## IMF Staff Concludes Visit to Senegal

_IMF News, September 12, 2024_

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## Bibliographic details
- Published: September 12, 2024

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### Mission overview
- 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.

### Recent economic developments and performance (first half of 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.

### Projections and macroeconomic outlook for remainder of 2024
- 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.

### Fiscal position, debt, and risks
- 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.

### Policy recommendations and structural reforms
- 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.

### Engagements and acknowledgements
- 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.*

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_Source: https://www.imf.org/en/news/articles/2024/09/12/pr24329-senegal-imf-staff-concludes-visit_