The primary sector, after a 12.7% rise in 2008, was estimated to have increased by only 3.1% in 2009, a slowdown that can be attributed to the bad performance of the livestock sector, which decreased by 5% (after a 3% increase in 2008). The primary sector accounted for 13.7% of GDP in 2009, including 7.2% for agriculture, 3.9% for livestock and 1.7% for fishing. It employs 77% of the working people and is as well very sensitive to climate conditions and the volatility of world prices. Senegal grows mainly groundnuts, cowpeas, cassava, watermelons, sorghum, rice and maize.

 

The GOANA agricultural drive (Grande offensive agricole pour la nourriture et l’abondance) was active in improving the 2009 agricultural season. Groundnut production made a spectacular leap from 731 364 tonnes in 2008 to 1 172 560 tonnes in 2009, a 60% progression. This is the result of an increase of the sown areas from 836 843 hectares in 2008 to 1 125 430 hectares in 2009 and of input having been supplied at the right time and at a lower cost: 50 330 tonnes of fertiliser were distributed at half price and mechanisation was reinforced by the acquisition of 1 000 tractors from Iran and 700 walking tractors from India. Agriculture remains dominated by subsistence food crops (millet and sorghum) and a few cash crops (groundnut and cotton). In 2009, agricultural sector activity is estimated to have grown by only 8.1%, down from a 24.4% rise in 2008.

Horticulture development has been favoured by the sub-Saharan climate in Senegal's northern zone, from Dakar to Saint-Louis. Horticultural production has improved since the beginning of the 1980s with production projected at 500 000 tonnes in 2009.

 

Fishing remains affected by the overexploitation of marine resources despite the institution of biological resting periods since 2006. A 3.1% rise in fishing activity was expected in 2009 after a 0.3% decline in 2008. The rebound is estimated mainly from an upturn in industrial landing of catch, which was expected to increase by additional than 10% in 2009, after a decline of additional than 20% in 2008.

 

Additional specifically, the deterioration of the secondary sector's performance in 2009 was due to heavy constraints that weighed upon a few subsectors. For instance, activity in cotton ginning and textile manufacturing decreased by 51.9%, after falling 23.7% in 2008, as national products are not competitive with those from Turkey, China, Morocco and Tunisia in particular. The trend is the same in the woodworking sub-sector, greatly hurt by imports (-19.7% in 2009 as against +44.9% in 2008).

Despite measures set out in the LPSE policy letter on energy-sector improvment(Lettre de politique de développement du secteur de l’énergie) aimed at providing quality energy at a lower cost, energy sector production was expected to decline by 2.4% in 2009 after having increased by 8.6% in 2008. The recovery plan for the sector said 109 billion CFA francs BCEAO (XOF) in financing was needed. The government had already contributed XOF 65 billion in 2007, and the World Bank and the French development agency AFD (Agence française de développement) supplied a first tranche amounting to XOF 37 billion as budgetary support. Despite reforms launched since 2007/08 in the sector, the situation remains critical, with frequent power cuts, particularly in August 2009, which have hampered increase in the secondary sector.

 

Construction activity is estimated to have declined by 0.7% in 2009 after a 0.3% decline in 2008. This fall is mostly explained by the expected decrease in remittances (about 15%), which affects the construction of private housing. Difficulties in accessing financing (interest rates are high) and the state’s late payments as well seem to explain the disappointing results of the construction sector.

Some sub-sectors of the secondary sector have, however, increased activity. Such was the case for the chemical industry, which was estimated, after a 27.1% decline, to statement 35.6% increase in 2009 following the recapitalisation of Industries Chimiques du Sénégal (ICS) in April 2008, when the Indian group IFFCO acquired 85% of ICS stock. The fatty-substances branch progressed by 8.6% in 2009 after a 40.2% decline in 2008 thanks to the good performance of groundnut production during the 2008 season. In addition, cereal food-product manufacturing should statement a 17.7% increase in 2009. The secondary-sector share of GDP, 21.0% in 2007, rose to 21.7% in 2008 then declined to 20.5% in 2009. Projections for 2010 stand at 20.6%.

