- Senegal was today granted a US$ 850 million debt service relief by the International Monetary Fund (IMF) and the World Bank. More is likely to follow soon. The two institutions agree that Senegal now fulfils the demands for such debt release due to "political stability" and "broad ranging structural reforms," including privatisation and deregulation of the economy.
According to a statement issued today by the IMF, the two agencies had "agreed that Senegal has taken the necessary steps" to reach the so-called "completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative," meaning that the IMF and World Bank now must complete their debt relief programme for Senegal. Senegal becomes the 12th country ever to reach this point.
Total debt relief under this initiative from all of Senegal's creditors amounts to US$ 850 million in nominal terms. This assistance is equivalent to a reduction in net present value terms of US$ 488 million as agreed at the decision point, which now becomes irrevocable. This debt relief is provided by multilateral creditors, industrialised countries and the IMF/World Bank.
In addition, many creditors of the so-called Paris Club of industrialised countries have indicated their intention to provide additional relief beyond the HIPC Initiative. This is estimated to total about US$ 400 million, according to information from the IMF. Senegal could thus receive debt service relief totalling us$ 1.2 billion.
Given this large reduction, the IMF holds that Senegal now should be in a significantly improved position to service its national debt. The current debt relief, together with other assistance, "will lower Senegal's debt-to-export ratio to 116 percent, and its debt-to-revenue ratio to 157 percent," the Fund holds.
Over the long run, Senegal was now set to achieve "significantly improved chances to achieve and maintain sustainable debt levels," the IMF said. "Provided Senegal adheres to sound macroeconomic policies, persists with its reform strategy and secures borrowing predominantly on highly concessional terms, the debt ratios after the provision of enhanced HIPC assistance should continue to improve steadily."
The IMF statement also detailed the reasons for the decision to complete Senegal's debt relief programme at this moment. "Senegal is politically stable," the Fund observed, referring to the "smooth transition of power after the 2000 presidential election," when opposition leader Abdoulaye Wade came to power.
- In recent years, the authorities have implemented stability-oriented macroeconomic policies and broad ranging structural reforms, the statement added. "The regional central bank's monetary policy has secured price stability and the authorities' prudent financial policies have strengthened Senegal's fiscal position."
Senegal's structural reforms have included measures that have reduced the role of the state in the economy, improved the business environment, promoted trade and strengthened public sector performance. The government of President Wade has led Senegal on a road to controversial privatisation of state companies, strictly following IMF and World Bank recipes.
- These policies have contributed to strong sustained growth and poverty reduction over the past decade, the IMF claims. "Since 1994, Senegal's real GDP growth has averaged 5 percent, resulting in GDP per capita growth of over 2 percent during this period, in sharp contrast to the preceding decades after independence, when GDP per capita fell," the Fund adds.
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