## 1senea2023001

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---

### Context and outlook
- Weaker external demand, rising food and energy prices, tightening financial conditions, and the US dollar appreciation have negatively impacted the Senegalese economy.
- Multiple challenges: heightened regional insecurity, growing social demands amid soaring cost of living, and severe floods.
- Growth and inflation revisions for 2022:
  - Growth revised down to 4.7 percent in 2022.
  - Inflation revised up to 8.5 percent in 2022.
- Medium-term prospects:
  - Temporary boost from oil and gas production expected to start in late 2023.
  - Oil and gas production is set to start at end-2023 and is expected to materially improve both the current account balance and debt-to-GDP ratio.
  - Non-hydrocarbon growth expected to pick up to around 6 percent from 2023 onwards.
- Key projection entries (selected from Text Table 4):
  - Real GDP percent change: 6.1 (2021), 5.0 (IMF CR 22/197), 4.7 (Proj. 2022), 8.3 (Proj. 2023), 8.3 (Proj. 2024), 10.4 (Proj. 2024 alternative column).
  - CPI inflation, average: 2.2 (2021), 5.5 (IMF CR 22/197), 8.5 (Proj. 2022), 3.1 (Proj. 2023), 3.5 (Proj. 2024), 2.0 (Proj. 2024 alternative column).
  - Current account balance (percent of GDP): -13.3 (2021), -13.2 (IMF CR 22/197), -15.7 (Proj. 2022), -8.8 (Proj. 2023), -11.0 (Proj. 2024), -4.9 (Proj. 2024 alternative).
  - Gross debt public sector (percent of GDP): 73.2 (2021), 75.1 (2022), 75.1 (2023), 71.4 (Proj. 2023 alt), 73.7 (Proj. 2024), 69.5 (Proj. 2024 alt).

### Recent economic developments
- Growth and sectoral performance:
  - GDP growth slowed from 5.2 percent in March to 2.9 percent y/y in June 2022.
  - Deceleration driven by secondary sector (+0.5 percent y/y) and tertiary sector (+3.7 percent y/y).
- Inflation:
  - Headline inflation through October hit 13 percent y/y (multi-decade high).
  - Core inflation reached 5.1 percent.
  - Domestic food inflation at 19.5 percent y/y.
- External sector and reserves:
  - Current account deficit was 13.3 percent of GDP in 2021 and widened further.
  - WAEMU pooled reserves at 4.5 months of prospective imports at end-October.
  - External position projected to strengthen once hydrocarbon exports begin in late 2023.
- Financial sector and monetary indicators:
  - Broad money increased by 18.4 percent through September (y/y).
  - Credit to the economy up 20.2 percent (y/y).
  - Nonperforming loans to total loans at 11.2 percent at end-June 2022 (11.5 percent at end-2021).
  - Regulatory capital to risk-weighted assets at 12.0 percent.

### Fiscal execution and public finances (end-September / revised 2022 budget comparisons)
- Revenues and grants: 2,514 (Sep-22); Revised 2022 budget: 3,587; 21.0 percent of GDP.
- Revenues (excl. grants): 2,383 (Sep-22); Revised 2022 budget: 3,344; 19.6 percent of GDP.
- Tax Revenues: 2,264 (Sep-22); Revised 2022 budget: 3,163; 18.5 percent of GDP.
- Grants: 132 (Sep-22); Revised 2022 budget: 243; 1.4 percent of GDP.
- Expenditure: 2,287 (Sep-22); Revised 2022 budget: 4,640; 27.1 percent of GDP.
- Current (excl. interest): 1,985 (Sep-22); Revised 2022 budget: 2,898; 17.0 percent of GDP.
- Investment: 1,187 (Sep-22); Revised 2022 budget: 1,362; 8.0 percent of GDP.
  - Externally financed investment: 478 (Sep-22).
  - Internally financed investment: 709 (Sep-22).
- Balance: -959 (Sep-22); Revised 2022 budget: -1,053; -6.2 percent of GDP.
- Energy subsidy envelope entirely spent at end-September.
- Pay increase extended to all civil servants (+0.1 percent of GDP).
- Investment execution rate (net of disposal of nonfinancial assets): 87.2 percent.
- Public debt rose to 74.3 percent of GDP during the first semester.

### Program performance, structural benchmarks, and procurement
- Overall program performance through end-June 2022: broadly satisfactory.
- Quantitative performance criteria:
  - All end-June 2022 performance criteria were met.
  - Strong tax revenue performance and partial transfer of proceeds from sale of government buildings (0.5 percent of GDP) helped meet fiscal deficit PC.
- Indicative targets:
  - Two out of three indicative targets were met (ceiling on use of simplified procedures for non-personalized services; floor on social spending).
  - Ceiling on share of contracts awarded through single-source procurement was breached and continuously missed.
- Structural benchmarks (SBs):
  - Three out of nine SBs were met:
    - Tax expenditure report for 2020 published.
    - Semi-annual report on customs–tax administration cooperation prepared before end-June.
    - Evaluation framework to monitor MTRS implementation adopted.
  - Six SBs not met (examples): expansion of tax base not achieved; adoption of a new public procurement code (prior action) not met on schedule; roadmap to eliminate energy subsidies not published (prior action); PPP database not updated; digital payments under the regular cash transfer program not implemented by end-November SB; adoption of a new fiscal framework for oil and gas revenues met with delays.
  - A prior action was added on raising energy prices to limit electricity and fuel subsidies to 2.7 percent of GDP in 2023.

### Fiscal policy and 2023 budget stance
- Revised 2022 budget:
  - Fiscal deficit maintained at 6.2 percent of GDP through additional revenue measures and savings to offset larger energy subsidies.
- 2023 budget and targets:
  - 2023 budget initially targets a higher deficit (-5.5 percent of GDP) than previously agreed.
  - Authorities committed to limit the deficit to 4.9 percent of GDP by leaving most of the budget reserves (0.8 percent of GDP) untapped and by increasing tax revenue collection.
  - Goal to achieve a large fiscal adjustment toward meeting the 3 percent of GDP deficit target by 2025.
- Energy subsidies and mitigation:
  - Authorities will raise energy prices effective January 1, 2023, to contain the energy subsidy bill in 2023.
  - Mitigating measures: subsidies to mass transportation and increased cash transfers to the poorest households.
- Budget impact of cost-of-living measures (Text Table 5, CFAF billion / percent of GDP):
  - New measures fiscal impact: Total 37 / 0.19.
    - Tax base adjustment on sugar: 7 / 0.04.
    - Tax base adjustment on cement: 6 / 0.03.
    - Tax base adjustment on edible oil: 6 / 0.03.
    - Tax base adjustment on powdered milk: 9 / 0.05.
    - Tax base adjustment on iron rods: 7 / 0.04.
    - Suspension of custom duty on hatching eggs: 1 / 0.01.
  - Previous measures (selected): Total 113 / 0.59.
  - Total (new + previous): 149 / 0.8.

### Debt outlook, financing, and capacity to repay
- Public sector gross debt: 73.2 percent (2021), 75.1 percent (2022), 75.1 percent (2023) in Text Table 4 entries.
- Total public debt projected to peak at 75 percent of GDP in 2022 before declining as hydrocarbon projects boost growth in 2023-24.
- Debt drivers: larger fiscal deficits from external shocks (COVID-19, Russia’s invasion of Ukraine), strong US dollar appreciation, additional SOE borrowing.
- Financing strategy:
  - Authorities intend to tap the regional bond market and seek concessional and semi-concessional loans; no near-term international bond issuance planned.
  - Strengthening debt oversight by the national debt committee (CNDP) and implementing action plan following debt audit.
- Capacity to repay the Fund (baseline):
  - Repayments to the Fund will peak at 4.4 percent of government revenue and 3.6 percent of exports of goods and services in 2026 under baseline scenario.
  - Total obligations based on existing and prospective credit (SDR Millions): 906.0; 852.1; 722.7; 545.9; 314.6; 158.2; 93.5; 33.6; 0.0; 0.0; 0.0 (series shown in table).
  - Percent of GDP (same series): 4.7; 4.2; 3.2; 2.2; 1.2; 0.5; 0.3; 0.1; 0.0; 0.0; 0.0.

### Outlook, risks, and vaccination
- Near-term outlook:
  - Challenging external and domestic environments will continue to weigh on the economy.
  - Growth projections for 2022 revised from 5 to 4.7 percent.
  - Inflation revised from 5.5 to 8.5 percent for 2022.
- Medium-term:
  - Growth projected at 8.3 percent in 2023 and 10.4 percent in 2024 (Text Table 4 entries).
- Downside risks:
  - Continued geopolitical tensions and high commodity prices.
  - US dollar appreciation pass-through.
  - Further tightening of global financial conditions.
  - Fiscal slippages and political/social disruptions (including in run-up to 2024 presidential elections).
  - Subsequent waves of COVID-19 and vaccine rollout risks (only 16.6 percent of population 15 years and older fully vaccinated).

### Inflation persistence and policy implications (Annex I)
- Recent dynamics:
  - Headline y-o-y inflation hit 13 percent in October 2022.
  - Core inflation at 5.1 percent.
  - Food accounts for almost half of the CPI consumption basket.
  - Public sector wages were increased by about 20 percent in 2022 and 2023; additional spending related to the increase and security-related spending represents almost 1 percent of GDP in 2022.
- Empirical findings:
  - Autoregressive parameter for headline inflation increased from 0.69 (average, 2012–2020) to 0.75 (average, post-pandemic).
  - A one-standard deviation increase in global food prices increases headline inflation by about 1 percentage point after 3 or 4 months, building up to 3 percentage points over 12 months.
  - Broad money shocks have significant impact on headline inflation with two or three quarters lag.
  - Government current expenditure shocks not significant in the estimates.
- Policy implications:
  - Avoid increasing untargeted food and energy subsidies ("not an optimal and sustainable policy option").
  - Prioritize targeted measures (e.g., cash transfers to the most vulnerable) by strengthening the existing social safety net (SSN).
  - Gradually pass through international prices to domestic prices as SSN is strengthened.
  - Implement structural measures to boost agricultural productivity and monitor potential second-round effects closely.

### Gas-to-Power Strategy (Annex II) — impacts and recommendations
- Context:
  - Current electricity supply about 1 GW; government target to increase to about 3 GW and reduce cost of electricity (currently about 25 US cents/kWh) by more than 20 percent.
  - Oil and gas discoveries identified reserves comprising more than 400 million barrels of oil and in excess of 40,000 billion cubic feet of gas.
- Macroeconomic and fiscal impacts:
  - Cheaper, more reliable electricity can spur growth, reduce energy input costs, and lower energy subsidies (Total energy subsidies reached 4.4 percent of GDP in 2022).
  - GTP can promote know-how and a transition away from heavy fuel electricity production.
- Policy recommendations:
  - Ensure GTP implementation reflects highest governance standards and effective regulatory framework; transparency in bidding and competition is essential.
  - Create fiscal space by gradually reducing energy subsidies, support the vulnerable with targeted measures, and use part of the fiscal space to support GTP.
  - Provide clarity on timing and key steps of GTP while managing expectations.

### Public Financial Management (PFM), governance, and AML/CFT
- PFM reforms:
  - Progress satisfactory; Treasury single account: closure of 176 central government bank accounts (out of 276).
  - Remaining efforts: limit direct transfers to entities and reclassify by economic nature; address weaknesses from COVID-19 funds audit (Court of Accounts).
  - Procurement: revised procurement code adopted (prior action) to limit exemptions to open and competitive tenders.
- Financial sector vulnerabilities:
  - La Poste SN-LPSN: action plan finalized in July 2022 for restructuring and transformation into a postal bank; recapitalization and recovery plan foreseen.
  - AML/CFT: Senegal remains on the FATF grey list; urgency to establish targeted financial sanctions, strengthen AML/CFT supervision, and strengthen beneficial ownership framework.

### Public sector reforms, private sector, and social programs
- Business environment reforms under PREAC and SNDSP:
  - PREAC I–III and PREAC III (2019–2023) ongoing reforms (labor law, commercial justice, Investment Code, PPP law).
  - National private sector development strategy (SNDSP) 2023–2035: targets include 150 enterprises per 100,000 inhabitants and formalization of 300,000 enterprises.
- Emergency youth employment program (XËYU NDAW ÑI):
  - Total cost: 450 billion.
  - Allocations: CFAF 300 billion for 2021–2022; CFAF 150 billion projected for 2023.
  - Outcomes to date: 32,354 jobs created and 27,422 youths trained.

### Program support and policy recommendations (staff appraisal highlights)
- Staff supports completion of the sixth PCI review and the third SBA/SCF reviews based on broadly satisfactory program performance and authorities’ commitments.
- Policy recommendations:
  - Start fiscal adjustment in 2023 to protect debt sustainability.
  - Refrain from providing untargeted and costly subsidies; improve composition of fiscal adjustment.
  - Forcefully avoid additional fiscal slippages given depleted policy space.
  - Strengthen revenue mobilization via MTRS, digitalization, and better tax–customs coordination.
  - Fully operationalize fiscal framework for oil and gas revenue management and strengthen debt oversight of SOEs.

