Press Release No. <a name="P16_75"></a>03/62

The Executive Board of the International Monetary Fund (IMF) approved on April 28, 2003, a new three-year arrangement under the Poverty Reduction and Growth Facility (PRGF) amounting to SDR 24.27 million (about US$33 million) for Senegal, which will support the government's economic reform program for 2003-05. The decision will enable Senegal to draw SDR 3.47 million (about US$5 million) from the IMF immediately. The last disbursement under Senegal's previous PRGF arrangement was made in April 2002. The Executive Board also agreed to provide Senegal additional interim assistance under the enhanced HIPC Initiative.

The PRGF is the IMF's concessional facility for low-income countries. It is intended that PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period on principal payments.

In commenting on the Executive Board's decision, Eduardo Aninat, Deputy Managing Director and Acting Chairman, made the following statement:

"The Senegalese authorities continued to manage the economy well in 2002. As a result, positive economic growth was maintained—albeit at a lower rate because of adverse weather conditions—inflation remained low, and the external current account strengthened.

"The authorities have embarked on a three-year economic program to maintain macroeconomic and debt sustainability and to address the main barriers to rapid economic growth and sustained poverty reduction. The program is grounded in the development priorities identified in Senegal's poverty reduction strategy paper. These priorities were developed through a participatory process including strong ownership by key stakeholders, and accordingly the program has good prospects for implementation. The authorities have already demonstrated a strong commitment to reform by enacting important legislation in the area of public expenditure management and by issuing a letter of energy sector policy.

"The program incorporates an ambitious macroeconomic and reform agenda. The structural reforms are crucial to accelerate broad-based economic growth, create the conditions for sustained poverty reduction, and reduce domestic and external vulnerabilities. The authorities are committed to pursuing prudent macroeconomic policies while increasing social spending, improving expenditure efficiency and transparency, and strengthening tax administration. Their efforts to improve the timeliness and accuracy of fiscal information, and to strengthen expenditure controls, should contribute strongly to accountability and good governance in the public sector, and reinforce the impact of additional spending on reducing poverty. They are encouraged to vigorously implement the public expenditure management reform.

"Other structural reforms focus on alleviating critical impediments to private sector investment and addressing inefficiencies in the electricity and groundnut sectors. The authorities are to be commended for soliciting private sector feedback in a systematic way to identify major constraints to investment, and for committing to sustain the consultative process, including through the recently-established Investors' Council.

"The authorities' economic program will strengthen Senegal's external position. In particular, the medium-term financial program is fully consistent with debt sustainability, while permitting a significant increase in spending for priority services. Increased vigor and resolve in the implementation of the reform agenda should pave the way for reaching the completion point under the enhanced Heavily Indebted Poor Countries Initiative," Mr. Aninat said.

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