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.
Publication Date:
28 Jan 2019
eISBN:
9781484396254
Language:
English
Keywords:
ISCR; CR; debt; deficit; Senegal; current account; broad money; fiscal policy; debt service; cash management; Budget planning and preparation; Loans; Public investment and public-private partnerships (PPP); Global; West Africa; financial system
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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

Abstract

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

Recent Developments, Outlook and Risks

Political and Economic Context

1. Sustaining strong growth in the medium term will depend on the effective implementation of fiscal consolidation and structural reforms. Growth is projected to be over 6 percent for the fourth year in a row, despite low levels of rainfall in 2018. However, maintaining the high growth rates envisioned in the Plan Sénégal Emergent (PSE) and meeting development and social challenges in a sustainable manner over the medium term will require steadfast implementation of reforms. Further progress on improving the business environment would boost private investment, including foreign direct investment (FDI), and allow the private sector to drive growth over the medium term. Addressing weakness in public financial management (PFM) and revenue administration would ensure that public investment is implemented efficiently, while supporting fiscal sustainability. Implementation of a comprehensive reform agenda elaborated in the second phase of the PSE covering 2019-23, including management of oil and gas resources in line with international best practices, will be essential to meeting these challenges.

2. The presidential election scheduled for February 2019 has delayed progress on reforms and created risks to meeting budget targets. The looming elections have already impacted fiscal policy through maintenance of fixed domestic energy prices despite elevated global oil prices for most of 2018, a significant increase of the wages, and transfers to the education and health sectors committed over the next two years. This, combined with accelerated implementation of large infrastructure projects and poor revenue performance, has resulted in significant pressure on public finances and payment delays to the private sector. Meeting the fiscal deficit target will require substantial cuts in expenditure in the last quarter of the year. While the 2019 budget is consistent with the 3 percent of GDP WAEMU fiscal deficit criterion, strong efforts will be needed to meet ambitious revenue projections, reduce the energy subsidy, and meet the carryover of fiscal obligations from previous years.

Recent Economic Developments

3. Growth is expected to stay strong in 2018, while inflation remains low. Real GDP growth in 2017 was 7.2 percent and is projected to remain robust at 6.2 percent in 2018, driven by mining, construction and services (especially transportation and real estate services), which have helped offset reduced growth in agricultural production due to late rains (MEFP ¶3). On the demand side, growth is mainly driven by domestic demand, with an important contribution of public investment during the PSE I phase (2014-2018). As in past years, inflation is projected to remain low at under 2 percent, helped by the stark decrease in prices for telephone services.

4. Fiscal pressures are creating significant policy challenges. Weak revenue performance and pre-election pressures on expenditures are weighing on the implementation of the 2018 budget. In addition, an increase in global oil prices over the first 9 months of the year coupled with fixed domestic energy prices since early 2017 resulted in a growing energy subsidy and lower energy revenues. While the end-June 2018 budget target was met, all these factors, combined with the financing of the post office group (SN La Poste) through “below-the-line” Treasury operations contributed to an accumulation of unmet obligations to the energy sector and payment delays to other private sector participants.1 These fiscal slippages will require major efforts to cut expenditures (by 1.2 percentage point of GDP) in the last quarter of 2018 to stay within the agreed fiscal envelope.

5. The external situation remains stable, despite some deterioration over the past two years. The current account deficit widened significantly in 2017, reflecting higher global commodity prices and expansionary fiscal policies, and is projected to remain above 7 percent of GDP in 2018. The large Eurobond issuance in 2018 has provided sizable relief on the financing side. WAEMU pooled reserves were at $15.1 billion at end-September 2018 (4.3 months of imports), up from $13.0 billion at end-2017, with the increase largely driven by Eurobond issuances of Senegal and Cote d’Ivoire in the first half of the year. The real effective exchange rate (REER) has appreciated slightly over the past 2 years and remains broadly in line with fundamentals.

6. Credit growth has slowed substantially in 2018 as the banking sector negotiates the transition to new prudential norms. Year-on-year (y-o-y) growth of credit to the economy was only slightly positive at end September at 0.6 percent, and -4.1 percent since December 2017. The main reason was repayments of large loans to SOEs in 2018 that were contracted in the second half of 2017.2 Growth of credit to the private sector (0.4 percent at end-September 2018 (y-o-y)) was also slow as banks conformed to Basel II/III and the new chart of accounts, along with its accompanying requirement of increased capital.

Medium-Term Outlook and Risks

7. The medium-term outlook for Senegal’s economy remains broadly positive, provided that fiscal consolidation and structural reforms are effectively implemented. Sustaining high growth rates over the medium term will require reforms to improve the business environment and boost private investment so that it can take the reins of growth. Aside from continuing with PSE-related public investment, efforts to lower energy costs, improve tax administration and address impediments to SME access to bank credit, will improve the business environment and sustain strong growth in private investment. These reforms are part of the PSE II and will now need to be steadfastly implemented. A failure to do so would result in a loss in growth momentum, returning Senegal to the low per capita GDP growth of the past, and put pressure on debt sustainability. The external sector is projected to remain stable. However, FDI is low relative to peers suggesting that reforms are needed to boost competitiveness and further attract export-oriented investment. In the next three years, large oil and gas investment-related imports in the pre-production period are expected to widen the current account deficit further, with a sharp reversal of trend in 2022 as production boosts exports significantly.

8. Senegal faces both domestic and external risks. The primary sources of risk in the near term are: (i) increases in global energy prices and lack of progress in reducing the domestic energy subsidy; and (ii) larger than projected adverse growth and fiscal impact of drought. Over the longer term, risks include: (iii) adverse impact of slowing implementation on reforms to boost revenues and private investment; (iv) domestic and regional security threats; and (v) possible increases in the cost of public borrowing. On the upside, possible additional oil and gas discoveries (exploration is ongoing) could present potentially large macroeconomic benefits, underscoring the need for establishing a fiscal framework in line with international best practices.

Policy Discussions

9. Discussions centered on policies to sustain high growth and meet development objectives without undermining stability. The overall objective of the PSE strategy is to achieve, through the structural transformation of the economy, a strong, inclusive and sustainable growth that improves the well-being of the people. More concretely, between 2018 and 2023, the PSE II aims for growth rates above 9 percent, and a reorientation of economic activity towards industry. Also, substantial improvements in key education, health, poverty and inequality indicators are targeted. Accordingly, discussions focused on policies and reforms to: (i) strengthen PFM to contain financing needs and enhance efficiency of investment; (ii) increase domestic revenue mobilization; and (iii) improve the business environment to boost private investment and competitiveness. In the context of the Article IV Consultation, discussions also covered; (iv) the macroeconomic impact and fiscal framework related to the oil and gas sector, (v) issues related to gender and inequality, and (vi) reforms to promote financial sector development and stability. The authorities broadly implemented most staff recommendations from the 2016 Article IV3 (Annex III).

