## _cr16144 ## Source details **Canonical URL:** [_cr16144](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16144.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16144.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16144.pdf.json) --- ### Recent developments and outlook - Growth and projections - Growth was robust at 6.5 percent in 2015 (the highest in 12 years). - Real growth is projected at 6.6 percent in 2016 and around 7 percent in the medium term as PSE reforms yield results. - Growth increased from 4.3 percent in 2014 to 6.5 percent in 2015, reflecting PSE-related projects, buoyant agriculture, and renewed dynamism in refining, chemicals, cement, energy, and construction. - Inflation and prices - Inflation: 0.4 percent y-o-y at end-December 2015; 0.1 percent yearly average in 2015. - Inflation is expected to stay within the 1–2 percent range over the medium term. - GDP deflator revised to 0.0 percent in 2015 and 1.7 percent in 2016 (from 0.2 and 1.8 percent). - External sector and current account - Current account: narrowed by 1.3 percentage points to 7.6 percent of GDP in 2015 (from 8.9 percent in 2014). - Current account projected to improve to 6 percent of GDP in 2016. - Projected oil prices in 2016 are 30 percent lower than last year’s. - Workers’ remittances: 11.9 percent of GDP in 2015; projected 10 percent of GDP by 2020. - Foreign direct investment: 2.4 percent of GDP in 2015 (up from 2 percent in 2014). - Public debt and sustainability - Public debt: 56.8 percent of GDP in 2015; estimated 57.3 percent of GDP in 2016; projected to decline to 50 percent in 2021. - Updated DSA results confirm Senegal’s low risk of debt distress. - Financial sector - NPLs fell from 23 percent of total loans at end-June 2015 to 18.8 percent at end-December 2015. - Growth of net foreign assets (NFA) in 2015 was 14.4 percent. - Domestic credit grew 11.2 percent in 2015. - Macroeconomic revisions - ANSD revised value added growth for 2014 to 4.3 percent (down from 4.7). - Deflator for 2014 revised to -1.0 percent (compared with 0.1 percent). ### Fiscal performance, consolidation, and policy recommendations - Fiscal targets and outcomes - 2015 fiscal deficit target CFAF 389 billion (4.8 percent of revised GDP) was met. - 2016 deficit target CFAF 372 billion (4.2 percent of GDP) remains as programmed under the PSI. - Revenue was 0.7 percentage points of GDP higher than projected in 2015; tax revenue accounted for 70 percent of this increase. - Revenue mobilization measures - 0.7 percentage points of GDP expected from tax revenues mainly from VAT on oil products. - Actions to strengthen collection: - institute procedures for forced recovery of arrears and introduce case management units within each recovery unit; - ensure recovery or settlement of at least 50 percent of the stock of outstanding assessment notices as of the end of each year; - implement the single taxpayer identification number (NINEA); - continue DGID–DGD cooperation to broaden the tax base through better control over imports and customs clearance monitoring. - Action plan to rationalize tax expenditures to be adopted by the government before the end of August 2016 (further steps in 2017 referenced). - Expenditure rebalancing and public investment - Public consumption projected to decline from 18.6 percent of GDP in 2015 to 17.2 percent in 2016 to allow more public investment in human capital and infrastructure. - Spending on goods and services expected to remain at 4.3 percent of GDP. - Precautionary Reserve Envelope (PRE): 2015 PRE set at 0.6 percent of GDP (CFAF 52bn); at end-2015, 33 percent mobilized (CFAF 17bn). 2016 PRE: CFAF 18.7 billion (0.2 percent of GDP) for current operations and CFAF 44.4 billion (0.5 percent of GDP) for investment. - Wage bill and payroll management - Wage bill: CFAF 526 billion in 2015 (as projected); revised to CFAF 573 billion in the 2016 budget (increase of about CFAF 34 billion in absolute terms and 6.4% in proportional terms). - Wage bill initially set in 2016 budget law at CFAF 556 billion (including the National Assembly and CESE) and CFAF 538 billion (excluding them). - Payroll policy measures: freeze pay supplements at 2014 level; tighten overtime controls; cap number of teachers integrated into the civil service at 4,000; freeze recruitment in non-priority areas. - To contain the wage bill: impose budget constraints on hiring in all sectors; ensure all contractuals in education, health, and vocational training are integrated into the payroll by 2017. - Debt policy and financing strategy - Authorities to continue relying on non-concessional loans for investment projects while securing access to foreign concessional financing equivalent to about 6 percent of GDP (including grants). - Exploring about Euro 1 billion of non-concessional financing for 2016 from AfDB and WB. - If multilateral facilities are not mobilized, international financial and regional markets will be used. - Strengthen debt management: develop medium-term debt strategy appended to the budget; announce a central government debt ratio deemed sustainable over five years in the next budget with corrective measures if thresholds exceeded (structural benchmark, October 2016); introduce a database and monitoring mechanism for public enterprise debt and collateral; strengthen and expand the CNDP. ### Program performance, structural reforms, and governance - PSI performance and conditionality - Program performance through December 2015 broadly satisfactory; all end-December 2015 quantitative assessment criteria met. - End-December indicative target on share of public sector contracts signed by single tender was missed due to unsolicited bids used to accelerate rural electrification (PSE target: electrification of 60 percent of rural households by 2017 from about 25 percent in 2012). - Structural benchmarks: six out of ten 2015 structural benchmarks met overall; four unmet by end-December 2015 (one met with delay, three expected to be met between end-May and end-October 2016). - Staff supports authorities’ request for completion of the second PSI review and adjustment of the mid-year end-June 2016 deficit assessment criterion. - Governance and reform priorities - Implementation of structural reforms has been slow, particularly those aimed at improving economic governance. - Authorities committed to corrective action to accelerate structural reforms, reduce patronage and rent-seeking, and open economic space to SMEs and FDI. - Specific steps: eliminate five agencies with no formal existence (by end-April 2016); performance contracts signed for five agencies and three public institutions; more to follow. - Structural reform timeline and new benchmarks (selected) - Establish integrated projects bank (platform) describing project lifecycle: rescheduled to September 2016. - Create structure responsible for recovering unpaid taxes (end-September 2016 SB). - Adopt action plan for reducing tax expenditure (end-September 2016 SB). - Announce debt ratio for next budget (rescheduled to October 2016). - Develop management strategy for government and public enterprise investment portfolios (rescheduled to September 2016). ### Risks, scenarios, and mitigating factors - Downside risks - Slow implementation of reforms to roll back rents and patronage. - Continued unproductive public consumption and failure to raise expenditure efficiency. - Growing regional security threats. - Adverse agricultural shocks: lower than average rainfall or stalled land reform. - External risks: tighter global conditions in 2016–17 and lower investor risk appetite could reduce availability of external financing or increase costs. - Mitigating factors - Program provides for increased security spending and a precautionary cushion in the budget. - Limited regional investment opportunities imply lower risk appetite would likely affect cost but not availability of financing in the regional sovereign bond market. - Moody’s rated Senegal as the only sub-Saharan African country with a positive outlook in its March 2016 Edition; Senegal has one of the lowest sovereign bond spreads in SSA. ### Key macroeconomic projections and selected indicators (as presented) - Real GDP growth: 2015: 6.5 percent; 2016: 6.6 percent (projected); medium term: around 7 percent. - GDP at constant prices (annual growth rates): 2014: 4.7; 2015: 4.3; 2016 (Est.): 5.1; 2017 (CR 16/3 Prel. Proj.): 6.5; 2018: 5.9; 2019: 6.6; 2020: 6.8; 2021: 7.0. - GDP deflator (annual growth): 2014: 0.1; 2015: -1.0; 2016: 0.2; 2017: 0.0; 2018: 1.8; 2019: 1.7; 2020: 1.7; 2021: 1.7. - Consumer prices, annual average: 2014: -1.1; 2015: -1.1; 2016: -0.5; 2017: 0.1; 2018: 1.3; 2019: 1.2; 2020: 1.2; 2021: 1.2. - Current account (official transfers included, percent of GDP): 2014: -8.8; 2015: -8.9; 2016: -8.2; 2017: -7.6; 2018: -8.7; 2019: -6.2; 2020: -5.8; 2021: -5.6. - Total public debt (percent of GDP): 2014: 53.2; 2015: 54.2; 2016: 54.4; 2017: 56.8; 2018: 55.1; 2019: 57.3; 2020: 56.2; 2021: 54.2. - Workers’ remittances: 2015: 11.9 percent of GDP; projected 10 percent of GDP by 2020. - FDI: 2014: 2 percent of GDP; 2015: 2.4 percent of GDP. - Memorandum: Gross domestic product (CFAF billions) 2015: 7,583; 2016: 8,078; 2017: 8,764; 2018: 9,528; 2019: 10,363; 2020: 11,291; 2021: 12,299; projection 13,380. ### Public financial management, monitoring, and reporting requirements - Floor on net lending/borrowing as of December 31, 2014: minus CFAF 381 billion (Revenue CFAF 1,877 billion; Total expenditure CFAF 2,258 billion). - Floor including grants adjusted downward by budget grants shortfall up to a maximum of CFAF 15 billion. - Reporting requirements: - Authorities to report provisional overall fiscal balance monthly to Fund staff with a lag no more than 30 