Senegal - World Banksiteresources.worldbank.org/INTAFRSUMESSD/... · Mr Wade !s party, the Parti dØmocratique sØnØgalais (PDS), will retain its solid majority in the National Assembly

Country Report

Senegal

May 2006

The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom

Senegal at a glance: 2006-07

OVERVIEW Senegal!s president, Abdoulaye Wade, is expected to remain in power until the presidential election, due on February 25th 2007, and probably beyond if he stands for re-election, which is highly likely. Mr Wade will be 80 years old in May and appears to be in good health, although there have been rumours that his frequent visits abroad are for treatment of a serious medical condition. Mr Wade!s party, the Parti démocratique sénégalais (PDS), will retain its solid majority in the National Assembly until the legislative election, which had been due in April 2006, but will take place on the same day as the presidential poll. Mr Wade!s political dominance has been recently challenged by the announcement by the former prime minister, Idrissa Seck, that he will run in the presidential election. If Mr Seck is allowed to run, he is likely to be a serious contender provided he can secure the backing of at least one of the main parties. The government will continue to pursue a donor-supported economic reform programme in order to obtain a non-financial facility with the IMF, to replace the three-year poverty reduction and growth facility (PRGF), which expired in late April 2006. Real GDP growth is expected to fall to 5% in 2006, partly owing to weaker industrial-sector growth as a result of high oil prices, before rising slightly to 5.1% as oil prices fall.

Key changes from last month

Political outlook • There have been no major changes to the Economist Intelligence Unit!s

political outlook.

Economic policy outlook • There have been no major changes to our economic policy outlook.

Economic forecast • Following the publication of new official trade data, we have revised our

current-account forecast: we expect the current-account deficit to narrow slightly from an estimated 10.3% of GDP in 2005 to 10.2% of GDP in 2006 and 9.8% of GDP in 2007.

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Senegal 1

Country Report May 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006

Contents

Senegal

3 Summary

4 Political structure

5 Economic structure 5 Annual indicators 6 Quarterly indicators

7 Outlook for 2006-07 7 Political outlook 8 Economic policy outlook 10 Economic forecast

13 The political scene

20 Economic policy

23 The domestic economy 23 Economic trends 25 Agriculture 26 Mining 27 Industry 28 Infrastructure and communications 30 Financial and other services

30 Foreign trade and payments

List of tables 10 International assumptions summary 12 Forecast summary 24 Real GDP growth by sector 25 Agricultural production 26 Fish production 27 Industrial production index 29 Growth in mobile phone subscribers, 2005 30 Financial indicators 31 External trade 32 External debt, 2003

2 Senegal


List of figures

13 Gross domestic product 13 Consumer price inflation 28 Dakar to Bamako road improvement program

Senegal 3


Senegal May 2006

Summary

The Economist Intelligence Unit expects the president, Abdoulaye Wade, to remain in power until the presidential election scheduled for 2007, and possibly beyond if he stands for re-election. Given the divisions within the ruling party, Parti démocratique sénégalais (PDS), between supporters of the former prime minister, Idrissa Seck, and supporters of Mr Wade, the postponement of the legislative election until 2007 has given the PDS time to shore up its support, making a PDS victory in the election more likely. The government will continue to pursue a donor-supported economic reform programme, with the aim of obtaining a non-financial arrangement with the IMF. Real GDP growth is expected to fall, from an estimated 6.1% in 2005 to 5% in 2006, partly owing to weaker industrial growth as a result of high oil prices, before slightly rising to 5.1% in 2007 as oil prices begin to fall.

The former prime minister, Idrissa Seck, has been freed from Rebeuss prison in the capital, Dakar. Less than two months after his release, Mr Seck announced his candidacy in the presidential election scheduled for February 25th 2007. A new opposition coalition, the Coalition populaire pour l!alternance (CPA), has been created to present a united front against Mr Wade in the next elections.

The government is seeking a policy support instrument (PSI) arrangement from the IMF in 2006. A private company, Aéroport International Blaise Diagne (AIDB) has been created to have oversight of the project to build a new airport at Ndiass, 45 km north-east of Dakar. The IMF has published the government!s second annual progress report on the implementation of its poverty reduction strategy paper (PRSP).

The Ministry of the Economy and Finance has announced a substantial upward revision to its estimate of real GDP growth in 2005, to 6.1%, as a result of stronger than expected growth in the primary sector and lower GDP growth in 2004. The fiscal deficit is estimated to have fallen to 1% of GDP in 2005.

According to data from the economy and finance ministry, merchandise exports rose by 8.4% in 2005, to CFAfr730.9bn (US$1.39bn), despite a poor performance from Senegal!s main export commodities"food, cotton, cement, phosphates and chemical products"which represent 59% of total merchandise exports.

Editors: Juliette Grundman (editor); Roger Boulanger (consulting editor) Editorial closing date: May 2nd 2006 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule

Outlook for 2006-07

The political scene

Economic policy

The domestic economy

Foreign trade and payments

4 Senegal


Political structure

République du Sénégal

Unitary republic

Based on the Napoleonic Code and the constitution of January 2001

National Assembly, with 120 members elected for five years by universal suffrage on a mixed system of first-past-the-post (65 seats) and proportional representation (55 seats)

President, elected by universal suffrage, serves a five-year term of office and may stand for re-election once; a transitional provision allows Mr Wade to serve his current seven-year mandate

March 2000 (presidential), April 2001 (legislative); next legislative and presidential elections to be held on February 25th 2007

The president and his Council of Ministers; last major cabinet reshuffle April 2004

Parti démocratique sénégalais (PDS, the dominant party in the Assemblée nationale); Alliance des forces du progrès (AFP); Parti socialiste (PS, the former ruling party); Union pour le renouveau démocratique (URD); Ligue démocratique-Mouvement pour le parti du travail (LD-MPT); And-jëf/Parti africain pour la démocratie et le socialisme (AJ/PADS); Parti de l�indépendance et du travail (PIT)

President Abdoulaye Wade (PDS) Prime minister Macky Sall (PDS)

Agriculture & water Habib Sy (PDS) Economy & finance Abdoulaye Diop (PDS) Foreign affairs Cheikh Tidiane Gadio (PDS) Infrastructure, public works & transport Habib Sy (PDS) Justice Cheikh Tidiane Sy (PDS) Maritime economy Djibo Kâ (URD)

Agriculture, water & food security Farba Senghor (PDS) Civil service, labour & employment Adama Sall (PDS) Economy & finance Abdoulaye Diop (PDS) Education Moustapha Sourang (no party) Energy & mines Madické Niang (PDS) Environment & conservation Thierno Lo (PDS) Health Abdou Fall (PDS) Industry & crafts Bineta Bâ Samb (AJ/PADS) Information Bacar Dia (FP) Infrastructure, equipment & transport Mamadou Seck (PDS) Interior Ousmane Ngom (PDS) Planning & sustainable development Mamadou Sidibe (PDS) Small & medium-sized enterprises Marie-Pierre Sarr Traoré (PDS) Tourism & air transport Ousmane Masseck Ndiaye (PDS) Trade Mamadou Diop (AJ/PADS)

Damo Justin Barro (interim)

Main political parties

Ministers of state

Key ministers

Governor of the regional central bank (BCEAO)

Official name

Form of state

Legal system

National legislature

Head of state

National elections

National government

Senegal 5


Economic structure

Annual indicators

2001a 2002a 2003 a 2004 b 2005b

GDP at market prices (CFAfr bn) 3,379.8 3,510.6 3,768.8 4,008.3 4,352.7

GDP (US$ bn) 4.6 5.0 6.5 7.6 8.3

Real GDP growth (%) 5.6 1.1 6.5 5.6 6.1

Consumer price inflation (av; %) 3.0 2.3 0.0 0.5 a 1.7a

Population (m) 10.6 10.9 11.1 11.4 a 11.7

Exports of goods fob (US$ m) 1,003.1 1,066.5 1,257.0 1,270.5 1,385.7

Imports of goods fob (US$ m) 1,428.4 1,603.9 2,065.5 2,490.0 2,805.3

Current-account balance (US$ m) -245.4 -316.9 -436.6 -695.7 -848.1

Foreign-exchange reserves excl gold (US$ m) 447.3 637.4 1,110.9 1,386.4 a 1,200.0

Total external debt (US$ bn) 3.7 4.1 4.4 4.0 3.5

Debt-service ratio, paid (%) 12.1 11.3 10.8 17.6 8.8

Exchange rate (av) CFAfr:US$ 733.0 697.0 581.2 528.3 a 527.5a

a Actual. b Economist Intelligence Unit estimates.

Origins of gross domestic product 2003 % of total Components of gross domestic product 2003 % of total

Agriculture 16.8 Private consumption 73.6

Industry 21.2 Government consumption 14.6

Manufacturing 12.8 Gross domestic investment 19.3

Services 62.0 Exports of goods & services 28.3

Imports of goods & services 36.6

Main exports 2005a US$ m Main imports fob 2005a US$ m

Fish & fish products 249 Food products 685

Refined oil re-exports 232 Petroleum products 619

Phosphates & products 222 Capital goods 408

Groundnut oil 26

Destination of exports 2004b % of total Origin of imports 2004b % of total

India 14.0 France 25

France 10.2 Nigeria 12.1

Mali 10.1 Italy 4

Italy 5.8 Thailand 3.8

a Ministère de l'économie et des finances. b Derived from partners� trade returns; subject to a wide margin of error.

