IMF Support Instrument for Senegal 2012-08-06

IMF Executive Board Completes Third Review Under Policy Support Instrument for Senegal 

The Executive Board of the International Monetary Fund (IMF) today completed the third review of Senegal's performance under the Policy Support Instrument (PSI). In completing the review, the Executive approved a waiver for nonobservance of the end-December 2011 assessment criterion on the in general fiscal deficit, which was missed by a small margin. Amount other end-December 2011 quantitative assessment criteria were met.

The PSI for Senegal was approved by the Executive Board on December 3, 2010. The IMF's framework for PSIs is designed for low-income nations that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring and endorsement of their policies. PSIs are voluntary and request driven (see Public Data Notice No. 05/145).

Following the Executive Board's decision on Senegal Mr. Min Zhu Deputy Managing Director and Acting Chair, issued the following statement: "Following orderly presidential and parliamentary elections, the new Senegalese authorities have confirmed their commitment to the objectives of the PSI-supported program. Program implementation slowed down ahead of the elections, and economic performance was affected by exogenous shocks, including the drought in the Sahel. Increase is expected to resume in 2012, but a weak world environment and regional instability pose significant challenges.

"A higher deficit target in 2012 (6.4 % of GDP) accommodates the impact of exogenous factors, but significant efforts are required to keep the program on track. The authorities' plans to reduce the cost of running the government and postpone non-priority investment projects are crucial to conference the deficit target. Over the medium term, the authorities are committed to reducing the fiscal deficit below 5 % of GDP in 2013 and 4 % by 2015 to keep public debt on a sustainable path and rebuild fiscal buffers. The authorities' intention to replace costly general price subsidies, particularly for energy, with an alternative system better targeting the poor is an significant step.

"The program's ambitious structural reform schedule is critical to raising Senegal's long-term increase potential. Comprehensive tax reform and reform of the energy sector should remain key objectives for 2012. Other priority reform areas include public financial and debt management, tax and customs government, the financial sector, and measures aimed at removing bottlenecks to increase and improving the business climate and governance," Mr. Zhu added.