Press Release No. 10/368

Press Release No. 10/368
September 30, 2010

An International Monetary Fund (IMF) mission visited Senegal during September 15-29, 2010 to conduct the sixth review under the Policy Support Instrument (PSI) and discussions on the authorities’ economic program that could be supported under a successor three-year PSI. The mission met with the Prime Minister and the ministers in charge of economy and finance, international cooperation and infrastructure, energy, the budget, and other government officials. The mission also met representatives of the private sector and development partners. The current Policy Support Instrument (PSI) for Senegal will end this year.

At the conclusion of the visit, the mission issued the following statement in Dakar:

“Economic performance through September 2010 has been broadly satisfactory. Monthly indicators point to an ongoing economic recovery, which appears somewhat stronger than anticipated at the last review. Growth is currently projected at 4 percent in 2010 and 4.4 percent in 2011. But risks remain and include a weak global recovery, higher oil prices, and persistent electricity supply problems. On the upside, a faster global recovery and continued structural reforms could support growth. Inflation is expected to remain below 2 percent.

“The current PSI-supported program remains broadly on track. At end-June the deficit target was met and the budgetary float was below the program ceiling. Revenues exceeded their programmed level and overall expenditures were, thus far, contained. On the structural side, reforms in public financial management are progressing broadly in line with program commitments.

“Discussions on an economic program that could be supported by a new PSI progressed well. It was agreed that raising trend growth would be a key priority. Key steps, which could be integrated in a new PSI, include: (i) maintaining macroeconomic stability, supported by a sound fiscal policy and improvements in the quality of spending; (ii) increasing government revenues to create more room in the budget for priority spending, including higher public investment in infrastructure, coupled with better investment planning and stronger debt management; (iii) consolidating progress in PFM by improving budget credibility and implementation and avoiding accumulation of new payment delays; and (iv) pursuing broad-based structural reforms leading to an improved business climate, better governance, and more effective energy and financial sectors.

“The 2011 budget deficit should be kept below 4.5 percent of GDP, excluding specific large new infrastructure investments for which execution plans and financing options are currently being examined. Known spending pressures must be realistically and transparently reflected in the 2011 budget. Challenges in the electricity sector, that remain a drain on the budget and growth, need to be addressed expeditiously in close cooperation with development partners.

“The mission stressed the importance of carefully prioritizing new public investment in infrastructure, ensuring that such investment has a high rate of return and is in line with the country’s overall development strategy. Plans for new infrastructure investment need to be, transparently integrated in the budget framework, and should also be conducive to the development of additional private sector investment. It will also be important to follow a cautious approach in accessing external non-concessional borrowing to finance infrastructure investment so as to preserve Senegal’s macroeconomic stability.

“Discussions on a new PSI will continue in the coming weeks. It is expected that the IMF’s Executive Board will discuss the review of the PSI before the end of 2010.”