Translated document

AFRICAN DEVELOPMENT FUND

PROGRAMME : INCLUSIVE GROWTH AND ECONOMIC

COMPETITIVENESS SUPPORT PROGRAMME (PACICE)

COUNTRY : SENEGAL

APPRAISAL REPORT

Appraisal Team

Team Leader: Ahmed Ismail MAHDI, Chief Financial Analyst, OSGE.1/SNFO

Sector Director: Regional Director: Division Manager: Resident Representative:

Isaac LOBE NDOUMBE, Director, OSGE Franck PERRAULT, Director, ORWB Jean-Luc BERNASCONI, Division Manager, OSGE.1 Leila MOKADEM, Regional Resident Representative, SNFO

OSGE DEPARTMENT

June 2013

TABLE OF CONTENTS

I. THE PROPOSAL ......................................................................................................... 1

II. COUNTRY AND PROGRAMME CONTEXT ......................................................... 2 2.1. Recent Political and Socio-economic Developments, Perspectives, Constraints and

Challenges .................................................................................................................. 2

2.2. Bank Group Portfolio Status ...................................................................................... 5

2.3. Government’s Overall Development Strategy and Medium-term Reform Priorities 5

III. RATIONALE, KEY DESIGN ELEMENTS AND SUSTAINABILITY ............. 6 3.1. Links with the CSP, Analytical Underpinnings and Country Readiness Assessment 6

3.2. Collaboration and Coordination with Other Donors .................................................. 7

3.3. Outcomes of Past and On-going Similar Operations and Lessons ............................. 8

3.4. Relationship to On-going Bank Operations ............................................................... 8

3.5. Bank’s Comparative Advantage and Value-added .................................................... 9

3.6. Application of Good Practice Principles on Conditionality ....................................... 9

3.7. Application of the Bank Group policy on Non-concessional Loans .......................... 9

IV. THE PROPOSED PROGRAMME ........................................................................ 9 4.1. Programme Goal and Objectives ................................................................................ 9

4.2. Programme Components, Operational Objectives and Expected Results .................. 9

4.3. Financing Needs and Arrangements ........................................................................ 14

4.4. Programme Beneficiaries ......................................................................................... 14

4.5. Impact on Gender ..................................................................................................... 14

4.6. Impact on the Environment ...................................................................................... 15

V. IMPLEMENTATION, MONITORING AND EVALUATION ............................ 15

5.1. Implementation Arrangements ................................................................................. 15

5.2 Monitoring and Evaluation Arrangements ............................................................... 16

VI. LEGAL DOCUMENTATION AND AUTHORITY ........................................... 16

6.1. Legal Documentation ............................................................................................... 16

6.2. Conditions Precedent to Bank Group Intervention .................................................. 16

6.3. Compliance with Bank Group Policies .................................................................... 16

VII. RISK MANAGEMENT ......................................................................................... 17

VIII. RECOMMENDATION ......................................................................................... 17

i

Tables

Table 1: Macroeconomic Indicators

Table 2: Status of the Portfolio as of end-April 2013

Table 3: Eligibility Conditions for Programmatic Support Operations

Table 4: Financial Requirements

Table 5: Risks and Mitigation Measures

Annexes

Annex 1: Government’s Policy Letter

Annex 2: Matrix of PACICE Measures Extracted from the Matrix

of ACAB TFP Members

Annex 3: Statement on Country Relations with the IMF

Annex 4: Key Macroeconomic Indicators

Currency Equivalents

April 2013

Currency Unit CFAF

UA 1 USD 1.5

UA 1 EUR 1.17

UA 1 CFAF 767.38

Fiscal Year

1 January – 31 December

ii

Acronyms and Abbreviations

ACAB Budget Support Framework Arrangement

ADEPME Small- and Medium-sized Enterprises Development Agency

ADF African Development Fund

AfDB African Development Bank

ANSD National Agency for Statistics and Demography

APR Annual Performance Report

BCEAO Central Bank of West African States

BNDE National Bank for Economic Development

CCHS Joint Committee for the Harmonisation and Monitoring of Reforms

CNRF National Land Reform Commission

CODE Committee on Operations and Development Effectiveness

CPI Presidential Investment Council

CPIA Country Policy and Institutional Assessment

CSP Country Strategy Paper

DASP Private Sector Support Directorate

DEEG Equity and Gender Equality Directorate

DGD General Directorate of Customs

DGID General Directorate of Taxation and Lands

DMC Money and Credit Directorate

DPEE Forecasting and Economic Studies Directorate

DREAT Delegation for State Reform and Technical Assistance

EITI Extractive Industries Transparency Initiative

EPSI Economic Policy Support Instrument

ERSP Economic Reform Support Programme

ESPS Poverty Monitoring Survey in Senegal

FONGIP Guarantee Fund for Priority Investments

GDP Gross Domestic Product

GII Gender Inequality Index

HDI Human Development Index

IMF International Monetary Fund

ISA Senegalese Institute of Administrators

MCA Millenium Challenge Account

MEF

MINEFI

Ministry of Economy and Finance

Ministry of Economy and Finance

MSE Micro- and small-scale enterprises

OECD Organisation for Economic Cooperation and Development

ONP National Parity Observatory

PACICE Inclusive Growth and Economic Competitiveness Support Programme

PAMOCA Cadastral Survey Modernization Support Project

PAP Priority Action Plan

PAPSP Private Sector Promotion Support Project

PCRBF Budget and Financial Reforms Coordination Project

PEFA Public Expenditure and Financial Accountability

PPP Public-Private Partnerships

PRBF Budget and Financial Reform Plan

iii

PRSP Poverty Reduction Strategy Paper

PTIP Triennal Public Investment Programme

REP Regional Economic Programme

SME Small- and Medium-sized Enterprises

SMTEF Sector Medium-Term Expenditure Framework

SNDES National Strategy for Economic and Social Development

SNEEG National Strategy for Equity and Gender Equality

SNFO Bank’s Regional Office in Dakar

TFP Technical and Financial Partners

UA Unit of Account

UNDP United Nations Development Program

WAEMU West African Economic and Monetary Union

iv

Loan Information

Client Information

BORROWER : Republic of Senegal

EXECUTING AGENCY : Ministry of Economy and Finance

Financing Plan

Source Amount (UA million) Instrument

ADF loan 25.54 Budget support

IDA WB loan 19.93 Budget support

ADF Financing Information

Grant/loan currency

UA

Type of interest rate Not Applicable

Base rate Not Applicable

Interest rate margin Not Applicable

Financing margin Not Applicable

Commitment fee (loan) 0.50%

Servicing fee (loan) 0.75%

Loan maturity 50 years

Grace period (loan) 10 years

Indicative Schedule

Activities Date Concept Note approval (OpsCom) 14 March 2013 Appraisal mission 25 March -5April 2013 Negotiation of loan and grant agreements 16 May 2013 Board presentation June 2013 Effectiveness June 2013 Disbursement of the single tranche July 2013 Completion report December 2014

v

Programme Executive Summary

Programme

Overview Programme Title: Inclusive Growth and Economic Competitiveness Support Programme (PACICE) Geographical Scope: Senegal – Nationwide Program Objective: Create appropriate conditions that guarantee sustainable and inclusive economic

growth by mainstreaming the gender and job-creation dimensions through improvement of economic

and financial governance, and support to private sector development. Timeframe: 18 months (June 2013 – December 2014) Program Cost: UA 25.54 million (ADF loan)

Expected

Programme

Outcomes and

Beneficiaries

The programme seeks to contribute to sustainable and shared economic growth by promoting

efficiency, equity and transparency in public resource management, and creating conditions conducive

to inclusive private sector development. The main results expected from the Programme are: (i)

improved State efficiency, accountability, transparency and equity in public management; and (ii)

improvement of corporate governance and of the business climate to ensure inclusive private sector

development through an innovative approach that includes the gender and job-creation dimensions.

Essentially, the programme seeks to: (i) promote reforms that ultimately lead to the institution of

gender-sensitive and results-based budgeting by mainstreaming the gender dimension into public

policies and factoring gender and employment indicators into public investment programmes; and (ii)

promote reforms that improve the business environment and develop the private sector, especially

SMEs, by specifically supporting women’s entrepreneurship and the initiatives of young entrepreneurs.

Although the entire Senegalese population stands to benefit from the programme, special emphasis will

be laid on women and the youth, who are both users of public services and entrepreneurs, with a view

to ensuring inclusiveness and sustainability.

Needs

Assessment and

Relevance

Despite Senegal’s strong economic and social performance in recent years, gender- or age-related

socio-economic disparities and inequalities that adversely affect certain segments of the population

(especially women and the youth) are still the major problems that undermine the attainment of more

inclusive growth. In this regard, PACICE objectives are consistent with the priorities of SNDES 2013-

2017 and CSP 2010-2015 according to the mid-term review. A financing request was submitted for the

programme in 2012 and needs were assessed in an effort to take stakeholder diversity into account.

Furthermore, from its design to its execution, the proposed programme seeks to ensure

complementarity with projects being prepared (such as the Youth and Women’s Employment

Promotion Project (PAPEJF)) or implemented (such as the Private Sector Promotion Project (PAPSP)).

Bank’s Value-

added The Bank is the key stakeholder for economic and financial governance reform in Senegal. It holds the

Vice-Chair of ACAB, which is a permanent and dynamic framework for coordinating technical and

financial partner operations and monitoring reforms through an evolutive common matrix. The Bank

successfully implemented the ERSP that enabled the country to initiate broad public management and

business environment improvement reforms. Although PACICE seeks to build on previous operations

by supporting the implementation of measures adopted under previous programmes, the current Bank

operation differs from conventional economic and financial governance approaches in that it targets a

series of key measures that include the gender and job-creation dimensions, especially for women and

the youth, in an effort to promote robust, inclusive and sustainable growth. While being a single-

tranche operation, PACICE is part of the medium-term policy dialogue between the Government and

the Bank on key issues.

Institutional

Development

and Knowledge

Building

The programme will have a clear impact in terms of institutional development and knowledge building

since: (i) it supports human and institutional capacity-building reforms; and (ii) its innovative approach

is justified by a number of studies and underlying analyses, including the Bank's report on a study of

gender-sensitive budgeting experiences in Senegal.

vi

Results-based Logical Framework

Country and Programme Title: Senegal – Inclusive Growth and Economic Competitiveness Support Programme (PACICE)

Programme Goal: Create the appropriate conditions that guarantee sustainable and inclusive economic growth by integrating the

gender and job-creation dimension through the improvement of economic and financial governance and support to private sector

development.

RESULTS CHAIN PERFORMANCE INDICATORS

MEANS OF

VERIFICATION

RISKS/

MITIGATION

MEASURES Indicator (including

ISCs) Baseline Situation Target

IMP

AC

T

Public management and

private sector

development contribute

to sustainable and

inclusive growth that

include the gender and

job-creation dimensions

Average GDP

growth rate 3.5% in 2012 4.5% on average

over the 2013-

2015 period

Reports of the

Ministry of Economy

and Finance

Share of women in

GDP Share of women

in GDP: 22.8% in

2006-2010

Share of women

in GDP: 25% in

2015

ESAM I & II surveys,

ANSD, Women’s

Entrepreneurship and

Microfinance

Directorate Inequality-adjusted

HDI 0,315: 2012 value

0,320: 2014 target

value UNDP Human

Development Report

EF

EC

TS

Effect 1: Public resource

management is more

efficient and gender-

sensitive

1.1 Improvement of

the country’s

Gender Inequality

Index (GII)

0,540: 2012 value

0,520: 2014 target

value UNDP Human

Development Report Risk 1: An

unfavourable

macroeconomic

situation and

exogenous shocks

likely to affect

expected programme

outcomes

Mitigation Measure

1:

This risk is mitigated

by the support of

development partners

to Government efforts

aimed at maintaining

productive

investments to

consolidate economic

recovery and boost the

resilience of the

population

1.2 Criterion 16 (a)

of CPIA

“Accountability of

the executive to

oversight

institutions”

Score of 4 in 2010 Score of 5 in 2014 Senegal CPIA Report

Effect 2: The private

sector development

framework is conducive

to inclusive and

sustainable growth

Contribution of

SMEs to job

creation

40 % in 2011

45% in 2014 Reports of the

Ministry of Youth,

Employment and the

Promotion of Civic

Values and of

ADEPME

2.2 Contribution of

women

entrepreneurs to

GDP

5.54 % in 2010 6.5 % in 2014 ESAM I & II surveys,

ANSD, Women’s

Entrepreneurship and

Microfinance

Directorate

OU

TC

OM

ES

Component 1. Improvement of State efficiency, accountability, transparency and equity in public management 1.1 Public management

is results-based and

gender-sensitive

1.1.1 Updating of

SNEEG and

adoption of an

action plan for

mainstreaming

gender into public

policy

The SNEEG

prepared in 2005

is no longer up to

date

SNEEG is

updated and an

action plan for

mainstreaming

gender into public

policy is adopted

before end 2013

New SNEEG

document and its

corresponding action

plan

1.1.2 Design of a

project assessment

framework to be

incorporated into

the Triennial Public

Investment

Programme (PTIP)

that includes job-

and gender-related

indicators

Lack of a project

assessment

framework for the

PTIP that includes

job- and gender-

related indicators

A project

assessment

framework for the

PTIP that includes

job- and gender-

related indicators

is designed before

end 2013

The project

assessment

framework for the

PTIP that includes

job- and gender-

related indicators is

available

Risk 2: The

governance of external

oversight and

procurement oversight

institutions may also

affect the

implementation of

certain measures

Mitigation Measure

2:

This risk will be

mitigated through

revision of texts

governing the Audit

Bench, capacity-

1.2 Oversight of

government action is

strengthened in an effort

to ensure accountability

and transparency

1.2.1 Adoption of

the enabling decree

on the organic law

on the Audit Bench

Enabling decree

of the former

organic law on the

Audit Bench

Signature of the

new enabling

decree on the

organic law on the

Audit Bench

before 30 June

2013

Enabling decree

signed

vii

1.2.2 Council of

Ministers adopts a

bill on the

declaration of

ministers’ assets

No law on the

declaration of

ministers’ assets

Tabling of the bill

on declaration of

ministers' assets in

the National

Assembly before

end 2013

Law on the

declaration of

ministers’ assets

building for the

Directorate of Public

Procurement and the

independence of

ARMP

OU

TC

OM

ES

Component 2. Improvement of corporate governance and the business climate to ensure inclusive private

sector development Risk 3: Central and

territorial services are

resistant to change

and/or have limited

capacity to implement

and monitor reforms

from the technical

standpoint

Mitigation Measure

3:

Complementarity

between PACICE and

the Private Sector

Promotion Support

Project (PAPSP),

which essentially

includes a support

component on the

improvement of

services to SMEs and

SME guidance

structures. Capacity-

building actions

provided for in the

implementation plan

for new WAEMU

directives

2.1. The business climate

is improved and support

mechanisms for

entrepreneurs are

harmonised to ensure

inclusive private sector

development

2.1.1 Application of

the new status of

“entreprenant”

(literarily “business

grower”) adopted

by OHADA

Inclusion of the

application of the

new status of

"entreprenant"

adopted by

OHADA among

the priority and

urgent reforms in

the matrix of CPI

recommendations

Tabling of the bill

on the application

of the new status

of "entreprenant"

adopted by

OHADA in the

National

Assembly before

30 June 2014

Law on the new

OHADA status of

“entreprenant”

adopted and enabling

decrees issued

2.1.2 Streamlining

of MSE and SME

support mechanisms

at the national and

local levels by

implementing

recommendations of

the study conducted

in that regard.

Launching of a

study on the

streamlining of

MSE and SME

guidance

mechanisms

Presentation of

the finalized study

report and

submission of the

corresponding

action plan by end

2013

Study on the

streamlining of MSE

and SME guidance

mechanisms

conducted and the

corresponding action

plan available

2.2 Guarantee and

financing mechanisms

are implemented

efficiently for women

and young

entrepreneurs

2.2.1 Adoption of

an action plan for

the institution of a

contracts fund based

on a corresponding

study

Launching of a

study on the

creation of a

contracts fund

An action plan for

the creation of the

fund is adopted

before end 2013

Action plan for the

creation of a contracts

fund resulting from a

specific study

2.2.2 Adoption of

an action plan to

streamline the

various support

funds for the

development of

initiatives

Launching of a

study on the

streamlining of

various support

funds for the

development of

initiatives

An action plan for

streamlining the

various support

funds for the

development of

initiatives is

adopted before

end 2013

Action plan on the

streamlining of

various support funds

for the development

of private initiatives

Resources

ADF loan: UA 25.54 million

World Bank loan: UA 19.93 million

1

REPORT AND RECOMMENDATION FROM THE MANAGEMENT TO THE BOARD

OF DIRECTORS CONCERNING A PROPOSAL TO GRANT A LOAN TO SENEGAL

TO FINANCE THE INCLUSIVE GROWTH AND ECONOMIC COMPETITIVENESS

SUPPORT PROGRAMME

(PACICE)

I THE PROPOSAL

1.1. This proposal submitted to the Board for approval concerns the granting of a loan of

UA 25.54 million, on African Development Fund resources, to the Republic of Senegal, for

financing an Inclusive Growth and Economic Competitiveness Support Programme (PACICE).

PACICE is a budget support programme that will be executed over an 18-month period. The

Programme seeks to contribute to sustainable and shared economic growth by developing efficiency,

equity and transparency in public resource management, and by creating conditions conducive to

inclusive private sector development. The main expected results of the programme are: (i)

improvement of State efficiency, accountability, transparency and equity in public management; and

(ii) improvement of corporate governance and the business environment to develop the private sector

through an innovative approach the includes the gender and job-creation dimensions. Hence, the

programme seeks to: (i) promote reforms that ultimately lead to the institution of gender-sensitive and

results-based budgeting by mainstreaming the gender dimension into public policies and factoring

gender and employment indicators into public investment programmes; (ii) promote reforms that

improve the business environment and develop the private sector, especially SMEs, by specifically

supporting women entrepreneurship and the initiatives of young entrepreneurs.

1.2. Despite Senegal’s economic and social performance in recent years, socio-economic

disparities and inequalities that adversely affect certain segments of the population (especially women

and the youth) are still the major problems that undermine the attainment of more sustainable and

inclusive growth. PACICE, which seeks to reduce such inequalities, is consistent with Senegal’s

National Economic and Social Development Strategy for 2013-2017, especially two of its priority

pillars, namely: (1) growth, productivity and wealth creation (employment, private sector

development, the rural economy); and (2) governance, institutions, peace and security (promotion of

equity and gender equality, State reform and strengthening of public administration, local

development and territorial management, economic and financial governance). It is also consistent

with the priorities of the 2010-2015 Country Strategy Paper (CSP) reviewed mid-term and approved

by the Boards on 24 April 2013, especially Pillar 1 which focuses on support to inclusive growth

through economic diversification and integration. Furthermore, PACICE falls under the Budget

Support Framework Arrangement (ACAB) concluded between the Government and technical and

financial partners in an effort to harmonise operations and ensure greater resource predictability.

Programme appraisal was conducted based on consultations with Senegalese services and authorities,

private sector stakeholders and technical and financial partners. Although PACICE is a single tranche

programme, it focuses on the medium-term. It ensures the continuity of reforms supported by recent

Bank operations by taking account of the lessons learnt from such operations. It falls within a

Government medium-term programme by supporting innovative reforms aimed at reducing gender

disparities.

2

II COUNTRY AND PROGRAMME CONTEXT

2.1. Recent Political and Socio-economic Developments, Perspectives, Constraints and

Challenges

Political Context

2.1.1. From the political perspective, power changed hands at the helm of State after the free

and fair presidential elections of March 2012, which represented a successful example of

democratic regime change. The legislative elections of 1 July 2012 were conducted under the same

conditions and gave the new President a comfortable majority in the National Assembly. Thanks to

the parity law adopted in 2010, women’s representation has almost doubled from 22% in the former

legislature to approximately 43% in the new parliament. As regards security, the new authorities have

adopted a regional approach to resolving the Casamance conflict by ensuring that The Gambia and

Guinea-Bissau are more involved. Nevertheless, Mali’s socio-political instability has increase the

terrorist threat for Senegal.

Economic Context

2.1.2. Senegal’s macroeconomic reference framework is based on the agreement signed with

the IMF under the Economic Policy Support Instrument (EPSI), the fifth review of which was

conducted from 27 March to 10 April 2013. Despite the country’s political stability and efforts made

by successive governments, economic growth remains too slow to sustainably reduce poverty and

inequality. The 2012 growth rate, initially projected at 3.9% of GDP, was lowered to 3.5%1 mainly

due to the consequences of the public debt crisis in

Europe, the difficulties of the US economy, the Malian

crisis and stagnation in the major emerging economies.

For 2013, the projected growth rate is 4% despite a

sluggish economy and sociopolitical tension in the

region. Inflation which stood at 3.4% in 2011 was

reduced to 1.4% in 2012.

2.1.3. Public finance management is characterised by transposition of the six guidelines of

WAEMU’s harmonised framework for public finance management.2 In public finance, the

authorities strive to preserve their budgetary flexibility and contain deficits while improving

expenditure efficiency. The overall budget deficit in 2012, including grants, was estimated at CFAF

424 billion (5.9% of GDP) compared to CFAF 455 billion (67% of GDP) in 20113. The new

authorities intend to continue with budget reduction efforts by cutting recurrent expenditure,

postponing certain non-priority public investments and streamlining State structures and public

entities. They also made a special effort to institutionalize a culture of transparency and

accountability, notably through reform of the Audit Bench, the audit of public bodies, the creation of

the National Fraud and Corruption Control Authority and the adoption of the Public Finance

Management Transparency Code.

