Senegal - Second Structural Adjustment Program Project

Document of The World Bank FOR OFFICIAL USE ONLY Reprt No. P-4213-SE REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT OF SDR 18.3 MILLION AND A PROPOSED SPECIAL AFRICAN FACILITY CREDIT OF SDR 40.3 MILLION TO THE REPUBLIC OF SENEGAL FOR A STRUCTURAL ADJUSTMENT PROGRAM January 10, 1986 This docanient has r estricted distributien and may be used by recipients only in the performace of their ofikial dufies. It centents may not otherwise be disclosed without World Bak suaherization. CURRENCY EQUIVALENTS Currency Unit = CFA franc (CFAF) US$1.00 = CFAF 412 (December 1985) CFAF 1 million = US$ 2,427 (December 1985) SYSTEM OF WETGHTS AND MEASURES: METRIC Metric US Equivalent 1 meter (m) = 3.28 feet (ft) 1 kilometer (kn) = 0.62 miles (mi) 1 square kilometer (km2) 0.39 square mile (sq mi) 1 hectare (ha) = 2.47 acres (a) 1 metric ton (t) = 2,205 pounds (lb) 1 kilogram (kg) = 2.2046 pounds (lb) ABF.RFVIATIONS AND ACRONYMS AF Special African Facility CCCE Caisse Centrale de Coop&ration Economique (France) CG Consultative Group CTSP Caisse de PEr6quation et de Stabilisation des Prix (Price Equalization and Stabilization Fund) CSA Commissariat de S&curit6 Alimentaire (Food Security Commission) EFF Extended Fund Facility FAO Food and Agriculture Organization (UN) ICS Industries Chimiques du SEn6gal LDP Letter of Development Policy NPA Nouvelle Politique Agricole (New Agricultural Policy) NPC Nominal Protection Coefficient PAML Programme d'Ajustement Economique et Financier 5 Moyen et Long Terme (Medium and Long Term Adjustment Program) PAP Priority Action Program PIP Public Investment Program PREF Plan A Moyen Terme de Redressement Economique et Financier (Tedium-Tern Recovery Plan) SAED Soci6tE d'Am6nagement et d'Exploitation des Terres du Delta du Fleuve S6n6gal et des Vall6es du Fleuve SEnigal et de la FalCm6 (Senegal River Valley Development Agency) SCF Standard Conversion Factor SJF Special Joint Facility SOFISEDIT Socift6 Financiare SFnggalaise pour le D6veloppement de l'Industrie et du Tourisme (Financial Development Agency) SONAR Socift6 Nationale d'Approvisionnement du Monde Rural (State Groundnut Seed Distribution Agency) UMOA Union Mon6taire Ouest-Africaine (West African Monetary Union) UNDP United Nations Development Program UNIDO United Nations Tndustrial Development Organization USAID United States Agency for International Development FISCAL YEAR July 1 - June 30 Republic of Senegal I) FICIALIJSEtONLY Structural Adjustment Program Credit and Program Summary Borrower: Republic of Senegal Amount: IDA Credit: SDR 18.3 million (US$20.0 million equiv.) AF Credit: SDR 40.3 million (US$44.0 million equiv.) Swiss SJF Grant: Sw F 13.5 million (about US$6.0 million equiv.) Terms: IDA and AF Credits: Standard Swiss SJF Grant: Non-reimbursable contribution Program Description: The proposed credits would support the first phase (1985-87) of the Government's medium-term adjustment program (1985-92). This first phase consists of a comprehensive action program of policies and measures aimed at accelerating growth in production and employment and strengthening public sector management. Specifically, the SAC program would include measures, some already taken, in the following areas: (i) agricultural incentive reforms to increase cereal production, including price support mechanisms and adjustments, as well as liberalization of marketing and the restructuring of rural development agencies; (ii) steps to decontrol agricultural input distribution, free up sector marketing arrangements and increase groundnut producer prices; (iii) industrial policy reforms intended to reduce effective import protection, rationalize the export subsidy system, reduce wage and labor law rigidities, and progressively eliminate price controls; (iv) implementation of a two-year public investment program emphasizing productive sectors and high-priority rehabilitation activities, and reform of the public investment programming and budgeting process to develop a three-year "rolling" programming and budgeting system and preparation of the first consolidated program/budget; (v) acceleration of parapublic sector reforms, including development of a coherent strategy for restructurating and/or privatizing of most state-owned enterprises; and (vi) measures to address the underlying structural causes of financial disequilibrium by controlling expenditure growth, improving the revenue base, reducing payment arrears, and reforming the Price Equalization and Stabilization Fund. The ongoing Technical Assistance Project for Economic and Financial Management would assist in implementation of the program. This docummt ha a resicted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Estimated Disbursements: The proceeds of the proposed credits and Swiss grant (US$70 million equivalent in total) would be disbursed in two tranches and would be used exclusively for financing the foreign exchange cost of eligible imports. The first tranche of US$35 million would be available for disbursement immediately upon effectiveness of the credits and the Swiss grant. Disbursement of the second tranche of US$35 million would be contingent upon the Government making significant and satisfactory progress in implementing the structural adjustment program. It is envisaged that release of the second tranche would occur around October/November 1986 after a performance review. Disbursements of the entire credit are expected to be completed within 15 months after credit effectiveness. Staff Appraisal Report: Not applicable. nk: IBRD 11470 R INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ) ON A PROPOSED DEVELOPMENT CREDIT AND A PROPOSED SPECIAL AFRICAN FACILITY CREDIT TO THE REPUBLIC OF SENEGAL FOR A STRUCTURAL ADJUSTMENT PROGRAM 1. I submit the following report and recommendation on a proposed Development Credit of SDR 18.3 million (US$20 million equivalent) and a proposed Special African Facility Credit of SDR 40.3 million (US$44 million equivalent) on standard IDA terms to the Republic of Senegal to help support the Government's structural adjustment program. In addition, I recommend that IDA would administer a proposed Special Joint Financing non-reimbursable Contribution of Sw F13.5 million (about US$6 million equivalent) by Switzerland. 2. Part I of this report reviews the characteristics, performance and constraints of the economy. Part II outlines the Government's structural adjustment program, and Part III analyzes the expected economic and social impact of the program. Parts IV and V describe IDA's role in the adjustment process, the proposed operation, and other Bank Group operations in Senegal. PART I - THE ECONOMY 3. A report entitled Senegal: Country Economic Memorandum (5243-SE) was distributed to the Executive Directors on November 5, 1984. Updated country data appear in Annex I. A. Introduction 4. Senegal's economy has only modest growth prospects and has been in the grips of a crisis since about 1978-79. Precipitated by a concurrence of external shocks, this crisis nevertheless had its roots in misconceived or unsustainable policies followed in the 1970s. Although the short-run economic situation and the medium-term outlook remain as difficult as those described in the last Country Economic Memorandum (CEM), the Senegal Government's policy formulation and economic management have improved consistently over the last two years and have begun to bring the economic crisis under control. The Government has clearly recognized that recovery from the crisis involves adhering to a sustained and long-term adjustment program whose implementation necessarily involves immediate sacrifice and political risk. The road to full recovery may be a long one, and the two-year structural adjustment program described in this Report represents only the first stage of this long-term adjustment process. The program is already underway and gaining momentum. The sense of urgency and - 2 - seriousness with which the Government has embarked on its program of reforms bodes well for the success in the long run for the structural adjustment program as a whole. B. Background to the Crisis 5. Even in the context of Sub-Saharan Africa, Senegal confronts an unusual development challenge. At independence (1960), Senegal inherited a relatively well-equipped physical and social infrastructure and a GDP that was then larger than that of either the Ivory Coast or Cameroon. This inheritance was, however, more suited for its former privileged leadership role in colonial French West Africa than for the reduced political, administrative, and economic circumstances of a nation with three-quarters of its territory in the Sahel zone and subject to periodic devastation by drought. Since 1960, Senegal has experienced the lowest GDP growth rate (2.3 percent per annum) of any African state not affected by war or civil strife. As in most other African countries, Senegal's population growth is high (estimated at 2.9%, as of 1984) and, although the Government has an active population policy, demographic factors will continue to absorb most of the growth in private consumption for some time to come. In 1984, Senegal had an estimated per capita income of US$380 (at the current exchange rate), roughly half that of Cameroon and Ivory Coast, placing it for the first time in the ranks of the lower income countries. 6. On the whole, the Senegalese economy has not yet escaped from its dependence on the mainstays of the traditional economy - millet cultivation and cattle raising for domestic consumption and groundnut cultivation for export - and this traditional economy is in stagnation. Rural and most urban incomes are lower in real terms than in 1960, and nearly half of Senegal's basic food supplies are imported. The reason for this is partly that Senegal's resource-poor and open economy is highly vulnerable to climatic vagaries and adverse movements in the international terms of trade. In the 15 years since 1970, Senegal's agriculture has been hit by drought no less than seven times, i.e., every other year, on average. The nation is inherently disadvantaged, lacking the rich agricultural potential or mineral resources of many other countries on the West African coast. 7. Another important feature of the economy is the high concentration of modern sector employment and consumption patterns, commercial facilities, and social services in Dakar and the coastal belt, resulting in important urban-rural and inter-regional disparities in employment opportunities. The economy is also characterized by direct government participation or regulatory controls in most of the formal sectors. The sluggish economic performance of the 1960s and 1970s witnessed only a small structural shift of the economy towards industry. Slow growth in incomes has also limited domestic savings, prolonged dependence on foreign budgetary support, and made structural adjustment measures more difficult to implement. Yet adjustment became unavoidable at - 3 - the end of the 1970s, when a combination of poor financial and investment policies, declining terms of trade, and successive droughts plunged an already weakened economy into a severe crisis. This crisis persists today in spite of increasing recent efforts by the Government to implement adjustment policies. C. Recent Economic Developments 8. The array of acute structural and financial problems from which Senegal had suffered for several years was compounded in 1983/84 by the return of severe drought conditions. These reduced by almost 40% the volume of agricultural production available both for export (groundnuts) and for domestic consumption (mainly cereals). The drought, the second most severe since 1972-73, had a negative impact oa the level of economic activity in 1984 (GDP fell by 4%), on Senegal's balance of payments and on its public finances. Despite some encouraging signs of growth in sectors not directly affected by the drought (e.g., fishing and tourism), prospects for a sustained recovery in aggregate output and employment are uncertain not only because of the vagaries of the climate, but also as a result of the persistent financial pressures. 9. A major constraint on the Government's finances and the balance of payments is the serious and growing burden of external public debt. Over the past four years, debt rescheduling agreements have been signed four times with the Paris Club and twice with the commercial banks, providing an estimated total debt relief of some US$380 million over the period 1981/82-1985/86. Scheduled debt service (including moratorium interest) is projected to average around US$300 million per year over the next four years; this will represent an average debt service ratio of about 21% and is almost certain to require a continuation of debt relief for a few more years until the adjustment program has had time to take effect. As a result of much more stringent budgetary policies, the Government's overall fiscal deficit has been reduced by more than half over the last two years. The current account oeficit of the balance of payments has also diminished by comparison with the years 1980/81-1981/82 when the crisis reached its peak. ComLined -ith the tight monetary policies exercised by the authorities of the West African Monetary Union, which have contained general inflation to an average of about 10% a year since 1981, the Government's reduced spending has had a further deflationary effect on the economy. This situation has placed a number of enterprises in difficulty, and modern private sector employment is estimated to have declined as a consequence. The above trends have had a particularly hard impact on the urban population. 10. Preliminary figures for imports and for revenue collection for the first quarter of 1985/86 suggest that the recession which took place in 1984 following the 1983/84 drought continued well into 1985. With an expected record one million ton cereal crop and a 600-700 thousand ton production of groundnuts in 1985/86, the outlook for 1986 is much more promising. It will, however, be important to keep a firm control over wage increases as economic conditions improve. The Government recognizes the need for continued vigilance in restraining the growth in aggregate demand. D. Earlier Bank and Fund Adjustment Programs 11. In the late 1970s, the Government began to recognize the shortcomings of its development plans and diversification efforts as it faced the cumulative effects of successive droughts and declining terms of trade. In December 1979, the Government announced a Plan 5 moyen terme de redressement &conomique et financier (PREF) which had been extensively discussed with both the Bank and the IMF. The PREF, which vas to run for five years, was designed to stabilize the economy, increase investment in the productive sectors, raise public savings, liberalize trade policies, reverse the policy of state participation in the economy, and streamline the parapublic sector. 12. These new policies facilitated the mobilization of important balance of payments and budgetary aid to Senegal and were the basis for an IMF Extended Fund Facility (EFF) for SDR 184.8 million, approved in August 1980, and a combined Structural Adjustment Loan/Credit (P2869a-SE; IDA, SDR 22.9 million; IBRD, $30 million) which was approved by the Executive Directors in December 1980. Macroeconomic performance, however, quickly got off track for a variety of internal and external reasons, including recurrent drought, and was mixed for both the SAL and the various IMF programs implemented between 1980 and 1983. 13. The program of structural reform supported by the SAL had four major components: (a) reform of the parapublic sector; (b) reform of agricultural policies; (c) improved production incentives; and (d) investment policies. The program also contained a set of economic stabilization measures which were to be monitored by the IMF. All proceeds of the Credit and part of the Loan (US$13.2 million) were disbursed on schedule by September 1981 to finance the first tranche of the imports program. Although the SAL succeeded in meeting most of the objectives in the areas of parapublic sector reform, production incentives and investment policies, it ran into difficulty in the implementation of agreed policies concerning fertilizer and seed distribution. The second tranche was cancelled on June 30, 1983 after a long and difficult dialogue on agricultural policies. The reasons for this and the lessons which the Bank and the Government can draw from it are described in the Program Performance Audit Report which was issued on May 21, 1985 (Report No. SecM85-624). The key points were: (i) over optimistic expectations regarding some difficult policy issues, such as those in the agriculture sector (e.g., reform of the subsidized central seed and fertilizer distribution system); - 5 - (ii) the failure to make allowance for certain data deficiencies (e.g., regarding the size of the debt problem) and to anticipate the recurrence of external shocks (e.g., drought and terms of trade losses); and (iii) the distraction of the Government's attention to the reform process caused by the political events (change in President) in 1981 and the sharp deflationary impact of the two successive drought years (1980 and 1981). 14. Difficulties were also experienced with Fund programs, starting with the EFF program of 1980. In September 1981, at the request of Senegal, the EFF was cancelled and replaced by a stand-by arrangement of SDR 63 million for 1981/82. The Government successfully implemented that arrangement; but a new arrangement of SDR 47.25 million for 1982/83 was not completed. This was attributable to a relaxation of the authorities' adjustment efforts, and a sharp drop in the export price for groundnuts which led to heavy losses for the CPSP, the Government's commodity price equalization and stabilization agency. The internal and external financial imbalances widened substantially also because the corrective measures that could have allowed the authorities to attain their original objectives proved difficult to take in the pre-elections period. 15. In August 1983, following the announcement of measures to reduce subsidies on a broad range of consumer products, a new stand-by was agreed for 1983/84 in an amount of SDR 63 million. This program aimed at reducing the external current account deficit by more than three percentage points of GDP and at bringing down the overall fiscal deficit from 8.2 to 4.8 percent of GDP, on a commitment basis. As a result of a more stringent control over public expenditures, and helped by a substantial recovery in groundnut export prices, the Government was able to achieve in full the objectives of the 1983/84 program. 16. In early 1985, an 18-month stand-by arrangement for SDR 76.6 milliou was approved by the Fund, covering the period up to end-June 1986. Performance under this program, too, is judged satisfactory to date by the IMF. The basic objectives of the program are to reduce the BOP current account deficit from 11.1 percent of GDP in 1983/84 to 6.9 percent in 1985/86 and to lower the overall fiscal deficit, on a commitment basis, to 1.4 percent of GDP in 1985/86. If the full amount of the current stand-by arrangement (SDR 76.6 million) is purchased, and after taking into account scheduled repurchases during the stand-by period (SDR 68.6 million), Senegal's drawings from the IMF subject to repurchase would amount, by end-June 1986, to the equivalent of 250 percent of quota. E. Priorities for the Next Phase of Adjustment 17. In 1984, the Government, in close consultation with Bank staff, prepared a Programme d'ajustement 6conomigue et financier 5 moyen et - 6 - long-terme (PAML) for the period 1985-1992. The PAML, which was presented to the first meeting of the Consultative Group (CG) for Senegal in December 1984, provides a macroeconomic framework and a set of objectives and policies, sector strategy orientations and guiding principles for the preparation of appropriate adjustment measures. Against a background of adverse factors (climate, terms of trade, demography) which are unlikely to improve over the medium term, the Senegalese authorities and the members of the CG agreed on the three main problem areas of economic policy which must be addressed: 0 Incentives. Pricing, subsidy and incentive policies have discouraged the production of tradeables and tended to accentuate dependence on food and energy imports. Farmers have not invested in the production for the market of traditional cereals, partly because of the availability of cheap cereal imports but also because of the riskiness of technical packages for the rainfed areas. Manufactured exports have grown very little due to excessive protection of the domestic market, haphazard government interventions and labor policies which have driven up costs and reduced export competitiveness. 0 Role of Government. Over-extension of the public sector and elaborate but ineffective controls over the use of public funds have brought about an unsustainable growth in consumption and imports, untenable public sector borrowing, and the build-up of large domestic payment arrears. o Quality of Investment. An excessive share of past investments has been directed towards poorly conceived or unproductive projects, resulting in pervasive low returns on investment. 18. As a consequence of these three groups of problems, the Senegalese economy is crippled by lack of growth in the production of tradeables, large fiscal and external current account deficits, and an intractable debt servicing problem. A postponement of adjustment measures by borrowing to support current consumption, rather than .0roductive investments and reequipment, has compounded the debt crisis. Relative to the size of its economy 1/ and a growth potential of 3 to 4 percent a year, the external debt burden (debt outstanding is equivalent to about 80 percent of the 1984 GDP) is such that Senegal could not emerge from the crisis by the year 1990 without substantial additional aid. 19. The 1984 CEM made it clear that the immediate underlying cause ot the present disequilibria in the economy must be traced primarily to the maintenance of an unsustainable level of consumption. Indeed, consumption will have to be curtailed if Senegal is to pay back debts incurred in part to finance consumption. For this reason, the adjustment measures will inevitably be painful. However, with the concrete evidence of the I/ In 1984, Senegal's GDP was on the order of US$2.4 billion, exports US$800 million, and net capital inflow plus official transfers US$400 million. - 7 - Government's determination to face this reality that has come from the formulation and initiation of a credible adjustment program, sufficient external assistance may be mobilized to permit the adjustment period to be spread over a number of years and thus to mitigate the social cost of the austerity measures required. G. Long-Term Challenges 20. Although its physical resource base is limited, Senegal could sustain a significantly higher long-term rate of economic growth than it has achieved in the past. This growth should be based on a diversification of agricultural production (export-based and import-substituting) and on creating stronger linkages between industry and the rest of the economy. However, faster growth can only be sustained by a reversal of some of the structural trends in the economy and by assuring a better balance of financial uses and resources while maintaining an open economy. For this reason, Senegal's long-term prospects critically depend on the success of the medium-term adjustment program to create a stronger base for long-term development by structurally improving the institutional and incentive environment. These objectives imply less direct involvement of the Government in productive activities. 21. The country also faces fundamental technical problems of developing rainfed and irrigated crop production at reasonable cost and with adequate returns to producers, calling for a transformation of rural institutions and appropriate incentive policies for agriculture. A comprehensive shift in industrial incentive and protection policies in favor of export production is also required. 22. In the long run, the prospects for employment creation in non-agricultural activities will depend in large measure on the Government's success in extricating itself from activities which it could better leave to the private sector; in reducing the excessive levels of protection which have tended to create private sector monopolies; and in encouraging capable local entrepreneurs to take over activities or markets currently occupied by the public sector or by foreigners. This latter task, the Senegalization of the economy, will not, however, be achieved by injudicious credit policies or excessive levels cf protection of local enterprises. Iu parallel with the promotion of private sector activities, the country will need to take stronger action to curb the present very high rate of population growth and to adapt radically those parts of its education system which appear excessively costly and unsuited to the needs of the economy. -8- PART II - THE GOVERNMENT'S STRUCTURAL ADJUSTMENT PROGRAM A. Overview 23. The basic objective of the Government's structural adjustment program is to lay a firm foundation for the resumption of sustainable growth in the long term. The prerequisites for success are an incentive envircment which maximizes the exploitation of the growth potential, particularly in agriculture and industry, and an economic management performance which optimizes public resource allocation and promotes financial stabilization. 24. Two main themes underpin the Government's strategy to accomplish these objectives over the period 1985-1992: (i) progressive withdrawal of the state from direct involvement in production activities, and the promotion of private sector initiative through a change in incentive policies; and (ii) achievement of greater efficiency of public resource management through improvements in the quality and management of public investments, the streamlining and reform of the parapublic sector, and the generation of public savings. 25. Since the meeting of the CG, the Senegalese authorities, with Bank staff assistance, have prepared an action program of monitorable measures for implementation during the first phase of the adjustment program (1985-87), which is described in the Government's Letter of Development Policy (LDP). This action program, which will be supported by the proposed SAC, builds on and is consistent with the program supported by the current stand-by arrangement with the IMF. The SAC's main features are as follows: (a) Policies for Accelerated Growth in Production and Employment (i) incentive reforms in agriculture to raise cereals output through: adjustments in the price of imported rice; the liberalization of cereals marketing; a floor price support mechanism for cereals; the preparation of a program of supporting measures to improve the production potential for rainfed and irrigated cereals; and the restructuring of rural development agencies; (ii) steps to decontrol input distribution and marketing arrangements in the groundnut sector, increase the producer price of groundnuts to improve farmer incomes, and reduce the cost of government support; (iii) a comprehensive package of industrial policy reforms, including the adoption of objectives to be pursued in the medium-term, implementation of a first set of immediate measures, and preparation of an action plan, aiming inter alia to: reduce the levels of effective protection; rationalize the export subsidy system; reduce the rigidities in the labor and wage laws; and progressively eliminate price controls. -9- (b) Public Sector Management (i) implementation of a two-year public investment program which channels resources to productive sectors and high priority rehabilitation activities based on explicit criteria; reform of the public Investment programming and budgeting process to develop a three-year "rolling" investment programming and budgeting system; and preparation of the first three-year investment program and consolidated budget; (ii) acceleration of parapublic sector reforms, including elaboration of a coherent strategy to guide the restructuring and/or privatization of the bulk of state-owned enterprises; (iii) reducing financial disequilibria through measures to control the growth of expenditures, improve the revenue base, reduce payment arrears on the basis of agreed criteria, and reform the CPSP. Much work by the Senegalese authorities and considerable technical assistance will be required to prepare and implement the above meastres. The ongoing Technical Assistance Project for Economic and Financial Planning and the Second Technical Assistance Project for the Parapublic Sector would assist in this effort. B. Policies for Accelerated Growth in Production and Employment B. 1. Development of Agriculture 26. The Government attaches top priority to rural development and growth in agricultural production. The New Agricultural Policy (NPA) which was adopted in 1984 following extensive consultations with the major donors, including the Bank, outlines the general framework for the reform of the rural sector. These consultations have resulted in substantial progress in several areas, although further efforts are needed to define specific measures. The first set of these measures has been identified under the proposed SAC. Additional measures dealing with the intensification of cereals production, supporting credit and applied research service-, and institutional reforms would be identified and implemented under sector-specific operations planned by Government over the next few years. - 10 - 27. The Government's main objectives in agriculture are: to increase cereals production to improve food self-sufficiency; to expand the production and rationalize the marketing of groundnuts, the main export crop; and to reduce the State's intervention in production activities so as to allow free play to producer initiative. To achieve these objectives, the SAC program calls for the following policies and measures which concentrate on the main cereals pricing issues, the reform of the groundnut sector, and the restructuring of the rural development agencies (RDA). 28. Cereals Policy. The Government's strategy for the development of domestic cereals production is based on two main thrusts: (i) stimulate demand for coarse grains by setting the consumer price of rice (the main imported cereal) at a level which would provide some protection for local cereals production; and (ii) encourage production of cereals through remunerative producer prices, liberalized marketing, and development of improved farming systems. This represents a major change in policy from the past, when the Government subsidized the consumer price of rice and lacked a strategy for promoting the production of domestic cereals. Hereafter, in setting the rice price, the Government would maintain at a minimum a nominal protection coefficient (NPC) 2/ of 25%. This level of protection is consistent with the estimated standard conversion factor (SCF) for Senegal. The consumer price of rice has been increased by a total of 100 percent in nominal terms since 1982 . As a result, the former subsidy element to the consumers has been eliminated, and the current price (CFAF 160/kg) provides domestic cereals production a nominal protection of some 30-40 percent, depending on the fluctuations of the dollar and the world market price for broken rice. If the import price and the exchange rate fluctuate in a significant and durable fashion so as to reduce the level of nominal protection below 25%, the Government and the Association would, in the context of semi-annual consultations, discuss the need for a price adjustment as well as the amount, modalities and the date of the adjustment. The Government is thus pursuing a cautious policy of making urban consumers pay the price for developing domestic food production. In conjunction with this policy, the Government's objective is to reduce the volume of rice imports on a per capita basis over the medium-term. If ti-e above measures are successful in increasing the demand for and supply of domestic cereals, annual rice imports, which have steadily grown from about 200,000 tons in 1974 to about 340,000 tons in 1984, would be stabilized at or reduced below their 1984 level during the period 1985-89 (para 71). 