## 1senea2021001 ## Source details **Canonical URL:** [1senea2021001](https://www.imf.org/-/media/files/publications/cr/2021/english/1senea2021001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2021/english/1senea2021001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2021/english/1senea2021001.pdf.json) --- ### Executive Summary — context, recent developments, and outlook - Pandemic impact and policy response: - Additional fiscal spending exceeded 3 percent of GDP. - IMF disbursed US$442 million (100 percent of quota) under the RFI/RCF in April. - Authorities prepared 2021–23 economic recovery plan (PAP2A). - Regional anchor and social impact: - WAEMU Finance Ministers agreed to return to the 3 percent of GDP fiscal deficit anchor more gradually (by 2023). - World Bank estimate: poverty headcount could increase to 40 percent in 2020, up from 38 percent in 2019. - About 85 percent of all households and firms suffered a reduction in their income. - Activity and near-term outlook: - Initial expectation: economic contraction of 0.7 percent in 2020 could be avoided given a broad-based recovery from June 2020 and favorable agricultural prospects. - Growth projected to rebound to about 5 percent in 2021. - Initial estimates: GDP stood 1.3 percent below its 2019 level at end-June 2020. - Sector performance 2020H1: tertiary sector -2.8 percent y/y; manufacturing and mining -2.2 percent y/y. ### Recent macroeconomic and external developments - External sector: - Exports of goods and services: -12.6 percent (y/y), largely from lower tourism. - Imports: +7.6 percent (y/y). - Remittances (end-September): +4.2 percent (y/y). - Current account deficit increased by 74 percent (y/y), partly financed by hydrocarbon-related FDI. - Monetary and financial indicators (end-September 2020): - Credit to the economy: +0.1 percent (y/y). - Credit to the government: +77 percent (y/y). - Broad money: +11.7 percent (y/y). - Deposits: +11.9 percent (y/y). - Budget execution and COVID-19 spending (end-September 2020): - Domestically-financed expenditure: 80 percent of total spending committed. - COVID-19-related expenditure: almost 100 percent executed. - Spending on priority projects relying on external concessional loans could exceed the revised budget allocation by about CFAF 44.8 billion (0.3 percent of GDP). ### Key macro projections and selected figures (as presented) - Real GDP (percent change): 1.1 -0.7 4.0 5.2 6.0 11.9 - Non-hydrocarbon GDP (percent change): 1.1 -0.7 4.0 5.2 6.0 7.3 - CPI inflation, average (percent): 2.0 2.0 2.0 2.0 2.0 1.5 - Net lending/borrowing, including grants (percent of GDP): 1 -6.1 -6.5 -4.5 -4.9 -4.0 -3.0 - Current account balance (percent of GDP): -8.8 -10.9 -10.2 -10.7 -10.6 -4.6 - Gross Debt of Public Sector (percent of GDP): 68.6 67.6 70.4 68.2 68.1 63.7 ### COVID-19 Fund measures and budgetary impacts (table excerpts as in source) - COVID-19 support measures: 804809762448 (as appears in source table). - Pillar I - COVID-19 health action plan: 79 108 88 79 - Pillar II - Social safety net (food kits, utility subsidy, diaspora): 103 104 98 103 - of which utility bills: 19 19 18 19 - of which food aid: 69 69 63 69 - Pillar III - Economic support (tax rebate, direct aid,..): 345 349 337 145 - of which direct support to affected firms: 100 107 107 100 - of which tax debt cancellation 2/: 42 42 Ongoing 0 - Pillar IV - Securing of key supplies: 78 34 34 34 - Accelerated payment of pre-2020 unmet obligations: 200 214 205 87 ### Alternative scenario and risks - Alternative (slower recovery) scenario assumptions: - Slower economic recovery, lower external demand, further delays in hydrocarbon production. - Room for further fiscal support limited by debt sustainability and regional stability concerns. - Policy options if financing worsens: - Seek additional concessional financing from development partners or a Fund financial arrangement. - Risk drivers: - Upside: favorable agricultural output and high-frequency data. - Downside: pandemic resurgence in Europe or a 2nd wave in Senegal, weaker firms’ and households’ balance sheets, higher NPLs, fiscal pressures and regional tensions. ### Program implementation, performance, and corrective actions - Program status: - Performance on end-June PCI objectives broadly satisfactory; five out of seven quantitative targets (QTs) were met. - Two deviations were temporary and not compromising program objectives. - Specific deviations and corrective actions: - Ceiling on the overall fiscal deficit missed by 0.2 percent of GDP due to COVID-19 response and delayed exceptional donor support. - Ceiling on share of single-sourced procurement contracts exceeded due to COVID-19 procurement simplified procedures (decree); decree repealed in September and authorities reduced non-essential spending to meet end-December targets. - Reform Targets (RTs): - Met: finalization of the Medium-Term Revenue Strategy (MTRS); studies on the expenditure chain and girls’ education obstacles; establishment of National Public Debt Committee (CNDP). - Missed: financial inclusion strategy delayed; to be finalized by end-year per staff expectation. ### Fiscal policy, 2021 budget, and fiscal sustainability path - Fiscal projections and path: - Staff projects GDP to decline by 0.7 percent in 2020 (+1.1 percent in 1st PCI review). - Fiscal deficit projected at about 6 ½ percent of GDP in 2020 (6.1 percent previously) owing to lower nominal GDP and delayed grant. - Deficit projected to decline to 4.8 percent of GDP in 2021 (excluding forthcoming and potential DSSI relief). - Deficit to converge to WAEMU criterion of 3 percent of GDP by 2023. - WAEMU reserves to stabilize at about 4 months of imports in medium term. - Current account deficit in 2020–21 projected to hover around 11 percent of GDP. - 2021 budget agreed features: - Consolidation of about 1 ½ percent of GDP in 2021. - Tax collection projected to increase by 0.3 percent of GDP to 17.1 percent of GDP; one-off dividend from a land sale (0.4 percent of GDP). - Most 2020 COVID-19 tax relief unwound (except VAT exemptions for tourism and media). - VAT refund period reduced to 30 days. - Investment to increase by 0.4 percentage points, tilted to health, agriculture, transportation with concessional external financing. - Ex-ante cost-benefit evaluation: 50 multi-year projects evaluated; 37 deemed sufficiently mature for the budget. - Overall deficit projected at 4.8 percent of GDP excluding prospective DSSI relief; precautionary reserve of 0.4 percent of GDP (compared with 0.2 percent in 2019-20). ### Revenue mobilization and structural fiscal reforms (MTRS and PFM) - MTRS objectives and actions: - Raise tax-to-GDP by increasing registered taxpayers and reducing tax expenditures (5.7 percent of GDP in 2017). - Decree to raise pre-payment on income taxes at customs for unregistered importers by end-December 2020 (RT). - M-tax platform to be fully operational by end-2020 (RT, December 2020). - Publish tax expenditure reports: 2015-17 by end-2020; 2018-19 by June 2021 (RT, June 2021). - Allow cement companies’ tax exemptions to expire in 2021 — potential yield about 0.1 percent of GDP. - PFM improvements: - Decree to limit spending eligible for simplified procedures and reduce transfers to below-the-line treasury accounts finalized by end-2020 (RT). - 2021 budget limits such transfers to 4 percent of total transfers (17 percent in 2019-20). - Move to program budgeting including decentralized spending authorizations. - Establish database for all PPPs and power purchase agreements by June 2021 (RT); include a fiscal risk statement in 2022 budget documentation (RT, December 2021). - Inventory of public entities’ accounts in commercial banks ongoing and on track (RT, December 2020). ### Debt sustainability, DSSI, and financing strategy - Debt projections and risks: - Public debt projected to peak at about 68 percent of GDP during 2020–22 before gradually declining. - Debt profile has limited space to absorb shocks; significant downside risks: lower growth, higher fiscal deficits, adverse exchange rate movements. - Financing strategy and recommended actions: - Seek concessional financing; limit non-concessional borrowing to priority projects with high expected returns; strengthen debt management. - CNDP fully operational; expected to submit 2021–23 Medium-Term Debt Strategy, DSA and 2021 borrowing plan to Cabinet by end-2020. - Additional efforts needed to strengthen monitoring and recording of public sector debt; audits of debt software and public debt database expected early 2021. - DSSI: - Senegal to extend participation in DSSI into 2021. - Savings realized under DSSI: approximately CFAF 29.9 billion in 2020 (CFAF 24.1 billion in principal and CFAF 5.8 billion in interest); extension to H1 2021 would increase savings to CFAF 42 billion. - Some official creditors yet to confirm requests; authorities to follow up. ### Financial sector, monetary measures, and partial credit guarantee - BCEAO monetary actions: - Policy rates reduced by 50 basis points: auction rate to 2 percent; marginal lending rate to 4 percent (from June 24, 2020). - Special refinancing window at fixed rate 2.5 percent for COVID-19 T-bills (maturity three months, renewable). - Fixed-rate auctions since March 27, 2020; increased liquidity to banks; expanded refinancing access. - Banking and microfinance sector (end-September 2020): - Bank assets growth: 6.3 percent; security holdings +28.1 percent; loan activity stagnated (-0.2 percent). - Deferred loan maturities: nearly CFAF 74 billion for loans totaling CFAF 337.1 billion (7 percent of outstanding loans). - Gross NPLs rose to 14.2 percent (up 30 basis points between end-March and end-September 2020). - Four banks and one financial institution (8.5 percent market share) exhibit capital shortages. - Microfinance sector: recovery +7.3 percent vs March 2020; prudential deterioration with increases in gross overdue claims. - Partial credit guarantee scheme (revamped): - State will partially guarantee loans up to CFAF 300 billion (2.1 percent of GDP), equally divided between large and smaller enterprises. - Guarantee structure: non-remunerated deposits; coverage 40 percent for large enterprises (50 percent for priority sectors) and 60 percent for SMEs (70 percent for priority sectors). - Lending maturity up to 7-10 years; interest rate cap 5.5 percent. - Staff encourages prudent bank credit risk assessment and monitoring of fiscal costs. ### Oil and gas projects, governance, and revenue management - Project timelines: - GTA project delayed: gas production pushed from 2022 to 2023. - SNE oil project on track for production in 2023. - Yakaar-Teranga pending final investment decision; expected to become main domestic gas supplier. - Governance and legal framework: - Authorities finalizing legal framework for hydrocarbon governance with IMF TA; draft law on hydrocarbon revenue sharing progressed. - Staff encourages defining a fiscal rule anchored in a multi-year investment plan consistent with debt sustainability and realistic hydrocarbon revenue projections. ### Program modalities, conditionality adjustments, and financing - Authorities requested program modifications; staff supports: - Increase end-2020 ceiling on total nominal debt by 1.4 percent of GDP to accommodate: oil and gas investment resilience (0.9 percent of GDP), adjusted fiscal target due to grant shortfall (0.3 percent of GDP), and addition of a new SOE to debt perimeter (0.2 percent of GDP). - New memorandum item for net government financing on regional WAEMU market. - Eliminate QT on budgetary float and modify QT on spending through exceptional procedures from 2021. - New RTs to support gradual reduction of tax expenditures and extension of social safety nets. - Program financing (2021 expected sources): - Confirmed donor commitments: 4.4 percent of GDP. - DSSI: 0.3 percent of GDP. - Net securities issuance on regional market: 2.9 percent of GDP. - Program remains fully financed; no present or prospective balance of payments need identified. Authorities have not expressed interest in a Fund financing program to date. ### Social protection, informal sector, and PAP2A - Social protection and RNU: - Authorities updating and expanding national register of vulnerable households (RNU); target to double registered households to at least 1 million by end-2021 (RT, December 2021). - Consider expanding cash transfers and creating a shock-response mechanism; support for households committing to keep girls in school. - Informal sector and SMEs: - Informal sector: over 95 percent of enterprises; 92 percent of working-age population engaged in informal activities. - One-stop shop for SMEs delayed; envisaged operational by June 2021. - SMEs seek continued utility bill support, rent support, and access to long-term financing. - PAP2A (authorities’ recovery plan) financing and assumptions: - Real GDP growth projected in PAP2A: 5.2 percent in 2021, 7.2 percent in 2022, 13.7 percent in 2023. - Total financing need for PAP2A: CFAF 14,712 billion over 2021-2023 (105 percent of 2020 GDP); 39 percent expected from private sector. - Nominal public investment expected to increase by an average of 20 percent from 2020 to 2023. - Implementation risks: ambitious assumptions, need for consistency with medium-term debt strategy, careful design of sectoral support (limit duration, ensure targeting), avoid new import restrictions. ### Annex I — Socio-economic impact survey highlights and program commitments - Survey findings: - Households: 85 percent reported income decline; one third temporarily stopped working; 4/5 worse-off since pandemic start. - Formal firms: 85 percent reported decline in turnover in first 6 months of 2020; 27 percent temporarily stopped operations; SMEs intend to invest but need government support. - Informal Production Units (IPUs): represent 97 percent of enterprises; nine out of 10 reported reduced sales; over 72 percent expected recovery within a year. - PRES (Economic and Social Resilience Program) endowment and use: - PRES endowment: CFAF 1 trillion. - As of November 4, 2020: disbursable expenditure registered CFAF 628.4 billion (budget expenditure CFAF 558.4 billion; cash operation CFAF 70 billion). - PRES budget expenditure distribution (CFAF 558.4 billion): Pillar 1 (health) CFAF 77.8 billion; Pillar 2 (social resilience) CFAF 103 billion; Pillar 3 (assistance to private sector) CFAF 300 billion (CFAF 200 billion clearing unpaid obligations; CFAF 100 billion support to affected enterprises); Pillar 4 CFAF 77.6 billion. - Mobilized resources as of November 4, 2020: CFAF 701.2 billion (coverage rate 111.6 percent). - Enterprise support mechanism: - Total approved financing CFAF 12.5 billion; preserved more than 13,000 jobs. - New guarantee mechanism (end-November 2020): state guarantee coverage 60 percent for SMEs and 40 percent for large enterprises; interest rate 5.5 percent. ### Budget performance, PFM, transparency, and reporting commitments - Budget performance (end-September 2020): - Revenue including grants: CFAF 1,880.51 trillion vs annual target CFAF 2,962 trillion. - Q4 tax and non-tax revenue to collect: CFAF 695.81 billion. - Budget grants received: CFAF 122.72 billion (budget grants CFAF 43.18 billion; capital grants CFAF 79.54 billion). - Shortfall approx CFAF 50 billion due to delayed budget support operation. - 89.1 percent of total domestic expenditures committed. - Adjusted budget deficit projected CFAF 907.8 billion. - Transparency and audits: - Monitoring committee to finalize comprehensive report on FORCE COVID-19 fund by end-2020 and publish. - Quarterly budget execution reports (RTEB) submitted to Parliament and published online. - Audit Office to prepare dedicated audit on COVID-19 expenditure to be linked to 2020 budget execution reporting. ### Reporting, TMU definitions, and program monitoring instruments - Quantitative targets, continuous targets, and reform targets monitored across specified dates (end-December 2020, end-June 2021, etc.). - Definitions