January 18, 2019
PRESS OFFICER: Lucie Mboto Fouda
Phone: +1 202 623-7100Email: MEDIA@IMF.org
On January 15, 2019, the Executive Board of the International Monetary Fund (IMF) completed the seventh review of Senegal’s economic performance under the program supported by the Policy Support Instrument (PSI) [1] approved on June 24, 2015 (see Press Release No. 15/297 ). The Board also concluded the 2018 Article IV Consultation with Senegal.
Senegal’s macroeconomic situation is stable. Real GDP growth in 2017 was 7.2 percent and is projected to remain robust at 6.2 percent in 2018, while inflation remains low. The fiscal deficit is projected to reach 3.5 percent of GDP in 2018 and the 2019 budget is in line with the WAEMU fiscal deficit convergence criterion of 3 percent of GDP. The current account deficit widened significantly in 2017, partly driven by higher global commodity prices, and is projected to remain above 7 percent of GDP in 2018.
Program performance under the PSI remains broadly satisfactory with all but one of the end-June 2018 assessment criteria and indicative targets met. Progress was made on reforms with two prior actions met and four of the six structural benchmarks set for the PSI 7th review met.
Following the Executive Board’s discussion, Mr. Furusawa, Deputy Managing Director and Acting Chair, issued the following statement
Executive Board Assessment [2]
Senegal’s economic performance has been positive, with strong growth and low inflation. Steadfast implementation of the comprehensive reform strategy in the Plan Senegal Emergent (PSE) II will be important to sustain high growth rates over the medium term and make the private sector the main driver of growth. Policies to address gender and inequality issues will contribute to poverty reduction and well-distributed growth.
Performance under the PSI-supported program has been broadly satisfactory, with all but one of the end-June 2018 assessment criteria and indicative targets met. Progress was made on reforms with two prior actions met and four of the six structural benchmarks set for the PSI 7th review met.
The near-term macroeconomic outlook remains favorable, but downside risks include increases in global energy prices, adverse impact of drought, security threats, increases in the cost of public borrowing, and slowing implementation on reforms to boost revenues and private investment. The 2019 budget is aligned with the WAEMU fiscal deficit convergence criterion of 3 percent of GDP. Implementing revenue reforms, including a streamlining of tax expenditures, would help meet ambitious revenue projections and make continued progress over the next few years towards meeting the tax revenue WAEMU convergence criterion of 20 percent of GDP.
In 2018, large expenditure cuts were needed to offset lower than projected revenues. Going forward, it will be important to implement budgeted levels of public investment and social spending while maintaining fiscal discipline. Steadfast implementation of approved measures will be key to strengthening budget implementation. Creating a strong policy framework for managing oil and gas resources consistent with international best practice would ensure optimal and transparent use of these resources.
Senegal is at low risk of debt distress, but its debt dynamics will need to be closely monitored. In this context, adherence to the planned fiscal consolidation path, accelerated implementation of reforms to sustain high growth, and implementation of a prudent debt strategy which gives priority to concessional borrowing will be essential.
[1] The Policy Support Instrument (PSI) offers low-income countries that do not want—or need—Fund financial assistance a flexible tool that enables them to secure Fund advice and support without a borrowing arrangement.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .
