## cr1927-senegal-a4

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### Executive summary — macro outlook and program status
- Main challenge: sustaining high GDP growth while maintaining fiscal sustainability and improving the business environment to create jobs for the fast-growing population.
- PSE II (2019-23) aims for growth rates above 9 percent between 2018 and 2023 and a reorientation towards industry.
- Program performance:
  - Performance under the PSI-supported program has been broadly satisfactory.
  - All end-June 2018 assessment criteria and indicative targets met, except for the indicative target on the share of public contracts subject to a single tender.
  - Two prior actions met; two of six structural benchmarks set for the PSI 7th review missed.
  - Staff recommendation: completion of the seventh PSI review.

- Recent macro highlights:
  - Real GDP growth 2017: 7.2 percent.
  - Real GDP growth projected 2018: 6.2 percent.
  - Inflation projected to remain under 2 percent in 2018.
  - Current account deficit projected to remain above 7 percent of GDP in 2018.
  - WAEMU pooled reserves: $15.1 billion at end-September 2018 (4.3 months of imports), up from $13.0 billion at end-2017.
  - Credit to the economy y-o-y growth: 0.6 percent at end-September 2018; -4.1 percent since December 2017.
  - Credit to the private sector y-o-y growth: 0.4 percent at end-September 2018.

### Fiscal sustainability, near-term pressures, and 2019 budget
- Near-term pressures:
  - Pre-election spending pressures and energy subsidies weighed on the 2018 budget; expenditures needed to be cut by 1.2 percentage point of GDP in the last quarter of 2018 to stay within the fiscal envelope.
  - Staff estimates overall subsidy to the energy sector to reach about 2 percent of GDP by end-2018.
    - In 2018, the budget is expected to compensate the sector up to 0.6 percent of GDP; the remaining will be settled by 2023.
    - Authorities issued a promissory note close to one percentage point of GDP acknowledging the government owes this amount to SENELEC.

- 2019 budget:
  - Aligned with WAEMU fiscal deficit convergence criterion of 3 percent of GDP, but requires strong efforts to meet revenue objectives and reduce energy subsidies.
  - Financing of the 2019 budget (CFAF billions):
    - Total financing: 979
    - Escrow: 236
    - Donor loans: 618
    - WAEMU bond issuance: 125
    - Gross financing need: 979
    - Fiscal deficit: 430
    - Additional Treasury borrowing: 0
    - Amortization: 548

- End-2018 fiscal financing estimates (CFAF billions and % of GDP):
  - PSI borrowing requirements target: -4.1 (% of GDP), -551 (CFAF bn)
  - Lower revenue: -0.9 (% of GDP), -115 (CFAF bn)
  - Higher expenditure: -0.2 (% of GDP), -30 (CFAF bn)
  - Higher below-the-line financing: -0.2 (% of GDP), -21 (CFAF bn)
  - Estimated borrowing requirements without measures: -5.4 (% of GDP), -717 (CFAF bn)
  - Needed effort to be in line with PSI target: 1.2 (% of GDP), 166 (CFAF bn)
    - Revenue measures (tax collection): 0.2 (% of GDP), 34 (CFAF bn)
    - Current spending cuts: 0.4 (% of GDP), 51 (CFAF bn)
    - Capital spending cuts: 0.6 (% of GDP), 82 (CFAF bn)

- Recommended fiscal actions:
  - Continue fiscal policy and revenue administration reforms to ensure borrowing is consistent with approved budget financing needs.
  - Increase tax revenues to the WAEMU 20 percent of GDP target over the medium term.
  - Implement a debt management strategy that increases the proportion of domestic debt and prioritizes access to concessional debt whenever possible.
  - Adjust domestic energy prices in steps and align with global oil prices to eliminate the energy subsidy.

### Revenue mobilization — diagnosis and priorities
- Rebased GDP lowered tax revenues to GDP to about 15 percent, below WAEMU target of 20 percent.
- Short- and medium-term revenue reform actions (selected):
  - Short-term focus on tax administration measures to raise compliance and collect recoverable arrears.
  - Reform roadmap aiming to increase the tax-to-GDP ratio by four percentage points in four years.
  - Priority tax-administration measures include improved enforcement, redirecting audits toward high-risk taxpayers, revising the “acompte sur importations” regime to contain VAT evasion, and de-registering inactive VAT registrants.
  - Implement the 20-point digitalization action plan:
    - Expand e-procedures to medium-size enterprises.
    - Enhance Mon Espace Perso (officially launched July 26, 2018).
    - Enhance SMS and voice reminders; implement M-tax by April 2019.
  - Tax policy options post-election to broaden base include: increase CIT withholding on imports of small taxpayers; raise the ceiling of the minimum CIT in the commercial sector; review VAT exemptions on staple food; eliminate the lower VAT rate on tourism; adjust PIT rates and brackets.

- IT initiatives:
  - E-tax for e-filing and e-payment.
  - M-tax for taxpayers without Internet via cell phone.
  - Mon Espace Perso for individuals and businesses.

- Property tax strengthening:
  - Propose clear plan and timeline for a complete country-wide cadaster.

### Public investment, PFM, and extra-budgetary financing
- Containing current expenditures and improving investment efficiency:
  - Implementation of civil service employment ceilings in 2019 to help contain wage expenditures.
  - Creation of a “project bank” listing fully assessed investment projects.
  - Implement PIMA recommendations: align investment projects with multi-year budget, evaluate projects by economic returns, manage PPP fiscal contingent liabilities.

- PFM and extra-budgetary Treasury financing actions (prior actions implemented):
  - SN La Poste: new convention (October 2018) to limit Treasury guarantee for clearing postal checks; restructuring plan and separation of Poste Finance to seek banking license.
  - Lettres de Confort: ministerial order (November 2018) to cease use of budgetary letters that commit central government to expenditures beyond current budget year or outside budget, with limited acceptable uses.
  - Comptes de Dépôt: decree to remove ability to carryover “current spending” balances from one year to next starting end-December 2018; limit capital spending carryover to 5 percent of remaining balance; elimination of most balances except three para-public agencies to be converted to bonds in early 2019.
  - FNR: complementary pension scheme implemented; further parametric reforms planned.

### External sector, competitiveness, and oil & gas implications
- External position:
  - Current account deficit nearly doubled since 2016 to over 7 percent of GDP.
  - FDI averaged just over 2 percent of GDP; low relative to peers.
  - WAEMU pooled reserves: $15.1 billion at end-September 2018 (more than 4 months of regional imports).

- Oil and gas discoveries and macro integration:
  - Sangomar (2014) and Saint-Louis (2016) blocs: Sangomar SNE proven reserves ~530 million barrels of oil and 1.3 TCF of gas; GTA field (Saint-Louis) gas reserves 15 TCF.
  - PETROSEN equity: 10 percent, potentially up to 18-20 percent.
  - Final investment decisions expected end-2018 (GTA) and by mid-2019 (SNE); first oil and gas expected in 2022; production timeframe ~30 years.
  - Staff macro impact calculations:
    - Share of hydrocarbons in nominal GDP: 4.5 percent in 2022 and 6.5 percent in 2023; average ~5 percent between 2024 and 2040.
    - Real GDP growth impact: acceleration from baseline to 11.5–11.6 percent in 2022, then leveling off; average real GDP growth 2024-40: 5.2 percent (table values).
    - Hydrocarbon-related imports rise sharply in pre-production period, widening current account deficit through 2021; sharp reversal in 2022 as production boosts exports.

- Fiscal management recommendations for hydrocarbons:
  - Ensure all hydrocarbon revenues transit through the central government budget.
  - Allocate a share of resource revenues for stabilization and intergenerational purposes.
  - Link hydrocarbon fiscal framework to WAEMU deficit rule; consider a non-resource primary balance rule (NRPB).
  - Put in place a fiscal framework to support countercyclical policy, transparency, good governance, and sound PFM.

### Debt sustainability and DSA findings
- Debt metrics and DSA highlights:
  - Expansion of debt perimeter and GDP rebasing raised total public debt to 60.6 percent of GDP in 2017 (expanded coverage).
  - Total public debt projected to 64.5 percent of GDP in 2018.
  - External public debt projected at 47.6 percent of GDP in 2018.
  - Public debt service (Percent of government revenue) projected 2018: 40.9.
  - Staff assessment: Senegal at low risk of debt distress but borderline — contingent on continued reform, prudent borrowing, and debt liability management.

- Key DSA assumptions (selected):
  - Discount rate: 5 percent.
  - Long-run real GDP growth: 5.1 percent (2020-34).
  - Domestic debt share assumed ~16.4 percent of total public debt on average 2018-23.
  - Average maturity assumptions and interest rates specified for domestic and external categories in the DSA.

- Stress-test findings:
  - External debt indicators breach thresholds temporarily under extreme scenarios (e.g., Eurobond rollover spike).
  - Debt service-to-exports breaches under specific one-year shocks (2018 and 2021 noted).
  - Mitigating factors: GDP rebasing, Eurobond repurchase to smooth 2021 spike, WAEMU reserves, access to concessional financing, ongoing guarantees to address currency risk.

- Policy priorities from DSA:
  - Continue fiscal consolidation and revenue mobilization.
  - Contain Treasury financing and control non-concessional borrowing terms and volumes.
  - Strengthen debt management and monitor financing plans.
  - Improve project selection and prioritize high-return public investment.

### Financial sector development and stability
- Banking sector and NPLs:
  - New chart of accounts and Basel II/III alignment expected to lower NPL ratio below 15.5 percent at end-2017; net of provisioning NPL ratio 6.3 percent.
  - One financial institution reported negative equity; majority shareholder restructuring underway.
  - Government agreed to inject CFAF 50 billion in tradable government securities into a state-owned bank; difficult-to-recover loans transferred to the SNR.

- Access to credit and SME finance:
  - Constraints: information asymmetries, enforcement of credit covenants, large informal sector.
  - Credit bureau activity improved markedly: contracts reported 1,693,312 at end-September 2018 (up from 464,272 end-March 2018).
  - SME and inclusion initiatives:
    - DER extended loans to women and youth in H1 2018 with budget CFAF 30 billion (0.2 percent of GDP in 2018).
    - BNDE, FONSIS (CFAF 500 billion), FONGIP, CDC, ADEPME ‘Envol’ program and BRVM initiatives listed as support channels.
  - Financial inclusion:
    - Adults with an account increased from 6 percent in 2011 to 42 percent in 2017.
    - Mobile money accounts ~5.2 million as of December 2017 versus ~1.6 million bank accounts.

- AML/CFT:
  - Assessment against 2012 FATF standards (September 2017) found strategic deficiencies; transposition of WAEMU AML/CFT law in February 2018 is a welcome step; further steps needed to ensure FATF compliance and protect correspondent banking relationships.

### Governance, transparency, and PFM diagnostics
- Governance status:
  - Senegal compares relatively well to SSA and WAEMU averages on governance and transparency.
  - Joined SDDS in 2017; reporting fiscal data under GFSM 2001/14 with efforts to expand coverage beyond central government.
  - FTE (May 2018) key findings:
    - PFM legal framework modernized; Open Budget Index 2017 score 51/100.
    - Main FTE recommendations: strengthen coverage and credibility of budget information; harmonize budget and accounting classifications; enhance fiscal risk evaluation; strengthen macro-fiscal projection analysis; involve civil society in budget discussions.

- Public procurement and single-tender contracts:
  - Indicative target on quarterly ceiling for single-tender public contracts not met; procurement needs strengthening and unsolicited offers should be brought into normal vetting processes.

- Special Economic Zones (authorities’ data):
  - Diass: Investments made: 2.2 (FCFA bn); planned: 261.3; Jobs created: 135; Jobs planned: 1159.
  - Diamniadio: Investments made: 25.0; planned: 92.8; Jobs created: 635; Jobs planned: 5180.
  - Sandiara: Investments made: 1.0; planned: 111.6; Jobs created: 0; Jobs planned: 5340.
  - Staff emphasis: SEZs should be governed by transparent rules with no ad hoc tax exemptions and companies paying reasonable corporate tax rates.

### Inequality, gender, and social policies
- Education and gender gaps (selected indicators):
  - Female primary gross enrollment: 1999: 59 ; 2016: 88. Male primary gross enrollment: 1999: 71 ; 2016: 78.
  - Female primary completion rate: 2000: 33 ; 2016: 64. Male primary completion: 2000: 43 ; 2016: 54.
  - Secondary gross enrollment (2016): Females 48 ; Males 48.
  - Tertiary gross enrollment 2016: Females 8 ; Males 13.
  - Wage gender gap: estimated at 47 percent using 2011 Household Survey controlling for observables.

- Simulation results (general equilibrium model calibrated to Senegal):
  - Increase years of education so every percentile receives at least 5 years:
    - GDP gains in a single generation: ~8 percent.
    - Female labor force participation increase: 11 percentage points.
    - Gini coefficient reduction: 3 percentage points.
    - Extra tax collections: 1.1 percent of GDP; cost: 1.7 percent of GDP; net cost: 0.6 percent of GDP.
  - Combined with 10 percentage point increase in formal sector share (from 55% to 65% of GDP): government revenue gains 3.2 percent of GDP and net budget surplus 1.5 percent of GDP.
  - Higher education scenario to 10 years yields potential gains ~26 percent of GDP in a single generation.
  - A 5-percentage point drop in earning gap due to discrimination could increase female labor force participation by 8.6 percentage points.

- Policy messages:
  - Reforms to increase revenues and improve public investment efficiency can finance inclusive development.
  - Authorities committed to National Strategy for Equity and Gender Equality in Senegal: 2016–2026 and to further actions on education, asset access, labor discrimination, and health outcomes.

### Program monitoring, reporting, and technical assistance
- Reporting commitments and transparency:
  - Authorities will transmit detailed fiscal and debt data within specified lags (daily three-day notices for major decisions; monthly/quarterly TOFE and reconciliations).
  - Escrow account reporting: monthly statement from June 30, 2018 with max delay of one week.

- Technical assistance and capacity development:
  - IMF and AFRITAC West TA on tax policy, revenue administration, public investment efficiency, PFM, national accounts rebasing, and DSA/debt portfolio risk management.
  - Recent missions: FTE and PIMA with attached action plans; TA to expand fiscal data coverage beyond central government.

### Staff appraisal — risks and recommendations
- Outlook:
  - Medium-term outlook broadly positive if fiscal consolidation and structural reforms implemented.
  - Upside: additional oil and gas discoveries could bring large macro benefits if managed by a fiscal framework aligned with international best practices.

- Key risks:
  - Near-term: increases in global energy prices and lack of progress reducing domestic energy subsidy; adverse drought impacts.
  - Longer-term: slowing reform implementation to boost revenues and private investment; domestic/regional security threats; increases in cost of public borrowing.

- Priority policy recommendations (summarized):
  - Strengthen PFM to contain financing needs and enhance investment efficiency.
  - Increase domestic revenue mobilization and implement comprehensive revenue reform.
  - Improve the business environment to boost private investment and competitiveness.
  - Develop a fiscal framework for oil and gas aligned with international best practice.
  - Contain energy subsidies by adjusting domestic prices in steps and settle past arrears.
  - Continue prudent debt management, prioritize concessional financing, and increase domestic debt share where appropriate.
  - Implement gender-sensitive policies and invest in education to reduce inequality and support inclusive growth.

*IMF staff report: Executive Summary — Senegal (December 27, 2018).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Article IV issues and strategic objectives
- Main challenge: sustaining high GDP growth rates while maintaining fiscal sustainability and improving the business environment to create jobs for the fast-growing population.
- The second phase of the Plan Sénégal Emergent (PSE) covering 2019-23 sets out a comprehensive reform agenda to achieve these objectives.
- Fiscal reforms should aim to increase revenues, strengthen public financial management (PFM), and improve the composition and quality of spending.
- Structural reforms recommended:
  - Facilitate private investment and competitiveness to provide durable sources of growth.
  - Develop a fiscal framework for oil and gas aligned with international best practice to ensure high economic and social returns.
  - Simplify tax administration and facilitate SME access to finance.
  - Further develop the Special Economic Zones (SEZs).
- Policies to address gender and inequality would contribute to poverty reduction and well-distributed growth.

### Fiscal sustainability and near-term pressures
- Pre-election spending pressures and energy subsidies are weighing on the budget, requiring strong measures in the last quarter of 2018 to stay within the annual fiscal financing envelope amid weak revenue collection.
- The 2019 budget is in line with the WAEMU fiscal deficit convergence criterion of 3 percent of GDP, but efforts are needed to:
  - Ensure ambitious revenue projections are met.
  - Reduce the energy subsidy.
  - Address carryover of fiscal obligations from previous years.
- Progress noted:
  - Important progress on strengthening budget implementation and containing “below-the-line” financing.
- Recommended actions:
  - Continue fiscal policy and revenue administration reforms to ensure borrowing is consistent with financing needs in the approved budget.
  - Increase tax revenues to the WAEMU 20 percent of GDP target over the medium term.
  - Implement a debt management strategy that increases the proportion of domestic debt and prioritizes access to concessional debt whenever possible.

### Program implementation and IMF engagement
- Performance under the PSI-supported program has been broadly satisfactory.
  - All end-June 2018 assessment criteria and indicative targets met, except for the indicative target on the share of public contracts subject to a single tender.
  - Two prior actions met; two of the six structural benchmarks (SBs) set for the PSI 7th review missed.
- Staff recommendation: completion of the seventh PSI review.

### Recent macroeconomic developments (highlights)
- Growth and inflation:
  - Real GDP growth in 2017 was 7.2 percent.
  - Real GDP growth is projected at 6.2 percent in 2018.
  - Inflation projected to remain under 2 percent in 2018.
- Drivers of growth: mining, construction and services (especially transportation and real estate services); domestic demand with an important contribution of public investment during PSE I (2014-2018).
- Fiscal pressures and adjustments:
  - Weak revenue performance and pre-election expenditures have increased pressure on public finances and payment delays to the private sector.
  - To stay within the agreed fiscal envelope, expenditures need to be cut by 1.2 percentage point of GDP in the last quarter of 2018.
- External sector and reserves:
  - Current account deficit widened in 2017 and is projected to remain above 7 percent of GDP in 2018.
  - WAEMU pooled reserves: $15.1 billion at end-September 2018 (4.3 months of imports), up from $13.0 billion at end-2017.
- Banking and credit:
  - Year-on-year growth of credit to the economy: 0.6 percent at end-September 2018; -4.1 percent since December 2017.
  - Growth of credit to the private sector: 0.4 percent at end-September 2018 (y-o-y).
  - Slowdown related to repayments of large loans to SOEs contracted in second half of 2017 and banks’ transition to Basel II/III and the new chart of accounts.