1 DPEE Data: Report on the Economic and Financial Situation for 2011 and Outlook for 2012. 2 These are Directive No. 01/2009: Public Finance Management Transparency Code; Directive No. 06/2009: Finance Laws; Directive No. 07/2009:

General Regulations of Public Accounting (RGCP); Directive No. 09/2009: State Accounting Plan (PCE); Directive No. 10/2009: Table of Financial

Operations of the State (TOFE); and Directive No. 08/2009: State Budget Nomenclature.

3 ANSD Data.

Table 1

Macroeconomic Indicators

2011 2012

(e) 2013

(p) 2014

(p) GDP growth 2.1 3.5 4.0 5.1 Inflation 3.4 1.4 1.6 1.8

Budget balance (%

of GDP) -6.6 -7.0 -7.9 -7.4

Current account

(% of GDP) -7.7 -8.6 -9.3 -10.0

Source: ADB

3

2.1.4. Senegal is not overly exposed to the risk of a debt overload. Its public debt is estimated at

42.5% of GDP in 2012, compared to 39.7% of GDP in 2011, which puts it below the 70% ceiling

retained under the WAEMU convergence criteria4. The debt remains sustainable according to the last

sustainability analysis conducted by the National Public Debt Committee in September 2011.

2.1.5. The business environment, which remains unfavourable to investment expansion and

support to SMEs, especially women entrepreneurs and young project proponents, is not

effective. In Doing Business 2013, Senegal is ranked 166th

out of 185 countries, which is poor

performance compared to 2012, when it ranked 154th5

. This stems from the difficulty of initiating new

reforms in this area during 2012 (an election year). The new government is pursuing a series of

reforms that mainly relate to the General Tax Code and the Customs Code, with a view to improving

the private sector environment.

Social Context

2.1.6. As concerns the social sector, the results obtained in the area of poverty reduction and

human development were average, and gender disparities, underemployment and exclusion of

the youth and women from the labour market remain major problems that undermine the

attainment of sustainable and inclusive growth. Provisional statistics from the Senegal Poverty

Monitoring Survey (ESPS II) of September 2012 show that the number of individuals living below the

poverty line was 46.7% in 2011 compared to 48.3% in 2006, representing a decline of 1.6 points.

According to the UNDP’s Gender Inequalities Index (GII) for Senegal, the labour force participation

rate (male/women ratio) was 0.748 in 2012, while a report on women entrepreneurs’ contribution to

the national economy shows that women's contribution to GDP rose from 17.63% for the 1994 - 2000

period to 20.04% for 2001-2005, and 22.88% for 2006-2010. Women’s contribution to GDP is twice

lower than their demographic weight (52%), thus representing low productivity for women’s labour

that is concentrated mainly in the primary and service sectors. According to the same study, the

contribution of women entrepreneurs to GDP is growing rapidly, even exponentially: rising from

0.06% in 1994 to 0.28% in 2000, 1.19% in 2005 and 5.54% in 20106. Regarding the MDGs,

significant progress was made in access to primary education, safe drinking water and health, although

the results are still modest specifically in connection with maternal and child health or the primary

school completion rate. Improving these results apparently requires the introduction of gender-

sensitive budgeting to promote better public resource allocation because it will lead to targeted budget

programming.

2.1.7. To address the equity challenge, a National Strategy for Gender Equality and Equity

(SNEEG) by 2015 was prepared from 2004 to 2005, and two institutional mechanisms, namely

the Directorate for Gender Equity and Equality (DEEG) and the National Observatory on

Parity (ONP), were set up. The mid-term review process for SNEEG was launched on 20 March

2013 through stakeholder mobilisation (sector ministries, parliament, TFPs, private sector and civil

society). An institutional readjustment was recently made to attach the Microfinance Directorate to

DEEG or the Women's Organisations and Women’s Entrepreneurship Directorate to the Ministry of

Women's Empowerment, Children's Affairs and Women’s Entrepreneurship. The new authorities have

placed women’s empowerment and youth support at the core of government action. At the

institutional level, certain flagship measures were adopted such as the application of parity to

Parliament or actions to curb State expenditure and the lifestyles of elected representatives (abolition

of the Senate7, reduction of the size of the Government from 41 to 25 Ministers), streamline

4 Under WAEMU’s multilateral surveillance framework, the GDP debt ratio must be below 70%.

5 Doing Business 2012 and 2013. 6 "Assessment of the Contribution of Women Entrepreneurs to the National Economy (GDP)", Directorate for Women’s Entrepreneurship, Ministry

of Women’s Entrepreneurship and Microfinance, December 2011.

7 Constitutional Law No. 06/2012 to amend the Constitution.

4

administrative structures (reduction of the number of public and semi-public entities), and

institutionalise a culture of transparency (reform of the Audit Bench, audit of public bodies, creation

of the Fraud and Corruption Control Authority, the Public Finance Management Transparency Code,

etc.).

Perspectives, Constraints and Challenges

2.1.8. Economic activity should pick up in 2013, with the maturity of major projects in the road

infrastructure and energy sub-sectors, the execution of major government projects for heavy minerals

such as the one in Grande Côte (zircon), the commencement of major projects and the continuation of

agricultural sector recovery. In all, the real GDP growth rate should stand at 4% in 2013 compared to

3.5% in 2012. This net improvement in the growth rate is supposedly driven essentially by the primary

and secondary sectors. The projected inflation rate for 2013-2015 is 1.8%, which is below the

community ceiling of 3%.

2.1.9. The major challenges and constraints that hamper Senegal’s socioeconomic

development mainly relate to economic and financial management weaknesses and poor private

sector development, especially for SMEs. Despite the progress made in economic and financial

governance in recent years, the results remain average because of regulatory instability characterized

by several amendments in the Public Procurement Code and inadequate accountability in government

policies. To address this situation, the new authorities intend to improve public management and State

efficiency through actions based on transparency, performance and results-based management, mainly

by: (i) mainstreaming the gender and employment dimensions into budget programming; (ii)

increasing oversight of government action; and (iii) instituting a government policy

monitoring/evaluation framework.

2.1.10. As concerns private sector governance more specifically, businesses and especially

SMEs, face two major constraints: upstream, difficult access to financing; and downstream, a

limited market for saleable goods and services. SME performance could improve considerably

through enhancement of the business environment, access to credit, adapted assistance in the

preparation of business plans, and facilitation of market access, especially for public procurements.

The preparation of a Corporate Governance Code and the political will to enforce the new status of

“entreprenant” adopted by OHADA, constitute favourable prospects for improvement of the business

climate and inclusive private sector promotion.

2.1.11. In general, the private sector is characterized by a high bankruptcy rate for new

businesses, informal sector predominance, difficult access to government contracts and SME-

adapted financing, especially for women and young entrepreneurs. This is compounded by

difficult access to land, which is a major constraint to the business environment, especially for women

who rarely have access to landed property. Such difficulty in having access to landed property

prevents the development of the mortgage loan, which is the main guarantee that SMEs can propose.

In public management, there are no tools for ensuring monitoring/evaluation of government policies

used for cost-benefit analysis that includes the gender dimension. Nevertheless, despite a sluggish

international environment, growth opportunities are real insofar as government policies are reoriented

towards greater efficiency in terms of results and inclusion.

5

2.2. Bank Group Portfolio Status

2.2.1. As of 30 April 2013, the Bank’s total active portfolio in Senegal comprised 9 active

national operations, 7 multinational operations and 3

private sector operations. This portfolio has a net total

commitment volume of UA 146.69 million from the public

window, with a disbursement rate of 74.5%. In the current

portfolio of operations in Senegal, the infrastructure sector

has the lion’s share with 37.2%, followed by the rural

sector (21.2%), water and sanitation (20.45%), and multi-

sector operations (21%). Financing is broken down into

loans (97.5%) and grants (2.5%).

2.2.2. With total commitments of EUR 137 million, the private sector has 3 active operations

(Sendou power plant, the Dakar-Diamniadio toll highway and the Blaise Diagne International

Airport). The Bank’s private sector projects in Senegal generated an investment of over EUR 1.2

billion through co-financing arrangements. These highly complementary projects should play a key

role in fuelling economic growth and boosting national competitiveness. The multinational projects

portfolio was over UA 146.78 million end April 2013 for a total disbursement rate of approximately

45.3%.

2.2.3. The performance of the Bank’s national public sector portfolio is deemed satisfactory. The

total portfolio assessment score of 2.49 on a scale of 0 to 3 in 2012 reflects a net positive trend since

2009 (score 2.01). The combined report for the CSP 2010-2015 mid-term review and portfolio

performance review was approved on 22 March 2013. The performance of Bank operations has

improved since the last portfolio review (2011). This is seen in the efficiency of operations as regards

processing of files (payment and disbursement requests), the procurement of goods and services and

financial execution in 2012. The Bank's national public sector portfolio in Senegal has an average age

of 3.47 years, representing a net rejuvenation since the last review of 2011 (5.5 years).

2.2.4. In the area of economic and financial governance, the Bank implemented the Economic

Reform Support Programme (ERSP) over the 2011-2012 period. In 2012, it also launched the Private

Sector Promotion Support Project (PAPSP) that focuses on improving the business environment,

especially for SMEs. Hence, the Bank continues to dialogue with Senegalese authorities on economic

and financial priorities thanks especially to its presence in the country.

2.3. Government’s Overall Development Strategy and Medium-term Reform Priorities

2.3.1. Senegal’s development policy reference, namely the National Economic and Social

Development Strategy (SNDES) validated in November 2012, strengthens the linkage between: (i)

economic and financial governance; and (ii) sustainable and inclusive growth. The SNDES focuses on

the following three pillars: (i) growth, productivity and wealth creation; (ii) human capital, social

protection and sustainable development; and (iii) governance, institutions, peace and security. This

strategy includes cross-cutting issues, focusing on gender and employment.

2.3.2. The SNDES is implemented through a Priority Action Plan that is operationalized

through the Triennial Public Investment Plan and the Medium-Term Expenditure Framework

(MTEF). These instruments enable the Government of Senegal to maintain consistency between the

macroeconomic framework, the budget framework and sector policies, and to optimize public

resource allocation in accordance with national socio-economic priorities.

