## _cr09205 ## Source details **Canonical URL:** [_cr09205](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09205.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09205.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09205.pdf.json) --- ### Executive Summary — Program status and fiscal management - Unpaid government bills reduced from CFAF 175 billion in October 2008 to CFAF 65 billion (1 percent of GDP) at end-March 2009—below the program ceiling and just ⅓ percent of GDP above the normal budgetary float to be reached by end-June. - Cash flow from the Treasury reduced unpaid bills by half to less than ½ percent of GDP at end-April 2009; bills rose again after road agency invoices were submitted. - Preliminary external audit identified CFAF 73 billion of spending without budgetary appropriations; full audit expected in June. - Assessment (performance) criterion (AC) on the float raised to CFAF 45 billion to approximate prior relative level; implies about three weeks on average to pay a verified bill. - Structural conditionality: PFM reforms adopted/in progress: - Budget preparation procedures improved (structural assessment criterion). - Rules on budgetary carryover specified (structural assessment criterion). - 2008 budget and accounting year closed on time (structural assessment criterion) though payment orders related to 2008 were issued after December. - Audit of extrabudgetary spending delayed to June (tender procedures). - Decree implementing new microfinance law adopted (structural benchmark). - Rights and duties for special economic zone agencies specified (structural benchmark). - External audit of new procurement framework delayed; draft expected September 2009. - Quantitative program targets: All met except end-2008 AC on the basic fiscal deficit (exceeded by ⅓ percent of GDP); staff recommends waiver given corrective actions and meeting end-March 2009 basic fiscal balance target. ### Economic outlook, channels of the global crisis, and risks - GDP growth series (Proj./Est.): 4.7 2.5 3.1 3.4 4.3 4.8 (2007–12 sequence as shown). - Nonagriculture GDP growth series: 6.2 1.3 3.1 3.4 4.4 4.9. - 2008: nonagricultural growth slowed sharply due to payment delays and high food/fuel prices; agriculture performed well. - Sectoral effects: construction flat after prior double-digit growth because of unpaid government bills and cutbacks. - Senegal’s growth and fiscal performance lagging other WAEMU countries. - Fiscal shortfalls: tax revenue 1¼ percent of GDP below program; petroleum tax receipts down ¼ percent of GDP; SENELEC tax payments postponed to 2009 (⅔ percent of GDP) due to cash-flow problems. - Main transmission channels of the global crisis: - Remittances: 8 percent of GDP in 2008; slowed in 2008 and declined sharply year-on-year in Q1 2009. - Exports: export prices projected significantly lower in 2009; phosphoric acid price projected at half its 2008 level. - FDI: projected to increase more slowly; major iron ore project delayed. - Tourism: falling arrivals noted. - Outlook and risks: - 2009 rebound projected weak even as payment delays are eliminated and ICS production accelerates; medium-term growth projected around 5 percent, lower than previously foreseen. - Inflation expected low on average in 2009 given declines in food and energy prices; return to historical WAEMU trends medium term. - Current account: projected to narrow slightly in 2009 and more strongly medium term as ICS recovers and FDI/subdued growth contain imports. - Reserves: should hover just above three months of imports reflecting depressed financial inflows, especially FDI. - Banking sector: not exposed to toxic assets; indirect effects on credit quality possible. - Uncertainties: lower-than-projected exports, remittances, FDI, or aid; adverse weather/pests; commodity price shocks; political/governance risks that could affect donor support and program commitments. ### Policy response and program recommendations - Fiscal policy: - Temporary fiscal easing envisaged for 2009 to counter external shock while safeguarding key social spending and infrastructure investment. - Over medium term, fiscal policy geared to safeguard debt sustainability. - Structural reforms and administration: - Deepen PFM and tax administration reforms. - Improve budget preparation, monitoring, execution, and safeguard revenue performance. - IMF program actions requested by staff: - Complete program reviews and augment and extend access under the ESF. - Grant a waiver for the missed end-2008 basic fiscal deficit AC given corrective actions and late-2008 prudence. --- ### ESF request, access, timing, and balance-of-payments impact - Original ESF (Dec 2008): 30 percent of quota (SDR 48.54 million); first tranche (15 percent) drawn at approval. - Requested augmentation: raise access to 75 percent of quota (SDR 121.35 million, or about CFAF 90 billion). - Requested extension: from 12 to 18 months. - Undrawn balance of 60 percent of quota (SDR 97.08 million, or about CFAF 72 billion) to be disbursed in three equal tranches at the third, fourth, and fifth PSI reviews. - Last PSI/ESF review in mid-2010 to assess future Fund engagement form. Balance-of-payments findings and projections - ESF would address two successive shocks: 2008 oil and food price shock and 2009–10 global economic crisis. - Combination of shocks leads to larger, longer balance-of-payments need extending into 2010; recovery expected beyond 2010. - Cumulative impact (relative to 2007) of two shocks estimated at CFAF 389 billion during 2008–10. - Senegal’s overall balance of payments projected to deteriorate by CFAF 419 billion during 2008–10. - Compared with IMF Country Report No. 09/5 projections, overall balance of payments over 2008–10 is worse by CFAF 330 billion. - Main transmission channels: remittances, FDI, exports. Key balance-of-payments figures (series as presented) - External shocks, total (2008, 2009, 2010, 2009-10, 2008-10): -132 -114 -143 -257 -389 - Food and fuel prices: -205 -20 -73 -93 -298 - Food imports, net: -114 -67 -75 -142 -256 - Rice: -116 -65 -66 -131 -247 - Oil imports, net: -9 14 73 49 -42 - International crisis: 74 -95 -70 -165 -91 - Remittances, net: 1 42 -47 -55 -102 -61 (net of induced imports; change relative to 2007) - Travel receipts: -39 -60 -65 -126 -165 - Phosphoric acid export price series: 8 13 23 26 51 46 - Direct investment, net: 1 2 -11 -19 18 -1 -12 (excluding privatization in 2009) - Overall balance of payments (change): -156 -107 -155 -263 -419 - Memorandum overall balance of payments: -105 -56 -104 -160 -266 - Gross reserves, change (without ESF): -8 -46 -137 -137 -137 - Gross reserves, change (with ESF): 9 19 -48 -48 -48 - Gross reserves, eop level (with ESF): 744 754 687 687 687 (months of GNFS imports: 3.2 3.5 3.1 3.1 3.1) Additional cumulative presentation relative to ESF approval (selected) - Total crises-related flows (2008-10): 78 -62 -140 -203 -124 - Overall balance of payments: -77 -149 -104 -253 -330 - Reserves, eop (with ESF; months of imports): 5 -11 3 -193 -193 -193 (as shown in the series) ESF role for reserves and import coverage - Proposed access would partially, not fully, offset deterioration in overall balance of payments. - Proposed access would help stabilize Senegal’s contribution to WAEMU international reserves. - Import coverage expected to remain above 3 months in 2009-10, with a 2009 spike driven by one-off privatization receipts and toll highway financing. - Access adjustments could be considered at future review. Donor and multilateral coordination - Fund and Bank support expected to catalyze stepped-up donor support. - World Bank expected to approve fast-track budget support of US$60 million in mid-June 2009. - Authorities to approach other development partners after third PSI review. - Donors indicated scaling up assistance only after successful PSI review to confirm past slippages addressed. Repayment capacity and debt outlook - Senegal’s capacity to repay the Fund is strong (Table 11). - Updated DSA confirms Senegal at low risk of debt distress provided prudent macroeconomic policies pursued. --- ### Program macroeconomic pillars, fiscal stance, and financing - PSI four pillars: - Contain fiscal deficit to underpin macro stability and safeguard debt sustainability. - Improve fiscal governance and transparency to enhance credibility and external assistance. - Encourage private-sector activity by improving business environment and addressing structural impediments. - Limit financial sector vulnerabilities and raise sector contribution to the economy. - 2009 program focus: weather global crisis while normalizing government financial relations with private sector. - Authorities commit to prudent fiscal stance with temporary flexibility to avoid large spending cuts amid falling tax receipts. - Structural conditionality focus: deepen PFM reforms and strengthen tax administration. Key fiscal and financing points - Authorities intend to settle all payment delays by mid-year; external and domestic financing becoming available will facilitate this. - Based on external audit, government to decide by end-July on extrabudgetary claims; any claims to be paid included in 2010 budget. - Updated DSA: overall fiscal deficit of 4 percent of GDP over medium term preserves debt sustainability. - Temporary easing in 2009: scope for 1¾ percent of GDP easing relative to earlier program targets, with overall fiscal deficit of 4½ percent of GDP. - Maintaining original 2¾ percent of GDP target would have required significant spending reductions; spending already cut by 1½ percent of GDP in 2008. - Financing mix for higher deficit: donor financing, regional securities, bank financing collateralized with SONATEL shares, and privatization receipts. - Prior action: mid-year supplementary budget submitted to parliament to regularize 2008 carryover, include Dakar-Diamniadio toll highway appropriations (CFAF 55 billion), and shave nonpriority spending. --- ### Structural reform agenda (PFM, energy, private sector, financial sector) PFM and tax administration (six macro-relevant structural benchmarks) - Audit SIGFIP to improve reliability, coverage, and ability to produce periodic budget execution data. - Improve flexibility and presentation of the budget to increase transparency and expenditure control. - Make ASTER accounting system operational to improve treasury accounts reliability. - Following external audit, decide on extrabudgetary spending to be rejected or regularized in 2010 budget. - Tax administration: study to identify level and justification for tax exemptions. - Assign collection of FSAPP gasoline tax to DGID (tax authority) instead of SAR to raise transparency and revenue take. Energy sector risks and reforms - 2008 SENELEC tax arrears and SAR governance problems pose fiscal risks. - Energy reform supported by World Bank and donors to restore SENELEC financial equilibrium and allow settlement of tax and private sector arrears in 2009. - Commitments: - SENELEC to make tax payments quarterly and adjust electricity tariffs to market prices quarterly. - Phase out last energy subsidy (butane gas) by mid-year. - As of end-May, two-thirds of SENELEC’s back taxes have been settled. - FSAPP and SAR reforms: transform FSIPP into FSAPP for three years, repay CFAF 27 billion SAR debt, finance CFAF 10 billion for SAR logistics/investments; transfer FSAPP collection to DGID by end-October 2009; transparent use of FSAPP revenues. Private sector reforms - Improve Doing Business ranking via judicial efficiency, faster property transfers and construction permits, relax fixed-term labor contract restrictions, and other trade facilitation measures. Financial sector monitoring and stability measures - Intensified monitoring of credit risks, provisioning needs, risk concentration, and asset-liability mismatches. - Stress tests indicate vulnerability to credit shocks; more than half of banks exceed single-borrower exposure ceiling. - Liquidity tensions in 2008: banks’ excess reserves at three-year low; BCEAO refinancing surged. - Recommended BCEAO measures: relax monetary conditions, new liquidity support operations/maturities, lower reserve requirements, expand eligible collateral. --- ### Staff appraisal, recommendations, and program conditionality - Authorities reduced stock of payment delays by three-fourths since end-October 2008 peak. - Reforms in budget preparation, execution, and monitoring should limit recurrence risk of slippages, though cash flow management needs further improvement. - ESF augmentation recommended to support balance of payments during the period. - Temporary fiscal easing in 2009 appropriate given low risk of debt distress and financing availability. - Staff welcomes commitment to return to fiscal stance preserving debt sustainability medium term. - Staff recommends waiver for nonobservance of end-2008 basic fiscal deficit AC given underspending in 2008, meeting end-March fiscal balance target, and commitment to regular SENELEC tax payments. --- ### Prior actions, structural benchmarks, and reporting (implementation status highlights) - Prior actions implemented: - Passage of 2009 Budget Law: Implemented on November 18, 2008. - Decree amending RGCP limiting procedures to normal and simplified (prohibiting Treasury advances): Implemented on November 28, 2008. - Manual and reconciliations for budget/TOFE/Treasury accounts/SIGFIP: Implemented on November 30, 2008. - Structural assessment criteria completed: Decree on budget timetable (target Jan 31, 2009) and decree on reopening/carryover (target Feb 28, 2009); 2008 budget/accounting year closed (SIGFIP frozen/published) by April 30, 2009. - Structural benchmarks under way/delayed: - External audit of extrabudgetary commitments: under way (progress report identified CFAF 73 billion); completion expected June (delayed by bidding procedures). - First audit of ARMP: under way; preliminary reports expected September 2009. - SIGFIP external audit to be completed by end-September 2009. Reporting requirements and SIGFIP - Authorities to report weekly and monthly SIGFIP tables showing committed expenditures, certified but not cleared expenditures, payment orders, payment orders accepted by Treasury, and payments made. - SIGFIP