6 Senegal


Quarterly indicators 2004 2005 2006 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 QtrPrices Consumer prices, Dakar (2000=100) 104.5 106.7 107.0 105.8 105.7 109.3 109.8 n/aConsumer prices, Dakar (% change, year on year) 0.5 0.7 1.0 0.6 1.1 2.4 2.6 n/a

Financial indicators Exchange rate CFAfr:US$ (av) 544.8 536.8 506.9 498.9 521.0 538.0 552.0 545.8Exchange rate CFAfr:US$ (end-period) 539.7 528.6 481.6 506.0 542.5 544.7 556.0 541.9Deposit rate (av;%) 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5Bank rate (end-period; %) 4.5 4.0 4.0 4.0 4.0 4.0 4.0 4.0Money market rate (av; %) 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0M1 (end-period; CFAfr bn) 830.7 818.3 887.9 920.8 930.2 933.4 962.7 n/aM1 (% change, year on year) 49.5 38.3 6.7 13.3 12.0 14.1 8.4 n/aM2 (end-period; CFAfr bn) 1,297.9 1,343.2 1,432.3 1,469.6 1,490.5 1,518.7 1,549.3 n/aM2 (% change, year on year) 36.0 33.5 12.2 15.7 14.8 13.1 8.2 n/aForeign trade (US$ m)a Exports fob 329.1 322.3 310.0 398.3 357.0 444.6 459.3 n/aImports fob -730.5 -694.1 -737.1 -887.1 -865.7 -998.9 -1,047.9 n/aTrade balance -401.4 -371.8 -427.2 -488.9 -508.7 -554.3 -588.6 n/a

Foreign reserves (US$ m) Reserves excl gold (end-period) 1,175.1 1,183.4 1,386.4 1,341.6 1,390.8 1,305.6 1,191.0 n/a

a DOTS estimates.

Sources: IMF, International Financial Statistics; Direction of Trade Statistics.

-1,200

-1,000

-800

-600

-400

-200

0

200

400

600

Q2

2004

Q3 Q4 Q1

05

Q2 Q3 Q4

Exports fob Imports fob Trade balance

Source: IMF, Direction of Trade Statistics.

Foreign trade(US$ m)

1,050

1,100

1,150

1,200

1,250

1,300

1,350

1,400

Q2

2004

Q3 Q4 Q1

05

Q2 Q3 Q4

(a) Excluding gold.

Source: IMF, International Financial Statistics.

Foreign reserves (a)(US$ m; end-period)

Senegal 7


Outlook for 2006-07

Political outlook

Senegal!s president, Abdoulaye Wade, is expected to remain in power until the presidential election due on February 25th 2007, and probably beyond if he stands for re-election, which is highly likely. Mr Wade will be 80 years old in May and appears to be in good health, although there have been rumours that his frequent visits abroad are for treatment of a serious medical condition. Mr Wade!s party, Parti démocratique sénégalais (PDS), will retain its solid majority in the National Assembly until the legislative election, which had been due in April 2006 but is now to take place in 2007. Mr Wade!s dominance of the Senegalese political landscape has recently been challenged by the announcement on April 4th by the former prime minister, Idrissa Seck"who was also Mr Wade!s former protégé"that he will stand in the presidential election.

It remains unclear, however, whether Mr Seck will be allowed to stand, given that he could still face legal action. He has been accused of violating public tender procedures on public works when he was prime minister and of breaching national security, on what were widely perceived to be politically motivated charges. The charge of breaching national security was dismissed by the courts in January, allowing Mr Seck to be released from prison, although he is still facing charges of corruption. If Mr Seck is eventually allowed to stand in the presidential poll, he is likely to be a serious contender provided that he can secure the backing of one or more of the major parties. In any case, the outcome of both the presidential and the legislative election is likely to depend on Mr Seck.

The fact that it is possible that Mr Seck might stand for any number of parties reflects the highly fluid political landscape in Senegal. Since becoming president in 2000, Mr Wade has conducted a multitude of cabinet reshuffles, often with the aim of distancing himself and the PDS from the alliance of parties, Convergence des actions autour du président en perspective du 21ème siècle (CAP21), which brought him to power. As a consequence, it is not yet clear which parties in the CAP21 coalition will ally themselves electorally with the PDS. Following the dismissal of ministers from the Ligue démocratique-Mouvement pour le parti du travail (LD-MPT) in March 2005, the LD-MPT is collaborating with the former ruling party, Parti socialiste (PS), and some other parties in an attempt to challenge the PDS-led coalition more effectively. Although Mr Wade enjoys the support of much of the electorate, many are disappointed at the lack of progress in reducing unemployment and raising rural incomes. In addition, the government!s commitment to democracy has been called into question by a series of physical attacks and threats against its critics, such as the charges against Mr Seck, the perception of cronyism and the decision to delay the legislative election on the pretext of saving public funds.

The prospects for a lasting peace in Casamance, in southern Senegal, improved with the signing of a peace accord in December 2004 between the government

Domestic politics

8 Senegal


and the rebel group, Mouvement des forces démocratiques de Casamance (MFDC). However, by February 2005 negotiations had stalled; talks resumed at the end of December and a new round of negotiations is scheduled for 2006. The attainment of peace is likely to continue to be obstructed by sporadic fighting and banditry and by divisions within the political and military leadership of the MFDC"as illustrated by recent outbreaks of violence in March and April in Guinea-Bissau between Senegalese separatists from the MFDC and military troops from Guinea-Bissau. Nevertheless, the bulk of the MFDC!s leaders appear to have concluded that armed insurgency is no longer a viable option.

Despite the misgivings that he has expressed over the limited impact that it has had so far, Mr Wade will continue to support the New Partnership for Africa!s Development (Nepad), which aims to increase donor support and inflows of foreign direct investment to African countries in exchange for improvements in governance. Mr Wade will also play an active part in encouraging conflict resolution in West Africa"Senegalese troops are taking part in regional peacekeeping efforts in Côte d!Ivoire and Liberia. The situation in Casamance will dominate relations with Guinea-Bissau and The Gambia, both of which host MFDC bases and Casamançais refugees. The support of Senegal!s main trading partners in the EU will remain strong, particularly that of the former colonial power, France. In October 2005 Senegal restored diplomatic relations with China, and this should lead to closer economic and political co-operation between the two countries.

Economic policy outlook

The government will continue to pursue a donor-supported economic reform programme, as outlined in the IMF!s three-year poverty reduction and growth facility (PRGF), which was due to expire at the end of April 2006. The government has stated that it would like to finalise negotiations for a new non-financial arrangement with the IMF, a policy support instrument (PSI), before the end of 2006. The PSI is aimed at providing extensive external monitoring of a government!s reform efforts, but no financial support, unlike a PRGF. The PSI will provide a fixed schedule of reviews (normally half-yearly), which will signal to other donors that agreed policies are on track, as well as a mechanism for notifying donors that a policy is off-track or that there has been a misreporting of data. It will also aim to ensure that economic policy supports the country!s poverty reduction strategy process and that agreed debt relief is being spent in the areas identified in the poverty reduction strategy.

Whether pursuing a PRGF or a PSI, the overall policy is aimed at dovetailing with the government!s poverty reduction strategy paper (PRSP), which was published in October 2002. A new PRSP is in preparation and is expected to place greater emphasis on tackling rural poverty and on healthcare, two areas where shortcomings were noted in the first PRSP. The government will also continue to focus on large-scale infrastructure programmes, including the building of a new international airport and the Diamniadio industrial platform project. In its letter of intent to the IMF"dated December 29th 2005"the

Policy trends

International relations

Senegal 9


government stated that the new PRSP!s objectives are to be aligned with the accelerated growth strategy, Stratégie de croissance accélérée (SCA), which aims to increase annual real GDP growth to over 7%. Consultations with the private sector will take place to develop action plans for five priority sectors: agriculture and agro-industries, fish and fishing industries, textiles, information technology and telecommunications, and tourism. In September 2005 the World Bank and the IMF agreed to support Senegal!s SCA and the government aims to start implementing the SCA action plans by June 2006, although delays are likely owing to administrative constraints.

The main problem with the overall reform programme in Senegal will, however, continue to be that structural reforms will make only slow progress. The state-owned electricity company, Société nationale sénégalaise d!électricité (Senelec), is likely to continue to suffer financial problems, but the government is aiming to increase electricity prices according to a new electricity price formula in order to limit losses. The liberalisation of the telecoms sector will proceed, with an invitation to tender for a third mobile-phone operator!s licence in 2006. In 2005 the government privatised the groundnut parastatal, Société nationale de commercialisation des oléagineux du Sénégal (Sonacos); however, in December it reimposed import taxes on refined vegetable oils in order to protect Sonacos!s rapidly declining market share. The World Bank has protested at this decision and the government may need to revise its policy towards Sonacos during the forecast period. The acute financial difficulties faced by Senegal!s largest industrial enterprise, Industries chimiques du Sénégal (ICS), may force the government to cede its majority shareholding in exchange for an injection of capital. The government has also pledged to revise the legal framework for procurement in order to limit the use of no-bid contracts.

In the 2006 budget public expenditure is set to rise by 10.7% year on year, to CFAfr1.36trn (US$2.5bn), as the government expects its recent efforts to boost domestic revenue to continue in 2006, despite the likely reduction in corporate tax revenue in 2006 as a result of lower corporate tax rates. The government is forecasting that total revenue will rise to CFAfr1.34bn in 2006, driven by higher tax revenue and increased donor funding. Public expenditure will target large infrastructure projects and the priority sectors identified in the PRSP, namely health and education. Government efforts will also concentrate on improving public-expenditure management and transparency in order to ensure continued donor support. Even if not all of the budgeted expenditure is carried out"particularly domestically financed capital expenditure"the Economist Intelligence Unit expects the budget deficit to rise in 2006. As legislative and presidential elections are due in 2007, the pressure to increase public expenditure will be considerable. As a result, we forecast that the fiscal deficit, which will be financed mainly by international donor assistance, will rise from an estimated 1% of GDP in 2005 to 4% of GDP in 2006, before falling to 3.9% of GDP in 2007.

