IMF Staff Completes Mission for the 2021 Article IV Consultation and Reviews under the Policy Coordination Instrument, Stand-By Credit Facility and Stand-By Arrangement for Senegal
IMF News, December 1, 2021
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- Authors: Credit Facility, Stand-By Arrangement
- Published: December 1, 2021
Mission outcome and financing
- IMF staff reached a staff-level agreement with the authorities that could support approval of the fourth review under the Policy Coordination Instrument (PCI) and the first review under the Stand-By Credit Facility (SCF) and Stand-By Arrangement (SBA).
- Consideration by the IMF’s Executive Board is tentatively planned for January 2022.
- Upon completion of the Executive Board review, Senegal would have access to SDR 129.4 million (equivalent to about US$180 million), bringing the total IMF financial support under the SCF and SBA arrangements to SDR 258.8 million (about US$360 million).
- The IMF team conducted a hybrid mission from October 22 to November 20, 2021, led by Ms. Corinne Deléchat.
Recent macroeconomic performance and 2021 revisions
- Senegal’s economic rebound through September 2021 was stronger than envisaged despite a third wave of the pandemic in Q3 2021.
- GDP growth for 2021 is revised up from 3 ½ to 5 percent.
- Average inflation is projected at 2 ½ percent, largely reflecting elevated food prices.
- Budget execution through September was broadly in line with the revised 2021 budget.
- The authorities adopted a second supplementary budget to incorporate spending related to the SDR allocation and higher energy subsidy needs.
- On the SDR-related spending, the authorities decided to spend two-thirds of the allocation in 2021 on unmet obligations, the health sector, domestic vaccine production, and additional cash transfers to vulnerable households.
- These exceptional priority expenditures will bring the 2021 fiscal deficit to 6.3 percent of GDP.
Medium-term outlook and projections
- GDP growth is projected to accelerate to 5 ½ percent in 2022.
- GDP growth is projected to peak at about 10 percent in 2023-24 with the onset of oil and gas production before stabilizing at around 6 percent over the medium term.
- The 2022 draft budget focuses on expanding priority social spending and targets a deficit of 4.8 percent of GDP.
- To contain rising debt vulnerabilities, returning to the WAEMU fiscal deficit norm of 3 percent of GDP by 2024 is an objective highlighted by the IMF team.
Program performance, fiscal policy, and transparency
- Performance under the program has remained satisfactory.
- All but one end-June 2021 performance criteria and indicative targets were met.
- The share of single-sourced procurement contracts exceeded the program ceiling.
- On the structural front, six out of eight structural benchmarks were met.
- The authorities made progress on accountability and transparency regarding the 2020 Covid-19 related spending:
- The report of the Fonds Force COVID-19 monitoring committee is now available online.
- The report on procurement procedures related to COVID-19 spending by the Public Procurement Regulatory Authority (ARMP) will be published by mid-December.
- The special report of the Audit court is advancing and is now expected to be published at end-March 2022.
Policy recommendations and priority reforms
- Implement a revenue-based fiscal consolidation to reduce the budget deficit to 3 percent of GDP by 2024 while preserving space for priority spending and investment and keeping public debt on a downward trajectory.
- Boost domestic revenue mobilization through resolute implementation of the medium-term revenue strategy.
- Rein in fuel and electricity subsidies.
- Enhance the efficiency of public spending.
- Maintain macroeconomic stability, improve public service delivery, gradually phase out energy subsidies, step up investment in education and social protection, and accelerate reforms to overcome constraints to private sector development to support strong, inclusive, and job-rich growth.
- Adopt the institutional and legal framework for the management of oil and gas revenues before end-2021 (authorities’ intention).
- Strengthen social safety nets by institutionalizing the social protection scheme and expanding the beneficiary registry.
- Embrace digital payments for the cash transfer program to improve reliability and speed.
- Foster private sector development by facilitating access to cheap and reliable electricity while promoting greener energy, facilitating access to credit and to land, improving public services through digitalization, and reducing labor market skills mismatches.
- Ensure sector-specific support to promote industrialization and job creation (including domestic production of staple foods and pharmaceuticals) is well-targeted, transparent about objectives and scope, and regularly evaluated with regards to cost and benefits.
- Step up efforts to align the AML/CFT framework with international standards.
Engagement and consultations
- The IMF team thanked the authorities for cooperation and met with:
- President Macky Sall;
- Minister of Finance and Budget Abdoulaye Daouda Diallo;
- Minister of Economy, Planning and International Cooperation Amadou Hott;
- Governor of the BCEAO Tiémoko Meyliet Kone;
- First President of the Court of Auditors Mamadou Faye;
- General Director of the Public Procurement Regulatory Authority Saër Niang;
- Other senior government and BCEAO officials.
- Staff also held discussions with development partners, representatives of the private sector, and civil society.
IMF Communications Department — Press Release No. 21/353, December 1, 2021