INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND SENEGAL Joint World Bank-IMF Debt Sustainability Analysis 1 April 2020 Prepared Jointly by the staffs of the International Development Association (IDA) and the International Monetary Fund (IMF) Approved by Marcello Estevão (IDA), Annalisa Fedelino and Ana Corbacho (IMF) Senegal: Joint Bank-Fund Debt Sustainability Analysis Risk of external debt distress: Moderate Overall risk of debt distress Moderate Granularity in the risk rating Some scope to absorb shocks Application of judgment No Mechanical risk rating under the external DSA Moderate Mechanical risk rating under the public DSA Moderate Senegal’s debt is assessed to remain sustainable with a moderate risk of debt distress (external and overall) using the post COVID-19 pandemic scenario as baseline, in line with the previous Debt Sustainability Analysis (DSA) of January 2020. However, the country’s space to absorb shocks— previously deemed limited in the short term—has somewhat narrowed compared to the previous DSA. The macroeconomic framework reflects currently available information. However, risks are heavily tilted to the downside: a more extensive global and domestic COVID-19 outbreak could lead to a much steeper economic decline in 2020 and more gradual recovery thereafter. 1 This DSA has been prepared following the revised LIC-DSA framework. It updates the previous Joint DSA (IMF Country Report No. 20/11). Senegal’s debt carrying capacity, calculated based on the April and October 2019 WEOs and the 2018 CPIA, is classified as strong. The applicable thresholds to public and publicly guaranteed external debt are: 55 percent for the PV of debt- to-GDP ratio, 240 percent for the PV of debt-to-exports ratio, 21 percent for the debt service-to-exports ratio, and 23 percent for the debt service-to-revenue ratio. The applicable benchmark for the PV of total public debt for strong debt carrying capacity is 70 percent of GDP. 1. This DSA updates the joint World Bank-IMF analysis of January 2020 using the post COVID-19 pandemic as baseline. 2 It uses the same debt stocks for 2018 and 2019 as in the previous DSA, with a much-revised macroeconomic environment reflecting the impact of the COVID-19 pandemic as used in the staff report for the 2020 RCF/RFI. Compared with the previous DSA, the pandemic is reflected as a one-time large shock leading to a significant decline in GDP and a widening of the fiscal and current account deficits. GDP is expected to rebound in 2021 as the situation is assumed to normalize in H2 2020. 2. The main revisions to the macroeconomic assumptions can be summarized as follows: • The authorities have revised GDP growth in 2019 down to 5.3 percent from 6 percent in the last DSA. For 2020, staff’s preliminary assessment is that growth will decline to 3 percent in 2020 compared to 6.8 percent in the previous DSA. The economy is assumed to gradually recover starting in 2021 with a growth rate of 5.5 percent (7 percent in previous DSA) and remaining high over the medium-term. Over the long run, real GDP growth is projected to converge to about 5.1 percent over 2025-39 as in the last DSA. • The public sector deficit is estimated at about 5 percent of GDP in 2019 compared to 4.7 in the previous DSA and to widen sharply to 6.9 percent of GDP in 2020 owing to revenue losses and additional expenditures to fight the pandemic. • The current account deficit stood at 9.1 percent in 2019 (broadly the same as in the previous DSA) and is projected to widen to 11.3 percent of GDP in 2020. The negative impact of the crisis on goods and services exports, as well as remittances, is only partly offset by savings on oil imports. Over the long term, the average current account deficit is projected to decline to about 1.5 percent of GDP (slightly higher than the 1.2 percent in the last DSA) (Text Table 1). • The realism tools do not flag any serious issues. 