29. Regarding supply, the degree of competitiveness of locally produced cereals in consumable form (particularly of millet) will require additional actions on several fronts, especially improving the productivity of existing farming systems in conjunction with expected improvements in industrial transformation/processing technologies. Specifically, the Goverment would implement the following measures. First, a cereals 2/ NPC is defined as: Pr-Pc, where Pr=retail price of rice; Pc and Pc=cif price + handling charges and marketing margins. - 11 - development action program -- under preparation with assistance from FAO - would be completed after consultation with the Association as a condition of release of the second tranche. This action program, which would be presented to the donors at a proposed meeting to be held during the first half of 1986, would address issues related to the agronomic potential for cereals production, improved farming systems, producer price policy, and the processing of coarse grains to respond to consumers' tastes and eating habits. Second, in application of its objective to liberalize the marketing of cereals, the Government has, as a first step, lifted all barriers and administrative controls previously imposed on the internal marketing of cereals (except for paddy rice whose production represents less than 10% of total consumption of cereals). The marketing of paddy is currently controlled by the rural development agencies which are involved in production activities. The ultimate objective is to liberalize the marketing of paddy, too, in the coming years in parallel with the disengagement of rural development agencies (notably SAED, the Senegal River Valley Authority) from production and marketing activities in consultation with the Association (paras. 36, 118). 30. Finally, the Government has made progress in realigning its producer pricing policy. It has abandoned the past practice of setting rigid fixed prices based largely on political considerations, and obliging traders to buy at those prices, and begun to give more weight to economic factors. In particular, in view of the deterioration of farmers' income resulting from several years of severe droughts, the Government is concerned jith assuring minimum acceptable rural incomes. Although this policy falls short of establishing a framework in accordance with economic pricing in a strict sense, it represents a positive move away from purely political considerations. 31. For the current year (1985/86), producer prices were increased by 20-30 percent for millet and sorghum and by 40-50 percent for maize and rice paddy in order to provide farmers additional incentives to produce cereals. In the case of coarse grains, the Government intends to treat producer prices as floor prices and to support them, if necessary, during a transition period, i.e., before the consumer demand for local cereals has developed sufficiently to absorb marketable surpluses of local grains. At present, urban consumers do not readily substitute local cereals for imported rice owing partly to the changes in dietary habits which have taken place in favor of rice in the last few decades, and partly because the techniques for industrial transformation of local cereals into readily consumable products have not yet been perfected. In the current marketing season, cereals production is estimated at one mi7.lion tons, which is somewhat above the estimated total consumption requirements of the rural population. Accordingly, the Government intends to intervene in the market through the Food Security Commission (CSA), whose operations would be financed by the counterpart funds of food aid. CSA is the agency responsible for distributing food aid and has an adequate network of regional stores to buy and store local grains. Its intervention would be limited in time and space to support producer prices as and when required. Since the bulk of local cereals are produced as subsistence crops and marketable surpluses (estimated at about 100,000 tons) are small relative to the total volume of production, CSA's intervention is not expected to go beyond 25,000 tons, for which financing has already been arranged. - 12 - 32. The policy instruments described above represent a feasible strategy f or the development of cereals production given the existing economic, institutional and social constraints. Nevertheless, there are risks concerning: (i) the impact of higher rice prices on cereals consumption patterns; (ii) the net benefits of potential substitution effect between coarse grains production and other cash crops; and (iii) uncertainties regarding the feasibility of new technologies for industrial transformation of coarse grains. While these risks are not negligible, they are, nevertheless, worth taking since there are no clear alternatives at this time. 33. Groundnut Sector Reform. The Government's strategy for the development of groundnut production, has four main thrusts: (a) provide adequate incentives for production through remunerative producer prices; (b) decontrol input distribution and marketing; (c) rationalize the structure and management of groundnut oil mills; and (d) reduce the cost of state intervention in processing and in marketing. To achieve these objectives, the Government has taken the following actions during the 1985-86 growing season: (i) liquidation of SONAR, the parastatal managing seed and fertilizer distribution, and the transfer of groundnut marketing responsibilities from a discredited cooperative system to the oil mills; (ii) reduction of the centrally held seed stock by 20% to 100,000 to-.s and limiting free distribution of seeds to 60,000 tons, with the balance sold for cash; (iii) abolition of the levy on groundnut marketing to finance SONAR's seed and fertilizer distribution activities; (iv) increase of 30% in the producer price to a level which is considered adequate and financially sustainable given current world market prices; and (v) reduction by half of the state subsidy to cover the oil mills' fixed costs, which have tended to be high relative to variable costs because of the seasonality of production. As in the past, the Government will continue to review the producer price of groundnuts annually in light of world market conditions and financial constraints. 34. The following additional measures are envisaged during 1986. First, the state will withdraw entirely from seed distribution, except for maintaining control over the production and quality of foundation seeds. Producers will be free to store seeds themselves, deposit seeds for proper storage with the oil mills or purchase their seed requirements from the security stock managed by the oil mills. The security stock will be limited to 50,000 tons in 1986 and reduced gradually thereafter as producers adapt to the new system. The Government would also prepare, by end-June 1986, a seeds action program including measures to help producers store their seeds under proper conditions. Second, the two state companies involved in oil milling will be merged and a "contrat-plan" (contractual agreement between state enterprises and the Government specifying the respective obligations of the parties including a performance plan for the enterprise) signed, which would provide a framework for the restructuring of their operations, including the reorganization and reduction of capacity of the less efficient plants. One plant is already being closed down and about 200 employees have been laid off thereby lowering the fixed cost. In - 13 - addition, as a first step toward the liberalization of marketing, private operators who meet criteria regarding creditworthiness, marketing capacity, etc. would be allowed to buy groundnuts from producers and sell to the oil mills. Finally, the remaining subsidies for the fixed costs of the oil mills would be entirely eliminated as of the current crushing season. 35. Fertilizer 'Policy. Fertilizer distribution has been centrally controlled and heavily subsidized (about 50% subsidy element) through the rural parastatals. The Government's objective is to decontrol progressively the marketing channels and eliminate the subsidies. With the abolition of SONAR, the main instrument of state intervention has been removed. However, a more limited subsidy scheme (about 25% subsidy element) with donor financing was used during the past growing season since, at current market prices, imported fertilizers (primarily urea) or the special blends produced in Senegal by ICS (a recently completed chemical fertilizer complex with foreign participation including IFC) are not attractive to the farmers. Similar schemes are under preparation with donor assistance for the coming season. The following principles would guide the Government's policy on fertilizers over the next four years: (i) subsidies (on both imported and domestically produced fertilizers) required to ensure an increase in fertilizer consumption would not be financed through resources of the Treasury; (ii) subsidies financed directly by the donors would be phased out progressively by the 1989-90 growing season in accordance with a specific schedule as outlined in the LDP; (iii) imports of fertilizers would be progressively liberalized during the same period in parallel with the expected improvements in the operating efficiency of ICS; (iv) marketing would be gradually transferred to the private sector in parallel with the disengagement of the RDAs and the development of effective rural credit; and (v) fertilizer prices would be differentiated regionally to reflect the real costs of transportation. 36. Restructuring of Rural Development Agencies. The Government's objective is to wind down the activities of the RDAs in the rural sector and to encourage private initiative. The restructuring of RDAs would be based on the following principles: (i) withdrawal of RDAs from direct production activities and limiting their mandate to planning of rural development operations and extension; (ii) progressive elimination of state subsidies; and (iii) reduction of staff and improvement in the quality of retained staff. In line with these objectives, the Government has already abolished SONAR and STN (the parastatal in charge of development of new territories), reduced the staff of SODEVA (the groundnut development agency) by 55%, and signed a "lettre de mission" (contractual agreement) with SAED which calls for the latter's disengagement in accordance with a schedule to be determined in consultation with donors. In addition, during 1986, "lettres de mission" will be finalized with SOMIVAC and SODAGRI (the agencies for irrigation development in the Casamance region), SODEVA and SODEFITEX (the cotton development agency). Finally, the Government would put in place, with donor support, a credit scheme to help the laid off staff of RDAs (about 2000 to date) engage in remunerative activities in the private sector (para 114). - 14 - B.2. Reform of Industrial Incentives 37. The development of Senegal's industrial sector in recent years has been constrained by internal as well as external factors. The main internal factors are as follows. First, the strategy for industrial development in Senegal has historically concentrated on import substitution (with the exception of the new industries engaged in the transformation and export of phosphates, fish and groundnuts). Given the small size of the domestic market, this strategy has now reached its limits. The underlying policy of high import protection has not only discouraged the development of exports, it has simultaneously encouraged fraudulent imports. Second, in order to stimulate investment in certain subsectors, the Government has been granting special advantages (exemptions, rebates) to individual firms through a system of "conventions", or contracts. This practice, which has proliferated in recent years, has led to serious distortions of incentives and has encouraged the allocation of resources to economically unattractive projects. Moreover, the Government has encountered problems in administering or monitoring these privileges or in paying for them. Third, the constraints and the complex network of controls imposed on enterprises (e.g., price controls, investment regulations, labor legislation) have become a block to industrial development. Although price controls have been progressively relaxed, they still constitute an administrative bottleneck and disincentive for some manufacturers and distributors. 38. Because of the above situation, the Government has decided to undertake a comprehensive reform of the industrial policy framework with the following objectives: (i) improve the competitiveness of the sector on both the domestic and the external markets; (ii) make enterprises bear more fully the risk of their investment and business decisions but also enable them to exercise fuller control over their operations (e.g., by simplifying government regulations, reducing government interference and eliminating price controls); and (iii) reduce the cost to the Government of administering the industrial incentives system. 39. The Government has undertaken to prepare and implement the industrial policy reform program through the following chronological steps: (a) announcement of a new Industrial Policy by early-February 1986 consistent with the principles outlined in the LDP; (b) implementation of a set of immediate measures starting in January 1986; and (c) preparation by end June 1986 of a detailed action program for the period July 1986-December 1988. The gradualism implicit in this approach is designed to permit the necessary restructuring operations within the sector to take place effectively. 40. The policy reform program, which is a result of a long dialogue between the Government and the Bank, has the following five major elements: (i) a rationalized system of protection essentially based on tariff protection with a reduced and narrowed band of harmonized tariffs; (ii) a system of revamped export promotion measures which would ultimately make exports as attractive as domestic sales; (iii) application of the general fiscal and trade laws to all registered companies, and elimination of - 15 - individual ad hoc incentives granted under special contracts or uconventions" between the State and individual enterprises; (iv) elimination of controls or constraints burdening enterprises, and (v) improvement of labor laws and regulations in order to foster labor mobility and incentives to improve productivity. 41. The decision to implement the bulk of the measures supporting the proposed reforms over a three year period beginning in 1986 is dictated by the very breadth and scope of the measures and the careful preparation necessary to achieve the end objectives. However, recognizing the importance and urgency of the reforms, the Government has decided to introduce immediately certain measures in a balanced manner in order to start the reform process. These immediate measures, taken in January 1986, include the following: Regarding protection: (a) an immediate freeze of the number of products subject to quotas and of an increase of some of these quotas; (b) elimination of quantitative restrictions for a list of goods not produced in Senegal; and (c) reduction of import duties for 15 groups of products (some from 90% to 65%). The lists of products for all three measures were agreed during negotiations. Regarding other incentives: (a) adoption of two key principles, the first concerning the modification of the export subsidy scheme so as to base it on industrial value added in international prices, and the second involving the revision of the system of drawbacks so as to make them transferable (effective action on these two subjects, which requires preparatory work to be partly supported by the Bank, is to follow within six months as noted below); (b) renunciation of the practice of granting ad hoc privileges to individual firms thriugh the system of "conventions". 42. The main steps to be taken during 1986 are: (further detail is included in the LDP and the SAC Action Matrix shown in Annex V) (a) Preparation by July 1, 1986 of a detailed action program for the additional reform measures needed, with a specific timetable for their systematic implementation by December 1988; (b) Elimination by July 1, 1986 of quantitative restrictions for categories of goods starting with at least one subsector to be identified in consultation with the Association; (c) Introduction by July 1, 1986 of a strengthened export subsidy scheme based on industrial value added in international prices, which is designed to: (i) give equivalent incentives accross manufacturing sectors; and (ii) further reduce the divergence of incentives between production for export and for the domestic market (condition of release of the second tranche); - 16 - (d) Introduction by July 1, 1986 of a revised drawback scheme; and (e) Adoption by the Government by October 1, 1986 of a revised tariff Code satisfactory to the Association as a condition of release of the second tranche. 43. Actions will also be taken during 1986 in order to: improve the administrative procedures regulating hiring, firing and temporary work contracts; simplify export and import licenses; streamline the overall administrative procedures affecting the sector; improve the export insurance and financing system; review existing contracts with private enterprises; review and improve the regulations concerning salary structure and levels; progressively eliminate remaining price controls and introduce a new system which will permit linking salary increases to improved productivity at the enterprise level (participation in profits, capital, etc.). In addition, some of the measures highlighted in paras. 41-42 above would necessitate a revision of the Investment Code. 44. Much work will be required by the Senegalese authorities to prepare and implement the above measures in close coordination with the Bank and the Fund staff. The Bank, on its part, will need to extend considerable assistance in the form of supporting preparatory -issions as well as expert technical assistance, especially with regard to the revision of the tariff code and the export subsidy scheme. The Technical Assistance Project for Economic Planning would finance the required studies and expert assistance. With regard to the required restructuring of the industry, the Government is currently in the process of reviewing the physical state of the sector with the help of UNIDO in order to identify plant-level problems. It plans to organize a meeting of donors around mid-1986 to explain the new policy framework, discuss its overall industrial strategy, and invite support for specific restructuring efforts. For its part, the Bank plans to assist the Government in these efforts through an industrial sector operation to help finance the rehabilitation and restructuring needs of selected enterprises (para.119). B.3. Energy Sector Policy 45. The Government's objective is to reduce dependence on imported sources of energy by substituting indigenous energy (such as hydro-power), or less costly imported fuel (such as coal) for imported petroleum, and to restrain energy consumption by increasing the efficiency of energy use through conservation and an appropriate pricing policy. So far, efforts to develop indigenous resources have been unsuccessful, and the consumption of petroleum products has increased from about 600,000 tons in 1981 to about 720,000 tons in 1984. However, the proposed development of the hydro-power potential of the Manantali dam, scheduled for completion by the end of the 1980s, would significantly increase domestic energy production capacity. 46. There are major distortions in the structure of energy prices in Senegal: petroleum products for electricity generation, for fishing and for household use are subsidized; electricity tariffs do not allow for - 17 - economic costs; and fuelvood and charcoal prices do not reflect the cost of reforestation. The Government has made significant progress in addressing these issues. During the energy sector donor meeting in July 1985, the Government announced the following comprehensive package of price and tariff adjustments. First, all subsidies on petroleum products would be progressively eliminated. As a first step, significant price increases on petroleum products were introduced with effect from July 1, 1985; as a result, subsidies have been reduced by 40-75% on certain products (e.g., butane gas) and completely eliminated for others (e.g., gas-oil). Second, taxes on gasoline products would be increased by 10-40%, while the forestry tax on fuelwood for charcoal would rise ten-fold by January 1987 and about twenty-fold by 1990. Third, electricity tariffs would be raised on three occasions by 10% each time over the 18 month period from September 1985 to March 1987. In addition, the Government would reduce its fuel oil subsidy to SENELEC (the power utility) by 30% each in March 1986 and March 1987 and the remainder in March 1988. These measures would be monitored under the proposed Power I (Sector Rehabilitation) Project which is under preparation (para. 121). C. Public Sector Management C.1. Public Investment Program 47. The economic difficulties experienced by Senegal since the mid-1970s have been accentuated by the long-standing weaknesses of the investment selection, programming and supervision process. The four-year development plans (of which Senegal had six until 1984/85) have been more concerned with mobilizing new aid commitments than with ensuring that they are allocated to good projects and spent efficiently. This has made it difficult to program and monitor the use of resources effectively and has contributed to the financing of unproductive and poorly-conceived projects. Senegal has taken three major steps in recognition of the above problems: (i) improving the analytical basis of the Seventh Plan (1985/86-1988/89) and its investment component; (ii) preparing an interim, two-year investment program which brings further precision and refinements to, and is more operational than, the Plan; and (iii) initiating a series of reforms of the planning and programming process centered on the preparation, beginning in 1987/88, of a three-year "rolling" public investment program. These steps are described below. 48. Seventh Plan. The Seventh Plan outlines, for indicative purposes, a four-year investment program which is consistent with the macroeconomic objectives of the PAML - in particular, a reduction of the investment/GDP ratio from 17 percent in the 1970s to 14 percent, coupled with an increase in the productivity of capital. The Plan aims, inter alia, to raise the share of the primary sector in the investment program, to reduce the proportion of investment expenditures financed externally, and to allow the share of private investment to rise from 28 percent during the Sixth Plan to 37 percent. To achieve these and other objectives, the - 18 - Plan gives priority to rehabilitation projects, underlines the importance of properly estimating and financing recurrent costs, and defines a set of project selection criteria which include: impact on the growth of production; employment creation; contribution to domestic savings; contribution to reduction of the external deficit; and alleviation of vulnerability to external factors. A distinguishing feature of the Seventh Plan is the delineation of 21 Priority Action Programs (PAPs) designed to concentrate the effort on a limited number of well defined areas. 49. Two-Year Program. The Senegalese authorities have prepared a public investment program (PIP) for the years 1985/86-1986/87 which has been reviewed by the Bank staff. This program was derived from the Seventh Plan by eliminating some large new projects of questionable justification or priority, especially in the mining, sewerage and energy sectors, and paying closer and more systematic attention to the advancement phase of projects (in particular, the availability of feasibility studies). The two-year program amounts to about CFAF 310 billion in 1984/85 prices, or about US$700 million at the average 1984 exchange rate. This is slightly less than the amount for the same two years included in the Seventh Plan and, therefore, is consistent with its macroeconomic framework. 50. The sectoral distribution of the PIP (attached to the LDP) is in line with Senegal's priorities, and the changes from the Sixth Plan are in the right direction: while the share of the primary sector (agriculture and rural water supply) has been raised from 22 percent to 35 percent, that of the secondary and tertiary sectors combined (industry, mining and infrastructure) has been reduced from 61 percent to 43 percent. (The balance is accounted for by the social sectors.) Although the intra-sectoral distribution of projects seems also appropriate in most cases, the Government intends to review, in consultation with the Bank, the priorities within certain sub-sectors to ascertain the justification of some of the large projects and/or to assure consistency with the new policy directions outlined in this Report. This is especially the case with the industry projects, which were identified before the new industrial policy was mapped out. The Government also intends to reconsider some of the new projects in the education sector in light of their recurrent cost implications. Moreover, the Government has undertaken not to implement new projects before a thorough technical, economic and financial appraisal demonstrates their suitability in the context of the public investment strategy and financial constraints. 51. Investment Programming/Budgeting Process. Although the preparation of the Seventh Plan and the two-year PIP constitute important steps forward, additional efforts are required to translate intentions into actions especially with respect to the following: (i) reconciliation of objectives and means; (ii) stricter application of criteria based on economic rates of return; and (iii) giving a legal foundation to the PIP to assure fuller compliance with it. In order to achieve these objectives, Senegal has decided to implement a number of reforms bearing literally on every phase of the project cycle and involving organizational changes within the Planning Ministry. These actions should lead to the preparation - 19 - of a three-year program whose first year would constitute a consolidated budget -- the first in Senegal -- and have a legal status, i.e, form part of the budget law. The first three-year program is scheduled to be prepared during the first half of 1986, i.e., roughly a year before its official start; this would permit the production of a final draft, to be discussed with the donors, by late 1986 -- in time for inclusion in the budget law for fiscal 1987/88. A satisfactory review by the Association of the draft first three-year (1987/88-1989/90) PIP would constitute a condition of release of the second tranche. 52. Although the improvement of the programming process is important, the effectiveness of the PIP will depend in large part on the quality of the financing decisions by the donors themselves, especially with regard to the focus, size and design of projects and their consistency with macroeconomic and sectoral objectives. The preparation of well thought out and documented PIPs ahead of time is expected to assist in and improve donor decisions. In addition, the CG provides an important vehicle for the coordination of investment decisions between Senegal and the donors as well as among donors. The sectoral meetings on telecommunications and energy, held within the CG framework, have proven effective in reaching a consensus on sectoral investment strategies as well as in mobilizing the required financing. Additional sectoral meetings are planned in 1986 (para 124). C.2. Accelerated Reform of the Parapublic Sector 53. An accelerated reform of public sector enterprises is necessary to overcome the overall weaknesses in investment, savings and budgetary performance. Following an extensive policy dialogue in this area which started under the 1980 SAL and intensified since the meeting of the CG, the Government adopted in July 1985 a New Parapublic Sector Strategy and Action Plan, which has two main thrusts: divestiture and rehabilitation. 54. Divestiture decisions will be based on sectoral strategies and on specific evaluations of enterprises. All enterprises involved in the production of commercial goods and services will be considered for divestiture, with priority given to enterprises which are already competing with the private sector and those which put a heavy burden on public finances. A detailed inventory of the Government's portfolio (direct and indirect participations) has been completed. The process of privatization and liquidation will be launched by end June 1986 for the first group of enterprises. 55. The necond thrust of the strategy focuses on the rehabilitation of a core group of enterprises that will remain in the Government's portfolio. Key elements of this program are: a reduction in overall subsidies (direct and indirect); improved management with increased autonomy and accountability; simplified but strengthened government supervision of the parapublic sector; and the generalization of "contrats-plans" between the Government and the remaining public enterprises. - 20 - 56. The Government's role in enterprises in housing, transport, industry and banking remaining in the public sector will be assessed through sector studies, and specific recommendations will be prepared by end June 1986. The "contrat-plan" process will be expanded to all core public enterprises, with at least seven additional contrats-plans to be signed during 1986 - after preparation of sound diagnoses and rehabilitation programs. In addition, all rural development agencies will sign a "lettre de mission" defining their future reduced role as described in para 36. 57. The Government intends to liquidate its arrears to the parapublic enterprises. A partial reconciliation of the reciprocal obligations between the Government and the enterprises has been completed and a preliminary program prepared for the liquidation of the reconciled amounts. By end July 1986, the remaining amounts will be reconciled, and a schedule agreed between both parties for the orderly settlement of all outstanding debts and arrears as of June 30, 1985. 58. Given the multitude and complexity of the measures, there will be a need for considerable technical assistance to ensure their timely implementation. Most of these needs have been anticipated under the Second Technical Assistance Project for the Parapublic Sector. C.3. Public Finance Policies 59. Appropriate fiscal policies are essential for reducing overall structural imbalances between resources and uses in the economy, financing a satisfactory rate of investment, disengaging the State from the economy, and providing improved incentives for production. Because of the rigidities in the exchange rate field and in the setting of monetary policy (given Senegal's membership in the West African Monetary Union), the stabilization and improvement of the public finance situation are of special importance for implementing the adjustment policies described earlier in this chapter. 60. The Government's fiscal policy has three major objectives: (i) achieving a substantial increase in budgetary savings; (ii) maintaining the sectoral as well as functional allocation of current expenditures in line with longer-term development priorities; and (iii) settling the burden of past arrears. To achieve these objectives, the Government will undertake a program of specific measures which are summarized below. Details of the proposed measures are outlined in the Action Matrix (Annex V) and their expected impact on the public finances and macro-economic aggregates is discussed in Part III. 61. Control and Reorientation of Current Expenditures. The Government has already taken firm measures -- under the IMF stand-by agreements concluded since mid-1983 -- to contain the growth in expenditures, as shown by the figures in Annex I. The bulk of the cuts in expenditure have fallen on operating expenditures (including budgeted operating subsidies to public enterprises), which have remained - 21 - approximately stable in nominal terms. While the wage bill has declined slightly in real terms and as a share of current expenditures, interest on public debt has grown dramatically and its share of expenditures nearly tripled since 1980/81. Although total revenues and grants have generally been maintained at a stable percentage of current GDP, revenue collections from taxes and customs have shown signs of falling off during the last year. Finally, with improvements in the performance of the parapublic sector and the CPSP, there has been a marked strengthening since 1982/83 in the net position of various Treasury accounts. 62. To consolidate the progress already achieved in controlling current expenditures, and in view of the need to allocate more resources for operating and maintenance expenses, the Government would take the following actions. First, it would carry out a detailed analysis of the sectoral and functional pattern of current expenditures. A review of current expenditures undertaken by Bank staff in 1982 revealed that, while no major sectoral distortions were evident, there was a generalized under-provision for operating and maintenance expenses. The proposed study, for which terms of reference have been agreed, will provide recommendations for any necessary shift in budgetary allocations in time for the preparation of the 1987/88 budget. 