Table 2

Portfolio Situation as of end April 2013

Sector Number of

Operations Amount

(UA) % of

Portfolio Transport 1 45 30.68%

Water and

sanitation 1 30

20.45%

Agriculture 4 31.06 21.18%

Energy 1 9.58 6.53%

Governance 2 31.04 21.16%

Total 9 146.68 100.00%

6

III RATIONALE, KEY DESIGN ELEMENTS AND SUSTAINABILITY

3.1. Links with the CSP, Analytical Underpinnings and Country Readiness Assessment

3.1.1 Links with the CSP: The budgetary and financial reforms supported by PACICE seek

to facilitate the implementation of SNDES 2013 and SNEEG. Therefore, the proposed programme

is consistent with SNDES and SNEEG, and in line with the new guidelines of CSP 2010-2015 and the

Bank’s new strategy for 2013-2022, which focus on private sector governance and development, and

treat the gender dimension as a major cross-cutting pillar. This programme is equally justified by its

alignment on AfDB’s strategic guidelines on gender reiterated during the first AfDB Gender Forum

held on 10 May 2013. PACICE will help to support the new authorities in implementing priority

reforms that promote gender-sensitive public management and inclusive private sector development

and to sustain the pace of reforms implemented in previous programmes related to governance,

oversight of government action and the business environment.

3.1.2 Prerequisite for implementing a programme-based operation: The proposed operation is

consistent with the Bank's Policy on Programme-based Operations adopted in March 2012

(ADB/BD/WP/2011/68 - ADF/BD/WP/2011/38). The country preparedness analysis presented in the

table below shows that Senegal fulfils the conditions for application of the programme-based support

instrument.

Table 3

Eligibility Conditions for Programme-based Operations

Preliminary

Conditions Observations on the Current Situation

Government’s

determination to

combat poverty

Senegalese authorities are determined to reduce poverty and improve the wellbeing of the people.

This commitment is clearly seen in the adoption of the National Economic and Social

Development Strategy (SNDES 2013-2017) in November 2012, which focuses on inclusive

growth, improvement of governance, and development of strategic sectors that have a significant

positive impact on social wellbeing and social demand. The SNDES focuses on the following

three strategic pillars: (i) growth, productivity and wealth creation; (ii) human capital, social

protection and sustainable development; and (iii) governance, institutions, peace and security. It is

implemented through a Priority Action Plan (PAP) which is its driving force and serves as the

reference framework for the drafting of the finance law. The PAP covers the major actions that

contribute to the attainment of set objectives through yearly readjustments of the finance law and

the triennial programming of public investments.

Macroeconomic

stability

As soon as the country’s new authorities took office, they asserted their resolve to preserve

economic stability through a cautious budget policy, with a controlled budget deficit. The first

pillar of the National Economic and Social Development Strategy (SNDES) for 2013-2017

includes private sector development and is implemented through the Accelerated Growth Strategy

(SCA). The SCA seeks to improve public finance management and the business environment.

Furthermore, the Economic Policy Support Instrument programme is being implemented

satisfactorily with the IMF. The latest assessment (April 2013) confirmed the stability of the

national macroeconomic framework.

Satisfactory

fiduciary risk

assessment

Based on the existing diagnosis (PEFA 2011 review, 2012 review of the implementation status of

budgetary and financial reforms jointly implemented by Senegal and technical and financial

partners, fifth EPSI review by the IMF from 25 March to 10 April 2013), the fiduciary framework

review is satisfactory. Senegal has made much progress in public finance management. These

efforts will be consolidated through the implementation of texts resulting from the transposition of

the new WAEMU guidelines for the harmonized public finance management framework that are

consistent with international standards. Senegal’s public procurement code contains WAEMU

provisions and serves as a reference in this area. As regards corruption control, a National Fraud

and Corruption Control Authority has been set up. Progress remains to be made regarding public

access to financial information.

7

Preliminary

Conditions Observations on the Current Situation

Political stability

Senegal has enjoyed political stability since achieving independence in 1960. Recent presidential

elections consolidated peaceful regime change at the helm of State while legislative elections led

to a change of majority at the National Assembly with the application of full parity for the very

first time.

Harmonisation

A partnership exists between Senegal and donors as illustrated in the Budget Support Framework

Arrangement (ACAB) signed between Government and donors: ACAB-2 (2013-2015) reflects the

determination of the Senegalese Government and development partners (AfDB, World Bank,

European Union, Canada, Netherlands, Spain) to continue using budget support as one of their

financial cooperation instruments for implementing national policies.

3.1.3. Underlying analytical work: a number of analytical and consultancy studies underpin

the proposed general budget support operation. They pertain primarily to: SNDES, PEFA 2011,

Doing Business 2013, the national competitiveness report (2011), the national report on the

implementation status of PCRBF budgetary and financial reforms (November 2012), the global MTEF

for 2012-2014, the CPI recommendations matrix, the DASP study to establish an inventory of

guarantee funds in Senegal, the PAPSP appraisal report, and a Bank study on gender-sensitive

budgeting that yielded information on various gender-sensitive budgeting experiences in Senegal. The

main findings of this study are presented in PACICE Technical Annex 2.

3.2. Collaboration and Coordination with Other Donors

3.2.1. In Senegal, official development assistance is coordinated through various exchange and

dialogue frameworks. At the very top of the coordination mechanism is the Enlarged Group of

Technical and Financial Partners or “Group of 50”, co-chaired by AfDB and USAID since January

2013. The "Group of 50" is the framework for policy dialogue between the Government and TFPs. It

is assisted by a Consultative Committee of Technical and Financial Partners (CCPTF), known as the

"Group of 12",8 chaired by Belgium, which serves as the technical secretariat for "Group of 50"

meetings and as the interface with thematic working groups.

3.2.2. Coordination and dialogue on budget support are conducted under ACAB, with the

Bank serving as Vice-chair. ACAB is a sustainable and dynamic framework for coordinating

TFP operations using this instrument and for monitoring reforms based on a common

evolutionary matrix. It has significantly contributed to the improvement of TFP coordination and the

predictability of budget support financing. The common matrix of measures to be promoted

constitutes a permanent framework for dialogue between the Government and ACAB-2 (2013-2015)

members. Apart from ensuring the harmonized definition of disbursement criteria for budget support,

ACAB enables TFPs to develop synergies in terms of joint missions, studies, audits or simply the

sharing of best practices. The Bank relied on this consultative framework during PACICE preparation

and appraisal by collaborating with TFPs within ACAB, especially the World Bank’s budget support

estimated at UA 19.93 million for FY 2013, but also bilaterally with other partners such as UN

Women.

3.2.3. In the area of private sector development, the "Private Sector" Group whose lead agency is

the United States, comprises a thematic sub-group that is specifically devoted to SME problems,

among others. Although the Bank’s PAPSP is a major operation in this area, there are other operations

initiated by partners such as USAID, EU, AFD or the German (GIZ) and Italian cooperation agencies.

3.2.4. It should be noted that the measures supported by this programme were designed in

consultation and coordination with donors involved in ACAB and private sector development in a bid

to ensure the complementarity and harmonization of operations.

8 The CCPTF or "Group of 12" comprises Germany, Belgium, Canada, Spain, France, Italy, Japan, Netherlands, African Development Bank (ADB),

World Bank, World Food Programme (WFP) and UNFPA.

8

3.3. Outcomes of Past and On-going Similar Operations and Lessons

3.3.1. The lessons from implementing previous programmes were reflected in designing this

programme. The completion reports of previous operations, especially that of the Economic Reform

Support Programme (ERSP), highlighted a number of lessons that guided the choices made under

PACICE. These include the need to:

(i) Improve selectiveness to underpin reforms with fewer but higher impact measures.

While the previous programme (ERSP) had a large number of measures, including

sensitive ones, to be implemented over 2 years, this programme has a streamlined

number of measures that reflect government priorities;

(ii) Increase the involvement of operational departments to ensure greater ownership of

measures. Under the current programme, the quality of meetings with various structures

concerned facilitated agreement on priority reforms and implementation mechanisms

that last for the duration of the programme (18 months); and

(iii) Improve TFP coordination to build synergies in an effort to ensure the efficiency of

official development assistance. The programme was designed through consultation

with TFPs that have complementary instruments or actions. Hence, the measures of this

new AfDB programme are found in the common ACAB matrix.

3.3.2. The Bank has already conducted several similar operations in Senegal, the latest of which

(ERSP) had two components: (i) support to public finance management improvement; and (ii) support

to SME promotion. The ERSP, whose completion report has been prepared, supported the reforms

that yielded convincing results (public contracts, Audit Bench, land tenure, transposition of new

WAEMU guidelines into the harmonized framework for public finance management, etc.). These

reforms also concerned the corporate environment, especially through the adoption of a new General

Tax Code that contains several provisions relating to SME development. The implementation of

certain reforms promoted by the ERSP was hampered by a few obstacles that engendered a number of

lessons (c.f. Technical Annex 10). PACICE builds on the reforms of previous programmes, especially

those relating to the application of WAEMU guidelines, and will support PAPSP-backed activities,

particularly in the area of SME assistance, in an effort to promote inclusive private sector

development.

3.4. Relationship to On-going Bank Operations

The proposed programme seeks to ensure complementarity with other Bank projects, such as

the Youth and Women’s Employment Promotion Project (PAPEJF) and the Private Sector

Development Project (PAPSP). This quest for synergy, which pre-empts any inconsistencies between

projects and programmes, should have a direct positive impact on the implementation of operations

mentioned. PACICE also complements initiatives developed in related sectors, e.g. youth

employment. Besides, through its private sector development activities, PACICE will help to increase

the impact of Bank operations sponsored by the private sector window and should also have a direct

positive impact on the portfolio of on-going multinational operations. PACICE will contribute to

consolidating gains from reforms initiated under past budget support operations and also support the

implementation of activities scheduled under the on-going Institutional Support Project, PAPSP.

9

3.5. Bank’s Comparative Advantage and Value-added

The Bank’s value-added resides in the continuity between various budget support operations

(ERSP, PACICE) and their complementarity with project support initiatives (PAPSP,

PAPEJF). Furthermore, the linkage between PACICE Component 1 (“improvement of State

efficiency and support for gender-sensitive government policies”) and Component 2

(“operationalizing government policies targeting improvement of the business environment to ensure

inclusive private sector development, focusing on women and young entrepreneurs”) reflects a holistic

and integrated approach that has a comparative advantage over more separate approaches.

3.6. Application of Good Practice Principles on Conditionality

The programme was designed in accordance with best practices regarding conditionality.

Measures adopted were first discussed with the Government, which was keen to have them validated

by the competent structures. Discussions also focused on the terms and programming of support to

ensure consistency with national needs outlined in various national strategy documents.

3.7. Application of the Bank Group policy on Non-concessional Loans

The Government of Senegal is aware that all non-concessional financing must be tied to projects

deemed economically profitable (as appraised by an internationally renowned firm) and should not

undermine public debt sustainability. In accordance with the Bank’s policy on non-concessional debt

accumulation amended in 2011, the loan agreement has a specific clause requiring the country to

report new non-concessional loans and apply a debt policy that is consistent with the terms agreed

upon with the IMF. Senegal fulfils the conditions precedent to budget support as required in the Policy

on Programme-based Operations9 (see table). Although the proposed operation is autonomous, it falls

within the framework of multi-year reforms that may be supported by the Bank in the medium term

following a programme-based approach under ADF 13.