3. The DSA assumes a financing mix consistent with a prudent borrowing strategy, aimed at gradually increasing the share of domestic debt and seeking new external financing on concessional terms whenever feasible. The projected large financing gaps related to the COVID-19 epidemic are assumed to be filled mostly with grants and highly concessional loans. The authorities are also considering delaying some planned project and their related loan disbursements. The initial 2020 financing plan did not envisage any Eurobond issuances, but relies on net issuances of about 1 percent of GDP in the regional WAEMU market. On March 21, the BCEAO announced a series of measures to enhance liquidity provision and current projections assumes this financing will materialize, noting however it could be at risk in case of a more prolonged crisis. The average maturity of new external debt is assumed close to 18 years, with 6-year grace period and an average interest rate of 4 percent, broadly unchanged 2 See IMF Country Report No. 20/11. 2 compared to the previous DSA. New medium- and long-term domestic debt has an average maturity of 5 years, with 3-year grace period. 4. An analysis of the impact of the COVID-19 on debt sustainability indicates that the risk of debt distress remains moderate. The assessment is unchanged relative to the previous DSA. All external debt indicators remain below the relevant indicative threshold under the new baseline except the debt service-to-exports ratio which now peaks at 24 percent in 2020 (22.7 percent in the January DSA). 3 However, a further shortfall in export receipts than currently envisaged in 2020 could push the PV of external debt-to-export ratio above its threshold. Total public sector debt now peaks at 67 percent of GDP in 2020 (against 62 percent previously forecasted) before resuming a downwards trajectory. Stress tests also indicate that external and public debt would remain sustainable over the projection period (Appendix Tables 1 and 2 and Figures 1 and 2). However, Senegal’s space to absorb shock has narrowed compared to the previous DSA. (Figure 7). 5. Debt is projected to remain sustainable over the medium term supported by the authorities’ strong commitment to maintaining macroeconomic stability and fiscal discipline under the PCI and the WAEMU convergence criteria. The authorities remain firmly committed to their reform objectives supported by the PCI and to returning as soon as possible to the pre- crisis fiscal path anchored by the WAEMU convergence criteria. The projected large financing gaps related to the COVID-19 epidemic are assumed to be filled mostly with highly concessional loans and possibly grants, which would partly displace lower priority externally financed projects and related disbursements. Senegal has access to international capital markets but was not considering any Eurobond issuance in 2020. 