IMF Staff Concludes Visit to Senegal

IMF News, September 12, 2024

Source details

Mission dates: September 5-12, 2024.
Mission led by: Mr. Edward Gemayel.
Purpose: Continue discussions regarding the authorities’ economic program supported by the IMF’s Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements and the Resilience and Sustainability Facility (RSF).
Approved arrangements (by IMF Executive Board on June 26, 2023):
- EFF/ECF and RSF combined: SDR 1,132.6 million (about US$ 1.5 billion).
- RSF: SDR 242.70 million (about US$320 million).
Next procedural step: Discussions for the combined second and third reviews under the ECF/EFF and RSF arrangements are tentatively scheduled for late October 2024.

Real GDP growth registered 2.3 percent in the first quarter of 2024.
High-frequency indicators suggest a similar deceleration in the second quarter of 2024.
Sectoral drivers of the slowdown: weaker activity in the mining, construction, and agro-industrial sectors, and to a lesser extent in the primary sector.
Headline inflation averaged 2.2 percent y/y in the first half of 2024, driven by lower international commodity prices and subdued domestic demand.
Budget execution through end-August revealed a significant revenue shortfall, while expenditures remained broadly in line with projections.
Authorities relied on costly external commercial borrowing with short maturities due to lower-than-expected liquidity buffers.

Real GDP growth projection for 2024: 6.0 percent (downward revision from the 7.1 percent forecast in June 2024).
Growth in the non-hydrocarbon sector: projected to slow to 3.3 percent (previous projection: 4.8 percent).
Headline inflation forecast: average 1.5 percent y/y.
Current account deficit: anticipated to narrow to 12.7 percent of GDP, reflecting commencement of hydrocarbon production amidst subdued non-hydrocarbon export performance.

Central government deficit projection in the absence of additional fiscal measures: projected to surpass 7.5 percent of GDP (significantly above the 3.9 percent envisaged in the initial budget).
Drivers of fiscal deterioration: lower revenue collections and increased expenditure on energy subsidies and interest payments.
Central government debt: expected to remain above the WAEMU convergence criterion of 70 percent.
Fiscal target timing risk: Absent additional measures, reaching the WAEMU deficit target of 3 percent of GDP in 2025 is likely to take longer than initially anticipated.
Liquidity and arrears: Continued accumulation of unpaid obligations to private companies, particularly in the construction and energy sectors.

Fiscal measures urged:
- Implement bold measures including streamlining tax exemptions.
- Phase out untargeted and costly energy subsidies to ensure a timely return to the WAEMU deficit target and place public debt on a downward trajectory.
Public liabilities management:
- Compile an inventory of unpaid obligations to private companies.
- Establish a settlement plan with a clear and realistic timeline to ensure timely resolution.
Energy and electricity sector reforms:
- Revise the petroleum product pricing formula.
- Make progress on the diagnostic of electricity production costs.
- Improve the financial viability of the public electricity company SENELEC.
- Design a new electricity tariff structure, including a social tariff aimed at protecting vulnerable households.
Governance and confidence-building:
- Continue efforts to implement the full set of measures recommended by the Financial Action Task Force (FATF) to facilitate exit from the “grey list.”
- Authorities reaffirmed commitment to transparency, good governance, and public accountability.
- General audit of public finances is nearing completion; its findings and recommendations are expected to facilitate implementation of robust measures toward deficit and debt reduction.

Meetings held with: His Excellency, Prime Minister Ousmane Sonko; Mr. Abdourahmane Sarr, Minister of Economy, Planning and Cooperation; Mr. Cheikh Diba, Minister of Finance and Budget; other senior government officials; representatives of the business community; and development partners.
IMF team expressed gratitude for excellent cooperation and candid, constructive discussions during the mission.

Source: Press Release No. 24/329, IMF, September 12, 2024.