Overview
The International Monetary Fund (IMF) conducted a mission to Senegal from April 26 to May 3, 2024, to assess economic and political developments. Here are the key takeaways:
- Resilience in 2023:
- Despite challenges, Senegal’s economy proved resilient.
- Growth surprised on the upside (4.6 percent), driven by a successful agricultural campaign and a strong tertiary sector.
- Inflation declined faster than anticipated (5.9 percent).
- Fiscal deficit was contained at 4.9 percent of GDP through prudent measures.
- 2024Q1 Challenges:
- Political uncertainties related to the presidential election affected economic activity.
- Businesses postponed investments, and consumers reduced spending.
- Headline inflation declined to 3.3 percent year-on-year.
- Outlook and Adjusted Growth Projection:
- The overall outlook remains favorable.
- Economic growth for 2024 is now projected at 7.1 percent (down from the initial 8.3 percent) due to electoral context and gas production delays.
Recommendations for Senegal’s Economic Improvement
1. Fiscal Measures:
- Tax Exemptions: Senegal should reduce tax exemptions to enhance revenue collection.
- Spending Efficiency: Implement ambitious measures to improve spending efficiency.
- Supplementary Budget: Create a supplementary budget to achieve the end-2024 fiscal deficit target of 3.9 percent of GDP.
- Regional Target: Work towards reaching the regional target of 3 percent of GDP by 2025.
2. Structural Reforms:
- Petroleum Pricing Formula: Revise the petroleum product pricing formula to ensure fair pricing.
- SENELEC Audit: Conduct an audit of the electricity company SENELEC to implement a new tariff structure, including a social tariff for vulnerable households.
- Exit FATF Grey List: Progress on measures to exit the Financial Action Task Force’s grey list.
3. Strategic Alignment:
- Senegal’s new authorities reaffirm commitment to the existing IMF-supported program.
- Core pillars align with Senegal’s strategic goals:
- Enhancing fiscal resilience and reducing debt vulnerabilities.
- Strengthening governance.
- Promoting structural transformation.
- Building resilience to climate change.
Senegal’s economic journey requires prudent fiscal management, structural reforms, and strategic alignment. By implementing these recommendations, Senegal can navigate challenges and build a resilient, diversified economy. 🌟🌍💡