tables exclude delegations for regions/embassies and treasury advances (separate table). - Monthly reporting of provisional data with maximum lag of 30 days on tax receipts, expenditure commitments/certified/payment orders, TOFE, provisional Treasury balances, and reconciliations between TOFE, Treasury accounts, NGP, and SIGFIP. Key quantitative items (selected numeric targets and definitions) - Basic fiscal balance floors (CFAF billions): -60 (June 30, 2009 example), -90, -119. - Ceiling on contracting/guaranteeing new nonconcessional external debt by the government: CFAF 80 billion (to finance Dakar-Diamniadio toll highway); ceiling raised accordingly. - Ceiling on amount of the float (dépenses liquidées non payées par le Trésor): 30, 45, 45, 45 (table entries). - Quarterly ceiling on single-tender contract share: 20 percent. --- ### Budgetary float definition and monitoring - Defined as outstanding stock of government expenditure for which bills have been received and validated but not yet paid by the Treasury (difference between dépenses liquidées and dépenses payées). - AC set as a ceiling on the float, monitored at end of quarter. - Authorities to report weekly/monthly SIGFIP breakdowns and provide monthly reporting (max 30-day lag) on any spending outside normal/simplified procedures. Reported fiscal and program facts (selected) - Real GDP growth: 4.7 percent in 2007; 2.5 percent in 2008. - Consumer prices (inflation): 5.8 percent average in 2008. - External current account deficit: 12.3 percent of GDP in 2008. - Budgetary float end-February 2009: CFAF 66 billion (program ceiling CFAF 92 billion). - Budgetary float end-March 2009: CFAF 65 billion (program ceiling CFAF 80 billion). - Single-tender contracts: 6 percent in Q4 2008; 14 percent in Q1 2009 (ceiling 20 percent). - Basic fiscal deficit end-2008: CFAF 50 billion (program ceiling CFAF 21 billion). - Government target for budgetary float: CFAF 45 billion by end-June 2009 (revised AC). --- ### Debt sustainability analysis (DSA) — baseline, stress tests, and policy implications - HIPC/MDRI relief reduced external public debt from 33 percent of GDP at end-2005 to below 20 percent of GDP at end-2008. - More than 60 percent of end-2008 external debt owed to multilateral institutions; Arab countries 21 percent; Paris Club 11 percent. - Domestic public debt 5 percent of GDP at end-2008. - Baseline macro assumptions (selected): - Real GDP growth: 3¾ percent over 2009-11; 4¾ percent over 2012–14; 5¼ percent over 2015–29. - Inflation: just above two percent. - Current account deficit (including grants): widens to over 10 percent of GDP mid-decade, narrows to below 6 percent later. - Net FDI may approach 3½ percent of GDP. - Fiscal deficit: 4 percent of GDP through next decade (about 3¼ percent without interest), then gradual decline. - Aid flows: around 7 percent of GDP gross. - Public domestic borrowing share less than one-third of total public debt; assumed interest rate 5½ percent; average maturity 5 years. - Nonconcessional borrowing assumed exceptional; DSA assumes 2009 second tranche of nonconcessional loan from France and CFAF 80 billion for toll road. - Summary assessment: - Senegal at low risk of debt distress; baseline and shock scenarios keep indicators below indicative thresholds. - Vulnerabilities: sustained nonconcessional external borrowing and sustained high fiscal deficits. - Stress-test highlights: - Most extreme stress test: increase by 2 percentage points in interest rate on new external public borrowing—concessionality sharply reduced; debt ratios rise but remain below thresholds. - Scenario A.3: exports and real GDP grow 5 and 2 percentage points less respectively in 2009–10—debt ratios remain below thresholds. - Scenario A.4: GDP growth 2 percentage points lower and primary fiscal deficit 4 percentage points higher in 2009–10—deterioration contained if return to baseline policies. - A sustained primary deficit at 2009 level would cause PV of overall public debt-to-GDP ratio to rise continuously and nearly double. - Policy implication: sustain fiscal discipline, avoid imprudent nonconcessional borrowing, implement sensible debt management, and pursue growth-enhancing policies. Selected debt indicators and projections (as presented) - Public sector debt (percent of GDP, selected): 21.9; 23.5; 24.7; 28.1; 29.9; 32.1; 34.0; 35.8; 37.5; 43.8; 44.7 (series shown). - PV of external debt (selected): 39.5; 43.1; 44.4; 45.2; 45.7; 46.5; 47.3; 50.3; 49.6. - Debt service-to-exports (percent, selected): 12.0; 10.6; 9.3; 15.9; 15.2; 18.1; 18.3; 18.4; 17.6; 17.0; 14.3. - Gross financing need (Billions USD, selected): 0.9; 1.3; 1.6; 1.4; 1.4; 1.5; 1.6; 1.7; 1.8; 2.4; 3.3. --- ### Data provision, statistics, and reporting adequacy - Data provision broadly adequate for surveillance/program monitoring but weaknesses in national accounts, production, and social indicators. - Authorities committed to improving data quality/availability with technical assistance. - Participation in GDDS; SDDS subscription intent noted; November 2008 SDDS assessment mission developed action plan. - Real sector: national accounts follow SNA 1993; resource constraints limit surveys and informal sector coverage; plans to start quarterly national accounts (QNA) with target regular dissemination from March 2010. - GFS: compiled by Ministry of Economy and Finance; last reported electronic redissemination data to STA were for fiscal year 2001; improvements underway to align TOFE with WAEMU extended TOFE. - Monetary and financial statistics: reporting to STA improved; lag reduced to three–four months; SRF test data provided by BCEAO. - External sector: BOP compiled by national BCEAO agency; implementation of BPM5 and survey improvements with STA support. - Table of Common Indicators Required for Surveillance: latest observations and frequencies listed (examples: reserve assets obs 3/2009; CPI obs 4/2009; central government TOFE obs 3/2009). Selected statements and approvals (June 19, 2009) - BCEAO lowered key policy rate by 50 basis points to 4.25 percent and lowered reserve requirement ratio from 9 to 7 percent effective June 16. - CPI fell 0.9 percent in May 2009 month-on-month and by 0.4 percent year-on-year. - Authorities project average inflation of 0.8 percent in 2009. - IMF Executive Board approved ESF increase by SDR 72.81 million to SDR 121.35 million and extension from 12 to 18 months; enabled immediate draw of SDR 32.36 million and equal amounts upon completion of subsequent reviews. - Board completed first ESF review and third PSI review and granted waiver for basic fiscal balance AC for end-December 2008. --- ### Conclusions and staff recommendations (summary) - Authorities made substantial progress restoring program: settlement of unpaid bills, PFM reforms that "helped restore the integrity of the budget system." - Further PFM completion and prudent policies increase prospects to weather global crisis, conditional on strong political commitment. - ESF augmentation and extension recommended to support balance of payments. - Temporary fiscal easing in 2009 supported given low debt-distress risk and financing availability; return to medium-term fiscal path required to preserve debt sustainability. - Staff recommends waiver for missed end-2008 basic fiscal deficit AC and completion of program reviews and ESF augmentation/extension. *Source: _cr09205 - Executive Summary and selected sections from the IMF staff report and Technical Memorandum (June 2009).* ### Executive Summary....................................................................................................... ### Executive Summary ### I. A Successful Turnaround—Program Back on Course - The government’s unpaid bills were reduced from CFAF 175 billion in October 2008 to CFAF 65 billion (1 percent of GDP) at end-March 2009—below the program ceiling and just ⅓ percent of GDP above the normal budgetary float to be reached by end-June. - Cash flow provided by the Treasury allowed agencies to reduce their unpaid bills by half, to less than ½ percent of GDP at end-April 2009; bills have risen again as the road agency submitted invoices for several infrastructure projects awaiting payment. - A preliminary report by the external auditor identified CFAF 73 billion of spending without budgetary appropriations; the full audit report was expected in June. - The assessment (performance) criterion (AC) on the float was raised to CFAF 45 billion to approximate the relative level prevailing earlier; this implies that the government would have three weeks on average to pay a verified bill. - Structural conditionality: PFM reforms adopted and in progress - Budget preparation procedures improved (structural assessment criterion). - Rules specified to regulate budgetary carryover (structural assessment criterion). - 2008 budget and accounting year closed on time (structural assessment criterion), though payment orders related to 2008 were issued after December. - Audit of extrabudgetary spending delayed by 3 months to June due to tender procedures. - Decree implementing new law on microfinance institutions adopted (structural benchmark). - Rights and duties for special economic zone agencies specified (structural benchmark). - External audit of the new procurement framework delayed; draft audit report expected for September 2009. - Program quantitative targets: All quantitative program targets met except the end-2008 assessment (performance) criterion on the basic fiscal deficit, which was exceeded by ⅓ percent of GDP despite significant underspending; staff recommends a waiver in light of prudent late-2008 budget stewardship and corrective actions that allowed the end-March 2009 basic fiscal balance target to be met. ### II. Economic Outlook and Risks—A Challenging Economic Environment - Recent growth and sector performance - GDP growth (Proj./Est. series in source): 4.7 2.5 3.1 3.4 4.3 4.8 (years 2007–12 sequence shown in source). - Nonagriculture GDP growth (same series): 6.2 1.3 3.1 3.4 4.4 4.9. - Growth outside agriculture slowed sharply in 2008 due to government payment delays and the effect of high food and fuel prices; agriculture performed well due to favorable rains. - Construction was flat after several years of double-digit growth because of unpaid government bills and cutbacks in government orders. - Senegal’s growth and fiscal performance have fallen behind other WAEMU countries. - Fiscal developments and revenue shortfalls - The end-2008 fiscal deficit assessment (performance) criterion was not met; the ceiling was exceeded by ⅓ percent of GDP. - Tax revenue was 1¼ percent of GDP below programmed levels. - Revenue shortfalls stemmed from shrinking petroleum tax receipts (¼ percent of GDP) and the postponement to 2009 of tax payments by SENELEC (⅔ percent of GDP) related to cash-flow difficulties tied to high oil prices and unpaid government bills. - Main transmission channels of the global crisis (Box 2) - Remittances: Reached 8 percent of GDP in 2008; with two-thirds originating in the USA, France, Spain, and Italy, inflows slowed in 2008 and declined sharply (year-on-year) in Q1 2009. - Exports: Export prices projected significantly lower in 2009 than in 2008; the price of phosphoric acid projected at half its 2008 level. - FDI: Projected to increase more slowly; an iron ore project that was to account for half of total FDI over the next several years was delayed; other projects (port expansion, special economic zone) may be developed more slowly. - Tourism: Falling arrivals noted. - Outlook and risks - The economic rebound in 2009 is projected to be weak even as payment delays are eliminated and ICS production accelerates; medium-term growth projected at around 5 percent, lower than previously foreseen. - Inflation expected to be low on average in 2009 given sharp declines in food and energy prices; inflation projected to return to historical WAEMU trends over the medium term. - Current account: Projected to narrow slightly in 2009 and more strongly over the medium term as ICS reaches former export capacity while subdued growth and FDI contain imports. - Reserves: Reflecting more depressed financial inflows, especially FDI, reserves should hover just above three months of imports. - Banking sector: Not directly affected by toxic assets; indirect effects could arise, such as on credit quality. - Uncertainties and risks include: lower-than-projected exports, remittances, FDI, or aid; adverse weather and pest conditions; commodity price shocks; political and governance risks (including erosion of ruling party support and institutional weaknesses) that could trouble development partners and increase the risk of backtracking on program commitments. ### Policy Response and Program Recommendations - Fiscal policy - A temporary fiscal easing relative to earlier program targets is envisaged for 2009 to help counter the impact of the external shock; in the presence of a substantial revenue shortfall, this would enable authorities to maintain spending close to programmed levels to safeguard key social spending and infrastructure investment. - Over the medium term, fiscal policy will continue to be geared towards safeguarding debt sustainability. - Structural reforms and administration - Continue to deepen structural reforms, mainly related to PFM and tax administration. - Further improve budget preparation, monitoring, and execution and safeguard traditionally strong revenue performance. - IMF program actions requested by staff - Staff recommends completion of the program reviews and augmentation and extension of access under the ESF. - Staff recommends a waiver for the missed end-2008 basic fiscal deficit performance criterion given corrective actions and late-2008 prudence. *Source: _cr09205 - Executive Summary.