IV THE PROPOSED PROGRAMME

4.1. Programme Goal and Objectives

PACICE development objective is to create appropriate conditions that guarantee sustainable

and inclusive economic growth by mainstreaming the gender and job-creation dimension through

improvement of economic and financial governance, and support to private sector development.

PACICE seeks to achieve growth that benefits everyone, especially women and the youth, by

promoting gender-sensitive public management (Component 1) and inclusive private sector

development (Component 2). Although the entire Senegalese population stands to benefit, special

emphasis will be laid on women and the youth, as both users of public services and entrepreneurs,

with a view to generating inclusive and sustainable growth.

4.2. Programme Components, Operational Objectives and Expected Results

4.2.1. The programme’s main expected outcomes are: (i) improvement of State efficiency,

accountability, transparency and equity in public management; and (ii) improvement of corporate

governance and the business environment to ensure inclusive private sector development through an

innovative approach that includes the gender and job-creation dimensions.

4.2.2. Hence, PACICE has two components, namely: (i) Component 1: Improvement of State

efficiency, accountability, transparency and equity in public management; and (ii) Component 2:

Improvement of corporate governance and the business environment to ensure inclusive private sector

development.

9 ADB/BD/WP/2001/68/Rev.3/Approved-ADF/WP/2011/38/Rev.3/Approved

10

4.2.3. Component 1 of the programme has two sub-components, namely: (i) promoting results-

based and gender-sensitive public management; and (ii) strengthening oversight of Government action

in an effort to ensure accountability and transparency. Under Component 1, this entails supporting

reforms that enhance budgetary credibility and transparency by operationalizing the new public

finance management framework resulting from transposition of WAEMU guidelines to introduce a

gender-sensitive budgeting approach in the medium-term. Integrating the gender dimension

“upstream” – that is, during the design, preparation, planning, programming and budgeting of

Government action – will yield more targeted public policies “downstream”, including impact

indicators on gender and job creation, and provide new ways of measuring the performance of

government action.

4.2.4. Component 2 of the programme has two sub-components, namely: (i) improvement of the

business environment and harmonisation of "entreprenant" guidance mechanisms to ensure the

inclusive development of businesses10

; and (ii) operationalization of SME guarantee and financing

mechanisms for women and youth entrepreneurs. The guidance of "entreprenants" (according to

OHADA terminology), including women and youth entrepreneurs, will be done by aligning the

various SME support mechanisms at the national and local level to enhance the efficiency of

government action in this area as well as the viability and sustainability of businesses. It also entails

ensuring that SMEs, especially those managed by women, have easy access to financing and

guarantee mechanisms by streamlining the various development support funds for private initiatives

into SMART-based entities11

.

Component 1: Improvement of State efficiency, accountability, transparency and equity in

public management

4.2.5. Component 1 of the programme seeks to support the Government in implementing its

extensive reform drive resulting from transposition of the new WAEMU guidelines, with the objective

of achieving results-based management characterised by equity and inclusiveness. It also entails

promoting the establishment of a public policy monitoring/evaluation framework that includes impact

indicators on gender and job creation to improve State efficiency while strengthening oversight of

government action in an effort to ensure accountability and transparency in public management.

Sub-component 1.1: Promotion of results-based and gender-sensitive public management

4.2.6. Observations and Challenges: The implementation of the Medium-Term Expenditure

Framework (MTEF) and the Medium-Term Sector Expenditure Framework (MTSEF) paved the way

for the preparation of the general State budget through a results-based budgeting approach.

Nevertheless, the public policy monitoring/evaluation approach is not structured; its management is

not organised but rather fragmented among various stakeholders (DREAT, Prime Minister’s Office,

MINEFI, sector ministries, etc.) whose approaches need to be harmonised following a clear

methodology and relevant gender- and job-related indicators.

4.2.7. Recent Government Action: The entry into force of Decree No. 2009-85 of 30 January

2012 governing budget preparation, following transposition of WAEMU’s guidelines for the

harmonized public finance management framework, and which seeks to institutionalize the public

finance preparation schedule, requires that Annual Performance Reports (APRs) be prepared. This

reform equally translated into restoration of the programme planning and monitoring/evaluation

function. The number of ministries under MTSEF rose from 20 in 2010 to 27 in 2012. Following

reduction of the size of the new Government when power changed hands, 19 ministries designed their

10 According to OHADA, the "entreprenant" is an individual entrepreneur, physical person who, upon simple declaration provided for in the Uniform

OHADA Act, practices a civilian, commercial, handicraft or agricultural activity. 11 "Simplified, Measurable, Adaptable, Relative, Transparent" – 2013 Doing Business Report.

11

draft budgets for 2013 with an MTSEF and APR. Significant improvements were also noted in the

MTSEF preparation process itself: the sector frameworks are more precise, transmitted early in the

year (except for 2012 when the regime changed) and officially so. Great efforts were also made to

address the gender issue in public management. This is the case with SNEEG, prepared in 2005,

which highlights the pillars of Government policy on gender, and Pillar 2 of the new Statistics Master

Plan, which is devoted to gender-disaggregated statistics to facilitate measurement of policy impact on

the reduction of gender inequalities.

4.2.8. Programme Measures: Under this programme, the following measures will be promoted: (i)

update SNEEG 2005-2015 and define an action plan for mainstreaming gender into public policies:

this entails updating the strategy document based on the mid-term review of SNEEG and the policies

of the new government; (ii) operationalize Pillar 2 of Senegal's Statistics Master Plan on gender-

sensitive statistics and indicators by implementing the activities designed in that regard; (iii) have the

Minister of Economy and Finance validate the appraisal guide for projects to be included in the PTIP

while incorporating gender- and job-related indicators; (iv) define an action plan for setting up a

public policy monitoring/evaluation mechanism that includes gender- and job-related indicators; (v)

ensure adoption, by the Council of Ministers, of the decree setting up the National Employment

Observatory, and reinforce the system for production of job-related statistics and indicators.

4.2.9. Expected Outcomes: The main outcome sought is the availability of operational tools for

results-based budget programming that targets equity and inclusiveness. The proposed measures seek

to ensure better coordination of existing initiatives in terms of the performance of government action.

This entails encouraging the establishment of a public policy monitoring/evaluation framework that

includes gender- and job-related indicators, while defining its policy basis, technical management and

deployment, from the central government to the local level (via peripheral and decentralized entities).

Sub-component 1.2: Strengthening oversight of Government action in an effort to ensure

accountability in public management and transparency

4.2.10. Observations and Challenges: The transposition of new WAEMU guidelines opened up

new reform areas relating to oversight of government action. Such reforms essentially focus on

strengthening financial controls and the greater role of Parliament in this area, including the holding of

a mandatory budget policy debate at the beginning of the finance law preparation process, among

other. New areas were considered more recently, as evident in the Senegalese Government’s

willingness to join the Extractive Industries Transparency Initiative (EITI). The current challenge is to

set up oversight mechanisms in accordance with the changes in the nature and scope of government

action to promote a culture of transparency and accountability.

4.2.11. Recent Government Action: From the institutional standpoint, the Audit Bench reform

process was initiated with the adoption of an organic law. As regards transparency and accountability,

the issue of declaration of assets is under discussion. Following the recent discovery of minerals, such

as zircon and gold, Senegal has also initiated a process that will enable it to apply for the status of an

EITI candidate country.

4.2.12. Programme Measures: PACICE will support the following changes: (i) adoption, by the

Council of Ministers, of the enabling decree of the organic law on the Audit Bench; (ii) adoption, by

the Council of Ministers, of the texts governing the status of magistrates of the Audit Bench; (iii)

adoption, by the Council of Ministers, of the bill on declaration of ministers’ assets; (iv)

implementation of all measures precedent to Senegal’s membership of EITI.

4.2.13. Expected Outcomes: The main expected outcome is strengthening of the oversight of

Government action in an effort to ensure public management accountability and transparency.

12

Component 2: Improvement of corporate governance and the business climate to ensure

inclusive private sector development

4.2.14. Component 2 of the programme seeks to operationalize policies relating to the business

environment and private sector development, especially for young and women entrepreneurs. Special

attention will be paid to SMEs which constitute 90% of private businesses, contribute 20% to GDP

and employ 40% of the labour force. Specifically, it will entail improving the business environment

and harmonizing guidance mechanisms for "entreprenants" to ensure inclusive private sector

development, while operationalizing guarantee and financing mechanisms for SMEs that promote

women and youth entrepreneurship.

Sub-component 2.1: Improvement of the business environment and harmonization of guidance

mechanisms for “entreprenants” to ensure the inclusive development of businesses.

4.2.15. Observations and Challenges: Although the OHADA law became effective in the country

in 1995, Senegal is ranked 166th

out of 185 countries in Doing Business 2013. Procedures, deadlines

and costs remain unwieldy for private sector operators as regards dealing with construction permits,

registering property, getting electricity or paying taxes. This undermines inclusive private sector

development. SMEs are faced with the limited capacity of "entreprenants" not only in accounting and

financial reporting or relations with government services (especially the tax department) but also in

the development of a business plan, targeting of the appropriate customer base, searching for market

outlets and making medium-term projections. In general, the institutional framework for private sector

support is characterized by the absence of a common reference framework and the uncoordinated

intervention of many stakeholders (chambers of commerce, trade chambers, ADEPME, DASP,

Women’s Entrepreneurship Directorate, etc.), among others.

4.2.16. Recent Government Action: The activities of the Presidential Investment Council set up in

2002 attest to a growing awareness of the concerns of businesses. The Corporate Governance Code,

prepared by the Senegalese Institute of Administrators (ISA), was adopted in December 2011 and

provides for regular monitoring through the Governance Code Monitoring Committee. An assessment

guide for corporate governance practices was also developed by the ISA. As concerns the land tenure

regime and title deeds, a National Land Reform Commission (CNRF) was set up on 27 March 2013

and should adopt a land reform roadmap within the shortest time possible. Furthermore, the

Senegalese Government has improved the procedures and timeframe for addressing economic and

trade conflicts, and ratified about fifteen Investment Promotion and Protection Agreements (IPPAs)

and Non-Double Taxation Agreements (NDTAs). Besides, the SME framework law provides that

15% of government contracts be reserved for SMEs. The General Tax Code and the Public

Procurement Code have also been reformed to render them more favourable to the business

environment. Adoption of the OHADA Uniform Acts on guarantee operations and the status of

"entreprenant", which became effective on 15 May 2011, will improve access to credit and increase

the range of assets that can be used as guarantee, among others. In general, assessment of the global

private sector support mechanism is the core activity of CPI’s Work Group 1.