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

10. Sizable spending cuts are needed to stay within the 2018 fiscal envelope. On tax revenues, corporate taxes have been trending below projections and the new measures introduced in the 2018 Budget and in the June 2018 Supplementary Budget have not yielded the expected results—although it may be to some extent too early to judge since implementation started in March 2018 and July 2018.4 In addition, important measures to rationalize exemptions and to improve tax collection have not been forcefully implemented. Overall, and before new policy measures, revenues are projected to be below the end-year target by about 0.9 percent of GDP. On the expenditure side, beyond the growing wages and transfers incorporated during the last PSI review, expenditures are expected to increase by another 0.2 percent of GDP, representing mainly higher transfers to the education sector. To contain the impact on the fiscal balance, and, given that there is only a small window for action before end-2018, the authorities have decided to take decisive action to cut substantially low priority domestically-financed capital expenditure and non-wage current spending as needed to stay within the agreed fiscal envelope, while to the best extent possible protecting social outlays. The authorities have also agreed to compensate above the line for “below-the-line” financing operations exceeding the program target, i.e., adding some 0.15 percent of GDP in spending cuts.

Fiscal Projections for End-2018

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11. The 2019 budget is aligned with the 3 percent of GDP fiscal deficit convergence criterion. It will require strong efforts to meet ambitious revenue objectives and reduce energy subsidies, while addressing the potential carryover of fiscal obligations from previous years.5 The projected poor performance of revenues in 2018, including from new revenue measures, creates some uncertainty regarding the 2019 revenue projections. The authorities are committed to reinvigorate domestic revenue mobilization efforts in 2019 and to adjust budget spending as needed to achieve the 3 percent of GDP fiscal deficit target. The authorities will consider in due course whether a supplementary budget law is needed. While the drop in global oil prices in late 2018, if sustained, will contribute to lowering the amount of energy subsidies needed, the staff recommended that domestic energy prices be adjusted in steps and sufficiently aligned with global oil prices to eliminate the energy subsidy. It also recommended that previous payment delays to the energy sector and the broader private sector be addressed over time. Projected financing of the 2019 budget will include a full drawdown of the escrow account corresponding to the overfinancing (1.6 percent of GDP) from the 2018 Eurobond, substantial concessional financing from development partners and a return to the WAEMU bond market.

Fiscal Financing, 2019 (CFAF billions)

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12. Reforms to increase revenues are needed to finance development in a sustainable way. The rebasing of GDP implemented in early 2018 lowered tax revenues to GDP to about 15 percent, well below the 20 percent WAEMU convergence criterion. Implementing reforms to boost revenues will be essential to finance the ambitious PSE public investment program and increased social spending without increasing debt-related vulnerabilities (Box 1). While the authorities have made good progress on revenue reforms in recent years, reaching the WAEMU target will require substantial effort, including in areas where there has been slow progress such as tax collection and tax exemptions. Staff urged the authorities to consider both tax policy and revenue administration measures, including: (i) further streamlining tax exemptions, ensuring they are granted through a rules-based transparent process, and strengthening ex-post assessment in coordination with the tax expenditures evaluation process; (ii) enhancing the data exchange platform between tax and customs administrations; (iii) fully implementing the IT innovative solutions; and (iv) strengthening property taxes, notably by proposing a clear plan and timeline for a complete country-wide cadaster. The IT initiatives include (1) E-tax for e-filing and e-payment; (2) M-tax that allows taxpayers without Internet access to declare and pay taxes via cell phone; and (3) Mon Espace Perso, a personalized tax space allowing individuals and businesses to have easy access to their taxes. The authorities are committed to meet the WAEMU revenue target over the medium term and are working on a comprehensive strategy, drawing from ongoing technical assistance (TA) from the IMF. Implementing a fiscal framework for oil and gas in line with international best practice will also help boost revenues over the long term (see Section E below).

13. Efforts to contain current expenditures and improve the efficiency of investment should continue. The increase in current spending and energy subsidies in the pre-electoral period required capital expenditure to be delayed, suggesting that further efforts are needed to contain current expenditure and improve the efficiency of public investment. Implementation of the civil service employment ceilings in 2019 should help contain wage expenditures. A comprehensive civil service reform could provide a broader framework to ensure that development objectives can be financed within the existing prudent projected financing envelope. The recent creation of the so-called “project bank” (a list of investments projects which have been fully assessed) is welcome, but implementation of public investment could be improved further by implementing recommendations of the Public Investment Management Assessment (PIMA) (Box 2). These measures will be important to ensure that investment projects are aligned with the multi-year budget, investment decisions are driven by economic returns rather than availability of financing, and fiscal contingent liabilities from public-private partnerships (PPP) are properly managed.

14. Reforms to strengthen PFM and address potential sources of additional Treasury financing “below the line” are being implemented. Over the past few years, there has been an important disconnect between total financing needs and budget deficits. In particular, Treasury financing of the SN La Poste, Fonds National de Retraites (FNR), and accumulated appropriations from past budget years in the comptes de dépôt, as well as the use of lettres de confort to pre-finance expenditure and implement expenditure outside the budget, resulted in an accumulation of debt exceeding the financing needs implied by the budget deficit. The authorities have made good progress in addressing these issues, including by implementing prior actions for the PSI 7th review:

  • SN La Poste (MEFP ¶5, ¶44)—In October 2018, a new convention between the Post Office and the Treasury was signed to limit the Treasury guarantee for clearing the Post Office checks (prior action). Furthermore, the authorities are working with development partners on a comprehensive restructuring plan to improve the efficiency of postal operations and separate Poste Finance from La Poste. The latter handles the more classic post office operations, while the former is a deposit-taking financial institution. The separation would allow for Poste Finance to receive a banking license and be supervised by the WAEMU banking commission.