*Source: SENEGAL — EXECUTIVE SUMMARY and related chapters, International Monetary Fund, December 2, 2022.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context and outlook
- Weaker external demand, rising food and energy prices, tightening financial conditions, and the US dollar appreciation have negatively impacted the Senegalese economy.
- Multiple challenges include heightened regional insecurity, growing social demands amid soaring cost of living, and severe floods.
- Growth and inflation revisions for 2022:
  - Growth revised down to 4.7 percent in 2022.
  - Inflation revised up to 8.5 percent in 2022.
- Medium-term prospects:
  - Temporary boost from oil and gas production expected to start in late 2023.

### Recent economic developments
- Growth and sectoral performance:
  - GDP growth slowed from 5.2 percent in March to 2.9 percent y/y in June 2022.
  - Deceleration driven by secondary sector (+0.5 percent y/y) and tertiary sector (+3.7 percent y/y).
- Inflation:
  - Headline inflation through October hit 13 percent y/y (multi-decade high).
  - Core inflation reached 5.1 percent.
  - Domestic food inflation at 19.5 percent y/y.
- External sector and reserves:
  - Current account deficit was 13.3 percent of GDP in 2021 and widened further.
  - WAEMU pooled reserves at 4.5 months of prospective imports at end-October.
  - External position projected to strengthen once hydrocarbon exports begin in late 2023.
- Fiscal execution through end-September:
  - Revenues and grants: 2,514 (Sep-22); Revised 2022 budget: 3,587; 21.0 percent of GDP.
  - Revenues (excl. grants): 2,383 (Sep-22); Revised 2022 budget: 3,344; 19.6 percent of GDP.
  - Tax Revenues: 2,264 (Sep-22); Revised 2022 budget: 3,163; 18.5 percent of GDP.
  - Grants: 132 (Sep-22); Revised 2022 budget: 243; 1.4 percent of GDP.
  - Expenditure: 2,287 (Sep-22); Revised 2022 budget: 4,640; 27.1 percent of GDP.
  - Current (excl. interest): 1,985 (Sep-22); Revised 2022 budget: 2,898; 17.0 percent of GDP.
  - Investment: 1,187 (Sep-22); Revised 2022 budget: 1,362; 8.0 percent of GDP (Externally financed: 478 Sep-22; Internally financed: 709 Sep-22).
  - Balance: -959 (Sep-22); Revised 2022 budget: -1,053; -6.2 percent of GDP.
  - Energy subsidy envelope entirely spent at end-September.
  - Pay increase extended to all civil servants (+0.1 percent of GDP).
  - Investment execution rate (net of disposal of nonfinancial assets): 87.2 percent.
  - Public debt rose to 74.3 percent of GDP during the first semester.
- Financial sector:
  - Broad money increased by 18.4 percent through September (y/y).
  - Credit to the economy up 20.2 percent (y/y).
  - Nonperforming loans to total loans at 11.2 percent at end-June 2022 (11.5 percent at end-2021).
  - Regulatory capital to risk-weighted assets at 12.0 percent.

### Program performance and structural reforms
- Overall program performance through end-June 2022: broadly satisfactory.
- Quantitative performance criteria:
  - All end-June 2022 performance criteria were met.
  - Strong tax revenue performance and partial transfer of proceeds from sale of government buildings (0.5 percent of GDP) helped meet fiscal deficit PC.
- Indicative targets:
  - Two out of three indicative targets were met (ceiling on use of simplified procedures for non-personalized services; floor on social spending).
  - Ceiling on share of contracts awarded through single-source procurement was breached and has been continuously missed.
- Structural benchmarks (SBs):
  - Three out of nine SBs were met:
    - Tax expenditure report for 2020 published.
    - Semi-annual report on customs–tax administration cooperation prepared before end-June.
    - Evaluation framework to monitor MTRS implementation adopted.
  - Six SBs not met (examples):
    - Expansion of tax base (additional registered taxpayers) not achieved.
    - Adoption of a new public procurement code (prior action) not met.
    - Roadmap to eliminate energy subsidies not published (prior action).
    - PPP database not updated.
    - Digital payments under the regular cash transfer program not implemented by end-November SB.
    - Adoption of a new fiscal framework for oil and gas revenues met with delays.
  - A prior action was added on raising energy prices to limit electricity and fuel subsidies to 2.7 percent of GDP in 2023.

### Fiscal policy, social measures, and public debt
- Revised 2022 budget:
  - Fiscal deficit maintained at 6.2 percent of GDP through additional revenue measures and savings to offset larger energy subsidies.
- 2023 budget and fiscal targets:
  - 2023 budget initially targets a higher deficit (-5.5 percent of GDP) than previously agreed to cope with external and domestic challenges.
  - Authorities committed to limit the deficit to 4.9 percent of GDP by leaving most of the budget reserves (0.8 percent of GDP) untapped and by increasing tax revenue collection.
  - Goal to achieve a large fiscal adjustment toward meeting the 3 percent of GDP deficit target by 2025.
- Energy subsidies and mitigation:
  - To contain the energy subsidy bill in 2023, authorities will raise energy prices effective January 1, 2023.
  - Measures to cushion impact on vulnerable households: subsidies to mass transportation and increased cash transfers to the poorest households.
- Public debt dynamics:
  - Public sector gross debt: 73.2 percent (2021), 75.1 percent (2022), 75.1 percent (2023) in Text Table 4; projections show fluctuations (see table entries).
  - Public debt increased in first semester to 74.3 percent of GDP, driven by higher deficit and US dollar appreciation.

### Outlook and risks
- Near-term outlook:
  - Challenging external and domestic environments will continue to weigh on the economy.
  - Growth projections for 2022 revised from 5 to 4.7 percent.
  - Inflation revised from 5.5 to 8.5 percent for 2022.
- Medium-term:
  - Growth projected at 8.3 percent in 2023 and 10.4 percent in 2024 (Text Table 4 entries: Real GDP percent change: 6.1 (2021), 5.0 (IMF CR 22/197), 4.7 (Proj. 2022), 8.3 (Proj. 2023), 8.3 (Proj. 2024), 10.4 (Proj. 2024 alternative column)).
  - CPI inflation, average: 2.2 (2021), 5.5 (IMF CR 22/197), 8.5 (Proj. 2022), 3.1 (Proj. 2023), 3.5 (Proj. 2024), 2.0 (Proj. 2024 alternative column).
  - Net lending/borrowing, including grants (percent of GDP): -6.3 (2021), -6.2 (IMF CR 22/197), -6.2 (Proj. 2022), -4.5 (Proj. 2023), -4.9 (Proj. 2024), -4.0 (Proj. 2024 alternative).
  - Current account balance (percent of GDP): -13.3 (2021), -13.2 (IMF CR 22/197), -15.7 (Proj. 2022), -8.8 (Proj. 2023), -11.0 (Proj. 2024), -4.9 (Proj. 2024 alternative).
  - Gross debt public sector (percent of GDP): 73.2 (2021), 75.1 (2022), 75.1 (2023), 71.4 (Proj. 2023 alt), 73.7 (Proj. 2024), 69.5 (Proj. 2024 alt).
- Downside risks:
  - Continued geopolitical tensions and high commodity prices.
  - US dollar appreciation pass-through.
  - Further tightening of global financial conditions.
  - Fiscal slippages and political/social disruptions (including in run-up to 2024 presidential elections).
  - Subsequent waves of COVID-19 and vaccine rollout risks (only 16.6 percent of population 15 years and older fully vaccinated).

### Capacity to repay and institutional safeguards
- IMF repayment capacity:
  - Under baseline scenario, repayments to the Fund will peak at 4.4 percent of government revenue and 3.6 percent of exports of goods and services in 2026.
  - Capacity to absorb additional shocks is limited; materialization of risks could render capacity to repay more vulnerable.
  - Senegal’s strong track record of timely repayment and commitment to reforms are mitigating factors.
- BCEAO safeguards:
  - BCEAO implemented all recommendations from the 2018 safeguards assessment.
  - Assessment found broadly appropriate governance arrangements and a robust control environment.
  - An update assessment of the BCEAO is planned for 2023.

### Policy discussions and Fund support
- Authorities and IMF staff agreed on a revised 2022 budget maintaining the 6.2 percent of GDP deficit.
- Authorities committed to measures to limit the 2023 deficit and to pursue fiscal consolidation toward a 3 percent of GDP deficit target by 2025.
- Staff supports the request for completion of the sixth PCI review and the third SBA/SCF reviews.

*Source: SENEGAL — EXECUTIVE SUMMARY, International Monetary Fund, December 2, 2022.*

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### 1senea2023001 - 10.4 percent, respectively, driven by oil and gas production which is set to start at end-2023 and is

### Growth outlook and risks
- Oil and gas production is set to start at end-2023 and is expected to materially improve both the current account balance and debt-to-GDP ratio.
- Non-hydrocarbon growth is expected to pick up to around 6 percent from 2023 onwards.
- Growth prospects assume a gradual normalization of the current crisis related to the war in Ukraine and appropriate policy making.
- Risks to the outlook remain high and heavily tilted to the downside:
  - Lower global growth, tighter financial conditions, more intense and prolonged war in Ukraine, and geopolitical tensions could weigh on external demand and depress Senegal’s growth prospects.
  - Higher commodity prices, supply chain disruptions, and further US dollar appreciation could lead to persistently higher domestic inflation that would negatively impact domestic demand.
  - Further risks include natural disasters related to climate change, deterioration of the regional security situation, and worsening social tensions ahead of the 2024 presidential elections.
- Upside possibility: hydrocarbon production could benefit from higher oil and gas prices and from European efforts to reduce reliance on energy imports from Russia.

### Alleviating the cost-of-living crisis with limited fiscal space
- Fiscal pressures emerged since the last review amid the July parliamentary elections:
  - Tax revenues will exceed projections due to the rebound in direct taxes and more stringent revenue collection efforts.
  - Expenditures are under pressure: government provided the first across-the-board pay raise since 2014.
  - Energy subsidy bill is the highest in the WAEMU region and is expected to more than double compared to the commitment at the time of the last review, largely driven by higher-than-expected refined fuel prices and reluctance to adjust energy prices.
  - Interest payments projected to considerably increase due to US dollar appreciation.
- November measures to alleviate the cost-of-living crisis: 15 new measures costing about 0.2 percent of GDP in 2023; subsidies extended to additional local and imported food products, cement and iron rods, and education tuition; temporary price caps on some local food products and housing rentals expected to have no budgetary impact.
- To keep the overall fiscal deficit in 2022 at 6.2 percent of GDP, authorities will:
  - Use one-off proceeds of the sale of government buildings (1.5 percent of GDP) to SOGEPA (financed by a Sukuk issuance in April).
  - Enforce revenue administration measures.
  - Identify savings, including cuts in domestically and externally-financed investments.
- Staff concerns and recommendations:
  - Highlighted high cost and regressive nature of untargeted subsidies.
  - Noted fiscal target for 2022 achieved thanks to sale of government buildings and significant investment cuts, raising concerns about spending quality.
  - Urged ensuring SOGEPA generates sufficient resources to meet debt service obligations.
  - Advised against price caps and export restrictions as they may harm supply.
  - Preferred a second supplementary budget law for transparency rather than changes by advance decrees.

