Senegal: IMF Executive Board Approves U.S.$650 Million Stand-By Arrangement and an Arrangement Under the Standby Credit Facility and Completes the Third Review Under the Policy Coordination Instrument for Senegal

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Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the third review under the Policy Coordination Instrument (PCI) and approved an 18-month Stand-by arrangement (SBA) and an arrangement under the Stand-By Credit Facility (SCF) for Senegal.

Approval of the SCF/SBA enables an immediate disbursement of SDR 129.4 million or about US$187 million. This follows previous Fund emergency support to Senegal in April 2020 in the amount of US$442 million at the time of approval ( see Press Release No. 20/152 ).

The COVID-19 pandemic hit the Senegalese economy hard and caused hardship for many, particularly those active in the informal sector. Growth in 2020 is estimated at 1.5 percent, supported by a record harvest while the hospitality, tourism and transport sectors suffered severe contractions. The government's forceful implementation of an Economic and Social Resilience Program (PRES) helped strengthen the health sector and mitigate households' and firms' income losses. A subdued recovery is expected for 2021 with growth reaching about 3.7 percent.

To ensure transparency and accountability of pandemic-related spending, the authorities have published quarterly budget execution reports detailing the use of such resources. The report of the Fonds Force COVID-19 monitoring committee has also been finalized. The annual audit of procurement procedures, including those related to COVID-19 spending, will be finalized end June and the audit court will publish its report on the 2020 budget law implementation in October.

Staff and the authorities agreed on a revised budget deficit trajectory for 2021-23 which incorporates the COVID-19 vaccine rollout and a new program to boost youth and women employment. A steadfast implementation of the Medium-Term Revenue Mobilization Strategy and spending reprioritization will provide fiscal space while the overall deficit is expected to return to the WAEMU deficit anchor of 3 percent of GDP by 2023.

Performance under the PCI has remained positive and program objectives of achieving strong and inclusive growth while maintaining macroeconomic stability remain relevant. Fund engagement with Senegal under the PCI will continue concurrently with the new SBA and arrangement under the SCF until end-2022.

At the conclusion of the Board discussion on the third review under the PCI and the requests for the SBA and arrangement under the SCF for Senegal, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair made the following statement:

"The COVID-19 pandemic has had a severe impact on the Senegalese economy which was mitigated by the authorities' forceful response. The publication of quarterly budget execution reports detailing the use of COVID-19 spending and of the report by the COVID-19 fund monitoring committee are important steps to ensure the transparency and accountability of such spending.

"The near-term macroeconomic outlook has deteriorated owing notably to the protracted COVID-19 pandemic, higher commodity prices, and higher financing needs for the vaccine rollout. A gradual recovery is expected in 2021, although it is subject to important downside risks, including a third wave of the COVID-19 pandemic.

"The authorities' reform agenda, supported by the Policy Coordination Instrument, remains appropriate to achieve the program's objective of strong and inclusive growth while maintaining macroeconomic stability. The fiscal strategy fully accommodates the costs for the vaccination campaign and will, together with new Fund financing under the SCF/SBA, additional donor support, and the extension of the G-20 Debt Suspension Initiative, help unwind the actual but short-term balance-of-payments need.

"Fiscal policy should remain anchored by a credible, revenue-based consolidation towards a fiscal deficit of 3 percent of GDP by 2023, in line with the WAEMU norm. The identification of strong revenue mobilization measures for the program period and the authorities' full commitment to the medium-term revenue mobilization strategy are essential in this regard. Additional spending for the new youth and women employment program should be well-targeted and efficient, and accompanied by reforms to support private sector job creation. Public debt has risen continuously in recent years and risks to debt sustainability need to be carefully monitored and concessional financing should be prioritized.

"The legal framework for the management of upcoming hydrocarbon revenue is being finalized reflecting best international practices. Ongoing reforms to improve public financial management will help strengthen spending efficiency and transparency."

Table 1. Senegal: Selected Economic and Financial Indicators, 2019-251

2019

2020

2021

2022

2023

2024

2025

Prel.

Est.

Proj.

Proj.

Proj.

Proj.

Proj.

(Annual percentage change)

National income and prices

GDP at constant prices 1

4.4

1.5

3.7

5.5

10.8

6.1

5.4

Of which: Non-hydrocarbon GDP

4.4

1.5

3.7

5.5

6.1

6.0

5.8

Of which: Hydrocarbon GDP

...