  • Lettres de Confort (MEFP ¶30)—In November 2018, a ministerial order was signed to cease the use of budgetary letters that commit central government to expenditures beyond the current budget year or to expenditures outside the budget (prior action). Future use of these letters will be limited to letters which (i) do not imply any financial commitment; (ii) are formal guarantees for para-public entities; or (iii) support within-year execution of spending related to national defense and agriculture.

  • Comptes de Dépôt (MEFP ¶6)—A decree has been signed which, starting end-December 2018, will remove the ability to carryover “current spending” balances in the comptes de dépôt from one year to the next and limit the amount of “capital spending” carryover to 5 percent of the remaining balance. The rest of the balances in the comptes de dépôt at end-December 2018 will be eliminated, except for the remaining balances of three para-public agencies, which will be converted to bonds to be issued in early 2019. Continued progress in implementing multi-year budgeting will help reduce the potential challenges created by large public investment projects, which have resulted in accumulation of past appropriations in the comptes de dépôt and pre-financing arrangements with banks in the form of lettres de confort.

  • FNR (MEFP ¶11)—A complementary pension scheme has been implemented, which has returned civil service pension to a small positive balance. Further efforts are planned on parametric reforms, creating a defined contribution scheme and the creation of a separate institution governing civil service and military pensions.

Proposed Revenue Reforms

In the short term, priority should be given to tax administration measures, which is where marginal revenue gains are the highest. Substantial efforts are needed to raise taxpayer compliance levels and help improve revenue performance. Following numerous TA missions, a reform roadmap—including a package of concrete measures to increase the tax-to-GDP ratio by four percentage points in four years—has been developed. Priority actions include: (1) improved collection enforcement and collecting recoverable tax arrears and tackling remaining defaulters; (2) redirecting tax audit towards taxpayers with the highest risks (such as unreported business income and over-claimed deductions and rebates) and improved crosschecking of amounts reported in tax declarations with information obtained from third party sources; (3) revising the “acompte sur importations” regime to contain widespread VAT evasion and fraud across all VAT segments (large enterprises and SMEs); and (4) de-registering VAT registered entities that have been inactive.

The implementation of the 20-point digitalization action plan is also critical to enhance the effectiveness of the internal revenue department (DGID). Progress is expected in implementing the November 2016 hackathon’s recommendations such as expanding e-procedures, improving data quality and consistency and aligning IT organization, infrastructure, process to the DGID needs. More specifically, short-term outcomes should include: (1) expanding e-procedures to medium-size enterprises; (2) enhancing the personalized tax space—Mon Espace Perso—(one of the hackathon’s winning solutions, which was officially launched on July 26, 2018); (3) enhancing the SMS and voice message reminder of tax obligations system; and (4) implementing the second hackathon’s solution (M-tax) that allows taxpayers without internet access to declare and pay taxes via cell phone by April 2019.

On the tax policy side, the authorities need to prepare a strategy for new broad tax reform to be implemented after the Presidential elections. This strategy should focus on broadening the tax base, notably by bringing the informal sector into the tax net, so that rates can eventually be lowered. Such a strategy could envisage the following measures:

  1. Increase corporate income tax (CIT) withholding on imports of small taxpayers, which are more likely not to file or to underreport;

  2. Raise the ceiling of the minimum CIT (Impôt minimum forfaitaire) at least on the commercial sector—this could be partly offset by a lower CIT rate in a revenue-increasing reform if the higher ceiling is not limited to the commercial sector;

  3. Initiate a systematic review of VAT exemptions on staple food and other basic goods to focus the exemptions on goods consumed mainly by the poorest segments of society;

  4. Eliminate the lower VAT rate (on tourism) and replace it with the full rate; and

  5. Adjust the personal income tax rates and brackets so that the tax system is more equitable across all ranges of income.

Main Results and Recommendations from the Public Investment Management Assessment (PIMA)

The PIMA provides a comprehensive diagnostic of the strengths and weaknesses of a country’s public investment management system, allowing comparisons with similar groupings.

A mission conducted a PIMA in Dakar in November 2018. It found that Senegal’s institutions were broadly stronger than those in other already assessed West-African countries. Yet, some efficiency gaps (i.e. access to infrastructure and physical efficiency indicators) remain and should be addressed to ensure a sustainable increase in the country’s capital stock.

The mission made four main recommendations, consistent with ongoing government reform plans: (1) review and streamline the three-year investment plan, which involves cancelling projects that yield no or little output; (2) bring the implementation of ad hoc investment projects (including so-called unsolicited offers) back under normal procedures and proper evaluation and oversight; (3) update the legal framework for PPPs to minimize risks and establish sound procedures to respond to the increasing needs for government capital spending; and (4) make operational a project management functionality in the information system, currently under-development, to ensure projects are financed and monitored from design to completion.

B. Strengthening Competitiveness and External Stability

15. The widening of the current account deficit over the past two years has been matched by substantial increases in external financing. Senegal’s current account deficit as a percent of GDP has nearly doubled since 2016 to over 7 percent of GDP. While this increase was driven, in part, by rapid growth and investment-related imports, there was also a fiscal contribution through increases in current spending and additional Treasury extra-budgetary financing related to SN La Poste and civil service pensions, as well as rising oil import prices. The widening of the current account deficit was matched by substantial increases in external debt, including via $3.3 billion in Eurobonds being issued since 2016 on largely favorable terms. FDI did not show significant increases, averaging just over 2 percent of GDP.

16. Senegal’s external position is broadly in line with medium-term fundamentals and desired policies (Annex I). The current account (CA) deficit is projected to widen over the next 3 years due to oil and gas-related investments in the pre-production phase—to be financed through a mix of increased FDI and debt. However, the CA trend will sharply reverse in 2022 when oil and gas production is expected to start, and related exports are projected to rise substantially. Remittances will continue to be a reliable source of CA inflows, although they are expected to fall as a percentage of GDP over the longer term, consistent with rapid GDP growth and Senegal’s drive to reach middle income status. A debt strategy which aims to increase the proportion of domestic debt in total public-sector debt will also contribute to lower external vulnerabilities. The WAEMU regional pooled reserves stood at $15.1 billion at end-September 2018 (more than 4 months of regional imports), up from $13.1 billion at end-2017, with the increase largely driven by Eurobond issuances of Senegal and Cote d’Ivoire in the first half of 2018. Estimates using the IMF’s external balance assessment methodology (EBA-lite) show the REER gap at around 5 percent and the CA gap at around -1 percent, suggesting that Senegal’s REER is broadly consistent with fundamentals and desirable policy settings.6 The authorities agreed that the external position is broadly in line with medium-term fundamentals.

