Press Release No. 04/26

Press Release: IMF Completes First Review Under Senegal's PRGF Arrangement and Approves US$ 5.2 Million Disbursement

February 13, 2004

The Executive Board waived the nonobservance of a quantitative performance criterion on contracting and guaranteeing of new nonconcessional external debt and two structural performance criteria initially established under the PRGF-supported program (see Press Release No. 03/62). The Board also approved additional interim assistance under the enhanced HIPC Initiative in the amount of SDR 1.06 million (about US$1.6 million) for February-April 2004. Senegal is expected to reach the HIPC completion point by end-March 2004.

The PRGF is the IMF's concessional facility for low-income countries. 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 discussion, Agustín Carstens, Deputy Managing Director and Acting Chairman, made the following statement:

"The Senegalese authorities continued to manage the economy well during the first half of 2003. The economy regained its growth trajectory after a large exogenous shock in 2002, inflation was low, and fiscal performance was on track. There were, however, some delays in the enactment of structural reforms and some weaknesses in external debt management. To address these slippages, in the second half of 2003, the authorities took strong measures to tighten external debt management and meet their commitment to increase private participation in the groundnut and electricity sectors.

"The authorities intend to vigorously implement their ambitious program of economic and financial policies geared toward growth and poverty reduction. They are committed to pursuing prudent macroeconomic policies and implementing the structural reform agenda. The 2004 budget is consistent with the authorities' dual goals of higher spending on the priorities defined in their Poverty Reduction Strategy Paper and maintaining fiscal discipline.

"Structural reforms are crucial to achieve high economic growth and reduce poverty. In particular, the agenda to improve tax and customs administration and increase transparency in the expenditure process should be strictly adhered to; the privatization of the groundnut company, SONACOS, should be completed; and reforms in the electricity sector should be vigorously pursued, with a view to further harnessing private investment for the needed expansion of energy generation and forestalling the potential imposition of a burden on the government budget.

"Continued implementation of the reform agenda should pave the way for reaching the completion point under the enhanced Heavily Indebted Poor Countries Initiative," Mr. Carstens stated.