### Medium-term outlook and risks
- Outlook conditional on reforms:
  - Medium-term outlook remains broadly positive if fiscal consolidation and structural reforms are effectively implemented.
  - PSE II aims for growth rates above 9 percent between 2018 and 2023 and a reorientation towards industry.
- Risks (near-term and longer-term):
  - Near-term: (i) increases in global energy prices and lack of progress in reducing the domestic energy subsidy; (ii) larger than projected adverse growth and fiscal impact of drought.
  - Longer-term: (iii) slowing implementation of reforms to boost revenues and private investment; (iv) domestic and regional security threats; (v) possible increases in the cost of public borrowing.
  - Upside: additional oil and gas discoveries could present potentially large macroeconomic benefits, underscoring need for a fiscal framework in line with international best practices.
- External outlook: FDI is low relative to peers; large oil and gas investment-related imports in the pre-production period expected to widen the current account deficit further in the next three years, with a sharp reversal in 2022 as production boosts exports.

### Policy discussions and priorities
- Policy discussions focused on sustaining high growth and meeting development objectives without undermining stability. Priority areas:
  - Strengthen PFM to contain financing needs and enhance efficiency of investment.
  - Increase domestic revenue mobilization.
  - Improve the business environment to boost private investment and competitiveness.
  - Macroeconomic impact and fiscal framework for oil and gas.
  - Gender and inequality issues.
  - Financial sector development and stability.
- Fiscal policy specifics:
  - Tax revenues: corporate taxes trending below projections; new measures in 2018 have not yet yielded expected results.
  - Before new policy measures, revenues projected to be below the end-year target by about 0.9 percent of GDP.
  - Expenditures expected to increase by another 0.2 percent of GDP (mainly higher transfers to education).
  - Authorities decided to cut low priority domestically-financed capital expenditure and non-wage current spending to stay within the agreed fiscal envelope while protecting social outlays where possible.
  - Authorities agreed to compensate above the line for “below-the-line” financing operations exceeding the program target, i.e., adding some 0.15 percent of GDP in spending cuts.
- 2019 budget and energy subsidy:
  - 2019 budget aligned with 3 percent of GDP fiscal deficit criterion; will require strong efforts to meet revenue objectives and reduce energy subsidies.
  - Staff recommended domestic energy prices be adjusted in steps and sufficiently aligned with global oil prices to eliminate the energy subsidy.
  - Staff recommended addressing previous payment delays to the energy sector and the broader private sector over time.
  - Staff estimates overall subsidy to the energy sector to reach about 2 percent of GDP by end-2018.
    - In 2018, the budget is expected to compensate the sector up to 0.6 percent of GDP, and the remaining will be settled by 2023.
    - The authorities have issued a promissory note in an amount close to one percentage point of GDP acknowledging the government owes this amount to SENELEC.
- Financing of the 2019 budget (components and amounts):
  - Total financing: 979 (CFAF billions)
  - Escrow: 236 (CFAF billions)
  - Donor loans: 618 (CFAF billions)
  - WAEMU bond issuance: 125 (CFAF billions)
  - Gross financing need: 979 (CFAF billions)
  - Fiscal deficit: 430 (CFAF billions)
  - Additional Treasury borrowing: 0 (CFAF billions)
  - Amortization: 548 (CFAF billions)

### Fiscal projections and adjustment needs (end-2018 estimates)
- Fiscal Financing, 2019 (CFAF billions) and corresponding % of GDP:
  - PSI borrowing requirements target: -4.1 (% of GDP), -551 (CFAF bn)
  - Lower revenue: -0.9 (% of GDP), -115 (CFAF bn)
  - Higher expenditure: -0.2 (% of GDP), -30 (CFAF bn)
  - Higher below-the-line financing: -0.2 (% of GDP), -21 (CFAF bn)
  - Estimated borrowing requirements without measures: -5.4 (% of GDP), -717 (CFAF bn)
  - Needed effort to be in line with PSI target: 1.2 (% of GDP), 166 (CFAF bn)
    - of which revenue measures (tax collection): 0.2 (% of GDP), 34 (CFAF bn)
    - of which current spending cuts: 0.4 (% of GDP), 51 (CFAF bn)
    - of which capital spending: 0.6 (% of GDP), 82 (CFAF bn)

- Projected financing mix and amounts (CFAF billions):
  - Total financing: 979
  - Escrow: 236
  - Donor loans: 618
  - WAEMU bond issuance: 125
  - Gross financing need: 979
  - Fiscal deficit: 430
  - Additional Treasury borrowing: 0
  - Amortization: 548

*IMF staff report: Executive Summary — Senegal (December 27, 2018).*

### 12.      Reforms to increase revenues are needed to finance development in a sustainable way.

### 12. Reforms to increase revenues are needed to finance development in a sustainable way

### Revenue mobilization: diagnosis and priorities
- The rebasing of GDP implemented in early 2018 lowered tax revenues to GDP to about 15 percent, well below the 20 percent WAEMU convergence criterion.
- Implementing reforms to boost revenues is essential to finance the ambitious PSE public investment program and increased social spending without increasing debt-related vulnerabilities.
- The authorities are committed to meet the WAEMU revenue target over the medium term and are working on a comprehensive strategy, drawing from ongoing technical assistance from the IMF.
- Implementing a fiscal framework for oil and gas in line with international best practice will help boost revenues over the long term.

Key policy recommendations urged by staff:
- Further streamline tax exemptions, ensure they are granted through a rules-based transparent process, and strengthen ex-post assessment in coordination with the tax expenditures evaluation process.
- Enhance the data exchange platform between tax and customs administrations.
- Fully implement the IT innovative solutions.
- Strengthen property taxes, notably by proposing a clear plan and timeline for a complete country-wide cadaster.

IT initiatives (as described):
- E-tax for e-filing and e-payment.
- M-tax that allows taxpayers without Internet access to declare and pay taxes via cell phone.
- Mon Espace Perso, a personalized tax space allowing individuals and businesses to have easy access to their taxes.

Box 1 — Short- and medium-term revenue reform actions:
- Short-term priority on tax administration measures to raise taxpayer compliance and improve revenue performance.
- A reform roadmap has been developed, including a package of concrete measures to increase the tax-to-GDP ratio by four percentage points in four years.
- Priority actions include: (1) improved collection enforcement and collecting recoverable tax arrears and tackling remaining defaulters; (2) redirecting tax audit towards taxpayers with the highest risks and improved crosschecking with third party sources; (3) revising the “acompte sur importations” regime to contain widespread VAT evasion and fraud; (4) de-registering VAT registered entities that have been inactive.
- Implementation of the 20-point digitalization action plan, including: (1) expanding e-procedures to medium-size enterprises; (2) enhancing Mon Espace Perso (officially launched on July 26, 2018); (3) enhancing SMS and voice message reminders of tax obligations; (4) implementing M-tax by April 2019.
- On tax policy, prepare a strategy for broad tax reform post-Presidential elections focused on broadening the tax base, notably by bringing the informal sector into the tax net. Possible measures listed:
  1. Increase corporate income tax (CIT) withholding on imports of small taxpayers.
  2. Raise the ceiling of the minimum CIT (Impôt minimum forfaitaire) at least on the commercial sector.
  3. Initiate a systematic review of VAT exemptions on staple food and other basic goods.
  4. Eliminate the lower VAT rate (on tourism) and replace it with the full rate.
  5. Adjust the personal income tax rates and brackets for greater equity.

### Containing current expenditures and improving investment efficiency
- The increase in current spending and energy subsidies in the pre-electoral period required capital expenditure to be delayed, indicating the need for further containment of current expenditure and improved efficiency of public investment.
- Implementation of the civil service employment ceilings in 2019 should help contain wage expenditures.
- A comprehensive civil service reform could provide a broader framework to ensure development objectives can be financed within the existing prudent projected financing envelope.
- The recent creation of the “project bank” (a list of investment projects which have been fully assessed) is welcome.
- Further improvements possible by implementing recommendations of the Public Investment Management Assessment (PIMA) to ensure:
  - investment projects are aligned with the multi-year budget;
  - investment decisions are driven by economic returns rather than availability of financing;
  - fiscal contingent liabilities from public-private partnerships (PPP) are properly managed.

Box 2 — PIMA main results and recommendations:
- The PIMA mission (Dakar, November 2018) found Senegal’s institutions broadly stronger than other assessed West-African countries but noted efficiency gaps (access to infrastructure and physical efficiency indicators).
- Four main recommendations:
  1. Review and streamline the three-year investment plan, cancel projects that yield no or little output.
  2. Bring the implementation of ad hoc investment projects (including unsolicited offers) back under normal procedures and proper evaluation and oversight.
  3. Update the legal framework for PPPs to minimize risks and establish sound procedures for government capital spending needs.
  4. Make operational a project management functionality in the information system to ensure projects are financed and monitored from design to completion.

### Strengthening PFM and addressing extra-budgetary Treasury financing
- Over recent years, a disconnect emerged between total financing needs and budget deficits due to Treasury financing of SN La Poste, Fonds National de Retraites (FNR), accumulated appropriations in the comptes de dépôt, and the use of lettres de confort to pre-finance expenditure and implement expenditure outside the budget.
- The authorities have made good progress addressing these issues, including implementing prior actions for the PSI 7th review:
  - SN La Poste: In October 2018, a new convention between the Post Office and the Treasury was signed to limit the Treasury guarantee for clearing the Post Office checks (prior action). Authorities are working on a comprehensive restructuring plan and separating Poste Finance from La Poste to allow Poste Finance to receive a banking license and be supervised by the WAEMU banking commission.
  - Lettres de Confort: In November 2018, a ministerial order was signed to cease the use of budgetary letters that commit central government to expenditures beyond the current budget year or to expenditures outside the budget (prior action). Future use will be limited to letters that (i) do not imply any financial commitment; (ii) are formal guarantees for para-public entities; or (iii) support within-year execution of spending related to national defense and agriculture.
  - Comptes de Dépôt: A decree signed will, starting end-December 2018, remove the ability to carryover “current spending” balances in the comptes de dépôt from one year to the next and limit the amount of “capital spending” carryover to 5 percent of the remaining balance. The rest of the balances in the comptes de dépôt at end-December 2018 will be eliminated, except for remaining balances of three para-public agencies, which will be converted to bonds to be issued in early 2019.
  - FNR: A complementary pension scheme has been implemented, returning civil service pension to a small positive balance. Further efforts are planned on parametric reforms, creating a defined contribution scheme and a separate institution governing civil service and military pensions.
- Continued progress in implementing multi-year budgeting will help reduce challenges created by large public investment projects that resulted in accumulation of past appropriations and pre-financing arrangements.

### External stability, competitiveness, and implications for revenue/debt
- Senegal’s current account deficit as a percent of GDP has nearly doubled since 2016 to over 7 percent of GDP.
- The widening CA deficit was matched by substantial increases in external financing, including $3.3 billion in Eurobonds issued since 2016 on largely favorable terms.
- FDI did not show significant increases, averaging just over 2 percent of GDP.
- WAEMU regional pooled reserves stood at $15.1 billion at end-September 2018 (more than 4 months of regional imports), up from $13.1 billion at end-2017.
- Estimates using the IMF’s external balance assessment methodology (EBA-lite) show the REER gap at around 5 percent and the CA gap at around -1 percent.
- Staff assessment: Senegal’s external position is broadly in line with medium-term fundamentals and desired policies.
- Senegal is at low risk of debt distress but is a borderline case:
  - Since the previous DSA: GDP rebasing resulted in a 30 percent increase in nominal levels; oil and gas macro impact incorporated; authorities expanded the debt perimeter.
  - External debt-to-exports indicator has two marginal breaches of its threshold; external debt service-to-export ratio has a temporary spike breaching the threshold more significantly under a stress scenario due to Eurobond rollover (reflecting liquidity rather than solvency issues).
  - Low risk assessment is predicated on ongoing debt liability management, guarantees to address currency risk, access to liquid financial assets and market access, adherence to planned fiscal consolidation, acceleration of reforms, and prudent borrowing.

### Making the private sector more supportive of growth
- The private sector needs to be the engine of the economy for Senegal to reach the PSE II medium-term growth objective of 8 percent.
- PSE II (2019-23) aims to develop clusters of economic activity; planned investments in the three established SEZs (Diamniadio, Diass, and Sandiara) amount to about 3.7 percent of GDP.
- Constraints to private sector development persist: (i) access and cost of energy; (ii) heavy procedures in the tax system and the judiciary; (iii) labor regulations; (iv) access and cost of credit; (v) efficiency of public investment; and (vi) weak human capital.
- Progress during PSE I included improved electricity reliability and access (rural electrification increased from 33 percent to 40 percent over 2014-2017) and reduced urban power outages; Millennium Challenge Account grants worth $600 million over 5 years; domestic gas production from 2022 expected to support electricity generation.
- Staff emphasized that SEZs should be governed by transparent rules, with no granting of ad hoc tax exemptions and all companies paying a reasonable corporate tax rate.

*Source: cr1927-senegal-a4 - 12.      Reforms to increase revenues are needed to finance development in a sustainable way.*

### 22.      Senegal has made progress on governance, but further reforms are needed. Senegal

### 22.      Senegal has made progress on governance, but further reforms are needed. Senegal

### Governance and public financial management
- Senegal compares relatively well to SSA and WAEMU averages on governance and transparency indicators (Figure I.2 in Annex I).
- Adherence to the IMF’s Special Data Dissemination Standard (SDDS) and GFSM2001/14 and efforts to move towards reporting fiscal data beyond central government is improving fiscal data and providing a more comprehensive picture of contingent liabilities and debt-related vulnerabilities.
- The establishment of a “project bank” that will contain assessed ex ante domestically-financed public investment projects is welcome, but now needs to be carefully implemented.
- Weaknesses and concerns:
  - Inability to regularly meet the PSI ceiling (indicative target) on the share of public procurement using sole source suggests procurement could be strengthened, including bringing unsolicited (spontaneous) investment offers into the normal public investment vetting process.
  - Accumulation of unmet liabilities towards SENELEC and the private sector signals challenges in meeting revenue projections and weakness in budget implementation.
  - Continuation of Treasury financing of the Post Office outside of the budget is a concern; beyond recently adopted measures, reforms are required to restructure the Post Office and produce proper estimates of needed transfers in budget formulation.
  - Governance structure of institutions managing oil and gas wealth should be in line with international best practice (see Section E).

### Special Economic Zones — investment and jobs (Source: Senegalese authorities)
- Diass:
  - Investments (FCFA bn) made: 2.2
  - Investments (FCFA bn) planned: 261.3
  - Jobs created: 135
  - Jobs planned: 1159
- Diamniadio:
  - Investments (FCFA bn) made: 25.0
  - Investments (FCFA bn) planned: 92.8
  - Jobs created: 635
  - Jobs planned: 5180
- Sandiara:
  - Investments (FCFA bn) made: 1.0
  - Investments (FCFA bn) planned: 111.6
  - Jobs created: 0
  - Jobs planned: 5340

### Transparency, benchmarking, and diagnostic assessments
- Authorities’ participation in international benchmarking:
  - A Fiscal Transparency Evaluation (FTE) conducted in early 2018 is contributing to greater fiscal transparency.
  - The ongoing PIMA should help identify measures to improve public investment efficiency.
  - A Public Expenditure Financial Accountability (PEFA) exercise is underway to benchmark Senegal’s PFM system vis-à-vis peers and identify areas for progress (MEFP ¶39, ¶40).

Box 3 — Main Results and Recommendations from the Fiscal Transparency Evaluation (FTE)
- Nature of the FTE:
  - The FTE is the IMF’s fiscal transparency diagnostic, assessing practices against the differentiated standards of the IMF’s Fiscal Transparency Code and estimating financial position of the entire public sector.
- Key findings from the May 2018 FTE mission in Dakar:
  - Senegal has achieved remarkable progress in strengthening nascent fiscal transparency practices.
  - The 2017 Open Budget Index (OBI) gave Senegal a score of 51 out of 100, above the world average, recognizing efforts in budget documentation dissemination and enhanced roles for Parliament and the supreme audit institution.
  - The PFM legal framework has been substantially modernized with implementation of regional WAEMU directives.
  - Senegal joined the SDDS in 2017, strengthening the quality and comprehensiveness of fiscal data.
- Main recommendations (five objectives):
  1. Strengthen coverage and credibility of budget and financial information.
  2. Ensure harmonization and compliance of budget and accounting classifications.
  3. Enhance evaluation of fiscal risks and anticipate their impacts.
  4. Strengthen analysis of macro-fiscal projections.
  5. Involve civil society in discussion over budget preparation and follow-up.

### Financial sector development and stability
- Credit markets and access to finance:
  - Structural impediments are limiting credit to the private sector despite Basel II/III introduction (expected to be a temporary factor).
  - Deposit growth has outpaced credit growth in recent years.
  - Initiatives taken:
    - Reforming credit bureaus (recent law improving data flow from banks to bureaus) (MEFP ¶49).
    - Launching programs to help SMEs gain access to credit (MEFP ¶50, 51).
  - Need to ensure initiatives work efficiently, with proper risk assessment, avoiding duplication, and adequate monitoring.
  - Costs and benefits should be carefully assessed in subsidized loan programs administered through CNCAS and the Délégation générale à l’Entreprenariat Rapide (DER).
    - DER extended loans to women and youth in the first half of 2018 with a budget of CFAF 30 billion or 0.2 percent of GDP for the whole of 2018.
  - Specific care needed for institutions outside WAEMU banking regulations (e.g., DER) and non-traditional banking instruments (microfinance, mobile banking).

