Washington DC: A staff team from the International Monetary Fund (IMF), led by Mr. Edward Gemayel, conducted a mission from September 29 to October 6, 2022, to take stock of recent economic developments and update growth and budget forecasts, and to discuss the draft 2023 budget.
At the conclusion of the mission, Mr. Gemayel issued the following statement:
“The impacts of the war in Ukraine and the soaring commodity prices are taking a toll on the Senegalese economy. Activity in the secondary and services sectors slowed in the first half of this year, leading to a modest downward revision of growth projection to 4.7 percent. However, inflation reached a multi-decade high of 11.2 percent in August y/y, driven by rising food prices (17.3 percent), which is adversely impacting household living standards. Average inflation in 2022 is now expected to reach 7.5 percent. Revenue collection through end-September was stronger than expected but soaring energy subsidies have led the government to envisage delaying some projects to contain the fiscal deficit at the targeted level of 6.2 percent of GDP. In the medium term, the growth outlook appears to be favorable, averaging around 10 percent over the period 2023 and 2024, boosted by oil and gas production, and inflation is expected to gradually fall to 2 percent.
While a reduction of the fiscal deficit is projected in the 2023 budget, the fiscal consolidation efforts are insufficient given tight financing constraints and rising public debt vulnerabilities. Higher revenue collection targets, and credible commitments to phase out energy subsidies in the short to medium term are needed. To this end, the authorities are encouraged to eliminate costly tax exemptions, more forcefully implement the medium-term revenue strategy, and take the necessary measures to reduce energy subsidies while protecting the most vulnerable in a targeted way.
Strengthening the resilience of the Senegalese economy in the face of the multiple shocks and building buffers to address future shocks hinge on advancing key structural reforms, namely: (i) streamlining exemptions to the public procurement code for the energy sector and finalize the revision of its legal framework to strictly limit exemptions to open and competitive tenders, and (ii) preparing and executing the roadmap for the control and better targeting of energy subsidies.
The IMF team wishes to thank the authorities and other counterparts for their excellent cooperation, and candid and constructive discussions during the visit and reaffirms the IMF’s support to the government’s efforts to implement its economic reform program. Discussions for the final review under the Policy Coordination Instrument, the Stand-By Arrangement, and the Stand-By Credit Facility are planned for early November 2022.
During the visit, the IMF team met with his excellency Prime Minister Amadou Ba; Mr. Mamadou Moustapha Ba, Minister of Finance and Budget, the National Director of the BCEAO, Mr. Ahmadou Al Aminou Lo, and senior government officials.