### Budget impact and key fiscal figures (selected exact numbers from Text Table 5 and Text Table 7)
- Text Table 5 — Budget Impact of Measures to Alleviate the Cost-of-Living Crisis and Help the Vulnerable, 2023 (In CFAF billion / in percent of GDP):
  - New measures with a fiscal impact:
    - Tax base adjustment on sugar: 7 / 0.04
    - Tax base adjustment on cement: 6 / 0.03
    - Tax base adjustment on edible oil: 6 / 0.03
    - Tax base adjustment on powdered milk: 9 / 0.05
    - Tax base adjustment on iron rods: 7 / 0.04
    - Suspension of custom duty on hatching eggs: 1 / 0.01
  - New measures with no fiscal impact: Lower tuitions (public and private education tiers), Lower price caps of local onions, potatoes, carrots, chicken, beef, and sheep, Lower housing rental (-20 percent below CFAF300,000, -10 percent below CFAF500,000, and -5 percent above CFAF500,000)
  - Total for new measures: 37 / 0.19
  - Previous measures (selected):
    - Tax base adjustment on wheat flour: 13 / 0.07
    - Suspension of customs duty on broken rice: 19 / 0.10
    - Tax base adjustment on edible oil: 23 / 0.12
    - Lower import tax on wheat: 23 / 0.12
    - Subsidy for local rice production of CFAF 32 per kg of rice paddy: 3 / 0.02
  - Total for previous measures: 113 / 0.59
  - Total (new + previous): 149 / 0.8
- Text Table 7 — 2023 Budget and Staff Projections (In percent of GDP, selected rows):
  - Revenues and Grants: 39 99 (5th Review), 39 20 (2023 Budget), 40 61 (Projections 2023)
  - Tax revenues: 35 50 (5th Review), 34 87 (2023 Budget), 35 87 (Projections 2023)
  - Nontax revenues: 1 58 (5th Review), 1 54 (2023 Budget), 1 54 (Projections 2023)
  - Grants: 2 91 (5th Review), 2 79 (2023 Budget), 3 20 (Projections 2023)
  - Expenditure: 48 57 (5th Review), 49 65 (2023 Budget), 50 01 (Projections 2023)
  - Interest: 3 84 (5th Review), 4 24 (2023 Budget), 4 24 (Projections 2023)
  - Compensation of employees: 12 27 (5th Review), 12 73 (2023 Budget), 13 10 (Projections 2023)
  - Current transfers:
    - 95 1 (5th Review), 128 6 (2023 Budget), 134 2 (Projections 2023)
    - Energy subsidies: 3 00 (5th Review), 3 50 (2023 Budget), 5 10 (Projections 2023)
  - Net acquisition of nonfinancial assets: 18 98 (5th Review), 15 88 (2023 Budget), 15 31 (Projections 2023)
    - Domestically financed: 10 86 (5th Review), 9 20 (2023 Budget), 8 63 (Projections 2023)
    - Externally financed: 8 12 (5th Review), 6 68 (2023 Budget), 6 68 (Projections 2023)
  - Deficit: -8 58 (5th Review), -10 45 (2023 Budget), -9 40 (Projections 2023)

### Fiscal consolidation, energy subsidies, and composition of spending
- Authorities aim to return to a central government fiscal deficit of 3 percent of GDP by 2025 instead of 2024.
- The delayed fiscal consolidation is consistent with most WAEMU countries and is expected to have limited impact on pooled international reserves.
- Risks of a looser fiscal stance:
  - Higher borrowing from the regional market amid tighter global financing conditions could increase borrowing costs and debt service and crowd out the private sector.
  - Repeated departure from agreed consolidation path could undermine credibility of the medium-term fiscal strategy.
- 2023 budget decisions and adjustments:
  - Original budget submitted to parliament targeted a deficit of 5.5 percent instead of 4.5 percent of GDP (5th review) and includes 0.8 percentage point of GDP of budgetary reserves.
  - Staff and authorities agreed to target a deficit of 4.9 percent of GDP instead.
  - Government commits to limit use of budgetary reserves to 0.2 percent of GDP and increase tax revenues by 0.5 percent of GDP through additional revenue administration measures.
  - Energy subsidies would be higher than in the budget by +0.9 percent of GDP; domestically-financed investment cut by 0.3 percent of GDP relative to the budget.
  - Result: fiscal tightening of 1.3 percent of GDP relative to 2022, including a decline in the primary deficit of 1.2 percent of GDP.
- Main features of the 2023 budget:
  - Non-oil tax revenues would increase by 0.3 percent of non-oil GDP to reach 18.8 percent of non-oil GDP.
  - Budget will include for the first time revenues from oil and gas production, expected to generate 0.3 percent of GDP.
  - Spending priorities: non-primary current spending (60 percent of total spending), higher public wage bill (6.9 percent of GDP), subsidies (2.7 percent of GDP), shift from hard infrastructure to programs supporting socio-economic integration and basic services.

### Debt trajectory, hydrocarbon revenues, and public debt management
- Total public debt projected to peak at 75 percent of GDP in 2022, an increase of 15 percentage points relative to pre-COVID projections, before sharply declining as hydrocarbon projects boost growth in 2023-24.
- Higher debt level primarily reflects larger fiscal deficits from multiple external shocks (COVID-19, Russia’s invasion of Ukraine, strong appreciation of the US dollar) and additional borrowing by state-owned enterprises.
- Authorities’ recent and planned actions:
  - Undertaken debt management operations to reduce risks associated with external debt profile.
  - Intend to tap the regional bond market and seek concessional and semi-concessional loans from multilateral and bilateral partners for budget financing.
  - Do not plan to tap the international bond market in the near term given rising global interest rates.
- Achieving durable fiscal consolidation and ongoing debt management reforms needed to strengthen debt sustainability.
  - Debt Sustainability Analysis (June 2022) found Senegal remains at moderate risk of debt distress with limited space to absorb shocks.
  - Strengthening debt oversight by the national debt committee (CNDP) is a positive step but requires further efforts to ensure all borrowing by state-owned enterprises is captured.
  - Implementation of action plan following the recent debt audit is progressing; additional resources needed to strengthen quality and timeliness of debt data from state-owned enterprises.

### Hydrocarbon revenue management and large projects
- Fiscal framework for oil and gas revenue management expected to become fully operational in 2023.
  - Implementation decrees for the hydrocarbon revenue management law were not all adopted by November 2022.
  - A decree was issued on setting up an expert committee and defining a price formula for revenue projections.
  - Governance and management of hydrocarbon stabilization and intergenerational funds have not yet been clarified.
  - Design of a long-term budget anchor that takes into account oil and gas revenues was not completed.
- Gas-to-Power Strategy (GTP):
  - Key pillar of Plan Senegal Emergent; expected to increase reliability and reduce average cost of electricity.
  - Financing needs for the GTP are yet to be finalized; staff urged authorities to provide clarity on timing and key steps and to build capacity to manage the project in close cooperation with development partners.

### Revenue mobilization and tax policy
- Improving tax policy design and strengthening revenue administration are essential to enhance domestic revenue mobilization.
- Implementation challenges to the MTRS:
  - Insufficient coordination among stakeholders impairs implementation.
  - MTRS governance bodies and performance monitoring are now in place, but tax policy lacks strategic direction.
  - Revenue mobilization objectives are not fully reflected in operational revenue collection targets; digitalization lags; coordination between tax and customs administrations is insufficient.
- Recommended measures:
  - Develop a comprehensive medium term tax strategy focusing on large revenue items, including rebalancing taxation between consumption, labor, and capital, eliminating small taxes, rationalizing tax expenditures and exemptions.
  - Expand digitalization and strengthen coordination between tax and customs administrations.
  - Undertake a communication campaign to explain benefits of additional government revenues to finance public spending.

*Source: Senegalese authorities and IMF staff calculations (excerpts from the provided IMF document).*

### 30.      Progress on PFM reforms has been satisfactory, and efforts should be pursued in the

### 1senea2023001 - 30.      Progress on PFM reforms has been satisfactory, and efforts should be pursued in the

### Public Financial Management (PFM) reforms
- Progress and remaining priorities:
  - Progress on PFM reforms has been satisfactory (MEFP ¶28-29).
  - Noticeable progress on implementing the Treasury single account: closure of 176 central government bank accounts (out of 276 bank accounts).
  - Remaining efforts: complete limiting direct transfers to entities and reclassify them by the economic nature of spending.
  - Need to address significant weaknesses identified in the audit report on the use of COVID-19 funds (Court of Accounts) forcefully (Box 1).
  - Staff recommendation: authorities should follow-up on audit findings by swiftly adopting and implementing an action plan, investigate any potential misuse of funds, and apply necessary sanctions.
  - Procurement: general procurement rules strengthened with adoption of a revised procurement code (prior action) that strictly limits exemptions to open and competitive tenders, including in the oil and gas sector (MEFP ¶13).

### Addressing vulnerabilities in the financial sector
- La Poste SN-LPSN (post office group):
  - Authorities indicated an action plan finalized in July 2022 to lay the ground for restructuring the post office group and a new management team was appointed.
  - Plan includes: the group’s recapitalization, the adoption of a recovery plan, estimates of compensation needed for losses associated with quasi-fiscal activities, and specific steps for its transformation into a postal bank (MEFP ¶32).
- AML/CFT framework:
  - Efforts to strengthen anti-money laundering and combating the financing of terrorism (AML/CFT) are uneven and need to be stepped up.
  - Senegal remains on the Financial Action Task Force’s (FATF) grey list following the October Plenary.
  - Recommended accelerations ahead of the February 2023 Plenary:
    - Establishing and implementing the targeted financial sanctions regime.
    - Strengthening the AML/CFT risk-based supervision of financial institutions.
    - Strengthening the country’s beneficial ownership framework.
  - Authorities should define a credible roadmap for addressing remaining deficiencies and minimize financial-sector vulnerabilities to AML/CFT risks (MEFP ¶34).

### Box 1 — Main findings of the Audit Court report on the use of COVID-19 funds
- Overall finding:
  - The Court of Accounts’ audit of government spending under the emergency COVID-19 plan (Force COVID-19) revealed shortcomings in procurement and spending execution that should be addressed swiftly to improve public spending efficiency.
- Specific shortcomings and recommendations:
  - Emergency suspension of spending and procurement procedures:
    - Temporary suspension of the public procurement code during the pandemic led to widespread use of direct awarding of public contracts, sometimes to inexperienced suppliers, at high costs or with substantial cost overruns, without necessarily ensuring faster contract execution.
    - Recommendation: the revised public procurement code should aim at safeguarding open competition even in strictly defined emergency situations.
  - Direct transfers to entities:
    - Spending execution through commercial bank accounts led to irregularities (excessive use of cash, overpayment or double payments for services, spending not reaching beneficiaries, etc.).
    - Spending commitments sometimes exceeded budget appropriations and/or allocations, leading to budget overruns or accumulation of financial liabilities.
    - Recommendation: accelerate efforts to strictly limit budget transfers to central government entities and centralize spending within the budget execution chain to fully operationalize the Treasury single account.
    - Implementation steps suggested: improve banking services provided by Treasury and adopt a roadmap to eventually close all remaining central government accounts, including for revenue-generating entities (hospitals, universities, financial companies, etc.).
- Source: Senegal Court of Accounts

### Improving the business environment and promoting inclusive growth
- Ongoing reforms and priorities (MEFP ¶35):
  - Revision of the investment code is underway but needs better integration into broader macroeconomic and fiscal plans.
  - Digitization of the land registry slated for the first half of 2023 for the entire territory.
  - Three-year emergency program for youth employment, launched in 2021, continues with an annual envelope of about 1 percent of GDP.
  - A new strategy for private sector development brings together government efforts to support businesses and develop value chains and should be implemented without delays.

### Staff appraisal — macro-fiscal context and policy guidance
- Recent shocks and economic impact:
  - Senegal experienced multiple acute challenges since 2020: the Covid pandemic, the impact of the war on Ukraine, tightening global financial conditions, regional security risks, severe floods, and domestic socio-political tensions.
  - These shocks led to a growth slowdown, high inflation, and deterioration of external and fiscal accounts; risks to the outlook remain unusually elevated and to the downside.
- Program performance and reforms:
  - The program did not achieve all objectives, but significant reforms were implemented across the three pillars, including:
    - Increasing the share of social spending in the budget and institutionalizing social safety nets.
    - Strengthening domestic revenue mobilization and debt management.
    - Improving budget planning and execution.
    - Developing a fiscal framework for managing oil and gas revenues.
  - Fiscal consolidation was delayed, energy subsidies soared in 2022, and public sector debt significantly increased.
- Policy recommendations:
  - Fiscal adjustment should start in 2023 to protect debt sustainability.
  - Authorities should:
    - Refrain from providing untargeted and costly subsidies.
    - Improve the composition of fiscal adjustment.
    - Forcefully avoid additional fiscal slippages given depleted policy space.
  - Note on 2022 fiscal target: The 2022 fiscal target remains unchanged but will be achieved thanks to one-off proceeds of the sale of government buildings financed by higher public sector borrowing, and the crowding out of public investment spending.

*Source: IMF staff report content provided in the supplied PDF excerpt.*

### 37.      Putting public debt on a firmly downward trajectory is critical to rebuilding policy

### 37.      Putting public debt on a firmly downward trajectory is critical to rebuilding policy buffers

### Debt trajectory and fiscal consolidation
- Total public debt is projected to reach 75 percent of GDP at end-2022, reflecting the impact of multiple shocks, additional SOE borrowing, and the recent appreciation of the US dollar.
- Rebuilding fiscal buffers to cope with future crises requires that Senegal stay the course on fiscal consolidation with the aim of reaching the 3 percent of GDP deficit target by 2025.
- Given higher borrowing needs, the authorities need to seek out alternative and less costly financing sources to reduce the adverse impact on the regional bond market and strains on WAEMU pooled reserves.
- SOEs’ borrowing plans should be curtailed to reduce public debt vulnerabilities.

