News Brief: IMF Completes First Review of Senegal Under PRGF-Supported Program, Approves US$19 Million Disbursement
June 21, 2000
The International Monetary Fund's (IMF) Executive Board completed today the first review of Senegal's economic performance under a program supported by a three-year SDR 107 million (about US$142 million) Poverty Reduction and Growth Facility (PRGF)1 credit (see Press Release No. 99/29). The completion of this review enables the release of a further SDR 14.3 million (about US$19 million) disbursement, which brings total disbursements under the current program to SDR 64.2 million (about US$85.5 million).
At the conclusion of the Executive Board's discussion of Senegal's economic and structural reform program, Eduardo Aninat, Deputy Managing Director and acting Board Chairman, summarized the discussions:
"Senegal has successfully completed the first review of the second annual arrangement, under a three-year PRGF-supported program, notwithstanding some slippages.
"The economy has performed well. Real GDP growth was strong and inflation low in1999; the fiscal outcome was better than projected; and real exchange rate developments suggest that external competitiveness has been preserved. Prospects for 2000 are for a continuation of these positive trends. Nonetheless, in the wake of the tariff reduction in the framework of the West African Economic and Monetary Union (WAEMU), Directors stressed the importance of persevering with a strong fiscal consolidation, notably by offsetting the tariff-induced reduction in revenue; this will be helped by the introduction of a single-rate VAT at a sufficiently high rate in July 2000 as scheduled. As envisaged under the program, a reactivation of the passthrough system for the retail prices of petroleum products was also recommended to reduce its fiscal costs, as was containing overall outlays, notably the wage bill. A special emphasis was also placed on steps to strengthen management of the Treasury to ensure greater accountability and transparency of the central government financial operations.
"Regarding structural reforms, Directors welcomed the full implementation of the Common External Tariff of the WAEMU. They recommended that the authorities refrain from using the safeguard measures allowed by the CET as a means of granting additional protection to inefficient domestic industries. They expressed concern at the further delays in the privatization program, and urged the authorities to adhere closely to the new privatization agenda. They noted that additional steps are also needed to improve the regulatory and judiciary systems in order to strengthen private sector participation in the economy, while reforms in the energy sector would help improve the competitiveness of the economy.
"Directors are concerned that Senegal's good macroeconomic performance had not translated into a noticeable improvement in social indicators and alleviation of poverty. In this context, Directors warmly welcomed the strategy outlined in Senegal's Interim Poverty Reduction Strategy Paper and considered that it provides a sound basis for the development of a fully participatory PRSP, for reaching the decision point under the HIPC Initiative, and for concessional assistance under the PRGF. Directors believed the strategy to be adequate, but pointed out that, to ensure its successful implementation, there should be a strengthening of statistics on poverty and of mechanisms for monitoring poverty reduction outcomes, and a better link between the poverty alleviation strategy and the macroeconomic framework. Directors also welcomed the authorities' decision to prepare, in the coming months, a comprehensive poverty reduction strategy through a broad participatory process," Mr. Aninat said.
1On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility, was renamed the Poverty Reduction and Growth Facility, and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper. This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5%, and are repayable over 10 years with a 5 ½-year grace period on principal payments.