Statement of the IMF Mission to SenegalPress Release No. 12/325
September 20, 2012
An International Monetary Fund (IMF) mission led by Hervé Joly visited Senegal during September 6 – 19, 2012 for discussions of the fourth review of the three-year arrangement under the Policy Support Instrument (PSI), approved in December 2010, and the Article IV consultations. The members of the mission met with the ministers of economy and finance, energy, tourism, and budget; representatives of the Central Bank of West African States (BCEAO); other senior government officials; and representatives of the private sector, civil society, and the development partners.
At the conclusion of the visit, Mr. Joly issued the following statement:
“The beginning of 2012 was marked by a difficult pre-electoral context and sociopolitical tension in Mali and Guinea-Bissau. However, economic activity in the non-agricultural sector held up relatively well, and real GDP growth of 3.7 percent is expected in 2012, following 2.6 percent in 2011. Inflation stood at 1.5 percent for the first six months of 2012 and is expected to remain well below 2 percent in the coming months. The current account deficit is expected to increase in 2012 due to increased imports relating to food and petroleum products, while the balance of payments would record a deficit.
“The external environment is expected to remain weak. Despite a modest acceleration of the global economy expected in 2013, high petroleum product prices, rising cereal prices, and sociopolitical tensions in the subregion are factors that will continue to affect economic activity, the external accounts, and public finances in Senegal.
“Despite the gloomy international context, GDP growth is expected to increase slightly to 4.3 percent in 2013, sustained primarily by major projects coming to fruition in the electricity and road sectors, the continued recovery of the agricultural sector, implementation of the heavy metals project (zircon) in Grande Côte, gold mining projects in Golouma and Massawa, and the startup of projects financed by the Millennium Challenge Account. Inflation is expected to remain contained at about 2 percent in 2013. The current account deficit should decline, but would remain high in light of imports associated with investments in the energy and mining sectors. The overall balance of payments is expected to post a slight deficit.
“In the medium term, the key challenge for Senegal is to return to strong, sustainable, shared growth. The government has an important role to play in the process, for instance, through the development of essential infrastructure, reforms to improve the business climate, and appropriate social policies. Reconciling the objectives of meeting the country's development needs and maintaining a sustainable debt position calls for greater efficiency in public spending.
“Program implementation was satisfactory. All of the quantitative performance criteria and indicative targets for end-June 2012 were met, including the budget deficit target, through efforts to control public spending. The implementation of all the structural reforms likewise demonstrates progress. The prime minister's recent comprehensive policy statement confirmed the new government's resolve to pursue the implementation of reforms.
“Discussions between the authorities and the mission addressed the budget outlook for 2012 and 2013. The budget deficit target for 2012 remains unchanged, and in keeping with the new government's commitment to ensure fiscal sustainability, the budget deficit is expected to be reduced to less than 5 percent of GDP in 2013. This reduction will require continuing the efforts under way to reduce the cost of running the government and streamline public expenditure. Efforts are also under way to extend and increase the effectiveness of the social safety net and gradually reduce the general energy and food price subsidies.
“The discussions also addressed the structural reforms intended to further improve public governance and promote private sector development, as well as the general outlook for growth and poverty reduction for Senegal in the medium term. In that context, particular attention was focused on ways to continue developing financial services and increase access while preserving the stability of the financial system.
“The mission will recommend ad referendum that the IMF Executive Board complete the fourth program review. The Board is expected to take up the review prior to end-2012.”