6. Risks to the outlook depend primarily on the depth and duration of the COVID-19 pandemic. A deeper global slowdown combined with a prolonged outbreak in Senegal could further lower GDP and export receipts in 2020 and weaken the expected recovery thereafter. Lower oil prices benefit Senegal in the short term and help mitigate the current account deterioration but, should world oil and gas prices remain low for a prolonged period this could jeopardize planned investments in hydrocarbon production and significantly alter the medium-term outlook. 3The one-time breach of the external debt service to exports ratio is automatically discounted from the analysis according to the LIC-DSF guidance note. 3 Text Table 1. Senegal: Evolution of Selected Macroeconomic Indicators, 2019–22 Med. Long 1 2 2019 2020 2021 2022 term term Real GDP growth Current DSA 5.3 3.0 5.5 8.0 6.8 5.1 Previous DSA 6.0 6.8 7.0 8.4 7.9 5.1 Overall fiscal deficit (percent of GDP) 3 Current DSA 5.0 6.9 4.6 4.3 4.6 3.4 4 Previous DSA 4.7 4.1 4.1 4.1 4.0 2.4 Current account deficit (percent of GDP) Current DSA 9.1 11.3 11.4 8.5 7.8 1.5 Previous DSA 9.2 10.7 10.5 7.7 7.6 1.1 Exports of goods and services (percent of GDP) Current DSA 24.1 20.9 22.9 26.2 26.7 31.4 Previous DSA 22.7 23.5 24.1 26.9 26.4 31.3 1 Defined as the first 5 years of the projection period. For the current DSA update, the medium term covers the years 2019-2024. 2 Defined as the last 15 years of the projection period. For the current DSA update, the long term covers the years 2025-2039. 3 Overall fiscal deficit of General Government and Public Sector. 4 Overall fiscal deficit of Central Government. 4 Figure 1. Senegal: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2019-29 PV of debt-to GDP ratio PV of debt-to-exports ratio 100 350 90 300 80 70 250 60 200 50 40 150 30 100 20 50 10 Most extreme shock is One-time depreciation Most extreme shock is Exports 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Debt service-to-exports ratio Debt service-to-revenue ratio 30 35 25 30 25 20 20 15 15 10 10 5 5 A one-off breach excluded: One-time depreciation Most extreme shock is Exports Most extreme shock is Combination 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Baseline Historical scenario Most extreme shock 1/ Threshold 1 DSA January 2020 1 Stress test with (the largest) one-off breach Customization of Default Settings Borrowing Assumptions for Stress Tests* Size Interactions Default User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Tests Terms of marginal debt Combined CLs Yes Avg. nominal interest rate on new borrowing in USD 4.0% 4.0% Natural Disasters n.a. n.a. USD Discount rate 5.0% 5.0% 17 17 2/ Commodity Prices n.a. n.a. Avg. maturity (incl. grace period) Market Financing No No Avg. grace period 6 6 Note: "Yes" indicates any change to the size or * Note: All the additional financing needs generated by the shocks under the stress tests are interactions of the default settings for the stress tests. assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal "n.a." indicates that the stress test does not apply. debt are based on baseline 10-year projections. Sources: Senegal authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2029. Stress tests with one-off breaches are also presented (if any), while these one- off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one- off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 5 Table 1. Senegal: External Debt Sustainability Framework, Baseline Scenario, 2016-39 (Percent of GDP, unless otherwise indicated) Actual Projections Average 8/ 2016 2017 2018 2019 2020 2021 2022 2023 2024 2029 2039 Historical Projections External debt (nominal) 1/ 55.1 62.0 68.3 77.5 81.3 82.2 79.2 72.3 66.4 47.4 26.8 52.6 66.9 Definition