days. - SIGFIP expenditure tracking table to be transmitted weekly and monthly showing committed, certified, payment orders, payments accepted by Treasury, and payments made. - Authorities to transmit specific decisions three days after adoption and preliminary monthly data within 30 days on tax receipts, expenditures, TOFE, provisional monthly balance of Treasury accounts, and reconciliation tables. - Central bank to transmit monthly balance sheet with maximum lag one month and consolidated bank balance sheets and monetary survey with maximum lag two months. - Government to update website monthly with preliminary TOFE and SIGFIP tables and provide full information on Energy Sector Support Fund operations and power sector projects. - Budgetary float: ceiling monitored at end of quarter; SIGFIP table excludes delegations for regions and embassies and lists payments without cash impact. - Social spending definition and semiannual reporting obligations specified. ### Technical assistance, capacity building, and peer learning - TA priorities: improvements in project management; better management of fiscal risks from PPPs; full implementation of the single treasury account; enhancing tax administration; rebasing of national accounts; adopting the SDDS. - Peer-learning: one-day seminar chaired by the Prime Minister and “book on emergence” book sprint brought together Senegal, IMF, World Bank, and peers (Mauritius, Morocco, Seychelles). - Staff appraisal: growth momentum welcomed; sustaining 20-year high growth requires reducing patronage and rent-seeking and opening space for SMEs and FDI; PSE growth rates of 7 to 8 percent over 20 years considered feasible with reforms. ### Energy, investment efficiency, and PPPs - Power capacity additions expected in 2016 totaling 250 MW: Taiba Ndiaye 105 MW; Cap des Biches 85 MW; Bokhole solar 20 MW; import from Mauritania 40 MW. - SENELEC reform plan cost estimated at 2.4 percent of GDP between 2016 and 2018. - Authorities to develop rigorous project selection and ranking criteria; all PPP projects require ex-ante analysis and MFEP to determine PPP financing modalities. ### Program recommendation and implementation status - Staff recommends completion of the second PSI review and supports the authorities’ request to adjust the mid-year end-June 2016 assessment criterion on net lending/borrowing. - At end-December 2015: all assessment criteria met; ceiling on single-tender contracts missed due to rural electrification acceleration. - Structural benchmark progress: six out of ten 2015 SBs met; several SBs rescheduled to mid-2016 to late-2016; new SBs introduced for tax recovery structure and tax expenditure action plan. - Review schedule: third review by end-December 2016; fourth review by end-June 2017; fifth review by end-December 2017. *International Monetary Fund — Senegal country report content unit* ### 6.5 percent is the highest in 12 years and is projected at 6.6 percent in 2016. Inflation is ### _cr16144 - 6.5 percent is the highest in 12 years and is projected at 6.6 percent in 2016. Inflation is ### Recent developments and outlook - Growth and projections - Growth was robust at 6.5 percent in 2015 (the highest in 12 years). - Real growth is projected at 6.6 percent in 2016 and around 7 percent in the medium term as PSE reforms yield results. - Growth increased from 4.3 percent in 2014 to 6.5 percent in 2015, reflecting PSE-related projects, buoyant agriculture, and renewed dynamism in refining, chemicals, cement, energy, and construction. - Inflation and prices - Inflation is low: 0.4 percent y-o-y at end-December 2015 and 0.1 percent yearly average in 2015. - Inflation is expected to stay within the 1–2 percent range over the medium term. - The GDP deflator is revised to 0.0 percent in 2015 and 1.7 percent in 2016 (from 0.2 and 1.8 percent, respectively). - External sector and current account - The current account narrowed by 1.3 percentage points to 7.6 percent of GDP in 2015 (from 8.9 percent in 2014). - A further improvement is projected in 2016; the current account is projected to continue improving to 6 percent of GDP in 2016. - Projected oil prices in 2016 are 30 percent lower than last year’s. - Workers’ remittances in 2015 amounted to 11.9 percent of GDP and are projected to decline to 10 percent of GDP by 2020. - Foreign direct investment is estimated to have increased from 2 percent of GDP in 2014 to 2.4 percent of GDP in 2015. - Public debt and sustainability - Public debt reached 56.8 percent of GDP in 2015. - In 2016, public debt is estimated to increase to 57.3 percent of GDP. - A downward trend in the debt-to-GDP ratio is expected thereafter, reaching 50 percent in 2021. - Updated DSA results confirm Senegal’s low risk of debt distress. - Financial sector - NPLs fell from 23 percent of total loans at end-June 2015 to 18.8 percent at end-December 2015. - Growth of net foreign assets (NFA) in 2015 was 14.4 percent. - Domestic credit grew 11.2 percent in 2015. - Macroeconomic data and revisions - ANSD revised GDP estimates for 2010–14; value added growth for 2014 revised to 4.3 percent (down from 4.7). - The change in deflator for 2014 was revised to -1.0 percent (compared with 0.1 percent). ### Fiscal performance and policy - Fiscal targets and outcomes - The 2015 fiscal deficit target of CFAF 389 billion (4.8 percent of revised GDP) was met. - The 2016 deficit target of CFAF 372 billion (4.2 percent of GDP) remains as programmed under the PSI. - In 2015, revenue was 0.7 percentage points of GDP higher than projected; tax revenue accounted for 70 percent of this increase. - Wage bill and personnel measures - The wage bill was CFAF 526 billion in 2015 (as projected). - The wage bill was revised to CFAF 573 billion in the 2016 budget (increase of about CFAF 34 billion in absolute terms and 6.4% in proportional terms). - The wage bill was initially set in the 2016 budget law at CFAF 556 billion (including the National Assembly and CESE) and CFAF 538 billion (excluding them). - Payroll policy measures included freezing the level of pay supplements at the 2014 level, tightening controls on overtime, capping the number of teachers integrated into the civil service at 4,000, and freezing recruitment in non-priority areas. - Composition of spending and revenue mobilization - Public consumption is projected to decline from 18.6 percent of GDP in 2015 to 17.2 in 2016 to allow more public investment in human capital and infrastructure. - Spending on goods and services is expected to remain at 4.3 percent of GDP. - The wage bill will be 0.2 percentage points higher than initially projected (at 6.5 percent of GDP) in 2016 but is expected to decrease afterwards. - Continued strengthening of public finances is required by further mobilizing revenue and rebalancing public expenditure towards investment in human capital and social infrastructure. ### Program performance, structural reforms, and governance - PSI program performance - Program performance through December was broadly satisfactory. - All end-December 2015 quantitative assessment criteria were met. - The end-December indicative target on the share of the value of public sector contracts signed by single tender was missed. - Four out of ten 2015 structural benchmarks were unmet by end-December 2015; one was met with delay and three were expected to be met between end-May and end-October 2016. - Six out of ten 2015 structural benchmarks were met overall. - Specific implementation issues - The missed IT on single-tender contracts reflected the use of unsolicited bids to accelerate rural electrification (PSE target: electrification of 60 percent of rural households by 2017 from about 25 percent in 2012). - Collection at end-December of unpaid 2014 taxes was 47 percent (against the target of 50 percent); technical difficulties in isolating 2014 liabilities contributed to missing the target; the goal is expected to be achieved by end June 2016. - A debt anchor included in the 2016 budget lacked language on corrective actions in case of debt slippages; this omission will be addressed in the next corrective budget in October 2016. - The structural benchmark for a management strategy for government and public enterprise investment portfolios was pushed back from end-March 2016 to end-September 2016. - Five agencies with no formal existence were eliminated by end-April 2016; performance contracts for five agencies and three public institutions have been signed, with additional performance contracts expected. - Governance and reform priorities - Implementation of structural reforms has been slow, particularly those aimed at improving economic governance. - Authorities committed to taking corrective action to accelerate structural reforms and improve economic governance. - Authorities agreed that the limits of public sector driven growth are being reached. - Sustaining PSE targets requires reducing patronage and rent-seeking and opening economic space to SMEs and FDI to create economic opportunities for all. - Staff position - Staff supports the authorities’ request for the completion of the second PSI review. ### Risks and outlook scenarios - Downside risks highlighted - Slow implementation of reforms to roll back rents and patronage. - Continued unproductive public consumption and failure to raise expenditure efficiency. - Growing regional security threats. - Adverse agricultural shocks: lower than average rainfall or stalled land reform could reverse good results in agriculture. - External risks: tighter global conditions in 2016–17 and lower investor risk appetite could reduce the availability of external financing or increase costs. - Mitigating factors and assessments - The program provides for increased security spending and a precautionary cushion in the budget. - With limited investment opportunities in the region, lower risk appetite would likely affect cost but not availability of financing in the regional sovereign bond market. - Moody’s rated Senegal as the only sub-Saharan African country with a positive outlook in its March 2016 Edition; Senegal has one of the lowest sovereign bond spreads in SSA. - Projections summary (selected) - Real GDP growth: 6.5 percent in 2015; projected 6.6 percent in 2016; around 7 percent in the medium term. - Inflation: 0.4 percent y-o-y at end-December 2015; 0.1 percent yearly average in 2015; expected to remain within 1–2 percent over the medium term. - Current account: 7.6 percent of GDP in 2015; projected 6 percent of GDP in 2016. - Public debt: 56.8 percent of GDP in 2015; 57.3 percent of GDP in 2016; projected to decline to 50 percent in 2021. - Workers’ remittances: 11.9 percent of GDP in 2015; projected 10 percent of GDP by 2020. - FDI: 2.4 percent of GDP in 2015 (up from 2 percent in 2014). *May 9, 2016. International Monetary Fund.