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.”