Press Release: Statement at the Conclusion of an IMF Mission to Senegal
March 25, 2010Press Release No. 10/113
March 25, 2010
An International Monetary Fund (IMF) mission, led by Norbert Funke, held discussions with the Senegalese authorities during March 11–25, 2010 for the 2010 Article IV consultation and to review Senegal’s Policy Support Instrument (PSI) and Exogenous Shocks Facility (ESF). The mission met with Minister of State and 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 business and financial sectors, trade unions, civil society, and development partners. Discussions centered on the progress Senegal is making with its economic program and policies to raise growth.
At the end of the mission, Mr. Funke issued the following statement in Dakar:
“The Senegalese economy should begin a gradual rebound this year after two years of slower than usual growth resulting from both external and domestic shocks. Real GDP growth, which averaged about 2 percent in 2008 and 2009, is expected to pick up to close to 3½ percent. However, the outlook remains uncertain, with risks that the global recovery will be more hesitant than expected, the threat of renewed problems in the energy sector, and financing constraints that limit the government’s fiscal room for maneuver. Annual inflation, which has been negative for more than six months, is expected to gradually return to about 2 percent.
“The difficult economic environment has complicated implementation of some measures of the government’s economic and financial program. Most quantitative assessment criteria were met, including the limit on central government payment delays, and key structural benchmarks have been completed. However, the overall fiscal deficit was higher in 2009 than envisaged under the program, reaching 5 percent of GDP. Revenues fell short, mostly due to tax arrears of public enterprises (mainly SENELEC), and current expenditure was higher than programmed. Public investment, a government priority, rose to 10½ percent of GDP. As the recovery gains momentum, the fiscal stimulus that has been used to cushion the impact of the global crisis will need to be gradually withdrawn to return to the medium-term deficit target of 4 percent of GDP that is consistent with debt sustainability. To reach this target, non-priority expenditure will need to be contained through sound public financial management. In 2010, the fiscal deficit should remain below 5 percent of GDP.
“Progress on structural reforms has been mostly satisfactory. The government has made progress in paying down extra-budgetary spending and agency and public institution debt and is committed, based on a careful review, to regularize past expenditures that were not budgeted. Expeditious payment in this area, accompanied by a transparent and publicly communicated process, is indispensable so that financial relations between the government and the private sector can return to normal. Initiatives that are centered on public financial management, a financial sector action plan, and tax expenditures are progressing broadly in line with program commitments. The mission remains concerned about slow progress in energy sector reform.
“To raise Senegal’s growth potential, the authorities must accelerate implementation of their growth strategy, giving priority to improving competitiveness through a better business climate and further improvements in governance. Comprehensive reform of the energy sector, in close cooperation with development partners, needs to proceed without further delay in order to limit the significant fiscal costs and economic and financial risks related to that sector. Energy supply bottlenecks need to be addressed, SENELECs operational efficiency increased, and tariffs and the tariff structure need to reflect the true cost of energy production, while protecting the most vulnerable. Because Senegal’s financial sector also needs to make a larger contribution to growth, it is vital to improve the institutional, legal, and operating environment for that sector prudently, while guarding against vulnerabilities.
“On its return to Washington the IMF mission will summarize the discussions in a staff report to the IMF Executive Board. The Board is expected to discuss the PSI and ESF program reviews and the Article IV consultation in late May.”