### Revenue mobilization and energy subsidies
- Strong revenue mobilization efforts and a gradual elimination of energy subsidies should underpin fiscal consolidation efforts.
- To mobilize additional tax revenues, efforts to improve tax compliance should be complemented by policy measures to broaden the tax base, increase progressivity, and incentivize formalization.
- These revenue measures would help meet development spending needs while achieving durable fiscal consolidation.
- The recent decision to hike energy prices and the publication of a roadmap to gradually phase out energy subsidies are critical steps to improve spending efficiency and strengthen medium-term fiscal credibility.
- Full implementation of the roadmap will be critical and should be accompanied by extensive communication efforts to build consensus and by bolstering social safety nets to protect the most vulnerable.

### Fiscal transparency, governance, and oil & gas revenue management
- Reforms to improve fiscal transparency and accountability should continue.
- The adoption of a new procurement code demonstrates the authorities’ commitment to improving transparency and governance.
- As a next step, measures should be adopted to address public financial management weaknesses exposed by the audit report on the use of COVID-19 funds.
- The full operationalization of the fiscal framework for oil and gas revenue management will be critical to ensure that these windfalls will benefit Senegal’s development.

### AML/CFT framework
- Greater urgency is needed to improve the AML/CFT framework.
- Full implementation of the AML/CFT action plan will be critical to avoid possible negative macroeconomic repercussions from the enhanced oversight by FATF, including strengthening the risk-based supervision of financial institutions and the beneficial ownership framework.
- Preparing a credible roadmap for addressing the remaining deficiencies would be critical.

### Program support, consultations, and assessments
- Based on the program performance and the authorities’ commitment to medium-term fiscal sustainability, staff supports the completion of the final reviews under the PCI, SBA, and SCF.
- It is recommended that Senegal moves to a 12-month cycle for Article IV consultations.
- Given that outstanding credit to the Fund exceeds 200 percent of quota, a Post-Financing Assessment will need to be initiated.

### Key statistics and projections (selected exact figures from the text and tables)
- Total public debt: 75 percent of GDP at end-2022.
- Deficit target: 3 percent of GDP by 2025.
- Public sector debt ratio (noted elsewhere in figures): increased to 77.8 percent of GDP (figure caption).
- Table 1 projections (selected entries):
  - GDP at constant prices (2022 Act.): 1.3; (2023 Est. IMF CR 22/197) 6.1; (2024 Proj.) 5.0; (2025 Proj.) 4.7.
  - Of which: Non-hydrocarbon GDP (2024 Proj.) 5.9; (2025 Proj.) 6.0.
  - Consumer prices (annual average) (2022 Act.) 2.5; (2023 Est.) 2.2; (2024 Proj.) 5.5; (2025 Proj.) 8.5.
  - Revenue (percent of GDP) (2022 Act.) 20.7; (2023 Est.) 21.0; (2024 Proj.) 21.2; (2025 Proj.) 21.3; (2026 Proj.) 22.4; (2027 Proj.) 23.4.
  - Total expenditure (percent of GDP) (2022 Act.) 26.9; (2023 Est.) 27.2; (2024 Proj.) 25.7; (2025 Proj.) 26.2.
  - Net lending/borrowing (including grants) (percent of GDP): -6.2 (2022 Act. and 2023 Est.); -4.5 (2024 Proj.); -4.9 (2025 Proj.); -4.0 (2026 Proj.); -3.0 (2027 Proj., 2026–27 medium-term target).
  - Primary fiscal balance (percent of GDP): -4.2 (2022 Act.); -3.9 (2023 Est.); -2.5 (2024 Proj.); -2.7 (2025 Proj.); -1.8 (2026 Proj.); -0.7 (2027 Proj.).
  - Total public debt (percent of GDP): 75.1 (2022 Act. and 2023 Est.); 71.4 (2024 Proj.); 73.7 (2025 Proj.); 69.5 (2026 Proj.); 67.4 (2027 Proj.); 65.3 (2026–27 entries shown in table sequence).
  - Domestic public debt (percent of GDP): 17.6 (2022 Act.); 16.8 (2023 Est.); 17.8 (2024 Proj.); 19.3 (2025 Proj.); 19.7 (2026 Proj.); 21.0 (2027 Proj.).
  - External public debt (percent of GDP): 57.5 (2022 Act.); 58.2 (2023 Est.); 53.6 (2024 Proj.); 54.4 (2025 Proj.); 49.8 (2026 Proj.); 46.4 (2027 Proj.).
  - Total public debt service (percent of revenue): 26.5 (2022 Act.); 25.8 (2023 Est.); 27.4 (2024 Proj.); 31.2 (2025 Proj.); 28.0 (2026 Proj.); 32.1 (2027 Proj.).
- Balance of payments (Table 2, selected annual levels in Billions of CFAF):
  - Current account (2022 Act.): -2,038; (2023 Est.): -2,033; (2024 Proj.): -2,229; (2025 Proj.): -2,689; (2026 Proj.): -1,656; (2027 Proj.): -2,108.
  - Exports, f.o.b. (2022 Act.): 3,047; (2023 Est.): 3,036; (2024 Proj.): 3,589; (2025 Proj.): 3,433; (2026 Proj.): 4,291; (2027 Proj.): 4,308.
  - Imports, f.o.b. (2022 Act.): -4,753; (2023 Est.): -4,752; (2024 Proj.): -5,994; (2025 Proj.): -5,852; (2026 Proj.): -6,431; (2027 Proj.): -6,360.
  - Direct investment (financial account, Billions of CFAF): 1,379 (2022 Act.); 1,476 (2023 Est.); 1,330 (2024 Proj.); 1,430 (2025 Proj.); 1,163 (2026 Proj.); 1,182 (2027 Proj.).
- Fiscal indicators (Table 4, Budgetary Central Government, Billions of CFAF, selected items):
  - Revenue and Grants (2022 Act.): 2,978; (2023 Act. IMF CR 22/197) 2,978; (2024 Act.) 3,498; (2025 Proj.) 3,587; (2026 Proj.) 3,999; (2027 Proj.) 4,061.
  - Expenditure (2022 Act.): 3,943; (2023 Act. IMF CR 22/197) 3,943; (2024 Act.) 4,553; (2025 Proj.) 4,642; (2026 Proj.) 4,857; (2027 Proj.) 5,002.
  - Net acquisition of nonfinancial assets (2022 Act.): 1,406; (2023 Act.) 1,406; (2024 Act.) 1,754; (2025 Proj.) 1,362; (2026 Proj.) 1,898; (2027 Proj.) 1,531.

*International Monetary Fund.*

### 1. Total Financing Requirement

### 1. Total Financing Requirement

### Total Financing Requirement (selected items, CFAF billions)
- Current account balance (excluding budget grants): 2,590; 2,686; 3,484; 2,267.4; 2,942; 1,764; 1,745; 2,196; 2,314
- Debt Amortization (excl. regional market securities): 266; 447; 473; 374.1; 823; 433; 366; 588; 577
- Repayment to the Fund: 0; 0; 0; 44; 46; 111; 151; 197; 133
- Change in Net Foreign Assets BCEAO (- increase) 1/: -341; 35; -305; -137; 123; -128; -170; -202; -200
- Change in Net Foreign Assets (Other depository institutions) (- increase): 167; 0; 0; 0; 0; 0; 0; 0; 0
- Errors and Omissions: -100; 0; 0; 0; 0; 0; 0; 0; 0

(Note: CFAF billions; 1/ Indicates intra-WAEMU flows are included and data are not indicative of country’s impact on WAEMU aggregate external position or pooled WAEMU reserves.)

### Total Financing Sources (CFAF billions)
- Total financing sources: 2,276; 2,003; 2,802; 2,096; 2,678; 1,599; 1,596; 2,045; 2,161
- Foreign direct investment (net): 1,476; 1,330; 1,430; 1,163; 1,182; 1,070; 1,043; 1,084; 1,127
- Regional market financing from non-residents (net): 250; 216; 303; 336; 417; 356; 336; 372; 397
- Project grants and loans: 579; 710; 610; 812; 668; 693; 718; 745; 775
- Other capital flows (net): -28; -253; 459; -216; 411; -519; -501; -155; -138

### Total Financing Needs, Expected Financing, and Residual Gap (CFAF billions)
- 3. Total Financing Needs: 314; 683; 682; 171; 264; 165; 149; 151; 153
- 4. Expected Financing: 117; 312; 303; 171; 264; 165; 149; 151; 153
  - Budget support (grants + loans): 87; 267; 258; 171; 264; 165; 149; 151; 153
  - Vaccination campaign financing (World Bank): 30; 45; 45; 0; 0; 0; 0; 0; 0
- 5. Residual Financing Gap: 197; 372; 378; 0; 0; 0; 0; 0; 0

### IMF and Other Contingent/Planned Support (CFAF billions / notes)
- IMF (SBA/SCF) 2/: 0; 266; 252; 0; 0; 0; 0; 0; 0
- SBA/SCF augmentation: ...; 106; 126; ...; ...; ...; ...; ...; ...
- DSSI: 0; 0; 0; 0; 0; 0; 0; 0; 0

(Sources: Senegalese authorities; and IMF staff calculations. 2/ For 2020 RFI/RCF disbursement. SBA/SCF in 2021/22; only undisbursed amounts.)

---

### Capacity to Repay the Fund — Selected Obligations and Ratios (SDR millions; CFA francs; percent)
- IMF obligations based on existing credit — Principal (SDR millions): 0.00; 53.93; 129.45; 176.77; 171.37; 90.47; 52.72; 47.93; 21.58; 0.00; 0.00
- IMF obligations based on existing credit — Charges and interest (SDR millions): 3.54; 16.17; 13.14; 8.42; 3.83; 0.61; 0.01; 0.01; 0.01; 0.01; 0.01
- IMF obligations based on existing and prospective credit — Principal (SDR millions): 0.00; 53.93; 129.45; 176.77; 231.29; 156.38; 64.71; 59.93; 33.57; 0.00; 0.00
- IMF obligations based on existing and prospective credit — Charges and interest (SDR millions): 4.08; 19.31; 16.72; 12.00; 6.90; 1.95; 0.07; 0.01; 0.01; 0.01; 0.01

Total obligations based on existing and prospective credit:
- SDR Millions: 906.0; 852.1; 722.7; 545.9; 314.6; 158.2; 93.5; 33.6; 0.0; 0.0; 0.0
- CFA francs: 715.4; 711.6; 615.0; 466.0; 268.5; 135.0; 79.7; 28.6; 0.0; 0.0; 0.0
- Percent of GDP: 4.7; 4.2; 3.2; 2.2; 1.2; 0.5; 0.3; 0.1; 0.0; 0.0; 0.0
- Percent of quota: 280.0; 263.3; 223.3; 168.7; 97.2; 48.9; 28.9; 10.4; 0.0; 0.0; 0.0

Net use of IMF credit:
- Disbursements (SDR millions): 453.1; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 1.0
- Repayments and repurchases (SDR millions): 4.1; 73.2; 146.2; 188.8; 238.2; 158.3; 64.8; 59.9; 33.6; 0.0; 0.0

Ratios (selected):
- Percent of government revenue: 0.1; 2.0; 3.6; 3.9; 4.4; 2.7; 1.0; 0.9; 0.4; 0.0; 0.0
- Percent of exports of goods and services: 0.1; 1.8; 2.8; 2.9; 3.6; 2.4; 0.9; 0.8; 0.4; 0.0; 0.0
- Percent of external debt service: 0.6; 10.1; 13.8; 17.8; 20.8; 11.0; 4.6; 4.7; 3.2; 0.0; 0.0

Memorandum items (billions of CFA francs; other):
- Nominal GDP: 15,319; 17,093; 19,093; 21,497; 22,974; 24,613; 26,388; 28,753; 30,893; 33,167; 35,607
- Exports of goods and services: 3,581; 4,172; 5,149; 6,533; 6,581; 6,721; 7,070; 7,606; 7,998; 8,466; 9,116
- Government revenue: 2,978.3; 3,587.4; 4,061.2; 4,805.3; 5,378.5; 5,779.5; 6,255.8; 6,998.7; 7,465.2; 7,939.2; 8,531.6
- External Debt service: 736.1; 728.6; 1,059.3; 1,058.4; 1,145.9; 1,444.7; 1,411.6; 1,278.8; 1,049.9; 1,142.8; 1,413.4
- IMF Quota (SDR millions): 323.6 (each year listed)
- CFA francs/SDR (period average): 790; 835; 851; 854; 853; 853; 852; 852; 852; 852; 852

---

### Program Reviews and IMF Arrangements (selected schedule items)
- Policy Coordination Instrument reviews: First Review By June 30, 2020 (Test Date: End-December 2019); Second Review By December 31, 2020 (Test Date: End-June 2020); Third Review By June 30, 2021 (Test Date: End-December 2020); Fourth Review By December 31, 2021 (Test Date: End-June 2021); Fifth Review By June 30, 2022 (Test Date: End-December 2021); Sixth Review By December 31, 2022 (Test Date: End-June 2022).
- Stand-By Arrangement and Standby Credit Facility disbursements (SDR million / % of quota): Program Request June 7th, 2021 — SBA 86.3; SCF 43.1; Total 129.4 (27; 13; 40 percent of quota). First Review December 7th, 2021 — same availability and disbursement. Second Review June 7th, 2022 — SBA 107.8; SCF 45; Total 161.8 (33; 17; 50). Third Review November 22nd, 2022 — SBA 107.8; SCF 45; Total 161.8 (33; 17; 50). Total listed: SBA 388.2; SCF 90; Total 194.1; Grand total 582.4 (120; 60; 180 percent of quota).

