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Senegal: 161.82 million special drawing rights allocated by the IMF


Lsoaring global fuel and food prices, aggravated by the war in Ukraine and, to a lesser extent, the freeze on trade with Mali, due to Economic Community of East African States sanctions West (ECOWAS), disrupt post-pandemic recovery and make political arbitration difficult for Senegal. “Senegal’s economy entered 2022 with strong growth momentum, but fallout from the war in Ukraine is hampering this rebound,” said Kenji Okamura, Deputy Managing Director and Acting President of the International Monetary Fund (IMF). As a result, the West African country’s growth has been revised down to around 5%, while inflation is expected to reach 5.5%, driven by higher food and energy prices.

The IMF has therefore decided to allocate to Dakar 161.82 million special drawing rights (SDR), or about 215.78 million dollars. These funds are intended to support the country’s post-pandemic recovery.

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Containing the shock against the Covid and initiating its economic recovery

This is good news for President Macky Sall, who is leading the battle internationally for a reallocation of SDRs to Africa. Equivalent to an IMF money printing board, “special drawing rights” are monetary assets granted directly to member countries, and which can be converted into foreign currency, either to repay their obligations to the Fund or to be spent without creating debt.

The international community had agreed on the principle of a global issue of SDRs of 650 billion dollars to cushion the impact of the Covid-19 pandemic, of which 33 billion must automatically return to Africa, through the interplay of quotas within the Washington institution – an amount deemed very insufficient by the African Union, but which African states cannot do without.

The IMF recalls that the Senegalese authorities “adopted an amending budget in May 2022 to take into account temporary and targeted measures aimed at supporting the most vulnerable and stabilizing food prices consumed by low- and middle-income households, while preserving debt sustainability”. This has an impact on the budget deficit, it is estimated this year at 6.2% of GDP against 4.8% of GDP in the initial budget. Public debt is expected to reach 75% of GDP in 2022.

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The State distributes aid in the face of the effects of the world crises

In early May, the Senegalese president launched a program of financial allowances for more than half a million poor households, to help them cope with the effects of the war in Ukraine and the Covid-19 Pandemic. Since the start of the war in Ukraine at the end of February, oil prices have soared on world markets, fueling a sharp rise in fuel and food prices in many countries, including Senegal. “To provide solutions to the unfavorable economic situation, I have decided to support the resilience of 542,956 households to receive from the State an exceptional financial cash transfer in the amount of 43.4 billion FCFA. [66 millions d’euros] “, justified Macky Sall. “The objective is to give 80,000 FCFA [121 euros] per household and improve their level of consumption and the education of their children”, added President Sall, qualifying the operation as an “exceptional emergency measure”.

The state will use mobile payments to transfer funds to poor households, authorities said. Senegal, a country of over 17 million people, is ranked among the poorest in the world. The minimum wage there is 75 euros. The funds used to finance this operation come from a World Bank project, with other donors, including Germany and the United Kingdom, indicated the Director of Operations of the World Bank for Senegal, Nathan Nice summer.

The global rise in the price of food and energy caused by this conflict adds “to the aftermath of the pandemic, regional insecurity and the increase in social demands in the run-up to the parliamentary elections in July”. , said Edward Gemayel, who led an IMF mission to Senegal from March 9 to 15, recently. “All these elements increase the risks of a slowdown in economic growth and will probably translate into aggravation of inflationary pressures and a considerable increase in public spending”, he had commented.

Despite these new challenges, the outlook for Senegal is rather optimistic, the IMF deems economic activity to be robust in the medium term, “provided that appropriate policies are implemented”. To strengthen the country’s economic resilience, the institution recommends an acceleration of “the domestic revenue mobilization strategy, prudent debt management and better spending efficiency”.

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