* ### 0.7 percentage points of GDP is expected from tax revenues mainly from VAT on oil products. To ### _cr16144 - 0.7 percentage points of GDP is expected from tax revenues mainly from VAT on oil products. To ### Fiscal consolidation and targets - 0.7 percentage points of GDP is expected from tax revenues mainly from VAT on oil products. - Staff believe that the current package of policies will allow Senegal to meet by 2018, a year early, the 3 percent of GDP fiscal deficit convergence criteria of the West African Economic and Monetary Union. - Continued curtailment of subsidies and control of the growth of the wage bill are required to meet consolidation objectives. ### Revenue collection and tax policy - Revenue collection will continue to improve in 2016 and beyond (MEFP ¶14–16). - Actions to strengthen revenue collection: - Institute procedures for forced recovery of arrears and introduce case management units within each recovery unit. - Ensure recovery or settlement of at least 50 percent of the stock of outstanding assessment notices as of the end of each year. - Implement the single taxpayer identification number (NINEA). - Continue close cooperation between the Direction Générale des Impôts et Domaines (DGID) and the Direction Générale des Douanes (DGD) to broaden the tax base through better control over imports and customs clearance monitoring. - Further steps in 2017 to rationalize tax expenditures; an action plan based on the 2013 report on tax expenditures and working group conclusions will be adopted by the government before the end of August 2016. ### Expenditure rebalancing and public investment - PSE calls for a shift away from public consumption towards public investment to scale up physical and human capital. - Public investment (in percent of GDP) fell in 2015 after three years of rising faster than public consumption. - In 2014 and 2015, less than 50 percent of the growth in total government expenditure was attributable to growth in public investment. - To create fiscal space for public investment, the authorities should: - Curtail public consumption. - Improve the overall quality of public investment by better project preparation and managing the full project cycle. - Precautionary Reserve Envelope (PRE): - 2015 PRE set at 0.6 percent of GDP (or CFAF 52bn). - At end-2015, 33 percent of the envelope (or CFAF 17bn) was mobilized to fund priority investments. - 2016 PRE: CFAF 18.7 billion (0.2 percent of GDP) for current operations and CFAF 44.4 billion (0.5 percent of GDP) for investment. ### Wage bill, hiring, and subsidies management - Three fourths of the recent increase in expenditures is explained by regularization of outstanding arrears related to benefits and other allowances; the remaining one fourth is due to automatic conversion of contractual to public servants as well as new hiring on security and defense. - To contain the wage bill: - Impose budget constraints on hiring in all sectors. - Ensure all current contractuals in education, health, and vocational training are integrated into the payroll by 2017. - Management of subsidies: - Improve subsidy management based on recommendations of a working group to report by September (year as in source). - Limit subsidies to institutions of higher education (already being acted on). - From 2017, distribution by functions within the integrated public financial management system will become mandatory; any release of subsidies will require prior approval by technical and financial oversight bodies. ### Public financial management and Treasury Single Account (TSA) - Implementation of the TSA continues for completion by the end of 2017 (MEFP ¶26). - Extension of the first-generation TSA to all bank accounts within the network of accounting staff in public institutions and agencies completed in advance of the June 2016 completion date. - Second-generation TSA to be deployed and operational as of June 2016; assessment criteria for accounts to be "repatriated" will be established. - TSA finalization scheduled for December 2017. - Strengthen supervisory control over agencies (MEFP ¶25): - Any creation of new agencies to be preceded by an impact study. - Plan to sign performance contracts with three additional agencies by end-May 2016. ### Debt policy and financing strategy - Authorities will continue relying on non-concessional loans to finance investment projects, particularly transport infrastructure, energy, water and sanitation (MEFP ¶23). - Secured access to foreign concessional financing equivalent to about 6 percent of GDP (including grants). - Exploring about Euro 1 billion of non-concessional financing for 2016 from the African Development Bank (ADB) and the World Bank (WB). - If multilateral facilities cannot be mobilized sufficiently rapidly, authorities will use international financial and regional markets to make up the shortfall. - Debt management capacity strengthening measures: - Continue to develop a medium-term debt strategy to be appended to the budget. - For the next budget, announce the central government debt ratio deemed sustainable over five years with a commitment that, in case thresholds are exceeded, corrective measures (over four years) would be taken in the following budget (structural benchmark, October 2016). - Introduce a database and establish a mechanism for monitoring all external and domestic debt taken on by public enterprises and all collateral set aside by the government on this debt (MEFP ¶24). - Strengthen and expand the National Public Debt Committee (CNDP) to cover other government entities. ### Investment efficiency and PPPs - Authorities will develop rigorous criteria for selection and ranking of projects; all project proposals to be recorded in a project pipeline and subjected to rigorous feasibility analysis before inclusion in the budget. - Ex-ante analysis required for all projects financed under public-private partnerships (PPPs); the Ministry of Finance and Economic Planning (MFEP) will determine modalities for financing PPPs to ensure risks are properly accounted for. ### Financial sector and inclusion - Financial sector remains broadly sound; focus on financial deepening through a financial inclusion strategy and the recent creation of a credit information bureau (CIB) (MEFP ¶31–32). - A private credit information bureau, Creditinfo VoLo, has been in operation since February 1, 2015; banks and micro-finance institutions must participate; customers must currently sign a consent form for their information to be made available to the CIB. - A National Financial Stability Committee has been created (MEFP ¶35); 2015 focus on portfolio quality of banks and SFDs. Priorities for 2016 include concentration risk and development of electronic money. ### Structural reforms and private sector promotion - Steadfast implementation of structural reforms is required to open space for SMEs and FDI to sustain growth to 2035. - Recent reform steps: - Five working groups established on: (i) enterprises in difficulties; (ii) government subsidies to enterprises; (iii) integration of para-fiscal taxes into the budget; (iv) tax expenditures; and (v) introduction of an independent accountants’ network within the DGID. - Decree setting maximum pay levels for personnel of agencies (except directors general and governance bodies) and decree on closure of five agencies that had no staff have been signed; the decree fixing maximum wages was reversed due to implementation problems and will be reissued once practical problems are addressed. - Government intends to speed privatization for SUNEOR. - Target date for development of a management strategy for government and public enterprise investment portfolios moved from March to September 2016 to build consensus. - Sector-specific reforms: - SENELEC reform plan cost estimated at 2.4 percent of GDP between 2016 and 2018; 250 MW of additional capacity expected to come on stream in 2016 (Taiba Ndiaye 105 MW; Cap des Biches 85 MW; Bokhole solar 20 MW; import from Mauritania 40 MW). - Promotion of a Special Economic Zone (SEZ) with business-friendly regulations and a tax regime with moderate taxation rate and minimal tax expenditures; streamline administrative procedures; examine a price-risk management fund in the cotton sector; continue implementing PREAC. ### Program design, benchmarks, and capacity building - Quantitative assessment criteria (ACs) for 2016 remain broadly as initially programmed; new structural benchmarks (SBs) agreed with authorities. - Staff supports authorities' request for readjustment of the mid-year end of June 2016 deficit target and June 2016 indicative target on tax revenue to reflect developments through March 2016; the deficit target for the year is