IMF Executive Board Approves Increase in Financial Support under Senegal’s ESF, US$50 million Disbursement and Completes Third Review of PSIPress Release No. 09/223
June 19, 2009
The Executive Board of the International Monetary Fund (IMF) approved an increase in financial support for Senegal under the Exogenous Shocks Facility (ESF) by SDR 72.81 million (about US$112 million) to SDR 121.35 million (about US$186 million) and an extension of the ESF arrangement from 12 to 18 months to help finance the balance-of-payments impact of the global economic crisis. The approval enables Senegal to draw an amount of SDR 32.36 million (about US$50 million) from the IMF immediately, and equal amounts upon completion of the second and third reviews under the ESF arrangement.
The Executive Board has also completed the first review under the ESF and the third review under the Policy Support Instrument (PSI) and granted a waiver for the quantitative performance criterion on the basic fiscal balance for end-December 2008. The ESF for Senegal was approved on December 19, 2008 (see Press Release No. 08/334) to help finance the balance-of-payments impact of higher food and energy prices. The three-year PSI for Senegal was approved on November 2, 2007 (see Press Release No. 07/246) to support the country's economic reform efforts. It is aimed at consolidating macroeconomic stability, increasing the country's growth potential, and reducing poverty. The program focuses on maintaining a sound fiscal policy stance and enhancing fiscal governance and transparency. It also includes measures to develop the private sector and increase the financial sector's contribution to growth.
Following the Board's discussion on Senegal, Murilo Portugal, Deputy Managing Director and Acting Chair, made the following statement:
“The global economic crisis has begun to affect the Senegalese economy. Economic growth is expected to remain weak in 2009, reflecting falling remittances, lower export prices, and a contraction of foreign direct investment. Inflation is expected to fall sharply, reflecting the decline in international food and fuel prices and the absence of domestic demand pressures. The financial sector has weathered the crisis, and recent steps to strengthen financial stability monitoring are welcome.
“The government’s economic program supported under the PSI and ESF aims to help Senegal address the effect of the global economic crisis. Scope exists for a temporary easing of fiscal policy. Over the medium term, it will be important that fiscal policy returns to a sustainable path, consistent with macroeconomic stability and debt sustainability, while preserving spending in priority social sectors and on public infrastructure.
“Significant steps have been taken to reduce payment delays to the private sector and modernize public financial management, with a view to improving budget planning, execution, and monitoring. These efforts need to be continued and deepened so as to prevent a recurrence of past budgetary slippages. It will also be essential to follow up expeditiously on the independent external audit of extrabudgetary spending and avoid any reoccurrence of such spending. Structural reforms aimed at developing the financial sector and improving the business climate are key to bolstering economic performance and boosting investor confidence,” said Mr. Portugal.
The IMF's framework for PSIs 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. PSI-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners. This is intended to ensure that PSI-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. Members' performance under a PSI is reviewed semi-annually, irrespective of the status of the program (see Public Information Notice No. 05/145).
The ESF is designed to provide policy support and financial assistance to low-income countries facing exogenous but temporary shocks. It is available to countries eligible for the Poverty Reduction and Growth Facility (PRGF)—the IMF's main instrument for financial assistance to low-income countries—but that do not have a PRGF-supported program in place. Financing terms are equivalent to a PRGF arrangement and are more concessional than under other IMF emergency lending facilities.