Co ~RESTRICTEDFILE CoRy Report No. AF-73a

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

CURRENT ECONOMIC POSITION

AND PROSPECTS

OF

SENEGAL

February 29, 1968

Africa Department

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This report was prepared by a mission which visited

Senegal in November 1967 and was composed of:

Paolo Leon

Heinz Bachmann

TABLE OF CONTENTS

Page No.

BASIC DATA

MAPS

SUMMARY AND CONCLUSIONS 0000000000eooe000ooe0e000 i

Is GENERAL . 1

The Country and the People ........ 1Political Situation *.o.o...ooeece .ovo..oooee 1Social Conditionse. " ¢ooo0.eoo0 e0 oe oe 2Employment, Wages and Salaries 4o ecoovea 2Recent Economic Growth ec.oooo.00oo0ooeOOO 3Balance of Payments Ooeoooo5ooooooosooeoo S

IIo PRINICIPAL ECONCMIC ACTIVITIES o.o.o..oooooo.oO 7

Agriculture ooo. oooocoe.oooooooe.oooo 7Livestock *60000O000C0C*0000-0- d00O - 14Fisheries oo0 - o0ooooooooo o0ooooo eo 14Mining ooooooooo000eoooooooooooooooo0o 15Manufacturing oo.ooooooo ooooo -oooooooo 16Construction 000000000000000 00000000o0000000 19Prospects for Industry Loooooooooooo 19Tourism ooooooooooooooroooooooo0eooooooo0 20Transport,-Power-and-Water ooo*ooaecoooccooOo 20Education o 21

IIIe MONEY AND BANKING oooo.oo. oooeoooooeooecoooo 22

IVe PUBLIC FINANCE .... 00.0a... 00000000000000000 25

Current Government Revenue 0o.ooG ooo 25Current Government Expenditures O OO 0oe*°° 27Public Enterprises e0000 000000 oooo0e0o0oo0 29Cver-all Financial Situation-and

the Treasury s*ooooeeco*0 o0oooc00 0oe0*o0 30Development Plan 1965/66-1968/69 000000o00c00 32

Vs PROSPECTS 000 000000000000000000 000000 co 38

VI. PERFORMANCE AND CREDITWORTHINESS ............. Li

AI*EX I - iIedium-Term .arlset Prospects for WorldPrioes of Groundnuts

ANNEX II - Groundnut Prices and Treasury SupportANNEX III - Prospective Industrial ProjectsANNEX IV - Najor Projects Included in the Revised

1965/66-1968/69 Development Plan

ANNEX V - Projections: 1968-1972

STATISTICAL APPENDIX Tables 1-33

BASIC DATA

Area: 76,100 square miles, 197,200 square kilometers

Population (1966):

Total 3,568,000of which 47,000 non-African

Density 47 per square mileRate of growth 2.4% per annumSchool attendance 34% (1964)

Political status: Independent since 1960

Gross domestic product (market prices):

1959 1964 1965 1966preliminary

(billion CFA francs 148.6 181.9 186.0 196.14at current prices (

(million US $ 601.8 736.9 753.7 794.6

Rate of growth (% p.a.) / 4.2 _ /

(CFA francs 41,915 45,776 45,607 47,261per head (

(us $ 169.8 185.4 184.8 191.5

Rate of growth (% p.a.) / 1.8 /

Possible price rise (% p.a.) / 2.0 - 3.0 /

Structure of GDP at market prices (1965):

Origin % Uses %

Agriculture 27.9 Private consumption 74.8Energy and mining 2.1 Public consumption 15.5Manufacturing 11.5 Gross domestic investments 11.8Construction 3.0 Net balance of foreignTransport 3.8 trade and services -2.1Commerce 29.8Other services 6.5Government 15.4

Total 100.0 Total 100.0

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Financing of gross domestic investment(in billion CFA francs)

1961 196L4 1965 1966

Gross fixed capital formation 15.5 21.5 21.9 18.8Gross national savings 14.8 15.0 11.7 15.7Not capit&l inflow and changes

in foreign assets 0.7 6.5 10.2 3.1

Gross domestic savings 19.7 21.2 18.0 22.4

Central Government Budget(in billion CFA francs) 1962/63 1965/66 1966/67

Total current revenues 34.6 35.8 35.4Total current expenditures 29.9 33.0 33.3Surplus of the current budget 4,7 208 2.1Budgeted development expenditures2/ 5.5 2.9 4.8Total deficit 0.70 O.1 2.7financed from:foreign sources 0.7 0.2 0.2local sources 2/ 0.1 -0.1 2.5

Estimated gross disbursements of foreig assistance(in billion CFA francs)

1964 1965 1966

France 8.2 7.0 6.3EEC (FED) 1.2 2.7 2.9U.S . 1.2 0.1 ) 11Others 1.1 O,8 )

Total 11.7 10.6 10.3

Money and Credit

Relationship to large monetary area: Member of the West African MonetaryUnion (UMOA) and of the Frasc -area.

Money supply (end of period, 1962 1964 1965 1966billion CFA francs)

Total money supply 34.9 29.5 28.8 26.8Credit to the private sector 33.8 34.6 34.3 30.5Credit to the Government -10.8 -8.9 -6.6 -8.8

1/ Excluding all development expenditures entirely financed by foreign aide.

2/ Changes in Treasury balances (-= increase) due to budgetary operations.

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3aslsnce of Payments(in billion CFA francs) 1961 1964 1965 rli9i6

Prelimi.nar.r

Imports 43.5 45.6 44.6 42.9Exports 39.3 38.3 38.5 44.5

Trade Balance -4.2 :777 --b 1.6Net services 8.4 7.0 2.2 2.0Net factor income payments -1.5 -2.3 -2.2 -2.3Private transfers -3.4 -3.9 -4.1 -4.4Public transfers 5.0 6.1 5.2 5.6Current Account Balance 3 7 2e5

External Trade

Relationship to large customs area: Member of the West African Customs UnionAssociate Member of the EEC

1964 1965 1966

Exports of goods and services: % of GDP 23i0 22.6 24.6Rate of growth (%) +9.4 +0.4 +14.8

Imports of goods and services: % of GDP 28.4 27.1 25.6Rate of growth (%) +1.0 -3.1 -3.8

Concentration of exports (%)Groundnuts and groundntut products 66.5 67.5 68.5

International Reserves As of December 31(External assets imputed withinthe West African Monetary Union 1964 1965 1966

Total value (US $ million) 33.2 23.2 32.5Months' imports of goods 2.2 1.5 2.2

IMF Position (US $ million) 1964 1965 1966

Quota 25.0 25.0 25.0Drawings - - -

External Public Debt (end of year) 1964 1966

Total debt outstanding, includingundisbursed (US $ million) 67.8 79.2

World Bank Group Operations

A. Past operations (US $ million, December 31, 1967)

Amount committed Amount disbursedIBRD 4.0 0.44IDA 9.0 1.18

B. Terms of IBRD/IDA Operations Weighted AverageRate of Interest . Grace Periods '*Rep yet PeriQds

(p.a.) (years) (years)September 1966-

May 1967 2.4% 7.8 31.6

SENEGAL

3',VLiC; '' "''"' jl , 4. RAINFALL'; i z ~~~~~~~~AND CULTIVATION

j~~~~~~~~~~. . . .. PE CE TA E OF MCU *LTIAT D L AND0

F9~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'DM KARCH 19 0 -D 1721

MARCH 1966 N IBRD-1721~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 0

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Dog"Mt't- J~~ ccanc." ~- \ ADMINISTRATION

J F .'t \ AND POPULATIONInternational boundaries

S ] {> ! 1vt1 Lou. Regeio.nal boundaries

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PO P U L A T I O N O E N SI Y I P O P U L A T I ONOT O W N S

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ogo NXs 4 <+TRANSPORT

Existing paved roads

. . S c . .- - - Earth roads under construction

\ \ s z l--t z | Railway

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M o M TanoffDakar- airport

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JANUARY: 1968 ni -sOR8L

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JANUAY 196 P OR T UG U S E U IN E Ai °;e G UI N A x - _ _ -

SENEGAL MAIN AGRICULTURAL CROPS\%\.Millet .

Groundnuts

X Rice

Cattle 0 50 100 150 200

59 Phosphate min < Miles

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February 1968 IBRD 2213R

SUMMARY AND CONCLUSIONS

1. In recent years, Senegal has experienced a slow growth in outputand income; on a per capita basis, real incomes may even have declined byas much as 1 percent per annum. Agriculture has grown at a satisfactorypace, although its major product--groundnuts--has been saddled by widecyclical fluctuations. This crop--exported both as shelled nuts and asoil--is the mainstay of the economy, providing about 69 percent of totalexports and over 17 percent, including processing, of gross domesticproduct. Manufacturing has suffered considerably from the break of theold French West Africa and the resultant loss of export markets; industryis also saddled with a high cost structure, which has prevented exports tocountries other than those in the West African Monetary Union.

2. Investment activity by the private sector has picked up speed in1966 and 1967, with new ventures in infrastructure and industry. Its slackin previous years was partly offset by larger Government capital outlays,which have avoided a more severe depression, and which were partly financedby,a reduction in Treasury balances.

3. The major economic problem of the country is a high price level,which has prevented the diversification of output and exports in the past.This overpricing also caused the Government to increase duties and importtaxes, and this may have aggravated the profit squeeze on potential exportsectors. Recently, Senegal has lost its preferential price for groundnutexports in France, and the 1967/68 crop will be sold at world market pricesconsiderably below (20 percent) the preferential price. The Government,which was aware of this pricing shift, had in previous years acted by progrEm-Itending to increase farmers' productivity and output, thereby attempting toshield total farm incomes from the price declines. The export tax on ground-nuts was reduced, and marketing and processing costs have been lowered.A limited price stabilization program was also set up by the EEC to softenthe impact of the shift. The world price, however, has declined to a largerextent then envisaged by either the Government or the EEC. As a result,producer prices were reduced by about 13 percent for the 1967/68 crop.

4. Since independence, current government expenditures have beenkept very loyX Important rises in the rates of taxes resultedin a considerable increasa in current revenues up to 1965, but since thenlow imports, smuggling and the reduction of duties vis-a-vis EEC countrieshave had a negative effect on import tax revenues and budgetary surpluseshave declined. The public sector is managed by a competent administration,sustained by large numbers of foreign experts and administrators. A sub-stantial skill gap exists, however, in middle level positions. Capital expendi-tures suffered in 1965/66 and 1966/67 both from the lack of projects ready fcrimplementation and from the lack of local sources of finance. They are ex-pected to increase very considerably during the current and next fiscal year,although less than the planned amount. The current development plan is awell balanced program and, with the exception of a large water supply

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project, its priorities appear, by and large, correct. Senegal is receivingsubstantial amounts in foreign aid mainly from France--which, inter alia,pays for the cost of technical assistance personnel--from the EEC--whichhas been helping Senegal's groundnut sector with both price support andinvestment aid--and to a much smaller extent, froin tae United States, Germany,and Canada. Il e ITorld Bank Group and UK agencies are active in the country.

5. For the remaining two years of the development plan (1967/68 -1968/69), although large amounts of foreign aid are expected, the Govern-ment is unlikely to be able to finance all the development expenditures itcould carry out. For one thing, current budgetary surpluses will remainsmall, because it is in practice impossible to raise tax rates withoutfurther impairing the competitiveness of Senegalese export productions.The Government will probably continue to be successful in its sustainedefforts to avoid increases in current expenditure, keeping their rise inthe future at the same slow rate as in the past. The financial positionof statutory bodies and municipalities is being improved, and it isreasonable to suppose that they will not need to draw on Treasury reservesin the foreseeable future. A large financial gap and a drastic cut in de-velopment expenditures would become necessary, if additional local sourcesof finance were not tapped. Treasury reserves are, at present, substantialand it should be possible for the Government to utilize part of them forinvestment financing. However, the Government has not yet decided to do so.

6. The future of groundnut prices has a bearing on Treasury balances:if world prices remain at approximately present levels, and if producerprices and/or other marketing charges are not reduced, the Treasury willreceive less than what it used to receive in the past. As world pricesare in fact expected to remain at present low levels, the Government willhave to reduce producer prices and/or other charges if it wants to avoida drop in its revenue from groundnuts; the needed reduction, if carried outgradually, should not affect the farmers' incentive to utilize modernimplements and production inputs.

7. The short and long term picture is dorAnated by the pricedecline of groundnut exports. Although the value of agricultural productionshould continue to grow at a rate of 3.5 percent per annum in the long term

it is expected to increase by only 2 percent per annum between 1966 and 1972due to adverse climatic conditions (of cyclical nature) in 1971 and 1972.This low rate is neither offset by an expected increase in the share of oilin groundnut exports, since also oil prices are expected to decline, nor bya substantial increase in the output of manufacturing. Gross domesticproduct would thus continue to increase at low rates, possibly still lowerthan the rate of population growth.

8. Senegal's debt burden is not excessive. The ratio of debt serviceto exports was, in 1966, 2 percent and to Government current revenue 2.6percent. Despite large foreign financing expected for the next two yearsand stagnant export, the debt service ratio is expected to reach only 4percent by 1972, mainly because of the "soft"l structure of foreign aid

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disbursements. Yet, the longer-run prospects for Senegal remain clouded,since output and exports are likely to continue to increase slowly or evenstagnate; and any sustained recourse to conventional finance may endangerthe country's longer run external equilibrium. Unless a readjustment incost-price relationships is effected in favor of new export products--anissue on which Senegal, as a member of a regional monetary union, has onlylimited decision-making powers--borrowing should continue to be at sub-stantially softer terms than conventional finance.

9. On grounds of poverty and performance, Senegal qualifies for newIDA credits. On grounds of creditworthiness, Senegal can be considered a"blend" country: moderate amounts of Bank lending should be feasible.

CURRENT ECONOMIC POSITION AND PROSPECTS OF SENEGAL

I. GENERAL

The Country and the People

1. Senegal covers an area of some 76,000 square miles, at the extremewest of the African continent. Four principal rivers traverse the countryfrom the East; the Senegal, which forms the frontier with Mauritania and isnavigable for 1J60 miles inland; the Saloum; the Gambia and the Casamance.In the middle and lower valley of the Gambia lies the former British colony,which forms a narrow enclave in Senegalese territory. The climate andvegetation differ widely from sub-saharan in the North, with annual rainfallof less than 15 inches, to tropical forests in the south (Casamance), withrainfall as high as 70 inches.

2. Senegal's population numbers some 3 million, growing at about 2.4percent per annum. Non-Africans--mainly from France, Lebanon and Syria--have decreased from 63,000 to 47,000 between 1961 and 1966. Emigration ofSenegalese to Europe--which had reached a maximum of 7,700 in 1962--is nowreduced to a trickle.

3. In the absence of a recent census, the characteristics of Senegal'spopulation (sex, age) remain a matter of conjecture. Calculations of regionsltotals, however, have been undertaken recently (Table 3). They show a largevariability in population density, from 1,011 persons per square kilometer inCap-Vert (dominated by the Dakar metropolitan area) to 3 persons per squarekilometer in Eastern Senegal, a region well provided with cultivable land,but cut-off from the main lines of communications. The Sin$-Saloum is themost densely populated agricultural area (33 persons/square kilometer).

4. Internal migratory movements are important. While rural populatiornhas remained almost stagnant since 1961, urban areas have grown nearly 7 per-cent per annum. Within the rural areas, further drifts are in process, withsubstantial migration towards Eastern Senegal.

Political Situation

5. The political situation has changed little since the last economicreport and Senegal is still one of the politically most stable countries in

West Africa. This is largely the result of the outstanding political leader-ship of President Senghor. The internal political situation changed in

June 1966, when the only legal opposition party (PRA--S5nigal) 1/ merged witkthe party in power (UPS) 2/ and three former opposition leaders were ap-pointed ministers. This mrove was especially important in view of the generalelections in February 1968, and it can now be assumed that only one partywill participate in these elections. Changes can be anticipated in thecomposition of the Government after the elections but no basic change ofpolicies is expected. The absance of any organized opposition has facilitate6.the handling of some political uneasiness in the spring of 1967, caused inpart by implementation of an urban renovaticn program in Dakar and. by

1/ Parti de la R4volution Africaine2/ Union -ogroessiste Sen6galaise

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some disputes between different Islamic sects. These were totally un-connected with an attempt to assassinate President Senghor in the Springof 1967 which proved to be the act of a single individual.

