## 1senea2020002

## Source details

**Canonical URL:** [1senea2020002](https://www.imf.org/-/media/files/publications/cr/2020/english/1senea2020002.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2020/english/1senea2020002.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2020/english/1senea2020002.pdf.json)

---

### Overview and immediate impact
- 226 confirmed cases of COVID-19 as of April 6.
- Authorities increased health spending and provided targeted support to vulnerable households and firms, including food aid, suspension of utility bill payments for the poorest, and targeted tax relief.
- Authorities’ strategic plan to fight COVID-19 is costed at about FCFA 70 billion (0.5 percent of GDP).
- Real GDP growth estimated to weaken to 3 percent (from an earlier projected 6.8 percent).
- Estimated balance-of-payments financing need of about CFAF 366 million (2.5 percent of GDP).
- Baseline assumes the pandemic would subside during H2 2020, recovery beginning in 2021, and growth gradually accelerating to about 5 ½ percent.
- Main short-term risk: more extensive domestic outbreak leading to a much steeper economic decline in 2020 and more gradual recovery thereafter.

### Financing request, national fund, and catalytic effects
- Authorities request financial assistance under the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI) for a total of SDR 323.6 million (100 percent of quota).
- Proposed blending of access:
  - RCF: 33.3 percent of quota or SDR 107.87 million;
  - RFI: 66.7 percent of quota or SDR 215.73 million.
- RCF/RFI disbursement expected to cover about 70 percent of the identified financing gap and could catalyze further assistance from other external partners, preferably in the form of grants.
- Government will set up a national solidarity fund (Fonds FORCE COVID-19) of up to FCFA 1,000 billion (7 percent of GDP), financed by donor contributions, voluntary private donations, and the budget; Fund will be channeled to a special account at the BCEAO.
- Authorities request that IMF funds be disbursed as direct budget support to the Ministry of Finance and Budget, with disbursement to the Treasury account at the BCEAO.

### Fiscal stance, measures, and quantified effects
- Temporary widening of the budget deficit to 5.6 percent of GDP in 2020 is deemed appropriate; staff projects the deficit would increase to 5.6 percent of GDP (2.5 percentage points higher than the financing foreseen in the 2020 budget).
- Authorities plan to develop a plan to bring the deficit back to at least 3 percent of GDP once the crisis abates (in line with regional fiscal rules).
- Authorities’ preliminary fiscal plans costed at about 1.7 percent of GDP, comprised of:
  - 0.5 percent of GDP for direct measures to support the health sector,
  - 0.15 percent of GDP for tax measures,
  - 1.05 percent of GDP for spending measures.
- Key fiscal measures announced or envisaged:
  - Tax-side: option for firms to delay payments related to VAT suspension; writing-off up to 75 percent of firms’ outstanding and overdue taxes as of end-2019; postponing tax payments due for most affected sectors (hotels, restaurants, transport) and SMEs.
  - Expenditure-side: reallocations and savings on fuel subsidies, provision of food aid and cash transfers, expediting payments of unmet obligations.
  - Expansion of “bourses familiales” cash transfers from current 300,000 beneficiary households to the full 580,000 households registered as vulnerable, and with World Bank support to a total of 1 million households.
  - Use of the national solidarity fund to support operating costs of firms in difficulty (e.g., social security fees, utility bills) to preserve jobs.

- Fiscal and revenue effects (FCFA billion, exact reported values):
  - Revenue (incl. grants): LFI 2020 = 3,122; Current = 2,808; Diff. = -314.
  - Taxes: LFI 2020 = 2,675; Current = 2,370; Diff. = -304.
    - impact of lower world oil prices = 11.
    - impact of lower trade = -204.
    - impact of lower growth = -91.
  - Grants: LFI 2020 = 293; Current = 314; Diff. = 21.
  - Non-Tax Revenue: LFI 2020 = 154; Current = 124; Diff. = -30.
  - Expenditure: LFI 2020 = 3,574; Current = 3,626; Diff. = 51.
    - Expense: LFI 2020 = 2,131; Current = 2,288; Diff. = 156.
    - COVID-19 health action plan = 73.
    - Spending on social safety net programs = 121.
    - Other economic support measures = 35.
    - Savings in capital expenditure = -105.
    - Electricity subsidy bill -- impact of lower world oil prices = -42.
  - Net acquisition of non-financial assets: LFI 2020 = 1,443; Current = 1,338; Diff. = -105.
  - Balance: LFI 2020 = -452; Current = -817; Diff. = -365.
  - Financing Gap = 366.
  - Prospective RCF/RFI = 263.
  - Prospective financing from Development Partners = 0.
  - Residual Financing Gap 1/ = 103.
  - Balance (in percent of GDP): LFI 2020 = -3.1; Current = -5.6; Diff. = -2.5.
  - Balance (using nominal GDP of PCI Request) = -3.0.
  - Financing Gap = 2.5 (percent of GDP).
  - Residual Financing Gap 1/ = 0.7 (percent of GDP).

### External channels and macro effects
- Tourism: 1.6 million visitors in 2018; associated revenues about 5.5 percent of GDP; tourism-related jobs account for 9 percent of total formal employment. Services exports expected to decline by 25 percent y/y.
- Remittances: amount to 10 percent of GDP; expected reduction by about 1.5 percent of GDP.
- Tighter external financial conditions: Eurobond spreads have increased by 280 basis points since the beginning of the year; net capital inflows expected to be lower than expected by 0.4 percent of GDP.
- Improved terms of trade: oil import bill (imports of petroleum products about 8 percent of GDP in 2019) could reduce by about 3 percent of GDP due to lower prices.
- Exports-to-GDP ratio expected to fall by about 1 percentage point of GDP due to lower external demand.
- Global supply disruptions could affect implementation of investment projects and imported consumption goods availability.

### Financial stability and banking sector measures
- Banking system enters the crisis with broadly adequate capital levels and NPLs stable through 2019.
- Credit to tourism, trade and transport together account for almost one third of total credit outstanding; majority of loans are short term, heightening liquidity pressures and rollover risks.
- BCEAO measures (announced March 21):
  - Increase in liquidity provision to banks by a weekly amount of CFAF 340 billion;
  - Extend collateral framework to include CFAF 1,050 billion of debt of prequalified companies;
  - Allocation of CFAF 25 billion to the BOAD trust fund to increase concessional resources for member states;
  - Establish a framework with banks to support firms with repayment difficulties.
- Staff recommends standing ready at the regional level to provide liquidity while ensuring transparent information on eligible collateral, closely monitoring loan restructurings and banks’ balance sheets.
- Banks encouraged to use the special window for refinancing credit granted to SMEs; negotiations with mobile money issuers to reduce transaction costs and encourage digital payments.

