Press Release: IMF Executive Board Completes First Review Under Policy Support Instrument for Senegal
June 6, 2011Press Release No. 11/219
June 6, 2011
The Executive Board of the International Monetary Fund (IMF) today completed the first review of Senegal’s economic performance under the Policy Support Instrument (PSI). In completing the review, the Board approved a waiver for the nonobservance of the quantitative assessment criterion related to the fiscal deficit target.
Senegal’s second three-year Policy Support Instrument (PSI) was approved by the Board on December 3, 2010 (see Press Release No. 10/469). The IMF's framework for PSIs is designed for low-income countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring, and endorsement of their policies (see Public Information Notice No. 05/145).
Following the Executive Board’s discussion on Senegal, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, stated:
“Senegal’s economic recovery continues, and performance under its PSI-supported program is satisfactory. There are however downside risks stemming mainly from continued electricity supply problems and increasing food and fuel prices, which pose some inflationary risks.
“With the emergence of critical investment needs in the energy sector, fiscal policy faces the challenge of accommodating additional priority expenditure while maintaining debt sustainability. Although there is some space for temporarily higher fiscal deficits, a substantial contribution will need to come from additional revenue measures and reprioritizing expenditure. In the medium term, fiscal consolidation, supported by a prudent approach to borrowing, will be critical to bring down the deficit to levels consistent with preserving debt sustainability. The recent issuance of the Eurobond to finance infrastructure projects should be accompanied by strengthening investment planning and debt management.
“To sustain the growth momentum and increase Senegal’s growth potential, the pace of structural reforms should be accelerated. This includes tax policy reforms aimed at broadening the tax base and increasing the revenue effort, energy sector reforms, financial sector reforms, and other reforms geared towards removing bottlenecks to growth and promoting an improved business climate and governance,” she added.