November 28, 2022

IMF approves release of $442 million to Senegal to respond to coronavirus economic crisis

Independence Square
Independence Square

The International Monetary Fund (IMF) on Monday approved the disbursement of $442 million to Senegal to respond to the novel coronavirus economic crisis.

The IMF said its board approved the purchase, under the Rapid Financing Instrument (RFI), of $294.7 million, and a disbursement, under the Rapid Credit Facility (RCF), of $147.4 million “to help Senegal meet the urgent balance of payment needs stemming from the COVID-19 pandemic.”

IMF said the COVID-19 pandemic was hitting Senegal hard, and the sharp global economic downturn and domestic containment measures have led to a substantial reduction in economic activity, with sectors such as tourism, transport, construction, and retail particularly hard-hit, and the pandemic in Europe is also translating into lower remittances.

As a result, the short-term economic outlook has deteriorated significantly, with large uncertainties surrounding the duration and spread of the pandemic.

Mr. Mitsuhiro Furusawa, IMF Deputy Managing Director and Acting Chair, said the COVID-19 Pandemic was having “a severe impact on Senegal, creating an urgent balance-of-payments and fiscal financing need.”

“To mitigate the impact of the pandemic, the authorities have acted fast by increasing health spending and providing targeted support to vulnerable households and firms, including through food aid, suspension of utility bill payments for the poorest, and targeted tax relief.

“The IMF’s emergency financing under the Rapid Credit Facility and the Rapid Financing Instrument will provide much-needed liquidity to support the authorities’ response to the crisis and could catalyze further assistance from the international community, preferably in the form of grants,” Furusawa added.

He said a temporary widening of the budget deficit in Senegal was appropriate to mitigate the health and economic impact of the pandemic.

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“It is also advisable that macroeconomic policies continue to be guided by the objectives of the current Policy Coordination Instrument (PCI) to the extent possible. Once the crisis abates, a gradual return to the budget deficit target of 3 percent of GDP, in line with regional fiscal rules, is necessary to preserve external and debt sustainability.

“Additional concessional donor support will be critical to close the remaining financing gap, ease the adjustment burden, and preserve Senegal’s impressive economic achievements. Ensuring that disbursed funds are used in a well-targeted, cost-effective and transparent manner remains imperative.”

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