During its last mission at the beginning of May, the IMF insisted on the implementation of a new energy tariff, for which subsidies had reached 620 billion CFA francs. In addition to subsidies, there is the reduction of debt vulnerabilities, the strengthening of governance and the structural transformation of the economy. However, the medium-term outlook remains less favourable due to the delayed start-up of hydrocarbon production. If the mission is conclusive, Senegal should benefit from a further disbursement of around 1150 billion CFA francs in July, as part of the second review of the 2023-2026 program.

If the two parties parted company on May 4, they will meet again starting this Thursday. The IMF Mission to Dakar will last until June 13, after the new authorities decided to pursue the review of the program put in place by the previous regime under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF). During their stay in Dakar, IMF officials and Senegalese political authorities will continue their discussions to validate the second review of the program. While there are still a number of items on the agenda, the issue of subsidies, in particular spending on energy which amounts to 620 billion CFA francs, or 3.3% of GDP, will be the highlight of the discussions. The IMF has noted that budget execution was marked by a shortfall in revenue and an overrun in the cost of energy subsidies compared with the initial budget envelope.

Relative “success” of 450 billion Fcfa Eurobonds

Today, the authorities, who find it hard to give up these subsidies, are unable to reduce food prices because there are no fiscal levers or taxes to activate. The status quo remains unchanged, despite firm promises to the electorate to reduce the cost of living. More than two months later, the various parties are looking for a new magic formula. To no avail. In any case, in its recommendations, the IMF had suggested “implementing a new electricity tariff schedule, with a social tariff for vulnerable households”. And a review of the formula for determining petroleum products and an audit of Senelec. For the IMF, ambitious measures are needed to rationalize fiscal expenditure and improve spending efficiency. These measures should be taken as part of a rectifying budget that would enable the regional budget deficit target of 3% of GDP by 2025 to be met.

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This second IMF Mission comes against a less cheerful economic backdrop. Due to a tense and uncertain electoral context, growth in “economic activity in the first quarter of 2024” had contracted, as companies postponed investment and consumers cut back on spending. As a result, “inflation eased to 3.3% (year-on-year)”.

Over the course of a week, the two parties will intensify discussions on the second review of the 2023-2026 program, which provides for a total disbursement of around 1150 billion CFA francs. After conclusive talks, a second disbursement will be prepared in July 2024, after validation by the institution’s Board of Directors. This new tranche will be another breath of fresh air for Diomaye and Sonko, who in recent hours have raised 450 billion francs Cfa, part of which is earmarked for outstanding debt. This recourse to Eurobonds is a strategy that has been put in place, as the new authorities have also decided to go to the financial markets to raise funds to service their debt. It should be noted that the central government’s debt is 73.4% of GDP, above the ceiling set by the Uemoa. At 18.8% of GDP, the “current account deficit remained high, reflecting the persistent weakness of goods exports”.

By Bocar SAKHO / bsakho@lequotidien.sn