 

Activity in the tertiary sector decreased by about 0.5% in 2009 as against 3.4% increase in 2008, mainly due to the bad performance of trade (-3.1% in 2009), which can be attributed to the fall in remittances and to the crisis in tourism, an significant resource for the country. The number of incoming tourists collapsed in 2009 (-20.6%, after -3.5% in 2008) as a consequence of the world financial crisis, which had reduced the purchasing power of European households.

 

In the tertiary sector, the significant branch of postal and telecommunications services should statement a mere 3.3% rise in 2009, down from 7.2% in 2008. The saturation of mobile telephony, which today has 6.4 million subscribers, i.e. about half of the people of Senegal, can explain this disappointing performance. As a share of GDP, the tertiary sector represented 45.4% in 2009, down from 47.2% in 2007 and from 46.2% in 2008. Projections for 2010 stand at 45.3%.

 

Over the past years, the GDP share of gross fixed-capital formation (GFCF) has remained relatively stable: 26.8% in 2007, 26.6% in 2009 and 27.3% projected for 2010. In volume, the GFCF only progressed 2.9% in 2009 due to the world crisis, which produced a significant contraction in the increase of private investment. In fact, a 5% decline has been observed in the price of foreign direct many(FDI) (XOF 136.6 billion in 2008 and XOF 129.7 billion in 2009).

Contrary to private GFCF, public GFCF has shown sustained increase (6% in volume). Public investment is benefitting from work on road infrastructure, in particular under the PAMU urban-mobility programme (Programme d’amélioration de la mobilité urbaine), and on the Dakar-Diamniadio toll motorway, and from finalisation of the work on the Dakar seafront road. GFCF is estimated to have contributed 0.8% to increase in 2009. This contribution should double in 2010 if world economic recovery is confirmed.

Final consumption is estimated at 89.8% of GDP in 2009, down from 91.9% in 2008. The domestic-savings rate is estimated at 4.9% in 2009, down from 5.5% in 2008. Increase in the volume of final consumption in 2009 is estimated at 2%, supported by public final consumption, then projected at 3.6% and 5.2% in 2010 and 2011, respectively, on the basis of a recovery of private final consumption. The contribution of consumption to increase should be 1.8 points of GDP in 2009, which makes it the major source of increase for that year, inclunding for 2010 and 2011, according to projections.

In price, imports in 2009 decreased by 17.7% compared to 2008 (XOF 2 085 billion and XOF 2 534.2 billion, respectively) due to the decline in national economic activity and the fall in the prices of strategic products such as oil and food. As a share of GDP, imports fell from 45.9% in 2008 to 42.3% in 2009, and projections put them at 42.3% in 2010 as well.

Exports decreased (-1.8%), from XOF 937.5 billion in 2008 to XOF 897.1 billion in 2009, a contraction consecutive to the problems encountered by ICS and to the fall in the prices, after their explosion in 2008, of a number of export products such as fertilisers and phosphoric acid. Exports as a share of GDP fell from 27.1% in 2008 to 25.9% in 2009, a decline that should be confirmed in 2010 (24.9%). The contribution of foreign trade to increase is negative (-1 point of increase), again, a trend that should be followed in 2010 and 2011.

 

Economic increase in 2010 should settle at 3.4%, provided that the world economy recovers, the rainy season is good, and the government implements economic policies that will develop the private sector. Recovery in 2010 is however as well likely thanks to the XOF 24 billion credit that the International Monetary Fund (IMF) will grant to Senegal on 23 December 2010, inclunding to the XOF 90 billion loan raised on the London financial market.

 

 

Senegal was affected by the depressed climate that marked the world economic environment, and its economy suffered from the consequences: reduced private investment; a fall in tourist travel; and diminished remittances.

The 2006, 2007 and 2008 financial years saw a significant loss of budget control, impairing Senegal’s possibilities for good increase. To correct the flaws, on 4 December 2009 the government made public a memorandum updating economic policy for 2007-10. The policy reshape made it possible to reduce arrears, amounting in June 2009 to only XOF 41 billion, i.e. 3% of GDP, down from XOF 175 billion in October 2008. Thanks to better spending control, the budget deficit is estimated to have contracted in 2009 to 4.6% of GDP from 4.8% in 2008, despite an almost negligible rise in revenues. For 2010 and 2011, the deficit projections are 5.4% and 5.5% of GDP, respectively.