unchanged. - Proposed rescheduling and new SBs: - Move SB on establishment of a platform describing the lifecycle of projects to September 2016 (from June 2016) to gain line ministry buy-in. - Two new SBs: create a structure responsible for recovering unpaid taxes (end-September 2016 SB), and adopt an action plan for reducing tax expenditure (end-September 2016 SB). - Announcement of a debt ratio for the budget was not met; staff proposes to reschedule to October 2016. - Reschedule development of a management strategy for government and public enterprise investment portfolios to September 2016 (from March 2016). *International Monetary Fund — Senegal country report content unit* ### 30. To continue supporting reform implementation, priorities and objectives of technical ### _cr16144 - 30. To continue supporting reform implementation, priorities and objectives of technical ### Technical assistance (TA) priorities and guidance - Authorities’ TA priorities include: - improvements in project management - better managing fiscal risks from PPPs - fully implementing the single treasury account - enhancing tax administration - rebasing of national accounts - adopting the SDDS - Guidance from the Fund and from peers on how best to implement improvements within prevailing political economy considerations would be welcome. ### Peer-learning and consensus building - Reform implementation continues to be supported through peer-learning. - A one-day seminar, chaired by the Prime Minister and including key Ministers in areas of reform covered in the “book on emergence” helped build a consensus on reforms. - The “book on emergence” was drafted in early January 2016 during a one-week workshop (or “book sprint”) that brought together authors and experts from Senegal, the IMF, the World Bank, and peer countries including Mauritius, Morocco and Seychelles. ### Staff appraisal — macroeconomic performance and growth prospects - Findings: - Growth increased from 4.3 percent in 2014 to 6.5 percent in 2015. - Growth is projected to continue at a similar level in the year following 2015, reflecting: - initiation of PSE-related projects - buoyant performance in agriculture - renewed dynamism in the secondary sector - Staff view on long-term growth: - Sustaining positive growth momentum over a 20-year period will require steadfast implementation of reforms to reduce patronage and rent-seeking so as to open economic space to SMEs and FDI. - Staff welcomes initial steps to eliminate unnecessary agencies and to use performance contracts to improve the performance of those to be retained. - Staff believes that the PSE growth rates of 7 to 8 percent over 20 years are feasible if SMEs and FDI are provided a space where good economic governance prevails. - Collaboration with the Government of Mauritius on joint management of a special zone could open such space and produce a business friendly regulatory framework and taxes that are reasonable, easy to comply with and with limited and rules based tax expenditure. - Price and fiscal context: - Inflation remains low. - Fiscal deficits are declining and expected to reach the WAEMU convergence criteria of 3 percent of GDP one year earlier than the mandated 2019. ### Fiscal policy, revenue measures, and public expenditure - Staff welcomes the authorities’ commitment to keep the 2016 fiscal deficit target in line with the program. - Key recommendations and observations: - Action on tax expenditures will be important to safeguard revenues and to open up the economy to achieve the high growth targets of the PSE. - The measures envisaged to raise revenue and control expenditure will need to be solidified to ensure meeting the 4.2 percent of GDP deficit target in 2016. - The elimination of energy subsidies in the 2016 budget should become the norm going forward. - Efforts to rebalance public expenditure towards investment in human capital and public infrastructure, as enshrined in the PSE, are welcome. ### Governance, public enterprises, and sectoral reforms - Positive governance actions: - The authorities’ decision to cancel Senegal Airlines’ flying rights and take back its traffic rights and to close 5 agencies is commendable. - These actions will have a positive impact on public finances and enhance the authorities’ credibility on economic governance. - Critical ongoing reform areas: - Continue tackling patronage and rent seeking. - Reform agencies, the energy sector, and enterprises in difficulty. - Rationale: - The success of fiscal consolidation plans and achieving the growth targets of the PSE will partly depend on the transparency and accountability under which government agencies and other public enterprises function. - It will also depend on whether the energy sector becomes more efficient and viable to fully be at the service of promoting the growth of SMEs and FDI. *Source: _cr16144 - 30. To continue supporting reform implementation, priorities and objectives of technical* ### 36. Staff recommends completion of the second PSI review and supports the authorities’ ### _cr16144 - 36. Staff recommends completion of the second PSI review and supports the authorities’ ### Recommendation - Staff recommends completion of the second PSI review and supports the authorities’ request for adjustment of the assessment criterion on the mid-year fiscal deficit at end-June 2016. ### Recent developments (high-frequency indicators) - CPI Inflation (12-month inflation rate): Energy, Food, Overall series shown for 2014M12–2015M12; inflation "picked up in May and June of 2015, driven by food price inflation." - Real GDP Growth (annual percentage change, quarterly basis): Growth is driven by the secondary and tertiary sectors and, more recently, by the primary sector. - Effective Exchange Rate (12-month percentage change): Senegal gained some price competitiveness owing to real exchange rate depreciation. - Figure caption summary points: - After being negative for more than a year, inflation picked up in May and June of 2015, driven by food price inflation. - Senegal gained some price competitiveness owing to real exchange rate depreciation. - Growth is driven by the secondary and tertiary sectors and, more recently, by the primary sector. ### Near- and medium-term projections (selected) - GDP Growth (Real GDP Growth; Real GDP per Capita Growth) shown for 2016–2021: "Growth is expected to pick up gradually while inflation would remain moderate." - Twin Deficits (Percent of GDP): Current Account Balance and Overall Fiscal Balance projected 2016–2021. - Debt (Percent of GDP): Public Debt and NPV of External Public Debt projected 2016–2021; projection note: "...which would keep Senegal at low risk of debt distress." - Expense, Investment and Revenue (Percent of GDP) projected 2016–2021. - Fiscal consolidation: "Fiscal consolidation is predicated on expenditure and revenue measures..." and "Fiscal consolidation would help reduce external vulnerability." ### Key macroeconomic indicators and projections (Table 1 highlights) - GDP at constant prices (annual growth rates): 2014: 4.7; 2015: 4.3; 2016 (Est.): 5.1; 2017 (CR 16/3 Prel. Proj.): 6.5; 2018: 5.9; 2019: 6.6; 2020: 6.8; 2021: 7.0 - GDP deflator (annual growth): 2014: 0.1; 2015: -1.0; 2016: 0.2; 2017: 0.0; 2018: 1.8; 2019: 1.7; 2020: 1.7; 2021: 1.7 - Consumer prices, annual average: 2014: -1.1; 2015: -1.1; 2016: -0.5; 2017: 0.1; 2018: 1.3; 2019: 1.2; 2020: 1.2; 2021: 1.2 - Exports, f.o.b. (CFA francs, annual percentage change): 2014: 3.5; 2015: 3.5; 2016: 3.1; 2017: 13.0; 2018: 3.6; 2019: -8.2; 2020: 11.1; 2021: 8.4 - Imports, f.o.b. (annual percentage change): 2014: -1.1; 2015: -1.1; 2016: 2.4; 2017: 3.3; 2018: 5.8; 2019: -4.9; 2020: 8.2; 2021: 6.6 - Broad money (annual percentage change): 2014: 11.4; 2015: 11.4; 2016: 6.5; 2017: 13.4; 2018: 7.1; 2019: 7.4; 2020: 7.4 - Revenue (percent of GDP): 2014: 24.2; 2015: 24.8; 2016: 24.4; 2017: 25.1; 2018: 24.3; 2019: 24.8; 2020: 24.4; 2021: 24.3 - Grants (percent of GDP): 2014: 3.3; 2015: 3.3; 2016: 2.9; 2017: 2.9; 2018: 3.0; 2019: 2.7; 2020: 2.9; 2021: 2.8 - Total expenditure (percent of GDP): 2014: 29.2; 2015: 29.8; 2016: 29.2; 2017: 29.9; 2018: 28.6; 2019: 29.1; 2020: 28.1; 2021: 27.5 - Net lending/borrowing (overall balance) excluding grants (percent of GDP): 2014: -8.3; 2015: -8.5; 2016: -7.1; 2017: -7.7; 2018: -7.2; 2019: -7.0; 2020: -6.6; 2021: -6.0 - Including grants (percent of GDP): 2014: -4.9; 2015: -5.0; 2016: -4.8; 2017: -4.8; 2018: -4.2; 2019: -4.2; 2020: -3.7; 2021: -3.2 - Primary fiscal balance (percent of GDP): 2014: -3.2; 2015: -3.3; 2016: -2.9; 2017: -2.8; 2018: -2.4; 2019: -2.4; 2020: -1.9; 2021: -1.3 - Current account balance (official transfers included, percent of GDP): 2014: -8.8; 2015: -8.9; 2016: -8.2; 2017: -7.6; 2018: -8.7; 2019: -6.2; 2020: -5.8; 2021: -5.6 - Gross domestic investment (percent of GDP): 2014: 27.9; 2015: 25.1; 2016: 26.9; 2017: 25.3; 2018: 27.0; 2019: 26.6; 2020: 27.1; 2021: 27.2 - Gross national savings (percent of GDP): 2014: 19.1; 2015: 16.1; 2016: 18.7; 2017: 17.7; 2018: 18.3; 2019: 20.4; 2020: 21.3; 2021: 21.6 - Total public debt (percent of GDP): 2014: 53.2; 2015: 54.2; 2016: 54.4; 2017: 56.8; 2018: 55.1; 2019: 57.3; 2020: 56.2; 2021: 54.2 - External public debt (percent of GDP): 2014: 39.5; 2015: 37.3; 2016: 39.3; 2017: 40.2; 2018: 39.3; 2019: 41.6; 2020: 40.3; 2021: 38.2 - Memorandum: Gross domestic product (CFAF billions): 2015: 7,583; 2016: 8,078; 2017: 8,764; 2018: 9,528; 2019: 10,363; 2020: 11,291; 2021: 12,299; projection 13,380 ### Balance of payments (Table 2 highlights, in Billions of CFAF) - Current account: 2014: -678; 2015: -611; 2016 (Proj.): -546; 2017: -549; 2018: -579; 2019: -632; 2020: -647; 2021: -642 - Exports, f.o.b.: 2014: 1,473; 2015: 1,665; 2016: 1,527; 2017: 1,697; 2018: 1,839; 