Senegal: Fifth Review Under the Policy Coordination Instrument, Second Reviews Under the Stand-by Arrangement and the Arrangement Under the Standby Credit Facility, and Requests for Augmentation of Access, Waiver of the Nonobservance of a Performance Criterion, and Modification of a Performance Criterion and Quantitative Targets—Debt Sustainability Analysis
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International Monetary Fund. African Dept.
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Publication Date:
27 Jun 2022
eISBN:
9798400214219
ISBN:
9798400214219
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English
Keywords:
risk rating; risk indicator; exports threshold; dynamics equation; debt risk; Debt sustainability analysis; Debt service
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SENEGAL

Abstract

SENEGAL

Title page

SENEGAL

FIFTH REVIEW UNDER THE POLICY COORDINATION INSTRUMENT, SECOND REVIEWS UNDER THE STAND-BY ARRANGEMENT AND THE ARRANGEMENT UNDER THE STANDBY CREDIT FACILITY, AND REQUESTS FOR AUGMENTATION OF ACCESS, WAIVER OF THE NONOBSERVANCE OF A PERFORMANCE CRITERION, AND MODIFICATION OF A PERFORMANCE CRITERION AND QUANTITATIVE TARGETS—DEBT SUSTAINABILITY ANALYSIS

June 7, 2022

Approved By

Montford Mlachila and Natalia Tamirisa (IMF), Abebe Adugna and Marcello Estevão (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 is assessed to be at moderate risk of external and overall public debt distress, with limited space to absorb shocks. Public debt is projected to commence a downward trajectory in 2023, driven by a positive interest-rate growth differential and revenue-based fiscal consolidation. The key assumptions underpinning this assessment are (i) a boost to growth, exports, and fiscal revenues from hydrocarbon production over the medium term, (ii) fiscal deficits that converge to the regional convergence criterion of 3 percent of GDP by 2024, and (iii) medium-term potential growth of about 5 percent of GDP. Projections are subject to significant uncertainty. A prolonged war between Russia and Ukraine would contribute to higher commodity prices and weigh on external demand, potentially slowing growth and further increasing fiscal costs to Senegal from subsidies. New COVID variants, regional security challenges, higher external financing costs, and potential delays to the hydrocarbon projects are also risks. One potential upside risk is a potential increase in demand for hydrocarbons from Europe as they seek alternative energy sources. Maintaining debt sustainability in this context requires a prudent borrowing strategy that prioritizes concessional external borrowing and domestic regional financing alongside continued efforts to strengthen debt management. Broader fiscal policy should seek to increase fiscal space over the medium-term to respond to future shocks, primarily by expanding the revenue base and eliminating costly energy subsidies.

Debt Coverage

1. This DSA uses a broad definition of public debt. The assessment includes public and publicly guaranteed (PPG) debt held by (i) the central government, (ii) para-public entities, and (iii) state-owned enterprises (SOEs) (Text Table 1).2 This DSA uses a currency-based definition of external and domestic debt as data constraints prevent the use of a residency-based definition. Debt to the regional development bank (BOAD) has been treated as domestic debt since the beginning of the current PCI in January 2020.3 The default financial sector shock of 5 percent of GDP is more than adequate to cover contingent risks from potential bank recapitalization needs, which are estimated to be less than 1 percent of GDP.

Text Table 1.

Senegal: Coverage of Public Sector Debt and Design of the Contingent Liability Stress Test

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The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country’s public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE’s debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%.

2. The authorities are taking steps to strengthen the quality and coverage of public debt data. A recent audit of the quality and coverage of the public debt database did not identify major weaknesses, but noted risks related to the timeliness and reliability of SOE debt data. The authorities are following through on an action plan to address these deficiencies. The national debt committee (CNDP), chaired by the Minister of Finance, reviews all large public investment decisions, including those by SOEs. However, ongoing vigilance is required to ensure that the framework is consistently followed in practice.4 A recent circular and decree to reinforce the regular and timely provision of debt data by SOEs is starting to bear fruit, enhancing the debt authorities’ visibility on the wider perimeter of debt.

Background

3. Public sector debt levels have increased significantly since the end of 2019. The fiscal response to the COVID-19 pandemic led to a surge in public debt of about 10 percentage points, from 63.6 percent of GDP at end-2019 to 73.2 percent of GDP as of end-2021. The central government’s debt makes up the majority of this amount (67.4 percent of GDP) and remains just below the regional ceiling of 70 percent. The bulk is external debt (57 percent of GDP). For the central government (for which more granular data is available), the largest sources of external debt are multilateral institutions, Eurobonds, and bilateral official sector lending (Text Figure 1). 5

Text Figure 1.
Text Figure 1.