---

### Annex I — Inflation Persistence in Senegal: Key Findings and Policy Implications

### Recent inflation dynamics and persistence
- Headline y-o-y inflation hit 13 percent in October 2022, a multi-decade high.
- Core inflation is at 5.1 percent, described as "more than quadruple its pre-pandemic level."
- Food accounts for almost half of the CPI consumption basket.
- Public sector wages were increased by about 20 percent in 2022 and 2023; the additional spending related to the increase of public sector wages and security-related spending represents almost 1 percent of GDP in 2022.

### Empirical assessment of persistence
- Univariate time-series tests (unit root and autoregressive models) indicate inflation persistence has increased since early 2021 after a decade of decline.
- Autoregressive parameter for headline inflation increased from 0.69 (average, 2012–2020) to 0.75 (average, post-pandemic).
- Unit root test p-values for headline and subcomponents are higher in 2021–2022 sub-period, indicating stronger inertia.

### Drivers of inflation — external vs domestic
- Two modelling approaches used:
  - A hybrid open-economy Phillips curve (semi-structural, estimated by SUR) with equations for food, energy, and non-food non-energy inflation.
  - A local projection model to estimate pass-through to headline inflation from external shocks (commodity prices, shipping costs, nominal exchange rate) and domestic shocks (government current expenditures, broad money, output gap, climate shock).
- Key quantitative findings from local projection results:
  - A one-standard deviation increase in global food prices increases headline inflation by about 1 percentage point after 3 or 4 months, building up to 3 percentage points over 12 months.
  - A one-standard deviation increase in global fertilizer prices has a similar magnitude but takes longer to build up and lasts longer.
  - Nominal exchange rate shocks pass through to headline inflation quickly but with smaller magnitude than global food and fertilizer shocks.
  - Broad money shocks have a significant impact on headline inflation with two or three quarters lag.
  - Shocks to government current expenditures do not significantly affect inflation in the estimates.
- Local supply shocks (e.g., erratic rainfall leading to poor agricultural harvest in 2021) also contributed to accelerating inflation.

### Interpretation and policy implications
- External factors (commodity prices, shipping costs, exchange rate depreciation) have been the main drivers of the recent inflation surge; domestic demand factors have played a limited role since early 2021.
- Risks:
  - Broadening of inflation (non-food and non-energy components contributing) raises risk that high inflation becomes entrenched.
  - Second-round effects: higher commodity prices can raise production, harvesting, and transport costs and feed into core inflation and wage demands.
- Policy recommendations:
  - Avoid increasing untargeted food and energy subsidies as a medium-term response; such subsidies are described as "not an optimal and sustainable policy option" because they are distortive, fiscally costly, and risk crowding-out other spending.
  - Prioritize targeted measures (e.g., cash transfers to the most vulnerable) by strengthening the existing social safety net (SSN).
  - As SSN is strengthened, gradually pass through international prices to domestic prices to promote efficiency and mitigate fiscal impact.
  - Implement structural measures to boost productivity in agriculture, including improving efficiency of programs to support agricultural inputs for small and medium-sized farmers.
- Monitoring: Authorities should closely monitor potential second-round effects from external shocks given inflation breadth and persistence.

*Sources: Senegalese authorities; and IMF staff calculations.*

### Annex II. The Impact of the Gas-to-Power Strategy

### Annex II. The Impact of the Gas-to-Power Strategy

### Context
- The lack of reliable and affordable electricity is a major bottleneck hampering sustained and higher economic growth in Senegal.  
- High cost of energy and unreliable supply (especially for electricity) constrain private sector growth and undermine the fiscal framework.  
- Availability of electricity is a binding constraint to investment due to frequent power outages, reducing firms’ cost-effectiveness and adding uncertainties in value chain creation.  
- Low access to electricity directly affects human development, including health (SDG3), education (SDG4), gender equality (SDG5), provision of water for agriculture and drinking (SDG6), and poverty reduction (SDG1). Access to modern electricity also helps with climate change mitigation efforts (SDG13).  
- Government targets under Plan Senegal Emergent (PSE): increase the supply of reliable electricity to about 3 GW (from the current 1 GW) and reduce cost of electricity (currently at about 25 US cents/kWh) by more than 20 percent. The PSE energy recovery pillar aims to expand the grid and improve the reliability of Senelec distribution network. The PSE also supports medium- to long-term diversification toward lower carbon options such as solar and wind, leveraging domestic natural gas and regional interconnections for low-cost hydroelectricity.  
- Senegal’s recent oil and gas discoveries (2014–2017) identified oil and gas reserves comprising more than 400 million of barrels of oil and in excess of 40,000 billion cubic feet of gas; several fields (mostly deep-sea water) are still under exploration. Noted fields include GTA, Sangomar, and Yakaar-Terranga. These are “producible” amounts (quantities extractable at current technologies and projected market prices); oil and gas “in place” are larger amounts.

### Macroeconomic Impact
- Cheaper electricity can spur growth by supporting energy-intensive industries and value creation; reducing energy input costs aligns with horizontal policies to tackle growth constraints and support competitiveness.  
- Increasing GDP per capita along development paths is linked to higher energy consumption; causality is bidirectional — access enables transformation, usage drives it.  
- Fiscal effects: Total energy subsidies in Senegal reached the very high level of 4.4 percent of GDP in 2022, of which about one-third (or 1.3 percent pf GDP) are directly related to subsidies to compensate for losses in the sector. Reducing the average cost of electricity generation can directly reduce energy subsidies, creating space for growth-enhancing and social fiscal policies.  
- The GTP implementation can promote know-how in an emerging energy sector anchored in more modern, greener technologies and serve as a transitional step away from heavy fuel electricity production toward cleaner electricity.  
- Household welfare: Increasing supply of cheaper and more reliable energy can improve household living conditions, reduce inequalities (especially in rural areas), and improve education and health outcomes. Limited access to energy constrains hospital and emergency services, education (e.g., children doing schoolwork at night), and business market access and trade.

### Policy Issue and Recommendations
- Realizing benefits depends critically on ensuring good governance, addressing uncertainties that could delay projects, and establishing a clear and transparent fiscal framework to leverage fiscal space freed by lower energy costs for growth-enhancing, inclusive spending.  
- Priority governance and regulatory actions:  
  - Ensure the GTP strategy implementation reflects highest governance standards and an effective regulatory framework to ensure value-for-money. This requires transparency in bidding across up-, mid-, and down-stream components and ensuring competition in electricity production/distribution. International experience indicates value-for-money requires private sector participation and openness to foreign investors.  
  - Ensure consistency between the development agenda and fiscal sustainability: create fiscal space by gradually reducing energy subsidies, support the vulnerable with targeted measures, and use part of the fiscal space to support the GTP and create conditions for a greener economy.  
  - Provide clarity on key elements and timing of the GTP strategy while managing expectations: communicate that the strategy is not a silver bullet for high energy cost, financial viability of the electricity sector, or universal electricity access. Its impact depends on implementation and high governance standards in the electricity sector.

*Annex II. The Impact of the Gas-to-Power Strategy.*

### Appendix I. Letter of Intent/Program Statement

### Appendix I. Letter of Intent/Program Statement

### Context and economic shocks
- The Senegalese economy is affected by the war in Ukraine, the consequences of the COVID-19 pandemic, the appreciation of the US dollar, tightening financial conditions and the global economic slowdown.
- Domestic shocks include major floods and regional political and security tensions.
- These shocks have: slowed economic activity, pushed inflation to a level not seen in several decades, weighed on public finances, and aggravated external account deterioration.
- The Government has taken measures to contain the rise in food and energy prices to preserve purchasing power and maintain social stability.

### Political and social developments
- Two elections were organized in the same year; legislative elections were held in July with results accepted by all political actors.
- A Prime Minister was appointed and a new Government formed in September.
- Dialogues on the high cost of living began on September 26, 2022 with stakeholders; 11 priority measures and 4 structural measures were agreed (15 measures total) including subsidies for wheat, tax reduction/suspension, strengthened controls, and measures to ease port congestion.
- Priority for 2023: maintain social stability and fight the high cost of living; emphasis on improving and promoting value chains in strategic sectors.

### Economic performance and developments in 2022
- GDP growth slowed from 5.2 percent in March to 2.9 percent y-o-y in June 2022.
- General index of economic activity excluding agriculture and forestry rose by 2.7 percent during the first nine (9) months of 2022, versus 7.7 percent during the same period in 2021.
- Industrial and agricultural sectors recorded -0.8 percent during the period; services sector climbed by 4.5 percent.
- Overall inflation hit 13 percent y-o-y in October 2022; food inflation increased by 19.5 percent y-o-y.
- Non-food and non-energy prices rose by 5.1 percent y-o-y.
- Imports of goods were up by 38.9 percent; exports of goods rose 24.6 percent.
- Money supply was up 18.4 percent in annual shift as of end-September 2022.
- Lending to the economy jumped 19.1 percent as of end-September.
- Net external assets declined by 21.1 percent compared to end-September 2021.
- Deposits rose 23.7 percent as of end-September 2022.
- Lending increased 20.8 percent as of end-September 2022; short-term loans +33.7 percent, medium-term loans +11.2 percent, long-term loans +18.4 percent.
- Gross portfolio impairment rate was 11.0 percent versus 12.6 percent one year earlier; provisioning rate reached 65.6 percent.
- Solvency ratio was 13 percent as of end-August, versus 12.6 percent in 2021; risk coverage above minimum 11.25 percent threshold except for three (3) banks whose share of the sector’s total balance sheet is 3.8 percent.

### Fiscal developments and public finance execution
- Tax revenues (excluding grants) reached 2,382.8 billion at end-September versus a target of 2,335.1 billion, a gain of 47.7 billion.
- Tax revenue amounted to 2,263.6 trillion versus 1,5068.9 billion in end-June. [text preserved as in source]
- Total expenditures executed amounted to 3,473.8 billion.
- Wage bill as of Q3: 807.4 billion.
- Investment spending executed: 1,2761 billion; of that, 798.2 billion executed directly by central government or by capital transfers, and 477.9 billion externally financed. [text preserved as in source]
- Subsidies for energy products amounted to 267.5 billion as of end-September 2022 (152.1 billion for tariff offsets; 115.4 billion for commercial losses and other related charges) compared to an annual envelope of 757 billion.
- Budget deficit stood at 959.4 billion at end-September; financed by net accumulation of liabilities amounting to 1,1625 billion and 204.8 billion in net acquisitions of assets. [text preserved as in source]
- Government raised 799.5 billion in the regional financial market as of September 30 (637.05 billion in T-bills; 162.4 billion in Treasury bonds, including 35 billion in a cash operation). The amount includes a buyback operation of 105.5 billion. Net financing is 764.5 billion. Total requirement to be raised in the market is 1,0642 billion; execution rate (excluding cash operation) is 71.8 percent. [text preserved as in source]

### Program performance (targets and structural benchmarks)
- All performance criteria and two of the three program quantitative indicators were met.
- Tax revenue surpassed the 1.361 trillion ceiling target.
- Net lending/borrowing (budget deficit) amounted to CFAF 771 billion versus a target of CFAF 772 billion.
- No external arrears were established.
- Social expenditures accounted for 40 percent of total spending (in line with objective).
- Spending using simplified procedures for nonpersonalized government services amounted to 1 percent of total transfer spending, versus a ceiling of 2 percent.
- Public sector contracts signed by single tender exceeded program ceiling: 43 percent versus a ceiling of 15 percent.

- Structural benchmarks implemented on time (3 of 9):
  - Tax expenditures report for 2020 published in June 2022: coverage rose to 79 percent, i.e. 339 measures, versus 77.3 percent, i.e. 270 measures in 2020; tax expenditures of 846.1 billion (95.8 billion more than 2019), accounting for 31.6 percent of tax revenue, or 6 percent of GDP. By tax type: VAT 88.2 percent (743.3 billion), income tax 5 percent (42.5 billion), customs duties 5 percent (41 billion).
  - Twice-yearly report on interconnection and information-sharing between DGID and DGD.
  - Evaluation framework for monitoring SRMT adopted by Minister of Finance Order No. 7402 of April 20, 2022.

