## 1senea2023003

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---

### Executive summary and recent macro developments
- Context and pressures:
  - Disruptions from the halt of the cereal export agreement between Russia and Ukraine; restrictions on rice exports by India; appreciation of the U.S. dollar; increasingly stringent regional and global financial conditions; instability in some neighboring countries.
  - Preparing for February 2024 presidential elections; incumbent president not a candidate; more than 200 candidates filed applications; Constitutional Court validation in December concludes sponsorship collection phase started in October.
  - Authorities committed to: execute the 2023 budget, submit a 2024 budget law consistent with the June 2023 ECF/EFF and RSF program requests, and implement agreed structural reform measures.
- H1-2023 performance:
  - Real GDP grew by 4 percent (y/y) during H1-2023.
  - Sectoral slowdowns: agri-food manufacturing -7.4 percent; textile related production -19.6 percent.
  - Inflation: peaked November 2022 at +14 percent; at end-October 2023 headline inflation 2.4 percent Y-o-Y; core inflation 2.9 percent.
  - External sector: current account deficit narrowed by 23 percent at end-June 2023 vs. same period 2022; remittances +38 percent; tourism +32 percent.
  - Budget execution through end-September 2023: tax revenue collection 70.5 percent of annual target; total expenditure executed at 75 percent of annual projections (split equally between recurrent and investment spending).
  - Public debt: central government outstanding debt 71.0 percent of GDP (excluding treasury operations), up 2.8 percentage points relative to end-2022; public sector debt including SOEs 77.9 percent of GDP, up 1.9 percentage points relative to end-2022.
  - Banking sector (as of end-August): shareholder’s equity +13.4 percent; tier-1 capitalization 12.7 percent (prudential norm 7.5 percent); nonperforming loans declined from 11.3 to 9.9 percent; liquidity ratio 106 percent (regulatory minimum 75 percent).
  - Financial conditions: BCEAO purchased CFAF 2 trillion in sovereign debt securities from the banking system; average yields for sovereign bonds Jan–Sep 2023 6.49 percent (from 4.96 percent); maturities shortened to 2.67 years (from 5.28 years); S&P reconfirmed B+ with stable outlook in June.

### Program implementation and performance under ECF/EFF/RSF
- Overall assessment: Performance under the ECF/EFF/RSF satisfactory.
- Quantitative performance criteria and indicative targets (end-June 2023):
  - All quantitative performance criteria for end-June 2023 met.
  - Two out of three indicative targets met; missed IT on the ceiling on total public sector debt due to government frontloading of borrowing to build cash buffers ahead of 2024 election period.
- Structural benchmarks (SBs) and RSF:
  - Four out of six SBs for the first review implemented; two implemented with one-month delay due to OFNAC leadership changes and a government reshuffle in October.
  - Two RSF reform measures completed.
- Risks and repayment capacity:
  - Enterprise risks manageable; Senegal at moderate risk of debt distress with limited buffers.
  - Risk mitigants: commitment to downward debt trajectory, track-record repaying Fund obligations, even phasing and satisfactory program implementation, stable socio-political environment so far.
  - Business/reputational risks manageable given strong government engagement with Fund.

### Staff views and program modifications supported
- Staff supports:
  - Completion of first reviews under ECF/EFF/RSF.
  - Modification of a quantitative performance criterion and addition of a quantitative performance criterion.
  - Rephasing and addition of four new structural benchmarks and rephasing of two existing SBs.

### Outlook and balance of risks
- Growth projections (revised):
  - 2023: 4.1 percent;
  - 2024: 8.3 percent.
  - Revisions reflect tense socio-political environment in H1-2023, slowdown in secondary sector (particularly mining), and postponement of oil and gas production to second half of 2024.
- Inflation projections (revised):
  - 2023: 6.5 (from 5) percent;
  - 2024: 3.9 (from 2) percent.
- Current account deficits for 2023 and 2024 revised upward due to weaker export growth in 2023 and delayed hydrocarbon exports in 2024.
- Balance of risks: tilted to the downside. Key risks include prolonged war in Ukraine, conflict in the Middle East, higher commodity prices, tighter financial conditions, stronger US dollar, heightened political instability ahead of elections, structural risk if hydrocarbon revenues fall short, and climate vulnerability.
- Upside: higher oil and gas prices and phase 2 FID for GTA and Sangomar could materially boost production and exports.

### Staff appraisal summary
- Staff considers authorities’ policy response appropriate but urges vigilance given narrowed debt margin and multiple external shocks.
- Staff supports fiscal consolidation, ambitious revenue mobilization, containment and targeting of energy subsidies, governance and AML/CFT reforms, and maintaining RSF reform momentum to catalyze climate finance.

---

### Fiscal policy for 2024: deficit, consolidation and financing
- 2024 draft budget law (prior action) aligns with agreed deficit target of 3.9 percent of GDP.
- Objective: gradually achieve WAEMU convergence criterion of 3 percent of GDP by 2025.
- Medium-Term Revenue Strategy objective: reach 20 percent of GDP by 2025; focus on rationalizing tax expenditures and VAT exemptions.
- Authorities commit to containing energy subsidies to approximately 1 percent of GDP.
- Financing of fiscal deficit to rely on continued strong budget and project loans from partners and use of 2023 over-financing.

Key budget projections and figures (2023 → 2024):
- Revenues and Grants: 4,621 (21.8 percent of GDP) → 4,682 (22.0 percent of GDP)
- Tax revenues: 4,123 (19.5 percent of GDP) → 4,180 (19.7 percent of GDP)
- Nontax revenues: 239 (1.1 percent of GDP) → 210 (1.0 percent of GDP)
- Grants: 259 (1.2 percent of GDP) → 292 (1.4 percent of GDP)
- Expenditure: 5,452 (25.7 percent of GDP) → 5,521 (26.0 percent of GDP)
- Compensation of employees: 1,482 (7.0 percent of GDP) → 1,442 (6.8 percent of GDP)
- Use of goods and services: 345 (1.6 percent of GDP) → 428 (2.0 percent of GDP)
- Current transfers: 1,054 (5.0 percent of GDP) → 1,249 (5.9 percent of GDP)
  - Energy subsidies: 153 (0.7 percent of GDP) → 215 (1.0 percent of GDP)
- Interest: 507 (2.4 percent of GDP) → 578 (2.7 percent of GDP)
- Net acquisition of nonfinancial assets: 2,064 (9.7 percent of GDP) → 1,823 (8.6 percent of GDP)
  - Domestically financed: 1,249 (5.9 percent of GDP) → 1,122 (5.3 percent of GDP)
  - Externally financed: 815 (3.8 percent of GDP) → 702 (3.3 percent of GDP)
- Overall balance: -831 (-3.9 percent of GDP) → -838 (-3.9 percent of GDP)
- Non-hydrocarbon primary balance: -444 (-2.1 percent of GDP) → -310 (-1.5 percent of GDP)
- Nominal GDP: 21,176 → 21,258
- Hydrocarbon revenues: 120 (0.6) → 500 (0.2)

Government financing (selected lines, 2023 → 2024):
- Financing need (A): 2,658.9 (14.0) → 2,136.7 (10.1)
  - Central Government fiscal deficit: 935.9 (4.9) → 838.5 (3.9)
  - Amortization: 1,269.6 (6.7) → 1,248.2 (5.9)
  - On-lending to SOEs: 277.8 (1.5) → 0.0 (0.0)
  - Clearance of late payments: 145.6 (0.8) → 0.0 (0.0)
- Financing sources (B): 3,263.7 (17.2) → 1,531.9 (7.2)
  - External borrowing: 1,945.2 (10.3) → 1,159.5 (5.5)
    - Donor budget support: 796.7 (4.2) → 550.5 (2.6)
    - IMF: 431.1 (2.3) → 338.1 (1.6)
    - WB: 185.0 (1.0) → 107.9 (0.5)
    - BAD: 110.6 (0.6) → 49.0 (0.2)
    - AFD: 52.5 (0.3) → 30.4 (0.1)
    - Japan: 17.5 (0.1) → 25.0 (0.1)
  - Project loans: 435.6 (2.3) → 445 (2.1)
  - External general commercial borrowing: 712.9 (3.8) → 164.0 (0.8)
  - Domestic borrowing: 1,318.5 (7.0) → 372.4 (1.8)
- Change in government deposits (over-financing) (C=B-A): 604.8 (3.2) → -604.8 (-2.8)
- Memo: Excludes issuance/amortization of short-term treasury bills. External debt definition based on currency-basis. BOAD loans are classified as external.

Precautionary liquidity buffers and over-financing (2023 → 2024)
- Authorities raising approximately 3.2 percent of GDP through syndicated commercial loans and regional market issuance to cover debt service January–April 2024.
- Staff view: over-financing is a financing shift between 2023 and 2024; constitutes a debt management operation with no material impact on DSA.
- Agreed safeguards:
  - New performance criterion (PC) on government’s deposits at BCEAO for end-2023 to ensure resources not used in 2023.
  - Adjustors for existing PC on PV of new external public sector borrowing to accommodate 2023 over-borrowing and symmetrically lower 2024 ceiling.
  - 2024 budget law stipulates budget execution will reflect commensurate under-borrowing.

Measures to strengthen fiscal consolidation (staff-authorities agreement)
- Tax revenue boost: increase tax-to-GDP ratio by 1.1 percentage points to 19.7 percent of GDP through tax policy and administrative measures.
  - Major items:
    - Unwinding suspension of taxes and customs duties imposed in 2023: 140.0 bn CFAF — 0.66 percent of GDP.
    - Rationalization of tax expenditure including VAT exemptions: 100.0 bn CFAF — 0.47 percent of GDP.
    - VAT on online/digital transactions: 15.0 bn CFAF — 0.07 percent of GDP.
    - Re-instate import duties on smartphone devices: 19.3 bn CFAF — 0.09 percent of GDP.
    - Other tax policy measures (alcoholic beverages, tobacco expansion): 20.0 bn CFAF — 0.09 percent of GDP.
    - Tax administration measures (expand base, digitalization, DGD-DGID cooperation, single window): 15.0 bn CFAF — 0.07 percent of GDP.
  - Total expected fiscal yield: 309.3 bn CFAF — 1.45 percent of GDP.
- Spending stance:
  - Primary recurrent spending projected to decline by 1.6 percentage points of GDP to 14.7 percent of GDP in 2024, driven by fall in energy subsidies to around 1 percent of GDP.
  - Public wage expenditures and spending on goods and services expected to remain around 6.8 percent and 2 percent of GDP, respectively.
  - Staff urged readiness to increase energy prices in 2024 if energy subsidy envelope insufficient.
  - Savings to be redirected to expand social protection and priority public investments (agriculture inputs, water and electricity access, transport networks).

---

### Debt, debt management, and safeguards
- Public sector debt and DSA:
  - Central government debt 71.0 percent of GDP (excluding treasury operations); public sector debt including SOEs 77.9 percent of GDP as of mid-2023.
  - Total public debt (percent of GDP) series: 73.3; 76.0; 77.7; 79.6; 73.2; 72.5; 67.4; 67.2; 67.0; 65.5.
  - Total stock of debt to the Fund expected to reach 6.6 percent of GDP (including access under the RSF).
  - Upcoming total debt service to the Fund will peak at 4.6 percent of government revenues and 4.0 percent of exports of goods and services in 2026.
  - Baseline: downward debt trajectory in the medium term; moderate risks of external and overall public debt distress; debt sustainable in medium-term per staff assessment.
- Debt management measures and SOE oversight:
  - Adopt more active, forward-looking approach to SOE debt; set indicative debt stock ceilings for the 16 largest SOEs.
  - Monitor top six SOEs via a committee led by the Minister of Finance.
  - Enhance SOE transparency via publication of financial statements (new SB, end-December 2024).
  - Adopt regulation on SOE on-lending and strengthen National Public Debt Committee.
  - Implement action plan from audit of computerized public debt management platform (DAIDA).
- Safeguards assessment:
  - 2023 update of BCEAO assessed robust controls and strong governance; all recommendations from 2018 safeguards assessment implemented.
  - Financial reporting and external audit arrangements in line with international practices.

---

### Structural reforms, governance, and RSF climate agenda
- Tax policy and administration (selected SBs and actions):
  - Decree strengthening Legislation and International Cooperation Directorate (SB, September 2023).
  - Automatic transmission provision in 2024 draft budget law for electricity and water companies’ client data to tax department (SB, October 2023).
  - Identified tax expenditures 148 billion CFAF; plan to rationalize at least 100 billion CFAF annually (SB, November 2023).
  - Prepayment for income taxes at customs and broaden tax base by adding 25,000 taxpayers (SBs, December 2023).
- Energy subsidies reform roadmap:
  - Roadmap adopted January 2023: gradually phase out untargeted subsidies; improve targeted transfers.
  - Independent committee established to determine and publish final consumption prices for fuel and electricity (SB, November 2023); government pledged to uphold committee’s pricing decisions.
  - Review of petroleum pricing formula underway with structural benchmark December 2023; government committed to propose new electricity tariff structure with social tariff (SB, September 2024).
  - World Bank TA requested to finalize SENELEC audit (SB, May 2024).
- Governance and AML/CFT:
  - Law establishing a dedicated Financial Prosecutor’s Office ratified (August 2023).
  - Draft laws to fortify OFNAC and refine asset declaration law submitted (implemented with one-month delay).
  - Authorities aim to exit FATF grey list; exit now expected in June 2024.
  - Commitments to publish public sector financial operations table by November 30 each year and publish certified financial statements for public entities and companies borrowing internationally (SB, end-November 2024).
- RSF and climate measures:
  - PIM decree incorporating climate considerations enacted (RM1, completed end-October 2023).
  - Strategy for environmentally friendly public transport adopted and reflected in 2024 budget law (RM2, completed end-November 2023); transport measures estimated to reduce CO2 emissions by about 146.000 tons annually.
  - First Green Budget appended to 2024 budget law.
  - JETP engagement: anticipated contributions Euro 2.5 billion over 3–5 years; objective renewable share 40 percent by 2030; Senegal to use domestic natural gas during transition.
  - RSF reforms to support climate impact evaluation for ex-ante project assessment; technical assistance from IMF and WB planned.

### Social safety nets, Single National Registry (RNU), and La Poste
- Social protection adjustments:
  - Quarterly cash transfers (Programme des Bourses Familiale) increased from CFAF 25,000 to CFAF 35,000.
  - Social protection allocation increased from CFAF 35 billion to CFAF 49 billion; 2024 allocation CFAF 54 billion.
  - Authorities committed to expand RNU to one million households by end-2024 and fully digitalize payment system; training and platform prepared with some delays.
- La Poste restructuring:
  - Recapitalizations: SN La Poste CFAF 139.4 billion; Poste Finance CFAF 10 billion; Express Mail Service CFAF 2.6 billion.
  - Hiring freeze from 2023; targeted personnel transition plan for 2025; feasibility study to transform Poste Finance into postal bank.

### Financial sector restructuring and oversight
- Banking sector restructuring:
  - First troubled bank: state acquired 63.4 percent public stake via recapitalization approved by UMOA Banking Commission; recapitalization expected end-2023.
  - Second troubled bank: state and primary shareholder to inject capital to reduce primary shareholder’s stake to 30 percent and state to take 30 percent stake; review by Banking Commission scheduled December 2023.
  - Staff recommendation: state involvement should be temporary and accompanied by governance improvements.

---

### Program modalities, monitoring, and conditionality
- Program financing and sequencing:
  - ECF/EFF/RSF arrangements, with partner budget support, expected to close external financing gaps; program fully financed with firm commitments for next 12 months and good prospects thereafter.
  - RSF to support prospective BoP needs from long-term structural climate challenges and substitute for more expensive financing.
- Modifications to quantitative performance criteria:
  - 2023 over-financing accommodated via adjustor to debt-related PC and IT.
  - New PC introduced setting a floor on government deposits at BCEAO end-2023.
  - Adjustor for budget grant shortfalls added to public sector debt IT to ensure coherence.
  - Changes requested to QPC on non-hydrocarbon primary balance for end-December 2023 and end-June 2024 to reflect changes in budget support grants.
- Structural benchmarks (selected new and rephased):
  - New SBs: SENELEC financial audit; new social electricity tariff; expand VAT to digital services; mandate publication of audited financial statements for public entities borrowing externally.
  - Rephased SBs: centralized land management system (LMS) and collateral register.
- Program monitoring and reporting:
  - TMU defines PC, IT, continuous targets and reporting; test dates: second review test date December 31, 2023; third review test date June 30, 2024.
  - Authorities to transmit a wide set of fiscal and debt data at specified lags (monthly provisional TOFE, consolidated bank balance sheets, DAIDA reports, etc.).

