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.

IMF: drought drags down GDP

According to the recent IMF mission report on Senegal's economic progress, much gain has been made. But drought conditions brought down harvests, and with that overall economic vitality of Senegal. According to the May 15 report: "Macroeconomic developments in 2011 were less positive than expected because of the drought in the Sahel region. The steep decline of agricultural production despite sound results in the other sectors of economic activity has limited GDP growth to 2.6 percent. Inflation stood at 3.4 percent in 2011, driven by the increase of food and transport prices, in a context of rising global commodity prices." Check out the Café Touba at Cassicafe.com.

Presidential election and the rule of law

This weekend's presidential elections, scented with teargas, a delicate dance between the mob and self-determination, give real meaning to the rule of law--or its lack. At this juncture in the history of Senegal, here is the latest ranking of the county by the Rule of Law Index prepared by the World Justice Project:

"Within its income group, Senegal is in the middle of the rankings in most dimensions. Government accountability is weak, with particular concerns regarding the proper functioning of checks and balances on the executive branch (ranking 51st among the 66 countries in the sample and 11th out of 16 lower-middle income countries). Another area where efforts are required is open government, where the country ranks 62nd. The country has a moderate record in protecting fundamental rights (ranking 38th overall and 3rd among the Indexed countries in Sub-Saharan Africa), although police abuses and harsh treatment of prisoners remain a source of concern."

This is not the last word on Senegal's democracy, nor will be the elections this weekend. We will see how it plays out.

IMF notes energy improvements

In its latest report on Senegal, the International Monetary Fund (IMF) notes the following:

"Senegal’s economy has remained resilient to the global economic turmoil. Growth is expected to dip slightly to 4 percent in 2011 because of power outages in the first half of 2011. In 2012, the restoration of sufficient electricity provision, together with large energy and road infrastructure spending, should boost growth to 4.4 percent and help make up for a less favorable international environment. Inflation rose in early 2011 reflecting increasing international food and petroleum prices, but this trend reversed in the second half of the year. Year-on-year inflation is now back below 3 percent, and is expected to remain so next year. The prudent approach to expenditure management has fostered macroeconomic stability and helped keep the authorities’ program on track, with all quantitative targets for end-June and end-September 2011 met. Good progress was made too with structural reforms aimed at strengthening public financial management, tax policy and administration, and debt management."

Government law would set state's telcom cut

According to Reuters Senegal's government has proposed a law that will ensure that the state has at least a 35 percent share in all telecommunications companies operating in Senegal, the president said on state television on Thursday.

Senegal's APS news agency said that the law had been passed by the cabinet at a meeting on Thursday and might be extended to other sectors, beyond telecommunications.

IMF upgrades economic prospects

An International Monetary Fund (IMF) mission, led by Mr. Hervé Joly, visited Senegal from October 5-19, 2011 to conduct the second review under the three-year Policy Support Instrument (PSI) arrangement approved in December 2010. The members of the mission met with the ministers of economy and finance, budget, international cooperation, infrastructure, and energy; representatives of the BCEAO; other senior government officials; and representatives of the private sector, civil society and development partners.

At the conclusion of the visit, the mission issued the following statement:

“After recovering in 2010, the Senegalese economy experienced a modest slowdown in early 2011 due to persistent power cuts. Assuming that recent improvements in the electricity sector continue, however, Senegal should post GDP growth of 4 percent in 2011. Inflation rose in early 2011, reflecting increasing international food and petroleum prices, but this trend reversed in the second half of the year and inflation is now expected to average 3.6 percent in 2011.

“Growth in 2012 is expected to be sustained by the significant increase in public investment in 2012, in particular with continued construction work on the toll road and implementation of the Plan Takkal. The restoration of a more reliable supply of electricity should also have a positive impact on other sectors of the economy. These domestic drivers of growth are expected to largely offset the anticipated weakening of external demand and a generally less promising external environment than expected. Overall GDP growth is expected to reach 4.4 percent in 2012 compared to 4 percent in 2011. Inflation should continue to decline, and remain well below 3 percent.

Lukens confirmed as US ambassador

Lewis Lukens was confirmed yesterday by the U.S. Senate as ambassador to Senegal. Son of a diplomat who was also ambassador to Africa, Lukens had this to say in his confirmation hearing earlier this month:

"The United States and Senegal share a strong bilateral relationship. As a critical partner in Francophone Africa, Senegal is a key ally in the fight against terrorism and narcotics, and has been an important player on regional and international issues.

"Senegal is one of a few African countries to have never experienced a coup, and prides itself as a religiously tolerant nation. However, Senegal does face economic, governance, and press freedom challenges that threaten its democratic and development future. Senegal suffers from a crippling energy crisis that causes frequent power outages and has weakened economic growth. Senegal would like to emerge as a major regional economic hub, and if confirmed, I will work with the government to encourage enactment of economic reforms necessary to attract investment and expand access to markets.

"Senegal will hold presidential and legislative elections in February 2012. These elections are important to the country’s democratic future. Concerns about democratic backsliding and corruption have tarnished Senegal’s longstanding democratic reputation. If confirmed, I will work with President Wade and the Government of Senegal in their efforts to prepare for transparent, fair, and credible elections.

"Senegal is a recipient of many foreign assistance programs, most notably a $540 million Millennium Challenge Corporation (MCC) Compact. I understand that the United States Government must be accountable to American taxpayers and, especially in this difficult economic climate, every dollar must be effectively used. If confirmed, I will work closely with our strong partners in Senegalese civil and religious society and with the government to ensure that Senegal continues to improve on all of its indicators." Check out the Café Touba at Cassicafe.com.