Statement by Enzo Del Bufalo at the Board meeting of January 29, 1998

International Bank for Reconstruction and Development 86885 International Development Association International Finance Corportation Multilateral Investment Guarantee Agency FOR OFFICIAL USE ONLY CONFIDENTIAL EDS98-46 January 28, 1998 Board Meeting of January 29, 1998 Statement by Enzo Del Bufalo Senegal: Country Assistance Strategy We would like to commend the staff for this candid and str0ight-forward Country \:;-;i:;t:!I1CL' :..;ll":tte~\ p:ti-'l'l \\ l' CS!!L'Ci:illy ~ljiJII'CCi~lk the j)<tll:·.:.;•:!l••l-\ di:_tli•~~U•-' ill its [ii"CJ!:II":!li•.ll1_ <ts \\eli cts lls c~tmlicillL''>S in sllll\\ i11g iis jl:tst C\pcriL'IlLC :_u,d it_. ;llli'<•du<;litJ:l in the curn_:nl C \~;. \\ l' also belie\ C th:tl this Sll":tlcgy !'tlCLISCS ill the Ctllllltl")';,; j!l"illl:ll") ih.'CL':-i:)itiL'S in the rutllle. \\-L' consider the projected World L3ank Group \·olumc of assistance l'or the forthcoming years adequate. and the benchmarks that determine the different scenarios appropriate. We have five main comments: 1. We agree with the assertion mentioned in the document that no reduction of poverty incidence can occur without high, sustained, and employment generating economic growth (Paragraph 47). Therefore, we support the Bank's approach to pursue two objectives: (i) assistance in implementing the policies and programs aimed at more rapid and sustained growth; and (ii) assurance of the program's social sustainability. Attachment 1 of the document mentions that comparison of GINI coefficients from the 1994- 95 survey with those of previous years reflects that relative inequality has not increased, although the absolute number did. Therefore, we support the IBRD approach emphasizing projects that encourage economic growth. Nevertheless, we wonder if the balance is appropriate. According to figures provided in Annex B3, only 16% of the lending programs seem to achieve social sustainability. We feel more comfortable with the distribution for non-lending services: 60% to activities that promote growth, and 40% to reinforce social sustainability. 2. Macroeconomic achievements are very impressive, inflation has been driven down, the fiscal deficit is under control and the country has achieved a path of sustained economic growth. Notwithstanding, those achievements and the favorable expectations of economic growth in ..---;;:E_;:U (Senegal's main trade partner), the current account defi<;:i!. is, in our opinion, still This document has a restricted distribution and may be used by recipients only in ~ petformance of their official duties. Its contents may not otherwise be disclosed without World B;mk authorization.  2 worrisome (it is expected to remain around 6% over the coming years). On the other hand, Senegal maintains some external debt burden, that without Paris Club treatment could deteriorate the country's external sector. To finance the balance of payments deficit will be remarkably difficult, in a context of tight official aid and less capital in-flows, due partially to the Asian crisis. We would like the Bank to devote more attention to this subject. 3. The volume of savings is extremely low compared to countries with similar levels of development. The same occurs with investment. For this reason, we support fiscal reform oriented to increase public savings. Increasing tax revenues will also facilitate management of the external debt that is very high compared to fiscal income. We would also like to know if the Bank plans to become involved in an income-tax reform in addition to the VAT. 4. We support additional Bank involvement in the financial sector. The development in this area is crucial for Senegal since the private sector constitutes 80% of GDP. We hope that the ESW estimated for FY 99 will result in obtaining a loan for this purpose. As mentioned in the document it \Vould be quite interesting to see the de\'clopment of micro-credit. T(. it•dlht'li-:·.'i~~ :,; :t!su imporl:l!ll lllck\t_·f··:' !_',l;·:ii:tl 1 '11-'·•'i'' !!:-; h~·!l' \\ill ]-,_·Ill' illll':l:< 1 <i~~llli!·_·c~!lC..._' t •• l :.il··.t'i':·.1J>. i"'l'lldL:ctiur~ i11 >;;__.,,~~--~~~! r •.. \'\;1:\i'i ·'llt.~!" ·:._'L'[I:!·.~ h•._':-'1,lt_'S ~~.~;·i.:t. 1 lilli"L'. \\·~· :;!JIJ]'I<I'l ! !:( ··..; ··t'!(·,:·h 1:1 J'c':ii:h :;111~111 ;ttl•.! 111 :dill''1 ·-;i/•.' '.'!1kTpri:~~-·:; lhctl :tl'l' th1: h··st lllt.\111:-l !11 clltllill cl better distribution nr wealth. 5. Finally, as far as aid coordination is concerned, \\C understand thal it is being coordinated at a sectoral level by leading bilateral or multilateral agencies. Nonetheless, maybe there is no coordination on a global level. In this case, we think that the Bank could play a more important role in it.