Statement by IMF Mission to SenegalPress Release No. 11/375
October 20, 2011
An International Monetary Fund (IMF) mission, led by Mr. Hervé Joly, visited Senegal from October 5-19, 2011 to conduct the second review under the three-year Policy Support Instrument (PSI) arrangement approved in December 2010. The members of the mission met with the ministers of economy and finance, budget, international cooperation, infrastructure, and energy; representatives of the BCEAO; other senior government officials; and representatives of the private sector, civil society and development partners.
At the conclusion of the visit, the mission issued the following statement:
“After recovering in 2010, the Senegalese economy experienced a modest slowdown in early 2011 due to persistent power cuts. Assuming that recent improvements in the electricity sector continue, however, Senegal should post GDP growth of 4 percent in 2011. Inflation rose in early 2011, reflecting increasing international food and petroleum prices, but this trend reversed in the second half of the year and inflation is now expected to average 3.6 percent in 2011.
“Growth in 2012 is expected to be sustained by the significant increase in public investment in 2012, in particular with continued construction work on the toll road and implementation of the Plan Takkal. The restoration of a more reliable supply of electricity should also have a positive impact on other sectors of the economy. These domestic drivers of growth are expected to largely offset the anticipated weakening of external demand and a generally less promising external environment than expected. Overall GDP growth is expected to reach 4.4 percent in 2012 compared to 4 percent in 2011. Inflation should continue to decline, and remain well below 3 percent.
“Program implementation during the first half of 2011 was broadly in line with objectives. All quantitative assessment criteria and indicative targets for the program at end-June 2011 were met, reflecting prudent management of public finances. Senegal also moved ahead in implementing structural reforms, although progress was somewhat slower than initially anticipated in certain areas, including implementation of the Plan Takkal.
“Discussions between the authorities and the mission addressed issues including the 2012 budgetary framework in a context of increased spending on electricity and road infrastructures. The mission encouraged the authorities to ensure the good implementation of these investments, which are critical fro growth and employment creation in Senegal. The mission also drew the authorities’ attention to the high budgetary cost of consumer electricity subsidies, which could reach 100 billion CFAF in 2011.
“The mission encouraged the authorities to continue their efforts to improve public financial management and transparency. It commended the authorities’ intention to undertake an a major fiscal reform aimed at establishing a modern tax system, in line with international best practice. The mission noted that an important objective of the reform would be to improve the business environment so as to support the development of the private sector and job creation. In view of these objectives, the mission encouraged the broadening of the tax base by reducing tax expenditures. While sharing the authorities’ objective of increasing government’s own resources, the mission noted the risks of introducing new taxes or levies that might create significant distortions prior to the implementation of comprehensive tax reforms.
“The mission will recommend that the IMF Executive Board complete the second program review. The Board is expected to take up the review in December 2011.”