. Ms. Malta (SPR) joined part of the mission to present research on gender issues and lead a workshop on income inequality. The team met with President Sall, the ministers in charge of economy and finance, and energy, the National Director of the BCEAO, and other senior officials. The team also met with representatives of the private sector, civil society, and donor community. Ms. Devine and Ms. Mensah provided research support and Ms. Quartey (all AFR) provided assistance in the preparation of this report.

Contents

  • RECENT DEVELOPMENTS, OUTLOOK AND RISKS

  • RECENT ECONOMIC DEVELOPMENTS

  • MEDIUM-TERM OUTLOOK AND RISKS

  • POLICY DISCUSSIONS

  • A. Fiscal Policy: Strengthen Budget Implementation and Containing Financing Needs

  • B. Strengthening Competitiveness and External Stability

  • C. Making the Private Sector More Supportive of Growth

  • D. Promoting Financial Sector Development and Stability

  • E. Oil and Gas

  • F. Inequality and Gender

  • PROGRAM AND OTHER ISSUES

  • STAFF APPRAISAL

  • BOXES

  • 1. Proposed Revenue Reforms

  • 2. Main Results and Recommendations from the Public Investment Management Assessment

  • 3. Main Results and Recommendations from the Fiscal Transparency Evaluation

  • FIGURES

  • 1. High Frequency Indicators, 2015-18

  • 2. Real and External Sectors, 2012-17

  • 3. Fiscal and Financial Indicators, 2012-17

  • 4. Outlook, 2017-23

  • 5. Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2018-28

  • 6. Indicators of Public Debt Under Alternative Scenarios, 2018-28

  • TABLES

  • 1. Selected Economic and Financial Indicators, 2015–23

  • 2. Balance of Payments, 2015–23 (Billions of CFAF)

  • 3. Balance of Payments, 2015–23 (Percent of GDP)

  • 4. Government and FSE Financial Operations, 2015–23 (Billions of CFAF)

  • 5. Government and FSE Financial Operations, 2015–23 (Percent of GDP)

  • 6. Monetary Survey, 2015–20

  • 7. Financial Soundness Indicators for the Banking Sector, 2010–17

  • ANNEXES

  • I. External Sector Assessment

  • II. Financial Sector Developments in Senegal

  • III. Authorities’ Response to the 2016 Article IV Policy Recommendations

  • IV. Risk Assessment Matrix

  • APPENDIX

  • I. Letter of Intent

    • Attachment I. Memorandum of Economic and Financial Policies, 2015–19

    • Attachment II. Technical Memorandum of Understanding

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INTERNATIONAL MONETARY FUND

SENEGAL

STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION AND SEVENTH REVIEW UNDER THE POLICY SUPPORT INSTRUMENT AND REQUEST FOR MODIFICATION OF ASSESSMENT CRITERIA—DEBT SUSTAINABILITY ANALYSIS 1

December 27, 2018

Approved By

Dominique Desruelle and Maria Gonzalez (IMF), and Paloma Anos-Casero (IDA)

Prepared by the staffs of the International Monetary Fund and the International Development Association

Senegal Joint Bank-Fund Debt Sustainability Analysis

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Senegal has expanded its debt perimeter to include para-public entities and state-owned enterprises (SOEs) and remains at low risk of debt distress despite short-term breaches of two external debt indicators under the most extreme scenarios. The low risk of debt distress is predicated on: (i) ongoing debt liability management, guarantees to address currency risk, access to liquid financial assets and a sound track record of market access; and (ii) adherence to the planned fiscal consolidation path, an acceleration of reforms, and a prudent borrowing strategy. Looking ahead, it will be important to contain fiscal pressures from Treasury operations and address fiscal risks from the broader public sector, including the energy sector.

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INTERNATIONAL MONETARY FUND

SENEGAL

STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION AND SEVENTH REVIEW UNDER THE POLICY SUPPORT INSTRUMENT AND REQUEST FOR MODIFICATION OF ASSESSMENT CRITERIA—INFORMATIONAL ANNEX

December 27, 2018

Prepared By

The Staff of the International Monetary Fund

(In consultation with other departments)

Contents

  • RELATIONS WITH THE FUND

  • RELATIONS WITH OTHER FINANCIAL INSTITUTIONS

  • STATISTICAL ISSUES

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Press Release No. 19/05

FOR IMMEDIATE RELEASE

January 18, 2019

International Monetary Fund

Washington, D. C. 20431 USA

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January 14, 2019

Senegal: Staff Report for the 2018 Article IV Consultation and Seventh Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria--Debt Sustainability Analysis-Press Release; Staff Report; and Statement by the Executive Director for Senegal
Author: International Monetary Fund. African Dept.