Country Report Senegal March 2011

Outlook for 2011-12: Fiscal policy

Despite the IMF's medium-term fiscal deficit target of 4% of GDP and Fund-approved stimulus, Senegal's 2011 budget envisages the deficit widening to 5.9% of GDP, despite earlier expectations that the government would seek to narrow the deficit. Nevertheless, the authorities remain committed to restraining current expenditure, which will grow only marginally; the bulk of this primarily foreign-financed spending will go on infrastructure investment and education, in order to underpin future growth. The immediate fiscal cost of reducing arrears to the private sector and settling remaining extra-budgetary spending and public institution and agency debt should be offset by the economic benefits of improving (slowly) the business environment and encouraging timely private-sector tax payments, supported by a clear tax code and lower taxes. In order to support its infrastructure investment plans, the government is seeking to refinance its 2009 US$200m Eurobond, issuing further project-linked debt of up to US$300m in 2011. The Economist Intelligence Unit sees the budget deficit widening from an estimated 4.9% of GDP in 2010 to 6% in 2011, before narrowing back to 4.9% in 2012 as revenues accelerate.

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