- Systemic stability and vulnerabilities:
  - New chart of accounts introduces a new definition of non-performing loans (NPLs), which should lower the ratio of NPLs to total loans below 15.5 percent at end-2017.
  - When accounting for provisioning, NPL ratio drops to 6.3 percent.
  - Newly formed Dakar commercial tribunal, once functioning, could help reduce still-high NPLs, as would sound enforcement of prudential norms.
  - Pockets of vulnerability:
    - One financial institution reported negative equity; its majority shareholder is being restructured with knock-on effects.
    - Government agreed to inject CFAF 50 billion in tradable government securities into a state-owned bank in need of liquidity; difficult-to-recover loans transferred to the Société Nationale de Recouvrement (SNR), with recoveries accruing to the government. Issuance of securities still needs to happen; government plans to issue paper in the near future.

### Anti-money laundering / Combating the financing of terrorism (AML/CFT)
- Recent assessment:
  - Senegal was assessed against the 2012 FATF standards during an onsite visit in September 2017.
  - The assessment report adopted by GIABA (still under FATF review) found a number of strategic deficiencies, which could lead to close monitoring by the FATF and potential public listing.
- Steps taken and recommendations:
  - Transposition of the WAEMU AML/CFT uniform law into national legislation in February 2018 is a welcome step to address legislative shortcomings.
  - Further steps should be swiftly taken to ensure compliance with the FATF standard and its effective implementation to prevent pressure on correspondent banking relationships, which could increase financial intermediation costs, including for trade and remittances.

### Authorities’ views on macroeconomic policy and reforms
- Authorities generally agreed with staff views on broad macroeconomic policy mix.
- Commitments and goals:
  - Contain fiscal financing needs to support debt sustainability.
  - Committed to meeting 2018 fiscal targets largely through expenditure cuts.
  - Ensure 2019 budget is aligned with the 3 percent of GDP WAEMU fiscal deficit convergence criterion.
  - Undertake revenue reforms over the next few years to meet the 20 percent of GDP WAEMU tax revenue to GDP criterion.
  - Continue PFM reforms to contain financing needs.
  - Implement structural reforms to boost competitiveness and private investment, including supporting SMEs and facilitating access to credit while strengthening financial stability.
  - Implement broad reform agenda as outlined in the PSE II covering 2019-23.

### Oil and gas discoveries and macroeconomic integration
- Discoveries and reserves:
  - Sangomar (2014) and Saint-Louis (2016) blocs: offshore, deep-water.
  - Sangomar: two viable fields identified—SNE and FAN; proven reserves for SNE of around 530 million barrels of oil and 1.3 trillion cubic feet (TCF) of gas.
  - Saint-Louis: gas reserves worth 15 TCF discovered at the Grand Tortue Ahmeyin (GTA) field (near Mauritanian border); current inter-governmental agreement stipulates gas production is evenly split between the two countries.
  - PETROSEN (national oil company) owns 10 percent equity in these fields but could increase participation up to 18-20 percent.
  - Final investment decisions expected at the end of 2018 (GTA) and by mid-2019 (SNE), with first oil and gas expected in 2022 in both cases.
  - Timeframe of production estimated to be about 30 years.
- Expected macroeconomic impact (staff calculations):
  - The share of hydrocarbons in nominal GDP is expected to reach about 5 percent on average between 2022 and 2040.
  - Incorporating SNE and GTA fields:
    - Share of hydrocarbons in nominal GDP: 4.5 percent in 2022 and 6.5 percent in 2023.
    - Average 5 percent between 2024 and 2040.
  - Real GDP growth impact:
    - Acceleration from a baseline without hydrocarbons from 7.7 percent to 11.5 percent in 2022, then quickly leveling off with a negative contribution on average over 2024-40.
  - Investment in hydrocarbon sector expected to increase substantially in 2019-21; most activity has high import content, though domestic sectors (transportation, services) will benefit.
- Hydrocarbons in macro aggregates (text table excerpt; IMF staff calculations):
  - Nominal GDP (FCFA billion): 2019: 14,524; 2020: 15,924; 2021: 17,268; 2022: 19,653; 2023: 21,921.
  - Hydrocarbon sector (nominal GDP contribution): 2022: 914; 2023: 1,402.
  - Share of hydrocarbon in GDP (%): 2024-40 (avg) shown as 5.1% in table header and elsewhere average referenced as 5 percent.
  - Real GDP growth (%): 2019: 6.9% ; 2020: 7.5% ; 2021: 7.1% ; 2022: 11.6% ; 2023: 10.4% ; 2024-40 (avg): 5.2%.
  - Balance of Payments (selected items, % of GDP):
    - Exports of goods and services: 2019: 22.3% ; 2020: 22.4% ; 2021: 22.6% ; 2022: 27.1% ; 2023: 27.7%.
    - Of which hydrocarbon (exports): 2022: 5.8% ; 2023: 7.3% ; 2024-40 (avg) in table: 6.2%.
    - Imports of goods and services: 2019: -36.6% ; 2020: -39.2% ; 2021: -39.9% ; 2022: -35.4% ; 2023: -33.5%.
    - Of which hydrocarbon-related imports: 2019: -2.4% ; 2020: -5.2% ; 2021: -6.1% ; 2022: -5.2% ; 2023: -5.0% ; 2024-40 (avg): -1.7%.
    - Income: 2019: -3.4% ; 2020: -3.6% ; 2021: -3.5% ; 2022: -5.5% ; 2023: -7.7%.
    - Of which hydrocarbon (repatriated dividends + interest payments): 2019: -0.2% ; 2020: -0.3% ; 2021: -0.3% ; 2022: -2.1% ; 2023: -4.4% ; 2024-40 (avg): -1.8%.
    - Current Account: 2019: -7.5% ; 2020: -10.3% ; 2021: -10.8% ; 2022: -4.6% ; 2023: -4.4%.
    - Financial Account: 2019: 7.1% ; 2020: 8.9% ; 2021: 9.8% ; 2022: 7.3% ; 2023: 6.2%.
    - Of which hydrocarbon (FDI + net borrowing): 2019: 3.2% ; 2020: 4.5% ; 2021: 5.0% ; 2022: 3.2% ; 2023: 2.0% ; 2024-40 (avg): 0.3%.
  - Fiscal Accounts (% of GDP):
    - Total revenues including grants: 2019: 19.1% ; 2020: 19.5% ; 2021: 19.6% ; 2022: 20.1% ; 2023: 20.3%.
    - Of which hydrocarbon: 2022: 0.5% ; 2023: 0.9% ; 2024-40 (avg) shown as 1.6% in table header and elsewhere averaged as 1.5% between 2023 and 2040.
- Timing and dynamics:
  - Current account projected to deteriorate in pre-production period due to high import content of hydrocarbon investment; from production years exports increase substantially and reduce current account deficit.
  - Assumption made that all oil and gas production is exported (hypothetical scenario to be updated when national strategy is finalized).
- Fiscal management recommendations:
  - Ensure all hydrocarbon revenues transit through the central government budget.
  - Allocate a share of resource revenues for stabilization and intergenerational purposes.
  - Link hydrocarbon revenues to the existing WAEMU deficit rule; consider anchoring fiscal policy to a non-resource primary balance rule (NRPB) as a benchmark for sustainable spending (IMF, 2012).
  - Put in place a new fiscal framework to ensure consistency between objectives and support countercyclical fiscal policy, transparency, good governance, and sound PFM.

Authorities’ views on oil and gas
- Authorities welcomed incorporation of hydrocarbons into the macroeconomic framework and committed to transparent governance.
- Teams from the Ministry of Finance and ANSD worked with IMF staff on incorporating oil and gas effects.
- Authorities welcomed IMF and World Bank TA on the petroleum code expected to be finalized by end-2018.
- Work on institutional set-up to govern future resource revenues is ongoing with IMF assistance; authorities stressed importance of all hydrocarbon revenues transiting through the central government budget.

### Inequality and gender
- Macroeconomic benefits of reducing gender gaps:
  - Further reduction of large gender gaps in Senegal would have potential macroeconomic benefits.
  - Literature links gender gaps in education to negative consequences for growth, higher income inequality, and lower diversification.
- Progress and persistent gaps:
  - Over two decades, progress in addressing inequality between men and women has occurred.
  - Female labor force participation increased from 34 percent of the total labor force in 2000 to 41 percent in 2016.
  - Primary education gender gaps have closed in enrollment and completion and have started reversing.
  - Large gaps persist in secondary and tertiary education; in 2012, for every 10 boys completing secondary education, only 6 girls got their diploma.
  - Wage gender gap: estimations using the 2011 Household Survey point to a wage gap of 47 percent in Senegal, even after controlling for education, experience, sector, localization, type of contract and type of job.
- Recent evolution of gender gaps in education (selected figures, sources: DHS, Unesco, World Development Indicators):
  - Primary education gross enrollment: Females 1999: 59 ; 2016: 88. Males 1999: 71 ; 2016: 78.
  - Primary completion rate: Females 2000: 33 ; 2016: 64. Males 2000: 43 ; 2016: 54.
  - Secondary gross enrollment: Females 1999: 12 ; 2016: 48. Males 1999: 18 ; 2016: 48.
  - Secondary completion rate: Females 2005: 10 ; 2012: 14. Males 2005: 14 ; 2012: 26.
  - Tertiary gross enrollment: Females 2008: 5 ; 2016: 8. Males 2008: 10 ; 2016: 13.
  - Tertiary completion rate: Females 2006: 4 ; 2016: 8. Males 2006: 8 ; 2016: 13.

*Source: IMF staff compilation from the provided chapter content.*

### 34.      Social barriers and funding issues create obstacles, requiring stronger efforts to

### cr1927-senegal-a4 - 34.      Social barriers and funding issues create obstacles, requiring stronger efforts to

### Social barriers and funding issues
- Many social barriers prevent broader and more effective discussion of gender inequality.
- Specific challenges cited:
  - Fertility rate is at 4.8, yet family planning discussion is not common.
  - Difficulties enforcing civil laws where customary laws are the norm.
  - Women have less access to assets, especially land.
  - Girls’ secondary education dropout rates are higher due to child pregnancy and child marriage.
- Education levels:
  - According to UNDP, overall levels of education in Senegal were 3 years in 2015.
  - For the population under 20 years of age, about 5 years in 2015.
  - Sub-Saharan Africa average was 7 years (reference for comparison).

### Simulations: effects of reducing education and labor market gaps
- Model description:
  - Simulations use a general equilibrium model with heterogeneous agents calibrated to the Senegalese economy.
  - Benchmark: girls receive, on average, 75 percent of the years of education received by boys (and 50 percent when only the bottom 10 percent of the income distribution is taken into account).
- Scenario: increase years of education so every percentile receives at least 5 years of education
  - Promotes GDP gains in a single generation on the order of 8 percent.
  - Improves female labor force participation by 11 percentage points.
  - Reduces inequality (Gini coefficient) by 3 percentage points.
  - Generates an extra 1.1 percent of GDP in tax collections and would cost 1.7 percent of GDP.
  - Net cost: 0.6 percent of GDP.
- Combined with formal sector increase:
  - If the measure is accompanied by an increase in the formal sector of the magnitude of 10 percent of GDP (from 55 percent to 65 percent of GDP), total government revenue collection gains would be 3.2 percent of GDP and the policy would generate a net budget surplus of 1.5 percent of GDP.
- Higher education scenario:
  - Increasing years of education to 10 (consistent with the law making education compulsory until 16 years of age) yields potential gains in a single generation amounting to 26 percent of GDP.
- Labor market discrimination:
  - A 5-percentage point drop in the earning gap due to discrimination could elevate female labor force participation by 8.6 percentage points.

### Role of tax reform and fiscal consolidation on inequality
- Lower inequality correlated with faster and more robust growth (Ostry, Berg, and Tsangarides, 2014).
- Senegal committed to meet the WAEMU tax revenue target over the medium term.
- Model simulations calibrated to Senegal assess raising additional tax revenue of 4 percent of GDP (to reach WAEMU target) through a combination of VAT, PIT, and CIT.
- Results: proper usage of savings from the consolidation, combined with a framework to ensure efficiency of public investment expenditures, could boost growth and reduce the rural-urban inequality gap.

### Authorities’ views
- Authorities reaffirmed commitment to reduce gender and inequality gaps and welcomed findings from gender and inequality analyses.
- They noted publication of the “National Strategy for Equity and Gender Equality in Senegal: 2016 – 2026”.
- Authorities acknowledged more effort is needed on:
  - Education (including high dropout rates for girls in secondary school due to early marriage and pregnancy).
  - Access to assets.
  - Discrimination in the labor market.
  - Health outcomes.
- On income inequality, authorities concurred that there is room to improve tax revenue mobilization to strengthen public investment and reduce rural-urban inequality.
- They stressed improving living conditions is a key element of the PSE and committed to continue efforts to make growth more inclusive and reduce gender gaps.

### Program performance and implementation issues
- PSI performance:
  - All end-June 2018 assessment criteria (AC) and indicative targets (ITs) were met, except the quarterly ceiling on the share of the value of public sector contracts signed by single tender (not met since December 2017).
  - All end-September 2018 ITs were met, except the ceiling on the share of the value of public sector contracts signed by a single tender, floor on net lending/borrowing, and floor on tax revenues.
  - The floor on tax revenues represented a key weakness in program performance through the first nine months of 2018.
- Structural reforms:
  - Two prior actions were met and two of six structural benchmarks for the PSI seventh review were missed due to delays in operationalizing payment of taxes via mobile phones and limited progress in implementing the action plan for reducing tax expenditures.
  - Adjustors are being introduced to the end-December 2018 ACs on the floor on net lending/borrowing and the ceiling on the central government’s overall net financing requirement.
- Safeguards assessment of the BCEAO (April 2018):
  - Central bank maintained a strong control environment since 2013 assessment.
  - Governance arrangements broadly appropriate.
  - IFRS adopted beginning with the 2015 financial statements.
  - 2016 external quality review of internal audit found broad conformity with international standards.
  - Risk management framework established in 2014 progressing well.
- Data provision:
  - Senegal subscribed to the IMF’s SDDS in late-2017.
  - In 2018, national accounts base year changed from 1999 to 2014.
  - Senegal reports fiscal data under GFSM 2001/14.
  - Progress made broadening fiscal data perimeter from central government to public sector, but further efforts needed before full public sector fiscal accounts can be reported.
  - Weaknesses remain in national accounts and social indicators data.
- Capacity development:
  - IMF TA focuses on tax policy, revenue administration, public investment efficiency and PFM.
  - Recent IMF missions conducted an FTE and a PIMA with attached action plans.
  - TA delivered to expand fiscal data beyond central government and to expand the perimeter of debt data.
  - Cooperation on macro-critical issues related to oil and gas, notably on statistical and fiscal aspects.

### Staff appraisal: fiscal, external, and outlook
- Growth and macro targets:
  - Growth in 2018 projected to be above 6 percent for the fourth year in a row.
  - Inflation remains below 2 percent.
  - To reach emerging market status by 2035, reforms must address development challenges sustainably.
- Fiscal policy needs:
  - Fiscal policy must deliver infrastructure and increased social spending without undermining fiscal sustainability.
  - Comprehensive and effective reform strategy in the PSE II covering 2019-23 is essential.
  - Post-election period seen as opportunity to reinvigorate reform momentum.
- 2018 budget execution pressures:
  - Sizable spending cuts needed to meet the 2018 fiscal targets due to weak revenue performance, pre-election spending pressure, growing energy subsidy, and higher than programmed “below-the-line” Treasury financing of the Post Office.
  - Accumulation of unmet obligations to the energy sector and payment delays to other private sector participants.
- Medium-term fiscal reforms:
  - 2019 budget aligned with WAEMU 3 percent of GDP convergence criterion, but strong efforts needed to meet revenue projections, reduce energy subsidies and address spillovers from past fiscal obligations.
  - Over the medium term, revenue measures needed to reach the WAEMU tax revenue to GDP 20 percent criterion.
  - Important to contain current expenditures and improve investment efficiency.
- External sector and oil and gas:
  - Widening of the current account since 2016 matched by increases in external financing, including access to the Eurobond market.
  - WAEMU pooled reserves stood at over 4 months of imports through end-September 2018.
  - Staff analysis finds Senegal’s REER broadly consistent with fundamentals and desirable policy settings.
  - Further widening of the external deficit projected through 2021 due to high import content of pre-production oil and gas investment, followed by a sharp reversal as production and export of hydrocarbons come online in 2022.
  - Staff urges development of a fiscal framework for oil and gas aligned with international best practices.
  - Senegal remains at low risk of debt distress, but is a borderline case.
- Risks and recommendations:
  - Risks: domestic and regional security threats, adverse consequences of drought, possible increases in cost of borrowing.
  - Upside: potential macroeconomic benefits of oil and gas discoveries.
  - Staff recommends completion of the seventh PSI review and approval of the modification of assessment criteria.
  - All end-June 2018 quantitative ACs and ITs were met except the indicative target on the quarterly ceiling on the share of the value of public sector contracts signed by single tender.
  - All end-September ITs met except the ITs on the floor on net lending/borrowing, the floor on tax revenues and ceiling on the share of the value of public sector contracts signed by a single tender.
  - Staff supports the authorities’ request for modification of the end-December 2018 ACs on the floor on net lending/borrowing and the ceiling on central government overall net financing requirement.

*International Monetary Fund — cr1927-senegal-a4 (excerpt)*

### 48.      It is proposed that the next Article IV consultation take place within 24 months in

### cr1927-senegal-a4 - 48.      It is proposed that the next Article IV consultation take place within 24 months in

### Article IV consultation timing
- It is proposed that the next Article IV consultation take place within 24 months in accordance with the Decision on Article IV Consultation Cycles Decision No. 14747-10/96.

### High-frequency indicators (2015–18)
- CPI Inflation (12-month inflation rate, eop): charts indicate energy, food, overall series with values spanning negative and positive monthly changes between -10 and 10 (percent scale on chart); at end Oct-18, y-o-y inflation turned positive, driven by increasing food prices, while energy prices remained flat.
- Industrial Production Index (Annual percentage change, quarterly basis): series for Food, Construction, Energy, IPI showing quarterly changes between -30 and 40 (percent scale on chart); food production performed poorly, contributing to negative growth in 2018Q2; activity in construction sector picked up.
- Effective Exchange Rate (12-month percentage change): Nominal effective exchange rate and Real effective exchange rate series between -8 and 10 (percent scale on chart); real exchange rate appreciation between mid-2017 and 2018Q1 was partly reversed as the dollar strengthened vis-à-vis the euro.