63. Second, in order to strengthen its control over subsidy payments through the budget, the Government would: (i) eliminate starting with the 1987/88 budget all support for operating losses of public enterprises and to limit transfer payments for social/public services to those which the Government specifically requires enterprises to provide; (ii) provide subsidies only on the basis of assessed needs in the context of contractual agreements between the Government and enterprises; (iii) reduce budgetary subsidies by a minimum of 50 percent (in nominal terms) between 1985/86 and 1989/90; (iv) accelerate the pace of subsidy reduction beyond the minimum target, if the detailed study to be completed by mid-1986 (and to be submitted to the Bank for review) indicates that a faster pace could be achieved without resulting in a substantial reduction of essential public services; (v) elaborate a system for accurate recording of these subsidies (with an economic and functional classification); and (vi) carry out a detailed analysis of all indirect subsidies, permitting their monitoring in a convenient form ("tableau de bord"). 64. Finally, the Government would reduce the excessive share of current revenues which is preempted by the wage bill, by inter alia: (i) freezing the total number of civil servants at their level of July 1, 1985 (70,114), at least through end June 1988; and (ii) limiting the annual growth rate in the wage bill to approximately half the expected growth rate in fiscal revenues, such that the ratio of the wage bill to fiscal revenues (55.3% in 1984/85) would not exceed 53% in 1985/87, 51% in 1986/87 and 48% in 1987/88. To meet these targets, the Government would limit salary increases for civil servants essentially to those resulting from scale advancements and promotions. - 22 - 65. Tax Reform and Strengthening Tax Administration. Over the years, Senegal's tax base has undergone a number of changes which have led to a shift towards indirect taxation as the principal revenue source. However, recent experience suggests that indirect taxation cannot be relied on to sustain an adequate growth in revenue. In addition, there are weaknesses in some of the material and organizational aspects of the tax and customs administration. Accordingly, in addition to preparing a new Tariff Code (para.42), the Government would take the following fiscal reform measures, which will be monitored by the IMF: (i) submission of the final report of a Tax Reform Commission proposing revisions to the Tax Code; (ii) completion of a test of a new cadastral survey of the Dakar region (as an updated base for assessment of property taxes); and (iii) preparation of a detailed plan of action for the strengthening of the Customs Department. 66. Reduction of Government Payment Arrears and Domestic Debt. The progressive reduction of the Central Government's massive arrears - some more than six years old - to private and parapublic enterprises and debts to the banking sector is an important channel for the recycling of budgetary savings into the economy to allow faster growth. If resources permit, the Government plans to reinject CFAF 20-30 billion of much-needed liquidity into the non-government sector over the next three years. It should be noted in this connection that because of an unforeseen shortfall in revenues (brought about by the poor groundnut crop in 1984/85), Senegal has in recent months built up substantial arrears on its external debt service payments (estimated at CFAF 11 billion at end-December 1985). The Government has agreed to make every effort to eliminate these arrears by end June 1986 and to consult regularly with the Bank and the IMF on the progress it is making in that regard. This factor will constrain the Government's ability to reduce the domestic arrears during 1985/86. 67. Specific actions would be taken to prepare a long-overdue inventory of domestic arrears, together with a detailed plan and a set of priorities for the reduction of those arrears, as well as of the Government's debt to the banking sector (ONCAD debt). 3/ An exhaustive reevaluation of the stock of arrears has already been initiated. In addition, the Government has established the following preliminary order by which arrears will be settled in the future: (i) arrears to small/medium-scale enterprises would be paid first; (ii) for arrears to large-scale enterprises, selection would be based upon a judgment of their economic and fiscal multiplier effects; and (iii) other things being equal, the oldest arrears would be settled first. However, the Government has not yet determined the relative priority to be given to paying suppliers or banks, with the explicit objective of improving the liquidity situation of certain banks, which would possibly permit them to increase their lending for productive new projects. Accordingly, during 1986, the Ministry of Finance, in conjunction with the BCEAO staff, would carry out a study of the banking system, which would examine the latter's capacity to recycle additional resources effectively for the recovery of the economy and would make recommendations for the improvement of the functioning of the 3/ The debt of the former agricultural marketing parastatal, estimated at about CFAF 92 billion, which was taken over by the Government on the abolition of that agency in 1980. - 23 - financial sector in Senegal. Based on the conclusions of this study and the previously-described exercises concerning the reevaluation and analysis of the Government's arrears stock, a set of operational criteria and priorities will be drawn up in consultation with the Association and the IMF for the settlement of arrears during the 1986/87 and 1987/88 fiscal years. 68. Improved Debt Management. An unsustainable external debt burden is one of the principal constraints on development which Senegal has inherited from the past. Apart from its decision last year not to resort to commercial borrowing to finance its operations and, more recently, to give priority during 1985/86 to eliminating external debt arrears, the Government would undertake a series of measures designed to improve its debt management capability. First, the computerized debt management system established under a program of IDA-financed technical assistance would be further improved. Second. a decision has been made to discontinue the transfer of debt relief negotiated by the Government to final borrowers. Third, in recognition of the need to make a clear presentation of debt service obligations in the annual Budget, the resources allocated to the Caisse Autonome d'Amortissement (a special Treasury account from which debt service payments are made) will be increased by a minimum of 10 percent a year over the next three years. Although not sufficient to cover all scheduled interest payments, this represents a step in the right direction. Finally, the aid coordination arrangements within the framework of the CG are designed to strengthen the link between borrowing decisions, production effects and debt servicing capacity. 69. CPSP Reform. This agency implements the Government's policies for the support and stabilization of prices of the major exported and imported agricultural products (groundnuts, cotton, sugar, rice, flour and vegetable oil). The financial operations of this agency have a major impact on the performance of the agricultural, agro-industrial and banking sectors o. the economy, as well as on the government budget. Since 1980, it is estimated that the CPSP incurred a cumulative deficit of CFAF 35 billion (including the operations of the former SONAR, which it financed), representing a substantial share of the overall budgetary deficits. The absence of reliable accounting systems in the CPSP have posed considerable problems for the management of the Government's finances and agricultural and industrial incentive policies. These difficulties were aggravated when the CPSP also became responsible, in 1980, for rice importing and marketing operations. Consequently, a thorough reform of this agency's role and operations beca-me a foremost priority for the Government. 70. Following diagnostic studies carried out by consultants financed by France, USAID and IDA, the Government has begun to implement measures relating to CPSP's internal management, which have already had a substantial positive effect on the public finance outlook for 1985/86. These measures involve, inter alia: installing new management systems and controls; repayment of CFAF 17 billion of bank credits; adoption of a schedule for the payment of arrears on customs duties on rice imports and payment of CFAF 2.5 billion as of end November 1985; and collection of substantial amounts due by rice traders. - 24 - 71. In addition, the Government has decided to remove the rice operation from the CPSP and to privatize the rice trade within the indicative import targets which the Government will continue to set in line with its policy to promote the consumption of local cereals and to reduce rice imports on a per capita basis (para. 28). However, during a two-year transition period, the Government would maintain a partial involvement in the market. This is necessary to ensure that adequate supplies of rice (a strategic staple) are available throughout the country before the private sector has had the opportunity to adjust to the new system and to develop a distribution network outside the Dakar area. In the past, private traders had not found it profitable to trade in these areas primarily because of a pricing structure, which, among other things, did not take the real cost of transportation into account. 72. Accordingly, the new system, which will be put in place with effect from May 1986 (i.e., the expiration of CPSP's current contracts) as a condition of the release of the second tranche, would be based on the following arrangements subject to final details being worked out in consultation with the major donors by end-February 1986: (1) a security stock of 60,000 tons (equivalent to about two months imports) to be financed by food aid counterpart funds would be constituted and managed by SONADIS -- a public-private mixed company involved in the distribution of rice and other goods throughout the country; (ii) during the transition period, SONADIS would import and distribute directly 80,000 tons (estimated consumption in the urban centers outside Dakar); the balance of the requirements would be imported and distributed freely by private importersitraders who would have to fulfill certain minimum objective criteria (relating to creditworthiness, financial capacity, etc.) under a licensing scheme to be administered by a committee composed of representatives of various ministries with the assistance of an independent audit firm; and (iii) the Government would continue to set the level and structure of the rice price, which would include margins based on real transport cost. In addition, the Government intends to study the modalities of privatizing SONADIS with donor assistance with a view to a complete privatization of the rice trade. D. Next Phase of Adjustment 73. It is too early to determine the precise content of policies and reforms during the next phase of adjustment starting around mid-1987. To some extent, the policies and measures for the next phase would depend on the experience in implementing the first phase of the PAML. The main elements of the next phase of adjustment are likely to include: further liberalization of marketing system for cereals (to include paddy rice) and groundnuts; elimination of the floor price mechanism for cereals and the subsidy scheme for fertilizers; complete privatization of the rice trade and decontrcl of the consumer price of rice; further decontrol of prices and wages in the industrial sector; reform of the banking system; budget reform towards a system of program budgeting; reform of the civil service, including redefinition of tasks of major departments and development of long-term manpower planning; and continued improvements in the quality of public investments and the structure of current expenditures. - 25 - III. ECONOMIC AND SOCIAL IMPACT 74. The Government's program of medium- and long-term adjustment (PAML) is designed to correct the unsustainable economic trends which were described in Part I and to put the economy back on a sustainable growth path over an eight-year period, 1985-92. The proposed SAC would support the first phase of the PAML, a phase which marks the consolidation of the ongoing financial stabilization efforts begun with close support from the IMF and an increasing emphasis on reinvigorating the productive sectors. Through more positive incentive policies for agriculture and industry and measures to improve the quality of investment decisions and public sector management, the SAC would assist Senegal to make better use of its development potential, improve employment prospects and lay the foundations for growth and development in the medium term. The SAC would aim, in particular, to reverse the present trend of declining real living standards by the end of the decade. A. Economic Impact 75. Senegal's economy cannot grow without undergoing profound adjustment. The trend rate of growth of Senegal's GDP over the past two decades is estimated at only 2.3% a year - lower than the rate of population growth (2.9% a year). The last CEH showed that past trends were unsustainable because they generated a structural and ever-widening gap on the balance of payments, implying an insoluble financing problem. By 1990 the overall deficit on the balance of payments as well as the government budget financing gap would both be of the order of US$250 million per year, or 5 percent of projected GDP, while public investments would have to be financed entirely by external resources. Total debt outstanding would rise from 40% of GDP in 1981 to 80% in 1990, and 105% in 1995, and the ratio of debt service to exports would approach 30 percent by 1995. In short, there is no "trend scenario" for Senegal's economy because past trends, unadjusted, do not constitute a feasible scenario at all. 76. Therefore, two distinct sets of projections were prepared for the CEM and recently updated: Projection "A" portrays what might take place if there were no attempt to implement structural adjustment policies: in this case the adjustment is a "forced" one, requiring the growth in GDP to be kept down to a rate at which the balance of payments is equilibriated. Projection "B" illustrates a growth path which is feasible and consistent with estimated financing resources, provided that adjustment policies are applied. The results of these two projection scenarios are summarized in Table 1 and details are given in Annex VI. - 26 - Table I Macroeconomic Projections Summary Impact of the Structural Adjustment Program Provisional Projection "A" Projection "B" Actual Estimates "Forced adjustment" "Managed adjustment" 1984 1985 1986-90 1990-95 1986-90 1990-95 Growth Rates (% p.a.) GDP (at market prices) -4.1 2.1 1.4 1.9 3.4 4.1 Primary -18.7 4.8 0.3 1.8 2.8 3.2 Secondary -1.4 -.9 1.8 1.9 4.6 5.5 Tertiary .6 2.6 1.6 2.0 3.0 3.6 Exports of GMS -13.2 .9 2.6 1.5 5.1 3.7 Imports of GNFS -7.8 1.7 1.0 1.7 2.9 4.0 Percent of GDP (current) Private Consumption 79.1 76.5 75.0 75.0 72.7 74.3 Public Consumption 19.8 19.0 17.6 17.1 16.6 14.7 Domestic Savings a/ 1.0 4.5 7.4 7.8 10.7 11.1 Investment, total 13.0 14.5 13.2 13.3 17.3 17.4 Resource Balance -12.0 -10.0 -5.8 -5.5 -6.6 -6.3 Budgetary Savings -1.2 -3.4 -3.9 -4.0 +1.1 +2.2 Overall Fiscal Deficit -4.1 -2.1 -6.8 -6.7 -5.9 -3.3 Current Account Balance -17.7 -15.0 -8.9 -7.8 -9.7 -8.7 Memorandum Items ICOR .. 5.1 6.3 6.2 4.2 3.9 GDP per cap. growth rate -7.8 -1.1 -1.5 -1.1 0.5 1.0 Private per cap. consumption b/ 75.1 73.3 72.4 68.9 73.8 78.1 Debt Service Ratio (M) cl 10.8 18.5 21.0 16.7 20.0 15.1 Interest/Gov't Revenue (%) d/ 19.5 18.6 15.5 1.3 15.0 1.9 Debt Outstanding/GDP (S) e/ 74.2 81.6 63.8 58.9 66.1 60.8 USS Million (annual averages) Current account balance -411 -366 -340 -432 -385 -540 Net private & direct inv't 82 37 43 81 43 81 Official transfers 129 118 140 194 140 194 Actual/projected disbursements f/ 235 269 91 4 91 4 Actual/projected amortization f/ 35 58 163 126 163 126 New financing required (net) I/ - - 229 279 274 387 a/ Excluding terms of trade adjustment. b/ In terms of constant CFAF'O00 (1979). cf After debt rescheduling in 1984 and 1985. d/ Interest payments on public debt as % of total revenues. e/ Including required additional financing. f/ On existing commitments (to end 1984). g/ Excluding new debt rescheduling and net use of IMf resources. - 27 - 77. Projection A, the "forced adjustment" scenario, suggests that without successful policy adjustment, even the past 2.3% rate of growth could probably not be sustained, because aid flows would not be sufficient to finance a widening balance of payments deficit. Such a "forced adjustment" scenario would permit an estimated average rate of growth of GDP between 1985 and 1995 of no more than 1.9% a year, implying a decline in private per capita consumption of about 0.9% annually over this period. Without structural adjustment, attempts to generate a faster growth in incomes and consumption would be choked off by insufficient liquidity to finance the induced increase in import demand. This scenario is, therefore, one of low savings, low investment, low growth, high unemployment and falling wages, acute financial shortages in all sectors, and heightened vulnerability to drought-induced or other exogenous shocks. Even if this equilibrium remained a stable one, the base for future economic development in Senegal would be severely weakened. Moreover, by 1995, the Senegalese population would have foregone the equivalent of five years' income growth, as compared with the "managed adjustment" scenario. 78. Projection B illustrates the only viable alternative to the forced adjustment scenario, that of a phased and coordinated "managed adjustment" program of measures for stabilizing the economy and for encouraging growth in tradeables production. Under this scenario a gradual acceleration of the annual growth rate of GDP from an average of 3.4% over 1986-90 to about 4% from 1990 onwards would be feasible and compatible with internal and external financing constraints. It should be recognized that there is uncertainty attached to expectations regarding the supply response of Senegal's economy to an improved policy environment for agriculture and industry and for investment, and regarding the participation of donors in financing the adjustment process, as well as assumptions regarding the external environment. The main assumptions underlying the "managed adjustment" scenario relate to the structure and growth of production and to the allocation of available resources between consumption and savings. 79. Concerning output, the new support policies for agriculture already being introduced would, it is estimated, lead to an average rate of growth in value-added in the primary sector of some 2.8% a year between now and 1990 and of 3.1% a year after 1990. 4/ Part of this improvement over the 1.1% a year average growth rate for this sector over the period 1980-85 is due to the recovery of agricultural production in the 1985/86 season from the two previous drought years. However, the pivotal difference as compared with Projection "A" lies in the expected response of farmers to improved price and marketing incentives for cereal production, which would attain a level of about 1.2 million tons/year by 1990, compared with a 1981-85 average of about 0.9 million tons. This would permit rice and wheat imports per capita to fall by at least 15% between 1985 and 1990. It is also expected that the recent declining trend in groundnut production and exports could be halted by 1990 as a result of maintaining remunerative prices, shifting the center of production southwards into better-rainfall areas and by implementing a program for seed quality improvement and 4/ These average growth rates allow for the incidence of drought. - 28 - nematode pest control. In the 1990-95 period, a more favorable climate for private investment and planned public investments in irrigation and rural water supply should lead to a diversification of marketed agricultural production into higher value crops, including horticultural products -- an export sub-sector with considerable potential for Senegal. 80. The new industrial incentive policies would, it is estimated, lead to an acceleration of the secondary sector growth rate -- but only after about 1989, since some uncompetitive factories might be forced to reduce activities and others would need some time to reequip and to adapt their product lines in order to become competitive on export markets. Between 1990 and 1995, it is expected that the industrial sector could achieve a growth rate of about 5.5% a year, as compared with only about 2% a year without adjustment. The private services sector is expected to benefit from a progressive liberalization of commerce, notably in rice and domestic cereals marketing and distribution. However, under the managed adjustment scenario the value-added imputed to public administration is deliberately kept constant between 1985 and 1988, reflecting the Government's policy commitments outlined in Part II for control of the government wage bill and other government consumption. Growth in commercial energy demand and supply is expected to be maintained at about 3.5% a year between 1985 and 1990 as a result of the Government's more stringent policies to eliminate subsidies and to reduce fuel imports. 81. The main thrust behind the managed adjustment scenario is an increase in the rate of domestic savings, from 4.5 percent of GDP in 1985 to 11 percent by 1990, which would accelerate the process of structural adjustment in the economy. This, combined with the effect of improved public investment programming on the rate of return of investment, and of giving greater scope to the private sector, would result in a reduction in the economy-wide Incremental Capital Output Ratio (ICOR) from 4.4 in 1985-90 to 3.9 in 1990-95, compared to an average of 6.3 under the forced adjustment scenario. 82. Under the managed adjustment scenario, a substantial improvement in the public finance situation is expected between 1985 and 1990. Current budgetary savings would change from -0.8 percent of GDP in 1984/85 to 2.6 percent of GDP by 1988/89, as a result of the strict containment of the government wage bill and of transfers to the parapublic sector. There would also be an improvement in the share of total current expenditure devoted to supplies, maintenance and operations by the central government, which have been severely curtailed in the 1980-85 period (para 61). The overall financing requirement of the central government (equivalent to the overall fiscal deficit on a cash basis as defined by the IMF) would rise somewhat faster in nominal terms between 1985 and 1990 under the managed adjustment scenario as compared with the forced adjustment scenario, due to the higher investment rate under the former, but would be substantially lower as a percentage of GDP. 83. Under both adjustment scenarios, the current account deficit of the balance of payments (excluding official transfers) would decline (both I - 29 - in relative and absolute terms) during the 1986-90 period, compared with the recent past. The current account deficit has been equivalent to about US$435 million per year on average between 1981 and 1985, or 18% of GDP. This deficit would be reduced between 1986 and 1990 as a result of measures to promote export production and to limit the growth in food and consumer goods imports (through import-substitution and fiscal policies). The average deficit (and therefore external financing requirement) during 1986-90 is estimated to be somewhat higher under Projection B than under Projection A -- US$385 million, as compared with about US$ 360 million, per year on average. This is primarily due to the higher rate of investment and imports of intermediate goods needed to sustain a faster rate of growth of GDP under the managed adjustment scenario. 84. Financing Requirements. Although the current account deficit is projected to decline between 1981-85 and 1986-90, increased aid efforts as compared with the past years are needed to enable Senegal to implement its adjustment program. This is because of the growing debt service burden. If, for example, gross annual disbursements of medium and long term loans (MLT) were to remain unchanged between 1986 and 1990 at their estimated 1985 level of about US$250 million equivalent, then no less than 65 percent (US$163 million per year on average) would simply be absorbed by existing amortization obligations - which include maturities already rescheduled under the Paris and London Club agreements. Therefore, a substantial increase in the rate of gross disbursements is needed to maintain a total net inflow (including official transfers) in line with the estimated financing requirements cited above. As shown in the preceding paragraph, these are estimated to be some 10 percent lower, in current dollar terms, in 1986-90 than in the 1981-85 period. 85. What is the magnitude of the increased aid effort required? Allowing only for a modest increase in net private capital inflows and in grant aid from bilateral donors, and counting, for illustration, only expected disbursements from the existing pipeline of investment loans (committed as of end-1984), net annual disbursements would then amount to only about US$110 million in 1986-90, and about US$ 150 million in 1990-95. The net additional (new) external financing required under the high growth scenario would thus amount to about US$275 million a year in 1986-90, and about $390 million a year in 1990-95. These figures, averaging US$330 million a year for the projection period, compare with an average for recent years (1981-85) of about US$250 million per year. In the next few years, the increase needed over the recent past could still largely be covered by recourse to conventional debt rescheduling. The short-term relief thus gained would, however, involve a negative net impact on the balance of payments after 1990, and would therefore only constitute a second-best solution. 86. The alternative, preferred solution would involve multilateral and bilateral donor agencies increasing their gross disbursements of project and non-project aid (including grants), to about US$440 million per year on average between 1986-1990 compared to roughly US$360 million in the early 1980's in current terms. Part of the increase in disbursements by - 30 - the bilateral donors should take the form of long-term debt relief or equivalent grants. The adjustment program is also expected to result in an increase in the contribution of foreign private capital, but mainly after 1990 as Senegal's creditworthiness and investment prospects improve. (Including direct foreign investment, net private capital inflow is projected to remain at about US$40 million per year in 1986-90 and then to pick up to an average of US$80 million per year in 1990-95). The required effort by aid donors could be met by combining a sustained 6% annual growth in grant aid with a 9% annual increase in new (mainly concessional) 14LT commitments between 1986 and 1990, but showing to a 6% annual increase (in nominal terms) after 1990. Such solution is consistent with the aid indications discussed at the CG. 87. Despite the uncertainties inherent in projecting net external financing needs, it seems clear that some increase in gross disbursement levels will be needed to enable Senegal to finance the managed adjustment program, given its external debt situation. The adjustment program has been designed as a balanced program, giving due weight to the respective needs of short-term stabilization and of long-term development. If the external resources indicated above are not mobilized, the need for adjustment will remain but the balance and the feasibility of the program could be impaired, because of the necessity for even deeper cutbacks in consumption and in the imports of goods needed to sustain economic activity and investment. A failure to preserve this essential balance in the program between restraint and provision for growth could have serious consequences for Senegal's long-term economic prospects. B. Social Impact 88. In Senegal, as in other countries, structural adjustment has its social costs. These costs are unavoidable, although they are likely to be less painful than the social costs involved in a "forced adjustment"; but they are nevertheless real and they ultimately condition the pace at which structural reform can be implemented. The risk factor in this regard is discussed in Part IV. 89. The social costs of adjustment in Senegal consist, in economic terms, of two components: (i) a planned overall reduction in real consumption levels in order to permit savings and investment for the future; and (ii) a reallocation of incomes and transfers between different social and economic groups. Although it is possible to attach some quantitative indicators only to the first component, the second (the redistributive aspect) is likely to be of at least equal importance during SAC implementation. 90. It should be underlined that Senegal is unable to "grow its way out" of its economic crisis in the medium term: its economic situation necessitates an absolute reduction in average per capita consumption before there can be an improvement, and some further belt-tightening appears - 31 - necessary. Fortunately, much of this adjustment in 'onsumption has taken place already. In the period 1977-78 -- before the economic crisis appeared -- Senegal's per capita consumption averaged CFAF 97,000 per annum; in 1985 it will have fallen to only about CFAF 92,000 (both figures expressed in constant 1979 terms). According to our projections of the "managed adjustment" scenario, the turning point would be reached in 1988: in that year average per capita consumption would be only CFAF 91,000 (in 1979 terms), after this point it could begin to increase by approximately 1.0% per annum. The 1977-78 level of per capita consumption would be regained in 1994-95. The Government's recently adopted Seventh Development Plan specifically incorporates the above assumptions. 91. Few reliable data on income distribution in Senegal are available since a household budget survey conducted in 1960, which showed very marked differences between average urban and rural real incomes and within urban and rural groups: it is believed that this pattern still largely persists and has led to substantial rural-urban migration, especially during the 1970s. However, the gap betw%en average urban and rural incomes has already Legun to narrow as a consequence of the Government's adjustment policies. 92. In a broad sense, the program involves a major shift in income distribution from urban areas to rural communities as a whole. Farmers' real incomes will benefit from the new pricing policies for agriculture, while urban consumers are already paying much higher prices for all basic food commodities (rice, fish, meat, sugar, cooking oil, and bread), both imported and domestically produced. The Government's new policies for agriculture are also now addressing the key issue of assuring a more balanced development between different regions of the country. At the same time, urban incomes have been reduced by Government policies for the containment of wage increases, especially in the public sector which represents over half the formal employment market, and for the reduction of other current expenditures and transfers. In the past, the public investment program was used to some extent as a counter-cyclical instrument to maintain employment levels, but this policy contributed to inefficiencies in investment and is no longer feasible. 