- Following bitter exchanges between the International Monetary Fund (IMF) and the Senegalese government, in recent months, over the country's economic stability and policies, the IMF has now commended achievements made, calling for sustained performance. Senegal is hailed for achieving one of West Africa's highest economic growth rates.
"The government made great strides in implementing its structural reform programme. All structural assessment criteria and all but one benchmark through end-March 2008 were met," commended the IMF after the conclusion of an extended memorandum of economic and financial policies programme with Senegal.
The IMF further said the Senegalese government remains committed to higher sustainable growth and making fast progress toward the Millennium Development Goals (MDGs). "To achieve these goals, it will continue to implement its economic and financial programme, which relies on prudent macroeconomic policies and accelerated structural reforms," the IMF said.
Senegal's macroeconomic outlook for 2008-09 is viewed as broadly favourable despite more difficult international perspective - with real GDP growth projected to average about 5.5 percent over the next two years, reflecting a buoyant construction activity, and continued strong growth in the telecommunications and transport sectors.
Further, the IMF reports that inflation is projected to return to its historical level of 2 percent over the medium term. "Nonetheless, because upward pressures on the prices of food and energy are expected to continue in the short run, the government projects the inflation rate at 4.5 percent in 2008," the IMF report said, adding that external current account deficit should oscillate between 11 and 12 percent of GDP, financed to an increasingly large extent by FDI inflows.
The body noted that international food and energy price increases had placed a considerable burden on the Senegalese population, and concurred with the authorities that measures should be taken to shield the population's most vulnerable segments from these price increases. The IMF continued there was a scope for improvement by targeting of existing measures while minimising economic distortions and keeping them affordable so that they remained consistent with macroeconomic stability and debt sustainability.
In the longer term, IMF recommends the introduction of a social safety net and for the country to promote development of the agricultural sector.
The IMF's general observation was that Senegal's overriding economic challenge was to raise growth and reduce poverty, while also encouraging authorities to maintain prudent macroeconomic policies and persevere in implementing structural reforms under its so-called Accelerated Growth Strategy. "This, together with energy sector reform, continued efforts to attract FDI, and targeted government spending in infrastructure, health, and education, would encourage private sector-led growth, raise external competitiveness, and strengthen and diversify exports," observed the IMF.
The report has further observed that Senegal, over the last decade, has achieved macroeconomic stability and recorded economic growth above that in other West African Economic and Monetary Union (WAEMU) countries.
The country's external current account deficit in 2007 increased to 10.5 percent of GDP as the cost of importing energy and food rose, but exports plateaued because of the delayed restructuring of phosphate production that prevented Senegal from being more competitive.
The IMF has however underlined that it was critical for Senegal to contain fiscal deficit to preserve debt sustainability, respect limited financing capacity of the regional financial market, and contain demand pressures, thereby promoting domestic stability in the context of Senegal's monetary union membership.
In May this year, the IMF and Senegalese officials were at each other's throats over alleged distortions in the country's budget situation, the Fund holding that deficit was becoming more and more worrying, to the extend that government would not be able to pay wages to civil servants. The IMF statement was however rebound a month later, and now with the completion of the IMF assessment, the outlook is even much promising.
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