The main priority of the regional central bank, Banque centrale des Etats de l!Afrique de l!ouest (BCEAO), will be to maintain the CFA franc!s peg to the euro. Accordingly, the BCEAO will continue to pursue tight monetary policies

Fiscal policy

Monetary policy

10 Senegal


similar to those of the European Central Bank (ECB). We expect that the ECB, which raised interest rates by one-quarter of a percentage point in early March, will raise its interest rates again towards the end of 2006, to an average of 2.9%, before increasing them in 2007 to an average of 3.7% in order to contain inflationary pressure brought about by high oil prices. The BCEAO!s rate broadly reflects movements in the ECB!s variable rate. However, there is a divergence between the rates set by the BCEAO and those set by the ECB, as the former takes into account its members! economic situation, inflation rates and the level of bank liquidity. In 2006 the BCEAO will keep its interest rates on hold, but it is expected to raise them in 2007 in line with our forecast for ECB interest rates.

Economic forecast

International assumptions summary (% unless otherwise indicated)

2004 2005 2006 2007

Real GDP growth World 5.1 4.6 4.3 4.1

OECD 3.2 2.7 2.6 2.3

EU25 2.4 1.7 2.2 2.3

Exchange rates ¥:US$ 108.1 110.1 113.2 103.0

US$:� 1.244 1.245 1.261 1.348

SDR:US$ 0.675 0.677 0.677 0.649

Financial indicators � 3-month interbank rate 2.13 2.15 2.90 3.69

US$ 3-month commercial paper rate 1.48 3.49 5.24 4.88

Commodity prices Oil (Brent; US$/b) 38.5 54.7 60.0 55.3

Rice (US$/tonne) 244.8 291.0 297.5 302.5

Food, feedstuffs & beverages (% change in US$ terms) 8.5 -0.5 4.0 -4.2

Industrial raw materials (% change in US$ terms) 21.0 10.5 11.7 -15.8

Note. Regional GDP growth rates weighted using purchasing power parity exchange rates.

Although growth in the global economy is forecast to decelerate over the outlook period, to a forecast 4.3% in 2006 and 4.1% in 2007, it will still compare favourably to rates achieved for much of the 1990s. Economic growth in Senegal!s main export market, the EU25, is expected to be more modest, at 2.2% in 2006 and 2.3% in 2007. A problem facing Senegal over the outlook period will be high world oil prices"the price for Brent is forecast to average US$60/b in 2006 and US$55.3/b in 2007"which will mean that the cost of energy imports remains high. In addition, the price for phosphate products will continue to suffer from weak international prices and high input costs.

In January the Ministry of Economy and Finance announced that it had revised its real GDP growth figures for 2004 from 6.2% to 5.6%, and for 2005 from 5.1% to 6.1%. The ministry is still projecting that growth will moderate to 5% in 2006, largely as a result of a halving of agricultural growth and, to a lesser extent, a slowdown in the secondary sector driven by the impact of high oil prices. This significant upward revision to growth in 2005 was driven by the strong

Economic growth

International assumptions

Senegal 11


performance of the primary sector, which grew by 12%"with agriculture rebounding by 18.3% after a poor harvest in 2004. High oil prices are expected to impact negatively on the secondary sector in 2006-07, although growth in energy and construction is expected to remain buoyant. The services sector, which generates nearly two-thirds of GDP, will grow strongly throughout the forecast period, mainly owing to the continuing rapid growth of telecom-munications. Earnings from business tourism and construction (and related employment) are also expected to rise significantly in 2006-07 as Senegal hosts the Organisation de la conférence Islamique!s triennial Islamic Summit in December 2007. Construction activity related to large infrastructure projects will also remain robust over the forecast period. With growth in agriculture expected to slow after the strong rebound in 2005, we expect real GDP growth to slow but to remain strong in 2006-07, at around 5%.

Although inflation rose in 2005, owing mainly to higher prices for food (which has a 40% weighting in the consumer price index) and to continuing strong fuel prices, the tight monetary policy of the BCEAO helped to keep the annual average rate of inflation in Senegal at 1.7%. Assuming normal harvest over the forecast period, the main inflationary impetus is expected to come from the continuing impact of high world oil prices feeding through the economy, notably on transport, energy and industrial costs. However, the BCEAO is likely to continue to practise a tight monetary policy and, as a result, inflation is forecast to rise modestly to around 2% in 2006-07.

The CFA franc is pegged to the euro at a rate of CFAfr655.96:#1. Given the broad stability of the euro against the US dollar, the CFA franc averaged CFAfr527.5:US$1 in 2005. The stability of the US dollar against the euro looks set to continue over the next months, but the US dollar will struggle to hold its own once US interest rates peak, European and Japanese rates start to rise, and the current-account and fiscal deficits in the US deteriorate further. We therefore expect renewed depreciation to set in from mid-2006 onwards and for the US dollar to average US$1.26:#1 in 2006 and US$1.35:#1 in 2007. On the basis of this forecast, we expect the CFA franc to appreciate modestly against the US dollar to CFAfr520.3:US$1 in 2006 and then more sharply to CFAfr486.8:US$1 in 2007. We believe that the peg to the euro will remain in place over the forecast period as a result of continued strong commodity prices, which will help to maintain healthy terms of trade among member states, as well as strong political opposition to a devaluation.

Despite the steady growth of merchandise exports, higher imports, driven partly by higher oil imports, led to a large trade deficit in 2005, which is estimated at 17.2% of GDP. The prospects for many of Senegal!s traditional exports"particularly fertilisers and fish"remain unpromising, although new export niches, such as horticultural exports, are expected to grow strongly. Export earnings will remain high in US-dollar terms in 2006-07, averaging US$1.6bn. Fish production, and therefore fish exports, will continue to be affected by dilapidated equipment and the depletion of stocks as a result of overfishing, but is expected to rise slightly during the forecast period. Weak phosphate prices will hamper phosphate and fertiliser export receipts from

Inflation

Exchange rates

External sector

12 Senegal


Industries chimiques du Sénégal, as will an adverse international context of rising sulphur and high oil prices, which has aggravated its already weak financial situation.

Although business tourism is doing well"in recent years the capital, Dakar, has developed into a regional conference and business centre"the holiday tourism sector has suffered because fewer new hotels have been built, the existing hotels need renovation, competition from North Africa has increased and there is a low level of repeat tourism. New tourist development projects are under way, some of which will be finalised during the forecast period, and these are expected to increase tourism receipts in 2006-07. The holding of the Islamic Summit at the end of 2007 should boost receipts from business tourism. As a result, the deficit on the services account is expected to fall. The deficit on the income account will fall in 2006-07, owing mainly to debt relief received under the IMF-World Bank!s heavily indebted poor countries (HIPC) initiative. The current transfers account will continue to post a large surplus in 2006-07, as donors are expected to continue supporting the government!s reform efforts and remittances will remain high. Although the current-account deficit will widen to US$912m in 2006 and US$1bn in 2007 owing to the growing trade deficit, as a proportion of GDP the current account will fall to 10.2% of GDP in 2006 and 9.8% of GDP in 2007 because of continuing robust GDP growth.

Forecast summary (% unless otherwise indicated)

2004 a 2005 a 2006b 2007b

Real GDP growth 5.6 6.1 5.0 5.1

Industrial production growth 6.2 4.2 3.5 3.6

Gross agricultural production growth 2.7 12.0 6.1 5.1

Consumer price inflation (av) 0.5 c 1.7 c 2.0 1.9

Short-term interbank rate 5.0 c 5.0 c 5.0 5.0

Government balance (% of GDP) -2.4 -1.0 -4.0 -3.9

Exports of goods fob (US$ bn) 1.3 1.4 1.5 1.6

Imports of goods fob (US$ bn) 2.5 2.8 3.0 3.3

Current-account balance (US$ bn) -0.7 -0.8 -0.9 -1.0

Current-account balance (% of GDP) -9.2 -10.3 -10.2 -9.8

External debt (year-end; US$ bn) 4.0 3.5 3.3 3.2

Exchange rate CFAfr:US$ (av) 528.3 c 527.5 c 520.3 486.8

Exchange rate CFAfr:¥100 (av) 488.6 c 479.2 c 459.5 472.6

Exchange rate CFAfr:� (year-end) 652.0 c 655.9 c 656.0 656.0

Exchange rate CFAfr:SDR (year-end) 747.9 c 794.7 c 754.1 759.1

a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.

Senegal 13


Senegal Sub-Saharan Africa

Gross domestic product(% change, year on year)

Senegal Sub-Saharan Africa

Consumer price inflation(av; %)

0

1

2

3

4

5

6

7

2001 02 03 04 05 06 07

-2

0

2

4

6

8

10

2001 02 03 04 05 06 07

The political scene

On February 7th the former prime minister, Idrissa Seck, was freed from Rebeuss prison in Dakar, after having spent six months and 17 days in detention on charges of overspending public funds on construction work at Thiès and endangering state security (October 2005, The political scene). An investigating panel of the Senegalese High Court of Justice ordered the release of Mr Seck after the charges of threatening state security and of involvement in the Thiès scandal were lifted. However, the investigation panel into charges against him of illicit enrichment is awaiting financial information. The judiciary has requested assistance from foreign courts, notably in France and the US, where Mr Seck is said to have numerous bank accounts. The freeing of Mr Seck did not come as a surprise, as there were rumours circulating from late 2005, suggesting that the affair would not come to a trial if some kind of political compromise was reached between the president, Abdoulaye Wade, and his former protégé. This appeared more likely after Mr Wade told a delegation of US congressmen in mid-January that he did not believe the charge against Mr Seck of his being a threat to national security. There had also been speculation that the aim behind the charges against Mr Seck was to make him ineligible for the legislative election (this was when the legislative election was scheduled to be held in early 2006).