6. The external political situation has considerably improved.Relations with M4ali have become cordial and President Senghor has usedhis influence to facilitate the recent change in lJalits monetary policy.Relations with Guinea were normalized at the meeting of the Presidents ofthe four Senegal river basin countries I/ in Bamako in November 1967, when

it was agreed to re-establish cooperation among the four governments.Relations with France remain extremely cordial: President Senghor's planto create a community of French-speaking countries in and outside Africahas strengthened his position as one of the leaders of French-speaking Africa.

Social Conditions

7. Not unlike other countries in Africa south of the Sahara, the peopleof Senegal are divided among several tribes, each sub-divided in castes.Tribalism, however, plays a lesser role in Senegal. Common feature of alltribes is the extended family system, by which the employed town dwellerfeels obligated to host relatives coming fram the countryside or other towns

in search of work. Sample surveys, conducted to establish the size of suchfamilies, have indicated an average of 9 dependents among industrial workersand a tendency of dependents to rise in proportion of earnings. The system

encourages migraticn to the cities and at the same time tends to reduce theincentive of urban workers to earn more.

8. An employed town dweller also supports to scme extent his relativesstill living in rural areas. Despite urban remittances to the countryside,and the probability that farmers' incomes may have increased faster thanthose of urban dwellers in recent years, rural emigration has not notablydiminished. The city has not lost its attraction, especially when a youngfarmer loses next to nothing in going to town, even if he does not find

employment, since he knows he will be supported by his family there.

9. Although over 95 percent are Moslems, the Senegalese are furtherdivided religiously. A nunmber of religious sects exist, two of which groupthe majority of the population. Their leaders--marabou--are hereditaryand wield large power.

E&ployment, WIages and Salaries (Table 4)

10. In 1965, wvage and salary earners were some 120,000, about 10 percentless than in 1960. A substantial increase in employment in manufacturing wasovercompensated by a large reduction in those employed in service activitiesand in Government. The latter movement was due, apparently, to the reduction

in the French military forces since 1963, and to the progressive withdrawalof large private companies from groundnut marketing. Employment by theSenegalese government has remained roughly stationary since pre-independencetimes.

!/ Mauritania, Senegal, Mali, Guinea.

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11. Unemployment registration--in urban areas--by worlkers and employeeawho have had a previous job, has increased faster than urban population. In1966 and 1967 there seems to have been no increase in employment. On thecontrary, a number of enterprises are modernizing their plants and intro-ducing labor-saving equipment. In 1967, nearly 400 workers in manufacturingestablishments were dismissed.

12. The minimum legal wage (SMIG) has not changed since 1961, andappears to be adhered to by employers. Collective bargaining fixes wiagesand salaries for iworkers above the unskilled level and these too have notshown much of a rising trend although, as a consequence of the scarcity ofsldclled workers, they seem rather high (the annual basic wJage for foremenranges from $2,200 to over $3,000). The net take-home pay for a sample ofindustrial workers of all grades in 1964 w-ras calculated at some $1,000 a year.Such a high level is also a result of the fact that expatriates working inprivate industry may earn from 2 to 4 times the salary they would earn inFrance. There is, therefore, still a substantial spread between the earningsof a Senegalese and those of an expatriate filling the same position. Someenterprises are trying to push in-service training of Senegalese to reap thebenefits of loter pay. Progress, however, is quite slow.

Recent Economic Growth (See tables 5 - 8)

13. Although national accounts data are still rough approximations,they do provide a meaningful picture of recent growth. Since 1959, grossdomestic product has increased 4.2 percent per annum at current prices.Prices are believed to have risen between 2 and 3 percent per annum, parti-cularly in most recent years. Population has grown about 2.4 percent perannum. Thus, per capita incomes may well have declined by 1 percent perannum. In 1966, per capita GDP may be estimated at $190 at the currentofficial exchange rate.

14. The reasons for the slow growth are many. On the one hand,Senegal's independence was followed by the breakup of the former FrenchWest Africa (AOF) in individual sovereign nations, and Dakar lost its roleas administrative, commercial and industrial center of the region. The resultwas, inter alia, a loss of export markets for its industry, built on a regionalscale. Since 1963, the number of French troops has also dwindled considerabl.r,depriving Senegal of a large source of income from military expenditures.

15. On the other hand, independence itself created, for a time, un-certainties in entrepreneurs and potential investors, compounded by theGovernment's action taking the trade in groundnuts out of private handsin the context of improving the farmers' lot. These uncertainties, however,have been largely overcome since then, and the general economic climate ofthe country is now as favorable as possible to private activity.

16. Since independence, the structure of the economy has not changedsignificantly:

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Percent of GDPat market pri-es

1959 1966

Agriculture 28 29Industryhidningoonstruction 16 16Services 41 40Government 15 15

Total 100 100

The high share of industry is explained also by the groundnut processingsector, which alone represents almost one-fourth of total manufacturingoutput.

17. The structure of the expenditure account has also not shown anymajor changes:

Percent of GDP1961 1966

Consumption 88 89Investment 10 10Net exports 2 1

Total 100 100

Gross domestic savings 12 11

18. The period of uncertainty and the post-independence readjustments,however, have had an effect on investment. A slack in private sectoractivity between 1959 and 1962 was largely offset by increasing publicsector investment:

Percent of Gross Capital Formation

1959 1962 1965

Private sector 57 45 55Public sector 43 55 45

Total 100 100 100

19. Senegal is an open economy. Endowed with a convertible currencyand with a regional banking system, it is fully open -to private capitalmovements. This is shown by the large outflows of private incomes--mostlyof Europeans residing in the country--as well as of private capital, bothapparently based on the strong preference to keep liquid funds abroad.Inflows of private capital, linked with new investment opportunities, havealso taken place, but these are less regular than outflows, since theydepend on individual opportunities which, in turn, have been few and

irregular. Inflows of public capital--both for investment and for current

purposes such as technical assistance--have largely offset the outflows

and have been an important factor for Senegal's growth, by providing scarco

skills as well as finance for public projects.

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Balance of Payments (Tables 9 - 12)

20. Trade. Senegal does not yet have satisfactory balance of paymentsstatistics and only estimates--in some cases very rough--can be given.There exist statistical problems even for trade (see Tables 10-11). Theweight of external trade in the economy has shown a significant change:

Percent of GDP

1961 1963 1966

ierchandise exports 25 20 23Yerchandise imports 27 25 22

21. Export have follouwed closely the results of groundnut harvests.The high level of 1966 is attributable to the record crop of 1965-66. Thefall between 1961 and 1963 is also partly due to a decline in exports tothe member countries of the 'Test 4fric8r ciustons Union. which apranrsto have continued2 total exports- to these ciWgtries- cap be estimatedat some CFA francs 6 billion in 1966, as against some CFA francs 19 billionin 1959 (Table 10). Groundnuts and groundnut products remain the largestsingle component of exports (Table 12). France is the biggest buyer (61%of exports) and her share has remained roughly constant since 1961; howeveiron the occasion of particularly large groundnut crops, France's share hasdeclined in favor of other European countries (Portugal, Italy), which buySenegal's groundnuts sold on the world market. Exports of calcium phosphatealso rose substantially until 1965, with the opening of a new mine. Otherexports--mainly raw materials and manufactures--remain smal and have notshown significant changes.

22. Imports have reached a peak in 1964 and have declined since.Consumer goods, both agricultural and industrial, were mainly responsiblefor this cycle. Food, in particular, rose by over CFA francs 1 billionbetween 1961 and 1964, declining by about the same amount in 1966. Thisfluctuation is most likely due to food crop changes in Senegal, but higherimport taxes on consumer goods, including prepared foods, were also re-sponsible for the decline since 1964. It is also likely that the with-drawal of the large trading finns from inland commerce since 1963 hasadversely affected the availability of imported goods. Higher taxes alsoappear to have been the cause of the reduction in industrial consumergoods. Capital and intermediate goods imports have not changed signifi-cantly in the last few years, while raw materials have increased consider-ably. The latter is a result of the rise of industrial activity experiencedin 1965 and 1966.

23. Although France supplies the bulk of imports, its share in thetotal has decreased substantially (from about 59 percent in 1961 to 47 per-cent in 1966), a result of the liberalization of trade with other EECcountries, and the increased trade by Senegal (and Mali) with Easterncountries.

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24. Trade Policies. As a member of the West African Customs Union(UDOA) 1/ and an associated member of the EEC, Senegal participates in twopreferential zones. Total import charges (customs duties, fiscal duties,etc.) on trade between UDOA members are reduced to 50 percent of totalimport charges levied on imports from the most favored nation outside UDOA,This preference seems to be quite substantial, but its impact on inter-uniontrade has remained small and trade between the UDOA member countries hasstagnated or even declined since 1960. A major cause has been the diffi-culties in coordinating industrial policies and new investments in manu-facturing within the customs union so that an increasing number of sinilarentaxprises were est-blished in the different member countries. Vis-a-vis theEEC, Senegal enjoys the same customs privileges as the EEC countries doamong themselves; thus, customs duties on imports from and exports to Senegalhave been gradually abolished and will completely disappear by the middle of1968, although Senegal retains the right to levy customs duties to safeguardlocal productions. The Common Tariff does not impose customs duties on andtherefore gives no preference to Senegal's shelled groundnuts, but imposes aduty of 15 percent on groundnut oil produced outside the EAMA, 2/ therebygiving a preference in the same amount to these countries.

25. Senegal has concluded about a dozen bilateral trade agreements,mainly with other African countries and some eastern European governments,but none of them has become important. The highly discriminatory treatment.of imports from Japan, which are subject to import taxes three times thenormal tariff, is primarily in the interest of the EECcountries; it preventsSenegal from tapping a relatively cheap source of supplies.

26. Services and Capital Account. Most of the other elements in thebalance of payments (Table 9) have been estimated on very flimsy evidence.Transport includes mainly services rendered by Senegal to Mali, through therailway and the port of Dakar, and to ships stopping at the port. Servicesrendered to Mauritania are not included. Travel, a large negative item,includes both air and shipping fares paid by Senegal residents and residents,expenditures abroad, the latter a large amount due to the mobility of theexpatriate element of the population. Tourist and businessmen expendituresin Senegal are not substantial. Government services include the value oftechnical assistance services provided to Senegal and expenditures by Frenchmilitary forces in Senegal; the latter have been declining in recent years.

27. Private transfers abroad are again a large negative item andinclude all incomes of expatriates residing in Senegal which are eithersent or kept abroad. The estimate is probably conservative as it is basedon the observed behavior of expatriates in 1959. Since then, the propensityto keep funds abroad may well have increased with the rise in the cost ofliving in Senegal--particularly for expatriates. Migrants' remittances arealso a rough guess. Their trend--stagnation after 1963--is based on theobserved stagnation in the number of Senegalese residing abroad.

1/ Union Douaniere Ouest-Africaine; the members are: Mauritania, Senegal,Mali, Ivory Coast, Upper Volta, Niger and Dahomey.

2/ Etats Africaines et Malgache 1.ssoci6s.

-7-

28. External public assistance (Table 13) is partly estimated, due tothe difficulties in reckoning, in money terms, all the aspects of the as-sistance given by France to Senegal. It includes the full value of techni-cal assistance, irrespective of whether funds were spent in France or inSenegal, estimated at over CFA francs 5 billion a year. This is the figureused in the balance of payments.

29. Factor income payments are estimated by assuming that the profitsmade in industry--almost entirely in foreign hands--are all transferredabroad, In principle, a part of these earnings should appear again ascapital inflow, since reinvestments are known to have occurred. However,the residual element in the capital account of the balance of payments--after public capital inflow and changes in external assets--shows a sizableoutflow. This can be partly laid down to unrecorded trade movements andprivate transfers; however, it could include also substantial capital re-patriations. This outflow must be ascribed primarily to the preference byhouseholds and enterprises to keep abroad both liquid funds and savings--including company reserves, depreciation funds, etc.

II. PRITCIPAL ECONOMIC ACTIVITIES

Agriculture (Tables 15 - 18)

30. Senegal is a predominantly agricultural country. Over 70% of theactive male population are engaged in agriculture, almost entirely as smallfarmers, cultivating 3-6 hectares of communal land with the help of theirfamilies, or practicing pastoral nomadism. During colonial times, twoattempts to create big-scale agricultural projects, one in groundnuts,the other in rice, based on intensive mechanization and hired labor, failed.Value added in agriculture and livestock accounts for about hO percent oftotal GDP at factor costs, a share which has hardly chtnged over the pasteight years.

31. The climatic conditions are such that, for all of Senegal exceptthe deepest south (Casamance), agricultural possibilities are restricted toa small number of different crops. The main part of the country receivesless than 40 inches 1/ of rain per year, spread over a period of 3½-h months,so that only plants with a short vegetative cycle can be grown. Tradition-ally, agriculture was based on millet and livestock and, to a much smallerextent, cassava and some local cotton. In the early years of Europeanpenetration, groundnuts were introduced in Senegal.

32. Of the total agricultural production (excluding fishing) averagingaround CFA francs 43 billion during the period 1962-1966, livestock accountedfor slightly over 10 percent, forestry for around 1 percent and agricultureproper for almost 90 percent. The production of groundnuts alone--the onlyimportant export crop--accounts for almost half of total output. By com-parison, export crops in Dahomey represent only 15 percent of agricultural

1/ 1,000 nvm.

production and even in the highly export-oriented agricultural economy ofthe Ivory Coast, they account for no more than 40 percent of output. Thestrong concentration on groundnuts is due largely to the fact that naturalconditions are favorable to this crop. Outside Casamance, groundnuts wereclearly more remunerative than other crops and livestock, particularlyduring the period when France guaranteed a high and stable preferentialprice. Cotton is the only other product that can be grown in significantquantities and that may become as profitable as groundnuts. In the past,

however, cotton was considered too difficult a crop for the Senegalesefarmers and was accordingly neglected.

33. During the eight years from 1959 to 1966, agricultural productionincreased on the average by about 4 percent per annum, largely due to anextension of the cultivated area. Yields have increased very slowly and

generally remain low as the bulk of the farmers still use traditionalmethods of production. Groundnut production has risen by only about 3 per-cent per annum whereas the production of millet, rice, vegetables and live-stock has grown considerably faster, but is still inadequate to cover localdemand.

34. For the near future, the rate of growth in agriculture may declin.esomewhat. Groundnut yields can be expected to increase considerably, butthe cropped area is likely to rise at a lower rate and export prices iwillfall, so that the total value of groundnut exports is unlikely to increaseby more than 1 percent per annum. Although the combined production ofcotton, sugarcane, rice and the traditional crops can be expected to rise

by almost 6 percent per annum, the value of agricultural production willprobably grow--on a trend basis--by a little over 3 5a. However, between

1966 and 1972, the value of total agricultural production will increase,on the average, by less than 2 percent per annum, due to likely adverseclimatic conditions (of cyclical nature) in 1971 and 1972.

35. The part-cular conditions of soil and climate found in thesavannah of Senegal are eminently suited to the production of groundnuts.Originally concentrated in the regions east and north of Dakar, the culti-vation of this crop has expanded, over the last 15 years, more and more

into the even better-suited southeast, as increasing population pressurein the old groundnut regions resulted in a growing shortage of suitableagricultural land and a reduction of fallow below the optimum level.The continuous emigration of groundnut farmers out of the highly-populatedcenter of the country has been facilitated by the Government through the

extension of the road network and the provision of water. As a resultsthe cropped area has increased from around 650-700,000 hectares in 1947-1955to over 1,000,000 hectares in 1966 and 1967. Yields, however, have remaineqi

low since the cultivation methods have largely remained traditional. Theuse of fertilizer was unknown until very recently and animal traction isstill at an infant stage, although draft animals are available. Overall

production has increased in line with total area from around 450-600thousand tons during 1947-1955 to 950-1,150 thousand tons in 1963-1966.