Senegal: Public Sector Debt Characteristics

Citation: IMF Staff Country Reports 2022, 197; 10.5089/9798400214219.002.A002

Sources: Senegalese authorities and IMF staff calculations.

4. External and total public debt service are significant. The ratio of public external debt service to exports reached 21.8 percent in 2021, reflecting both the decline in exports due to the COVID shock and the Eurobond debt management operation. This ratio is projected to average about 17 percent over the medium term as the recovery takes hold and hydrocarbon exports come online. Public external debt service is projected to average about 17 percent of revenues over the medium term (Table 1), while for total public debt service the average is around 29 percent of revenues and grants for the same period (Table 2). Both figures are slightly higher than in the previous DSA, reflecting additional borrowing to finance the higher fiscal deficit in 2022.

5. Senegal is benefitting from increased financing from multilateral and bilateral partners. The World Bank and the African Development Bank are increasing their budget support by a combined 0.5 percent of GDP, potentially scaling this up further by 0.2 percent of GDP. Germany is assessing higher budget support in 2022. Fund financing, including the proposed augmentation, would cover 53 percent of the financing need over the entire program period.

6. Senegal participated in the G-20 Debt Service Suspension Initiative (DSSI). The DSSI was a NPV neutral exercise intended to provide eligible members with liquidity relief to allow them to focus more resources on responding to the COVID-19 pandemic. The DSSI provided around CFAF 30 billion in debt service relief (0.2 percent of GDP) over May-December 2020 and CFAF 71 billion (0.5 percent of GDP) in 2021. Deferred payments will be made over 2022–27 and average about CFAF 17 billion per year.

7. Senegal has access to both regional and global capital markets. Senegal has access to the regional securities market at relatively favorable conditions. Senegal also has access to the Eurobond market, though spreads have increased following the tightening of monetary conditions in advanced economies (Text Figure 2). The authorities issued a EUR775 million Eurobond in June 2021, their first Euro-denominated obligation. The proceeds were used to buy back USD-denominated Eurobonds maturing in 2024, thereby reducing rollover and FX risk,6 and to pre-finance oil and gas investments. The Eurobond issuance also helped support the build-up of WAEMU pooled reserves. More recently, the authorities issued a CFAF 330 billion sukuk in April 2022 (2 percent of GDP) via a new SOE set up to manage government property and other strategic assets. The proceeds of the sukuk will be primarily used to buy back buildings currently being leased by the central government. Planned investments in regional airports to support the tourism industry (1.6 percent of GDP over 2022–24) have also been included in the DSA.

Text Figure 2.
Text Figure 2.

Senegal: Financing Conditions

Citation: IMF Staff Country Reports 2022, 197; 10.5089/9798400214219.002.A002

Sources: Bloomberg and IMF staff calculation.

Baseline Scenario

8. The macroeconomic assumptions underlying the projections are consistent with the program baseline discussed in the main staff report. The main changes relative to the previous DSA of January 2022 include a slight slowdown in growth to account for the impact of Russia’s invasion of Ukraine and sanctions on Mali, an increase in commodity prices (food and energy) that leads to significantly higher inflation, and higher fiscal deficits in 2022 reflecting elevated subsidy costs. Long-run macroeconomic assumptions remain largely unchanged.7 The main macroeconomic assumptions are as follows:

  • . Real GDP Growth. Senegal’s real GDP growth rate is estimated to be 5 percent in 2022, compared to 5.5 percent in the previous DSA, reflecting a broad-based recovery, particularly in the secondary and tertiary sectors. Preliminary data for 2022Q1 indicates that growth rates have been resilient to external shocks thus far. The anticipated impact of oil and gas production on growth in 2023 and 2024 is broadly unchanged from previous DSA, though it has been pushed back slightly due to delays in the hydrocarbon projects. Long run growth is still expected to average about 5 percent.8

  • Oil and gas. The baseline includes the Sangomar (SNE) offshore oil field development and the Greater Tortue Ahmeyim (GTA) gas project, with production is expected to begin in the fourth quarter of 2023.9 The remaining financing needs of Petrosen (the state-owned oil company) for both projects are estimated at CFAF 987 billion from 2022 through 2037 (Text Table 2) and are assumed to be financed as external debt on commercial terms. These estimates are subject to change as the projects and financing strategy evolve. The Yakaar-Taranga project has not yet reached a final investment decision and is thus not included in the DSA.

