IMF says Senegal needs fiscal space for investment in infrastructure

19 Décembre 2017

Dakar, Senegal, December 19 (Infosplusgabon) -  Senegal’s growth is expected to exceed 6 percent in 2017 for the third year in a row, while inflation remains low, according to the Executive Board of the International Monetary Fund (IMF) which has just completed the fifth review of the country’s economic performance under a programme supported by the Policy Support Instrument (PSI).

“Senegal’s macroeconomic situation is stable. The fiscal deficit has been declining progressively in recent years and is projected to reach 3.7 percent of GDP in 2017, but debt has grown faster than the fiscal deficit would imply as the Treasury has financed the deficits of the Post Office and Civil Service Pension, as well as expenditures from past years’ appropriations,” the IMF said on Tuesday.

Completing the review, the IMF Board noted that the current account deficit is projected to increase to 7.8 percent of GDP in 2017 due to higher oil prices and slightly slower export growth, reversing a decreasing trend over the past several years.

The Fund’s PSI supports the Senegalese authorities’ macroeconomic reforms designed to advance the Plan Sénégal Emergent (PSE), the strategy set to increase growth and reduce poverty while preserving macroeconomic stability and debt sustainability.

While the outlook for the Senegalese economy remains on the whole positive, the Board said: “Senegal needs to continue implementing its structural reform programme to maintain high growth rates of recent years.”

Noting the progress made in implementing public infrastructure projects, the Board emphasised that Senegal “now needs to accelerate the implementation of reforms to improve the business environment and attract private investment”.

“The new Special Economic Zone could play a catalytic role in this regard by leading by example in terms of good governance,” the Board said, pointing out that “further progress is needed on implementing measures to facilitate small and medium enterprise access to credit and, more broadly, the transition of the informal sector to the formal sector.”

It cautioned that sources of external risk include spillover from regional security threats and tightening of regional and global financial market conditions.

According to the IMF, the main macroeconomic challenge for Senegal in the short term is to find the fiscal space for investment in infrastructure to facilitate private sector development, on the one hand, and for social spending, on the other hand, without undermining debt sustainability.

“To achieve this, the authorities will need to contain financing needs for Treasury operations through reforms of the Post Office, Civil Service Pensions and the ‘comptes de dépôt’.

“Over the medium term, continuing to support the PSE will require raising tax revenues to the WAEMU (West African Economic and Monetary Union) convergence criterion level following the GDP rebasing, which will entail improvements in tax policy and revenue administration.

“While Senegal remains at low risk of debt distress, debt indicators have deteriorated, requiring strong progress on fiscal and structural reforms. Senegal needs to continue to manage its debt prudently, including exercising caution with non-concessional debt,” the Board said.

FIN/INFOSPLUSGABON/RTE/ GABON 2017

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