---

### Risk assessment (Annex I) — selected items and policy responses
- Conjunctural risks:
  - Intensification of regional conflicts (Likelihood: High). Policy response: strengthen automatic pass-through of global commodity prices; phase out untargeted energy subsidies and target support.
  - Abrupt global slowdown or recession (Likelihood: Medium). Policy response: careful spending prioritization and sustained revenue mobilization given limited policy space.
  - Social discontent from high inflation/real income loss (Likelihood: Medium). Policy response: ensure transparency and effectiveness of fiscal measures and expand/target social safety nets.
- Structural risks:
  - Deepening geo-economic fragmentation (Likelihood: High). Policy response: boost economic resilience and regional coordination.
  - Extreme climate events (Likelihood: Medium). Policy response: invest in adaptation and improve shock response mechanisms.
- RAM notes: likelihood bands defined as low <10 percent, medium 10–30 percent, high 30–50 percent; risks may interact and be non-mutually exclusive.

---

### Selected short-term economic and financial outlook and fiscal execution (end-September) highlights
- Fiscal execution (end-September):
  - Revenue mobilization: CFAF 2,480.5 billion (+9.6 percent y/y).
  - Grants mobilized: CFAF 119.9 billion (43 percent execution of projected annual CFAF 279 billion).
  - Expenditures: CFAF 3,702.9 billion (+6.6 percent y/y).
  - Fiscal deficit: CFAF 952.1 billion (decrease of CFAF 7.3 billion y/y).
  - Deficit financing: net incurrence of liabilities CFAF 2,055 billion; net acquisition of financial assets CFAF 1,101 billion.
- Monetary and banking indicators (end-August):
  - Money supply +8.2 percent; domestic claims +13.1 percent; net claims on central government +19.0 percent.
  - Credit to economy +10.7 percent, concentrated in services, trade, manufacturing.
  - Net external assets -3.1 percent; Central Bank external position decline CFAF 352.9 billion (-27.9 percent); other deposit-taking institutions external position +CFAF 288.4 billion (+34.1 percent).
  - Banking system: 28 credit institutions; effective capital +9.6 percent; solvency ratio 13.4 percent (threshold 11.5 percent); NPL ratio 3.4 percent (down from 3.9 percent); liquidity ratio 106 percent (requirement 75 percent).
- Short-term outlook revisions:
  - 2023 real GDP growth adjusted to 4.1 percent (excluding hydrocarbons).
  - 2024 real GDP growth projected at 9.2 percent with 6 percent attributed to real GDP excluding hydrocarbons (in some presented tables projections vary; staff’s revised central projections noted above).
  - Inflation expected 3.9 percent in 2024; likely to continue downward trend but not reach target before 2025.
  - Current account expected deficit 15.1 percent of GDP in 2023 (down from 19.9 percent in 2022); exports and imports dynamics described in tables.

---

*Source: EXECUTIVE SUMMARY and selected chapters from IMF staff report (1senea2023003), November 29, 2023.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- The Senegalese economy continues to face headwinds as it recovers from the COVID-19 pandemic, including: (i) the halt of the cereal export agreement between Russia and Ukraine; (ii) restrictions on rice exports by India; (iii) the appreciation of the U.S. dollar; (iv) increasingly stringent regional and global financial conditions; and (v) instability in some neighboring countries.
- Senegal is preparing for the February 2024 presidential elections; for the first time the incumbent president will not be a candidate. More than 200 candidates filed applications; the Constitutional Court will validate applications in December, concluding the sponsorship collection phase that began in October.
- Authorities remain committed to program objectives: execute the 2023 budget, submit a 2024 budget law consistent with the June 2023 ECF/EFF and RSF program requests, and implement agreed structural reform measures.

### Recent developments and macroeconomic performance (H1-2023)
- Real GDP grew by 4 percent during H1 (y/y), below expectations, due to deceleration in services and commerce and slowdowns in agri-food manufacturing products (-7.4 percent) and textile related production (-19.6 percent).
- Inflation: after peaking in November 2022 (+14 percent), headline inflation has been coming down; at end-October, inflation stood at 2.4 percent Y-o-Y and core inflation fell to 2.9 percent.
- External sector: current account deficit narrowed by 23 percent at end-June 2023 versus the same period in 2022, supported by remittances (+38 percent), tourism (+32 percent), FDI, and external borrowing by government.
- Budget execution through end-September 2023: tax revenue collection reached 70.5 percent of the annual target; total expenditure executed at 75 percent of annual projections (split equally between recurrent and investment spending).
- Public debt: central government outstanding debt (excluding treasury operations) reached 71.0 percent of GDP, up 2.8 percentage points of GDP relative to end-2022. Public sector debt including state-owned enterprises stood at 77.9 percent of GDP, up 1.9 percentage points relative to end-2022. Key drivers were the fiscal deficit and accelerated government borrowing to increase cash buffers.
- Banking sector (as of end-August): shareholder’s equity increased by 13.4 percent; tier-1 capitalization up 11.1 percent to 12.7 percent (prudential norm 7.5 percent); nonperforming loans declined from 11.3 to 9.9 percent; liquidity ratio 106 percent (regulatory minimum 75 percent).
- Financial conditions: BCEAO purchased CFAF 2 trillion in sovereign debt securities from the banking system; average yields for Senegal’s sovereign bonds issued during January-September 2023 increased to 6.49 percent (from 4.96 percent); maturities shortened to 2.67 years (from 5.28 years). Senegal’s EMBIG spreads have narrowed since the February 2023 peak. In June, S&P reconfirmed Senegal’s B+ rating with a stable outlook.

### Program implementation and performance under ECF/EFF/RSF
- Overall assessment: Performance under the ECF/EFF/RSF has been satisfactory.
- Quantitative performance criteria and indicative targets:
  - All quantitative performance criteria for end-June 2023 under the ECF/EFF were met.
  - Two out of three indicative targets were met; the IT on the ceiling on total public sector debt was missed due to government frontloading of borrowing to build cash buffers ahead of the 2024 election period.
- Structural benchmarks (SBs):
  - Four out of six structural benchmarks for the first review implemented; the remaining two were implemented with a one-month delay due to leadership changes within OFNAC and a government reshuffle in October.
- RSF reform measures:
  - The two reform measures (RMs) under the RSF have been completed.
- Enterprise and financial risks:
  - Enterprise risks appear manageable and unchanged since program approval.
  - Senegal’s capacity to repay the Fund remains adequate; the country remains at moderate risk of debt distress with limited buffers to absorb large new shocks.
  - Risk mitigants: commitment to a downward debt trajectory in the medium term; demonstrated track-record in repaying Fund obligations; even phasing and satisfactory program implementation; a stable socio-political environment so far in the run-up to the 2024 Presidential elections.
- Business and reputational risks:
  - Business risks to program implementation (policy slippages, regional insecurity spillover, tighter financial conditions) are manageable given strong government engagement with the Fund.
  - Reputational risks are manageable given broadly positive media coverage and rapid COVID crisis response.

### Staff views and program modifications supported
- Staff supports authorities’ requests for:
  - (i) completion of the first reviews under the ECF/EFF/RSF;
  - (ii) modification of a quantitative performance criterion;
  - (iii) addition of a quantitative performance criterion.
- Staff supports rephasing and addition of four new structural benchmarks to strengthen the structural reform agenda, and rephasing of two existing structural benchmarks to align program design with authorities’ reform plans and capacity development needs.

### Outlook and risks
- Growth projections were revised to:
  - 2023: 4.1 percent;
  - 2024: 8.3 percent.
  - Revisions reflect: (i) tense socio-political environment in H1-2023 disrupting retail and hospitality services and reducing consumer spending and investment; (ii) slowdown in the secondary sector, particularly mining; (iii) postponement of oil and gas production to the second half of 2024.
- Inflation projections revised to:
  - 2023: 6.5 (from 5) percent;
  - 2024: 3.9 (from 2) percent.
- Current account deficits for 2023 and 2024 revised upward due to weaker export growth in 2023 and delayed hydrocarbon exports in 2024; hydrocarbon production start expected to contribute to export pickup in 2024.
- Balance of risks: tilted to the downside (Annex I). Key risk factors include:
  - External: prolonged war in Ukraine; conflict in the Middle East; higher commodity prices; tighter financial conditions; stronger US dollar.
  - Regional/domestic: heightened political instability and polarization ahead of the presidential elections.
  - Structural: hydrocarbon revenues could be lower-than-projected if global transition to net zero accelerates.
  - Climate vulnerability.
- Upside risk: higher oil and gas prices could stimulate hydrocarbon investment and boost growth; phase 2 FID for GTA and Sangomar could materially increase oil and gas production and exports.

### Building fiscal resilience (ECF/EFF Pillar I)
- Authorities reaffirm commitment to keeping the fiscal deficit within the program target of 4.9 percent of GDP for 2023.
- To ensure robust revenue collection and fiscal outturn:
  - Implementation of the cross-debt agreement with SENELEC is underway.
  - Contingent spending budget lines related to budgetary reserves (around 0.4 percent of GDP) will not be executed to compensate for higher energy subsidies, which now account for 3.1 percent of GDP (+0.1 percentage point of GDP) and other recurrent expenditures.

*Source: EXECUTIVE SUMMARY (1senea2023003) — IMF staff report, November 29, 2023.*

### 15. To ensure debt service payments around the 2024 presidential elections amidst

### 15. To ensure debt service payments around the 2024 presidential elections amidst 

### Precautionary liquidity buffers and over-financing (2023 → 2024)
- Authorities are raising an amount equivalent to approximately 3.2 percent of GDP through syndicated commercial loans from international banks and issuance on the regional financial market (text table 3).
- The over-financing is calibrated to cover debt service payments during January-April 2024.
- Staff concurred that the over-financing strategy effectively represents a financing shift between 2023 and 2024 and therefore constitutes a debt management operation with no material impact on the debt level or the DSA.
- Agreed safeguards:
  - A new performance criterion (PC) on the government’s deposits at the BCEAO for end-2023 to ensure these resources are not utilized in 2023.
  - Adjustors for the existing PC on the present value of new external public sector borrowing to accommodate over-borrowing in 2023 but symmetrically lower the ceiling in 2024 so that over-borrowing is used to replace borrowing in 2024.
  - The 2024 budget law specifically stipulates that budget execution will reflect a commensurate under-borrowing.

### Fiscal policy for 2024: deficit, consolidation and financing
- 2024 draft budget law (prior action) aligns with the agreed-upon deficit target of 3.9 percent of GDP (Text Table 5).
- Objective: gradually achieve the regional convergence criterion of 3 percent of GDP by 2025.
- Medium-Term Revenue Strategy (MTRS) objective: reach 20 percent of GDP by 2025; primary focus on rationalizing tax expenditures and VAT exemptions.
- Authorities commit to containing energy subsidies to approximately 1 percent of GDP.
- Financing of the fiscal deficit will rely on continued strong budget and projects loans from partners and the use of the 2023 over-financing.

Key budget projections and figures (Text Table 5; preserve exact values):
- Revenues and Grants: 4,621 (21.8 percent of GDP) → 4,682 (22.0 percent of GDP)
- Tax revenues: 4,123 (19.5 percent of GDP) → 4,180 (19.7 percent of GDP)
- Nontax revenues: 239 (1.1 percent of GDP) → 210 (1.0 percent of GDP)
- Grants: 259 (1.2 percent of GDP) → 292 (1.4 percent of GDP)
- Expenditure: 5,452 (25.7 percent of GDP) → 5,521 (26.0 percent of GDP)
- Compensation of employees: 1,482 (7.0 percent of GDP) → 1,442 (6.8 percent of GDP)
- Use of goods and services: 345 (1.6 percent of GDP) → 428 (2.0 percent of GDP)
- Current transfers: 1,054 (5.0 percent of GDP) → 1,249 (5.9 percent of GDP)
  - Energy subsidies: 153 (0.7 percent of GDP) → 215 (1.0 percent of GDP)
- Interest: 507 (2.4 percent of GDP) → 578 (2.7 percent of GDP)
- Net acquisition of nonfinancial assets: 2,064 (9.7 percent of GDP) → 1,823 (8.6 percent of GDP)
  - Domestically financed: 1,249 (5.9 percent of GDP) → 1,122 (5.3 percent of GDP)
  - Externally financed: 815 (3.8 percent of GDP) → 702 (3.3 percent of GDP)
- Overall balance: -831 (-3.9 percent of GDP) → -838 (-3.9 percent of GDP)
- Non-hydrocarbon primary balance: -444 (-2.1 percent of GDP) → -310 (-1.5 percent of GDP)
- Nominal GDP: 21,176 → 21,258
- Hydrocarbon revenues: 120 (0.6) → 500 (0.2)

Government financing table (Text Table 3 — selected lines; 2023 → 2024):
- Financing need (A): 2,658.9 (14.0) → 2,136.7 (10.1)
  - Central Government fiscal deficit: 935.9 (4.9) → 838.5 (3.9)
  - Amortization: 1,269.6 (6.7) → 1,248.2 (5.9)
  - OPEX: 30.0 (0.2) → 50.0 (0.2)
  - On-lending to SOEs: 277.8 (1.5) → 0.0 (0.0)
  - Clearance of late payments: 145.6 (0.8) → 0.0 (0.0)
- Financing sources (B): 3,263.7 (17.2) → 1,531.9 (7.2)
  - External borrowing: 1,945.2 (10.3) → 1,159.5 (5.5)
    - Donor budget support: 796.7 (4.2) → 550.5 (2.6)
    - IMF: 431.1 (2.3) → 338.1 (1.6)
    - WB: 185.0 (1.0) → 107.9 (0.5)
    - BAD: 110.6 (0.6) → 49.0 (0.2)
    - AFD: 52.5 (0.3) → 30.4 (0.1)
    - Japan: 17.5 (0.1) → 25.0 (0.1)
  - Project loans: 435.6 (2.3) → 445 (2.1)
  - External general commercial borrowing: 712.9 (3.8) → 164.0 (0.8)
  - Domestic borrowing: 1,318.5 (7.0) → 372.4 (1.8)
- Change in government deposits (over-financing) (C=B-A): 604.8 (3.2) → -604.8 (-2.8)
- Memo: Excludes issuance/amortization of short-term treasury bills. External debt definition based on currency-basis. BOAD loans are classified as external.

### Measures to strengthen fiscal consolidation (staff-authorities agreement)
- Tax revenues: combination of tax policy and administrative measures to increase the tax-to-GDP ratio by 1.1 percentage points to 19.7 percent of GDP (Text table 4).
  - Majority of anticipated revenue from tax policy measures comes from rationalizing tax expenditures, including unwinding the suspension of taxes and customs duties imposed in 2023 (0.7 percent of GDP).
  - Revenue administration measures: broaden tax base, enhance digitalization, strengthen cooperation between tax and customs administrations, and reinforce tax controls.
- Spending: Primary recurrent spending projected to decline by 1.6 percentage points of GDP to 14.7 percent of GDP in 2024, primarily driven by a fall in energy subsidies to around 1 percent of GDP.
- Staff urged readiness to increase energy prices in 2024 if the energy subsidy envelope proves insufficient.
- Public wage expenditures and spending on goods and services expected to remain around 6.8 percent and 2 percent of GDP, respectively.
- Savings from lower energy subsidies will be redirected to expand social protection programs and increase priority public investments (agriculture inputs, water and electricity access, transport networks).

