Economy

The former capital of French West Africa, Senegal is a semi-arid country located on the westernmost point of Africa. Predominantly rural and with limited natural resources, the country earns foreign exchange from fish, phosphates, peanuts, tourism, and services. Its economy is highly vulnerable to variations in rainfall and changes in world commodity prices. Senegal depends heavily on foreign assistance, which in 2000 represented about 32% of overall government spending--including both current expenditures and capital investments--or CFA 270.8 billion (U.S.$ 361.0 million). Senegal has well-developed though costly port facilities, a major international airport serving 23 international airlines, and direct and expanding telecommunications links with major world centres.

In Depth

Current GDP per capita of Senegal shrank by 1.30% in the Sixties. But it registered a peak growth of 158% in the Seventies. In the turbulent Eighties, it still expanded 43%. However this proved unsustainable and it consequently shrank by 40% in the Nineties.

In January 1994, Senegal undertook a bold and ambitious economic reform program with the support of the international donor community. This reform began with a 50% devaluation of Senegal's currency, the West African CFA franc, which was linked at a fixed rate to the former French franc and now to the euro. Government price controls and subsidies have been steadily dismantled. After seeing its economy contract by 2.1% in 1993, Senegal made an important turnaround, thanks to the reform programme, with real growth in GDP averaging 5 % annually during 1995-2001. Annual inflation had been pushed down to less than 1%, but rose to an estimated 3.3% in 2001. Investment rose steadily from 13.8% of GDP in 1993 to 16.5% in 1997.

Since the January 1994 CFA franc devaluation, the International Monetary Fund (IMF), the World Bank, and other multilateral and creditors have been supporting the Government of Senegal's structural and sectoral adjustment programs. The broad objectives of the program have been to facilitate growth and development by reducing the role of government in the economy, improving public sector management, enhancing incentives for the private sector and reducing poverty.

With an external debt of $ 2,495 million, and with its economic reform program on track, Senegal qualified for the multilateral debt relief initiative for Heavily Indebted Poor Countries (HIPC). Progress on structural reforms is on track, but the pace of reforms remains slow, as delays occur in implementing a number of measures on the privatisation program, good governance issues and the promotion of private sector activity. However, macroeconomic indicators show that Senegal turned in a respectable performance in meeting IMF targets in 2000: annual GDP growth increased to 5.7%, compared to 5.1% in 1999. Inflation was reported to be 0.7% compared to 0.8% in 1999, and the current account deficit (excluding transfers) was held at less than 6% of GDP.

As a member of the West African Economic and Monetary Union (WAEMU), Senegal is working toward greater regional integration with a unified external tariff. Senegal also realised full Internet connectivity in 1996, creating a mini-boom in information technology-based services. Private activity now accounts for 82% of GDP. On the negative side, Senegal faces deep-seated urban problems of chronic unemployment, socioeconomic disparity, juvenile delinquency and drug addiction; much as produced within hierarchically class-based populations in the developed/industrialised world's urban environs.

The fishing sector has replaced the groundnut sector as Senegal's export leader. Its export earnings reached $239 million in 2000. The industrial fishing operations struggle with high costs, and Senegalese tuna is rapidly losing the French market to more efficient Asian competitors.

Phosphate production, the second major foreign exchange earner, has been steady at about $95 million. Exports of peanut products reached $79 million in 2000 and represented 11% of total export earnings. Receipts from tourism, the fourth major foreign exchange earner, have picked up since the January 1994 devaluation. In 2000, some 500,000 tourists visited Senegal, earning the country $120 million.

Senegal's new Agency for the Promotion of Investment (APIX) plays a pivotal role in the government's foreign investment program. Its objective is to increase the investment rate from its current level of 20.6% to 30%. Currently, there are no restrictions on the transfer or repatriation of capital and income earned, or investment financed with convertible foreign exchange. Direct U.S. investment in Senegal remains about $38 million, mainly in petroleum marketing, pharmaceuticals manufacturing, chemicals and banking. Economic assistance, about $350 million a year, comes largely from France, the IMF, the World Bank and the United States. Canada, Italy, Japan and Germany also provide assistance.