- Structural benchmarks met but delayed:
  - Adoption of a new government procurement code (prior action) to better manage spontaneous offers and direct contracting.
  - Adoption of a new budgetary framework to manage oil and gas resources (end-August benchmark).
  - Roadmap to gradually eliminate energy subsidies (including communication phase and measures to support vulnerable households) finalized and published in November instead of September (prior action).

- Structural benchmarks not met:
  - Quarterly update of the database for all PPPs and power purchase agreements was not met.
  - Circular for making digital payments in the Family Security Grants Program starting in 2023 not adopted due to operational difficulties in the Sédhiou experiment (93 percent hybrid payments). DGPSN will pursue a holistic approach to identify fintechs for mass digitized payments; roadmap prepared to broaden the National Single Registry to about one million households no later than end-2023.
  - Tax base expansion: registration of 57,995 new taxpayers versus target of 75,000. Implementation of withholding contribution for 40,000 additional employees not yet in place pending merger of pension and social security databases.

- Progress on other commitments:
  - Audit report on use of Force COVID-19 Office funds published.
  - TSA consolidation: closed 158 of 276 bank accounts identified; outstanding 118 accounts used by public industrial and commercial entities, public health entities (hospitals), and public tertiary education institutions.
  - Single register of guarantees accessible online to be operational for pilot centers beginning November 2022.
  - Dematerialization of government property, real estate and registration procedures under deployment began end-May 2022 (first two of five lots delivered); expected full implementation end-Q3 2023.
  - Grouping of funds to finance programs promoting women’s entrepreneurship and youth jobs into a single fund is effective budgetarily.
  - A statement of budgetary risks was annexed to the 2023 budget law.

### Policy commitments and 2023 orientation
- As preconditions for conclusion of the review, government:
  - Took steps to limit energy subsidies to a maximum of around CFAF 450 billion in 2023.
  - Adopted and published a roadmap for better targeting and phasing out subsidies by 2025 with an implementation plan, communication phase and support measures for vulnerable households.
  - Approved a new public procurement code to better regulate use of contracts by direct agreement.

- Fiscal stance and debt management:
  - 2023 budget law projects a deficit of 5.5 percent of GDP, including precautionary and management reserves of 0.8 percent of GDP.
  - Government committed during program discussions to limit the possible use of fiscal reserves to a maximum of 0.2 percent of GDP, reducing the budget deficit to 4.9 percent of GDP in 2023.
  - Government reiterates determination to reduce public debt vulnerabilities by pursuing fiscal consolidation, prioritizing concessional borrowing, and strengthening debt management.

- Social protection and digital payments:
  - Complete update and expansion of the Single National Register (RNU) in 2023.
  - Finalize development of the platform allowing digital payments of cash transfers to beneficiary households.

- Financial sector:
  - Continue residual actions to exit close surveillance by the Financial Action Task Force (FATF).
  - Accelerate restructuring process of the postal group.

### Requests to the IMF and program outlook
- Government requests:
  - Conclusion of the sixth review of the arrangement under the Policy Coordination Instrument.
  - The third review under the Stand-By Credit Facility/Stand-By Arrangement.
  - Disbursement of 50 per cent of quota, or SDR 161.82 million.

- The Government believes the policies in the attached Memorandum of Economic and Financial Policies (MEFP) are adequate and will consult the Fund on further measures or revisions in accordance with Fund policies.
- The government plans to request a Fund-supported program in 2023 to address balance of payments needs that would result from materialization of risks to the macroeconomic outlook.
- Government authorizes IMF to publish this Letter, the Memorandum of Understanding, the Technical Memorandum of Understanding, and the Staff Report on this program.

*Appendix I. Letter of Intent/Program Statement — Dakar, Senegal — December 2, 2022*

### 17.      The challenging external environment and persistent inflationary tensions will

### 1senea2023001 - 17.      The challenging external environment and persistent inflationary tensions will

### Macroeconomic outlook and risks
- 2022 growth projection revised downward by 0.3 percentage points to 4.8 percent, due to sluggish domestic and external demand.
- 2022 inflation projection revised upward to an average of 9.1 percent, reflecting:
  - acceleration of inflation during the first nine months of the year,
  - persistence of high commodity prices,
  - US dollar appreciation.
- 2022 current account deficit expected to deteriorate further to 15.7 percent of GDP, driven by higher deficits in:
  - balance of payments,
  - services account,
  - primary income account.
- Secondary income account expected to strengthen due to strong remittances from migrants.
- 2023 outlook:
  - Economic growth should reach 10.1 percent in 2023 as the production of hydrocarbons starts.
  - Non-hydrocarbon growth should bounce back up to 6.1 percent.
  - Inflationary pressures expected to gradually ease with the good 2022-2023 farming season and anticipated drop in global commodity prices beginning in 2023.
- Key uncertainties and risks:
  - Growth in 2023 and 2024 depends on assumptions on the start date and pace of development of the production fields.
  - A more pronounced slowdown in global economic growth and more aggressive tightening of monetary policies would compress external demand and negatively affect growth.
  - Deterioration in the security situation in the region and unfavorable climate conditions could affect economic activity.
  - Inflation projections could be significantly impacted by a greater and unrelenting increase in oil and food prices.

### Ease the cost of living amid reduced fiscal space — measures and adjustments
- Government incorporated new expenditures amounting to CFAF 336 billion (2 percent of GDP) and additional revenue of CFAF 112 billion (0.7 percent of GDP).
- Additional expenditures (highlights):
  - Energy subsidies: budget envelope revised upward by CFAF 457 billion, bringing total amount for 2022 to CFAF 757 billion (4.4 percent of GDP).
  - Wage bill: additional budget cost of roughly CFAF 22 billion from expanding wage pay measures to all civil servants.
  - Interest payments on debt: additional allocation of CFAF 32 billion due to strong appreciation of the US dollar.
- Revenue adjustment:
  - CFAF 112 billion increase in tax revenue and a CFAF 22 billion drop in grants.
  - DGID revenue targets revised upward by CFAF 59.5 billion; DGID measures include strengthening tax compliance control and optimizing collection of tax administration receivables.
  - DGD projected annual gain of CFAF 52.5 billion through continuation of measures, especially operationalization of the last quarter’s action plan.
- One-off resources:
  - Decree accrued one-off resources of CFAF 247.3 billion from sale of administrative buildings to SOGEPA; acquisition financed by issuing Islamic bonds (Sukuk) in CFAF by SOGEPA in the WAEMU regional market.
- Budget savings measures to keep budget deficit unchanged at 1055.1 billion:
  - Drawings on project loans reduced to 415 billion, or 100 billion less than in the Supplementary Budget Law.
  - Domestically-financed investments envelope reduced by 45 billion.
  - Current expenditures budget cuts of 30 billion.
- Measures to support firms and household purchasing power:
  - Direct subsidies compensations for the energy sector to subsidize consumer prices: CFAF 450 billion.
  - Support for household staples and services (wheat, oil, sugar, rice and corn): CFAF 100 billion.

### Fiscal consolidation, 2023 budget framings, and revenue targets
- Government plans to accelerate fiscal consolidation while preserving priority expenditures.
- Policy intentions:
  - Bolster domestic revenue mobilization by vigorously implementing the Medium-Term Revenue Mobilization Strategy (MTRS).
  - Reform energy subsidy policy with a roadmap to gradually eliminate energy subsidies by 2025.
- 2023 draft budget law and commitments:
  - Draft budget law lowers budget deficit to 5.5 percent of GDP; includes precautionary and management reserves of 0.8 percent of GDP.
  - Government agreed to limit use of these budgetary reserves to 0.2 percent of GDP to bring budget deficit down to 4.9 percent of GDP in 2023.
  - Committed to mobilize additional tax revenue of CFAF 3,587 billion (this is CFAF 100 billion additional relative to the 2023 budget law).
  - Committed to raising the ceiling for energy subsidies to about CFAF 450 billion, which is 100 billion more than in the draft 2023 budget law.
  - Two-fold increase in monetary transfers to 0.4 percent of GDP to mitigate impact of higher energy prices on the most vulnerable households.
- Revenue collection targets:
  - Target for collecting tax revenue is 3,587 billion, an increase of CFAF 368 billion compared to the last 2022 revenue estimates.
  - SRMT operationalization focus areas: adapt tax and customs system to economic, social, environmental and digital context; improve productivity of revenue entities; lower taxpayers’ costs to comply.
- Roadmap to gradually eliminate regressive energy subsidies by 2025 components:
  - Adjustment of electricity prices and prices of oil products, combined with increased monetary transfers to mitigate impact on the most vulnerable households.
  - Revision of the electricity pricing structure.
  - Efforts to improve performance of public enterprises in the energy sector and reduce production costs.
  - Heightened communication efforts.
- 2023 financing requirement for the government: CFAF 2,222 billion, to be covered by:
  - Project loans amounting to 435 billion.
  - Other program loans of 158 billion.
  - Market financing for 1,637 billion, of which 251.2 billion is for refinancing the debt of the Blaise Diagne International Airport (AIBD).

### Budget reforms and public financial management improvements
- MTRS implementation acceleration in 2023:
  - Numerical results of the national program to survey taxable properties to be presented in Q1 2023.
  - SEN’FINANCES Portal expected operational in the first half of 2023 to unify filing tax returns online and requests for revenue administrations.
  - Order of the Minister of Finance to be issued to stabilize scope of the tax expenditures report before the end of Q1 2023.
- New budget and financial reform matrix adopted with six (6) strategic objectives:
  - Improve comprehensiveness, credibility and consideration of public policies in preparing the budget.
  - Bolster identification, monitoring and management of budget risks.
  - Improve budget execution and its control.
  - Improve coverage and quality of financial and accounting information.
  - Improve management of government assets and liabilities.
  - Put in place sound legal and institutional frameworks for the management of public finances.
- Key reform actions in progress:
  - Decentralization of payment authorization among senior and secondary payment officers since January 2022; requires strengthening stakeholder capacities and internal budget control tools to be effective in 2023 once the internal budget control order is signed.
  - Infra-annual budget execution programming being implemented in stages; forward-looking cash plan annexed to the 2022 draft budget law; draft order for infra-annual planning expected to be signed before January 2023 execution.
  - Reclassification efforts since FY 2020 of budget entries of capital transfers into government investment to improve compliance and streamline implementing agencies’ treasury accounts.
  - Reclassification of transfer expenditures continued in the 2023 draft budget law; capital transfers decreased by 4.3 percent.
  - Operationalize the Integrated Financial Information Management System (SIGIF).
- 2023 planned audits and publications:
  - Terms of reference for the functionality audit finalized for performance by an independent firm in 2023.
  - Publish Table of Government Operations (TOFE) for government agencies in accordance with SDDS commitments; consolidated statement of financial operations produced and published annually in the PNRD platform.
  - Strengthen management of budgetary risks regarding PPPs; 14 PPP projects being examined in UNAPPP with one project having a positive assessment.
  - Single Treasury Account (STA): strategy redesign needed to address institutions of higher learning and public health institutions’ specificities regarding management of entities’ own resources.
  - Improve programming, budgeting and monitoring of investment project execution; budgetary programming form for investment projects validated and submitted to project coordinators.

### Public debt stance and management
- Public debt has increased in recent years due to COVID-19 pandemic and impact of the war in Ukraine; expected to reach about 75 percent of GDP at end-2022.
- Debt Sustainability Analysis (DSA) performed in June 2022 shows Senegal remains at a moderate risk of debt distress with limited margin for absorbing shocks.
- Government debt policy priorities:
  - Prioritize concessional loans.
  - No planned issuance of Eurobonds in the short-term due to higher global interest rates.
  - Limit other commercial loans to highly profitable projects.
- Debt management platform improvements:
  - Accelerate implementation of the action plan from the technical and functional audit of the computerized public debt database management platform (DAIDA).
  - Actions include consolidating complementary modules, upgrading backup system, securing access, adopting a continuity plan, and implementing protection against malicious intrusions.
  - Work continuing with USAID funding.
  - Government committed to prioritize interoperability of state-owned enterprises debt management platform with DAIDA.

### Remedying vulnerabilities in the financial sector
- Restructuring of Société nationale La Poste:
  - Management changes enacted; tasks include finalizing preparation of financial statements and convening General Assemblies to recapitalize Société nationale de la Poste and its subsidiaries.
  - Strategic development plan prepared; adoption of a cost accounting system submitted to regulator for validation.
  - Strengthen separation between La Poste’s businesses, including transformation of Poste-finances into a financial entity intended to evolve into a banking institution with direct access to clearing operations without the Treasury’s guarantee.
- Restructuring of three small banks in difficulty:
  - Bank with mostly public capital: central government and new private shareholder raised capital from 15 billion to 35 billion; change submitted to the WAMU Banking Commission for approval.
  - Second bank (shares held by a microfinance entity): restructuring in final phase with increase in majority shareholder’s stake and disposal of related real estate assets.
  - Third bank (under close monitoring due to severe deterioration in equity): recapitalization in progress driven by the government with shareholders and investors; operation to be submitted to the Banking Commission’s December 2022 meeting.
- FATF monitoring and exit plan:
  - After 30 residual actions remained upon expiration of Senegal’s action plan in September 2022, FATF plenary session in October 2022 decided to keep Senegal on the list of jurisdictions under close monitoring.
  - Government determined to fully implement the 30 residual actions promptly before the next in-person meeting with the joint group scheduled for January 2023; actions include adopting implementing regulations, providing training, performing controls, and deploying operational tools and mechanisms.