  • Inflation. Inflation is projected to increase significantly in 2022 to 5 ½ percent, reflecting higher commodity prices. Over the medium term, inflation is expected to return to an average of 2 percent.

  • Public sector deficit. The public sector deficit—which includes both the central government deficit and the net lending and borrowing of SOEs—is estimated to be 7.3 percent of GDP in 2022. This increase over the previous DSA mainly reflects the higher projected fiscal deficit for the central government and the new airport investments by the SOE sector. The public sector deficit is projected to stabilize at around 3 percent of GDP over the medium term as the central government deficit converges towards the regional target of 3 percent of GDP in 2024 (supported by the unwinding of commodity subsidies and enhanced revenue-mobilization) and financing needs in the hydrocarbon sector decline.

  • Revenues. Public sector revenues are estimated at 28.4 percent of GDP in 2021. Projections assume a gradual increase to about 31 percent of GDP, driven by increasing non-hydrocarbon tax revenues of the central government which are projected to gradually increase from 17 percent to 20 percent of non-hydrocarbon GDP by 2024, in line with the objectives of the Medium-Term Revenue Strategy (MTRS). This outlook assumes the steady implementation of MTRS reforms to support revenue mobilization, with a focus on expanding the tax base and reducing tax expenditures. Oil and gas-related revenues will start adding to revenue from 2023 onwards.

  • Current account deficit. The baseline scenario assumes a current account deficit of about 13 percent in 2022, an increase of about 4 percent of GDP since the previous DSA, primarily reflecting deteriorating terms of trade due to higher import prices. Although the net effect is negative, higher prices will also result in higher nominal exports. Starting in 2023, the current account deficit is projected to sharply decline as oil and gas exports come online (boosting exports and reducing investment-related imports), with a gradual recovery in tourism also contributing.

Text Table 2.

Senegal: Petrosen Borrowing Assumptions1

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As the projects are under development, these figures are subject to change Source: Senegalese authorities, IMF staff projections.

Text Table 3.

Senegal: Evolution of Selected Macroeconomic Indicators

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Source: Senegalese Authorities; IMF staff calculations

2022–2027

2028–2042

4th PCI Review and 1st SBA/SCF Review (January 2022)

Includes General Government and state-owned enterprises.

9. The DSA assumes the authorities will continue implement a prudent borrowing strategy that includes support from multilateral and bilateral partners. About two-thirds of the higher 2022 fiscal deficit (relative to the previous DSA) will be financed by loans from the World Bank, AfDB, and the proposed augmentation of Fund financing. The remaining third will be financed on the regional market. The authorities’ medium-term debt strategy includes continued support from multilateral partners but also a gradual shift away from external financing denominated in U.S. dollars towards a greater reliance on EUR-denominated debt. The issuance of Eurobonds is also assumed to gradually increase over the long term (with new issuances equivalent to the stock of maturing Eurobonds plus 20–30 percent) as Senegal shifts away from concessional external borrowing to access global capital markets more regularly. In the regional CFAF market, Senegal’s credit is strong, and the country is able to issue at increasingly longer maturities. Accordingly, the DSA assumes that domestic borrowing will average about 46 percent of total financing over 2022–27, a small increase from the 40 percent projected for 2022.

Text Table 4.

Senegal. 2022 Borrowing Strategy

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Debt with a positive grant element

Budget deficit minus pre-financing, plus operating expenditures and other financial operations

Minus pre-financing for Petrosen

Source: Senegalese authorities, IMF calculations

10. The realism tools suggest that the proposed fiscal adjustment path is ambitious, but staff believe it is possible under the circumstances. The assumed primary balance adjustment path of 4.3 percent of GDP over 2022–24 is in the top quartile of the historical distribution for LICs (Figure 4). In the case of Senegal, a significant portion of the adjustment would reflect an unwinding of the fiscal costs of energy subsidies over the medium-term, consistent with the roadmap agreed as part of the program. The robust implementation of the authorities’ medium-term revenue strategy is also required to achieve this target. Separately, the projected economic growth rates in 2023 are above the range of potential growth paths under various fiscal multipliers, but the expected growth from hydrocarbon projects is not captured by the exercise. The realism tools related to the share of government investment and the contribution of investment to growth do not signal any concerns (Figure 4). In terms of historical forecast errors, the large residual is the result of the one-off expansion of the public debt perimeter in 2017 to include state-owned enterprises (Figure 3).