and reporting requirements include: - Ceiling on share of single-tender contracts (semiannual reporting within one month). - Floor on social expenditure (semiannual reporting within two months). - Ceiling on total nominal public debt (quarterly reporting within two months); currency conversion rates for program evaluation: for 2020 CFAF/US$ 598 and CFAF/SDR 817; for 2021 CFAF/US$ 531 and CFAF/SDR 761. - Ceiling on spending through simplified procedures for non-personalized services (semiannual reporting within six weeks). - Memorandum item on net domestic and regional financing transmitted quarterly with TOFE within two months. ### Debt Sustainability Analysis (DSA) — key assessments and recommendations - Risk ratings: - Risk of external debt distress: Moderate. - Overall risk of debt distress: Moderate. - Debt carrying capacity classified as strong (CI Score 3.19). - DSA key macro revisions and assumptions: - GDP growth projected -0.7 in 2020; 5.2 percent in 2021. - Public sector deficit staff estimate: 7.4 percent of GDP in 2020 (higher than 6.8 percent at RCF/RFI). - Current account deficit projected 10.9 percent of GDP in 2020 and 10.7 percent in 2021. - Exports of goods and services expected to increase significantly by 2025 driven by oil and gas. - Public debt dynamics: - Public sector debt projected to peak around 68 percent of GDP in 2020–22 then decline. - Debt service burden projected about 21 percent of total revenues and grants in 2020, rising to about 24 percent on average medium term due to hydrocarbon borrowing. - DSA policy implications: - Prudent borrowing strategy prioritizing concessional external borrowing and regional domestic financing. - Further revenue mobilization efforts and strengthened debt management recommended. - Baseline remains below critical thresholds but limited space to absorb shocks; extreme shocks breach several external indicators. ### Program review decision and mission details - Staff supports completion of second PCI review based on "good program performance and the authorities’ strong commitment to medium-term fiscal sustainability and growth-oriented reforms." - Supported modifications: discontinue QT on budgetary float; modify QT on simplified procedures; increase 2020 debt ceiling; modify QTs on central government overall net financing requirement and floor on net lending/borrowing. - Mission and administrative details: - Discussions held remotely during November 3–16, 2020. - Approved By: Annalisa Fedelino (AFR) and Chad Steinberg (SPR). - Mission team: Ms. Deléchat (AFR–head), Messrs. Rosa, Stenzel (both AFR), Ms. Fotiou (FAD), Mr. Hart (SPR); assisted by Resident Rep office; Mr. Diakite (OED) attended. H. Devine and J. Treilly (both AFR) contributed. - Date on document: December 18, 2020. *Source: IMF staff report excerpt (1senea2021001).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context - The pandemic has remained fairly contained in Senegal but its economic impact has been severe. - Policy response: - Additional fiscal spending exceeded 3 percent of GDP. - The IMF disbursed US$442 million (100 percent of quota) under the RFI/RCF in April to support the crisis response. - The authorities prepared an ambitious 2021–23 economic recovery plan (PAP2A) to build a more resilient economy and support inclusive and private sector-led growth. - Regional fiscal anchor: - WAEMU Finance Ministers agreed to return to the 3 percent of GDP fiscal deficit anchor more gradually (by 2023) owing to the pandemic’s impact and the security challenges in the Sahel. - Social impact: - The World Bank estimates the poverty headcount could increase to 40 percent in 2020, up from 38 percent in 2019. - About 85 percent of all households and firms suffered a reduction in their income. - Unprecedented numbers of young Senegalese have attempted to migrate illegally to Europe in recent months. ### Recent developments and outlook - Growth and activity: - With a broad-based recovery starting in June 2020 and favorable perspectives for the 2020–21 agricultural season, the economic contraction of 0.7 percent expected in 2020 could be avoided. - Momentum is expected to carry over to 2021, with growth projected to rebound to about 5 percent. - According to initial estimates GDP stood 1.3 percent below its 2019 level at end-June. - Sector performance in 2020H1: tertiary sector (transport, hospitality) -2.8 percent y/y; manufacturing and mining -2.2 percent y/y. - External sector: - Exports of goods and services slowed markedly (-12.6%, y/y), mostly driven by lower tourism. - Import demand remained robust (+7.6 percent, y/y). - Remittances’ inflows exceeded expectations at end-September (+4.2 percent, y/y). - The current account deficit increased by 74 percent (y/y), partly financed by strong hydrocarbon-related FDI. - Monetary and financial indicators: - Credit to the economy remained almost flat (+0.1 percent in September y/y). - Credit to the government rose sharply (+77 percent y/y). - Broad money grew 11.7 percent (y /y). - Deposits increased +11.9 percent y/y. - Budget execution and COVID-19 spending: - Execution of the revised 2020 budget reflected robust implementation of the government’s COVID-19 response. - As of end-September, domestic revenue has remained resilient and on track to reach end-year objectives. - Domestically-financed expenditure remained strong, with 80 percent of total spending already committed and almost 100 percent of COVID-19-related expenditure executed. - Spending on priority projects relying on external concessional loans accelerated and could exceed the revised budget allocation by about CFAF 44.8 billion (0.3 percent of GDP), to be absorbed mostly by savings on domestically-financed investment and expected relief on interest payments under the DSSI. - Risks: - A deeper and longer lasting pandemic at the global and regional level could impact the favorable outlook. ### Program implementation and performance - Program status: - Performance on end-June PCI objectives has been broadly satisfactory and the program remains on track. - Five out of seven quantitative targets (QTs) were met. - Two deviations from targets were temporary and do not compromise program objectives. - Specific deviations and corrective actions: - The ceiling on the overall fiscal deficit was missed by 0.2 percent of GDP, owing to robust implementation of the COVID-19 response and a delay in exceptional donor support. - The ceiling on the share of single-sourced procurement contracts was exceeded by a significant amount as COVID-19-related procurement was allowed by decree to follow simplified procedures. - Corrective measures: the authorities reduced non-essential spending to meet end-December program deficit targets and repealed the decree on COVID-19 procurement in September. - Reform Targets (RTs): - Met RTs: finalization of the Medium-Term Revenue Strategy (MTRS); undertaking studies on the expenditure chain and overcoming obstacles on girls’ education; establishment of the National Public Debt Committee (CNDP). - Missed RT: the financial inclusion strategy was not met due to pandemic-related delays and has not been reset as conditionality was streamlined in the 1st PCI review. The strategy should nonetheless be finalized by end-year. ### Policy discussions and recommendations - 2021 budget: - Staff and the authorities agreed on a 2021 budget balancing support for the recovery and fiscal sustainability, including a moderate loosening of fiscal targets relative to the first PCI review. - Fiscal sustainability and return to WAEMU anchor: - Staff stressed the importance of returning to the WAEMU deficit anchor by 2023 through gradual fiscal adjustment supported by revenue mobilization, expiring COVID-19 measures, and rationalization of current spending. - Debt and fiscal risks: - Limiting new SOE borrowing, enhancing debt management and ensuring adequate monitoring of fiscal risks from PPPs will be essential to maintain debt sustainability. - Structural reforms and social protection: - Staff encouraged the authorities to accelerate reforms to improve the business environment and broaden the social safety net. - Natural resources governance: - The draft law on hydrocarbon revenue sharing provides for sound and transparent management of natural resources’ wealth. ### Program support and mission - Staff supports the completion of the second PCI review as well as the authorities’ request for modification of quantitative targets. - Administrative details: - Approved By: Annalisa Fedelino (AFR) and Chad Steinberg (SPR). - Discussions were held remotely during November 3–16, 2020. - Mission team: Ms. Deléchat (AFR–head), Messrs. Rosa, Stenzel (both AFR), Ms. Fotiou (FAD), and Mr. Hart (SPR); assisted by Mr. Koulet-Vickot (Resident Representative–RR) and Messrs. Ba and Fame (RR office). Mr. Diakite (OED) also attended mission meetings. H. Devine and J. Treilly (both AFR) contributed to this report. - Date on document: December 18, 2020. *Executive Summary—SENEGAL (from the IMF staff report, Executive Summary).* ### 10. The pandemic’s economic impact could be partly mitigated by strong prospects for ### 10. The pandemic’s economic impact could be partly mitigated by strong prospects for ### Economic outlook and agricultural prospects - Staff projects GDP to decline by 0.7 percent (+1.1 percent in 1st PCI review), owing to the larger-than-anticipated GDP decline in 2020H1. - The decline could be mitigated if the recovery initiated in Q3 continues, and if agricultural production exceeds expectations, which is now likely given abundant rainfall and higher government subsidies for agricultural inputs. - The recovery is expected to strengthen in 2021 with growth projected at around 5 percent (PS, ¶7). - Growth over 2022-25 remains projected at 8 percent on average, consistent with pre-crisis rates, while the onset of hydrocarbon production in 2023 will provide an additional boost (Text Figure 3). ### Fiscal and external outlook - The fiscal deficit is projected at about 6 ½ percent of GDP in 2020 (6.1 percent of GDP previously), owing to the lower nominal GDP and the delay of a large budget support grant to early 2021. - The deficit is projected to decline to 4.8 percent of GDP in 2021 (excluding forthcoming and potential DSSI debt service relief). - The deficit would gradually converge to the WAEMU criterion of 3 percent of GDP by 2023. - WAEMU reserves would stabilize at about 4 months of imports in the medium term. - The current account deficit in 2020–21 is projected to hover around 11 percent of GDP due to weaker growth in Senegal’s trading partners and reflecting large imports ahead of hydrocarbon production (Text Table 2). Key macroeconomic figures (as presented in source) - Real GDP (percent change)1.1-0.74.05.26.011.9 - Of which: Non-hydrocarbon GDP1.1-0.74.05.26.07.3 - CPI inflation, average (percent)2.02.02.02.02.01.5 - Net lending/borrowing, including grants (percent of GDP)1 -6.1-6.5-4.5-4.9-4.0-3.0 - Current account balance (percent of GDP)-8.8-10.9-10.2-10.7-10.6-4.6 - Gross Debt of Public Sector (percent of GDP)68.667.670.468.268.163.7 ### COVID-19 Fund measures and budgetary impacts - COVID-19 support measures: 804809762448 (as appears in source table). - Pillar I - COVID-19 health action plan79108 8879 - Pillar II - Social safety net (food kits, utility subsidy, diaspora)10310498103 - of which utility bills1919 1819 - of which food aid6969 6369 - Pillar III - Economic support (tax rebate, direct aid,..)345 349337145 - of which direct support to affected firms100107 107100 - of which tax debt cancellation 2/242242Ongoing0 - Pillar IV - Securing of key supplies783434 34 - Accelerated payment of pre-2020 unmet obligations20021420587 (Notes from source) - 1/ Reflects the net impact of the emergency resources allocated by government to cope with the impact of the pandemic (COVID-19 Fund, first column) in the revised 2020 budget (second column), relative to the original 2020 budget. - 2/ Reflects partial forgiveness to companies of outstanding tax debts. To date only a few eligible companies have requested cancellation of their tax debts. - Source: Ministry of Finance and Budget, Ministry of Economy and Planning, IMF staff estimates. ### Alternative scenario and risks - Staff’s alternative scenario assumes a slower economic recovery, lower external demand, and further delays in hydrocarbon production (Annex III). - Room for further fiscal support in that scenario would be limited given the debt sustainability outlook and potential concerns about regional macroeconomic stability. - If access to financing worsens, options could include seeking additional concessional financing from development partners or a Fund financial arrangement. - Risks are tilted to the downside: - Upside: recent high frequency data and favorable prospects for agricultural output point to a possibly stronger 2020 outturn. - Downside: pandemic resurgence in Europe and a possible 2nd wave in Senegal could compromise nascent recovery, weaken firms’ and households’ balance sheets, and negatively impact banks. - Fiscal pressures and socio-political tensions in other WAEMU countries could affect external and regional market financing prospects. ### Policy discussions — Maintaining fiscal and debt sustainability - Medium-term fiscal path predicated on gradual return to the WAEMU regional anchor by 2023. - The 2021 budget envisages a consolidation of about 1 ½ percent of GDP. - Authorities committed to deficit reaching 3 percent of GDP by 2023, with annual adjustments of about 1 percent of GDP in 2022-23 (PS ¶22). - Path underpinned by withdrawal of COVID-19 stimulus, MTRS implementation, and current spending rationalization. - 2020 fiscal management and financing: - Authorities aim to contain the 2020 deficit to 6 ½ percent of GDP (CFAF 907.8 bn) by reducing non-essential spending to compensate for a delayed grant (CFAF 35 billion) (PS ¶20). - The World Bank made an emergency support disbursement of US$100 million in June 2020, and committed another US$180 million by year-end (half grant, half concessional loan). - Transparency and governance: - COVID-19 Fund operations monitored by a high-level coordination committee and technical committees with civil society participation. - Committee finalizing report after gathering procurement contracts, beneficial owners, purchases’ certification, and on-site visits; staff urged publication as soon as available. - Continued publication of detailed quarterly budget execution reports and prospect of a dedicated audit by the Audit Court, to be finalized during 2021H1. - 2021 budget features: - Tax collection projected to increase by 0.3 percent of GDP to 17.1 percent of GDP, reflecting digitalization, fraud-fighting, and fiscal responsibility measures; plus a one-off dividend from a land sale by a public entity (0.4 percent of GDP). - The draft budget unwinds most of the 2020 COVID-19 tax relief (except VAT exemptions for tourism and media), includes new fiscal measures with a net positive but relatively small yield. - VAT refund period reduced to 30 days to support private sector. - Continued current spending rationalization with modest increase in wage bill for new health personnel; settlement of most remaining pre-2020 unpaid obligations (0.7 percent of GDP). - Investment will increase by 0.4 percentage points, tilted to health, agriculture and transportation with concessional external financing. - Ex-ante cost-benefit and financial evaluation of 50 multi-year projects included; only 37 deemed sufficiently mature for the budget (PS ¶24). - Overall deficit projected at 4.8 percent of GDP, excluding prospective DSSI debt relief; larger precautionary reserve (0.4 percent of GDP compared with 0.2 percent in 2019-20) (PS ¶25). ### Structural fiscal reforms and public financial management - MTRS objectives: - Raise tax-to-GDP ratio by increasing registered taxpayers and reducing tax expenditures. - With Fund TA support, finalize matrix of priority reforms, timetable and potential yield by end-2020 (PS ¶26, ¶27). - Specific reform actions: - Expand taxpayers’ registry: decree to raise pre-payment on income taxes at customs for unregistered importers by end-December 2020 (RT); exchange of information between tax and customs advanced; M-tax platform to be fully operational by end-2020 (RT, December 2020). - Reduce tax expenditures (5.7 percent of GDP in 2017): publish 2015-17 annual reports by end-2020; publish 2018-19 reports by June 2021 (new RT, June 2021); finalize study to reduce exemptions over 2021-23 starting with most regressive (new RT, June 2021). Allow cement companies’ tax exemptions to expire in 2021, which could yield about 0.1 percent of GDP. - PFM improvements welcomed by staff: - Use of simplified spending procedures: decree to limit spending eligible for simplified procedures and reduce transfers to below-the-line treasury accounts finalized by end-2020 (RT); 2021 budget limits such transfers to 4 percent of total transfers (17 percent in 2019-20). Reformulation of the QT to monitor spending under exceptional procedures. - Program budgeting: move to program budgeting including decentralized spending authorizations (“ordonnancement”) (PS ¶28). - Fiscal risks: increased by COVID-19 related SOE debts and operations; mitigating factors include halted ambitious growth strategy of Air Sénégal and delayed PETROSEN capitalization efforts. With IMF TA, authorities will (i) establish a database for all PPPs and power purchase agreements by June 2021 (RT); and (ii) include a fiscal risk statement as part of the 2022 budget documentation (PS ¶31, December 2021 RT). - Single Treasury Account: inventory of all public entities’ accounts in commercial banks ongoing and on track (PS ¶30, December 2020 RT). - Windfall from lower oil prices: - Net impact for 2020 should be positive at current and projected world oil prices, as reflected in revised budget projections. - FSIPP collection has remained well below revised budget projections (Text Figure 4). - Authorities to amend inter-ministerial decree to record full FSIPP revenue as tax revenue and support to SAR as a subsidy in the budget, and to define SAR subsidy in the budget law based on SAR’s multi-year investment plan (PS ¶32). *Source: IMF staff and Senegalese authorities as presented in the chapter.