93. The reform of incentive policies for industry may typify the overall effects of the program on employment and income distribution: in the short run, some reductions in wage rates and/or employment may occur, as inefficient firms face increased import competition. In the medium term, however, new employment opportunities and improved earnings are expected as manufacturing and processing industries respond to the new situation and as controls on internal trade are relaxed. This more favorable environment for private investment and entrepreneurship is likely to encourage a faster departure of government employees into private sector activities, which would in turn permit some improvement in rewards for performance in the civil service, compensating partly for its overall loss of remuneration since the adjustment process began. The reorientation of Government current expenditures should also permit renewed attention to - given to maintaining essential social services. - 32 - 94. The speed at which these economic and social adjustments will take place, particularly those dependent on the supply response of farmers and industrialists, is hard to predict. What is certain is that the Government will need to exercise all its skills to ensure that the essential consensus in favor of thr: total reform package is preserved. There is also no doqbt that whatever may be the short-term social costs involved in the managed adjustment process, they would be minimal as compared to the social costs of a forced adjustment, in terms both of future overall consumption and of inequities among social groups. PART IV - IDA'S ROLE AND THE PROPOSED OPERATION A. Role of IDA in the Adjustment Process 95. The nature of Senegal's crisis is such that decisive progress is not possible unless action is taken over the medium-term to address simultaneously the central issues related to production incentives and economic management. These central incentive and economic management issues effectively undermine efforts initiated at the sectoral level. Accordingly, an essential feature of IDA's lending strategy for Senegal is to plan for a series of realistically targetted structural adjustment credits over to next several years which would serve as a "strategic framework" for addressing the central issues. Sectoral and project operations would reinforce the reforms supported by the structural adjustment program and translate them into longer-term development gains. Operations of this sort, complementary to the proposed SAC, are under preparation in agriculture, industry and energy as described in Part V. 96. Coordination of donor activities in support of the adjustment effort is another essential element of the above strategy. The meetings of the CG would continue to focus on the general framework of adjustment policies and development strategy. These would be supplemented by a series of sectoral meetings of donors to discuss specific sectoral issues and investment priorities (para. 124). B. Background to the Proposed Operation 97. Following an extensive policy dialogue in the context of the preparation of the last CEM, the Government outlined a medium-term adjustment program (1985 - 1992) at the December 1984 meeting of the CG. Two IDA missions in February and April/May 1985 helped the Senegalese authorities prepare a comprehensive program of policies and measures for the first phase (1985-87) of the adjustment program to be supported by the proposed operation. This program was appraised by two IDA missions in September and November 1985, which also reviewed the 1985-87 public investment program. Technical discussions took place in Washington on December 16-18, 1985, and negotiations were held in Washington on December 19, 1985, with a Senegalese delegation headed by His Excellency Cheikh - 33 - Hamidou Kane, Minister of Planning and Cooperation, who submitted to the Association the Government's latter of development policy dated December 19, 1985, which forms the basis for this operation (Annex IV). Supplementary data appear in Annex III. C. The Proposed Financing Package 98. The Government's structural adjustment program would be suppirted by a proposed Development Credit of US$20 million and a proposed African Facility (AF) Credit of US$ 44 million on standard IDA terms, and a Special Joint Financing non-reimbursable Contribution of Sw F 13.5 million (about US$ 6 million equivalent) by Switzerland (heretofore called the grant) and administered by the Association. The proposed credits and grant would amount to a total of US$70 million equivalent of which US$35 million would be made available immediately after credit effectiveness. The remaining US$35 million would be released after the Government has made significant and satisfactory progress in implementing the structural adjustment program, notably in completing the specific actions dnscribed in paragraph 103 below. The proposed credits and grant are expected to be disbursed over the 15-month period ending about Jun-, 1987. They would finance about 4 percent of Senegal's 1986-87 imports of goods and would meet about 7.5 percent of the 1986 - 87 gross external capital requirements of the country. 99. In meeting the gross external capital requirements of the country, the proposed credits and grant would be complemented by net IMF credits, official grants, project foreign borrowings and other non-project financing. Among the latter, USAID is preparing a three-year US$ 45 million program under the Economic Support Fund for the period October 1985 - September 1988 ($15 million has already been authorized of which $10 million was disbursed in December 1985; authorization of subsequent disbursements and additional program amounts will depend on progress in meeting agreed conditions), and is also considering a US$10-20 million program under the African Economic Policy Reform Program for the year starting October 1, 1985. In addition, CCCE has agreed on a CFAF 10 billion (about US$ 22 million equivalent) structural adjustment loan, of which three-quarters will be disbursed during the 1985/86 fiscal year mainly in support of agricultural reform (notably groundnuts) and repayment of arrears. France has also recently provided a special grant of CFAF 5 billion for balance of payments support. 100. In preparing the program to be supported by the proposed credits and grant, IDA staff have consulted extensively with the donor community, in particular the IMF and those involved in structural adjustment operations. These aid coordination efforts have helped in ensuring a consistency and complementarity between the policy contents of the various structural adjustment type operations supported by the donor community. - 34 - D. Monitorable Actions 101. The action program described in the following paragraphs reflects the agreements reached with the Government as to the key policies needed to stimulate private sector initiative and to improve production incentives in agriculture and industry, and the central management reforms required to achieve greater efficiency in the use of public resources. A detailed program of measures under the SAC is described in matrix form in Annex V, which contains a schedule and identifies actions to be monitored during supervision. 102. The following actions have already been taken by the Government under the proposed program: a. agreement on the objectives and policies of a 1984/85-1985/86 stand-by arrangement with the IMF (para.16); b. an increase in the consumer price of rice from CFAF 130/kg to CFAF 160/kg (para.28); c. lifting all barriers and administrative controls previously imposed on the internal marketing of cereals (except paddy) (para.29); d. an increase in the producer prices for the 1985/86 crop year as follows: 20-30 percent for millet, sorghum, and groundnuts; 40-50 percent for maize, rice paddy and cotton (paras. 31,33); e. liquidation of the state groundnut seed distribution agency (SONAR) and transfer of its remaining functions to the oil mills; abolition starting with the current (1985186) crop season of levies on groundnut sales to finance state distribution of fertilizers and seeds; reduction of the centrally - held groundnut seed stock from 120,000 tons to 100,000 tons as of the 1985/86 crop season and distribution to farmers of only 60,000 tons free of charge; and halving of the state guarantee for the coverage of 80 percent of oil millers' fixed costs in 1985 (para. 33); f. laying-off of about 2000 staff of selected rural development agencies (para. 36); g. preparation of a satisfactory 1985/86 - 86/87 public investment program (paras. 49-50); h. adoption of a new strategy for Parapublic Sector Reform and an action program (para. 53); i. discontinuation of past practice of automatically transferring to - 35 - public enterprises the benefits of conventional debt rescheduling (para. 68); and J. settlement of CPSP's debt to the banking sector, and adoption of a schedule for repayment of arrears on customs duties (para. 70); k. freezing the list of products subject to quotas and an increase in the import quotas for 1986 (para.41); 1. elimination of prior import authorization for certain goods not produced in Senegal (para. 41); m. adoption by the Government of a draft amendment to the customs tariff law reducing tariff rates on 15 categories of goods (some from 90 percent to 65 percent) as a final step before parliamentary approval which is expected shortly (para.41); and o. reorganization of the Ministry of Planning and Cooperation effective January 1, 1986, as a prelude to the introduction of a three-year rolling public investment programming and consolidated budgeting system (para. 51). 103. Disbursement of the secnd tranche would be contingent upon the Government making significant and satisfactory progress in implementing the structural adjustment program, notably in completing the following actions in a manner satisfactory to the Association and consistent with the objectives of the adjustment program: a. agreement with the Association on a satisfactory action program for the development of domestic cereals production (para. 29); b. adoption of a new draft tariff code satisfactory to the Association and consistent with the new Industrial Policy (para. 42); c. revision of the export subsidy scheme to an industrial value added basis (para. 42); d. satisfactory review by the Association of the first three-year (1987/88-89/90) public investment program (para. 51); and e. effective separation of the rice operation from CPSP and privatization of importing and internal marketing of rice consistent with the principles outlined in the LDP (paras. 71-72); 104. The structural adjustment program would be implemented by the various government departments and agencies involved in the reform process, under the --erall responsibility of the Minister of Planning and Cooperation. The latter would report to a specially-created Interministerial Committee which was established in early 1985 with the - 36 - mandate to coordinate and supervise the design and monitoring of the adjustment program and composed of the Ministers of Economy and Finance, Rural Development, Commerce, Industrial Development and Handicrafts, and the Minister of State, and chaired by the President of the Republic. Since the first meeting of the CG, the Interministerial Committee has met on three occasions and is expected to meet about every three months hereafter to review progress under the adjustment program. To monitor and control the day-to-day execution of the program, the Government has established a Technical Follow-up Committee which acts as a permanent secretariat for the Interministerial Committee. The Technical Committee is already operational with UNDP assistance. To strengthen the analytical capability of the Technical Committee, the Bank has agreed to second an economist under the Technical Assistance Program for IDA Only Countries. These institutional arrangements appear at present sufficient to ensure timely and adequate monitoring of the measures under the adjustment program. In addition, the Government would from time to time review with the Association in the light of experience the adequacy of these monitoring arrangements. 105. The Association's supervision and monitoring process would include at least two public investment reviews and six supervision missions. The first investment review took place in September-November 1985 and agreed on a satisfactory program for 1985/86-86/87. The proposed supervision missions would supplement the regular follow-up by the Resident mission in the field. Through these arrangements the Association would maintain a close dialogue with the Senegalese authorities in order to provide advice and support at crucial stages of the program implementation. E. Procurement and Disbursement 106. The proceeds of the proposed credits and Swiss grant ($70 million in total) would be used exclusively for the financing of the foreign exchange cost of eligible imports. Procurement procedures have been designed to permit rapid use of the funds while ensuring efficiency and economy in the process. Except for a few exclusions such as consumer goods, luxury and defense items, any imports would be eligib! for financing provided they were paid for after January 1, 1986 but not more than U$20 million would be used for petroleum imports and not more than US$20 million for food imports. Imports by public agencies exceeding US $1 million would be subject to international competitive bidding. Three price quotations would be required for purchases under US $1 million. Imposts of goods procured under contracts costing less than US $10,000 equivalent would not be financed under the SAC. Imports by private entities a-- well as imports of petroleum and food stuffs commonly traded in the international market would be in accordance with normal commercial practices, which are acceptable. 107. To facilitate disbursement and procurement, three special accounts would be established at the Central Bank on behalf of the Treasury, one each for the IDA Credit, the AF Credit and the SJF Contribution. The Senegalese Government would be the borrower. The - 37 - Central Bank would be responsible for maintaining the credit accounts. After credit effectiveness, an initial deposit of US$2.5 million would be made by IDA and US$11 million by the AF and US$3 million by Switzerland into the respective special accounts. These accounts would be replenished regularly and up to the limit of the First Tranche on the basis of fully documented reimbursement applications for amounts in excess of US$1 million and on the basis of statements of expenditures under that amount. The minimum amount of replenishment applications would be $1 million. The Central Bank would indicate on the statements of expenditures the nature and origin of the goods, as well as the payment date and would maintain all relevant supporting documentation (invoices, import certificates and evidence of payment) for review by supervision missions. Expenditures covered by the IDA credit would be in accordance with normal IDA rules, while expenditures covered by the AF Credit and the SJF Contribution would be in accordance with the resolution establishing the AF. 108. The proceeds of the proposed credits and grant would be disbursed in two tranches as follows: a. a first tranche of US$35 million composed of $7 million from the IDA credit, $22 million from the AF credit, and the entire $6 million equivalent of the SJF contribution would be available immediately upon effectiveness of the respective agreements (expected in March/April 1986); b. a second tranche of US$35 million composed of the balance of funds in the IDA credit and AF credit would be made available in late 1986 after a review of performance under the program to be carried out before then, and provided the conditions stimpulated in paragraph 103 above have been fulfilled. F. Counterpart Funds 109. The CFA franc counterpart funds generated by the proposed credits and grant would be deposited in the above mentioned Treasury special accounts in the Central Bank and would be used to finance operations designated by the Government in support of its structural adjustment process and its development policy. The Government has indicated that it would give priority in the use of the counterpart funds to: (i) financing the maintenance and rebabilitation of key infrastructure and public services; and (ii) settlement of Government's net arrears towards parapublic and private entities in accordance with criteria acceptable to the Association. in addition, the Government would provide the Association with information on the use of counterpart funds, on a quarterly basis. G. Benefits and Risks 110. The proposed structural adjustment program is expected to improve the growth prospects of the Senegalese economy through increased public savings, productivity and a higher return on investments, and to reduce the - 38 - country's budgetary and balance of payments deficits and external debt service burden. More specifically, on the production side, the proposed package of policy measures, together with the expected improvements in the efficiency of public enterprises and the rationalization of the public investment program, would help eliminate long-standing distortions in the economy and provide incentives for the development of local cereals production and the reorientation of manufacturing away from its current inward-looking approach of producing primarily for an over- protected domestic market, and towards exports. Without the proposed reforms, the public finance and balance of payments deficits are likely to deteriorate and reach unsustainable levels, bringing about a prospect of a rapidly expanding debt burden which is unlikely to be servtceable. Finally, there is the prospect of a significant decline in real per capita incomes resulting in further hardship for the Senegalese people with a real risk to the survival of the country's socio-political order. 1l1. The Senegalese authorities clearly recognize the need for change and have shown their commitment to the adjustment process by implementing a long list of actions in the past two years. Nevertheless, in the process of adjustment, short-term costs are usually felt before most of the expected long-term benefits become visible. Therefore, in a democratic society like Senegal, the acceptance of sacrifices by the population will be conditioned by the fairness and efficiency with which the reforms are perceived to be administered. In this context, the main risks of the proposed operation, relate to the following uncertainties: (i) the capacity of Senegal's institutional framework to further prepare the remaining practical details of the agreed reforms and monitor their implementation; (ii) the unpredictability of rainfall, external market conditions and internal market responses, which could delay the realization of growth targets; and (iii) the Government's ability to withstand the socio-political pressures that could be generated against some of the reforms. However, the following considerations make taking these risks acceptable. 112. First, with regard to the institutional weakness, the constraints would be partly mitigated in the following ways: (i) the FAO, in cooperation with the Bank and other donors, is assisting the Government in preparing an action program for domestic cereals production; (ii) the on-going IDA-financed Second Technical Assistance Project for Economic and Financial Planning and the Second Parapublic Technical Assistance Project would help strengthen the Government's ability to carry out and monitor the adjustments in the areas of public investment programming, parapublic sector reform, export incentives and effective protection measures, and debt management; a follow-up IDA technical assistance project for economic management is under preparation; (iii) in close collaboration with the Bank, the IMF, the US and France intend to continue to assist the Government in formulating and implementing appropriate financial policies and measures; (iv) the proposed IDA energy sector rehabilitation credit to be presented to the Board in this fiscal year would strengthen the Government's ability to implement the reforms in the energy sector; and (v) as described in para 104 above, the proposed monitoring arrangements are - 39 - satisfactory and would be reviewed by the Association during the implementation of the program. 113. Secondly, as to the climatic/external market risks, while they could delay the realization of some of the financial and growth targets, they are unlikely to put in question the policy reform measures unless they give rise to radical change in the underlying situation. With regard to internal market responses, the main uncertainties concern cereal production. As noted in para.32 above they relate in particular to the impact of higher rice prices on cereals consumption patterns, the substitution between coarse grains and other cash crops, and the technologies for the industrial transformation of coarse grains. While these risks are real, they are worth taking since there are no clear alternatives at this time. 114. Finally, with regard to the socio-political risks, the aggregate impact of the adjustment program on income and welfare levels is expected to be positive. Aggregate employment levels in the economy are expected to be higher with the adjustment program than in its absence, since: (i) the reforms will eliminate biases (in agricultural incentives, tariffs, and labor laws) which have encouraged imports of food and the use of capital and discouraged local food production and the use of labor; and (ii) a more efficient use of resources will result in greater productivity of investment and higher GDP levels than was the case in the past. In addition, the distributional impact of the adjustment program is unquestionably in the right direction, with most of the income transfer going from the urban to the hitherto relatively unprotected and over-taxed agricultural sector. Furthermore, there are countervailing factors which would tend to mitigate the negative impact of the program on some social groups in the short term: increased producer prices are expected to alleviate some of the impact of the elimination of input subsidies; and the establishment of preferential credit schemes with assistance from the donors would help the laid off staff of parastatals to engage in remunerative activities in the private sector. One such scheme has already been envisaged for the staff of the rural development agencies under the recent IDA-supported Irrigation Technical Assistance Project. Nevertheless, some social groups will be adversely affected, at least in the short term. The urban poor are likely to be most seriously affected by increased prices for food and energy and an increase in unemployment in the short run for some inefficient, over-protected industries. So far, the Government has been remarkably successful in explaining to the population the justification for reforms and the need for sacrifice by all groups in the short term. Finally, the Government appreciates fully that while the costs of planned adjustment may be high, the alternative of a forced adjustment brought about by a continuation of past policies would almost certainly be more costly with greater risks to sociopolitical stability. - 40 - PART V - BANK GROUP OPERATIONS IN SENEGAL 115. As of October 31, 1985, the Bank Group had approved 58 operations in Senegal for a total of US$573.3 million, including 34 IDA Credits, 11 Bank loans, five blends of Bank and IDA funds, five IFC operations, two blends of 2ank and IFC funds, and one blend of Bank, IDA and IFC funds. Physical execution of projects is progressing reasonably well, although some operations are affected by the shortage of counterpart funds due to the Government's continuing difficult public finance situation. Annex II contains the Status of World Bank Operations in Senegal. 116. Until a few years ago, our assistance was mostly project-oriented with a strong emphasis on diversification of the economy and improvewent and expansion of basic infrastructure. The acuity of the financial crisis of the past several years and the magnitude of the structural distortions in the economy has led to a major shift in our strategy, which now has the following main objectives. First, to assist the Government, supported where appropriate with technical assistance and structural adjustment lending operations, to improve the production incentive environment and the efficiency of economic management, and restore in the medium-term a sound financial basis for development efforts. Second, to promote the long-term growth and development of the economy by underpinning the structural adjustment operations through well-prepared investment, rehabilitation and sectoral adjustment operations within a framework of appropriate sectoral policies. Third, to improve our knowledge of social, institutional and the administrative frameworks to better taylor policy reforms to the country's absorptive capacity. Finally, to contribute to improved aid effectiveness in Senegal by acting as the focal point for aid coordination between donors and the Government, and at the same time assisting the latter to strengthen its own planning and aid coordination ability. 117. While the proposed structural adjustment operation is conceived as the first in a series of such operations to promote central incentive policy changes and improved economic management objectives, over the medium-term the IDA leading program will also include complementary project lending and sector operations which will be increasingly policy oriented and highlighting sectoral strategies, investment programs and institutional reforms. Finally, as described below, the on-going project portfolio also supports the development of sound economic growth in the productive sectors as well as the rehabilitation of infrastructure. 118. In agriculture, past operatons have aimed at improving the productivity of traditional food and cash crops, supporting diversification into new crops and regions, and enhancing forestry outputs and agricultural research. At the core of the Government's development strategy in agriculture is the promotion of rainfed cereals production and the exploitation of the irrigated rice farming potential in the Senegal River Valley. In addition to an Irrigation Technical Assistance Project approved in October 1985 to help restructure the River Valley Development Agency (SAED) including preparation of a specific schedule for the latter's disengagement from production activities, the Fourth Irrigation Project - 41 - under preparation would help rehabilitate and expand rice perimeters. Sector operations are also under preparation in support of inputs and marketing activities for the development of rainfed food crops. 119. Diversification of the productive base of the economy has also been supported by lending to the growing industrial sector through the Socifti Financiire S6n6galaise pour le D6veloppement de l'Industrie et du Tourisme (SOFISEDIT), a development finance company established with Bank assistance in 1974. The Bank has also financed the rail infrastructure component for the ICS phosphoric acid/fertilizer complex and an engineering credit to promote development of Senegal's phosphate industry. In response to the effects of the 1979 oil crisis, the Bank has also financed a petroleum exploration promotion project to assist the Government in its search for economical new energy resources. An industrial sector operation is under preparation to underpin the industrial reforms initiated under the proposed structural adjustment operation. The sector operation would focus on the elimination of price controls as well as finance the rehabilitation needs of existing efficient enterprises. 120. Past projects have strongly supported modernization and expansion of the country's infrastructure in all modes of transport: highways, rail, port and airport. Emphasis is now being placed on better utilization and maintenance of existing facilities. To this end, three projects were approved during FY84: a Fifth Highway Project addresses the Government's limited capacity to provide funds for road maintenance; the Dakar Container Port Project includes rehabilitation and maintenance of the Port of Dakar; and the Technical Assistance Project for Urban Management and Rehabilitation emphasizes maintenance and rehabilitation of urban infrastructure. 121. As in infrastructure, the Bank is supporting the rehabilitation, modernization and expansion of the major public utilities. In telecommunications, preparation is underway on a project which would restructure and reequip the sector entity. In electric power, an engineering credit approved in 1980 led to sector reorganization proposals, and a follow-up sector rehabilitation operation which is under preparation to support tariff policy reforms and expansion of generating capacity. Under the joint program with the UNDP, the Bank has also helped identify the investment priorities and technical assistance requirements of the energy sector which has led to the preparation of an industrial energy conservation program. Finally, in the urban water supply and sanitation sector, an engineering credit, approved in 1979, laid the groundwork for sector reorganization, supported by the Eleven Centers Water Supply and Sewerage Project which was approved in March 1985. 122. While Bank strategy has supported the emphasis on financing productive projects and rehabilitation needs, it also recognizes the need to support the social sectors, with due consideration to the capacity of both the Government and users to bear the recurrent costs involved. In education, past efforts have been directed at primary education and technical and vocational training to support activities in the productive - 42 - sectors. Another project is under preparation in support of primary education and policy measures to reduce costs per pupil. In health, efforts have been directed at primary -are in the rural regions by strengthening support structures and improvements in quality of health personnel. 123. As it became increasingly clear that the weak institutional framework was an important constraint to project implementation and macroeconomic policy management, the Rank's program began to shift in the late 1970s towards multi-sectoral technical assistance. Two operations in support of this latter effort are currently being implemented: in the parapublic sector, a second technical assistance project is helping to begin rehabilitation of some key public enterprises through detailed action plans; and a Technical Assistance project for economic and financial planning is helping reform the investment programming process and strengthen debt management capability. Follow-up projects are under preparation to consolidate progress made in strengthening the institutional framework. 124. Given the need to focus Senegal's public investment program on high-priority rehabilitation and maintenance needs and recurrent costs, improved donor coordination is now assuming increased importance. In this connection, the Bank convenrd a first meeting of the Consultative Group in December 1984 at which agreement was reached on the policy framework for structural adjuscment, the orientation of sector strategies and investment program, and aid coordination mechanisms needed to enable Senegal to overcome its economic and financial difficulties and mobilize donor assistance for the priority investments. The Bank followed up on this meeting by organizing sector meetings of interested donors on telecommunications and energy which agreed on policy reforms and medium-term sectoral investment programs. Further sector meetings are planned during 1986 for the agriculture, industry, and water supply sectors. A second CG meeting is also planned for 1986 to consider the Government's first three-ye.-r investment program, which will be a product of the new investment programming and budgeting system supported under the proposed structural adjustment operation. 125. The Bank Group's share in total external aid disbursements to Senegal over 1980-84 averaged approximately 20%, of which roughly two-thirds was IDA-financed. The Bank Group's share in outstanding disbursed debt was 18% at end-1984. The Bank Group's share in external debt service is estimated to have risen from 3.7% in 1980 to about 7.5% in 1985. PART VI - RECOMMENDATION 126. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association. - 43 - 127. I am also satisfied that the proposed African Facility Credit would comply with Resolution No. IDA 85-1 adopted on May 21, 1985 by the Executive Directors of the Association. 128. I am also satisfied that the proposed Special Joint Financing Administration Agreement for the non-reimbursable contribution from Switzerland would comply with the agreement between the Government of Switzerland and the Association for cooperation in the Cofinancing of Programs of the Special Facility for Sub-Sahara Africa dated September 11, 1985. 129. I recommend that the Executive Directors approve the proposed Development Credit and the proposed African Facility Credit and that the Association would act as Administrator of the proposed Special Joint Financing non-reimbursable contribution from Switzerland. A. W. Clausen President Attachments January 10, 1986 Washington, D.C. a» 4. Wýrs cm tis - 1- b gigNW-0 jj M iIJI ter -.-wJ'.I . 1. 1 ' e i0 e - y [ pa i 1 1r 1 bl b bi15 -4 ?h lin i~~i~- NuI 1å 1 oaoC 93 iiItä 1u JSo O'N tsb - 46- Annex I TABLE 3A Page 3 of 6 SENEGAL - SOCIAL INDICATORS DATA SHUT SENEGAL REFERENCE CROUPS (MEIGHTED AVERAGES) /a HOST (MOST RECENT ESTIMATE) lb RECENT NIDDLE INCOME MIDDLE INCONE 1960/b 1970t ESTINA.Ib AFRICA S. OF SAHARA N. AFRICA & MID EAST ARA (TOUSNDn S. Xo TOTAL 196.2 196.2 196.2 ACRICULTURAL 99.6 104.5 109.3 CHP Pal carn CaUS) .11 1 440.0 1063.6 1134.9 EmAG CONSUPTION PER CAPITA (KILOGRAMS OF OIL EQUIVALENT) 381.0 360.0 206.0 581.5 623.9 w0FULA1M AD VTAL STATISTICS POPULATION.lD-YEAR (THOUSANDS) 3498.0 4415.0 6211.0 URBAN POPULATION (2 OF TOTAL) 23.0 30.0 34.4 32.0 49.0 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (HILL) 10.1 STATIONARY POPULATION CHILL) 30.0 POPULATION MOMENTUM 1.9 POPULATION DENSITY PER SQ. KH. 17.8 22.5 31.7 65.1 37.8 PER SQ. KH. ACRt. LAND 35.1 42.2 55.2 124.8 470.1 POPULATION AGE STRUCTURE (2) 0-14 YRS 42.7 43.9 44.4 45.6 43.5 15-64 YRS 54.2 53.1 52.6 51.5 53.0 65 AND ABOVE 3.0 2.8 2.8 2.7 3.3 POPULATION GROTr. RATE () TOTAL 2.8 2.3 2.6 2.9 2.8 URBAN 3.4 5.0 3.7 5.1 4.4 CRUDE BIRTH RATE (PER THOUS) 47.5 46.7 46.1 47.0 40.0 CRUDE DEATH RATE (PER THOUS) 24.4 21.9 18.5 15.0 11.5 CROSS REPRODUCTION RATE 3.1 3.1 3.2 3.2 2.8 FAMILY PLANNING ACCEPTORS. ANNUAL (TROUS) USERS ( OF MARRIED l0NEN) .. .. 