Senegal - Economic Recovery Credit (ERC)

Report No. PIC994 Project Name Senegal-Economic Recovery Credit (ERC) Region Africa Sector Non-Sectoral Project ID SNPA35592 Borrower Government of Senegal Implementing agency Ministry of Economy, Finance and Planning Dakar Republic of Senegal Contact: Mr. Ousmane Diene Tel: (221) 234845 Facsimile: (221)224195 Date Prepared March 11, 1994 Appraisal Date January-February, 1994 Board Date March 17, 1994 Credit Objectives The ERC seeks to assist the Government of Senegal to deepen its adjustment strategy and to ensure that gains in competitiveness are consolidated, social sector expenditures for 1994 are protected in real terms, and the adverse effects of the devaluation on vulnerable groups are minimized. Credit Description The African Members of the Franc Zone decided to devalue their currency, the CFA franc, effective January 12, 1994. The proposed credit would support the post-devaluation reform program for 1994 as outlined in the Government's Statement of Economic and Social Policies dated February 23, 1994, whose main objectives are private sector-led growth and the alleviation of poverty. The Senegal Government has already taken a series of key macroeconomic and structural measures to regain and consolidate competitiveness. These measures include: (i) the devaluation of the CFA franc from 50CFAF to 100CFAF/1FF; (ii) an increase in the producer price of groundnuts of 43% and of cotton of 30%; (iii) a program of social measures to mitigate the effects of the devaluation on vulnerable groups; (iv) prudent demand management policies to reduce public sector absorption and limit public wage increases; (v) reduction and simplification of tariffs and domestic taxation; and (vi) protection of social sector expenditures in real terms. The ERC is designed to support implementation of these measures in 1994. Implementation Arrangements (Procurement and Disbursement) The proposed Credit would be of SDR18.2 million (US$ million equivalent). Due to the urgent nature of the operation, the entire credit is proposed for disbursement in a single tranche shortly after effectiveness. Proceeds of the credit would reimburse 100% of the foreign exchange costs of eligible imports of public or private sector origin, except for negative list and imported goods already funded under bilateral or multilateral credits. The proposed date of eligibility would be set in light of the Government's preparation of a deepened austerity program in August 1993. In order to permit timely disbursements in the amounts needed to keep to program targets, the full amount of the credit would be eligible for retroactive financing. August 15, 1993 is proposed as the cut-off date for retroactive financing. Environmental Category In conformity with IDA policies for adjustment operations, no environmental rating has been assigned. However, the operation would be consistent with IDA policy and would follow acceptable IDA procedures. Contact Point: Public Information Center The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone: (202)458-5454 Fax No.: (202)522-1500 Note: This is information based on an evolving project. Certain components may not necessarily be included in the final project. - 2 -