Press Release: IMF Executive Board Approves Three-Year PSI for Senegal

IMF News, June 24, 2015

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Canonical URL: Press Release: IMF Executive Board Approves Three-Year PSI for Senegal

Date of press release header: June 24, 2015
Publication note date: June 27, 2015
The Executive Board of the International Monetary Fund (IMF) approved a three-year Policy Support Instrument (PSI) for Senegal.
The PSI supports implementation of a three-year program of macroeconomic reforms designed to advance the Plan Sénégal Emergent (PSE), the authorities’ strategy to increase growth and reduce poverty while preserving macroeconomic stability and debt sustainability.
The PSI is described as an instrument for countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring and endorsement of their policies.

Short-term targets and intentions:
- Achieve an economic growth rate of at least 5 percent in 2015 compared with 4.7 percent in 2014.
- Maintain the inflation rate below 2 percent in 2015.
- Decrease the budget deficit to 4.7 percent (implicit target for 2015).
Medium-term targets:
- Increase the GDP growth rate to over 6 percent by 2017.
- Contain inflation below 3 percent by 2017.
- Reduce the budget deficit to 3.6 percent by 2017.
- Reduce the budget deficit to 3 percent by 2018.
- Reduce the current account deficit from 9 percent of GDP in 2014 to 6.5 percent of GDP in 2017.

Revenue and fiscal policy:
- Focus on increasing tax revenues by broadening the tax base.
- Strengthen tax and customs administration.
- Rationalize taxation of the financial sector and telecommunications.
Expenditure policy:
- Rationalize current expenditures to create fiscal space for financing infrastructure and social expenditure.
- Reorient lower priority spending, particularly public consumption, to provide room for higher public investment.
- Attention to the quality of expenditure, including investment.
Structural reforms and governance:
- Accelerate structural reforms to foster a more attractive business environment and promote private sector development.
- Strengthen public financing, transparency, and economic governance.
Program design and signaling:
- The PSI aims to signal IMF endorsement of the authorities’ policies to donors, multilateral development banks, and markets.

Identified risks:
- Political calendar may pose risks to planned fiscal consolidation.
- Reforms to curb unproductive public consumption and raise expenditure efficiency may slow down.
- Potential revenue shortfalls.
- External downside risks including:
- Slower growth in partner countries.
- Continued volatility in oil prices—which may affect revenue targets and subsidies.
- Spillovers from regional shocks including extremism and natural disasters.
Mitigating actions by authorities:
- Supplement fiscal deficit targets with a debt anchor.
- Expand use of the precautionary reserve envelope to link project financing to reform progress.

The PSI supports a three-year program of macroeconomic reforms embedded in the PSE for inclusive growth and poverty reduction.
The PSE’s growth goals of above 7 percent are described as achievable provided reforms are accelerated, broadened and deepened.
Early signs indicate positive momentum owing to progress in reform implementation and favorable external factors, but more remains to be done to solidify momentum.
The authorities are committed to meeting the West African Economic and Monetary Union target of a fiscal deficit of 3 percent of GDP by 2018.
The 2015 budget targets a deficit of 4.7 percent of GDP.

Source: Press Release: IMF Executive Board Approves Three-Year PSI for Senegal (June 24, 2015 / June 27, 2015).