An International Monetary Fund (IMF) mission to conduct the sixth and final review under the Policy Coordination Instrument (PCI) and the Stand-By Credit Facility (SCF) have been concluded.
The mission made significant progress in the discussions on policies and reforms that could pave the way for the completion of the sixth and last review under the PCI and the third and last reviews under the SCF and SBA.
Discussions will continue over the coming days towards reaching a staff-level agreement, subject to IMF management approval and consideration by the IMF Executive Board by mid-December.
Weaker external demand, rising food and energy prices, and the US dollar appreciation have negatively impacted the Senegalese economy. As a result, this year’s growth was revised down to 4.7 percent and inflation, which has reached a multi-decade high, was revised up to 8.5 percent.
Inflationary pressures, largely coming from soaring food prices are proving broader and more persistent than anticipated, causing serious hardship for households, especially the most vulnerable.
The economy is projected to rebound in 2023 with a strong pickup in growth to 8.3 percent on the back of a temporary boost from oil and gas production and absent further escalation of the war in Ukraine.
“Program performance was broadly satisfactory. Apart from the ceiling on the share of contracts awarded through single-source procurement, all quantitative targets were met. Significant progress was made in the implementation of structural reforms, but at a slower pace than envisaged under the program. The fiscal framework to manage the oil and gas revenues and the new public procurement code, which is expected to ensure more open and competitive tenders, are yet to be adopted. Significant delays in payments of the cash transfer scheme for the poorest households are observed and should be addressed urgently. The authorities should move to a more effective digital payment of the cash transfer program. Implementing the remaining AML/CFT actions to move Senegal out of the enhanced oversight by the Financial Action Task Force (FATF) is critical.
“Given the limited fiscal space, gradual fiscal consolidation efforts are needed over the medium term to preserve debt sustainability. Such efforts should start in 2023 by raising more fiscal revenues building on the strong revenue performance this year and limiting the use of the budgetary reserve envelop, which would allow the authorities to contain the fiscal deficit around 5 percent of GDP.
Untargeted and regressive energy subsidies are soaring and are expected to amount to CFAF 750 billion in 2022 (or 4.4 percent of GDP) and absent any new policy measures would reach 800 billion (or above 4 percent of GDP) in 2023. It is thus important for the authorities to convincingly commit to start phasing them out in 2023 and to accelerate efforts to finalize a credible roadmap to gradually unwind them by 2025.
The team lead of the International Monetary Fund (IMF) mission, led by Mr. Edward Gemayel thanked the authorities and other counterparts for their excellent cooperation and candid and constructive discussions during the mission and reaffirmed the IMF’s support to Senegal.