A staff team from the International Monetary Fund (IMF), led by Mr. Ali
Mansoor, visited Dakar from September 7-19, 2017 and engaged in discussions
as part of the fifth review of the IMF’s Policy Support Instrument (PSI)
approved in June 2015
.
At the conclusion of this visit, the team issued the following statement:
“Economic growth is expected to remain robust above 6 percent, and
inflation to be contained at 2 percent in 2017. However, public debt has
continued to rise and debt service is expected to increase from 24 percent
of revenue in 2014 to 30 percent in 2017. Continued fiscal consolidation is
required. This will need domestic revenue mobilization, particularly
rolling back exemptions with low socio-economic impact, curtailing
own-financed investment projects that have not been vetted by the project
bank, and strictly limiting net Treasury financing to budgetary operations
of the current year.
“PSI program implementation remains broadly satisfactory. The quantitative
targets for end-June 2017 were met, except for the indicative target on tax
revenue, explained by a shortfall in petroleum revenues. There is
significant progress with implementation of the three structural benchmarks
on revenue administration and public financial management.
“The macroeconomic outlook for 2018 is favorable, but the rising burden of
public debt service requires attention. The mission welcomes the
authorities’ commitment to take measures to eliminate additional borrowing
needs beyond the budgetary fiscal deficit by:
(i) restructuring the Post Office; (ii) implementing civil service pension
fund reform; and (iii) subjecting comptes de dépôts to budgetary rules.
“The pace of fiscal consolidation is programmed to slow down slightly in
2018 reaching a deficit of CFAF 367 billion (3.5 percent of GDP) to provide
space to implement projects that are financed with concessional resources.
To ensure that this relaxation does not lead to excessively high debt
service over the medium term, it will be important to curtail tax
exemptions, integrate quasi-fiscal revenues into the budget, and ensure the
evaluation of all new domestically-financed investment projects. If these
measures are implemented in 2018, they are expected to help reduce debt
service to 2014 levels over the next 10 years.
“To maintain the growth momentum over the medium term, the reforms to the
Special Economic Zone (SEZ) framework need to be extended to promote SME
development and mobilize foreign direct investment for globally competitive
production. The mission welcomes the authorities’ proposals to use the
G-20’s Compact with Africa to extend and accelerate reforms in the SEZ
aimed at rules-based economic governance and a transparent tax regime.
Replacing the 50-year tax holidays in the SEZ with income taxes of 15
percent that cannot be exempted is a positive step. Further reforms should
include subjecting all SEZ investors to the VAT, with a rapid refund regime
for exporters. This would allow controls over who invests in the zone to be
relaxed, making it easier for small and medium-sized enterprises to emerge
from the informal sector. Support under the Compact with Africa will also
enable tackling SEZ bottlenecks in infrastructure, particularly
electricity.
“The fifth review under the PSI is tentatively scheduled to be taken up by
the IMF Executive Board in December 2017.”
The team met with the Prime Minister, the ministers or senior government
officials responsible for the economy, finance and planning, the civil
service, industry and mines, investment promotion, the BCEAO National
Director, other senior government officials and development partner
representatives. The team wishes to thank the authorities for their
hospitality, as well as the close working relationship and climate of
openness in evidence throughout the discussions.