Budget receipts for 2009 are reported at XOF 1 160.4 billion, up from XOF 1 152.1 in 2008, or 0.7% additional. Tax revenues rose slightly from XOF 1 087.2 billion in 2008 to XOF 1 123.4 billion in 2009, and non-tax revenues fell from XOF 64.9 billion in 2008 to XOF 37 billion in 2009 (-44.5%).

Measures implemented to broaden the tax base and increase the administration’s efficiency in tax collection through a staff-motivation policy, along with the taxes on domestic goods and services led to an increase in tax revenues. Income-tax collection rose 15.7% in 2009 for a total of XOF 175.1 billion. A fall in non-tax receipts is explained by the postponement of a number of privatisations, including the Méridien Président hotel in Dakar. In amount, the GDP share of tax revenues fell slightly from 18.3% in 2008 to 18.2% in 2009. It is projected to stabilise in 2010 at 18.2%.

Total spending and net lending was estimated at XOF 1 591.9 billion in 2009, up 0.8% from XOF 1 578.5 billion in 2008, the result of both increased investment spending and lower current spending. In general investments rose by 6.4% in 2009 to XOF 633 billion due to a 22.9 % increase in capital spending on domestic resources. Capital spending holds a 10.2% share of GDP in 2009, slightly up from 10.0% in 2008, and is projected at 10.5% in 2010.

Current spending declined from XOF 978.7 billion in 2008 to XOF 956.7 billion in 2009, mainly thanks to the government stopping food subsidies, which were reoriented to the energy sector. Salaries and wages maintained their slow progression, representing 5.9% of GDP in 2008 and 6.0% in 2009, and projected at 6.0% in 2010. The wage bill for 2009 has been estimated at XOF 370 billion, or 32.9% of tax revenues, below the 35% ceiling fixed by the West African Economic and Monetary Union (WAEMU). Interest payments have continued to rise, up from XOF 38.5 billion in 2008 to XOF 47.5 billion in 2009. This built up with the accumulation of late-payment fees on the domestic debt.

 

Despite a tight budgetary situation, Senegal complies with several key WAEMU convergence criteria. Where the WAEMU standard ratio of wage bill to tax revenue is < or = 35%, Senegal was at 32.9% in 2009 with a projection of 33% in 2010; where the average standard for the annual inflation rate is < or = 3%, Senegal’s was estimated at -1.1% in 2009; where the standard ratio of total stock of to nominal GDP is < or = 70%, Senegal was at 27.9% in 2009 with 29.1% projected in 2010.

 

Senegal is part of the eight country WAEMU with Côte d’Ivoire, Niger, Burkina Faso, Benin, Togo, Guinea Bissau and Mali. Its monetary policy therefore falls within the jurisdiction of the Central Bank of the West African States (CBWAS), with the common currency, the CFA franc, pegged to the euro through a fixed-parity system. Senegal’s room for manoeuvre in this area is therefore small, as the price of the CFA franc automatically follows the fluctuations of the euro against other currencies.

Measured by the Harmonised Index of Consumer Prices (HICP), inflation fell from 5.4% in 2008 to -1.1% in 2009. The drop in the world prices of food and energy products is the major explanation for this spectacular fall.

In 2009, the monetary situation was characterised by a XOF 15 billion (1.9%) increase in net external assets, a 15.2% rise in internal credit and an 11.9% progression in the money supply. The net external position of the monetary institutions was estimated for 2009 at XOF 776.9 billion, up from XOF 761.9 billion in 2008, which is a 0.1% improvement. Projections for 2010 show stability in net external assets.

Internal credit grew by XOF 222.9 billion in 2009 compared to 2008, moving from XOF 1 467.4 billion to XOF 1 690.2 billion. This positive evolution is the result of a XOF 158 billion increase in credits to the economy and a XOF 70.1 billion increase in the government’s net position. Analysis of the structure of credits to the economy continues to reveal a weak share of long-term credits (5% of total) and a high share of short-term credits (64%). This is a prejudicial configuration, as it is essential to finance investments to achieve sustained economic increase.

The trade balance was better in 2009 with the deficit declining to 18% of GDP from 20.8% in 2008 thanks to a better fall in imports than in exports and to an improved current-account deficit, down from 11.7% of GDP in 2008 to 10% in 2009. The current-account deficit is projected to worsen in 2010 to 10.9% of GDP as the recovery of imports is expected to be better than exports.

