Press Release No. 09/418

Press Release: Statement at the Conclusion of an IMF Staff Mission to Senegal

November 18, 2009

An International Monetary Fund (IMF) mission headed by Norbert Funke visited Senegal during November 4 – 18, 2009 to conduct discussions for the fourth review of the Policy Support Instrument (PSI) and the second review of the Exogenous Shocks Facility (ESF). The mission met with Minister of State and Minister of Economy and Finance Abdoulaye Diop, Budget Minister Abdoulaye Diop, Minister of State in charge of International Cooperation and Infrastructure Karim Wade, Minister of Energy Samuel Sarr, Minister of Agriculture Fatou Gaye Sarr, BCEAO National Director Fatimatou Zahra Diop, other senior government officials, and representatives of the private sector, trade unions, civil society, and development partners.

At the end of the mission, Mr. Funke issued the following statement today in Dakar:

“The global financial crisis and domestic shocks are affecting Senegal’s economy. Growth is expected to slow to 1¼ percent in 2009 from an already depressed 2½ percent in 2008. Business activity has been weak, remittances have been under pressure, and tax revenues are lower than expected. In the second half of this year the economy has also been undercut by electricity shortages and urban flooding.

“However, the expected global recovery and the pursuit by Senegal’s government of appropriate economic policies should set the stage for a pick-up in growth to about 3½ percent in 2010. Annual inflation, which was negative during the past few months, is expected to gradually return to about 2 percent.

“Despite the difficult economic environment, implementation of the government’ economic and financial program has been broadly satisfactory. All quantitative assessment criteria were met and key structural benchmarks have been completed. The stock of the government’s unpaid bills within the regular expenditure chain has been normalized. The mission welcomed progress with reforms to improve public financial management.

“The 2010 budget aims at striking a balance between resource constraints and promoting investment and protecting priority spending. Under the mission’s macroeconomic assumptions, the budget implies that the fiscal deficit could increase to about 5 percent of GDP in 2010. Such a moderate fiscal expansion could help support demand and would not jeopardize Senegal’s medium-term debt sustainability.

“The government confirmed its intention to bring to account all past extra-budgetary expenditure and pay public agency debt as soon as possible. Expeditious payment of these outstanding payments, embedded in a transparent and publicly communicated process, is indispensable for the full normalization of financial relations between the government and the private sector. The mission will continue to work closely with the authorities towards this goal. To help increase the room for fiscal maneuver, efforts to mobilize sufficient financing in a timely manner will need to be strengthened.

“Stronger economic growth will also be important in this context. To raise economic growth, the government will need to undertake major reforms. In addition to normalizing relations between the government and the private sector, improved governance, and further progress in budget planning, and better revenue administration and liquidity management, are crucial. The mission encouraged the authorities to continue to strengthen governance, including through publishing regularly the budget execution and ensuring that audit and regulatory agencies have adequate financial and human resources. Other critical reforms that are needed are in the energy and financial sectors, and through the adoption of measures that will improve the current business climate. In close collaboration with development partners, the authorities will need to provide SENELEC with an operational and financial model that ensures its long-term financial soundness and adequate energy generation and distribution. Broader and deeper domestic and regional financial markets would enhance access to finance, stimulate small- and medium-sized entrepreneurial activity, and ultimately reduce poverty. Measures to improve the business climate could include reducing delays in transferring property rights, better contract enforcement, and the simplification of customs procedures.

“The IMF's Executive Board will discuss the PSI and ESF program reviews in the coming weeks.

“The mission wishes to thank the authorities for their warm hospitality and the high quality of the technical discussions.”