### Debt sustainability, DSA findings, and risks
- Public debt projections:
  - Public debt expected to temporarily increase to over 65 percent of GDP in 2020.
  - Public debt expected to revert to a downward trajectory thereafter, stabilizing below 60 percent of GDP in medium term, contingent on unwinding stimulus, returning to program fiscal path, and prioritizing concessional external financing.
  - Risk of debt distress assessed as moderate.
- DSA macro revisions and exact figures:
  - Real GDP growth: 2019 = 5.3; 2020 = 3.0; 2021 = 5.5; 2022 = 8.0; long run (2025-2039) = 5.1.
  - Overall fiscal deficit (percent of GDP), Current DSA: 2019 = 5.0; 2020 = 6.9; 2021 = 4.6; 2022 = 4.3.
  - Current account deficit (percent of GDP), Current DSA: 2019 = 9.1; 2020 = 11.3; 2021 = 11.4; 2022 = 8.5.
  - Exports of goods and services (percent of GDP), Current DSA: 2019 = 24.1; 2020 = 20.9; 2021 = 22.9; 2022 = 26.2.
- Selected DSA table highlights (exact figures preserved):
  - PV of PPG external debt-to-GDP ratio (selected years): 43.4; 48.4; 49.6; 49.2; 47.2; 43.5; 40.6; 28.3; 17.5.
  - PV of PPG external debt-to-exports ratio (selected years): 184.4; 200.6; 237.0; 214.6; 180.0; 132.4; 123.1; 95.5; 56.5.
  - PPG debt service-to-exports ratio (selected years): 10.4; 8.9; 16.3; 14.9; 24.3; 19.1; 16.1; 10.3; 14.3; 11.2; 5.9.
  - Public sector debt (selected years): 47.5; 61.1; 62.1; 64.2; 67.4; 67.6; 66.5; 62.5; 60.3; 55.9; 63.2; 41.6; 61.5.
- Stress-test outcomes:
  - Debt service-to-exports ratio peaks at 24 percent in 2020 (one-time breach; LIC-DSF guidance automatic discount applied).
  - Public sector debt peaks at 67 percent of GDP in 2020 under baseline.
  - Sensitivity tests raise indicators but baseline remains below most thresholds except the noted one-time breach.
- Conclusion: debt remains sustainable under the post COVID-19 baseline but the country’s space to absorb shocks has narrowed.

### IMF support, conditionalities, and staff appraisal
- Staff supports the authorities’ request for disbursement under the RCF and purchase under the RFI given the urgent BOP need; proposed total access of 100 percent of quota (SDR 323.6 million or about US$442 million) is about 72 percent of the estimated financing gap.
- Staff recommends:
  - Prioritize health spending and containment measures;
  - Provide targeted support to most vulnerable households and the most affected sectors;
  - Allow a temporary fiscal deficit widening to 5.6 percent of GDP while maintaining PCI objectives to the extent possible;
  - Develop a plan to return gradually to the deficit target of 3 percent of GDP once crisis abates;
  - Seek additional concessional donor support (grants preferred) to close remaining financing gaps and preserve external and debt sustainability;
  - Ensure disbursed funds are used in a well-targeted, cost-effective and transparent manner;
  - Encourage authorities to reach an understanding with WAEMU authorities on temporary deviation from the fiscal deficit convergence criterion.
- Repayment capacity and safeguards:
  - Senegal assessed as having sustainable debt and adequate capacity to repay the Fund; repayments to the Fund will remain at its peak under 10 percent of total projected external debt service.
  - BCEAO has one recommendation outstanding from the 2018 safeguards assessment relating to strengthening the risk management function, which is in process.

### Program implementation commitments and operational measures
- Authorities continue to satisfactorily implement the economic program supported by the PCI; preliminary data suggest program quantitative targets for end-December 2019 have been met except the target on sole sourcing.
- Structural reforms progress: medium-term revenue strategy (draft finalized) and legal framework for transparent and sustainable management of expected oil and gas resources.
- Government commitments:
  - Prioritize compulsory expenditure such as salaries and social security contributions;
  - Streamline current expenditure and suspend nonessential spending (vehicles, missions, training, conferences);
  - Delay launch of new projects and programs;
  - Use savings from reduced energy subsidies to finance pandemic response;
  - Adopt flexible procedures, open a special BCEAO account for COVID-19 operations, and draft a supplementary budget before June 30, 2020;
  - Maintain a prudent borrowing policy, focus on concessional borrowing, and consider postponing or canceling lower-priority external borrowing.

*Source: IMF staff report (excerpt).*

### 1. The COVID-19 Pandemic is having a severe impact on Senegal, creating an

### 1. The COVID-19 Pandemic is having a severe impact on Senegal, creating an urgent balance-of-payments and fiscal financing need.

### Overview and immediate impact
- The authorities have increased health spending and provided targeted support to vulnerable households and firms, including food aid, suspension of utility bill payments for the poorest, and targeted tax relief.
- There have been 226 confirmed cases of COVID-19 as of April 6.
- The authorities’ strategic plan to fight COVID-19 is costed at about FCFA 70 billion (0.5 percent of GDP).
- Real GDP growth is estimated to weaken to 3 percent (from an earlier projected 6.8 percent).
- The pandemic has generated an estimated balance-of-payments financing need of about CFAF 366 million (2.5 percent of GDP).

### Financing request and expected catalytic effect
- The authorities are requesting financial assistance under the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI) for a total of SDR 323.6 million (100 percent of quota).
- The RCF/RFI disbursement is expected to cover about 70 percent of the identified financing gap and could catalyze further assistance from other external partners, preferably in the form of grants.
- Additional concessional donor support is needed to close the remaining financing gap and ease the adjustment burden.
- The government will set up a national solidarity fund (Fonds FORCE COVID-19) of up to FCFA 1,000 billion (7 percent of GDP), financed by donor contributions, voluntary private donations, and the budget. The Fund will be channeled to a special account at the BCEAO.