### Revenue measures and expected fiscal yield (Text Table 4; preserve exact amounts)
- Unwinding the suspension of taxes and customs duties measures put in place in 2023: 140.0 bn CFAF — 0.66 percent of GDP
- Rationalization of tax expenditure including VAT exemptions: 100.0 bn CFAF — 0.47 percent of GDP
- VAT on online transactions and sales / introduction of a VAT on digital transactions: 15.0 bn CFAF — 0.07 percent of GDP
- Re-instate the import duties on smartphone devices: 19.3 bn CFAF — 0.09 percent of GDP
- Other tax policy measures in 2024 budget law (additional tax on alcoholic beverages, expansion of the tax base of tobacco etc.): 20.0 bn CFAF — 0.09 percent of GDP
- Tax administration measures (expand tax base, digitalization, strengthen collaboration between DGD and DGID, single window for vehicle clearance at customs, tighter tax controls): 15.0 bn CFAF — 0.07 percent of GDP
- Total expected fiscal yield: 309.3 bn CFAF — 1.45 percent of GDP

### Tax policy and administration progress (structural benchmarks and actions)
- Decree strengthening the Legislation and International Cooperation Directorate to oversee domestic tax policy (structural benchmark, September 2023).
- 2024 draft budget law includes provision for automatic transmission of electricity and water companies’ client data to the tax department; enhancement of real estate tax compliance (structural benchmark, October 2023).
- Identified tax expenditures equivalent to CFAF 148 billion; plan to rationalize tax expenditures by at least CFAF 100 billion annually over the next two years (structural benchmark, November 2023).
- Prepayment for income taxes levied at customs: inter-departmental working group defining technical mechanisms and drafting a decree expected to be signed by December 2023 (structural benchmark, December 2023).
- Broadening the tax base by adding 25,000 taxpayers, including centralized third-party data and registration at the Ziguinchor tax service center (structural benchmark, December 2023).

### Specific tax policy measures in the 2024 budget
- Reactivating suspended tax and customs duty relief measures: expected revenue ≈ 0.7 percent of GDP on an annual basis.
- Reducing tax expenditures by at least 0.5 percent of GDP.
- Reinstating import duties on smartphone devices: expected revenue equivalent to 0.1 percent of GDP.
- Implementing a VAT on digital services (TVA numerique) (New structural benchmark, end-December 2023).
- Additional tax on alcoholic beverages and expansion of the tobacco tax base.
- Tax administration reforms to broaden the tax base, enhance digitalization, strengthen collaboration between tax and customs administrations, and implement a single window for vehicle clearance.

### Energy subsidies reform roadmap and related measures
- Roadmap adopted January 2023: (i) better reflect international prices into domestic prices by gradually phasing out untargeted subsidies; (ii) improve targeted transfers to protect the most vulnerable.
- Independent committee established to determine and publish final consumption prices for fuel and electricity (structural benchmark, November 2023); government pledged to uphold committee’s pricing decisions (MEFP ¶14).
- Comprehensive review of the pricing formula for petroleum products (gasoline and diesel) underway with elements: (i) examination of price structure components; (ii) reevaluation of the reference price; (iii) implementation of a gradual price adjustment mechanism; (iv) reassessment of the frequency of price adjustments (structural benchmark, December 2023) (MEFP ¶16). IMF technical assistance sought.
- Government committed to proposing a new electricity tariff structure with a social tariff for vulnerable groups (new structural benchmark, September 2024) (MEFP ¶29).
- World Bank technical assistance requested to finalize an audit of SENELEC (new structural benchmark, May 2024) to update assessment of variable and fixed costs in the electricity sector (MEFP ¶29).

### Public financial management (PFM) and governance measures
- Authorities implemented an action plan following the December 2022 Court of Accounts audit report on the use of COVID-19 funds; criminal proceedings launched against individuals and companies involved in misappropriation of COVID-relief funds (cases awaiting judicial resolution).
- Gradual elimination of treasury deposit accounts (comptes de dépôts) used by central government entities without legal personality (structural benchmark, end-June 2024). Government confirmed no additional funds will be allocated to these accounts.
- Reclassification of investments previously executed through capital transfers (chapter 6) as investments executed by the central government (chapter 5) through the normal budget circuit (structural benchmark, end-December 2023); an additional CFAF 98.7 billion allocated to domestic investments through the regular budget procedure (MEFP ¶30).
- Ongoing consolidation of central government bank accounts with commercial banks into the TSA; testing phase for TSA management software (SIGCDD) underway; benchmarking mission end-2023 to inform a new roadmap to bring back all public entity funds into the TSA.

### Public sector debt strategy and monitoring
- Outlook for debt sustainability remains unchanged; authorities revised downwards the reported stock of 2022 public sector debt relative to the program request.
- Government over-financing will temporarily drive up the 2023 public sector debt stock above the projected level; unwinding over-financing to reduce 2024 borrowing needs is expected to keep the public sector debt trajectory from 2024 onwards at similar levels as agreed at program request.
- Higher external financing in 2023 and increased global interest rates affect external debt service, but higher projected global export prices for key commodities are expected to assist in meeting debt service requirements.
- Authorities acknowledge that Senegal’s margin to remain classified as a moderate risk of debt distress has narrowed and agreed additional measures:
  - Adopt a more active and forward-looking approach to debt management in state-owned enterprises (SOEs).
  - Set indicative debt stock ceilings for the 16 largest SOEs.
  - Implement thorough monitoring of the top six SOEs through a committee led by the Minister of Finance.
  - Advance reforms to bolster debt management, including:
    - Enhance SOE sector transparency through publication of financial statements (new structural benchmark, end-December 2024).
    - Adopt a regulation on SOE on-lending.
    - Strengthen the functions of the National Public Debt Committee.
    - Implement the action plan recommended by the audit of the computerized public debt management platform (MEFP ¶33).

### Enhancing governance and AML/CFT (ECF/EFF Pillar II)
- Government ratified a law establishing a dedicated Financial Prosecutor’s Office to tackle economic and financial misconduct (August 2023).
- Two major reforms implemented with one-month delay due to OFNAC leadership changes; proposed amendments submitted to the National Assembly in November to:
  - Fortify OFNAC (structural benchmark, end-October 2023).
  - Refine the assets declaration law (structural benchmark, end-October 2023).
- Authorities aim to exit the FATF grey list; remaining weaknesses include operationalization of the beneficial ownership (BO) registry, effective implementation of a targeted financial sanctions regime, and training of supervisors for designated Non-Financial Business or Profession (DNFBPs). Exit from the grey list is now expected in June 2024 (MEFP ¶34).
- Strengthening financial information and public accountability:
  - Strengthened information system of main extra-budgetary entities.
  - Commitment to publish a table of public sector financial operations of the previous year no later than November 30 of each year.
  - Commitment to publish financial statements certified by all public entities and companies that have borrowed on the regional or international market in the format agreed under the program (structural benchmark, end-November 2024).

### Hydrocarbon revenue management preparations
- Legal and institutional framework for management of oil and gas revenues concluded and committed to full enforcement under Law No. 2022-09.
- Two implementation decrees adopted:
  - Stabilization Fund decree (issued in September 2023).
  - Inter-generational Fund decree (issued in October 2023).
- Authorities initiated formulation of an investment strategy for the intergenerational fund.

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

### 28. The authorities and staff agreed on the importance of sustaining structural reforms to

### 1senea2023003 - 28. The authorities and staff agreed on the importance of sustaining structural reforms to

### Structural reforms: centralized systems and collateral
- Authorities committed to finalize two key reforms:
  - Centralized land management system (LMS):
    - Contract with original developer cancelled; new procurement process initiated.
    - Interim deployment of LMS functionalities to manage: creation and delivery of cadastral number of the plot, establishment of the inventory, processing of requests for statements of real rights, and delivery of extracts plan.
    - New structural benchmark, November 2024 (MEFP ¶44).
  - Collateral register:
    - Roadmap developed to establish an online-accessible register combining movable and immovable collateral.
    - Initial step: establish a committee to complement the existing movable collateral register with the mortgage register.
    - Committee to undertake and finalize an inventory of all collaterals (both movable and non-movable assets), leading to making the collateral register available online.
    - New structural benchmark, November 2024 (MEFP ¶45).

### Social safety nets and single registry expansion
- Immediate actions and budgetary figures:
  - Quarterly cash transfers (Programme des Bourses Familiale) increased from CFAF 25,000 to CFAF 35,000.
  - Number of recipients expanded, bringing social protection allocation from CFAF 35 billion to CFAF 49 billion (MEFP ¶50).
  - 2024 social protection allocation increased to CFAF 54 billion (MEFP ¶50).
- Administrative targets and progress:
  - Authorities committed to expanding the Single National Registry (RNU) to one million households by end-2024 and to fully digitalize the payment system (MEFP ¶51).
  - Progress: updates to the targeting committee and training of supervisors completed this year; digitalization platform prepared for digital payments but awaits full adoption by La Poste.
  - Authorities determined to complete expansion in 2024 despite some observed delays.

### Banking sector restructuring
- Two banks facing difficulties:
  - First bank:
    - State became a shareholder, securing a 63.4 percent public stake through an approved recapitalization plan by the UMOA Banking Commission.
    - Recapitalization expected to be finalized by end-2023.
  - Second bank:
    - State and the primary shareholder will inject new capital to reduce the primary shareholder’s stake to 30 percent, with the state taking a 30 percent stake.
    - Changes to the voting structure pending Banking Commission approval; review scheduled for December 2023.
- Staff recommendation: state involvement should be temporary and accompanied by governance improvements (MEFP ¶49).

### Restructuring of Société Nationale La Poste (SN La Poste)
- Key measures:
  - Recapitalizations: SN La Poste with CFAF 139.4 billion; Poste Finance with CFAF 10 billion; Express Mail Service with CFAF2.6 billion.
  - Hiring freeze from 2023 and a targeted personnel transition plan for 2025.
  - Transform Poste Finance into a postal bank, supported by a feasibility study.

### Gender budgeting and reforms to mitigate disparities
- Status and commitments:
  - Senegal has actively implemented gender budgeting since 2016 (Annex III).
  - Gender dimension integrated into the entire budgetary process; budgetary laws include a specialized report evaluating fiscal impact on gender inequality across ministries.
  - Authorities committed to reforms (MEFP ¶48), including:
    - Increasing social spending on programs for young girls and women.
    - Removing barriers to girls’ education, particularly facilitating transition from primary to secondary education.
    - Providing training and financial opportunities to female entrepreneurs.

### Building resilience to climate change (RSF implementation)
- Progress on RSF reform measures:
  - Reform measures associated with the first review implemented:
    - Enacted Public Investment Management (PIM) decree incorporating climate considerations for all public investment projects (RM1, completed by end-October 2023).
    - Adopted a strategy for environmentally friendly public transport, reflected in the 2024 budget law (RM2, completed by end-November 2023).
    - These transport measures are estimated to reduce emission of C02 by about 146.000 tons annually.
    - For the first time, a Green Budget appended to the 2024 budget law (Annex II).
    - Later RSF reforms (RM9 and RM10) will provide a shared approach to climate impact evaluation for ex-ante project assessment.
  - Progress on second review measures:
    - Authorities engaging ministries and civil society to define National Development Strategy (Plan Senegal Emergent (PSE-PAP3 2023-2027)); PAP3 will focus on climate adaptation and mitigation priorities.
    - Initiated conclusion of Senegal’s National Adaptation Plan, aligning it with PAP3.
    - Draft Urban and Construction codes submitted to the National Assembly in October 2023; implementation decrees expected to be finalized by the end of April 2024 in close collaboration with the World Bank.
    - Authorities laying groundwork to update the National Determined Contribution (NDC) in time for COP 30 in Brazil in 2025.
  - Technical Assistance:
    - Authorities intend to leverage TA from the IMF and the WB; specific TA needs discussed and framework agreed (Annex III).

### Just Energy Transition Protocol (JETP) and climate finance mobilization
- JETP engagement and targets:
  - Authorities entered a Just Energy Transition Protocol (JETP) with the G7 and partners (Germany, France, the European Union, the United Kingdom, and Canada).
  - Anticipated contributions from international partners and multilateral development banks expected to reach Euro 2.5 billion over an initial period of 3-5 years.
  - Objective: raise the proportion of renewable energies in the Senegalese electricity mix to 40 percent by 2030.
  - Senegal seeks to use domestic natural gas for electricity generation during the transition, based on less polluting technologies.
- Fund-supported climate finance actions:
  - Joint Fund/Senegal roundtable convened in Dakar on November 14 to catalyze climate finance; attended by multilateral organizations and private sector entities.
  - Proposed options discussed: establishing a Green Investment Facility, issuing a Green Bond with De-risking Support, and exploring Debt-for-nature Swaps.
  - Three working groups established to develop concrete proposals to accelerate financing for renewable energy, adaptation priorities, and climate mitigation with the aim of announcing them by the time of the Spring Meetings.

### Program modalities, financing, and program adjustments
- Financing under ECF/EFF/RSF:
  - ECF and EFF arrangements, with budget support from partners, expected to close external financing gaps (Table 2 and Table 14).
  - Budget support from partners broadly in line with levels estimated at program request.
  - Senegal’s annual contribution targets to regional reserves rephased to reflect 2023 government over-financing, increasing reserves contribution in 2023 but decreasing it in 2024.
  - Cumulative reserves contribution revised down, reflecting delay in hydrocarbon exports and weaker than expected other exports in 2023 among other factors (table 14).
  - Program, including rephasing of availability dates for disbursements, is fully financed, with firm commitments for the next 12-months and good prospects for the remainder of the program (Text table 3).
  - RSF will support financing prospective BoP needs from long-term structural climate challenges, substituting for more expensive financing. The EFF/ECF/RSF arrangements will continue to go towards budget support.
- Modifications requested to quantitative performance criteria:
  - 2023 over-financing accommodated through introduction of an adjustor to the debt-related performance criterion and indicative target.
  - New performance criterion introduced setting a floor on government deposits at the BCEAO to safeguard use of 2023 over-financing for 2024 government financing needs.
  - Adjustor for budget grant shortfalls added to the public sector debt IT to ensure coherence between the government deficit PC and the public sector debt IT.
  - Authorities requested change to the QPC on non-hydrocarbon primary balance for end-December 2023 and end-June 2024 to reflect change in budget support grants.
  - Program targets set until end-December 2024.
- Structural benchmarks (SBs):
  - Four new SBs proposed and two SBs re-phased. New SBs cover:
    - Financial audit of Senelec to better understand cost structure.
    - Setting up a new social tariff for electricity.
    - Expand VAT to digital services.
    - Mandate publication of audited financial statement for public entities borrowing on the regional or international market.
  - Two re-phased SBs: centralized land management system and collateral register.

### Debt, Fund exposures, safeguards, and risks
- Fund exposure and debt service:
  - Total stock of debt to the Fund expected to reach 6.6 percent of GDP (including access under the RSF).
  - Upcoming total debt service to the Fund will peak at 4.6 percent of government revenues and 4.0 percent of exports of goods and services in 2026.
  - Baseline: downward debt trajectory in the medium term with moderate risks of external and overall public debt distress; debt assessed as sustainable in the medium-term.
- Safeguards assessment:
  - 2023 update assessment of the BCEAO found a robust control environment with strong governance arrangements.
  - All recommendations from the 2018 safeguards assessment have been implemented.
  - Financial reporting and external audit arrangements remain in line with international practices.
- Program implementation risks:
  - Domestic risks: policy slippages, political unrest in the run up to the presidential elections, insecurity spillovers from the region.
  - External risks: escalation of the war in Ukraine or in the Middle East, further global slowdown, and tighter global and regional financial conditions.
  - If risks materialize, keeping the program on track would require proactive adjustment in macroeconomic policies in consultation with Fund staff.