The sudden development in the Seck affair led many commentators to suggest that the decision to dismiss some of the charges was based on behind the scenes negotiations between Mr Wade and his former protégé via mediators. According to a Paris-based weekly, Jeune Afrique, discussions began to take place after Mr Wade realised last October that it would be extremely difficult to convict Mr Seck on the corruption or endangering state security charges. The president of the Paris-based Fédération internationale des ligues de droit de l!homme, Sidiki Kaba, and the Senegalese vice-president of the federation of female jurists, Nafissatou Diop Cissé, became involved in meditation efforts. However, a stumbling block was Mr Wade!s desire to have the former prime minister leave the country for some months after regaining his liberty,

Idrissa Seck regains his liberty after six months in prison

Questions are raised about Mr Seck's release

14 Senegal


something which Mr Seck refused to agree to. There have also been rumours that the negotiations touched upon financial issues, in particular the handling of political slush funds, which Mr Seck has strongly denied.

After being released from prison Mr Seck headed to Paris to join his family. There was some media speculation that he could be planning a political comeback. However, according to Mr Wade, the fact that the judiciary was still investigating the possible misappropriation of funds meant that any return of Mr Seck to the leadership of the ruling party, Parti démocratique sénégalais (PDS), was out of the question, as was any decision to return to politics. Speaking in Paris on February 26th, Mr Seck said that he did not know if he still had a political future. Mr Wade!s decision to state in the French media, on March 12th, that there was no question of Mr Seck returning to the PDS, together with his comment that he was the man who had "created" Mr Seck, seemed to suggest that any idea of a reconciliation was premature.

The prospects for reconciliation between the two men became even less likely when Mr Seck, after hesitating for several weeks, officially announced his candidacy in the February 2007 presidential election. The announcement, made on April 4th (Independence Day) came as a complete surprise to many people, including Mr Wade himself. In July 2005 the former prime minister had declared that he would not stand against Mr Wade in the 2007 presidential election"in an attempt to downplay the perception that he represented a threat to the president"as his role was to assist and not compete against him, while stating that his ultimate political goal was to eventually become president. Mr Seck sent the text declaring his candidacy to the press and radio stations, and posted it on his newly launched website. In his declaration, Mr Seck denied that there had been any political or financial accord with the president paving the way for his release from prison. He stated that he would be presenting a national recovery plan in his electoral campaign and that he would look for support within the PDS itself, a party that shared his values and vision, but he also extended an appeal to the opposition to join him in his electoral campaign.

Reacting to Mr Seck!s candidacy, the health minister and spokesman of the PDS, Abdou Fall, stated that the ruling party wanted clarification regarding the funds used in the Thiès construction works. He also argued that Mr Seck!s candidacy was hypothetical and could be accepted only when all judicial investigations against him were finished and he had been cleared of all charges. Other PDS officials declared that the former prime minister!s candidacy was a "non-event", and that it was a way of influencing the investigations currently under way and of politicising them. Newspapers reported that sources close to the presidency were claiming that there could be new developments on the illicit enrichment dossier against Mr Seck, and that the state could approach the general prosecutor of the High Court of Justice to require Mr Seck to prove the origin of his wealth. There are also questions that could be raised regarding funds deposited in foreign bank accounts. If true, these reports once again suggest the politicisation and manipulation of the judicial system for political purposes, which was widely believed to have occurred at the start of the Thiès affair.

Mr Wade doubts that Mr Seck could return to politics

PDS officials react to the announcement

Mr Seck announces his presidential candidacy

Senegal 15


Responding to Mr Seck!s candidacy, the leader of the Ligue démocratique-Mouvement pour le parti du travail (LD-MPT), Abdoulaye Bathily, ruled out any future alignment with Mr Seck. Likewise, the leader of the Alliance des forces de progrès (AFP), Moustapha Niasse, stated that the opposition had a common electoral programme and it was not ready to join Mr Seck. As expected, the main opposition parties did not automatically align themselves with Mr Seck, preferring to support a candidate from their own ranks. Mr Seck will, of course, be able to count on his own movement, the Mouvement de soutien à Idrissa Seck (MSIS or M6) and a political party created by Yankhoba Diattara, the Forces intégrées pour la démocratie et la liberté (FIDEL; October 2005, The political scene). Mr Seck!s strength will in part depend on how many disgruntled politicians within the PDS he can convince to rally round him. As Mr Seck stated in his announced of April 4th, his ideal allies are members of the PDS and not opposition figures. However, with the election ten months away and given that Mr Seck has not yet been fully cleared of all charges, it is too early to say whether he will be allowed to run as a presidential candidate, and if so, what will be the strength of his support.

Rivals: Idrissa Seck and Abdoulaye Wade

Idrissa Seck is the 46-year old mayor of Thiès and former protégé of the 80-year old president, Abdoulaye Wade. Mr Seck was prime minister from November 2002 to April 2004, and is a former second in command of the ruling Parti démocratique sénégalais (PDS). It was widely believed at the time that Mr Wade was grooming Mr Seck, a close ally, as his successor. However, rivalry between the two men came to the fore during Mr Seck!s tenure as prime minister. An open rift occurred during the organisation of Independence Day celebrations on April 4th 2004 and Mr Seck�s dismissal came just a few days later (July 2004, The political scene). Although he was dismissed because of overspending for the preparation of the Independence Day celebrations, relations were rumoured to have soured when Mr Seck�s popularity was high and he was beginning to be seen as a strong contender for the presidency. Mr Seck!s dismissal led to a policy of "Deseckisation" and the ousting of several politicians associated with him. The growing animosity between the two men came into the open on July 2005 when the president, addressing the public on live state television, accused Mr Seck of having massively overspent government funds on construction works for public celebrations while he was prime minister. On the same day the prosecuting authorities issued a statement saying that there was sufficient information to suggest that Mr Seck�s actions could amount to misconduct and a threat to state security. In August the National Assembly voted in favour of Mr Seck appearing before the High Court of Justice, in a turn of events that was widely believed to have been political, aimed at keeping Mr Seck out of the political scene, as was the decision to expel him from the PDS that same month. Mr Seck was held in prison from July 2005 to February 2006. "Deseckisation" reflects Mr Wade!s fear of Mr Seck"who is popular in Thiès, Senegal!s second city"as a political rival. This fear appears to have become a reality after Mr Seck publicly declared his candidacy to the presidential election. Most political analysts believe that reconciliation between the two men is now impossible.

Opposition figures are divided over Mr Seck

16 Senegal


While it remains unclear whether Mr Seck will be allowed to stand in the presidential election, opposition parties are preparing themselves for both the presidential and legislative polls. In early April a new opposition coalition, the Coalition populaire pour l!alternance (CPA), was created to present a united front against Mr Wade in the next general elections. The CPA consists of the Cadre permanent de concertation (CPC) and the Groupe de 10 (G10), two opposition coalitions, as well as the Ligue démocratique-Mouvement pour le travail (LD-MPT), led by Abdoulaye Bathily. Already in July 2005 the parties that make up the CPC announced that they would present a joint electoral list with the LD-MPT. The main parties in the CPC are the Parti socialiste, led by Ousmane Tanor Dieng and the Alliance des forces du progrès (AFP), led by Moustapha Niasse, which have a combined total of 21 deputies in the National Assembly, but the CPC also includes the Rassemblement national démocratique (RND) and the Parti de l!indépendence et du travail (PIT), which each have one seat, as well as a number of other small parties. Until March 2005, when two of its ministers were sacked in a cabinet reshuffle, the LD-MPT had been an integral part of the governing coalition, Convergence des actions autour du président en perspective du 21ème siècle (CAP21). The decision to create the CPA thereby formalises an agreement reached last year to join forces to oust the regime of Mr Wade.

After the controversial postponement of the legislative election (February 2006, The political scene), the government is trying to change the rules for electing a president. On March 27th a PDS deputy, Ibrahima Isidore Ezzan, stated in an interview with a local newspaper, L'As, that he was preparing a draft law to suppress the second round of the presidential election. Mr Ezzan is famous for drafting a controversial amnesty law which granted a blanket amnesty for all crimes committed between 1983 and 2004 relating to general or local elections or with a political motivation (February 2005, The political scene). The logic behind this new proposal is essentially the same as the argument advanced by Mr Wade in 2005 to hold the legislative and presidential elections at the same time, namely to save scarce financial resources (October 2005, The political scene). According to Mr Ezzan, not only is a second round expensive, but the prolonged electoral campaigning distracts from day to day administration and governing. Anticipating criticism, Mr Ezzan stated that two rounds of voting was not more democratic, pointing out that in the US the presidential election is held in one round. In the interview, Mr Ezzan stated that he would discuss his proposal with members of the majority parliamentary group, Libéral et démocratique (LD). It is unclear whether the proposal will go through, and this is likely to depend on whether or not Mr Ezzan has the support of Mr Wade.

A decision to change the rules for electing a president less than a year ahead of the vote"on April 13th the cabinet set the date for the presidential election for February 25th 2007"would create a new uproar, and could further tarnish Senegal!s democratic credentials. The Senegalese human rights group, Rencontre africaine pour la défense des droits de l!homme (Raddho), has said that this new attempt to change the electoral laws, coming as it does after the postponement of the legislative election, could be destabilising and that changing the rules in an unilateral fashion posed a risk to democracy.

A senator proposes removing second round to election

A new opposition coalition is created

Senegal 17


The financial cost of holding elections was stressed recently by the president of the electoral commission, Commission électorale nationale autonome (CENA), Mouhamadou Moustapha Touré. At a press conference held in early March he stated that the funding made available to his organisation was inadequate to ensure the proper preparation of the elections scheduled for early 2007. These statements were made at the end of a meeting Mr Touré held with the prime minister, concerning voter registration. For his part the minister of the interior, Ousmane Ngom, stated that the government would ensure that CENA would have all available means at its disposal. Mr Touré also said that voter registration had been extended to May 31st. In September 2005 the government launched the countrywide voter registration campaign, which aimed to sign up 3m people to the national electoral roll ahead of the coming elections, a process that was expected to be completed by December (October 2005, The political scene). In a press conference on March 13th, Mr Ngom estimated that there were already 2.6m registered voters, the same number as in the 2000 elections, but that the total would be much higher by the end of the registration process.

