IMF Executive Board Approves US$1.51 billion Under the Extended Fund Facility and Extended Credit Facility, and US$324 million Under the Resilience and Sustainability Facility for Senegal

IMF News, June 26, 2023

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IMF Executive Board Approves US$1.51 billion Under the Extended Fund Facility and Extended Credit Facility, and US$324 million Under the Resilience and Sustainability Facility for Senegal

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Bibliographic details

• Published: June 26, 2023

Program approval and financing

• Executive Board approved a 36-month Extended Credit Facility (ECF) and Extended Fund Facility (EFF) of SDR 1.132 billion (about US$1.51 billion) with Senegal.
• Executive Board also approved an Arrangement Under the Resilience and Sustainability Facility (RSF) of about SDR 242.7 million (about US$324 million).
• The Executive Board’s decision enables an immediate disbursement equivalent to SDR 161.8 million (about US$216 million) under the EFF/ECF.

Program objectives and policy priorities

• EFF/ECF-supported program objectives:
  • Meet Senegal’s protracted balance of payment needs.
  • Address macroeconomic imbalances.
  • Reduce debt vulnerabilities through growth-friendly fiscal consolidation.
  • Strengthen governance.
  • Deliver more inclusive and job-rich growth.
• RSF objectives:
  • Tackle longer-term structural challenges related to climate change.
  • Support climate change mitigation objectives and accelerate climate change adaptation.
  • Mainstream climate change considerations into the budget process.

Economic context and recent performance

• Key shocks and challenges affecting Senegal:
  • Rising food and energy prices, tightening financial conditions, weaker external demand, and US dollar appreciation.
  • Heightened regional insecurity and growing socio-political tensions ahead of the presidential elections.
• 2022 outcomes highlighted in the press release:
  • Growth decelerated to 4.0 percent.
  • Inflation accelerated to 9.7 percent.
  • Fiscal and current account deficits widened.
• Medium-term prospects:
  • Oil and gas production set to start in early 2024, supporting more favorable medium-term growth prospects.
  • Risks remain high and heavily tilted to the downside, including lower global growth, tighter financial conditions, prolonged war in Ukraine, further US dollar appreciation, climate-related disasters, deterioration of regional security, and socio-political tensions.

Fiscal strategy and debt management

• Authorities’ fiscal intentions:
  • Embark on growth-friendly fiscal consolidation to contain the budget deficit at 3 percent of GDP by 2025.
  • Undertake additional revenue measures and improve spending efficiency, including progressive phasing-out of energy subsidies.
  • Strengthen governance, transparency, and anti-corruption frameworks.
• Specific policy recommendations from the Acting Chair’s statement:
  • Accelerate implementation of the medium-term revenue strategy, including streamlining VAT exemptions and broadening the tax base.
  • Gradually eliminate untargeted energy subsidies while strengthening social safety nets.
  • Apply prudent debt management and enhance oversight of SOEs borrowing and public-private partnership operations to mitigate debt sustainability risks.

Structural reforms, governance, and financial sector

• Recommended structural reforms to promote inclusive, private sector-led growth:
  • Enhance social safety nets.
  • Strengthen governance and transparency.
  • Improve the business environment.
  • Address weaknesses in the financial sector.
• Anti-corruption and AML/CFT priorities:
  • Empower the anti-corruption agency (OFNAC) and strengthen the asset declaration system for public officials.
  • Urgent actions needed to address deficiencies in the AML/CFT framework to avoid negative macroeconomic and reputational repercussions and to exit the FATF’s grey list.

Climate-related reforms under the RSF

• RSF-supported policy reform focus:
  • Mitigation measures to protect against coastal erosion.
  • Enhance water management to strengthen agriculture.
  • Integrate climate change considerations into the budget process.
  • Leverage synergies with the World Bank, the Global Center on Adaptation, and other development partners to catalyze private climate financing.

Selected indicators (from Table 1)

• Immediate program parameters and fiscal target:
  • 36-month program.
  • Fiscal deficit target: 3 percent of GDP by 2025.
• Macroeconomic outcomes and projections (selected figures as presented):
  • Growth decelerated to 4.0 percent (2022).
  • Inflation accelerated to 9.7 percent (2022).
  • ECF/EFF: SDR 1.132 billion (about US$1.51 billion).
  • RSF: SDR 242.7 million (about US$324 million).
  • Immediate disbursement: SDR 161.8 million (about US$216 million).
• Public sector debt (listed in table): Total public debt 69.2 73.2 73.3 75.1 76.6 73.7 77.7 70.4 69.5 68.7
• Other table figures cited in the release:
  • Gross domestic product (CFAF billions): 14,101 15319.0 15,288 17092.7 17,268 19093 18,770 21,176 23,202 24,806 26,596

International Monetary Fund. Press Release No. 23/239, June 26, 2023.

References

• Kenji Okamura
• PRESS CENTER
• Senegal and the IMF
• The IMF and Good Governance -- A Factsheet
• IMF-World Bank Debt Sustainability Framework for Low-Income Countries -- A Factsheet
• Special Drawing Rights (SDRs) -- A Factsheet
• Press Releases
• https://www.imf.org/en/home