### Staff appraisal and policy recommendations
- Macroeconomic assessment:
  - Staff acknowledges a challenging external environment with multiple shocks; growth revised down and inflation remains high; Senegal's debt margin to remain classified at a moderate risk of distress has narrowed.
  - Authorities' policy response appropriate, but risks to the outlook warrant vigilance.
- Fiscal policy and revenue:
  - Staff welcomes authorities' commitment to fiscal consolidation and considers the fiscal stance appropriate to help converge to the regional deficit target of 3 percent of GDP by 2025.
  - Staff supports ambitious revenue policy and administration reforms and urges containment of borrowing capacity of public sector entities beyond the central government, welcoming decision to set specific debt limits for large borrowing SOEs.
- Subsidies and tax policy:
  - Strengthening revenue mobilization and phasing out untargeted energy subsidies critical for fiscal consolidation and creating fiscal space for priority spending.
  - Staff welcomes implementation of the MTRS, including commitments to reduce tax expenditures and broaden the tax base.
  - Staff urges ensuring regressive energy subsidies remain within program target; revision of fuel price setting formula and establishment of smoothing mechanism are key reforms.
- Governance, AML/CFT, and anti-corruption:
  - Strengthening AML/CFT, governance, and anti-corruption frameworks critical for macroeconomic stability and sustainable growth.
  - Adoption of law establishing a dedicated Financial Prosecutor's Office and submission of law to fortify OFNAC and enhance assets declaration law are welcome.
  - Staff urges expediting remaining reforms needed to exit FATF grey list and continuing progress in financial transparency and accountability of public entities and companies borrowing on regional or international markets.
- Climate and RSF:
  - Staff commends progress under the RSF, including adoption of a Green Budget aligned with 2024 budget law priorities to build climate resilience.
  - Staff urges maintaining reform momentum under the RSF and strengthening climate mitigation and adaptation policies to catalyze new investments from donors and the private sector.

*Source: 1senea2023003 - 28. The authorities and staff agreed on the importance of sustaining structural reforms to (PDF chapter/section).*

### 47. Based on the program performance and the authorities’ commitment to medium-term

### 1senea2023003 - 47. Based on the program performance and the authorities’ commitment to medium-term

### Program assessment and IMF staff recommendation
- Staff supports completion of the first reviews under the ECF/EFF/RSF based on program performance and the authorities’ commitment to medium-term fiscal sustainability.
- Staff supports:
  - modification of a quantitative performance criterion;
  - addition of a quantitative performance criterion;
  - request for rephasing of availability date for disbursements;
  - addition of four new structural benchmarks to strengthen Senegal’s structural reform agenda;
  - rephasing of two existing structural benchmarks to align with authorities’ reform plans and capacity development needs.
- Policies outlined in the attached LOI are judged adequate to achieve the program’s goals.

### Macroeconomic projections and key statistics (selected)
- GDP at constant prices: 2021 Act. 6.5; 2022 4.0; 2023 5.3; 2024 4.1; 2025 10.6; 2026 8.3; 2027 10.2; 2028 5.2 (annual percentage change series as presented).
- Non-hydrocarbon GDP: 6.5; 4.0; 5.3; 4.1; 6.0; 5.4; 6.0; 6.0; 6.0; 6.0 (series by year as shown).
- GDP deflator: 1.8; 8.6; 3.2; 5.3; 2.0; 3.7; 2.0; 2.0; 2.0; 2.0.
- Consumer prices (annual average): 2.2; 9.7; 5.0; 6.5; 2.0; 3.9; 2.0; 2.0; 2.0; 2.0.
- Broad money growth: 15.4; 21.6; 20.0; 17.0; ...; 10.7 (selected years as presented).

### External sector (selected balances and projections)
- Current account balance (official transfers included, Billions of CFAF): 2021 -1,710; 2022 -3,415; 2023 -2,497; 2024 -2,743; 2025 -1,289; 2026 -1,889; 2027 -1,146; 2028 -1,177; subsequent -1,202; -1,302 (table series).
- Exports, f.o.b. (Billions of CFAF): 3,045; 3,822; 4,392; 3,774; 5,517; 4,964; 6,194; 6,603; 7,108; 7,826.
- Imports, f.o.b. (Billions of CFAF): -4,707; -6,702; -6,834; -6,488; -6,880; -6,920; -7,558; -8,129; -8,787; -9,604.
- Services (net, Billions of CFAF): -1,203; -1,575; -1,401; -1,360; -1,251; -1,235; -1,139; -1,099; -1,064; -1,155.
- Current transfers (net, Billions of CFAF): 1,571; 1,665; 1,813; 1,797; 1,869; 1,889; 1,988; 2,129; 2,268; 2,416.
- Current account (percent of GDP): -11.2; -19.8; -13.3; -14.5; -6.1; -8.9; -4.8; -4.6; -4.4; -4.4.

### Central government fiscal operations (selected)
- Revenue (percent of GDP): 19.5; 19.9; 21.5; 21.2; 21.8; 22.0; 22.5; 23.1; 23.3; 23.4 (2021–2030 series).
- Grants (percent of GDP): 0.9; 0.8; 1.6; 1.5; 1.2; 1.4; 1.2; 1.2; 1.2; 1.2.
- Total expenditure (percent of GDP): 25.8; 26.6; 26.4; 26.1; 25.7; 26.0; 25.5; 26.1; 26.3; 26.4.
- Net lending/borrowing (including grants, percent of GDP): -6.3; -6.6; -4.9; -4.9; -3.9; -3.9; -3.0; -3.0; -3.0; -3.0.
- Primary fiscal balance (percent of GDP): -4.3; -4.4; -2.2; -2.3; -1.5; -1.2; -0.7; -0.7; -0.7; 0.0.
- Non-hydrocarbon primary balance (percent of GDP): -4.3; -4.4; -2.2; -2.3; -2.1; -1.5; -1.4; -1.7; -1.5; -1.2.
- Revenue and Grants (Billions of CFAF): 2,978; 3,444; 4,029; 4,014; 4,621; 4,682; 5,370; 5,909; 6,410; 6,977.
- Expenditure (Billions of CFAF): 3,944; 4,589; 4,948; 4,950; 5,452; 5,521; 6,093; 6,675; 7,227; 7,862.
- Net lending/borrowing (Overall balance, Billions of CFAF): -965; -1,145; -920; -936; -831; -838; -724; -766; -816; -886.
- Net acquisition of nonfinancial assets (Billions of CFAF): 1,406; 1,279; 1,433; 1,363; 2,064; 1,823; 2,146; 2,366; 2,631; 2,882.

### Monetary and financial sector (selected)
- Net foreign assets (BCEAO + commercial banks, Billions of CFAF): 1,905; 2,004; 1,975; 2,181; 2,601; 1,978 (selected entries).
- Net domestic assets (Billions of CFAF): 5,096; 6,022; 7,827; 9,487; 8,823; 10,660.
- Broad money (Billions of CFAF): 6,389; 7,370; 8,961; 10,756; 10,504; 11,606.
- Broad money growth (percent): 12.3; 15.4; 21.6; 20.0; 17.2; 10.5.
- Credit to the economy (net, Billions of CFAF): 4,668; 5,112; 5,939; 7,296; 7,306; 8,343.
- Credit to the private sector (percentage growth): 2.2; 10.3; 22.0; 22.0; 8.2; 1.0; 15.4 (series as presented).
- Credit to private sector/GDP (percent): 29.3; 29.8; 32.3; 35.9; 35.6; 36.6.

### Banking sector indicators (selected)
- Regulatory capital to risk weighted assets: 19.1; 14.5; 13.6; 10.5; 13.1; 11.9; 12.0; 12.5.
- Gross NPLs to total loans: 19.3; 18.0; 16.2; 13.1; 13.9; 13.3; 11.5; 9.3.
- Provisioning rate: 57.7; 62.5; 59.7; 68.1; 61.5; 66.7; 68.2; 72.4.
- Net NPLs to total loans: 9.2; 7.6; 7.2; 4.6; 5.9; 4.9; 4.0; 2.7.
- After-tax return on average assets (ROA): 0.8; 1.0; 1.7; 0.7; 1.2; 1.0; 1.4; 1.3.
- After-tax return on average equity (ROE): 9.0; 13.0; 19.9; 7.2; 12.6; 21.1; 16.7; 15.8.

### Debt, capacity to repay, and financing plans
- Total public debt (percent of GDP): 73.3; 76.0; 77.7; 79.6; 73.2; 72.5; 67.4; 67.2; 67.0; 65.5 (series in Table 1).
- External public debt (percent of GDP): 57.2; 56.4; 59.3; 58.7; 56.5; 55.7; 52.7; 51.4; 49.8; 47.1.
- Domestic public debt (percent of GDP): 16.1; 19.6; 18.5; 20.8; 16.8; 16.8; 14.7; 15.8; 17.2; 18.3.
- Total public debt service (percent of revenue): 28.6; 30.7; 32.5; 32.2; 26.1; 27.4; 31.5; 31.8; 30.7; 31.7.
- Capacity to repay (IMF-related indicators):
  - IMF obligations based on existing credit (Principal, SDR millions and charges series): Principal 27.0 (2023); 129.5 (2024); 176.8; 211.8; 165.4; 101.6; 88.7; 62.3; 34.8; 28.8; 14.4 (table series).
  - Total outstanding Fund credit (SDR Millions): 1224.3; 1515.5; 1759.4; 1709.4; 1544.0; 1415.5; 1247.7; 1048.7; 846.8; 645.4; 458.4.
  - Total outstanding Fund credit (Percent of GDP): 5.4; 5.8; 6.0; 5.4; 4.6; 3.9; 3.2; 2.5; 1.9; 1.4; 0.9.
- Debt holder composition (end-period, m USD and percent of total debt, selected):
  - Total debt (m USD): 21,172 (2022) = 100.0% as reported.
  - External: 15,712 (74.2%); Multilateral creditors 6,517 (30.8%); IMF 991; World Bank 2,975; Bonds (Eurobonds) 4,045 (19.1%).
  - Domestic: 5,460 (25.8%).

### Financing needs, IMF programs, and RSF access
- Financing requirements (bn CFA) 2022–2028 (selected): 395; 234; 732; 487; 164; 518; 661; 879; 1,954 (table series).
- Financing gap before accounting for IMF UCT program (bn CFA): 757; 379; 258; 101 (selected as presented).
- IMF Financing (disbursements and program): Net IMF UCT Financing Support series: 102; 242; 354; 348; 161; 156; 118; -40 (table sequence).
- Proposed IMF EFF-ECF program disbursements (SDR millions): Total access 755.07377.531132.60233.4116.6350.00 (tables show breakdown by EFF and ECF; see Table 12 series).
- RSF proposed/current access schedule (Table 12b/12d):
  - Availability date entries with disbursements of 24.27 (Millions of SDRs) each tied to completion of RSF review of reform measures 1–10; total 242.70 (Millions of SDRs) = 75 percent of quota.
  - Memorandum item: Quota 323.6 (SDR millions).
- Proposed RSF Reform Areas and Reform Measures (selected targets and statuses):
  - RM2M Support decarbonization: Adopt implementation plan for greener public transport; target End-November, 2023; Status MET.
  - Adopt an electricity tariff adjustment plan to phase out electricity subsidies by 2025 and restore cost recovery by end-2025 (linked to Senelec financial audit).
  - RM4A Protection of coastal zones: Submit to the National Assembly laws establishing the Urban Code and the Construction Code; target End-April, 2024.
  - RM1A, M Budget presentation: Adopt and publish a PIM decree integrating climate considerations at each step of project development; target End-October 2023; Status MET.
  - RM6A, M Budget presentation: Assess and quantify disaster-related fiscal risks as part of the Risk Statement Annex included in the 2025 budget law; target End-September, 2024.

### Structural benchmarks, prior actions, and implementation status (selected)
- Prior actions met before First Review:
  - Submit to the National Assembly the 2024 budget law reflecting a deficit target of 3.9 percent of GDP — Met.
  - Strengthen the Legislation and International Cooperation Directorate at the DGID by ministerial decision — Met (September 2023).
  - Reinforce legal obligation for public service companies to communicate customer information to tax authorities — Met (October 2023).
  - Put in place an independent body to determine and publish petroleum product prices based on revised formula — Met (November 2023).
  - Prepare a tax expenditure rationalization strategy/plan and from 2024 reduce tax expenditures by at least 100 billion CFA francs per year — Met (November 2023).
- Structural benchmarks (selected new and rephased):
  - Implement a VAT taxation system for online sales of digital goods and services — New SB, December 2023 (Proposed).
  - Finalize financial audit of SENELEC to revise RMA formula — New SB, May 2024 (Proposed).
  - Gradually eliminate treasury deposit accounts used by public entities without legal personality — Target June 2024.
  - Propose a new electricity tariff structure including a social tariff — New SB, September 2024 (Proposed).
  - Finalize inventory of movable and immovable collaterals and put in place a collateral register accessible online (collaboration with BCEAO) — New SB, November 2024 (Proposed).
  - Deploy core functionalities of the land management system (LMS) — New SB, November 2024 (Proposed).
  - Publish certified financial statements of all public entities and companies having borrowed on regional or international market — New SB, November 2024 (Proposed).
- Prior Action status exceptions:
  - Draft law amending OFNAC submitted to National Assembly — Not met, implemented with delay (October 2023).
  - Draft law amending assets declaration law — Not met, implemented with delay (October 2023).

### Program conditionality (selected performance criteria and targets)
- Preliminary Performance Criteria (June 2023–December 2024, Table 9 highlights):
  - Floor on nonhydrocarbon primary balance (CFA billion): Program Adj. Prog. -335; Actual -334 (Met); Program request -417; Proposed -435; subsequent quarterly targets -335; -156; -310 (as listed).
  - Floor on nonhydrocarbon tax revenue (CFA billion): 1,602; ...; Actual 1,668 (Met); Program request 3,514; Proposed 3,514; quarterly targets 1,882; 1,882; 4,155.
  - Ceiling on the present value of public sector external new borrowing (CFA billion): 3,755; ...; Actual 2,403 (Met); Program request 3,755; Proposed 3,755; quarterly targets 1,828; 1,828; 2,543.
  - Ceiling on public sector external payment arrears (stock): 0 (Met).
  - Ceiling on public sector domestic payment arrears (stock): 0 (Met).
  - Floor on deposit of the Central Government at the BCEAO (CFA billion): Proposed 626.7; quarterly targets 22.0; 22.0.
- Indicative targets and memorandum items include ceilings on total nominal public sector debt (CFA billion) and floors on social expenditures (percent of total spending = 40, Met).

*Source: IMF staff calculations and Senegalese authorities as presented in the provided content.*

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### Conjunctural risks
- Intensification of regional conflict(s)
  - Description: Escalation of Russia’s war in Ukraine or other regional conflicts and resulting economic sanctions disrupt trade (e.g., energy, food, tourism, and/or critical supply chain components), remittances, FDI and financial flows, and payment systems, and lead to refugee flows.
  - Likelihood: High
  - Policy response:
    - Strengthen automatic pass-through of global commodity price changes; in the energy sector, in particular, stick to the roadmap to gradually eliminate untargeted subsidies and provide targeted support to the vulnerable; ensure food supply through forward-looking planning.

- Abrupt global slowdown or recession
  - Description: Global and idiosyncratic risk factors combine to cause a synchronized sharp growth downturn, with recessions in some countries, adverse spillovers through trade and financial channels, and market fragmentation causing sudden stops in EMDEs.
  - Regional scenarios and channels highlighted:
    - U.S.: Amid tight labor markets and/or commodity price shocks, inflation remains elevated, prompting the Fed to keep rates higher for longer and resulting in more abrupt financial, housing, and commercial real estate market correction, and “hard landing.”
    - Europe: Intensifying fallout from the war in Ukraine, recurrent energy crisis and supply disruptions, and monetary tightening exacerbate economic downturns, and housing and commercial real estate market corrections.
    - China: Sharper-than-expected slowdown in the property sector, unexpected fiscal tightening due to local government financing stress and decline in investment, and/or rising geopolitical tensions disrupt economic activity.
  - Likelihood: Medium
  - Policy response:
    - Limited policy space to cushion the economic impact on key commodities (related to energy and food) will require careful spending prioritization and sustained revenue mobilization efforts.

- Social discontent
  - Description: High inflation, real income loss, and spillovers from crises in other countries (including migration) worsen inequality, trigger social unrest, and give rise to financing pressures and detrimental populist policies. This exacerbates imbalances, slows growth, and triggers market repricing.
  - Likelihood: Medium
  - Policy response:
    - Ensure transparency and effectiveness of fiscal measures and social spending. Expand and better target the social safety net.

### Structural risks
- Deepening geo-economic fragmentation
  - Description: Broader and deeper conflict(s) and weakened international cooperation lead to a more rapid reconfiguration of trade and FDI, supply disruptions, technological and payments systems fragmentation, rising input costs, financial instability, a fracturing of international monetary and financial systems, and lower potential growth.
  - Likelihood: High
  - Policy response:
    - Boost resilience of economy and key supply chains, including through diversification and more effective coordination at the regional level.