4.0 Iv 6.4 21.4 FOOD AM MUEriTIM INDEX OF FOOD PROD. PER CAPITA (1969-71-100) 125.0 83.0 64.0 82.9 95.1 PER CAPITA SUPPLY OF CALORIES (Z OF REQUIREMENTS) 99.0 93.0 99.0 98.5 118.2 PROTEINS (GRAMS PER DAT) 67.0 62.0 70.0 55.4 77.8 OF ilICH ANIMAL AND PULSE 20.0 19.0 19.0 /d 16.5 17.8 CHILD (AGES 1-4) DEATH RATE 45.9 38.1 28.0 16.6 12.8 sALTi LIFE EXPECT. AT BIRTH (TEARS) 39.4 42.4 45.5 52.0 57.8 INFANT HORT. RATE (PER THOtiS) 176.5 164.0 140.0 108.8 96.8 ACCESS TO SAFE MATER (XPOP) TOTAL .. .. 42.' le 42.4 67.2 URBAN .. .. 77.0 T 67.5 93.4 RURAL .. .. 25.07 35.8 45.8 ACCESS TO EXCRETA DISPOSAL (Z OF POPULATION) TOTAL .. .. 33.0 /c 28.9 45.9 URBAN .. .. 100.0 57.7 63.0 RURAL .. .. 2.0 20.7 28.6 POPULATION PER PHYSICIAN 24990.0 16790.0 13780.0 Ie 11791.7 4331.0 POP. PER NURSING PERSON 3150.0 If 1950.0 1390.0T 2459.8 1845.0 POP. PER HOSPITAL BED TOTAL 640.0 820.0 900.0 /d 981.1 621.8 URBAN 660.0 450.0 560.0 36B.8 545.0 RURAL 1990.0 1250.0 1280.0T- 4371.9 2511.3 ADMISSIONS PER HOSPITAL BED .. 22.2 29.2 Id 27.2 25.7 BOUSING AVERASE SIZE OF HOUSEROLD TOTAL .. URBAN .. 7.6 /h RURAL .. 6.o ... AVERAGE NO. OF PERSONSIROOM TOTAL 1.5 l1 URBAN .. RURAL .. PERCENTAGE OF EWELLINGS WITH ELECT. TOTAL URBAN RURAL - 47 - Annex I TABL 3 3A Page 4 of 6 SENEGAL - SOCIAL INDICATORS DATA SEET SuaL asRnmaC GRouPs (WEIGETED AVERAGES) /a NOST (HOST RECENT ISTIMATE) b iqwLb 1970/b RECENT MIDDLE INCOME MIDDLE INCOME ESTIMETL AFRICA S. OF SAHARA N. AFRICA 4 MID EAST smocaron ADJUSTED KROLIENT RATIOS PRIART: TOTAL 27.0 38.0 48.0 95.7 89.8 MALE 36.0 47.0 58.0 100.0 103.7 FEALE 17.0 30.0 38.0 83.2 75.2 SECONDARY: TOTAL 3.0 9.0 12.0 17.3 42.9 MALE 4.0 13.0 16.0 25.0 50.9 FENALE 2.0 5.0 8.0 14.8 34.6 VOCATIONAL C OF SECONDARY) 23.1 9.2 10.4 5.9 10.0 PUPIL-TEACHER RATIO PRIMARY 43.0 L& 45.0 43.0 41.1 29.7 SECONDARY 34.0 34.0 21.0 25.5 18.8 CONSUNPTIGK PASSENGER CARS/THOUSAND POP 5.7 8.7 .. 20.8 17.8 RADIO RECEIVERS/TiOUSAND POP 35.7 60.7 61.3 107.8 175.9 TV RECEIVBAS/THDUSAND POP .. 0.3 0.8 20.8 51.2 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 5.7 4.5 7.5 18.4 37.2 CINEMA ANNUAL ATTENDANC/CAPITA .. .. 0.7 fl 0.4 2.4 LAMO YOMC TOTAL LABOR FORCE (THOUS) 1619.0 1925.0 2509.0 FEMALE (PERCENT) 39.5 39.0 37.9 36.2 11.0 AGRICULTURE (PERCENT) 86.0 80.0 76.9 /a 54.5 42.4 INDUSTRY (PERCENT) 5.0 7.0 10.0 7e 18.3 27.9 PARTICIPATION RATE (PERCENT) TOTAL 46.3 43.6 40.4 36.8 26.2 MALE 56.3 53.7 50.7 47.1 46.2 FEMALE 36.4 33.7 30.6 27.2 5.8 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.2 1.3 1.8 IN=I DISUEilTES PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5E OF HOUSEDS 36.8 /k . RICHEST 202 OF HOUSEHOLDS 62.5 7 .. LOAEST 20 OF HOUSEHOLDS 3.2 .. LOuEST 402 OF HOUSHOLDS 9.4 .. PEMR TARGET CROUPS ESTIMATED ABSOLUTE POVERIE INCONE LEVEL (USS PER CAPITA) URBAN .. .. .. 590.7 226.3 RURAL .. .. 82.0 /c 275.3 134.0 ESTINA3ED RELATIVE POVERT INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 194.0 lc 545.6 431.5 RURAL .. .. .. 201.1 326.0 ESTIMATED POP. BELOt ABSOLUTE POVERTY INCOME LEVEL (2) URBAN .. RURAL .. .. .. .. 29.0 NOT AVAILABLE NOT APPLICABLE NOTES Ix The group averages for each indicator are population-maIghted aritbhetic mans. Coverage of countries among the indicators depends on availability of data and to not uitfor. /b Unless otherwise noted, "Data for 1960" refer to any year between 1959 and 1961; "Data for 1970" between 1969 and 1971; and data for "Most Recent Estimate" between 1981 and 1983. /c 1978; /d 1977; a 1980; f 1963; j& 1962; & 1973; a 1955; j 1976; 1 Population. /1 not available according to new Bank Atlas methodology JUm, 1985 48- Annex I Page 5 of 6 DEFINrFIONS OF SOCIAL INDICATORS Noter Although the data are drawn from soures Sencrally judged the most authoritative and reliable. it should also be noted that they may not be internationally comparable because of the lack of standardized definitions and concepts used by different countries in collecting the data. The data are. nonetheless useful to describe orders of magnitude. indicate trends. and characterize certain major differences between countries. The reference groups are 41) the same country group of the subject country and 12) a country group with somewhat higher average income than the country group of the subject country (ecept for-High incomcOilf Exporters" group where -Middle Income North Africa and Middle East"is chosen because of stronger socio-cultural affinities). In the reference group data the averages are population weighted arithmetic means for each indicator and shown only when majority of the countries in a group has data for that indicator. Since the coverage at countries among the indicators depends on the availability of data and is not uniform. caution must be exercised in relating averages of one indicator to another. These averages are only useful in comparing the value of one indicator at a time among the country and reference groups. AREA (thousand sq.km.) Cr kthRate (perzhorsand)-Numberoflive births in theyear Toel-Total surface area comprising land area and inland waters per thousand of mid-year population 1960. 1970. and 1983 data. 1960. 1970 and 1983 data. Crude Death Re (per thousand)-Number of deaths in the year Agrieculrural--Estimate of agricultural area used temporarily or per thousand of mid-year population; 1960. 1970. and 1983 data. permanently for crops. pastures. market and kitchen gardens or to Gross Repredwedon Rae-Average number oftdaughters a woman lie fallow. 1960. 1970 and 1982 data. will bear in her normal reproductive period if she experiences present age-specific fertility rates:. usually five-yea r averages ending GNP PER CAPITA (USS"NP per capita estimates at current in 1960. 1970. and 1983. market prices. calculated by same conversion method as World Faw4- PhausbW-Aceprors. Aimal (thonsands--Annual nur- Bank Atlas (198 1-83 basis): 1983 data. her ofacceptors of birth-control devicet underauspices ofnational ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program. consumption of commercial primary energy (coal and lignite. aml Pninw-User (percent of-arred mnen)-Thc pcen- petroleum. natural gas and hydro-. nuclear and geothermal elec- tage of married omen of child-bearing age who ar practicing or tricity) in kilograms of oil equivalent per capita: 1960. 1970. and whose husbands are practicing any form ofcontraception. Women 1982 data. of child-bearing age are generally women aged 1549. although for some countries contraceptive usage is measured for other age POPULATION AND VITAL STATISTICS groups- Total Poparion, Mid-Year (thousands)-As of July 1; 1960. 1970. FOOD AND NUTRITION and 1983 data. Urba Poulaton perent f aal)-Raio f uban o ttal liasdes of FoodAProduction Per Capita (1969-71 = 100)-Index ofper Urban Popul d (percent on of urban ae toa capita annual production of all food commodities. Production population: different deitionsexcludes animal feed and seed for agriculture. Food commodities ability of data among countries: 1960. 1970. and 1983 data. include primary commodities (e.g. sugarcane instead of sugar) Population Projections which are edible and contain nutrients (e.g. coffee and tea are Population in year 2000-The projection of population for 2000. excluded): they comprise cerls, root crops. pulses, oil seeds. made for each economy separately. Starting with information on vegetables, fruits, nuts, sugarcane and sugar beets, livestock, and total population by age and sex. fertility rates. mortality rates, and livestock products. Aggregate production of each country is based international migration in the base year 1980. these parameters on national average producer price weights. 1965. 1970. and were projected at five-year intervals on the basis of generalized 1982 data. assumptions until the population became stationary. Per Capita Saply ofCalories (perceit ofrequarement)-Comput- Stauionary population-Is one in which age- and sex-specific mor- ed from calorie equivalent ofnet food supplies available in country tality rates have not changed over a long period. while age-specific per capita per day. Available supplies comprise domestic produc- fertility rates have simultaneously remained at replacement level ton, imports less exports, and changes in stock. Net supplies (net reproduction rate = 1). In such a population. the birth rate is exclude animal feed, seeds for use in agriculture, quantities used in constant and equal to the death rate. the age structure is also food processing and losses in distribution. Requirements were constant, and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity size was estimated on the basis of the projected characteristics of and health considering environmental temperature, body weights. the population in the year 2000. and the rate of decline of fertility age and sex distribution of population. and allowing 10 percent for rate to replacement level. waste at household level; 1961. 1970 and 1982 data. Population Momentun-Is the tendency for population growth to Per Capita Supply of protein (gras per day)-Protein content of continue beyond the time that replacement-level fertility has been per capita net supply offood per day. Net supply offood is defined achieved: that is. even after the net reproduction rate has reached as above. Requirements for all countries established by USDA unity. The momentum of a population in the year r is measured as provide for minimum allowances of 60 grams of total protein per a ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein. of which 10 grams the year r. given the assumption that fertility remains at replace- should be animal protein. Thes standards.are lower than those of ment level from year t onward. 1985 data. 75 grans of total protein and 23 grams of animal protein as an Population Desity average for the world, proposed by FA in the Third World Food Per sq.ka.-Mid-year population per square kilometer (100 hec- Supply: 1961. 1970 and 1982 data. tares) of total area 1960. 1970. and 1983 data. Per Capita rein Supply rom Animal and Pulse-Protein supply Per sq.km. agricultural land-Computed as above for agricultural offood derived from animals and pulses in grams perday: 196165. land only. 1960. 1970. and 1982 data. 1970 and 1977 data. Papaarieon Age Stracture (perceat)-Children (0-14 years). work- Chd (ages 1-4j Deat Rate (per thousand)-- Number ofdeaths of ing age (15-64 years). and retired (65 years and over) as percentage children aged 1-4 years per thousand children in the same age of mid-year population: 1960. 1970. and 1983 data. group in a given year. For most developing countries data derived Population Growth Rate (percet)--roral-Annual growth rates of from life tables; 1960. 1970 and 1983 data. total mid-year population for 1950-60. 1960-70. and 1970-83. HEALTH Population Growth Rate (percent)-urha--Annual growth rates Lafe Expectancy at Bith (years)-Number of years a newborn of urban population for 1950-60. 1960-70. and 1970-83 data. infant would live if prevailing patterns of mortality for all people Annex I Page6of 6 at the time of of its birth were to stay the same throughout its life; Pkpleacker Rate - primary, and secandarp-Total students en- 1960. 1970 and 1983 data. rolled in primary and secondary levels divided by numbers of Infanr Mertaltp Rare (per themuad)-Num her of infants who dic teachers in the corresponding levels. before reaching one year of age per thousand live births in a given year 1960. 1970 and 1983 data. CONSUMPTION Access so Safe Water (percent of papstam)-tard, arim, and Psse4w Cars (per skonsaid povilstionj-Passenser cars com- rad-Number of people (total, urban, and rural) with reasonable prse motor cars sating less than eight persons; excludes ambul- access to safe water supply (includes treated surface waters or ances, hearses and military vehicles. untreated but uncontaminated water such as that from protected boreholes, springs a for radio broadcasts to general public per thousand of population; tive populations. In an urban area a public fountain or standpost excludes un-licensed receivers in countries and in years when located not more than 200 meters from a house may be considered as being within reasonable access of that house. In rural areas r tio ofradio se was ine ator recens may reasonable access would imply that the housewife or members of the houselbold do not have to spend a disproportionate part of the day TYRecriven (per dhdussdpopoksio)-TV receivers for broadcast in fetching the family's water needs. to general public per thousand population excludes unlicensed TV Acces t ExcereVhWsd (ercet o popllsion)-tost, *=. receivers in countres and in years when registration of TV sets was Access to Excreta Disposut (percent of popdlaries)-rotal, arban, i le and rarat-Number of people (total, urban, and rural) served by excreta disposal as percentages of their respective populations. Aiwsaper Cwcafin (per thousaidpopuan)-Shows the aver- Excreta disposal may include the collection and disposal, with or age circulation of -daily general interest newspaper.- defined as a without treatment, of human excreta and waste-water by water- peodial publication devoted primarily to recording general news. borne systems or the use of pit privies and similar installations. It is considered to be 'daily" if it appears at least four times a week. Popuation per Physicap-Population divided by number of prac- Cma Annl Attendance per Caia per Yea-Based on the tising physicians qualified from a medical school at university level. number of tickets sold during t year. including admissions to Joplation per Nrsing Perse-Pbpulation divided by number of drive-in cinemas and mobile units. practicing male and female graduate nurses, assistant nurses. practical nurses and nursing auxiliaries. LABOR FORCE Papulatio per Hospital ed--tral arban. and rad-Population Totalabor Force (thossands-Economically active persons. in- (total, urban. and rural) divided by their respective number of cluding armed forces and unemployed but excluding housewives. hospitalstudents. et. covering population of all ages. Definitions in hospitals bed ravilain ulcnds Hpria s ar csalshirt various countries are not comparable: 1960. 1970 and 1983 data. hospitals and rehabilitation centers. Hospitals are establishments permanently staffed by at least one physician. Establishments prov- Femae (percemt-FemaLe labor force as percentage of total labor iding principally custodial care are not included. Rural hospitals, force. however, include health and medical centers not permanently staffed Aricalr (percent)-Labor force in farming. forestry, hunting by a physician (but by a medical assistant, nurse, midwife etc.) and fishing as percentage of total labor force. 1960. 1970 and 1980 which offer in-patient accommodation and provide a limited range daa of medical facilities. Indstry (percen)-labor force in mining. construction, manu- Admissias per Hspiret Red-Total number of admissions to or facturing and electricity, water and gas as percntage of total labor discharges from hospitals divided by the number of beds. force; 190. 1970 and 1980 data. PArtiipon Rate (percewt)-W4ta ak.e andffeak-Partmpatior HOUSING or activity ra are computed as total male, and female labor forc Aerage ize of Hssehold (persos per kaseholdw)-trta, iam, as percentages of total, male and feale population of all ages audrawal-A household consists of a group of individuals who share respectively 1960. 1970. and 1983 data. The are based on ILOs living quarters and their main meals. A boarder or lodger may or partcip-tion rates reflecting age-sex structure of the population, and may not be included in the household for statistical purposes. long time trend. A few estimates are from national sourcs. Average Nunbr of Persmns per RAoom-toralf, arhan. and ru- Econmir Oependency RaIP-Ratio of population under 15. and Average number of persons per room in all urban. and rural 65 and over, to the working age population (those aged 15-64). occupied conventional dwellings, respectively. Dwellings exclude non-permanent structures and unoccupied parts. INCOME DISTRIBITION Percentage of Dweffings wirk Electricity--rera, arbam, and urael- Prcentaie of Total Diposbl Income (&"h i cash and kind)- Conventional dwellings with electricity in living quarters as percen- Acmruing to percentile groups of households ranked by total house- tage of total, urban, and rural dwellings respectively. hold income. EDUCATION POVERTY TARGET GROUPS Ad4usted Eamoment Ratios The following estimates are very approximate measures of poverty Primary school - lota male awf fmwk-Gross total. male levels and should be interpreted with considerable caution. female enrollment of all ages at the primary level as percentages of EsmatedAbsolste Poverty Jarome Level (USS per copir)-urban respective primary school-age populations. While many countries and raral-Absolute poverty income level is that income level consider primary school age to be 6- 1 years. others do not. The below which a minimal nutritionally adequate diet plus essential differences in country practices in the ages and duration of school non-food requirements is not affordable. are reflected in the ratios given. For some countries with universal Estimated Reative Pbverty Income Lewd (= per capa)-whim education. gross enrollment may exceed 100 percent since some and raral-Rural relative poverty income level is one-third of pupils are below or above the country's standard primary-school average per capita personal income of the country. Urban level is age. derived from the rural level with adjustment for higher cost of Secondary school - total. male andfamae-Computed as above living in urban areas. secondary education requires at least four years of approved pri- Esated Population Below Absolite Povery Income Level (per- mary instruction; provides general, vocational. or teacher training cent)-rban and rurl- Percent of population (urban and rural instructions for pupils usually of 12 to 17 years of age; correspond- who ar absolute poor.- ence courses are generally excluded. Vocational Eurolbneni (percent of secondary)-Vocational institu- Comparative Analysis and Data Division tions include technical. industrial, or other programs which operate Economic Analysis and Projections Department independently or as departments of secondary institutions. June 19s5 - 50 - ANE II Page 1 of 2 SrATUS OF MRID BANC OPERATIS IN SENEGA4 A. Statenant of Bank leans and IDA Credits (as of Septamber 30, 1985) * Andunt less cancellations) lean/Crelit kLb. ruanyo lumber Year Borrower Purpose Bank IDA 2/ Uxlisbursed. 2/ Thirteen loans I/ and twenty Credits fully disbursed 71.97 133.24 1412-T-SE 1977 Senegal Petite CSte Tourin 8.0 1.11 141-E 1977 Senegal Petite Cte Tourisn 5.6 0.91 1518-SE 1978 RCRS Bailways III 11.0 0.43 775-SE 1978 Senegal Debi-ampsar Irrigation 20.0 1.18 908-SE 1979 Senegal Educat1Im tII 22.0 8.52 991-E 1980 Senegal Sonl1 Rural Operations 11.0 5.03 993-SE 1980 Senegal Fourth i 28.0 0.01 1810-SE 1980 Senegal Fourth r 10.0 10.00 S-26-SE 1980 Senegal Power fbg.&T.A. 3.3 0.66 1061-SE 1980 Senew-l T.A. fo PUnning 5.3 1.59 1973-SE 1981 SOFI T Investment Prma 6.5 4.04 1136-SE 1981 Senegal Investment Prootion 2.5 1.26 2025-SE 1981 SEFICS Rail Transport 19.3 6.37 1103-SE 1981 Senegal Forestry 9.3 6.31 1176-SE 1982 Senegal Research 19.5 12.77 1310-SE 1983 Senegal Health 15.0 10.01 1323-SE 1983 Senegal Petrolem Tcploration 9.5 5.17 1360-SE 1983 Senegal Phos. Ind Dev. . 7.7 7.14 1398-SE 1983 Senal 11.0 8.83 1406SE 1983 Senegal E.S. Rural Dev. 16.1 14.94 1448-SE 1984 Senegal Fifth 10.75 7.31 SF-l5-SE 1984 Senegal Fifth 10.75 8.85 1458-SE 1984 Senegal T.A. for Urba . & Rebab. 3.05 2.29 SF-13-SE 1984 Senegal T.A. for Urban & Rebab. 2.95 2.83 1459SE 1984 Senegal Dakar Container 2.65 2.23 SF-14-SE 1984 Senegal Dakar Container Port 4.85 4.98 1554-SE 1985 Senegal Eleven Centers Water Supply 24.00 24.02 Total 132.37 372.44 158.79 of which repaid 24.61 6.20 Total nov outstanding 107.76 366.24 IND IDA mount sold 3T 12T of vhich has been repaid 3.24 1.17 0.19 0.05 Total nov beld by Bank and IDA 3/ 107.57 366.19 Total undisbursed 22.86 135.93 158.79 1/ A lan of US$3.5 million for agricultural credit (584-SE) made in 1969 was cancelled on March 25, 1971. 2/ n with Credit 1061-SE, credits have been doinated in Special Drawing Rights (SDR). The do abmunts in these colums represent the dollar equivalents at the time of credit negtiations for the IDA anmunts and the IES equivalents as of Septeuber 30, 1985, for the disbursed amunts (1 SDR = IS$1.05940). 3/ Prior to aCbange adjustents. * The status of the projects listed in Part A is described in a separate report on all Bank/DA financial projects in execution, which is updated twice yearly and circulated to the tecutive Directors on Api 30 and October 31. - 51- AlEET I 2w 2 B. SUumit of 110 Invesmn (as of Septaber 30, 1985.r Fcal Year Chig Type of usness Lga Inveset Total 1967 Spe Tafitrienle FertliuE Plant 2.45 1.01 3.46 d egdsdu S5nga 1972 1973) B S~nigal, S.A. Vqetable 5cport - 0.84 0.84 1976 1974 SKWISEDIl Deelopmnt - 0.24 0.24 1980 ler h^U~ y and Capital - 0.47 0.47 1980 Socit 1rike TurisM 3.00 - 3.00 du Bras, S.A. 1982 Indm~ries Chimiques Fertiu=r 25.00 25.00 du Så~gl Total Gro~s c~nniman 30.45 2.56 33.01 Lem COelatimo, Te inn , Repsyjm , Sales amd Taes 2.62 1.0567 Total 'ud..t.n ur held by IMC 27.83 1.51 29.34 Udlaired Elimnes 24.00 0.00 24.00 - 52 - ANNEX III Page 1 SENEGAL SECOND STRUCTURAL ADJUSTMENT OPERATION SUPPLEMENTARY PROJECT DATA SHEET SECTION I: TIMETABLE OF KEY EVENTS (i) Time taken to prepare the program: si:. months (ii) Initial discussions with IDA: February 1985 (iii) Preparation mission: April-May 1985 (iv) Appraisal missions: September and November 1985 (v) Negotiations: December 1985 (vi) Planned date of effectiveness March/April 1986 SECTION II: SPECIAL IDA IMPLEMENTATION ACTION None SECTION III: SPECIAL CONDITIONS OF THE CREDITS Disbursement of the second tranche (US$35 million) of the proposed credits would be contingent on the Government making significant and satisfactory progress in implementing the structural adjustment program, notably in completing the following specific actions in a manner satisfactory to IDA: a. agreement with the Association on a satisfactory action program for the development of domestic cereals production (para.29)? b. adoption of a new draft tariff code satisfactory t . the Association and consistent with the new Industrial Policy (para.42); c. revision of the export subsidy scheme to an industrial v2lue added basis (para.42); d. satisfactory review by the Association of the first three-year (1987/88-89/90) public investment program (para.51); and e. effective separation of the rice operation from the CPSP and priviatization of importing and internal marketing of rice consistent with the principles outlined in the Letter of Development Policy (paras.71-72). - 53 - Annex IV Page 1 (Translation from Original French) Dakar, December 19, 1985 Mr. A. W. Clausen, President International Development Association Washington, D. C. 20433 Dear Mr. President, I have the honour to submit to you herewith the Letter of Development Policy which has been approved by the Government of Senegal. This Letter describes the main features of the Structural Adjustment Program implemented by the Government since the first meeting of the Consultative Group for Senegal which was held in Paris in December 1984 under the World Bank's Chairmanship. This program formalizes and strengthens the various adjustment policies which, as you know, the Government has pursued in recent years in order to address the immediate crisis and the structural and institutional constraints which beset Senegal's economy. These policies have received active support by aid donors, both bilateral and multilateral, including in particular a series of standby arrangements concluded with the IMF, of which the most recent covers the period January 1985 - June 1986. It is in support of this program, representing an important phase of the Medium-and Long-term Adjustment Program (PAML) endorsed by the Consultative Group, that the Government of Senegal submits its formal request to IDA for a second structural adjustment credit in an amount of US$70 million, including a grant of US$6 million by Switzerland and a US$44 million credit from the Special African Facility. The Senegal Government not only is convinced that it must undertake the reforms needed to rebuild the bases for growth and for sustained and balanced economic development, but is also firmly committed to implementing its medium- and long-term adjustment program until these objectives are attained. The Government is encouraged by the willingness which has been expressed by the international community to provide substantial support for the efforts being made by Senegal. We reiterate that, in the framework of the permanent consultation with its partners and in particular with IDA, the Government is willing to consult with the Association in order to identify, if the need arises, any supplementary measures needed to ensure the realization of its policy objectives. More generally, the Government desires to maintain a very close contact with the authorities of the Association in order to ensure an effective monitoring of its adjustment program. Yours sincerely, (signed) Cheikh Hamidou Kane Minister for PL ming & Cooperation - 54 - ANNEX IV Page 2 LETTER OF DEVELOPMENT POLICY December 19, 1985 INTRODUCTION At the first meeting of the Consultative Group for Senegal, held in Paris in December 1984, the Government of the Republic of Senegal made a General Policy Declaration (Dfclaration de Politique Gfnfrale; DPG) that set forth the Medium- and Long-Term Adjustment Program (Programme d'Ajustement Economique et Financier A Moyen et Long Termes: PAHL) it intends to implement in the period 1985-1992. This program expresses the determination of the Government to both continue and strengthen the adjustment policies adopted as part of the 1979 Stabilization Program and the Economic and Financial Recovery Plan for 1980-1985 (Plan de Redressement Economique et Financer: PREF). The measures adopted in this context and aimed at stabilizing the financial situation of the country have undoubtedly had a considerable impact; nevertheless, the need to strengthen the adjustment so that the persistent structural causes of the crisis can be tackled has rapidly become apparent. Those causes are: - the fluctuations in economic growth; - the relative inefficiency of investments; - the important and predominant place of the public and the parapublic sector in the economy; - the excessive expansion of domestic demand resulting in substantial financial deficits, both domestic (public finances) and external (balance of payments). This situation, while highlighting the inadequacies of the policies adopted earlier, given the size of the imbalances, has revealed the structural and institutional rigidities that affect the Senegalese economy and made it essential to pursue a firm adjustment policy, which is all the more necessary in view of the unfavorable international economic situation. The Government expressed to the Consultative Group its determination to carry out in full all the policies envisaged in the program and to imple- ment the necessary institutional and structural reforms. It has noted the willingness of donors to support the program, specifically through appropriate financial contributions estimated at about US$500 million annually. 55 -ANNEX IV Page 3 I. THE MEDIUM- AND LONG-TERM ADJUSTMENT PROGRAM (1) The Stabilization Phase (1979-1984) As noted earlier, the adjustment policy of Senegal has been well under way since the end of the 1970s and the beginning of the 1980s as a result of the implementation of the 1979 Stabilization Plan and the PREF (1980-1985). These two programs, which were basically aimed at rehabilitating the financial situation, assigned considerable weight to stabilization policies, even if they included certain structural change objectives. For the execution of its program, Senegal has received very effec- tive support from the international community. In this context, it concluded its first agreement with the IMF under the Extended Fund Facility and received a Structural Adjustment Loan/Credit from the World Bank/IDA. In the same period, the Government also concluded a stand-by arrangement with the IMF, and has received substantial financial aid from Arab donors in particular. It has also benefited from the rescheduling of its external debt through the Paris Club and the London Club. It should also be noted that the Government pursued a firm price adjustment policy during this period, which from 1980 to 1983 resulted in increases of 22.7% in the price of groundnut oil, 15.6% in the price of sugar, and 56.7% in that of bread. The price of rice was raised on two occasions by 31.3% and by 23.8% in 1982 and 1983, respectively. However, this firm policy of demand management failed to prevent the deterioration of the Government's financial situation. whose deficit as a proportion of GDP rose from 3.0% in 1978/79 to 7% in 1982/83 before being reduced to 4.3% in 1983/84. Concurrently, the external deficit as a proportion of GDP after having declined from 15.1% and 17.7Z in 1980 and 1981, respectively to 9.1% in 1979 rose to 11.9% in 1983. Consequently, it has become urgent to continue the adjustment effort as part of a medium-term program that will make it possible to achieve the structural reforms now required. (2) The Medium- and Long-Term Adjustment Program (1985-1992) The distinguishing feature of economic policy during the program period will be the assignment of top priority to the implementation of struc- tural reforms while preserving and stiengthening the gains made in the area of financial stabilization. To do so, the authorities have established five objectives for the Adjustment Program. They are: (a) Consolidation of the bases of economic growth through the redefini- tion of appropriate sectoral strategies and the provision of - 56 - ANNEX IV Page 4 appropriate incentives for promoting the revival of private investment. In this context, the authorities have specifically designed a new agricultural policy (Nouvelle Politique Agricole: NPA) and prepared a balanced package of incentives for industrial production. (b) Improvement of the efficiency of investments bLcause of the need to increase the marginal productivity of capital and thus to achieve a growth rate of 3.2% despite the fact that the investment rate will be kept at the level of only 14% of GDP. For that purpose, private investment will be encouraged and public investment will be further channeled to the productive sectors. (c) Easing of the structural constraints that impose a heavy burden on the economy of Senegal by rescaling the public and parapublic sector and improving its management. (d) Safeguarding of the long-term Lases of growth through a redefinition of the strategy for social services (education, health, etc.). (e) Simultaneous efforts :r -eptore the soundness of Senegal's public finances and external position. To achieve these objectives, the Government prepared and submitted to the Consultative Group an Action Plan enumerating the types of measures to be implemented including an indicative execution schedule. This Action Plan is completed and updated each quarter at the meeting of the committee established in early :985 for monitoring the execu- tion of the PAML, which is chaired by the President of the Republic himself. By the end of the execution period of the PAML, Senegal will have restored the conditions for sound and balanced growth, which will make it possible to generate sufficient national savings for financing investments without excessive recourse to external sources. More specifically, the overall balance of government operations will be in surplus beginning in 1991/92, when the current external deficit will not exceed 2.8% of GDP as against 10.2% in 1984. The Structural Adjustment Credit the Government is requesting fro the World Bank Group in support of the first phase of its program of reforms should be viewed in the overall context of the execution of this program. - 57 - ANNEX IV Page 5 II. FIRST PHASE OF THE PA1L(1985-1987) The first phase of the PAML in the period 1985-87 has two major focuses: o Production incentives; and o Reorganization of the public sector and improvement of its manage- ment. It is important to note that production incentives have become essential given, on the one hand, the constraints on the country's economy