Country Classification and Determination of Stress Test Scenarios

11. Senegal’s debt carrying capacity remains strong. Based on data from the April 2022 World Economic Outlook database and the World Bank’s 2020 Country Policy and Institutional Assessment (CPIA) score, Senegal’s Composite Indicator (CI) is 3.25. This assessment affects the thresholds used to calculate the mechanical external debt risk ratings. Senegal’s CI score is unchanged compared to the last vintage (3.25) (Text Table 5).

Text Table 5.

Senegal: Debt Carrying Capacity

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Source: IMF staff estimates

12. The standard stress tests have been applied, along with a market financing shock. The use of a tailored stress test for market financing reflects Senegal’s outstanding Eurobonds. The test assumes a temporary increase in the cost of new commercial external borrowing by 400 basis points, a nominal depreciation of the CFAF relative to the US dollar, and a shortening of maturities and grace periods.

External DSA

13. External debt indicators remain below their thresholds under the baseline scenario (Figure 1). The present value of debt to GDP is close to the risk threshold in the first year of the baseline projection but steadily declines thereafter, driven by growth and a declining non-interest current account deficit. The present value of debt to exports sharply declines in 2023–24 due to export growth from the oil and gas projects. The two liquidity indicators – external debt service to exports ratio and the external debt service to revenues ratio – remain below the risk thresholds throughout the projection period.

14. All four external debt risk indicators breach their threshold under the sensitivity analysis. For the present value of debt-to-GDP ratio and the debt service-to-revenue ratio, the most extreme shock is a combination shock. For the two export-related indicators, the most extreme shock is a shock to exports. Overall, these results point to vulnerabilities to Senegal’s debt profile under adverse conditions, including a slower external demand or a significant downgrade in the expected output of the hydrocarbon sector. The breaches from the stress tests result in an external debt distress risk rating of Moderate. A key difference between the baseline and the historical scenario (which would result in sharp increases in all four indicators) is the non-interest current account deficit, reflecting prospective hydrocarbon exports under the baseline.

15. The market financing risk indicators point to moderate risks. Senegal’s spreads have recently widened beyond the EMBI benchmark, reflecting the tightening of global financial conditions. Under the shock scenario, the debt service-to-exports ratio would breach the risk threshold 2026–2028 (Figure 5). This period corresponds to large forthcoming principal payments that are associated with maturing Eurobonds (and which coincides with the peak of repayments to the Fund). This result suggests that Senegal could have potential market financing vulnerabilities in the medium-term. An active debt management strategy that smooths out these debt service peaks would help reduce this risk.

Overall Risk of Public Debt Distress

16. There are no breaches of the overall public debt risk indicator in the baseline scenario. Total public debt is projected to peak at about 75 percent of GDP in 2022 before gradually declining due to fiscal consolidation and favorable interest rate-growth dynamics (Table 2). The present value of public debt to GDP is very close to the risk threshold in 2022–2023 under the baseline scenario, gradually declining to below 60 over the medium-term. The present value of debt to revenues is also projected to gradually decline. Debt service is projected to remain substantial, averaging about 28 percent of total revenues and grants over the next five years.

17. Stress tests indicate that Senegal is most vulnerable to a growth shock. Under the standard growth shock (which simulates a growth rate of 2.4 percent in 2022–23), all three public debt indicators would be set on an explosive growth path. This represents an extreme shock, one that ignores the expected rebound from COVID-19 and growth impact of hydrocarbon production. Nevertheless, it underscores the importance of reforms to strengthening Senegal’s resilience by building fiscal space and enhancing its medium-term growth potential. The breaches under the stress tests result in a public sector debt distress risk rating of Moderate.

Risk Rating and Vulnerabilities

18. Senegal remains at moderate risk of external debt distress, with limited space to absorb shocks (Figure 6). Senegal is considered to have “limited space to absorb shocks” because the realization of the median observed shock is expected to result in a downgrade to high risk of debt distress. Senegal’s vulnerability to growth and export shocks, combined with heightened uncertainty over the global economic outlook, points to the need for a balanced approach that combines near-term fiscal support to the population with medium-term debt sustainability. The authorities should aim to return to the regional deficit target by 2024, complemented with reforms to contain fiscal risks and enhance debt management.

19. Senegal’s overall risk of debt distress also remains moderate. Given elevated debt service, the authorities should prioritize further efforts to mobilize additional domestic revenues and seek out concessional borrowing in the near term.