### Real and external sectors (2012–17)
- Real GDP Growth (Annual Percent Change): time series for Total GDP, Non-Agriculture GDP, Agriculture GDP on a 0–14 percent vertical scale; caption: "Real GDP growth continues to increase..."
- Contributions to GDP Growth (Percent): sectoral contributions from Primary Sector, Secondary Sector, Tertiary Sector, Public Administration.
- Demand-side Contributions to GDP Growth (Percent): components include Consumption - public, Consumption - private, Investment - public, Investment - private, Change in inventory, Net Exports.
- CPI Inflation (12 Month Average, Percent Change): Overall Inflation and Core Inflation (excl. food and energy) on -1.5 to 2.0 percent scale; caption: "Inflation has increased but remains below 2 percent."
- Trade Balance, Net (Percent GDP): Goods balance, Services balance, Income net, Remittances series on -40 to 20 percent scale; caption: "Large trade deficits are partially offset by remittances..."
- Current Account Financing (Percent GDP): composition by FDI, Eurobonds, Other, Program loans, Project loans; caption: "...with the recent widening financed largely by Eurobonds."

### Fiscal and financial indicators (2012–18)
- Revenue and Expenditure (Percent GDP): Taxes - Direct and Indirect, Grants, Other Revenue; Wages, Goods and Services, Interest, Investment, Other Expenditure.
- Fiscal Financing (Percent GDP): Net Domestic Financing, Net Foreign Financing, Fiscal Deficit (with financing reliance increasingly on external sources).
- Debt and Deficit (Percent GDP): Debt series rising despite improving deficit.
- Credit to the Private Sector (Annual Percent Change, Monthly Basis): series showing slowdown in growth of credit to private sector in early periods; NPLs falling and in single digits net of provisioning.

### Outlook (2017–23)
- Real GDP Growth (Annual Percent Change): baseline projections for Total GDP, Non-Agriculture GDP, Agriculture GDP showing increases through 2023 on a 2.0–14.0 percent chart scale; note: "Under the PSE, implementation of structural reforms are meant to support high growth over the medium term, with an acceleration in 2022 due to oil and gas product."
- Current Account Balance (Percent GDP): projected path 2017–2023 with oil and gas production leading to an initial increase during the investment period followed by a decrease as hydrocarbon exports start in 2022; chart scale -20 to 20 percent with components Goods (net), Services (net), Current transfers (net), Income (net).
- Financing of Budget Deficit / Additional Treasury Operations (Percent GDP): projected reduction of additional Treasury operations contributes to lower government financing needs; chart scale 0–5 percent.

### Public and publicly guaranteed external debt — stress tests and scenarios (2018–28)
- Indicators of Public and Publicly Guaranteed External Debt under alternative scenarios: charts present projected Debt service-to-revenue ratio, PV of debt-to-exports ratio, PV of debt-to-GDP ratio, Debt service-to-exports ratio with most extreme shocks identified (e.g., "Most extreme shock is Combination", "Most extreme shock is Exports", "Most extreme shock is One-time depreciation").
- Borrowing assumptions and stress test notes:
  - All additional financing needs generated by shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA.
  - Default terms of marginal debt are based on baseline 10-year projections.
  - Commodity Prices stress test shock magnitudes are based on the commodity prices outlook prepared by the IMF research department.
  - Customization table excerpt shows thresholds and parameters including Avg. nominal interest rate on new borrowing in USD 5.0%, USD Discount rate 7, Avg. maturity and grace period values listed as 17 and 5.0% in tabular notes.

### Public debt indicators under alternative scenarios (2018–28)
- Public debt composition notes: External PPG medium and long-term, Domestic medium and long-term, Domestic short-term, Domestic MLT debt, External MLT debt; borrowing assumptions for stress tests list shares and terms of marginal debt.
- Charts show PV of Debt-to-Revenue Ratio, Debt Service-to-Revenue Ratio, PV of Debt-to-GDP Ratio with "Most extreme shock is Growth" or similar labels.

### Selected economic and financial indicators (Table 1, 2015–23) — key figures (preserve values exactly)
- GDP at constant prices: 2015 6.4 2016 6.2 2017 7.2 2018 7.0 2019 6.2 2020 6.9 2021 7.5 2022 7.1 2023 11.6 10.4 (table rows present concatenated numbers; values preserved as in source).
- Share of Hydrocarbon in total GDP (%): 0.0 0.0 0.0 0.0 4.6 6.4
- GDP deflator: 1.1 0.8 1.8 2.2 2.3 1.8 2.0 1.3 2.0 1.1
- Consumer prices (Annual average): 0.1 0.8 1.3 1.4 0.7 1.3 1.5 1.5 1.5 1.5
- Consumer prices (End of period): 0.4 2.1 -0.7 1.4 1.5 1.9 1.5 1.5 1.5 1.5
- Current account balance (official transfers included): -5.6 -4.0 -7.3 -8.0 -7.3 -7.5 -10.3 -10.8 -4.6 -4.4
- Gross domestic investment: 26.1 25.3 27.5 25.9 26.3 27.7 28.7 30.7 29.5 33.2
- Total public debt: 44.5 47.7 60.6 49.4 64.5 61.8 60.2 59.2 55.0 52.2
- Total public debt service (Percent of government revenue): 34.0 39.7 28.2 46.6 40.9 30.9 23.8 26.3 19.8 19.5
- Memorandum: Gross domestic product (CFAF billions): 10,509 11,252 12,278 13,407 13,340 14,524 15,924 17,268 19,653 21,921

(Note: Table 1 contains additional series and projection columns; key figures above are preserved exactly as they appear in the source table.)

### Balance of Payments highlights (Tables 2–3, 2015–23)
- Current account (Billions of CFAF): 2015 -593; 2016 -456; 2017 -892; 2018 -973; 2019 -1,088; 2020 -1,641; 2021 -1,858; 2022 -899; 2023 -956.
- Exports, f.o.b. (CFA francs, Billions): 2015 1,644; 2016 1,703; 2017 1,908; 2018 2,131; 2019 2,384; 2020 2,659; 2021 2,938; 2022 4,306; 2023 4,981.
- Imports, f.o.b. (Billions): 2015 -2,944; 2016 -2,868; 2017 -3,460; 2018 -3,837; 2019 -4,151; 2020 -4,756; 2021 -5,221; 2022 -5,351; 2023 -5,664.
- Unrequited current transfers (net, Billions): 2015 1,016; 2016 1,077; 2017 1,120; 2018 1,264; 2019 1,391; 2020 1,476; 2021 1,582; 2022 1,589; 2023 1,644.
- Capital and financial account (Billions): 2015 875; 2016 502; 2017 1,036; 2018 1,349; 2019 1,271; 2020 1,692; 2021 1,979; 2022 1,753; 2023 1,691.
- Memorandum: Current account balance including current official transfers (percent of GDP): -5.6 -4.0 -7.3 -7.3 -7.5 -10.3 -10.8 -4.6 -4.4.

### Government finance (Tables 4–5) — selected fiscal aggregates (2015–23)
- Revenue (CFAF billions, selected early years): 2015 2,026; 2016 2,335; 2017 2,377; 2018 2,494; 2019 2,767; 2020 3,103; 2021 3,383; 2022 3,945; 2023 4,453.
- Grants (CFAF billions): 2015 232; 2016 244; 2017 264; 2018 274; 2019 291; 2020 318; 2021 343; 2022 374; 2023 407.
- Total expenditure (CFAF billions): 2015 2,413; 2016 2,704; 2017 2,739; 2018 2,946; 2019 3,197; 2020 3,573; 2021 3,907; 2022 4,525; 2023 5,113.
- Net acquisition of nonfinancial assets (CFAF billions): 2015 909; 2016 1,091; 2017 1,059; 2018 1,023; 2019 1,224; 2020 1,403; 2021 1,551; 2022 1,834; 2023 2,060.
- Net lending/borrowing (Overall balance, CFAF billions): 2015 -387; 2016 -369; 2017 -362; 2018 -453; 2019 -430; 2020 -471; 2021 -524; 2022 -581; 2023 -660.
- Net incurrence of liabilities (CFAF billions): 2015 287; 2016 311; 2017 386; 2018 689; 2019 194; 2020 471; 2021 524; 2022 581; 2023 660.
- Memorandum: Nominal GDP (CFAF billions): 2015 10,509; 2016 11,252; 2017 12,265; 2018 13,340; 2019 14,524; 2020 15,924; 2021 17,268; 2022 19,653; 2023 21,921.

### Monetary and financial sector indicators (Tables 6–7)
- Monetary survey (Billions of CFAF): Net foreign assets: 2016 1,119; 2017 1,165; 2018 1,309; 2019 1,684; 2020 1,868; 2021 1,919. Broad money: 2016 3,703; 2017 4,214; 2018 4,603; 2019 4,869; 2020 5,481; 2021 6,009.
- Monetary growth (Changes in percent of beginning-of-period broad money): Net foreign assets 9.1 1.2 3.4 8.2 3.8 0.9; Net domestic assets 10.6 13.6 6.6 -2.1 8.8 8.7; Broad money 19.3 13.8 9.2 5.8 12.6 9.6.
- Financial Soundness Indicators (banking sector, selected years):
  - Regulatory capital to risk-weighted assets: 2010 18.2; 2011 16.0; 2012 16.8; 2013 16.3; 2014 16.4; 2015 17.7; 2016 14.8; 2017 14.2.
  - Ratio of non-performing loans (NPLs) to total loans: 2010 20.2; 2011 16.2; 2012 18.4; 2013 19.1; 2014 20.8; 2015 18.8; 2016 17.3; 2017 15.5.
  - NPLs net of provisions to total loans: 2010 9.1; 2011 8.1; 2012 8.2; 2013 8.6; 2014 9.0; 2015 7.9; 2016 6.5; 2017 6.3.
  - After-tax return on average assets: 2010 1.6; 2011 2.2; 2012 1.7; 2013 1.3; 2014 0.6; 2015 0.9; 2016 0.9; 2017 1.7.
  - Liquid assets to total assets: 2010 39.8; 2011 36.1; 2012 37.0; 2013 42.1; 2014 40.8; 2015 51.0; 2016 53.4; 2017 50.0.

*Source: Senegal Authorities; and IMF Staff Calculations.*

### Annex I. External Sector Assessment

### Annex I. External Sector Assessment

### Summary assessment
- The external position of Senegal in 2017 is broadly consistent with fundamentals and desirable policy settings.
- After widening in 2017, the current account remains stable in 2018, pointing to a sustainable external position in 2018.
- Survey-based indicators of external competitiveness show that Senegal has outperformed regional peers in the past; however, improvements by peers imply Senegal will need to accelerate reforms to maintain or improve its standing.

### Assessment of the external position
- Current account developments:
  - The current account deficit declined from 8.7 percent of GDP in 2012 to 4 percent in 2016, then widened to 7.3 percent in 2017.
  - The widening in 2017 reflects higher global commodity prices and expansionary fiscal policies.
  - The current account deficit is projected to remain stable at 7.3 percent of GDP in 2018.
  - The deficit is expected to remain elevated in subsequent years and is projected to further deteriorate in 2020-2021 owing to high investment in the oil and gas pre-production period.
  - The current account is projected to improve from 2022 onward as the oil and gas sector enters production.
- Capital flows and external position:
  - Net FDI inflows increased from 1.3 percent of GDP in 2016 to 2.4 percent in 2017 and are expected to stand at 2 percent in 2018.
  - Portfolio debt inflows have surged owing to successful Eurobond issuances in 2017 and 2018.
  - The net IIP position remains negative at 51 percent of GDP in 2017, mostly reflecting persistent current account deficits. A narrowing of the current account deficit and fiscal consolidation are required to stabilize it.
- Reserves:
  - WAEMU pooled international reserves dropped by CFAF 933 billion ($1.7 billion) in 2016.
  - Regional pooled reserves stood at $15.1 billion at end-September 2018 (more than 4 months of imports), up from $13.1 billion at end-2017, with the increase largely driven by Eurobond issuances of Senegal and Cote d’Ivoire in the first half of the year.
- Model assessments and staff views:
  - The unadjusted current account (CA) model points to a cyclically adjusted CA of -7.3 percent of GDP, but staff consider this to be boosted by temporary factors (increase in investment, strong import growth, growth above potential).
  - Staff estimate the cyclically adjusted CA, removing all temporary factors, to be about -5.8 percent of GDP.
  - The CA gap is estimated at -1.2 percent of GDP after the adjustment and the REER would be overvalued by 4.9 percent.
  - The equilibrium REER approach appears as an outlier showing an undervaluation of 15 percent.
  - The REER index model has limitations for Senegal because of: (i) no sustained price pressure (inflation below 2 percent); (ii) large structural changes; and (iii) short data spans.
  - The current account model, which takes full advantage of cross-country information, is considered more reliable for Senegal.

### EBA-lite findings (2017)
- External sustainability approach (EBA-lite, 2017):
  - Targeting a net international investment position (NIIP) of -40 percent for the next 10 years points to a small undervaluation of -0.1 percent.
  - Stabilizing the NIIP at the current level of -51 percent of GDP points to an overvaluation of 4 percent.
- Overall assessment:
  - Both the external sustainability approach and the current account approach yield misalignments within the range considered in line with fundamentals based on both the CA gap and the REER gap.
  - The external position is expected to remain sustainable in 2018 with the current account deficit projected to remain at 7.3 percent of GDP.

### Structural competitiveness and policy implications
- Structural strengths and challenges:
  - Senegal has outperformed regional peers on governance and attractiveness for doing business historically, supported by World Bank Doing Business, World Governance indicators, and World Economic Forum competitiveness scores.
  - Other countries have improved their indicators recently; Senegal needs to accelerate structural reforms to maintain or improve its position.
  - Senegal has increased export diversification in products and across trading partners but needs to step up efforts to fully operationalize its Special Economic Zone (SEZ) through the “Triangle of Prosperity” project.
- Policy recommendations to boost competitiveness and external sustainability:
  - Complete and operationalize the “Triangle of Prosperity” SEZ to attract further FDI and expand export-oriented productive capacity.
  - Improve access to credit.
  - Create a transparent, rules-based tax system to make taxation simpler and more predictable, boosting private investment and unlocking export potential.

*International Monetary Fund, Annex I. External Sector Assessment (cr1927-senegal-a4).*

### introduction of a new concept of debt restructuring, the alignment of the NPL definition with the Basel II/III

### introduction of a new concept of debt restructuring, the alignment of the NPL definition with the Basel II/III

### Non-performing loan (NPL) definition and debt restructuring
- Introduction of a new concept of debt restructuring, alignment of the NPL definition with the Basel II/III treatment.
- Possibility of reclassifying restructured, doubtful or litigious claims.
- Recognition of NPLs as unrecovered losses at the end of the fifth financial year from their transfer into the non-performing category.
- NPL threshold of 90 days is extended to 180 days for small- and medium-sized client Small and Medium Industries (SMEs/SMIs) and public sector entities to take into account the particular characteristics of these counterparties.

### Banking system soundness and capital
- All banks are in compliance with the CFAF 10 billion regional capital requirements.
- Capital adequacy ratios have deteriorated in recent years but remain above the regional average.
- Deterioration is driven by (weighted) assets growing faster than capital, especially in larger Senegalese banks.
- One financial institution did not meet capital requirements at end-2017; its majority shareholder is being restructured, producing knock-on effects on the bank.
- Government agreed to inject CFAF 50 billion in the form of tradable government securities into a state-owned bank in need of liquidity.
  - Difficult-to-recover loans of this bank have been transferred to the Société Nationale de Recouvrement (SNR), with any recovered funds accruing to the government.
  - The issuance of the securities still needs to happen; the government plans to issue paper in the near future.
- Specific care required for institutions not under WAEMU banking regulation (e.g., DER activities) and non-traditional banking instruments (e.g., microfinance institutions or mobile banking).
- Policy challenge: maintain good credit standards while improving access to finance for currently underserved market segments.

### Access to credit and initiatives for SMEs and underserved segments
- Structural problems constrain Senegal’s credit markets; access to credit is a major constraint to private sector development.
- Main obstacles identified: informational asymmetries and difficulties enforcing credit covenants; large informal sector reduces banks’ ability to assess risk.
- Credit bureaus cover a limited number of individuals and corporations, but coverage is improving following a legal change easing exchange of information for credit bureaus (MEFP ¶49).
- Enforcing contracts is time consuming despite a higher recovery rate in insolvency than peers; authorities undertook a 10-year plan to improve judicial infrastructure and resources, including training judges and establishing a dedicated commercial tribunal in Dakar (MEFP ¶47).
- Initiatives to improve credit access (Box II.1 highlights):
  - Banque Nationale de Développement Economique (BNDE): balance sheet of FCFA 141 billion at end-2017.
  - Fonds souverain d’investissement stratégiques (FONSIS): CFAF 500 billion strategic sovereign fund; projects expected to be financed 50 percent equity and 50 percent debt which would leverage CFAF 2000 billion in investments. In 2016, FONSIS invested CFA 14 billion of its own capital in 12 projects; other partners contributed, resulting in total financing of CFAF 248 billion.
  - Fonds de Garantie des Investissements Prioritaires (FONGIP): has used CFAF 11.6 billion to leverage CFAF 34.7 billion in financing.
  - Caisse des Dépôts et Consignation (CDC): mandate to promote long-term financing for priority areas such as social housing, infrastructure, and SMEs following a recent overhaul.
  - Delegation general à l’Entrepreunariat Rapide des Femmes et des Jeunes (DER): CFAF 30 billion presidential initiative from 2018 aimed at female and youth entrepreneurship; size of program announced to be reduced after 2018.
  - BCEAO initiative: banks provide credit to SMEs and these loans can be used as collateral at the BCEAO refinancing window (MEFP ¶50).
  - Bourse Régionale des Valeurs Mobilières (BRVM): created a new section to help SMEs raise long-term funds through capital markets.
  - ADEPME ‘Envol’ program: aims to give SMEs CFAF 160 billion over 5 years, jointly with a private bank; includes ADEPME’s e-rating tool (MEFP ¶51).