and, on the other, the limits of a policy based solely on demand management. The anticipated 3.2% average annual growth under the PAML can be achieved only if a revitalized private sector fully plays its part in a renewed economic environment. To that end, the authorities have designed a system of effective incentives for both the rural sector and the industrial sector. In this regard, it is important to restore an institutional frame- work that provides incentives for the expansion of investments and production. It is in that perspective that the Government has designed a new agricultural policy intended to promote food self-sufficiency while consolidating the gains made in industrial crops. The assignment of greater responsibility to produc- ers and the withdrawal of the State from production and marketing operations are, together with an appropriate pricing policy, the essential instruments of this new policy. Concurrently wiz k this new agricultural policy, the Government has begun to implement a new industrial strategy. Senegalese industry, one of the sectors most affected by the reduc- tion in private investment since the end of 1970s, has high production costs (linked to inappropriate tariff protection) that limit its competitiveness both in the local market and in the export market. This situation is exacer- bated by administrative red tape and by the obsolescence and inadequacy of much of its productive apparatus. The Government has therefore launched a program of vigorous reforms of the protection system as well as the reorganization and modernization of the productive apparatus; this is because the new system of industrial incen- tives will not be fully effective unless both the equipment and the management of industry are modernized. The counterpart of the policy of encouraging individual initiative that characterizes the Government's new economic policy is the disengagement of the State, which in the future will confine its interventions to essential areas of public activity. To that end, on July 29, 1985 the Government adopted a general policy statement on the parapublic sector that specifies the arrangements for the disengagement of the State. But concurrently with this disengagement, the Government wishes to improve the management of this sector, on the one hand, by reforming the procedures for programming, budgeting, and monitoring public investments, and, on the other hand, by improving its overall financial management. - 58 - ANNEX IV Page 6 It is, therefore, in support of all these reforms, which have become unavoidable, that the Government of the Republic of Senegal is requesting the support of the World Bank, under whose chairmanship the first meeting of the Consultative Group was held. The Government would like this Structural Adjustment Credit to be considered the first in a series supporting the various phases of the PAML. A. Agricultural Incentives The rural economy employs at least two thirds of the population of Senegal. At the heart of the economic and social activity of the country, it is assigned absolute priority by the Government. Senegalese agriculture is going through a deep crisis that has many causes: - prolonged droughts have upset the balance of the agrarian ecosystems; - the rural exodus has led to a substantial reduction of the available labor force; - the low degree of mechanization and the shortage of of inputs, especially fertilizers, have prevented an increase in agricultural productivity; - the relative price structure, which is unfavorable to the rural sector, has not provided a satisfactory livelihood for small farm- ers, whose social conditions have deteriorated; and - finally, rural extension services have given rise to increasing expenses for the State which have not been offset by productivity gains in all agricultural activities. To reverse these trends that are harmful to the rural economy and to the national economy as a whole, the Government of Senegal has undertaken to implement a New Agricultural Policy (NPA), which took effect in 1984. Its purpose is to increaae domestic production and facilitate the marketing of surpluses by assigning more responsibility to the actors involved (farmers, cooperatives, traders and industrialists). At the same time, the State is redefining its own role by creating a general framework that rewards initia- tive on the part of those actors, and by gradually withdrawing from its traditional functions of support and extension in favor of a broader role of flexible planning. As part of the PAML and NPA, the Government has decided to undertake a coherent package of programs which aims at accelerating agricultural devel- opment. - 59 - ANNEX IV Page 7 1. Cereals Policy (a) Food self-sufficiency of producers The first objective is to ensure the food self-sufficiency of the producers themselves. In recent years, the precarious nature of the living conditions of rural dwellers has upset the nutritional balance of small holder farmers, who are forced to sell part of their reserves after the grain harvest in order to satisfy their ca&h requirements. In the short term, grain produc- ers in certain regions are threatened by malnutrition. In the preharvest period, food needs are satisfied at a high price. As a result, the debt levels of the farmers have increased and the flight to the towns has acceler- ated. The rebuilding of village production storage capacities is therefore an essential requirement for retaining in the countryside the necessary volumes of food for covering food needs. Concurrently, the increases in the producer prices of millet-sorghum, maize and groundnuts, which were announced by the Head of State on April 3, 1985, are now enabling producers to maintain their cash incomes without being forced to sell their personal reserves. Improved agricultural supply requires the design and application of a cereals program, which is now being prepared. The components of this program deal with the provision of production factors, the dissemination of appropriate technologies, market organization, and pricing policy. This program will be submitted to the international communit- with a view to obtaining financing during the sectoral meeting devoted to agriculture that is scheduled for April 1986. The purpose of setting producer prices is to increase incentives for production. In the event of abundant grain harvests (as in the crop year 1985/86) and in order to prevent speculative downward pressures on purchase prices, the Government has decided that price regulation measures shall be taken through the Office of the Commissioner for Food Security (Commissariat A la S6curit6 Alimentaire: CSA), which has various procurement and storage installations throughout the country. The areas with marketable surpluses have been identified. CSA operations will be financed by foreign grants, by the counterpart funds of food aid, and by an advance from the Price Equaliza- tion and Stabilization Fund (Caisse de Pfrfquation et de Stabilization des Prix: CPSP), together amounting to the equivalent of about 25,000 metric tons of millet-sorghum and maize. The timing and location of activities under the purchase program are defined each week in the light of conditions observed on regional markets. When the floor price, which for example is currently set at CFAF 70/kg for millet, is assured by private traders, CSA will not intervene. Its role is therefore exclusively one of price regulation. The stock controlled by CSA in 1985/86 will be sold to millers as part of the test operation aimed at improving the processing of local grains. -.60 - -.60 -ANNEX IV Page 8 (b) Marketing Subject to respecting the floor price for grain producers, which will assure a continuation of their efforts to increase production, marketing is completely decontrolled. A circular to this end, to be published in January 1986, will eliminate all restrictive measures other than common law measures relating to the circulation of grain, other than paddy rice, within the national territory. The privatization of the paddy rice market will depend on the phased disengagement of the Senegal River Valley Authority SAED, after consultation with the World Bank and other lenders. (c) Promotion of Urban Markets for Local Grains Alongside satisfaction of the food needs of rural dwellers and the organization of marketing, the third objective of the NPA is the reestablish- ment of urban and semi-urban grain markets. The Government has committed itself to a deliberate policy of increasing the consumption of local grains. The components of this policy are as follows: The processing of local grains. Rigidities still affect production and marketing; they also affect final demand. Consequently, it is advisable to facilitate a shift in the behavior of consumers by offering them processed local grains that can replace imported grains. To this end, the Government has decided to conduct several major operations designed to deliver to the market such processed products as semolina and millet couscous, maize flour, a mixed wheat and millet bread, maize bread, corn meal, etc. Technical proce- dures to do so already exist. Operations involving the CSA, the CPSP, the millers (Grands Moulins, Sentenac), the Food Technology Institute (ITA) and the bakers are now being launched with donor support. Consumer prices. The level of protection for domestic cereals obtained since the increase in the price of imported rice to CFAF 160/kg is at present satisfactory. Should the escential components of the import price of grain (the world price of rice and the exchange rate of the CFA franc vis-5-vis the dollar) change in a significant and lasting manner and lower the level of nominal protection of local grain below 25%, the consumer price of rice would have to be increased by the Government. 1/ If this occurred, at the semiannual reviews, the Government and the Bank together would: 1/ it present, the nominal protection coefficient (NPC) is 43%, calculated as follows: PV - PC = x% or 160 - 92 - 43%; where PV 160 PV - sales price of imported rice to consumers PC - C.i.f. price + charges other than customs duties and taxes (or 68 + 24 - 92). -61- ANNEX IV Page 9 (i) examine the advisability of an adjustment in the consumer price of imported rice; (ii) set the amount of the adjustment; (iii) decide on the arrangements for the adjustment; and (iv) set the uate for the adjustment. Furthermore, on the occasion of these reviews, the Government and the Bank may also together assess the need to grant temporary subsidies to finished prod- ucts based on local cereals until such time as economies of scale are achieved. The grain imports program. The Government has decided to stabilize the volume of rice imports for the 1985-89 period at the 1984 level (about 340,000 metric tons). This decision was adopted by the National Assembly when it passed Law No. 8534 of July 23, 1985 approving the Seventh Plan. This stabilization represents a substantial effort given the earlier import trends noted (200,000 metric tons in 1974, 340,000 metric tons in 1984) and population growth (+2.9% annually). It will be the result of an active policy to reduce food dependence. The volume of wheat imports will also be limited to the 1984 level. As and when it is found that marketing releases genuine surpluses of local grains and that their processing into finished products effectively allows for a substitution of demand, the Government may decide to revise this import program downwards. Reform of the rice marketing system. The Government confirms its deci- sion to separate the price equalization function from the rice marketing function at the level of the CPSP, which will no longer concern itself with rice import marketing operations. The Government also confirms its decision to privatize the importation and distribution of rice. However, in view of the need to ensure the security of supply to all areas of the country at all times, the Government has decided to introduce a new system for the supply and marketing of rice in Senegal, as follows: o A security stock of 60,000 metric tons will be established. It will be imported and managed by SONADIS, a mixed capital company under private law. o The Government will take responsibility for negotiating the purchase of this security stock with rice producing countries, and its financing will be negotiated with donors. o To guarantee the security of the supply of rural areas, where the SONADIS network is in place, SONADIS will also take charge of importing the amount required for this purpose, currently estimated at 80,000 metric tons of rice annually. o This tonnage could be revised downward at the end of the two year period ending on December 31, 1987. The private sector will use - 62 - ANNEX IV Page 10 this period to strengthen its distribution network in the interior of the country. o The remaining requirements of Senegal will be covered by the private sector, both national and foreign, which will be responsible for import operations. o The companies that will be allowed to carry out the import opera- tions will have to meet a number of requirements set forth in the competitive bidding process carried jut under the auspices of a committee assisted by a private consulting firm selected after competitive bidding. o To eliminate any risk of monopoly and to promote competition by diversifying the sources of supply, in no case will there be fewer than three importing companies (including SONADIS). o With the assistance of the consulting fl-. retained, the committee will be responsible for monitoring the execution of import and marketing operations and will report on them to the competent authorities so as to permit the latter to take such protective measures as may be required. o The level and structure of the price of rice will continue to be set by the Government. Insofar as possible, the rice price structure will include margins determined on the basis of economic costs so as to permit the distribution of rice in the interior of the country. o Apart from the customs duty on rice, the government levy will consist of a specific tax that will replace the existing price equalization levy. o Large- and small-scale wholesale distribution throughout the nation- al territory will carried out by SONADIS and by Senegalese importers and wholesale merchants working on the basis of agreements negotiat- ed directly and freely with importers. o In the event of the failure of private operators, SONADIS will be responsible for taking the steps necessary to fully supply the country. o This new system will come into effect at the end of the present supply contract now being executed by the Price Equalization and Stabilization Fund. o In cooperation with donors, this transitional period will be used to take all the steps necessary for the effective launching of the new system when the supply contract ends. Even so, given the unavoid- able time lags in this area, the call for bids will have to be put out on or about February 15, 1986. A working party has been estab- lished for the purpose of proposing to the Government the practical arrangements for applying the new system. -63- ANNEX IV Page 11 o The new system is a stage in the process already underway of privatizing the rice system. To this end, the arrangements and conditions for the privatization of SONADIS will be studied and applied in cooperation with donors. 2. Fertilizer Policy The following principles will guide the Government's policy in the area of fertilizer distribution: (a) the subsidies required to ensure an increase in consumption (through prices acceptable to small farmers) will in no case be financed out of the resources of the Public Treasury; (b) these subsidies, which must be eliminated between now and the 1989/90 crop year, must be made in such a way as to directly benefit agricultural producers; (c) the schedule for scaling back the subsidization is as follows: 1986/87 1987/88 1988/89 1989/90 Subsidy (in CFA francs per 24 16 8 0 kilogram) These subsidies constitute maxima which will make it possible beginning with crop year 1986/87 to sell fertilizer to producers at prices ranging from CFAF 60 to CFAF 72 per kilogram, (d) these subsidies pertain only to cash purchases by individual produc- ers, village-level units ("sections villageoises") of cooperatives and producer groups, and not to regional development companies. The objective is thus to stimulate the marketing of fertilizers by the private sector; (e) fertilizer imports will be progressively decontrolled between now and the 1989/90 crop year. Beginning with crop year 1985/86, as regards area they will be made subject to international competitive bidding; (f) marketing will be gradually transferred to the private sector as and when the regional development companies are phased out; (g) different prices will be charged in different regions, this in light of various socioeconomic factors, in particular the transport cost differential; (h) these difterential prices will be announced by end-1985. 3. Institutional Reforms As provided for in the NPA, the Government is determined to continue winding down public companies in the agricultural sector and to promote private initiative in all operations that do not relate to public service. - 64 - ANNEX IV Page 12 Following the dissolution of SONAR and of STN, and the reduction in the staff of SODEVA, the program includes the reorganization of SAED (in accordance with its "lettre de mission" and the IDA credit for the irrigation technical assistance project), of SODAGRI, and of SOKIVAC (see Section D on parapublic sector reform). The purposes of this reorganization are: (a) to enable the regional development companies to specialize in the planning, project control and extension activities that are not within the ambit of the private sector; (b) to eliminate the need for subsidies in accordance with a phased timetable; (c) to reduce staff costs, adjust staff qualification and increase the quality of the staff. To that end, a fund for the reincorporation into the productive sector of the dismissed personnel will come into effect at the end of 1985 with the support of the donors. The second institutional reform already under way relates to the groundnut marketing system. With effect from the 1986/87 crop year, the State will completely withdraw from the seed marketing system and the producers will have to constitute their own reserves, except for foundation seeds. However, through SONACOS, the Government will ensure the maintenance of a stock of 50,000 metric tons of Level 2 (certified) seeds intended to cope with any eventuality that could affect the amount of seeds available for the next crop year. In the light of the reaults of the experience of assigning responsibil- ity to producers, the Government will review the level of the public stock of Level 2 seeds. Concurrently with the phasing out of the public or parapublic companies, the Government intends to increase the productivity of the public ageucies. With the assistance of the lenders, it wishes specifically to strengthen the planning and managerial capability of the Ministry of Rural Development (MDR) as a particularly valuable instrument of Senegal's agricul- tural policy. The principal components of this project, for which the Govern- ment of Senegal requested World Bank financing on December 12, 1985, are as follows: - strengthening of the units in charge of planning, of preparing policy decisions and agricultural strategy, and of coordinating with other government agencies; - strengthening of the units in charge of the preparation and execu- tion of the MDR budget; - creation/reorganization/strengthening of the units in charge of monitoring large-scale projects, the public companies and the regional and local offices of MDR; and - establishment and equipping of a statistical unit for developing an agricultural data bank, and ultimately introducing a management chart ("tableau de bord") in the Ministry. - 65 - ANNEX IV Page 13 4. Groundnut policy The Government's objective is to increase farm income and improve overall performance in a subsector that is essential to the Senegalese econo- my, in particular in terms of foreign exchange earnings. However, these objectives must be achieved at the same time as the cost of government inter- vention is reduced. The reform of the groundnut marketing system has three essential components: (i) an increase in the producer price, in order to maintain a satisfactory relationship with the prices of other substitute products; (ii) the decontrol of the distribution and marketing of inputs; (iii) the reorganization of the industrial apparatus (oil mills); and (iv) the gradual elimination of subsidies on seeds and fertilizer. A package of measures already adopted in the 1984/85 crop year constitutes the first phase of the implementation of the above-mentioned policy. First, SONAR, the public agency heretofore responsible for the marketing of seeds and the groundnut crop, was eliminated in March 1985 and its functions transferred to the oil millers as part of the transition to the complete decontrol of these activities. In 1985/86, the stock of seeds maintained by the Government has been reduced by 20% to 100,000 metric tons; free distribution of seeds has also been limited to 60,000 metric tons, the balance being earmarked for cash sales. In addition, it has been decided to eliminate the witbholdings on seeds and fertilizer that the Government used to collect at harvest time. Finally, on April 3, 1985 the producer price was increased to CFAF 90/kg. At the same time, the Government has taken a certain number of measures to streamline the management of the oil mills. The two companies (SONACOS and SEIB) will be definitively merged in mid-1986 and their procedures unified. A contractual agreement ("contrat-plan") to this end will be drawn up between the Government and the new company during the first quarter of 1987. The halving of the number of colLction centers, the active participation of cooperatives, and the increase in the number of approved traders will make it possible already this year to achieve substantial savings in marketing costs. In like manner, the correction factor for absorbing fixed costs was reduced by 50% in 1985 pending its complete elimination in 1986. A package of supplementary measures has been decided upon for the 1986/87 crop year. The Government will completely withdraw from the seed marketing system except for the prefoundation seeds produced by research. It will continue, however, to exercise quality controls over and to certify selected Level 1 seed (foundation seed) and Level 2 seed (certified), which come under the responsibility of the public authorities through the seed service. An annual volume of 10,000 metric tons of Level 1 seeds, managed by SONACOS, will be used to produce 50,000 metric tons of Level 2 seeds, to be used for renewing the seed stocks retained by producers. These 50,000 metric tons also represent the security stock, under the sole responsibility of SONACOS. Producers will thus be free either to store their own seed reserves, to store them (after treatment) in the facilities of the oil millers in order to keep them in good condition, or finally to buy them from the security stock for cash or in barter transactions. The Government undertakes, by June 30, 1986, to have drawn up and implemented a seed action plan designed to facilitate the producers' transition from the Government controlled system to a private sector marketing system. A preliminary study in this regard is already under way. The Government also undertakes to completely eliminate, beginning in the 1989/90 crop year, the subsidy associated with the exchange - 66 - ANNEX IV Page 14 between regular seed and certified seed. The implementation of this program will be facilitated by the execution of the plan for enhancing the existing equipment in village-level storage facilities. 5. Program of public investment in the agricultural sector For the Government, investment is an important instrument of agri- cultural Zevelopment. The investment program drawn up by the Government for the agricultural sector during the Seventh Plan is expected to inzrease incomes and raise productivity in the rural sector and in the existing produc- tion systems. The overall level of the investment program and its timing are tailored to the execution capacity of the various agencies concerned and to estimates of the present and expected costs of the various projects. During the Seventh Plan period, the agricultural investment program amounts to CFAF 81.7 billion (in current terms), of which CFAF 42.4 billion is allocated to irrigated crops (CFAF 33.4 billion for SAED). For the 1985-87 period, the investment for the agricultural setctor is set at CFAF 43.5 bil- lion. However, a number of projects must be reviewed in order to determine their economic worth or their advisability. Furthermore, the Government declares that the choice of priority projects within each subsector or among subsectors, specifically between rainfed agriculture and irrigated agricul- ture, will be based on the criteria of net incremental benefit in economic terms. Future adjustments of investment among subsectors will be examined with the Bank during discussions on agricultural policy. 6. International cooperation The Government wishes to continue an active dialogue with the various donors on agricultural development policy. As regards the World Bank Group, the Government intends to pursue this cooperation in three respects: (a) with respect to policies, the Structural Adjustment Credit (SAC) is but one stage. Exchanges of views must be continued during the execution of the SAC and beyond, specifically as regards pricing policies and the execution of the cereals program; (b) through the holding of an agricultural sector meeting, following the Consultative Group in December 1984; and (c) assistance with the development of irrigation, with the reform of the groundnut seed marketing system, and with the strengthening of the MDR. B. Reform of Industrial Incentives 1. Diagnosis The development of the Senegalese industrial sector has slowed in recent years. In addition to confronting unfavorable world economic condi- tions, certain aspects of the incentive policies adopted have ceased to have positive effects on enterprises. -67 - ANNEX IV Page 15 The analyses conducted as part of the Government's adjustment program have highlighted the following three aspects: - The priority granted to Import substitution industries, except as regards the development of natural resources (groundnuts, phos- phates, marine products), have not tended to promote exports of nontraditional products. This policy has reached its limits because of: (i) the narrowness of the Senegalese market; and (ii) excessive and unequal protection that discourages exports and encourages clandestine imports; - The current policy on business incentives has harmful effects. The proliferation of special advantages accorded on the basis of indi- vidual agreements has produced: (i) distortions in the industrial environment; (ii) a poor allocation of resources; and (iii) enormous costs for the State. - The constraints to which enterprises are subject have become excessive and limit the leeway of industrialists: (i) price control; (ii) regulation of investments; and (iii) employment and wage legislation. 2. Objectives Under the medium- and long-term economic adjustment program, the Government has undertaken to redefine industrial policy objectives and instru- ments in order to increase the sector's productivity and competitiveness. This new policy will be dealt with in a Government statement in early February 1986. It will consist of: - Revising the system of industrial incentives in order to: o make the industrial sector more competitive on the domestic and export markets by providing companies with inputs whose cost and quality are more comparable to those of the world market; o gradually re-establish competition and increase the freedom of decision of both private and public enterprises in a stable and certain institutional environment; o lower the cost to the State of administering the incentives system, and improve its tax revenue. - Creating means of supporting enterprises by positive adjustment measures, including: o reform of the existing institutions for the financing of industrial development; o . provision of loans specifically for industrial reorganization and development, the contribution of quasicapital and reserves, and the transfer of enterprises; ANNEX IV -68Page 16 o the availability of advisory, research and promotion services tailored to the needs of enterprises and the withdrawal of the State from these activities; o offer of technological, financial and advisory assistance to enterprises that locate outside the major urban centers so as to carry out the decentralization policy; o coordination of international donors and national economic agents in order to deiine new export-oriented manufacturing. To this end, strengthening Senegalese research and development potential in order to enter innovative sectors and increase the value added of national products; o coordination of inJustrial policy with policies that have an impact on industrial inputs: industrial energy, water, trans- port, commerce, export insurance, etc. These orientations reflect the Government's determination to see that enterprises are free in a competitive market, while at the same time providing them with the means for making successful adaptations during a difficult transition period in which situations of overprotection must be overcome. 