4.2.17. Programme Measures: PACICE will support reforms aimed at: (i) enforcing the new status

of "entreprenant" adopted by OHADA through the Government's adoption of two bills on the fiscal

status and social status of "entreprenant"; (ii) implementing the Corporate Governance Code by

disseminating the Monitoring Committee report prepared to that end; and (iii) adopting a road map on

land reform that lays greater emphasis on women's access to land.

4.2.18. Expected outcomes: The main expected outcome is the improvement of the corporate

governance regulatory framework so that the business environment will be more conducive to

inclusive private sector development.

13

Sub-component 2.2: Rationalisation of the guarantee and financing mechanisms for SMEs in an

effort to promote efficiency, equity and inclusion.

4.2.19. Observations and Challenges: Although they constitute 90% of private businesses, SMEs

do not have easy access to financing and guarantee mechanisms. The Senegalese banking system is

indeed characterized by a high concentration of bank credits allocated to large corporations,

considered to be both viable and solvent. Furthermore, the bank guarantees required attain 150% of

the value of credits requested on average, depending on the sector. Moreover, SMEs resort to

alternative costly solutions such as self-financing, supplier credit or decentralized financial systems

(DFS) with low financing or refinancing capacity. Private sector guarantee and financing funds are

numerous but barely streamlined: Economic Promotion Fund (FPE), Microfinance Stimulus Fund,

National Fund for the Promotion of Women’s Entrepreneurship (FNPEF), National Credit Fund for

Women, Guarantee Fund for the Handicraft Promotion and Development Agency (APDA), ARIZ

(Insurance for Private Investment Financing Risk in Project Areas) Fund, Investment Support Fund

for Senegalese Nationals Abroad (FAISE), National Fund for Youth Promotion (FNPJ), Guarantee

Fund for the Federation of Mutual Cooperative Societies, etc.

4.2.20. Recent Government Action: The issue of financing mechanisms, equity participation and

guarantees for businesses is central to Government’s concerns as reflected in its determination to set

up FONSIS, FONJIP, BNDE or the public procurement fund. The willingness to create a National

Economic Development Bank (BNDE) addresses the need to facilitate SME access to financing,

among others. The BNDE’s registration request has been submitted to BCEAO. Furthermore, various

SME guidance structures were set up by the authorities, from Tool Centres to the Upgrade Office.

ADEPME is an SME guidance agency which has an Information and Formalisation Window (GIF)12

,

among others. However, this raises questions as to its relationship with government services in charge

of SMEs, including those responsible for women and youth entrepreneurs. The establishment of

Business Creation Centres was announced in the Prime Minister’s General Policy Statement

(September 2012) to ensure the harmonisation and efficiency of the SME guidance mechanism that

has hitherto left no visible impact. An SME labelling programme is supported through PAPSP, which

also seeks to set up an information system to collect, analyse and disseminate reliable data on women

entrepreneurs and to produce and disseminate an updated guide on them.

4.2.21. Programme Measures: In this regard, PACICE will support reforms aimed at: (i) getting the

ad hoc Agencies’ Evaluation Committee to adopt an action plan for streamlining financing

mechanisms for the development of private initiatives that result from rationalisation of executing

agencies and similar structures; (ii) ensuring the adoption of an action plan for the establishment of a

contracts fund in accordance with the recommendations of the relevant study; and (iii) streamlining

the guidance mechanisms of MSEs and SMEs at the national and local level.

4.2.22. Expected Outcomes: To facilitate SME access (especially for women and youth) to

guarantee and financing systems, guarantee and financing instruments (contract funds, factoring,

financial lease, venture capital, etc.) will have to be diversified to ensure complementarity and

harmonization. It would also entail harmonizing and disseminating the various SME guidance

mechanisms for MSEs and SMEs (existing Tool Centres and Business Creation Centres mentioned in

the Prime Minister’s General Policy Statement) at the national and local level so as to promote the

viability and sustainability of businesses, and improve the guidance of "entreprenants", especially

women and youth entrepreneurs.

12 2012 ADEPME Progress Report indicates that the GIF processed 149 (one hundred and forty-nine) applications for guidance out of

163 (one hundred and sixty-three) received in 2012, representing a rate of 91%.

14

4.3. Financing Needs and Arrangements

The financing requirement on external resources is projected to be CFAF 328.5 billion13

. Such

financing will comprise CFAF 217 billion from "project" loans, CFAF 55 billion from "programme"

loans expected mainly from the World Bank (CFAF 15.3 billion), AFD (CFAF 19.9 billion) and

AfDB (CFAF 19 billion), CFAF 91.4 billion from external debt write-offs, CFAF 18 billion from

HIPC assistance, the net amount from bond issues on the local and sub-regional markets projected at

CFAF 392 billion for 2013, and lastly non-concessional loans amounting to CFAF 129.9 billion. Net

domestic financing is projected at CFAF 49.2 billion, including CFAF 39.2 billion as net bank

financing (comprising CFAF 53.2 billion as net public securities) and CFAF 10 billion expected from

the non-banking system. Table 4

Financing Requirement in CFAF billion, except otherwise indicated) 2013 Prog. Total revenue and grants 1 812.39

Budget revenue and FSE 1 604.54

Grants 207.85

Budget 38.94

In capital 168.91

Total expenditure and loans (net) 2 190.21

Recurrent expenditure 1 277.83

Capital expenditure 912.38

Domestic financing 515.28

External financing 397.10

On-lending 12.80

Overall budget balance (cash basis. including grants) - 377.82

Financing 377.72

External financing 328.51

Including AfDB 19.00

Including WB 15.3

Including AFD 19.9

Domestic financing 49.20 Source: DPEE, estimates by Bank services

4.4. Programme Beneficiaries

Although the entire population of Senegal will benefit from this programme because it focuses on

inclusive and job-creating growth, women and the youth will benefit more as public service users,

entrepreneurs and stakeholders in various representation structures (civil society, socio-professional

organisations, dialogue frameworks such as the CPI or the National Land Reform Commission, etc.).

With respect to impact and outcomes, PACICE will directly strengthen institutions responsible for

reform implementation, especially those under the Ministry of Economy and Finance, the Audit

Bench, APIX, the Ministry in charge of SMEs and ADEPME, and DREAT. SMEs especially will

benefit from this programme because it seeks to facilitate access to financing and government

contracts.

4.5. Impact on Gender

Through this programme, the Bank supports the Government’s gender-sensitive budgeting initiatives.

The two components of the programme will have a positive impact on women, by mainstreaming the

gender dimension into public policies and promoting inclusive private sector development. In seeking

to promote the updating of SNEEG, PACICE will enable the Directorate for Gender Equity and

Equality to review its strategy to make it more effective. Similarly, the operationalization of Pillar 2 of

Senegal's Statistics Master Plan will endow the country with reliable statistics on the gender

dimension. The same applies to various measures recommended by PACICE to boost the development

13

DPEE: Report on the 2012 Economic and Financial Situation and the Outlook for 2013

15

of SMEs, a large number of which are managed by women entrepreneurs. Reforms relating to the

rationalization of private sector development funds and guidance mechanisms for SMEs, or to the

government contracts fund, will promote the formalisation of businesses and increase women's access

to government contracts.

4.6. Impact on the Environment

PACICE is a general budget support operation. It will have no impact on the environment and is

classified under Category III.

V. IMPLEMENTATION, MONITORING AND EVALUATION

5.1. Implementation Arrangements

5.1.1. Competent institution: The Ministry of Economy and Finance (MEF) is the programme

executing agency. Programme implementation will be piloted by the Budget Support Monitoring

Committee (the policy organ responsible for coordination, guidance and decision-making). The

Committee comprises institutions responsible for public finance management and other bodies such as

the Development Policy Studies Centre (CEPOD), the National Agency for Statistics and Population

Studies (ANSD), the National Agency for Investment Promotion and Major Projects (APIX), the

Directorate for Forecasting and Economic Studies (DPEE) and any other structure such as the Audit

Bench, where appropriate. Hosted within the MEF cabinet, this Committee has the requisite

experience and capacity. It has already satisfactorily managed and coordinated previous programmes

funded by the Bank and other TFPs. Furthermore, PACICE will be implemented in accordance with

the provisions of ACAB as a framework for coordinating TFPs and for dialogue with the Government.

Through ACAB, the Government and TFPs that signed the Arrangement agreed on a matrix

containing the measures of each TFP programme. They also agreed to hold joint periodic reviews

involving representatives of structures tasked with implementing measures retained in the matrix.

5.1.2. Procurements: The loan will be granted as a general budget support. Consequently, its

implementation does not raise direct questions of procurement of goods and services. A summary on

the monitoring of public procurement reforms is presented in Technical Annex VII of the appraisal

report.

5.1.3. Disbursements: The financing proposed under the programme is a loan of UA 25.54 million.

It will be disbursed as a single tranche of UA 25.54 million once the applicable precedent conditions

have been fulfilled. The decision to make a single tranche disbursement in 2013 is justified by the

pragmatic approach of budget support operations, based on an annual disbursement to improve aid

predictability. Indeed, the Bank has been disbursing budget support to Senegal annually since 2010.

This will continue with future programme-based operations from 2014. The funds will be paid into a

Treasury account opened in the books of the BCEAO national branch in Senegal.

5.1.4. Financial Management: Since this is a budget support programme, the resources allocated

will all be used through the public expenditure circuit (resource allocation, expenditure chain, control,

audit). The Ministry of Economy and Finance shall assume responsibility for the administrative,

financial and accounting management of such resources.

5.1.5. Audit: Loan resources will be audited as part of review of the 2013 Budget Act by the Audit

Bench. A copy of the 2013 Draft Budget Act should be transmitted to the Bank at the same time that

the said draft is tabled before the National Assembly.

16

5.2 Monitoring and Evaluation Arrangements

The programme’s common matrix of measures and logical framework are reference instruments for

PACICE monitoring/evaluation. This programme will be supervised and subjected to mid-term

reviews in accordance with Bank regulations. The ACAB Secretariat will prepare half-yearly

monitoring reports for submission to the Bank. The Bank’s regional office in Dakar (SNFO) will

supervise and closely monitor the programme. SNFO will regularly update ACAB partners and the

IMF on programme status. The completion report, which will be shared with these partners, will be

prepared according to Bank regulations.

VI LEGAL DOCUMENTATION AND AUTHORITY

6.1. Legal Documentation

The legal document to be used under the programme is the Loan Agreement between the Republic of

Senegal (Borrower) and the African Development Fund (the Fund).

6.2. Conditions Precedent to Bank Group Intervention

6.2.1. Conditions precedent to loan effectiveness: Loan effectiveness shall be subject to fulfilment

of the conditions provided for in Section 12.01 of the Fund’s General Conditions Applicable to Loan

Agreements and Guarantee Agreements.