* ### 21. Under staff’s baseline scenario, Senegal’s public debt is projected to remain ### 21. Under staff’s baseline scenario, Senegal’s public debt is projected to remain ### Debt sustainability and risk - Public debt is projected to peak at about 68 percent of GDP during 2020–22, before gradually declining over the medium term. - Debt profile has limited space to absorb shocks in the near term and is subject to significant downside risks, including: - lower growth, - higher fiscal deficits, - adverse exchange rate movements. - Authorities broadly shared staff’s assessment and agreed on the need to contain risks while emphasizing the need for critical investments to support growth. ### Financing strategy and debt management - Staff recommendations: - Seek concessional financing. - Limit non-concessional borrowing to priority projects with high expected returns. - Continue to strengthen debt management. - Institutional developments: - The CNDP is now fully operational and has begun reviewing major SOE investments. - CNDP expected to submit to Cabinet by end 2020 a 2021–23 Medium-Term Debt Strategy, debt sustainability assessment and 2021 borrowing plan. - Data and monitoring: - Authorities agreed additional efforts are needed to strengthen monitoring and recording of public sector debt. - Forthcoming audits of the debt management software and the public debt database are expected to be completed in early 2021. ### Debt Service Suspension Initiative (DSSI) - Senegal will extend its participation in the DSSI into 2021. - A few official creditors are yet to confirm Senegal’s requests for relief under the DSSI; authorities agreed to follow up with all official creditors. ### Inclusive and private sector-led growth (PCI Pillar I) - COVID-19 increases urgency to boost inclusive and private sector-led growth; recovery plan builds on “Plan Sénégal Émergent”. - Policy priorities include: - Strengthen domestic production of food and pharmaceuticals. - Improve access to health and education services. - Expand social safety nets. - Staff cautioned on ensuring efficiency and mitigating rent-seeking in direct sectoral support. ### Social protection and vulnerable households - Authorities updating and expanding the national register of vulnerable households (RNU). - Target: double number of registered households to at least 1 million by the end of 2021. - Considering expanding cash transfer program and creating a new shock-response mechanism. - Additional support envisaged for households that commit to keeping girls in school. - Staff encouraged gradually increasing domestic financing for social programs and broadening their scope. ### Support for informal sector and business environment - Informal sector constitutes over 95 percent of Senegalese firms. - One-stop shop for SMEs to access government support delayed by pandemic; envisaged for June 2021. - Government preparing proposals by end-2020 to streamline public initiatives for SMEs. - Progress supported by G20 Compact with Africa includes: - digitalization of employment contracts and elaboration of a social security code; - better management of land and property rights including advances towards a digital integrated land management system; - enhanced vocational training jointly with private sector. ### Public-private partnerships (PPPs) - New legal framework on PPPs should adequately limit fiscal risks. - Law requires ex-ante evaluation of all projects and counter-evaluation of unsolicited offers. - Staff recommends: - Strengthen role of Ministry of Finance at all stages of PPP approval and implementation. - Establish clearer limits on use of simplified procurement procedures. - Authorities prefer to address concerns in implementing decrees. ### Financial stability and banking sector - Non-performing loans (NPLs) edged up to 14.2 percent of total loans through September from 13.9 percent at end-December 2019. - Banking system reported CFAF 74 billion of repayment moratoriums at end-September. - Corresponding outstanding claims amounted to 7 percent of total credit. - Banking system’s capital adequacy ratio increased by about CFAF 20 billion boosted by capital increases. - Four banks and one financial institution, accounting for 8.5 percent of market share, continue to exhibit capital shortages. - Several microfinance institutions are experiencing financial difficulties. - Staff cautioned that impact on loan portfolios will be reliably quantified once situation stabilizes and exceptional measures are lifted; warned weaker-than-expected recovery could increase NPLs. - Staff encouraged coupling support to public institutions with reforms to business models and governance; pay careful attention to microfinance institutions. ### Partial credit guarantee scheme - Revamped scheme features: - State will partially guarantee loans of up to CFAF 300 billion (2.1 percent of GDP), equally divided between large and smaller enterprises. - Partial guarantee in form of non-remunerated deposits: 40 percent of loan amount for large enterprises (50 percent for priority sectors) and 60 percent for SMEs (70 percent for priority sectors). - Lending maturity up to 7-10 years. - Interest rate cap is 5.5 percent. - Staff encouraged banks to exercise due care in credit risk assessment and monitor fiscal costs and risks. ### AML/CFT assessment and correspondent banking - FATF is due to assess Senegal’s progress in addressing remaining AML/CFT deficiencies in 2021Q1. - Authorities confident measures are sufficient to avoid gray-listing; noted that if gray-listed, correspondent banking relationships (CBRs) could be affected. - Authorities attribute recent CBR difficulties mostly to business decisions based on cost-benefit analyses. ### Oil and gas projects and revenue management (PCI Pillar III) - Project timelines: - GTA project delayed: natural gas production pushed from 2022 to 2023 due to subcontractor force majeure. - SNE oil project remains on track to start production in 2023. - Yakaar-Teranga has yet to reach final investment decision; expected to become main supplier of domestic gas. - Staff urged: - Continue capacity building to negotiate complex oil and gas projects. - Accelerate efforts to finalize gas-to-power strategy. - Legal framework: - Authorities finalizing legal framework for governance of hydrocarbon resources with Fund technical assistance. - Progress toward finalization of law on hydrocarbon revenue sharing. - Staff encouraged defining a fiscal rule anchored in a multi-year investment plan consistent with debt sustainability and absorption capacity and grounded in realistic projections of hydrocarbon revenue. ### Program modalities, conditionality adjustments, and financing - Authorities request modifications to program conditionality: - Staff supports increase of the end-2020 ceiling on total nominal debt by 1.4 percent of GDP to accommodate: - more resilient-than-anticipated investment in the oil and gas sector (0.9 percent of GDP), - additional financing needs to cover adjusted fiscal target due to grant shortfall (0.3 percent of GDP), - addition of a new SOE to the debt perimeter (0.2 percent of GDP). - Proposal for new memorandum item for net government financing on the regional WAEMU market to monitor consistency with regional stability. - From 2021, authorities agreed to eliminate the QT on budgetary float and modify the QT on limiting spending through exceptional procedures. - Minor modification to grants adjustor to clarify symmetric application to grant shortfalls and surpluses. - New RTs agreed to support gradual reduction of tax expenditures and extension of social safety nets. - Program financing: - Program remains fully financed; staff’s analysis does not indicate a present or prospective balance of payments need. - Fiscal financing needs in 2021 expected to be covered by: - confirmed donor commitments (4.4 percent of GDP), - the DSSI (0.3 percent of GDP), - net securities issuance on the regional market (2.9 percent of GDP). - Authorities have not expressed interest in a Fund financing program to date. ### Risks and contingency considerations - Risks to the program have risen but remain manageable. - Economic outlook contingent on pandemic path and global recovery; regional instability could exert pressure on external reserves. - If risks materialize, a more prudent macroeconomic policy stance would be appropriate but could be politically difficult. - Risk mitigants include authorities’ timely response to pandemic and strong track record in Fund-managed programs. ### Capacity development and safeguards - Capacity development (CD) focuses on: - preparation of draft laws for PPPs and legal framework for hydrocarbon revenues, - a model to forecast hydrocarbon revenues, - tax and customs administration (in line with the MTRS), - strengthening public financial management for 2021 budget preparations. - 2018 safeguards assessment: BCEAO has maintained a strong control culture and is implementing the only outstanding recommendation relating to strengthening risk management. ### Staff appraisal — outlook, fiscal stance, and reforms - Pandemic trajectory relatively mild and economic recovery is underway; state of emergency lifted in June and schools and borders reopened amid declining case numbers. - Factors supporting recovery: fiscal and monetary support, resilient remittances, strong prospects for agricultural sector due to favorable rainy season. - Recovery remains fragile; authorities should prepare contingency plan to address risks. - Fiscal execution: - Revised 2020 budget execution on track; authorities expected to meet adjusted fiscal target of 6 ½ percent of GDP. - COVID-19 related spending amounted to 3.2 percent of GDP. - Full accountability and transparency prioritized: publish quarterly budget execution reports, COVID-19 monitoring committee report, and audit court’s dedicated audit report. - 2021 budget: - Draft 2021 budget targets consolidation of about 1 ½ percent of GDP in 2021. - Return to the WAEMU deficit anchor now envisaged for 2023 (one year later than previously assumed). - Fiscal adjustment underpinned by withdrawal of COVID-19 stimulus, rationalization of current spending, and domestic revenue mobilization. - Staff urges strict adherence to deficit limits, containment of SOE borrowing, and continued enhancement of debt management. - Recourse to regional debt market should be contained to programmed levels consistent with maintaining external stability. - Structural fiscal reforms: - Progress on medium-term revenue strategy, broadening tax base, and reducing regressive tax exemptions welcomed. - Resumed publication of annual tax expenditure reports and planned removal of exemptions for cement companies noted. - Move to program budgeting and reduction in transfers via simplified spending procedures, and progress in ex-ante evaluations of public investment projects will improve transparency and efficiency. - Plans to enhance monitoring of fiscal risks from SOEs and PPPs and increase transparency of energy-related revenues and subsidies welcomed. - PPPs and hydrocarbon revenue management: - Adjustments to “Plan Sénégal Émergent” reflect COVID-19 lessons and maintain focus on inclusive and private sector-led growth. - Investment and growth targets appear optimistic; financing needs should be consistent with debt sustainability and realistic private participation expectations. - Revised PPP legal framework should minimize fiscal risks by strengthening safeguards. - New fiscal rule for hydrocarbon revenues should be anchored in a multi-year investment plan consistent with debt sustainability and absorptive capacity and based on realistic assumptions. *Source: IMF staff report excerpt (Senegal).