### Fiscal policy stance and measures
- A temporary widening of the budget deficit to 5.6 percent of GDP in 2020 is deemed appropriate; staff projects the deficit would increase to 5.6 percent of GDP (2.5 percentage points higher than the financing foreseen in the 2020 budget).
- Authorities plan to develop a plan to bring the deficit back to at least 3 percent of GDP once the crisis abates (in line with regional fiscal rules).
- The authorities’ preliminary fiscal plans to confront the COVID-19 pandemic are costed at about 1.7 percent of GDP, comprised of:
  - 0.5 percent of GDP for direct measures to support the health sector,
  - 0.15 percent of GDP for tax measures,
  - 1.05 percent of GDP for spending measures.
- Key fiscal measures announced or envisaged:
  - Tax-side: option for firms to delay payments related to VAT suspension; writing-off up to 75 percent of firms’ outstanding and overdue taxes as of end-2019; postponing tax payments due for most affected sectors (hotels, restaurants, transport) and SMEs.
  - Expenditure-side: reallocations and savings on fuel subsidies to support households and affected sectors, provision of food aid and cash transfers, expediting payments of unmet obligations.
  - Expansion of “bourses familiales” cash transfers from current 300,000 beneficiary households to the full 580,000 households registered as vulnerable, and with World Bank support to a total of 1 million households.
  - Use of the national solidarity fund to support operating costs of firms in difficulty (e.g., social security fees, utility bills) to preserve jobs.

### Fiscal and revenue effects quantified (from Text Table 2)
- Revenue (incl. grants): LFI 2020 = 3,122; Current = 2,808; Diff. = -314 (FCFA billion).
- Taxes: LFI 2020 = 2,675; Current = 2,370; Diff. = -304 (FCFA billion).
  - Of which: impact of lower world oil prices = 11 (FCFA billion).
  - Of which: impact of lower trade = -204 (FCFA billion).
  - Of which: impact of lower growth = -91 (FCFA billion).
- Grants: LFI 2020 = 293; Current = 314; Diff. = 21 (FCFA billion).
- Non-Tax Revenue: LFI 2020 = 154; Current = 124; Diff. = -30 (FCFA billion).
- Expenditure: LFI 2020 = 3,574; Current = 3,626; Diff. = 51 (FCFA billion).
  - Expense: LFI 2020 = 2,131; Current = 2,288; Diff. = 156 (FCFA billion).
  - COVID-19 health action plan = 73 (FCFA billion).
  - Spending on social safety net programs = 121 (FCFA billion).
  - Other economic support measures = 35 (FCFA billion).
  - Savings in capital expenditure = -105 (FCFA billion).
  - Electricity subsidy bill -- impact of lower world oil prices = -42 (FCFA billion).
- Net acquisition of non-financial assets: LFI 2020 = 1,443; Current = 1,338; Diff. = -105 (FCFA billion).
- Balance: LFI 2020 = -452; Current = -817; Diff. = -365 (FCFA billion).
- Financing Gap = 366 (FCFA billion).
- Prospective RCF/RFI = 263 (FCFA billion).
- Prospective financing from Development Partners = 0 (FCFA billion).
- Residual Financing Gap 1/ = 103 (FCFA billion).
- Balance (in percent of GDP): LFI 2020 = -3.1; Current = -5.6; Diff. = -2.5.
- Balance (using nominal GDP of PCI Request) = -3.0.
- Financing Gap = 2.5 (percent of GDP).
- Residual Financing Gap 1/ = 0.7 (percent of GDP).

### External channels and macro effects
- Tourism: 1.6 million visitors in 2018; associated revenues about 5.5 percent of GDP; tourism-related jobs account for 9 percent of total formal employment. Services exports expected to decline by 25 percent y/y.
- Remittances: amount to 10 percent of GDP; expected reduction by about 1.5 percent of GDP.
- Tighter external financial conditions: Eurobond spreads have increased by 280 basis points since the beginning of the year; net capital inflows expected to be lower than expected by 0.4 percent of GDP.
- Improved terms of trade: oil import bill (imports of petroleum products about 8 percent of GDP in 2019) could reduce by about 3 percent of GDP due to lower prices.
- Exports-to-GDP ratio expected to fall by about 1 percentage point of GDP due to lower external demand.
- Global supply disruptions could affect implementation of investment projects and imported consumption goods availability.

### Financial stability and banking sector
- Banking system enters the crisis with broadly adequate capital levels and NPLs stable through 2019.
- Credit to tourism, trade and transport together account for almost one third of total credit outstanding; majority of loans are short term, heightening liquidity pressures and rollover risks.
- Staff recommends standing ready at the regional level to provide liquidity to the financial system while ensuring transparent information on eligible collateral, and closely monitoring the impact of the downturn and loan restructuring on banks’ balance sheets.

### Outlook and risks
- Baseline assumes the pandemic would subside during H2 2020, with recovery beginning in 2021 and growth gradually accelerating to about 5 ½ percent.
- Main short-term risk: more extensive domestic COVID-19 outbreak leading to a much steeper economic decline in 2020 and more gradual recovery thereafter.
- Downside risks include a protracted or recurrent global pandemic, prolonged global slowdown, depressed commodity prices, and delayed hydrocarbon investment affecting medium-term growth.

### Policy recommendations and conditionalities
- Support the authorities’ request for disbursement under the RCF and purchase under the RFI given the urgent BOP need.
- Allow a temporary fiscal deficit widening to 5.6 percent of GDP while maintaining the objectives of the Policy Coordination Instrument (PCI) to the extent possible.
- Develop a plan to return gradually to the deficit target of 3 percent of GDP once the crisis abates.
- Seek additional concessional donor support (grants preferred) to close remaining financing gaps and preserve external and debt sustainability.
- Ensure disbursed funds are used in a well-targeted, cost-effective and transparent manner.
- Encourage the authorities to reach an understanding with WAEMU authorities on the temporary deviation from the fiscal deficit convergence criterion.