3. Action program The Government's aim is to achieve these objectives between now and December 31, 1988. Consequently, preparatory works and preliminary studies are in progress or will be begun very shortly so that it will be possible to draw up an action plan that will take effect on July 1, 1986 and contain the detailed program of measures to be taken in the 1986-88 period and their implementation schedule. This program will be centered on the following: (a) The establishment of a system of protection based on reduced and harmonized tariff protection: - reduction of absolute and relative prohibitions; - gradual elimination of the prior authorizations system; - freezing of the number of products subject to quotas and gradual increases in quota levels; - subsequent abolition of quotas; - reduction of import duties and harmonization of their levels so as not to discourage its production of raw materials and intermediate goods. -69 - ANNEX IV Page 17 (b) Improvement of export promotion instruments - improvement of the system of drawbacks, making them endorsable and uuable for paying other duties (customs duties, fiscal levy); - revision of the system of the export subsidy, basing it on industrial value added at border prices, and adjustment of its level to make relative "profitabilities" comparable on the domestic and export markets; - simplification of procedures for granting export and import permits; - analysis of the problems associated with financing and insuring of exports and proposal of appropriate solutions to be intro- duced. (c) Extension of the common law system of taxation to all companies; - abandonment of the principle of special agreements and con- tracts between producing enterprises and the Government (in particular under the investment code); - revision of the existing agreements so as to extend the common system to all enterprises while respecting the Government's commitments. (d) Relaxation of constraints on enterprises, including price control: - gradual elimination of the control of industrial prices in competitive markets (concomitantly, in the case of the sectors concerned, with the lifting of administrative protection measures); - easing of administrative procedures (investment dossiers, export permits, etc.). (e) Easing of employment regulations and increase in flexibility in determining wages Easing of the operation of the labor market is an important condi- tion for the success of the economic adjustm2nt program. This will be done gradually and on several fronts: employment regulations, formulas for worker incentives, collective bargaining, etc. The following measures will be taken, or considered after the necessary studies have been conducted: (i) Hiring, dismissal and employment contracts - introduction of provisions enabling employers to recruit Senegalese workers directly or through employment agencies; - 70 - ANNEX IV Page 18 - sharp reduction in the time taken by public employment agencies to reply to job announcements by enterprises; - enhancement of the resources and performance (quantitative and qualitative) of public employment agencies; - introduction of new provisions designed to better take into account the economic difficulties of enterprises submitting requests for large layoffs; - introduction of provisions permitting unlimited renewals of fixed-term employment contracts. (ii) Compensation - study of the link between external competitiveness, productivi- ty and nominal wages, and proposal of appropriate measures to be implemented; - encouraging enterprises and trade unions to make increases in bonuses and wage supplements contingent on changes in produc- tivity and the operating results of each enterprise. Greater attention to these criteria in possible government arbitration proceedings (in the event of disagreement); - reduction of the social security costs borne by labor-intensive enterprises. (iii) New formulas for the determination and distribution of compen- sation - study of the possibilities of a link between employee compensation and enterprise profits, and proposal of appropriate measures to be implemented. (f) Other measures - actions aimed at generating youth employment; - gearing of employment policies to the creation of small busi- nesses. (g) Immediate measures Recognizing the importance and the urgency of the measures to be taken, the Government has decided to take the following steps beginning on January 1, 1986: (a) freezing of the number of products subject to quotas, increase in the quotas authorized for certain products, and maintenance of the present levels for others (list provided to the Bank during negotia- tions); -71 - ANNEX IV Page 19 (b) elimination of the prior authorization requirement for goods not produced in Senegal (list provided to the Bank during negotiations); (c) reduction in the rate of fiscal levies on certain products (list provided to the Bank during negotiations). In addition, it has been decided to: (a) improve the system of drawbacks, making them endorsable and usable for paying customs duties, with implementation beginning July 1, 1986; (b) base the export subsidy on the industrial value added at border prices, with implementation beginning July 1, 1986; (c) prepare a new customs tariff, the draft of which will be submitted to the World Bank for comment by July 1, 1986; it will be discussed and approved by the Council of Ministers before October 1, 1986, with a view to its submission to the National Assembly as soon as possible; (d) by July 1, 1986, eliminate the prior authorization requirements for the categories of products in at least one of the sectors subject to them; (e) revise as quickly as possible the procedures for hiring, renewing fixed-term employment contracts, and dismissal; (f) by December 1, 1986, implement an employment incentive policy for labor-intensive enterprises by reducing the social costs they bear. 4. Conclusion To sum up, the program of industrial reforms is designed to be implemented gradually. Its principal stages are: o announcement by the Government of the industrial policy as defined in this letter, in early February 1986; o introduction of certain urgent recovery measures during the first half of 1986; o preparation and adoption of a complete program of measures that will take effect on July 1, 1986; and o full implementation of the new industrial policy by December 31, 1988. This gradualist approach will make it possible to take the support and reorganization measures necessary in order for industries to adapt to a changing economic environment. -72 - ANNE IV Page 20 C. Public Investment Policy 1. Objectives At present the public investment program is a four-year program with a fixed timeframe; an adjustment is made at mid-point. Despite substantial progress, the procedure (program preparation, execution and monitoring) includes some flaws, the most important of which are: the weakness of the economic appraisal of projects, the lack of a true investment budget express- ing the outlays for the multiyear programs in annual terms, and inadequate follow-up in certain areas, especially in the case of projects conceived during the execution of the Plan. Despite the efforts made since the preparation of the Sixth Plan began (better criteria for selecting priority projects), the rate of return on investments is still low. Improving the efficiency of investments is one of the principal conditions for the success of the adjustment policy in the public sector; such improvement must come from enhanced rationalization of the programming of investments. To achieve this goal, the Government of Senegal has set itself a number of objectives: - to assign priority to productive projects whose economic and finan- cial rates of return are high; - to improve the programs for rehabilitating and maintaining the existing infrastructure; - to increase the stringency of the process for screening non-productive economic and social infrastructure projects; - to enhance the efficiency of the public investment planning system. 2. Implementation measures In this context, the Government has undertaken to draw up a two-year investment program and to reform its planning system. Furthermore, the preparation of the Seventh Plan placed emphasis on the selectivity of develop- ment activities, achieved by means of the Priority Action Programs (PAP). The purpose of this methodology is, on the one hand, to bring together those Seventh Plan activities that play the greatest role in the achievement of the major objectives in a small number of programs (21) and, on the other, to increase the level of effectiveness of the Plan by focusing efforts on the Government's major priorities. Each PAP has respected one or more criteria drawn from the strategic guidelines of the Seventh Plan, namely; - impact on the growth of national output; - contribution to job creation; - contribution to the formation of domestic savings; -73 - ANNEX IV Page 21 - impact on the reduction of the external deficit; - effect on lessening the economy's vulnerability to external shocks; - consistency with the sectoral strategy. To ensure satisfactory execution of the activities provided for in the Seventh Plan, the Government has taken the following measures: - the definition of a two-year public investment program for 1985/86-1986/87; and - institutional changes that reorganize certain units of the Ministry of Planning and Cooperation (MFC) and of the Ministry of Economy and Finance (MEF) so as to permit the implementation of rolling three-year programming that will be submitted to Parliament each year in the form of a program-law ("loi-programme"). This will enable us, following rigorous appraisal, to introduce new projects during the Plan execution period and to ensure close liaison between the Plan and the investment budget, which must correspond to the first of the three years covered by the program-law ("loi-programme"). At present, public investments are covered by a two-year program, which constitutes a first step toward the adoption of rolling three-year programming and thus provides a transition between the old and new systems. 3. The two-year program of public investments (1985/86-1986/87) The two-year program grows out of the activities identified by the Seventh Plan. In accordance with the DPG presented to the meeting of the Consultative Group, priority is accorded to productive projects and to projects with high rates of return, while in the case of projects "of deferred profitability" such as social projects, priority is accorded to the rehabili- tation of the existing infrastructure. This program covers all the national projects that involve the Government's participation or guarantee. This participation may take the form of a direct contribution to the national investment budget, contribution through public enterprises or Government backing for bank guarantees. The 1985-87 public investment program will not exceed CFAF 310 billion in current terms. The sectoral distribution is shown in the attach- ment. Only priority projects whose financing is ensured or those being executed have been retained. Certain projects in an advanced stage of negotiation have been included as part of the second year of the program. Furthermore, in executing the program, the Government will take the following factors into account: (i) For agriculture, the choice of priority projects within each subsector or between two subsectors (in particular between rainfed and irrigated agriculture) will be based on the criteria of the net incremental benefit in economic terms. Future adjustments among - 74 - ANNEX IV Page 22 subsectors will be examined with the Bank during our policy discus- sions on the agricultural sector. (ii) With respect to industry, in view of the new policy reforms adopted in this sector, the Government will re-evaluate certain large-scale projects, particularly those that have not yet been begun, in consultation with the Bank. (iii) The Government will review the priorities and the actions defined in the railway subsector in the light of the findings of the ongoing study on the subsector's prospects once these findings have been adopted by the Government of Senegal. This review will be carrIed out in consultation with the World Bank. A study on the overall strategy for the transportation sector in Senegal will be carried out before June 1986 in order better to prepare the projects of the sector in the context of the rolling programming system. (iv) With respect to education, the calculation of recurrent costs will be improved in order to take them into account in selecting projects (new projects as well as those already included in the Plan, but whose execution has not yet begun) and in identifying on the con- straints that can hamper the efficient operation of the education infrastructure. The steps referred to above will be taken before end-February 1986 so that the results can be reflected in the consolidated public investment budget for 1986/87. 4. Implementation of the rolling three-year programming system The execution of the plan will be strengthened by the implementation beginning in fiscal 1987/88 of rolling three-year programming for planned investments. This programming will make it possible to take into account any intervening changes in economic policy and to establish a more efficient relationship between the plan and the annual government budget. This will contribute to improving the efficiency of investments and markedly increasing national production. Furthermore, this reform of the programming of public investments will lead to the establishment of procedures for coordinating the efforts of the various ministerial departments concerned. No investment will be included in the program until it has been studied and a decision made as to the advisability of its execution on the basis of an evaluation that stresses the economic rate of return of projects (where calculable), technical and financial viability, the arrangements and manpower requirements for its effective implementation, and its operating costs. This three-year programming, which will be submitted to Parliament each year, will make it posible to make adjustments in investment activities annually. The Government's investment budget will represent the first of t1-, three years covered by the prograr-law. - 75 - ANNEX IV Page 23 The adoption of such a system implies the need for reorganization of the MPC and the computerization of the Debt and Investment Directorate (DDI) of the MEF. The Government has prepared a detailed action plan for the implementation of these reforms, of which the key stages are the following: (i) Reorganization of the Ministry of Planning and Cooperation, which will take effect at the end of December 1985. (ii) Implementation of the new budgetary process: December 1985-April 1986. The program-law of public investments for fiscal 1986/87 will constitute the second year of the two-year program. The first proposed three-year program law will be presented for fiscal 1987/88. (iii) Preparation of the first rolling three-year program (1987/88-1989/90): January-June 1986. (iv) Computerization of the DDI: September 1985-June 1986. D. Parapublic Sector Reforms 1. Diagnosis The parapublic sector of Senegal is made up of more than 80 enter- prises (public agencies, national corporations, mixed-capital corporations) in which the Government holds all or the majority of the capital and of a portfo- lio of minority participations in more than 100 enterprises. The extent of this participation, estimated at about CFAF 130 billion, poses two major problems: - The equity participations, plus the amount of the subsidi2s, exemp- tions, guarantees and sureties or the reassignment of unpaid debts, pose a heavy burden on public finances and likewise affect the overall efficiency of the national economy. - Public sector enterprise that are less efficient than other compara- ble private sector entities have adopted inefficient management procedures that generate deficits incompatible with the essential stringency imposed by the policy of restoring the major economic equilibria. This diagnosis points to precise objectives that make it possible to take appropriate measures for a disciplined rehabilitation of the sector. 2. Objectives The New Policy on the Parapublic Sector (Nouvelle Politique envers le secteur parapublic: NPSP) adopted by the Council of Ministers on July 29, 1985, is intended to strengthen the general framework that will permit the revitalization of the national production potential and increased efficiency in the management of government resources. To do so, the NPSP is based on the establishment of certain priority objectives for the rehabilitation of the sector, namely: - 76 - ANNEX IV Page 24 (a) Disengagement objectives - The State would reduce to a minimum its intervention in the system of commercial activities and to focus its activities more on its priority tasks. The principle is to decide on the disengagement of the State when it is demonstrated that a service or a product can be obtained at a lower social cost by some other means. - The objective of this principle is, on the one hand, to define the central core of enterprises that should remain part of the parapublic sector because they carry out their public service tasks effectively or because they play a strategic role in the development of economic activities. - On the other hand, the principle is aimed at increasing the involvement of private operators so as to reduce the Government portfolio significantly. (b) Objectives of the reform of public enterprises There is one sphere of activity that cannot escape the direct intervention of the State, or at least its supervision, either because only the State can protect the general interest or because it alone can take the risk associated with the investment. The principal objective of reforming what is retained of the parapublic sector is to increase the volume and quality of the services rendered to the public while reducing their unit cost for the State through: - improving the parapublic sector information and follow-up system; - placing the relations between the State and the public enterprises on a contractual basis; - incorporating efficiency standards into the internal management of the enterprises; - simplifying the control exercised by the State and strengthening its supervision. The Government is also setting itself two objectives to be achieved by 1989/90: halving the present amount of the direct subsidies granted to the parapublic sector (see section on Public Finance below) and carrying out 20 priority reform operations (perfori.ance contract, recovery plan, 15 of which will be signed or prepared before end-1986). - 77 - ANNEX IV Page 25 3. Action program On July 29, 1985, the Interministerial Council decided to accelerate the reform of the parapublic sector and the disengagement of the State by establishing a short- and long-term action plan. (a) Actions already undertaken and short- and medium-term measures (before end-June 1986) As part of this new policy, the Government of Senegal has already signed contracts-plans with SOTRAC and SONEES, as well qs "lettres de mission" with SAED. The Post and Telecommunications Office has been reformed, as a result of which the National Telecommunications Corporation and the Post and Savings Bank Office came into being on October 1, 1985. The Government has decided on the following measures: o Establishment of a methodology for the appropriate transfer of certain State activities to private operators. o A study on the establishment of a securities exchange will be completed by March 31, 1986 at the latest. o A list of the enterprises that can be privatized or liquidated during 1986 will be drawn up by December 31, 1985. o As soon as the evaluation of the State portfolio has been finalized, it will be necessary to develop an information system on the status of the public enterprises, in particular through the establishment of an annual economic table ("tableau de bord") of the parapublic sector. o The inventory of agreements linking the State and the public enter- prises will be completed by end-February 1986. o A provisional inventory of reciprocal debts and claims for all the public enterprises was drawn up in November 1985; a proposal for the settlement of the reciprocal debts and claims recognized by both parties is scheduled for December 31, 1985; then, a final reconcili- ation of the figures put forward by the Ministry of Economy and Finance on the one hand, and the enterprises on the other, is planned for June 1986, making it possible to arrive at a net posi- tion statement and a definitive settlement plan. o Data on the parapublic sector will be computerized during 1986, both at the Ministry of Economy and Finance and in the supervisory bodies. o The Government has established a breakdown by enterprise of the subsidies recorded as common expenditure for the last six budget years. - 78 - ANNEX IV Page 26 o A management charter of the public enterprises -- that should set forth the major approaches to efficient management in these enter- prises and also constitutes a necessary stage in improving the efficiency of control -- will be prepared by March 1986 at the latest; this chart will, inter alia, stimulate improvements in pricing systems, forecasting, and wage policy. o Continuation of the preparation of contrats-plans and "lettres de mission" defining the reciprocal commitments of the State with certain public enterprises; those relating to SODAGRI, SODEVA and SODEFITEX will be completed by December 31, 1985, while those for SOMIVAC, SENELEC and SONADIS are scheduled for completion by March 1986; it goes without saying that sectoral strategies (housing, transportation, industry and finance) will have a significant impact on enterprise-level activities within each sector and will modify the terms of the performance contracts to be negotiated. o Before end-March 1986, the Government will again update the existing circular that recommends the preparation of audits/diagnoses before the preparation of any program contract. o Merger of enterprises engaged in the same activities, with a view to betti: portfolio management; in the short term, this measure affects SOFIDAK and CSCE, whose merger will become effective after the findings of the working group responsible for deciding on a better organization of the new institution have been submitted. o The disengagement of the State will take place through the transfer of a substantial proportion of its portfolio to the private sector; a list of the enterprises to be liquidated or privatized in whole or in part beginning in 1986 will be submitted to the authorities for approval in January 1986; this list will be accompanied by transfer guidelines. By March 31, 1986, the Goverr-aent will adopt these criteria and select the enterprises to be privatized or liquidated in 1986; the privatization/liquidation operations will be initiated during the second quarter of 1986. o Updating of the Government's portfolio on the basis of a new classi- fication similar to that of the national accounts (commercial sector, quasigovernmental) by end-December 1985. o The implementation before June 1986 of the findings of a study on the supervisoty bodies (to be submitted by end-December 1985) will permit more effective monitoring of the central core of the enter- prises that will remain public; this effectiveness will be enhanced by the adoption of a number of accounting and managerial measures. o A study on the advisability of regrouping financial institutions will be conducted before December 1986. o A study on the pricing of public services based on cost prices and social costs will be completed by June 1986. 79 - ANNEX IV Page 27 o Likewise, a number of studies on the advisability of transforming OHLM and PAD into national corporations or mixed capital companies or on the attachment of certain public agencies to the administra- tion will be completed by the end of the second quarter of 1986; for the two enterprises referred to above, these studies will be prereq- uisites for a possible negotiation of program contracts. o Finally, the measures aimed at more extensive disengagement of the State in the sector will be continued by the introduction of a standard disengagement procedure, the definition of the arrangements for accelerated disengagement, and the launching of a plan for reducing subsidies; all these are scheduled for June 1986. The definition of the transfer arrangements, which implies the introduction of innovations into the organization of the financial system, with the possible creation of a securities exchange, will make it possible to minimize the rinks of failure and to better appraise the capabilities of private operators, both national and foreign, to take over the State's shares. The preference granted to national investors ir. the matter of disengagement in no case implies the exclusion of foreign investors, whose experience and technology can in certain cases significantly contribute to the development of the national economy. The results expected from this disengagement are: a reduction in the burdens on the Government budget through the gradual reduction of the overall amount of the operating subsidies, the objective being their limita- tion to half the present amount by fiscal 1989/90, greater economic and financial efficiency, and improved consumer services. (b) Longer-term actions For the implementation of its strategy, the Government has also decided on the following measures: o The contrats-plan process will be continued with the signature of ONPCE, SONATEL, SICAP, and OHLM contrats-plans in 1986.- The contrat-plan with the institution resulting from the merger of SONACOS and SEIB will be signed during the first quarter of 1987; this contrat-plan will be preceded by a thorough diagnosis of the new enterprise created by the merger and by a reorganization pro- gram; the terms of reference of this diagnosis will be submitted to the Bank by February 1986. o The recovery plan or cutback plan procedure will be continued with the preparation of rehabilitation plans for SODESP and SERAS, among others, in 1986. o A study on the advisability of liquidation of the deficit enterprises that have no public Eervice function and were not included in the list of enterprises to be liquidated in 1986 will be conducted during the second half of 1986. - 80 - ANNEX IV Page 28 The coordination of the execution of the action plan for the New Policy on the Parapublic Sector will be carried out by the Program Contracts Unit ("Cellule des contrats-plans": CCP) of the General Secretariat of the Office of the President of the Republic. The CCP will submit a quarterly monitoring report on the execution of the parapublic sector program to the President of the Republic. E. Rehabilitation of Government's Financial Situation and Consolidation of the Gains Made 1. Diagnosis Government actions have a decisive influence on the performance of the economy, in particular because of the weight of public demand in aggregate demand. The expansion of public consumption has led to a reduction in domes- tic savings, an increase in the public debt, and a deficit in our balance of payments. Current expenditure absorbs virtually all of government revenue, preventing the Government from satisfactorily fulfilling its obligations to all its creditors; consequently, there has been a substantial buildup in payment arrears. Thus, as of June 30, 1983, the Government's arrears to the public sector amounted ro CFAF 55.7 billion; the Government has undertaken to absorb them, albeit si .y because its revenue does not rover its expenditure. Despite sustained efforts to compress the wage bill, it still absorbs a substantial proportion of government revenue, and in the short term will continue to exert heavy pressure because of the age structure of the civil service and limited prospects of employment in the private sector. 2. Objectives Senegal will continue to pursue the essential objective of eliminat- ing the imbalance between resources and uses of funds so as to generate budgetary savings to provide adequate financing of public investments and satisfactory coverage of external debt service. The objective of reducing and even eliminating the Government's arrears to the private sector over a three or four year period will enable it to reinject the necessary liquidity into the economy, which will facilitate the rehabilitation of the productive apparatus and the financing of investment in both the private and the parapublic sectors. The settlement of the ONCAD debt will, as a consequence of the resulting restoration of the banking system's liquidity, contribute to the successful conclusion of this process. This rehabilitation of the productive apparatus is the best guarantee of the creditworthiness of the overall economy. The reorientation of the sectoral and functional allocation of current expenditure, and the impact of the tax system, will be important incentive instruments. The objectives of reducing the share of current revenue taken up by wages and salaries and of reforming the CPSP will be continue to be pursded because of their considerable impact on public finances. ?. Action program The Senegalese Government will take measures designed to continue and consolidate the financial rehabilitation. This rehabilitation necessarily -81- ANNEX IV Page 29 requires the re-establishment of the balance between resources and uses of funds that was disturbed by the heavy demand for jobs exerted on the Govern- ment ard the weight of subsidies to the public and private enterprises (among other financial pressures). The re-establishment of the balance between resources and uses of funds demands a sectoral analysis of current expenditures so as to better ascertain their sectoral and functional allocation. The terms of reference for the in-depth study of this problem have been prepared and the recommenda- tions of this study will be delivered before June 30, 1986. To reduce the pressure of public and private enterprises on public finances, an inventory of budgetary subsidies and a functional/sectoral breakdown of the subsidies included in common expenditure are now being prepared and will be included in the Government budget beginning 1987/88; the Government undertakes to pay no direct subsidies to public enterprises other than those included in the Government budget. The subsidies included in the current budget will be limited beginning in fiscal 1987/88 to public service activities and will be evaluated on the basis of contractual documents. The budgetary subsidies will be reduced by at least 50% overall relative to their 1985/86 level (CFAF 9.5 billion) by 1989/90. An analysis that will permit the correct application by beneficiary enterprise is under way; the recommenda- tions of this analysis will be submitted in early June 1986. The pace at which the subsidies will be reduced will be sharply accelerated beginning in fiscal 1987/88 in light of the implementation of the parapublic sector reform policy. The terms of reference of the study aimed at identifying all indirect transfer payments will be prepared before end-January 1986. The findings - _ the study will be delivered at the end of June 1986. This study will make it possible to set up a flow chart ("tableau de bord") by the end of October 1986. The final report of the tax commission on revision of the tax code as part of a further simplification and a possible broadening of the tax base will be filed before end-June 1986 and adopted by the Government by early October 1986. The feasibility study on the property tax register ("cadastre fiscal") of the city of Dakar will be submitted before the end of September 1986, with a view to its implementation as soon as possible. The recommendations of a working party on the revision of customs duties will be submitted before end-June 1986 and a new draft customs code will be adopted before October 1986. A decision on the computerization of customs declarations/assessments, as well as tne preparation of an action plan for strengthening the customs service, will be ready by end-June 1986. All these steps are being taken in close cooperation with the International Monetary Fund. With respect to the Price Equalization and Stabilization Fund (CPSP), the following measures are now being implemented: - the first phase of the reconciliation of accounts has been completed (December 1985). A schedule for the complete payment of the CPSP's arrears to the Treasury and its bank loaLs has been prepared. The settlement will be completed not lat-r than end-June 1986; - 82 - ANNEX IV Page 30 - collection of the CPSP's claims on rice distributors; - strengthening of the technical and financial management of the reorganized CPSP. All these actions will be strengthened by the revision of the CPSP's role, the Govnrnment having taken the decision to separate its equalization from its marketing activities. The arrangements for this separation are defined in Section A on AgriculturaliIncentives. In addition to the settlement of the external debt arrears, which is a high priority for fiscal 1985/86, the settlement of the State's arrears to the private sector is an important objective. The objective of rehabilitating the banking system assigns high priority to the settlement of the ONCAD debt in accordance with its contractual schedule. The Government has already defined the priorities for the payment of arrears, as well as a plan for their reduction, in accordance with the following criteria: - claims of the small and medium-scale enterprises and claims for small amounts; - for the other enterprises, selection of claims according to economic sector or depending on the positive impact on government finance; - for all the categories of enterprises, given equal findings in terms of the other criteria, claims will be settled on the basis of their seniority. A more detailed study will be conducted by the staff of the Public Treasury before end-December 1986 in order to identify more reliable relationships between the ranking of domestic arrears and the payment criteria. In this regard, if the PAMTL is to achieve its overall objectives for the revival of the economy, it is desirable for donors to contribute to the resources required for that rehabilitation. The government has decided to carry out the definitive reconcilia- tion, by June 30, 1986 at the latest, of the reciprocal debts and claims of the State and the public enterprises as of end-June 1985 so that they can be settled in accordance with a timetable to be definitively established by end-July 1986. Public employment and the wage bill of the Government are a heavy burden on society because of the poor performance of the private sector and of the resulting heavy employment pressure exerted on the Government. The Government maintains, as its immediate and minimum objective, the stabilization of civil service staffing, which was 70,114 employees as of June 30, 1985. The wage bill monitoring unit is currently responsible for the enforcement of this policy. The measures already taken will help bring about the following annual reductions in the maximum ratio of expenditure on wages and salaries to government revenue (excluding grants) for the next three fiscal years: - 83 - ANNEX IV Page 31 1985/86 - 53 percent 1986/87 - 51 percent 1987/88 - 48 percent. A possible reduction and redeployment of personnel in this sector will be facilitated by the adoption of a series of measures designed to permit the reabsorption of former government employees into the private sector and to improve the planning of training school admissions. These measures will be examined in an in-depth study to be completed before the end of 1986. A substantial reduction in civil service staffing, in particular by means of voluntary departures by government employees, could be achieved through the creation of conditions that promote the development of successful enterprises. The establishment of a securities market and the setting up of a mechanism to facilitate the establishment of enterprises could contribute to the achievement of this objective. To consolidate the. benefits of the austerity policies now in place, the Government has decided to give priority to the allocation of budgetary savings to investments (Budget Nationale d'Equipement: BNE) and to the servicing of the external debt. Increasing amounts of funds (CFAF 12 billion) have already been allocated to the Autonomous Amortization Fund ("Caisse Autonome d'Amortissement": CAA) under the current budget for this budget year. This amount will increase by at least 10% annually during the next four budget years. To minimize the disbursements for the guaranteed debt, the Govern- ment has decided not to renew subsidiary agreements for the rescheduling of guaranteed debt and to apply a series of other measures to ensure that all beneficiaries of loans guaranteed or reassigned by the State adhere to the contractual schedules. Finally, the Government has drawn up a work program aimed at strengthening capabilities as regards the multiannual forecasting of public finances. In its first phase (January-March 1986), this program will consist in improved data gathering and short- and medium-term forecasting methods; in a second phase (April-June 1986), d technique for rationalizing budgetary choices will be introduced. - 84 - Attachment to the LDP Senegal: Public Investment Program, 1985/86 - 1986,/87 (In millions of current CFA francs) Sector Cost of Secured Two-Year Program Seventh Plan Financing 1985/86 1986/87 Total Agriculture 81,715 43,707 18,037 25,492 43,529 Livestock 10,668 3,462 1,704 3,714 5,418 Fisheries 34,835 34,735 6,099 11,414 17,513 Forestry 26,421 13,595 4,618 7,529 12,147 Rural Water Supply 34,434 37,017 11,927 13,123 25,050 Agricultural Water Supply 4,524 3,902 2,068 1,622 3,690 Total: Primary 192,597 136,418 44,453 62,894 107,347 Industry 39,434 33,418 7,138 12,216 19,354 Mining 38,645 6,637 2,560 7,011 9,571 Energy 43,582 22,470 11,100 17,432 28,532 Handicrafts 1,936 1,469 841 1,145 1,986 Total: Secondary 123,647 63,994 21,639 37,804 59,443 Commerce 3,243 1,343 55, 1,221 1,774 Tourism 780 775 342 343 685 Transportation 67,500 50,998 27,519 28,051 55,570 Telecommunications 29,772 8,197 6,480 7,197 13,677 Total: Tertiary 101,295 61,313 34,894 36,812 71,706 Urban Development/ Environment 2,314 1,059 1,028 550 1,578 Housing 15,265 7,894 4,911 2,376 7,287 Urban Water Supply 31,078 26,603 5,410 9,579 14,989 Sanitation 12,537 8,237 4,766 3,781 8,547 Health 14,162 8,842 5,886 5,012 10,898 Education/Training 19,405 10,583 2,807 7,141 9,948 Social Development 15,064 13,328 3,710 4,370 8,080 Youth and Sports 2,140 860 860 0 860 Studies and Research 10,843 5,303 2,295 3,798 6,093 Information 1,666 108 103 827 930 Total: Quaternary 124,474 82,817 31,776 37,434 69,210 TOTAL 542,013 344,542 132,762 174,944 307,706 * Includes only the four-year cost of the Seveuth Plan projects included in the two-year program. SEEGAL: STRUC11)RAL AMlUDENW PROGRAM MATRIX OF ISSUE, MFASUR AND ACfl=NS Structural Issues Action taken by the Measures to be taken Monitorable Actions and Government TI:dIn 1. AGRICUMLIRAL SECOR INCENIVES Cereals Policy Excessive dependence on food Initiated preparation of Identification of a coherent Preparation of cereals development Imports; subsidization of cereals developmnnt action cereals developmat action action progran tisfactory to the Inported rice; imperfect program with FAD assistance. program focussing on production Association (condition of 2nd substitutability between factors, processing, and price tranche release). local cereals and inported Increase in producer prices in policies. cereals. 