* ### 46. Based on good program performance and the authorities’ strong commitment to ### 1senea2021001 - 46. Based on good program performance and the authorities’ strong commitment to ### Program review decision - Staff supports completion of the second review based on "good program performance and the authorities’ strong commitment to medium-term fiscal sustainability and growth-oriented reforms." - Staff supports: - discontinuation of the quantitative target on budgetary float, - modification of the target on limiting spending through simplified procedures, - increase of the 2020 debt ceiling, - modifications to the QTs on central government overall net financing requirement and the floor on net lending/borrowing. ### Real and external sectors (2015–20 highlights from Figure 1) - Real GDP growth (Annual Percent Change): series plotted for 2015–2020 (no single summary number provided in figure caption). - Supply-side contributions shown: Primary Sector, Secondary Sector, Tertiary Sector, Public Administration to Total GDP. - Demand-side contributions shown: Consumption - public, Consumption - private, Investment - public, Investment - private, Change in inventory, Net Exports. - CPI Inflation (12 Month Average, Percent Change) and Core Inflation (excl. food and energy) presented for 2015–2020. - Current account components (Percent GDP): Goods balance, Services balance, Income net, Current transfers net; narrative notes: - "Official grants and resilient private transfers will help contain the current account deficit..." - "…which is mostly financed by FDI and concessional financing." ### Fiscal and financial indicators (2015–20 highlights from Figure 2) - Revenue composition (Percent GDP): Taxes, Other Revenue, Grants (2015–2020 plotted). - Narrative: "A large increase in budget grants in 2020 will help counter the decline in tax revenue..." - Expenditure composition (Percent GDP): Wages, Goods and Services, Interest, Investment, Other Expenditure. - Narrative: "... and finance higher spending, related to the COVID-19 crisis." - Financing (Percent GDP): Net Foreign Financing, Net Domestic Financing, Fiscal Deficit, Below-the-line Operations. - Narrative: "The higher fiscal deficit will be financed through a mix of domestic and external concessional financing..." - Debt and deficit (Percent GDP): Debt and Deficit (incl. grants) plotted; narrative: "... while the debt ratio increases moderately." - Credit to the private sector (Percent change, 3 months moving average): Credit growth moved to negative territory in 2020H1. - Non-Performing Loans (Percent of Total Loans): Gross NPL and Net NPL series 2015–2020; narrative: "NPLs have remained stable in 2019, but are set to increase going forward due to the crisis." ### Outlook 2019–25 (Figure 3 and narrative) - Real GDP Growth (Annual Percent Change) plotted 2019–2025 with narrative: - "Growth will slow sharply in 2020 followed by a gradual recovery to growth rates seen in previous years." - "The level of GDP jumps in 2023 because of hydrocarbon production coming online." - Current account (Percent GDP) projection narrative: - "Oil and gas related investments lead to a higher current account deficit before production until exports starting in 2023 will lead to a significant decline." - Central Government Fiscal Performance (Percent GDP) narrative: - "Total revenues, temporarily buoyed by grants in 2020, are expected to increase over the medium term in line with the medium-term revenue mobilization strategy, used for substantial capital expenditure." ### Selected economic and financial indicators (Table 1 — selected figures) - GDP at constant prices (annual percent change): 2019: 5.3; 2020: 1.1; 2021: -0.7; 2022: 4.0; 2023: 5.2; 2024: 6.0; 2025: 11.9; subsequent entries 8.7, 6.0 (table layout preserved). - Of which: Non-hydrocarbon GDP: same series for 2019–2025 with values 5.3, 1.1, -0.7, 4.0, 5.2, 6.0, 7.3, 7.2, 7.3 (as presented). - GDP deflator: 2019: 1.7; 2020: 2.5; 2021: 2.1; 2022: 1.7; 2023: 1.7; 2024: 1.7; 2025: 1.5; later entries 1.8, 1.4. - Consumer prices (Annual average): 2019: 1.0; 2020: 2.0; 2021: 2.0; 2022: 2.0; 2023: 2.0; 2024: 2.0; 2025: 1.5; end of period values: 2019: 0.6; 2020: 2.5; 2021: 1.4; 2022: 0.9; 2023: 2.6; 2024: 1.7; 2025: 1.3; later entries 1.7, 1.4. - Exports, f.o.b. (CFA francs, percent change): 2019: 12.3; 2020: -11.9; 2021: -5.1; 2022: 12.7; 2023: 8.9; 2024: 15.0; 2025: 67.7; later entries 16.1, 8.2. - Imports, f.o.b. (CFA francs, percent change): 2019: 4.7; 2020: -8.2; 2021: 1.5; 2022: 12.1; 2023: 4.6; 2024: 9.7; 2025: 19.3; later entries 8.7, 8.9. - Revenue (Percent of GDP): 2019: 20.2; 2020: 21.0; 2021: 21.1; 2022: 20.0; 2023: 20.6; 2024: 20.9; 2025: 21.7; later entries 21.9, 22.6. - Grants (Percent of GDP): 2019: 1.6; 2020: 3.5; 2021: 3.2; 2022: 2.5; 2023: 2.2; 2024: 2.3; 2025: 1.9; later entries 1.7, 1.7. - Total expenditure (Percent of GDP): 2019: 24.0; 2020: 27.1; 2021: 27.6; 2022: 24.5; 2023: 25.5; 2024: 24.9; 2025: 24.7; later entries 24.9, 25.6. - Net lending/borrowing (including grants, Percent of GDP): 2019: -3.8; 2020: -6.1; 2021: -6.5; 2022: -4.5; 2023: -4.9; 2024: -4.0; 2025: -3.0; later entries -3.0, -3.0. - Primary fiscal balance (Percent of GDP): 2019: -1.9; 2020: -4.0; 2021: -4.3; 2022: -2.6; 2023: -2.7; 2024: -1.9; 2025: -0.9; later entries -0.9, -0.9. - Current account balance (official transfers included, Percent of GDP): 2019: -7.5; 2020: -8.8; 2021: -10.9; 2022: -10.2; 2023: -10.7; 2024: -10.6; 2025: -4.6; later entries -3.6, -4.2. - Gross domestic investment (Percent of GDP): 2019: 31.7; 2020: 29.7; 2021: 30.7; 2022: 32.5; 2023: 33.9; 2024: 34.3; 2025: 35.7; later entries 33.5, 33.6. - Total public debt (Percent of GDP): 2019: 64.1; 2020: 68.6; 2021: 67.6; 2022: 70.4; 2023: 68.2; 2024: 68.1; 2025: 63.7; later entries 61.0, 59.7. - Memorandum: Nominal GDP (CFAF billions): sequence includes 13,815; 14,307; 14,006; 15,123; 14,991; 16,154; 18,347; 20,313; 21,826. ### Balance of Payments (Table 2 — selected figures, billions of CFAF) - Current account (billions CFAF): 2019: -1,042; 2020: -1,254; 2021: -1,524; 2022: -1,546; 2023: -1,607; 2024: -1,718; 2025: -850; later entries -735, -909. - Balance on goods (billions CFAF): 2019: -1,701; 2020: -1,655; 2021: -1,894; 2022: -1,841; 2023: -1,879; 2024: -1,922; 2025: -840; later entries -540, -630. - Exports, f.o.b. (billions CFAF): 2019: 2,523; 2020: 2,223; 2021: 2,394; 2022: 2,506; 2023: 2,608; 2024: 2,999; 2025: 5,031; later entries 5,839, 6,315. - Imports, f.o.b. (billions CFAF): 2019: -4,224; 2020: -3,878; 2021: -4,288; 2022: -4,346; 2023: -4,487; 2024: -4,921; 2025: -5,871; later entries -6,379, -6,945. - Current transfers (net, billions CFAF): 2019: 1,139; 2020: 1,059; 2021: 1,442; 2022: 1,255; 2023: 1,337; 2024: 1,463; 2025: 1,550; later entries 1,653, 1,791. - Private (net): 2019: 1,149; 2020: 843; 2021: 1,275; 2022: 1,165; 2023: 1,286; 2024: 1,374; 2025: 1,503; later entries 1,631, 1,767. - Public (net): 2019: -102; 2020: 151; 2021: 66; 2022: 91; 2023: 151; 2024: 89; 2025: 72; later entries 22, 24. - Capital and financial account (billions CFAF): 2019: 1,036; 2020: 1,253; 2021: 1,533; 2022: 1,940; 2023: 1,832; 2024: 1,989; 2025: 1,717; later entries 2,028, 2,368. - Financial account (billions CFAF): 2019: 815; 2020: 983; 2021: 1,262; 2022: 1,648; 2023: 1,551; 2024: 1,689; 2025: 1,398; later entries 1,691, 2,011. - Direct investment (billions CFAF): 2019: 584; 2020: 502; 2021: 751; 2022: 767; 2023: 804; 2024: 844; 2025: 834; later entries 871, 962. - Portfolio investment (net): 2019: 191; 2020: 428; 2021: 64; 2022: 312; 2023: 98; 2024: 113; 2025: 96; later entries 54, 49. - Public sector (net): 2019: 610; 2020: 334; 2021: 207; 2022: 237; 2023: 294; 2024: 169; 2025: 150; later entries -712, 11. - Overall balance (billions CFAF): series includes 153; -183; 942; 252; 718; 671; 1,293; later entries 1,458. - Financing (billions CFAF): series includes -153; 1; -8; -394; -225; -271; -867; later entries -1,293; -1,458. ### Balance of Payments (Table 3 — percent of GDP highlights) - Current account (percent of GDP): 2019: -7.5; 2020: -8.8; 2021: -10.9; 2022: -10.2; 2023: -10.7; 2024: -10.6; 2025: -4.6; later entries -3.6, -4.2. - Exports, f.o.b. (percent of GDP): 2019: 18.3; 2020: 15.5; 2021: 17.1; 2022: 16.6; 2023: 17.4; 2024: 18.6; 2025: 27.4; later entries 28.7, 28.9. - Imports, f.o.b. (percent of GDP): 2019: -30.6; 2020: -27.1; 2021: -30.6; 2022: -28.7; 2023: -29.9; 2024: -30.5; 2025: -32.0; later entries -31.4, -31.8. - Current transfers (net, percent of GDP): 2019: 8.2; 2020: 7.4; 2021: 10.3; 2022: 8.3; 2023: 8.9; 2024: 9.1; 2025: 8.5; later entries 8.1, 8.2. - Financial account (percent of GDP): 2019: 5.9; 2020: 6.9; 2021: 9.0; 2022: 10.9; 2023: 10.3; 2024: 10.5; 2025: 7.6; later entries 8.3, 9.2. - Overall balance (percent of GDP): series includes 1.1; 0.0; 0.1; 2.6; 1.5; 1.7; 4.7; later entries 6.4; 6.7. ### Budgetary central government operations (Tables 4 & 5 — selected figures) - Revenue and Grants (CFAF billions): 2019: 2,789; 2020: 3,008; 2021: 2,962; 2022: 3,027; 2023: 3,089; 2024: 3,381; 2025: 3,987; later entries 4,451; 4,933. - Taxes (CFAF billions): 2019: 2,410; 2020: 2,354; 2021: 2,354; 2022: 2,517; 2023: 2,564; 2024: 2,862; 2025: 3,470; later entries 3,924; 4,371. - Grants (CFAF billions): 2019: 225; 2020: 502; 2021: 453; 2022: 382; 2023: 332; 2024: 377; 2025: 356; later entries 349; 370. - Total expenditure (CFAF billions): 2019: 3,317; 2020: 3,881; 2021: 3,870; 2022: 3,708; 2023: 3,822; 2024: 4,022; 2025: 4,531; later entries 5,057; 5,581. - Net acquisition of nonfinancial assets (CFAF billions): 2019: 1,160; 2020: 1,428; 2021: 1,424; 2022: 1,443; 2023: 1,584; 2024: 1,539; 2025: 1,877; later entries 2,190; 2,475. - Net lending/borrowing (Overall balance, CFAF billions): 2019: -528; 2020: -873; 2021: -908; 2022: -681; 2023: -733; 2024: -641; 2025: -544; later entries -605; -648. - Net lending/borrowing (Percent of GDP): 2019: -3.8; 2020: -6.1; 2021: -6.5; 2022: -4.5; 2023: -4.9; 2024: -4.0; 2025: -3.0; later entries -3.0; -3.0. - Domestically financed public investment (Percent of GDP): 2019: 4.1; 2020: 5.2; 2021: 4.9; 2022: 5.1; 2023: 4.9; 2024: 5.2; 2025: 6.6; later entries 7.4; 8.0. - Externally financed public investment (Percent of GDP): 2019: 4.3; 2020: 4.8; 2021: 5.3; 2022: 4.5; 2023: 5.3; 2024: 4.3; 2025: 3.7; later entries 3.4; 3.3. - Exceptional Financing (CFAF billions / percent of GDP): 2019: 0; 2020: 90; 2021: 300; 2022: 420; subsequent projections 0. ### Monetary and banking sector indicators (Tables 6 & 7 — selected figures) - Broad money (CFAF billions): 2019: 5,687; 2020: 6,167; 2021: 6,222; 2022: 6,662; 2023: 6,790; 2024: 7,372. - Credit to the economy (net, CFAF billions): 2019: 4,597; 2020: 4,624; 2021: 4,705; 2022: 4,728; 2023: 5,015; 2024: 5,344. - Credit to the private sector (percentage growth): 2019: 6.7; 2020: 0.7; 2021: 2.7; 2022: 2.7; 2023: 7.5; 2024: 7.4. - Credit to private sector/GDP (percent): 2019: 29.3; 2020: 28.5; 2021: 29.7; 2022: 27.6; 2023: 29.8; 2024: 29.7. - Financial soundness indicators (selected, various years): - Regulatory capital to risk weighted assets: 2015: 19.1; 2016: 14.5; 2017: 13.6; 2018: 11.8; 2019 Dec: 13.2; 2019 June: 13.1; 2020 Dec: 13.9. - Gross NPLs to total loans: 2015: 19.3; 2016: 18.0; 2017: 16.2; 2018: 13.1; 2019 Dec: 13.6; 2019 June: 13.9; 2020 Dec: 13.4. - Provisioning rate: 2015: 57.7; 2016: 62.5; 2017: 59.7; 2018: 68.1; 2019 Dec: 63.9; 2019 June: 61.5; 2020 Dec: 68.2. - Net NPLs to total loans: 2015: 9.2; 2016: 7.6; 2017: 7.2; 2018: 4.6; 2019 Dec: 5.4; 2019 June: 5.9; 2020 Dec: 4.7. - After-tax return on average assets (ROA) series includes 0.8; 1.0; 1.7; 0.7; ...; 1.2; ... - After-tax return on average equity (ROE) series includes 9.0; 13.0; 19.9; 7.2; ...; 12.6; ... - Liquidity indicators (selected): Liquid assets to total assets around mid-20s across years; Total loans to total deposits ranged from 90.6 to 101.6 in series. ### Policy coordination and reviews (Table 8) - Schedule of Reviews Under the Policy Coordination Instrument, 2020–22: - Second Review: Proposed Date By December 31, 2020; Test Date End-June 2020. - Third Review: Proposed Date By June 30, 2021; Test Date End-December 2020. - Fourth Review: Proposed Date By December 31, 2021; Test Date End-June 2021. - Fifth Review: Proposed Date By June 30, 2022; Test Date End-December 2021. - Sixth Review: Proposed Date By December 31, 2022; Test Date End-June 2022. ### Risks and policy responses (Risk Assessment Matrix, Table 9) - Unexpected shift in the COVID-19 pandemic: - Relative Likelihood: High - Potential impact: High. "The disease proves harder to eradicate..., requiring more containment efforts and impacting economic activity. Fiscal policy response is insufficient amid dwindling policy space and concerns about debt sustainability." - Policy response: "Prepare for contingency scenario and flexibly adjust policy as necessary to ensure appropriate health policy response and mitigate economic damage." - Widespread social discontent and political instability: - Relative Likelihood: Medium/high - Potential impact: Medium. "Social tensions... cause economic hardship... Economic activity is disrupted." - Policy response: "Ensure transparency and accountability of the social and economic response to COVID-19." - Oversupply in the oil market: - Relative Likelihood: Medium/high - Potential impact: High. "Large energy price swings can have significant fiscal implications... Oil and gas production in Senegal could be delayed if prices remain very low." - Policy response: "Consider locking in current low energy prices to remove fiscal uncertainty and strengthening automatic pass through to domestic energy prices while protecting vulnerable segments of society when prices increase." - Domestic and regional security threats: - Relative Likelihood: Medium/high - Potential impact: Medium. "An increase in security concerns for Senegal would require higher security expenditures and could affect private investment." - Policy response: "Ensure that the multi-year budget framework allows room to address fiscal contingencies." *Sources: Senegal authorities; and IMF staff calculations.* ### Annex I. The Socio-Economic Impact of the COVID-19 Crisis ### Annex I. The Socio-Economic Impact of the COVID-19 Crisis ### Survey findings: Households, formal firms, and Informal Production Units (IPU) - Households - 85 percent of households reported a decline in their income, notably from non-agricultural activities. - A third of household heads temporarily stopped working due to the containment measures. - 4/5 of households reported they are worse-off since the beginning of the pandemic. - Most households were aware of and approved the containment measures; closing of markets and travel restrictions were least appreciated. - Households appreciated government support measures, notably: support to the health sector, payment of water and electricity bills for the most vulnerable families, food distributions, and support to the diaspora. - Formal firms - 85 percent reported a decline in their turnover in the first 6 months of 2020. - About 3/5 of formal firms reduced their activity during the crisis. - Almost one tenth slashed production by more than 75 percent. - 27 percent of formal firms stopped their operations temporarily; hotels and restaurants were particularly hard-hit, with half of them closed for at least some time. - Over two-thirds of formal firms intend to invest post-crisis but would need to rely on some form of government support, particularly SMEs. - SMEs indicated preferences for continued help with utility bills, rent support, and access to long-term financing. - Informal Production Units (IPUs) - Informal firms represent 97 percent of total enterprises. - 92 percent of total working-age population in Senegal is engaged in informal activities. - Nine out of 10 informal production units reported reduced sales. - Coping strategies included cost-reducing measures, stops in production, or seeking a loan. - Over 72% of UPIs were hopeful that activity would recover within a year. - 78% considered that the government should establish a support fund for the most affected sectors and continue to subsidize utility bills. *Source: Surveys by the “Agence Nationale de la Statistique et de la Démographie” (September and August 2020).