*International Monetary Fund staff report, April 7, 2020.*

### 13.      In the current highly uncertain environment, the probability of adverse fiscal risks

### 13.      In the current highly uncertain environment, the probability of adverse fiscal risks

### Fiscal risks and public debt
- Proposed measures are directly related to increased health costs or linked to giving relief to vulnerable households and firms; they need to be devised so they are easy to roll back once the pandemic is over.
- Fiscal risks will increase as economic activity declines, notably in sectors expected to be hard hit, such as transportation, with important contingent liabilities in the 100 percent government-owned Air Sénégal.
- Fiscal risks could materialize from citizens or companies not being able to physically pay taxes, although Senegal has made good progress in developing e-filing and e-payment systems with the majority of large enterprises making use of these.
- Staff will explore with the authorities potential fiscal measures and financing options if Senegal’s economic situation substantially deteriorates from the current baseline.
- Public debt projections:
  - Public debt is expected to temporarily increase to over 65 percent of GDP in 2020.
  - Public debt is expected to revert to a downward trajectory thereafter, stabilizing below 60 percent of GDP in medium term, contingent on unwinding fiscal stimulus, return to the program’s fiscal deficit path in line with the WAEMU commitments, and continued prioritization of concessional external financing.
  - The risk of debt distress is assessed as moderate.
- The authorities are considering delaying or canceling planned external borrowing for lower-priority projects to allow more space for additional budget support in the short term.

### Providing liquidity and safeguarding financial stability (BCEAO measures and banking sector)
- On March 21 the BCEAO adopted measures to preserve financial stability and provide additional liquidity:
  - An increase in liquidity provision to banks, by a weekly amount of CFAF 340 billion;
  - Extending the collateral framework to access the BCEAO’s refinancing to include CFAF 1,050 billion of debt of prequalified companies;
  - An allocation of CFAF 25 billion to the trust fund of the West African Development Bank (BOAD) to increase the amount of concessional resources available to eligible member states;
  - In cooperation with banks, the establishment of a framework to support firms with repayment difficulties.
- Banks are encouraged to make use of resources available on the special window for refinancing credit granted to SMEs.
- Negotiations initiated with mobile money issuers aim to reduce transaction costs and encourage greater use of digital means of payment to limit contacts and travel.
- Banking system risks and supervisory advice:
  - The economic downturn and heightened uncertainty are expected to weigh on bank balance sheets.
  - Nonperforming loans could increase, and liquidity-constrained households and enterprises may face challenges to make debt payments on time.
  - Staff advised close monitoring of the banking system’s health and ensuring adequate liquidity provision.
  - Authorities envisage leveraging existing schemes to support credit supply and encourage banks and micro-finance institutions to stand ready to restructure loans—including by extending their maturity—on a temporary and time-bound basis.

### Access and capacity to repay the Fund (RCF/RFI request and blending)
- The authorities are requesting a disbursement under the RCF combined with a purchase under the RFI equivalent to 100 percent of quota (SDR 323.6 million or about US$442 million) under the exogenous shock window.
- Senegal meets the eligibility requirements for support under the RCF/RFI; the pandemic is expected to generate extensive economic damage in the short term and qualification criteria are met.
- Blending rules for the proposed access:
  - One-third of access is to be provided under the RCF: 33.3 percent of quota or SDR 107.87 million;
  - Two-thirds under the RFI: 66.7 percent of quota or SDR 215.73 million.
- The proposed total access of 100 percent of quota is about 72 percent of the estimated financing gap.
- Based on initial discussions with development partners, the authorities consider that the remaining financing gap could be filled by grants and highly concessional loans, but stand ready to adjust policies as needed.
- Repayment capacity and safeguards:
  - Senegal is assessed as having sustainable debt and adequate capacity to repay the Fund.
  - The January 2020 assessment showed debt to be sustainable with a moderate risk of debt distress; the preliminary DSA update including COVID-19 impact leaves the overall assessment unchanged but notes that the space to absorb shocks in the short term has further narrowed.
  - Repayments to the Fund will remain at its peak under 10 percent of total projected external debt service.
  - The BCEAO has only one recommendation outstanding from the 2018 safeguards assessment relating to strengthening the risk management function, which is in process; overall the central bank has maintained a strong control culture.

### Staff appraisal — key findings and policy recommendations
- The Covid-19 pandemic is having a severe impact on Senegal; the short-term economic outlook has deteriorated rapidly owing to the sharp deterioration in global economic conditions and the impact of domestic containment measures.
- Senegal is facing urgent external and fiscal financing needs; staff’s revised macroeconomic outlook indicates additional fiscal and external financing needs of 2 ½ percent of GDP.
- Staff welcomes the authorities’ swift response to contain and mitigate the spread and impact of the virus and recommends:
  - Prioritize health spending to prepare for a spread of the virus and spending for containment measures;
  - Provide targeted support to the most vulnerable households and those sectors most affected to mitigate negative effects on the economy;
  - The temporary loosening of the fiscal stance is well-justified; the authorities’ commitment to return to a budget deficit within the 3 percent of GDP target, in line with WAEMU fiscal criteria, is welcomed as conditions normalize.
- Authorities’ commitment to medium-term fiscal and debt sustainability:
  - Authorities are seeking grants and concessional resources from development partners to address fiscal pressures from security-related costs, health spending and to safeguard debt sustainability.
  - A revised DSA baseline including the impact of the COVID-19 pandemic confirms that debt remains sustainable even under the more negative outlook compared to before the COVID-19 pandemic.

*Source: IMF staff report (excerpt).*

### 24.         Staff supports the authorities’ request for a disbursement under the Rapid Credit

### 24. Staff supports the authorities’ request for a disbursement under the Rapid Credit

### IMF decision and procedural note
- Staff supports the authorities’ request for a disbursement under the Rapid Credit Facility and a purchase under the Rapid Financing Instrument for a total amount of SDR 323.6 million (100 percent of quota).
- Staff’s support is based on:
  - urgent balance of payments needs arising from the severe impact of the pandemic;
  - the authorities’ existing and prospective policies to address this external shock;
  - the authorities’ strong track record, which will mitigate risks for the Fund.
- In light of the urgent balance of payment need, staff will discuss with the authorities if there is a need to postpone discussions for the first review under the PCI given the severity of the shock, aiming for completion before September 30, 2020.