At a cabinet meeting held on March 16th the government adopted a bill to modify the Constitution and create a Senate. In last November 2005 Mr Wade announced his intention to re-establish the second chamber of parliament, which was abolished in January 2001 following a referendum on constitutional changes (February 2006, The political scene). It is rumoured that by re-establishing the Senate, Mr Wade hopes to sideline the current president of the National Assembly, Pape Diop, who is considered by some PDS politicians to be close to Mr Seck. Under the current constitution, Mr Diop would become interim head of state for 60 days"a period during which elections would have to be organised"if the president became incapacitated or died in office. Under the constitution amended as proposed, the president of the Senate would become interim president. Given the PDS!s majority in the National Assembly, it is likely that this draft law will be passed, in which case it will be interesting to see who will be selected as the president of the Senate.

On February 1st Mr Wade dismissed the minister of infrastructure, Mamadou Seck, and the minister of small and medium-sized enterprises, Maïmouna Sourang Ndir. Mamadou Seck was replaced by the agriculture minister, Habib Sy, while Farba Senghor"who until then was the minister responsible for national solidarity"obtained the agriculture, water and food security portfolio; Ms Ndir was replaced by Marie Pierre Traoré. The cabinet reshuffle took many political analysts by surprise, even if it follows a pattern of frequent cabinet reshuffles under the presidency of Mr Wade. According to the local press, the main aim of the cabinet reshuffle was to remove Mamadou Seck, who has been blamed for the slow progress of certain large public-works projects.

On March 14th Mr Wade carried out another cabinet reshuffle appointing the recently dismissed Ms Ndir as minister to the newly created ministry of environment and recreation, and Sokhna Touré Fall as the minister responsible to the prime minister for local development. This time, the cabinet reshuffle was widely perceived to have been motivated by the dismissal of Aminata Tall

Small cabinet reshuffles takes place in February

Draft law to create a Senate is approved by government

The cabinet is reshuffled again in March

Electoral commission states that it lacks proper funding

18 Senegal


as the decentralisation minister. Ms Tall, known as the !iron lady!, is the mayor of Diourbel in central Senegal and was the minister of family and national solidarity between April 2000 and May 2001, before joining the government in April 2004 as decentralisation minister. Ms Tall!s dismissal appears to have been requested by the prime minister, Macky Sall, after comments she made to the press that were critical of the government. In particular, Ms Tall condemned the presence of newly wealthy figures in the government and demanded that the national programme for local development, the Programme national de développement local (Pndl), be administered by her ministry. However, the real reason for the antagonism between Ms Tall and the prime minister appears to have been the recent decision by the PDS to not appoint her as the secretary-general of the party in Diourbel. Meanwhile, Mr Wade decided to name her as a minister of state to the presidency, thus defusing the crisis between two key government figures.

In a communiqué on April 7th the secretariat of the French Parti socialiste (PS), expressed its concern about the political situation in Senegal, and the frequent summoning of journalists and opposition figures to the criminal investigation division, who are then held in custody. In the French PS!s view, the secretary general of the opposition party, the Parti de l!indépendance et du travail (PIT), Amath Dansokho, is the most recent victim of intimidations that have created a tense political climate. On April 6th Mr Dansokho was questioned for six hours by the criminal investigations division of the police. According to Mr Dansokho the questioning concerned revelations made by his party regarding the transfer of CFAfr400bn (US$769m) via the regional central bank, Banque centrale des Etats de l�Afrique de l�ouest (BCEAO), to banks abroad. Already in March a PIT central committee member, Ibrahima Sène, had been arrested and accused of circulating "false news" about the transfers of the funds abroad. Later in the month Mr Sène was cleared of charges, having argued that the information he had revealed to the press had been obtained from a local newspaper, Nouvel Horizon.

Mr Dansokho was summoned to appear at the criminal court on April 18th for further questioning. The secretariat of the central committee of the PIT responded to this by denouncing Mr Wade!s regime, arguing that it had systematically violated democratic liberties. Following a request by the defence, Mr Dansokho!s trial has been postponed until May 19th. Another example of the tense political climate is the arrest inside Dakar cathedral, on April 18th, of Jean-Paul Dias, secretary general of the Bloc des centristes Gaindé. Mr Dias was detained in police custody, charged with endangering state security and public order after having made declarations in support of Mr Dansokho. Responding to the recent wave of arrests, the head of the Paris-based human rights group, Fédération internationale des ligues des droits de l!homme (FIDH), Sidiki Kaba, stated that the criminalisation of political activity and social protest in Senegal was threatening social and political stability. In his view such acts suggested that the political climate could lead to intimidation, which could affect the staging of free and democratic elections.

Wave of arrests suggests worsening political climate

Senegal 19


In mid-March clashes involving Senegalese separatists from the Casamance rebel group, Mouvement des forces démocratiques de Casamance (MFDC), and military troops from Guinea-Bissau, broke out near the northern city of São Domingos in Guinea-Bissau. According to the government of Guinea-Bissau, a faction led by the hardline insurgent commander and self-proclaimed leader of the MFDC, Salif Sadio, launched a two-hour attack on the military barracks in São Domingos. The border region where the fighting erupted is porous and heavily mined. According to humanitarian organisations, about 4,500 civilians were forced to flee the zone after fighting started, with about 2,500 people heading north to main city of Casamance, Zinguinchor, and a further 1,600 moving into the towns of Cacheu and Ingore in Guinea-Bissau. According to Guinea-Bissau military, the MFDC rebels have placed new mines in the border area. On March 24th and during April the Guinea-Bissau army launched new offensives to try to dislodge MFDC fighters from its territory.

It is believed that these outbreaks of violence originated in rivalries between Mr Sadio, who is against the Casamance peace accord and another MFDC leader, Ibrahim Magne Diémé, who favours the accord and is said to be supported by Guinea-Bissau military. Operations by the Guinea-Bissau army on the border were aimed at expelling the MFDC faction led by Mr Sadio from Guinea-Bissau territory, after his forces crossed the border while fighting rival MFDC factions. Although Senegalese soldiers were not involved in the clashes, it is believed that Mr Wade!s government does not see the recent fighting as a bad thing, given that Mr Sadio is widely perceived to be the main obstacle to achieving peace in Casamance. Reacting to the recent events, Senegal!s foreign minister, Tidiane Gaudio, stated it was not a problem if soldiers from Guinea-Bissau made incursions in Senegalese territory. According to some observers there is a risk that the renewed outbreak of violence between rival MFDC factions and the Guinea-Bissau army against Mr Sadio could damage the Casamance peace process by further radicalising Mr Sadio and his followers.

The Casamance separatist conflict

The government and the Mouvement des forces démocratiques de Casamance (MFDC) signed a peace accord on December 30th 2004, 22 years after the start of the Casamance conflict"Casamance is separated from the rest of Senegal by a sliver of land that makes up The Gambia. The root cause of the secessionist rebel movement was the complaint by the Diola ethnic group"which represents over 60% of the Casamance!s population"of marginalisation by the Wolof, Senegal!s dominant ethnic group. Efforts to negotiate an end to the conflict improved after Mr Wade was elected president in 2000, as he opted for direct dialogue with the separatists, meeting for the first time with their leader, Augustin Diamacoune Senghor, in May 2003. The prospects for peace further improved after the decision in July 2004 of the National Assembly to approve a law granting amnesty to ex-combatants of the separatist group. At the time of the accord the MFDC pledged that it had definitively renounced armed violence in exchange for a political struggle. Although Mr Diamacoune holds significant influence within the MFDC, he does not lead unchallenged. Earlier agreements failed because of persistent divisions within both the movement�s military and political wings. Detailed negotiations on the economic and political aspects of the deal began at Foundiougne in Fatick region on

Fighting erupts in the Senegal- Guinea-Bissau border region

20 Senegal


February 1st 2005 (April 2005, The political scene). These negotiations, called Foundiougne I by the local press, were suspended only three days after having started, and then postponed at the request of the MFDC!s leadership, which wanted to arrange consultations between the movement�s various rival factions.

As for Guinea-Bissau, it appears that the real reason for preventing Mr Sadio from using its territory for rebel activities, is motivated by the decision of Mr Sadio in 1999 to support the rebellion that led to the ousting of the then-president, João Bernardo Vieira (known as Nino Vieira), who returned to office as Guinea-Bissau!s president in October 2005 following elections. The latest operation could be interpreted as a reprisal by Mr Vieira against Mr Sadio for his involvement in the 1998/99 civil war, when he supported the rebellion which led to the ousting of Mr Vieira. On April 14th Mr Vieira told the UN Integrated Regional Information Networks (IRIN News) that Guinea-Bissau troops would continue their offensive until all Senegalese rebel bases established there in the last month were destroyed.

On January 23rd Mr Wade!s emissary for the Casamance peace process, Mibaye Jacques Diop, met in Zinguinchor with several factions of the MFDC and civil society organisations, in preparation for the Foundiougne II talks, which were initially scheduled to take place on February 2nd-3rd. Two days later, the leader of the MFDC, Father Augustin Diamacoune Senghor, sent a letter to Mr Diop, requesting the postponement of Foundiougne II in order to give Mr Diop more time to continue discussions with all factions of the MFDC. These preliminary meetings are deemed to be important, as in the past negotiations have tended to break down because of infighting within different factions of the MFDC. On February 22nd Mr Diop organised a meeting between the MFDC, the government of Senegal and the national bureau of the African Development Bank (AfDB). The AfDB resident representative, Mohamed H!Midouche, stated the commitment of his organisation to financially support economic recovery in Casamance. Differences within the MFDC have led to delays in the preparation for Foundiougne II, with Mr Diop suggesting that these talks could take place by June. It is unclear to what extent the recent outbreak of violence in Casamance has affected the pre-Foundiougne II discussions, as Mr Sadio is not a party to the peace process, having rejected the December 2004 accord and having proclaimed since that he would accept nothing other than independence for Casamance (February 2006, The political scene).