### Financial inclusion and microfinance
- Microfinance usage among adults more than doubled over the last decade to reach 28 percent in 2016.
- Microfinance credit growth outpaced deposits; accompanied by higher NPLs in the microfinance category:
  - NPLs in MFIs increased from 4.3 percent to 5.7 percent of total loans between June 2017 and June 2018.
- Account ownership:
  - Share of adults with an account at a financial institution increased from 6 percent in 2011 to 42 percent in 2017.
  - About 5.2 million mobile money accounts were open as of December 2017, compared to about 1.6 million open bank accounts.
  - Thirty-two percent of adults had a mobile money account in 2017, compared to 6 percent in 2014.
- Gender and wealth disparities:
  - Women’s access to an account increased from 5 percent in 2011 to 16 percent in 2017.
  - Men’s access increased from 6 percent in 2011 to 26 percent in 2017.
  - Overall, six million people still do not have access to financial services.
- Main obstacles to financial inclusion (survey responses):
  - 65 percent: revenues insufficient relative to costs.
  - 27 percent: fees charged prohibitively expensive.
  - 22 percent: financial institutions are too far away.
  - 16 percent: do not have adequate documentation to open an account.
- Policy progress:
  - A regional financial inclusion strategy was adopted; authorities are finalizing the national component.
  - Strategy includes lowering costs by making basic banking services free of charge, promoting diversified financial solutions for the poor, addressing inadequate property and land registry, low financial literacy, and lack of information on credit worthiness.

### Authorities’ response to Article IV recommendations (high-level assessment)
- Fiscal:
  - 2019 draft budget aligned with the 3 percent deficit WAEMU criteria (positive response).
  - Efforts to contain public consumption: fall in current expenditures to GDP in 2017; however, higher wages and transfers in 2018 following protests and failure to increase domestic energy prices (mixed response).
  - Revenue reforms: IMF technical assistance provided; progress mixed—e-filing and e-payment implemented, DGD-DGID data platform partially implemented (mixed response).
  - Treasury cash management: additional borrowing to finance Post Office, Civil Service Pension and comptes de dépôt projected to reduce from CFAF 216 billion in 2016 to 75 billion in 2018 and to zero by 2019 (mixed response).
  - Debt management: increased reliance on non-concessional external debt and Eurobond issuance since 2011 created bullet repayment spikes; authorities actively manage spikes through debt repurchase; strategy focuses on re-balancing composition of debt to increase domestic debt share (mixed response).
- Competitiveness and private sector:
  - PSE implementation contributed to growth over 6 percent for four years; goal to boost growth to 7 percent by 2019 (positive response).
  - Business environment reforms: improvements in rankings; SEZ beginning to take shape though governance structure not finalized and private investment not rising quickly enough (positive response).
  - Reforms to address impediments to bank lending: progress on credit bureau law and opening of Dakar commercial tribunal (positive response).

### Risk Assessment Matrix (selected risks, relative likelihood, potential impact, policy response)
- Rising protectionism and retreat from multilateralism
  - Relative Likelihood: High
  - Potential impact: Low
  - Policy response: Structural reforms to improve external competitiveness.
- Sharp tightening of global financial conditions
  - Relative Likelihood: High
  - Potential impact: High. A surge in interest rates would increase costs of financing and could reduce access for the Senegalese government in international markets.
  - Policy response: Continue with fiscal consolidation, efforts to contain Treasury financing needs, and a strengthening of debt management.
- Weaker-than-expected global growth
  - Relative Likelihood: Medium
  - Potential impact: Medium
  - Policy response: Structural reforms to improve external competitiveness.
- Sizeable deviations from baseline energy prices
  - Relative Likelihood: Medium
  - Potential impact: High. Increases in energy prices could complicate fiscal policy making and undermine achieving the 3 percent of GDP fiscal deficit target by 2019.
  - Policy response: Contain energy subsidies, including by raising domestic energy prices.
- Delayed implementation of structural reforms to boost fiscal revenues and attract private investment
  - Relative Likelihood: High
  - Potential impact: High. Risks returning to lower growth with implications for fiscal sustainability.
  - Policy response: Steadfast implementation of Phase II of the PSE.
- Adverse growth and fiscal impact of drought
  - Relative Likelihood: Medium
  - Potential impact: Low
  - Policy response: Provide assistance as needed to agriculture sector.
- Domestic and regional security threats
  - Relative Likelihood: Medium
  - Potential impact: Medium. Would require higher security expenditures and could affect private investment.
  - Policy response: Ensure multi-year budget framework allows room to address fiscal contingencies.

*Source: IMF staff report content provided.*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Program request and scope
- The Government of Senegal requests completion of the seventh review of its economic and financial program supported by the Policy Support Instrument (PSI).
- The attached MEFP reviews program results at end-June and structural benchmarks at end-September 2018 and outlines macroeconomic policies for the remainder of 2018 and the short term.

### Program implementation status (summary)
- Overall assessment: program implementation remains satisfactory overall.
- Quantitative assessment criteria at end-June 2018 were met:
  - Quarterly ceiling on treasury float: CFAF 50 billion (met).
  - Target for the fiscal deficit: CFAF 304 billion (met).
  - Target for tax revenues (met).
  - Floor for social spending: 35 percent (met).
- Exceptions and shortfalls:
  - The IT on single tender contracts was not met; overrun mainly due to unsolicited bids.
  - Four of six structural benchmarks have been met; substantial progress on the remaining two.
  - Two prior actions have been implemented.

### Fiscal policy objectives and outcomes
- Fiscal policy aims to meet the convergence criterion for the WAEMU fiscal deficit ceiling.
- Fiscal revenues at end-H1 2018:
  - Collections amounted to 1065.3 billion and increased by 61.8 billion, or 6.2 percent in relative value, compared with the same period of the previous year.
- Fiscal outlook:
  - Fiscal deficit projected to decline from 3.5 percent of GDP in 2018 to 3.0 percent in 2019, and stabilize at 3 percent for the medium term based on increased revenue mobilization and greater efficiency in public spending.

### Key reforms and administrative measures in 2018
- Reforms implemented in 2018 included:
  - New agreement between La Poste and the Treasury limiting the Treasury's guarantee for clearing postal checks.
  - Ministerial order prohibiting use of budget letters committing the central government to expenditure for future fiscal years or off-budget expenditure.
  - Establishment of special economic zones to stimulate exports of goods and services and to foster job creation.

### Short-term reform priorities
- Planned reforms, within government capacity, will focus on:
  - Taxation.
  - Energy supply.
  - Upgrading of the education system.
- Expected impact of natural resource development:
  - Entry into production of oil and gas should be beneficial to growth while increasing fiscal revenues and sources of financing for the economy.

### Proposed program adjustments
- The attached memorandum proposes:
  - Modification of the two end-December 2018 ACs on the floor on net lending/borrowing and the ceiling on central government overall net financing requirement.
  - End-March 2019 ITs are also being proposed.

### Commitments to IMF engagement
- The government affirms:
  - Policies and measures in the attached MEFP are appropriate for achieving PSI objectives.
  - Commitment to macroeconomic stability and debt sustainability and to improving the business environment for private sector-led growth.
  - Will take early action on any additional measures necessary to achieve program objectives and will consult with IMF staff before adopting new measures or reviewing MEFP measures.
  - Will provide the IMF with information requested on progress.

### Implementation details from the attached MEFP — Recent economic developments
- PSE (2014-2018) first phase completed in 2018 with strong results:
  - Average annual rate of growth: 6.2 percent (2014-2018) vs. 3.3 percent (2009-2013).
  - Investment growth: 7.6 percent on average (2014-2018) vs. 5.4 percent (2009-2013).
  - Exports growth: around 9 percent on average (2014-2018) vs. 7 percent (2009-2013).
- Real GDP growth revision:
  - Nonagricultural growth (IGA) eight months into 2018: 5.9 percent.
  - Revised real GDP growth rate for 2018: 6.8 percent (down from initial projection of 7 percent).
- Inflation:
  - Consumer prices increased 0.3 percent over the first eight months of 2018 compared to the same period in 2017.
  - Local products: +0.9 percent; imported products: -1.0 percent.

### Revenue and cash-flow developments (end-September 2018)
- Provisional shortfall in fiscal revenues: CFAF 102.7 billion.
  - Causes cited:
    - Difficulties implementing some new measures and delays.
    - Effects of tax exemption certificates (CDD), including significant refunds to SENELEC; at end-September, 52 percent of the CDDs applied to SENELEC-related revenues.
    - Decline in corporate income tax (IS) paid by subsectors, particularly telecommunications and mining.
    - Difficulties implementing taxation of nonmonetary gold due to fiscal stability clauses.
- Cash flow/cash float:
  - Ceiling of CFAF 75 billion authorized for cash flow operations was slightly exceeded; overrun limited to CFAF 21.4 billion.
  - Clearance of prior credit balances on deposit accounts: CFAF 80.8 billion at end-June 2018.
  - Illiquid revenues (recettes d’ordre): around CFAF 15.6 billion at end-September 2018.
  - Measures taken:
    - CFAF 19.3 billion cash flow deficit on clearance of postal checks at end-September 2018 will be reduced using garnishment orders against La Poste; a new agreement to cover postal checks is in place (prior action).
    - Elimination of acceptance of checks against prior credit balances on deposit accounts to settle with suppliers or pay taxes or levies.

### Treasury and public accounts management
- Clearance of credit balances on deposit accounts:
  - Initial stock: CFAF 387.4 billion (CFAF 326.7 billion excluding IPRES, CDC and CSS).
  - Reduced to CFAF 331.2 billion (CFAF 268.1 billion excluding IPRES, CDC and CSS) at end-June 2018.
  - Securitization work underway for portions related to IPRES and CDC.
- Modernization of the Treasury:
  - ISO certification confirmed for the General Treasury Revenue Agency (RGT) for the second consecutive year; certification of the Public Debt Directorate (DDP) effective.
  - Commitment to incorporate ten additional public agencies in SICA-STAR by March 2019 at the latest; a first batch of 10 entities was incorporated by end-June 2018.
  - Application introduced to limit cash balances held by accounting units, revised by a new decree.

### Financial sector and monetary aggregates
- At end-September 2018:
  - Net foreign assets of deposit institutions increased by CFAF 366.2 billion or 26.7 percent compared to one year earlier, owing to the government bond issue on international financial markets.
  - Money supply rose 10.9 percent.

### Structural reforms and tax administration improvements
- Structural benchmarks:
  - Of six benchmarks, four met; progress on remaining two.
  - All fully domestically financed projects > CFAF 1 billion included in the 2019 budget were submitted to the investment selection committee and taken from the integrated project database, except sovereignty projects.
  - Ministerial order making e-declaration and e-payment obligatory for medium-sized enterprises signed and implemented since July 2018.
    - As of October 15, 2018: 629 taxpayers had signed up for E-TAX (13 percent of the tax population of the Medium-Sized Taxpayers Directorate (DME)), including 562 domiciled with the Dakar I Medium-Sized Business Center (80 percent of its list).
  - Progress on compiling and transmitting financial debts and financial statements of a part of parastatals and public corporations to the IMF for DSA update.
  - Discussions on securitization of Treasury deposit accounts related to CDC and IPRES are well under way.
  - Action plan to reduce tax expenditures has not been fully implemented, partly accounting for significant 2018 revenue shortfall.
- Tax regime changes (Law No. 2012-31 reforms and 2018 measures):
  - Provisional collection at end-September 2018:
    - From application of tax changes (expansion of tax base or increase in rate): CFAF 23.1 billion (execution rate 12 percent vis-à-vis initial targets).
    - From newly created taxes: CFAF 7.1 billion (execution rate 19 percent vis-à-vis initial targets).
  - Low execution attributed to delays in application (between three and six months).
- Hackathon projects and digitalization:
  - “Mon Espace Perso” officially launched on July 26, 2018.
  - M-Tax Project at call for tender stage; expected effective availability by June 30, 2019 (delayed due to mobilization of funds).
  - Batch Scanning Project expected effective availability by December 31, 2019.
- Electronic data exchange between DGID and DGD:
  - Information on imports and exports is reported to DGID every six months starting 2018.
  - New servers to facilitate data exchange expected in Q1 2019.
  - Two new reports created to crosscheck SIGTAS data with import/export information.

### Specific tax and levy changes in 2018 supplementary budget
- Merging of CODETE (3 percent) and PST (1 percent) into a single tax CST at rate 5 percent; taxpayers and tax base remain unchanged.
- Inclusion in the 2019 budget of levies previously considered quasi-fiscal taxes:
  - Levy in support of the energy sector (PSE).
  - Road Use Tax (TUR).
  - Levy to benefit the Senegalese Council of Shippers.
  - Royalties for assignment of radio frequencies.

### Medium-term strategy and outlook
- Priority Action Plan (PAP) for 2019-2023 prepared to guide the second phase of PSE with the objective to raise average annual growth above 8 percent and a privileged role for the private sector.
- Oil and gas discovery implications:
  - Production exploitation expected by 2022-2023.
  - Could substantially increase fiscal revenues and alter sectoral balances if connected properly to the rest of the economy.
- Program pillars going forward:
  - (i) Fiscal consolidation.
  - (ii) Strengthening public financial management and governance.
  - (iii) Improvement of the business environment.
- Fiscal trajectory reiterated:
  - Fiscal deficit to decline from 3.5 percent of GDP in 2018 to 3.0 percent in 2019 and stabilize at 3 percent over the medium term through increased revenue mobilization and improved public spending efficiency.

*Attachment: Letter of Intent and Memorandum of Economic and Financial Policies (2015–19), Dakar, December 20, 2018.*

### 20. The government intends to respect the fiscal deficit target of CFAF 476 billion at

### cr1927-senegal-a4 - 20. The government intends to respect the fiscal deficit target of CFAF 476 billion at

### Fiscal target and overall stance
- The government intends to respect the fiscal deficit target of CFAF 476 billion at end-December 2018.

### Tax policy measures and administration modernization
- 2018 budget measures already included:
  - Merging of the CODETE and PST into a single tax called the CST (telecommunications sector).
  - Increase in the tax rate on tobacco from 50 percent to 65 percent.
  - Increase in the tax rate on alcoholic beverages from 40 percent to 50 percent.
  - Increase in the tax on cosmetics products from 10 percent to 15 percent.
  - Introduction of a levy on insurance companies (PCA).
- These measures have not yet led to greater mobilization of revenues in 2018.
- Innovative measures being considered:
  - Possibility and potential for taxing internet communication networks.
  - A study on the mechanism for monitoring and taxing the very wealthy.
  - Consideration of the tax treatment of midstream oil and gas activities.
  - Piloting a task force responsible for auditing all DGID information system (SIGTAS) accounts.
- Tax administration outcomes with IMF technical assistance:
  - Filing rates: 95 percent of large businesses and 90 percent of medium-sized businesses now declare their VAT by the legal deadline.
  - Collection rate for tax arrears in the first half of the year was 25 percent (with a target of 40 percent).

### Tax arrears (PECs) collection strategy and targets
- DGID projects collections of pending payments (prises en charge—PECs) in the amount of CFAF 110 billion in 2018, compared to CFAF 74.9 billion in 2017, an expected annual increase of CFAF 35.1 billion.
- A PEC recovery rate of 65.5 percent, or about CFAF 72 billion, is expected from the clearance of the stock of PECs deemed recoverable and currently held by collection agencies.
- The balance is expected to be covered by actions related to the stock of PECs deemed difficult to recover and new PECs expected from the tax audit program currently under way.
- Planned program to improve PEC collection:
  - Legislative framework to substantially reduce taxes over two years in arrears, conditional on debtor paying the balance within six months.
  - A special committee of private sector and parliamentary representatives to ensure transparency.
  - Possible waiver of personal or corporate income tax in addition to tax forgiveness.
  - Special program for collection of government fees applicable to fees on time-bound usage rights not eligible for free conversion into land titles.
  - Extension of SENSOUF software inventory of leases beyond Dakar and Mbour to strengthen collection of state fees (recettes domaniales).

### Customs reform and revenue protection
- Measures to ensure coverage of the customs territory:
  - Convert major inland customs offices into full customs offices.
  - Authorize customs clearance at some customs posts.
  - Connection of main offices to GAINDE to secure revenues.
- Better handling of suspended duty arrangements via full GAINDE system to minimize revenue losses from illegal dumping.
- Refocusing on transit and re-export operations identified as having positive impact on fiscal revenues; a related action plan has been developed.
- Broad use of new application for automated management of customs transport permits for vehicles imported by land to:
  - Ensure close management of vehicles from entry into customs territory.
  - Clear vehicles at border posts.
  - Monitor associated payments.

### Treasury and inter-agency cooperation
- Cooperation between the DGD and DGCPT continues.
- A new platform by the Treasury to improve consistency between customs payments and collections and to ensure better management of collection credits (crédits d’enlèvement).
- The platform will be operational in the second half of 2019.

### Expenditure management and budget framework reforms
- Consolidation of the multi-year budget framework to improve expenditure management.
- Transition to program budgeting scheduled for January 2020; ministries and constitutional institutions have adopted performance budgeting.
- Draft Prime Ministerial decree establishing ministerial fiscal programs and appropriations finalized; decree to be signed by end-December 2018 to allow inclusion of program managers in proposals.
- Limits on budget letters to:
  - Comfort letters not involving a financial commitment.
  - Formal letters of guarantee for parastatals.
  - Domicilation letters for settlement for the agriculture sector and for defense and national security projects.
- A decree establishing conditions for issuance of letters of guarantee, domiciliation letters for settlement and comfort letters has been signed (prior action).
- Ceilings on authorizations of government positions (Article 12 of the 2011-2015 LOLF of July 8, 2011, as amended) could be implemented in 2019 in preparing the draft 2020 budget.
- Technical ministries, supported by West AFRITAC/IMF, will use tools to assess ceilings related to authorization of positions during the draft 2020 budget preparation.
- Test runs for decentralization of payment authorization in five pilot ministries (Finance, Education, Health, Justice and Environment) were not entirely successful; several options will be proposed to control financial risks of ministers and presidents of constitutional institutions.