### Selected economic and price indicators (selected entries as reported)
- GDP at constant prices (annual percentage change): 6.4; 6.0; 5.3; 6.8; 3.0; 7.0; 5.5; 8.0
- Non-hydrocarbon GDP (annual percentage change): 6.4; 6.0; 5.3; 6.8; 3.0; 7.0; 5.5; 6.8
- GDP deflator (annual average): -0.5; 1.1; 1.7; 1.1; 2.0; 1.8; 1.7; 1.4
- Consumer prices, annual average: 0.5; 1.0; 1.0; 1.5; 2.0; 1.5; 1.9; 1.5
- Consumer prices, end of period: 1.1; 2.0; 0.6; 1.5; 1.9; 1.5; 2.0; 1.1

### External sector and balance of payments (selected entries)
- Current account balance (percent of GDP), including current official transfers: -8.8; -9.2; -9.1; -10.7; -11.3; -10.5; -11.4; -8.5
- Current account balance (percent of GDP), excluding current official transfers: -9.2; -9.4; -9.5; -10.9; -11.6; -10.9; -11.7; -8.8
- Exports, f.o.b. (percent of GDP): 17.4; 17.1; 18.5; 18.0; 16.9; 18.8; 17.7; 20.5
- Imports, f.o.b. (percent of GDP): -31.3; -30.4; -31.9; -31.4; -28.0; -32.0; -29.5; -29.5
- Balance on goods (percent of GDP): -13.8; -13.3; -13.5; -13.4; -11.1; -13.2; -11.8; -8.9
- Capital and financial account (percent of GDP): 12.4; 10.9; 10.9; 9.9; 7.1; 10.1; 11.0; 9.8
- Financial account, direct investment (percent of GDP): 3.4; 3.7; 3.7; 4.8; 4.6; 4.7; 5.0; 4.4
- Financial account, portfolio investment (net, percent of GDP): 7.0; 0.1; 0.4; 0.8; -0.3; 0.3; 1.0; 0.9
- Overall balance (percent of GDP): 3.9; 1.7; 1.1; -0.8; -4.1; -0.5; -0.4; 1.3

### Fiscal operations and public financing (selected entries)
- Revenue and grants (percent of GDP): 18.8; 20.3; 20.2; 20.7; 19.3; 21.5; 19.5; 20.3
- Taxes (percent of GDP): 15.4; 17.2; 17.4; 17.7; 16.3; 18.6; 16.6; 17.5
- Grants (percent of GDP): 2.0; 1.9; 1.6; 1.9; 2.2; 1.9; 2.0; 1.9
- Total expenditure (percent of GDP): 22.4; 24.0; 24.1; 23.7; 25.0; 24.5; 22.8; 23.3
- Net lending/borrowing (Overall Balance, excluding grants, percent of GDP): -5.6; -5.7; -5.5; -4.9; -7.8; -4.9; -5.3; -5.0
- Net lending/borrowing (including grants, percent of GDP): -3.6; -3.7; -3.9; -3.0; -5.6; -3.0; -3.3; -3.0
- Primary fiscal balance (percent of GDP): -1.7; -1.8; -1.9; -0.9; -3.5; -1.1; -1.2; -1.1
- Total public debt (percent of GDP): 62.1; 63.7; 64.2; 61.9; 67.4; 60.8; 67.6; 66.5
- Domestic public debt (percent of GDP): 13.9; 10.2; 11.2; 10.0; 13.3; 9.8; 13.7; 14.7
- External public debt (percent of GDP): 48.1; 53.5; 52.9; 51.9; 54.2; 51.0; 53.9; 51.8
- Memorandum: Nominal GDP (CFAF billions) reported as 12,907; 13,983; 13,815; 15,085; 14,516; 16,421; 15,580; 17,074

### Budgetary central government operations (selected entries)
- Revenue and grants (CFAF billions): 2,425; 2,833; 2,789; 3,122.0; 2,808; 3,537; 3,039; 3,458
- Taxes (CFAF billions): 1,990; 2,400; 2,410; 2,675; 2,370; 3,059; 2,594; 2,981
- Grants (CFAF billions): 256; 271; 225; 293; 314; 312; 312; 332
- Expenditure (CFAF billions): 2,896; 3,349; 3,326; 3,575; 3,627; 4,026; 3,546; 3,973
- Net acquisition of nonfinancial assets (CFAF billions): 1,030; 1,295; 1,160; 1,443; 1,338; 1,713; 1,418; 1,700
- Net lending/borrowing (Overall balance, CFAF billions): -470; -523; -537; -453; -818; -489; -507; -515
- Financing Gap (CFAF billions): 366; Prospective RFI/RCF: 263; Residual Financing Gap: 103

### Monetary aggregates and financial soundness (selected entries)
- Broad money (CFAF billions): 5,255; 5,731; 5,687; 6,107; 5,850; 6,089
- Broad money (annual percentage change): 14.2; 9.1; 8.2; 6.6; 2.9; 4.1
- Net foreign assets (CFAF billions): 1,820; 2,063; 1,971; 1,946; 1,736; 1,673
- Net domestic credit (CFAF billions): 4,746; 5,155; 5,157; 5,701; 5,639; 6,049
- Credit to the economy (CFAF billions): 4,275; 4,504; 4,597; 4,880; 4,682; 5,013
- Nominal GDP growth (percentage growth): 5.9; 7.2; 7.0; 7.9; 5.1; 7.3
- Financial soundness (selected ratios, most recent reported):
  - Regulatory capital to risk weighted assets: 13.2 (Dec 2019)
  - Gross NPLs to total loans: 13.6 (June 2019); 13.9 (Dec 2019)
  - Provisioning rate: 63.4 (June 2019); 62.0 (Dec 2019)
  - Liquid assets to total assets: 31.4 (Dec 2019)
  - Total loans to total deposits: 100.6 (Dec 2019)