1985. CSA's operation is to be limited In Introduction of producer size (about 25,000 tons in 1986/87) 1 Rigid producer price structure Doubling of consuner price of price-support mechanian for and applied to supporting producer D and controls on umrketing of rice since 1982; eliminating cereals annaged by CSA. prices. cereals. consuner subsidies aid providing adequate nominal Maintainance of at least a 25 Consultation with the Bmnk every Excessive Govertament intervention protection. percent nominal protection for six montbs fran date of credit In food imports and marketing. domestic cereals by adjusting, effectiveness to determine need for Adoption of objective to as necessary, the retail price adjust t in rice price, the stabilize rice and wheat of rice, following consultations audalities, level and timing of the flour inport volune at with the Bank. adjustment. 1984 level for the 1985-89 period. Progressive state disengagement Effective separation of the rice fran rice import operations and operation fran the PSP and Lifting of all barriers to the privatization of rice participation of private 0 3 free oarketing of cereals distribution folloing iporters/traders in import and 0 0 (except paddy). coupletion of r-gping CPS distribution of rice after ay 1986 m Q. contract (May 1986). (condition of 2nd tranche release). CO Structural Issues Action taken by the Measures to be taken Monitorable Actimns and Governmeint Tbmn Fertilizer Polig Excessive Govermet intervention Elimination of fertilizer Progressive eliminatimn of Fertilizer subsidies applied in in distribution, including heavy levies cn producer price of fertilizer subsidies, inport accordance with guidelines outlind subsidies. grouhuts; sale of fertilizer liberalization, and in IDPs subsidy limited to CFAF an cash basis only; decision privatization of fertilizer 24/kg during the 1986/87 season. not to finance subsidies distribution by 1989/90 season. through Treasury resources and ralying exclusively an subsidy schieme financed by external grants in 1985/86 growing season. Groudnut Sector Excessive state intervention in Liquidation of SNAR, the Progressive reduction of central Central security stock limited to seed distribution and marketing parastatal managing Input groundnut sr-' security stock. 50,000 t during 1986/87 season; of groundnuts leading to heavy distribution; reduction in burden on public finances; low central groundnut seed stock Cooplete liberalization of seed Discontinue free distribution of producer prices; inefficient fran 120,000 t to 100,000 t distribution as of 1986/87 seed; fazumers to store am seed or structure and annagemint of oil during 1985/86 season; season. prase fran oil mills at cost. mills, Including heavy state elimination of seed and subsidies to cover direct costs. fertilizer levies on producer Eliminatin of all guaranteed Preparatimn and Japlantatim of a prices, coverage of oil mills' fixed seeds action progran including costs. sus to help fmers store Reductic- in half of the their seeds under proper guaranteed coverage of oil Restructuring oil milling conditims, by Jme 1986. mills' fixed costs. operations by arglng SONMA00S and SEEB. Finalization of contract-plan with m Increase in the number of the new caspeny oemrgng fran the r private traders licensed fusion of SONAMDS and SEIB by March a < to purchase groundnuts. 1987. 1 Structural Issuou Action taken by the Measures to be taken Monitorable Actimas and Govermanc Institutional Reforus Instituticnal weakness in Liquidation of SN Continued restructuring and Finalizatim of "lettres de planning. investant programning, disengagaent of RDAs. mIssiCn" for SUWE, SEVA, budgetinp,, statistics. Restructuring of SODEVA, SODFflEK,SCHVAC by Mrch 1986. Including 55% cut in staff. Strengthening Rural Developmt Ekcessive Involvanent of rural Ministry's ability to plan, development agencies (RDAs) in Restructuring of SAED, and program investmants, and execute production activities; signature of a "lettre de budgets. overstaffing; poorly defined Mission". objectives, leading to heavy burdan on public finances. II. REFORM OF IOUSRMIAL INCENMlES ~IVEI General Measures Strategy focused on Import Elaboration of a canprehensive Public declaratia by Annucent of the new industriul substitution and high protection industrial incentive reform Goverment of the min elnments policy by carly February 1986. levels, discouraging exports, program. of the new industrial policy. encauraging fraudulent Imports, and Increased costs to the econam. Preparation of detailed Action Campletion of Actim Progran by Program for the perind July en-iue 1986. 198-Decerber 1988. Protection a Proliferation of special Freezing list of products Reduction in absolute and Preparation of new draft tariff 0 advantages (exonerations, subject to quotas or prior relative levels of Import code by July 1986, and adoption by exoptions) distorting authorization and increase in restrictions; gradual Goverment of the draft tariff code incentive systan, quotas for 1986. elimination of prinr '-port satisfactory to the Association by encouraging misallocation of authorizations; gradual October 1986 (condition of 2nd investments, reducing Elimination of prior phasing-out of quantitative tranche releae. Goverment reveue, and authorization for kport of famort restrictions. Strucuaral Tasues Action taken by the Measures to be taken Monitorable Actions and Govermat Timig being costly to administer. certain goods not produced in Elimination of prior Senegal starting January 1986. General reduction and authorizations for categories of harmonization of tariffs. products in at least one sector (to Adoption by Government of be determined in consultatim with amendment to the tariff code Generalized use of Commn Law the Association), by July 1986. reducing the tariffs rates on systan. 15 categories of products; Review of existing "caventims" Review of Investment Code. with private enterprises by Renunciation of , , ,.ial end-1986 with a view to their "Conventions" system. Replacement of existing drawback possible renegotiation within legal system by transferable constraints. Adoption of principle to revise drawbacks. the drawback systen. Adoption of new drawback system by Basing export subsidies on value July 1986. Adoption of principle to modify added at border prices. O the export subsidy scheme so as Adoption of new export subsidy O to base it on industrial value system based on value added at added In International prices. boarder prices by July 1986 (conditim of 2nd tranch release). Government Control Ecoessive controls with regard Phasing-wt controlled Review of the adninistrative to: price levels and atructure; industrial prices in tandwn with procalures in the franework of the investment administration; and measures to reduce protection in labor law regulating hiring, firing labor uage legislation. the respective sectors. and taporary work contracts, by end 1986. Simpler Investment Code administration and export/Import Preparation of measures to licensing procedures. encourage job-creation by labor intensive Industries through Flostering labor mobility (direct reduction In social charges, by enda recruitmat by employers, faster 1986. action by labor offices, more flexible interpretation of tUrther actions to be identified in collective firing rules and the Action Program. renewal of term contracts). Structural Issues Action taken by the Measures to be taken Monitorable Actions and Goverrment Incentives for hiher productivity (linking wage increases to productivity gains, lower social charges for labor-intensive industries). III. IMVED QmALITY OF PUBLIC INVESIME Institutional Reform ECessive empbasis on external Conpletion of comprehensive Inproved financial supervision Extensim of debt monitoring systen resource mobilization at the study of investnrnt progranming of investment progran, and to project level by June 1986. o expense of resource allocation. and budgeting systan and computerized link to debt adoption of recamendations on monitoring systen. Inadequate policy and planning institutional reform. enviromaet. Introduction of new systen for Reorganization of Ministry of estimating recurrent costs. Inadequate interministerial Planning and Cooperation, as of coordination. January 1986. Investnment Programing Over-ambitious investment targets Reduction of public investment Introduction of a three-year Preparation of draft three and large rmaber of uneconanic targets for 1985-89 to levels rolling investment program and year program 1987/88-89/90 projects. consistent with the acro consolidated budgeting systan as by June 1986, and its fra-ork.. of 1987/88. satisfactory review by the Ln Deficient project selection and Association (condition for evaluation. Use of Priority Action Programe Emphasize rehabilitation and 2nd tranche release). In the preparation of the maintenance operations. Infrequent reviews leading to 1985-89 Plan to select priority bu-idp of distortions. projects. Stricter technical, econnic and financial project analysis Unclear project ranking criteria. Preparation of 1985-87 two year criteria; investment program awd its review by the Bank. Structural Issues Actimn taken by the Measures to be taken Moitorable Actions and Government IV. ACCELERATED REFM OF TUW PARAPUBLIC SECIUR Divestiture Ekcessive Goverment Adoption of a new Sector Policy Divestiture or liquidation of Adoption by Govemnt of list of participation in the economy Statement and Action Program. enterprises. enterprises to be privatized or uhose costs are exacerbated by liquidated in 1986, by March 1986. special treatuent awarded to Liquidation of S0AR aid SIN parapublic sector (subsidies, and restructuring of other exaeptions, debt guarantees, parastatals. etc). Rednctim in indirect subsidies (e.g., fuel subsidy to SENELEC) and increase in tariffs. Rehabilitation Misallocation of invesment, low Introduction of "contrat-plan" Improved sector data manageoet Comuterizatim of sector data base efficiency, poor savings and system. and reporting. by end-1986. budgetary perfomance. Signature of contrat-plans with Clarifying the transactions Final recmciliatim of cross Ncessive operating costs and SEES and SDIRMC aid of between the Goverment and the arrears and settlement progma losses (assumed by the treasury). "lettre de mission" with SAED. parapublic sector. by July 1986. High level of payoent arrears Restructuring of Post and Improved managment of Finalzatimn of "Iettres de , toward enterprises and the Telecamanication Sector parastatals' contractual mission" or "contrats-plans" for a . banking sector. (October 85). relations with the S0DAGRI; SDEVA; SUEF'l, a Governoont. SOW.!V!; SENEJC; SONADIS (trch "' ENcessive or inadequate control Provisional reconciliation of 1986), OPCE, SONAT, SICAP, 11M and supervisimn of the sector and cross arrears and proposals for Iproved control of enterprises. (end-1986), SODWDS/SEB (Mrh of its inpact on the econany. settlemnt. 87). Poor anagent of enterprises. Study of udalities for restructuring public financial institutions by end-86. Structural Issues Action taken by the Measures to be taken Monitorable Actims and Goverment Tund V. PUBLIC FtNM RMOVY Revenues Monitored under IMF stand-by arrngmet. Declining tax ratio despite high Tax and price incrses under Sinplificatimn. of the Tax Code nminal tax rates. stabilization progras with the with a view to experding the tax Submissim of Tax CCmittee report IMF (1980/81 - 1985,'86). base. by July 1986 and subsequent Excessive legal exeptions and taplMeRtation of I datims. exonerations. Administrative and accounting Taxation of real estate in UEban reform in the public sector. areas. Completim of feasibility sbly for Tax evasion (notably custas fiscal cadaster of DMkar regim, by fraud). Strengtiening of CPSP financial Reduction and harmodizaton of end September 1986. nnagement to ensure timely custan tariffs to reduce fraud Weaknesses in tax administration payment of custan duties on and expand the tax base. Completim of progran for recovery (excessive uaber of low-yield Inported rice and recovery of of arres by CPSP and miesures o taxes, inadequate collaboration arrears. Camuterization of custon luprome CPSP tectdcal and amng various departments, statenents to control fraud. financial annagemet by end Jun training and auam.ent Discontinuing past practice of 1986. abortcanings, non-assesanent subsidiary agrenents Complete repayment of arrears of of sane taxes, e.g., real transferring to enterprises the custans duties by CPSP. estate in urban areas). benefits of debt rescheduling. Ourrent nItures High and fast-growing level of Freeze of civil service staff Sectoral analysis of current Completiom of study of current personnel eq aditures. In 1985/86. expenditures to improve sectoral expenditures by July 86. aid fumctional allocation. High level of subsidies and Lindting wage bill increase to Plamning for reduction of bigetary P transfers to the parapublic seniority increases (4-5%) in Reduction by 50% of budgetary subsidies and allocation by sector. 1985/86. subsidies by 1939/90, compared beneficiary to be subitted by JAem to 1985/86. 86. Insufficient allocation of Camunity participation (user indgetary resources to maintain fees) for prinmry health care, Gradual elimination of indirect Proposals for factimal investments (recurrent costs). introduced in 1985. subsidies. classification of direct absidies by enid-Jm 1986; Iaplemetation in Tighter financial control and Continirng reduction in Wge the budget for fiscal 1987/88. decision to reduce subsidies bill and stabilization of civil and transfers to parastatals. service xumers; Inproving Nuimber of civil servants not to control of civil service exceed their level of July 15, 1985 staffing. (70,114). Structural Issues Action taken by the Measures to be taken Monitorable Actims and Goverment TM Identification and revier of indirect subsidies by end-Aim 86; "tableau de bord" by end-October 1986. Ratio of mges and salaries to fiscal receipts (other than grants) not to exceed 53% in 1985/86, 51% In 1986/87, and 48% in 1987/88. Investment Financing Excesaive dependence on external Inventory of Government payment Settlemnt of Covenimt's not Payment of CFAF 4 bln to private financing of investment. arrears to private sectors. Indebtedness towards private enterprises and 12 bln to the enterprises and the banking banking sector in 1985/86 and of 10 o Inability to service debt. Reduction of danestic payment sector. bln and 12 bln respectively in Depriving the econoy of arrears to enterprises and 1986/87 in accordance with criteria financing through banks (under Stand-by program) Increasing budgetary resources listed in IDP. accumlation of arrears to and planning for their for debt servicing to improve enterprises and banking sector. progressive liquidation creditworthiness. Increase by 10% p.a. of budgtary allocation to the CAA betwen Increasing role of domestic 1986187 - 1989/90. banks in financing investment. Study on the ability of the banking Improving debt service sector to recycle the resources annagenant and performance. injected by Govermnnit through repayment of arrears by July 1986. Settlement of all arrears on external debt by July 1986. a 0 O - 93~ - 93 Annex VI SENEGAL Page 1 of 6 COUTRY ANALYSIS NDEL (SENCAN) SUM RY RESULTS - MANAGED AD.USTIENT SCENARIO ITEN 1981 1982 1983 1984 1985 1986 1997 1999 199 199 1995 A. Growth and Production (in constant 1979 CFAF) Gip 28 558.3 640.4 656.0 629.2 642.5 697.6 712.0 738.1 767.8 797.3 970.1 PRIDRY 38 107.7 134.3 140.9 114.6 120.1 134.6 132.7 139.0 146.1 150.5 175.6 SECONMRY 44 144.7 165.6 169.8 167.4 165.9 178.0 186.5 194.3 202.4 212.9 277.0 TERTIARY 48 305.9 340.5 345.3 347.2 356.4 385.0 392.8 404.7 419.3 433.9 517.6 iPR' 227 0.0 14.7 2.4 -4.1 2.1 8.6 2.1 3.7 4.0 3.9 4.1 YAIRGR 219 -5.6 24.7 4.9 -18.7 4.8 12.1 -1.4 4.8 5.1 3.0 3.2 YINDIR' 218 5.7 14.4 2.5 -1.4- -0.9 7.3 4.8 4.2 4.2 5.2 5.5 YOTIR' 220 -1.9 11.3 1.4 0.6 2.6 8.0 2.0 3.0 3.6 3.5 3.6 I/GDY' 257 15.5 19.4 13.7 10.8 12.9 15.6 15.7 15.8 15.8 15.7 15.7 ICOR 262 0.2 1.0 7.7 -3.2 5.1 1.5 7.5 4.3 3.9 4.0 3.8 B. Savings and Investment (current CFAF billion or shares) 6UR 251 670.3 845.0 939.9 1015.9 1136.8 1325.5 1448.3 1604.3 1782.8 1976.0 2995.1 CONS-PUT 421 545.9 637.0 729.5 803.8 869.6 971.0 1046.4 1161.9 1291.6 1446.3 2251.4 PC/GDP 82 81.4 75.4 77.6 79.1 76.5 73.3 72.3 72.4 72.5 73.2 75.2 60. CONS. 500 150.7 169.0 186.5 201.5 215.5 232.6 248.6 264.5 25.0 307.9 419.5 C/ 83 22.5 20.0 19.9 19.8 19.0 17.5 17.2 16.5 16.0 15.6 14.0 D0 SAVING 531 -26.2 39.0 23.8 10.6 51.7 121.9 153.3 178.0 206.2 221.8 324.2 IS/6DY' 258 -0.6 8.4 3.8 2.1 5.1 9.3 10.4 10.9 11.3 11.0 10.9 INUESTHENT 425 110.1 155.2 146.5 131.9 165.3 227.8 250.2 278.2 309.1 342.0 520.2 TOT.I/GDP 84 16.4 18.4 15.6 13.0 14.5 17.2 17.3 17.3 17.3 17.3 17.4 RES3WL 549 -136.3 -116.2 -122.7 -121.3 -113.5 -105.9 -97.0 -100.2 -102.9 -120.1 -196.0 RESBAL/GDP 252 -20.3 -13.8 -13.1 -11.9 -10.0 -8.0 -6.7 -6.2 -5.8 -6.1 -6.5 C. Public Finance (current CFAF billions) TOTAL REV 1/388 146.5 170.9 190.B 209.8 223.0 246.7 266.9 290.8 317.6 349.3 510.3 CUR EXP 389 174.3 185.4 201.2 221.7 257.0 288.0 309.2 326.1 350.5 380.4 518.1 CR 60 SARE 398 -27.8 -14.5 -10.4 -11.9 -34.0 -41.3 -42.4 -35.3 -32.9 -31.1 -7.8 BEV EXP 399 30.3 54.9 40.5 44.1 46.9 52.5 58.9 65.9 72.8 79.4 122.1 AARS 445 5.0 19.6 21.2 4.8 11.3 15.0 15.0 0.0 0.0 0.0 0.0 TOT EXPEND 448 209.6 259.9 262.9 270.6 315.2 355.5 383.0 392.0 423.3 459.7 640.2 FIRED 401 63.1 89.0 72.1 60.8 92.2 108.8 116.2 101.2 105.7 110.4 129.9 EXT. FIN. 402 38.0 90.2 54.6 63.9 81.3 59.7 52.6 46.2 52.2 57.7 107.3 DN DRU 407 0.0 58.7 11.7 3.8 2.6 4.7 4.0 4.8 5.4 6.3 7.7 FI BP 21 415 0.0 0.0 5.8 -6.9 8.3 44.4 59.6 50.2 49.1 46.4 14.9 FIMEDGDP 520 9.4 10.5 7.7 6.0 8.1 8.2 8.0 6.3 5.9 5.6 4.3 FIN BAP/GW1 414 0.0 0.0 0.6 -0.7 0.7 3.5 4.1 3.1 2.7 2.3 0.5 SENICL 1/ including grants (capital and budgetary) 2 / excluding new rescheduling and use of IMF resources 11:38 Al - 94 - Annex VI Page 2 of 6 MANAGED ADJUSTMENT SCENARIO ITEm 191 1982 1993 1994 1985 1996 1987 1989 1989 L990 1995 D. Exports and Imports (current CFAF billions) GROtMUNOTS 130 9.1 44.3 59.4 53.5 31.7 65.7 73.8 82.8 93.0 99.5 134.0 FISH 131 27.9 37.6 41.7 49.0 55.2 62.8 71.4 81.3 92.6 105.5 203.2 PHOSPHATES 132 19.9 21.6 22.7 29.6 26.5 29.6 33.8 38.6 44.1 50.4 63.1 PETiLEUH 133 38.3 45.6 40.8 45.7 47.0 47.3 50.9 54.8 58.9 63.4 116.1 SALT 134 2.3 2.9 3.1 5.4 5.9 6.4 7.3 8.3 9.3 10.2 16.6 COTTON 135 2.0 4.8 8.1 6.0 7.3 8.5 9.3 10.1 11.3 9.7 -10.4 FERTILIZERS 136 2.6 2.0 3.9 12.2 24.6 37.6 44.5 52.7 62.4 73.0 102.6 OIERS 137 33.6 30.4 32.0 34.7 40.0 45.1 51.0 57.9 65.9 74.8 122.5 ENTREPOT 138 3.1 4.4 4.9 5.5 5.6 6.3 7.1 8.0 9.0 10.2 16.2 EXP NFS 139 97.2 108.2 107.0 112.6 127.2 142.8 160.4 191.0 204.7 231.3 367.9 EXPWFS 206 226.0 301.8 323.6 352.2 371.0 452.1 509.5 575.5 651.1 728.8 1131.7 IM FOOD 151 72.9 71.5 69.0 65.0 62.4 71.6 77.2 85.2 92.7 106.8 144.6 IIP PET 152 90.8 82.6 77.4 105.0 93.9 96.9 100.4 110.0 120.6 132.9 220.6 OTH.CON.6 145 36.9 50.7 54.2 57.2 61.0 68.6 74.1 93.2 93.7 106.4 171.2 INT.600DS 146 68.8 82.1 93.8 91.8 99.0 113.8 127.6 142.98 160.2 181.4 294.0 CAPITAL 6. 149 32.5 45.0 62.6 55.5 60.5 78.2 85.0 93.9 104.3 115.6 168.5 ENTEROPT 150 19.3 22.0 23.6 24.8 25.2 29.1 31.2 34.6 38.4 43.2 65.3 FR. & INS. 153 37.4 42.6 45.7 48.1 48.8 56.2 60.5 66.9 74.1 83.3 125.5 IFS 74 88.5 106.7 111.4 122.3 131.3 156.1 171.4 192.9 218.3 246.2 389.9 IIPGFS 208 362.3 418.0 446.3 473.5 484.5 558.0 606.4 675.7 754.1 849.0 1327.7 E. Balance of Payments (current US dollars, million) RESBAL 209 -501.7 -353.3 -322.0 -277.6 -243.1 -252.1 -230.8 -238.5 -245.1 -286.1 -466.6 NETFSY 205 -93.8 -87.0 -120.7 -164.8 -155.3 -146.1 -156.6 -160.7 -163.9 -168.5 -217.8 NETCTR 194 31.3 29.5 29.1 31.1 32.1 34.1 37.2 40.6 43.6 46.2 61.9 CURBAL 209 -564.2 -410.8 -413.6 -411.3 -366.3 -364.0 -350.3 -358.7 -365.4 -408.4 -622.6 NETDIRFORINV 197 65.9 44.4 51.4 91.3 53.5 60.3 63.9 67.8 .1.8 76.2 101.9 DBTRT 122 122.2 106.5 112.8 129.1 117.8 124.6 132.0 140.0 148.4 157.3 231.1 DBT0FF 92 214.8 260.1 303.7 198.9 235.7 261.1 282.0 300.4 317.4 336.6 516.3 BBTPRI 93 2.9 45.7 14.4 11.4 60.1 38.3 29.4 18.3 26.0 22.2 20.0 ANTOFF 95 12.2 8.5 13.7 24.9 42.6 86.6 103.7 130.5 145.3 167.0 203.9 ANTPRI 96 35.8 1.4 3.3 10.2 15.6 40.2 55.6 54.7 47.1 25.2 22.3 IETHLT 104 169.6 295.8 301.1 175.2 237.6 172.6 152.1 133.5 150.9 166.6 310.1 SHTER 198 11.0 3.0 2.8 3.0 3.5 3.5 3.6 3.7 3.8 4.0 5.1 CAPE 199 195.5 -38.9 -54.4 12.9 -46.2 0.0 0.0 0.0 0.0 0.0 0.0 GAPFIL 210 0.0 0.0 0.0 0.0 0.0 2.9 -1.3 13.7 -9.6 4.3 -25.6 RESBALIDP 252 -20.3 -13.8 -13.1 -11.9 -10.0 -8.0 -6.7 -6.2 -5.8 -6.1 -6.5 CURBALISDP 253 -22.9 -16.0 -16.8 -17.7 -15.0 -11.5 -10.2 -9.4 -8.6 -8.7 -8.7 -95 - Annex VI Page 3 of 6 MANAGED ADJUSTMENT SCENARIO ITEM 1981 1992 1993 1984 1985 1986 1987 1988 1989 1990 1995 F. External Debt (current US dollars, million, or ratio) CONOFF 87 311.3 498.4 195.6 252.6 265.0 295.2 310.9 338.9 366.8 388.9 604.9 COURE 88 31.5 47.9 16.2 59.7 19.4 10.0 10.0 10.0 20.0 20.0 20.0 ELT 113 979.6 1239.4 1493.9 1546.1 1793.8 1956.4 2108.4 2242.0 2392.9 2559.5 3932.1 80DGAP 214 0.0 0.0 160.5 179.8 201.3 228.4 254.5 298.8 325.0 368.3 413.5 DOD#6AP/IP 303 39.7 48.3 67.1 74.2 81.6 69.2 68.5 66.5 64.0 62.2 59.5 BEBT SEIICE 367 89.2 48.0 59.2 106.5 159.1 249.0 291.0 319.3 330.7 335.0 406.6 DS/EXPMFS 264 10.7 5.2 7.0 10.8 17.3 20.9 21.7 21.1 19.0 17.1 13.3 BSR-W/P 360 10.7 5.2 7.0 13.2 20.0 23.1 24.0 23.3 21.3 19.3 15.1 (current CFAF billions) INT DON 394 10.0 10.0 10.0 0.6 0.6 1.0 1.1 1.2 1.3 1.4 1.7 INT FOR 396 11.2 12.5 16.0 24.0 38.3 42.3 44.9 44.6 44.2 44.7 57.2 INT. ON GAP 217 0.0 0.0 0.0 8.4 10.1 10.1 11.5 12.8 15.1 16.4 19.9 INTERESTS 397 21.2 22.5 26.0 33.0 49.0 53.4 57.5 58.7 60.5 62.5 78.6 TOTAL REU 38B 146.5 .170.9 190.8 209.8 223.0 246.7 266.8 290.8 317.6 349.3 510.3 G. irices (1979 = 100) IPRICE 18 113.9 9B.9 95.4 104.2 101.9 120.1 128.: 137.8 147.8 158.6 205.1 NPRICE 189 120.1 111.3 109.6 110.1 103.6 122.5 131.8 142.1 153.4 165.5 212.4 TTINDX 190 94.8 88.9 97.0 94.7 9B.3 98.0 97.5 96.9 96.4 95.9 96.5 IPB 1/ 250 120.1 131.9 143.3 161.5 176.9 190.0 203.4 217.4 232.2 247.8 308.8 H. Per Capita Consumption (CFAF '000, 1979 prices) PC'PP 592 74.7 76.5 77.8 75.1 73.3 74.3 72.6 73.2 73.8 75.0 80.8 GC'/POP 593 19.8 20.0 20.1 20.0 19.0 19.6 18.0 17.4 17.0 16.7 15.7 C'IPaP 581 94.5 96.5 97.9 95.1 92.3 92.9 90.7 90.6 90.8 91.7 96.5 SEN/CAN/79 1/ GDP deflator 12/06/95 11:41 AM - 96 - SUMMARY RESULTS FORCED ADJUSTMENT SCENARIO Annex VI Page 4 of 6 IER 1981 1982 19B3 1984 1985 1996 1987 1988 1989 1990 1995 A. Growth and Production (in constant 1979 CFAF billions) GDP 23 558.3 640.4 656.0 629.2 642.5 699.B 688.9 701.1 715.0 72B.5 801.7 PRIMRY 38 107.7 134.3 140.9 114.6 120.1 134.6 129.1 131.3 133.7 136.1 149.7 SECONDARY 44 144.7 165.6 169.8 167.4 165.9 169.2 171.9 175.1 178.4 181.7 199.6 TERTIARY 48 305.9 340.5 345.3 347.2 356.4 385.0 397.8 395.3 402.9 410.6 452.3 GDPG' 227 0.0 14.7 2.4 -4.1 2.1 7.2 0.0 1.9 1.9 1.9 2.0 YAGRGR' 219 -5.6 24.7 4.9 -18.7 4.8 12.1 -4.1 1.8 1.8 1.8 2.0 YINDGR' 218 5.7 14.4 2.5 -1.4 -0.9 2.0 1.6 1.9 1.9 1.9 1.9 YOTMlR 220 -1.9 11.3 1.4 0.6 2.6 8.0 0.7 1.9 1.9 1.9 2.0 I/GDY' 257 15.5 19.4 13.7 10.B 12.9 11.9 12.0 12.0 12.1 12.1 12.2 ICOR 262 0.2 1.0 7.7 -3.2 5.1 1.8 1241.4 6.4 6.3 6.3 6.2 B. Savings and Investment (in current CFAF billions, or Z share) 6PCUR 251 670.3 845.0 939.8 1015.9 1136.8 1334.2 1455.7 1614.8 1765.0 1901.1 2816.4 CONS-PUT 421 545.9 637.0 729.5 803.8 869.6 1012.3 1086.9 1206.9 1319.9 1426.3 2114.6 PC/BP 92 81.4 75.4 77.6 79.1 76.5 75.9 74.7 74.7 74.0 75.0 75.1 6W. CONS. 500 150.7 169.0 186.5 201.5 215.5 236.5 259.7 293.9 307.2 328.9 477.6 SC/P 83 22.5 20.0 19.8 19.9 19.0 17.7 17.8 17.6 17.4 17.3 17.0 D0N SAUING 531 -26.2 39.0 23.8 10.6 51.7 85.3 109.1 124.1 137.9 145.9 224.2 DS/0Y' 258 -0.6 8.4 3.8 2.1 5.1 6.5 7.3 7.4 7.6 7.5 7.6 INUESTHENT 425 110.1 155.2 146.5 131.9 165.3 174.7 191.5 213.0 233.8 253.0 376.0 TOT.I/GDP 84 16.4 18.4 15.6 13.0 14.5 13.1 13.2 13.2 13.2 13.3 13.4 RESBAL 549 -136.3 -116.2 -122.7 -121.3 -113.5 -89.4 -82.4 -9.0 -95.8 -107.0 -151.8 RESBAL/6DP 252 -20.3 -13.8 -13.1 -11.9 -10.0 -6.7 -5.7 -5.5 -5.4 -5.6 -5.4 C. Public Finance (current CFAF billions ) TOTAL REU/ 388 146.5 170.9 190.8 209.B 223.0 242.8 261.7 285.2 30B.5 331.4 459.5 CURR EXP 389 174.3 195.4 201.2 221.7 257.0 292.0 318.6 342.7 369.5 398.7 579.0 CUR GOU SAYE 398 -27.8 -14.5 -10.4 -11.9 -34.0 -49.2 -56.9 -57.6 -61.0 -67.3 -119.5 DEU EXP 399 30.3 54.9 40.5 44.1 46.9 35.2 39.4 44.1 48.8 53.2 91.8 ARREARS 445 5.0 19.6 21.2 4.8 11.3 15.0 15.0 0.0 0.0 0.0 0.0 TOT EXPEND 448 209.6 259.9 262.9 270.6 315.2 342.2 373.0 396.9 418.3 451.9 660.8 FINRED 401 63.1 89.0 72.1 60.8 92.2 99.4 111.3 101.7 109.B 120.5 201.3 EXT. FIN. 402 38.0 90.2 54.6 63.9 81.3 57.8 48.3 39.1 37.9 35.1 51.8 DON BRUB 407 0.0 58.7 11.7 3.8 2.6 4.0 3.8 4.7 4.7 4.6 5.9 FIN BAP - 415 0.0 0.0 5.8 -6.9 8.3 37.7 59.2 57.9 67.2 80.8 143.6 FINRD/WP 520 9.4 10.5 7.7 6.0 8.1 7.5 7.6 6.3 6.2 6.3 7.1 FIN GAP/GDP 414 0.0 0.0 0.6 -0.7 0.7 2.8 4.1 3.6 3.8 4.3 5.1 SEN/. 1/ including grants (capital and budgetary) new 2/ excluding/rescheduling and use of IMF resources 12/06/85 5:00 PM - 97 - Annex VI Page 5 of 6 FORCED ADJUSTMENT SCENARIO ITEm 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1995 D. Exports and Imports (current CFAF billions) GROUNDnUTS 130 9.1 44.3 59.4 53.5 31.7 65.8 69.1 72.6 76.2 90.0 97.9 FISH 131 27.9 37.1 41.7 48.0 55.2 62.8 70.4 78.9 99.5 96.7 150.6 PHOSPHATES 132 19.9 21.6 22.7 28.6 26.5 29.6 33.9 38.7 44.2 50.5 63.2 PETROLEUM 133 38.3 45.6 40.8 45.7 47.0 47.3 49.9 52.5 55.3 58.3 95.9 SALT 134 2.3 2.9 3.1 5.4 5.9 6.4 7.3 8.2 9.1 10.0 15.9 COTTON 135 2.0 4.8 8.1 6.0 7.3 8.5 9.1 9.5 10.2 11.1 14.2 FERTILIZERS 136 2.6 2.0 3.9 12.2 24.6 37.7 43.8 50.9 59.2 68.8 95.7 OTHERS 137 33.6 30.4 32.0 34.7 40.0 45.2 49.5 54.5 60.1 64.7 80.6 ENTREPOT 138 3.1 4.4 4.9 5.5 5.6 6.3 6.9 7.6 8.4 9.2 12.9 EXP IFS 139 87.2 108.2 107.0 112.6 127.2 142.9 157.2 173.7 192.3 212.7 304.4 EXPSFS 206 226.0 301.8 323.6 352.2 371.0 452.5 496.9 547.1 603.5 662.1 931.3 IMP FOOD 151 72.9 71.5 69.0 65.0 62.4 73.3 79.9 90.4 102.4 116.2 144.1 IMP PET 152 80.8 82.6 77.4 105.0 93.9 97.0 101.0 108.4 116.4 125.0 207.4 OTH.CON.6 145 36.9 50.7 54.2 57.2 61.0 70.6 74.2 81.6 99.7 98.7 138.7 INT.GODS 146 68.9 82.1 93.8 91.8 99.0 108.3 117.7 129.9 141.4 155.0 212.1 CAPITAL 6. 149 32.5 45.0 62.6 55.5 60.5 65.3 69.8 76.1 93.0 90.5 121.0 ENTEROPT 150 19.3 22.0 23.6 24.8 25.2 28.1 29.8 32.6 35.7 39.1 53.3 FR. t INS. 153 37.4 42.6 45.7 48.1 48.8 54.4 57.7 63.1 69.1 75.6 102.7 NFS 74 88.5 106.7 111.4 122.3 131.3 153.8 164.6 181.1 199.8 220.1 309.2 IPMP6S 208 362.3 418.0 446.3 473.5 484.5 542.0 579.4 636.1 699.3 769.1 1083.1 E. Balance of Payments (current US dollars, million) RESBAL 208 -501.7 -353.3 -322.0 -277.6 -243.1 -212.9 -196.3 -211.8 -228.2 -254.8 -361.5 NETFSY 205 -93.8 -87.0 -120.7 -164.8 -155.3 -146.1 -156.7 -161.2 -164.8 -168.6 -187.7 NETCTR 194 31.3 29.5 29.1 31.1 32.1 34.1 37.2 40.6 43.6 46.2 61.9 CRBAL 209 -564.2 -410.8 -413.6 -411.3 -366.3 -324.9 -315.8 -332.5 -349.4 -377.2 -497.3 NETDIRFORINU 197 65.9 44.4 51.4 91.3 53.5 60.3 63.9 67.8 71.8 76.2 101.9 BBTGRT 122 122.2 106.5 112.8 129.1 117.8 124.6 132.0 140.0 148.4 157.3 231.1 DBTOFF 92 214.8 260.1 303.7 198.9 234.8 255.4 269.4 279.8 286.5 293.4 366.0 BBTPRI 93 2.8 45.7 14.4 11.4 60.1 38.3 29.4 18.3 16.0 2.2 0.0 AmTOFF 95 12.2 8.5 13.7 24.9 42.6 86.6 103.7 130.5 145.9 169.0 203.9 AmTPRI 96 35.8 1.4 3.3 10.2 15.6 40.2 55.6 54.7 47.1 25.2 12.3 NETHLT 104 169.6 295.8 301.1 175.2 236.8 166.9 139.5 113.0 109.4 101.3 149,8 SHTERK 198 11.0 3.0 2.8 3.0 3.5 3.5 3.6 3.7 3.8 4.0 5.1 CAPNEI 199 195.5 -38.9 -54.4 12.8 -45.3 0.0 0.0 0.0 0.0 0.0 0.0 GAPFIL 210 0.0 0.0 0.0 0.0 0.0 -30.5 -23.2 8.1 15.9 38.4 -0.6 RESBAL/GDP 252 -20.3 -13.8 -13.1 -11.9 -10.0 -6.7 -5.7 -5.5 -5.4 -5.6 -5.4 CUR3AL/SDP 253 -22.9 -16.0 -16.8 -17.7 -15.0 -10.2 -9.1 -8.6 -8.3 -8.3 -7.3 - 98 - Annex VI Page 6 of 6 FORCED ADJUSTMENT SCENARIO ITErm 1991 1992 1993 1994 1985 1996 1987 1988 1989 1990 1995 F. External Debt (current US dollars, million, or ratio) COAFF 87 311.3 498.4 195.6 252.6 272.0 304.2 323.6 338.0 353.5 367.9 482.9 mR 88 31.5 47.9 16.2 58.7 19.4 10.0 10.0 10.0 10.0 0.0 0.0 W081LT 113 979.6 1239.4 i493.9 1546.1 1782.9 1949.9 209.3 2202.3 2311.7 2413.1 3033.1 D0AP 214 0.0 0.0 160.5 179.8 201.3 195.0 195.2 226.7 269.8 340.6 779.2 BODIGAP/GP 303 39.7 48.3 67.1 74.2 81.5 67.5 65.9 63.2 61.4 60.8 56.9 DT SRVICE 367 89.2 48.0 59.2 106.5 159.1 249.0 297.1 312.6 323.6 330.4 403.1 -S/EPMFS 264 10.7 5.2 7.0 10.8 17.3 20.9 22.3 22.2 20.6 18.9 14.4 DSR-VBAP 360 10.7 5.2 7.0 13.2 20.0 23.1 24.3 24.0 22.5 21.0 18.2 (current CFAF billions) INT 101 394 10.0 10.0 10.0 0.6 0.6 1.0 1.1 1.2 1.3 1.4 1.7 INT FOR 396 11.2 12.5 16.0 24.0 38.3 42.3 45.0 44.8 44.6 44.8 44.5 INT. ON GAP 217 0.0 0.0 0.0 8.4 10.1 10.1 9.8 9.8 11.4 13.6 35.1 WEUT 397 21.2 22.5 26.0 33.0 49.0 53.4 55.9 55.9 57.3 59.8 81.3 TOTAL REV 146.5 170.9 !90.8 209.8 223.0 242.8 261.7 285.2 308.5 331.4 459.5 G. Prices (1979=100) XPRICE 18 113.9 99.9 95.4 104.2 101.9 120.2 128.5 137.8 147.9 158.9 207.0 IPHICE 189 120.1 111.3 109.6 110.1 103.6 122.3 131.4 141.7 153.1 165.4 212.3 TTIIX 190 94.8 88.9 87.0 94.7 98.3 98.3 97.8 97.2 96.6 96.1 97.5 IPB 1 250 120.1 131.9 143.3 161.5 176.9 193.7 211.3 230.1 246.9 261.0 351.3 H. Fer Capita Consumption (CFAF '000, 1979 prices) PC'PP 592 74.7 76.5 77.8 75.1 73.3 76.0 72.7 71.9 71.0 70.3 67.2 GC'IPOP 583 19.8 20.0 20.1 20.0 19.0 18.6 18.2 17.7 17.3 16.9 15.9 C'IPOP 591 94.5 96.5 97.9 95.1 92.3 94.6 90.8 89.6 88.3 97.2 83.0 SENICll/79 1/ GD? deflator 12/06/85 5:02 PH M A U R I T A N l A .. fAt0EIA S E N E G A L 0•••. in,erneteen .Buae MAL 8 KNis ..i I R.E O - C.. 0 N lmltt. o sit ~ DMAsa= cåvRøAot\ MIN. AOcean O ER:l 'E G - Atlaniic R E G I 0 N REGION OF - E 3. CAP-VERT \ F 9 .-T- H 5 Ocean I ~s o i - RE GE I N FM A 14* am ocC n S f N E G A ' O R E N .T--A t E G F C A 5 A A N C E sessemammaroe guouo - .. G GUINE AF -CBASS U GMUA7NNEC