- After assessing the economic situation and trends in Senegal, the International Monetary Fund (IMF) urged the government to "implement structural reforms vigorously." A relatively slow economic growth rate needed to be raised "to achieve a sustained reduction of poverty," the IMF concluded.
The IMF today published its recent conclusions on a economic policy consultation with Senegalese authorities. Overall economic developments in 2002 had been mixed, the IMF found.
Real GDP growth had decelerated to 2.4 percent - down from 5.6 percent in 2001 - reflecting a large drop in agricultural output due to unusually poor and ill-timed rainfalls. Non-agricultural GDP growth remained close to 5 percent, however, boosted by strong manufacturing and construction activity.
The Senegalese government had stayed the course of "prudent financial management," IMF said. The unification of VAT rates in September 2001 and strong collection efforts in the second half of 2002 had yielded a 10 percent increase in tax revenue. Tight control was exercised over expenditure, and the financial performance of key public enterprises that had required large budget transfers in 2001 had improved in 2002.
The implementation of structural reforms had also finally gained momentum in the second half of last year. Two policy reform committees had been created to design reform agendas in the complicated electricity and groundnut sectors.
The IMF thus commended Senegalese authorities for their "continued sound macroeconomic management of recent years." As a result, healthy per capita income growth had been maintained, inflation had remained low, and the external current account had been strengthened.
- Going forward, the key challenge facing Senegal is to raise the rate of economic growth to achieve a sustained reduction of poverty, the IMF assessment said. IMF directors therefore called upon the authorities "to implement structural reforms vigorously while maintaining macroeconomic and debt sustainability."
Efforts to boost growth and reduce poverty would need to pay particular attention to reducing the rural-urban divide, improving private sector access to bank financing, enhancing productivity, and reducing labor market rigidities, the Fund said.
The IMF further supported the authorities' plans to accelerate spending in the social sectors and on basic infrastructure, in line with the priorities outlined in its poverty reduction strategy. The Fund however called for improved tracking of poverty-related spending.
In the assessment, the authorities were further urged to "implement the structural reform agenda with greater determination and urgency in order to stimulate broad-based economic growth, reduce poverty, and strengthen the public finances." The IMF thus clearly demonstrated its impatience with slow progress in Senegal's privatisation efforts.
The Fund emphasised that "decisive action needs to be taken to address the financial and operational problems facing the state-owned electricity and groundnut companies." In this regard, it had "welcomed" the development of a medium-term strategy for the energy sector, which included plans for "a carefully-designed privatisation" of the electricity company (SENELEC) to ensure reliable energy supply at moderate prices and boost productivity.
The IMF also called on Senegalese authorities to develop and implement reforms in the troubled groundnut sector, "including privatisation of the groundnut company (SONACOS), which will be crucial for increasing efficiency in this sector and enhancing the prospects of the rural poor, for whom groundnut production is a major source of income."
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