of external/domestic debt Currency-based of which: public and publicly guaranteed (PPG) 31.5 38.9 48.1 52.9 54.2 53.9 51.8 47.3 43.6 30.2 19.1 29.9 43.9 Is there a material difference between the Yes two criteria? Change in external debt -2.1 6.9 6.3 9.3 3.8 0.9 -3.0 -6.9 -5.9 -3.7 -1.4 Identified net debt-creating flows -0.9 -0.3 -0.7 1.9 4.5 2.3 -1.9 -8.3 -6.1 -2.8 -2.5 3.1 -2.2 Non-interest current account deficit 2.7 6.1 6.8 6.7 8.7 8.8 5.8 1.2 0.5 1.1 0.4 5.4 3.4 Deficit in balance of goods and services 11.0 13.8 15.0 15.5 15.8 16.9 13.0 7.3 6.6 3.6 2.8 14.1 8.7 Exports 21.5 21.9 23.5 24.1 20.9 22.9 26.2 32.9 33.0 29.6 31.0 Debt Accumulation Imports 32.5 35.7 38.6 39.7 36.7 39.9 39.2 40.2 39.6 33.2 33.8 7.0 25 Net current transfers (negative = inflow) -9.4 -9.4 -8.9 -9.2 -7.7 -8.7 -9.3 -9.4 -9.2 -8.5 -7.7 -9.5 -8.9 of which: official -0.4 -0.4 -0.3 -0.2 -0.1 -0.1 -0.2 -0.2 -0.2 -0.2 -0.3 6.0 Other current account flows (negative = net inflow) 1.2 1.6 0.6 0.4 0.6 0.5 2.1 3.3 3.0 6.1 5.3 0.8 3.6 20 Net FDI (negative = inflow) -1.3 -2.4 -3.4 -3.7 -4.6 -5.0 -4.4 -4.2 -4.0 -2.9 -2.6 -1.9 -3.9 5.0 Endogenous debt dynamics 2/ -2.3 -3.9 -4.0 -1.1 0.4 -1.5 -3.3 -5.3 -2.6 -0.9 -0.3 Contribution from nominal interest rate 1.4 1.2 2.0 2.4 2.6 2.7 2.7 2.4 2.6 1.7 0.9 4.0 15 Contribution from real GDP growth -3.4 -3.7 -3.6 -3.6 -2.2 -4.1 -6.0 -7.7 -5.1 -2.6 -1.2 3.0 Contribution from price and exchange rate changes -0.4 -1.4 -2.5 … … … … … … … … Residual 3/ -1.2 7.1 7.0 7.4 -0.7 -1.4 -1.1 1.4 0.3 -1.0 1.1 0.4 0.3 10 2.0 of which: exceptional financing 2.3 0.6 1.1 -1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 5 Sustainability indicators 0.0 PV of PPG external debt-to-GDP ratio ... ... 43.4 48.4 49.6 49.2 47.2 43.5 40.6 28.3 17.5 PV of PPG external debt-to-exports ratio ... ... 184.4 200.6 237.0 214.6 180.0 132.4 123.1 95.5 56.5 -1.0 0 PPG debt service-to-exports ratio 10.4 8.9 16.3 14.9 24.3 19.1 16.1 10.3 14.3 11.2 5.9 2019 2021 2023 2025 2027 2029 PPG debt service-to-revenue ratio 12.0 7.8 15.6 13.6 20.4 17.4 16.2 12.6 17.5 12.2 6.7 Gross external financing need (Billion of U.S. dollars) 0.9 1.5 1.8 1.8 2.6 2.5 2.0 0.5 0.9 1.4 0.1 Rate of Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 6.4 7.4 6.4 5.3 3.0 5.5 8.0 11.2 7.9 5.6 4.7 4.8 6.2 GDP deflator in US dollar terms (change in percent) 0.7 2.7 4.1 -3.7 1.6 2.8 1.9 3.2 2.9 3.1 2.7 -1.3 2.1 Effective interest rate (percent) 4/ 2.7 2.4 3.6 3.6 3.5 3.5 3.6 3.5 3.9 3.6 3.5 2.3 3.7 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 1.8 12.2 19.2 4.0 -9.2 18.8 25.9 43.8 11.5 9.5 7.5 4.9 11.5 of which: Private Growth of imports of G&S (US dollar terms, in percent) -1.8 21.3 19.6 4.4 -3.2 17.7 8.3 17.5 9.5 5.2 9.1 3.5 7.1 90 Grant element of new public sector borrowing (in percent) ... ... ... 18.1 20.5 12.6 13.9 14.7 13.1 20.0 18.2 ... 16.1 80 Government revenues (excluding grants, in percent of GDP) 18.5 25.1 24.5 26.3 24.9 25.2 26.1 26.9 27.0 27.1 27.3 18.1 26.5 Aid flows (in Billion of US dollars) 5/ 0.9 1.0 1.0 0.7 0.8 0.6 0.7 0.7 0.8 1.0 1.7 70 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 3.2 3.7 2.8 2.6 2.4 2.3 2.0 1.7 ... 2.5 60 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 31.2 38.5 33.8 37.7 41.7 39.0 54.4 53.1 ... 41.9 Nominal GDP (Billion of US dollars) 19 21 23 24 25 27 29 34 37 57 120 50 Nominal dollar GDP growth 7.1 10.3 10.8 1.4 4.6 8.4 10.1 14.7 11.0 8.9 7.4 3.4 8.5 40 Memorandum items: 30 PV of external debt 7/ ... ... 63.5 73.0 76.7 77.5 74.6 68.5 63.4 45.5 25.2 20 In percent of exports ... ... 