- Extreme climate events
  - Description: Extreme climate events cause more severe than expected damage to infrastructure (especially in smaller vulnerable economies) and loss of human lives and livelihoods, amplifying supply chain disruptions and inflationary pressures, causing water and food shortages, and reducing growth.
  - Likelihood: Medium
  - Policy response:
    - Invest in climate adaptation and improve shock response mechanisms to cope with floods and droughts.

### Notes on the Risk Assessment Matrix
- The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path.
- The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline:
  - “low” is meant to indicate a probability below 10 percent,
  - “medium” a probability between 10 and 30 percent, and
  - “high” a probability between 30 and 50 percent.
- The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities.
- Non-mutually exclusive risks may interact and materialize jointly.
- Conjunctural shocks and scenarios highlight risks that may materialize over a shorter horizon (between 12 to 18 months) given the current baseline.
- Structural risks are those that are likely to remain salient over a longer horizon.

*Source: Annex I. Risk Assessment Matrix*

### 10.      Budget execution at end-September was marked by a sharp increase in revenue and

### 10.      Budget execution at end-September was marked by a sharp increase in revenue and

### Fiscal execution (end-September)
- Revenue mobilization totaled CFAF 2,480.5 billion, a 9.6 percent increase from the previous year, driven mainly by domestic taxes and import duties.
- Grant mobilization reached CFAF 119.9 billion compared to a projected annual amount of CFAF 279 billion, achieving a 43 percent execution rate.
- Expenditures rose to CFAF 3,702.9 billion, a 6.6 percent increase from 2022.
- Fiscal deficit: CFAF 952.1 billion, a slight decrease of CFAF 7.3 billion year-on-year.
- Deficit financing: net incurrence of liabilities totaling CFAF 2,055 billion and a net acquisition of financial assets totaling CFAF 1,101 billion.

### Monetary developments (end-August)
- Money supply increased by 8.2 percent.
- Increase driven by a 13.1percent rise in domestic claims.
- Net claims on the central government were up 19.0 percent, reflecting greater reliance on the regional securities market.
- Credit to the economy grew by 10.7 percent, concentrated in the "services," "trade," and "manufacturing industries" sectors.
- Net external assets fell by 3.1 percent, mainly due to a decline in the Central Bank’s external position of CFAF 352.9 billion, or 27.9 percent, partly offset by an increase in the external position of other deposit-taking institutions of +CFAF 288.4 billion, or +34.1 percent.

### Banking sector soundness (end-August)
- Total number of credit institutions in Senegal: 28 (one new bank licensed).
- Effective capital of credit institutions grew by 9.6 percent.
- Solvency ratio: 13.4 percent (minimum threshold: 11.5 percent).
- Non-performing loan (NPL) ratio: 3.4 percent, down from 3.9 percent a year earlier.
- Compliance: all but two banks fully complied with the risk coverage rule.
- Liquidity ratio: 106 percent (minimum requirement: 75 percent).

### Performance under the program (end-June)
- Non-hydrocarbon primary fiscal balance: CFAF -333.8 billion, compared to a floor of CFAF -335 billion.
- Tax revenue: CFAF 1,668.3 billion, compared to a target of CFAF 1,602 billion (CFAF 66.3 billion above target).
- Ceiling on the present value of new public sector external borrowing: US$2,403 million, compared to a ceiling of US$3,755 million.
- No public sector external financial arrears or central government domestic arrears recorded.
- Indicative targets: all met except public sector debt.
  - Nominal public sector debt: CFAF 14,725.4 billion, compared to a ceiling of CFAF 14,591 billion.
  - Social expenditure as a percent of total public expenditure: 43.1 percent (floor: 40 percent).
  - Stock of government amounts payable (reste a payer) as of June 30, 2023: CFAF 33.3 billion (ceiling: CFAF 40 billion).
- Memorandum item: share of the value of public sector contracts signed by single tender: 50 percent, compared to a target of 15 percent.
  - Main single-tender contracts: operation and maintenance of the Regional Express Train (TER), totaling CFAF 119.6 billion; extension of the new TER line between Diamniadio and Blaise Diagne International Airport (AIBD), amounting to CFAF 108.4 billion.

### Structural benchmarks and reforms (progress and timelines)
- Four of six structural benchmarks for the first review of the EFF- and ECF-supported program met on time.
- Tax policy and administration measures met on time:
  - Legal obligation for public service enterprises and certain government entities to communicate customer information to tax authorities added to draft budget law for 2024 (Article 19).
  - Ministerial order strengthening the Legislation and International Cooperation Directorate of DGID signed.
  - Strategy for rationalizing tax expenditures: government to implement (1) removal of exemption for sales and services by administrative services or bodies (point 19 of article 361 of the General Tax Code) with estimated budgetary cost of 147.84 billion FCFA; (2) DGID review of headquarters and special agreements to identify measures to save at least one hundred billion francs in tax expenditure. Structural benchmark met on time.
- Energy subsidy reform benchmark met on time:
  - Decree No. 20221599 of September 12, 2022 issued; Regulatory Commission for the Energy Sector (CRSE) established; committee up and running since October 2023.
- Governance and anti-corruption benchmarks:
  - Draft law amending the law on the creation of OFNAC: submitted to government and resubmitted; adopted and submitted to the National Assembly by November 30, 2023 — met with delay.
  - Draft law amending the law on the declaration of assets: submitted to the National Assembly by November 2023 — met with delay.
- RSF-supported program reforms implemented:
  - Draft decree incorporating climate considerations in public investment issued (decree No. 2023-2142 of October 31, 2023).
  - Strategy and implementation plan for greener public transportation adopted and reflected in the 2024 PIP budget of the Ministry of Transportation.
  - “Green Budget” annex prepared to identify and classify climate-related investment projects for the 2024 draft budget law.

### Progress on end-December structural benchmarks and delays
- Progress toward broadening the tax base: target to increase registered taxpayers with DSF by 25,000 is on track to be exceeded.
  - New DSF registrations: first half of 2023 — 12,669; second half of 2023 — 7,721; total 20,090 new registrations.
  - Additional ongoing registrations: 2,980 new taxpayers at Ziguinchor CSF.
  - Automation of tax compliance levy process (PCF): interdepartmental working group meets weekly; decree scheduled to be signed by December 31, 2023.
  - Reclassification of capital transfer expenditures (Title 6) to investments executed by the government (Title 5): credits of entities without legal personality moved under Title 5; plan for autonomous entities to specify economic nature in the budget management and information system.
- Revision of petroleum products pricing formula: study near completion; interim results expected before the end of 2023 to identify parameters needing revision.
- Delayed structural benchmarks:
  - Centralized and integrated land management system (LMS): contract issues led to new implementation plan; activities to resume by December 2023. New structural benchmark: functionalities of lot 1 delivered and deployed at pilot sites by end-November 2024; functionalities of lot 2 during first quarter of 2025; lots 3 to 5 delivered gradually over last three quarters of 2025.
  - Online collateral register (movable collateral and mortgages) with BCEAO: completion no later than end of December 2025. Interim step: finalize inventory of movable and immovable collaterals by November 2024 (new structural benchmark, end-November 2024).

### Short-term economic and financial outlook (2023–2024)
- Growth projections revised downward:
  - 2023 real GDP growth adjusted to 4.1 percent, down from 6.3 percent (excluding hydrocarbons).
  - 2024 real GDP growth projected at 9.2 percent, with 6 percent attributed to real GDP excluding hydrocarbons.
  - 2024 upside driven by scheduled start of oil and gas production in latter half of 2024 and increased public investment, including acceleration of second phase of MCA-Senegal “Power to Compact” and economic support measures.
- Inflation:
  - Expected to continue downward trend but unlikely to reach target before 2025.
  - Expected inflation: 3.9 percent in 2024, driven primarily by increase in food prices.
- Current account:
  - Expected current account deficit: 15.1 percent of GDP in 2023, down from 19.9 percent in 2022.
  - Imports of goods expected to decline by 5.4 percent; exports of goods expected to decline by 1.3 percent year-on-year.
  - Deficit in balance of services expected to drop by about 10 percent.
  - Primary income account deficit expected to rise slightly (+2.1 percent) due to interest payments on public debt.
  - Secondary income account expected to be up by 5.5 percent due to consolidation of migrant remittances.
- Risks and uncertainties:
  - Geopolitical shocks could spike food and energy prices.
  - Global economic slowdown could reduce external demand.
  - Rising interest rates and strengthening U.S. dollar could increase debt servicing costs.
  - Regional security/political deterioration, domestic presidential election challenges, and delays in starting oil production could adversely affect the forecast.

### Fiscal policy: 2023 actions and 2024 budget orientation
- Government commitment to fiscal consolidation targets under the program:
  - Fiscal deficit targets: 4.9 percent in 2023, 3.9 percent in 2024, and 3 percent of GDP in 2025.
- Measures for 2023 to meet the 4.9 percent of GDP deficit target:
  - Revenue developments:
    - Tax revenue mobilization at end-September provisionally totaled CFAF 2,480.6 billion against an annual floor of CFAF 3,517 billion (recovery rate: 71 percent).
    - Directorate General of Customs (DGD) to recover outstanding amounts totaling CFAF 150 billion (SENELEC and externally financed contracts).
    - DGID recovery of claim on Caisse des Dépôts et des Consignations: CFAF 35 billion to offset projected loss of CFAF 10.3 billion.
    - DGCPT expected improvement of CFAF 26.4 billion, mainly from dividends (+CFAF 15.9 billion).
  - Expenditure developments:
    - Wage bill expected within planned annual ceiling of CFAF 1,273 billion.
    - Investment execution rate at 66 percent; external resource drawdowns fairly low at 59 percent — expected boost to raise execution rate before year-end.
    - Energy subsidy expenditures expected to exceed planned envelope (CFAF 556 billion) by CFAF 38.9 billion due to higher petroleum prices and rise in U.S. dollar versus CFA franc.
- Liquidity reserve building:
  - CFAF 604.8 billion in projected overfinancing for 2023 earmarked for servicing debt in the first quarter of 2024.
  - Repurchase operations in 2023 would reduce overfinancing by equivalent amounts.
- 2024 draft budget submitted to the National Assembly aims to:
  - Reinforce fiscal sovereignty through increased domestic revenue mobilization.
  - Consolidate gains from streamlining expenditures to cover social welfare expenses and accelerate investment expenditures.

*Source: IMF staff report (1senea2023003).*

### 23.      The aim of the budget is to achieve a tax mobilization rate of 19.4 percent of GDP in

### 1senea2023003 - 23.      The aim of the budget is to achieve a tax mobilization rate of 19.4 percent of GDP in

### Tax mobilization target and revenue projections
- Aim: achieve a tax mobilization rate of 19.4 percent of GDP in 2024, a projected increase of 1.1 percentage points of GDP in tax revenues compared to 2023.
- 2024 budget law provides for general budget grants and revenue of CFAF 4,693.7 billion, including CFAF 4,180 billion in tax revenue.
- Revenue-enhancing measures expected to contribute to this progression:
  - Elimination of measures to waive duties and taxes assessed in 2023 at CFAF 103 billion for import duties and CFAF 39 billion for domestic indirect taxes, totaling around CFAF 140 billion.
  - Streamlining of tax expenditures of at least CFAF 100 billion.
  - Expected impacts of specific tax policy and administration measures:
    - Taxing of imports of telephone devices, which could bring CFAF 19.3 billion.
    - Registration of 25,000 new taxpayers with the Tax Services Directorate.
    - Ramp-up of the single window for vehicle customs clearance (Guichet unique de Dédouanement des Véhicules – BGDUV), improving vehicle assessment control and customs value governance.

### Tax policy and tax administration measures (commitments and benchmarks)
- Automation of the tax compliance liquidation process (Prelevement de Conformite Fiscale) for greater efficiency (structural benchmark, end-December 2023).
- Implementation of the VAT taxation system for online sales of digital goods and services (TVA numerique) through platforms domiciled abroad (new structural benchmark, end-June 2024).
- Increase in the rate of the additional tax on alcoholic beverages through higher taxable volumes.
- Expansion of the scope of the tobacco tax to cover any product made from tobacco and related materials (including water pipes, pipes and their parts, pipe preparations, inhalers with or without nicotine, hookah materials, e-cigarettes, or any other device of this nature used to inhale through the mouth).
- By June 2024, carry out a study to implement an electronic invoicing system to detect taxpayers operating without invoices, plan tax audits based on identified risks, detect false declarations of charges on local purchases, and detect undeclared VAT invoices.
- Reactivation of taxation applicable to telephone devices included in the Common External Tariff (CET) of ECOWAS; this taxation had been suspended in favor of RUTEL.
- Legal strengthening for delegated entities of urban or rural public service in the water and electricity sector to provide tax administration, not later than January 31 of every year, with client portfolio information.
- Introduction of specific reporting obligations for delegated enterprises and operators of port and airport works, gaming and leisure enterprises, enterprises covered by anti–money laundering and counter–terrorist financing regulations, and digital platform operators.
- Broadening the tax base by increasing by 25,000 the number of taxpayers registered with the Directorate in charge of small and micro-enterprises (structural benchmark, end of December 2023).
- Update mechanism for implementing Action 13 of the BEPS project concerning automatic exchange of country-by-country declarations.
- Clarification of the scope of direct or indirect transfer applicable to transmission of rights relating to mining titles and property and real estate rights.
- Continuation of digitizing customs clearance procedures by extending the GAINDE system to domestic offices to achieve digital maturity within the DGD.
- Continued operationalization of the BGDUV; preliminary first-year performance shows satisfactory results.
- Strengthening the Intelligence, Risk Analysis, and Valuation Directorate through a postlanding inspection program to establish better customs valuation control.
- Restoration of common law taxation on products subject to price support tax measures based on the downtrend in world prices without affecting consumer purchasing power; measure could offset loss of revenue from tax waivers estimated at CFAF 140 billion in 2023. A table of affected revenue items with quantified evaluation will be made available to the National Assembly and to the IMF (as part of the Quarterly Budget Execution Report).

### Expenditures and reallocation priorities
- Energy subsidy reduction: expected to decrease from 3.1 percent of GDP in 2023 to about 1 percent of GDP in 2024; generated savings redirected to social welfare policies and increased investment expenditures.
- General budget expenditures for 2024: CFAF 5,533.9 billion, compared to CFAF 4,965 billion for 2023, an increase of CFAF 568.9 billion (11.5 percent).
- Principal expenditure items:
  - Wage bill: CFAF 1,442.5 billion (6.7 percent of GDP) in 2024 LFI, up from CFAF 1,273 billion (6.7 percent of GDP) in 2023 LFI; increase of CFAF 169.5 billion (13.3 percent).
    - Contributing factors include recruitment in 2023 of 1,158 public servants; hiring of 8,500 contractual teachers and professors per April 2018 protocol; payment reminders for teachers and other employees; financial impact of reclassification of decision-making teachers.
    - Financial impact of above items estimated at CFAF 239.086 billion, plus salaries of local embassy staff CFAF 11 billion and transportation expenses CFAF 200 million.
    - Social benefit expenditures: CFAF 38 billion (health spending CFAF 28 billion; disability pensions CFAF 9.6 billion; death benefits CFAF 400 million).
  - Goods and services acquisitions: projected CFAF 428.4 billion, up CFAF 32.7 billion (8.3 percent) year-on-year.
  - Current transfer expenditures: CFAF 1,248.5 billion (5.8 percent of GDP), down CFAF 35.2 billion compared to 2023 LFI; decrease mainly due to capping energy subsidies at 1 percent of GDP for 2024.
    - Social welfare: family security grant envelope increased to CFAF 51 billion from CFAF 35 billion in 2023; increase follows a CFAF 10,000 increase in social protection grant amount and increased beneficiaries; higher allocations to territorial governments, university aid and grants, health facilities, social work for students and universities, and financing of employability training programs like “XËYU NDAW ÑI”.
    - Agricultural support: CFAF 100 billion for access to inputs, mechanization, crop protection; continuation of agricultural insurance subsidy payments.
  - Investment expenditures: projected CFAF 1,836.3 billion (8.5 percent of GDP), up CFAF 248.1 billion from 2023 LFI.
    - Increase largely from CFAF 214.4 billion in investments from domestic resources; domestic-resource investments up by close to CFAF 250 billion reflecting catch-up on projects previously eclipsed by energy subsidies.
    - Emphasis on regional development plans, transportation infrastructure, mobility, trade and energy infrastructure, and rural electrification.