20. There are significant risks to the assessment. The near-term outlook depends primarily on external developments, primarily related to the spillovers from Russia’s invasion of Ukraine. Sustained higher commodity prices would negatively impact Senegal’s terms of trade and fiscal balances (due to subsidies). Slower global growth could hinder the recovery while still-limited access and uptake of vaccines leaves the country vulnerable to future waves of COVID-19. A tightening in global financial conditions would raise the cost of external financing. Senegal is also subject to risks from natural disasters and a deterioration in regional security. Significant delays in hydrocarbon production would have a material impact on growth and revenues. By contrast, sustained higher oil prices and the potential for higher demand from Europe for alternative energy sources represents a source of upside risk for Senegal in the medium-term, and investments in higher tourism capacity at regional airports could support growth and exports.

21. A prudent borrowing strategy needs to leave space for further downside risks to materialize. This will require exercising some restraint in terms of new borrowing initiatives, focusing on concessional and domestic regional financing and continued efforts to strengthen debt management. Active debt management will be needed to manage potential financing risks from maturing Eurobonds in the medium-term. Fiscal policy should seek to increase fiscal space over the medium-term to provide space to respond to future shocks by enhancing the revenue base and gradually eliminating costly subsidies to food and energy over the medium-term.

Authorities’ Views

22. The authorities broadly agree with staff’s analysis. They share the outlook and assessment of debt risks and recognize that the margin to absorb new shocks is limited. Nevertheless, they remain optimistic, notably with regard to the positive impact of the hydrocarbon projects on medium-term growth and the positive spillovers this will have to many related sectors. The authorities are determined to gradually reduce their reliance on borrowing by growing domestic revenues through the implementation of the MTRS and containing fiscal deficits in line with regional targets. At the same time, they will continue to look for opportunities to proactively manage the public debt, smooth debt service payments, and further mitigate risks to the debt profile.

Figure 1.
Figure 1.

Senegal: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2022–32

Citation: IMF Staff Country Reports 2022, 197; 10.5089/9798400214219.002.A002

Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2032. 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 extreme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.
Figure 2.
Figure 2.

Senegal: Indicators of Public Debt Under Alternative Scenarios, 2022–32

Citation: IMF Staff Country Reports 2022, 197; 10.5089/9798400214219.002.A002

Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2032. 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 extreme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.
Figure 3.
Figure 3.

Senegal: Driver of Debt Dynamics—Baseline Scenario, 2017–32

Citation: IMF Staff Country Reports 2022, 197; 10.5089/9798400214219.002.A002

1/ Difference between anticipated and actual contributions on debt ratios.2/ Distribution across LICs for which LIC DSAs were produced.3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation.
Figure 4.
Figure 4.

Senegal: Realism Tools, 2016–27

Citation: IMF Staff Country Reports 2022, 197; 10.5089/9798400214219.002.A002

Figure 5.
Figure 5.

Senegal: Market-Financing Risk Indicators, 2022–32

Citation: IMF Staff Country Reports 2022, 197; 10.5089/9798400214219.002.A002

Sources: Country authorities; and staff estimates and projections.
Figure 6.
Figure 6.

Senegal: Qualification of the Moderate Risk Category, 2022–321

Citation: IMF Staff Country Reports 2022, 197; 10.5089/9798400214219.002.A002

Sources: Country authorities; and staff estimates and projections.1 For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent.
Table 1.

Senegal: External Debt Sustainability Framework, Baseline Scenario, 2019–42

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Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r – g – ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
Table 2.

Senegal: Public Sector Debt Sustainability Framework, Baseline Scenario, 2019–42

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Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The entire public sector, including SOEs . Definition of external debt is Currency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
Table 3.

Senegal: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2022–32

(Percent)

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Sources: Country authorities; and staff estimates and projections.

A bold value indicates a breach of the threshold.

Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Includes official and private transfers and FDI.

Table 4.

Senegal: Sensitivity Analysis for Key Indicators of Public Debt, 2022–32

(Percent of GDP, unless otherwise indicated)

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Sources: Country authorities; and staff estimates and projections.

A bold value indicates a breach of the benchmark.

Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.

Includes official and private transfers and FDI.

Annex I. Debt Holder Profile Table

Annex I. Table 1.

Senegal: Decomposition of Public Debt and Debt Service by Creditor, 2021–231

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As reported by Senegalese authorities according to their classification of creditors, including by official and commercial. Debt coverage is the same as the DSA.

Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan. An example would be borrowing to finance the budget deficit, collateralized by oil revenue receipts. See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers” for a discussion of issues raised by collateral.

Includes other-one off guarantees not included in publicly guaranteed debt (e.g. credit lines) and other explicit contingent liabilities not elsewhere classified (e.g. potential legal claims, payments resulting from PPP arrangements).
1

Senegal’s debt carrying capacity is classified as strong (3.25, calculated based on the April 2022 WEO and 2020 World Bank Country Policy and Institutional Assessment (CPIA) score).

2

The inclusion of para-public enterprises and SOEs began in 2017. The list of entities covered by the DSA is provided in the Technical Memorandum of Understanding. The 2018 public sector balance sheet was compiled with support from Fund TA.

3

Following the conclusion of the current program, BOAD debt will be reclassified as external debt to ensure consistency with other WAEMU members. As of end-2021, the stock of BOAD debt amounted to 1.3 percent of GDP.

4

The recently issued CFAF 330bn sukuk, discussed below, did not go through the regular CNDP procedures.

5

The perimeter of public debt was expanded in 2017 to capture public and para-public enterprises, creating a structural break in the data. Senegal is the only WAEMU member country to use this broader definition of public sector debt.

6

The domestic currency, the CFA franc, is pegged to the Euro.

7

The large residuals in Table 2 are explained primarily by below-the-line COVID measures (2020), arrears clearance following the SDR allocation (2021), and the sukuk (2022). Additional residuals (e.g., 2019) may in part be explained by the inability of the LIC DSF to fully capture exchange rate effects.

8

The methodology to project the impact of oil and gas production on real GDP is unchanged compared to the last DSA using an expenditure-side approach .

9

GTA is exploited jointly with Mauritania.

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Cover IMF Staff Country Reports
Senegal: Fifth Review Under the Policy Coordination Instrument, Second Reviews Under the Stand-By Arrangement and the Arrangement Under the Standby Credit Facility, and Requests for Augmentation of Access, Waiver of the Nonobservance of a Performance Criterion, and Modification of a Performance Criterion and Quantitative Targets-Press Release; Staff Report; and Statement by the Executive Director for Senegal
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2022: Issue 197
Publisher:
International Monetary Fund
ISBN:
9798400214219
ISSN:
1934-7685
Pages:
113
DOI:
https://doi.org/10.5089/9798400214219.002
  • <sup><xref rid="RA002fig01" ref-type="fig">Text Figure 1.</xref></sup>
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    Text Figure 1.

    Senegal: Public Sector Debt Characteristics

  • <sup><xref rid="RA002fig02" ref-type="fig">Text Figure 2.</xref></sup>
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    Text Figure 2.

    Senegal: Financing Conditions

  • <sup><xref rid="RA002fig03" ref-type="fig">Figure 1.</xref></sup>
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    Figure 1.

    Senegal: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2022–32

  • <sup>Figure 2.</sup>
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    Figure 2.

    Senegal: Indicators of Public Debt Under Alternative Scenarios, 2022–32

  • <sup><xref rid="RA002fig05" ref-type="fig">Figure 3.</xref></sup>
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    Figure 3.

    Senegal: Driver of Debt Dynamics—Baseline Scenario, 2017–32

  • <sup><xref rid="RA002fig06" ref-type="fig">Figure 4.</xref></sup>
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    Figure 4.

    Senegal: Realism Tools, 2016–27

  • <sup><xref rid="RA002fig07" ref-type="fig">Figure 5.</xref></sup>
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    Figure 5.

    Senegal: Market-Financing Risk Indicators, 2022–32

  • <sup><xref rid="RA002fig08" ref-type="fig">Figure 6.</xref></sup>
    View in gallery
    Figure 6.

    Senegal: Qualification of the Moderate Risk Category, 2022–321

Text Figure 1.

Senegal: Public Sector Debt Characteristics
Text Figure 2.

Senegal: Financing Conditions
Figure 1.

Senegal: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2022–32
Figure 2.

Senegal: Indicators of Public Debt Under Alternative Scenarios, 2022–32
Figure 3.

Senegal: Driver of Debt Dynamics—Baseline Scenario, 2017–32
Figure 4.

Senegal: Realism Tools, 2016–27
Figure 5.

Senegal: Market-Financing Risk Indicators, 2022–32
Figure 6.

Senegal: Qualification of the Moderate Risk Category, 2022–321