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36. On the marketing side, the GovernwJnt has intervened sinceindependence by concentrating groundnut sales for export and for localprocessing in the hands of a public corporation and by creating agri-cultural cooperatives which would sell their crops directly to thispublic corporation, thus replacing private traders. Since the establish-ment of cooperatives has taken a considerable time, the private tradershave been only gradually replaced. On the production side, however,effective public intervention started only in 1964 when the Governmententrusted SATEC 1/ to implement a program of agricultural extension workin the main groundnut regions, aimed at increasing average groundnutyields by 25 percent within 5-6 years. SATBC started its operaticns onabout 150,000 hectares in 1964 and reached the foreseen maximum of 724,000hectares in 1966. The latter total comprises roughly two-thirds of thetotal groundnut area of Senegal and produces 85 percent of the total crop.

37. Side by side with SATEC, which provides farmers with technicaladvice, focussing, among other things, on the use of fertilizer and improvedseed, and on the introduction of animal traction and implements for plowingand weeding, three Senegalese public institutions are concerned with ground-nuts. ONCAD 2/ is responsible for providing technical advice to farmercooperatives and supplies the cooperatives with the groundnut seeds, agri-cultural equipment and fertilizer. Starting with the current crop year(1967/68), it is also partly responsible for the internal marketing byacting as an intermediary between the cooperatives and OCAS, 3/ the publiccorporation responsible for the external marketing of groundnuts and thesupplying of the local oil mills. BNDS, h/ the public development bank,is responsible for the short and medium-term financing of the purchase offertilizer and agricultural machinery by the farmers and, together withcommercial banks, for the short-term financing of the groundnut crop.For this purpose, it extends credits to the cooperatives as well as to OCAS.

38. The use of fertilizer in the production of groundnuts is supportedby a FED-financed program subsidizing fertilizer by about 30 percent of itsmarket value. In 1965, the demand for fertilizer was below expectation, butincreased in 1966 from 26,000 to 39,000 tons, with total subsidies increasingfrom CFA francs 200 million to CFA francs 300 million. After the second FEDends in the spring of 1969, the Government will have to take over thefinancing of this program.

39. On the basis of past trends in the cropped area and the probableincrease in yields in farm areas included in the SATEC program, it has beenestimated that the growth in the volume of production may in the future

1/ Soci&t& dtAssistance Technique et de Coop6r:tion, a semi-public French,non-profit organization, specialized in agricultural planning andextension work.

2/ Office National de Coop6eration et d'Assistance au Developpement.5/ Office de Commercialisation Agricole du Skn6gal.17/ Banque National de D6veloppc-e-nt du S6n6gal.

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reach almost 5 percent per year. However, since the past groundnut cycles ;Isuggest that 1970/71 and probably also 1971/72 may well be bad crop years'the increase in groundnut production between 1966/67 and 1971/72 may onlyaverage 2.5% per annum.

EXPORT PRICES AND PRODUCER PRICES FOR GROUNDNUTS

(CFA francs per kg., shelled basis 2/)~~~ ~1969/70

Up to 1967/68- & there-1963/64 1964/65 1965/66 1966/67 1968/69 after

French guaranteedprice 52.5 49.5 48.5 48.5 - _

World market price ** 39.0 40.3EEC price sipport - 3-0 1.0 o.5 .9

Senegalese exportprice (c.i.f.) 52.5 52.5 49.5 49.O 41.9 .40__

Governmentrevenue 8.6. 8.6 6.7 6.2 4.1 4

Marketing, processingcharges 14.1 14.1 13.0 13.0 11.7 ) 36.2

Producer price 29.8 29.8 29.8 29.8 26.1 )Producer price un-

shelled 2/ (20.9) (20.9) (20.9) (20.9 ) (18.3)

40. Producer's prices are fixed by the Government at the beginning ofeach harvest. Based on prices guaranteed by France, Senegal was able until1966/67 to export the bulk of its groundnuts (processed and unprocessed) atprices considerably above world market prices and to pay relatively highproducer prices. As a result of EEC regulations France had to graduallyreduce its guaranteed price, with the EEC covering part of the reductions;it was completely abolished by 1967. From then on, Senegal must sell itsgroundnuts at world market prices, but up to 1969 the EEC will reimburseSenegal for 80 percent of the price difference should the world market Dricefall below OFA francs 46/kg. However, 'EC limits its price support-.to atotal amount of $13 million for all'exports of vegetable oils and fats fromall associated states into the Common Earket during the period 1967/68 -

1968/69.

41. When world market prices for shelled groundnuts fell sharply toCFA francs 39/kg. in late 1967, the amount earmarked by EEC for price support

1/ Two to three good years, followed by one to two bad years, with yields10-20 percent below average.

2/ 1 kg. of unshelled groundnuts corresponds to 0.7 kg. of shelledgroundnuts.

-Et Not relevant.

in 1967/68 became insufficient to cover 80 percent of the price difference;Senegal will thus receive, on the average, not more than CFA francs 42/kg.(c.i.f. shelled basis), EEC subsidies included. This prospect has forcedthe Government to reduce the producer price by about 13 percent to CFAfrancs 18.30/kg. (unshelled) for the year 1967/68. The Government is alsoattempting to lower handling and marketing charges.

42. The reductions in producer prices and handling costs were notsufficient to absorb the entire fall in export prices, and a reduction innet income to the Government was inevitable. At an export price of CFAfrancs 52.50/kg., the Treasury received in the past about CFA francs 8.60/kg0of shelled groundnuts, of which CFA francs 6.5 in the form of export taxesand CFA francs 2.1 as net addition to the groundnut price stabilization fund.At an export price of CFA francs 42/kg., the net revenue for the Treasurywill fall to CFA francs 4.1 with export taxes of CZA francsh,4 ]/ and a lossto the stabilization fund of CFA francs 0.3/kg. Although the increase inoverall production will compensate for part of this loss, a reduction inGovernment revenue is lilcely. It is thus to be expected that a furtherreduction in producer's prices is likely after the EEC price support willhave come to an end in the spring of 1969. Annex I discusses briefly themedium term prospects for world prices of groundnuts, while Annex IIreviews the effects of world price fluctuation on the Treasury.

43. WThile over the medium term there are reasons to believe that thelevel of world prices will require only a small additional readjustment inthe producer price, the outlook for the longer run remains very uncertain.Major fluctuation in world groundnut prices have been witnessed in the past,and there is no reason to suppose that in the future they will not occuragain. More important, the competitiveness of groundnut oil vis-a-visother vegetable oils is slowly deteriorating. On the one hand, technicalprogress in processing the seeds is likely to reduce the present costadvantage of groundnuts; on the other hand, consumers in Western Europe--Senegal's main export outlet--are likely to reduce their preference forgroundnut oil in favor of other vegetable oils, influenced in this by theimprovement in quality of the latter. Senegal's continuing dependence ongroundnuts, therefore, is likely to expose the econony to wide exportfluctuations--from which it was sheltered until 1966/67 by the French andEEC guaranteed price. Moreover, the likely deterioration of the com-petitiveness of groundnuts vis-a-vis other oilseeds can seriously endanger,in the long run, the growth potential of the economy. Diversification,thus, has become imperative and the Government's growth strategy emphasizesit. The objective of the present plans in raising yields is designed topartly offset the impact of the shift to world marketing of groundnuts andto provide a breathing spell, over the medium term, while preparations fordeveloping alternative export crops are undertaken. But the Governmentdoes not intend to expand indefinitely production of groundnuts. Thisstrategy appears sound.

44. Millet is the most important staple food in Senegal, accountingfor 15-20 percent of the total value of agricultural production. The area

1/ At a reduced rate, introduced in January 1966.

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planted has considerably increased since 1960 and approximates that plantedto groundnuts, since millet is the farmers' staple food and is grown inrotation with groundnuts. Millet is grown also in the north which is toodry for groundnuts. Until very recently yields were generally low and hadremained stagnant for a long time; total production, although increasingfast had been insufficient to cover entirely the local demand. Whereaslocal production has increased from 400,000 tons in 1961 to over 550,000 tonsin 1965, imports have risen from 14 to 30,000 tons. The agricultural ex-tension program started by SATEC in the groundnut areas relates also tomillet, and since millet responds to the input of fertilizer better thangroundnuts, the increase in millet yields is likely to exceed the goal of25 percent foreseen for groundnuts. Thus, in the medium and long run,millet production might exceed the local demand for human consumption andmight serve as a basis for future livestock development. Up to the middle1970ts, however, the increasing local demand is likely to absorb totalproduction.

45. Rice is a traditional foodcrop in Casamance where it is cultivatedeither in the form of swamp rice in the mangroves or as upland rice. Mostof the production, however, is not marketed so that the increasing demandfor rice in the rest of the country had to be covered mainly through imports.fluctuating around 170,000 tons9 or two-thirds of total local consumption.An attempt to produce rice with highly mechanized techniques in the Senegalriver valley (Richard Toll) was started in 19ht9, but the venture has neverbeen profitable. Part of the land is now likely to be diverted to sugarcane,A new attempt to cultivate rice in the delta of the Senegal river was startedin 1964 with FAC financirg. The project will provide a partially controlledwater supply for some 30,000 hectares of rice which small independent farmersare expected to cultivate partly writh the help of mechanized equipment.When fully developed, the area is expected to produce about 60,000 tons ofpaddy per year. As a first step, a 50-mile long earth dam was built alongthe Senegal river both to protect the land from sea water flooding in thedry season, and to permit irrigation with fresh watsr in the rainy season.Management difficulties, however, hampered rapid progress, and SATEC wasappointed to provide technical assistance to SAED, 1/ the public enterprisein charge of the project. By 1967, about 6,000 hectares were under culti-vation, but further extension of the area is not expected before 1970, toallow the consolidation of the past results. In Casamance, past experiencesshow that a gradual amelioration of traditional methods through intensiveextension work is the most promising way of increasing rice production.The application of fertilizer together with the introduction of improvedvarieties, can probably double average yields without basic changes intraditional methods, whereas the recent application of more sophisticatedtechniques in a FED-financed project has not given the expected results.Several rice programs will soon be started in Casamance. In addition,SATEC has been charged by the Government to prepare an overall developmentstrategy for rice cultivation in Senegal.

1/ Sociate dlAw6nagernent et d'Exploitation des Terres du Delta

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46. Rough comparisons show that, in Senegal, the production of cottonis at present almost as profitable as that of groundnuts and may become asprofitable, if groundnut prices remain at their present low level. A cottonproduction project started in 1963 in Eastern Senegal, with FAC providingthe financing and CFDT 1/ assuming the responsibility for the agriculturalextension work as well as the marketing of cotton. Areas and yields haveincreased satisfactorily and it is likely that by 1971 13,000 hectareswill be under cotton with an average yield of 1,000 kg/ha. Nevertheless,cotton production will account for not more than 1 percent of total agri-cultural output in 1972. However, should the resultsattained remain aspromising as they seem in 1967, a considerable extension of cotton pro-duction might be envisaged in the longer run, particularly for export.A cotton ginning mill, financed by FED, is presently under constructionand should be ready for operation by the end of 1968.

47. To cover part of the increasing imports of sugar (65,000 tons in1965), Senegal plans a program of sugarcane development on lands presentlypart of the unsuccessful mechanized rice scheme in Richard Toll. If presentplans are pursued, production on a commercial scale may start in 1971. Theprofitability of the project, which includes a sugar mill and a refineryto be set up by private interests, is not assured for the economy at large.Locally produced sugar will require a subsidy to be able to compete withimported sugar--and the latter bears the preferential price of the OCAAM 2/sugar agreement, which is much higher than world market prices.

48. Vegetables are produced primarily in the Niayes, a small stretchof land along the coast between Dakar and St. Louis, where a shallow watertable produces small fresh water lakes, around which a variety of vegetablesare grown. The almost coinplete lack of extension services and the badlyorganized marketing facilities have resulted in a stagnating production.Two cooperatives have had some success in exporting green beans to Europe,where the advantageous timing of the marketing (December/January) com-pensates the high f.o.b. price. On the other hand, an Italian manufacturerof tomato concentrates, recently established in Senegal, has not been ableto procure sufficient tomatoes and has had to rely entirely on imports.The existing potential can only be exploited if production and marketingare assisted and organized. A program similar to the SATEC and CFDT schemesis under study in the Ministry of Agriculture.

49. In Casamance, the potential for increasing and diversifying agri-cultural production is considerably greater than in the rest of the countrv,but actual development remains small. Research stations covering traditionalfoodstuffs like rice, millet and groundnuts, as well as a wide variety of

1/ Compagnie Frangaise pour le DFveloppe-ment des Fibres Textiles, a semi-public French non-profit company specialized in the promotion of cottonproduction.

2/ Organisation Commune Africaine et Malgache. To protect the sugar pro-duction in Madagascar and Congo (Brazzaville), the OCAM members haveagreed to buy part of their sugar needs from these two countries at apreferential price considerably higher than the world market price.

- 14 -

fruits, exist since long before independence, but little has been done upto now to transmit their findings to the farmers, who are among the mostbackward in the country. Since this region has now been linked to the restof the country through the construction of several new roads, a concentratedeffort could well be undertaken to implement some of the studies carried outrecently.

Livestock

50. According to rough estimates, the number of cattle may haveincreased by over 5 percent per annum from 1.6 million in 1959 to 2.2million in 1965, and the number of goats and sheep by over 10 percentper annum from 1 to 1.9 million. These high growth rates reflect theGovernment's efforts to eradicate the rinderpest and to increase live-stock grazing areas by drilling wells. However, the economic impact ofthe increasing livestock number has remained limited, since little hasbeen done in the past to encourage herdsmen to use their livestock moreeconomically and to improve market organization. The Government has nowbecome awzare of these problems and several projects are under way toorganize and increase the marketing of meat and milk. FED has agreed tofinance the construction of two slaughterhouses in Thies and St. Louis,which should facilitate and rationalize marketing. By the middle of 1968,the Government expects to open a ranch at Doli which will b3 capable ofaccommodating about 10,000 head of cattle to be bought from traditionalpastoralists and to be sold eventually to the principal slaughterhouses.Should this ranch prove successful, four more are planned for the 1970'sto channel the bulk of marketable catt'e through these ranches. The milktreating center in St. Louis--the construction of which is included inthe current Development Plan--should increase the marketing of milk inthat important livestock region. In addition to these projects, however,the creation of a more effective and more wqidespread livestock extensionservice is a precondition to any satisfactory integration of livestock inthe money economy. In the groundnut area, SATEC is promoting the use oflivestock for animal traction in the cultivation of groundnuts and milletand considerable improvements can be expected from their efforts. Nothingsimilar, however, exists in the main livestock areas in the interior and

the north of the country.

Fisheries

51. This is a promising sector and the Government has taken vigorousaction for its development. Fish is an important element in the diet ofcoastal Senegalese, and it is also sold--dried--in the interior. The watersoff the coast are rich in fish and, at any time, they receive as many as 300fishing vessels of 12 nationalities in the general area, catching some450,000 tons a year. A number of factories producing canned and frozentuna for exports exist' in Dakar, and smaller ventures in the productionand export of frozen shrimp have started recently.

52. The largest quantities of fish caught in Senegal come from smallboats, mostly sail "pirogues" near the coast and are sold directly cn themarket.

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The largest industrial exploitation is tuna fishing, until recently under-taken entirely by French boats, unloading their tuna in Dakar.

53. The Government has now set up a public company (SOSAP 'which has5 boats, equipped with freezing plant. By 1971, the company plans to have

19 boats. Total investment can be estimated at around CFA francs 2.9billion. Output and exports of tuna products should treble.

Mining

54. The sector contributes about 1 percent to GDP and nearly 6 per-cent to merchandise exports. Its contribution to Government revenue is

marginal. The major products are calcium phosphate, mined by the inter-nationally-owned Compagnie Sen6ga2laje dle Phosphlates de Taiba, aluminumphosphate, salt and attapulgite (used in oil drilling muds).