* ### 7. The Senegalese authorities request augmentation and extension of their ESF to ### 7. The Senegalese authorities request augmentation and extension of their ESF to ### ESF request: access, amounts, and timing - Original ESF approved in December 2008 for the food and fuel price shock: 30 percent of quota (SDR 48.54 million), of which the first tranche (15 percent of quota) was drawn at approval. - Requested augmentation would raise access to 75 percent of quota (SDR 121.35 million, or about CFAF 90 billion). - Requested extension of the ESF from 12 to 18 months. - Undrawn balance of 60 percent of quota (SDR 97.08 million, or about CFAF 72 billion) to be disbursed in three equal tranches at the time of the third, fourth, and fifth (last) PSI reviews. - The last PSI/ESF review in mid-2010 could be used to assess the future form of Fund engagement with Senegal. ### Balance of payments impact of shocks (findings and projections) - ESF would be provided for two successive sudden and exogenous external shocks: the oil and food price shock in 2008 and the impact of the global economic crisis in 2009–10. - Combination of shocks leads to a balance of payments need larger and longer than initially expected, extending into 2010; beyond 2010, balance of payments expected to recover. - Relative to pre-crises year 2007, cumulative impact of the two shocks estimated at CFAF 389 billion during 2008–10. - Food and fuel crisis dominates in 2008; global crisis becomes lead cause in 2009–10. - Senegal’s overall balance of payments projected to deteriorate by a cumulative CFAF 419 billion during 2008–10. - Compared to past projections (IMF Country Report No. 09/5), overall balance of payments over 2008–10 is worse by CFAF 330 billion. - Main transmission channels of the global crisis: remittances, FDI, and exports. ### Key balance of payments figures (as presented) - External shocks, total (2008, 2009, 2010, 2009-10, 2008-10): -132 -114 -143 -257 -389 - Food and fuel prices: -205 -20 -73 -93 -298 - Food imports, net: -114 -67 -75 -142 -256 - Of which: Rice: -116 -65 -66 -131 -247 - Oil imports, net: -9 14 73 49 -42 - International crisis: 74 -95 -70 -165 -91 - Remittances, net: 1 42 -47 -55 -102 -61 (net of induced imports; change relative to 2007) - Travel receipts: -39 -60 -65 -126 -165 - Phosphoric acid export price: 8 13 23 26 51 46 (appears in series as reported) - Direct investment, net: 1 2 -11 -19 18 -1 -12 (excluding privatization in 2009) - Other, residual: -25 7 -12 -6 -30 - Overall balance of payments (change): -156 -107 -155 -263 -419 - Memorandum: Overall balance of payments: -105 -56 -104 -160 -266 - Gross reserves, change (without ESF): -8 -46 -137 -137 -137 - Gross reserves, change (with ESF): 9 19 -48 -48 -48 - Gross reserves, eop level (with ESF): 744 754 687 687 687 (months of GNFS imports: 3.2 3.5 3.1 3.1 3.1) (Additional cumulative presentation relative to ESF approval) - Total crises-related flows (2008, 2009, 2010, 2009-10, 2008-10): 78 -62 -140 -203 -124 - Fuel and food: -131 72 23 92 6 - Imports of oil and oil products, net: 44 95 97 191 236 - Imports of food, net: -57 -78 -75 -152 -210 - International crisis: 91 -79 -162 -242 -150 - Remittances, net: 1 99 13 -26 -128 7 - Travel receipts: 28 -3 -19 -22 7 - Phosphoric acid exports: 17 -78 -57 -135 -118 - Direct investment, net: 1 -54 -12 -60 -72 -126 - Other, residual: -155 -86 36 -50 -206 - Overall balance of payments: -77 -149 -104 -253 -330 - Memorandum: Reserves, eop (without ESF): 6 -14 -1 -244 -244 - Reserves, eop (with ESF): 5 -11 3 -193 -193 -193 (in months of imports: 0.0 -0.2 -0.4 -0.4 -0.4) ### ESF role for reserves and import coverage - Proposed access would partially, but not fully, offset deterioration in overall balance of payments. - Proposed access level would help stabilize Senegal’s contribution to the WAEMU’s international reserves. - Import coverage of reserves expected to remain above 3 months in 2009-10, with a spike projected for 2009 due to one-off privatization receipts and financing for the toll highway. - Adjustment to access levels could be considered at a future review in light of developments. ### Donor and multilateral coordination - Fund’s and Bank’s support expected to serve as catalyst for stepped-up donor support. - World Bank expected to approve a fast-track budget support operation of US$60 million in mid-June 2009. - Authorities intend to approach other development partners after completion of the third PSI review to solicit additional support. - Donors indicated they would consider scaling up assistance only after a successful PSI review to ascertain that past budgetary slippages have been addressed. ### Repayment capacity and debt outlook - Senegal’s capacity to repay the Fund is strong (Table 11). - Accompanying updated DSA confirms Senegal is at a low risk of debt distress, provided prudent macroeconomic policies are pursued. ### Program discussions — macroeconomic policies and fiscal stance - Authorities intend to base the economic program on the PSI’s four pillars: - Containing the fiscal deficit to underpin macroeconomic stability and safeguard debt sustainability. - Improving fiscal governance and transparency to enhance policy credibility and sustain external assistance. - Encouraging private sector activity by improving the business environment and addressing structural impediments to higher economic growth. - Limiting financial sector vulnerabilities and raising the sector’s contribution to the economy. - 2009 program focus: help Senegal weather the global economic crisis while completing normalization of government financial relations with the private sector. - Authorities commit to a prudent fiscal policy stance, with temporary flexibility to avoid large cuts in spending given falling tax receipts. - Structural conditionality will focus on deepening PFM reforms and strengthening tax administration. Key fiscal and financing points - Authorities intend to settle all payment delays by mid-year; external and domestic financing becoming available will facilitate this goal. - Based on completed audit of extrabudgetary spending, government will decide by end-July on claims (structural benchmark); any claims to be paid will be included in the 2010 budget. - Updated DSA confirms that an overall fiscal deficit of 4 percent of GDP over the medium term preserves debt sustainability. - Temporary easing in 2009: scope for a temporary easing of 1¾ percent of GDP in 2009 relative to earlier program targets, with an overall fiscal deficit of 4½ percent of GDP. - Maintaining original deficit target of 2¾ percent of GDP would have necessitated significant spending reductions; spending already cut by 1½ percent of GDP in 2008. - Financing mix for higher deficit: donor financing, regular securities issues in regional market, bank financing with SONATEL shares as collateral, and privatization receipts. - A mid-year supplementary budget submitted to parliament (prior action) regularizes spending carryover from 2008, incorporates appropriations for donor-supported Dakar-Diamniadio toll highway, and shaves off some nonpriority spending. ### Structural reforms (PFM, energy, private sector, financial sector) - PFM and tax administration remain core: agenda includes six macro-relevant structural benchmarks (MEFP Table 2). - Audit of budget monitoring system SIGFIP to improve reliability, coverage, and ability to produce periodic budget execution data. - Improve flexibility and presentation of the budget to increase transparency and enhance expenditure control. - Make accounting system ASTER operational to improve reliability of treasury accounts. - Following external audit, decide on extrabudgetary spending to be rejected or regularized in 2010 budget law. - Tax administration: study to identify level and justification for tax exemptions. - Assign collection of specific gasoline tax (FSAPP) to tax authority instead of SAR to raise transparency and revenue take. - Energy sector risks and reforms: - 2008 SENELEC tax arrears and SAR (petroleum refinery) financial and governance problems pose public finance risks. - Energy sector reform, supported by World Bank and other donors, aims to restore SENELEC’s financial equilibrium and allow settlement of tax and private sector arrears in 2009. - Authorities committed to having SENELEC make tax payments on a quarterly basis and to adjust electricity tariffs to market prices in quarterly intervals. - Commitment to phase out the last energy subsidy—on butane gas—by mid-year. - As of end-May, two-thirds of SENELEC’s back taxes have been settled. - Private sector reforms to improve "Doing Business" ranking: enhance judicial system for commercial disputes, accelerate transfer of property ownership and issuance of construction permits, relax restrictions on fixed-term labor contracts. - Financial sector monitoring and stability measures: - National and regional authorities stepped up monitoring to detect credit risks and address solvency and liquidity problems. - Focus on provisioning needs, reducing risk concentration and asset-liability mismatches, and anticipating spillovers from parent companies abroad. - Stress tests suggest vulnerability to credit shocks; more than half of banks do not comply with ceiling on exposure to single borrower. - Liquidity tensions intensified in 2008; banks’ excess reserves reached a three-year low; BCEAO refinancing operations surged. - Enhanced liquidity support by BCEAO recommended, including relaxation of monetary conditions, new liquidity support operations at new maturities, lower reserve requirements, and expansion of eligible collateral for discount and open market operations. ### Staff appraisal and policy recommendations - Authorities have made good use of opportunity to bring program back on course: reduction in stock of payment delays by three-fourths since end-October 2008 peak. - Recent reforms in budget preparation, execution, and monitoring should limit recurrence risk of past budget slippages; further improvement in cash flow management remains. - Achievements should help shore up economic activity amid global crisis; however, outlook for economic growth worsened substantially and downside risks increased. - ESF augmentation recommended to help support Senegal’s balance of payments during this crucial period. - Temporary fiscal easing in 2009 is appropriate to help face economic slowdown given low risk of debt distress and availability of financing. - Staff welcomes commitment to return speedily to fiscal policy stance that preserves debt sustainability over medium term. - Staff recommends waiver for nonobservance of end-2008 assessment criterion on basic fiscal deficit, given underspending in 2008, meeting end-March fiscal balance target, and commitment to regular SENELEC tax payments. *Source: IMF staff report excerpt (country report section on Senegal: ESF augmentation and program discussions).* ### 28. The structural reform agenda, focusing on measures to further strengthen PFM ### 28. The structural reform agenda, focusing on measures to further strengthen PFM ### Reform objectives and rationale - The structural reform agenda focuses on measures to further strengthen PFM and tax administration, and supports the authorities’ fiscal objectives. - The reforms will help safeguard macroeconomic stability and allow Senegal to get full closure on the past budgetary slippages. ### Key priorities and actions - A timely decision on how to deal with the extrabudgetary spending identified in the external audit report is of particular importance to staff. - Reform of the energy sector, undertaken with the support of the World Bank and other development partners, will be key to further containing fiscal risks and helping raise Senegal’s growth potential. *Source: _cr09205 - 28. The structural reform agenda, focusing on measures to further strengthen PFM* ### 29. Staff recommends the waiver, completion of the program reviews, and request ### _cr09205 - 29. Staff recommends the waiver, completion of the program reviews, and request ### Staff recommendation and policy judgment - Staff recommends the waiver, completion of the program reviews, and request for augmentation and extension of the ESF. - Progress cited: - Settlement of unpaid bills. - Implementation of key PFM reforms that "has helped restore the integrity of the budget system." - Conditional assessment: - The authorities’ intention to complete the PFM reform agenda and pursue prudent economic policies "augur well for the country being able to weather the impact of the global crisis," provided that the political commitment remains strong. ### National income and prices (selected indicators; percent or levels as in source) - GDP at constant prices (annual percent change): - 2006: 2.4 - 2007: 4.7 - 2008: 2.5 - 2009 Est.: 5.2 - 2010 Prog.: 3.1 - 2011 Proj.: 3.4 - 2012 Proj.: 4.3 - 2013 Proj.: 4.8 - 2014 Proj.: 4.9 - Nonagriculture GDP (annual percent change): - 2006: 4.0 - 2007: 6.2 - 2008: 1.3 - 2009 Est.: 5.5 - 2010 Prog.: 3.1 - 2011 Proj.: 3.4 - 2012 Proj.: 4.4 - 2013 Proj.: 4.9 - 2014 Proj.: 5.0 - GDP deflator (annual percent change): - 2006: 4.0 - 2007: 5.5 - 2008: 7.4 - 2009 Est.: 2.3 - 2010 Prog.: 2.1 - 2011–2014 Proj.: 2.1 each year - Consumer prices (annual average): - 2006: 2.1 - 2007: 5.9 - 2008: 5.8 - 2009 Est.: 3.3 - 2010 Prog.: 0.8 - 2011–2014 Proj.: 2.2 each year - Consumer prices (end of period): - 2006: 3.9 - 2007: 6.2 - 2008: 4.3 - 2009 Est.: 2.2 - 2010–2014 Proj.: 2.2 each year ### External sector (selected indicators; volumes, values, and balances) - Exports, f.o.b. (CFA francs, percent change): - 2006: 0.1 - 2007: -3.7 - 2008: 14.1 - 2009 Est.: 5.6 - 2010 Prog.: -12.1 - 2011–2014 Proj.: 13.8, 6.6, 4.6, 4.5, 4.8 (sequence as in table) - Imports, f.o.b. (CFA francs, percent change): - 2006: 9.6 - 2007: 19.5 - 2008: 9.8 - 2009 Est.: 1.0 - 2010 Prog.: -7.8 - 2011–2014 Proj.: 5.4, 4.7, 6.4, 6.3, 6.5 (sequence) - Export volume (annual percent change): - 2006: -12.3 - 2007: -1.2 - 2008: -4.0 - 2009 Est.: 12.6 - 2010 Prog.: 9.0 - 2011 Proj.: 8.6 - 2012–2014 Proj.: 3.9, 4.0, 4.1 - Import volume (annual percent change): - 2006: 6.5 - 2007: 11.3 - 2008: -0.3 - 2009 Est.: 8.2 - 2010 Prog.: 2.5 - 2011–2014 Proj.: 1.8, 2.9, 4.8, 5.4 - Terms of trade ("–" = deterioration; percent change): - 2006: 10.9 - 2007: -9.4 - 2008: 8.4 - 2009 Est.: 0.4 - 2010 Prog.: -11.0 - 2011–2014 Proj.: 1.2, 0.7, -1.0, -0.5, -0.3 ### Money and credit (changes in percent of beginning-of-year broad money) - Net domestic assets (percent of beginning-of-year broad money, changes): - 2006: 5.0 - 2007: 8.6 - 2008: 6.2 - 2009 Est.: 5.0 - 2010 Prog.: 5.1 - 2011–2014 Proj.: 10.6, 12.7, 11.3, 10.5, 9.1 - Domestic credit (percent