IMF Extends Arrangement for Senegal
By Dipo Olowookere
The Executive Board of the International Monetary Fund (IMF) has completed the fourth review of Senegal’s economic performance under a program supported by the Policy Support Instrument (PSI).
The aim of the program is to implement economic policies and structural reforms needed to sustain strong growth and ongoing fiscal consolidation to meet the regional fiscal criteria.
In completing the review, the Board also approved the authorities’ request for a one-year extension of the PSI arrangement. The PSI for Senegal was approved on June 24, 2015.
The PSI is an instrument of the IMF designed for countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring and endorsement of their policies.
The PSI helps countries design effective economic programs that, once approved by the IMF’s Executive Board, signal to donors, multilateral development banks, and markets the Fund’s endorsement of a member’s policies.
Following the Executive Board discussion, Mr Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, stated that, “The Policy Support Instrument with Senegal has supported the authorities’ reform efforts to increase growth, while maintaining economic stability.
“Under the Plan Sénégal Emergent (PSE), growth has increased steadily to 6.7 percent in 2016, while inflation has remained low.
“The fiscal deficit fell to 4.2 percent of GDP in 2016 and Senegal is projected to meet the West African and Monetary Union convergence criteria of 3 percent of GDP in 2018, one year earlier than mandated.
“Continued implementation of sound policies reforms is important to sustain high growth and meet Senegal’s development objectives.
“To achieve the PSE goals of sustaining high growth and reducing poverty over the medium term, the authorities are committed to undertaking further reforms to facilitate private investment. This requires implementation of high quality infrastructure projects and strengthening the business environment through continued efforts to reduce energy costs, strengthen governance and implement judicial and land reforms. A Special Economic Zone (SEZ) with high standards of economic governance and low tax rates could act as a catalyst to attract high levels of private investment.
“The authorities have implemented important fiscal reforms to support ongoing consolidation while increasing public investment. This has been achieved through containment of public consumption, including the wage bill. To create further fiscal space for much needed infrastructure spending, the authorities are committed to increasing revenues through improving revenue administration and lowering tax exemptions.
“The authorities recognize the importance of strengthening debt management to support fiscal sustainability. This requires reforms to address weaknesses in Treasury operations and contain additional financing needs from the Post Office and civil service pensions, as well as improving public financial management.
“Senegal’s economic outlook is broadly positive and risks remain manageable. However, to enhance growth prospects, it is important to strengthen the implementation of reforms to improve the quality of public investment and promote private investment. Priority should also be given to addressing weakness in Treasury operations to ensure fiscal sustainability.”