55. Output of calcium phosphate (see Table 19) has doubled between1962 and 1966, as a result of a large expansion program at Taiba. In 1967,output should reach 1.2 million tons (against 497,000 tons in 1962). Theoriginal plans called for a further expansion to 1.8 million tons by 1970.Due to unexpected difficulties in the mining operation, the expansion isuncertain and large additional investments wfill be needed even to maintainthe current level of output. Reserves are conservatively estimated at30 million tons. Research for new fields has been discouraging.

56. Output of aluminum phosphate has increased only marginally since1962. The mine, owned by foreign interests, seems to have reached in 1966its maximum capacity (some 200,000 tons). Reserves are limited and no new

deposits have been discovered.

57. In 1962, an industrial census showed that the mining sector as awhole was not even able to cover current costs. This was due largely to

the fact that the mining of calcium phosphate was only in its "infancy",but partly also to marketing problems encountered by the aluminum phosphatecompany on the world market and by the salt mining operation in Mali andthe Ivory Coast. A later industrial census, supplemented by data collected

for the national account, shows that the sector was able in 1966 to covercurrent costs, but not yet depreciation charges. The prospective profit-

ability of the sector hinges on the Taiba mine.

58. Petroleum research, interrupted in 1961, was resumed in 1966 with

drilling by Total, a French company. There are encouraging indications,which only further drilling in 1968 can confirm. Exploration is off-shore,in the Casamance region and near Dalar.

59. Mineral research--excluding oil prospection--is being carried outunder a UN-sponsored project and is concentrated in Eastern Senegal. The

surveyors have reported a few interesting mineralizations (molybdenum,chromite). France finances general geological studies.

1/ Soci6te Se*negalaise d'hrmament de Pe^che

- 16 -

Manufacturing (Tables 19 and 20)

60. This sector contributes at present some 12 percent of GDP. Inthe first half of the 'sixties manufacturing witnessed a serious recession:measured by the index of industrial production, manufacturing output,exclusive of oil mills, declined by 9 percent between 1961 and 1965.This was probably attributable to the withdrawal of French troops fromthe country and the breakup of the old AOF. The rupture of relationswith Mali until 1963 and, since then, Mali's continiued balance of paymentsdifficulties also contributedto the industrial recassion. Another factorhas been the slow growth of purchasing power in the cities. In fact, theproduction of textiles, consumed to a large extent in the countryside,suffered considerably less from the recession than other manufactures.These trends are confirmed by the industrial censuses of 1962 and 1966,while national accounts,probably due to statistical inaccuracies, do notreflect the extent of the past recession.

61. A strong revival of activity took place in 1966. The causes arevaried. New investments in mining, electric power, oil mills, agriculture,have spurred activity of the small but niumerous firms engaged in metaltransformation; an increase in import taxes has afforded greater protectionfor a number of locally producGd consumer goods (leather, textiles, chemical;}two good groundnut crops in succession (1964/65, 1965/66) at unchanged pro-ducer prices, have lifted incomes in the countryside substantially. Thelevel of activity was on the whole sustained during 1967, although in thesecond half of the year sales may well ha;; been affected by the year'ssmall groundnut crop.

62. The largest manufacturing branch--groundnut oil mills--has notbeen affected by these events, since it exports over 82 percent of its out-put. As a priority buyer on the groundnut market, this industry is also notsignificantly affected by fluctuations in the groundnut crop. The sectorhas been growing very satisfactorily and it does show, for Senegal conditions,a high profit. The Mission has estimated the progrees of the oil industryon the basis of available information, approximately as follows (billionCFA francs):

1962 1966 Growth rate

Total turnover 17.4 20.4 17%Value added 4.2 4.9 17%Labor costs, taxes 3.5 3.9 11%Gross profits 0.8 1.0 25%Invested capital 4.4 n0a.Gross profit in g qf

capital 17% n.a.Gross profit in % of turnover 4.6 4.9

- 17 -

63. The profitability of the oil industry probably increased in 1966as invested capital must have grown, at the most, in step with total turnov6r.The industry works at nearly full capacity and is well managed. Foreigninvestors are largely responsible for its success, mainly because of theirclose connections with major French distributors. One of the enterprises isin fact a subsidiary of a large French company. It is an indication of theprofitability of oil mills operating in Senegal that the crushing capacitycontinued to increase in the 'sixties: the proportion of the marketed croptreated at the mills rose from 53 percent in 1960-61 to 54 percent in 1965-66, even though total sales of groundnuts rose by nearly 20 percent.

64. The level of profit rates in oil mills appears higher than thatof any other branch of manufacturing. The least profitable branches appeartobe other food processing, mainly flour mills, which have been cut offfrom the export outlats of neighboring countries and have lost the marketrepresented by the French militaly establishment in Senegal. Mechanicaland electrical firms--mostly very small establishments--have shown only amodest improvement (limited to the year 1966) and it is doubtful whetherthey earn a satisfactory rate of return.

65. A differecit picture is shown by the textile industry, the secondlargest branch of the sector. Senegal has, until the present time, importedcotton in bales and has engaged in spinning, weaving, finishing and printini±vIn the near future, local cotton will be increasingly used. The industry isdominated by two large enterprises, both foreign-owned: ICOTAF (spinning andweaving), SOTIBA-SITMAFRIC (printing). Most of the output is sold in Senegal,but exports to neighboring countries (Mauritania, Mali, Niger, Ivory Coast)are also important. Sustained by an expanding local market and not yet hurt.by competition in neighboring countries, the sector is profitable. Thebranch'sprogress-can be estimated as follows (in. billion CFi. francs'):

1962 1966

Total turnover 5.1 6.7Value added 1.9 2.6Labor costs, taxes 1.6 1.8Gross profit 0.3 0.8Gross profit as % of turnover 7 12

The table includes one shoe factory (BATA) and the clothing factories, butnot the full value of handicraft activity, which is large (valued at CFAfrancs 3 million). The figures are only rough approximations, but theyshow that the increase in sales has benefitted mostly the income of capitalrather than labor. This phenomenon seems associated with a tendency towardmechanization, which appears to characterize Senegal's industry as a whole.Other instances can be found in oil mills, food processing and transpor-tation.

66. The industry producing construction materials--mainly cement,produced by a local factory, SOCOCIM--has suffered in the last two yearsfrom the reduction of building activity in Senegal and the loss of marketsin Mali and the Ivory Coast, where cheaper imports and local processing ofclinkers have been developed.

67. Policies towards industry have been generous. The Government'sincentive legislation--introduced in 1962--gives to "priority" enterprisesexemption from profit taxes for periods of 5-8 years, allows deduction fromtaxable income of reinvested earnings, reduces by 50 percent the tax rateon dividends for a 3-year period, allows drawbacks for exports and insuresenterprises benefitting from tax concessions against changes in tax ratesduring the life of the investment. Further benefits are allowed in specialcases. All enterprises expanding or investing anew can receive such benefitsprovided they invest more than CFA francs 40 million (20 million outside theCap Vert region). The Government is pledged to a mixed economy and nonationalization in industry is contemplated. However, a Government minorityparticipation is often asked by the State and agreed to by the private sector.

68. Protection. There are five major taxes on imports in Senegal:(a) customs duties, varying from 2 percent (on staple foods) to 5 Y- v -10 percent (most other commodities), to 25 - 75 percent (on a number oflocally produced commodities); (b) fiscal duties, varying according to thenature of the consumer goods on which they are applied; (c) a statisticaltax (uniform at 3 percent); (d) a tax in lieu of (or in addition to) theturnover tax at a uniform rate of 20.6 percent but increased to 30.9 percentfor a number of commodities produced domestically or for which there ex"stlocal substitutes;(e) a turnover tax at a uniform rate of 13.5 percent, butincreased to 33.3 percent for a number of durable consumer goods, not produe;3ddomestically. It should be noted that the turnover tax applicable to locallyproduced goods is only 9.9 percent. Table 14 shows the cumulative weight ofimport taxes in Senegal for a number of commodities produced locally andcompares it with the Ivory 'oast. The different import taxes seem to havebeen used also for protective purposes, with the paradoxical exception ofcustoms duties, which have been gradually eliminated vis-a-vis all EECcountries.

69. In addition to import duties and taxes, Senegal has prohibited orsubmitted to license the imports of a number of commodities produced locallysuch as: shoes, canned fish, cotton blankets, cotton yarn, sugar (in cubes),tiles, cotton fabric. The protection is enhanced, in a number of cases, byexemption from import taxes of some of the inputs (in general, capital goodsand raw materials required by the local manufacturer).

70. In general, protection against imports has developed without anyclear cut overall policy. Decisions to tax or prohibit imports in most caseshave been taken in response to the alleged needs of particular enterprises.Their cost for the economy or their implications for further industrializatioha'egenerally not been considered. "While the protective system, by and large,does not yet appear excessive, continuation of present practices of protection,without consideration of its possible adverse effects in the long run maysaddle Senegal with industries that have little prospect of becoming efficien'tand competitive.

71. With the exception of oil mills, industry is saddled with high costs,limited export markets, and an internal market whose growth depends essentiallyon the effect on incomes from the growth of groundnut output and exports.

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Vigorous export promotion is necessary to ensure the future of Senegal'sindustry. New markets--Gambia, Ghana, Nigeria, even Europe--must be opernedup, and only lower export prices can make this possible.

Construction

72. This sector has suffered recently from the decline of Government-financed housing and from the departure of French military forces. Lowincome housing is badly needed in Senegal. The Government is conscious ofthe need and realizes the importance of home construction for the localindustry. For financial reasons, however, the Government has had to curtailits support for housing and in this process is attempting to shift prioritiesfrom middle to low income housing.

Prospects for Industry

73. Industrial prospects (see also Annex III) depend to a large extent,on prospects for the groundnut oil milling branch. Oil mills have beenfavored, until the present time, by the preference they have obtained inFrance. They will benefit from the fact that the common external tariff onoils of the EEC (15 percent) does not apply to imports from Senegal and fromtheir established relations with mother companies or correspondents in Franca.But there is little doubt that the prospective profitability of oil millswill decline as a result of lower export prices. Nevertheless, according tothe local industrialists, medium-term marketing prospects seem to be satis-factory. A number of expansion projects are on the drawing board at present,and it is expected that productive capacity will rise from the present levelof 530,000 tons/year (unshalled basis) to about 8CO,000. tons by1973, when oil mills will be crushing nearly two-thirds of the crop.

74. A number of major projects are unider construction at present in therest of the sector. A plant producing complex fertilizer mainly for thedomestic market and which has been financed, inter alia, by IFC, will startproducing in 1968. An integrated cotton textile mill, with a capacity of10 million meters/year, will start production in 1969 and will furnish theraw materials for an expanded capacity (by 4 million meters) of the existingprinting factory. Some nine other smaller industrial projects are expected tostart between 1967 and 1970. They cover a variety of products, all for theinternal markets (e.g., margarine, beef canning, pots and pans). A number ofother projects are under study, including an expansion of the cement factory,if and when marketing permits, the construction of a small electric furnaceand rolling mill for production of steel, and factories producing wires, nails,and batteries. These projects are still in the concoptual stage only and itis not clear whether entrepreneurs willing to undertake them can be found. Ifall projects were carried out, new investment in the 1968-72.. period wouldtotal almost CFA francs 13 billion. If only the projects for which firm commit-ments have been made are considered, new investment in the 1968-72 periodwould total some CFA francs 9.4 billion. The mid-seventies, judging fromtoday's knowledge, are unlikely to see a corresponding investment activity inmajor projects, unless export conditions change and Senegal succeeds in im-proving its ability to compete. At present, in any case, no new major projectis under consideration by the private or public sectors.

Tourism

75. Senegal does not yet have a developed tourism industry. Thecountry has some natural advantages. Its climate permits winter swimming;it has beautiful beaches and large fishing opportunities; it is well-linkedby airlines. Yet, no serious effort has been made to attract more touristsuntil very recently. The competition by Canary Islands and Southern Moroccois also a serious drawiback. On the other hand, if prices in Senegal wereadvantageous, the additional cost of travelling from Europe to Dakar, vis-a-vis the Canary Islands, is small and could be easily absorbed.

76. Some 20,000 visitors were in Senegal in 1966, of which about one-half were businessmen and one-half tourists. This number may be optimistic,since it may include relatives visiting expatriates in Senegal. In the yearof the "Festival de la Negritude", an additional 10,000 people visited Senegal..Hotel capacity is at present limited. One beautiful beach hotel, N'Gor,built with a Government participation, is clearly suited for short-termvacationers, but is at present almost fully booked by businessmen and airlinepersonnel. A new hotel by Sheraton is under consideration.

77. The most serious obstacle to the expansion of tourism is the highcost of living. The costs differential vis-a-vis Morocco and the CanaryIslands remains important, even after taling account of the fact that theprospective clientele is of the relatively high income bracket. This mayhave been the reason for the lack of interest by foreign potential investorsand promoters.

Transport, Power and Water

78. No major changes in either sector has occurred since the lasteconomic report. Government expenditures on road construction should bebetter coordinated. No overall transport survey lies at the foundation ofcurrent investment programs, and a number of projects being carried out seemto have little economic justification (e.g., routes du di6ri). Moreover,transport coordination is still lacking; and while measures have been recentlytaken to ensure a different distribution of traffic between rail and road--to the advantage of the foraer--it would seem important, before the next plan,that a study of transport coordination be carried out. Both studies are allthe more important in view of the need to allocate carefully the limitedresources of the Government. However, at least one road construction projectwithin the Government's program--feeder roads in groundnut growing areas--seems prima facie to have sufficient high priority.

79. Recently, some difficulties have been experienced in the transportof-groundnuts. Perhaps as an unexpected effect of the withdrawal of non-African traders from groundnut marketing, the number of trucks has decreasedconsiderably, and there seems to be a lack of Senegalese transporters credits-worthy for commercial bank lending.

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80. Electric power is in the hands of a private foreign company whose

tariffs are regulated by the Government. The company has recently built a

new thermal power station (Cap des Biches, 25 million KW) which appears

sufficient to cater for the expected increase in demand until 1969/70.

Consumption of electricity has been rising rather fast in the 'sixties

(9.7 percent per annum between 1960 and 1966, with a more rapid increase

in industrial consumption).

81. Industrialists consider that charges for transport, power and

water are all high, by comparison with European countries, and negatively

affect Senegal's ability to compete with foreign producers. These charges

have indeed risen fast in recent years, because it has been necessary to

restore a measure of financial equilibrium in a number of statutory bodies

(ports, railways) and taxes on inputs have increased.

Education

82. During the First Development Plan (1961-1964), the objective of

providing primary schooling for 50 percent of school-age children was not

attained: in 1964, only some 34 percent were in schools. For the second

plan period (1965-1966 - 1968-1969), this objective was reduced to 43 per-cent by 1969, and greater emphasis was to be given to secondary, higher

and technical education, with a view to producing a greater number of

teachers and middle-level manpower, thereby raising the quality of the

teaching staff and accelerating the substitution of expatriates. In fact,

the recent revision of the Plan indicates that the target for primary

schooling will have to be further reduced to some 40 percent. There are

two reasons for this reduction:

(a) the lack of budgetary resources to meet the additionalrecurrent expenditures and

(b) the slowi pace of implementation of construction programs,due essentially to technical and administrative reasons.

Delays in implementation have also affected teacher-training projects and

secondary schools. In technical education, which has also witnessed such

delays, the Government is now reconsidering its program in terms of a 10-year

"perspective". Capital outlays on higher education have been cut, principally

for reasons of economy. Also, the Government is progressively increasing its

share of the operating cost of the University with France providing the balance.

33. The education system has a number of weakaesses. Three Ministries

are mainly responsible for education, one for general, one for technical

education and one for youth and sports. Post secondary agricultural training

is under the Ministry of Agriculture. This reduces substantially the flexi-

bility in allocating scarce teachers, and creates considerable competition for

limited funds available. Moreover, technical education is, in turn, divided

into two major branchas (technical, secondary and vocational training), and

is in small part not even dependent on the Ministry.