17. Reforms are needed to boost external competitiveness and FDI. Senegal has made some progress on structural reforms as evidenced by the improved scores across several dimensions in global benchmarking exercises such as the World Bank Doing Business (DB) or the World Economic Forum (WEF) competitiveness report. Progress has, however, slowed recently, as climbing the rankings further implies tougher reforms, while peers are also making progress.7 The level of FDI is low relative to peers (Text Figure 1), suggesting that more needs to be done to boost private investment. Increased private sector interest in the Special Economic Zones (SEZs) bodes well in this respect (see Section C below).

Text Figure 1.
Text Figure 1.

Foreign Direct Investment (net)

(2015-17 average, percent of GDP)

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

* WAEMU average excludes SEN and TGO. The latter because net FDI was negative during 2015-17)Source: IMF World Economic Outlook database.

18. Senegal is at low risk of debt distress, but debt vulnerabilities need to be managed. Since the previous DSA (Country Report No. 18/8): (i) GDP has been rebased, resulting in a 30 percent increase in nominal levels; (ii) the macroeconomic impact of oil and gas discoveries has been incorporated in projections; and (iii) the authorities have made strong efforts to expand the perimeter of debt to cover the broader public sector and are committed to continue filling remaining data gaps. Staff’s assessment is that Senegal continues to face a low risk of debt distress, but is a borderline case. The external debt-to-exports indicator has two marginal breaches of its threshold, while the external debt service-to-export ratio has a temporary spike that breaches the threshold more significantly under a stress scenario due to Eurobond rollover. This debt service breach reflects liquidity, rather than solvency issues. Overall, public debt and debt service have been rising in recent years, underscoring the need for prudent debt management. 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 prudent borrowing.

C. Making the Private Sector More Supportive of Growth

19. The private sector will need to become the engine of the economy for Senegal to reach the PSE II medium-term growth objective of 8 percent (MEFP ¶16). Senegal is developing PSE II (2019-23), the second phase of its strategy to become an emerging market by 2035. Progress made during PSE I (2014-18), which delivered growth rates above 6 percent, needs to be consolidated, notably by enabling a larger role for the private sector through structural reforms. The PSE I benefited from direct government support, notably through financing of “projets structurants,” which improved infrastructure and gave impetus to the construction sector, but also through indirect interventions, for example in the agricultural sector. During this period, investment increased, even though not much faster than Senegal’s peers, while FDI continued to be relatively low (Text Figures 1 and 2), and productivity gains were relatively feeble. On the financing side, PPPs were used much less than expected, despite the law governing PPPs having been revised in 2014. PSE II aims to rectify this, with potential financing and technical assistance also coming under the Compact with Africa framework.

Text Figure 2.
Text Figure 2.

Investment

(percent of GDP, 2017)

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

* Excluding Senegal.Sources: IMF World Economic Outlook database.

20. Constraints to private sector development persist, even though important progress was made on several fronts during PSE I. Constraints include: (i) access and cost of energy; (ii) heavy procedures in the tax system and the judiciary; (iii) labor regulations; (iv) access and cost of credit; (v) efficiency of public investment; and (vi) weak human capital, with a business environment that is generally difficult to operate in. Improvements were made during PSE I, helped by the Programme de Réforme de l’Environnement des Affaires et de la Competitivité (PREAC) which is now being updated for the period 2019-21 (MEFP ¶46). During PSE I, reliability and access to electricity improved (e.g., rural electrification rates increased from 33 percent to 40 percent over 2014-2017 and power outages in cities were significantly reduced). The energy sector is an important driver of PSE II, and its development is expected to benefit from the recently concluded investments by the Millennium Challenge Account (grants worth $600 million over 5 years), and the domestic production of gas (from 2022) for use in new electricity generating projects or conversion to gas of existing thermal projects. The legal system governing commerce is expected to improve through the recently created Dakar commercial tribunal (“Tribunal de commerce”), with next steps involving development of the appeals chamber and—potentially—a second tribunal outside Dakar (MEFP ¶47). Progress was also made in developing programs to improve credit access (see Section D below), and in PFM (see Section A above). PSE II acknowledges that high labor costs and labor market rigidities hinder private sector activity. A review of the labor laws is ongoing.

21. The PSE II growth strategy aims to develop clusters of economic activity, with SEZs now up and running. Planned investments in the three established SEZs: Diamniadio, Diass, and Sandiara amount to about 3.7 percent of GDP (see text table on Special Economic Zones), with companies coming from several countries, including China and Tunisia, and representing different sectors like plastics, food processing, bank cards, medical services and research (MEFP ¶48). It will be important for the SEZ rules regarding both imports and exports to be simple and consistent (e.g., at the moment, the three SEZs have slightly different rules regarding the percentage of exports in total sales that are required to benefit from incentives). More generally, staff emphasized that SEZs should be governed by transparent rules, with no granting of ad hoc tax exemptions and all companies paying a reasonable corporate tax rate. In the agricultural sector, three integrated agropoles are being launched to help the sector develop high value-added in agrobusiness and reduce reliance on imported foodstuffs. A somewhat similar approach is planned for the tourism sector. All these initiatives play a role in advancing economic activity outside Dakar. The development of the plateformes d’investissement, which aims to give enterprises and households access to administrative services outside of Dakar, is also consistent with this strategy.

Special Economic Zones

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Source: Senegalese authorities.

22. Senegal has made progress on governance, but further reforms are needed. Senegal compares relatively well to SSA and WAEMU averages on governance and transparency indicators (Figure I.2 in Annex I). Adherence to the IMF’s Special Data Dissemination Standard (SDDS) and GFSM2001/14 and efforts to move towards reporting fiscal data beyond central government is improving fiscal data and providing a more comprehensive picture of contingent liabilities and debt-related vulnerabilities. The establishment of a “project bank” that will contain assessed ex ante domestically-financed public investment projects is welcome, but now needs to be carefully implemented. The inability to regularly meet the PSI ceiling (indicative target) on the share of public procurement using sole source suggests that the procurement process could be strengthened, including bringing unsolicited (spontaneous) investment offers into the normal public investment vetting process (see also Box 2 above). The accumulation of unmet liabilities towards SENELEC and the private sector is also a sign of challenges in meeting revenue projections and weakness in budget implementation. The continuation of Treasury financing of the Post Office outside of the budget is a concern and, beyond the recently adopted measures, requires reforms to restructure the Post Office and proper estimates of needed transfers in budget formulation. Further, it will be important that the governance structure of institutions managing oil and gas wealth be in line with international best practice (see Section E below). All these issues are part of the wider agenda of opening up economic space for all Senegalese economic actors, and combatting rent seeking and entrenched interests.

