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

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


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

Relations with the Fund

(As of October 31, 2018)

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Latest Financial Arrangements:

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Formerly PRGF.

Projected Payments to Fund2

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Implementation of HIPC Initiative:

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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.

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.

Implementation of Multilateral Debt Relief Initiative (MDRI):

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The MDRI provides 100 percent debt relief to eligible member countries that qualify for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

Implementation of Catastrophe Containment and Relief (CCR): Not Applicable As of February 4, 2015, the Post-Catastrophe Debt Relief Trust has been transformed to the Catastrophe Containment and Relief (CCR) Trust.

Exchange System:

Senegal, a member of the West African Economic and Monetary Union (WAEMU), accepted the obligations under Article VIII, Sections 2(a), 3 and 4 of the Fund’s Articles of Agreement, and maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions. The WAEMU’s exchange regime is a conventional peg to the euro.

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 were also discussed in the report “WAEMU: Common Policies for Member Countries” (Country Report No. 18/106).

Article IV Consultations:

The previous consultation discussions were held during August 17–30, 2016. The Article IV consultation was completed by the Executive Board on December 2, 2016 and the staff report was published on January 4, 2017 (Country Report No. 17/1).

In completing the third review of Senegal’s economic performance under the program supported by the PSI and concluding the 2016 Article IV consultation with Senegal, Executive Directors endorsed staff’s appraisal, as follows: Implementation of the first set of PSE projects has helped move Senegal to a higher growth path, but sustaining this growth over the medium term requires steadfast implementation of reforms that would enable SMEs to thrive and attract FDI for globally competitive production. Continued efforts to increase the competitiveness of the private sector, including through making tax collection more transparent, lowering electricity costs and improving service distribution, and creating an environment where SMEs and FDI can contribute to broad-based growth, will allow the private sector to take the reins of growth over the medium term. Staff welcomes efforts to revamp the rules for the SEZ, drawing on the experience of China and Mauritius, and with input from organizations representing the investors from China, Europe and the US. It will be important, however, for the SEZ to move away from tax holidays and to have a transparent, rules-based tax regime that is easy to comply with and has reasonable rates.

The authorities are committed to preserving macroeconomic stability. Efforts to increase revenue collection and rationalize public consumption have helped control budget deficits. However, these efforts need to be pursued with further vigilance, particularly with respect to the wage bill, a more transparent and fairer public sector wage remuneration system and a more equitable and efficient collection of taxes, where tax expenditures are significantly reduced. Reforms to ensure everyone pays their fair share of taxes in a transparent system, should make it possible to raise more revenue, whilst removing tax disincentives facing SMEs and FDI in globally competitive activities. The use of comfort letters to encourage bank financing of projects in advance of budget appropriations can undercut fiscal discipline and create contingent liabilities, and should be kept to the absolute minimum.

The financial sector should play a stronger role in supporting private-sector led growth. Financial indicators are improving, but from a low level. Regional supervision should be strengthened, including with a view to further reducing non-performing loans. Domestic reforms are needed to improve incentives for extending credit.

Senegal remains at low risk of debt distress, but debt levels are rising. Increased nonconcessional borrowing, including on the regional market, has raised the debt service burden on the budget. Maintaining its low risk of debt distress is predicated on sustaining the high levels of growth envisaged under the PSE while adhering to the planned fiscal consolidation path, which will require rapid progress in fostering private investment. Better selection, evaluation and monitoring of investment projects to ensure a strong economic return and accessing concessional and semi-concessional borrowing whenever possible as part of a comprehensive debt management strategy will contribute to keeping debt on a sustainable path while ensuring efficient implementation of the public investment program envisaged under the PSE. Moreover, there is an urgent need to strengthen Treasury operations that are under pressure from legacy arrears and financial difficulties of the postal system. Staff welcomes the authorities’ intention to take stock of the pressures on the Treasury by conducting an audit by end-March 2017 and formulate an action plan as soon as possible.

The outlook for the Senegalese economy is positive and risks are manageable, provided there is a concerted effort to continue improving economic governance. PSE success depends on rapidly implementing the critical mass of reforms which have been identified, including from the peer learning catalyzed by the Fund. An explicit review of the political economy of reforms should facilitate implementation of these reforms. However, risks, mainly domestic, relate to the entrenched rent seeking and patronage that may hinder opening up economic space and ensuring that everyone pays their fair share of taxes in a transparent system.

Failure to overcome these lobbies for the status quo would, as has happened four times since 1990, result in the current growth momentum being lost. External risks include possible increases in the cost of public borrowing and slow growth in key partner countries. Security risks in the region could also adversely affect investment and, hence, growth and exports.

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 IMF conducted a mission under the FSAP program in 2000 and 2001. The Financial System Stability Assessment (FSSA) was issued in 2001 (IMF Country Report No. 01/189). An FSAP update was undertaken in 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 2007 and the FSSA was issued in May 2008 (SM/08/139). A ROSC on the data module was published in 2002. An FAD mission conducted a ROSC on the fiscal transparency module in 2005.

Technical Assistance (2010–18):


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B. Headquarters

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C. Resident Representative

Stationed in Dakar since July 24, 1984; the position has been held by Ms. Cemile Sancak since September 2017.

D. Anti-Money Laundering/Combating the Financing of Terrorism

Senegal has been assessed against the 2012 Financial Action Task Force (FATF) standards during an onsite visit carried out in September 2017 by the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA). The assessment report was adopted by the GIABA plenary in November 2018 and will be published following a quality and consistency review by the FATF. The preliminary results of the assessment indicate that Senegal’s AML/CFT regime has strategic deficiencies both in terms of the strength of the framework and its effective implementation. Based on the results of its evaluation, Senegal is likely to be referred to the Financial Action Task Force for monitoring by its International Cooperation Review Group and is at risk of being publicly listed, following a one-year observation period. Since its evaluation, Senegal has adopted a new AML/CFT law, transposing into the national legislation the WAEMU uniform law.

Relations with Other Financial Institutions

C. West African Development Bank (BOAD)

D. Islamic Development Bank

Statistical Issues

(As of October 31, 2018)

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Senegal: Table of Common Indicators Required for Surveillance

(As of December 11, 2018)

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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.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

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


Reported to staff during mission.


When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

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.