270.0 302.5 366.5 337.9 284.4 208.4 192.1 153.7 81.3 Total external debt service-to-exports ratio 14.6 14.8 18.7 18.4 30.0 24.7 20.7 13.5 18.0 14.4 7.5 10 PV of PPG external debt (in Billion of US dollars) 10.1 11.4 12.2 13.2 13.9 14.7 15.2 16.0 21.0 0 (PVt-PVt-1)/GDPt-1 (in percent) 5.7 3.5 3.7 2.8 2.7 1.6 -0.1 0.6 2019 2021 2023 2025 2027 2029 Non-interest current account deficit that stabilizes debt ratio 4.9 -0.8 0.5 -2.6 4.9 7.9 8.9 8.1 6.3 4.9 1.8 Sources: Senegal authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 6 Figure 2. Senegal: Indicators of Public Debt Under Alternative Scenarios, 2019-29 PV of Debt-to-GDP Ratio 90 80 70 60 50 40 30 20 10 Most extreme shock is One-time depreciation 0 2019 2021 2023 2025 2027 2029 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 300 45 40 250 35 200 30 25 150 20 100 15 10 50 Most extreme shock is One-time 5 Most extreme shock is Growth depreciation 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Baseline Most extreme shock 1/ Public debt benchmark Historical scenario DSA January 2020 Borrowing Assumptions for Stress Tests* Default User defined Shares of marginal debt External PPG medium and long-term 45% 45% Domestic medium and long-term 50% 50% Domestic short-term 6% 6% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 4.0% 4.0% Avg. maturity (incl. grace period) 17 17 Avg. grace period 6 6 Domestic MLT debt Avg. real interest rate on new borrowing 3.5% 3.5% Avg. maturity (incl. grace period) 5 5 Avg. grace period 3 3 Domestic short-term debt Avg. real interest rate 2% 2% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Senegal authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2029. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 7 Table 2. Senegal: Public Sector Debt Sustainability Framework, Baseline Scenario, 2016-39 (Percent of GDP, unless otherwise indicated) Actual Projections Average 6/ 2016 2017 2018 2019 2020 2021 2022 2023 2024 2029 2039 Historical Projections Public sector debt 1/ 47.5 61.1 62.1 64.2 67.4 67.6 66.5 62.5 60.3 55.9 63.2 41.6 61.5 Definition of external/domestic of which: external debt 31.5 38.9 48.1 52.9 54.2 53.9 51.8 47.3 43.6 30.2 19.1 29.9 43.9 Currency-based debt of which: local-currency denominated 16.1 22.2 13.9 11.2 13.3 13.7 14.7 15.1 16.7 25.7 44.1 Change in public sector debt 3.0 13.6 1.0 2.1 3.3 0.2 -1.1 -4.0 -2.2 -0.8 1.2 Is there a material difference Identified debt-creating flows 1.2 -4.7 2.9 2.7 3.8 0.2 -1.1 -4.0 -2.1 -0.8 1.2 2.3 -0.4 Yes between the two criteria? Primary deficit 1.6 0.7 2.2 3.0 4.7 2.5 2.4 2.1 1.6 1.3 2.4 2.5 2.1 Revenue and grants 20.7 27.2 26.5 27.9 27.1 27.2 28.0 28.7 28.7 28.7 28.7 20.2 28.3 of which: grants 2.2 2.2 2.0 1.6 2.2 2.0 1.9 1.8 1.7 1.6 1.3 Public sector debt 1/ Primary (noninterest) expenditure 22.3 27.9 28.8 30.9 31.8 29.8 30.4 30.7 30.3 30.0 31.1 22.8 30.3 Automatic debt dynamics -0.4 -5.3 0.6 -0.3 -0.9 -2.3 -3.5 -6.1 -3.7 -2.1 -1.3 of which: local-currency denominated Contribution from interest rate/growth differential -1.4 -2.4 -2.0 -1.5 0.2 -2.0 -3.6 -5.6 -3.3 -1.2 -0.7 of which: foreign-currency denominated of which: contribution from average real interest rate 1.2 0.8 1.7 1.7 2.1 1.5 1.4 1.2 1.2 1.8 2.0 of which: contribution from real GDP growth -2.7 -3.3 -3.7 -3.1 -1.9 -3.5 -5.0 -6.7 -4.6 -3.0 -2.8 80 Contribution from real exchange rate depreciation 1.0 -2.9 2.6 ... ... ... ... ... ... ... ... 