### Pension reform and FNR measures
- Following Law No. 2018-12 of March 30, 2018 instituting a compulsory supplementary pension plan, planned reforms include:
  - Parametric reform to restore FNR financial equilibrium:
    - Amend pension award base from average annual salary over the final three years to the final five years.
    - Renewal of the contributing population through annual recruitment (2.5 percent for civilians and 2 percent for military).
    - Increase in the contribution rate from 35 percent to 40 percent (15 percent from employee and 25 percent from government).
    - Investment of the reserves at a target return rate of 3.5 percent.
    - A 10 percent increase in pension levels is planned.
  - Elimination of capping and widening of the tax base related to contributions regarding the research/training special allowance (ISRF); Law No. 2018-23 enacted on July 6, 2018.
  - Institutional reform discussions to change FNR’s status from a Special Treasury Account to an independent fund with legal personality and financial autonomy.
  - Study on financial and technical feasibility of transferring pension rights of local government civil servants and government officials without civil service status to the FNR.

### Public finance management, transparency, and accounting reforms
- Expansion of oversight of public sector financial operations and contingent liabilities; technical assistance from the World Bank on contingent liabilities in October 2018.
- Debt coverage expanded significantly in the debt sustainability analysis (DSA); limited impact on debt indicators owing to recent change in the GDP base.
- Senegal has a medium-term debt strategy and continues prudent debt management.
- Transposition of WAEMU directives on public finances into national law is ongoing:
  - Draft law on the Code of Ethics for Public Officials adopted.
  - Draft law on financing of political parties not yet ratified.
  - Commitment authorizations and payment appropriations (AE/CP), ceilings on civil servant positions, decentralization of payment authorization and accrual accounting to be ready for transition to new fiscal and accounting management system in January 2020.
- Directive on inventory accounting transposed in May 2018; implementing regulations and training still required.
- Development of a computerized system for inventory accounting with interface to SIGIF.
- Need to develop a budget nomenclature (NBE) amending Decree No. 2012-673 of July 4, 2012; draft 2019 budget prepared on basis of both 2012 and 2019 NBE; draft law to be signed by end-December 2018.
- Fiscal transparency:
  - 2017 Senegal Open Budget Survey score improved from 43/100 to 51/100; IBP recommends improved public participation, mid-year review publication, and additional data on expenditures, non-financial performance and links to public policy.
  - Preliminary results of the Fiscal Transparency Evaluation (FTE) in April 2018 encouraging; areas for improvement identified and an action plan to start implementation in 2019.
- PEFA and PIMA assessments:
  - PEFA (February 2016 version) field test underway with results expected in June 2019.
  - PIMA conducted in November 2018.
- Government Chart of Accounts (PCE) review underway; accounting standards produced and instructions drafted; annex to PCE to be amended from 3 digits to 4 digits.
- Work on opening balance of inventory and valuation of government assets continuing; inventory of fixed assets (tangible and intangible) and accounting macro process development begun; final report on assessment of equivalent value of government equity participations expected.

### WAEMU-TOFE reporting and accrual transition
- New WAEMU-TOFE fiscal reporting system completed using IMF’s Government Financial Statistics Manual nomenclature.
- All analytical tables ready, except the table detailing the financial position based on accrual accounting.
- Related LOLF provisions (accrual basis recording of revenues and expenditures) to be applicable in 2020 with the transition to the new budget and accounting management system.

### La Poste reforms and postal check clearance
- Steps to control clearance of postal checks:
  - Convention signed in October to restrict clearance through Public Treasury accounts at the BCEAO for checks drawn on third parties, individuals and legal entities, except banks, oil companies and entities part of Groupe SN La Poste (prior action).
- Structural measures implemented:
  - Audit report on financial flows of Poste Finances completed by the BCEAO in December 2017.
  - Mission to rectify accounts of Groupe SN La Poste to start before end-2018; restructuring in 2019.
- Restructuring plan measures (2014 plan updated 2018):
  - Reform of procedure guaranteeing clearance of postal checks; new guarantee agreement and opening of a guarantee account at the BCEAO provisioned by La Poste.
  - Rectification of accounts and preparation of reliable financial statements for the group and subsidiaries.
  - Completion of recapitalization through consolidation of capital from 2017 cross-debts agreement.
  - Reconstitution of deposits of third parties with Poste Finances (CNE and CPP accounts).
  - Assessment in 2019 of La Poste’s cost accounting module by ARTP.
  - Preparation and implementation of a recovery plan: rationalize personnel expenditures and increase sales.
  - Institutional conversion of Poste Finances into a Postal Bank.
- Cost accounting pilot phase has been under way since December 2016; external consultant assessment by ARTP expected by March 2019.

*Source: IMF content unit cr1927-senegal-a4.*

### 45. Efforts to improve the financial position of SENELEC continue. The SENELEC arrears,

### 45. Efforts to improve the financial position of SENELEC continue.

### SENELEC arrears and coverage
- SENELEC arrears assessed at August 31, 2018: CFAF 223 billion.
- Coverage of arrears:
  - CFAF 70 billion already included in the 2018 budget.
  - CFAF 28 billion in the form of budgetary support from the World Bank.
  - A letter of guarantee allowing SENELEC to raise CFAF 125 billion on the market, to be covered by a repayment plan to banks over 5 years starting in 2019.

### Measures to avoid future arrears (MEFP, as of 2019)
- Two key measures by the Ministry of Economy, Finance and Planning (MEFP):
  - (i) The amount of the subsidy will be included in all future budget laws (initial or supplementary budgets).
  - (ii) For entities such as public establishments with financial autonomy (EPAFs): effective inclusion (by decree) of an expenditure item for electricity in their budgets making payment of the electricity bills mandatory.
- The government will study additional measures in 2019 to limit the need for energy subsidies (electricity and refined petroleum products).

### Momentum for PSE projects, business environment, and private investment
- Presidential Investment Council (CPI) 13th session (November 20, 2017) validated updated action plan of PREAC II through 2020 with 23 recommendations.
- Priority reform areas: land, digitization, simplification of pricing systems and schedules, labor legislation, credit information, and commercial justice.
- 2018–2020 implementation milestones:
  - Simplification of the application to register a labor contract began in 2018; digitization planned by end-2020.
  - A study to evaluate labor legislation with a draft report expected by end-2018.
  - Creation of regional investment platforms and operationalization of economic zones prioritized.
- 2019 priority: establishment of a collateral registry requiring harmonization of the registry of chattel loans (clerk) with the registry of mortgages (registrar) and study of practical implications with necessary legal oversight in cooperation with the BCEAO.

### Commercial justice
- Dakar commercial court began operations on February 23, 2018.
- As of July 5, 2018:
  - Total cases heard: 1,369.
  - Judgments handed down: 928.
- Challenge: make judicial procedures paperless to increase efficiency and strengthen legal and judicial environment; computerization of Commercial Court procedures underway.

### Special economic zones (ZES)
- Three zones established by decree: Diamniadio Integrated Industrial Park; Diass Special Economic Zone; Sandiara Special Economic Zone.
- Objective: increase exports of goods and services and promote job creation.
- Diamniadio industrial park utilization:
  - Total land: 53 hectares; only 13 hectares used so far to build four buildings (three 10 hectare buildings and one 5 hectare building) and a 4-storey administrative building.
  - Businesses moving in include PVC piping, magnetic cards, textiles, services, etc.

### Credit Information Bureau (BIC) and banking reforms
- BIC platform activity at end-September 2018:
  - Contracts reported: 1,693,312 (against 464,272 at end-March 2018), an increase of 1,229,040 contracts.
  - Customers surveyed: 602,562 (including 13,886 businesses and 588,676 individuals).
  - New loans recorded January–September 2018: 160,065.
  - Number of credit reports consulted represented 69 percent of new loans over this period.
- Since January 1, 2018, new Basel II and Basel III provisions and the revised WAEMU Chart of Accounts for the banking sector entered into effect and are applied by the banking system.
- Banks have integrated innovations by updating information systems, diversifying customer segments, and adapting internal procedures.

### SME financing, Islamic finance, and financial inclusion measures
- A facility to support SME financing with assistance from the BCEAO launched in August 2018.
- New regulations on Islamic financing adopted for banks and microfinance institutions.
- Upcoming work:
  - (i) Development of a national financial inclusion strategy.
  - (ii) Setting up of a single platform for information exchange between microfinance institutions (SFDs).
  - (iii) Continuation of the financial education program.
  - (iv) Promotion of digitization of financial sector payments.

### ADEPME, SME quality certification, and public procurement financing
- ADEPME information systems:
  - SME quality certification unit information system and e-rating tool have played a significant role in SME financial eligibility.
- SME financing outcomes:
  - SMEs received close to CFAF 3 billion in financing in 2017, as against CFAF 1.3 billion in 2015.
- ADEPME developments:
  - New agreement signed with some banks.
  - E-rating tool accepted for prior analysis for SMEs awarded public contracts seeking bank financing.
  - Establishment of an information system on female entrepreneurship to be linked to the e-rating tool to support female entrepreneurship strategy and banking participation.
- Need: completion of the public procurement fund (implementation has begun) to offer SMEs alternative financial products adapted to their needs.

### Program monitoring indicators and TMU highlights
- Modifications proposed:
  - Modification of end-December 2018 assessment criteria and new end-March 2019 indicative targets (ITs).
  - Modifications include two end-December 2018 assessment criteria on the floor on net lending/borrowing and the ceiling on central government overall net financing requirement, and new end-March 2019 ITs (see Table 1 of the MEFP).
- Agreement: government and IMF staff agreed on measures and structural benchmark set out in Table 2 of the MEFP.
- Review schedule:
  - Reviews will occur at six-month intervals.
  - The eighth and final review is expected to be completed by June 23, 2019.

*Source: IMF staff report (excerpt).*

### 22. The government’s overall net financing requirement for fiscal year 2017 is CFAF 499 billion. It

### 22. The government’s overall net financing requirement for fiscal year 2017 is CFAF 499 billion. It

### Adjustment
- The overall net financing requirement is calculated as the sum of:
  - the overall fiscal deficit: CFAF 349 billion, and
  - additional borrowing to finance accounts payable: CFAF 150 billion.
- The ceiling is adjusted upward by the amount that budget grants fall short of program projections up to a maximum of CFAF 15 billion at current exchange rates (MEFP Table 1).
- The ceiling shall be adjusted upward by the equivalent in CFAF (at current exchange rates) of the DPO amount above $100 million that the World Bank approves in 2018, provided such amount is used by the central government to settle obligations owed to SENELEC beyond the CFAF 70 billion programmed in the 2018 supplementary budget (MEFP Table 1).
  - The amount of this adjustment is not to exceed $50 million.
  - Financing of the additional settlement of obligations owed to SENELEC should come either from:
    - (i) a disbursement in 2018 from the DPO approved in 2018, or
    - (ii) a drawdown of the escrow account at the BCEAO containing overfinancing from the 2018 Eurobond defined in the TMU.

### Reporting Requirements — Additional borrowing to finance accounts payable
- Data related to the additional borrowing by the Treasury to finance accounts payable will be sent annually within a period of one month from the end of the month of December. This comprises:
  - (a) the operations of the post office (Poste and Poste Finance),
  - (b) the pension system (Fonds National de Retraites),
  - (c) spending by ministries out of unutilized appropriations from past budgets (drawdown of the “comptes de dépôt”),
  - (d) offsets for illiquid revenues (“recettes d’ordre”).

### Reporting Requirements — Overall financing requirement
- Data related to the overall financing requirement will be sent annually within a period of one month from the end of the month of December and must include:
  - (i) total gross government debt;
  - (ii) total debt principal repaid by the government;
  - (iii) all guarantees granted by the government for domestic or external loans to its suppliers and contractors and any other public or private entity.
- Details regarding any government borrowing (including amounts on-lent and any guarantee granted by the government for domestic or external loans to its suppliers and contractors and any other public or private entity) will be reported monthly within six weeks of the end of the month.
- Borrowings data will be grouped as:
  - short-term (less than one year), or
  - long-term (one year or more).
- This rule applies also to amounts on-lent and guarantees granted by the government for domestic or external loans to its suppliers and contractors and any other public or private entity.

### H. Public Sector Contracts Signed by Single Tender — Definitions and reporting
- Public sector contracts: administrative contracts by the government or any entity subject to the procurement code for procurement of supplies, delivery of services, or execution of work.
- Single-tender contracts: contracts signed without competitive tender.
- The quarterly indicative target applies to total public sector contracts entered into by the government or any entity subject to the procurement code.
- The ceiling on contracts executed by single tender excludes:
  - classified purchases, and
  - fuel purchases by SENELEC for electricity production reflected in a new regulation that allows SENELEC to buy fuel from SAR on the basis of the current price structure.
- Reporting requirement:
  - The government will report quarterly to Fund staff, with a lag of no more than one month from the end of the observation period, the total amount of public sector contracts and the total value of all single-tender public sector contracts.

### I. Tax Revenues — Definition and monitoring
- Tax revenues are the sum of revenues from:
  - taxes and levies on income, profits and capital gains, salaries and labor, on assets;
  - taxes on goods and services;
  - taxes on foreign trade and international transactions;
  - other tax revenues.
- The indicative target will be assessed on the basis of data for these revenues provided in the quarterly TOFE.
- Petroleum revenues monitored specifically include:
  - VAT on oil,
  - excise taxes on oil,
  - customs duties on oil,
  - vehicle taxes,
  - the Petroleum Product Imports Security Fund (FSIPP).

### Additional Information for Program Monitoring — Transmission timelines and content
- The authorities will transmit the following to Fund staff, in electronic format if possible, with the maximum time lags indicated:
  - (a) Three days after adoption: any decision, circular, edict, supplemental appropriation order, ordinance, or law having economic or financial implications for the current program (including acts that change budget allocations, creation of a new agency or fund).
  - (b) Within a maximum lag of 30 days, preliminary data on:
    - Tax receipts and tax and customs assessments by category, with corresponding monthly revenue;
    - The monthly amount of expenditures committed, certified, or for which payment orders have been issued;
    - The monthly situation of checks issued by agencies from their deposit accounts at the Treasury but not paid to beneficiaries, with dates of issuance;
    - The quarterly report of the Debt and Investment Directorate (DDI) on execution of investment programs;
    - The monthly preliminary government financial operations table (TOFE) based on the Treasury accounts;
    - The provisional monthly balance of the Treasury accounts;
    - Reconciliation tables between SIGFIP table and consolidated Treasury accounts, between consolidated Treasury accounts and TOFE for “budgetary revenues and expenditures,” and between TOFE and the net treasury position (NTP), on a quarterly basis.
  - (c) Final data will be provided as soon as the final balances of the Treasury accounts are available, but not later than one month after the reporting of provisional data.
- Additional monthly provisional reporting during the program period:
  - Provisional data on current nonwage noninterest expenditures and domestically financed capital expenditures executed through cash advances on a monthly basis with a lag of no more than 30 days (drawn from preliminary consolidated Treasury account balances); final data within one month after provisional reporting.

### Central Bank and Financial Sector Reporting
- The central bank will transmit to Fund staff:
  - The monthly balance sheet of the central bank, with a maximum lag of one month;
  - The monthly consolidated balance sheet of banks with a maximum lag of two months;
  - The monetary survey, on a monthly basis, with a maximum lag of two months;
  - The lending and deposit interest rates of commercial banks, on a monthly basis;
  - Prudential supervision and financial soundness indicators for bank financial institutions (table: Situation des Établissements de Crédit vis--à-vis du Dispositif Prudentiel), on a quarterly basis, with a maximum delay of two months.

### Public Disclosure Requirements
- The government will update monthly on the designated website the following information:
  - (a) Preliminary TOFE and transition tables with a delay of two months;
  - (b) SIGFIP execution table, the table for the central government and a summary table including regions, with a delay of two weeks;
  - The amount of the airport tax collected, deposited in the escrow account, and used for the repayment of the loan financing the construction of the new airport, with a delay of one month.
  - Full information on:
    - (i) operations of the Energy Sector Support Fund (FSE);
    - (ii) investment projects in the power sector;
    - (iii) planning and execution of these projects;
    - (iv) details of financing and updated costs.

### J. Escrow Account — Definition and reporting
- Definition:
  - The escrow account is a special account in the general treasury (DGCPT) opened at the Central Bank (BCEAO) or in a private bank.
  - This account is credited with the balance of the amount raised through the issuance in March 2018 of a Eurobond in the amount of 2.2 billion dollars, after deducting amounts corresponding to financing of the 2018 supplementary finance law, in line with the macroeconomic framework, and net of debt repurchases made in conjunction with the 2011 Eurobond issue and related expenses.
  - The balance of 236 billion CFAF will be used only for:
    - debt reprofiling operations to repay outstanding external debt early,
    - replacing World Bank financing in 2018 in the event the World Bank’s DPO is disbursed in 2019,
    - financing of the 2019 budget.
- Reporting requirements:
  - From June 30, 2018, onwards, the authorities commit to provide the IMF with a monthly statement of the escrow account with a maximum delay of one week after the end of the month.

