Senegal - An economy under adjustment (Vol. 1 of 2) : Executive summary

Report No. 6454-SE Senegal An Economy under Adjustment Main Report February 13,1987 Western Africa Region FOR OFFICIAL USE ONLY n1~Ii' ~~a o!0rs ipayinotpothvs  CURRENCY EQUIVALENTS Currency Unit CPA Franc (CFAF) US$1.00 CPA 320 1/ CFAF 1 million US$3125 CFAF/US$ (Annual Average) (End Period) 271.7 1981 287.4 328.6 1982 336.3 381.1 1983 417.4 437.0 1984 479.6 449.3 1985 378.1 346.3 1986 322.8 MEASURES AND EQUIVALENTS 1 meter (m) = 39.37 inches (in) 1 square meter (mW) - 10.9 square feet (sq ft) 1 kilometer (km) 0.62 mil (ml) 1 hectare (ha) 10,000 I or 2.471 acres 1 acre - 4,047 m or 0.405 ha 1 kilogram (kg) - 2.2 pounds (lbs) 1 pound (lb) 0.454 kg 1 tonne (metric) - 2,205 lbs or 1,000 kgs FISCAL YEAR Government of Senegal July 1 - June 30 DEVELOPM2NT PLANS IVth Plan Fiscal years 1973/74 - 1976/77 Vth Plan Fiscal years 1977/78 - 1980/81 VIth Plan Fiscal years 1981/82 - 1984/85 VIIth Plan Fiscal years 1985/86 - 1988/89 1/ The CFA Franc (CFAF) is tied to the French Franc (FF) in the ratio of FF 1 to CFAF 50. The French Franc is currently floating. An Exchange rate of CFAF345 - US$1.00 is used for projection purposes in this report.  FOR OFFXIL US ONLY ABSTRACT Sives mid-1983, Senegal has made steady and substantial progress toward economic and financial adjustment. The economy has been progressively liberalized, production incentives have been strenthened and, through stricter demand management policies, the fiscal position and external account have registered substantial Ihprovements. However, economic growth has been sluggish, owing largely to the adverse impact of drought and continuing structural problems in several sectors. This study reviews Senegal's economic developments and adjustment efforts since the last Country Economic Memorandum (November 1984) and analyzes the country's medium-term growth prospects and its prospective financing gap. The report shows that the Government's determined effort to accelerate the rate of adjustment could, assuming the convergence of a number of favorable developments on the supply side, lead to faster growth togother with sustainable fiscal and external account deficits. This favorable outcome is, however, predicated on the assumpt4on that the Government will press ahead with policies to further liberalize the economy, contlnue the incentive policy reforms, and strengthen public sector management as well as policy planning. This document ha a sc distbutionand may be oud by repients onl In te pform of thei offica dutie ItB contn may not othrwis be dicoe withnt Word Bank authoriaon.  PREFACE This report was prepared on the basis of information obtained by a Bank mission consisting of Messrs. Christopher Redfern (mission chief), Eugene Scantele and Mohammad-Hassan Ordoubadi and Ms. Maria-Cristina Germany which took place in April-May 1986. It also takes into account the findings of various Bank missions which visited Senegal between January 1985 and June 1986 for the preparation and supervision of the Second Structural Adjustment Credit as well as of IMF missions which have colla- borated closely iD discussions on the adjustment program. Mr. Brian Ngo assisted in the preparation of the final draft. The word processing was carried out ably by Ms. Ann Joseph. The statistics used in the report are based on data provided by the Senegalese Government and the Senegal branch of the BCEAO (regional central bank). These generally cover the period up to December 1986. Many of the official data for the 1982-86 period used in compiling the Statistical Appendix are preliminary and subject to revision by the authorities. Following the detailed policy analysis presented in the last CEM 1/, this report sets out to provide an updated assessment of Senegal's recent economic developments and prospects and identify the broad priorities for the next phase of the adjustment program. This assessment takes account of progress made in implementing the first phase of the medium-term adjustment program which was endorsed by donors in