### Fiscal risks and contingency provisioning
- Execution risks: macroeconomic risks (external: prolonged war between Russia and Ukraine, higher oil and gas prices, dramatic rise in food prices, climate change risks; internal: food inflation, drop in rainfall affecting agricultural production, delay in oil and gas exploitation) and natural disaster and health emergency risks (floods, droughts, wildfires, agricultural crop pests, epidemics, animal health).
- Regulatory and provisioning measures:
  - Improved regulatory framework via Order No. 008655 of March 30, 2023, on fiscal risk provisioning methodology in the budget law.
  - Provisions for fiscal risks enhanced by CFAF 30.75 billion, in addition to CFAF 90 billion and CFAF 50.45 billion in precautionary and management reserves, respectively.

### Financing of the 2024 financing need
- Overall financing need: CFAF 2,138.7 billion, consisting of:
  - Fiscal deficit: CFAF 840.5 billion, or 3.9 percent of GDP.
  - Debt amortization: CFAF 1,248.2 billion.
  - External armed forces operations (OPEX): CFAF 50 billion.
- Planned coverage:
  - Expected overfinancing for 2023: CFAF 604.8 billion.
  - Program loans: CFAF 300 billion.
  - Project loans: CFAF 445 billion.
  - Other (market and bank) loans: CFAF 789 billion.

### Energy subsidy reform roadmap and mitigation measures
- Government will continue roadmap for gradual reduction of energy subsidies by 2025.
- Measures and milestones:
  - Review of the petroleum product price structure; interim results expected before the end of 2023 to identify parameters requiring review.
  - Setting up an independent committee to regularly determine and publish petroleum product prices (structural benchmark of end of November 2023); establishment of the Energy Sector Regulatory Commission (CRSE) to set electricity tariffs and determine selling prices of refined hydrocarbons and gas.
  - Propose new electricity tariff structure to CRSE by introducing a social rate for vulnerable populations and smoothing mechanisms to avoid high fluctuations (new structural benchmark, September 2024). IMF and World Bank technical assistance requested.
  - Financial audit of SENELEC to revise the maximum allowable revenue formula delayed past end-2023 due to procurement constraints; Government committed to finalizing financial audit (new structural benchmark, May 2024). CRSE’s review of new SENELEC tariff conditions covering a five-year period is being finalized.
  - Strengthening cash transfer programs: PNBSF resources revalued with a 7.9-percent increase in the budget envelope for cash transfers and a 12.4-percent increase in number of beneficiaries; plans to continue increasing beneficiaries and transfer amounts and to digitalize payments.
  - Improve performance of State-owned enterprises in energy sector via performance-related contracts, infrastructure upgrades, distribution improvements under the MCC project, operating cost control, “Gas-to-Power” strategy, promotion of renewables and energy efficiency, and strengthening public entities for energy management.
  - Launch a campaign from 2024 to publicize reform, estimate budgetary savings from subsidy reduction, and show resource redirection to priority sectors.

### Fiscal management and public investment reforms
- Reclassification of investments executed through capital transfers (chapter 6) as investments executed by the central government (chapter 5) through the normal budget circuit (structural benchmark as of end-December 2023) to strengthen internal controls and improve tracking.
  - For 2024: registration under Title 5 of CFAF 98.7 billion, including CFAF 41.9 billion from transfer expenditure reclassifications and CFAF 56.8 billion relating to new projects and programs.
  - Budget envelope for capital transfers under 2024 LFI: CFAF 795.4 billion, compared to ministries’ initial proposals of CFAF 894.1 billion.
  - Proportion of capital transfer expenditures relative to total expenditures financed from domestic resources to decrease from 76 percent in 2023 to 70 percent in 2024, a drop of 6 points year-on-year.
  - A computerized budget appropriation tracking system for capital transfers will be put in place to align mobilization pace and physical execution.
- Implementation of recommendations from the audit on COVID19 spending by the Court of Auditors; steps taken include bank account closures and follow-ups; 12 recommendations leading to legal proceedings remain pending before judicial authorities.
- Gradual elimination of all deposit accounts for non-personalized government entities (Structural benchmark, June 2024); reclassification of 11 budget chapters for CFAF 14.2 billion begun.
- Treasury Single Account (TSA) consolidation: SIGCDD deposit account management software rewritten and being tested; rollout to improve banking services for the Treasury’s correspondents; a new roadmap to repatriate all public agency resources in Treasury accounts to be developed after the benchmark mission slated before end-2023.

*Source: IMF staff summary of the 2024 budget chapter (extracted content).*

### 31.      The government is determined to reduce debt-related vulnerabilities. With respect to

### 1senea2023003 - 31.      The government is determined to reduce debt-related vulnerabilities. With respect to

### Debt sustainability and debt management
- Public debt remains at "moderate risk of debt distress" with "limited margins to absorb any potential future shocks."
- Debt sustainability is vulnerable to a slowdown in economic growth and deterioration in external conditions.
- Government debt policy priorities:
  - Preference for concessional loans, longer maturities, and lower refinancing, exchange, and interest rate risks.
  - Restrict other commercial loans to "highly profitable projects."
- Planned debt-management actions:
  - Strengthen the National Public Debt Committee (Comité National de la Dette Publique – CNDP) by providing permanent secretarial services.
  - Make it mandatory for all new public sector loans to be submitted to the CNDP "within at least 15 days," supported by a costs-and-benefits analysis.
  - Strengthen monitoring of indebtedness of the main parastatal companies; set annual indicative targets for the debt of the 16 largest companies.
  - In-depth monitoring of 6 companies: SENELEC, SAR, the Autonomous Port of Dakar, AIBD, SONACOS, Air Senegal, and PETROSEN.
  - Establish a monitoring committee chaired by the Minister of Finance and Budget, with a secretariat provided by the Directorate of the Parastatal Sector of the DGCPT, to meet at the end of each quarter to assess governance and indebtedness.
  - Publish certified financial statements for all entities and public enterprises that have borrowed from the regional or international market following the program-specified format (structural benchmark, by the end of December 2024).
  - Limit lending by the government to State-owned enterprises by adopting a regulation defining terms, conditions, and procedures for such loans.
  - Accelerate implementation of the action plan from the technical and functional audit of the computerized public debt management platform (DAIDA): consolidate complementary modules, upgrade backup system, secure access, adopt a continuity plan, deploy intrusion protection system; work financed by USAID.
  - Prioritize interoperability of State-owned enterprise debt management platform with DAIDA at the next stage.

### Green finance and external validation
- Senegal has a "sustainable financing framework document" guiding sustainable sovereign bond issues for private investors.
- External review by Moody’s found the document "aligned with international standards and market best practices."

### Anti-money laundering, FATF monitoring, and governance reforms
- Government committed to removing itself from enhanced FATF monitoring.
  - Seven progress reports submitted to the International Cooperation Review Group.
  - Seventh report evaluated during a face-to-face meeting on September 12, 2023, in Amman.
  - "38 measures are now deemed satisfactorily implemented." "11 measures remain to be executed."
  - Six measures addressed via revision of decree on targeted financial sanctions related to terrorism financing and proliferation.
  - Remaining five measures target oversight of the preventive program for certain DNFBPs (especially real estate), collection of beneficial ownership information for SMEs, and mitigating misuse risks of NPOs.
  - Government commits to submitting the eighth progress report by November 24, 2023, in preparation for a face-to-face meeting with FATF’s Middle East and North Africa Task Force scheduled for January 2024.
  - Termination of enhanced monitoring anticipated following FATF on-site visit in May 2024.

### Anti-fraud, anti-corruption, and legal institution strengthening
- Draft laws strengthening OFNAC and the asset declaration system were submitted to the National Assembly by November 2023 (one month delay versus structural benchmark end-October 2023) after changes in OFNAC presidency and Legal Advisor vacancy.
- Adoption of Financial Prosecutor’s Office law:
  - Law No. 202314 of August 2, 2023, amends Law No. 6561 of July 21, 1965 (Code of Criminal Procedure).
  - Establishes a Financial Judicial Pool (Pool judicaire financier – PJF) within the Special High Court and the Court of Appeal of Dakar to specialize in economic and financial crimes.
- Government commits to accelerate adoption of the draft law on the General Code of Ethics and Professional Conduct for Public Officials; plans to adopt by December 31, 2024.

### Public financial reporting and accountability
- Strengthened reporting system for main extrabudgetary entities.
- Government will publish a table of government financial operations "by not later than November 30 of every year."

### Private sector development, labor code, and commercial justice
- National Strategy for the Development of the Private Sector (SNDSP) validated by Council of Ministers on February 9, 2023.
  - 2035 objectives: "300,000 formal enterprises," "300 national champions," and "3 million formal jobs."
  - Order (Arrêté) to create steering bodies being signed; Presidential Council for formal launch planned.
- Labor Code reform objectives:
  - Anchor legislation in international labor standards, streamline social dialog bodies, preserve decent work and promote employment, reinforce inspection means, consider technological developments, and incorporate provisions from other texts.
  - Preliminary draft in finalization phase; to be submitted to the National Advisory Council on Labor and Social Security by December 2023 before government Secretariat General.
- Commercial judicial system developments:
  - Dakar’s commercial high court pursued digitalization; created an online platform for transactions and dispute management.
  - Procurement launched for new commercial high court construction in Sébi Ponty.
  - Dakar commercial court handles "two thirds of business disputes."

### Investment code, land management, and collaterals register
- Preliminary draft investment code validated at technical level by steering committee on November 23, 2022; political validation pending; consultations planned after the presidential election with objective to submit to National Assembly "before o end-2024."
- Centralized and integrated land management system (LMS) acceleration:
  - Main modules delivered by end of 2024; rest in 2025.
  - By November 2024, functionalities of lot 1 to manage the most usual operations will be delivered and deployed at pilot sites (Structural benchmark, end-November 2024): creation and delivery of cadastral number (NICAD), establishment of inventory, processing requests for statements of real rights, delivery of extracts plan, processing mortgage-of-lease-right requests.
  - Lot 2 functionalities to be deployed in first quarter of 2025: general public portal, professional portal, certain land title operations (delimitation, merger, etc.).
  - Lots 3 to 5 and LMS administration modules delivered progressively over last three quarters of 2025, including the register of real asset guarantees.
- Collaterals register:
  - Plan to set up an online collaterals’ register including movable collaterals and mortgages, in collaboration with the BCEAO.
  - Roadmap established to create the Senegalese Guarantee Register (Registre des Garanties du Sénégal).
  - Committee to supplement movable collateral register with immovable collateral register; finalize inventory of movable and immovable collaterals (structural benchmark, end-November 2024).
  - Inventory files to be updated quarterly pending full automation; completion targeted "by no later than end-December 2024."

### Gender, education, and social protection measures
- Commitment to combat workplace discrimination and protect women through:
  - ILO Convention No. 183 on Maternity Protection (2015).
  - Law No. 2022-02 (April 14, 2022) enhancing protections for pregnant women under Law No. 97-17 (December 1, 1997) of the Labor Code.
  - Decree No. 2021-1469 (November 3, 2021) addressing employment of pregnant women.
- Gender-targeted education objective:
  - Girls' elementary school graduation rate target: "77.7 percent in 2024," compared to "73.2 percent for boys."
- Social protection adjustments and digitalization:
  - Family grant per household increased from CFAF 25,000 to CFAF 35,000; budget allocation increased to CFAF 51.4 billion from CFAF 35 billion initially planned.
  - Beneficiaries of equal opportunities cards (cartes d’égalité des chances – CEC) enrolled in PNBSF, increasing number of beneficiaries from "316,941 to 354,951,162," requiring budgetary allocation of CFAF 52.93 billion.
  - Digital payment platform operational and used by SN la Poste for cash payments; DGPSN working with DGCPT to strengthen "Mobile" payments via the platform.

### State-owned enterprises, La Poste, and bank restructuring
- La Poste restructuring measures being implemented:
  - Hold general meetings to decide on continuation of operations.
  - Recapitalization amounts required: CFAF 139.4 billion for La Poste, CFAF 10 billion for Poste Finance, and CFAF 2.6 billion for Express Mail Service.
  - Implemented hiring freeze starting in 2023.
  - Draft and adopt negotiated severance and staff retraining plan; initial plan set to be finalized in 2025.
  - Ensure compliance with Treasury guarantee agreement provisions to eliminate reimbursement delays.
  - Institutional evolution of Poste Finances into a financial institution before transformation into postal bank; feasibility study and roadmap developed.
  - La Poste developed a Strategic Expansion Plan (PSE) with three objectives: improve institutional governance, develop service offering, and proceed with digital transformation; received support from French La Poste, which facilitated a partnership roundtable in Dakar in October 2023.
  - Establish an analytical accounting mechanism to determine public service remuneration pending validator regulator approval.
- Distressed banks restructuring:
  - First bank: Government to acquire stake; converted deposits into shares resulting in a public stake of "63.34%" in the bank's capital, surpassing voting majority threshold; recapitalization plan approved by WAMU Banking Commission; Ministerial Order No. 009923/MFB/DGSF/DMC/DRMC/PBD dated April 7, 2023 authorized shareholding changes; recapitalization expected to be completed in the fourth quarter of 2023.
  - Second bank: Capital increase supported by majority shareholder and government; planned capital reduction followed by increase resulting in a "30 percent government shareholding, equivalent to CFAF 9 billion," reducing majority shareholder's stake to 30 percent; changes to threshold require prior authorization from the Banking Commission; restructuring plan to be reviewed by the Banking Commission in its December 2023 session.

*International Monetary Fund — Senegal country chapter content unit*

### 52.      Regarding the Single National Register (RNU), the process of extension to 1,000,0000

### 1senea2023003 - 52.      Regarding the Single National Register (RNU), the process of extension to 1,000,0000

### Single National Register (RNU) extension and operational timeline
- The process of extension to 1,000,0000 households continues.
- Training activities:
  - Training of supervisors is being carried out.
  - Training of community relays is underway and should be completed in November 2023.
- Next operational steps:
  - Identification of new households to be registered in the register will follow training.
  - Validation meetings are scheduled for the end of November 2023.
  - Lists validated by the administrative authorities are expected in December 2023.
  - The DGSPN, in conjunction with the ANSD, will carry out the surveys during the first quarter of 2024 with a view to registering households in the RNU database.

### Pillar 4 — Build Resilience to Climate Change: overview and tools
- Climate-sensitive budgeting undertaken in 2024 through traceability of appropriations allocated to priority sectors, including those in the NDC, and assessment of implementation across programs.
- The “Green Budget” document:
  - Serves as a tool for analyzing environmental impact to better integrate climate issues into government policy.
  - Appears as a new form of classification of budget and tax expenditures according to their impact on the environment and an identification of environmental government resources.
  - Is an annex to the 2024 draft budget law, analogous to the Gender-Based Budget Document.

### Pillar 2 — Accelerate Senegal’s adaptation to climate change: upcoming RSF reform measures (second program review)
- Measures fully implemented:
  - Approved a ministerial decree to reflect climate considerations at each step of budget preparation and execution (reform measure 1 for end-October 2023).
  - Approved a strategy for greener public transportation (reform measure 2 for end-November 2023), to be reflected in the 2024 budget.
- Planned and scheduled reform measures:
  - Adopt a presidential decree ratifying the PAP3 (Country Development Strategy) for Senegal, which fully reflects Senegal’s PNA (reform measure, April 2024). Purpose: ensure strategic priorities are integrated into long-term development planning and annual budget processes.
  - Approve the urban planning and building codes (reform measure, May 2024). Implementing decrees relating thereto should be approved by end-May 2024. Purpose: improved framework to support urban masterplan and improved operation and maintenance of key infrastructure such as drainage.
  - Finalize Senegal’s first PNA, which should be ready by end September 2024.
- Technical assistance:
  - Government discussed specific technical assistance needs to be covered until end of program with assistance from the IMF, the WB and other development partners to ensure robust implementation of RSF reform measures.