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84. School academic standards are probably too high in view of the factthat education has to be given in a non-mother language from the very firstgrade. In 1966/67, about 18 percent of all primary school children were re-peaters. The Government has emphasized a policy of maintaining high standards,so that Senegal pupils can be at par with French pupils and be accepted inFrench higher schools. The need for schools with a bias towards Senegal'sparticular manpower needs is felt, and the Ministry of National Education hasa number of post primary classes with an agricultural bias, directed towards

providing primary school leavers iith a background of applied kmowledge in

modern agriculture and tools.

85. No manpower analysis to support educational planning is available.Studies are, however, in progress (sponsored, respectively, by France and ILO).They will hopefully lay a good foundation for justifying and preparing the next

Plan's education projects.

86. The lack of qualified teachers will remain the major limiting factorto education expansion. At present, there are some 1,000 foreign teachers(assigned to secondarv and post secondary schools), mostly provided under the

French technical assistance program. In 1967 out of 432 teachers in general

secondary education 340 were technical assistants. France has also providedalmost the entire staff of the University of Dakar. Senegal can hardly count,

in the future, on the availability of an even larger number of foreign teachers

to supplement its owm teachers.

III. MONEY AND BANKING

87. Senegal is a member of the West African Monetary Union (UMOA),together with six other countries. The union has a common currency (CFA franc)and a common central bank (BCEAO), which is the issuing authority and keeps theunion's external reserves. The CFA franc is freely convertible into Frenchfrancs; the convertibility is achieved through an operations account of theBCEAO at the French Treasury. The system has been described in detail in anumber of IBRD economic reports and elsewhere.

88. The main recent changes in BCEAO procedures concern Government

short-term borrowing from the Central Bank; the period during which the Govern-ment of a member country can borrow has been exRtended from 240 to 365 days.The amount of borrowing--up to 10o of the fiscal revenues in the previous

year--has not been changed.

89. The structure of the banking system has remained as described in thelast economic report. Although the discount rate has not changed (at 3.5%),the rate structure was altered in 1965. The new structure narrows the spreadbetween good and marginal borrowers. However, the interest rate mechanism is

not a tool of economic or credit policy. The only tool is the rediscountingpolicy of BCEFO, based on traditional creditworthiness appraisal standards, onan individual customer basis. BCEAO centralizes information on risks.

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90. Short-term credit in Senegal is overshadowed by the financing ofgroundnut marketing and processing. It thus follows a seasonal pattern,with credit expanding in December, reaching a peak in April, falling offuntil November. As a result, credit movements are best analyzed byutilizing yearly averages (billion CFA francs):

Cradit to private sectorAnnual Averages

bhort ton, Longy =diu Lmterm

1963 26 71964 27 71965 28 81966 28 8

It appears that short term credits have remained stagnant since 1965. Theinterpretation of this phenomenon is not easy, since GNP has increased, atcurrent prices, during the same period. It is likely that such specialcircumstances as the retreat of private companies from marketing in theinterior may have been responsible for the stagnation. A reduction ofdomestic credit is likely to have occurred in 1967 due to the bad ground-nut crop.

91. It does not seem that the Central Bank has had any restraininginfluence on the volume of credit. On the contrary, between September 1963and September 1966, the volume of its rediscounts has increased from aboutCFA francs 7 billion to about CFA francs 11 billion.

92. Table 21 analyzes short term credit by main borrowing sector.It shows the relative size of groundnut marketing. Yearly changes of theother sectors cannot clearly be reconciled with changes in sectoral valueadded. A number of firms (e.g. in mining, in the textile industry) financea share of their short-term credit needs from ovm funds, and increasedearnings due to increased activity may reflect in lower borrowings.

92. Table 22 shows long and medium term credits by main borrowingsectors. A rising trend' is apparent, particularly for long-termcredits, but the volume is still very small because commercial banRs,though empowered to lend long and medium term, are reluctant to do so.The disinclination of local banks--which, except for BNDS, are all branchesof overseas institutions--to engage in activities which the head office inthe home country is forbidden to undertake, is further reinforced by therelatively low profitability of Senegalese ventures. BNDS is, in practice,the only investor in other than short term credit and is financed largelyfrom French sources (Caisse Centrale de Cooperation Economique (CCCE)).Unless CCCE expands its lending to BNDS in the future, long and mediumterm credit, outside what is foreseen in the Development Plan, will haveto rely on other commercial banks with the help of rediscount facilitiesfrom BCEAO.

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93. As the end of year figures showv, money supply has declinedcontinuously between 1962 and 1966. The two major factors responsiblefor the decline until 1965 were the reduction in foreign assets and thedecline in Government deposits (Tables 23-25), whereas the fall in 1966was due to a considerable reduction in credits to the private sector bythe end of that year.

94. In 1964, the Government launched a long-term bond issue of CFAfrancs 4 billion on the domestic market, which was placed with the privatesector, including bankLs and public savings institutions. Locally-helddemand deposits aere dratm down initially by buyers and later replenishedby funds repatriated from abroad. The liquidity of local banks would havebeen affected, but banks were able to absorb the loss of deposits byborrowing from their head offices abroad. In part, they may also haveoffset the reduction in liquidity by somewhat contracting credit. This1964 loan fully demonstrated the narrowness of the local capital marketand makes any further recourse to this method of financing very problemat-ical. However, considerable amount of local savings are accumulated inthe Treasury through the surpluses of the social security system and ofthe postal savings institutions, and are thus available for financingpublic expenditures.

95. The BCEAO acts as a commercial bank in its rediscounting activity.Although there exist overall ceilings applied to rediscounts, they arelargely ineffectual and in excess of actual credit activity. There existbanking practices fixing credit for each individual borrower depending onits financial situation, which create an implicit and much narrower ceilingto rediscount. Since credit activity is therefore strictly linlced with thefinancial situation of borravers, Central Banlc action has no anti-cyclicalemphasis. Actually, whenever private activity slackens for either seasonalor more permanent causes, the credit mechanism may even tend to increase thesize of the cycle.

96. The departure of French military forces and the reduction of exportsfollowing the breakdomm of the old AOF created poclkets of excess capacity inSenegalese industry between 1960 and 1965. The resulting deflationary forceswere to same extent, although not consciously, countered by the Government'saction in reducing its deposits with the banking system and mobilizing localsavings. It is doubtful that a more conscious and marked expansionist policydesigned to stimulate purchasing paoer and utilize excess capacity would havebeen wise. It would probably have stimulated a fluther rise in thealready excessively high price level and contributed more to the demand forimports than for domestic products.

97. Prices. Price indices available in Senegal are not very repre-sentative. A consumer price index (based on the consumption basket of a1945 European family in Dakar) shows an annual average increase of 3 percentduring the period 1959-66 and of 2.9 percent for the period 1963-66.

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Another consumer price index (based on the consumption basket of a 1960-61African urban family) shows an increase of less than 5 percent per annumfor the period 1960/61 - 1966, with the fastest rise in the years 1965and 1966. Both indices indicate that price rises in the 'sixties have notbeen large or extraordinary.

98. Ever since the late 'forties, the general price level in Senegaland other franc area countries in Africa, has been high by comparison withEuropean countries including France, and with non-franc area countries inWest Africa (particularly Gambia). Although an index which compared pricelevels in Senegal and other countries is not available, prices for mostcommodities on the local market, both for necessities and for luxury goods,are rather high. Expatriates as well as Senegalese are well aware of thesituation. The former, in fact, have come to regard Dakar as one of themost expensive cities in the world, and often reckon as if prices there arealmost double those in Europe. While this is certainly an exaggeration,there are ample signs that the price level is so high as to have a profoundadverse effect on the economy at large.

IV. PUBLIC FINANCE

Current Government Revenue (Table 26)

99. Although Senegal's tax effort is substantial, fiscal revenueshave grown less than in proportion with the country's domestic product:

1962/63 1966/67

Total current revenues as % of GDP 20.4 18.1Total fiscal revenues as % of GDP 19.0 17.4Indirect taxes as % of GDP 14.6 12.6Import taxes as % of imports 36.0 35.4Direct taxes as % of GDP 3.7 4.3

The following will analyze developments since 1962/63; data on Governmentfinance are only comparable for the period thereafter. Senegalts fiscalsystem is similar to that of other countries of French expression inAfrica. There are some fourteen direct taxes representing together aboutone-fourth of total tax revenue. The most important is the profit tax(impot sur les b6n6fices, at 30% for corporations) followed by the generalincome tax and the development tax (on wages and salaries). Taxes on landand buildings are also important. The system of direct taxation is onlyvery slightly progressive: of all direct taxes, only the general incometax is progressive, and it represents some 13% of total direct tax revenue.

100. Since 1962/63, rates of taxation have been increased on the profittax (1966/67), on the development tax (1965/66) and on the wpatentes" (aspecial business tax, in 1964/65). As a result of these changes and,particularly, of a more efficient tax collection, direct tax revenue hasincreased 7.5% per annum (see table 26) between 1962/63 and 1966/67, a verysatisfactory rise, particularly when compared to the growth of GDP in thesame period (3.4% per annum).

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101. Further increases in tax rates are unlikely over the mediumterm. Since priority enterprises established in recent years benefitfrom tax holidays, any increase in company taxes would apply only to otherenterprises and would adversely affect these in relation to companiesoperating under tax concessions. Other income taxes cannot be raised sub-stantially, as tax yields have recently shown a tendency to decline.Furthermore, the recent tax collection effort represented, by itself, a taxincrease and it is feared its continuing success would be threatened byhigher tax rates.

102. Indirect taxation represents three-fourths of total tax revenue.The system is based on a turnover tax (taxe sur le chiffre d'affaires),levied on both imports and domestic transactions. The tax is the largestsingle revenue earning tax in Senegal, and in 1965/66 represented aboutone-third of total tax receipts. It includes an additional import tax(taxe forfaitaire representative sur la taxe des transactions) levied ata rate of 20% for most imported goods and at a rate of 30% on imports ofa number of commodities produced domestically. Other import duties havebeen mentioned above (para. 68). Excise duties are levied on a number oflarge consumption products (e.g., petroleum products, tobacco). Exportduties are levied only on groundnuts, accounting for about 10% of totalGovernment revenues during the years 1962-65.

103. Although since 1962/63, rates of all indirect taxes have beenincreased practically every year, the revenue of indirect taxation hasbeen declining. Between 1962/63 and 1966/67, it decreased by about 2%.The decline is entirely attributable to taxes on external trade because,while the revenue of other indirect taxes rose by 27%, the revenue of allimport and export taxes declined during this period by about 7%. Thedecline in export duties was due largely to the reduction in export taxesmentioned above. While total revenue from import taxes has decreased by8% during the 1962/63-1965/66 period, imports have declined during thesame period by only some 3%. Some revenue losses were certainly due tothe reduction in custom duties on imports from the EEC and tothe exemption granted priority enterprises from taxes on their inputs. Asubstantial loss may have been occasioned by the expansion of smugglingwith neighbouring countries brought about, inter alia, by the increase intax rates. The 1966/67 import tax revenues increased slightly, but werestill 2% less than in 1962/63.

104. These considerations lead one to think that, during the periodunder review, the economy has reacted against the high cost of imports notonly by reducing imports, but also by avoiding the tax burden. The Govern-ment is well aware of this phenomenon and feels that no additional taxincrease on imports can be effected in the medium-term. In fact, thebudget for 1967/68 shows only a small increase in revenue from import taxes.

105. Some margin for increase may exist for a number of excise duties(tobacco, gasoline), but here again the danger that smuggling may increasesubstantially is present. The danger of smuggling is considerably reducedin the case of durables and some marginal increases in revenues could beexpected from higher tax rates on these commodities.

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cu GvrmnE=n_ue (Tables 27-28)

106. Between 1962/63 and 1965/66, current expenditures rose by3.7 percent per annum at current prices, a modest rate resulting from theGovernment's long standing austerity program. Wages and salary scales hadnot increased during that period and the number of employees did notchange significantly. Thus, the Government wage bill rose only moderately(4.4 percent per annum). Expenditure on material inputs remained stagnantor slightly declined. Since transfers and other expenditures, takentogether, increased considerably, the main brunt of the slow rise of totalexpenditures was shouldered by maintenance works, in a period when, interalia, a sizeable amount of road construction was undertaken. Whether thepresent road system is still maintained satisfactorily remains to be seen.

107. Pressures for increased wage and salary scales became very seriousin recent years, when the rise in cost of living had been reducing realwage rates by some 3 percent per annum. The Government increased pay scalesby about 5 percent in 1966/67. However, the Government was able to restrictthe growth of total current expenditures to less than 1 percent in thatyear, mainly through still lower maintenance expenditures and lower transferand subsidy payments.

108. The following table shows the functional classification ofexpenditures and its change:

Percent of totalcurrent expenditures1962/63 1966/67

Sovereignty and defense 27.3 27.6Economic sectors 25.7 22.9Social sectors 20.4 22.4Common expenditures 1.5 1.5Public debt 3.4 1.6Transfers and other 21.2 24.0

Total 100.0 100.0

Social sectors have shown the fastest rise. The rise in school enroll-ments, and the large school construction program undertaken by the Govern-ment during the First Development P'lan, are largely responsible for therise.

109. Transfers and other expenditures absorb a large share (24%) ofthe total. The former include payments to municipalities and to housingagencies (OHLM) (actually tax transfers), the payments due Mauritania underthe customs union agreement by which the latter receives 8.7 percent of thecombined import tax revenues of Senegal and llauritania, scholarships tostudents, subsidies to prlvate schools and hospitals. The major items of"other" expenditures are the Senegalese participation to the cost of French

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technical assistance, including contributions to research institutes(part of the Developxasnt Plan), rent payments on buildings and the settingup of a new electronic colaputer and accounting center (more appropriatelyan investment outlay).

110. Throughout the last six years, there is little doubt that theGovernment has made a serious austerity effort in its expenditure. To acertain extent, this was imposed by the fact that the Government manpowerwas, at independence, far larger than the new State's needs. Nevertheless,success in keeping expenditures down has been remarkable.

111. In the future, there is little likelihood that any larger savingsin expenditures can be obtained than in the past. Although the Governmentlabor force could be reduced substantially without impairing the efficiencyof Government operations, it is not likely that the authorities will under-take to reduce the number employed. Against this action are not onlyobvious political reasons, but also the fact that any substantial cut wouldaffect very measurably town incomes and sales by local enterprises. Such acut would not necessarily be compensated by new employment opportunities else-

w-here and would most likely induce further unemployment.

112. The real challenge in this field, for the medium term future,lies in the ways to avoid new increases in expenditures. The wage bill,which in real terms has probably declined until 1965/66, cannot be keptrising less than prices for a long time, and in fact the Government hasallowed a 5 percent increase in wages and salaries for fiscal years1966/67 and 1967/68. To compensate for further possible wage increases,the Government should attempt to introduce a policy of gradual reductionof employment by leaving unfilled new vacancies in unessential-jobs.

113. Expenditures on materials and maintenance works will tend toincrease more rapidly in the future, as the result of past and continuinginvestments and the need for higher maintenance of older structures. Onlya policy of conscious priority among different Government functions andstructures(such as, e.g. maintenance of school vs. that of administrativebuildings) can prevent a wholesale rise here: sacrificing the less vitaltasks is imperative and it can be expected that the Government will bewilling to take decisions in this field.

114. The possibilities of cutting transfers are limited. Transfersto Mauritania, which move in step with the rise of Senegal and Mauritaniaimports, are likely to increase slightly. Transfers to municipalities, onthe other hand, could be kept at their present level. Actually, the wholefinancial situation of municipalities is under review at present, as theGovernment is now intervening to cover certain accumulated deficits byTreasury advances and has instituted strict supervision over communalspendings (data are not available for a fuller discussion of the effect ofmunicipal finances on both Government revenues and expenditures). Otherexpenditures are likely to remain roughtly constant at their present levelor to slightly decline when the computer center will be completed.

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115. To sum up. Current revenue is not likely to increase fasterthan national income. Direct taxation and excise taxes may be expectedto rise proportionately to the projected growth rate of GDP between 1966and 1972. Import tax revenue may be assumed to rise in step with totalimports. If the tax rate on groundnut exports is left unchanged, totalcurrent revenue would not rise at a rate greater than 2 percent per annum.On the other hand, it may be expected that total current expenditures,apart from debt service, would rise at nearly 3 percent annually. Ifthese projections are borne out and account is also taken of external debtservice, it is likely that the current surplus,after reaching CFA francs 1.3and 1.6 billion respectively in 1967/68 and 1968/69, may decline afterwardsto become a deficit in the early'seventies.