Economic policy

In his letter of intent to the IMF, dated December 29th 2005, the minister of economy and finance, Abdoulaye Diop, describes the policies that the government intends to implement in the context of its request for a new programme with the Fund"the current poverty reduction and growth facility (PRGF) expires on April 27th 2006. Mr Diop stated that Senegal was interested in obtaining a non-financial arrangement with the Fund, a policy support instrument (PSI), which would focus on accelerated growth, reducing poverty and deepening fiscal and financial reforms. The PSI is aimed at providing extensive external monitoring of a government�s reform efforts, but no financial

President of Guinea-Bissau wants to continue offensive

Preparations for Foundiougne II talks take place

Senegal requests a policy support instrument

Senegal 21


support, unlike the PRGF (which most Sub-Saharan African governments have with the IMF at present). One feature of this facility is that the government must have a strong home-grown economic policy in place to be monitored. The first government to agree a PSI with the IMF was Nigeria in October 2005. The PSI has three goals:

• to provide a fixed schedule of reviews (normally twice yearly) which will signal to other donors that agreed policies are on track;

• to provide a mechanism for notifying donors that a policy is off-track, or there has been a misreporting of data; and

• to ensure that economic policy is continuing to support the country�s poverty reduction strategy (PRS) process, and that agreed debt relief is being spent in the key areas identified in the PRS.

According to Mr Diop, the overarching framework for Senegal!s economic policy will be the accelerated growth strategy, the Stratégie de croissance accélérée (SCA). The SCA combines the goals fixed in Senegal�s poverty reduction strategy paper (PRSP)"which is the main framework for economic policy"with the goal of increasing real GDP growth from its current level of about 6% per year to more than 7% per year by 2015. Action plans to promote development in five key economic activities with growth potential and external competitiveness are currently under preparation. The process of updating the PRSP will take into account the SCA action plans, in order to reflect new policy priorities. The five areas include:

• agriculture, agro-industries;

• fishing and fishing industries;

• tourism, crafts and cultural industries;

• textile and clothing industries; and

• electronic customer-support services.

A private company, Aéroport International Blaise Diagne (AIDB), has been created to oversee on the project to build a new airport 45 km north-east of the capital, Dakar, in Ndiass. AIDB will oversee the financing, construction and development of the new airport and to this end, on March 2nd (with the AIDB accepting bids until March 27th), launched a tender for the management of the new airport. The new airport will have an annual capacity of 3m passengers and its development is being financed by an air-travel tax, the Redevances pour le développement des infrastructures aéroportuaires (RDIA), on tickets. The RDIA was introduced in April 2005 by presidential decree, charging #1 (US$1.26) for national flights and #30 for international flights. The RDIA is expected to generate #24m annually. AIDB is being advised by the Moroccan investment bank, BMCE Capital, on the tender process.

Questions concerning the management of the RDIA proceeds earmarked for the new airport were the main reason delaying the IMF!s third review of the PRGF (February 2006, Economic policy). This is because the promulgation of a decree

Accelerated Growth Strategy implementation from June

Creation of company with oversight over new airport

22 Senegal


on transparency procedures for the financing of the airport was a prior action for the combined third and fourth PRGF reviews. The government insisted that proceeds from the RDIA should be kept off budget, arguing that it would accelerate the construction of the airport. Although the Fund was not convinced by the government!s arguments, an agreement was reached regarding the procedures that would ensure both transparency and accountability in the use of these funds. The decree specifying the transparency procedures for the RDIA was issued on December 2005. The revenue generated by the RDIA will be collected by the International Air Transport Association (IATA) and will be deposited in a special bank account, from which funds can only be withdrawn to service the loan contracted to build the airport.

The World Bank has also expressed concern over risks associated with the airport project, including risk-sharing agreements between the government and the construction company. The assurances that both the IMF and the World Bank are seeking in the new airport project reflect their views on past construction projects in Senegal. In the IMF-World Bank!s first official progress report on PRSP implementation, doubts had been raised as to how Senegal!s large-scale infrastructure projects, including the new airport, fit into the spending priorities identified in the PRSP (April 2005, Economic policy). P ub

In February the IMF published the government!s second annual progress report on the PRSP, which runs from 2003 to 2005. The report covers PRSP implementation in 2004 and examines prospects for 2005. There are no new poverty indicators, in the absence of household surveys, and poverty indicators are estimated assuming that a rate of increase of per head GDP of 1% would reduce the incidence of poverty by 0.9%. If this elasticity parameter holds, then the high levels of growth achieved in 2004 and 2005 suggest that poverty rates have fallen in both 2004 and 2005. The joint staff advisory note (JSAN) of the IMF-World Bank on the second annual progress report was also made public in February. It noted progress in relation to some of the shortcomings identified in the first JSAN assessment, including improved linkages between resource allocations and PRSP priority actions and the strengthening of the participatory process. In addition, the allocation of spending for health care and education continued to rise. However, it cited a number of shortcomings in the implementation of the PRSP:

• The report does not detail the policy implications of the concentration of poverty in rural areas, something which the first JSAN had already noted (April 2005, Economic policy). This would require greater financial resources to be allocated to local government, increased training and capacity building, improved access to credit, especially for small and medium-sized companies. Lack of progress in implementing the government!s decentralisation strategy has also contributed to weak public service provision in rural areas.

• There is a continued need to strengthen budgetary reforms and fiscal transparency. The JSAN highlighted the need for both internal and external controls of budget execution and the finances of state-owned enterprises. Weaknesses in expenditure tracking was noted, making it difficult to ascertain whether budget allocations were spent as programmed. Enforcement of the new

Second official progress report on PRSP is made public

Senegal 23


procurement rule, the strengthening of the General Audit Court and improvements in public investment expenditure were also identified as areas which needed improvements.

• The Millennium Development Goal (MDG) targets for education and health will not be reached unless the pace of reform is accelerated. In particular, the government should improve access to, and the utilisation of, basic health services by strengthening outreach activities, implementing its infrastructure development plan, and reinforcing priority actions in the areas of disease prevention and the use of reproductive health services.

In January The Heritage Foundation/Wall Street Journal released the 2006 Index of Economic Freedom. This index measures 157 countries against a list of variables divided into ten factors of economic freedom: trade policy, fiscal burden of government, government interventionism, monetary policy, capital flows, banking and finance, wages and prices, property rights, regulation, and informal market activity. Low scores (the best score is 1 and the worst 5) are desirable as they reflect lower levels of government intervention in the economy. Senegal scores worst in the fiscal burden category, with a score of 4.5, followed by the openness of the banking and financial sector, informal market activity and regulation, all of which score four. Senegal performs relatively well by Sub-Saharan African standards, ranking 83rd out of 157 countries, significantly better than the median ranking for Sub-Saharan Africa, at 102.

However, eight other African countries"Botswana (30th), Cape Verde (46th), South Africa (50th), Madagascar (52nd), Uganda (66th), Mauritius (77th), Swaziland (78th) and Mauritania (81st)"performed better. Senegal!s score had been improving every year since 1996 when it was first covered by the index, but in 2006 both its ranking and score deteriorated for the first time"down from 72nd out of 161 countries in 2005"reflecting a worsening of the fiscal burden, banking and informal market scores.

The domestic economy

Economic trends

In January the Ministry of the Economy and Finance announced a substantial upward revision to its estimate of real GDP growth for 2005, as a result of stronger than expected growth in the primary sector and a lowering of its estimate of real GDP growth for 2004"instead of growing by 6.2%, Senegal!s economy grew by 5.6%. As a result, real GDP is estimated to have grown by 6.1% in 2005, instead of by 5.1% as the ministry had estimated in November 2005, bringing it close to the original government forecast of 6.2% (February 2005, The domestic economy: Economic trends).

Agricultural output is estimated to have risen by 18.3% in 2005 as a result of plentiful and well distributed rains; the strongest growth of the primary sector sub-categories. Although the secondary sector grew by 4.2%"up from the 3.2% estimated in November"this hides considerable variations within the sub-sectors. Growth in the construction sector remained high, at 13%, while the

Real GDP growth is revised up to 6.1% in 2005

Senegal ranking worsens in Index of Economic Freedom

24 Senegal


extractive industries sector (mainly phosphates and fertilisers) contracted by 8.8%. The tertiary sector grew by 5.5%, driven by strong growth in the transport, post and telecommunications category and in particular the booming telecoms sector. The ministry left its real GDP forecast for 2006 almost unchanged, lowering it from 5.1% to 5%. Economic growth will be slower in 2006, driven by much more moderate projected growth in the primary sector, after an exceptional rebound in 2005.

Real GDP growth by sector (% change; 1999 constant prices)

2004 2005 2006Primary sector 2.7 12.2 6.1 Agriculture 4.0 18.3 8.0 Fish 0.6 3.3 1.9Secondary sector 6.2 4.2 3.3 Mining 6.2 -8.8 3.5 Food oils -25.7 4.1 15.0 Manufacturing 3.1 1.7 0.1 Electricity, gas & water 8.4 9.9 1.5 Construction 17.7 13.0 13.0Tertiary sector 6.3 5.5 5.4 Commerce 3.3 4.6 4.0 Transport, post & telecommunications 15.0 10.4 9.0 Public administration 6.2 5.4 5.4

Real GDP growth 5.6 6.1 5.0

Source: Ministère de l'économie et des finances, Direction de la prévision et de la statistique, Situation économique et financière

en 2005 et perspectives en 2006, January 2006.