* ### Authorities’ Economic Recovery Plan (PAP2A): objectives, assumptions, and design - Objectives and adjustments - PAP2A aims to support strong and inclusive private sector-led growth, accelerate structural transformation, and enhance resilience. - Renewed emphasis on increasing production of critical supplies to reduce imports of food (notably rice), pharmaceutical products, and health services. - Authorities plan sector-specific tax exemptions, subsidies, and an overhaul of sectoral legal and regulatory frameworks to boost production. - Macroeconomic assumptions and financing - Real GDP growth projected at 5.2 percent in 2021, 7.2 percent in 2022, and 13.7 percent in 2023 on the back of strong investment and the start of oil production. - Total financing need for PAP2A is CFAF 14,712 billion over 2021-2023 (105 percent of 2020 GDP), of which 39 percent is expected to come from the private sector. - Nominal public investment is expected to increase by an average of 20 percent from 2020 to 2023. - Implementation risks and design principles - Assumptions about public and private spending are ambitious; lessons from prior plans and deeper implementation analysis are needed. - Consistency of the plan with the medium-term debt strategy is essential for debt sustainability. - Sectoral support measures (tax exemptions, subsidies) have mixed historical success; careful design is required (limit duration, ensure targeting). - New import restrictions would be a weak policy response with negative spillovers. - Labor market rigidities and underdeveloped capital markets impede resource reallocation; direct support should be carefully targeted and become more selective over time. - If non-performing loans increase and insolvencies rise, strengthening insolvency and debt enforcement mechanisms could speed debt resolution, support financial stability, and improve capital allocation. ### Alternative Scenario — A Protracted Recovery: risks and policy implications - Downside risks and projected path - Key downside risks: resurgence of the pandemic (domestic, regional, or global), more protracted scarring (lower consumption and investment), and slow recovery in hard-hit sectors such as tourism and travel. - In a slower recovery scenario: growth would reach 3 percent of GDP in 2021 and then stay around 5 percent of GDP before hydrocarbon production sets in. - Exports of goods and services related to travel and tourism are assumed to remain 1 percent of GDP under the baseline scenario; a prolonged downturn in diaspora host countries could weigh on remittances. - Fiscal and external pressures - Less economic activity and trade would reduce tax revenues and lead to a higher fiscal deficit (scenario assumes unchanged fiscal policies). - Room for further fiscal support would be limited given debt sustainability outlook and potential regional macroeconomic concerns. - Policy options under constrained fiscal space - Streamline tax expenditures (noting tax expenditures equaled 5.7 percent of GDP in 2017). - Delay investment spending (projected to grow by a nominal annual average of 12.2 percent until 2024 in the baseline) or further reduce non-essential current spending. - Seek additional concessional financing from partners or a Fund financial arrangement if access to financing worsens. - Emphasize reforms to improve the business environment, boost confidence, and spur private investment. ### Program Statement and near-term macro developments (highlights from Appendix I) - Near-term economic indicators (as of end-September 2020) - General economic activity index: preliminary 2.7 percent decline in economic activity compared with the same period in 2019. - Tertiary sector: fell by 4.6 percent; transportation, hotel and restaurant, tourism, support services, and telecommunications particularly affected. - Secondary sector: increased by 1.3 percent driven by agrofood processing (+0.7 percent), electricity, gas and water production, and construction (+7.5 percent). - Workers’ remittances increased by 4.2 percent during the first nine months of 2020; France accounts for 66 percent of Senegal’s inward remittances. - Fiscal and program commitments - Government implemented the Economic and Social Resilience Program (PRES) with rapid measures to assist vulnerable populations and support the private sector; spending under this program is CFAF 1 trillion. - Government expects growth of 5.2 percent in 2021 and has revised PAP2 into the adjusted and accelerated Priority Action Plan (PAP 2A) to address food, health, and pharmaceutical sovereignty, accelerate structural transformation, and strengthen social protection. - Government commits to preserving fiscal sustainability and gradually reduce the budget deficit over three years to the WAEMU convergence criterion of 3 percent of GDP. - Planned measures include broadening the tax base by reducing exemptions, implementing the medium-term revenue strategy, making the National Public Debt Committee (CNDP) operational, implementing program budgeting beginning in 2021, reducing use of deposit accounts for non-personalized government services, and consolidating the treasury single account. - Program monitoring and governance - Government will meet commitments of accountability and transparency for PRES spending. - Government requests completion of the second PCI review and modifications to certain end-2020 quantitative targets and ceilings as outlined in the Program Statement. *Italic: Annex I. The Socio-Economic Impact of the COVID-19 Crisis (extracted content).* ### 3. The government provided fiscal support to firms and households affected by the ### 3. The government provided fiscal support to firms and households affected by the ### Fiscal support under the Economic and Social Resilience Program (PRES) - PRES endowment: CFAF 1 trillion. - As of November 4, 2020, disbursable expenditure registered: CFAF 628.4 billion, including: - Budget expenditure: CFAF 558.4 billion. - Cash operation (treasury operation): CFAF 70 billion to establish a guarantee mechanism with the financial system. - Distribution of PRES budget expenditure (CFAF 558.4 billion): - Pillar 1 (health): CFAF 77.8 billion; - Pillar 2 (social resilience): CFAF 103 billion; - Pillar 3 (assistance to the private sector and job support): CFAF 300 billion divided into: - clearing unpaid obligations: CFAF 200 billion; - support to affected enterprises: CFAF 100 billion; - Pillar 4 (securing the supply of food, energy, and pharmaceuticals): CFAF 77.6 billion. - Mobilized resources as of November 4, 2020: CFAF 701.2 billion, equivalent to a coverage rate of 111.6 percent. - Tax measures: impacted firms’ requests for VAT refunds, tax debt cancellation, and wage withholding subsidies were addressed quickly to support cash flow and preserve jobs. - Enterprise support mechanism (partial credit guarantee scheme): - Total approved financing: CFAF 12.5 billion; financing maintained more than 13,000 jobs. - New guarantee mechanism (established end-November 2020) changes vs resilience mechanism: - State guarantee coverage: 60 percent for SMEs and 40 percent for large enterprises (can be increased for critical sectors); - Financing can cover working capital and investment spending (no longer limited to wages support); - Interest rate: 5.5 percent; - Less restrictive eligibility conditions to include all enterprises, whether or not affected by the pandemic. ### Monetary policy response by the BCEAO - Policy rate reductions: reduced policy rates by 50 basis points, bringing the auction rate to 2 percent and the marginal lending rate to 4 percent beginning on June 24, 2020. - Special refinancing window: opened at a fixed rate of 2.5 percent for Treasury bills ("COVID-19 bills"), maturity three months, renewable, subscribed by banks. - Purpose: enabled the government to cover its financing gap pending mobilization of full support from technical and financial partners. - Liquidity and refinancing: - Increased supply of liquidity to banks and expanded access to refinancing facility. - Fixed-rate auctions at auction windows held since March 27, 2020. - Enhanced automation of listing system for eligible enterprises and expanded access to refinancing for [B]-listed enterprises with a government guarantee. - Financial-stability and digital payments measures: - Recommended that banks and microfinance institutions grant deferred loan maturities for a period of three months, renewable, without interest, fees, or late penalties. - Deferment of measure to defer banks’ claims on customers extended until December 31, 2020. - Timetable for transitional arrangements under Basel II and Basel III deferred for one year; prudential standards applicable to capital components in 2019 extended. - Steps to encourage use of electronic payments by customers of electronic money issuers. ### Banking and microfinance sector performance (first nine months of 2020 / end-September 2020) - Bank assets growth: 6.3 percent, driven by: - Security holdings increase: +28.1 percent (related to subscribing government bonds). - Loan activity: stagnated (-0.2 percent). - Bank financing increased by 4.1 percent (rise in deposits and borrowing). - Liquidity requirements of credit institutions: increased by 65.3 percent. - Microfinance sector activity: recovery of +7.3 percent at end-September 2020 compared with March 2020. - Prudential capital: - Equity capital of credit institutions strengthened generally, but four banks and one financial institution representing 8 ½ percent market share continue to fall short of meeting the prudential norm for equity. - Microfinance sector prudential deterioration: - Sharp deterioration in portfolio of gross overdue claims, primarily due to downgrading of deferred maturities to nonperforming claims. - Sector expectations expressed in terms of operating balance and availability of long-term financing at affordable costs. - Deferred loan maturities (end-September): - Nearly CFAF 74 billion in deferred loan maturities for loans totaling CFAF 337.1 billion (equivalent to 7 percent of outstanding loans) were granted to 1,156 enterprises and 6,292 households. - Nonperforming loans: - Ratio of gross non-performing loans increased by 30 basis points to 14.2 percent between end-March and end-September 2020. - Some banks with market share of 8 ½ percent had equity levels below the regulatory minimum. - Supervisory action: BCEAO and Banking Commission of WAEMU will closely monitor banks and microfinance institutions, especially those with deteriorating financial situations. ### Macroeconomic outlook and risks - 2020 recession projection: initially projected recession of 0.7 percent in 2020 could be avoided given very strong preliminary data for the agricultural campaign 2020-2021. - Growth projection for 2021: growth expected to recover to 5.2 percent in 2021, driven by: - Primary sector: +4.7 percent; - Secondary sector: +5.5 percent; - Tertiary sector: +4.8 percent. - Risks to projections: - Domestic risks: delay in implementing flagship reforms under PAP 2A; weaker-than-anticipated private firm involvement in growth sectors; poor rainfall levels. - External risks: second wave of lockdowns in partner countries (particularly in the Euro Area) reducing external demand; volatility in commodity prices (primary products and crude oil). - Security risks: deterioration in security situation in some subregion areas with negative repercussions for the economy. ### Program implementation, quantitative and reform targets - Program implementation at end-June 2020: satisfactory. - Quantitative targets (QTs) met: tax revenue, budgetary float, and social expenditure. - QTs not observed: floor on net lending and borrowing, government procurement arrangements without open competitive tender (due to urgent pandemic response). - Continuous QTs observed: exceptional expenditure procedures and external public sector payment arrears. - Reform targets (RTs) observed: finalization of medium-term revenue strategy; studies on the expenditure chain and to identify policy measures to improve secondary school enrollment and attendance; establishment of the National Public Debt Committee (CNDP) with adoption of its manual of procedures. - Delayed RT: finalization of the national financial inclusion strategy initially programmed for end-June 2020 (delayed due to COVID-19). - Progress on RTs programmed for end-December 2020: - Interconnection and data exploitation between DGID and DGD: - Interconnection between the two systems completed; - Start of pilot phase of the platform with test data; - Updating of agreement with draft memorandum of understanding in the pipeline; - DGID drafted a detailed report in collaboration with the DGD. - M-tax project (tax filing and payment by mobile telephone): - Pilot phase with 50 taxpayers to begin on November 15, 2020; - System to be operational for all targeted taxpayers on December 15, 2020. - Revision of legal framework for PPPs: draft law to be adopted by the National Assembly by end of current parliamentary session. - Prepayment on income taxes at customs for unregistered taxpayers: draft decree prepared jointly by DGID and DGD; to be adopted by end-December 2020 with implementation effective from January 1, 2021. - Ministerial decree updating framework for expenses eligible for simplified procedures: will limit transfers to deposit accounts for non-personalized government services (excluding defense or national security) to 50 percent of total transfers in 2021 budget law (RT, December 2020). - Law on allocation and management of hydrocarbon revenues: finalization of draft law expected before end-December 2020; Interministerial Technical Committee to prepare and set up fiscal framework during 2021 (RT, end-December 2021). ### Strategic objectives and PAP 2A (post-COVID-19 recovery) - PAP 2A purpose: adjusted and accelerated Priority Action Plan to meet challenges of food, health, and pharmaceutical sovereignty and return economy to pre-COVID-19 track; strengthen social protection and accelerate industrial and digital transformation driven by a strong domestic private sector. - PAP 2A support structure: portfolio of public and private projects, structural reforms, and four innovative financing mechanisms: - Project preparation program; - Guarantee mechanism for the formal sector; - Guarantee mechanism for the informal sector; - Venture capital mutual fund. - Pillar I: Achieve strong and inclusive growth driven by the private sector: - Emphasis on strengthening and promoting sectors for sovereignty and growth: agriculture, livestock, fisheries, health, pharmaceuticals, tourism and air transportation, digital transformation, development of special economic zones and manufacturing hubs. - National Private Sector Development Strategy (SNDSP) to coordinate government interventions and serve as reference framework for private sector interventions for PAP 2A. - New legal framework for PPPs (draft law) will repeal Law 2014-09 of February 20, 2014 and Law 2004-14 of March 1, 2004; major innovations include: - Unified and simplified legal framework for PPPs; - Streamlined institutional framework; - Tools to facilitate rapid execution of quality projects; - Strengthened mechanism to promote the local private sector; - Management of PPPs with local units of government; - Attention to adequate control of fiscal risks while ensuring legal security for investors and promoting well-balanced PPP agreements. - Compact with Africa Initiative reforms (four main areas): labor legislation, access to land, financial inclusion for SMEs, vocational training — progress satisfactory despite pandemic. - Social Security Code: preliminary draft prepared. - Digitization of labor contracts: advanced with ADIE support; average processing time for labor contracts now maximum of seven days for large quantity filings, and 24 hours or 48 hours for small quantities (one or two contracts). - Decree establishing mechanism to calculate rental value for housing properties subject to property tax for buildings: Decree 2020-765 of March 9, 2020 adopted. - Manual on property, domain, and cadastral procedures adopted. - Decrees on vocational training adopted: Decree 2020-1051 of May 22, 2020 (certification) and Decree 2020-1050 of May 20, 2020 (continuing vocational training). - Digitization of domain, property, and cadastral procedures via integrated, centralized land management system in progress (RT, June 2021). - SME support coordination: - Study on streamlining public entities supporting SMEs to be completed by end-December 2020. - One-stop shop establishment adopted under Compact with Africa delayed due to pandemic; ADEMPE started process to make one-stop shop operational by June 2021. - Social safety nets and Single National Register (RNU): - Accelerate implementation schedule of Project to Support Social Safety Nets (PAFS); maintain current budget allocation for cash transfers. - Update of RNU in all regions except Kédougou and Sédhiou (update in progress). - Extension target: include at least one million households in all 14 regions of Senegal by end-2021 (RT, December 2021). - Institutionalization process for RNU initiated; draft decree on institutionalization forwarded to Secretariat General of Government for circularization. - Government to adopt ministerial decree establishing and regulating National Household Security Stipend Program (NBSF) and creating a new shock response program. - Government to support households that undertake to keep girls in school per recommendations to improve secondary education and enrollment. - Pillar II (introductory): Maintain fiscal discipline and debt sustainability during the current COVID-19 crisis — (content continues beyond provided extract). *International