...

...

...

...

10.5

-7.6

Of which: Non-agriculture GDP

4.4

-0.8

3.8

5.6

11.4

6.2

5.3

GDP deflator

1.9

2.3

1.9

2.1

1.7

1.8

1.9

Consumer prices

Annual average

1.0

2.5

2.0

2.0

1.5

1.5

1.5

End of period

0.6

2.4

2.2

1.7

1.3

1.7

1.4

External sector

Exports, f.o.b. (CFA francs)

15.5

-10.5

6.4

16.2

67.6

24.5

6.1

Imports, f.o.b. (CFA francs)

6.2

-6.7

11.5

6.7

23.3

11.0

6.4

Export volume

18.7

-7.2

2.8

15.2

79.3

22.0

4.1

Import volume

3.9

3.9

3.5

13.0

24.0

12.0

5.4

Terms of trade ("-" = deterioration)

-4.7

7.4

-3.8

6.8

-6.0

3.0

0.9

Nominal effective exchange rate

-1.3

...

...

...

...

...

...

Real effective exchange rate

-2.1

...

...

...

...

...

...

(Changes in percent of beginning-of-year broad money)

Broad money

8.2

12.4

6.2

8.6

...

...

...

Net domestic assets

7.4

14.4

7.6

10.7

...

...

...

Credit to the government (net)

1.7

15.4

2.3

4.0

...

...

...

(Percent of GDP, unless otherwise indicated)

Government financial operations

Revenue

20.4

20.0

20.2

21.0

22.0

23.0

23.9

Grants

1.6

2.3

1.9

2.1

1.9

1.7

1.5

Total expenditure

24.3

26.4

25.7

25.2

24.9

26.0

26.9

Net lending/borrowing (Overall Balance)

excluding grants

-5.5

-8.7

-7.4

-6.3

-4.8

-4.7

-4.5

including grants

-3.9

-6.4

-5.4

-4.2

-3.0

-3.0

-3.0

Net lending/borrowing (excl. one-off operations)

-3.1

-6.3

-5.1

-4.0

-3.0

-3.0

-3.0

Primary fiscal balance

-1.9

-4.3

-3.3

-2.1

-0.9

-0.9

-0.8

Savings and investment

Current account balance (official transfers included)

-8.1

-10.5

-11.3

-10.5

-5.5

-3.2

-3.9

Current account balance (official transfers excluded)

-8.4

-11.9

-11.8

-11.1

-6.0

-3.6

-4.1

Gross domestic investment

31.9

30.6

32.4

33.1

33.2

30.7

31.4

Government 2

6.3

6.9

7.1

7.6

6.1

6.5

6.6

Nongovernment

25.7

23.8

25.3

25.6

27.1

24.2

24.8

Gross national savings

23.8

20.2

21.1

22.6

27.7

27.5

27.6

Government

6.7

5.7

5.7

6.2

9.2

11.0

11.9

Nongovernment

17.1

14.5

15.4

16.5

18.5

16.6

15.7

Total public debt 3

63.8

68.7

70.9

69.9

64.9

62.8

61.1

Domestic public debt 4

11.0

14.6

14.0

13.3

12.3

12.0

12.5

External public debt

52.8

54.1

56.9

56.6

52.6

50.8

48.6

Total public debt service 3

Percent of government revenue

22.1

25.4

20.4

23.8

25.0

26.6

26.1

Memorandum items:

Gross domestic product (CFAF billions)

13,655

14,185

14,998

16,159

18,218

19,681

21,127

of which non-hydrocarbon (CFAF billions)

13,655

14,185

14,998

16,159

17,104

18,425

19,943

Gross domestic product (USD billions)

23.6

24.7

...

...

...

...

...

Share of hydrocarbon in total GDP (%)

...

...

...

...

6.1

6.4

5.6

National Currency per U.S. Dollar (Average)

586

575

...

...

...

...

...

Sources: Senegal authorities; and IMF staff estimates and projections.

1 Based on national accounts with base year 2014.

2 Reflects reclassification of public investment.

3 Starting in 2017 debt level, debt service and government revenue include preliminary data covering the broader public sector.

4 Domestic debt includes government securities issued in local currency and held by WAEMU residents.

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