Provisional data from the economy and finance ministry reveal a strong decline in the fiscal deficit, on a commitment basis, from CFAfr100.7bn (US$190.6m) in 2004 to CFAfr47bn in 2005. This is equivalent to a fall in the budget deficit from 2.4% of GDP in 2004 to 1% of GDP in 2005. Total revenue and grants increased by 10.9%, to CFAfr959bn, driven by strong growth in tax revenue, especially in direct tax revenue. Direct tax revenue rose from CFAfr178.1bn in 2004 to CFAfr214.4bn in 2005, as a result of higher revenue from company and income tax. Grants fell last year by 10.5%, owing to falls in both direct budgetary support and funding for capital investment. Total expenditure and net lending reached CFAfr1trn in 2005, representing a modest increase on 2004. The largest increase in public expenditure was in personnel expenses, which rose by 17.1%, owing to increased public-sector recruitment and higher remuneration of civil servants. Capital expenditure fell in 2005 as a result of lower external financed public investments, while internally financed capital expenditure rose from CFAfr221.2bn in 2004 to CFAfr266.9bn. The government did not accumulate external or domestic arrears on its public debt.

Fiscal deficit falls to an estimated 1% of GDP

Senegal 25


Government finances (CFAfr bn unless otherwise indicated)

2004 a 2005b

Total revenue 864.8 959.0

Domestic revenue 776.8 880.2

Tax revenue 738.5 850.8

Non-tax revenue 38.3 29.4

Grants 88.0 78.8

Total expenditure & net lending 965.5 1,006.0

Recurrent expenditure 553.9 613.0

Personnel expenses 217.6 254.8

Interest on debt 46.7 40.9

Other expenses 289.6 317.3

Capital expenditure 413.2 402.6

Internally financed 221.2 266.9

Net lending 12.3 4.7

Balance (commitment basis) -100.7 -47.0

% of GDP -2.4 -1.0

a Actual. b Provisional.

Source: Ministère de l'économie et des finances, Note de conjoncture, 4ème trimestre 2005.

Agriculture

Plentiful rain and low levels of pests and diseases led to a good harvest in 2005/06. Cultivated land increased by 6% compared with 2004/05. Production of groundnuts, Senegal!s most important export crop, increased from 602,621 tonnes to 820,119 tonnes, representing an increase of 36% compared with 2004/05"a year characterised by scant rainfall and locust infestations. Cereal production was also higher"particularly millet production, which increased by 113% year on year. The better than expected performance of agriculture explains in part the Economist Intelligence Unit!s revision of its forecast for real GDP growth in 2005, from 5.1% to 6.1%.

Agricultural production ('000 tonnes unless otherwise indicated; crop year)

2004/05 2005/06Export crops Groundnuts 602.6 820.1 Cotton 39.7 46.6Cereals 1,084.5 1,516.9 Millet 323.8 688.9 Sorghum 126.5 150.7 Maize 400.6 419.3 Rice 232.7 256.7 Fonio 1.0 1.2


Fish production performed poorly in 2005, falling by 5.9%, from 668,400 tonnes in 2004 to 628,800 tonnes. Artisanal fish production rose slightly in 2005, by 2.2%, although there was considerable regional variation, with falls in the fish catch off the coast of Thiès and Louga, and large increases around Dakar,

Agriculture performs well in 2005/06

Fall in industrial fishing production

26 Senegal


Ziguinchor, Fatick and Kaolack. The industrial fish catch continued to decline in 2005, by 17.6%, reflecting the problem of declining fish stocks, largely caused by excessive artisanal fishing. Despite the poor performance of the sector, fishing remains Senegal�s largest source of foreign exchange, constituting 18% of total merchandise exports in 2005. Although there have been questions about the government!s commitment to tackle problems in the sector, the government has introduced an artisanal fishing permit in March, permitted under the Code de la pêche of 1998. However, there will be no quotas in the first phase of implementation"the permit system is a first step in trying to obtain accurate statistics, with the possibility of introducing quotas in the medium term.

Fish production ('000 tonnes unless otherwise indicated)

2004 2005 % of changeArtisanal 394.5 403.2 2.2

Industrial 273.9 225.6 -17.6Total 668.4 628.8 -5.9


On December 16th 2005 the National Assembly voted in favour of the reintroduction of import taxes on refined vegetable oils in order to protect the privatised oilseed company, Société nationale de commercialisation des oléagineux du Sénégal (Sonacos; February 2005, The domestic economy). The decision to impose a 25% tax on palm oil imports and a 15% tax on other vegetable oils, up to a period of six years was motivated by Sonacos!s rapidly declining market share. The government justified the imposition of the new tax on the basis of a surge in vegetable oil imports since 2004, which they believed had weakened Sonacos! financial position and threatened its ability to buy the groundnut crop. However, donors had suggested earlier that the rise in imports could be dealt with by imposing a limited 200-day safeguard clause (the World Trade Organisation, WTO, allows members to temporarily restrict imports of a product to protect domestic industry from an increase in imports if it threatens to seriously undermine the industry), while conducting an audit of Sonacos to assess its financial position.

At a press conference in February, the director of the World Bank in Senegal, Madani Tall, stated that the government had broken its pledge to both the IMF and World Bank by reintroducing the tax. Mr Tall argued that financial support from the World Bank and the Fund totalling CFAfr45bn (US$86.5m) had been given to support the liberalisation of the groundnut sector, and that these funds might need to be returned if Senegal were not to rescind the oil import taxes. Under such strong external pressure, on April 8th the government submitted to the National Assembly a proposal to modify the vegetable oil import taxes.

Mining

According to a press release from Mittal Steel, on January 26th the company signed a memorandum of understanding (MoU) with the government of Senegal to explore the development and production of iron ore from the Falémé region, in south-east Senegal. The region has estimated reserves of

Proposal to rescind vegetable oil import taxes

Mittal Steel signs MoU over Falémé iron ore mines

Senegal 27


around 700m tonnes of iron ore. However, in March the South African metals producer, Kumba Resources, a subsidiary of Anglo-American, declared that the deposits allocated to Mittal are the same property on which it holds rights. In its annual report, Kumba Resources stated that it had concluded an agreement with the Senegalese government agency, Société des mines de fer du Sénégal oriental (Miferso), in July 2004 to explore the Falémé deposit. The agreement gave Kumba Resources at completion of the pre-feasibility study an option to acquire an 80% interest from Miferso. The Falémé project consists of the iron ore mines, a 741-km railway line and a new deepwater port for iron ore exports. According to an article published in March by the Paris-based publication, Jeune Afrique, Miferso informed Kumba Resources on December 30th 2005 that it had terminated its contracts as the company had not respected the deadline for the completion of a feasibility study, something which Kumba Resources contests. Mittal Steel has countered that it understands that the MoU that had earlier been concluded between the Government of Senegal and Kumba Resources had expired, suggesting that Kumba Resources hold no rights over the development and production of iron ore from the Falémé region.

Industry

Although the secondary sector as a whole grew by 4.2% in 2005, certain sub-sub-sectors performed poorly, particularly chemicals, which was badly affected by the impact of high prices for oil and inputs such as sulphur. Senegal!s largest industrial company, Industries Chimiques du Sénégal (ICS), which produces phosphates, phosphoric acid and fertilisers, performed poorly in 2005, as it was hit by adverse input costs, as well as lower average prices for its products. Production in both the extractive and chemical industries contracted in 2005 as a result. The construction material sub-sector was buoyant in 2005. Electricity and water production also increased in 2005, by 11.4% and 5.1% respectively. The agri-industry sub-sector performed well, helped by strong growth in canning, while there was only a modest increase in groundnut oil production. Looking ahead, the outlook for industrial production in 2006 is not good, given even higher international oil prices and strong financial difficulties in ICS, which could impact negatively on production of phosphates, phosphoric acids and fertilisers. The government is projecting that the secondary sector will grow by 3.3% in 2006, down from 4.2% in 2005.

Industrial production index (Index 1999=100)

2003 2004 2005Mining 126.3 114.6 97.7 Phosphates 120.3 114.3 99.6Agri-industry 104.5 136.2 146.0 Canning 72.3 109.0 123.9 Food oils 87.4 71.8 72.5Chemical industry 145.7 147.3 135.8 Industries chimiques du Sénégal (ICS) 163.6 171.8 156.5 Chemical products 145.5 148.3 136.5 Refinery 135.8 139.4 105.2

Poor performance of industrial sector in 2005

28 Senegal


Industrial production index (Index 1999=100)

2003 2004 2005Construction material 171.7 218.9 239.4Electricity 144.7 144.6 161.1

Water 116.2 121.1 127.3Total (incl others) 125.2 139.7 142.9


On April 22nd a meeting of the board of directors of ICS was held in Paris to try to sort out the difficulties faced by the company, which has led to blocked banking accounts, commercial litigations with suppliers and a stoppage of production since February (February 2005, The domestic economy: Industry). Negotiations have been ongoing between the largest shareholder of ICS, the government of Senegal (4.4%), and Indian members of an international consortium which has a 26.1% stake in the company (the remaining 27.5% share is distributed between other regional government and private companies), over a recovery plan. According to industry sources, the two parties appear to be close to an agreement. At a meeting held in Dakar in April, the Indian government pledged to finance US$50m of investments, while the Indian Farmers� Fertiliser Co-operative (IFFCO)"which has a 19.1% stake in ICS"pledged to recapitalise the company in order to restart production. The Indian offer is estimated at US$140m, composed of grants and a long-term concessional loan. One of the outstanding issues discussed in Paris was the precise mechanisms for implementing a recovery plan.

Infrastructure and communications

On March 29th a signing ceremony was held between the interim chargé d!affaires of the Japanese embassy in Dakar, Hisanobu Hasama, and the minister of economy and finance, Abdoulaye Diop, for a ¥960m (US$8.1m) loan for a road improvement and transport facilitation project between Dakar and Bamako. The corridor, a priority project of the infrastructure and road transport programme of the Union économique et monétaire ouest-africaine (UEMOA), will open up areas of economic potential in Mali and Senegal and help to strengthen regional co-operation and economic integration by reducing non-tariff barriers and invisible costs. The loan from the Japanese Bank for International Cooperation (JBIC) will help build an 81-km stretch of the Dakar-Bamako road.

