COVID-19: IMF, Senegal reach staff-level deal on economic, financial policies

15 Juin 2020

Dakar, Senega, June 15 (Infosplusgabon) - A staff team of the International Monetary Fund (IMF) has reached staff-level agreement with the authorities in Senegal on economic and financial policies that could support approval of the first review of their three-year programme under the IMF’s Policy Coordination Instrument (PCI) approved in January 2020.

In a statement made available to Infosplusgabon on Monday, said the IMF team conducted a virtual mission from June 2-12, led by Ms. Corinne Deléchat, and engaged in discussions as part of the first review of the IMF’s Policy Coordination Instrument.

At the conclusion of the mission, Ms. Deléchat remarked that the COVID-19 pandemic has had a significant impact on economic activity, exacerbated by border closures, a curfew, and social distancing.

Senegal’s GDP growth rate is projected at 1.1 percent for 2020 compared to 5.3 percent in 2019, she said, noting that these forecasts are based on the control of the spread of the pandemic, the implementation of measures to support the economy, and a gradual recovery of economic activity during the second half of 2020. The forecasts are nonetheless subject to major downside risks.

To mitigate the effects of the crisis attributable to COVID-19, the IMF team observed, the Senegalese government has set up an economic and social resilience programme to strengthen the health system and to support households, the Senegalese diaspora, as well as firms and their employees.

In April 2020, the IMF disbursed US$442 million under the Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF) to Senegal, thus providing immediate liquidity to support the government in its implementation of the national COVID-19 response plan (plan de riposte).

Ms. Deléchat pointed out that the performance of the PCI-supported programme is satisfactory. She said that at end-December 2019, all quantitative targets under the programme, except for one on the share of single-sourced public tenders, were met, and significant progress was achieved in attaining the reform objectives for end-June.

In particular, Fund staff welcomed the finalization of the medium-term revenue mobilization strategy, whose implementation in the second half of 2020 will support economic revitalization measures.

A comprehensive assessment of the impact of the pandemic on revenue collection and supplementary expenditure requirements raises the estimated budget deficit to 6.1 percent of GDP in 2020.

Senegalese authorities have stated their commitment to implementing measures that are temporary, well-targeted, cost-effective, and fully reflected in a revised budget. They intend to return gradually to a budget deficit of 3 percent of GDP through 2022 (WAEMU convergence criterion) as the crisis abates. The authorities are also committed to taking steps to strengthen transparency and accountability regarding emergency expenditure.

“With respect to economic support measures, it is important to ensure that financing assistance for firms is properly coordinated and targeted, and to ensure that the requirements for eligibility for the various facilities are clarified,” Ms. Deléchat emphasized. “Such support should also be based on appropriate risk-sharing in order to limit moral hazard and fiscal costs. Direct transfers intended for viable firms should be evaluated on a basis of cost-benefit analysis.”

In the view of the IMF team, the crisis represents an opportunity to expand social safety nets and enhance the effectiveness of the available instruments for supporting small- and medium-sized enterprises (SMEs).

According to Ms. Deléchat, Senegal will examine the possibility of broadening social safety nets in cooperation with its development partners. In addition, the government intends to accelerate the strengthening of the coordination of entities and programmes whose mission is to support SMEs.

Ms. Deléchat  said that the structural reforms of public financial management will continue, with the full implementation of programme budgets beginning with the 2021 budget law, tightened control over treasury deposit accounts ( comptes de dépôt), strengthening of the Treasury Single Account, as well as sound debt management.

Meanwhile, the government continues to prepare the governance framework to manage revenues generated by hydrocarbon operations.

Noting that the IMF team had frank discussions with the Senegalese authorities, she said the IMF Executive Board could consider the first review in the second half of July 2020.

FIN/ INFOSPLUSGABON/GBJ/GABON2020

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