Monetary Fund — Senegal staff report excerpt* ### 20. The budget objectives of the program for 2020 are still attainable, despite the delay in ### 1senea2021001 - 20. The budget objectives of the program for 2020 are still attainable, despite the delay in ### Budget performance and outlook for 2020 - Revenue, including grants, amounted to CFAF 1,880.51 trillion at end-September 2020, compared with an annual target of CFAF 2,962 trillion. - Under the revised budget (LFR), tax and non-tax revenue to be collected during the fourth quarter amounts to CFAF 695.81 billion. - Budget grants received amounted to CFAF 122.72 billion, split into budget grants (CFAF 43.18 billion) and capital grants (CFAF 79.54 billion). - A shortfall of approximately CFAF 50 billion is envisaged due to expected delays in the disbursement of one budget support operation. - To date, 89.1 percent of total domestic expenditures have been committed (staff, procurement of goods and services, current transfers, investments executed by the government, and capital transfers). - Overruns observed in externally-financed expenditure on project loans (priority projects in health and infrastructure) are compensated by savings on domestically-financed investments. - Projected domestic spending through the end of 2020 is in line with the revised budget’s projections. - The program budget deficit target adjusted for lower grants in the amount of CFAF 35 billion will be met through extremely close monitoring via weekly modulation meetings. - The adjusted budget deficit is now projected at CFAF 907.8 billion. ### Transparency, accountability, and COVID-19 expenditure - A monitoring committee was established to implement operations of the FORCE COVID-19 fund; it has conducted field missions and working sessions to collect all related information and prepare a comprehensive, detailed report to be completed by the end of 2020 and published. The report will include: - list of all related bids and an explanation of procurement procedures; - list of beneficiaries of public contracts; - description of expenditure control measures. - The regularity of procurement procedures relating to anti-COVID-19 expenditure will be assessed as part of the annual public procurement audit. - Ministries and public agencies that received allocations from the FORCE COVID-19 fund will produce reports; the ministry responsible for social and local equity has already produced a detailed report on execution of all food aid (targeting, contracting with suppliers, distribution to households). - Quarterly budget execution reports (RTEB) submitted to Parliament include financial data on implementation of the Economic and Social Resilience Program; these reports are published regularly online and available to the public. - The next budget review law for the 2020 fiscal year submitted to the National Assembly by June 30, 2021 will reflect the comprehensive, detailed status of all expenditure related to COVID-19. - The Audit Office will prepare a specific report on expenditure related to the COVID-19 pandemic, linked to its report on execution of the 2020 budget law. ### Fiscal policy objectives and the 2021 budget - Fiscal policy in 2021 aims to support economic recovery while setting a course towards a gradual return to the WAEMU deficit target by 2023. - The budget provides for increased priority investment and social expenditure, particularly in health, education, and transportation; budgets of the Ministry of Health and Social Services and the Ministry of Agriculture have increased substantially. - Planned investments aim at reducing inter-regional inequality and promoting new growth centers through balanced land management and enhancement of land potential in local areas. - To support private investment for economic recovery, the government will strengthen the guarantee mechanism established with the financial system under the PRES. ### Revenue mobilization and Medium-Term Revenue Strategy (MTRS) - Revenue under the initial budget law (LFI) for 2021 is expected to be CFAF 3,090 billion, primarily including tax revenue of CFAF 2,5645 billion and nontax revenue of CFAF 133.5 billion. - Mobilization of these resources will be facilitated by implementation of the three focus areas of the MTRS: - (i) expansion of the tax base through more effective promotion of tax compliance; - (ii) enhanced digitalization; - (iii) overhaul of governance in the revenue agencies. - Tax and customs administrations will implement administrative and tax policy measures focused on: - modernization through digital technologies for better control of the tax base; - fight against tax and customs fraud; - strengthening training for tax and customs officers; - incentives for greater tax compliance. - Tax policy measures will include: - introduction of a tax on textiles; - extension of the scope of the tax on dietary fats; - nondeductibility of VAT on certain services; - extension of the scope of the tax on nonrecyclable plastic packaging; - extension of the real estate capital gains tax to certain operations. - Customs measures will include: - increased use of digital technologies and optimized use of the inspection area for at-risk merchandise; - close monitoring of the customs clearing process for high-yield products and merchandise declared to the customs authorities; - more targeted surveillance of the borders to reflect new fraud patterns; - an ambitious ex-post inspection program to prevent diversions to privileged destinations to benefit from exemptions granted on an ex ante basis; - exploitation of potential revenue from niches relating to management of VAT suspended under the Investment Code. - A study under the MTRS on eliminating certain low-impact exemption regimes for the period 2021-23 (RT, June 2021) was undertaken; pending results, consultations were initiated on applying corporate income tax and local economic contributions to the cement industry beginning with the 2021 fiscal year—expected to yield approximately CFAF 15 billion in additional revenue by allowing companies to benefit from incentives under ordinary law established by the 2012 tax reform. - The government undertakes to validate and publish, by the end of 2020, the tax expenditure assessment reports for the 2015-2017 fiscal years, and to publish the tax expenditure assessment report for 2018 by June 30, 2021; it also undertakes to resume publishing tax expenditure reports annually for year N-2 on the Ministry of Finance and Budget website beginning in 2021 (RT, June 2021). ### Expenditure classification, program budgeting, and PFM reforms - Reclassification to determine true public investment and reflect gross capital formation: recurrent spending extraction from capital expenditure was enhanced and extended to all non-personalized government services. - Acquisitions of goods and services increased from CFAF 311.6 billion under the initial 2020 budget law to CFAF 347.7 billion in the 2021 draft budget law (increase of CFAF 36.1 billion; 11.6 percent in relative value). - Investments executed by the government increased from CFAF 104.9 billion in the 2020 budget law to CFAF 367.6 billion in the 2021 draft budget law (increase of CFAF 183.3 billion; 31.8 percent in relative value). - Investments funded with external resources increased from CFAF 761.6 billion in the 2020 budget law to CFAF 844 billion in the draft 2021 budget law. - A precautionary reserve of CFAF 66 billion is included in light of uncertainties related to participation of certain bilateral lenders in G-20 Debt Service Suspension Initiative debt relief. - The budget deficit in 2021 is expected to be reduced to about 5 percent of GDP in 2021, as against approximately 6.5 percent of GDP in 2020. - Financing for 2021 includes CFAF 576 billion in project loan drawings (bulk concessional) and CFAF 167.9 billion in bank and nonbank financing. - Program budgeting implementation in 2021: laws and decrees adapted in 2020 include: - Organic Law on Budget Laws 2020-07 of February 26, 2020; - Decree 2020-1020 of May 5, 2020 on government budget management; - Decree 2020-1021 of May 6, 2020 establishing a list of budget allocations and programs. - Program budgeting will be combined with decentralization of spending authorizations; each minister and institution head will be authorizing officer for their department. - The 2021 draft budget law was prepared in both SYSBUDGET and SIGIF; budget execution will be recorded in both systems in parallel with monthly loading from SYSBUDGET into SIGIF to test robustness. - Measures to improve expenditure chain transparency under the PCI include rationalization of deposit account use by reducing transfers to units not legally or financially autonomous, reclassification of credits for non-personalized government services, and subjecting transfers to ceilings. - Budget entries to be implemented under the normal procedure increased from 25.57 percent in the 2020 budget law to 40.12 percent in the 2021 draft budget law. - Transfers under the immediate settlement request (DMRI) procedure declined from 74.43 percent to 59.88 percent. - A ministerial decree will update the regulatory framework for expenditure eligible to simplified procedures and will limit transfers to deposit accounts for non-personalized government services (excluding defense or national security) to 50 percent of the total of these transfers under the 2021 budget law (RT, December 2020). - Consolidation of the treasury single account: a circular issued to accounting officers; to date, 114 responses corresponding to 250 bank accounts received; data processing underway to distinguish account types; assessment to be completed by the end of December 2020 (RT, December 2020). ### Fiscal risk management and sectoral revenue issues - The government will establish methodological, technical, and institutional mechanisms for managing fiscal risks; a fiscal risks document, including risks related to public enterprises and PPPs, will be prepared and appended to the 2022 draft budget law (RT, December 2021). - Pending establishment of a database of all PPPs and power purchase contracts (with budget impact and quantification of key fiscal risks) (RT, June 2021), the 2022-24 multiannual budget and economic programming paper (DPBEP) section on fiscal risks will be supplemented with a more comprehensive survey of fiscal risks and mitigation measures. - Significant decline in world oil prices in early 2020 and COVID-19 demand impact affected petroleum-related revenues; most petroleum-related revenue items will decline in 2020 compared with 2019, except for the Oil Product Import Security Fund (FSIPP) fee, which is expected to register a significant gain over 2019 reflecting the differential between international and domestic prices of oil products. - The DGID will pursue inspection missions with energy sector entities to ensure FSIPP revenue collection. - The interministerial decree governing distribution of the FSIPP between the government and SAR will be revised by the end of December 2020 to specify that: - all FSIPP revenue must be recorded in the budget; - transfers to the SAR (“marge de soutien”) must be included as a subsidy in the budget law and determined on the basis of an investment program approved by the ministers in charge of finance and energy. - These measures aim to ensure greater transparency of revenue and expenditure related to the energy sector. ### Debt outlook and sustainability - Public sector debt levels expected to rise from 64.1 percent of GDP in 2019 to 67.6 percent of GDP in 2020. - Central government debt service (interest and fees) represents 10.4 percent of total budget revenue in 2020, compared with 9 percent in 2019. - Debt strategy adjustments include greater recourse to concessional loans; nonconcessional financing increasingly used only for projects with high internal rates of return. - Market financing is shifting increasingly towards the regional public securities market. - Implementation of the MTRS is expected to improve domestic resource mobilization and reduce recourse to borrowing. - Overall assessment: debt remains sustainable with a moderate risk of overindebtedness and little scope to absorb further shocks in the short term. *Source: 1senea2021001 - 20. The budget objectives of the program for 2020 are still attainable, despite the delay in* ### 34. The government intends to strengthen debt management. The establishment and ### The government intends to strengthen debt management. The establishment and ### Strengthen public debt management - Establishment and implementation of the National Public Debt Committee (CNDP) to improve project selection and funding under optimal conditions. - CNDP will adopt a borrowing plan for 2021 compatible with the medium-term debt strategy before the end of the year. - Debt database and software audits are in progress; terms of reference validated and budget appropriations secured to launch selection of an authorized international consulting firm represented in Senegal. - The consulting firm will be selected by the end of the year. - Reform target: Finalize a procedures manual for the National Public Debt Committee. Target date: End June 2020. Status: Met. - Reform target: External audit of the public debt database, including SOE debt. Target date: End December 2020. ### Participation in G-20 Debt Service Suspension Initiative (DSSI) - Senegal continued participation in the G-20 debt suspension initiative in 2021. - Savings realized under the Initiative: - Approximately CFAF 29.9 billion in 2020 (24.1 billion in principal and 5.8 billion in interest). - With the Initiative extended to the first half of 2021, savings would increase to CFAF 42 billion. - The government will continue dialogue with all official bilateral lenders to benefit fully from the initiative. ### Hydrocarbon sector: exploitation, timelines, and governance - Projects in development: Grand Tortue/Ahmeyim (GTA) and Yaakar–Téranga (operated by BP), and Sangomar (operated by Woodside). - COVID-19 impact: - Postponement of certain works on Grand Tortue Ahmeyim resulted in postponement of the start of gas production from 2022 to 2023. - Execution rate of Grand Tortue Ahmeyim project was 44.8 percent at end-September 2020. - Project adjustments: - Government continues work with partners to optimize phases 2 and 3 of GTA in light of changes in the hydrocarbons market. - Sangomar timetable maintained, with start of production planned for the first half of 2023. - Government intends to promote development of Yaakar-Téranga gas project to establish a “Gas-to-Power” strategy designed to reduce the cost of electricity by 2023. - Governance framework: - Interministerial Technical Committee to finalize work on the budget framework to reflect hydrocarbon exploitation by end-December 2021 (RT initially planned for end-2020, postponed until December 2021). - Law on Management and Distribution of Hydrocarbon Revenue to be finalized by end-December 2020 (RT). ### Program monitoring, quantitative targets, and TMU definitions - Program instruments: - Monitoring via quantitative targets, continuous targets, and reform targets. - Quantitative targets proposed for end-December 2020, end-June 2021, end-December 2021, and an ongoing quantitative target. - Review schedule: - Third review completion by June 30, 2021. - Fourth review by December 31, 2021. - Fifth review by June 30, 2022. - Sixth review by December 31, 2022. - Examples of quantitative and continuous targets and related deadlines/statuses (as presented in program tables and text): - Floor on net lending/borrowing: multiple numeric entries and status indicators shown in Table 1a. - Ceiling on central government's overall net financing requirement: numeric entries and status indicators shown in Table 1a. - Ceiling on the amount of the budgetary float: 40, 40, 36.3 (Met) for relevant reporting periods as in Table 1a. - Floor on tax revenue examples: 2,328; 2,410 (Met); 1,059; 1,148 (Met); 2,295; 2,295; 1,132; 2,500 (values as in Table 1a). - Ceiling on the share of public sector contracts signed by single tender (percent): target 15; observed 17.3 (Not Met); 15; 51 (Not Met) (values as in Table 1a). - Floor on social expenditures (percent of total spending): 35; observed 43 (Met); 35; 45 (Met) (values as in Table 1a). - Ceiling on total nominal public debt (CFAF billion): 9,114; observed 8,848 (Met); 10,034; 10,234; 10,275 (values as in Table 1a). - Ceiling on spending undertaken outside normal and simplified procedures: 0; observed 0 (Met); later proposed limits and observed 25; 43 (values as in Table 1a). - Ceiling on public sector external payment arrears (stock): 0; observed 0 (Met) across reporting periods (Table 1a). - Continuous targets include: - Not to impose or intensify restrictions on payments and transfers for current international transactions. - Not to introduce or modify multiple currency practices. - Not to conclude bilateral payments agreements inconsistent with Article VIII. - Not to impose or intensify import restrictions for balance of payments reasons. - Technical Memorandum of Understanding (TMU) highlights: - TMU covers the program under the Policy Coordination Instrument (PCI) for January 10, 2020 – January 9, 2023. - Definitions: - “Government” means the budgetary central Government of the Republic of Senegal (excludes central bank and public sector outside budgetary central government). - “Public sector” means the government, local governments and all majority government-owned or controlled entities. - “Debt” follows paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements (Executive Board Decision No. 15688-(14/107), adopted December 5, 2014) with detailed sub-definitions for loans, suppliers’ credits, leases, arrears and penalties, debt guarantees, and external debt. - Definitions and reporting requirements for key program quantitative targets: - Floor on Net Lending/Borrowing: defined on GFSM 2001/14 basis; provisional monthly data to be reported with a lag of no more than 6 weeks; final data no later than two months after provisional reporting. - Ceiling on Central Government’s Overall Net Financing Requirement: defined as overall fiscal balance plus additional Treasury borrowing to finance accounts payable (comptes de dépôt, recettes d’ordre); data reporting quarterly within one month, and monthly details on Government borrowing within six weeks. - Floor on Tax Revenues: defined as sum of revenues from specified tax categories; assessed based on quarterly TOFE; petroleum revenues monitored specifically. *International Monetary Fund — Selected program extract from the program statement and Technical Memorandum of Understanding* ### 11. Reporting Requirement. Reporting requirements are the same as for the quantitative ### 11. Reporting Requirement. Reporting requirements are the same as for the quantitative ### Ceiling on The Share of The Value of Public Sector Contracts Signed by Single Tender (Percent) - Definition: - Public sector contracts: administrative contracts drawn up and entered into by the Government or any entity subject to the procurement code for procurement of supplies, delivery of services, or execution of work. - "Non-competitive" procurement: when the contracting authority awards the contract to the successful candidate without open competitive tender and without an open inquiry and open price. - Semiannual quantitative target applies to total public sector contracts entered into by the Government or by any entity subject to the procurement code. - Exclusions from the ceiling on single-tender contracts: - Classified purchases. - Fuel purchases by SENELEC for electricity production reflected in a new regulation that imposes on SENELEC to buy fuel from SAR on the basis of the current price structure. - Administrative amendments. - Riders whose execution with the supplier is a necessary condition for the final delivery of goods and services included in the original contract provided they comply with the procurement code. - Reporting Requirements: - Government will report semi-annually to Fund staff, with a lag of no more than one month, the total amount of public sector contracts and the total value of all single-tender public sector contracts. ### Floor on Social Expenditure - Definition: - Social spending: spending on health, education, the environment, the judicial system, social safety nets, sanitation, and rural water supply (as contained in the table on social expenditure). - The floor will be evaluated on a semiannual basis. - Reporting Requirements: - Authorities will report semiannual data to Fund staff within two months after each semester. ### Ceiling on Total Nominal Public Debt - Definition: - Debt defined as in paragraph 4, comprises external and domestic debt of the public sector (i.e. general government and public nonfinancial corporations as defined in paragraph 3), measured at nominal value. - Ceiling monitored on an annual basis. - To evaluate this target, debt denominated in foreign currency will be converted at the exchange rate for the projection of the debt stock: - for 2020 CFAF/US$ 598 and CFAF/SDR 817 - for 2021 CFAF/US$ 531 and CFAF/SDR 761 - Reporting Requirements: - Authorities will report quarterly data to Fund staff within two months following the end of each quarter. - As part of the program, the authorities will transmit quarterly to IMF staff, within six weeks after the end of the quarter in question, provisional data relating to the debts of the following public enterprises: LONASE, SN La Poste, RTS, SN PAD, SONES, SENELEC, APIX, SN HLM, SAED, SNR, SOGIP SA, SAPCO, SODAGRI, CICES, SSPP SOLEIL, PETROSEN, SIRN, SICAP, DDD, MSAD, ONFP, ONAS, CNQP, OFOR, OLAG, FONSIS, AIBD, FERA, ASER, FSE, ANAM, AGPBE, COUD, ACMU, CDC, Dakar Dem Dik, ITA, MIFERSO, CEREEQ, Air Senegal and SONACOS. - Any debt contracted during the year by a public enterprise not included in the above list and which is greater than 5 billion CFA francs will also be communicated, and this public enterprise will be added to the list for future reporting. - The stock of debt at end December of the current and previous year of all these public enterprises, as well as information on newly contracted debt during the year and principal payments, will be communicated to IMF staff within two months after the end of the year. - All retroceded or guaranteed debt emanating from the central administration and from which these public enterprises benefit will be communicated, as well as any retroceded or guaranteed debt benefiting enterprises in the private sector. Data will distinguish between guarantees and debt on-lent to public enterprises and those issued to private sector actors. - All commitments by comfort letter will be communicated quarterly to IMF staff within six weeks after the end of the quarter. If some of these comfort letters are already counted in another category (for example, guarantees), this will be explicitly mentioned in the data. ### Ceiling on Spending Through Simplified Procedures for Non-Personalized Services - Definition: - Quantitative target defined as the share of central government expenditures for non-personalized services executed through simplified procedures in total transfers. - Procedures relate to “Demandes de mise en règlement immédiat » (DMRI) and “Dépenses sans ordonnancement préalable » (DSOP). - Reporting Requirements: - Government will report semi-annually to Fund staff the total amount of spending on transfers, and the total amount of spending for non-personalized services executed through transfers on treasury deposit accounts, within six weeks of the end each semester. ### Ceiling on Public Sector External Payments Arrears (Continuous) - Definition: - External payment arrears: sum of payments owed and not paid when due (in accordance with the terms of the contract) on the external debt contracted or guaranteed by the public sector. - Definition of external debt given in paragraph 4 is applicable. - Target monitored on a continuous basis. - Reporting Requirements: - Authorities will promptly report any accumulation of external payments arrears to Fund staff. ### Memorandum Item on Net Domestic and Regional Financing of the Government - Definition: - Net domestic and regional financing of the government defined on the basis of the TOFE as the sum of the net accumulation of liabilities including: - (i) securities issued on the regional market (WAEMU), including T-bills, T-bonds, and Sukkuk - (ii) direct domestic loans in CFAF (including other loans and excluding the counterpart of IMF financing). - The accumulation of other accounts payable does not correspond to domestic or regional financing for this memorandum item. - Memorandum item monitored annually for the budgetary central government. - Reporting Requirements: - Data on net domestic and regional financing will be transmitted quarterly with the TOFE and a maximum delay of two months. ### Additional Information for Program Monitoring - Documents and timing to be transmitted to Fund staff (electronic format if possible): - Within 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 (e.g., supplemental appropriation orders, cancellation of budget appropriations, orders creating supplemental budget appropriations), and acts leading to creation of a new agency or a new fund. - Within a maximum lag of 30 days, preliminary data on: - Tax receipts and tax and customs assessments by category, accompanied by corresponding revenue on a monthly basis. - Monthly amount of expenditures committed, certified, or for which payment orders have been issued. - Monthly situation of checks issued by agencies from their deposit accounts at the Treasury but not paid to beneficiaries, with dates of issuance. - Quarterly report of the Debt and Investment Directorate (DDI) on the execution of investment programs. - Monthly preliminary Government financial operations table (TOFE) based on the Treasury accounts. - Provisional monthly balance of the Treasury accounts. - Reconciliation tables between the SIGFIP table and the consolidated Treasury accounts, between the consolidated Treasury accounts and the TOFE for “budgetary revenues and expenditures,” and between the TOFE and the net treasury position (NTP), on a quarterly basis. - Quarterly report on FSE operations in terms of revenues and expenditures. - Monthly report on the price structure of fuel products, including an estimate of the necessary subsidy for the rest of the year based on the latest price structure; no later than 4 weeks after the publication of the price structure. If domestic prices are higher than international prices, authorities will communicate in which part of the TOFE the benefits are accounted for. - Final data: provided as soon as final balances of the Treasury accounts are available, but not later than one month after reporting of provisional data. - Additional reporting during 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. - Monthly table from the expenditure tracking system (SIGFIP, or SIGIF once operational) showing committed expenditure, certified but not yet cleared for payment, payment orders, payment orders accepted by the Treasury, and payments made by the Treasury. SIGFIP table will exclude delegations for regions and embassies and list payments with no cash impact on Treasury accounts. Balances broken down by payer and spending category, maturity and length of time overdue. - Quarterly reporting on expenditures using derogatory procedures, including: - status of ‘waiting and provisional imputation’ accounts, - status of derogatory expenditures by category, - status of deposit accounts (comptes de dépôt) identifying beneficiary nature (i) agencies in the broad sense; (ii) legal entities governed by private law; (iii) private individuals; (iv) non-personalized state services; and (v) commitments related to comfort letters, - assessment of regularization of such expenditures from one quarter to the next. - Central bank reporting to Fund staff: - Monthly consolidated balance sheet of banks with a maximum lag of two months. - Monetary survey, monthly, with a maximum lag of two months. - Lending and deposit interest rates of commercial banks, semi-annual. - Prudential supervision and financial soundness indicators for bank financial institutions, as reported in the table entitled Situation des Établissements de Crédit vis--à-vis du Dispositif Prudentiel, semi-annual, with a maximum delay of four and a half months after the closing of accounts for prudential ratios and six months for the financial soundness indicators. - Government website updates (monthly) with 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. - (c) 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; and - (iv) details of financing and updated costs. ### Debt Sustainability Analysis Update (Joint Bank-Fund DSA) - Risk ratings: - Risk of external debt distress: Moderate - Overall risk of debt distress: Moderate - Granularity in the risk rating: Limited scope to absorb shocks - Application of judgment: No - Key assessment: - DSA indicates Senegal’s debt remains sustainable with a moderate risk of overall debt distress (external and public) under the current baseline, with limited scope to absorb shocks in the near term. - This is in line with the previous DSA update of April 2020 that accompanied Senegal’s RCF/RFI request. - The moderate risk is predicated on: - gradual recovery from the pandemic-induced economic shock, - continued adherence to a prudent fiscal path (in line with regional convergence criteria), - sound debt management. - Outlook remains highly uncertain and subject to significant downside risks, primarily broader global risks related to the COVID-19 pandemic. - Recommended policy anchor: prudent borrowing strategy prioritizing concessional external borrowing and domestic regional financing in line with programmed financing needs, combined with strengthened debt management and containment of fiscal risks. ### DSA Notes and Baseline Scenario - Preparation and approvals: - DSA prepared jointly with the World Bank and in collaboration with the Senegalese authorities. - Approved by Annalisa Fedelino and Chad Steinberg (IMF) and Marcello Estevão (IDA). - Prepared by staffs of the International Monetary Fund and the International Development Association. - Date on document header: December 18, 2020. - Debt carrying capacity and thresholds: - Senegal’s debt carrying capacity classified as strong (CI score of 3.19 calculated based on the October 2020 WEO and the 2019 CPIA). - Applicable thresholds for public and publicly guaranteed external debt: - 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 - Applicable benchmark for PV of total public debt for strong debt carrying capacity: 70 percent of GDP. - DSA coverage: - Uses a broad definition of public debt capturing: (i) the central government, (ii) para-public entities, and (iii) state-owned enterprises (SOEs), combining data provided by authorities with IMF technical assistance. - Baseline macroeconomic assumptions and revisions (selected): - GDP growth: - projected to be -0.7 in 2020 (3 percent in the previous DSA). - projected 5.2 percent in 2021 (5.5 percent in the previous DSA). - Public sector deficit: - staff estimates overall public sector deficit will be 7.4 percent of GDP in 2020, higher than the 6.8 percent of GDP anticipated at the time of the RCF/RFI. - Revision reflects larger central government fiscal deficit due to the crisis, updated revenue and expenditure data for para-public entities and SOEs through 2018, and revisions to PETROSEN’s oil and gas investment schedule reflecting slower investment due to COVID-19. - Current account deficit: - projected 10.9 percent of GDP in 2020 and 10.7 percent in 2021. - These are smaller deficits than anticipated at the time of the April DSA (11.3 percent and 11.4 percent, respectively), mainly due to a slight drop in imports from lower petroleum prices and more resilient remittances. - Exports of goods and services: - expected to increase significantly by 2025 (from 21 percent of GDP to 34 percent of GDP) driven by the onset of oil and gas exports which accounts for 3/4 of the increase. - Debt service path: - reflects reprofiling of DSSI-eligible debt in 2020 (May-December) and 2021 (January-June) on standard terms, except for debt from creditors whose participation is pending; this results in slightly higher debt service over the medium term. - Exchange rate effects: - public debt profile benefited from favorable exchange rate movements due to depreciation of the USD relative to the CFAF/euro peg since the previous DSA (by about 6 percent). - Present value calculation: - more precise calculation of the present value of debt service has resulted in a slightly lower debt service path than in the April DSA. *Source: 1senea2021001 - 11. Reporting Requirement. Reporting requirements are the same as for the quantitative (excerpt).