2019: 1,998; 2020: 2,193; 2021: 2,413 - Imports, f.o.b.: 2014: -2,862; 2015: -2,956; 2016: -2,812; 2017: -3,042; 2018: -3,242; 2019: -3,464; 2020: -3,692; 2021: -3,943 - Services and incomes (net): 2014: -257; 2015: -332; 2016: -326; 2017: -349; 2018: -371; 2019: -423; 2020: -458; 2021: -491 - Unrequited current transfers (net): 2014: 969; 2015: 1,013; 2016: 1,065; 2017: 1,144; 2018: 1,194; 2019: 1,258; 2020: 1,311; 2021: 1,380 - Capital and financial account: 2014: 897; 2015: 790; 2016: 586; 2017: 586; 2018: 611; 2019: 650; 2020: 701; 2021: 709 - Financial account (net): 2014: 680; 2015: 583; 2016: 376; 2017: 364; 2018: 378; 2019: 403; 2020: 442; 2021: 437 - Memorandum items: Gross official reserves (imputed reserves, billions of US$): 2014: 2.1; 2015: 2.1; 2016: 2.2; 2017: 2.2; 2018: 2.3; 2019: 2.3; 2020: 2.4; 2021: 2.5 ### Central government operations (Tables 4–5 highlights) - Revenue (CFAF billions): 2014: 1,877; 2015: 1,991; 2016 (CR 16/3 Prel.): 2,026; 2017 Prog.: 2,176; 2018: 2,325; 2019: 2,521; 2020: 2,751; 2021: 3,001 - Taxes (CFAF billions): 2014: 1,483; 2015: 1,583; 2016: 1,597; 2017: 1,779; 2018: 1,876; 2019: 2,059; 2020: 2,255; 2021: 2,487 - Total expenditure (CFAF billions): 2014: 2,258; 2015: 2,380; 2016 (CR 16/3 Prel.): 2,413; 2017 Prog.: 2,548; 2018: 2,674; 2019: 2,849; 2020: 3,074; 2021: 3,334 - Net acquisition of nonfinancial assets (public investment, CFAF billions): 2014: 858; 2015: 974; 2016: 909; 2017: 1,045; 2018: 1,157; 2019: 1,230; 2020: 1,298; 2021: 1,629 - Net lending/borrowing (overall balance, CFAF billions): 2014: -381; 2015: -389; 2016: -387; 2017: -372; 2018: -349; 2019: -328; 2020: -323; 2021: -334 - Revenue (percent of GDP): see Key macro indicators above. - Net lending/borrowing (overall balance, percent of GDP): 2014: -4.9; 2015: -5.0; 2016: -4.8; 2017: -4.8; 2018: -4.2; 2019: -4.2; 2020: -3.7; 2021: -3.2 - Net acquisition of nonfinancial assets (percent of GDP): 2014: 11.1; 2015: 11.3; 2016: 11.9; 2017: 11.3; 2018: 11.6; 2019: 11.9; 2020: 12.1; 2021: 11.9 ### Monetary and financial indicators - Monetary survey (Table 6, Billions of CFAF): Net foreign assets 2013: 85; 2014: 81; 2015: 1,078; 2016 (Proj.): 1,233; 2017: 1,273; 2018: 1,309 - Broad money (CFAF billions): 2013: 3,127; 2014: 3,485; 2015: 3,953; 2016 (Proj.): 4,246; 2017: 4,561 - Credit to the economy (CFAF billions): 2013: 2,414; 2014: 2,568; 2015: 2,735; 2016 (Proj.): 2,969; 2017: 3,224 - Financial soundness indicators (Table 7 highlights): - Capital to risk-weighted assets (percent): 2008: 13.8; 2009: 16.3; 2010: 18.0; 2015: 16.7 - Ratio of non-performing loans (NPLs) to total loans (percent): 2008: 17.4; 2009: 18.7; 2010: 20.2; 2015: 18.8 - Ratio of provisions for NPLs to total NPLs (percent): 2008: 51.5; 2009: 53.1; 2010: 54.9; 2015: 57.9 ### Program conditionality: Quantitative assessment criteria and indicative targets (Table 8 highlights) - Assessment criteria and target statuses for 2015–16 include: - Floor on net lending/borrowing (GFSM 2014 definition, cumulative since beginning of year): multiple periods with "met" and "not met" statuses; examples: Mar. 2015: Prog. -144, Act. -138, Status met; Jun. 2015: Prog. -255, Adj. -264, Act. -271, Status not met; Sep. 2015: Prog. -389, Act. -387, Status met. - Ceiling on the amount of the budgetary float: targets and statuses (e.g., Mar. 2015 Prog. 50, Act. 28, Status met; Jun. 2015 Prog. 50, Act. ..., Status ...; Sep. 2015 Prog. 50, Act. 45, Status met). - Indicative targets include floors on social expenditures, floors on tax revenue, and quarterly ceilings on single-tender contracts; mixed met/not met outcomes documented. ### Structural benchmarks for 2015–17 (Table 9 summary) - 2015 benchmarks (selected): - Sign performance contracts for eight agencies (Target date: December 2015): Not met; observation: "Five contracts have already been signed, and the remaining three will be signed by the end of May 2016." - Eliminate cash tax payments above CFAF 100,000 (June 2015): Met. - Institutionalize the precautionary management reserve (September 2015): Met. - Expand the precautionary reserve envelope for the 2016 budget (December 2015): Met. - Launch the connection between the DGD and the DGID to facilitate data exchanges with the NINEA unique ID (December 2015): Met. - Submit at least ten investment projects listed in the 2016 budget for cost–benefit analysis (October 2015): Met. - For the 2016 budget, announce the debt ratio sustainable over five years with a commitment in case thresholds are exceeded; corrective measures (over four years) would be taken in the budget that follows (December 2015): Not met; observation: "The measure will be respected in the next budget law." - Recover at least fifty percent of taxes left unpaid in 2014 (December 2015): Not met; observation: "47 percent has been recovered; the remaining 3 percent was recovered by the end of April 2016." - Implement the agency reform plan by limiting allocated budget resources solely to the payment of wages for the 16 agencies whose dissolution is pending (December 2015): Not met; observation: "Five agencies with no formal existence will be eliminated by April 2016." - Finalize the government flow-of-funds table according to Government Finance Statistics Manual 2001/14 (December 2015): Met; observation: "The minimum analytical framework is available although the final flow-of-funds table according to GFSM 2001/14 will only be finalized in 2016." - 2016 benchmarks (selected): - Establish a platform (integrated projects bank) which describes the lifecycle of the projects (September 2016). - Develop a management strategy for government and public enterprise investment portfolios (March 2016): Not met; observation: "This is being pushed back to end-September 2016 to give time for building consensus." - Extend the first-generation TSA to all bank accounts of the network of accounting agents of the agencies and public institutions (June 2016): Met. - For the next budget, announce the debt ratio sustainable over five years with the commitment that, in case thresholds are exceeded, corrective measures (over four years) would be taken in the budget that follows (October 2016). - Create a structure responsible for recovering problem tax claims (September 2016). - Adopt an action plan for reducing tax expenditures (September 2016). - 2017 benchmarks: - Establish accrual basis accounting with the initiation of the government’s opening balance (January 2017). - Introduce a medium-term budget framework (March 2017). *Source: Senegal authorities; and IMF staff estimates, projections, and calculations as presented in the document.* ### Appendix I. Letter of Intent ### Appendix I. Letter of Intent ### Request and purpose - Date and place: Dakar, Senegal, May 6, 2016. - The government of Senegal requests: - modification of the end-June 2016 assessment criterion on net lending/borrowing; - modification of the end-June 2016 indicative target on tax revenue; - completion of the second review of its macroeconomic program supported by the Policy Support Instrument (PSI) for the period 2015–17. - Reference to prior documentation: initial Memorandum of Economic and Financial Policies (MEFP) of May 8, 2015. - Attachments referenced: MEFP (reviews program implementation and updates objectives and policies), Technical Memorandum of Understanding (TMU). ### Program implementation and structural reforms - Structural benchmark performance: - six (06) structural benchmarks achieved at end-2015 out of a total of ten (10). - Of the four (04) benchmarks not met, one has been met and another will be met by June 2016. - Specific accomplishments and actions: - collected additional tax revenue arrears to reach 50 percent of the stock of recoverable claims recorded as at December 31, 2014 (achieved with a small delay in April 2016 instead of December 2015). - three (03) additional performance contracts involving government agencies will be added to the five (05) already signed. - decree closing five (05) agencies that have no personnel and exist only in a legal sense has been signed. - decree on the remuneration of general directors and members of the decision-making bodies of agencies and comparable entities will be signed. - government decision to make public its position on Sénégal Airlines (decision to be made public before the end of April 2016). - adoption of two new benchmarks: establishment of an entity within the DGID specializing in recovery of difficult claims; implementation of an action plan to reduce tax expenditures. ### Recent macroeconomic developments and outlook (2015–16) - Growth and sectoral developments: - real GDP growth estimated at 6.5 percent in 2015, compared to 4.3 percent in 2014. - agriculture, secondary sector (refining, chemical industries, cement, energy, construction) drove recovery; services underperformed due to slowdown in posts and telecommunications and tourism difficulties. - Inflation and external sector: - consumer price index: -0.1 percent (reflecting moderation in world prices). - current account deficit improved due to strength of exports and weakness in oil prices. - Program performance and targets: - All end-December 2015 assessment criteria met. - Indicative target on government procurement under direct contracting was missed due to speed-up in rural electrification using a "spontaneous tenders" procedure. - Fiscal deficit target of CFAF 389 billion (4.8 percent of revised GDP) was respected in 2015. - Wage costs contained within a ceiling of CFAF 526 billion in 2015. - Precautionary reserve extended in 2016 budget: CFAF 18.7 billion for operations and CFAF 44.4 billion for investment. - Structural reform progress and timing: - Platform for distribution of the NINEA single identifier is operational. - Automatic sharing