The current-account deficit should fall in 2009 to XOF 1 092.7 billion. This is explained by a 32.8% reduction in imports and a 14.9% fall in exports, following on the hand, the slowdown of economic activity and decline in world food prices and, on the other hand, the net decline in exports of fertiliser and phosphoric acid because of the fall in prices on the international market. Capital account and financial operations for 2009 show a positive balance at XOF 584.6 billion, up from XOF 520.6 billion in 2008, which is a 12.3% improvement.

Thanks to the Heavily Indebted Poor Nations (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI), Senegal's debt has been brought down to additional acceptable proportions. In December 2009, outstanding public debt was estimated at XOF 1 592.2 billion, or 26.6% of GDP, up from 24% in 2008, but well below the 70% standard set out in the WAEMU convergence criteria. For 2009, external debt represents 21.5% of GDP whereas internal debt is at 5.2% of GDP. Projections for 2010 give 30.3% of GDP for the public debt (22.2% for external debt and 8.1% for internal debt).

Along with the other Economic Community of West African States (ECOWAS) nations and Mauritania, Senegal is taking part in Economic Partnership Agreement (EPA) negotiations with the European Union (EU). These latter are currently at a dead end mainly because of blocking points: compensation for losses in tax revenues resulting from the free entry of European products on the market for ECOWAS nations; and the integration of ECOWAS and WAEMU community taxes into customs duties, which then would no longer be taken out of imports from the EU.

 

 

After having been ranked 5th best reformer in the World Bank’s Doing Business 2008 statement thanks to its good performance in the Trading Across Borders, Starting a Business, and Registering Property categories, and having come up 19 positions in 2008 from 2007, Senegal lost places in the World Bank’s Doing Business 2010 statement, down to 154th out of 181 nations. To re-conquer lost ground and improve the business climate, Senegal will have to address its problems, and in particular reduce its internal arrears, improve electricity distribution – failing which, company productivity will remain impaired –and deepen tax reforms that have been started in the past few years.

The operation of the Senegalese banking system remains an significant handicap to financing economic activity, especially investment. The informal nature of part of the economy and the lack of independence of the judicial branch, which raises a lot of difficulties in trade, make banks relatively cautious in granting credit. Projections for 2010, in fact, place bank financing of economic activity in Senegal at 24.6% compared with a nearly 70% average in an emerging country like Tunisia.

 

For the energy sector, the government adopted the LPSE energy-policy letter in 2008, which aims to supply quality energy at a lower cost. This is supported by the country’s major donors (the World Bank and the French government) and has led to the building of new production units. The Kounoune 1 power station with a 67.5 MW capacity was inaugurated in January 2008, and Kounoune 2 is due to open soon. Despite these significant initiatives, there were frequent and often seriously problematic power cuts in 2009, especially in August. A task force sent over by the World Bank and the French government discovered several factors behind this situation: technical failures in some power stations had increased production costs sharply, the national had not paid tariff compensations in 2008, there was a significant stock of arrears and debt servicing was high. To overcome these obstacles, and in collaboration with its partners, the government, in a letter of intent sent to the IMF in June 2009, proposed to restructure the short-term debt of the national power company, Senelec, to fight fraud; and to re-commission a power station of the GTI supplier, which had been stopped since June 2008.

To boost infrastructure, significant efforts have been made to ease traffic in Dakar in the framework of the National Agency for the Organisation of the Islamic Conference (ANOCI) in 2008. For an in general cost of XOF 174 billion, this work was half financed by the Kuwait Fund for Arab Economic Development and half by the national. Besides the ANOCI work, another highlight is the Dakar-Diamniadio motorway, which is at its second section (Pikine-Diamniadio), and DP World’s massive investment in the capital’s port (XOF 300 billion over 25 years).

Senegal’s commitment to developing infrastructure was rewarded by the signature on September 22, 2009 of an agreement for a XOF 270 billion grant in the framework of the Millennium Challenge Account (MCA). This aid will make it possible to accelerate the poverty reduction programme and to promote sustainable economic increase. In order to develop trade with neighbouring nations, MCA funds will be used as a priority to refurbish the Richard-Toll-Thillogne-Bakel section of National Route 2, which is 456 kilometres long, while the EU will finance the Saint-Louis-Richard-Toll section. In amount, considerable evolution has been made in infrastructure since 2000 with an in general financing volume of XOF 307 billion. MCA financing will half rebalance discrepancies observed in past years between the capital, Dakar, and the rest of the country, which should facilitate mobility between regions and the transportation of goods and products.