change of beginning-of-year broad money): - 2006: 5.8 - 2007: 11.5 - 2008: 7.3 - 2009 Est.: 5.3 - 2010 Prog.: 5.5 - 2011–2014 Proj.: 11.0, 13.1, 11.7, 10.9, 9.4 - Credit to the economy (percentage growth): - 2006: 4.2 - 2007: 10.5 - 2008: 17.2 - 2009 Est.: 10.9 - 2010 Prog.: 10.0 - 2011–2014 Proj.: 11.0, 11.4, 11.6, 11.8, 11.8 ### Government financial operations (selected fiscal aggregates; percent of GDP and levels) - Revenue (percent of GDP): - 2006: 19.7 - 2007: 21.1 - 2008: 19.4 - 2009 Est.: 20.7 - 2010 Prog.: 19.2 - 2011–2014 Proj.: 19.3, 19.7, 20.1, 20.3, 20.6 - Grants (percent of GDP): 1.5, 2.6, 2.3, 2.4, 2.4, 2.3, 2.2, 2.2, 2.2, 2.2 - Total expenditure and net lending (percent of GDP): - 2006: 27.2 - 2007: 27.6 - 2008: 26.5 - 2009 Est.: 25.9 - 2010 Prog.: 26.3 - 2011–2014 Proj.: 25.6, 26.0, 26.3, 26.5, 26.8 - Overall fiscal surplus (+) or deficit (–) (payment order basis, excluding grants; percent of GDP): - 2006: -7.2 - 2007: -6.2 - 2008: -6.9 - 2009 Est.: -5.1 - 2010 Prog.: -7.1 - 2011–2014 Proj.: -6.2, -6.2, -6.2, -6.2, -6.2 - Overall fiscal balance (payment order basis, including grants; percent of GDP): - 2006: -5.7 - 2007: -3.7 - 2008: -4.6 - 2009 Est.: -2.7 - 2010 Prog.: -4.6 - 2011–2014 Proj.: -4.0 each year - Primary fiscal balance 1/ (percent of GDP): - 2006: -5.2 - 2007: -3.3 - 2008: -4.2 - 2009 Est.: -2.0 - 2010 Prog.: -3.7 - 2011–2014 Proj.: -3.2 each year - Basic fiscal balance 2/ (percent of GDP): - 2006: -3.4 - 2007: -1.0 - 2008: -0.8 - 2009 Est.: 0.1 - 2010 Prog.: -1.9 - 2011–2014 Proj.: -1.0, -0.8, -0.5, -0.2, 0.0 - Gross domestic investment (percent of GDP): - 2006: 28.2 - 2007: 30.9 - 2008: 30.2 - 2009 Est.: 31.2 - 2010 Prog.: 27.6 - 2011–2014 Proj.: 27.8, 28.4, 29.3, 30.2, 31.0 - Gross domestic savings (percent of GDP): - 2006: 10.7 - 2007: 8.5 - 2008: 7.7 - 2009 Est.: 12.7 - 2010 Prog.: 7.8 - 2011–2014 Proj.: 9.8, 11.5, 12.2, 12.9, 13.6 Notes from fiscal tables (levels, CFAF billions): - Total revenue and grants (CFAF billions): - 2006: 1,036 - 2007: 1,277 - 2008: 1,341 - 2009 Est.: 1,293 - 2010 Prog.: 1,493 - 2011–2014 Proj.: 1,354, 1,429, 1,548, 1,682, 1,822, 1,974 (sequence across table) - Total expenditure and net lending (CFAF billions): - 2006: 1,331 - 2007: 1,491 - 2008: 1,541 - 2009 Est.: 1,579 - 2010 Prog.: 1,668 - 2011–2014 Proj.: 1,645, 1,692, 1,829, 1,985, 2,144, 2,323 - Primary fiscal balance 6/ (CFAF billions): -236, -163, -165, -235, -130, -231, -210, -226, -242, -257, -278 - Overall fiscal balance (including grants; CFAF billions): -279, -198, -200, -273, -175, -291, -263, -281, -302, -322, -348 ### Balance of payments and external accounts (levels in CFAF billions) - Current account (CFAF billions): - 2006: -464 - 2007: -638 - 2008: -733 - 2009 Est.: -742 - 2010 Prog.: -718 - Trade balance (CFAF billions): - 2006: -837 - 2007: -1,193 - 2008: -1,275 - 2009 Est.: -1,215 - 2010 Prog.: -1,212 - Exports, f.o.b. (CFAF billions): - 2006: 833 - 2007: 803 - 2008: 916 - 2009 Est.: 805 - 2010 Prog.: 917 - Imports, f.o.b. (CFAF billions): - 2006: -1,670 - 2007: -1,996 - 2008: -2,191 - 2009 Est.: -2,021 - 2010 Prog.: -2,129 - Unrequited current transfers (net; CFAF billions): - 2006: 437 - 2007: 618 - 2008: 651 - 2009 Est.: 556 - 2010 Prog.: 538 - Of which: Private (net) 2006–2010: 409, 566, 618, 507, 497 - Capital and financial account (CFAF billions): - 2006: 520 - 2007: 690 - 2008: 628 - 2009 Est.: 685 - 2010 Prog.: 614 - Overall balance (CFAF billions): - 2006: 575 - 2007: 51 - 2008: -105 - 2009 Est.: -56 - 2010 Prog.: -104 - Gross official reserves (CFAF billions; months of imports of GNFS): - Levels (CFAF billions): 661, 735, 744, 754, 687, 724, 781, 872, 976 - Months of imports: 3.8, 3.4, 3.2, 3.5, 3.1, 3.1, 3.1, 3.3, 3.4 - Memorandum: Current account balance including current official transfers (percent of GDP): -9.5, -11.8, -12.3, -11.8, -10.9, -10.1, -10.0, -10.1, -10.1 (2006–14 series as in table) ### Crisis-related flows and reserves (selected cumulative and change figures) - Total crises-related flows (CFAF billions): 169 (2007), 122 (2008), 258 (2009), 209 (2010) - Fuel and food (CFAF billions): -644 (2007), -750 (2008), -549 (2009), -612 (2010) - International crisis (CFAF billions): 813 (2007), 872 (2008), 807 (2009), 822 (2010) - Reserves, eop (without ESF; CFAF billions): 726 (2007), 688 (2008), 598 (2009), 720 (2010) - Reserves, eop (with ESF; CFAF billions): 744 (2007), 754 (2008), 687 (2009), 739 (2010) - Months of imports (with ESF): 3.2 (2007), 3.5 (2008), 3.1 (2009), 3.2 (2010) ### Monetary survey highlights (selected levels and growth) - Net foreign assets (CFAF billions): - 2006: 660 - 2007: 780 - 2008: 851 - 2009 Est.: 762 - 2010 Prog.: 776 - Broad money (M2; CFAF billions): - 2006: 1,553 - 2007: 1,751 - 2008: 1,973 - 2009 Est.: 2,007 - 2010 Prog.: 2,124 - Credit to the economy (CFAF billions): - 2006: 1,067 - 2007: 1,111 - 2008: 1,228 - 2009 Est.: 1,440 - 2010 Prog.: 1,583 - Velocity (GDP/M2; end of period): 3.0, 2.8, 2.7, 3.0, 2.9 (2005–09 series) ### Financial soundness and banking sector indicators (selected) - Capital to risk-weighted assets: 12.1, 11.9, 11.1, 13.1, 13.6, 13.9 (2003–08) - Gross NPLs to total loans 1/: 13.3, 12.6, 11.9, 16.8, 18.6, 19.1 (2003–08) - Provisions to NPLs 1/: 75.3, 75.7, 75.4, 52.0, 53.8, 51.5 (2003–08) - NPLs net of provisions to total loans 1/: 3.3, 3.4, 3.2, 8.8, 6.8, 9.3 (2003–08) - Average interest rate on loans: 8.7, 11.7, 11.8, 11.3, 11.6 (selected years) - After-tax return on average assets: 1.8, 1.8, 1.6, 1.6, 1.6 (selected years) ### Quantitative performance criteria and indicative targets (Dec 31, 2008 and Mar 31, 2009 snapshot) - Assessment (performance) criteria status (selected): - Floor on the basic fiscal balance 2/: Actual -21; Indicative target -50; Status: not met (Dec 31, 2008) - Ceiling on contracting or guaranteeing of new nonconcessional external debt by the government 3/4/: Indicative 80 5/; Actual 0; Status: met (Dec 31, 2008 and Mar 31, 2009) - Ceiling on spending undertaken outside normal and simplified procedures 4/: Indicative 0; Actual 0; Status: met - Ceiling on government external payment arrears (stock) 4/: Indicative 0; Actual 0; Status: met - Ceiling on the amount of the float (depenses liquidees non payees par le Tresor) 6/: Indicative 92; Actual 66; Status: met (Dec 31, 2008) - Indicative target: - Quarterly ceiling on the share of the value of public sector contracts signed by single tender (percent): Target 20; Actual 6 (Dec 31, 2008): met; Actual 14 (Mar 31, 2009): met ### Structural conditionality (table header; implementation tracking) - Table title present: "TABLE 10: STRUCTURAL CONDITIONALITY, DECEMBER 2008–MAY 2009" - Columns include: Policy Measures; Target Date for Implementation; Implementation Status; Prior Action *Source: IMF staff estimates and projections; data and text as presented in the source PDF.* ### 1. Ensure passage by Parliament of the 2009 Budget Law, ### 1. Ensure passage by Parliament of the 2009 Budget Law, ### Implementation status of specified prior actions and measures - Ensure passage by Parliament of the 2009 Budget Law, as described in paragraph 12 of the December 2008 MEFP. - Implemented on November 18, 2008 - Completed - Adopt a decree amending the general regulations on government accounting (RGCP) to require use of only the normal and simplified procedures, and prohibiting the use of procedures of any other type, in particular Treasury advances, as described in paragraph 21 of the December 2008 MEFP. - Implemented on November 28, 2008 - Completed - Set out in a manual the detailed procedures for reconciling the budget, the TOFE, the Treasury accounts, the NGP, and the SIGFIP; establish this reconciliation for end-2007 and selected months in 2008, and publish the results, as described in paragraph 24 of the December 2008 MEFP. - Implemented on November 30, 2008 - Completed ### Structural Assessment (Performance) Criteria (completed) - Improve the budget procedure by adopting a decree to set the timetable and principal methods for compiling the budget, as described in paragraph 19 of the December 2008 MEFP. - Target date: January 31, 2009 - Status: Completed - Adopt a decree specifying the system for the reopening and carryover of budgetary appropriations and commitments, as described in paragraph 22 of the December 2008 MEFP. - Target date: February 28, 2009 - Status: Completed - Close the 2008 budget and accounting year by freezing and publishing the SIGFIP by April 30, 2009, as described in paragraph 23 of the December 2008 MEFP. - Target date: April 30, 2009 - Status: Completed ### Structural Benchmarks (status) - Adopt the decree implementing the new law on microfinance institutions. - Target date: January 31, 2009 - Status: Completed - Conduct an external audit of all extrabudgetary commitments, based on terms of reference drawn up in consultation with IMF staff, as described in paragraph 26 of the December 2008 MEFP. - Target date: March 31, 2009 - Status: Under way - Draft memoranda of understanding specifying the respective rights and duties of the APIX, DGID, and DDI regarding the management of the DISEZ, as stated in paragraph 30 of the December 2008 MEFP. - Target date: March 31, 2009 - Status: Completed - Compile and publish the first audit report of the Government Procurement Regulatory Authority (ARMP), as described in paragraph 28 of the December 2008 MEFP. - Target date: May 31, 2009 - Status: Under way ### Key quantitative and program performance facts (as reported) - Real GDP growth: declined from 4.7 percent in 2007 to 2.5 percent in 2008. - Consumer prices (inflation): increased 5.8 percent on average in 2008. - External current account deficit: amounted to 12.3 percent of GDP in 2008 (deterioration of 0.5 percent of GDP relative to 2007). - Budgetary float (end-February 2009): reduced to CFAF 66 billion (program ceiling CFAF 92 billion). - Budgetary float (end-March 2009): CFAF 65 billion (program ceiling CFAF 80 billion). - Single-tender contracts: 6 percent of government procurement in Q4 2008; 14 percent in Q1 2009 (program ceiling 20 percent). - Basic fiscal deficit (end-2008): CFAF 50 billion (program ceiling CFAF 21 billion). - Government target for budgetary float: decline to CFAF 45 billion by end-June 2009 (revised quantitative assessment (performance) criterion). ### Audits and governance actions (status and findings) - Independent external audit of extrabudgetary expenditure (structural benchmark): progress report identified total amount of such commitments at CFAF 73 billion; completion expected in June 2009 (delayed by bidding procedures). - First audit report of ARMP (structural benchmark): not yet completed due to bidding procedures and delay in World Bank financing; audit launched; preliminary reports expected in September 2009. - Decree to determine modalities of recruitment, status and powers of the ARMP investigative unit agents adopted in late May 2009; first quarterly surveys launched. - Memoranda of understanding adopted to specify rights and duties of APIX, DGID, and DGD for DISEZ management (structural benchmark): Completed. ### Excerpts of fiscal policy and program adjustments for 2009 - Growth projection for 2009: about 3 percent. - Inflation projection for 2009: 0.8 percent. - Current account deficit projection for 2009: 11.8 percent of GDP. - Government commitment: limit overall fiscal deficit to 4 percent of GDP over the medium term. - 2009 fiscal stance: limit overall fiscal deficit to 4½ percent of GDP in 2009. - Corresponding revised basic fiscal deficit targets: CFAF 60 billion at end-June 2009 and CFAF 119 billion at end-December 2009 (revised quantitative assessment (performance) criteria). - Compensatory financing measures for 2009 revenue shortfall: proceeds from the privatization of Hôtel Méridien and a bank loan collateralized with shares of Sonatel. - Supplementary budget submitted to Parliament (prior action) objectives include: preserving budgetary equilibrium, incorporating reopened and carried-forward appropriations from 2008, and including appropriations for the Dakar-Diamniadio toll highway (CFAF 55 billion). - Social spending objective: increase from 33 percent to 40 percent of total expenditure between now and 2010 (PRSP objective). - Public investment: increase by 0.4 percent of GDP over 2008 levels to 10.4 percent of GDP in 2009. ### Program context and requests (from Letter of Intent / MEFP) - Government requests augmentation of the ESF from 30 to 75 percent of quota (SDR 121.35 million) and extension from 12 to 18 months. - All except one quantitative assessment (performance) criteria for end-2008 met; all quantitative indicative targets for end-March 2009 were met. The missed criterion was the basic fiscal balance ceiling for end-2008; the government requests a waiver for the missed criterion. - Government commitments: promptly take any additional measures necessary to achieve PSI and ESF objectives; consult with the IMF before adopting such measures or policy changes; provide IMF with requested information; authorize IMF to publish the letter, the MEFP, and related Staff Report. *Source: _cr09205 - 1. Ensure passage by Parliament of the 2009 Budget Law,* ### 13. To ensure debt sustainability, the government will continue to abide by the ### _cr09205 - 13. To ensure debt sustainability, the government will continue to abide by the ### Debt sustainability and external borrowing - Government will continue to abide by the general principle of not contracting or guaranteeing external borrowing on nonconcessional terms. - A loan of CFAF 80 billion earmarked for the Dakar-Diamniadio toll highway will be mobilized during 2009 (quantitative assessment (performance) criterion); timing of financial market access will depend on international market developments. - Government will consult with IMF staff well in advance regarding any other exceptions to this program criterion. - Debt management measures: - Update rolling two-year government issuance calendar on a quarterly basis or after each issuance, in cooperation with the Central Bank of West African States (BCEAO). - Semi-annual public debt sustainability analysis will include a risk assessment for contingent liabilities arising from guarantees issued by the government to