An International Monetary Fund (IMF) mission headed by Norbert Funke visited Senegal during November 4-18, 2009, to conduct discussions for the fourth review of the Policy Support Instrument (PSI) and the second review of the Exogenous Shocks Facility (ESF).
At the end of the mission, Funke issued the following statement in Dakar:
“The global financial crisis and domestic shocks are affecting Senegal’s economy. Growth is expected to slow to 1.25% in 2009 from an already depressed 2.5% in 2008. Business activity has been weak, remittances have been under pressure, and tax revenues are lower than expected. In the second half of this year the economy has also been undercut by electricity shortages and urban flooding.”
“However, the expected global recovery and the pursuit by Senegal’s government of appropriate economic policies should set the stage for a pick-up in growth to about 3.5% in 2010.”
“Despite the difficult economic environment, implementation of the government’s economic and financial program has been broadly satisfactory. All quantitative assessment criteria were met and key structural benchmarks have been completed. The stock of the government’s unpaid bills within the regular expenditure chain has been normalized. The mission welcomed progress with reforms to improve public financial management.”
“The 2010 budget aims at striking a balance between resource constraints and promoting investment and protecting priority spending. Under the mission’s macroeconomic assumptions, the budget implies that the fiscal deficit could increase to about 5% of GDP in 2010. Such a moderate fiscal expansion could help support demand and would not jeopardize Senegal’s medium-term debt sustainability.”
“To raise economic growth, the government will need to undertake major reforms. In addition to normalizing relations between the government and the private sector, improved governance, and further progress in budget planning, and better revenue administration and liquidity management.”
The mission encouraged the authorities to continue to strengthen governance, including through publishing regularly the budget execution and ensuring that audit and regulatory agencies have adequate financial and human resources. Other critical reforms that are needed, according to the IMF, are in the energy and financial sectors, and through the adoption of measures that will improve the current business climate.
“Broader and deeper domestic and regional financial markets would enhance access to finance, stimulate small- and medium-sized entrepreneurial activity, and ultimately reduce poverty. Measures to improve the business climate could include reducing delays in transferring property rights, better contract enforcement, and the simplification of customs procedures,” Funke concluded.
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