On January 10, 2020, the Executive Board of the International Monetary
Fund (IMF) approved a new three-year Policy Coordination Instrument
(PCI) for Senegal.
The PCI for Senegal will build on the lessons from the previous
programs supported by the IMF. It aims to support the authorities’
efforts to consolidate macroeconomic stability and foster sustained and
inclusive growth. Program reviews take place on a semi-annual fixed
schedule. While the PCI involves no use of IMF resources, successful
completion of program reviews would help signal Senegal’s commitment to
continued strong economic policies and structural reforms.
Following the Executive Board discussion, Mr. Tao Zhang, Deputy
Managing Director and Acting Chair, said:
“Senegal’s economic performance during the first phase of the Plan
Senegal Emergent has been strong. Growth has been robust, buoyed by
favorable external conditions and significant public investment, in the
context of an improving business environment. Although public debt has
increased and the current account deficit has widened, the outlook
remains favorable, provided the authorities follow through with their
comprehensive reform strategy and measures to consolidate macroeconomic
“The authorities’ economic program supported by the Policy Coordination
Instrument (PCI) focuses on achieving high, sustainable, and inclusive
growth, consolidating macroeconomic stability through prudent fiscal
policy and sound debt management, and managing the oil and gas sector
in a transparent manner. The PCI will provide an appropriate framework
for a close policy dialogue and signal policy priorities and reform
commitments to development partners.
“The reform agenda’s focus on promoting private sector‑led and
inclusive growth is welcome. Policies to support private sector
development will need to be well‑targeted and efficient to achieve the
“Fiscal policy will be anchored by the WAEMU convergence criterion to
limit the fiscal deficit to 3 percent of GDP. Further progress to
better assess and contain fiscal risks is needed, including by clearing
unmet obligations from 2017 and 2018, improving the recording and
monitoring of arrears, eliminating below‑the‑line operations, and
better managing subsidies.
“Enhanced domestic revenue mobilization and expenditure efficiency will
be essential to create further fiscal space. The medium‑term revenue
strategy appropriately targets an increase in the tax‑to‑GDP ratio to
20 percent of GDP by 2023.
“Future oil and gas production is likely to have substantial economic
benefits. The government’s strong commitment to setting up a
transparent framework to manage oil and gas revenues is welcome.”
Recent economic developments
Economic growth averaged 6.5 percent over the past five years, boosted
by public investment under phase I of Senegal’s development strategy,
the “Plan Sénégal Émergent” (PSE), and buoyant private consumption.
High public financing needs led to a rapid increase in public debt and
a widening of the current account deficit. Economic growth is estimated
at 6 percent in 2019 and inflation remains low at 1.3 percent for the
12-months period ending in October. The current account deficit widened
in 2018 to 8.8 percent of GDP owing to higher energy and capital goods
The economic outlook remains favorable. After slowing somewhat in 2019,
growth is expected to accelerate to 7 percent in 2020-21, supported by
the second phase of the PSE, robust activity in agriculture and
services and increasing hydrocarbon-related investments, which would
also lead to a temporary widening of the current account deficit to
about 11 percent of GDP. Risks to the outlook mostly stem from rising
security threats in the region, increasing trade barriers, and large
swing in energy prices.
The program to be supported by the new PCI is fully aligned with the
second phase of the authorities’ PSE and is articulated around three
main pillars: (i) achieving high, sustainable, and inclusive growth;
(ii) consolidating macroeconomic stability through prudent fiscal
policy, including through increasing revenues and spending efficiency,
and sound debt management; and (iii) managing the oil and gas sector in
a sustainable and transparent manner.
Reform commitments to promote inclusive growth include improving the
judicial system, the skill-set of the workforce, access to land and
credit, the functioning of the labor market and financial inclusion.
The authorities’ fiscal policy aims at consolidating macroeconomic
stability by targeting a 3 percent of GDP deficit throughout the
program period, in line with the WAEMU convergence criterion. A
medium-term domestic revenue mobilization strategy is being developed
with the objective to increase the tax-to-GDP ratio to 20 percent by
2023. The authorities’ aim to set up a strong and transparent
governance framework to govern the hydrocarbon sector and both the
legal and fiscal framework are in the process of being updated in line
with international best practices.