IMF cites energy and debt, but generally good health of Senegal's economy

The International Monetary Fund's recent review of Senegal's economy has some interesting observations. Following the Executive Board’s discussion on Senegal, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, stated:

“Senegal’s economic recovery continues, and performance under its PSI-supported program is satisfactory. There are however downside risks stemming mainly from continued electricity supply problems and increasing food and fuel prices, which pose some inflationary risks.

“With the emergence of critical investment needs in the energy sector, fiscal policy faces the challenge of accommodating additional priority expenditure while maintaining debt sustainability. Although there is some space for temporarily higher fiscal deficits, a substantial contribution will need to come from additional revenue measures and reprioritizing expenditure. In the medium term, fiscal consolidation, supported by a prudent approach to borrowing, will be critical to bring down the deficit to levels consistent with preserving debt sustainability. The recent issuance of the Eurobond to finance infrastructure projects should be accompanied by strengthening investment planning and debt management.

“To sustain the growth momentum and increase Senegal’s growth potential, the pace of structural reforms should be accelerated. This includes tax policy reforms aimed at broadening the tax base and increasing the revenue effort, energy sector reforms, financial sector reforms, and other reforms geared towards removing bottlenecks to growth and promoting an improved business climate and governance,” she added.