### Key balance of payments tables (selected CFAF billion entries)
- Current account (CFAF billions): -1,131; -1,284; -1,262; -1,612; -1,636; -1,731; -1,781; -1,451
- Balance on goods (CFAF billions): -1,787; -1,865; -1,860; -2,023; -1,605; -2,173; -1,838; -1,524
- Exports, f.o.b. (CFAF billions): 2,247; 2,388; 2,551; 2,716; 2,457; 3,079; 2,759; 3,508
- Imports, f.o.b. (CFAF billions): -4,034; -4,253; -4,411; -4,739; -4,062; -5,252; -4,597; -5,032
- Services (net, Cumulative credits and debits shown): Export 789; 782; 782; 823; 582; 878; 813; 969; Import -943; -1,093; -1,070; -1,383; -1,269; -1,680; -1,616; -1,664
- Current transfers (net, CFAF billions): 1,144; 1,275; 1,270; 1,434; 1,119; 1,655; 1,357; 1,593
- Financial account, direct investment (CFAF billions): 442; 523; 513; 718; 665; 773; 784; 756
- Financial account, portfolio investment (net, CFAF billions): 898; 216; 1; 115; -405; 616; 0; 146
- Overall balance (CFAF billions): 509; 243; 151; -117; -601; -76; -632; 28
- Financing (CFAF billions): -509; -243; -151; 117; 235; 76; 63; -228
- Net use of IMF resources (CFAF billions): -19; -13; -13; -3; -3; 0; 0; 0
- Financing Gap (CFAF billions): 366; Prospective RFI/RCF: 263; Residual Financing Gap: 0

*Source: IMF staff estimates and projections as presented in the provided content.*

### Annex I.  Letter of Intent

### Annex I. Letter of Intent

### Economic impact and urgent financing need
- Real GDP growth projections revised from 6.8% to 3% due to lower external demand, impact on travel and tourism, a sharp fall in remittances, and a decline in global trade.
- National containment measures expected to have an even greater impact on economic activity.
- Health and other additional expenditure to fight the pandemic estimated at around 0,5% of GDP.
- Residual urgent balance-of-payments financing need estimated at about CFAF 366 billion, or 2 ½ percent of GDP.

### COVID-19 Strategic Plan — phases and costs
- First phase financed exclusively by domestic resources: 6,440,584,650 CFA francs; established an operational emergency mechanism.
- Second phase estimated cost: 64,750,862,830 CFA francs; objectives include:
  - detection of suspected and confirmed cases;
  - rapid isolation of such cases;
  - strengthening prevention and control of infection in healthcare structures and in the community;
  - intensifying communication on the risk of infection and increasing community participation in response measures;
  - coordinating the response efforts to the pandemic.

### FORCE-COVID-19 (Response and Solidarity Fund) — financing and measures
- FORCE-COVID-19 will benefit from an appropriation of CFAF 1 trillion through budget refocusing and support from Development Partners and the private sector.
- Emergency food aid to one (1) million vulnerable households at a cost of 69,000,000,000 CFA francs.
- Targeted measures to support businesses and SMEs, including:
  - selected write-offs of tax debt or the deferment of some tax payments;
  - discounts on deductions made on wages and social security contributions for companies that commit to retaining their employees.

### Monetary and financial measures
- Measures announced by the BCEAO on March 21, 2020 to expand available liquidity to banks at preferential conditions.
- Development of a framework to support companies experiencing difficulties using special loan refinancing windows and a mechanism to delay loan reimbursement deadlines in cooperation with banks.
- Expansion of mobile money options while reducing their cost.

### IMF request and other financing
- Government requests emergency financial assistance from the IMF under the Rapid Credit Facility (RCF) and the Rapid Financing Instrument equal to 100% of our quota, amounting to SDR 323.6 million (approximately CFAF 265.8 billion).
- Request that funds be disbursed as direct budget support to the Ministry of Finance and Budget, with disbursement to the Treasury account at the Banque des États de l’Afrique de l’Ouest (BCEAO).
- BCEAO’s latest safeguards assessment was finalized in 2018 and remains valid.
- Government requests that the full amount be made available immediately following approval by the IMF's Executive Board.
- Additional financing is expected from multilateral and bilateral development partners to help close the identified financing gap in 2020.

### Program implementation and commitments
- Senegal continues to satisfactorily implement the economic program supported by the Policy Coordination Instrument (PCI).
- Preliminary data suggest program quantitative targets for end-December 2019 have been met, except the target on the share of government contracts using sole sourcing.
- Progress on structural reforms includes the medium-term revenue strategy (draft finalized after an IMF-led workshop) and the legal framework for transparent and sustainable management of expected oil and gas resources.
- Government remains committed to PCI objectives despite the inevitable deepening of the budget deficit in 2020 and to complying with the WAEMU convergence criterion on budget deficits as early as 2021, provided the crisis situation normalizes.
- Government considers measures to keep external debt distress risk moderate, as assessed by the Joint World Bank-IMF Debt Sustainability Framework.

### Fiscal and public expenditure measures (considered or adopted)
- Prioritizing compulsory expenditure such as salaries and social security contributions and the Government's financial commitments.
- Streamlining current expenditure with measures to suspend acquisition of vehicles and freezing expenditure on missions, staff training, conferences, conventions and seminars, supplies, etc.
- Delaying the launch of new projects and programs.
- Using savings generated by the reduction in subsidies to the energy sector to fight the pandemic.
- Flexible procedures for mobilizing funds adopted with opening of a special BCEAO account in the name of the General Treasurer dedicated to financing COVID-19 operations.
- A decree issued for a simplified procurement procedure as part of the COVID-19 Response Plan, taking into account urgency and compliance with procurement provisions.
- A supplementary budget will be drafted before the end of the ordinary session of the National Assembly (June 30, 2020).
- Government commits to maintaining a prudent borrowing policy, focusing on concessional borrowing and streamlining the 2020 debt plan by postponing or canceling non-essential projects.

### Commitment on external measures and dialogue with the IMF
- Government intends to continue dialogue with the IMF on temporary balance-of-payments difficulties.
- Government will not unilaterally take measures to exacerbate these difficulties, including introducing or intensifying exchange and trade restrictions or other measures that would compound them.