70 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 60 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Residual 1.8 18.2 -1.9 0.6 -1.6 -0.3 0.1 -0.5 -0.4 -1.0 -0.5 2.0 -0.6 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 58.9 60.0 62.6 62.8 61.9 58.6 57.3 54.0 61.6 2019 2021 2023 2025 2027 2029 PV of public debt-to-revenue and grants ratio … … 222.2 214.8 230.9 230.4 221.0 204.3 199.6 188.2 214.7 Debt service-to-revenue and grants ratio 3/ 35.6 26.0 39.6 26.0 28.7 26.4 26.6 24.6 28.1 30.3 37.8 Gross financing need 4/ 7.3 6.3 12.7 10.2 12.4 9.7 9.8 9.1 9.6 10.0 13.3 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 1 Real GDP growth (in percent) 6.4 7.4 6.4 5.3 3.0 5.5 8.0 11.2 7.9 5.6 4.7 4.8 6.2 1 Average nominal interest rate on external debt (in percent) 3.1 2.7 4.1 4.2 3.9 3.8 3.8 3.7 3.8 3.8 3.6 2.6 3.9 1 Average real interest rate on domestic debt (in percent) 5.2 4.1 5.2 4.1 4.4 3.9 4.3 2.8 3.2 2.8 3.3 4.7 3.4 1 Real exchange rate depreciation (in percent, + indicates depreciation) 3.3 -9.8 7.0 … ... ... ... ... ... ... ... 3.0 ... 1 1 n.a. Inflation rate (GDP deflator, in percent) 1.0 0.6 -0.5 1.7 2.0 1.7 1.4 2.9 2.7 3.1 2.7 0.6 2.5 0 Growth of real primary spending (deflated by GDP deflator, in percent) 10.6 34.3 9.7 13.1 5.8 -1.1 10.2 12.5 6.2 5.8 4.7 8.9 6.7 0 Primary deficit that stabilizes the debt-to-GDP ratio 5/ -1.4 -12.9 1.3 0.9 1.4 2.3 3.5 6.1 3.7 2.2 1.3 -4.3 2.6 0 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 2019 2021 2023 2025 2027 2029 8 Table 3. Senegal: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2019-29 (Percent) Projections 1/ 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 PV of debt-to GDP ratio Baseline 48 50 49 47 44 41 39 36 33 31 28 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 48 50 51 54 61 68 75 78 83 89 93 B. Bound Tests B1. Real GDP growth 48 51 53 50 47 43 41 39 36 33 30 B2. Primary balance 48 50 50 48 44 42 40 37 34 32 29 B3. Exports 48 54 56 54 50 46 44 42 38 35 32 B4. Other flows 3/ 48 53 56 54 50 46 44 42 38 35 32 B5. Depreciation 48 63 56 53 49 46 44 41 37 35 32 B6. Combination of B1-B5 48 58 60 58 53 50 48 45 41 38 34 C. Tailored Tests C1. Combined contingent liabilities 48 52 52 50 46 44 42 40 37 34 32 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 48 55 55 53 49 46 44 41 37 34 31 Threshold 55 55 55 55 55 55 55 55 55 55 55 PV of debt-to-exports ratio Baseline 201 237 215 180 132 123 114 108 100 105 96 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 201 237 223 206 185 206 220 232 250 303 315 B. Bound Tests B1. Real GDP growth 201 237 215 180 132 123 114 108 100 105 96 B2. Primary balance 201 239 219 184 135 126 117 111 103 108 99 B3. Exports 201 276 291 244 179 167 155 148 137 142 129 B4. Other flows 3/ 201 253 245 206 151 141 131 125 115 120 109 B5. Depreciation 201 237 192 161 119 110 102 97 89 94 86 B6. Combination of B1-B5 201 273 241 222 163 152 141 134 124 129 117 C. Tailored Tests C1. Combined contingent liabilities 201 251 227 191 140 132 124 118 110 116 107 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 201 237 215 181 134 125 115 109 100 104 95 Threshold 240 240 240 240 240 240 240 240 240 240 240 Debt service-to-exports ratio Baseline 15 24 19 16 10 14 10 12 12 14 11 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 15 25 20 18 13 20 16 21 22 27 25 B. Bound Tests B1. Real GDP growth 15 24 19 16 10 14 10 12 12 14 11 B2. Primary balance 15 24 19 16 10 14 10 12 12 14 11 B3. Exports 15 27 24 21 13 18 13 16 16 19 15 B4. Other flows 3/ 15 24 20 17 11 15 11 13 13 16 13 B5. Depreciation 15 24 19 15 10 14 10 12 12 12 10 B6. Combination of B1-B5 15 26 22 19 12 16 