of fiscal data (second phase) is in process of becoming operational. - TOFE being produced in accordance with the 2001/2014 GFSM; target date for accruals-based accounting system set at 2017. - CFAF 56 billion received to end-2015 from recovery of unpaid taxes; target of collecting 50 percent of stock of recoverable claims at end-December 2014 met in April 2016. - Computer system of the DGID not yet able to automatically distinguish between recoveries against old and new claims. - Development of a management strategy for government and public enterprise investment portfolios pushed back from end-March 2016 to end-September 2016. - Box 1 highlights on fiscal management (selected items): - wage bill 2015 projected at CFAF 526 billion; supplementary work costs held to CFAF 11.7 billion against budget forecasts of CFAF 18 billion. - hiring on contract of professors and teachers capped at 4,210 consistent with 2015 budget law. - operating expenses growth to be limited to 5 percent, including inflation. - cap on operating portion of investment projects to 10 percent versus 20 percent prior to 2015. ### Key working groups and preliminary conclusions - Five working groups established on: - problem enterprises; - State subsidies to enterprises; - integration of parafiscal taxes into the budget; - tax expenditures; - introduction of an independent accountants’ network within the DGID. - Box 2 preliminary conclusions (selected): - establish a committee to oversee decisions on disbursements of transfers and subsidies and track planning of transfer decisions; - establish a threshold fixing the ratio of the wage bill as a proportion of operating funds in subsidized enterprises; - examine establishing an independent accountants’ network within the DGID (phased process, training, use of ASTER); - create a virtual "problem-solving" window for enterprises; - establish a cash management mechanism for enterprises undergoing restructuring; - examine modalities for allocating parafiscal taxes to the State budget. ### Fiscal policy for 2016 and medium-term measures - 2016 projections and targets: - GDP projected to grow at 6.6 percent in 2016. - inflation expected to remain within the range of 1 to 2 percent. - current account deficit projected to be 6.1 percent of GDP in 2016 and to decline thereafter. - fiscal deficit target for 2016 set at CFAF 372 billion. - revenues revised upwards by CFAF 35 billion to allow additional expenditures (notably wage bill adjustments and backlog compensation). - Objectives of IMF-supported program for 2016: - (a) rebuild the government's fiscal space; - (b) strengthen public financial management and governance; - (c) improve the business environment. - Revenue mobilization and tax administration measures: - DGID to rely on close monitoring of taxpayers and broadening of the tax base; strengthen cooperation between DGID and DGD through exchange of information. - Establish a specialized structure (office or division) for recovery of problem tax claims by end of September (structural benchmark). - Institute procedures for forced recovery against debtors not complying with moratorium agreements for recoverable assessment notices. - Introduce case management units within each recovery office. - Reforms aimed to ensure recovery or settlement of an amount equal to at least 50 percent of the stock of outstanding assessment notices as of December 31 of each year; the amount to be recovered will be determined before the month of May and will be reported to the IMF. - Withholdings linked to non-commercial profits [bénéfices non commerciaux] subject to diagnostic assessment and corrective solutions. - Customs administration contributions: - broaden tax base via better control over imports by the informal sector; - reprofiling and better monitoring of customs clearance of potentially revenue-yielding products; - step up campaign against unfair competition affecting problem companies. - Tax expenditures and subsidies: - Action plan to rationalize tax expenditures to be adopted by the government before the end of September 2016 (structural benchmark). - Enhance transparency in management of State subsidies to university institutions: - for 2016 budgetary amendment law: appropriations not yet committed will be distributed by heading within SIGFIP among categories such as personnel (heading 2) and procurement of goods and services (heading 3); - for 2017: distribution by heading will be mandatory and release of government subsidy will be subject to prior approval of preliminary budget by technical and financial oversight bodies. *Letter of Intent, Dakar, Senegal, May 6, 2016.* ### 18. The government will impose budgetary constraints on hiring in all sectors. The ### _cr16144 - 18. The government will impose budgetary constraints on hiring in all sectors. The ### Hiring and payroll management - Government will impose budgetary constraints on hiring in all sectors. - Instruments to implement this measure will be in place by September 2016. - Applying rules to guarantee necessary balance among all sectors, contract personnel in education, health, social action and vocational training will be integrated into the payroll as of 2017. ### Investment efficiency and project selection - Government intends to enhance the efficiency of investment by developing rigorous criteria for selection and ranking of projects. - All project proposals will be recorded in a project pipeline ["bank of projects"] and subjected to rigorous analysis before inclusion in the budget. - Line ministries were asked to select at least 20 projects for feasibility studies to be performed during the year. - Projects examined will be given priority in the Consolidated Investment Budget (Budget Consolidé d’Investissement, BCI). - Implementation of the integrated project database platform (a SB set for September 2016) is continuing but has encountered delays; platform will be equipped for communication between line ministries and the MEFP. ### Management of government and public enterprise portfolios - Concern: government portfolio includes many strategic assets but is not managed coherently. - A management strategy for government and public enterprise portfolios and an action plan will be finalized no later than the end of June 2016 (structural benchmark, June 2016). ### Public-private partnerships (PPPs) - Government will conduct ex ante assessment of all PPP projects pursuant to the law on partnership contracts and the implementing decree. - Will use best criteria to analyze budgetary implications and ensure fiscal sustainability. - MEFP will determine modalities for financing PPPs and ensure operating risks are borne by private operators under contracts. ### Budgetary incentives and program budgeting - Strict performance criteria established for allocation of supplementary funds accompanying circular letters on budget preparation. - Ministries receiving these resources must undertake innovative structural reforms to improve quality of budgetary programming. - New program budgeting approach will allocate resources reflecting how public policies are implemented. ### External financing and debt management - Government will consider mobilizing nonconcessional external loans in 2016 (international markets or nonconcessional multilateral facilities) for investment projects in infrastructure, energy, water and sanitation. - Senegal recognized as able to manage its debt autonomously. - To improve debt management capacity in absence of borrowing limits in the program, government will: - continue to develop a medium-term debt strategy to be appended to the budget; - for the next budget, announce the central government debt ratio deemed sustainable over five years with a commitment that, in case thresholds are exceeded, corrective measures (over four years) would be taken in the budget that follows (structural benchmark, October 2016); - introduce a database and establish a mechanism for monitoring all external and domestic debt taken on by public enterprises and all collateral set aside by the government on this debt. - The National Public Debt Committee (CNDP) will be strengthened and expanded to cover other government departments. ### Strengthen Public Financial Management (PFM) - Supervisory control over agencies to be stepped up; creation of any new agency to be preceded by an impact study per agency policy law. - Government intends to sign performance contracts with three agencies no later than the end of May 2016. - Treasury single account (TSA / compte unique du Trésor, CUT): - Extension of the first-generation TSA to all bank accounts within the network of accounting staff in public institutions and agencies is completed. - Second-generation TSA will be deployed and operational as of June 2016. - TSA will be finalized in December 2017; assessment criteria for accounts to be "repatriated" will be established. - Work continuing on assessment of government assets; sectoral technical committee pursuing accrual basis accounting with initiation of government's opening balance. - Budgetary and accounting reforms continue: - In 2016, all ministries expected to prepare their "multiyear expenditure programming document" (Document de Programmation Pluriannuelle des Dépenses, DPPD) for 2017-2019. - Public finance statistics and reporting system being improved with adaptation of SIGFIP and ASTER to new WAEMU directives. - By end of 2016, support will be available for preparation and execution of the program budget and management of the new accounting system. ### Promote the private sector — Energy - Additional power capacity expected in 2016 totaling 250 MW: - Taiba Ndiaye dual oil/gas-fired power station: 105 MW - Cap des Biches dual oil/gas-fired power station: 85 MW - Bokhole solar power plant: 