### Debt Sustainability Analysis — Key findings and assumptions
- Coverage and stock:
  - The DSA expands the debt perimeter to include para-public entities and SOEs.
  - Expansion starting in 2017 increases the end-2017 debt stock by 10.8 percentage points of GDP to 60.6 percent of GDP, compared to central government debt of 49.8 percent of GDP.
  - The GDP rebasing increased the level of GDP by about 30 percent, creating a structural break with previous DSA data.
- Risk assessment:
  - Senegal remains at low risk of debt distress overall, though short-term breaches of two external debt indicators occur under the most extreme scenarios.
  - Low risk predicated on:
    - ongoing debt liability management, guarantees to address currency risk, access to liquid financial assets, and a sound track record of market access;
    - adherence to planned fiscal consolidation path, acceleration of reforms, and a prudent borrowing strategy.
  - Important to contain fiscal pressures from Treasury operations and address fiscal risks from the broader public sector, including the energy sector.
- External debt indicators and developments:
  - For 2018, external public debt projected at 47.6 percent of GDP, compared to 45.2 percent projected in the previous DSA.
  - Senegal issued a $2.2 billion Eurobond in 2018, its largest ever and twice the previous issuance of $1.1 billion in 2017.
  - Domestic debt projected to decrease from 20.2 percent of GDP at end-2017 to 16.9 percent of GDP at end-2018.
  - Total public debt, including expanded perimeter coverage, projected to reach 64.5 percent of GDP in 2018; this includes accumulation of 2018 budget overfinancing (1.6 percent of GDP) in an escrow account to be unwound to meet 2019 financing needs.
  - Public debt service projected to reach 40.9 percent of revenue in 2018.
- Table highlights (as presented):
  - Public and Publicly Guaranteed Debt (Rebased GDP) 2017: 45.7
  - Public and Publicly Guaranteed Debt 2018 (Current DSA, rebased): 64.5
  - Increase in Debt: 18.8
  - Expansion to include Public Sector Debt: 11.7
  - 2018 Eurobond Issuance: 7.3
  - Reduction in domestic debt from external: -0.2
- Underlying assumptions and borrowing plan:
  - Authorities committed to a debt management strategy relying predominantly on concessional and semi-concessional borrowing, borrowing largely from traditional bilateral and multilateral lenders.
  - Non-concessional borrowing to be used only in exceptional cases and for specific high-return projects.
  - Eurobond issuances and commercial borrowing considered if financing terms are favorable and concessional financing is not available.
- Macro assumptions in baseline scenario:
  - Real GDP growth projected at 6.2 percent in 2018.
  - Growth momentum maintained in the medium term, peaking at 11.6 percent in 2022 and decelerating to 10.4 percent in 2023 with incorporation of oil and gas production.
  - Long-run real GDP growth projected at 5.1 percent over the period 2020-34.
  - Public sector deficit projected at 5.1 percent of GDP in 2018.

*Source: IMF staff report excerpts as provided in the content unit.*

### 3.7 percent over the medium term. In the long run, the deficit is set at 2.8 percent of GDP,

### cr1927-senegal-a4 - 3.7 percent over the medium term. In the long run, the deficit is set at 2.8 percent of GDP,

### Fiscal outlook and inflation
- Overall fiscal deficit (percent of GDP) — Current DSA: 3.7 (2015), 3.3 (2016), 2.8 (2017), 5.1 (2018), Med. Term 3.7, Long Term 2.8.
- Overall fiscal deficit — Previous DSA: 4.8 (2015), 4.2 (2016), 3.7 (2017), 3.5 (2018), Med. Term 3.1, Long Term 3.0.
- Authorities aim to reduce debt ratios through further fiscal consolidation, improvement in the current account, and strengthening debt management policies, including more attention to the terms and volume of non-concessional external financing.
- Specific fiscal actions referenced:
  - Increase revenues mainly through improved revenue administration and lower tax exemptions.
  - Contain Treasury financing and fiscal pressures from Treasury operations.
  - Address fiscal risks from the broader public sector, including the energy sector.
  - Reduce structural deficits of the Post Office and civil service pensions and address appropriations from past budgets in the comptes de dépôt.
- Inflation and price measures:
  - Inflation projected to remain contained at under 2 percent in 2018.
  - GDP deflator projected at 2.2 percent in 2018 and expected to remain around 2 percent until 2023.
- Discount rate for this DSA is set at 5 percent.

### Current account and external flows
- Current account deficit (percent of GDP) — Current DSA: 5.6 (2015), 4.0 (2016), 7.3 (2017), 7.3 (2018), Med. Term 7.5, Long Term 1.2.
- Current account deficit — Previous DSA: 7.0 (2015), 5.6 (2016), 7.8 (2017), 7.2 (2018), Med. Term 6.8, Long Term 5.3.
- Drivers and projections:
  - Current account deficit projected to stay above 7 percent of GDP in 2018 due to increased imports of capital goods and oil, and lower export growth.
  - Projected to widen through 2021 because of oil and gas investment in the pre-production period.
  - Over the long term, average current account deficit projected to decrease to 1.2 percent of GDP due to improved export growth, including from the oil and gas sector and export-oriented investment in special economic zones (SEZs).
  - Remittances remain significant but are expected to decline as a percent of GDP over the medium term.

### Growth and debt-carrying assumptions
- Real GDP growth — Current DSA: 6.4 (2015), 6.2 (2016), 7.2 (2017), 6.2 (2018), Med. Term 8.3, Long Term 5.1.
- Real GDP growth — Previous DSA: 6.5 (2015), 6.7 (2016), 6.8 (2017), 7.0 (2018), Med. Term 7.0, Long Term 5.4.
- External financing mix and terms assumptions:
  - Financing mix consistent with a prudent borrowing strategy.
  - Recent borrowing shows increased reliance on non-concessional borrowing; average maturity of new debt close to 18 years, with 7-year grace period.
- Domestic borrowing assumptions:
  - Domestic debt assumed to account for 16.4 percent of total public debt on average over 2018-23.
  - 6.2 percent of domestic debt has maturity below one year.
  - New short-term domestic debt assumed issued at an average real interest rate of 4.0 percent.
  - Medium- and long-term domestic debt assumed to carry a real interest rate of 4.7 percent with average maturity of 6.0 years.
- Discount rate for this DSA: 5 percent.

### External DSA findings and stress tests
- Public and publicly guaranteed (PPG) external debt: estimated at 47.6 percent of GDP in 2018 and projected to decline to 35.7 percent of GDP in 2023 and below 30 percent in the long term.
- External debt indicators breach thresholds for a short period under most stress tests; external debt to export ratio breaches its threshold only under the most extreme shock.
- Debt service to exports ratio breaches threshold twice (each one-year events):
  - In 2018 due to an operation to reduce the Eurobond repayment spike in 2021 by 40 percent.
  - In 2021 due to the Eurobond bullet repayment under a shock to exports.
- Factors mitigating external vulnerability:
  - GDP rebasing.
  - Repurchase of 40 percent of the 2011 Eurobond reducing the 2021 bullet repayment spike.
  - Introduction of oil and gas-related production and revenues starting in 2022.
  - Ongoing exploration of debt liability management options to reduce the Eurobond bullet repayment in 2021 by 50 percent (simulation would reduce the 2021 debt service spike by close to 11 percent).
  - Partial credit guarantee for currency risk hedging from the African Development Bank and ongoing negotiations for supplementary partial guarantees with commercial banks.
  - Unrestricted access to a pool of liquid financial assets (e.g., WAEMU international reserves currently over $15 billion or more than 4 months of regional imports).
  - Sound track record of market access: Eurobond issuances in 2011, 2014, 2017, and 2018; 2018 issuance doubled the 2017 amount and was five times oversubscribed. Regional WAEMU bond market activity prior to 2017 with bond issuance surpassing 5 percent of GDP annually.

### Public DSA findings, vulnerabilities, and scenarios
- Total public debt increases from 60.6 percent in 2017 to 64.5 percent in 2018, then projected to decline to 40.5 percent of GDP by 2038.
- Public debt coverage expanded to include central government and preliminary data on para-public entities and SOEs.
- Historical scenario: If Senegal grows at 4.5 percent, most indicators would breach thresholds over the medium to long term and PV of total public debt trends upward, illustrating risks of insufficient reform and low growth.
- Under the most extreme stress test, a shock to GDP growth results in a prolonged breach of the public sector debt threshold; simulation assumes a large permanent increase in the primary deficit (about 4 percentage points of GDP higher than the baseline in 2021 and beyond).
- Debt service concerns:
  - Debt service reaches 40.9 percent of revenues in 2018, then falls over the medium term to 30.5 percent, with some spikes due to Eurobond bullet repayments.
  - High debt service absorbs a sizable portion of fiscal revenues, limiting room for infrastructure, health, and education spending.

### Risk assessment and policy recommendations
- Staff assessment: Senegal remains at low risk of debt distress but is a borderline case.
  - The breach of the debt service-to-export threshold in 2021 (Eurobond bullet repayment) is the most significant concern.
  - Other breaches are short-lived and mitigated by factors listed above.
  - Slippage on structural reforms or fiscal consolidation could place Senegal at moderate risk of debt distress.
- Key policy recommendations and priorities:
  - Continue fiscal consolidation and revenue mobilization (improve revenue administration, reduce tax exemptions).
  - Contain Treasury financing and control volumes and terms of non-concessional borrowing.
  - Implement structural reforms to sustain high private sector-led growth, including establishment of SEZs ("Prosperity Triangle") to boost exports.
  - Develop a transparent pipeline of bankable projects.
  - Strengthen debt management and continuously monitor financing needs and borrowing plans.
  - Expand the coverage of public sector deficits and debt to strengthen analysis of debt vulnerabilities.
- Authorities’ stance:
  - Authorities concurred broadly with the staff’s assessment, plan to expand coverage of public sector debt, and commit to limit non-concessional borrowing while considering borrowing impact on growth.
  - Successful Eurobond issuance in 2018 (five times oversubscribed and consisting of two bonds) indicates market confidence, but recent bond price trends suggest future issuances could be at higher interest rates.

*Source: IMF staff DSA content as provided in the supplied document excerpt.*

### 6.75 percent interest rate, principal repayment in the last 3 years; and (ii) a 10-year bond of € 1 billion, 4.75 percen

### cr1927-senegal-a4 - 6.75 percent interest rate, principal repayment in the last 3 years; and (ii) a 10-year bond of € 1 billion, 4.75 percent

### Debt sustainability: headline indicators (baseline, selected years)
- External debt (nominal) 2015–2038 (percent of GDP): 57.2; 57.3; 65.6; 67.3; 70.5; 70.4; 70.0; 64.0; 59.9; 42.3; 22.0; 49.8; 59.5
- Of which: public and publicly guaranteed (PPG) external debt (percent of GDP): 32.3; 33.6; 40.4; 47.6; 47.2; 44.9; 43.0; 38.7; 35.7; 28.3; 20.0; 27.0; 37.4
- PV of PPG external debt-to-GDP ratio (selected values): 34.7; 38.8; 40.2; 38.2; 36.5; 32.7; 30.0; 23.9; 17.1
- PV of PPG external debt-to-exports ratio (selected values): 159.7; 176.6; 180.7; 170.5; 161.5; 120.5; 108.1; 82.4; 61.6
- PPG debt service-to-exports ratio (selected values): 7.5; 10.4; 8.9; 22.6; 16.1; 14.3; 18.1; 10.9; 9.7; 9.4; 6.8
- PPG debt service-to-revenue ratio (selected values): 9.8; 12.0; 7.8; 20.3; 14.5; 12.6; 16.2; 11.4; 10.3; 10.4; 7.3
- Gross external financing need (Billion of U.S. dollars) (selected values): 0.9; 0.9; 1.4; 2.3; 1.7; 2.3; 2.9; 0.9; 0.9; 0.3; 1.3

### Key macroeconomic assumptions and projections (selected series)
- Real GDP growth (in percent) 2015–2038 (selected): 6.4; 6.2; 7.2; 6.2; 6.9; 7.5; 7.1; 11.6; 10.4; 5.1; 4.5; 4.6; 7.2
- GDP deflator in US dollar terms (change in percent) (selected): -15.6; 0.5; 3.9; 7.1; -1.3; 3.3; 1.9; 2.8; 1.6; 1.7; 2.0; -0.2; 2.3
- Effective interest rate (percent) (selected): 2.0; 2.7; 2.3; 3.7; 3.3; 3.8; 3.7; 3.7; 3.83.1 4.0; 1.9; 3.5 (note: formatting in source includes contiguous values)
- Growth of exports of G&S (US dollar terms, in percent) (selected): -7.6; 2.9; 12.2; 15.1; 6.9; 11.6; 10.1; 37.7; 14.6; 7.4; 7.4; 5.2; 12.9
- Growth of imports of G&S (US dollar terms, in percent) (selected): -13.4; -1.8; 20.9; 15.2; 7.9; 18.9; 11.0; 1.9; 5.8; 10.5; 6.8; 4.6; 8.7
- Government revenues (excluding grants, percent of GDP) (selected): 17.1; 18.6; 25.0; 24.4; 24.8; 25.3; 25.4; 25.9; 26.2; 26.2; 26.1; 17.2; 25.7
- Nominal GDP (Billion of US dollars) (selected): 18; 19; 21; 24; 25; 28; 31; 35; 39; 58; 111
- Nominal dollar GDP growth (selected): -10.2; 6.8; 11.3; 13.7; 5.5; 11.1; 9.1; 14.6; 12.1; 6.96.7; 4.3; 9.7 (source formatting contiguous)

### Public sector debt key metrics (baseline, selected years)
- Public sector debt (percent of GDP) (2015–2038 selected): 44.5; 47.7; 60.6; 64.5; 61.9; 60.2; 59.2; 55.0; 52.2; 47.6; 40.5; 37.3; 54.4
- Of which: external debt (percent of GDP) (selected): 32.3; 33.6; 40.4; 47.6; 47.2; 44.9; 43.0; 38.7; 35.7; 28.3; 20.0; 27.0; 37.4
- Change in public sector debt (selected): 2.1; 3.2; 13.0; 3.9; -2.6; -1.7; -1.0; -4.2; -2.8; -0.5; -0.9; Identified debt-creating flows: 3.9; -0.6; -6.5; 1.8; -1.0; -1.7; -0.9; -4.2; -2.8; -0.5; -0.9
- Primary deficit (percent of GDP) (selected): 2.2; 1.6; 0.9; 3.1; 2.3; 1.7; 1.7; 1.0; 1.1; 1.2; 0.7
- PV of public debt-to-GDP ratio (selected): 53.3; 57.2; 54.7; 53.3; 52.6; 48.9; 46.4; 43.2; 37.6
- PV of public debt-to-revenue and grants ratio (selected): 196.5; 216.3; 203.9; 195.7; 192.3; 175.7; 165.3; 153.8; 133.8
- Debt service-to-revenue and grants ratio (selected): 30.1; 35.6; 25.9; 37.7; 28.6; 22.0; 24.4; 18.4; 18.2; 16.5; 11.9
- Gross financing need (percent of GDP) (selected): 6.8; 7.4; 8.0; 12.3; 10.0; 7.7; 8.4; 6.1; 6.2; 5.8; 4.0

### Drivers of debt dynamics (baseline decomposition highlights)
- Endogenous debt dynamics contribution (selected): 7.5; -2.2; -4.7; -1.4; -2.3; -2.4; -2.2; -4.8; -3.7; -0.9; -0.1
- Contribution from nominal interest rate (selected): 1.2; 1.5; 1.2; 2.1; 2.1; 2.4; 2.4; 2.2; 2.2; 1.4; 0.9
- Contribution from real GDP growth (selected): -3.9; -3.3; -3.7; -3.6; -4.4; -4.8; -4.6; -7.1; -5.9; -2.2; -1.0
- Contribution from price and exchange rate changes (selected): 10.3; -0.3; -2.1; ... (source continues with ellipses)

### Stress tests, sensitivity analysis, and scenarios (selected outcomes)
- Most extreme stress-test rule: "The most extreme stress test is the test that yields the highest ratio in or before 2028. Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most extreme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented."
- Commodity price shock magnitudes: "based on the commodity prices outlook prepared by the IMF research department."
- External Debt Sustainability Framework, baseline scenario (selected sensitivity results, percent):
  - PV of debt-to-GDP ratio (Table 7 baseline row): 39; 40; 38; 36; 33; 30; 29; 27; 26; 25; 24 (years 2018–2028)
  - Debt service-to-exports ratio (Table 7 baseline row): 17; 7; 18; 1; 70; 16; 10; 8; 10; 6; 9 (source presents contiguous columns; use presented baseline series elsewhere)
- Public Debt sensitivity (Table 8 selected rows):
  - Public sector debt baseline (percent of GDP) 2018–2028: 57; 55; 53; 53; 49; 46; 46; 45; 44; 43; 43
  - Under alternative scenario A1 (historical averages) (percent of GDP) 2018–2028: 57; 56; 58; 59; 60; 61; 62; 63; 64; 65; 66
  - Bound test B1 (Real GDP growth) public debt (percent of GDP) 2018–2028: 57; 60; 67; 70; 69; 69; 71; 73; 75; 78; 80
  - Public debt benchmark (percent of GDP): 70 (constant 2018–2028)
- Sensitivity tables flag breaches where bold values indicate a breach of the threshold.

### Market and borrowing assumptions used in DSAs
- Note: "All the additional financing needs generated by the shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal debt are based on baseline 10-year projections."
- Borrowing assumptions (selected descriptors from Figures/Tables):
  - Shares of marginal debt categories include: External PPG medium and long-term; Domestic medium and long-term; Domestic short-term; Domestic MLT debt.
  - Terms of marginal debt: Avg. nominal interest rate on new borrowing in USD; Avg. maturity (incl. grace period); Avg. grace period.
  - Customization flags: "Yes" indicates any change to the size or interactions of the default settings for the stress tests. "n.a." indicates that the stress test does not apply.
  - Tailored tests presented include: Combined CLs; Natural Disasters; Commodity Prices; Market Financing.

### Diagnostics and realism tools
- Figures illustrate:
  - Indicators of Public and Publicly Guaranteed External Debt under Alternative Scenarios, 2018-28.
  - Indicators of Public Debt Under Alternative Scenarios, 2018-28.
  - Driver of Debt Dynamics—Baseline Scenario, 2013-28 (decomposition into price and exchange rate, real GDP growth, nominal interest rate, current account + FDI, other debt-creating flows).
  - Realism Tools, 2012-2023: comparisons of Government and Private Investment across DSA vintages and contributions to real GDP growth (5-year averages).

*Source: Senegal authorities; and staff estimates and projections, as presented in the document.*

### 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the

### 3-Year Adjustment in Primary Balance (Percentage points of GDP)

### Chart description
- Title fragment: "Fiscal Adjustment and Possible Growth Paths 1/"
- Horizontal axis: "The size of 3-year adjustment from program inception is found on the horizontal axis;"
- Vertical axis: "the percent of sample is found on the vertical axis."
- Labels and tick marks present in source:
  - Vertical axis ticks: 0, 2, 4, 6, 8, 10, 12, 14
  - Horizontal axis negative range: -4.5-4.0-3.5-3.0-2.5-2.0-1.5-1.0-0.5
  - Horizontal axis nonnegative range: 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0

### Key labels and annotations (verbatim)
- "3-Year Adjustment in Primary Balance"
- "Projected 3-yr adjustment"
- "3-year PBadjustment greater than"
- "More"
- "Distribution 1/"

### Observations drawn from the figure text
- The figure maps the distribution of 3-year adjustments in the primary balance (percentage points of GDP) across the sample, using:
  - Horizontal axis: size of 3-year adjustment from program inception (exact tick values listed above).
  - Vertical axis: percent of sample (tick values listed above).
- The figure includes a "Projected 3-yr adjustment" label and a note fragment "3-year PBadjustment greater than" indicating comparative thresholds are present in the original chart.

