New Plan Sets Senegal On Course to Become Emerging Economy

Senegal successfully completed latest IMF-supported program

Economy underperforms on growth, employment, poverty

New development strategy aims to make Senegal emerging economy by 2035

The plan presents a unique opportunity to unlock broad-based and inclusive growth that will make Senegal a regional hub and an emerging economy.

Senegal’s growth in recent years has been sluggish, which has hampered progress toward inclusiveness and poverty reduction. Continued prudent policies have helped preserve macroeconomic stability in Senegal, but slow implementation of structural reforms continues to weigh down growth.

A period of relatively strong, although still under-par, growth in 1995–2005 of 4.5 percent led to a substantial decline in poverty from 68 to 48 percent. However, in 2006–2013 growth decelerated to an average of 3.4 percent, reflecting a poor business climate, problems in the energy sector, poor infrastructure, low efficiency of public investment, and unproductive subsidies.

Series of shocks

In addition, Senegal was hit by a series of externally sourced shocks, such as spikes in food and fuel prices, the global financial crisis, regional droughts and floods, and more recently, the spillovers from the Ebola outbreak. As a result, poverty has declined only slightly in recent years and stands at about 47 percent.

The IMF staff report on Senegal’s economy projects that GDP growth can rise to 4.5 percent in 2014 and reach 7 percent by 2019. Consistent implementation of reforms set out in the new development plan, while preserving fiscal and debt sustainability, are key preconditions for such growth acceleration.

The authorities are taking steps in this direction. The fiscal outlook has improved owing to stronger revenue performance and expenditure control, and the overall deficit is expected to fall to about 5 percent of GDP in 2014. The 2015 budget targets a further reduction in the deficit to 4.7 percent of GDP.

The authorities expect to limit the deficit by holding back appropriations for new public investment projects until feasibility studies are ready. The authorities remain committed to bringing the fiscal deficit in line with the target set by the West African Economic and Monetary Union of 3 percent of GDP in the medium term.

The plan for the future

The “Plan Sénégal Emergent” is the authorities’ plan designed to help Senegal exit the trap of low growth and high poverty of recent years. It intends to make Senegal a hub for...