*International Monetary Fund — Senegal country report excerpt*

### 39.      Reforms are in progress to improve the business environment:

### Reforms are in progress to improve the business environment

### Progress of the PREAC reform program and outcomes
- PREAC I (2013-2015) and PREAC II (2016-2018) were used to undertake major reforms that improved the business climate in Senegal.
- These reforms facilitated the burst of innovative SMEs and nearly 275 percent growth in direct foreign investment, whose absolute value rose from $403 million (in 2014) to $1.5 billion (in 2020) according to UNCTAD figures.
- PREAC III (2019-2023) is under way and launched reforms covering:
  - labor law;
  - improvements in commercial justice;
  - the Investment Code makeover;
  - the legal framework in energy and access to ownership;
  - completion of telepayments;
  - continuation of streamlining pricing systems;
  - operationalization of systems for warehouse receipts;
  - development of Startups and SMEs, competition and regulation;
  - adoption of the public-private partnership law;
  - implementation of investment platforms.

### Priority reform projects and investment policy
- Investment Code makeover:
  - In its last phase (finalization and adoption).
  - Aims to address current challenges and anticipate changes in the continental African Free Trade Zone (ZLECAF) and globally.
  - Part of key reform projects in PAP2A to encourage private sector investment into growth engines.
  - Investment Code reform is in its final technical validation phase and is expected to take effect in 2023.
- Assessment of PREAC cycles (I, II, III) to learn lessons and establish a new reform program for 2030 to scale up private investment attraction.
- Operationalization of the Hybrid Investment Fund.
- National private sector development strategy (SNDSP) adopted:
  - Vision for 2023-2035 to densify the economic system to have 150 enterprises per 100,000 inhabitants, versus nine (9) today.
  - Formalization accelerated to 300,000 formal enterprises versus 12,000 to 14,000 today.
  - Three hundred (300) champion enterprises operating from Senegal regionally and abroad.
  - Create three (3) million formal jobs, or twenty-three (23) times more than today.
  - Strategy built on five programs: i) support for national enterprises; ii) category competitiveness strategies; iii) administration that facilitates conducting business; iv) attraction and development of regional and global groups; and v) dialogue and a public-private alliance.
  - These are broken down into sixteen (16) projects and roughly twenty priority categories.

### Emergency socioeconomic integration program for youth (XËYU NDAW ÑI)
- Total cost: 450 billion.
- Implemented since 2021 with the goal to create 65,000 direct jobs through special hiring, public community interest projects and job assistance programs.
- Program components include job training and integration into production categories and a government-employer agreement framework.
- Allocations and outcomes:
  - Raised an allocation of CFAF 300 billion for 2021 and 2022.
  - An allocation of 150 billion is projected for 2023.
  - To date, the program has created 32,354 jobs and has trained 27,422 youths.
- A study is in progress to estimate the number of youths that have taken advantage of freelancing.
- An interim program implementation report will be available in end-2023 on hiring, learning and category development components.

### Selected quantitative targets and performance criteria (highlights)
- Floor on net lending/borrowing (GFSM 2001 definition; cumulative since the beginning of the year):
  - Prog. -620; Act. -617; Status Met (2021 Jun.)
  - Prog. -967; Act. -965; Status Met (2021 Dec.)
  - Prog. -772; Act. -771; Status Met (2022 Jun.)
- Ceiling on central government's overall net financing requirement:
  - Prog. ...; Act. ...; Status ...
  - Prog. 997; Act. 965; Status Met (2021 Dec.)
- Floor on tax revenue:
  - Prog. 1,082; Act. 1144; Status Met (2021 Jun.)
  - Prog. 2,661; Act. 2,594; Status Not Met (2021 Dec.)
  - Prog. 1,361; Act. 1,507; Status Met (2022 Jun.)
- Ceiling on the share of the value of public sector contracts signed by single tender (percent):
  - Prog. 15; Act. 57; Status Not Met (2021 Jun.)
  - Prog. 15; Act. 25; Status Not Met (2021 Dec.)
  - Prog. 15; Act. 43; Status Not Met (2022 Jun.)
- Floor on social expenditures (percent of total spending):
  - Prog. 35; Act. 40; Status Met (2021 Jun.)
  - Prog. 35; Act. 40; Status Met (2021 Dec.)
  - Prog. 40; Act. 40; Status Met (2022 Jun.)
- Ceiling on total nominal public debt (CFAF billion):
  - Prog. ...; Act. ...; Status ...
  - Prog. 11,270; Act. 10,997; Status Met (2021 Dec.)
- Ceiling on spending through simplified procedures for non-personalized services:
  - Prog. 25; Act. 3; Status Met (2021 Jun.)
  - Prog. 3; Act. 5; Status Not Met (2021 Dec.)
  - Prog. 2; Act. 1; Status Met (2022 Jun.)
- Ceiling on public sector external payment arrears (stock):
  - Prog. 0; Act. 0; Status Met (all reported dates)

### Structural benchmarks and reform targets (selection)
- Set up a centralized and integrated land management system which will digitalize land management procedures.
  - Target date: End December 2021. Status: Not Met.
- Adopt a "circulaire" to make digital payments under the regular cash transfer program starting in 2023.
  - Target date: End November 2022. Status: Not met.
- Put in place a collateral registry accessible online combining movable collateral and mortgages in cooperation with the BCEAO.
  - Target date: End December 2021. Status: Not Met.
- Prepare a semi-annual report on the use of information from cooperation between customs and the tax administration.
  - Target: Semi-annual starting with end December 2020. Status: Met.
- Adopt an evaluation framework to monitor revenue administrations (DGID, DGD) on a monthly/quarterly basis.
  - Target date: End June 2022. Status: Met.
- Publish the tax expenditure report for year N-2 annually on the Ministry of Finance and Budget website.
  - Target: Annually, starting at end June 2021. Status: Met.
- Include in the 2022 budget law measures aiming at reducing tax expenditures by at least CFAF 25 billion.
  - Target date: End December 2021. Status: Not Met.
- Expand the tax base by increasing registered taxpayers at the Directorate in charge of small and micro-enterprises by 75,000 and tax at the source an additional 40,000 employees.
  - Target date: End June 2022. Status: Not met.
- Raise energy prices to limit electricity and fuel subsidies to 2.7 percent of GDP in 2023 while mitigating the impact on the most vulnerables.
  - Target date: End November 2022. Status: Prior action.
- Publish a roadmap to gradually eliminate energy subsidies from 2023 onwards.
  - Target date: End September 2022. Status: Not Met. (Prior action)
- Merge all funds for the financing of youth and women into a single fund.
  - Target date: End December 2021. Status: Not Met.
- Revise the public procurement legal framework to rely more on open, competitive tenders and limit single-source tenders.
  - Target date: End June 2022. Status: Not Met. (Prior action)
- Identify bank accounts of public entities with own revenues and set a roadmap for closure into the treasury single account.
  - Target date: End December 2021. Status: Met.
- Update quarterly the database for all PPPs and power purchase agreements with identification of budgetary impact and fiscal risks.
  - Target date: End September 2022. Status: Not met.
- Publish a fiscal risk statement as annex to the 2022 budget law.
  - Target date: End December 2021. Status: Met.
- Adopt a new fiscal framework with a long-term budgetary anchor to guarantee sharing of hydrocarbon revenues with future generations and a short-term operational rule excluding oil and gas revenues.
  - Target date: End August 2022. Status: Not met.

### Technical Memorandum of Understanding (TMU) — program monitoring
- The TMU defines quantitative performance criteria and indicative targets and continuous targets for monitoring:
  - the Standby Credit Facility and Stand-By Arrangement for the period June 2021 – January 10, 2023;
  - the IMF-supported program under the Policy Coordination Instrument (PCI) for the period January 10, 2020 – January 9, 2023.
- Reviews and test dates:
  - First review (fourth review under the PCI) will assess the end-June 2021 test date.
  - Second review (fifth review under the PCI) will assess the end-December 2021 test date.
  - Third review (sixth review under the PCI) will assess the end-June 2022 test date.
- Definitions and coverage:
  - “Government” means the budgetary central Government of the Republic of Senegal (excludes central bank and public sector outside the budgetary central government).
  - “Public sector” means the government, local governments and all majority government-owned or controlled entities.
  - Debt definition follows paragraph 8(a) of the Guidelines on Public Debt Limits in Fund-Supported Programs (Executive Board Decision No. 16919-(20/103), adopted October 28, 2020), including loans, suppliers’ credits, leases, arrears, penalties, judicially awarded damages and interest, and debt guarantees.
  - External debt is defined as debt borrowed or serviced in a currency other than the CFA franc, regardless of the residency of the creditor.
- Reporting requirements:
  - Authorities will report provisional data on the overall fiscal balance (program definition) and its components monthly to Fund staff with a lag of no more than 6 weeks after the end of the relative month.
  - Final data provided no later than two months after the reporting of the provisional data.

*Source: IMF staff and Senegalese authorities (excerpted chapter content).*

### 9.      Data related to the additional borrowing by the Treasury to finance accounts payable

### 9.      Data related to the additional borrowing by the Treasury to finance accounts payable

### Additional borrowing to finance accounts payable — reporting and content
- Frequency and timeliness:
  - Data will be sent quarterly within a period of one month from the end of the quarter.
- Content to be provided:
  - Spending by ministries out of unutilized appropriations from past budgets (drawdown of the “comptes de dépôt”).
  - Offsets for illiquid revenues (“recettes d’ordre”) and for other below-the-line operations.
  - A reconciliation between the budgetary balance (see section “Floor on net lending / borrowing” for the definition) and the financing made available during the respective quarter.

### Overall financing requirement — definitions and reporting
- Frequency and timeliness:
  - Data related to the overall financing requirement will be sent quarterly within a period of one month from the end of the quarter, starting from the end of December.
  - Details regarding any Government borrowing will be reported monthly within six weeks of the end of the month.
- Required data elements:
  - (i) total gross Government debt;
  - (ii) total debt principal repaid by the Government;
  - (iii) all guarantees granted by the Government for domestic or external loans to its suppliers and contractors and any other public or private entity.
- Classification and reporting conventions:
  - Borrowings will be grouped as short-term (less than one year) or long-term (one year or more). This rule applies also to amounts on-lent and guarantees granted by the Government.
  - Data on projected principal and interest payments will be reported on a commitment and a disbursement basis.

### Floor on Tax Revenues — definition and reporting
- Definition:
  - Tax revenues are the sum of revenues from taxes and levies on income, profits and capital gains, salaries and labor, on assets; taxes on goods and services; on foreign trade and international transactions; and other tax revenues.
  - Petroleum revenues subject to specific monitoring: VAT on oil (domestic consumption and imports), excise taxes on oil, customs duties on oil, vehicle taxes, the PSE, and the Petroleum Product Imports Security Fund (FSIPP).
- Reporting requirement:
  - Reporting requirements are the same as for the quantitative performance criterion on net lending/borrowing.

### Ceiling on Total Nominal Public Debt — definition and reporting
- Definition:
  - Debt comprises external and domestic debt of the public sector (general government and public nonfinancial corporations as defined in paragraph 3), measured at nominal value.
  - The ceiling will be monitored on an annual basis.
  - For evaluation, foreign-currency-denominated debt 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$ 534.5 and CFAF/SDR 775.8.
- Reporting requirements:
  - Quarterly provisional data to IMF staff, within six weeks after quarter end, on debts of listed 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, COUD, ACMU, CDC, Dakar Dem Dik, ITA, MIFERSO, CEREEQ, Air Senegal, SOGEPA, SONACOS).
  - Any public enterprise not on the list contracting debt greater than 5 billion CFA francs will be communicated and added to the list for future reporting.
  - The stock of debt at end December of the current and previous year for all listed public enterprises, plus newly contracted debt during the year and principal payments, will be communicated within two months after year-end.
  - All retroceded or guaranteed debt emanating from central administration benefiting public enterprises, and retroceded or guaranteed debt benefiting private sector enterprises, will be communicated within two months following the end of each quarter; data must distinguish guarantees vs debt on-lent to public enterprises and those issued to private sector actors.
  - All commitments by comfort letter will be communicated quarterly within six weeks after the end of the quarter; if already counted in another category (e.g., guarantees), this must be explicitly mentioned.

