## Senegal on the Way to an Emerging Economy: Transformation, Inclusiveness, Equity

_IMF News, February 10, 2015_

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## Bibliographic details
- Published: February 10, 2015

---

### Introduction and context
- Speech by Christine Lagarde, Managing Director, International Monetary Fund.
- Location and dates: Dakar, Senegal, January 30, 2015; published February 10, 2015.
- Key framing:
  - Senegal has strong democratic institutions, respected legal and education systems, dynamic civil society, and a strong civil service.
  - Senegal is at a critical turning point: foundations for growth exist but current growth is “neither vigorous nor inclusive enough” to unlock potential, reduce poverty, and secure youth prospects.
  - Government strategy: “Plan Senegal Emergent” is described as “ambitious yet feasible” for reaching emerging economy status.
- IMF context:
  - The Fund held an “Africa Rising” conference in Mozambique convening political, business, and civil society leaders from 42 African countries and other parts of the world.
  - The IMF has a membership of 188 countries and serves as a platform for cross-country knowledge exchange.

### 1. The road forward for “Africa Rising” — implications for Senegal
- Macro and growth performance:
  - Average Senegalese growth has been “3-4 percent annually,” described as insufficient to spur private-sector job creation and prosperity.
  - Historical underperformance: average growth over the last thirty years “hovered around 3.5 percent.”
  - Demographics: “45 percent of your population under 14 years of age.”
- Global environment and headwinds:
  - Recent IMF forecasts project global economic activity “weaker than we had projected only a few months ago,” despite lower oil prices and firmer activity in the United States and the United Kingdom.
  - Headwinds identified:
    - Asynchronous monetary policies in advanced economies (U.S. monetary normalization; easing in Japan and the Euro Area) with potential negative spillovers to emerging markets and global financial stability.
    - Persistently lower oil prices: negative for oil exporters; opportunity for oil importers to reform energy subsidies.
    - Persistence of geopolitical tensions (examples: Ukraine, the Middle East, Nigeria, Mali).
- Regional outlook:
  - Growth forecasts for Sub-Saharan Africa revised down due to lower oil and commodity prices, yet the region is still expected to post “close to 5 percent” growth in 2015—the world’s second highest after emerging Asia.
- Ambition:
  - Government target: “7 to 8 percent” growth envisaged in “Plan Senegal Emergent” and comparable to growth recorded by Asian tigers and fast-growing African economies.

### 2. Building on the success of peers — lessons for Senegal
- Two overarching conclusions from international experience:
  - Achieving emerging economy status within the next two decades is “achievable.”
  - No country succeeds in all reforms at all times; each has a distinct reform record.
- Implementation challenge:
  - Senegal has had many strategic plans but often failed in implementation (quote attributed to Minister Ba).
- Three key lessons to heed:
  - Prudent fiscal management and macroeconomic stability:
    - Successful takeoffs improved public spending and public investment management, which helped unlock private and foreign investment.
    - Warning: higher spending without these components often led to higher debt with sub-par outcomes.
    - Empirical reference: countries that saw an increase of “at least 5 percent in per capita growth rates” include India, Guyana, Sri Lanka, Cape Verde, Mauritius, and Uganda.
  - Export expansion through openness to foreign direct investment (FDI):
    - Successful episodes of growth were accompanied by dramatic export increases driven by significant FDI rises—typically from an average of “1 percent of GDP to about 4 percent.”
    - Improving the business climate and supporting small- and medium-sized enterprises is critical.
  - Building institutions and human capital:
    - Growth must increase overall well-being to avoid income imbalances and social strain; lack of jobs and limited human-capital investment can undermine reforms.

### 3. Senegal: building to the future — the need for a “big push” of reforms
- Preconditions noted as positive:
  - Strong government ownership of a development program and political consensus for reforms.
  - International community pledges: “more than US$7 billion” to help finance the program.
- Call for a “big push” to create a critical mass of reforms and accelerate growth.
- Three policy dimensions for the “big push”:
  - Strengthen public financial management and bridge infrastructure gaps:
    - Need for additional fiscal space for public infrastructure and social spending.
    - Fiscal space should be widened by increasing revenues and rationalizing spending rather than by simply accumulating more debt.
    - Reallocate spending from low-priority items (poorly planned capital spending, untargeted electricity subsidies that benefit mostly the rich) to high-priority public infrastructure and investments in human capital that benefit the poor.
  - Strengthen the business climate to accelerate structural transformation:
    - Regulatory reform has begun; Senegal was “amongst the top reformers in 2014” per World Bank Doing Business Indicators.
    - Despite reforms, Senegal remains in the bottom ranks among African peers on the investment climate.
    - Recent FDI levels in Senegal: “about 2 percent of GDP,” much lower than the “7 percent of GDP” levels recorded in many lower and middle-income countries in Sub-Saharan Africa.
    - Policies should broaden regulatory reforms and support small and medium enterprises to create formal-sector jobs for youth.
  - Make growth more inclusive:
    - Pro-active social policies are required to build human capital and ensure inclusiveness.
    - Target creation of opportunities for youth and women to bridge “the terrible gulf between young people’s aspirations and their accomplishments.”
    - Gender progress: laws requiring electoral lists to include equal representation of men and women have bolstered political gender diversity.
    - Remaining challenges:
      - Senegal ranks “77th out of 142 countries on the 2014 World Economic Forum Gender Gap ranking.”
      - Patriarchal structures limit women’s access to justice, decision-making, economic empowerment, and security.
    - Emphasis: higher female labor-force participation contributes to economic growth.

### Conclusion and IMF engagement
- Overall judgment:
  - Senegal is “at a turning point”; government goals are ambitious but achievable; risks are substantial but manageable; opportunities are vast.
  - Urgent priorities: inclusive, job-rich, and sustainable growth that empowers youth, women, and the poor.
- IMF support:
  - The IMF will continue technical assistance, capacity building, regular policy advice, peer-learning, and stands ready for new program engagement if desired.
- Closing metaphor: Senegal’s rise to emerging economy status would mark a milestone for “Africa Rising,” but it requires collective effort—“only if we sail together on this boat, ‘Senegal’ can we claim the brighter, more inclusive future.”

*Senegal on the Way to an Emerging Economy: Transformation, Inclusiveness, Equity by Christine Lagarde, Managing Director, International Monetary Fund (Dakar, Senegal, January 30, 2015; published February 10, 2015).*

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## References

- [Republic of Mozambique and the IMF](http://www.imf.org/external/country/MOZ/index.htm)
- [Senegal and the IMF](http://www.imf.org/external/country/SEN/index.htm)
- [Cabo Verde and the IMF](http://www.imf.org/external/country/CPV/index.htm)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [Christine Lagarde](https://www.imf.org/external/np/omd/bios/cl.htm)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp013015_