December 1984, and of changes in the international economic situation which have taken place since the program was prepared. A review of economic developments in 1984-86 is contained in Chapter I of the report. Chapter II provides an account of recent adjustment efforts and their implications for Senegal's medium-term recovery prospects. Chapter III focuses on Senegal's use of financial resources in recent years, including the considerable efforts made to reduce the weight of the public sector in total claims on resources. Chapter IV is devoted to an analysis of aid and capital flows to Senegal by source and type, the structure and serviciag requirement of the external debt, and the prospective financing gaps on the balance of payments. The report was discussed with the Senegalese authorities in December 1986 and reflects their comments. 1/ "Senegal: Country Economic Memorandum" (Report No.5243-SE, Novamber 5, 1984)  LIST OF ACRONYMS AND ABBREVIATIONS ACC Agent Comptable Central BCEAO Banque Centrale des Etate de l'Afrique de l'Ouest BNDS Banque Nationale du Developpemetn Senegalais BOX Bureau d'Organisation et MAthodes CAA Caisse Autonome d'Amortissement CFP Contr8le Financier de la Pr4sidence CNTOS Centre National du Theatre Daniel Soran COF Contr81e des Operations Financieres COUD Centre des Oeuvres Universitaires de Dakar CPSP Caisse de P6rdquation et de Stabilisation des Prix CSS Compagnie Sucri4re S6n4galaise CSPT Soci6td Nationale des Phosphates de Taiba CVCCEP Commission de VWrification de Contr6le des Comptes des Etablissements Publics DTAI Direction du Traitement Automatique des Informations GES Groupements Economiques S6ndgalais GESP Groupe d'Etudes du Secteur Parapublic ISRA Institut S6n6galais de Recherches Agronomiques LTA Institut Technologiques Alimentaire LONASE Loterie Nationale du Senegal MEF Ministere de l'Economie et des Finances OHLM Office des Habitations a Loyer Mod6r6 ONCAD Office National de Cooperation et d'Assistance pour le D4veloppement OPT Office des Postes et Telecouunications PAD Port Autonome de Dakar PREF Programe de Redressement Economique et Financier RCFS R4gie des Chemins de For du Senegal SAED Societe d'Am6nagement et d'Exploitation des Terres du Delta SAFAL Socigtg Africaine de Fonderie et l'Aluminium SAFCOP Soci6t6 Africaine de Commercialisation des Produits de la Mer SAIH Socift6 Africaine Immobilire et Hoteliare SAR Sociftf Africaine de Raffinage SEIB Soci6t6 Electrique et Industrielle de Baol SENELEC Soci6t6 Nationale de l'Electricite SENOTEL Socift6 Anonyme do Gestion Immobili0re et HEoteli&re SERAS Socift6 d'Exploitation des RessourceF. Animales du S6n4gal SICAP Socit6 Ilwiobiliare du Cap Vert SIDEC Societe de Distribution et d'Exploitation Cin4matographique SODAGRI Societ6 de Developpcment Agricole et Industrielle SODEFITEX Soci6te de DUveloppement des Fibres Textiles SODESP Soci6t6 de D6veloppement de la Zone Sylvo-Pastora'e SODEVA Societ6 de D&veloppement et de Vulgarisation Agricole SOFISEDIT SociWt4 Financiere S6negalaise pour le D6veloppement Industriel et du Tourisme SOFRIGAL Soci6t6 des Frigorifiques du Senegal SOMIVAC Soci6t4 de la Mise en Valour de la Casamance SONACOS Soci6t6 Nationale de CommerciAlisation des Ol4agineux de S4n6gal SONAR SociWt6 Nationale d'Approvisionnoment Rural SONATRA Soci6t6 Nationale de Transport AWrien SONEES Soci6t6 Nationale d'Exploitation des Eaux du Sen6gal  SOTRAC Soci4t4 de Transport en Commun du Cap Vert SNTI Soci4tt Nationale de la Tomate Industrielle SNSSS Socift6 Nouvelle des Saline du Sine-Saloum SPBU Soci4t6 Propri6taire de 1'H8tel de l'Union SSPT Soci4t4 S4n4galaise des Phosphates de Thies STN Socidt6 des Torres Neuves USB Union S4n6galaise de Banque  Table of Contents Page No. PR88AC.... ..... .................... .......... ........ ............ INTRODUCTION I.................................................... 1 I. RECENT ECONOMIC DEVELOPMENTS ................*............... 4 A. Background ............ ..................4.. ............. 4 B. Responses to the Crisis .......................... . 