* ### 4. The DSA assumes a financing mix consistent with a prudent borrowing strategy, aimed at ### 1senea2021001 - 4. The DSA assumes a financing mix consistent with a prudent borrowing strategy, aimed at ### Financing assumptions and market context - Financing mix: gradual increase in the share of domestic debt and seeking new external financing on concessional terms whenever feasible. - COVID-19-related expenses: financed mostly with grants and highly concessional loans. - Authorities have delayed some lower-priority projects in 2020. - BCEAO measures: taken to enhance liquidity in the sub-regional market, supporting prospects for domestic borrowing. - Constraints on domestic borrowing: lack of market depth combined with potentially higher demand from other countries in the region. ### Risk rating and vulnerabilities - Risk assessment: Senegal remains at moderate risk of external and public debt distress. - Baseline: remains below thresholds throughout the forecast period, with the exception of a one-off breach in the debt service-to-exports indicator in 2020. - Under most extreme shock scenarios: three of the four external debt indicators breach their thresholds for a significant period. - Public debt dynamics: public debt-to-GDP ratio is projected to peak at around 68 percent of GDP in 2021–22 before gradually declining over the medium term as oil and gas investments come online. - Debt service burden: projected to be about 21 percent of total revenues and grants in 2020, before gradually rising to about 24 percent on average over the medium term due to borrowing related to the hydrocarbon sector. - DSA realism tools: do not signal any signs of over-optimism in fiscal projections or large changes to investment and contributions to growth compared to previous DSAs. ### Projections and key statistics (as presented) - Real GDP growth (Current DSA): -0.75.26.011.96.25.1 - Real GDP growth (Previous DSA): 3.05.58.011.26.85.1 - Overall fiscal deficit (percent of GDP) (Current DSA): 7.45.85.24.04.82.7 - Overall fiscal deficit (percent of GDP) (Previous DSA): 6.94.64.34.14.63.4 - Current account deficit (percent of GDP) (Current DSA): 10.910.710.64.67.41.3 - Current account deficit (percent of GDP) (Previous DSA): 11.311.48.53.77.81.5 - Exports of goods and services (percent of GDP) (Current DSA): 21.022.324.132.728.132.2 - Exports of goods and services (percent of GDP) (Previous DSA): 20.922.926.232.926.731.4 Notes accompanying the projections: - Medium term defined as the first 5 years of the projection period; for the current DSA update, the medium term covers the years 2020-2025. - Long term defined as the last 15 years of the projection period; for the current DSA update, the long term covers the years 2026-2040. - Overall fiscal deficit refers to General Government and Public Sector. ### Policy implications and recommendations - Fiscal stance: Senegal has limited space to absorb shocks in the near term, reinforcing the need for prudent fiscal policy and sound debt management. - Fiscal constraints: relatively high debt service levels throughout the forecast period limit fiscal space for additional expenditures to support a robust and resilient recovery. - Recommended actions: - Further efforts to mobilize additional revenues. - Prioritize concessional borrowing. ### Risks to the outlook - Primary risk driver: depth and duration of the COVID-19 pandemic. - Other risks: - Deeper global slowdown and prolonged outbreak in Senegal or major trading partners could lower GDP and export receipts in 2020 and weaken the expected recovery. - Regional security risks and natural disasters could increase fiscal pressures. - Lower oil prices: beneficial in the short term for mitigating current account deterioration; prolonged low prices could hinder planned investments in the oil and gas sector with significant knock-on implications for the medium-term outlook. ### Authorities' views and planned actions - Authorities broadly share staff’s assessment: risks to the debt profile are moderate with limited space to absorb shocks in the near term. - Authorities’ priorities: major investments under the PAP2A are needed to bolster the recovery and foster sustainable growth. - Borrowing strategy: developing a borrowing strategy for 2021–23 that places greater emphasis on concessional or semi-concessional external financing, as well as increased domestic borrowing to minimize foreign exchange risk. - Strengthening oversight: seeking to strengthen oversight over public sector borrowing, including SOEs and PPPs, through the National Public Debt Committed (CNDP). ### CI Score (Calculation summary as presented) - CPIA: Coefficient 0.385, 10-year average value 3.75, CI Score component 1.45 — contribution 45% - Real growth rate (in percent): Coefficient 2.71, 10-year average value 96.29, CI Score component 1 — contribution 0.175% - Import coverage of reserves (in percent): Coefficient 4.05, 10-year average value 239.09, CI Score component 3 — contribution 1.5850% - Import coverage of reserves^2 (in percent): Coefficient -3.99, 10-year average value 15.283, CI Score component -0.61 — contribution -19% - Remittances (in percent): Coefficient 2.02, 10-year average value 10.261, CI Score component 1 — contribution 0.216% - World economic growth (in percent): Coefficient 13.52, 10-year average value 2.928, CI Score component 0.4012% — contribution 0.4012% - CI Score: 3.19 - CI rating: Strong *Source: IMF staff estimates and projections as presented in the DSA chapter.* ### 2.5 percentage points of GDP in ### 2.5 percentage points of GDP in ### Market-financing risk indicators (Figure 5) - Charts cover 2020–30 with series labeled: Baseline, Market financing, Threshold. - Debt service-to-revenue ratio: visual scale 0–25 (percent). - PV of debt-to-exports ratio: visual scale 0–300 (percent). - PV of debt-to-GDP ratio: visual scale 0–60 (percent). - Debt service-to-exports ratio: visual scale 0–25 (percent). - Notes: - 1/ Maximum gross financing needs (GFN) over 3-year baseline projection horizon. - 2/ EMBI spreads correspond to the latest available data. - Potential heightened liquidity needs: Low. ### Qualification of the Moderate Category (Figure 6) - Time horizon 2020–30; thresholds and classifications shown: Threshold, Limited space, Baseline, Some space, Substantial space. - Threshold parameterization: - For PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. - For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. ### External Debt Sustainability Framework, Baseline Scenario (Table 1) — Key levels and flows (2017–40) - External debt (nominal) series (2017–2040): 61.7, 71.6, 73.8, 78.1, 79.1, 78.3, 71.8, 66.6, 65.5, 50.7, 36.6, 56.1, 65.5. - Of which: public and publicly guaranteed (PPG) series: 39.1, 51.8, 53.2, 55.3, 55.5, 54.3, 49.5, 45.7, 43.3, 32.7, 21.7, 33.5, 44.2. - Change in external debt (selected years): 6.9, 9.9, 2.2, 4.3, 1.0, -0.8, -6.5, -5.1, -1.1, -2.6, -0.9. - Identified net debt-creating flows (selected years): -0.2, -0.7, 2.3, 6.0, 1.7, 1.0, -8.1, -6.3, -3.9, -3.9, -4.9, 2.8, -2.7. - Non-interest current account deficit (selected years): 6.0, 6.6, 5.4, 8.8, 8.2, 8.1, 2.2, 1.1, 1.7, 0.1, -1.5, 5.4, 2.9. - Exports (selected years): 21.9, 23.5, 24.2, 21.0, 22.3, 24.1, 32.7, 34.1, 34.3, 32.7, 31.9. - Imports (selected years): 35.7, 38.6, 38.0, 39.8, 39.0, 39.2, 39.9, 39.6, 40.4, 32.2, 30.3. - Net current transfers (negative = inflow) (selected years): -9.4, -8.9, -8.2, -10.3, -8.9, -9.1, -8.5, -8.1, -8.2, -7.8, -7.6, -9.5, -8.4. - Net FDI (negative = inflow) (selected years): -2.4, -3.4, -4.2, -5.4, -5.4, -5.2, -4.5, -4.3, -4.4, -2.8, -2.7, -2.1, -4.2. - Endogenous debt dynamics (selected years): -3.9, -3.9, 1.1, 2.6, -1.1, -1.9, -5.8, -3.1, -1.2, -1.2, -0.7. - Residual (includes exceptional financing) (selected years): 7.1, 10.5, -0.1, -1.7, -0.7, -1.9, 1.6, 1.2, 2.8, 1.3, 4.0, 0.5, 0.6. ### External DSA — Sustainability indicators and macro assumptions - PV of PPG external debt-to-GDP ratio (selected years): 45.1, 49.2, 47.9, 47.0, 43.3, 40.5, 38.6, 29.4, 19.2. - PV of PPG external debt-to-exports ratio (selected years): 186.4, 234.8, 214.6, 194.8, 132.6, 118.7, 112.6, 89.7, 60.2. - PPG debt service-to-exports ratio (selected years): 9.3, 16.5, 14.6, 22.1, 18.2, 18.1, 13.4, 15.9, 11.8, 9.7, 6.7. - PPG debt service-to-revenue ratio (selected years): 7.5, 14.0, 12.1, 16.1, 13.9, 14.9, 14.4, 17.5, 12.8, 10.0, 6.7. - Gross external financing need (Billion of U.S. dollars) (selected years): 1.5, 1.8, 1.4, 2.3, 2.2, 2.5, 1.1, 1.3, 1.0, 0.9, -1.7. - Key macroeconomic assumptions (selected series): - Real GDP growth (in percent): 7.4, 6.4, 5.3, -0.7, 5.2, 6.0, 11.9, 8.7, 6.0, 6.0, 4.9, 5.1, 5.9. - GDP deflator in US dollar terms (change in percent): 2.7, 4.1, -3.7, 3.8, 6.9, 2.5, 1.9, 2.1, 1.5, 2.3, 2.1, -1.1, 2.7. - Effective interest rate (percent): 2.5, 3.8, 3.0, 2.9, 3.6, 3.4, 3.5, 3.9, 4.0, 3.5, 2.9, 3.7. - Growth of exports of G&S (US dollar terms, in percent): 12.2, 19.2, 4.3, -10.7, 19.9, 17.4, 54.4, 15.8, 8.1, 7.0, 8.3, 6.5, 12.6. - Growth of imports of G&S (US dollar terms, in percent): 21.3, 19.6, 0.0, 7.8, 10.2, 9.3, 16.2, 10.1, 9.6, 4.2, 6.0, 6.0, 7.2. - Grant element of new public sector borrowing (in percent) (selected years): 15.6, 14.6, 12.1, 10.9, 10.9, 15.2, 15.2, 18.0, 13.8. - Government revenues (excluding grants, in percent of GDP) (selected years): 27.4, 27.6, 29.3, 28.7, 29.2, 29.4, 30.6, 31.7, 31.8, 31.8, 31.9, 20.1, 30.8 (series formatting in source). - Aid flows (Billion of US dollars) (selected years): 1.0, 1.0, 1.5, 0.8, 0.7, 0.8, 0.7, 0.7, 0.8, 1.0, 1.8. - Grant-equivalent financing (in percent of GDP) (selected years): 4.7, 3.2, 3.0, 2.4, 2.2, 2.2, 2.0, 1.8, 2.6. - Grant-equivalent financing (in percent of external financing) (selected years): 37.5, 35.6, 37.7, 37.5, 34.1, 44.2, 45.4, 51.8, 40.4. - Nominal GDP (Billion of US dollars) (selected year values presented in source): 21, 23, 24, 24, 27, 30, 34, 38, 40, 59, 116. - Nominal dollar GDP growth (selected years): 10.3, 10.8, 1.4, 3.1, 12.5, 8.6, 14.0, 11.0, 7.6, 8.4, 7.1, 4.0, 8.7. - Memorandum: PV of external debt (selected series): 65.8, 72.0, 71.5, 71.1, 65.7, 61.4, 60.8, 47.4, 34.1. - In percent of exports (selected series): 271.9, 343.7, 320.1, 294.3, 200.9, 180.1, 177.4, 144.7, 106.8. - Total external debt service-to-exports ratio (selected series): 15.3, 19.7, 19.7, 28.6, 23.6, 23.0, 16.7, 19.3, 15.2, 12.8, 8.5. - PV of PPG external debt (in Billion of US dollars) (selected series): 10.6, 12.0, 13.1, 14.0, 14.7, 15.2, 15.6, 17.2, 22.2. - (PVt-PVt-1)/GDPt-1 (in percent) (selected series): 5.6, 4.7, 3.2, 2.4, 1.6, 1.0, 0.9, 0.6. - Non-interest current account deficit that stabilizes debt ratio (selected series): -0.8, -3.2, 3.2, 3.2, 4.5, 7.2, 9.0, 8.7, 6.2, 2.8, 2.7, -0.6. ### Public Sector Debt Sustainability Framework, Baseline Scenario (Table 2) — Key levels (2017–40) - Public sector debt (2017–2040) series: 61.1, 63.2, 64.1, 67.6, 68.2, 68.1, 63.7, 61.0, 59.7, 53.1, 48.9, 45.5, 60.5. - Of which: external debt (selected series): 39.1, 51.8, 53.2, 55.3, 55.5, 54.3, 49.5, 45.7, 43.3, 32.7, 21.7, 33.5, 44.2. - Change in public sector debt (selected years): 13.6, 2.1, 0.9, 3.5, 0.7, -0.1, -4.4, -2.7, -1.3, -1.5, -0.2. - Identified debt-creating flows (selected years): -6.7, 3.0, 2.6, 7.2, 1.4, 0.2, -4.2, -2.7, -1.2, -1.5, -0.2, 2.5, -0.5. - Primary deficit (selected years): -2.8, 1.8, 2.4, 4.7, 3.2, 2.7, 1.5, 1.1, 0.6, 0.4, 0.8, 2.1, 1.4. - Revenue and grants (selected years): 29.5, 29.6, 29.0, 31.9, 31.4, 31.7, 32.5, 32.7, 33.4, 33.4, 33.4, 22.1, 32.8. - Primary (noninterest) expenditure (selected years): 26.7, 31.4, 33.4, 36.6, 34.5, 34.4, 34.0, 33.8, 34.0, 33.8, 34.2, 24.2, 34.2. - Automatic debt dynamics (selected years): -5.3, 0.6, -0.6, 1.6, -1.7, -2.5, -5.7, -3.8, -1.8, -1.9, -1.0. - Contribution from average real interest rate (selected series): 1.3, 2.7, 1.4, 1.2, 1.7, 1.4, 1.5, 1.3, 1.6, 1.1, 1.3. - Contribution from real GDP growth (selected series): -3.3, -3.7, -3.2, 0.4, -3.4, -3.9, -7.2, -5.1, -3.4, -3.1, -2.3. - Other identified debt-creating flows (selected years): 1.4, 0.6, 0.7, 0.9, 0.0. - Residual (selected years): 20.3, -0.9, -1.7, -3.7, -0.8, -0.3, -0.2, -0.1, -0.1, 0.0, 0.0, 1.2, -0.5. - Sustainability indicators: - PV of public debt-to-GDP ratio (selected series): 56.3, 59.5, 60.4, 60.8, 57.6, 55.7, 55.0, 49.8, 46.4. - PV of public debt-to-revenue and grants ratio (selected series): 181.8, 186.4, 192.5, 191.8, 177.1, 170.5, 164.8, 149.2, 138.9. - Debt service-to-revenue and grants ratio (selected series): 23.1, 31.9, 21.7, 21.3, 22.5, 25.1, 23.1, 27.0, 22.9, 23.7, 23.9. - Gross financing need (selected series): 5.4, 11.8, 9.8, 12.4, 10.2, 10.6, 9.0, 9.9, 8.2, 8.3, 8.8. - Key macro/fiscal assumptions: - Real GDP growth (in percent): 7.4, 6.4, 5.3, -0.7, 5.2, 6.0, 11.9, 8.7, 6.0, 6.0, 4.9, 5.1, 5.9. - Average nominal interest rate on external debt (in percent): 2.8, 4.5, 3.7, 3.5, 3.6, 3.4, 3.5, 3.7, 3.7, 3.7, 3.5, 2.9, 3.6. - Average real interest rate on domestic debt (in percent): 4.2, 4.2, 3.9, 4.1, 5.8, 4.3, 4.4, 4.1, 4.5, 3.7, 3.9, 4.9, 4.2. - Inflation rate (GDP deflator, in percent): 0.6, -0.5, 1.7, 2.1, 1.7, 1.7, 1.5, 1.8, 1.4, 2.3, 2.1, 0.9, 1.9. - Growth of real primary spending (deflated by GDP deflator, in percent) (selected values): 28.8, 24.8, 12.0, 9.0, -0.8, 5.5, 10.6, 8.0, 6.5, 5.9, 5.0, 10.8, 6.0. - Primary deficit that stabilizes the debt-to-GDP ratio (selected series): -16.4, -0.3, 1.6, 1.2, 2.5, 2.8, 5.9, 3.8, 1.8, 1.9, 1.0, -5.0, 2.4. ### Sensitivity analysis — Public and PPG external debt indicators (Table 3) - Baseline PV of debt-to-exports ratio (2020–30): 49, 48, 47, 43, 40, 39, 36, 33, 31, 29. - Alternative scenarios and bound tests produce series with breaches indicated by bold values in source. - Threshold for various indicators presented in tables: 55 for PV of debt-to-exports ratio; 240 for PV of debt-to-GDP ratio; 21/24/23 etc. across panels. - Scenarios covered include: - A1. Key variables at their historical averages in 2020-2030. - A2. Alternative Scenario :[Customize, enter title]. - B1–B6. Bound tests: Real GDP growth; Primary balance; Exports; Other flows; Depreciation; Combination of B1–B5. - C1–C4. Tailored tests: Combined contingent liabilities; Natural disaster (n.a.); Commodity price (n.a.); Market Financing. ### Sensitivity analysis — Public debt indicators (Table 4) - Baseline PV of public debt-to-GDP ratio (2020–30): 60, 60, 61, 58, 56, 55, 53, 52, 51, 50. - Total public debt benchmark: 70 across projection years. - PV of Debt-to-Revenue Ratio (selected baseline series): 186, 192, 192, 177, 171, 165, 159, 156, 156, 153, 149. - Debt Service-to-Revenue Ratio (baseline series): 21, 23, 25, 23, 27, 23, 26, 25, 26, 24, 24. - Scenarios and tests analogous to external DSA sensitivity analysis (A1, A2, B1–B6, C1–C4) with results shown year-by-year and thresholds noted; natural disaster and commodity price tailored tests marked n.a. where not applicable. *Sources: Country authorities; and staff estimates and projections.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1senea2021001.pdf_