23. The authorities’ participation in various international benchmarking exercises shows willingness to improve transparency and governance of public policy. A Fiscal Transparency Evaluation (FTE) conducted in early 2018 is contributing to greater fiscal transparency, while the ongoing PIMA should help identify measures to improve public investment efficiency (Box 2 and Box 3). The Public Expenditure Financial Accountability (PEFA) exercise that is underway will help benchmark Senegal’s PFM system vis-à-vis its peers and identify areas where progress can be made (MEFP ¶39, ¶40).

Main Results and Recommendations from the Fiscal Transparency Evaluation (FTE)1

The FTE exercise is the IMF’s fiscal transparency diagnostic. FTEs provide countries with a comprehensive assessment of their fiscal transparency practices against the differentiated standards set by the IMF’s Fiscal Transparency Code. This is done through rigorous analysis of the scale and sources of fiscal vulnerability based on a set of fiscal transparency indicators and provides a more complete picture of public sector activities by estimating the financial position of the entire public sector.

A mission conducted an FTE in Dakar in May 2018. It found that Senegal has achieved remarkable progress in strengthening its nascent fiscal transparency practices. The 2017 Open Budget Index (OBI) gave Senegal a score of 51 out of 100, above the world average score, recognizing the efforts in terms of budget documentation dissemination, as well as an enhanced role of the Parliament and the supreme audit institution in budget oversight. Furthermore, the PFM legal framework has been substantially modernized with the implementation of the regional WAEMU directives which are a key driver for reforms and enhanced transparency in PFM. Senegal joined the Special Data Dissemination Standards (SDDS) in 2017 which also helped strengthen the quality and comprehensiveness of fiscal data.

The main recommendations of the report focus on five objectives: (1) strengthening coverage and credibility of budget and financial information; (2) ensuring harmonization and compliance of budget and accounting classifications; (3) enhancing the evaluation of fiscal risks and anticipating their impacts; (4) strengthening the analysis of macro-fiscal projections; and (5) involving civil society in the discussion over budget preparation and follow-up.

1 The IMF’s Fiscal Transparency Code can be found here: http://blog-pfm.imf.org/files/ft-code.pdf

D. Promoting Financial Sector Development and Stability8

24. Credit markets need to improve their functioning to be able to finance a fast-growing economy. While the introduction of Basel II/III is likely a temporary factor in current credit developments, there are also important structural impediments holding back credit to the private sector. The Basel II/III system is expected to make the banking system more resilient and help improve credit quality. Surveys point to access to finance as an important constraint to private sector growth as the formal financial sector finds it difficult to serve certain segments of the market that are important for growth, such as SMEs. One indication of this is that deposit growth has outpaced credit growth in recent years. Senegal has taken numerous initiatives to address this constraint, notably by reforming credit bureaus (with a recent law improving data flow from banks to such bureaus) (MEFP ¶49) and launching programs to help SMEs gain access to credit (MEFP ¶50, 51). The challenge is now to have all these initiatives work efficiently, supported by proper risk assessment, avoid duplication of efforts, and monitor progress adequately. Costs and benefits need to be carefully assessed in subsidized loan programs such as those administered through CNCAS (agricultural sector) and the newly minted Délégation générale à l’Entreprenariat Rapide (DER), which has extended loans to women and youth in a very rapid manner in the first half of 2018 (with a budget of CFAF 30 billion or 0.2 percent of GDP for the whole of 2018). Specific care is needed for institutions that do not fall under the WAEMU banking regulations (e.g. DER activities) and non-traditional banking instruments (e.g. microfinance institutions or mobile banking).

25. The financial system remains stable with pockets of vulnerability. A new definition of non-performing loans (NPLs) is being introduced through the new chart of accounts, which should lower the ratio of NPLs to total loans below 15.5 percent at end-2017. When accounting for provisioning, this number drops to 6.3 percent. The newly formed Dakar commercial tribunal, once fully functioning, could help bring down the still high NPLs, as would sound enforcement of prudential norms. There are, nevertheless, some pockets of vulnerability in the banking system, with one financial institution reporting negative equity. The institution that is the majority shareholder of this bank is now being restructured, which is having knock-on effects on this bank. Further, the government agreed to inject CFAF 50 billion in the form of tradable government securities in a state-owned bank in need of liquidity. In return, difficult-to-recover loans of this bank have been transferred to the Société Nationale de Recouvrement (SNR), with any recovered funds accruing to the government. While this bank is currently meeting all prudential norms, the issuance of securities still needs to happen, with the government planning to issue paper in the near future.

26. Senegal’s recent AML/CFT assessment found important strategic deficiencies that need to be addressed. Senegal has been assessed against the 2012 FATF standards during an onsite visit carried out in September 2017. The findings of the assessment report adopted by the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA), which is still under FATF review, found a number of strategic deficiencies, which could lead to close monitoring by the FATF and potential public listing. While the transposition of the WAEMU AML/CFT uniform law into the national legislation in February 2018 is a welcome step in addressing the legislative shortcomings, further steps should be swiftly taken to ensure compliance with the FATF standard and its effective implementation and prevent pressure on correspondent banking relationships, which could increase financial intermediation costs, including for trade and remittances.

Authorities’ Views

27. The authorities generally agreed with staff views on the broad macroeconomic policy mix. The authorities acknowledge the importance of containing fiscal financing needs in support of debt sustainability. In this context, they are committed to meeting 2018 fiscal targets, largely through expenditure cuts, and ensuring that the 2019 budget is aligned with the 3 percent of GDP WAEMU fiscal deficit convergence criterion. In addition. they recognize the importance of undertaking revenue reforms over the next few years to meet the 20 percent of GDP WAEMU tax revenue to GDP criterion and PFM reforms to contain financing needs. To sustain growth over the medium term, the authorities concur with staff on the need for structural reforms to boost competitiveness and private investment, including by supporting SMEs, and plan to continue with efforts to facilitate access to credit while strengthening financial stability. The authorities underscored their commitment to implement a broad reform agenda as outlined in the PSE II covering 2019-23.