### Just Energy Transition Partnership (JETP)
- Senegal and international partners (Germany, France, the European Union, the United Kingdom, and Canada) launched a JETP to support universal access to energy and consolidation of a resilient and sustainable low carbon energy system.
- Financing pledge:
  - International partners and multilateral development banks have pledged €2.5 billion in new financing for an initial period of 3 to 5 years beginning in 2023.
- Objective and targets:
  - Accelerate rollout of renewable energies to bring the share of renewable energies in installed capacity to 40 percent of Senegal’s electric power mix by 2030.
  - By June 2024, the authorities undertake to finalize a list of projects to be implemented as part of the JETP.

### Program monitoring, reviews, and selected program targets/actions
- Program review cadence:
  - The program will undergo semi-annual reviews and will be monitored using performance criteria, indicative targets, and structural benchmarks.
  - As part of the 1st review, the government requested modification of the quantitative performance criteria to reflect build-up of liquidity reserves in 2023 and recent economic developments.
  - Under the RSF, monitoring will be conducted through the reform measures detailed in program documentation.
- TMU monitoring and test dates:
  - The Technical Memorandum of Understanding (TMU) defines quantitative performance criteria, indicative targets, and continuous targets, and establishes terms and timeframe for information transmission for monitoring the EFF and ECF for the period June 30, 2023–June 30, 2026.
  - Reviews will assess quantitative performance criteria and indicative targets at specified test dates and on a continuous basis.
  - Test dates: the second review test date will be December 31, 2023 and the third review test date will be June 30, 2024.
- Selected prior action and structural benchmark numeric targets and dates (as reported):
  - Submit to the National Assembly the 2024 budget law reflecting a deficit target of 3.9 percent of GDP — 5 days before the board meeting — Status: Met.
  - Strengthen the Legislation and International Cooperation Directorate at the DGID — September 2023 — Status: Met.
  - Reinforce legal obligation for public service companies to communicate customer information to tax authorities — October 2023 — Status: Met.
  - Submit draft law amending law creating OFNAC — October 2023 — Status: Not met, implemented with delay.
  - Submit draft law amending law on assets declaration — October 2023 — Status: Not met, implemented with delay.
  - Put in place an independent body to determine and publish petroleum product prices based on revised pricing formula — November 2023 — Status: Met.
  - Prepare a tax expenditure rationalization strategy/plan and from 2024 reduce tax expenditures by at least 100 billion CFA francs per year over the next two years — November 2023 — Status: Met.
  - Broaden tax base by increasing by 25,000 the number of taxpayers registered with the Department in charge of small and micro-enterprises — December 2023.
  - Automate the tax compliance liquidation process through Ministerial decree — December 2023.
  - Revise and publish the current pricing formula for petroleum products (gasoline and diesel) — December 2023.
  - Reclassify investments previously executed through capital transfer (chapter 6) as central government investments (chapter 5) — Quarterly monitoring from end-December 2023.
  - Implement a VAT taxation system for online sales of digital goods and services — New SB, December 2023 — Proposed.
  - Finalize the financial audit of SENELEC with a view to revising the maximum authorized revenue (RMA) formula — New SB, May 2024 — Proposed.
  - Gradually eliminate treasury deposit accounts used by public entities without legal personality — June 2024.
  - Propose a new electricity tariff structure by introducing a social tariff for vulnerable population — New SB, September 2024 — Proposed.
  - Finalize an inventory of movable and immovable collaterals to put in place a collateral register accessible online — New SB, November 2024 — Proposed.
  - Deploy functionalities of the land management system (LMS) to manage usual procedures with the aim of full LMS in place before end of 2025 — New SB, November 2024 — Proposed.
  - Publish certified financial statements of all public entities and companies having borrowed on the regional or international market following program format — New SB, November 2024 — Proposed.

*Source: IMF staff summary of the specified content unit.*

### 4.      Program exchange rate. In the context of the program, the applicable exchange rates for

### 4.      Program exchange rate. In the context of the program, the applicable exchange rates for 

### Program exchange rate and data sources
- Applicable exchange rates for the first and second review are those as of December 31, 2022.
- Source of exchange rate information: IMF's International Financial Statistics (IFS) database.
- For exchange rates not covered by IFS, mutually agreed sources for exchange rate data will be used.

### Quantitative performance criteria — Overview
- Performance criteria cover fiscal balances, revenue floors, debt present value ceilings, arrears ceilings, government deposits, and other debt-related and fiscal indicators.
- Valuation of debt and application of ceilings use program exchange rates unless otherwise specified.

### A. Floor on the Non-Hydrocarbon Primary Fiscal Balance (Program Definition)
- Definition: non-hydrocarbon primary fiscal balance = (i) total government revenue (including grants) excluding revenue from exploitation of hydrocarbons and proceeds from sale of central government’s non-financial assets to public sector entities; minus (ii) domestic government expenditure, excluding interest expenditure on domestic and external debt.
- Revenue and expenditure definitions consistent with the 2001/14 Government Financial Statistics Manual (GFSM).
- Petroleum revenue (including dividends paid by PETROSEN) and all fees and taxes paid by companies operating oil and gas reserves in Senegal are hydrocarbon exploitation revenue and recorded on a cash basis.
- Government expenditure defined on a payment order basis accepted by Treasury and those executed with external resources.
- Criterion set as a cumulative floor on the non-hydrocarbon primary fiscal balance since the beginning of the year.
- Adjustment: floor including grants is adjusted upward or downward by the amount that budget grants exceed or fall short of program projections up to a maximum amount specified in Table 1 of the memorandum of economic and financial policies; adjustment applied on a semiannual basis.
- Reporting: authorities will report provisional data monthly with a lag no more than six weeks after end of month; final data no later than two months after reporting provisional data.

### B. Floor on Non-Hydrocarbon Tax Revenue
- Definition: Tax revenue = sum of revenue from taxes and levies on income, profits and capital gains, wages and labor, on assets (excluding proceeds from sale of central government’s non-financial assets to public sector entities), taxes on goods and services, on foreign trade and international transactions, and other tax revenue.
- Excludes revenue deriving from oil and gas exploitation.
- Assessed based on quarterly TOFE data.
- Reporting: same requirements as the non-hydrocarbon primary balance (monthly provisional with six-week lag; final within two months).

### C. Ceiling on the Present Value of New Public Sector External Borrowing
- Scope: applies to all new external debt (concessional or otherwise), including commitments contracted or guaranteed for which no value has been received.
- Exclusions: (i) import-related trade debts with original maturity of less than one year, (ii) rescheduling agreements, (iii) IMF disbursements.
- Contracting criterion: debt considered contracted or guaranteed when all conditions met for it to enter into force, including government approval if required. For euro bonds, amount arranged = amount subscribed or purchased at end of subscription/purchase period.
- Present value calculation:
  - PV procedure applies to all future debt service payments (principal and interest) based on a program discount rate of 5 percent.
  - Calculation reflects maturity, grace period, payment schedule, upfront fees, and management fees.
  - PV calculated using IMF template based on loan amount.
  - A debt is concessional if, at date of conclusion, PV/nominal value < 65 percent (equivalent to grant element of at least 35 percent).
  - For loans with grant element ≤ zero, PV = nominal value.
- Treatment of variable-rate debt: PV calculated using program benchmark rate plus fixed spread (in basis points) specified in loan agreement.
- Program reference rate: six-month euro Financial Institution Repo Facility (FIRF) = 2.97 percent.
- Spread note: difference between the six-month US FIRF and the six-month euro FIRF is 50 basis points.
- Adjustments to ceiling:
  - Ceiling adjusted upward up to a maximum of five percent of the ceiling on the present value of external debt when discrepancies are caused by changes in financing conditions (interest, maturity, grace period, payment schedule, fees).
  - Adjuster cannot be applied when discrepancies derive from increase in nominal value of total contracted or guaranteed debt.
  - Ceiling for end of December 2023 is adjusted upward by the PV of external debt contracts signed related to the overfinancing in 2023, with a symmetrical downward adjustment applied to ceilings for end of June 2024 and end of December 2024.
  - Adjustment capped at 604.8 billion CFA francs (converted to USD at the program's exchange rate).
- Overfinancing in 2023: defined as issuance of debt beyond financing needs of 2023 to prefinance 2024 borrowing requirement to avoid interest rate spikes as the 2024 presidential elections approach.
- Reporting: authorities will inform IMF staff of any new planned external borrowing over a 12-month horizon and conditions before loans contracted or guaranteed; government will report PV of new public sector external borrowing quarterly within one month after quarter-end, accompanied by (i) IMF PV calculation tool used and (ii) a summary table of all external debt issues and financial conditions/procedures used to calculate PV.

### D. Ceiling on Public Sector External Debt Payment Arrears (Continuous)
- Definition: external payment arrears = payments owed and not paid when due on external debt contracted or guaranteed by the public sector.
- Applicability: quantitative performance criterion monitored on a continuous basis.
- Reporting: authorities will promptly report any accumulation of external payments arrears to Fund staff.

### E. Ceiling on Domestic Government Payment Arrears
- Definitions:
  - Payment arrears with private nonfinancial corporations = obligations unpaid for more than 90 days after treasury acceptance (prise en charge).
  - Domestic debt service arrears = debt service obligations (excluding BCEAO) with actual payment date exceeding 30 days after contractual due date.
- Monitoring: quantitative performance criterion for central government domestic payment arrears monitored continuously.
- Reporting: authorities to report any accumulation of domestic payment arrears monthly to IMF staff.

### F. Floor on the Deposits of the Government
- Definition: available balance of deposits and cash in the Treasury's account (clearing account, ordinary account, commercial accounts, Treasurer for Foreign Payments account, and special accounts at the BCEAO).
- Minimum required balance: at least equal to balance as of December 31,2022 (21.9 billion FCFA), increased by expected overfinancing (604.8 billion FCFA), for a total of 626.7 billion FCFA.
- Adjustor: floor reduced by amount of debt buyback operations carried out in 2023.
- Reporting: supporting documentation based on bank statements.

### Indicative targets — Major items

- G. Ceiling on Total Nominal Public Debt
  - Definition: debt comprises external and domestic debt of the public sector measured at nominal value and valued using program exchange rates.
  - Monitoring: semiannual.
  - Adjustor: ceiling adjusted upwards by amount budgetary grants fall short of program projections up to maximum in Table 1 of policy memorandum; adjustment made semi-annually.
  - Specific: ceiling for end-December 2023 increased by nominal value of 2023 overfinancing, reduced by amount of 2023 overfinancing used for early repayment beyond 2023; adjustment capped at 604.8 billion CFA francs.
  - Reporting requirements (selected):
    - Quarterly provisional data within six weeks after quarter-end on debts of listed public enterprises and any public enterprise debt > 5 billion CFA francs (to be added to list).
    - Stock of debt at end-December of current and previous year, newly contracted debt, and principal payments communicated within two months after year-end.
    - On-lent or guaranteed debt emanating from central administration and benefiting listed public enterprises, and guarantees/on-lent debt benefiting private sector enterprises, communicated within two months following quarter-end, distinguishing guarantees and on-lent debt.
    - All commitments by comfort letter communicated quarterly within six weeks after quarter-end, with cross-referencing if counted elsewhere.
    - Single-tender public sector contracts reporting requirement included.

- H. Floor on Social Expenditure
  - Definition: spending on health, education, the environment, the judicial system, social safety nets, sanitation, rural water supply, rural electrification, equipment support for vulnerable groups, and economic and social support for women and young persons (as provided in the table on social expenditure).
  - Monitoring: semi-annual.
  - Reporting: authorities report semiannual data within two months after each six-month period.

- I. Accounts Payable, Including Domestic Payment Arrears
  - Definitions:
    - Accounts Payable (unpaid balances) = domestic payment arrears and floating debt; all central government obligations due and pending payment; expenditure liquidated but not yet paid by government accounting officer.
    - Floating debt = stock of unpaid liquidated expenditure items overdue < 90 days for nonfinancial corporations and < 30 days for financial institutions’ debt service arrears.
  - Breakdown by maturity and overdue periods:
    - Nonfinancial corporations: less than 90 days, 90-365 days, and more than one year.
    - Financial corporations: less than 30 days, 30-365 days, and more than one year.
  - Undertakings:
    - Contain stock of accounts payable to less than CFAF 40 billion in 2023.
    - No accumulation of new domestic arrears throughout program period.

### Memorandum items and additional indicators

- J. Ceiling on the Share of the Value of Public Sector Contracts Signed on a Non-Competitive Basis (in percent)
  - Definition: public procurement considered "non-competitive" when awarded without open competitive tender and without open inquiry and open price.
  - Semi-annual indicative target applies to total public sector contracts entered by Government or entities subject to procurement code.
  - Exclusions: classified purchases; fuel purchases by SENELEC for electricity production (under new regulation obliging SENELEC to buy fuel from SAR on current price structure); administrative amendments; contractual clauses necessary for final delivery included in original contract if compliant with procurement code.
  - Reporting: Government reports semi-annually with lag no more than one month the total amount of public sector contracts and total value of non-competitive contracts.

- K. Ceiling on Spending Through Simplified Procedures for Non-Personalized Services (Services non-personnalisés)
  - Definition: share of central government expenditures for non-personalized services executed through simplified procedures in total transfers (procedures: DMRI and DSOP).
  - Reporting: government reports semi-annually total transfers and total spending for non-personalized services executed through transfers on treasury deposit accounts within six weeks of each six-month period end.

- L. Net Domestic and Regional Financing of the Government
  - Definition: based on TOFE as sum of net accumulation of liabilities including (i) securities issued on regional market (WAEMU) including T-bills, T-bonds, Sukuk, and (ii) direct domestic loans in CFAF (including other loans and excluding counterpart of IMF financing).
  - Accumulation of other accounts payable does not correspond to domestic or regional financing for this memorandum item.
  - Monitoring: indicative target monitored annually by budgetary central government.
  - Reporting: data on net domestic and regional financing transmitted quarterly with TOFE with maximum lag of two months.

- M. Additional Information for Program Monitoring
  - Authorities will transmit the following to Fund staff, preferably electronically, with specified maximum time lags:
    - Three days after adoption: any decision, circular, decree, 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 30 days: preliminary 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.
      - Quarterly report of the Debt and Investment Directorate (DDI) on execution of investment programs.
      - Monthly preliminary TOFE based on Treasury accounts.
      - Provisional monthly balance of Treasury accounts.
      - Reconciliation tables between SYSBUDGEP and consolidated Treasury accounts, between consolidated Treasury accounts and TOFE for “budgetary revenues and expenditures,” and between TOFE and net treasury position (NTP), on a quarterly basis.
      - Quarterly report on FSE operations in terms of revenues and expenditures.
      - Monthly report on price structure of fuel products, including estimate of necessary subsidy for rest of year based on latest price structure; no later than 4 weeks after publication of price structure. If domestic prices higher than international prices, authorities will communicate where in TOFE the benefits are accounted for.
    - Final data: provided as soon as final balances of Treasury accounts available, but not later than one month after reporting provisional data.
    - Any new project or development related to climate financing or strategies for a greener economy, including steps to access ESG-related bonds or green bonds.

*Source: Excerpt from program documentation provided in the content unit.*

### 38.      During the program period, the authorities will transmit to Fund staff provisional data

### 38.      During the program period, the authorities will transmit to Fund staff provisional data

### Fiscal reporting and cash-based expenditure data
- Authorities will transmit to Fund staff 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.
- The data will be drawn from preliminary consolidated Treasury account balances.
- Final data will be provided as soon as the final balances of the Treasury accounts are available, but no more than one month after the reporting of provisional data.

### Expenditure tracking system—monthly table requirements
- A monthly table from the expenditure tracking system in the financial information system must show:
  - all committed expenditure (dépenses engagées),
  - all certified expenditures that have not yet been 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),
  - all payments made by the Treasury (dépenses payées).
- The monthly table of expenditure in the financial information system will exclude delegations for regions and embassies.
- The monthly expenditure table will indicate any payments that do not have a cash impact on the Treasury accounts.
- The stock of accounts payable must be broken down by payer and spending category, as well as by maturity and length of time overdue.