Public Enterprises

116. In 1966, the Government was forced to make emergency advancestotalling about CFA francs 1.4 billion to a number of public enterprisesto consolidate their accumulated short term liabilities. To avoid furtheremergencies of this kind, the Government is now exercising a strict controlover the financial operations of most public enterprises and, inter alia,has centralized the accounting of 18 public enterprises in CEP-. 7- As awhole, these 18 enterprises2/ showed a net loss of CFA francs 350 millionin 1966. Their deposits with the Treasury reached CFA francs 4.1 billionby June 30, 1967, whereas their total outstanding debt vis-a-vis the Treasuryamounted to CFA francs 3.2 billion. Over 60 percent of total deposits,however, relate to postal checking accounts, and excluding the post office,the 17 remaining enterprises together owed the Treasury net about CFA francs1.6 billion. A considerable part of this debt will never be repaid.

117. During the fiscal year 1966/67, the biggest deficit accrued tothe railway and the Dakar bus service. A number of agricultural develop-ment schemes (Richard Toll, Delta, Casamance), the low cost housing programand Radio Senegal also showed substantial deficits. Large surpluses werereached by the post office and the social security scheme, and a smallerone by the port.

118. A change in the tariff structure and rising groundnut shipmentsare expected to reduce the deficit of the railway by a considerable amount.Increasing rates on municipal transport is a sensitive political issue and

1/ Centre des Etablissements Publics, a government corporation, dependingfrom the Nlinistry of Finance.

2/ Including all major public enterprises except OCAS, the groundnutexport monopoly, ONCAD,the agency closely related with groundnutproduction and BNDS, the public development bank, closely related withthe financing of the groundnut crop. A center similar to CEP, com-prising these three public enterprises,is planned for 1968.

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little reduction in this deficit can be expected. The deficits of theagricultural schemes as a whole are unlikely to decline, if the sugarproject is implemented as planned, although efforts are not being spared.As for Radio Senegal, which collects hardly any revenue, it is generallyfelt that its contribution to agricultural development and social stabilityare worth its costs. Thus, in the long run, the total income and expendi-tures of the 18 public enterprises handled by CEP may approximately balancewith deficits in bus services, agricultural schemes and the radio off-setting the surpluses of the social security schemes, the post office andthe port. This should relieve the Treasury of the burden of financingindefinitely a net deficit.

Over-all financial situation and the Treasury (Tables 29-30)

119. No consolidated account of the public sector is available, andonly a partial picture of Government finances can be drawn:

billion CFA francs1962/63 1963/64 1964/65 1965/66 1966/67

Current revenue 34.5 33.9 36.7 35.8 35.4Current expenditure 29.9 31.8 32.5 33.o 33.3

Surplus 14.6 2.1 4.2 2.8 2.1

Equipment budget 5.5 7.0 8.5 2.9 4.8

Total deficit 0.9 4.9 4.3 0.1 2.7

Financed from:

foreign sources 0.7 - 1.2 0.2 0.2local long term borrowing - 4.0 0.1 - -Treasury balances(-= increase) 0.2 0.9 3.0 -0.1 2.5

The equipment budget includes only one part of Government developmentexpenditures. In particular, the table excludes the large capital outlaysfinanced from foreign loans and grants. Also excluded are technicalassistance expenditures financed by France and French aid for the currentbudget of a number of bodies (e.g. research institutes, university, rail-ways). Nevertheless, the table is representative of major trends forGovernment finance, since the expenditures not accounted for are whollyfinanced by foreign sources, also not accounted for. The table shows atrend for the current surplus to decline and concentration of the largestdeficits at times of large equipment expenditures. Actually, the latterhave been subject - from time to time - to rationing, whenever pressureson Treasury balances were deemed excessive. Thus, the lof overall deficitof 1965/66, although partly due to the scarcity of development projectsready for implementation, was also the result of Government efforts toreconstitute its Treasury balances.

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120. A brief review of Treasury operations is essential, given the lartgorole this institution exercises in the entire public sector. It not only

finances the budget deficits but, in addition, provides public bodies--localauthorities, public enterprises--w-ith short and medium term finance, receivestheir deposits and generally acts as the public sector's bank. All cash trans-

actions of the Government are carried through the Treasury; any cash halancesavailable to the Government from its revenues, the deposits of public enter-

prises, the funds of social security and its borrowing can be used to finance

any authorized expenditure. The Treasury also extends short term credit to

importers through discount of custom duty bills and can rediscount these at

the Central Bank. It can obtain--but has never used--advances from the

Central Bank (see above, para. 88). It maintains an operations account with

the French Treasury.

121. As receiver of deposits and as lender of funds (in the form ofloans and advances), the Treasury has a monetary function which can escape

the control of the Central Bank. Thus, the large deficits of 1962/63-1964/65,

during a period when the country experienced a recession, can be interpreted

as the use of the Treasury as a monetary instrument.

122. Comparable statistics on Treasury accounts are available since

1963/64. The data are difficult to analyze, since each operation account

may or may not be unique relative to each operation and since one account

may include operations already included in other accounts. Senegal is

fortunate, however, in having a complete set of accounts--di.fferent in

this from many other countries in French spealing Africa--and is working

towards a mechanization of the accounting which may make possible a more

precise classification of the operations.

123. The iission has attempted to classify Treasury operations in

Table 30; although there still remains a residual amount explainable by

omissions and duplication, the Table does show the main changes. Treasury

balances rose in 1963/64 mainly because of large repayment of advances byand increases in deposits of public enterprises; it declined in 1964/65

and 1965/66 because of large budget deficits and decreases in deposits ofpublic enterprises; they rose again in 1966/67 by a relatively smallamount, again mainly because of deposits of public enterprises, and totalled

some CFA francs 9.4 billion at the end of the year.

124. Uhat is the minimum amount of balances necessary to ensure the

smooth functioning of Government operations? The authorities do not appear

to have a clearly defined policy on this subject although, as we shall see,

it will become an important one in the future. Not taking into account otherTreasury operations, the current level of Treasury balances covers a littlemore than three months of Government current expenditures. This is clearly

excessive, particularly when one considers that the equivalent of 10 percentof fiscal revenues can be obtained as advances from the Central Bank, bringing

the total reserve potential to about four months' current expenditures. The

Mission cannot venture, on the basis of its study of Government finances,

what a reasonable alternative could have been, but feels that, althoughTreasury balances have been drawn dom during the First Development Plan,

since the start of the Second Plan the management of Government finances has

been on the conservative side.

- 32 -

Development Plan 1965/66-1968/69 (Tables 31-33)

125. The lack of complete budgetary accounts on all expenditures,both current and capital, has already been mentioned. With foreign aidlargely excluded from budgetary documents (although it appears on internalaccounts prepared by the Ministry of Finance), with actual investments bystatutory bodies not reported to the M4inistry of the Plan, and withemphasis by this Ministry on ccmmitments rather than actual expenditureson individual projects, public investments can only be approximated. Bothiinistries mentioned above are awiare of the situation, and the Ministryof the Plan has recently issued a summary report on development expenditureswhich attempts to be as complete as possible. Although this documentreports only on expenditure commitments, it represents a precious tool ofanalysis and of policy.

126. The current (second) Government Development Plan - which includesmost Government and statutory bodies' expenditures - covers the four fiscalyears 1965/66-1968/69. It is therefore now at its mid-point, and arevision of its expenditures and sources of finance has been undertakenrecently. Tables 31 and 32 compare the original and revised version, andshow the amount of foreign financing which the Government is counting on.

127. The original and the revised versions emphasize investment inagriculture and related activities (respectively 34 percent and 29 percentof the total). About one-third of plan expenditures is allocated to socialsectors. The remainder is split between infrastructure expendituresresearch and studies and participations to industrial enterprises.

128. The relatively modest allocation to infrastructure investment isdue to the fact that Senegal has a well-developed infrastructure, bycomparison with other African countries, and that the first Plan (1961-1964)gave this sector a high priority. Against this, the allocation for watersupply is largely an unplanned result. Expenditures are absorbed mostlyby a huge water supply project for Dakar, which can probably be consideredexcessive by relation not only to Senegal's current needs, but also to itsfinancial resources (although a large part of the foreign finance committedfor this project, in the form of suppliers' credits, would not be availablefor other projects). The cost estimates of the project are already fouryears old and it is not impossible that actual costs may run higher. TheGovernment should reconsider its commitment to this project, if its ownresources will have to be used for its implementation. Leaving aside thisproject, the Plan represents a balanced expenditure program. A number ofproblems and difficulties arises, however, when its contents are examinedin detail.

129. The amount of studies and research work to be carried out in thePlan period is not excessive (included are also the current expendituresof a number of institutions of French origin engaged in applied researchin Senegal). The study of economic and financial aspects is only developingat present, mainly as a result of the demands that foreign financialagencies put to the Administration. Work on studies for determining the

- 33 -

project content of the next (third) Plan has not yet started. Foreign

aid agencies complain that project preparation - by comparison with

other West African countries - has been less than satisfactory.

130. In agriculture, a large sugar cane project, which"enjoys full overa-ment support and has attracted private sector interests, is of doubtful

economic profitability. Government studies have shown that only in the

tenth year of production will gross profits reach a satisfactory level.

In the intervening period, Government finances would be saddled with a

subsidy for the project. Studies on another important program - rice

cultivation in the delta of the Senegal river - had been based more on the

gains in value added to the economy at large than on the direct profit-

ability of the scheme. The result was an over-ambitious scheme which has

run into management difficulties. In this case, the Government has taken

vigorous action, scaling down the immediate program, hiring a technical

assistance company from abroad (SATEC) and charging it to further investi-

gate the economic and financial aspects of the program. A program for the

cultivation of vegetables - both for local consumption and for exports -

which had nearly failed during the first Development Plan, had had to be

redesigned and is still not ready for implementation. The major difficulty

was in the lack of extension services. In infrastructure, a number of road

construction projects, whose economic justification is doubtful, have been

implemented.

131. Examples of well-thought-out programs can also be found. The

most important is the groundnut-millet productivity action to which the

Government has given the highest priority and for which World Bank Group

financing has been requested. A large fishing program, to exploit local

resources, has been launched with the assistance of both France and the

USSR. The program, which appears to be a sound proposition, is interesting

in that both donors cooperate in the construction of the ships. A railway

improvement program, with IDA assistance, is also part of the Plan, and

its implementation has required new and courageous decisions by the Govern-

mient in such delicate areas as reduction of manpower anid increasingtariffs. A project for the cultivation of cotton as input for the local

textile industry has been set up with the help of a French cormpany (CFDT)

and has been very successful. A listing of major programs is given in

Annex IV.

132. In the absence of a full documentation giving actual expendi-

tures on all the projects included in the Plan, it is only possible to

venture a rough estimate of the size of investment expenditures the

Government may be able to effect in the remaining years of the Plan, if

the availability of financial resources were not a constraint.

133. During the first Plan (1961-1964), total development expendi-

tures were CFA francs 36.4 billion (9.1 billion per annum on average).

This includes expenditures by statutory bodies; without these (railways,

ports and telecommunications) and excluding some estimated expenditures

on commerce and tourism which cannot be compared with the more recent

pattern of expenditures, the total was CFA francs 33.2 billion (or D.3 billionper annum). During the first two yoars of the second Plan (1965/66-l966/67),actual expenditures totalled CFA francs 12.51 billion (or 6.3 billion perannum), of which 11.2 billion are budgeted (Table 33).

13h. This reduction in the pace of spending is due to the circum-stances of a new plan and of new projects, as well as to the difficultiesin project preparation for foreign aid agencies already mentioned. Thereluctance in utilizing local resources (mainly Treasury balances) hasalready been mentioned.

135. The comparison between actual expenditures in the last two yearsand the projections included in the revised Plan is interesting:

1965/66 - 1966/67Revised Plan Actual expenditures-

(billion CFA francs)

Studies 1.95 1.50Directly productive services_/ 7.15 4.73/Infrastructure 4.28 2.35Social expenditures 6.69 3.96

Tota 4/ 20.07 12.51

Only 62 percent of the revised Plan, in turn some 60 percent lower thanthe original Plan, was implemented. However, there have been expenditures

on agriculture (particularly within the FED program) which have beencarried out in the period, but for which payment had not been made byJune 1967. Even counting these, however, the rate of spending is low; themore so as the expenditure programs of some of the statutory bodies (rail-ways, port of Dakar, posts and telecommunications) have also suffered delays.

136. For the 1967/68-1968/69 period total Plan expenditures as revisedare projected at CFA francs 48.8 billion. The carry-over from the firsttwo years can be estimated at CFA francs 8.5 billion, including statutorybodies. Total expenditures in the current and next fiscal years shouldtherefore be 57.4 billion, or 28.7 billion a year. This is clearly anunrealistic level. There exist a number of constraints, other thanfinancial, which limit development spending.

1/ Excludes CFA francs 0.7 billion, carry-over from the first Plan.7/ Excluding Government participations in industry.3/ Including some CFA francs 2 billion in loans for agricultural imple-

ments and fertilizers not included in budgetary accounts, but includedin the Plan.

4/ Excludes expenditures on the port of Dakar, PTT, SICAP, railways, ONCAD.

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137. The most important of these constraints is the lack of personnel.This is felt even at the top coordinating level. The Ministry of the Plan,in charge of formulating programs and of negotiating their financing, hasa skeleton force of less than ten people and cannot possibly cope with aplan of these dimensions. Project preparation depends to a large extenton foreign consultants, and coordination of their work is a difficult task.Negotiations with foreign aid agencies are also difficult, given theirdifferent standards, project criteria and modus operandi. The number ofindividual public agencies - both bilateral and multilateral - which areactive in Senegal is, at any time, more than ten. When suppliers arecounted, the number can easily double. This variety affects also dis-bursement administration, since bidding and awarding procedures aredifferent in each case. The problem of coordinating these tasks was notfully appreciated when the Plan was launched and it is likely to becomemore difficult since Senegal's development effort appears to have to relymore and more on foreign financing. Lack of experienced personnel in thetechnical ministries and other spending agencies is also a brake on projectpreparation and implementation, even though recourse to foreign consultantsand technicians is widespread. After a review of the projects includedin the revised Plan, the Mission considers that total expenditures areunlikely to exceed CFA francs 38.3 billion, including an estimated 5.1billion of actual expenditures out of the first two years' carry-over.This is still a very high total (over twice the annual average of the firstPlan), but it should be possible to implement it, particularly because twoamong the largest sectors, water supply and housing, are in the hands ofcontractors and thus relatively immune from absorptive capacity problems.

138. To finance this level of actual expenditures, it is possible tocount on some CFA francs 17.7 billion as likely disbursements, out offoreign aid already cammitted, of which some 3 billion from France, .

billion from the EEC (FED), 3 billion from German aid and suppliers'credits, 2 billion from the World Bank Group, and approximately 0.5 billioneach from the U.S., UN agencies, the USSR and Canada. The degree of com-mitment by different agencies varies a great deal, and it is not fullyassured that resources in this amount will be forthcoming. The Government,however, is confident that it can mobilize even a larger amount of externalresources (counting, as it is, on larger expenditures).

139. The Government is also negotiating a public issue in Paris, tobe guaranteed by France, totalling CFA francs 1.5 billion. The interestand related charges are expected to be between 7 and 8 percent. Theproceeds of the loan are to be applied to projects included in the Plan.External resources at present in sight total therefore some CFA francs19.2 billion.

