An International Monetary Fund (IMF) mission led by Hervé Joly visited Senegal during March 27-April 10, 2013 to conduct the fifth review under the three-year Policy Support Instrument (PSI) approved in December 2010. The members of the mission met with the President of the Republic, the Prime Minister, the ministers of economy and finance, and energy; representatives of the Central Bank of West African States (BCEAO); other senior government officials; and representatives of the private sector, civil society, and the development partners.
At the conclusion of the visit, M. Joly issued the following statement:
“Recent macroeconomic developments were broadly in line with the projections made in fall 2012. Growth reached 3.5 percent in 2012 (from 2.1 percent in 2011), fueled by strong performance in the agricultural sector. Inflation has been moderate, with a 1.4 percent consumer price increase in 2012. External trade was marked by a deterioration in the current account deficit which exceeded 10 percent of gross domestic product (GDP) in 2012, driven largely by increases in imports of petroleum and food products. Credit to the economy increased by about 10 percent, while growth of the money supply was contained.
“Notwithstanding the sluggish international environment, GDP growth is expected to tick up to 4 percent in 2013. Inflation should remain below 2 percent. The current account deficit is expected to improve.
“Program implementation was satisfactory overall. All quantitative assessment criteria and indicative targets for the program at end-2012 were met, except for the indicative target on single tendering owing to emergency procurement associated with the floods and preparation for the 2012/2013 crop year. For the first time in the last few years, the annual fiscal deficit target was met despite significant revenue shortfalls (deficit of 5.9 percent of GDP). Progress was made with the implementation of structural reforms, notably with the entry into force of the new general tax code on January 1, 2013.
“The discussions between the authorities and the mission focused on efforts to reduce the fiscal deficit, which remains a priority objective for the authorities in order to maintain debt sustainability and rebuild fiscal space. Since the last review, the fiscal outlook has been affected by tax-revenue shortfalls and new spending pressures, largely reflecting the situation in the energy sector. These developments should be matched by additional efforts to increase fiscal revenues and savings on certain expenditures. Overall, however, deficit reduction will be slightly lower than expected in 2013, to allow for nonrecurrent expenditures associated with the security situation in Mali and the Sahel, and the launching of the program in response to the major flooding of 2012. Nevertheless, the authorities reaffirmed their objective to reduce the deficit to less than 4 percent of GDP by 2015.
“The mission expressed its concern regarding the situation in the energy sector. Energy price subsidies (electricity and petroleum products) cost Senegalese taxpayers more than CFAF 160 billion in 2012 and would remain high in 2013. The mission believes that this burden is difficult to bear for public finances and to justify, given that only a small share of these subsidies benefit the poor. Consequently, the mission encouraged the authorities to phase out these subsidies and replace them with better-targeted social protections. A long-term reduction in electricity subsidies will require bringing online power stations that use more efficient and less expensive technologies, as well as substantial efficiency improvements at SENELEC. Accordingly, the mission encouraged the authorities to accelerate the implementation of their energy sector reform strategy.
The IMF’s Executive Board is expected to take up the fifth program review in June 2013.”