The International Monetary Fund (IMF) has reached a staff-level agreement with Senegal to disburse $212 million (161.6 billion CFA Francs), pending board approval. This update comes after a recent review mission conducted by the IMF team, led by Edward Gemayel, in Dakar between Oct. 12 and Oct. 24.
- According to a press release, the final decision is expected in mid-December.
- Gemayel said Senegal will get an additional $65 million (40 billion CFA Francs) from a climate facility if the IMF board approves the agreement.
- The financial arrangement is set to last 36 months under the Extended Fund Facility and Extended Credit Facility of over $1.5 billion.
- Gemayel mentioned that Senegal’s debt outlook is sustainable. However, the forecast for 2024 economic growth has been lowered to 8.3% from the previous estimate of 10.6% due to delays in oil and gas production.
Key context: Earlier in the year, the West African country reached an initial agreement with the IMF for financing totaling about $1.9 billion. The pending $212 million disbursement is part of the $1.9 billion financing arrangement.
- The IMF says the financing is to help Senegal “address macroeconomic imbalances by reducing debt vulnerabilities, strengthening governance, and delivering more inclusive and job-rich growth.”
- The program is being supported by three different IMF facilities: the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements, and the Resilience and Sustainability Facility (RSF).
- The EFF is designed to support medium-term balance of payments problems, while the ECF provides financial assistance with longer-term structural challenges. The RSF focuses on promoting resilience and sustainability, particularly in climate change.
- Under the initial agreement, Senegal will receive approximately $1.5 billion from the EFF and ECF arrangements and an additional $320 million from the RSF over 36 months.
Why this matters
- In 2022, Senegal’s economy faced challenges, including a poor harvest and a pullback in industrial production. These factors and rising food prices led to inflation hitting a multi-decade high of 9.7%.
- The West African country is also plagued by rising public debt levels, which have increased to over 76% of GDP, raising concerns about debt sustainability.
- However, the IMF expects the economy to grow by 8.3% in 2023, thanks to some factors, including the production of oil and gas and a surge in domestic investment.
- In a similar arrangement, the IMF reached a staff-level agreement on a three-year extended credit facility with Ghana for about $3 billion in December 2022.
- The IMF required that the country stop borrowing from its central bank and restructure its debts.
- The IMF approved the $3 billion loan agreement with Ghana in May 2023 and carried out its first disbursement of $600 million to the West African country.