1h0. The plan foresees that some CFA francs 2.1 billion can bemobilized from the resources of statutory bodies to finance part of theirinvestments. These are mainly in port, railways, posts and telecommuni-cations and the housing authority. The plan includes expenditures - onhousing and research institutes - which are financed out of current budgettransfers, and have already been included in the above projection of curren'

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expenditures. These total about CFA francs 2.4 billions. Another 2.8billions are to come from loans by BNDS - for housing, agriculture,industrial ventures - to be discounted by the BCEAO. Although thesedepend on whether each individual project is approved by the BCEAO, theGovernment is confident that BCEAO resources in that amount can bemobilized. Finally, from para. 115 above, some CFA. francs 2.9 billioncan be expected as current budgetary surplus during the current and nextfiscal years (1967/68 and 1968/69). The total of mobilizable localresources is thus CFA francs 10.2 billion. As a result, the situationlooks as follows:

Billion CFA Francs

Estimated expenditures 1967/68-1968/69 33.2Estimated carry-over 1965/66-1966/67 5.1

Total to be financed 38.3

Financing in sight 29.4

Estimated disbursements from foreignaid commitments 17.7Bond issue in Paris 1.5Self-financing by statutory bodies 2.1Current budget transfers to statutorybodies 2.4Development bank loans discounted bythe Central Bank 2.8Current budget surplus 2.9

Gap 8.9

The financial gap of CFA francs 8.9 billion includes mostly projectswhich should be attractive to foreign aid donors. Among these i'sthe groundnut-millet productivity program which is actively considered bythe World Bank Group together with CCCE, as well as several road projects,including a feeder road program in the main groundnut areas for which theWorld Bank Group has been ]pzproached. However, to receive sufficientforeign financing, local counterpart funds have to be found and it isimperative that the Government mobilize additional local resources, abovethe CFA francs 10.2 billion which are already entirely tied to the committedforeign funds oi to projects not suitable for foreign financing. Thereexists in fact another possibility to increase local financing,by utilizingpart of the accumulated cash balance of the Treasury. At present, totalTreasury cash balances amount to CFA francs 9.4 billion. About 0.5 billionof these are earmarked for payments to local authorities to cover theirdeficits and -l;lost 1 bill!.on uill lilkely be spent iin giroundnut support(see Annex II). This leaves some CFA francs 8 billion of general cashreserves, corresponding to 22 percent of total current expenditures budgeted

- 37 -

for 1967/68. lJ This level of reserves appears considerable; assumingthat cash reserves of about 15 percent of current expenditures (or aboutCFA francs 5.5 billion) can be considered a satisfactory cushion, theGovernment could mobilize some CFA francs 2.5 billion from Treasury balances,corresponding to 28 percent of the financial gap described above. This is areasonable contribution and should be sufficient to attract such foreign aidagencies which require a local participation to the financing of projects.If foreign financing is not available for covering the balance of the gap(some CFA francs 6.8 billion, after counting on increased contributions fromthe Treasury), or if the gap is found, on the basis of more accurate estimates,to be larger, then a cut in development expenditures becomes inevitable. Thepriorities, in such an exercise, should be clear: cuts should affect watersupply and sewerage, road construction, cultural and recreation expenditures.

lJ The other main demand for cash on the Treasury might come from thegroundnut price stabilization fund, which will be almost exhaustedby the end of crop year 1968/69 and should be re-established. Asthe analysis in Annexes I and II shows, future world market prices,compared with present or even prospective producer prices, will notallow a sizable accumulation of roserves. On the other hand, theGovernment has palways the possibility to borrow from the CentralBank up to 10 percent of its current reveauec; this provides anadditional source of cash up to CFA francs 3.4 billion which,although formally short term, can be rolled over. This line ofcredit should be ample enough to take care of groundnut pricefluctuations on the world market, so that no additional Treasuryreserves need to be mobilized for that purpose.

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V. PROSPECTS

141. The value of agricultural output is expected to rise by only2 percent per annum, between 1966 and 1972. Low groundnut prices and thenormal cyclical behavior of groundnut output will affect the performanceof the sector in the next few years. (If the trend of agricultural outputis considered, rather than a spot year, the rate of growth over the nextfew years could be projected at 3.5 percent.) Food production is expectedto show a faster rise. Industry and construction can be expected to riseat 4 percent per annum. The growth is fastest for the period 1967-1970,slower thereafter; this is partly the result of lack of information atpresent on projects which may materialize in the 'seventies, but partlyalso the result of a drying up of investment opportunities. Other sectorswill grow at rates depending on the two leading ones. Total GDP would,therefore, rise by Tittle over 2 percent per annuu or slightly less than the

iW'GaMeLin population (Annex V).

142. Both private and public investment would probably be at a con-siderably higher level during the next few years. Estimates on publicinvestment after 1969, however, have been based wholly on a rough assessmentof the capacity of the public sector to absorb such investments.

143. Exports of groundnut products will suffer from lower prices;quantities are expected to grow substantially, but for two of the yearsunder review, a cyclical reduction of total output is to be expected, andtotal value of groundnut and groundnut products exports is likely todecline in the 1966-1972 period. Even the highest value reached by ground-nut exports in this period--that foreseen for 1970--probably will still be17 percent less than the past record year (1966). With the exception ofprocessed fish products and of fertilizers--a new export commodity--otherexports, particularly phosphates, will most likely stagnate. Thus, totalexports may well stagnate during this period.

144. Although imports of capital goods and of raw materials andintermediate products will rise considerably, imports of food items are

not likely to rise significantly--a result of both low per capita incomegrowth and of satisfactory rises in output of some import substitutes(millet and rice). Total imports can be expected to grow at 2 percentper annum between 1966 and 1967, or faster than exports. The tradebalance, which was positive in 1966, is thus likely to deteriorate. Itsdeficit will follow roughly the groundnut cycle, reaching a peak in 1971,the year of expected lowest groundnut output.

145. No large change is to be expected in the other items of thecurrent account of the balance of payments. Factor income payments abroadare likely to grow, both because of the recent foreign investments in a

number of enterprises and because of a rise, albeit small, in interestpayments on external debt. Government services are likely to show a lowersurplus in the future, as expenditures by French military forces decline.Grants for current purposes may also decline, particularly the FED progranof price support for groundnuts.

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1t6. On the capital account, estimates on the likely inflow ofpublic capital, based on the above discussion of development expendi-tures, can be made for 1968 and 1969. For these years, there islikely to be a net outflow of private capital, as in the past. Forlater years, public capital inflow will depend on both France's andthe EEC's willingness to continue their substantial aid programs.A declining trend in French assistance can be detected for the past;this was, however, offset by increasing EEC aid. The latter willcontinue until 1969, when the present association treaty expires.Thereafter, nothing is known about intentions or policies of CommonMarket countries. It is reasonable to assume, however, that a new aidprogram, in one form or another, will be instituted. In any case, theabove projections clearly show that Senegal will remain dependent onforeign aid and capital inflow for a long time to come.

147. With a larger investment, on average, and with a larger inflowof foreign capital than in the past, Senegal's savings effort shouldnot increase significantly. The marginal national savings ratio worksout at 12 percent between 1966 and 1970, slightly higher than pastaverages, but lower than past year-to-year changes. To this effort thepublic sector will contribute; while in the last two years of the FirstPlan, local sources contributed around 48 percent of total developmentexpenditures or some CFA francs 10 billion, they are likely to contributeless, in percentage, during 1967/68 - 1968/69 (35 percent), but more inabsolute amount (over 12 billion). A substantial part of the increase inthe local contribution to public investment, however, is due to the recom-mended reduction in Treasury reserves, or to what can be classified asdeficit financing. This should not have a negative effect on the pricelevel, because a considerable part will be reflected in imports alreadyaccounted for in the above projection. Any spill over into local demandshould not pose any serious problem, given the fact that there stillexist margins of excess capacity.

148. These projections imply a rise in the marginal capital outputratio. This increase, however, is due almost entirely to the declinein groundnut prices, and if projections of output were based on constantprices and compared with past constant price values, the ratio would notshow a significant change.

1h9. The picture of Senegalts economic future is thus clouded. Itshows that events since independence have not been as exceptional asthey may appear at first sight, and that the past slow growth--seen inthe light of further slow growth in the future--was due to deepercauses than the departure of French forces or the rupture of the oldAOF alone.

150. The high price level of Senegal has already been pointed out.The consequent overvaluation of the exchange rate has had the effectof encouraging imports--until the mid-sixties--and of discouraging ex-ports, other than groundnuts, and import substitutes. Due, however,to high preferential prices for groundnut exports and large inflows of

- 40 -

foreign public funds, a balance of payments equilibrium of sorts couldbe maintained. Growth was low, however, and practically all productionswere either unprofitable or only marginally profitable. The only exception--outside of groundnuts--were textiles, whose satisfactory progress was basedon the strong preference for textiles in the Senegalese consumerbudget. Moreover, a tendency towards capital intensive investment can bediscerned during this period, likely to be related to the high cost oflabor and relatively cheap imports of capital goods.

151. Facing slow growth in the economy, the Government reacted byimposing a protective barrier to stimulate import substitutes in manu-facturing and by increasing indirect taxes--mainly on imports--to obtainlarger savings for financing development expenditures. This, of course,has increased further the price level and may have adversely affectedexports. Its positive impact on manufacturing for local consumption hasbeen limited, however, since the small local market for manufacturedproducts (outside textiles) remains an obstacle to industrialization,even if protected. The negative effect on exports is difficult to prove,except for the fact that the past lack of diversification in exports hascontinued unabated. Also, import substitution in agriculture was discouraged,since for fear of increasing excessively the cost of living, the Governmentdid not increase import taxes on them.

152. The preference granted groundnut products has now been withdrawn.In order to offset a possible large loss of export earnings, and to avoida decline in farmersl incomes, the Government is implementing a program toincrease groundnut yields. Over the longer term, however, if Senegalremained dependent only on groundnuts, the economy would remain open toimportant fluctuations in export earnings due to fluctuations in worldmarket prices of groundnuts and would suffer from the slow erosion of theprice advantage groundnuts now have vis-a-vis other oilseeds. Incomes inthe country would thus be linked with the vagaries of a commodity which isunder a threat of competition from cheaper substitutes. Although, at -present, groundnuts remain the most profitable product in Senegal, diversi-fication is needed and is, in fact, possible.

153. The previous chapters have shown that cotton and vegetablescould be developed for export and that textile and shoe exports shouldbe possible. An increase in production of rice, millet, vegetables andfruits for local consumption is also possible. Outside manufacturing,supply elasticities are still low. But the vigorous Government measuresfor providing technical assistance in cotton and rice are steps in theright direction. Farmers' response to both crops has been rapid andvery encouraging. Whether these developments can bear fruit dependsessentially on whether new potential exports can effectively competeon the world market and potential import substitutes with imports.From the above analysis it appears that, unless the cost price relation-ship of most commodities is changed, Senegalese products other thangroundnuts will continue to be outpriced.

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154. Any change of this kind would put considerable pressure onGovernment finances in the short tenm; it could only be implemented onthe basis of an agreement within the monetary union, including the guar-antor of the CFA franc. Careful studies are needed before any decisionis taken, inter alia, to determine which commodities would need new costprice relationship and which would not. In any events the problem dis-cussed here is a serious policy issue for Senegal and there is littledoubt that the economic forces at work will compel the Government, themonetary authorities and Senegal's partners and major donors to come togrips with it.

VI. PERFODIAIACE AND CR1DITWORTHINESS

155. Senegalts past economic performance can be considered satis-factory. The main block to a faster and more diversified growth remainsthe country's high price level; but changing relative prices-to remedythis aspect requires careful stutdies and prudent application. In thiscontext, more-attention may be paid in the future to the costs and benefitsof protection*

156. Public savings are icw, although the Government has pursued apolicy of restraint in current expenditure0 As for development expendi-tures, although project preparations may have not been fully satisfactory,a serious effort is being undertaken at present to remedy this wearness.Project. implementation has been effectively improved by the Governmenttsrecourse to foreign technical assistance companies. The decision toimplement an excessively large water supply project is unfortunate; however,the rest of development expenditures to be carried out in the next two yearsare well balanced and their priorities are, by and large, correct. Per-formance in development expenditures must be viewed against the backgroundof recent-independence and by reference to the performance of other countriesin Africa. Although further improvements are needed, on the whole the publicinvestment effort can be considered satisfactory. There remain uncertaintiesregarding the financing of future development expenditures. This reportargues, inter alia, in favor of a drawdown in Treasury balances for develop-ment purposes. In general, the Government is aware of a financing problem,but does not seem to have faced it in all its implicationso

157. Another area of uncertainty is the effect of world groundnutprices on public finance, If prices remain at present low levels, thereis little alternative to a further--albeit small--reduction in the guar-anteed price to farmers. The recent experience has shown, however, thatthe Government is determined to avoid situations where its finances wouldbe endangered by excessive producer prices.

158. In conclusion, the Goverment can be relied upon to pursue de-velopment-oriented policies and to continue to combat pressures for in-creasing consumption--a particularly difficult task when per capita incomesare likely to remain stagnant or to decline.

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159. Senegal's external debt as of-December 31, 1966 was $79.2 millionincluding undisbursed amounts (Table 1). Since then, a number of loanshave been contracted (IBRD, CCCE, FAC) and total debt as of the end of 1967can be roughly estimated at $83.8 million. Disbursements are not known withprecision, but they can be placed at about $73 million. Debt service paymentsin 1967-(Table 2) were equivalent to 2.1 percent of 1966 total merchandiseexports. Of perhaps greater significance is the ratio of debt service paymentsto government revenues, since Senegal is part of a larger monetary union, doesnot have a currency of its oam and balance of payments difficulties haverelevance largely as they are reflected on government finance. Even thelatter ratio, however, is low (2.65).

160. Looking at the next few years, debt service is likely to increaseas new borrowing from French, German and other sources will be incurredeThe amounts involved, however, are not large (some-$25 million of new debt)and most of the debt continues to be at soft termse The only exceptionis the expected public bond issue in Paris, which may carry interest chargesat a rate as high as 8 percent. The debt service burden of the new in-debtedness will not be fully felt before the late seventies:-in 1972, forexample, debt service as a ratio of exports may not exceed 4h5 percent,notwithstanding expected stagnant exportso

161. If present trends continue, however, over the longer term, debtdifficulties are bound to arise: if the export capacity of Senegal continuesto be limited, per capita incomes continue to decline or to remain stagnant,and the country's ability to save does not rise substantially, investmentis likely to depend on ever larger flows of foreign capital, both publicand private. Unless the terms of the former continue to be "soft", thereare dangers that present debt commitments may imcperil Senegalts capacityto service its debt in the longer run,

162. It is important to underline the fact that Senegal's public in-vestment, and even part of what would be its current expenditure burden(payments of foreign technical assistance, expenditures by researchinstitutes, expenditures by the University, etco) is at present financedby large amounts of "soft" foreign assistance, Were this to cease, thereis no doubt that the country would find it hard to sustain the burden ofits present external debt, Foreign assistance on soft terms, however, canreasonably be assumed to continue for the next few years. Thus, Senegal'screditworthiness -- as well as its balance of payments equilibrium -- canbe considered as based essentially on continuing "soft" public capital inflows*In these circumstances, it would appear important for Senegal to avoidincurring large amounts of conventional debt, which would add to the country'svulnerability to debt crises.

163. In 1966, per capita gross domestic product was estimated to be aboutUS $190, at the current exchange rate. Thus,, on-grounds of both poverty andperfonmance, Senegal is eligible for IDA credits. On grounds of credit-worthiness; the country should incur only a limited amount of conventionalborrowings. Senegal can continue-to be regarded as a case where a "blend" ofIDA and IBP3D funds is appropriate.

ANNEX IPage 1

Medium-Term Market Prospects for lWorld Prices of Groundnlts-/

1. Starting with the 1967/68 crop, Senegal will sell its groundnutoutput at world market prices. Actually, about half of the crop will besold to local oil mills, but prices charged to them will also be based onworld prices (an agreement has been recently signed by both the Governmentand the oil producers which ensures that the latter will not bunch theirpurchases when the world price happens to be lower). The central role thatthis crop has for the economy warrants a brief review of medium-term worldprice expectations.