E. Oil and Gas9

28. Recent oil and gas discoveries are substantial but would not result in a seismic shift in Senegal’s productive landscape. Important oil and gas discoveries were made in the Sangomar blocs in 2014 and Saint-Louis blocs in 2016. Both are located offshore and are in deep-water territory. Regarding Sangomar, two viable fields have been identified—SNE and FAN—with proven reserves for the former amounting to around 530 million barrels of oil and 1.3 trillion cubic feet (TCF) of gas. For Saint-Louis, gas reserves worth 15 TCF were discovered at the Grand Tortue Ahmeyin (GTA) field, situated near the Mauritanian border. A major international oil company is leading the development of this field in close cooperation with both Mauritania and Senegal. The current inter-governmental agreement stipulates that gas production is evenly split between the two countries. Final investment decisions are expected at the end of 2018 (GTA) and by mid-2019 (SNE), with first oil and gas expected in 2022 in both cases. Senegal’s national oil company PETROSEN owns 10 percent of equity in these fields but could increase its participation up to 18-20 percent. The timeframe of production is estimated to be about 30 years (see Text Figure 3 for production profiles). While this oil and gas activity is expected to positively impact Senegal’s economy and help diversify it, Senegal would not be considered a “resource-rich country” under IMF terminology based on current discoveries.10 However, off-shore exploration of new fields is ongoing and commercially viable discoveries of oil or gas could be made and result in a significantly larger share of the hydrocarbon sector in the economy over the longer term.

Text Figure 3.
Text Figure 3.

Projected hydrocarbon production in Senegal

(Equivalent 000 barrels/day, 2022-2051)

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

Sources: Senegalese authorities, IMF staff estimates.

Integrating oil and gas in the Macro-framework

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Source: IMF Staff calculations.

29. The share of hydrocarbons in nominal GDP is expected to reach about 5 percent on average between 2022 and 2040. When incorporating the SNE and GTA fields, the share of hydrocarbons in nominal GDP would reach 4.5 and 6.5 percent in 2022 and 2023 respectively, and average 5 percent between 2024 and 2040 (see text table). Real GDP growth would show an acceleration from a baseline without hydrocarbon production from 7.7 percent to 11.5 percent in 2022 but would then quickly level off with a negative contribution on average over the 2024-40 period.11 Investment in the hydrocarbon sector is expected to increase substantially in the period 2019-21. Most of this activity will have a high import content, but an increase in economic activity in some domestic sectors can still be expected, for example, in transportation and other services.

30. Other macroeconomic aggregates such as the fiscal accounts and the balance of payments will also be impacted. Fiscal revenues would be 0.5 percent of GDP higher in 2022, and about 1 percent of GDP higher in 2023. The increase would reach a maximum of about 3 percent of GDP at peak production in 2030, and an average of 1.5 percent between 2023 and 2040 (Text Figure 4). The current account is projected to deteriorate in the pre-production period, as investments in the hydrocarbon sector typically have high import content. From the production years onwards, however, exports increase substantially and reduce the current account deficit substantially. For the time being, the assumption is made that all oil and gas production is exported.12

Text Figure 4.
Text Figure 4.

Projected resources revenues

(Percent of non-resource GDP and of total fiscal revenues)

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

Sources: Senegalese authorities and IMF staff calculations.

31. Fiscal management of oil and gas sectors should be consistent with international best practices to ensure optimal use of the resources. The authorities are committed to ensure that all hydrocarbon revenues transit through the central government budget and that a share of resource revenues should be allocated for stabilization and intergenerational purposes. However, they should also ensure that there is a clear link between hydrocarbon revenues and the existing WAEMU deficit rule. For this purpose, fiscal policy could be anchored to a non-resource primary balance rule (NRPB) (IMF, 2012). The level of the NRPB can be used as a benchmark for a sustainable level of spending that considers the finiteness of the resource wealth (see accompanying Selected Issues Paper). More generally, the authorities should put in place a new fiscal framework which will ensure consistency between objectives and is designed to support countercyclical fiscal policy, transparency, good governance, and sound PFM.

Authorities’ Views

32. The authorities welcomed the incorporation of macroeconomic effects of hydrocarbons into the macroeconomic framework and assured the mission of their commitment to a transparent governance framework for the sector. Teams from the Ministry of Finance and national statistics agency (ANSD) worked with IMF staff on incorporating oil and gas effects into the countries’ macro-framework. The authorities also welcomed the support of the IMF and the World Bank in providing TA on the petroleum code that was expected to be finalized by end-2018. Work on the institutional set-up that is to govern the management of future resource revenues is ongoing with IMF assistance, and the authorities stressed the importance of key aspects of this, such as all hydrocarbon revenues transiting through the central government budget.

F. Inequality and Gender

33. Further reduction of large gender gaps in Senegal would have potential macroeconomic benefits.13 The economic literature shows that gender gaps in education can have negative consequences for economic growth, development, and diversification, and that gender inequality is associated with lower economic growth, higher income inequality and lower economic diversification.14 Over the past two decades, Senegal has made progress in addressing inequality between men and women. For instance, gender gaps in primary education have closed in both enrollment and completion rates (and have actually started reversing) and female labor force participation increased from 34 percent of the total labor force in 2000 to 41 percent in 2016. However, large gaps persist in secondary education and are more pronounced in tertiary education. In 2012, for every 10 boys completing their secondary education, only 6 girls got their diploma. Furthermore, sizable wage gender gaps persist, as women face larger barriers to enter and advance in the labor market and entrepreneurial activities. Estimations using the 2011 Household Survey point to a wage gap of 47 percent in Senegal, even after controlling for other variables such as education, experience, sector, localization, type of contract and type of job.

Recent Evolution of Gender Gaps in Education

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Sources: DHS, Unesco, World Development Indicators.

34. Social barriers and funding issues create obstacles, requiring stronger efforts to address the gaps. The authorities understand that there are many social barriers preventing a broader and more effective discussion of gender inequality in the country. For instance, even though the fertility rate is at 4.8, family planning discussion is not common. Furthermore, there are other challenges, including: (i) difficulties in enforcing civil laws in areas where customary laws are the norm; (ii) women have less access to assets, especially land; and (iii) girls’ secondary education dropout rates are higher due to factors like child pregnancy and child marriage. The fact that overall levels of education in Senegal are low—according to UNDP it was 3 years in 2015 (and about 5 years for the population under 20 years of age), compared to an average of 7 years in Sub-Saharan Africa—deepens the problem.