*Letter of Intent — Dakar, Senegal, April 7, 2020*

### 10.      I authorize the IMF to publish this Letter of Intent and its Staff Report upon receipt of the

### 1senea2020002 - 10.      I authorize the IMF to publish this Letter of Intent and its Staff Report upon receipt of the

### Authorization and Signatory
- "I authorize the IMF to publish this Letter of Intent and its Staff Report upon receipt of the request for disbursement under the RCF/RFI."
- Signed: "/s/ Abdoulaye Daouda Diallo Minister of Finance and of the Budget"
- Country: "SENEGAL"

### Debt Sustainability Analysis (DSA) overview and classification
- Risk of external debt distress: Moderate
- Overall risk of debt distress: Moderate
- Granularity in the risk rating: Some scope to absorb shocks
- Application of judgment: No
- Mechanical risk rating under the external DSA: Moderate
- Mechanical risk rating under the public DSA: Moderate
- Conclusion: "Senegal’s debt is assessed to remain sustainable with a moderate risk of debt distress (external and overall) using the post COVID-19 pandemic scenario as baseline, in line with the previous Debt Sustainability Analysis (DSA) of January 2020."
- Note on shock absorption: "the country’s space to absorb shocks—previously deemed limited in the short term—has somewhat narrowed compared to the previous DSA."
- Debt carrying capacity classification: strong
- Applicable thresholds for strong carrying capacity:
  - PV of debt-to-GDP ratio: 55 percent
  - PV of debt-to-exports ratio: 240 percent
  - Debt service-to-exports ratio: 21 percent
  - Debt service-to-revenue ratio: 23 percent
  - Benchmark for PV of total public debt: 70 percent of GDP

### Purpose, preparation, and approvals
- Prepared by: "the staffs of the International Monetary Fund and the International Development Association"
- Date: April 7, 2020
- Approved by: Annalisa Fedelino and Ana Corbacho (IMF), and Marcello Estevão (IDA)
- This DSA: update of joint World Bank-IMF analysis of January 2020 using post COVID-19 pandemic as baseline; follows the revised LIC-DSA framework.

### Macroeconomic revisions and baseline assumptions
- GDP growth revisions:
  - 2019 (authorities revised): 5.3 percent (down from 6 percent in last DSA)
  - 2020 (staff preliminary assessment): 3 percent (compared to 6.8 percent in previous DSA)
  - 2021 recovery assumption: 5.5 percent (7 percent in previous DSA)
  - Long run convergence: about 5.1 percent over 2025-39 (as in last DSA)
- Fiscal balance:
  - Public sector deficit 2019: about 5 percent of GDP (compared to 4.7 in previous DSA)
  - Projected public sector deficit 2020: 6.9 percent of GDP
- Current account:
  - 2019: 9.1 percent of GDP (deficit)
  - Projected 2020: 11.3 percent of GDP (deficit)
  - Long-term average current account deficit: about 1.5 percent of GDP (slightly higher than 1.2 percent in last DSA)
- Realism tools: "do not flag any serious issues."

### Financing assumptions and strategy
- Financing mix: "consistent with a prudent borrowing strategy, aimed at gradually increasing the share of domestic debt and seeking new external financing on concessional terms whenever feasible."
- Pandemic-related financing gaps: "assumed to be filled mostly with grants and highly concessional loans."
- Authorities considering delaying some planned projects and related loan disbursements.
- Initial 2020 financing plan: no Eurobond issuances; relies on net issuances of about 1 percent of GDP in the regional WAEMU market.
- BCEAO liquidity measures announced March 21; current projections assume this financing materializes but note risk if crisis is prolonged.
- Assumed terms for new external debt:
  - Average maturity: close to 18 years
  - Grace period: 6-year
  - Average interest rate: 4 percent
- New medium- and long-term domestic debt:
  - Average maturity: 5 years
  - Grace period: 3-year

### DSA findings and stress tests
- Overall assessment: "risk of debt distress remains moderate. The assessment is unchanged relative to the previous DSA."
- External debt indicators: "All external debt indicators remain below the relevant indicative threshold under the new baseline except the debt service-to-exports ratio which now peaks at 24 percent in 2020 (22.7 percent in the January DSA)."
- Caveat: "a further shortfall in export receipts than currently envisaged in 2020 could push the PV of external debt-to- exports ratio above its threshold."
- Public sector debt trajectory:
  - "Total public sector debt now peaks at 67 percent of GDP in 2020 (against 62 percent previously forecasted) before resuming a downwards trajectory."
- Stress tests: indicate external and public debt would remain sustainable over the projection period; "Senegal’s space to absorb shock has narrowed compared to the previous DSA."

### Policy commitments and mitigation
- Authorities’ policy stance: "strong commitment to maintaining macroeconomic stability and fiscal discipline under the PCI and the WAEMU convergence criteria."
- Objective: return "as soon as possible to the pre-crisis fiscal path anchored by the WAEMU convergence criteria."
- Financing gap fill: "mostly with highly concessional loans and possibly grants, which would partly displace lower priority externally financed projects and related disbursements."
- Market access: "Senegal has access to international capital markets but was not considering any Eurobond issuance in 2020."

### Risks to the outlook
- Main driver: depth and duration of the COVID-19 pandemic.
- Specific risks:
  - "A deeper global slowdown combined with a prolonged outbreak in Senegal could further lower GDP and export receipts in 2020 and weaken the expected recovery thereafter."
  - "Lower oil prices benefit Senegal in the short term and help mitigate the current account deterioration but, should world oil and gas prices remain low for a prolonged period this could jeopardize planned investments in hydrocarbon production and significantly alter the medium-term outlook."
- LIC-DSF automatic discount: "The one-time breach of the external debt service to exports ratio is automatically discounted from the analysis according to the LIC-DSF guidance note."

### Key macroeconomic indicators (selected, exact values from Text Table 1)
- Real GDP growth:
  - 2019 Current DSA: 5.3
  - 2020 Current DSA: 3.0
  - 2021 Current DSA: 5.5
  - 2022 Current DSA: 8.0
  - Medium term (first 5 years average): 6.8 (Previous DSA listed)
  - Long term (2025-2039): 5.1
- Overall fiscal deficit (percent of GDP), Current DSA:
  - 2019: 5.0
  - 2020: 6.9
  - 2021: 4.6
  - 2022: 4.3
- Current account deficit (percent of GDP), Current DSA:
  - 2019: 9.1
  - 2020: 11.3
  - 2021: 11.4
  - 2022: 8.5
- Exports of goods and services (percent of GDP), Current DSA:
  - 2019: 24.1
  - 2020: 20.9
  - 2021: 22.9
  - 2022: 26.2