The total cost is estimated at US$290m, of which the African Development Bank (AfDB), through its African Development Fund, will provide about US$84m in loans. Although Bamako is roughly equidistant from Dakar and Abidjan, the use of Senegal as a trade corridor has long been hampered by the poor state of infrastructure. The reconstruction of the Senegal-Mali highway is one of the ten projects short-listed by the New Partnership for Africa!s Development (Nepad) under its short-term plan for infrastructure.

Loan to finance Dakar-Bamako transport corridor

Negotiations with India over ICS continue

Senegal 29


DAKAR SENEGAL

MAURITANIA

Dakar to Bamako road improvement program

MALI

GUINEA

GUINEA-BISSAU

THE GAMBIA

ATLANTIC

OCEAN

0 km 100 200

0 miles 50 100

1

1

4

4

4

3

3

2

2

Section to be improved

Congested section

Sections to be rehabilitated

Sections in fairly good condition

3 BAMAKO

A recent report by a UK company providing business intelligence to global telecoms and media markets, Informa Telecoms & Media, on the African mobile phone market shows strong growth in the number of mobile phone subscribers in the region. Part of the reason for the strong growth in mobile phone subscribers is the low number of mobile phones per 100 inhabitants, which suggests that the sector will continue to experience strong growth in the medium term. Senegal, where fewer than two out of ten individuals own a mobile, saw strong year-on-year growth in the number of mobile phone subscribers, estimated at 49.1%. According to a US communications research and advisory company, Pyramid Research, there were 640,000 new mobile phone subscribers in Senegal in 2005, taking the total to 1.8m. Pyramid Research is forecasting that there will be 3.8m subscribers by 2009. There are two mobile companies operating in Senegal, Sonatel Mobiles (trading under the name Alizé), a subsidiary of France Télécom that hold a 59.9% market share, and Sentel (trading under the name Tigo), a subsidiary of the Millicom group of Luxembourg, representing 40.1% of the market. An invitation to tender for a third mobile phone operator licence is expected to be launched in 2006.

Growth in mobile phone subscribers, 2005 (% change year on year)

Angola 96.3Cameroon 42.7

Congo (Brazzaville) 28.0Côte d'Ivoire 30.6

Ghana 90.6Kenya 78.0Nigeria 105.3

Senegal 49.1South Africa 39.9

Source: Jeune Afrique, No 2353, February 12th-18th 2006.

Strong growth of mobile telephony in Senegal

30 Senegal


In March and April Dakar experienced power cuts on a scale not seen for decades. The result was an outburst of public anger, as well as fears of its negative impact on economic activity. The national electricity company, Société nationale sénégalaise d�électricité (Senelec), has blamed the cuts on the breakdown last December of a 50-mw power station and on the decision of the refining company, Société africaine de raffinage (SAR), to refuse to provide diesel fuel to several power stations. The electricity supply fell to one-half of overall demand in mid-March, according to Samuel Sarr, the director-general of Senelec. SAR had refused to provide fuel to Senelec because of outstanding debts owed to it by the electricity utility"estimated at CFAfr7bn (US$13.5m). In early April the government managed to negotiate a deal to secure fuel from the Moroccan refinery, Société anonyme marocaine des industries de raffinage (SAMIR), part of the Saudi Corral group. SAMIR will also assist Senelec with the construction of oil storage tanks to help secure its supply. Despite the new contract, Mr Sarr has stated that power cuts can be expected until October. For its part, SAR was unable to import crude oil and faced stock difficulties in March, in part because of unpaid debts totalling CFAfr34bn owed to it by the state. The government contested the bill, but eventually paid CFAfr14.5bn. The interrelated problems faced by both Senelec and SAR reflect in part the inability of both the companies and the government to abide by their payments obligations, and come at a time when the government is keen to promote its accelerated growth strategy.

Financial and other services

According to a recent assessment by the IMF of the financial sector, Senegal!s banking system remains "reasonably" sound, despite vulnerabilities and a worsening of key financial indicators in 2005. In particular, credit concentration, defined as loans to the five largest borrowers of capital, remains high, equivalent to 143% of banks! capital, a figure higher than in 2004. The capital adequacy ratio of the banking system, measured as the capital to risk-weighted assets, has also declined in recent years, and stood at 11.6% in September 2005. The Fund urged Senegal to raise the statutory capital adequacy ratio (CAR), currently at 8%, given the limited ability of banks to diversify credit exposure. The government has already proposed raising the CAR at the council of ministers of the regional economic union, Union économique et monétaire ouest-africaine (UEMOA). Non-performing loans (NPLs) as a percentage of total loans have also increased in 2005, while provisions have declined. The recent financial difficulties of Senegal!s largest company, Industries chimiques du Sénégal (ICS), in which the banks are heavily exposed, illustrate the potential fragility of the financial sector if no new capital is injected to prevent its bankruptcy.

Crisis as electricity production drops significantly

Non-performing loans rise in 2005

Senegal 31


Financial indicators (%; end-period unless otherwise indicated)

2003 2004 2005a

Capital/risk weighted-assets 12.1 11.9 11.6

Loans to five largest borrowers/capital 141.0 131.4 143.1

Non-performing loans (NPLs)/total loans 13.3 12.6 13.4

Provisions/NPLs 75.3 75.7 62.9

a As of September.

Source: IMF, Senegal: Third and Fourth Reviews Under the Three-Year Arrangement Under the PRGF-Staff report, March 2006.

Foreign trade and payments

According to data from the Ministry of Economy and Finance, imports increased by 12.3%, to CFAfr1.69trn, despite an 8.4% rise in the value of exports in 2005 to CFAfr730.9bn (US$1.4bn), This widened Senegal!s trade deficit to CFAfr954.4bn, from CFAfr826.3bn in 2004. Surprisingly, however, the rise in exports was not driven by Senegal!s main exports"food, cotton, phosphates and chemical products"which represent 57% of total merchandise exports and performed poorly, falling by 9.6%. Phosphates performed worst, declining by 83.6% as a result of a fall in export volumes. Fertiliser exports also performed poorly, declining by 49% in value terms, mainly as a result of a 48% decline in volumes exported. Receipts from Senegal!s main merchandise export, fish, fell by 18.2%, largely as a result of a 14.6% fall in volumes exported and a 4.2% fall in the average price of fish exports. Unrefined groundnut oil export receipts rose only by 0.3% in 2005, but this hides considerable variation within the year, with very low export volumes in the third quarter"the owners of the newly privatised Société nationale de commercialisation des oléagineux du Sénégal (Sonacos), Advens, took over in April 2005�and high export volumes in the fourth quarter. The only two export categories that saw strong growth were fresh fruit (including cherry tomatoes and mangoes), with export receipts rising by 16% to CFAfr6.75bn, and cement.

Much of the surge in imports is explained by hydrocarbons"crude oil and petroleum products imports rose by 17.4% in value. This large increase in value reflects high international oil prices, as actual volumes of crude imports and petroleum products imports fell by 15% and 15.2% respectively. Food product imports rose significantly, by 10.4% in value; the volume of corn and sugar imports, rose dramatically by 167.5% and 60.2%, respectively, and that of rice, a national staple, was up by 14.5%. Imports of capital equipment also increased significantly, by 15.3%.

External trade (CFAfr bn)

2004 2005Total merchandise exports 674.5 730.9 Food 195.6 166.3 Fish 160.7 131.5 Unrefined groundnut oil 13.7 13.7 Cotton 15.3 11.2 Cement 14.7 27.1

Senegal's trade deficit widens in 2005

32 Senegal


External trade (CFAfr bn)

2004 2005 Phosphates 4.4 0.7 Chemical products 246.3 238.9 Petroleum products 115.2 122.3 Phosphoric acid 94.6 98.0 Fertilisers 36.5 18.6Total merchandise imports 1,500.8 1,685.3 Food 327.3 361.3 Rice 117.4 132.9 Crude oil & petroleum products 278.5 326.6 Crude oil 178.0 203.4 Petroleum products 100.4 123.2 Capital equipment 186.6 215.1Trade balance -826.3 -954.4


On March 28th the World Bank!s board of executive directors approved financing and implementation details for the Bank!s contribution towards the Multilateral Debt Relief Initiative (MDRI), which will cancel US$37bn of debt owed by eligible countries to the International Development Association (IDA; the part of the World Bank Group that provides long-term loans and grants to the poorest of the developing countries). The board of governors of the IDA are expected to vote in favour of the MDRI proposal, which would allow debt cancellation to start in July 2006. The World Bank!s action comes in the aftermath of the finalisation of the IMF!s assessment of the first group of countries eligible for multilateral debt relief in December 2005.

Senegal was one of 19 countries selected"all those that had reached completion point under the IMF-World Bank enhanced heavily indebted poor countries (HIPC) debt-relief initiative. As a result, all of Senegal!s outstanding debt with the Fund incurred before January 1st 2005 (amounting to about US$136m) was to be cancelled from January 2006 (February 2005, Foreign trade and payments). Both the World Bank!s and the IMF!s decisions on cancelling multilateral debt follow an initial agreement reached by the leaders of the G8 group of leading industrialised nations at their meeting in July 2005 at Gleneagles, Scotland (October 2005, Foreign trade and payments). In contrast to the more limited impact of the IMF!s decision to cancel Senegal!s debt owed to it, the IDA debt is much more significant, at US$1.8bn in 2003, representing 41% of Senegal!s total outstanding external debt. Although the modalities and timing of the debt cancellation remain to be worked out, Senegal could begin to receive IDA debt relief from the second half of 2006. This should lead to a substantial reduction in debt-service payments and debt ratios.

External debt, 2003 (US$ m)

Total external debt outstanding 4,418 IDA 1,806

Source: World Bank, Global Development Finance, 2005.

World Bank approves US$37bn for multilateral debt relief

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Senegal - World Banksiteresources.worldbank.org/INTAFRSUMESSD/... · Mr Wade !s party, the Parti dØmocratique sØnØgalais (PDS), will retain its solid majority in the National Assembly