Public-Private Partnerships (PPPs) and operations of public enterprises. ### Budget reforms — objectives and scope - Reforms based on the IMF technical assistance report and the work of the budget support group of donors to enhance budget efficiency and transparency and protect macroeconomic stability. - Key measures aim to limit expenditures outside firm spending limits (crédit évaluatif) and improve estimation methodology for such spending and current services (services votés). - Estimated appropriations limited to categories listed in Article 11 of the organic law: debt service, legal expenses and compensation deriving from court decisions, tax relief and repayments; and will not include other expenditures except: - (i) salaries and fringe benefits, - (ii) taxes on externally-financed government procurement, - (iii) embassy leases. - Special budget law annex under Article 11 will include only these three expenditure categories. ### Budget presentation enhancements (2010 budget law structural benchmark) - To be submitted to Parliament by October 15, 2009, the 2010 budget law documentation will include: - (a) Presentation of the standard concept of the overall fiscal deficit (not including resources from loans and principal repayments), according to the Government Finance Statistics Manual, in addition to currently calculated fiscal deficit. - (b) Budget execution data for the past year and the first six months of the current year presented in detailed revenue and expenditure tables. - (c) Contingency expenditure line (dépenses imprévues ou accidentelles): reserve five percent of total appropriations (excluding externally-financed capital expenditure and wages) under shared costs (charges communes). - (d) Annex presenting budget execution and forecast data (on expenditure and revenue) for each agency, para-public sector enterprise, and any other public body receiving budgetary allocations of more than CFAF 5 billion; government will provide this in future budget laws. ### SIGFIP and fiscal accounting reforms - Enhance SIGFIP system and expand coverage of budget operations. - (a) SIGFIP will be audited; bidding procedure launched for external audit to be completed by end-September 2009 (structural benchmark). Audit will focus on budget execution database and production of output tables covering several years, based on terms of reference agreed with IMF staff. - (b) SIGFIP workstations will be installed in the General Administration and Supplies Directorate (DAGE) and the General Administration and Supplies Service (SAGE) in ministries and institutions to enhance monitoring of budget execution. - SIGFIP and ASTER will be used as complementary instruments to improve fiscal and accounting operations and make TOFE more reliable; IMF will provide technical assistance. - Interface between SIGFIP and ASTER to strengthen linkages and facilitate preparation of the general account of the financial administration. - ASTER fiscal accounting module will be operational from end-October 2009 (structural benchmark). - Auxiliary expenditure accounting modules (CAD) and auxiliary revenue accounting modules (CAR) will be operational by end-2009. - Rollout of ASTER system at all accounting workstations is a prerequisite; a high-level information systems steering committee will be established within the Ministry of Finance. ### External audit of extrabudgetary commitments - External audit supplemented IGF audit; based on results, government will decide by end-July 2009 on amounts to: - (i) propose to Parliament for regularization in the 2010 budget, and - (ii) reject as invalid claims that will not be paid (structural benchmark). - Government will impose penalties on appropriations administrators who illegally created a liability for the government and bring liable administrators before the financial disciplinary chamber of the Audit Court. ### Tax administration and tax expenditures - Preserve excellent performance of the Senegalese tax system; resolution of government payment delays and transfer of direct tax collection from the Treasury to the DGID expected to strengthen revenue collection. - Government will report the basis for, and current level of, tax expenditures by end-September 2009 (structural benchmark). - Study on tax expenditures: - Overseen by the tax administration, in collaboration with customs administration and economic forecasting and statistics agencies. - Terms of reference to be agreed with IMF staff. - Objective: assess financial cost of tax expenditures and any economic and/or social impact. - Based on study, 2010 budget will include a report highlighting key tax expenditures and indicate for each its public policy objectives, duration, and beneficiaries. ### Energy sector reform measures and fiscal risk containment - Reform aims: improve security of energy supply, conserve energy, limit budgetary risks; apply market-based pricing and implement energy saving and efficiency measures. - Commitments and timelines: - (a) Modify electricity price structure every three months and adjust institutional price-setting process. SENELEC will not obtain compensation from the government for insufficient price adjustment. - (b) Complete recapitalization of SENELEC by end-June 2009. CFAF 7 billion has been appropriated for that purpose. - (c) Ensure SENELEC's tax obligations are included in the company's financial equilibrium calculations and tax payments transferred regularly (at least quarterly) to the government, in light of substantial tax arrears in 2008. - (d) Unbundle SENELEC's activities (production, transportation, distribution) by end-October 2009 and offer equity stakes in subsidiaries and holding company to the private sector by end-March 2010. An investment bank will be selected as consultant for these transactions by end-November 2009. - (e) Eliminate the butane gas subsidy by end-June 2009. Interim: butane gas prices will be adjusted so total subsidy is limited to CFAF 6.5 billion in 2009. - (f) Transform Fonds de Sécurisation des Importations de Produits Pétroliers (FSIPP) into Fonds de Sécurisation des Approvisionnements en Produits Pétroliers (FSAPP) that will exist for three years to allow full repayment of remaining debt of CFAF 27 billion of the petroleum refinery (SAR) and to urgently finance, through the budget, CFAF 10 billion needed for logistics and other investments in SAR, and for investments in the supply of hydrocarbon products. - (g) Use FSIPP’s financing mechanism for FSAPP and strengthen its management, control and reporting. Adopt, by end-October 2009, provisions to transfer FSAPP collection from SAR to the DGID and ensure transparent monitoring and improved accounting. DGID to exert control over FSAPP, including financial flows between other oil companies and SAR. Specific arrangements: - (i) FSAPP revenues related to imported finished petroleum products to be collected by the DGID directly from oil companies and deposited in a Treasury account; - (ii) FSAPP revenues related to refinery operations to be collected by SAR and transferred to the DGID, which will deposit the funds in a pledged Treasury account at the BCEAO; - (iii) FSAPP revenues collected on refinery operations will be used for investments in the petroleum sector and SAR; - (iv) any subsidy or transfer to SAR, or any strategic investment in the petroleum sector considered important by the government, will be transparently reflected in the state budget and be subject to government procurement rules (structural benchmark). - SAR’s reform to be carried out with support from donors and lenders. ### Private sector development commitments - Expedite reforms recommended by the Presidential Council on Investment (CPI) from November 2008 and incorporated in its monitoring committee's action plan. - Agreed measures to be achieved as soon as possible: - (a) Improve efficiency in the commercial justice system by providing courts resources and implementing administrative measures related to a new high-level court. - (b) Reduce delays and costs in transfer of property rights as specified in office memoranda issued in April 2008. - (c) Extend possibilities to renew fixed-term labor contracts. - (d) Adopt and implement the Prime Minister's circular reducing time to issue construction permits and hook up water, sanitation, electricity, and telephones. - (e) Improve Doing Business cross-border trade indicator by: - (i) completing 24-hour operation of port services initiated in January 2008; - (ii) liberalizing container transport; - (iii) fully deploying portable customs computer system (GAINDE) and its interconnection with the Orbus system; - (iv) testing and rolling out telepayment operations with the Corus system; - (v) having customs declarations filed prior to a ship's arrival through electronic acceptance of manifests. - (f) Hold second national forum on credit by end-2009, followed by implementation of its recommendations according to a timetable to be agreed. ### Financial sector reforms and stability measures - Recognize substantial pressure on financial sector at end-2008 due to government payment delays and world financial crisis risks. - Government undertakings to maintain financial sector stability: - (a) Continue close monitoring of solvency and liquidity in the banking sector: analyze bank assets and liabilities, nature and concentration of financing sources, liquidity relationships with parent companies or establishments from the same group abroad, and overall liquidity situation; intensify exchanges with WAEMU authorities and supervisors from foreign institutions with presence in Senegal. - (b) Focus on macro-financial risks from financing linkages between the government, private sector, and financial system. BCEAO will intensify consultations with government and banks; government will regularly update projected recourse to the financial sector; BCEAO will continue to provide adequate liquidity to banking system. - (c) Closely monitor, in consultation with central bank, enactment of new minimum capital rules by end-2010. - (d) Further strengthen capacity and resources of directorate in charge of regulation and supervision of microfinance institutions within the Ministry of Economy and Finance. - (e) Accelerate implementation of recommendations of the Financial Sector Assessment Program, jointly with authorities of the Union. ### Private sector financing and access to credit - Undertakings to improve environment for private sector financing and household access to credit: - (a) Implement action plan to increase rate of bank penetration to 20 percent by end-2012 through, inter alia, promotion of noncash means of payment by the government. - (b) Establish supportive legal framework for credit information bureaus. - (c) Finalize legislation governing venture capital to promote start-up and growth financing for innovative small- and medium-sized enterprises. ### Program monitoring and TMU arrangements - Quantitative assessment (performance) criteria for end-June 2009 and end-December 2009 and quantitative indicators for end-September 2009 were set to monitor program implementation in 2009 (see Table 1 in the technical memorandum of understanding (TMU)). - Prior actions and structural benchmarks listed in Table 2 of the TMU. - Review schedule: - Fourth PSI review and second ESF review to take place by end-December 2009. - Fifth PSI review and third ESF review to take place by end-June 2010. ### TMU — program conditionality and definitions (selected) - TMU defines quantitative assessment (performance) criteria, indicative targets, and structural benchmarks for monitoring the Fund-supported program under the Policy Support Instrument (PSI) in 2009 and serves as performance criteria under the ESF. - Government definition for TMU: central administration of the Republic of Senegal; excludes local administrations, the central bank, and government-owned entities with separate legal personality. - Basic fiscal balance (program definition): - Difference between government’s budgetary revenue and total expenditure and net lending, excluding externally-financed capital expenditure (financed by donors), drawings on on-lent loans (except on-lent loans to the energy sector financed through donor budget support), and expenditure funded with HIPC- and MDRI-related resources. - Budgetary revenue excludes privatization receipts and sales of mobile telephone licenses or other government assets. - Government expenditure defined on basis of payment orders accepted by the Treasury (dépenses prises en charge par le Trésor). - Assessment (performance) criterion set as a floor on cumulative basic fiscal balance since the beginning of the year. - Example provided: - Floor for basic balance as at June 30, 2009 is minus CFAF 60 billion. - Calculated from: budgetary revenue (CFAF 601 billion) and total expenditure and net lending (CFAF 823 billion), excluding externally financed capital expenditure (CFAF 124 billion), drawings on on-lent loans (CFAF 5 billion), and expenditure funded with HIPC- and MDRI-related resources (CFAF 33 billion). - Reporting requirements: - Authorities will report monthly to Fund staff provisional data on basic fiscal balance and its components with a lag of no more than 30 days. - Final data provided no later than two months after reporting of provisional data, drawn from preliminary treasury account balances. _Italic: Source — Technical memorandum and program text from the IMF document._ ### 7. The budgetary float (instances de paiement) is defined as the outstanding stock of ### _cr09205 - 7. The budgetary float (instances de paiement) is defined as the outstanding stock of ### Definition and monitoring of the budgetary float - The budgetary float (instances de paiement) is defined as the outstanding stock of government expenditure for which bills have been received and validated but not yet paid by the Treasury (the difference between dépenses liquidées and dépenses payées). - The assessment (performance) criterion is set as a ceiling on the budgetary float, monitored at the end of the quarter. - The budgetary-float definition repeated in MEFP Table 1: "Defined as all expenditure for which a bill has been received and recognized (dépense liquidée) but not yet paid by the Treasury." ### Reporting