6.2.2. Conditions Precedent to Loan Disbursement: Apart from the effectiveness conditions set

forth under paragraph 6.2.1 above, disbursement of the loan resources shall be subject to fulfilment of

the following precedent conditions:

(i) Provide proof that the ad hoc Agencies’ Evaluation Committee has adopted an action

plan for streamlining financing mechanisms for the development of private initiatives

resulting from the rationalisation of executing agencies and similar structures;

(ii) Provide proof that the Minister of Economy and Finance has validated the appraisal

guide for projects to be included in the Triennial Public Investment Programme (PTIP)

by incorporating gender- and job-related indicators; and

(i) Provide proof that the Council of Ministers has adopted the enabling decree of the

organic law on the Audit Bench.

6.3. Compliance with Bank Group Policies

PACICE is in line with the Bank’s 2013-2022 Ten-Year Strategy Guidelines, and especially with its

pillar on governance. It is also consistent with the Bank’s Policy on Programme-based Operations. No

exemptions are requested under this programme.

17

VII RISK MANAGEMENT

The table below generally presents the risks that could affect programme implementation or the

attainment of results.

Table 5

Risks and Mitigation measures Risks Mitigation Measures

Macroeconomic risk related to Senegal’s

vulnerability to external shocks that have a

negative impact on economic growth and public

finance.

This risk is mitigated by the support of development partners to

Government efforts aimed at maintaining productive

investments to consolidate economic recovery and boost the

resilience of the population. The governance of external oversight and

procurement oversight institutions may also

affect the implementation of certain measures.

This risk will be mitigated through revision of texts governing

the Audit Bench, capacity-building for the Public Procurement

Directorate and the independence of ARMP. Resistance to change, as regards transitioning

from means-based to results-based management

would likely affect the achievement of expected

project outcomes.

High-level commitment (Presidency / Prime Minister’s Office)

to implement structural reforms, especially regarding new

WAEMU guidelines, as well as capacity-building actions

scheduled under implementation of new WAEMU guidelines,

can mitigate this risk.

VIII RECOMMENDATION

This programme will help Senegal to address the challenges of inclusive and sustainable growth. The

reforms it supports are consistent with the Government’s vision and address the priorities of the

Bank’s strategy in Senegal. It is recommended that the Board of Directors approve a loan of UA

25.54 million, as general budget support, for the Republic of Senegal to finance the Inclusive Growth

and Economic Competitiveness Support Programme (PACICE).

ANNEX I PAGE 1/4

LETTER OF DEVELOPMENT POLICY

Republic of Senegal No. 005149 MEF/CAB/CT/A.Nd One people –One Goal – One faith

Ministry of Economy and Finance Dakar, May 16th, 2013

The Minister,

SUBJECT: ADB Budget Support Operation 2013-2014

Mr. President,

In the context of the budget support that the African Development Bank

makes available to our country in 2013, I am hereby sending you the Letter of

economic and social development policy. This document lays out recent economic

and social developments, and the main orientations of our 2013-2017 Economic and

Social Development Strategy.

I take this opportunity to thank the authorities of the African Development

Bank group for the constant support they provide to our country.

Please accept, Mr. President, the assurance of my high consideration.

To Mr. Donald KABERUKA

President of the African Development Bank

Temporary Relocation Agency (TRA)

Tunis, Tunisia

ANNEX I PAGE 2/4

GOVERNMENT’S POLICY LETTER

I. Introduction

The Government of Senegal is determined to carry on implementing the necessary reforms to create

conditions conducive to sustainable economic growth that facilitates attainment of the MDGs by 2015. To that

end, it will continue to apply cautious macroeconomic policies while modernising the business environment to

boost its economic competitiveness and improve the people’s living conditions. To implement its reforms, the

Government is supported by the IMF within the framework of a triennial agreement under the Economic Policy

Support Instrument (EPSI).

II. Recent Macroeconomic Trends

Recent macroeconomic developments have in general been consistent with projections made in the

autumn of 2012. Growth reached 3.5% in 2012 (from 2.1 % in 2011), fuelled by strong agricultural sector

performance. Inflation was moderate with a consumer price increase of 1.4% in 2012. External trade was

characterised by deterioration in the current account balance whose deficit, net of official transfers, exceeded

10% of gross domestic product (GDP) in 2012 due to an increase in petroleum and food product imports. Credit

to the economy grew by approximately 10% while growth in money supply remained contained. Despite a

sluggish international environment, GDP growth should inch up to 4% in 2013. Inflation would remain below

2%. The current account deficit is expected to improve.

As regards budget and structural reforms, substantial results were obtained under the previous EPSI

programme. Budget execution was characterised in 2012 by moderate revenue collection and cautious execution

of public spending. Indeed, total budget revenue (including FSE) is estimated at CFAF 1,464 billion compared to

CFAF 1,376 billion in 2011, representing an increase of CFAF 88 billion (+5.2%). Grants are estimated at CFAF

205.9 billion in 2012 compared to CFAF 150 billion the previous year. This trend stems mainly from agricultural

sector support provided by UN System agencies and development partners, as well as budget support from Saudi

Arabia. Meanwhile, total spending and net loans amount to CFAF 2,077 billion compared to CFAF 1,980 billion

a year earlier. On the whole, the total budget deficit including grants is estimated at CFAF 424 billion (5.9% of

GDP) compared to CFAF 455 billion (6.7% of GDP) in 2011.

III. Macroeconomic Policies for 2011-2013

Growth should continue accelerating as the effects of external shocks abate. Inflation is expected to stay

below the 3% threshold set under the WAEMU convergence pact. The current transactions deficit (net of official

transfers) should improve. The overall balance of payments should be positive and contribute to consolidation of

the Union’s foreign exchange reserves. As part of the overriding objective of accelerating economic growth, the

main objectives of Government’s programme are to: (i) conduct a cautious public finance and debt policy and

improve the quality of expenditure to preserve macroeconomic stability; (ii) increase revenue to create

substantial budgetary leeway to finance priority expenditure, including additional spending on infrastructure; (iii)

continue strengthening public finance management and governance to improve on public finance transparency,

budget planning and implementation; raise public spending productivity and reduce budgetary risks; and (iv)

encourage private sector development by initiating structural reforms, especially in the energy and finance

sectors, as well as other reforms relating to the business environment.

Pursue a cautious policy with regard to public finance, infrastructure needs and debt

Implementing a cautious policy on public finance and debt is the main instrument for preserving

macroeconomic stability, based on maintaining low inflation and public debt sustainability. Within the scope of

available financing, a budget deficit below 4% of GDP in the medium term and 3% of GDP in the long term will

facilitate attainment of Government’s set targets. It will also allow for maintaining the basic budget balance in

line with WAEMU convergence criteria. A cautious budget policy as Senegal complies with WAEMU's

monetary and foreign exchange policies will help to contain inflation.

The Government will relentlessly strive to improve the composition and efficiency of public spending.

After detailed analysis, it will adjust the composition of expenditure by cutting recurrent expenditure to increase

ANNEX I PAGE 3/4

investment spending. The Government will better monitor poverty control spending by improving data collection

and the definition and targeting of such data in coordination with the World Bank and within the framework of

SNDES 2013-2017. The Government intends to finance its investment programme by combining various

financing sources and adopting a sound loan policy that preserves public debt sustainability. To that end, it will

continue to prefer concessional financing and, in general, refrain from contracting or guaranteeing non-

concessional external loans. The Government is aware that all non-concessional financing must be tied to

projects deemed economically profitable (as appraised by an internationally renowned firm) and should not

undermine public debt sustainability. It will consult IMF services long in advance in case of any exceptions to

the above stipulations.

Increase revenue to generate greater budgetary leeway for priority expenditure financing

The Government is carrying on with its strategy to increase revenue as a percentage of GDP. The main

pillars of this strategy are: (i) rationalization of public spending; (ii) improvement of the tax and customs

departments; and (iii) improvement of the tax system in general with the help of an IMF technical assistance

mission responsible for conducting a diagnosis of the fiscal system. A new general tax code was adopted in 2012

and lays emphasis on the reduction of fiscal expenditure to increase revenue as well as transparency and

efficiency of the tax system.

The Government intends to continue modernizing the tax department following a strategic plan devised

by DGID and the customs department based on the DGD strategic plan. To that end, the DGID reorganized its

services to facilitate the payment of taxes by constructing new tax revenue offices and reducing the waiting time

for taxpayers.

Strengthen public finance management and governance

The Government is determined to continue improving public finance management and governance. It

intends to consolidate the progress made so far in budget preparation, modification and execution; the

improvement of accounting quality and the timely submission of management accounts. Accordingly, it has

mainstreamed all the new WAEMU guidelines into Senegalese national law. It plans to operationalize them and

has defined an implementation plan as part of the Budget and Financial Reform Plan (PRBF) designed by the

Government and development partners, and based in part on the 2011 PEFA report.

Private Sector Development

The Government is determined to implement reforms within the shortest time possible to support

private sector development, by laying special emphasis on the energy sectors, SME financing, the business

environment and governance.

Energy Sector

With respect to energy policy implementation, several reforms were initiated after a diagnosis that

highlighted the causes of structural imbalances such as, in particular, a major deficit between electricity supply

and demand as well as SENELEC’s critical financial situation.

However, difficulties were encountered in applying the emergency plan. This resulted in delays in

investments, notably the arrival of more powerful units to replace the rented power generators. These delays had

a considerable negative impact on operating costs and on the timeframe for improving the energy mix.

Nevertheless, the securement of fuel supplies to SENELEC, the rental of a 150 MW generator and the

rehabilitation of some power stations have helped to reduce the power generation deficit. Consequently, current

power outages are only due to disruptions caused by obsolescence of the transmission and distribution grids in

certain areas.

The Takkal Plan was evaluated during the second half of May 2012. After that, a decision was taken to

strengthen, adjust and broaden the plan’s strategic perspective, as well as continue to restructure the financing

and execution of investments that will be essential to the recovery and expansion of the country’s energy sector

by laying special emphasis on power transmission and distribution grids.

ANNEX I PAGE 4/4

All projects under the recovery plan were appraised and relevant alternatives to some of them,

especially in terms of power generation, are under consideration. Hence, to improve the energy mix, the

introduction of natural gas, hydropower and renewable energies will be considered as complementary to carbon.

The Government intends to speed up the implementation of delayed activities (for instance the financial

restructuring of SENELEC and demand management measures).

To ensure the sustainable restoration of the electricity sub-sector balance, an operational and financial

restructuring plan was prepared for SENELEC that seeks to restore the financial balance of the company. In

other words, it will restore its operational profitability and the fundamentals of its balance sheet, and ultimately

provide sustainable quality service at competitive prices. A performance contract will be signed between the

State and the company.

Private Sector Support

It will be recalled that Senegal set up a Presidential Investment Council (CPI) as far back as November

2002 to institute direct, frank and comprehensive dialogue between the Government and national and foreign

investors. The CPI has been a privileged framework for identifying the obstacles undermining the development

of private investment and constraints to Senegal’s competitiveness. It also prioritizes such constraints, proposes

reforms and monitors their implementation. The enforcement of CPI guidelines has been rather weak in recent

years - a factor that accounts for the decline in Senegal’s Doing Business ranking.