35. Simulations show there are large economic and social gains from reducing gaps in education and in labor markets. To study the issue, simulations are performed using a general equilibrium model with heterogeneous agents calibrated to the Senegalese economy.15 The model starts from a benchmark where girls receive, on average, 75 percent of the years of education received by boys (and 50 percent when only the bottom 10 percent of the income distribution is taken into account). Increasing years of education so that every percentile of the income distribution receives at least 5 years of education promotes GDP gains in a single generation on the order of 8 percent, improves female labor force participation by 11 percentage points and reduces inequality (as measured by the Gini coefficient) by 3 percentage points. The measure would generate an extra 1.1 percent of GDP in tax collections and would cost 1.7 percent of GDP,16 thus having a net cost of 0.6 percent of GDP. However, if this measure was accompanied by an increase in the formal sector of the magnitude of 10 percent of GDP (from 55 percent to 65 percent of GDP), then total government revenue collection gains would be 3.2 percent of GDP and the policy would generate a net budget surplus of 1.5 percent of GDP. If the policy was instead to increase the years of education to 10, consistent with the existing law which makes education compulsory until 16 years of age, the potential gains in a single generation would be substantial, amounting to 26 percent of GDP. Reducing discrimination in labor markets is also crucial, and for instance, a 5-percentage point drop in the earning gap due to discrimination could elevate female labor force participation by 8.6 percentage points.

36. Addressing the inequality gap is also germane for Senegal and tax reform could play a crucial role. Lower inequality is correlated with faster and more robust growth (Ostry, Berg, and Tsangarides, 201417) and Senegal could further reduce its inequality gap. At the same time, the country is committed to meet the WAEMU tax revenue target over the medium term. A quantitative assessment of the macroeconomic and distributional impacts of a fiscal consolidation through value added tax (VAT), personal income tax (PIT), and corporate income tax (CIT) are explored with a heterogenous agents general equilibrium model.18 Calibrated to represent the Senegalese economy, the model is used to simulate policy scenarios—raising additional tax revenue of 4 percent of GDP, in accordance with the need to reach the WAEMU target, through a combination of VAT, PIT, and CIT—that balance equity and efficiency. Results show that proper usage of savings from the consolidation, combined with a framework to ensure efficiency of public investment expenditures, could boost growth and reduce the rural-urban inequality gap.

Authorities’ Views

37. The authorities reaffirmed their commitment to reduce gender and inequality gaps. They welcomed the findings from the gender and inequality analyses and expressed interest in the model toolkit.19 Regarding the recommendations to diminish gender gaps, the authorities noted that a document with guidelines to reduce gender inequality has been published (“National Strategy for Equity and Gender Equality in Senegal: 2016 – 2026”), but that more effort is needed to address issues in many areas such as education (including high dropout rates for girls in secondary school due to early marriage and pregnancy), access to assets, discrimination in the labor market, and health outcomes. In terms of income inequality, the authorities concurred with staff that there is room to improve tax revenue mobilization, which can help strengthen public investment in support of growth and reduce the rural-urban inequality gap. They stressed that improving the living conditions of the population is a key element of the PSE and that social cohesion is important for macroeconomic stability. They expressed their commitment to continue their efforts to make growth more inclusive and reduce the gender gaps.

Program and Other Issues

38. Program performance under the PSI remains broadly satisfactory. All end-June 2018 assessment criteria (AC) and indicative targets (ITs) were met, with the exception of the quarterly ceiling on the share of the value of public sector contracts signed by single tender in part because of the use of “unsolicited offers” for some projects. This IT has not been met since December 2017 and the single tender issue is being discussed in the context of the PIMA review. All end-September 2018 ITs were met, with the exception of the ceiling on the share of the value of public sector contracts signed by a single tender, floor on net lending/borrowing, and floor on tax revenues, the last representing a key weakness in program performance through the first nine months of 2018.20 Performance on structural reforms was mixed. Two prior actions were met and two of the six structural benchmarks for the PSI seventh review were missed due to: (i) delays in the operationalization of the payment of taxes via mobile phones; and (ii) limited progress in implementing the action plan for reducing tax expenditures. Adjustors are being introduced to the end-December 2018 ACs on the floor on net lending/borrowing and the ceiling on the central government’s overall net financing requirement as set forth in the TMU.

39. Safeguards Assessment. An updated safeguards assessment of the BCEAO, completed in April 2018, found that the central bank has maintained a strong control environment since the last assessment in 2013 and its governance arrangements are broadly appropriate. In addition, audit arrangements have been strengthened, International Financial Reporting Standards (IFRS) were adopted as the accounting framework beginning with the 2015 financial statements, and a 2016 external quality review of the internal audit function found broad conformity with international standards. The BCEAO’s risk management framework established in 2014 is also progressing well with implementation of its work across the bank.

40. Data provision is broadly adequate for surveillance and program monitoring. In late-2017, Senegal became the fourth country in sub-Saharan Africa to subscribe to the IMF’s Special Data Dissemination Standard (SDDS), which sets high standards for the timing and periodicity of dissemination of economic and financial data. In 2018, the base year for the calculation of national accounts was changed from 1999 to 2014, a process which updated data sources and broadened the coverage of economic activity to better capture, for example, informal sector activities. Senegal reports fiscal data under GFSM 2001/14. Progress has been made on broadening the perimeter of fiscal data from central government to the public sector, but further efforts are necessary before fiscal accounts of the full public sector can be reported. In addition, there are still weaknesses in data on national accounts and social indicators.

41. Capacity development by the IMF and other development partners is supporting PSI implementation, while contributing to meeting PSE objectives. IMF TA in Senegal currently reflects the importance attached to fiscal developments, and focuses on tax policy, revenue administration, public investment efficiency and PFM. Recent IMF missions have conducted a FTE and a PIMA, with attached action plans to improve Senegal’s performance in these areas. Technical assistance has also been delivered to expand fiscal data beyond central government, which has helped expand the perimeter of debt data. Finally, close cooperation between the IMF and Senegal on macro-critical issues related to oil and gas discoveries has developed in the past year, notably on statistical and fiscal aspects.