requirements for expenditure tracking (SIGFIP) - Authorities will report to Fund staff: - Weekly (i.e., at the end of each week) and at the end of each month, a SIGFIP table showing: - all committed expenditures (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 SIGFIP table will exclude delegations for regions and embassies and treasury advances (separating regularized and nonregularized), which will be provided in a separate table. - The SIGFIP table will list any payments that do not have a cash impact on the Treasury accounts. ### Spending undertaken outside simplified and normal procedures - The criterion applies continuously to any procedure other than simplified and normal procedures to execute spending, including Treasury advances. - It excludes spending on the basis of an advance decree for absolute urgency and need in the national interest (Article 12 of the Organic Budget Law), which requires signatures by the President and Prime Minister. - Monitoring on this criterion becomes effective at the time of the second PSI review. - Reporting: authorities will report monthly and with a maximum delay of 30 days any such procedure, together with the SIGFIP table defined above. ### Government external payment arrears - Definition: External payment arrears are the sum of payments owed and not paid on the external debt contracted or guaranteed by the government. The definition of external debt given in paragraph 13 is applicable. - The assessment (performance) criterion on external payment arrears is monitored on a continuous basis. - Reporting requirement: authorities will report to Fund staff any accumulation in external payment arrears as soon as the due date is passed. ### Contracting or guaranteeing of new nonconcessional external debt by the government - Applicability and exclusions: - Applies to debt as defined in Point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt and to commitments contracted or guaranteed by the government for which funds have not been received. - Does not apply to: - (i) CFAF debt contracted or guaranteed by the government with WAEMU residents; - (ii) CFAF debt initially contracted or guaranteed by the government with WAEMU residents subsequently acquired by nonresidents; - (iii) CFAF government or government-guaranteed debt where the agreement is between the government and a resident WAEMU entity and there is no ensuing contractual obligation between the government and a nonresident entity, regardless of whether the resident WAEMU entity resells the debt to a nonresident; - (iv) debt rescheduling transactions of debt existing at the time of the approval of the PSI; and - (v) external debt contracted by the airport project company (AIDB) to finance construction of the new Dakar Airport. - Measurement and adjusters: - Measured on a cumulative basis since the approval of the second program review and applies continuously. - The ceiling is raised to accommodate CFAF 80 billion to finance exclusively the Dakar-Diamniadio toll highway project. No adjuster will apply to this criterion. - Definition of nonconcessional: - Any external debt whose present value, calculated with the reference interest rates mentioned, is greater than 65 percent of the nominal value (grant element of less than 35 percent) is considered nonconcessional, with the exception of IMF lending. - For debt with a maturity of more than 15 years, the ten-year reference market interest rate published by the OECD is used to calculate the grant element. - The six-month reference market rate is used for debt with shorter maturities. - Government scope: government includes public institutions of an industrial and commercial nature (EPIC), public administrative institutions (EPA), public institutions of a scientific and technical nature, public institutions of a professional nature, public health institutions, local administrations, public enterprises, government-owned or controlled independent companies (sociétés nationales), and government agencies. - Reporting: government will report any new external borrowing and its terms to Fund staff as soon as external debt is contracted or guaranteed by the government. ### Public sector contracts signed by single tender - Definition: Public sector contracts are administrative contracts for procurement of supplies, services, or execution of work by government entities subject to the procurement code. - Single-tender contracts: when the contracting agent signs the contract with the chosen contractor without competitive tender or award. - Coverage: the quarterly indicative target applies to public sector contracts examined by the Direction Centrale des Marchés Publics (DCMP). - Reporting: government will report quarterly, with a lag of no more than one month from the end of the observation period, the total value of contracts signed by all ministries and agencies and the total value of all single-tender contracts signed by these ministries and agencies. ### Additional information for program monitoring (reporting timetables and items) - Authorities will report the following with maximum time lags indicated: - Effective immediately: any decision, circular, edict, decree, ordinance, or law having economic or financial implications for the current program. - With a maximum lag of 30 days, preliminary data on: - Tax receipts and tax and customs assessments by categories, accompanied by the corresponding revenue collected by the Treasury on a monthly basis; - The monthly amount of expenditures committed, certified, and for which payment orders have been issued; - The quarterly report of the Debt and Investment Directorate (DDI) on execution of investment programs; - The monthly preliminary government financial operations table (TOFE), based on the Treasury accounts (balances de compte); - The provisional balance of the Treasury accounts; and - A reconciliation table between the fiscal reporting table (TOFE), the Treasury accounts (identifying the relevant accounts and amounts), the net government position (NGP), and the SIGFIP on a quarterly basis. - Final data: provided as soon as final balances of the treasury accounts are available, but not later than one month after reporting provisional data. - Monthly reporting (maximum lag of 30 days) of provisional data on: - current nonwage noninterest expenditures and domestically financed capital expenditures executed through advance payments and treasury advances, drawn from preliminary consolidated treasury account balances; final data provided within one month after provisional reporting. - Additional reporting: - Monthly balance sheet of the Central Bank, with a maximum lag of one month; - Consolidated balance sheet of banks with a maximum lag of two months; - Monetary survey, on a quarterly basis, with a maximum lag of two months; - Lending and deposit interest rates of commercial banks, on a monthly basis; - Prudential supervision and financial soundness indicators for bank and nonbank financial institutions, on a quarterly basis (as reported in the Table entitled Situation des Etablissements de Crédit vis-à-vis du Dispositif Prudentiel). - Monthly website update: amount of airport tax—redevance de développement des infrastructures aéroportuaires (RDIA)—collected, deposited in the escrow account, and used for the repayment of the loan financing construction of the new airport. ### Quantitative assessment criteria and indicative targets (selected numeric entries from MEFP Table 1) - Dates shown in table headings and notes: - September 30, 2009 - December 31, 2009 - June 30, 2009 - Assessment (performance) criteria (CFAF billions, unless otherwise specified): - Floor on the basic fiscal balance 2/: -60, -90, -119 (table entries) - Ceiling on the contracting or guaranteeing of new nonconcessional external debt by the government 3/ 4/: 80, 80, 80, 80 (table entries) - Note: The ceiling excludes government or government-guaranteed CFAF borrowing from financial institutions within the WAEMU and external loans contracted by the airport project company (AIDB) to finance the construction of the new Dakar Airport. - The amount of up to CFAF 80 billion is to finance exclusively the Dakar-Diamniadio toll highway project. - Ceiling on spending undertaken outside normal and simplified procedures 4/: monitored on a continuous basis (table shows "0000" as placeholder). - Ceiling on government external payment arrears (stock) 4/: 0, 0, 0, 0 (table entries) - Ceiling on the amount of the float (dépenses liquidées non payées par le Trésor) 6/: 30, 45, 45, 45 (table entries) - Indicative target: - Quarterly ceiling on the share of the value of public sector contracts signed by single tender (percent): 20, 20, 20, 20 (table entries) - Notes in table: - 1/ Indicative targets for September 2009, except for the assessment (performance) criteria monitored on a continuous basis. - 2/ Defined as total revenue minus total expenditure and net lending, excluding externally financed capital expenditure, on-lending, and HIPC and MDRI spending. Cumulative since the beginning of the year. Total revenue excludes privatization receipts and sales of mobile telephone licenses. - 3/ Excluding government or government-guaranteed CFAF borrowing from financial institutions within the WAEMU and external loans contracted by the airport project company (AIDB) to finance the construction of the new Dakar Airport. - 4/ Monitored on a continuous basis. - 5/ Cumulative since approval of second PSI review. - 6/ Defined as all expenditure for which a bill has been received and recognized (dépense liquidée) but not yet paid by the Treasury. ### Structural conditionality (selected measures and dates) - Prior action: - Submit a supplementary budget to Parliament, as described in paragraph 11 of the MEFP. Implementation date: June 5, 2009. - Structural benchmarks and implementation dates: - Decide whether extrabudgetary expenditure should be (i) proposed to Parliament for regularization in the 2010 budget; or (ii) rejected as invalid claims that will not be paid. Implementation date: July 31, 2009. - Complete a study on the basis for, and current level of, tax expenditures. Implementation date: September 30, 2009. - Complete an external audit of SIGFIP focused on the budget execution database and production of output tables. Implementation date: September 30, 2009. - Improve flexibility and presentation of the budget. Implementation date: October 15, 2009. - Make the ASTER budget accounting module operational. Implementation date: October 31, 2009. - Adopt provisions to transfer FSAPP tax collection to the DGID. Implementation date: October 31, 2009. ### Debt Sustainability Analysis (DSA) — background, assumptions, and key projections - Background: - HIPC and MDRI debt relief lowered external public debt from 33 percent of GDP at end-2005 to below 20 percent of GDP at end-2008. - More than 60 percent of end-2008 external debt was owed to multilateral institutions; Arab countries held 21 percent and Paris Club creditors 11 percent. - Domestic public debt was 5 percent of GDP at end-2008, or one-fifth of total debt. - Private external debt was 22 percent of GDP at end-2006; private sector external assets amounted to 13 percent of GDP. - Underlying macroeconomic assumptions for 2009–29 (Box 1 and narrative): - Growth projections (Box 1): - Real GDP growth: 3¾ percent over 2009-11, 4¾ percent over 20012–14, and 5¼ percent over 2015–29. - Inflation: at historical level of just above two percent. - Current account deficit (including grants): a widening to over 10 percent of GDP by the middle of the next decade, followed by a narrowing to below 6 percent of GDP, or 5¼ percent of GDP without interest. - Net FDI inflow may approach 3½ percent of GDP. - Fiscal deficit: 4 percent of GDP till the end of the next decade (or about 3¼ percent of GDP without interest) and thereafter a gradual decline to under 3 percent of GDP (or 2 percent of GDP without interest). - Aid flows (grants and concessional loans): around 7 percent of GDP on a gross basis, and about a percentage point lower on a net basis. - Public domestic borrowing: share less than one-third of total public debt stock; assumed interest rate of 5½ percent and average maturity of five years. - Nonconcessional borrowing: to remain the exception; DSA assumes government in 2009 will obtain the second tranche of the nonconcessional loan from France contracted at end-2008 and borrow CFAF 80 billion to help finance the Dakar-Diamniadio toll road. - Summary assessment: - Senegal is at a low risk of debt distress. The DSA indicates that debt remains well contained under the baseline and various shock scenarios. - Main vulnerabilities: sustained external borrowing at nonconcessional terms and sustained high fiscal deficits. - External public debt indicators under the baseline remain relatively stable and well below policy-dependent thresholds. External public debt service increases slightly but remains very low. Overall external debt remains contained and declines relative to GDP toward the end of the projection period. *Source: _cr09205 - 7. The budgetary float (instances de paiement) is defined as the outstanding stock of* ### 8. Stress tests do not reveal serious vulnerabilities for external public debt, as the ### _cr09205 - 8. Stress tests do not reveal serious vulnerabilities for external public debt, as the ### External public debt stress tests - Stress tests do not reveal serious vulnerabilities for external public debt; various indicators remain below the thresholds (Figure 1, Table 2). - The most extreme stress test for all indicators is an increase by 2 percentage points in the interest rate on new external public borrowing. - This sharply reduces the concessionality of new debt and, without policy adjustments, leads to marked increases over time in debt ratios. However, they remain below thresholds. - An additional stress test assumes exports and real GDP grow by 5 and 2 percentage points less, respectively, in 2009–10 than in the baseline (Table 2, scenario A.3). - Under this scenario, which returns to the baseline’s macroeconomic assumptions over the medium term, debt ratios also remain well short of thresholds. ### Public DSA and overall public debt - Indicators of overall (external plus domestic) public debt and debt service are largely similar to those for external public debt alone. - Baseline path: after rising somewhat in the earlier part of the period, debt ratios in the baseline subsequently decline as the fiscal deficit is gradually reduced (Figure 2, Table 3). - The debt service-to-revenue ratio remains well contained after peaking early on due to the relatively rapid repayment requirements of the 2008–09 nonconcessional loans. - Baseline projections reflect: - the settlement of payment delays remaining at the beginning of 2009; - expected—larger—privatization receipts in 2009. - Both are treated as budget financing items in the baseline but, by design, ignored in the stress tests—thereby on balance marginally worsening the results of the tests in this case. ### Vulnerabilities and stress-test scenarios - Public debt sustainability hinges on containing the fiscal deficit. - If the fiscal balance were to remain at its 2009 level, with a primary deficit of 3½ percent of GDP over the entire projection period, the PV of overall public debt-to-GDP ratio would rise continuously and nearly double (Table 4). - The financing needs created by such accumulating deficits would risk crowding out the private sector. - The PV of debt-to-revenue ratio would also rise substantially, reinforcing the need for the prudent fiscal policy that is envisioned in the baseline. - The public debt position remains vulnerable to unexpected shocks: - The most extreme stress test adds 10 percent of GDP to public debt in 2010 and results in the highest debt ratio in 2019 compared to other tests, illustrating the importance for debt sustainability of avoiding sudden, large increases in debt (for example, a renewed build-up of payment delays). - The second most extreme stress test entails a reduction in 2010–11 GDP growth and illustrates the relevance of growth-enhancing policies for debt sustainability and macroeconomic management. - An additional stress test with a more severe impact of the global crisis on Senegal in 2009–10 assumes: - GDP growth is 2 percentage points lower and - the primary fiscal deficit 4 percentage points higher in 2009-10 than in the baseline (Table 4, scenario A.4). - Under this scenario, the deterioration in public debt burden indicators is contained by the assumed return to baseline policies, illustrating the need for a prudent fiscal policy over the medium term. ### Conclusion - External public debt stress tests keep indicators below thresholds even under severe assumptions (interest rate shock; lower exports and growth in 2009–10). - Overall public debt sustainability depends critically on containing the fiscal deficit and avoiding sudden large increases in debt. - Growth-enhancing policies and prudent fiscal policy over the medium term are essential to contain vulnerabilities identified by the stress tests. *Source: _cr09205 - 8. Stress tests do not reveal serious vulnerabilities for external public debt, as the* ### 12. In sum, based on the staffs’ analysis, Senegal’s external debt burden is subject to a ### _cr09205 - 12. In sum, based on the staffs’ analysis, Senegal’s external debt burden is subject to a ### Main conclusion - Senegal’s external debt burden is subject to a low risk of debt distress. - Senegal’s public debt remains sustainable even after considering domestic debt in the analysis. - Baseline projections and associated standard stress tests show low risk related to external debt, as all indicators remain below the indicative debt burden thresholds. - Public debt sustainability is vulnerable to shocks, such as sharp increases in debt or declines in growth. - Policy implication: Senegal would benefit from continued fiscal discipline, prudent nonconcessional borrowing, and sensible debt management. ### Debt dynamics and risks - Real GDP growth volatility: standard deviation of growth of 2 percentage points over the last 10 years; Real GDP growth dropped by 3 percentage points in 2006 and 2¼ points in 2008. - Identified vulnerability: public debt sustainability is sensitive to sharp increases in debt or declines in growth. ### Stress tests and scenario outcomes (selected) - The most extreme stress test for multiple indicators corresponds to a Borrowing terms shock (figures b–f). - Scenario types referenced include: - Baseline - Historical scenario - Most extreme shock (highest ratio in 2019) - Alternative scenarios (A1, A2, A3) and Bound Tests (B1–B6) across 2009–2029 projections. ### Selected baseline external debt indicators (2006–2029; as presented) - External debt (nominal): 39.9; 42.0; 43.8; 48.7; 51.0; 52.6; 54.0; 55.8; 57.7; 64.1; 65.2 (series spanning years shown in Table 1). - o/w public and publicly guaranteed (PPG): 17.7; 17.9; 19.7; 24.4; 26.0; 26.4; 27.0; 27.9; 29.4; 34.9; 38.3. - Change in external debt (selected values): -23.1; 2.1; 1.8; 4.8; 2.3; 1.6; 1.5; 1.8; 1.8; 1.0; -0.5. - Identified net debt-creating flows (selected values): 3.3; 2.8; 4.1; 7.9; 7.1; 5.3; 5.0; 5.0; 4.9; 3.4; -0.3. - Non-interest current account deficit (selected values): 8.8; 11.3; 11.9; 6.9; 3.0; 11.1; 10.1; 9.4; 9.3; 9.4; 9.5; 8.8; 5.0; 7.7. - Exports (in percent of GDP, selected): 27.5; 27.2; 26.6; 23.3; 24.0; 24.4; 24.2; 24.0; 23.7; 25.8; 31.5. - Imports (in percent of GDP, selected): 45.9; 50.5; 49.8; 44.0; 43.0; 42.3; 42.1; 42.2; 42.0; 43.2; 45.2. - Net FDI (negative = inflow, selected): -2.2; -2.7; -2.3; -1.5; 0.9; -3.6; -2.9; -3.4; -3.3; -3.3; -3.3; -3.5; -3.1; -3.4. - Endogenous debt dynamics (selected): -3.2; -5.8; -5.5; 0.4; -0.1; -0.7; -1.0; -1.2; -1.3; -1.9; -2.2. - Contribution from nominal interest rate (selected): 1.1; 1.0; 1.0; 1.9; 1.5; 1.4; 1.3; 1.3; 1.2; 1.2; 1.1. - Contribution from real GDP growth (selected): -1.4; -1.6; -0.9; -1.5; -1.6; -2.1; -2.4; -2.5; -2.5; -3.1; -3.4. - Contribution from price and exchange rate changes (selected): -2.9; -5.3; -5.6; ... - Residual (3-4) (selected): -26.4; -0.7; -2.3; -3.1; -4.8; -3.7; -3.6; -3.2; -3.1; -2.4; -0.2. - o/w exceptional financing (selected): -48.1; -1.8; -0.6; -0.7; -0.6; -0.5; -0.5; -0.4; -0.4; -0.3; -0.1. - PV of external debt (selected values presented): 39.5; 43.1; 44.4; 45.2; 45.7; 46.5; 47.3; 50.3; 49.6 (as shown in Table 1 snapshots). - In percent of exports (selected): 148.5; 185.1; 185.0; 184.9; 189.0; 193.9; 199.5; 194.9; 157.2. - PV of PPG external debt (selected): 15.3; 18.9; 19.5; 18.9; 18.6; 18.6; 19.0; 21.1; 22.8. - In percent of exports (selected): 57.6; 81.1; 81.1; 77.6; 77.0; 77.4; 80.1; 81.6; 72.2. - In percent of government revenues (selected): 79.0; 98.5; 100.7; 96.0; 92.7; 91.3; 92.1; 103.0; 109.2. - Debt service-to-exports ratio (in percent, selected): 12.0; 10.6; 9.3; 15.9; 15.2; 18.1; 18.3; 18.4; 17.6; 17.0; 14.3. - PPG debt service-to-exports ratio (in percent, selected): 3.9; 3.2; 2.7; 4.8; 4.6; 7.5; 7.2; 6.8; 5.6; 4.2; 5.0. - PPG debt service-to-revenue ratio (in percent, selected): 5.4; 4.1; 3.8; 5.9; 5.7; 9.3; 8.6; 8.0; 6.4; 5.4; 7.6. - Total gross financing need (Billions of U.S. dollars, selected): 0.9; 1.3; 1.6; 1.4; 1.4; 1.5; 1.6; 1.7; 1.8; 2.4; 3.3. - Non-interest current account deficit that stabilizes debt ratio (selected): 31.9; 9.2; 10.1; 6.2; 7.8; 7.8; 7.9; 7.7; 7.7; 7.8; 5.5. ### Key macroeconomic assumptions (selected series as presented) - Real GDP growth (in percent, series spanning baseline/projections): 2.4; 4.7; 2.5; 4.3; 2.0; 3.1; 3.4; 4.3; 4.8; 4.9; 4.9; 4.2; 5.2; 5.5; 5.3. - GDP deflator in US dollar terms (change in percent, selected): 4.8; 15.2; 15.3; 6.1; 9.9; -9.1; 1.8; 2.2; 2.4; 2.4; 2.1; 0.3; 2.1; 2.2; 2.2. - Effective interest rate (percent, selected): 1.9; 3.0; 2.8; 2.0; 0.6; 4.1; 3.2; 3.0; 2.7; 2.5; 2.3; 3.0; 2.0; 1.9; 2.0. - Growth of exports of G&S (US dollar terms, in percent, selected): 0.5; 19.5; 15.2; 9.3; 10.4; -17.8; 8.5; 8.4; 6.2; 6.4; 5.9; 2.9; 9.8; 9.9; 9.7. - Growth of imports of G&S (US dollar terms, in percent, selected): 7.3; 32.6; 16.6; 14.0; 11.0; -17.2; 2.9; 4.9; 6.7; 7.6; 6.6; 1.9; 8.1; 8.2; 8.1. - Grant element of new public sector borrowing (in percent, selected): 29.2; 48.8; 51.2; 51.1; 51.1; 51.1; 47.1; 49.3; 47.1; 48.7. - Government revenues (excluding grants, in percent of GDP, selected): 19.7; 21.1; 19.4; 19.2; 19.3; 19.7; 20.1; 20.3; 20.6; 20.5; 20.8; 20.6. - Aid flows (in Billions of US dollars, selected): 0.4; 0.6; 0.9; 0.7; 0.7; 0.7; 0.9; 1.0; 1.1; 1.5; 2.7. - o/w Grants (Billions USD, selected): 0.1; 0.3; 0.3; 0.3; 0.3; 0.3; 0.3; 0.4; 0.4; 0.6; 1.1. - o/w Concessional loans (Billions USD, selected): 0.3; 0.3; 0.6; 0.4; 0.4; 0.4; 0.5; 0.6; 0.7; 0.9; 1.7. - Grant-equivalent financing (in percent of GDP, selected): 4.1; 4.0; 3.9; 4.1; 4.3; 4.4; 4.3; 3.8; 4.2. ### Public sector debt (Table 3 selected values) - Public sector debt (percent of GDP, selected): 21.9; 23.5; 24.7; 28.1; 29.9; 32.1; 34.0; 35.8; 37.5; 43.8; 44.7. - o/w foreign-currency denominated (selected): 17.7; 17.9; 19.7; 24.4; 26.0; 26.4; 27.0; 27.9; 29.4; 34.9; 38.3. - Change in public sector debt (selected): -23.7; 1.6; 1.2; 3.4; 1.8; 2.2; 1.9; 1.8; 1.7; 1.0; -0.4. - Identified debt-creating flows (selected): -2.1; -0.4; 3.2; 3.3; 2.2; 1.8; 1.6; 1.5; 1.4; 0.9; -0.7. - Primary deficit (percent of GDP, selected projections and averages): 5.2; 3.2; 4.1; 1.6; 2.3; 3.7; 3.2; 3.3; 3.3; 3.2; 3.3; 3.3; 3.2; 1.9; 2.7. - Revenue and grants (percent of GDP, selected): 21.2; 23.6; 21.7; 21.6; 21.6; 22.0; 22.3; 22.6; 22.8; 22.7; 22.9. - of which: grants (percent of GDP, selected): 1.5; 2.6; 2.3; 2.4; 2.3; 2.2; 2.2; 2.2; 2.2; 2.2; 2.1. - PV of public sector debt (selected): 4.3; 5.6; 20.3; 22.6; 23.3; 24.7; 25.6; 26.4; 27.1; 30.0; 29.1. - o/w external (selected): 15.3; 18.9; 19.5; 18.9; 18.6; 18.6; 19.0; 21.1; 22.8. - Gross financing need (selected, percent of GDP): 6.4; 4.3; 5.1; 5.5; 6.2; 7.3; 7.5; 7.6; 7.4; 7.3; 5.9. - PV of public sector debt-to-revenue and grants ratio (in percent, selected): 20.1; 23.6; 93.6; 104.4; 107.9; 112.2; 114.9; 117.2; 118.9; 132.1; 127.0. ### Sensitivity analysis highlights (Table 2 and Table 4 excerpts) - Alternative scenarios and bound tests are evaluated for PV of debt-to-exports, PV of debt-to-revenue, PV of debt-to-GDP, debt service-to-exports, and debt service-to-revenue ratios over 2009–2029. - A2 (new public sector loans on less favorable terms) and B6 (one-time 30 percent nominal depreciation in 2010) are among scenarios producing significant deterioration in several indicators (specific scenario tables and numeric outcomes are presented in the source tables). ### Policy recommendations (derived from staff conclusions) - Continue fiscal discipline. - Avoid imprudent nonconcessional borrowing. - Implement sensible debt management to mitigate vulnerability to shocks. *Source: IMF—INTERNATIONAL MONETARY FUND, SENEGAL: Third Review Under the Policy Support Instrument and First Review and Augmentation of Access Under the Exogenous Shocks Facility—Informational Annex (Prepared by the African Department), Approved June 5, 2009.* ### 13. Data provision has some shortcomings, but is broadly adequate for surveillance and ### _cr09205 - 13. Data provision has some shortcomings, but is broadly adequate for surveillance and ### Data provision — overview - Data provision is "broadly adequate for surveillance and program monitoring" but has weaknesses in data on national accounts, production, and social indicators. - Authorities are committed to improving quality and availability of economic, financial and social indicators, partially relying on technical assistance from the Fund and other international organizations. - A Report on the Observance of Standards and Codes was published on the IMF website on December 2, 2002. - The country participates in the General Data Dissemination System (GDDS); metadata were posted on the Fund’s Dissemination Standards Bulletin Board on September 10, 2001. - In September 2006, authorities expressed commitment to work toward subscription to the Special Data Dissemination Standard (SDDS) and appointed a national SDDS coordinator. - November 2008 SDDS assessment mission evaluated dissemination practices and developed an action plan to address identified gaps. ### Real sector statistics - National accounts compilation generally follows the System of National Accounts, 1993. - Lack of adequate financial resources has constrained data collection and processing; data sources are deficient particularly for the informal sector. - Surveys of business and households are not conducted regularly due to financial constraints. - Efforts to improve data collection procedures, strengthen coordination among statistical agencies, and reduce delays in data dissemination are underway. - West AFRITAC assistance and progress reported: - completion of national accounts for 1980–2004 with 1999 as the base year; - dissemination of the 1980–2003 series in hard copy and on the internet; - production of accounts by institutional sector (first series covers 2004 institutional sector accounts); - production of national accounts in accordance with the dissemination schedule. - Authorities plan to start production of quarterly national accounts (QNA) in view of intention to subscribe to the SDDS. - West AFRITAC missions assisted training for QNA compilation for the period 1990-2007; November 2008 mission agreed on a detailed work program aimed at starting regular dissemination of the QNA in March 2010. - An April 2009 mission focused on methods used for QNA compilation at current prices. ### Government finance statistics (GFS) - GFS compiled by the Ministry of Economy and Finance from customs, tax, and treasury directorate sources. - Data last reported to STA for electronic redissemination and publication in the 2007 Government Finance Statistics Yearbook were for fiscal year 2001. - Higher frequency data are not provided for redissemination in IFS; ministry compiles and disseminates quarterly government financial operations tables (TOFE) in their own publications. - Weaknesses in monitoring payment delays (including deficiencies in Treasury computerization) are being addressed under the PSI program. - February 2004 AFR team worked with authorities to improve fiscal reporting focusing on: - public accounts outside direct purview of the treasury; - treatment of correspondents’ accounts