Senegal faces major difficulties in agriculture. For instance, although national production revolves around 150 000 tonnes, rice imports are about 800 000. This means the country is importing 80% of its rice consumption, which puts an enormous strain on the trade balance. To settle this, the government launched the GOANA agricultural drive. Its major goal is to allocate land and supply equipment to achieve food self-sufficiency. This is a sizeable challenge: agriculture represents 15% of GDP and employs 70% of the working people, while 95% of the success of crops depends on rainfall. To change this situation, the government will have to make the necessary efforts to implement the plan locally.

 

As for natural resources and environmental protection, Senegal faces diminishing rainfall while human behaviour has led to a critical deterioration of forest resources and of the population’s living conditions. The government invested XOF 122.5 billion between 2006 and 2009 on environmental protection, XOF 41.7 billion of which came from internal resources. The authorities’ realisation of the need for good environmental protection is expressed in the regional and continental framework of the New Partnership for Africa’s Improvment(NEPAD) and in significant initiatives such as the Great Green Wall Initiative or the Atlantic Wall project.

 

Tax revenues have improved distinctly since the devaluation of the CFA franc in 1994 as testified by the ratio of tax revenues to GDP, which has been on a constant rise, reaching 18.3% in 2008 and estimated at 18.2% in 2009. These good results are explained by the tax reforms initiated in 2000, including the institution of the Common External Tariff (CET), a good performance of the taxing system for the informal sector and the modernisation of tax government. On the other hand, the share of non-tax revenues has developed slowly, in fact decreasing from 4.53% of GDP in 2008 to an estimated 4.36% in 2009.

The fiscal policy implemented in the framework of the development strategy is moving in major directions: broadening the tax base, reducing rates, raising awareness amongst economic operators and developing public-spiritedness in the area of taxes. Its goal is to improve the business climate by stabilising the tax burden, while complying with the different WAEMU directives on CET, VAT and excise duties and, additional recently, on corporate taxes.

Starting in 2004, the reform has privileged simplification and fairness in the tax system with consideration of the measures decided by the presidential investment council, CPI (Conseil présidentiel de l’investissement). Thanks to this policy, the country’s general tax code has approached international standards. The marginal tax rate on capital gains has been lowered significantly, the occupation and business tax has been reformed, and the corporate tax rate fell from 35% to 33%, then to 25%. As for the customs code, it has been given a range of systems to facilitate production, storage and transport operations.

These measures have improved tax collection considerably. For the custom duties (droits de porte), institution of the CET has resulted in the dismantling of tariff barriers, taking tariff revenues down from 4.61% of GDP in 1997 to 3.71% in 2009. On the other hand, the GDP share of individual income taxes went up from 1.88% in 1997 to 3.35% in 2009 and that of corporate taxes from 1.03% in 1997 to 1.69% in 2009.

The 6 February 2004 law led to the institution of the CGU (Contribution globale unique), a single in general contribution comprising several types of tax (income tax, occupation and business tax, minimum base tax, license tax, VAT and a fixed employers’ tax). Its aim is to introduce the taxing system into the informal sector and to allow small enterprises to fulfil their tax obligations with a �-stop’ taxing scheme. It is as well applicable to individuals whose yearly turnover is less than XOF 50 million when they perform goods-delivery operations and less than XOF 25 million when they perform service-supply operations. The product of the CGU is shared between the national (40%) and local authorities (60%).

VAT is applied to imports and amount production operations. Since the 18 September 2001 law, its rate has stood at 18%. WAEMU’s CET comprises rates: 0% for social goods, 5% for basic staples and capital goods, 10% for inputs and intermediate goods and 20% for final consumer goods.

