IMF completes 2nd review under Policy Coordination Instrument for Senegal

The 2021 budget approved in December 2020 envisages a consolidation of about 1½ percent of GDP, underpinned by the withdrawal of COVID-19 stimulus, implementation of the authorities’ Medium-Term Revenue Strategy, and further current spending rationalization.

The Executive Board of the International Monetary Fund (IMF) completed the second review under the Policy Coordination Instrument (PCI) for Senegal.[1] The Executive Board's decision was taken without a meeting. [2]

The PCI for Senegal was approved on January 10, 2020 (see Press Release No. 20/06 ). The program supports the authorities' development objectives under the "Plan Senegal Emergent" and focuses on three main pillars: (i) achieving inclusive and private sector-led growth; (ii) consolidating macroeconomic stability through prudent fiscal policy and sound debt management; and (iii) managing prospective oil and gas revenues in a sustainable and transparent manner.

Although the pandemic has remained fairly contained in Senegal, its economic impact has been severe through the first half of 2020. Strong fiscal and monetary policy support have helped bolster the health system and cushion the economic shock but led the projected 2020 fiscal deficit to increase from 3 to about 6 ½ percent of GDP. The IMF disbursed US$442 million (100 percent of quota) under the RCF/RFI in April to support the pandemic response. Drawing lessons from the crisis, the authorities have adjusted their economic development plan for 2021-23 to build a more resilient and inclusive economy, including by upgrading the social safety net.

The 2021 budget approved in December 2020 envisages a consolidation of about 1½ percent of GDP, underpinned by the withdrawal of COVID-19 stimulus, implementation of the authorities' Medium-Term Revenue Strategy, and further current spending rationalization. In line with regional understandings, the authorities are committed to returning to the WAEMU fiscal deficit target of 3 percent of GDP by 2023, which would help contain debt vulnerabilities. Public debt remains at moderate risk of debt distress with limited space to absorb shocks in the near term.

Reforms to gradually reduce tax expenditures, enhance budget execution transparency and monitor fiscal risks are advancing. The authorities are also finalizing the revised legal framework for PPPs and the legal framework for the management of hydrocarbon revenue, which should be aligned with international best practices.