The Government has taken serious measures to improve SME access to financing. These are: (i) the

adoption of a specific and regulatory framework for the creation and development of companies specialized in

financial leases; (ii) the institutional transformation of the Economic Promotion Fund (FPE) into a National

Economic Development Bank (BNDE); (iii) the adoption of the OHADA Uniform Acts on guarantee operations

and the status of "entreprenant", which became effective on 15 May 2011, improve access to credit and increase

the range of assets that can be used as guarantee, among others; (iv) the creation of new instruments that will

help to improve the mechanism for financing the economy through the creation of Priority Guarantee and

Investment Funds (FONGIP) and the Sovereign Strategic Investment Fund (FONSIS).

Other Factors that Improve the Business Climate and Governance

The objective over the next few years is to improve the business environment by implementing CPI

decisions. This will also lead to an improvement of Senegal’s "Doing Business" ranking. Hence, emphasis will

be laid on key actions identified in the short term called “Quick Wins” (i.e. targeted reforms to be initiated and

implemented within the shortest time possible). These include: (i) facilitation of access to developed land and

access to financing; (ii) modernisation of justice and labour legislation; (iii) organisation, safeguard and

development of resources; and (iv) continuation with the dematerialisation of procedures.

A. AKANE

Minister of State in charge of Economy and Finance

ANNEX II

Annex 2: Matrix of PACICE Measures Extracted from the Common Matrix of PTF ACAB Members (*) Conditions precedent to disbursement of the single programme tranche

Sub-component Programme Measures

Component 1: Improvement of State efficiency, accountability, transparency and equity in public management

Sub-component 1.1: Promotion

of results-based and gender-

sensitive public management

(i) Update SNEEG 2005-2015 and define a plan of action for gender integration into public policies:

(ii) Operationalize Pillar 2 of Senegal's Statistics Master Plan on gender-sensitive statistics and indicators by implementing the action

designed to that end;

(iii) Have the Minister of Economy and Finance validate the appraisal guide for projects to be included in the PTIP while incorporating

gender- and job-related indicators;(*)

(iv) Define an action plan for setting up a public policy monitoring/evaluation mechanism that includes gender- and job-related indicators;

(v) Ensure adoption, by the Council of Ministers, of the decree setting up the National Employment Observatory and reinforce the system for

production of job-related statistics and indicators.

Sub-component 1.2:

Strengthening oversight of

Government action in an effort

to ensure accountability and

transparency

(i) Adoption, by the Council of Ministers, of the enabling decree of the organic law on the Audit Bench;

(ii) Adoption, by the Council of Ministers, of the texts governing the status of magistrates on the Audit Bench;

(iii) Adoption, by the Council of Ministers, of the bill on declaration of ministers’ assets;

(iv) Implementation of all measures precedent to Senegal’s membership of EITI.

Component 2: Improvement of corporate governance and the business climate to ensure inclusive private sector development

Sub-component 2.1:

Improvement of the business

environment and

harmonization of guidance

mechanisms for

“entreprenants” to ensure the

inclusive development of

businesses.

(i) Application of the new status of "entreprenant" adopted by OHADA through the preparation of two bills on the fiscal status and social

status of the "entreprenant";

(ii) Implementation of the Corporate Governance Code through dissemination of the report of the Monitoring Committee set up to that effect;

(iii) Adoption of a road map on land tenure reform that lays special emphasis on women’s access to land.

Sub-component 2.2:

Streamlining of guarantee and

financing mechanisms for

SMEs that promote women’s

and youth entrepreneurship

(i) Adoption by the ad hoc Agencies’ Evaluation Committee of an action plan for streamlining financing mechanisms for the development of

private initiatives resulting from the rationalisation of executing agencies and similar structures;(*)

(ii) Finalise the study on the establishment of a contracts fund and propose a plan for the implementation of recommendations.

(iii) Finalise the streamlining of guidance mechanisms for MSEs and SMEs at the national and local levels.

ANNEX III

Statement on Country Relations with the IMF (Press Release No. 13/112 of 10 April

2013)

IMF Concludes 5th

PSI Review Mission to Senegal

The International Monetary Fund (IMF) mission that visited Senegal during March 27-April 10, 2013 to conduct

the fifth review under the three-year Policy Support Instrument (PSI) approved in December 2010 concluded as

follows:

"Recent macroeconomic developments were broadly in line with the projections made in fall 2012". Growth reached 3.5 percent in 2012 (from 2.1 percent in 2011), fuelled by strong performance in the agricultural

sector. Inflation has been moderate, with a 1.4 percent consumer price increase in 2012. External trade was

marked by a deterioration in the current account deficit which exceeded 10 percent of gross domestic product

(GDP) in 2012, driven largely by increases in imports of petroleum and food products. Credit to the economy

increased by about 10 percent, while growth of the money supply was contained. Notwithstanding the sluggish

international environment, GDP growth is expected to tick up to 4 percent in 2013. Inflation should remain

below 2 percent. The current account deficit is expected to improve.

"Program implementation was satisfactory overall." All quantitative assessment criteria and indicative

targets for the program at end-2012 were met, except for the indicative target on single tendering owing to

emergency procurement associated with the floods and preparation for the 2012/2013 crop year. For the first

time in the last few years, the annual fiscal deficit target was met despite significant revenue shortfalls (deficit of

5.9 percent of GDP). Progress was made with the implementation of structural reforms, notably with the entry

into force of the new general tax code on January 1, 2013. The discussions between the authorities and the

mission focused on efforts to reduce the fiscal deficit, which remains a priority objective for the authorities in

order to maintain debt sustainability and rebuild fiscal space. Since the last review, the fiscal outlook has been

affected by tax-revenue shortfalls and new spending pressures, largely reflecting the situation in the energy

sector. These developments should be matched by additional efforts to increase fiscal revenues and savings on

certain expenditures. Overall, however, deficit reduction will be slightly lower than expected in 2013, to allow

for non-recurrent expenditures associated with the security situation in Mali and the Sahel, and the launching of

the program in response to the major flooding of 2012. Nevertheless, the authorities reaffirmed their objective to

reduce the deficit to less than 4 percent of GDP by 2015.

"The mission expressed its concern regarding the situation in the energy sector." Energy price subsidies

(electricity and petroleum products) cost Senegalese taxpayers more than CFAF 160 billion in 2012 and would

remain high in 2013. The mission believes that this burden is difficult to bear for public finances and to justify,

given that only a small share of these subsidies benefit the poor. Consequently, the mission encouraged the

authorities to phase out these subsidies and replace them with better-targeted social protections. A long-term

reduction in electricity subsidies will require bringing online power stations that use more efficient and less

expensive technologies, as well as substantial efficiency improvements at SENELEC. Accordingly, the mission

encouraged the authorities to accelerate the implementation of their energy sector reform strategy.

"The IMF’s Executive Board is expected to take up the fifth program review in June 2013."

ANNEX III

Annex 4: Key Macroeconomic Indicators

Indicators Unit 2000 2008 2009 2010 2011 2012 2013 (e)

National Accounts

GNI at Current Prices Million US $ 5 038 12 023 12 954 13 428 13 661 ... ...

GNI per Capita US$ 530 1 020 1 070 1 080 1 070 ... ...

GDP at Current Prices Million US $ 4 693 13 414 12 807 12 901 14 355 12 613 13 425

GDP at 2000 Constant prices Million US $ 4 693 6 571 6 728 7 018 7 165 7 431 7 748

Real GDP Growth Rate % 3,2 3,7 2,4 4,3 2,1 3,7 4,3

Real per Capita GDP Growth Rate % 0,6 1,0 -0,3 1,6 -0,5 1,1 1,6

Gross Domestic Investment % GDP 20,4 31,3 22,1 22,6 25,3 25,8 27,0

Public Investment % GDP 4,5 6,2 6,3 6,4 6,6 7,6 8,8

Private Investment % GDP 15,9 25,1 15,7 16,2 18,7 18,2 18,2

Gross National Savings % GDP 14,6 19,7 22,6 25,3 22,3 22,5 22,9

Prices and Money

Inflation (CPI) % 0,7 5,7 -2,2 1,2 3,4 2,5 1,6

Exchange Rate (Annual Average) local currency/US$ 712,0 447,8 472,2 495,3 471,9 510,5 ...

Monetary Growth (M2) % 10,7 1,8 11,4 13,7 6,8 ... ...

Money and Quasi Money as % of GDP % 23,6 33,4 36,9 39,8 40,0 ... ...

Government Finance

Total Revenue and Grants % GDP 18,7 21,5 21,6 21,9 22,5 23,1 23,0

Total Expenditure and Net Lending % GDP 18,2 26,3 26,8 27,3 29,1 30,1 30,9

Overall Deficit (-) / Surplus (+) % GDP 0,5 -4,8 -5,2 -5,4 -6,6 -7,0 -7,9

External Sector

Exports Volume Growth (Goods) % -12,1 -8,3 26,3 0,8 2,7 -8,6 3,7

Imports Volume Growth (Goods) % -4,5 27,5 -7,8 -5,6 8,3 -4,7 0,1

Terms of Trade Growth % -1,4 35,9 -5,7 -2,4 1,5 1,2 -4,8

Current Account Balance Million US $ -328 -1 888 -856 -584 -1 103 -1 086 -1 251

Current Account Balance % GDP -7,0 -14,1 -6,7 -4,5 -7,7 -8,6 -9,3

External Reserves months of imports 2,7 2,7 4,8 4,7 3,9 3,5 ...

Debt and Financial Flows

Debt Service % exports 15,4 4,2 5,5 5,8 13,7 7,9 7,9

External Debt % GDP 81,0 43,7 51,9 53,2 48,5 59,7 60,2

Net Total Financial Flows Million US $ 482 1 361 1 396 924 1 255 ... ...

Net Official Development Assistance Million US $ 431 1 069 1 016 928 1 052 ... ...

Net Foreign Direct Investment Million US $ 63 398 320 266 286 ... ...

Source : AfDB Statistics Department; IMF: World Economic Outlook, October 2012 and International Financial Statistics, October 2012;

AfDB Statistics Department: Development Data Portal Database, March 2013. United Nations: OECD, Reporting System Division.

Notes: … Data Not Available ( e ) Estimations Last Update: May 2013

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

%

Real GDP Growth Rate, 2000-2013

-3

-2

-1

0

1

2

3

4

5

6

7

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Inflation (CPI),

2000-2013

-16,0

-14,0

-12,0

-10,0

-8,0

-6,0

-4,0

-2,0

0,0

2 000

2 001

2 002

2 003

2 004

2 005

2 006

2 007

2 008

2 009

2 010

2 011

2 012

2 013

Current Account Balance as % of GDP,

2000-2013