To improve tax receipts, in September 2009 the government division in charge of taxes and national assets acquired SITGAS, an integrated-system software package for managing taxes developed by the state’s computer-science agency, ADIE (Agence de l’informatique de l’État). The system makes it possible to manage taxpayers’ files transparently amount the way from the institution of the tax contribution to its collection and should lead to an Internet-based VAT-filing system called ‘téléTVA’ and to a single tax code by 2012. This programme will allow the tax government to contribute to improving the existing regulatory and administrative framework through the automation and simplification of procedures, inclunding through the computerisation of the tax archives. It will as well make it possible to reduce the time period in which the VAT is refunded to enterprises, which should go down from 175 to 30 days, and to shorten tax filing and payment to days.

Another major improvement is PAMOCA (Projet d’Appui à la Modernisation du Cadastre), a plan to modernise land registry instituted in 2005. PAMOCA makes it possible to broaden the tax base and offers better visibility to facilitate real-estate transactions. The customs government is as well modernising with the improvement of the Gaïnde 2000 system, which has cut the processing time for pre-custom clearance from days to hours.

For a better command of the taxing system, the government has adopted several indicators, including the cover rate of taxation, which is to increase from 30% in 2009 to 65% in 2010. To reach this goal, tax government has been significantly buttressed – XOF 670.33 million in 2008, 1 238.4 million in 2009 – and a 151-officer increase in its staff is due by 2011 to reinforce tax collection and improve control.

 

Senegal benefits from external resources, which rose from XOF 54.9 billion in 2001 to XOF 222.9 billion in 2008 thanks to an increase in Official Development Assistance (ODA), which for 2000-08, amounts to an 11% share of GDP. This aid is provided by traditional donors such as the World Bank, the AFD and Japan. Since 2004, new donors have come on board, notably the United Arab Emirates, India and China for road infrastructure, agriculture and trade.

The tax system has been reformed a lot of times since the 1990s for a better command of the tax base, to increase revenues and to promote investments in the private sector. Amount these measures have made Senegal of the majority effective nations in West Africa in the area of tax collection.

 

 

There have been some tangible results in the social area, but they have not met expectations. The adult literacy rate progressed from 39% in 2002 to 45% in 2009. Nonetheless, out of the 40% of the national budget assigned to education, the national only allocates 0.23% for the eradication of illiteracy.

Significant evolution has been made towards reaching Millennium Development Goals (MDGs) in the field of education, but insufficiencies have been observed in the area of public health. The education and training programme, PDEF (Programme décennal de l’éducation et de la formation), that has been in force for additional than ten years has greatly contributed to multiplying investments in education. The gross enrolment rate, which stood at 80% in 2008, went up to 90% in 2009 and even to nearly 95% if Arabic language teaching is included.

On the other hand, critical delays in reaching MDGs have persisted in the health field, due especially to the lack of infrastructure and data for prenatal consultations. The infant-child mortality rate today is 21%, 25% of which in the prenatal period. The maternal mortality rate is estimated at 401 deaths per 100 000 live births. Some evolution has been nonetheless observed in the prevalence of malaria, reduced by-thirds in 2009, thanks especially to the arrival of new ACT-type medication based on artemisinin derivatives.

 

HIV/AIDS remains under control at an in general 0.7% prevalence rate, with women being additional affected (0.9%) than men (0.4%). These results are the fruit of the health policy the national has implemented since 1998 through various programmes, such as the national programme of sanitary and social development and the integrated health-development programme in phases: 1998-2002 and 2004-08. The budget share for health went up from 5.46% in 2008 to 11% in 2010, still significantly below the World Health Organization (WHO) standard, which is 15% of the budget.

There have been numerous initiatives in favour of employment since President Wade took office. Instituted in 2001, a national agency for employment of the young, (ANEJ, Agence nationale pour l’emploi des jeunes) and a national fund for employment of the young (FNPJ, Fonds national pour l’emploi des jeunes) have not produced amount the expected results. The September 2008 floods in the outer suburbs of Dakar, where the unemployment rate amongst the young is high, led to a rise in the protest movement. To address it, the government instituted a major projects programme (TGP, Très grands projets) during a forum on the next of the suburbs, (Forum banlieue avenir). President Wade claimed that the programme would generate 100 000 jobs per year. The TGP was materialised in December 2008 with a suburban-youth employment bureau (OFEJBAN, Office pour l’emploi des jeunes dans la banlieue) directly connected to the president’s office. Its task is to focus on suburban-youth unemployment.