A staff team from the International Monetary Fund (IMF), led by Ms. Corinne Deléchat, conducted a virtual mission from November 5-16, 2020 and engaged in discussions as part of the second review of the IMF’s Policy Coordination Instrument (PCI) approved in January 2020. At the conclusion of this mission, Ms. Deléchat issued the following statement:
The IMF team reached staff-level agreement with the authorities on economic and financial policies that could support approval of the second review of their three-year program under the PCI. The IMF Executive Board could consider the second review in the first half of January 2021.
The pandemic’s economic impact was significant in the first half of 2020, but the recovery appears to be stronger than previously forecast, reflecting the lifting of lockdown measures, the steady decline in infections and hospitalizations since August and favorable prospects for the 2020-21 agricultural campaign. As a result, the economic contraction of 0.7 percent anticipated could be avoided. This growth momentum is expected to carry over to 2021, with economic activity projected to rebound at around 5 percent. The favorable outlook is however subject to significant uncertainty and will largely depend on the course of the pandemic globally and in Senegal.
Budget execution has been broadly satisfactory and is expected to result in a deficit of about 6 ½ percent of GDP in 2020. This is in line with the program’s objective adjusted for a shortfall in grants, due to the delay to 2021 of a budget support disbursement planned for 2020. The mission commended the authorities for the strong implementation of the Economic and Social Resilience Program (PRES), which was instrumental in cushioning the pandemic’s impact. The mission welcomed the authorities’ commitments regarding the accountability and transparency in COVID-19 related spending execution, notably relating to the continued publication of regular budget execution reports, the publication of the special report on the “Force COVID-19” fund by the monitoring committee, and the audit by the Audit Court.
Performance under the PCI-supported program remains solid. At end-June, five out of seven quantitative targets were met. Reform Targets on finalization of the Medium-Term Revenue Strategy (MTRS), undertaking studies on the expenditure chain and overcoming obstacles on girls’ education, and the establishment of the National Public Debt Committee (CNDP) were also met.
The mission welcomes the priorities of the draft 2021 budget, which aims at supporting the recovery while setting the path for a gradual return to the WAEMU deficit anchor by 2023. The mission and the authorities concurred on the importance of boosting revenue collection to secure the fiscal consolidation objectives. In particular, the mission underscored the need for streamlining exemptions and welcomed the authorities’ commitments to resume the publication of an annual tax expenditure report, also attached to the budget documentation, and to enhance transparency of fuel-related taxes. Efforts to strengthen public financial management will continue in 2021, notably with the implementation of program budgeting and the reduction of spending executed through deposit accounts (“comptes de dépôt”) enshrined in the draft 2021 budget law.
The mission welcomed the authorities’ plans to update and broaden the single national registry of vulnerable households to support expanded social safety nets post-pandemic. The mission emphasized the importance of pursuing ongoing reforms supported by the “Compact with Africa” to improve the business environment and to streamline entities and funds dedicated to SME support, as essential to unlock inclusive private sector-led growth. The mission noted the progress made in revising the legal framework on public private partnerships (PPPs) and in setting up the appropriate legal framework to manage hydrocarbon revenues and made recommendations to align them with international best practices.