Statement by an IMF Staff Mission at the Conclusion of their Visit to SenegalPress Release No. 08/81
April 9, 2008
An International Monetary Fund (IMF) staff mission, headed by Mr. Johannes Mueller, visited Senegal during March 26-April 9, 2008 to hold discussions for the 2008 Article IV consultations and the first review under the Policy Support Instrument (PSI).1 The mission met with Prime Minister Cheikh Hadjibou Soumaré, Minister of Economy and Finance Abdoulaye Diop, Central Bank of West African States (BCEAO) National Director Birane Sene, and other senior government officials, as well as with representatives of the business community, civil society, and Senegal's development partners.
The mission released the following statement in Dakar today:
"The Senegalese economy rebounded in 2007. Economic growth is estimated at 4¾ percent, driven by buoyant activity in the services and construction sectors, while the agricultural sector experienced a second year of output decline. The rapidly rising international fuel and food prices led to a rise in inflation—which reached 6 percent at year-end—and put pressure on the external and fiscal accounts, especially in the second half of 2007.
"Implementation of fiscal policies was not without difficulties in 2007. The authorities contained the fiscal deficit (payment order basis) within the program ceiling. However, they made significant expenditure commitments in 2007 that will need to be paid in 2008. This partially reflects that budgetary room in 2007 was increasingly taken up by outlays to help contain price increases of food and petroleum products. The mission supports the authorities' intention to adjust their spending and settle payment delays in 2008.
"The mission is particularly pleased with the progress made in the implementation of structural reforms. All but one structural condition under the program was met by end-March 2008. This included some key reforms, such as the implementation of a new public procurement framework. Agreement was reached to maintain the program's structural focus on improving fiscal governance and transparency, encouraging private sector development, and enhancing the role of the financial sector.
"Senegal's economic prospects remain good, although not without risk. Absent significant exogenous shocks, and provided a prudent macroeconomic policy stance is pursued, economic growth could average more than 5½ percent over the medium-term. Investment is expected to be driving growth in the years to come, including as a result of large foreign-financed investment projects. A strong recovery of the operations of Industries Chimiques du Sénégal (ICS) in the face of unabating world demand for phosphates should help support Senegal's growth and export performance over the next few years. Nonetheless, downside risks related to the global economic environment have increased, which the authorities need to monitor carefully so as to anticipate and limit their consequences on the economy.
"Discussions with the Senegalese authorities will continue in Washington during the Spring Meetings of the World Bank and IMF next weekend. The IMF Executive Board is tentatively scheduled to discuss the 2008 Article IV consultations and the first review of Senegal's economic program under the PSI in mid-June 2008."
1 The three-year PSI for Senegal was approved by the IMF Executive Board on November 2, 2007. The PSI is designed for low-income countries that may not need IMF financial assistance, but still seek close cooperation with the IMF in preparation and endorsement of their policy frameworks.