### Ceiling on Public Sector External Payments Arrears (Continuous) — definition and reporting
- Definition:
  - External payment arrears = sum of payments owed and not paid when due (in accordance with contract terms) on external debt contracted or guaranteed by the public sector.
  - The quantitative performance criterion on external payments arrears will be monitored on a continuous basis.
- Reporting requirement:
  - The authorities will promptly report any accumulation of external payments arrears to Fund staff.

### Indicative targets and specific ceilings/targets
- Ceiling on the share of the value of public sector contracts signed by single tender (percent):
  - Definition:
    - Public sector contracts: administrative contracts for procurement of supplies, services, or works.
    - “Non-competitive” = awarded without open competitive tender and without an open inquiry and open price.
    - Semiannual indicative target applies to total public sector contracts entered by the Government or any entity subject to the procurement code.
    - Exclusions: classified purchases; fuel purchases by SENELEC for electricity production under the new regulation requiring SENELEC to buy fuel from SAR; administrative amendments; riders necessary for final delivery provided they comply with procurement code.
  - Reporting requirement:
    - 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:
    - Authorities will report semiannual data to Fund staff within two months after each semester.
- Ceiling on Spending Through Simplified Procedures for Non-personalized Services:
  - Definition:
    - Share of central government expenditures for non-personalized services executed through simplified procedures in total transfers (procedures: DMRI and DSOP).
  - Reporting:
    - Government will report semi-annually 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 of each semester.
- Net Domestic and Regional Financing of the Government (memorandum item):
  - Definition:
    - Based on TOFE: sum of net accumulation of liabilities including (i) securities issued on the regional market (WAEMU), including T-bills, T-bonds, and Sukuk, and (ii) direct domestic loans in CFAF (including other loans and excluding the counterpart of IMF financing).
    - Accumulation of other accounts payable does not correspond to domestic or regional financing for this memorandum item.
    - Indicative target will be monitored annually for the budgetary central government.
  - Reporting:
    - Data transmitted quarterly with the TOFE and a maximum delay of two months.

### Additional information for program monitoring — obligations, timings, and publications
- Immediate and short-lag notifications:
  - Three days after adoption: any decision, circular, edict, supplemental appropriation order, ordinance, or law with economic or financial implications for the current program (including acts changing budget allocations, creating new agencies or funds).
  - Within a maximum lag of 30 days — preliminary monthly data on:
    - Tax receipts and tax and customs assessments by category with corresponding revenue monthly;
    - 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 reports within 30 days:
    - Quarterly report of the Debt and Investment Directorate (DDI) on execution of investment programs.
    - Monthly preliminary Government financial operations table (TOFE) based on Treasury accounts.
    - Provisional monthly balance of the Treasury accounts.
    - Reconciliation tables (SIGFIP ↔ consolidated Treasury accounts; consolidated Treasury accounts ↔ TOFE for “budgetary revenues and expenditures”; TOFE ↔ 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 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 will be provided as soon as final balances of the Treasury accounts are available, but not later than one month after reporting of provisional data.
- Monthly provisional 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; final data no more than one month after provisional data.
- SIGFIP (or SIGIF when operational) monthly table requirements:
  - Show all committed expenditure (dépenses engagées), all certified expenditures not yet cleared for payment (dépenses liquidées non encore ordonnancées), all payment orders (dépenses ordonnancées), all payment orders accepted by the Treasury (dépenses prises en charge par le Trésor), and all payments made by the Treasury (dépenses payées).
  - Exclude delegations for regions and embassies.
  - Also list payments that do not have a cash impact on Treasury accounts.
  - Balances outstanding broken down by payer and spending category, by maturity and length of time overdue.
- Expenditures using derogatory procedures — quarterly reporting:
  - Status of ‘waiting and provisional imputation’ accounts showing stock of transactions awaiting regularization;
  - Status of derogatory expenditures by expenditure category;
  - Status of deposit accounts (comptes de dépôt) identifying nature of beneficiaries:
    - (i) agencies in the broad sense (legal entity governed by public law, or independent of the State);
    - (ii) legal entities governed by private law (e.g., companies with public or private capital, beneficiaries of subsidies or equity);
    - (iii) private individuals (recipients of social assistance and grants);
    - (iv) non-personalized state services;
    - (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 maximum lag of two months;
  - Monetary survey on a monthly basis with maximum lag of two months;
  - Lending and deposit interest rates of commercial banks on a semi-annual basis;
  - Prudential supervision and financial soundness indicators for bank financial institutions (Survey of Credit Institution Compliance with the Prudential Framework) on a semi-annual basis, with maximum delay of four and a half months after closing of accounts for prudential ratios and six months for financial soundness indicators.
- Transparency via government website (monthly updates):
  - Preliminary TOFE and transition tables with a delay of two months;
  - SIGFIP execution table, table for the central Government and a summary table including regions, with a delay of two weeks;
  - The amount of the airport tax collected, deposited in the escrow account, and used for the repayment of the loan financing the construction of the new airport, with a delay of one month.
  - Full information on (i) operations of the Energy Sector Support Fund (FSE); (ii) investment projects in the power sector; (iii) planning and execution of these projects; and (iv) details of financing and updated costs.

### Program-period monthly reporting obligations (summarized)
- Provisional data on current nonwage noninterest expenditures and domestically financed capital expenditures — monthly, lag no more than 30 days.
- SIGFIP/SIGIF monthly table showing committed, certified, ordonnanced, taken-in-charge, and paid expenditures — monthly.
- Final Treasury account balances — provided as soon as available, no later than one month after provisional reporting.

### Statement by Mr. Sylla and Mr. Diakite — economic context, performance, and outlook
- Context and appreciation:
  - Authorities thank Management and staff for policy dialogue in the context of the sixth and last review under the Policy Coordination Instrument (PCI), and the third and last reviews under the Stand-By Arrangement (SBA) and the Standby Credit Facility (SCF).
  - Authorities express appreciation for Fund support to reform efforts under the “Plan Sénégal Emergent” (PSE).
- Recent shocks and policy priorities:
  - Economy hit by spillovers of the war in Ukraine, the Covid-19 pandemic, global tightening of financial conditions, economic downswing, major floods, and regional political and security tensions.
  - These shocks caused a slowdown in economic activity, pushed inflation upwards, and weighed on fiscal and external accounts.
  - Authorities prioritized containing the rise in food and energy prices and maintaining social stability.
- Program performance and intentions:
  - Despite global and domestic challenges, program performance at end-June 2022 has been broadly satisfactory; prior actions fulfilled.
  - Authorities intend to request a new IMF-supported reform program in 2023 to help meet potential balance of payments needs and support private sector-led sustainable and inclusive growth, preserve fiscal and debt sustainability, and ensure transparency and efficiency in hydrocarbon sector management.
- Recent economic developments and outlook — key figures and projections:
  - Real GDP growth projection revised downwards from 5.1 percent to 4.8 percent (weakening in secondary and tertiary sectors).
  - Headline inflation hit 13 percent y-o-y in October 2022.
  - Fiscal deficit contained at 6.2 percent, in line with program target, supported by strong revenue despite spending pressures.
  - External sector: current account deficit widened due to deteriorating terms of trade; trade balance and services account deficits worsened over first six months of 2022.
  - Banking sector remained resilient; credit activity strong in first nine months of 2022 with increased net bank loans to central administration and private sector.
  - Growth forecast for 2023: 10.1 percent, with large positive spillovers from the start of hydrocarbon production.
  - Non-hydrocarbon growth forecast: 6.1 percent.
  - Inflationary pressures expected to gradually decline starting in 2023 reflecting a good food harvest in 2022-2023 and anticipated drop in world commodity prices.

_Source: 1senea2023001 - 9.      Data related to the additional borrowing by the Treasury to finance accounts payable_

### 8.   The authorities broadly share the assessment that the risks to the outlook are elevated.

### 8.   The authorities broadly share the assessment that the risks to the outlook are elevated.

### Risks and growth outlook
- Growth projections in 2023 and 2024 depend significantly on the assumptions regarding the start date and pace of oil and gas production.
- Downside risks identified:
  - A greater slowdown in global growth.
  - Additional monetary policy tightening.
  - A deterioration of the regional security situation.
- Potential impacts of downside risks:
  - Weaker external demand.
  - Pressure on fiscal and external accounts.
  - Negative effects on growth.
- Upside factors cited by the authorities:
  - Positive spin-offs from a good agricultural season.
  - Efficient management of hydrocarbon resources.
  - Implementation of the authorities’ ambitious reform program.

### Program performance
- Overall assessment: Program performance has been broadly satisfactory.
- Quantitative and indicative results:
  - All quantitative performance criteria were met.
  - Two of three indicative targets were met.
  - The fiscal deficit target was observed, notably on the back of tax revenue largely exceeding the target floor.
  - No external arrears have been constituted.
  - Social spending represented 40 percent of total spending, in line with the relevant program objective.
- Shortfalls:
  - The ceiling on the share of contracts awarded through single-source procurement was missed.
  - Only three of the nine structural benchmarks/reform targets were implemented on time.
  - The authorities have taken corrective actions to implement the remaining structural benchmarks, albeit with delays.

### Fiscal consolidation, debt, and macroeconomic stability
- Fiscal consolidation targets and plans:
  - Authorities are committed to reduce the fiscal deficit to 4.9 percent of GDP in 2023.
  - Authorities intend to remain on course for reaching the regional deficit norm of 3 percent in 2025.
- Debt policy and management:
  - Public debt has increased in recent years notably due to the Covid-19 pandemic and the impact of the war in Ukraine.
  - Authorities aim to put public debt on a downward path by accelerating fiscal consolidation while preserving priority spending.
  - Government will continue to strengthen debt management and closely pursue a debt policy that favors concessional loans.
  - The government does not plan to issue short-term Eurobonds given the rise in global interest rates, and will limit and exclusively allocate other commercial borrowing to highly profitable projects.
  - Objective: preserve Senegal’s moderate risk of debt distress status.

### Revenue mobilization
- Medium-Term Revenue Mobilization Strategy (SRMT):
  - Target: achieve a tax-to-GDP ratio of 20 percent by 2024.
  - Focus areas: adapt the tax and customs system to changes in economic, social, environmental, and digital fields; improve productivity of revenue agencies; reduce compliance costs for taxpayers.

### Public spending and subsidies
- Social support and cost-of-living measures:
  - The 2023 budget steps up support notably for household consumer goods (wheat, oil, sugar, rice, and maize) and energy products.
  - Measures aim to address food insecurity concerns and support purchasing power of vulnerable households.
- Energy subsidies:
  - Authorities regard energy subsidies as unsustainable over the medium term.
  - Steps taken: increase energy prices, better target beneficiaries, and adopt a roadmap for the phasing out of energy subsidies by 2025 to avoid fiscal slippages.

### Public financial management reforms
- Ongoing reforms under the national budget and financial reform management strategy:
  - Strengthen identification, monitoring, and management of fiscal risks.
  - Improve budget execution and control.
  - Establish sound legal and institutional frameworks for public finance management.

### Private sector development and competitiveness
- Role in the PSE: private sector development remains a key pillar.
- PREAC achievements and plans:
  - Under PREAC, previous phases saw the emergence of innovative SMEs and an increase of nearly 275 percent in foreign direct investment.
  - PREAC III focuses on labor legislation and the investment code, commercial justice, and access to property.
  - Adoption of the law on public-private partnerships and establishment of investment platforms are program milestones.
- National private sector development strategy (SNDSP) 2023-2035:
  - Target: create up to 150 businesses per 100,000 inhabitants, compared to nine today.
  - Target: formalize 300,000 businesses in comparison to 12,000 to 14,000 presently.
  - Emphasis on economic integration and employment of young people, including women.

### Financial inclusion and banking sector measures
- Financial inclusion strategy 2021-2025 targets:
  - Financial inclusion rate of 65 percent for adults.
  - Financial inclusion rate of 90 percent for small and medium enterprises (SMEs).
  - Coverage: all municipalities in the country.
- Banking sector actions:
  - Complete restructuring process of the three non-systemic banks in close collaboration with the regional Central Bank (BCEAO) and Banking Commission.
  - Institutional transformation of “Postefinances” into a postal bank is progressing well.

### AML/CFT and international oversight
- Government objective: exit from the enhanced oversight of the Financial Action Task Force (FATF).
- Implementation status:
  - Joint group overseeing related developments is scheduled for January 2023.
  - Authorities are working to ensure full implementation of the 30 residual actions before the meeting.

### Conclusion and Fund engagement
- Authorities value the constructive policy dialogue with the Fund and remain committed to building on progress.
- Government intends to request Fund’s support for a new program in 2023.
- Authorities seek Executive Directors’ support for the completion of the final reviews under the PCI, SBA, and SCF, based on broadly satisfactory program performance and ongoing reform commitments.

*Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1senea2023001.pdf*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1senea2023001.pdf_