20 MW - Import of energy from Mauritania: additional 40 MW - Government reaffirms intention to continue SENELEC reform; discussions with World Bank for finalizing production plan; World Bank intends to field a production planning specialist to SENELEC. ### Promote the private sector — Financial sector - Credit information bureaus (bureaux d’information sur le crédit, BIC) operational as of February 1, 2016. - Government commitments to facilitate access to financial services: - launch comprehensive financial education for SMEs; - pursue discussions for payment of salaries in excess of CFAF 100,000 by direct deposit or electronic payment; - collaborate with technical and financial partners and BCEAO to prepare national strategy for financial inclusion and digitize certain government payments. - "Hotel and tourism credit" fund to support tourism revival; operational in 2016; institutional framework finalized with inter-ministerial decree and Technical Committee for eligibility prior to credit committee review. - Complete procedures for fielding six licensed "treasury securities specialists" (SVT) to facilitate placement of public securities and encourage secondary market. - Creation of a National Financial Stability Committee; 2015 focus on portfolio quality of banks and SFDs; 2016 priorities: risk of concentration and development of electronic money; IMF staff support may be requested. ### Promote the private sector — Business climate and PREAC - Government will: - create an economic space within a ZES with business-friendly regulations, moderate tax regime and minimal tax expenditures; - dematerialize administrative procedures and streamline circulation within industrial zone; review constraints on vehicle registration and prepare legal texts in security sector; - examine possibility of creating a price risk management fund in the cotton sector; - continue DGD support for business climate improvements, finalizing customs "release ticket" (ticket libératoire) via ministerial decree and computerized platform. - Program of Reforms to the Business Climate and Competitiveness (PREAC) continued; Senegal revised and harmonized major codes (Customs Code, General Tax Code, Code of Civil Procedures) and PPP law. - Sector-specific reforms: extension of reduced VAT to all tourism activities, halving government royalties on airline tickets, suspension of VAT to facilitate "anchor investor" in agriculture. - Second phase of PREAC (2016-2018) to complete reforms reducing factor and intermediation costs (port services, electricity), finalize structural measures in real estate, commercial justice, labor legislation, and consolidate dematerialized procedures including generalized use of remote payment ["telepayment"]. ### Program monitoring indicators and implementation status - Quantitative assessment criteria defined for 2016. - At end of March, indicative criterion for budgetary balance was not being met due to urgency of committing already budgeted funds (security expenditures and early distribution of seeds and other farming inputs). - Quantitative assessment criteria for end-December 2016 and quantitative indicators for end-December 2016 are being proposed; modification of end-June 2016 AC on net floor borrowing/lending is requested. - Reviews scheduled every six months: - third review by end of December 2016 - fourth review by end of June 2017 - fifth review by end of December 2017 ### Key numerical targets and items reported in the document (selected) - Power capacity additions in 2016: 250 MW (105 MW, 85 MW, 20 MW, 40 MW) - Credit information bureaus operational: February 1, 2016 - TSA second-generation operational as of June 2016; TSA finalized in December 2017 - Integration of contract personnel into payroll: as of 2017 - Structural benchmark deadlines cited: June 2016; September 2016; October 2016; December 2016; January 2017; March 2017 - Hiring implementation instruments in place by: September 2016 - Line ministries to select at least: 20 projects for feasibility studies *Source: IMF staff report content from the supplied chapter text.* ### 6. The floor on net lending/borrowing (program definition) as of December 31, 2014 is minus ### _cr16144 - 6. The floor on net lending/borrowing (program definition) as of December 31, 2014 is minus ### Floor on net lending/borrowing (program definition) - The floor as of December 31, 2014 is minus CFAF 381 billion. - It is calculated as the difference between: - Revenue: CFAF 1,877 billion - Total expenditure: CFAF 2,258 billion ### Adjustment (including grants) - The floor including grants is adjusted downward by the amount that budget grants fall short of program projections up to a maximum of CFAF 15 billion at current exchange rates. ### Reporting requirements on overall fiscal balance - During the program period, authorities will report provisional data on the overall fiscal balance (program definition) and its components monthly to Fund staff with a lag of no more than 30 days after the end of the relative month. - Data on revenues and expenditure included in the overall fiscal balance calculation will be drawn mainly from preliminary Treasury account balances. - Final data will be provided as soon as final Treasury account balances are available, but no later than two months after reporting of the provisional data. ### Social Expenditure — Definition and reporting - Definition: Social spending is defined as spending on health, education, the environment, the judicial system, social safety nets, sanitation, and rural water supply (as contained in the table on social expenditure). - Reporting requirements: Authorities will report semiannual data to Fund staff within two months following the end of each period. ### Budgetary Float — Definition and reporting - Definition: The budgetary float (instances de paiement) is 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). - Assessment criterion: Ceiling on the budgetary float, monitored at the end of the quarter. - Reporting requirements: Authorities will transmit to Fund staff on a weekly basis (end of each week) and at the end of each month a table from the expenditure tracking system (SIGFIP) showing: - all committed expenditure (dépenses engages), - all certified expenditures not yet cleared for payment (dépenses liquidées non encore ordonnancées), - all payment orders (dépenses ordonnancées), - all payment orders accepted by the Treasury (dépenses prises en charge par le Trésor), - all payments made by the Treasury (dépenses payees). - SIGFIP table exclusions and notes: - The SIGFIP table will exclude delegations for regions and embassies. - 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 - Scope: Assessment criterion applied continuously to any procedure other than the normal and simplified procedures to execute spending. - Exclusion: Spending undertaken on the basis of a supplemental appropriation order (décret d’avance) in cases of absolute urgency and need in the national interest, pursuant to Article 12 of the Organic Budget Law—such spending requires signatures of the President of the Republic and the Prime Minister. - Reporting: Authorities will report any such procedure immediately to Fund staff. ### Public Sector External Payments Arrears — Definition and reporting - Definition: External payment arrears are the sum of payments owed and not paid when due (in accordance with the terms of the contract) on the external debt contracted or guaranteed by the public sector. The definition of external debt given in paragraph 19 is applicable here. - Monitoring: The assessment criterion on external payments arrears will be monitored on a continuous basis. - Reporting requirements: Authorities will promptly report any accumulation of external payments arrears to Fund staff. ### Debt, Guarantees, and External Debt — Definitions - Debt: As set out in paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to Executive Board Decision No. 15688-(14/107), adopted December 5, 2014. - General: Direct, non-contingent liability created under a contractual arrangement requiring payments of assets or services according to a repayment schedule; payments discharge principal and/or interest. - Forms included: - Loans: advances of money including deposits, bonds, debentures, commercial loans, buyers’ credits; temporary exchanges equivalent to fully collateralized loans (repurchase agreements and official swap arrangements). - Suppliers’ credits: contracts permitting deferred payments after delivery of goods or services. - Leases: debt is the present value (at lease inception) of all lease payments expected during the agreement, excluding payments covering operation, repair, or maintenance. - Arrears, penalties, and judicially awarded damages and interest arising from failure to make payment under a contractual obligation that constitutes debt are debt. - Failure to make payment on an obligation not considered debt under this definition (e.g., payment on delivery) will not give rise to debt. - Debt guarantees: Guarantee arises from any explicit legal obligation of the public sector to service a debt in the event of nonpayment by the debtor (payments in cash or in kind). - External debt: Debt borrowed or serviced in a currency other than the CFA franc, regardless of the residency of the creditor. ### Public Sector Contracts Signed by Single Tender — Definitions and reporting - Definition: Public sector contracts are administrative contracts for procurement of supplies, delivery of services, or execution of work. “Single-tender” contracts occur when the contracting agent signs the contract with the chosen contractor without competitive tender. - Coverage: Quarterly indicative target applies to total public sector contracts entered into by the government or any