in the TOFE; - ensuring consistency between treasury and banking system information on government transactions. - Proposed changes are being implemented and improve presentation of government financial operations, as a first step toward aligning TOFE with the extended WAEMU TOFE. - Regional advisor in GFS conducting technical assistance to improve consistency of fiscal reporting and migrate to Government Finance Statistics Manual 2001 methodologies; supported resumption of reporting annual and higher frequency data for IFS and electronic dissemination of the GFS Yearbook. ### Monetary and financial statistics - Preliminary monetary data compiled by national agency of BCEAO and officially released by BCEAO headquarters. - Authorities now report monetary data to STA regularly, with lag reduced from about six months to about three to four months. - Timeliness of reporting interest rate and main depository corporation data has improved. - An area-wide page for the WAEMU zone was introduced in the January 2003 issue of IFS. - In 2005, BCEAO made substantial revisions to estimates of banknotes in circulation due to cross-border banknote movement; revised method based on updated sorting coefficients (“coefficients de tri”) applied retroactively from December 2003. - In August 2006 BCEAO reported test monetary data for June 2006 using Standardized Report Forms (SRF); BCEAO provided a revised central bank report form (1SR) and test data for other depository corporations (2SR) for STA review. - Completion of SRFs (1SR, 2SR, and 5SR) will allow publication of data in the IFS Supplement for countries compiling and reporting in SRF format. ### External sector statistics - Balance of payments statistics compiled by the Senegalese national agency of the BCEAO. - With STA support, steps taken include: - implementation of the Balance of Payments Manual, fifth edition; - modification and simplification of related surveys for companies and banks; - improvement in computerization of procedures; - significant strengthening of staff training. - Further steps could enhance quality and coverage of balance of payments statistics. - Definitive balance of payments statistics can now be provided with a delay of less than one year, though there are some delays in reporting data to STA. ### Key data-frequency and quality entries (Table of Common Indicators Required for Surveillance — as of June 5, 2009) - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation 3/2009; Date received 5/2009; Frequency of data M; Frequency of reporting M; Frequency of publication M. - Reserve/Base Money: Date of latest observation 3/2009; Date received 5/2009; Frequency of data M; Frequency of reporting M; Frequency of publication M. - Broad Money: Date of latest observation 3/2009; Date received 5/2009; Frequency of data M; Frequency of reporting M; Frequency of publication M. - Central Bank Balance Sheet: Date of latest observation 3/2009; Date received 5/2009; Frequency of data M; Frequency of reporting M; Frequency of publication M. - Consolidated Balance Sheet of the Banking System: Date of latest observation 3/2009; Date received 5/2009; Frequency of data M; Frequency of reporting M; Frequency of publication M. - Interest Rates: Date of latest observation 4/2009; Date received 5/2009; Frequency of data M; Frequency of reporting M; Frequency of publication M. - Consumer Price Index: Date of latest observation 4/2009; Date received 5/2009; Frequency of data M; Frequency of reporting M; Frequency of publication M. - Revenue, Expenditure, Balance and Composition of Financing – Central Government: Date of latest observation 3/2009; Date received 5/2009; Frequency of data Q; Frequency of reporting Q; Frequency of publication Q. - External Current Account Balance: Date of latest observation 2007; Date received 5/2008; Frequency of data A; Frequency of reporting A; Frequency of publication A. - Exports and Imports of Goods and Services: Date of latest observation 2007; Date received 5/2008; Frequency of data A; Frequency of reporting A; Frequency of publication A. - GDP/GNP: Date of latest observation 2007; Date received 12/2008; Frequency of data A; Frequency of reporting I; Frequency of publication A. - Gross External Debt: Date of latest observation 2007; Date received 5/2008; Frequency of data Q; Frequency of reporting I; Frequency of publication A. - International Investment Position: Date of latest observation 6/2007; Date received 5/2009; Frequency of data A; Frequency of reporting A; Frequency of publication A. ### Statement by the IMF Staff Representative on Senegal (June 19, 2009) - Effective June 16, the BCEAO lowered its key policy rate by 50 basis points, to 4.25 percent, and lowered the reserve requirement ratio applicable to Senegalese banks from 9 to 7 percent. - Consumer price index fell by 0.9 percent in May 2009 relative to the previous month, and by 0.4 percent year-on-year. - Authorities’ program projects average inflation of 0.8 percent in 2009. - Standard & Poor’s upgraded Senegal’s outlook from negative to stable while affirming ratings; long-term rating remained “B+” and short-term rating “B”. ### IMF Press Release No. 09/223 (June 19, 2009) — ESF increase and approvals - Executive Board approved increase in financial support under the Exogenous Shocks Facility (ESF) by SDR 72.81 million (about US$112 million) to SDR 121.35 million (about US$186 million) and extension of ESF arrangement from 12 to 18 months. - Approval enables Senegal to draw SDR 32.36 million (about US$50 million) immediately, and equal amounts upon completion of the second and third reviews under the ESF arrangement. - Executive Board completed the first review under the ESF and the third review under the Policy Support Instrument (PSI) and granted a waiver for the quantitative performance criterion on the basic fiscal balance for end-December 2008. - ESF for Senegal was approved on December 19, 2008. - Three-year PSI for Senegal was approved on November 2, 2007. ### IMF Acting Chair statement (Murilo Portugal) — selected policy points - Global economic crisis expected to affect the Senegalese economy; economic growth expected to remain weak in 2009 due to falling remittances, lower export prices, and contraction of foreign direct investment. - Inflation expected to fall sharply reflecting decline in international food and fuel prices and absence of domestic demand pressures. - Financial sector has weathered the crisis; recent steps to strengthen financial stability monitoring are welcome. - Scope exists for temporary easing of fiscal policy; over the medium term, fiscal policy should return to a sustainable path consistent with macroeconomic stability and debt sustainability while preserving spending in priority social sectors and public infrastructure. - Continued and deepened improvements in public financial management and follow-up on independent external audit of extrabudgetary spending are essential. - Structural reforms to develop the financial sector and improve the business climate are key to bolstering economic performance and investor confidence. ### Statement by Laurean Rutayisire, Executive Director for Senegal (June 19, 2009) — selected points - Authorities have made great strides in implementing the Fund-supported program; bulk of stock of unpaid bills to the private sector has been cleared. - Degree of compliance with program conditionality remains high; major improvements in public financial management earned improved rating from Standard & Poor's Ratings Services. - Transparent municipal elections in March were successfully organized; opposition parties won most major cities without incident. - Program performance remains strong on quantitative and structural fronts; all but one end-December 2008 quantitative program targets were met. - The criterion on the basic fiscal deficit was missed due to a significant decline in tax revenues during the last quarter of 2008 stemming from lower petroleum tax receipts and delayed tax payments by the electricity company, SENELEC. - Authorities took remedial actions to meet end-March 2009 targets, including program criterion on the fiscal balance, and request a waiver for nonobservance of the end-December 2008 assessment criterion on the fiscal balance. *Source: IMF staff report excerpts and associated statements (as provided in the supplied content).* ### 4. On the structural front, the authorities met all assessment criteria and most ### _cr09205 - 4. On the structural front, the authorities met all assessment criteria and most ### Structural reforms and benchmarks - Authorities met all assessment criteria and most benchmarks. - Adopted decrees enacting the timetable and procedures for compiling the budget. - Implemented a streamlined system for reopening and carrying over budgetary appropriations. - Implemented the new microfinance law. - Complied with the regulatory deadline for closure of the 2008 budget and accounting year. - Two end-March structural benchmarks were delayed: - External audit of extrabudgetary expenditures delayed due to longer-than-expected process for selecting the audit firm and mobilizing financing; audit firm has been selected and its report is expected to be completed later this month. - First audit report of the procurement regulatory authority (ARMP) delayed; preliminary reports will be available in September 2009. - Actions following audits: - After completion of the external audit, a decision will be made by end-July on the regularization of extrabudgetary expenditure in the 2010 budget. - ARMP audit preliminary reports in September 2009 will provide key inputs to assess effectiveness of the new procurement framework. - Plan to finalize external audit of SIGFIP by end-September. - Intention to make the budget accounting module of the Treasury accounting software (ASTER) operational by end-October 2009. ### Economic outlook and medium-term policy agenda (2009-10) - Standard & Poor's Ratings Services revised Senegal outlook to stable from negative on May 26, 2009, citing progress in public finance management and more rigorous spending and budget execution procedures. - 2009 projections: - Real GDP growth is projected to bounce back and exceed slightly its estimated level for 2008, reflecting progress by ICS toward full recovery of its operations and rebound of non-agricultural GDP growth. - Average inflation is forecasted to be contained. - External current account deficit is expected to narrow slightly compared to its 2008 level, dropping below 12 percent of GDP. ### Fiscal policy stance and public financial management (PFM) reforms - Medium-term fiscal objective: contain overall fiscal deficit in the neighborhood of 4 percent over the medium-term. - 2009 fiscal projection: - Fiscal deficit is projected to exceed this target by one half percent of GDP. - This level aims to protect social sector spending and critical growth-promoting investment despite weakening revenue performance. - Social spending objective: - Authorities aim to increase social expenditures from its current level of 33 percent to 40 percent of GDP by 2010. - Expenditure control: - Continue firm restraint over public expenditures, particularly those not subject by law to firm ceiling (crédits évaluatifs). - Tax policy and administration measures: - Finalize by end-September 2009 a study to determine the magnitude and rationale of tax exemptions. - Transfer responsibility of collecting the FSAPP tax from the petroleum refinery, SAR, to the tax department (DGID). - Measures to reduce fiscal risks from the energy sector: - Quarterly modification of the electricity price structure. - Elimination of butane gas subsidies. - Regular tax payments by the electricity company, SENELEC. ### Financial sector reforms and stability - Preserving financial stability remains a high priority. - Authorities will continue to abide by the monetary stance set by the regional central bank, BCEAO. - Monitor banking system soundness and take necessary actions amid the global financial crisis. - Ensure close monitoring of solvency and liquidity of the system. - Enactment of the new minimum capital ratios to take effect by 2010. ### Private sector development - Authorities will continue laying the basis for a private sector-led economy. - Agenda items to enhance the business environment: - Strengthen the judicial system. - Quicken transfer of property rights and issuance of construction permits. - Improve the Doing Business cross-border trade indicator. - Clearance of the stock of unpaid bills is expected to stimulate private sector activity and improve growth prospects. - Authorities express appreciation to the donor community, and France in particular, for financial support that largely contributed to the settlement of government’s payment delays to the private sector. ### Augmentation of access under the Exogenous Shocks Facility (ESF) - Rationale for augmentation and extension: - Successive global crises impacted Senegal worse than anticipated at ESF approval. - Food and oil price shocks triggered initial request under the ESF; current global economic turmoil justifies augmentation and extension. - Channels of negative effects on Senegal’s economy and external position: - Sharp decline in remittance inflows. - Expected slowdown in foreign direct investment. - Lethargy of the tourism sector and related activities. - Authorities request prompt follow-up and call on Directors to grant support to the augmentation and extension request. ### Conclusion and program assessment - Under the PSI-supported program, authorities achieved major policy accomplishments, particularly in fiscal areas where notable shortcomings had been identified. - Achievements were made despite difficult external circumstances, including two successive global shocks. - Outlook remains uncertain, especially in the event of a protracted global crisis. - Senegal will continue to value Fund assistance for designing and implementing the reform and policy agenda. - Authorities request Board support for completion of the PSI and ESF reviews and for the requested augmentation of access under the ESF. *Source: IMF staff report content provided in the content unit.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09205.pdf_