12 14 15 17 14 C. Tailored Tests C1. Combined contingent liabilities 15 24 20 16 11 15 11 13 13 14 12 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 15 24 20 17 11 17 15 16 13 12 9 Threshold 21 21 21 21 21 21 21 21 21 21 21 Debt service-to-revenue ratio Baseline 14 20 17 16 13 17 13 15 15 15 12 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 14 21 18 18 16 25 20 26 27 29 27 B. Bound Tests 14 20 17 17 14 20 15 18 18 18 14 B1. Real GDP growth 14 21 19 17 13 19 14 16 16 16 13 B2. Primary balance 14 20 17 16 13 18 13 15 15 15 12 B3. Exports 14 21 18 17 14 19 14 16 16 17 14 B4. Other flows 3/ 14 20 18 17 14 18 14 16 16 17 14 B5. Depreciation 14 26 22 19 15 21 16 18 18 17 14 B6. Combination of B1-B5 14 22 20 19 15 20 15 17 18 18 15 C. Tailored Tests C1. Combined contingent liabilities 14 20 18 17 13 18 13 16 16 15 13 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 14 20 18 17 14 21 19 20 16 13 9 Threshold 23 23 23 23 23 23 23 23 23 23 23 Sources: Senegal authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 9 Table 4. Senegal: Sensitivity Analysis for Key Indicators of Public Debt, 2019-29 (Percent of GDP, unless otherwise indicated) Projections 1/ 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 PV of Debt-to-GDP Ratio Baseline 60 63 63 62 59 57 57 56 55 55 54 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 60 60 62 63 65 67 70 72 73 75 77 A2. Alternative Scenario :[Customize, enter title] 57 56 55 54 51 50 50 50 50 51 51 B. Bound Tests B1. Real GDP growth 60 66 70 70 68 68 70 70 71 72 72 B2. Primary balance 60 63 65 64 60 59 59 58 57 56 55 B3. Exports 60 65 68 67 64 62 62 60 59 58 57 B4. Other flows 3/ 60 66 70 69 65 63 63 62 60 59 58 B5. Depreciation 60 75 73 69 63 59 57 54 51 49 47 B6. Combination of B1-B5 60 61 63 61 58 56 55 54 53 52 51 C. Tailored Tests C1. Combined contingent liabilities 60 69 69 68 64 63 62 61 60 59 59 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 60 63 63 62 59 58 57 56 55 54 54 Public debt benchmark 70 70 70 70 70 70 70 70 70 70 70 PV of Debt-to-Revenue Ratio Baseline 215 231 230 221 204 200 199 196 192 191 188 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 215 223 226 225 225 232 239 245 252 258 264 A2. Alternative Scenario :[Customize, enter title] 26 28 23 24 20 21 21 25 26 26 25 B. Bound Tests B1. Real GDP growth 215 241 254 250 237 237 242 244 245 248 251 B2. Primary balance 215 234 238 228 210 205 204 201 197 196 193 B3. Exports 215 238 251 240 221 216 214 211 206 203 199 B4. Other flows 3/ 215 243 256 245 226 220 218 215 210 206 202 B5. Depreciation 215 280 268 248 221 208 200 190 180 172 164 B6. Combination of B1-B5 215 226 230 219 201 195 193 189 184 181 177 C. Tailored Tests C1. Combined contingent liabilities 215 256 255 244 225 219 217 214 209 207 204 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 215 231 231 222 206 201 200 196 192 190 187 Debt Service-to-Revenue Ratio Baseline 26 29 26 27 25 28 26 30 31 32 30 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 26 29 26 28 28 33 32 37 39 42 41 A2. Alternative Scenario :[Customize, enter title] 26 28 23 24 20 21 21 25 26 26 25 B. Bound Tests B1. Real GDP growth 26 30 28 29 27 32 31 36 37 39 39 B2. Primary balance 26 29 27 27 25 29 28 31 31 33 31 B3. Exports 26 29 27 27 25 29 27 31 32 33 32 B4. Other flows 3/ 26 29 27 28 25 29 27 31 32 34 32 B5. Depreciation 26 30 31 30 27 32 29 33 33 34 32 B6. Combination of B1-B5 26 28 27 27 25 28 26 30 30 31 30 C. Tailored Tests C1. Combined contingent liabilities 26 29 29 28 26 33 32 32 32 34 33 