entity subject to the procurement code. - Exclusions to ceiling on single-tender contracts: - Classified purchases - Fuel purchases by SENELEC for electricity production reflected in a new regulation that allows SENELEC to buy fuel from SAR on the basis of the current price structure. - Reporting requirements: Government will report quarterly to Fund staff, with a lag of no more than one month from the end of the observation period, the total amount of public sector contracts and the total value of all single-tender public sector contracts. ### Tax Revenues — Definition and monitoring - Definition: Tax revenues are the sum of revenues from: - taxes and levies on income, profits and capital gains, salaries and labor, on assets; - taxes on goods and services; - taxes on foreign trade and international transactions; - other tax revenues. - Assessment: Indicative target assessed on the basis of data for these revenues provided in the quarterly TOFE. - Petroleum revenues monitoring: VAT on oil, excise taxes on oil, customs duties on oil, vehicle taxes, and the Petroleum Product Imports Security Fund (FSIPP) are specifically monitored in connection with international price trends. ### Additional information for program monitoring (transmission requirements) - Authorities will transmit the following to Fund staff, in electronic format if possible, with maximum time lags indicated: - Three days after adoption: any decision, circular, edict, supplemental appropriation order, ordinance, or law having economic or financial implications for the current program. This includes acts that change budget allocations in the budget law being executed (supplemental appropriation orders (décrets d’avance), cancellation of budget appropriations (arrêtés d’annulation de crédit budgétaires), orders or decisions creating supplemental budget appropriations (décrets ou arrêtés d’ouverture de crédit budgétaire supplémentaire)), and acts leading to creation of a new agency or fund. - Within a maximum lag of 30 days: preliminary data on: - Tax receipts and tax and customs assessments by category, accompanied by the corresponding revenue on a monthly basis; - The monthly amount of expenditures committed, certified, or for which payment orders have been issued; - The monthly situation of checks issued by agencies from their deposit accounts at the Treasury but not paid to beneficiaries, with dates of issuance; - 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; - The provisional monthly balance of the Treasury accounts; - Reconciliation tables between the SIGFIP table and the consolidated Treasury accounts, between the consolidated Treasury accounts and the TOFE for “budgetary revenues and expenditures,” and between the TOFE and the net treasury position (NTP), on a quarterly basis. - Final data: Provided as soon as final Treasury account balances are available, but not later than one month after reporting of provisional data. ### Monthly reporting on specific expenditures - During the program period, authorities will transmit to Fund staff provisional data on current nonwage noninterest expenditures and domestically financed capital expenditures executed through cash advances on a monthly basis with a lag of no more than 30 days. Data drawn from preliminary consolidated Treasury account balances. Final data no more than one month after reporting of provisional data. ### Central bank reporting - The central bank will transmit to Fund staff: - The monthly balance sheet of the central bank, with a maximum lag of one month; - The monthly consolidated balance sheet of banks with a maximum lag of two months; - The monetary survey, on a monthly basis, with a maximum lag of two months; - The lending and deposit interest rates of commercial banks, on a monthly basis; - Prudential supervision and financial soundness indicators for bank financial institutions, as reported in the table entitled Situation des Établissements de Crédit vis-à-vis du Dispositif Prudentiel (Survey of Credit Institution Compliance with the Prudential Framework), on a quarterly basis, with a maximum delay of two months. ### Government website updates (monthly) - The government will update on a monthly basis on the website established for this purpose: - a. Preliminary TOFE and transition tables with a delay of two months; - b. SIGFIP execution table, the table for the central government and a summary table including regions, with a delay of two weeks; - c. The amount of the airport tax collected, deposited in the escrow account, and used for the repayment of the loan financing the construction of the new airport, with a delay of one month. - Full information on: - i) the operations of the Energy Sector Support Fund (FSE); - ii) investment projects in the power sector; - iii) planning and execution of these projects; - iv) details of financing and updated costs. ### Statement by Ngueto Tiraina Yambaye, Executive Director for Senegal and Mohamed Sidi Bouna, Senior Advisor — May 25, 2016 - Introduction and program assessment - Authorities express appreciation for staff dialogue during the second review of the PSI. - Overall performance under the PSI remains satisfactory; reforms aligned with Plan Sénégal Emergent (PSE) are having a positive impact. - Growth rebounded to 6.5 percent in the prior year from 4.3 percent in 2014 and is forecast to further strengthen in line with PSE objectives. - At end-December 2015, all assessment criteria under the PSI were met. All indicative targets met except the “ceiling on the share of public sector contracts signed by single tender” due to acceleration of the rural electrification program. - Structural reforms: 6 out of 10 structural benchmarks met at end-December 2015 (corrective measures taken for remaining benchmarks). - Recent economic developments (2015) - Real GDP growth: 6.5 percent - Inflation: 0.1 percent - Current account deficit: narrowed from 8.9 percent in 2014 to 7.6 percent in 2015 - Fiscal deficit: improved to 4.2 percent in 2015 from 4.8 percent in 2014 - Public debt: stabilized at 56.3 percent of GDP (below WAEMU convergence ceiling of 70 percent) - Drivers of growth: broader-based, led by agriculture and industry; investment and exports remain main drivers. - Outlook and medium-term policies - Growth forecast: increase over the medium-term to reach the 7 percent PSE target by 2018. - Inflation projected: 1.2 percent over the medium-term. - Current account projection: steadily narrow to approximately 5 percent of GDP. - Fiscal policy commitments: - Reiterate commitment to the 2016 fiscal target and WAEMU fiscal deficit convergence criterion over the medium-term. - Continue streamlining public consumption (subsidies and wage bill) and reduce public consumption’s share in total budget spending in favor of public investment. - Revenue efforts: enhance revenue collection and broaden the tax base. - New structure for recovery of problem tax claims to be put in place by end-September 2016. - Customs administration to exercise stricter control over external trade; interconnection with tax department to boost revenue. - Public debt path: projected to steadily decline and revert to 50 percent over the medium-term. - Debt management: commitment to a prudent debt management strategy; new debt anchor to be announced for next budget. - Financing infrastructure: tap international capital markets in 2016 or use non-concessional facilities of multilateral donors for essential infrastructure in energy, water and sanitation. - Structural reforms - Improve efficiency and quality of investment projects including PPPs; develop rigorous criteria for selection and ranking of projects before budget inclusion. - Strengthen PFM: - First-generation “Treasury single account” (TSA) being finalized; second-generation TSA expected operational in June 2016. - Strengthen supervision of government agencies; signature of performance contracts with three additional agencies expected by end-May 2016 (structural benchmark). - Asset and enterprise management: - Introduce by end-September 2016 (structural benchmark) a management strategy for assets of the government and public enterprises. - Make arrangements to restructure and privatize public enterprises including Suneor. - Steps taken to liquidate Senegal Airlines; authorities seeking a strategic partner for the new airline. - Program of Reforms to the Business Climate and Competitiveness (PREAC): - First phase focusing on tourism (extension of reduced VAT to all tourism activities and halving government royalties on airline tickets) and on agriculture (suspension of the VAT to promote investment). - Second phase (2016-2018) to focus on port services and electricity to reduce factor and intermediation costs. - Creation of an economic space within a SEZ with business-friendly regulations. - Electricity sector: - Additional power capacity totaling 250 MW expected to come on stream in 2016. - Authorities considering options to reform Senelec with assistance from the World Bank and the AfDB. - Peer-to-peer learning: steering committee comprising representatives from line and sectoral ministries to facilitate implementation of lessons learnt; continued close work with Fund staff. - Conclusion - PSI remains an important instrument to advance PSE objectives. - Authorities remain fully committed to PSI policies and measures. - Authorities will pursue measures under the arrangement and seek the Board’s approval for completion of the second review of the Fund-supported program, and for modification of the end-June 2016 assessment criterion on net floor/borrowing lending. *Source: _cr16144 - 6. The floor on net lending/borrowing (program definition) as of December 31, 2014 is minus* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16144.pdf_