### Reporting on expenditures using exceptional procedures
- At the end of each quarter, authorities will report to IMF staff:
  - The status of the various types of suspense accounts (comptes d’attentes et d’imputation provisoire) showing the stock of transactions awaiting regularization from the general balance of accounts of the state.
  - The status of the exceptional expenditures presented by expenditure category.
  - The status of deposit accounts (comptes de dépôt) by identifying the nature of the 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.
  - An assessment of the regularization of such expenditures from one quarter to the next.

### Central bank reporting and financial sector indicators
- The central bank will transmit to Fund staff:
  - The monthly consolidated balance sheet of banks with a maximum lag of two months.
  - The monetary survey, on a monthly basis, with a maximum lag of two months.
  - Prudential supervision and financial soundness indicators for bank financial institutions, as reported in the table entitled Situation des Établissements de Crédit vis-à-vis du Dispositif Prudentiel (Survey of Credit Institution Compliance with the Prudential Framework), on a semi-annual basis, with a maximum lag of four and a half months after the closing of accounts for prudential ratios and six months for the financial soundness indicators.

### Government public disclosure on dedicated website
- The Government will update on a monthly basis on the website established for this purpose:
  - Preliminary TOFE and transition tables with a lag of two months.
  - The SYSBUDGEP budget execution table, the table for the central Government and a summary table including regions, with a lag of two weeks.

### Senegal vulnerability to climate change (summary findings)
- Since the 1950’s:
  - the country’s average annual temperature has increased by nearly 2°C.
  - there are about 50 more days with a Heat Index above 35°C and about 30 more “Tropical Nights” (>20°C).
  - the number of consecutive dry days is increasing (about 4 days per decade since the 1950’s).
- Coastal exposure and impacts:
  - 25 percent of the coastline threatened today by erosion.
  - 50 percent of the coastline threatened today by storm surges.
  - Costs of erosion for Senegal were estimated at US$ 537 million in 2017 (3.3 percent of 2017 GDP).
- Floods have accounted for nearly half of weather-related hazards over the last 40 years; droughts have had the largest impact in terms of people affected.
- Population movements linked to environmental deterioration are observed (pastoralists and relocations away from flooded coastal settlements).
- Coastal zones are home to:
  - 52 percent of Senegal’s population,
  - 68 percent of its GDP,
  - 90 percent of its industrial facilities.
- In Dakar:
  - population at risk of coastal flooding due to sea-level rise and extreme events is expected to increase by 20-30 percent in 2050,
  - economic damages could increase by 30% over the same period.
- Agriculture employs 30 percent of the working population; two-thirds of the poor derive livelihoods tied to agriculture.
- Projected economic impacts:
  - Without action, climate change could cause Senegal’s GDP to decrease by 1.3 percent by 2030 and 3.9 percent by 2050 in a 3°C scenario.
  - Under high climate change stress, the poverty rate could double as early as 2030.
  - Internal climate migration could reach up to 1 million persons by 2050.

### Greenhouse Gas (GHG) emissions profile
- In 2019 Senegal emitted 29.2 million tons of CO2 equivalent, representing less than 0.07 percent of global emissions.
- Emissions by sector in 2019:
  - Agriculture accounted for 42 percent,
  - Energy 30 percent,
  - Other sectors (waste, and industrial processes) for the remainder in equal shares.
- Energy sector characteristics and risks:
  - Predominance of oil in power production (more than 80 percent vs. 64 percent for the regional average).
  - Low share of renewable energy in total final energy consumption (39 percent vs. 68 percent for the regional average).
  - Only 24 percent of Senegal’s population has access to clean fuels and technologies for cooking.
  - Exploitation of oil and gas resources expected to begin in 2024-25 may increase energy-sector emissions and change transition dynamics.

### Government climate policy, commitments, and gaps
- Adaptation:
  - National Adaptation Plan released in 2006.
  - PSE (including PSE Vert) and the 2020 NDC include climate considerations; sectoral adaptation plans expected through 2023.
  - Implementation gaps: limited sectoral climate action plans, inconsistent alignment with sectoral codes and strategies, and weak monitoring and reporting.
  - Need for cross-sectoral and long-term adaptation planning, awareness raising, and capacity building.
- Mitigation:
  - NDC unilateral commitments: reduce GHG emissions by 5 percent in 2025 and by 7 percent in 2030 below “business as usual”.
  - Conditional commitments (with external support): reduce emissions by 23.7 percent in 2025 and 29.5 percent in 2030.
  - Key mitigation areas: carbon sequestration (forestry and agriculture), biomass energy, energy transition (renewables deployment and energy efficiency).
  - Government abandoned further coal-fired power plans and pursues a gas-to-power strategy to shift from heavy oil fuel to fossil gas.
  - A Long-Term Strategy under development must consider upcoming oil and gas exploitation.

### Financial requirements and mobilization needs
- Senegal’s NDC estimates financial needs at US$13billion over 2020-30.
- Mitigation needs are about twice larger than adaptation needs.
- Mitigation needs by sector (share of mitigation needs):
  - Power Production: 30 percent,
  - Waste Management: 21 percent,
  - Transport: 18 percent.
- Adaptation needs by sector (share of adaptation needs):
  - Water Resource Management: 20 percent,
  - Flood Risk Management: 17 percent,
  - Agriculture: 16 percent,
  - Coastal Zone Management: 15 percent.
- External support required: US$8.2billion over 2020-30 to implement the NDC and meet more ambitious targets.
- This corresponds to financial inflows of about US$800million a year for climate action (on top of a bit less than US$500million to support unconditional climate action).
- Recent climate-related development finance inflows in Senegal average US$400-500 million a year over 2018-2020, of which only one quarter is considered grant.
- Senegal’s climate finance capacity and instruments:
  - Accredited entity to the Green Climate Fund with 13 projects for commitments totaling US$174 million.
  - Access to Adaptation Fund resources (3 projects).
  - Registered and implemented the largest number of Clean Development Mechanism projects in West Africa.
  - Bilateral agreement with Switzerland for international emissions reductions trading under Article 6 provisions.
  - Under the Partnership for Market Implementation, developing a roadmap for the deployment of a carbon tax and framework/infrastructure for international carbon market participation.
- Mobilizing finance at scale will require increased private sector and financial market engagement.

### World Bank engagement and project areas
- Climate action is a cross-cutting dimension of the World Bank’s Country Partnership Framework (2020-24) for Senegal.
- World Bank instruments: lending, technical assistance, knowledge products, and preparation of the Country Climate and Development Report (CCDR) for Senegal to guide NDC implementation and inform the next CPF.
- Recent and ongoing World Bank-supported initiatives:
  - Coastal resilience: West Africa Coastal Areas Resilience Investment Project; Saint-Louis Emergency Recovery and Resilience Project; (closed) Senegal Tourism and Enterprise Project (Sally).
  - Flood Risk Management: (closed) Flood Prevention and Drainage Project; Stormwater Management and Climate Change Adaptation Project.
  - Social protection: Social Safety Net project; Adaptive Safety Net project.
  - Climate-smart agriculture: Agriculture and Livestock Competitiveness Program for Results; Sahel Irrigation Initiative Support Project; Sahel Pastoralism Support Project (regional).
  - Sustainable energy access: Senegal Energy Access Scale Up Project (adaptation and mitigation co-benefits).
  - Sustainable cities: Senegal Municipal Solid Waste Management Project; Dakar Bus Rapid Transit Pilot Project.
  - Carbon pricing exploration: Partnership for Market Implementation technical assistance to develop a roadmap for carbon tax deployment and Article 6 implementation.

*Source: IMF staff report excerpt (1senea2023003).*

### INTRODUCTION

### INTRODUCTION

### Overview
- Authorities express appreciation for IMF Management and Staff engagement and for the Roundtable on climate financing held in November in Dakar.
- Authorities request:
  - Completion of the first reviews under the Extended Fund Facility (EFF), the Extended Credit Facility (ECF), and the Resilience and Sustainability Facility (RSF).
  - Rephasing of the availability dates for disbursements.
  - Modification of performance criteria for end-December 2023 and June 2024 to reflect the build-up of liquidity reserves in 2023 and recent economic developments.

### Recent Economic Developments and Outlook
- PSE (2014-2023) assessment shows improvements in most socioeconomic indicators.
  - GDP per capita: "$1,397" in 2014 to "$1,706" in 2023.
  - Exports per capita have doubled.
- 2023 performance and 2024 outlook:
  - Economic growth anticipated to reach "4.1 percent" in 2023 (excluding hydrocarbons).
  - Inflation averaged "7.2 percent" in the first ten months of 2023, down from "8.9 percent" during the same period in 2022.
  - Outlook for 2024 more favorable with increased public investment and projected start of oil and gas production in the second semester of the year.
- External and fiscal aggregates (as of stated reporting periods):
  - Revenue mobilization totaled "CFAF 2,480.5 billion", a "9.6 percent" increase from 2022.
  - Grant mobilization reached a "43 percent" execution rate.
  - Expenditures increased by "6.6 percent" compared to the same period in 2022.
  - Authorities commit to keeping the fiscal deficit within the program target of "4.9 percent of GDP" for 2023.
  - External current account deficit dropped by "23 percent" at end-June compared to the same period in 2022.
  - Secondary income grew by "38 percent" in January–June 2023.
  - Services exports increased by "32 percent" from the same period in 2022.
- Key uncertainties noted:
  - Geopolitical tensions, food and energy price shocks, rising interest rates, and a stronger U.S. dollar could increase debt servicing costs.
  - Regional security and sociopolitical deterioration, domestic electoral challenges, or delayed start of oil production could adversely affect the outlook.
  - Conversely, higher oil and gas prices or progression to final investment decisions on large hydrocarbon fields could boost investment, production, and exports.

### Program Performance
- Overall assessment:
  - Program performance during the review period described as satisfactory despite external and domestic shocks.
  - All performance criteria and indicative targets at end-June were met, except the indicative target on the ceiling for outstanding public sector debt, which was breached due to government over-financing to cover borrowing needs in early 2024.
  - All six structural benchmarks for the first review have been implemented (two with delay).
  - The two reform measures under the RSF-supported program have been implemented.
- Political engagement:
  - Authorities reaffirm commitment to program objectives and organized discussions with Members of the Finance Commission of the Parliament, including all political coalitions.

### Economic Policies and Reforms for 2024

Fiscal Policy and Debt Management
- 2024 draft budget:
  - Amounts to seven thousand "(7.000) billion CFA francs", which is three times the 2012 budget "(around 2.300 billion CFAF)".
  - Targets a reduction in the fiscal deficit to "3.9 percent of GDP", closer to the WAEMU threshold of "3 percent".
  - Reflects primarily a significant decrease in tax exemptions and a projected decrease in energy subsidy to a maximum of "1 percent of GDP".
- Fiscal consolidation objectives:
  - Converge towards the regional deficit target of "3 percent of GDP" by 2025.
  - Medium-term revenue strategy (MTRS) objective of reaching "20 percent of GDP" by 2025.
  - Elimination of support measures on duties and taxes to increase revenue.
- Expenditure strategy:
  - Rationalize expenditures and VAT exemptions.
  - Primary recurrent spending projected to decline.
  - Wage bill to be contained within the planned annual ceiling.
  - Investment expenditure to be boosted to increase execution rate.
  - Energy subsidy expenditures expected to exceed the planned 2023 envelope but to decrease from "3.1 percent of GDP in 2023 to 1 percent in 2024".
  - Savings to be redirected to human capital, social protection, infrastructure development, and greening the economy.
- Debt management:
  - Senegal currently at a moderate risk of debt distress.
  - Authorities committed to closely managing public sector debt and monitoring new borrowing terms, including government lending to state-owned enterprises, to contain the DSA rating at the same or lower risk.

Monetary and Financial Sector Policies
- Regional financial conditions tight due to inflationary pressures in WAMU member countries and monetary policy tightening.
- Government securities market developments (January-September 2023):
  - Average yields for Senegal’s sovereign bonds increased from "4.96 percent" to "6.49 percent".
  - Maturities shortened to "2.67 years" from "5.28 years".
- Banking system:
  - Remains resilient and profitable, with shareholder equity increasing by "13.4 percent" as of August 2023.
  - Government committed to maintaining a sound supervision framework.
- Green finance initiatives:
  - Senegal’s Sustainable financing framework serves as a guide for sustainable sovereign bond issues on international capital markets.
  - External review by Moody’s found alignment with international standards and market best practices.
  - Roundtable on climate finance convened multilateral organizations and private sector entities; options discussed include Project preparation facility, Green Investment Facility, government infrastructure loans or guarantees with multilateral development banks, issuing green bonds with de-risking support, and debt-for-nature swaps.

Structural Reforms
- Social protection and inclusion:
  - Expand number of beneficiaries and continue household identification until end-2023.
  - Equal Opportunity Card beneficiaries enrolled in the Family Security Grant program, representing an increase of "about 11 percent" of the total number of beneficiaries.
  - Family Security Grant amount increased by "40 percent" effective since the beginning of 2023; budget allocation raised compared to the "35 billion" initially planned.
  - Platform for SN La Poste cash payments operational; efforts to reinforce mobile payments via the platform.
  - Extension process to "1,000,0000" households registered in the Single National Register (RNU) is underway (training of supervisors and community relays completed at end-November; beneficiary lists expected to be validated by administrative authorities by end-December).
- Gender-based budgeting:
  - 2024 Gender-based Budget annexed to the 2024 Budget Law increases spending on programs for girls and women, including measures to eliminate gender disparities and barriers to female education and to foster women's economic independence through training and access to credit.
- Energy strategy:
  - Gas to Power plan aims to provide by 2025 affordable energy to all while respecting social and environmental responsibility.
  - Current energy production capacity: "1789 MW".
    - Fossil fuels: "about 70%".
    - Renewables (solar, wind, hydraulic): "around 30%".
  - Authorities committed at the June 2023 Paris Summit to establishing by "2030" an energy mix with a "40% share of renewables" under the JETP.
  - Recent gas discoveries enable redesign of the energy production scheme and progressive elimination of energy subsidies.

The RSF-supported Reform Agenda (Climate and Green Budget)
- Climate vulnerability and priorities:
  - PAP II evaluation and PAP III diagnostics reveal growing vulnerability to climate change, particularly affecting agriculture, livestock, fisheries, forestry, and tourism.
  - Authorities plan to accelerate climate strategy implementation and meet commitments under Nationally Determined Contributions (NDC).
- Mitigation and adaptation measures:
  - Adoption of a greener public transportation strategy.
  - Commitments to revise the Petroleum Code and finalize a new Environment Code in collaboration with the World Bank to minimize greenhouse gas emissions across oil and gas project life cycles.
  - Measures to integrate adaptation priorities into long-term development planning and annual budgeting, including regular collection and dissemination of climate risk information to support agricultural insurance expansion.
  - Urban planning, infrastructure maintenance, enhanced drainage systems, and water security measures to mitigate coastal erosion and urban flooding and address inefficient water use in agriculture.
- Green Budget and climate-sensitive budgeting:
  - Government modifying standard budget preparation guidelines and public investment selection criteria to incorporate climate considerations and associated risks.
  - 2024 climate-sensitive budgeting includes traceability of appropriations allocated to priority sectors, including those in the NDC, and assessment of implementation across programs.
  - The 2024 "Green Budget", appended to the Budget Law, introduces:
    - Classification of budget and tax expenditures according to environmental impact.
    - Identification of environmental government resources.

### Conclusion and Requests
- Authorities consistently committed to transformative reforms for inclusive, greener, and sustainable growth while safeguarding public finance sustainability.
- ECF/EFF arrangements provide support in the shock-prone environment; RSF supports longer-term climate-related agenda.
- Authorities request Executive Directors’ support for:
  - Completion of the first reviews of the arrangements.
  - Approval of rephasing availability dates for disbursements under the EFF/ECF/RSF.
  - Modification of performance criteria for end-December 2023 and June 2024 to reflect build-up of liquidity reserves in 2023 and recent economic developments.

*Source: INTRODUCTION (1senea2023003) — IMF staff report content provided.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1senea2023003.pdf_