afrol News, 30 September - Faced with a continuing energy crisis and deteriorating infrastructure, Senegal's government is eager to make great investments to address the problems. Slow economic growth however made analysts urge authorities to have patience.
An analyst team from the International Monetary Fund (IMF) has visited Dakar for the last two weeks, holding extensive meetings with government and receiving fresh economic data.
Their conclusion was more positive than three months ago, but not good enough to agree with the Prime Minister and his desired large investment schemes in infrastructure.
Growth projections have been scaled upwards since the last analysis, made in June. The Senegalese economy is expected to grow by 4 percent this year and around 4.4 percent in 2011.
Corrected for population growth, this however will give a per capita GDP growth of 1.4 percent this year and 1.8 percent next year. As both 2008 and 2009 saw a negative per capita GDP growth (- 0.3 and -1.1 percent), the room for public spending still is limited.
So far, the IMF team held, the Senegalese government had handled the tough economic situation in a "broadly satisfactory" manner. While budget deficits had increased during the crisis, they were still within responsible limits.
The analysts however seemed to have been alarmed by government's plans for 2011, where major investments in particular in infrastructure are planned. The government of President Abdoulaye Wade, which faces tough elections in 2012, has been lost much popularity for its inability to halt the energy crisis and the deterioration of Senegal's infrastructure.
In particular, the electricity situation in Senegal has grown ever more worrisome. Power outages are now the rule in Dakar and outside, these posing strong limits for the national industry, enterprises and investors. The public demands swift action on the still deteriorating situation.
The IMF analysts however urge the governm
Senegalese GDP growth 2007-15, as planned for in the 2008 budget and as projected now
ent that the "budget deficit should be kept below 4.5 percent of GDP" during the post-election year. "Known spending pressures must be realistically and transparently reflected in the 2011 budget," they warn.
Addressing the electricity situation, the IMF team urged government to find additional external funding, for example through donors. "Challenges in the electricity sector, that remain a drain on the budget and growth, need to be addressed expeditiously in close cooperation with development partners," they advised.
The analysts also feared Dakar authorities could make sudden, poorly evaluated decisions on large-scale infrastructure projects that may cost the country dearly for years to come. They urged government to "carefully prioritising new public investment in infrastructure, ensuring that such investment has a high rate of return."
"Plans for new infrastructure investment need to be, transparently integrated in the budget framework, and should also be conducive to the development of additional private sector investment," the IMF analysts added.
Fearing that government could fall to the temptation of making easily available loans agreements with China to finance large infrastructure schemes, the analysts urged "a cautious approach in accessing external non-concessional borrowing." Otherwise, Senegal's macroeconomic stability could be endangered, they warned,
The Dakar government thus is in double fire: Citizens expect massive infrastructure investments but the budgetary situation and the IMF say "no". The Fund's analysts however promised to team up with government to examine alternative "execution plans and financing options" for "specific large new infrastructure investments."
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