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 26 29 27 28 26 32 32 35 31 30 28 Sources: Senegal authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 10 Figure 3. Senegal: Driver of Debt Dynamics—Baseline Scenario, 2014-29 External debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 50 80 Residual 30 Previous DSA proj. 40 70 DSA-2015 25 Interquartile 30 range (25-75) Price and 60 exchange rate 20 20 50 15 Real GDP 10 growth Change in PPG 40 10 debt 3/ 0 30 Nominal 5 interest rate -10 20 0 -20 Median Current 10 account + FDI -30 -5 0 -40 -10 Contri bution of Change in unexpected Di s tribution across LICs 2/ 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 PPG debt 3/ 5-year 5-year cha nges historical projected -15 change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) 50 Current DSA Residual Previous DSA proj. 25 DSA-2015 40 Interquartile 80 Other debt range (25-75) creating flows 20 30 70 60 Real Exchange 20 15 rate depreciation 50 10 Real GDP 10 Change in debt 40 growth 0 30 5 Real interest rate -10 20 0 10 Primary deficit -20 Median 0 -5 -30 Distribution across LICs 2/ 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Change in debt 5-year 5-year Contribution of unexpected historical projected -10 changes change change 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 11 Figure 4. Senegal: Realism Tools, 2013-24 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 9 0 14 Distribution 1/ 8 12 Projected 3-yr adjustment 7 3-year PB adjustment greater than 2.5 In percentage points of GDP percentage points of GDP in approx. top 6 10 quartile In percent 5 8 -1 4 6 3 2 4 1 2 0 -2 2013 2014 2015 2016 2017 2018 2019 2020 0 Baseline Multiplier = 0.2 Multiplier = 0.4 More -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is GDP growth paths under different fiscal multipliers (left-hand side scale). found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (% of GDP) (percent, 5-year average) 66 10 64 62 60 9 58 56 54 8 52 50 48 46 7 44 42 40 6 38 36 34 5 32 30 28 4 26 24 22 20 3 18 16 14 2 12 10 8 1 6 4 2 0 0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Gov. Invest. - Prev. DSA Gov. Invest. - Current DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Current DSA Contribution of government capital 12 Figure 5. Senegal: Market-Financing Risk Indicators, 2019-29 GFN 1/ EMBI 2/ Benchmarks 14 570 Values 12 470 Breach of benchmark No No Potential heightened liquidity needs Low 1/ Maximum gross financing needs (GFN) over 3-year baseline projection horizon. 2/ EMBI spreads correspond to the latest available data. PV of debt-to GDP ratio PV of debt-to-exports ratio 60 300 50 250 40 200 30 150 20 100 10 50 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Debt service-to-exports ratio Debt service-to-revenue ratio 30 25 25 20 20 15 15 10 10 5 5 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Baseline Market financing Threshold Sources: Senegal authorities; and staff estimates and projections. 13 Figure 6. Senegal: Qualification of the Moderate Category, 2019-291 PV of debt-to GDP ratio PV of debt-to-exports ratio 60 300 50 250 40 200 30 150 20 100 10 50 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Debt service-to-exports ratio Debt service-to-revenue ratio 30 25 25 20 20 15 15 10 10 5 5 0 0 2019 2021 2023 2025 2027 2029 2019 2021 2023 2025 2027 2029 Threshold Baseline Limited space Some space Substantial space Sources: Senegal authorities; and staff estimates and projections. 1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. 14