IMF Staff Concludes Mission to Senegal

IMF News, November 16, 2022

Source details

Mission dates: November 4-15, 2022.
Purpose: Conduct the sixth and final review under the Policy Coordination Instrument (PCI) and the third and final reviews under the Stand-By Credit Facility (SCF) and Stand-By-Arrangement (SBA).
Mission leader: Mr. Edward Gemayel.
Authorities and counterparts met: his excellency Prime Minister Amadou Ba; Minister of Finance and Budget, Mr. Mamadou Moustapha Ba; the Deputy Governor of the BCEAO, Mr. Mamadou Diop; the National Director of the BCEAO, Mr. Ahmadou Al Aminou Lo; senior government officials; and development partners.
Press contact: PRESS OFFICER: Tatiana Mossot; Phone: +1 202 623-7100; Email: MEDIA@IMF.org; @IMFSpokesperson

Downside shocks cited: weaker external demand, rising food and energy prices, and the US dollar appreciation.
Revised 2022 growth: 4.7 percent.
Revised 2022 inflation: 8.5 percent (described as a multi-decade high).
Inflation drivers: largely from soaring food prices; pressures are broader and more persistent than anticipated, causing serious hardship for households, especially the most vulnerable.
2023 projection: growth should rebound to 8.3 percent due to a temporary boost from oil and gas production and absent further escalation of the war in Ukraine.
2023 inflation outlook: inflation should recede due to an expected strong harvest and lower international commodity prices.

Overall program performance: described as broadly satisfactory.
Quantitative targets: all quantitative targets were met, except the ceiling on the share of contracts awarded through single-source procurement.
Structural reform progress: significant progress made but at a slower pace than envisaged under the program.
Pending key reforms:
- Fiscal framework to manage oil and gas revenues not yet adopted.
- New public procurement code, expected to ensure more open and competitive tenders, not yet adopted.
Cash transfer program: significant delays in payments for the poorest households observed and should be addressed urgently; authorities should move to a more effective digital payment of the cash transfer program.
AML/CFT: implementing the remaining AML/CFT actions to move Senegal out of the enhanced oversight by the Financial Action Task Force (FATF) is critical.

Fiscal space characterization: limited fiscal space.
Recommendation: gradual fiscal consolidation efforts over the medium term to preserve debt sustainability.
Timing and measures:
- Start in 2023 by raising more fiscal revenues building on the strong revenue performance this year.
- Limit the use of the budgetary reserve envelop to help contain the fiscal deficit around 5 percent of GDP.

Projected untargeted and regressive energy subsidies:
- Expected to amount to CFAF 750 billion in 2022 (or 4.4 percent of GDP).
- Absent new policy measures, would reach 800 billion (or above 4 percent of GDP) in 2023.
Recommendation: authorities should convincingly commit to start phasing them out in 2023 and accelerate efforts to finalize a credible roadmap to gradually unwind them by 2025.

Discussions: mission made significant progress toward completion of the reviews; discussions will continue over the coming days towards reaching a staff-level agreement, subject to IMF management approval and consideration by the IMF Executive Board by mid-December.
IMF stance: the IMF team thanks authorities and counterparts for cooperation and reaffirms the IMF’s support to Senegal.

Source: IMF Press Release No. 22/388, "IMF Staff Concludes Mission to Senegal", November 16, 2022.