### Selected DSA table highlights (exact figures preserved)
- Table 1 (External Debt Sustainability Framework, baseline projections highlights):
  - PV of PPG external debt-to-GDP ratio (selected years): 43.4; 48.4; 49.6; 49.2; 47.2; 43.5; 40.6; 28.3; 17.5
  - PV of PPG external debt-to-exports ratio (selected years): 184.4; 200.6; 237.0; 214.6; 180.0; 132.4; 123.1; 95.5; 56.5
  - PPG debt service-to-exports ratio (selected years): 10.4; 8.9; 16.3; 14.9; 24.3; 19.1; 16.1; 10.3; 14.3; 11.2; 5.9
  - PPG debt service-to-revenue ratio (selected years): 12.0; 7.8; 15.6; 13.6; 20.4; 17.4; 16.2; 12.6; 17.5; 12.2; 6.7
  - Gross external financing need (Billion of U.S. dollars) (selected): 0.9; 1.5; 1.8; 1.8; 2.6; 2.5; 2.0; 0.5; 0.9; 1.4; 0.1
- Table 2 (Public Sector Debt Sustainability Framework, baseline projections highlights):
  - Public sector debt (selected years): 47.5; 61.1; 62.1; 64.2; 67.4; 67.6; 66.5; 62.5; 60.3; 55.9; 63.2; 41.6; 61.5
  - PV of public debt-to-GDP ratio (selected): 58.9; 60.0; 62.6; 62.8; 61.9; 58.6; 57.3; 54.0; 61.6
  - PV of public debt-to-revenue and grants ratio (selected): 222.2; 214.8; 230.9; 230.4; 221.0; 204.3; 199.6; 188.2; 214.7
  - Debt service-to-revenue and grants ratio (selected): 35.6; 26.0; 39.6; 26.0; 28.7; 26.4; 26.6; 24.6; 28.1; 30.3; 37.8
  - Gross financing need (selected): 7.3; 6.3; 12.7; 10.2; 12.4; 9.7; 9.8; 9.1; 9.6; 10.0; 13.3

### Sensitivity and stress test summary
- External and public debt indicators were tested under alternative, bound, and tailored scenarios (see sensitivity tables and figures).
- Notable stress-test outcomes:
  - Debt service-to-exports ratio peaks at 24 percent in 2020 (one-time breach; LIC-DSF guidance automatic discount applied).
  - Public sector debt peaks at 67 percent of GDP in 2020 under baseline.
  - Tailored and combination shocks raise indicators but baseline remains below most thresholds except the noted one-time breach.

### Executive statement extract (April 13, 2020)
- Senegal requested "an urgent disbursement under the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI) to the tune of 100 percent of quota (SDR 323.6 million)."
- Estimated balance of payments financing need: "around CFAF 366 billion" (sentence truncated in source).
- Economic impact summary:
  - Projected drop in real GDP growth in 2020 from 6.8 percent to 3 percent.
  - Key channels: decline in external demand affecting travel, hotels and tourism; sharp drop in remittances; disruption of global supply chains; domestic containment measures (nightly curfew, restrictions on international travel, cancellation of public events).

*Prepared by the staffs of the International Monetary Fund and the International Development Association; April 7, 2020.*

### 2.5 percent of GDP.

### 2.5 percent of GDP.

### Fiscal measures
- Health response plan against the Covid-19 pandemic:
  - First phase: establishment of an operational emergency system financed exclusively from domestic resources up to CFA 6,4 billion.
  - Second phase: estimated at CFA 64,7 billion to strengthen capacities for detection of suspicious and confirmed cases, rapid isolation of patients, and strengthening of prevention and control of the infection in health facilities and in the community.
  - Additional actions: intensify communication on infection risk, promote population participation in enforcing response measures, and improve coordination of stakeholders.
- Financing and broader economic support:
  - National solidarity fund (Fonds de riposte et de solidarité contre les effets du Covid-19, FORCE COVID-19) to be endowed with public and private resources and support from development partners.
  - Economic and Social Resilience Program (Programme de Résilience économique et sociale) measures:
    - Emergency food aid to one million vulnerable households amounting to CFA 69 billion.
    - Targeted support to firms and small and medium enterprises (SMEs) in sectors most affected by the crisis.
    - Selective write-offs of tax debt recorded on December 31, 2019, and deferring the payment of certain taxes.
    - Firms that commit to retaining their employees will benefit from discounted deductions from wages and social security contributions.
- Government expenditure prioritization and savings measures:
  - Prioritize essential expenditures such as salaries and social security contributions.
  - Suspend acquisition of means of transportation, missions, staff training and conferences.
  - Delay implementation of new programs and projects.
  - Use savings generated by lower subsidies to the energy sector to finance the fight against the pandemic.
  - Continue to prioritize concessional borrowing and streamline the 2020 debt plan to postpone or cancel non-essential projects.

### Monetary and financial sector measures
- BCEAO measures announced on March 21, 2020:
  - Increase liquidity available to banks on preferential terms.
  - Develop support mechanisms to companies in difficulty through a dedicated refinancing instrument.
  - Postpone deadlines for loan repayment in collaboration with banks.
  - Extend availability of digital means of payment while reducing their cost.
- Objective: support economic activity while maintaining stability of the financial sector.

### Performance under the PCI-Supported Program and outlook
- Implementation status:
  - Authorities continue to satisfactorily implement their economic program supported by the Policy Coordination Instrument (PCI).
  - Preliminary data suggests quantitative targets at end-December 2019 have been reached with the exception of the target on the share of government contracts using sole sourcing.
  - Progress on structural reforms, notably the medium-term revenue strategy and the legal framework for transparent and sustainable management of oil and gas resources.
- Policy stance and commitments:
  - Authorities keen to resume solid growth performance and continue reforms under the “Plan Senegal Emergent” (PSE phase II).
  - Firm commitment to meeting targets set in the economic program supported by the PCI.
  - Despite widening of the fiscal deficit in 2020, intention to implement a prudent fiscal policy while addressing the public health crisis.

### Conclusion and financing request
- Urgent needs:
  - Authorities need to address urgently the substantial financing gaps stemming from the public health shock while remaining determined to achieve PCI program objectives.
- Post-crisis policy trajectory:
  - Upon normalization, continue to pursue WAEMU convergence criteria and implement structural reforms aimed at achieving strong and inclusive economic growth.
- Request to IMF:
  - Given authorities’ strong commitment to prudent policies to maintain macroeconomic stability and preserve debt sustainability, a request is made for Directors’ favorable consideration of urgent financing assistance under the RFI and the RCF.

*Source: 1senea2020002 - 2.5 percent of GDP.*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1senea2020002.pdf_