Staff Appraisal

42. Sustaining high growth rates over the medium term requires effective implementation of fiscal consolidation and structural reforms. Growth in 2018 is projected to be above 6 percent for the fourth year in a row and inflation remains below 2 percent. However, for Senegal to reach its goal of reaching emerging market status by 2035, reforms should address development challenges in a sustainable way. Fiscal policy will need to deliver infrastructure and increased social spending without undermining fiscal sustainability, while steadfast implementation of structural reforms will need to facilitate private investment and growth. Policies to address gender and inequality issues would contribute to poverty reduction and well-distributed growth. The formulation and implementation of a comprehensive and effective reform strategy in the PSE II covering 2019-23 is essential to achieve these objectives. In the staff’s view, the post-election period presents an opportunity to reinvigorate reform momentum and decisively implement key reforms to further strengthen fiscal sustainability and promote private sector-led growth.

43. In response to large tensions on budget execution, sizable spending cuts are needed to meet the 2018 fiscal targets. Fiscal challenges have been building in 2018, with weak revenue performance and pre-election pressure to increase spending, as well as a growing energy subsidy and higher than programmed “below-the-line” Treasury financing of the Post Office. This has led to an accumulation of unmet obligations to the energy sector and payment delays to other private sector participants. The staff is reassured by the authorities’ firm commitment to implement substantial expenditure cuts in the last quarter of 2018 to meet fiscal targets.

44. Looking ahead, further fiscal reforms to increase revenues and strengthen PFM are needed to support fiscal sustainability and growth. The 2019 budget is aligned with the WAEMU 3 percent of GDP convergence criterion, but strong efforts are needed to meet ambitious revenue projections, reduce energy subsidies and address the potential spillover of fiscal obligations from past years. Over the medium term, revenue measures are needed to reach the WAEMU tax revenue to GDP 20 percent criterion. On the expenditure side, it will be important to contain current expenditures and improve the efficiency of investment, while ensuring that expenditures and financing needs are consistent with the annual budget.

45. The external sector is stable, with oil and gas discoveries providing an opportunity to boost exports and diversification. The widening of the current account since 2016 has been matched by increases in external financing, including access to the Eurobond market. The WAEMU pooled reserves stood at over 4 months of imports through end-September 2018 and staff analysis finds Senegal’s REER to be broadly consistent with fundamentals and desirable policy settings. A further widening of the external deficit is projected through 2021 due to the high import content of pre-production investment in the oil and gas sector, but this will be followed by a sharp reversal as production and export of hydrocarbons come online in 2022. The staff urges the authorities to develop a fiscal framework for oil and gas which is aligned with international best practices and ensures that these natural resources provide high economic and social returns. Senegal remains at low risk of debt distress, but is a borderline case.

46. The outlook for the Senegalese economy is broadly positive, but risks remain. Growth is projected to remain strong over the next few years and accelerate with the start of oil and gas production. The external position is broadly in line with medium-term fundamentals and desired policies. The financial sector is stable and good progress is being made toward implementing Basel II/III. However, Senegal will need to implement an ambitious structural reform agenda to ensure the private sector takes the lead role in sustaining high growth over the medium term. Potential domestic and regional security threats, adverse economic consequences of drought and possible increases in the cost of borrowing present additional sources of risks. On the upside, the potential macroeconomic benefits of oil and gas discoveries are significant.

47. Staff recommends completion of the seventh PSI review and approval of the modification of assessment criteria. All end-June 2018 quantitative assessment criteria and indicative targets were met, with the exception of the indicative target for the quarterly ceiling on the share of the value of public sector contracts signed by single tender. All end-September ITs have been met except for the ITs on the floor on net lending/borrowing, the floor on tax revenues and ceiling on the share of the value of public sector contracts signed by a single tender. Staff supports the authorities request for the modification of the end-December 2018 ACs on the floor on net lending/borrowing and the ceiling on central government overall net financing requirement.

48. It is proposed that the next Article IV consultation take place within 24 months in accordance with the Decision on Article IV Consultation Cycles Decision No. 14747-10/96.

Figure 1.
Figure 1.

Senegal: High Frequency Indicators, 2015-18

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

Sources: Senegal Authorities; and IMF Staff Calculations
Figure 2.
Figure 2.

Senegal: Real and External Sectors, 2012-17

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

Source: Senegal Authorities; and IMF Staff Calculations
Figure 3.
Figure 3.

Segegal: Fiscal and Financial Indicators, 2012-18

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

Source: Senegal Authorities; and IMF Staff Caluations.
Figure 4.
Figure 4.

Senegal: Outlook, 2017-23

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

Source: Senegal authorities; and IMF Staff Calculations.
Figure 5.
Figure 5.

Indicators of Public and Publicly Guaranteed External Debt Under Alternatives Scenarios, 2018-28

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

Sources: Senegal authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2028. Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department.
Figure 6.
Figure 6.

Senegal: Indicators of Public Debt Under Alternative Scenarios, 2018-28

Citation: IMF Staff Country Reports 2019, 027; 10.5089/9781484396254.002.A001

* Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections.Sources: Senegal authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2028. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.
Table 1.

Senegal: Selected Economic and Financial Indicators, 2015–23

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Sources: Senegal authorities; and IMF staff estimates and projections.

Based on new national accounts rebased to 2014.

Reflects reclassification of public investment.

Starting in 2017 debt level, debt service and government revenue include preliminary data covering the broader public sector.

Domestic debt includes government securities issued in local currency and held by WAEMU residents.

Values for 2018 are for end-Sept 2018. All other years are end-December.

Table 2.

Senegal: Balance of Payments, 2015–23

(Billions of CFAF)

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Sources: Central Bank of West African States (BCEAO); and IMF staff estimates and projections.

This is not indicative of the country’s impact on WAEMU’s aggregate external position or the pooled WAEMU reserves since the data contains intra-WAEMU flows from the current, capital and financial account.

Values for 2018 are for end-September 2018. All other years are end-December.

Table 3.

Senegal: Balance of Payments, 2015–23

(Percent of GDP)

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Sources: Central Bank of West African States (BCEAO); and IMF staff estimates and projections.

This is not indicative of the country’s impact on WAEMU’s aggregate external position or the pooled WAEMU reserves since the data contains intra-WAEMU flows from the current, capital and financial account.

Table 4.

Senegal: Government and FSE Financial Operations, 2015–231

(Billions of CFAF)

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Sources: Ministry of Finance; and IMF staff estimates and projections.

Government Finance Statistics Manual (http://www.imf.org/external/pubs/ft/gfs/manual/).

Starting in 2016, Treasury operations to finance (i) Post office operations (Poste and Poste Finance), (ii) pensions (Fonds National de Retraites), and (iii) reduction of stock of comptes de depots.