5 C. Recent Economic Developments 6.......................... 6 1. Production .............. 6 2. Employment, Wages and Prices ...................... 13 3. External Trade ......... ........................... 16 4. Balance of Payments ..... ........... .. 20 5, Public Finance .......................................... 22 Do Conclusion ........... .................................. 25 II. THE MEDIUM-TERM ADJUSTMENT PROGRAM .......................... 26 A. Long-Run Development Potential ......................... 26 B. Medium-Term Adjustment Objectives ...................... 27 C* Reforms Underway . 29 D. Constraints on the Speed of Adjustment ................. 30 E. Evaluation of Progress ...... ........................... 32 F. Medium-Term Growth Prospects ........................... 33 G. Potential Growth Constraints ...... ..................... 36 III. RESOURCE UTILIZATION ........ ..........................*.... 39 A. Macroeconomic Picture - A Summary ...................... 39 B. Strengthening Public Sector Management ................. 41 C. Recent Performance .....*.............***e*e*******e* 43 D. Making Better Use of Public Resources ...... ............ 48 B. Conclusion . 51 IV. RESOURCE REQUIREMENTS ..... ..................................... 53 A. Review of Aid Comitments/Flows, 198145 ............... 53 B. External Public Debt and Debt Service .................. 56 C. Balance of Payments Projections ......................... 59 D. Conclusion ............................................ 62 STATISTICAL APPENDIX MAP  LIST OF TEXT TABLES 1.1 Estimated Growth in GDP, 1982-86 7 1.2 Selected Agriculture Data for 1981/82-85/86 9 1.3 Growth in the Secondary Sector 12 1.4 Trends in Fish Landings 12 1.5 Price Indices and GDP Deflator 15 1.6 GD? and External Trade, 1980-85 16 1.7 Composition of Merchandise Exports 1982-86 17 1.8 Terms of Trade, 1982-1986 18 1.' Estimated Real Growth of Imports, 1981-85 18 1.10 Composition of Imports, 1982-86 19 1.11 Summary Balance of Payments, 1982-86 23 1.12 Government Financial Operations, Summary 23 1.13 Composition of Tax Revenues 24 1,14 Reduction in Domestic Indebtedness of Central Government 24 2.1 Policy Objectives for the Medium-Term Projections 34 2.2 Detailed Growth Assumptions for the Medium-Term Projections 35 2.3 Commodity Price Forecasts 36 3.1 National Accounts Summary 40 3.2 Public Finance Indicators 44 4.1 Commitments of NLT Loans and Grants 54 4.2 External Public Debt Outstanding, 1981-85 57 4.3 Selected Results of the Medium-Term Projections 59 4.4 Projected Resource Gap, 1986-95 60 4.5 Projected Current Account Deficit, 1986-95 61 4.6 Projected Balance of Payments, 1986-95 62  Page I of 2 AIWA M-NIM i 1 MIYMIA- SIEM cc . i Wbal 19,20 B . 1. 6.4 u 4cn~I ) 314 pr s. 1 Ald~u1tara 10I30sq. ra lea of10)2 55,.2 u ot1eprq.I 1OPUJTf OIAR7iS1 (1981) (19?8) Cple Bireb kg. (par 1,0001 41t P1Auti WC: d1 1(1981) 14,200 9e 1 a th tef ( tr 1,000 1. Vt bed 0 3)4 briti lAte (p4 1,00) a = DTSI WI (1960) ___ _ _ _ __ _ _ _ Sof Natk re Not avalabble .. IH4*ft aAne41^ 62.5 TlW"t 0iinus* 3.2 A m PI) (v AC (1 0cOied dm11ii~s without I of Poptatim - ltal 16x safewter (S) 63.0 -10ual ( e ) mNm (19B1i83) SwA9| L Caloric totdo as S of B_mirmonm 9 9.0 AdhlU Lltey Pate 2 10.0 Per Cap:a Potein Tatke daiy) 10.0 Ptbm Sdto atolJat S 48.0 P? GCA tSn 1985Sg: 138*370 QM76 NAT1IWL PR=INU 11498 MKIAL urn OF (MM (2 fameui Wed. 08 *t 1960-70 1970-75 1975-80 190.5 P at H*et Prices 2417 100.0 2.5 1.9 0.6 2.6 Grossw Dat. Insmd nt 351 14.5 1.4 3.0 .6 _0 *OS8?ati(NUSBi fp -99 4.1 2.1 3.1 -3"1'.7 3 Current Acsmcat blane -451 -18.7 . . &xports of Coods, NPES 802 33.2 0.1 1.0 -3.2 0.3 taports of Goods, NFS 1123 46.5 0.2 1.4 -2.0 -0.7 MMw, MDiWr AND WCM 1N83 Valuo Adad Labor Fobce V.A. per lkedr AgtkultxiLbure 537.1 21.7 1.9 77.0 287 28.0 Tit1istiy 596.7 24.1 0.2 10.0 2456 241.0 Sezvices 1342.2 54.2 0.3 13.0 4208 414.0 Total 2476.0 10D.0 2.4 100.0 1017 100.0 a1/82 82/83 83/84 84/85 85/86 hbBFs a8nd le-4*B 46 43 48 49 48 7.4 Oppratlng ~euYixtwems 35 31 33 30 33 1.4 InteRret on publlc debt 10 13 18 20 18 22.3 Treaairqy.accounts,oet 9 13 1 1 1 Orb