IMF: tough times for new administration

The International Monetary Fund's press release today on Senegal's policy review predicted rough weather ahead for the country's new ruling administration under President Macky Sall. According to the statement of IMF deputy director Min Zhu, Senegal's economy “slowed down ahead of the elections, and economic performance was affected by exogenous shocks, including the drought in the Sahel. Growth is expected to resume in 2012, but a weak global environment and regional instability pose important challenges. “A higher deficit target in 2012 (6.4 percent of GDP) accommodates the impact of exogenous factors, but significant efforts are required to keep the program on track. The authorities’ plans to reduce the cost of running the government and postpone non-priority investment projects are crucial to meeting the deficit target. Over the medium term, the authorities are committed to reducing the fiscal deficit below 5 percent of GDP in 2013 and 4 percent by 2015 to keep public debt on a sustainable path and rebuild fiscal buffers. The authorities’ intention to replace costly general price subsidies, particularly for energy, with an alternative system better targeting the poor is an important step. “The program’s ambitious structural reform agenda is critical to raising Senegal’s long-term growth potential. Comprehensive tax reform and reform of the energy sector should remain key objectives for 2012. Other priority reform areas include public financial and debt management, tax and customs administration, the financial sector, and measures aimed at removing bottlenecks to growth and improving the business climate and governance,” Mr. Zhu added.