*Source: https://www.imf.org/-/media/files/publications/cr/2019/cr1927-senegal-a4.pdf*

### 2.5 percentage points of GDP in

### 2.5 percentage points of GDP in

### Market-financing risk indicators (2018–28)
- Figure 6 shows indicators including:
  - Maximum gross financing needs (GFN) over 3-year baseline projection horizon.
  - EMBI spreads correspond to the latest available data.
- Benchmarks and outcomes presented for:
  - GFN breach of benchmark: No
  - EMBI breach of benchmark: No
- Time series axes and labels included for:
  - Debt service-to-revenue ratio (2018–2028)
  - PV of debt-to-exports ratio (2018–2028)
  - PV of debt-to-GDP ratio (2018–2028)
  - Debt service-to-exports ratio (2018–2028)
- Multipliers illustrated in fiscal impulse scenarios:
  - Multiplier = 0.2
  - Multiplier = 0.4
  - Multiplier = 0.6
  - Multiplier = 0.8

### Relations with the Fund (as of October 31, 2018)
- Membership:
  - Joined: August 31, 1962
- Quota and holdings:
  - Quota 323.60
  - IMF’s holdings of currency (Holdings rate) 281.28
  - 86.92
  - Reserve Tranche Position 42.33
- SDR Department:
  - Net cumulative allocation SDR Million 154.80
  - %Allocation 100.00
  - Holdings 16.11
  - 10.41
- Outstanding Purchases and Loans:
  - ESF Arrangements SDR Million 31.55
  - %Quota 9  .75
- Latest financial arrangements (selected):
  - ESF Dec 19, 2008 — Expiration Jun 10, 2010 — Amount Approved 121.35 — Amount Drawn 121.35
  - ECF Apr 28, 2003 — Expiration Apr 27, 2006 — Amount Approved 24.27 — Amount Drawn 24.27
  - ECF Apr 20, 1998 — Expiration Apr 19, 2002 — Amount Approved 107.01 — Amount Drawn 96.47
- Projected Payments to Fund:
  - Forthcoming 2018 2019 2020 2021 2022
  - Principal 12.14 16.18 3.24
  - Charges/Interest 0.37 1.47 1.44 1.43 1.43
  - Total 12.50 17.65 4.67 1.43 1.43

### Debt relief and HIPC/MDRI implementation
- Implementation of Multilateral Debt Relief Initiative (MDRI):
  - I. MDRI-eligible debt (SDR million) 100.32
  - Financed by: MDRI Trust 94.76
  - Remaining HIPC resources 5.56
  - II. Debt Relief by Facility (SDR million) Eligible Debt Delivery Date GRA PRGT Total January 2006 N/A 100.32 100.32
- Implementation of HIPC Initiative:
  - Commitment of HIPC assistance Enhanced Framework Decision point date Jun 2000
  - Assistance committed by all creditors (US$ million) 488.30
  - Of which: IMF assistance (US$ million) 42.30
  - Completion point date Apr. 2004
  - II. Disbursement of IMF assistance (SDR million)
    - Assistance disbursed to the member 33.80
    - Interim assistance 14.31
    - Completion point balance 19.49
    - Additional disbursement of interest income 4.60
    - Total disbursements 38.40

### Key policy messages from Article IV / PSI review
- Growth and private sector:
  - Implementation of the first set of PSE projects has helped move Senegal to a higher growth path.
  - Sustaining growth requires steadfast implementation of reforms to enable SMEs and attract FDI for globally competitive production.
  - SEZ reforms should move away from tax holidays toward a transparent, rules-based tax regime with reasonable rates.
- Fiscal policy and public finances:
  - Authorities committed to preserving macroeconomic stability.
  - Efforts to increase revenue collection and rationalize public consumption have helped control budget deficits.
  - Vigilance needed on the wage bill, transparent and fair public sector wage remuneration, and reduction of tax expenditures.
  - Comfort letters to encourage bank financing in advance of appropriations should be kept to the absolute minimum.
- Debt and public investment:
  - Senegal remains at low risk of debt distress, but debt levels are rising.
  - Increased nonconcessional borrowing, including on the regional market, has raised the debt service burden.
  - Maintaining low risk of debt distress depends on sustaining high growth envisaged under the PSE and adhering to planned fiscal consolidation.
  - Recommendations: better selection, evaluation and monitoring of investment projects; access concessional and semi-concessional borrowing when possible; comprehensive debt management strategy.
  - Urgent need to strengthen Treasury operations under pressure from legacy arrears and financial difficulties of the postal system.
  - Staff welcomed planned audit by end-March 2017 and prompt formulation of an action plan.

### Risks and outlook
- Outlook:
  - Positive, with manageable risks provided continued improvement in economic governance and rapid implementation of identified reforms.
- Domestic risks:
  - Entrenched rent seeking and patronage could hinder opening economic space and equitable tax collection.
  - Historical precedent: failure to overcome such lobbies has resulted in loss of growth momentum four times since 1990.
- External and regional risks:
  - Possible increases in the cost of public borrowing.
  - Slow growth in key partner countries.
  - Security risks in the region could adversely affect investment, growth, and exports.

### Financial sector and supervision
- Financial sector role:
  - Financial indicators improving, but from a low level.
  - Regional supervision should be strengthened to further reduce non-performing loans.
  - Domestic reforms needed to improve incentives for extending credit.

### Technical assistance (2010–18) — AFRITAC West and Fund missions
- AFRITAC West TA areas by year (selected highlights):
  - 2010: Debt management; Quarterly national accounts; Tax administration modernization.
  - 2011: QNA; institutional sector accounts; Strengthening public debt management.
  - 2012: Annual Government Finance Statistics; Annual and quarterly national accounts; Budget preparation; MTBF.
  - 2013–2014: Public financial management; Public Debt Management; Identification and registration of tax payers; BCEAO mission on Basel II & III Implementation.
  - 2015–2016: Tax administration; Public financial management; Bank Supervision and Regulations; National Accounts; GFS updates; Transfer pricing workshop.
  - 2017–2018: National accounts (rebasing), Revenue administration, Public Investment Management Assessment (PIMA) mission, Training on revised debt sustainability framework and debt portfolio risk management, Strengthening quarterly national accounts systems, GFS consolidation.
- Headquarters TA and missions (selected):
  - Jan. 2010 FAD expert Review of the expenditure chain.
  - Jul. 2010 FAD expert PFM (Treasury Single Account and cash forecasts).
  - Nov. 2010 Staff/Expert Review of tax policy and tax expenditures.
  - Apr. 2013 FAD experts Public financial management.
  - Multiple FAD expert missions in 2012–2016 on VAT Credit Reimbursement System, PIT and sector taxation, wage bill, budget execution, and tax administration reform.
  - Jul. 2016 FAD experts Assessment of IT system for hackathon preparation.
  - Apr. 2017 FAD experts Public-Private Partnership (PPP) peer learning event.
  - Nov. 2018 FAD experts Public Investment Management Assessment (PIMA) mission.

### Statistical issues (as of October 31, 2018)
- General assessment:
  - Data provision has some shortcomings but is broadly adequate for surveillance and program monitoring.
  - Weaknesses in data on national accounts, production, and social indicators.
- National accounts:
  - Rebasing in 2018 changed base year from 1999 to 2014.
  - Rebased series available from 2007 to 2016, with quarterly series available up to 2018Q2 except for the demand side.
  - No regular (annual or quarterly) surveys for household consumption and gross fixed capital; a turnover index is being implemented to provide household consumption information.
  - Producer price indices for services and sector prices for agriculture released monthly (with concerns about concept for producer prices).
  - Ongoing efforts to improve coverage for forestry and farming production and prices.
  - West AFRITAC assisted with the rebasing exercise and improvement of real sector statistics.
  - IMF TA assisting to better capture activities related to natural resources (important given recent oil and gas discoveries).
- Government finance statistics (GFS):
  - GFS compiled by the Ministry of Economy and Finance from customs, tax, and treasury directorate sources and disseminated quarterly as TOFE.
  - Afritac West providing TA to improve consistency and migrate to GFS Manual 2001/2014 methodology, in accordance with WAEMU TOFE Directive.
  - Authorities resumed reporting annual data for GFS Yearbook and higher frequency data for budgetary central government for IFS publication.
  - Coverage of fiscal accounts improved from central government to general government; reported only for 2015 to date.
  - Data gathering remains ad hoc; structures needed to capture necessary information regularly.
- External sector statistics:
  - BCEAO for Senegal has been collecting data following BPM6 since 2013.
  - Senegal subscribed to the SDDS in November 2017; BCEAO has been disseminating quarterly BOP and IIP statistics on the National Summary Data Page of Senegal.
  - Latest available reference periods: first and second quarters of 2018.
  - Under the three-year JSA-AFR project (May 2016–April 2019), Senegal received three TA missions; latest in June 2018.
  - Coverage of quarterly transactions judged satisfactory; remaining coverage issues (especially on services and revenues) expected to be largely solved by the ongoing overhaul of the international transactions reporting system at BCEAO Headquarters.

*Staff Report for the 2018 Article IV Consultation and Seventh Review under the Policy Support Instrument and Request for Modification of Assessment Criteria—Informational Annex (Prepared by the Staff of the International Monetary Fund), December 27, 2018.*

### 2020. Several participants from the National Directorate of BCEAO for Senegal as well as from BCEAO

### Statement by Mr. Mohamed-Lemine Raghani, Executive Director and Mr. Oumar Diakite on Senegal January 15, 2019

### Data standards and quality
- In late-2017, Senegal became the fourth country in sub-Saharan Africa to subscribe to the Fund’s Special Data Dissemination Standard (SDDS).
- A Data ROSC was published on the IMF website in 2002.
- Monetary and financial statistics (MFS):
  - MFS are compiled and disseminated on a monthly basis by the Central Bank of West African States (BCEAO).
  - In August 2016, BCEAO completed the migration of Senegal’s MFS to the standardized report forms (SRFs) for the central bank and other depository corporations.
  - Since November 2016, BCEAO has continuously transmitted Senegal’s SRF-based MFS to the IMF’s Statistics Department for publication in International Financial Statistics (IFS).
- Financial sector surveillance:
  - BCEAO finalized the development of FSIs for deposit takers for Senegal.
  - Regular reporting to the IMF’s Statistics Department is expected to begin by end-December 2018.
- Regional capacity building:
  - Several participants from the National Directorate of BCEAO for Senegal as well as from BCEAO Headquarters, and the ANSD attended a JSA-AFR regional workshop on Goods Services and Secondary Income in Dakar, during October 12-16, 2018, to improve coverage of informal cross-border transactions.

### Table of Common Indicators Required for Surveillance (As of December 11, 2018) — selected entries
- Exchange Rates — Date of Latest Observation: Current; Date Received: Current; Frequency of Data: D; Frequency of Reporting: D; Frequency of Publication: D
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities — Date of Latest Observation: 11/2018; Date Received: 12/2018; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M
- Reserve/Base Money — Date of Latest Observation: 09/2018; Date Received: 11/2018; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M
- Broad Money — Date of Latest Observation: 09/2018; Date Received: 11/2018; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M
- Central Bank Balance Sheet — Date of Latest Observation: 09/2018; Date Received: 11/2018; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M
- Consolidated Balance Sheet of the Banking System — Date of Latest Observation: 09/2018; Date Received: 11/2018; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M
- Interest Rates — Date of Latest Observation: 08/2018; Date Received: 08/2018; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M
- Consumer Price Index — Date of Latest Observation: 09/2018; Date Received: 10/2018; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M
- Revenue, Expenditure, Balance and Composition of Financing – General Government — Date of Latest Observation: 2017; Date Received: 10/2018; Frequency of Data: A
- Revenue, Expenditure, Balance and Composition of Financing – Central Government — Date of Latest Observation: 10/2018; Date Received: 11/2018; Frequency of Data: Q; Frequency of Reporting: Q; Frequency of Publication: Q
- Stocks of Central Government and Central Government-Guaranteed Debt — Date of Latest Observation: 2018; Date Received: 10/2018
- External Current Account Balance — Date of Latest Observation: 2017; Date Received: 10/2018; Frequency of Data: A; Frequency of Reporting: A; Frequency of Publication: A
- Exports and Imports of Goods and Services — Date of Latest Observation: 2017; Date Received: 10/2018; Frequency of Data: A; Frequency of Reporting: A; Frequency of Publication: A
- GDP/GNP — Date of Latest Observation: 2017; Date Received: 10/2018; Frequency of Data: A; Frequency of Reporting: I; Frequency of Publication: A
- Gross External Debt — Date of Latest Observation: 2017; Date Received: 10/2018; Frequency of Data: A; Frequency of Reporting: I; Frequency of Publication: A
- International Investment Position — Date of Latest Observation: 2014; Date Received: 10/2016; Frequency of Data: A; Frequency of Reporting: A; Frequency of Publication: A

### Economic developments in 2018 and performance under the PSI
- Growth and inflation:
  - In 2018, real GDP growth is estimated to have reached 6.8 percent.
  - Inflation has remained below 2 percent.
  - Non-agricultural growth is estimated at 5.9 percent.
  - Senegal’s growth rate has remained above 6 percent for the fourth consecutive year.
- Demand drivers:
  - Strong domestic demand from public investments during phase I of the PSE and private consumption contributed to buoyancy in 2018.
- Fiscal performance:
  - Authorities experienced a revenue shortfall due to underperformance of some new tax measures and levying corporate income taxes in certain subsectors such as telecommunications and mining.
  - Authorities remain committed to meeting fiscal targets by stepping up collection of tax arrears, strengthening tax policy, streamlining tax expenditures, and cutting non-priority spending.
- PSI program performance:
  - Implementation of the PSI-supported program remains satisfactory.
  - The authorities implemented the two prior actions for completion of the review which will strengthen public finances and contain fiscal pressures from the post office.
  - All quantitative assessment criteria (AC) and indicative targets (ITs) at end-June 2018 were observed except the quarterly ceiling on the share of the value of public sector contracts signed by single tender (overrun caused primarily by unsolicited bids).
  - Four structural benchmarks achieved out of six expected under the seventh review; corrective measures taken for the remaining benchmarks.
- Administrative and technological reforms:
  - Operationalization of payment of taxes through mobile banking is advancing with approval of budgetary resources by the Ministry of Finance; provider selection is being finalized.
  - Authorities will step up efforts to implement the action plan for reducing tax expenditures.
  - Reforms advancing in modernization of the Treasury and in administrative and financial management of the National Retirement Fund.
  - Implementation of three “Hackathon” projects is advancing to enable the tax administration to leverage technological innovations.

### Medium-term macroeconomic policies and structural reforms
- PAP and growth target:
  - The Priority Action Plan (PAP) of phase 2 of the PSE (2019-23) aims to accelerate average annual growth to reach 8 percent or more.
  - Focus areas: structural transformation and diversification, adequate provision of basic public services, and accelerated poverty reduction.
- Strengthening fiscal consolidation, public financial management and governance:
  - Authorities will continue fiscal consolidation in accordance with WAEMU commitments.
  - Revenue-side measures: strengthen tax policy framework, modernize tax and customs administrations, streamline tax expenditures, simplify taxes in telecommunications, and increase tax rates for tobacco, alcoholic beverages, and cosmetics.
  - Steps to enhance collection of tax arrears and address impact of energy subsidies related to international oil prices.
  - Public spending: implement multi-year budget framework, improve public investment quality through better project selection and execution, streamline current expenditures while protecting social sectors.
  - Social protection: focus on the most vulnerable segments through social programs aimed at increasing poor households’ incomes and providing universal health coverage.
  - Contingent liabilities: circumscribed conditions for issuing letters of guarantees and expand coverage of public sector operations to strengthen evaluation of contingent liabilities and risks to fiscal and debt sustainability.
- Debt sustainability:
  - Authorities welcome staff’s assessment that Senegal remains at low risk of debt distress.
  - They will pursue fiscal consolidation and implement a prudent borrowing policy consistent with preservation of debt sustainability.
- Oil and gas revenue management:
  - Authorities appreciate staff’s analysis of the impact of future oil and gas production.
  - Selected Issues Paper provides recommendations to devise an appropriate framework for assessing fiscal revenue and choosing an optimal rule for revenue allocation.
- Improving business environment and promoting private sector development:
  - Continued implementation of the triennial program for reforming the business environment and competitiveness (PREAC); special economic zones established.
  - Priority sectors: agriculture, horticulture, agrobusiness, infrastructure, oil, gas and mining, digital economy, tourism and finance.
  - Structural constraints to address: energy, real estate, judicial environment, administrative procedures, labor legislation, and credit information.
  - Electricity sector priorities:
    - “Gas to power” strategy supported by the Millennium Challenge Account to ensure access to modern, clean and affordable energy, including rural areas.
    - Continued efforts to improve the financial situation of SENELEC with World Bank assistance.
  - Financial inclusion:
    - Expansion of credit information bureau activities with increased contracts and loans declared.
    - Launch in August 2018 of a mechanism to finance SMEs under the supportive mechanism from BCEAO.
    - Adaptation of legal and regulatory provisions of Islamic finance to Senegalese banking and microfinance sectors.
- Gender and inequality:
  - PSE addresses income inequality and women labor market participation.
  - Significant progress: enhanced access of women to education, reduced gender disparities, increased women labor market participation.
  - Authorities will continue addressing persistent income and gender inequalities by increasing access to education and the average number of schooling years for girls.

### Conclusion and request
- Authorities remain committed to the PSI and will continue policies and reforms to achieve strong and sustainable growth, preserve macroeconomic stability, and improve public financial management and the business environment.
- Based on satisfactory program progress and authorities’ commitment, they seek Directors’ support for completion of the seventh review under the PSI and approval of the request for modification of assessment criteria.

*Statement by Mr. Mohamed-Lemine Raghani and Mr. Oumar Diakite on Senegal (January 15, 2019).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/cr1927-senegal-a4.pdf_