2. The future world market of fats and oil will be influenced by twomajor developments: an increase in the growth rate of output of vegetableoils in some of the developing countries, if their current expansion plansare successful; and a decline in the rate of growth of the import demandin Western European countries, the major buyers on the world market. Whilethe expansion plans of developing countries may turn out to be of lessermagnitude than envisaged at present, it is also likely that consumption inthese countries will increase faster than in the past. Thus, the likelihoodof any major surplus, and therefore of a major fall in prices, is limited.The picture is somewxhat clouded by the uncertainties surrounding the fatsand oil situation in the Eastern European countries, including the USSRpandChina. These regions have been net importers in the past, but there aredoubts whether this situation is going to continue. In fact, 1967 pricesof groundnuts have been negatively affected, inter alia, by large exportsof sunflower seeds from the Soviet Union into Western Europe--a consequenceof an exceptionally good crop.

3. From 1950 to 1961-63, the estimated world production of fats andoils has increased about 3.5 percent annually, reaching 36.3 million tonsin 1965. The developed countries have shown the largest rise in production,and their share in world output is now about 45 percent.

4. Taking into account past trends and the future prospects mentionedabove, it appears that world supply and demand may be in approximate balanceby 1970, at slightly lower prices than the 1961-63 average. For later years,rises in output are likely to be more important and the price level may"further lose ground.

5. A special market is that of oilcakes, used as complement in dairycattle rations. Demand has been increasing at a fast rate until very recent-ly, but there are doubts that the trend may continue. There is evidence ofsubstitution of grain for oilseed meal that can be fed animals. Other sub-stitutes are available--urea--whenever prices of cake reach too high a level.

1.TBased on working papers of the Trade Analysis and Export ProjectionDivision of the Economics Department.

ANNEX IPage 2

6. The following are our price expectations for the early seventies,in old.L:

Groundnuts(Nigerian shelled, c.i.f. London) 60-65 long ton

Groundnut Oil(Nigerian, 3-5 percent,c.i.f. European Ports) 95-100 long ton

Groundnut cake(Nigerian, 56 percent, c.i.f. U.K.) 39-h0 long ton

7. Tn 1967, prices for groundnuts have shown a steep decline; theywere (old) 165/long ton in May and had dropped to (old) L55-17-6d in mid-November. Senegal is at present in the process of selling its coming cropand has already been able to place a sizable part of its exports at (old)161. Current thinking among those dealing with groundnuts is that thecurrent season's price will stabilize at (old) L55 per ton. This seems tobe the result of both unexpected USSR deliveries of competing seeds toWestern Europe and of the uncertainties of French processors in the faceof the change-over by the Common Market and its Associated States to worldmarket pricing of oilseeds.

8. For the medium-term, Senegalese authorities fear mostly thatgroundnuts will lose ground vis-a-vis other ccmpeting seeds. At present,groundnuts command a higher price vis-a-vis substitutes like soya beans,as a result of higher quality and a lesser need for processing and forreconstitution. IJhile the quality is essentially a matter of consumers'tastes that are not impossible to change by skillful promotion practicesin favor of substitutes, there is always a possibility that technicalimprovements are made in the processing of substitutes so as to reducetheir cost disadvantage.

9. These reasons seem strong enough for adopting a lesser optimisticview of medium-term groundnut prices. As a result, the mission has used,in the report, the lower prices indicated in the above future price range.

ANIE IIPage 1

Groundnut Prices and TreasurWr Support

1. The future behavior of groundnut prices on the world market vis-a-vis prices paid to farmers will have an important bearing on Treasuryliquidity since the Groundnut Stabilization Funds make up part of-the TreasuryAccounts. For the 1967/68 crop, the Government has reduced producer prices byabout 13 percent, anticipating a large decline in export prices, a result ofthe end of the preferential treatment for oilseeds from associated states inthe EEC and, particularly, in France. It is likely that the current preducerprice will also apply for the 1968/69 crop. For these two years, the situationis, therefore, as follows:

Shelled Basis 1967/68 1968/69

(a) World price (c.i.f. London, CFAF/ton) 38,990 40,335(b) Output for exports (1000 tons) 700 722(c) Total export earnings (CFAF million) 27,293 29,122(d) Assistance from EEC (CFAF million) 2,040 600(e) Producer price (CFAF/ton) 26,142 26,14?(f) Miarketing and processing costs

and taxes (CFAF/ton) 18,061 18,061(g) Total cost (e + f multiplied by b)

(CFAF million) 30,943 31,933(h) Total loss (g-c-dc, CFAF million) 1,610 2,211(i) Payments to stabilization funds included in (f)

(CFAF million) 1,400 1,445(j) Net loss to the Groundnut Stabilization Funds

(h-i, CFAF million) 210 lJ 766

2. Although a number of these items are only estimates and althoughthe world price has been assumed to increase in the period (from old L58 toold T60, to reach its prospective medium term level assumed in this report)the loss to the Groundnut Stabilization Funds can be approximated, for bothyears, at CFA francs 1 billion.

3. However, unless further aid from the EEC will become availableafter 196 9--a possib_lity that cannot be counted on--the losses to the Ground-nut Stabilization Funds would mount very rapidly in the years after 1968/69,and would put considerable stress on the overall liquidity of the Treasury.

1J This loss does not take into account the revenue accruing to theGovernment's current budget from the export tax on groundnuts, includedin line (f). On the basis of a tax rate of CFAF 4,400 per ton thispart of the export tax wTill yield about CFAF 3,080 million in 1967/68,so that the overall net contribution of groundnuts to public sectorrevenues will amount to approximately CFA francs 2,870 million(3,080 - 210).

ANNEX IIPage 2

Shelled Basis 1969/70 1970/71 1971/72

(a) World prices (CFAF/ton) 40,335 40,335 40,335(b) Output for exports ('000 tons) 601 609 847(c) Total export earnings (CFAF million) 24,241 24h,564 34,164(d) Total costs (CFAF million) 26,580 26,920 37l,441(e) Total loss (CFAF million) 2,339 2,356 3,277(f) Payments to stabilization funds

incl. in (d) (CFAF million) 1,203 1,218 1,694(g) Net loss to the Groundnut

Stabilization Funds(CFAF million) 1,136 1,138 1,583

4. On the other hand, a small reduction--4 percent--in producer pricesand/or in the other costs, would redress the situation, if all other assumption8are unchanged:

(a) Total export earnings (CFAF million) 24,241 24,564 34,164(b) Producer price and other charges

(CFAF/ton) 42,435 42,435 42,435(c) Total costs (CFAF million) 25,517 25,843 35,943(d) Total loss :1,276 1,279 1,779(e) Net loss to the Groundnut Stabi-

lization Funds 73 61 196

Is such a reduction feasible? If the decline affected only charges other thanthe producer price, they would have to decline from CFA francs 18,061/ton to16,293/ton (shelled basis). These charges, however, include both an exporttax and payments to the stabilization fund. If these are excluded, othercharges total at present CFA francs 11,770/ton and would have to decline toCFA francs 10,000/ton, or by 15 percent. A number of actions are to be under-taken by the Government to reduce these marketing and processing charges.Inter alia, the feeder road construction program in the groundnut area isintended to reduce transport cost. However, it is unlikely that marketing andprocessing costs alone can bear the needed reduction in the delivered price ofgroundnuts. Thus, a modest further reduction of the producer price is a.realistic possibility. Maintaining the assumptions above, and setting othercharges (arbitrarxly) at CFA francs 10,900/ton, the producer price should de-cline from CFA francs 26,142/ton to 25,250/ton or by 3.4%. On an unshelledbasis, this would mean a fall in producer prices from CFA francs 18,300/ton asin 1967/68 to CFA francs 17,677. It is believed that such reduction would notaffect the farmers' incentive to utilize fertilizers and other productioninputs.

5. In conclusion, during the 1967/68 - 1968/69 period, Treasury re-sources will probably decline by some CFA francs 1 billion. If world pricesremain at the level assumed in the report and if producer prices are adjusted.,no further Treasury loss is to be expected thereafter. The groundnut stabi-lization fund, however, would have been largely exhausted. This is not aserious problem for Senegal, (a) because the aggregate of Treasury resources

At=EX IIPage 3

can be shifted within the Treasury, and (b) because Treasury resourcesincluding the Government s recourse to Central Bank borrowing are ample enoughfor compensating fluctuations in world groundnut prices. Assuming that all

other Treasury resources are needed for other purposes, the simple availabilityof Central Bank finance (of the order of CFA francs 3.4 billion), shouldpermit the financing of short-term fluctuations in price of between 3-10 per-cent of the price assumed in this report (old o60/long ton).

6. For purposes of comparison, the folluiing are the producer pricesand other charges on shelled and unshelled basis used in this Annex:

CFAF per metric ton

Producer price, unshelled 13,300 17,677Other charges, unshelled 12,643 12,028

c.i.f. price, unshelled 30,943 29,705

Producer price, shelled 26,142 25,253Other charges, shelled 13,061 17182

c.i.f. price, shelled 4U03 42,435

O1 ongj on CFAF/metric ton

World price (c..i.f. London, shelled) 58 33,990World price " " " 60 40,335

In this note, exports of raw oil have been treated as exports ofshelled groundnuts.

ANNEX IIIPage 1

PROSPECTIVE INDUSTRIAL PROJECTS

Possible StartCapacity Investment Turnover of Production

i70xd-processing (million CFA francs)

Tomato concentrates 2,000 t/year 37 250 1968/69Fruit juices n.a. 180 n.a. 1969/70Fish processing 10,000 t/year 850 1,300 1969/70Beef canning n0a. 200 n.a. 1968/69Vish processing 15,000 t/year 40 n.a. 1967/68Rice mill (Delta) n.a0 100 n.a. 1968Rice mill (Richard Toll) nQa. 100 n.a. 1967

Sugar mill 12,000 t/year 2,000 500 1969/70Margarine 1,000 t/year 100 n0a. 1969

`:lxtAies and leather

Cotton spinning 4.,000 t/year 90 n.a. 1968Cotton weaving n.a. 705 n.a. *Printing 4 million meters/year 40o 2,800 1968Integrated mill 10 million meters/year 1,45o n0a. 1969/70Tanning 250,000 skins/year 40 160 1968

Other industries

Groundnut shells 2,500 t/year 130 90 1969Rubber 300,000 tires/year 160 80 *Fertilizers 1 0,000 t/year 3,100 1,100 1968Fertilizers,insecticides n.a, 100 n.a. ?Organic fertilizers 78,000 t/year 200 400 1968Aromatic essences n.a. 188 n.a. 196V68Petroleum products n.a. 120 n.a. 1967/68Cement 100,000 t/year 600 500 ?Pots and pans 1,000 t/year 100 .165 1968Metal caps n.a. 20 54 1968

* Of doubtful realization

? Uncertain; studies in progress

ANNEX III

Page 2

PROSPECTIVE INDUSTRIAL PROJECTS

Possible StartCapacity Investment Turnover of Production

(monCFA francs)

ulass factory n.a. 100 n.a. *Detergents 900 t/year 60 150 ?Electric steel mill 18,000-25,000 t/year 1,200 650 ?-e-talic wire 300-400 t/year 80 na. ?'e7ils, wires 400 t/year 150 90 ?

ftcfrigerators (assembly) 2,000 t/year 80 95*Air conditioners n,.a nsa, noa0 ??etteries ri/a. 00 231?Transistor radios 12,s00/year _0 100 ?

(assembly)Total 12_9830

Total, excluding uncertain and doubtful projects 944h5

* Cf doubtful realization

? UTncertain; studies in progress

SGurce: EEC, Possibilities dtindustrialisation des Etats Africains et Malgache,December 1966; IERD estimates

ANNEX IVPage 1

L1aor" Projects Included in the Revised 1965/66 - 1968/69 Development P2;r'

The following is a brief description of some of the major projectsincluded in the current development plan. A summary of those projects is giver.in Table 31 in the Statistical Annex.Agriculture

i. Groundnut and millet productivity. A complex operation involvingprovision of seeds, fertilizers, pesticides and extension services on a massivescale for raising yields of groundnuts and millet. The project originatesfrom the necessity to improve the profitability of cultivating groundnuts inthe face of the fall in export prices, and is intended to increase the techni-cal skill of farmers so as to facilitate future diversification into foodcropsand animal husbandry.

2. Rice cultivation0 A series of protects localized in four mainareas - (a) Senegal river delta--eventual goal of 30,000 hectares under rice,by smallholder and cooperative farming; has been slowed down waiting for the:esults of a newnfly implanted extension service; (b) Richard Toll on the Senegalriver--the mechanized exploitation has been disappointing and has faced seriousmanagement problems in the past; (c) Senegal river valley--a series of smallei-rice development areas along the river and exploiting its floods for irri-gation; (d) Casamance--two rice growing projects; the first is assistance tomangrove swamp rice cultivation, practiced already by farmers, the second isa project of demonstration on trial plots, training of personnlel and hydro-logical survey of the region (U.S. AID). Two rice mills are under constructicn(Delta and Valley areas).

3. Sugar. A project for cultivating a part of the land at and aroundRichard Toll (q.v.) under sugarcane. An experimental farm of 110 hectares isbeing set up at present. At a first stage, about 1,500 hectares will be de-veloped, but at a later stage--and after works on the river Taouoy for waterregulation and irrigation purposes are completed--an additional 7-8,000 ha.are to be put under cultivation. A sugar mill and a refinery are to be setup by private foreign interests with Government participation. The project isconceived as a means of diversifying agriculture. Output of sugar would beessentially for import substitution. Mauritania, on the other bank of theSenegal river, may plan a similar development. Other West African countries(Niger, Togo, Dahomey, Upper Volta) also have projects in sugar. It is likelythat the project will require subsidization from the Government for many years.

4. Cotton. A project for the cultivation of cotton in the Sine Saloumand Eastern Senegal, under the technical direction of CFDT (Compagnie Francaisedes Fibres Textiles). The original plan foresaw 4,000 hectares under cotton by1968/69 with the possibility of an immediate expansion to 5,000 hectares.The project has been highly successful and the revised Plan has increased theobjective to 12,500 hectares or a likely production of 4,500 tons of cottonfiber, corresponding to the input requirements of the local textile industry.A first cotton mill is to be set up in 1968. A second is also planned. FEDis providing a large share of the finance.

ANNEX IVPage 2

Livestock

1. A number of projects for improving animal health are beingcarried out.

2. Well drilling is being also implemented.

3. A number of abattoirs had been planned, but the program includedin the original Plan has been cut for lack of finance. A chain of coldstorage points are being built in the interior as well as a unit at theport of Dakar. Senegal imports large amounts of cattle, meat and dairyproducts, but the development of this sector is considered a longer termproposition, of second priority vis-a-vis agriculture.

Fishing

The major program--described above, paras 51 and 53--is a tunafishing fleet. There has been a delay in implementation due to a changein the technique of preservation (from refrigerating to freezing facilities).

Roads

A number of projects, different from those originally envisagedby the Plan are being carried out. They consist largely of reconstructionand renewal of existing roads. Other projects include:

1. Routes du di6ri. A long road coasting the Senegal river andbuilt mostly to open up areas to year-round traffic. The economic justi-fication of this road system seems doubtful.

2. Production roads. A number of feeder roads in the groundnut areato cormect areas already being cropped to the rail line; other roads includeone through Eastern Senegal, mostly for opening up new agricultural lands,and another through a vegetable growing district, north of Dakar. The latterdoes not seem to have a strong justification at present.

Railways

A program of renewal and reorganization has been financed by IDA.

Ports

A program of expansion and renewals of the port of Dakar has beenfinanced by the Bank. The original plan also envisaged the improvem6ent orexpansion of a number of other ports (particularly St. Louis); the revisedplan has dropped most of the latter projects.

ANNEX IVPage 3

Education

1. The revised program foresees a considerable reduction of edu-cational expenditures, falling from CFA francs 8.8 billion in the originalPlan to under CFA francs 5.3 billion. This reduction was accompanied by athorough change in emphasis towards more primary education to the detrimentprimarily of general secondary education and miscellaneous other educationalactivities. The share of primary education has been raised from formerly24% to almost 42% of total Plan expenditures in education, whereas the shareof secondary education was reduced from 28% to 22% and the share of miscel-laneous other educational activities and information from 17% to 9%. Theshares of technical education (15%) and the University (9%), have onlyslightly decreased but programs in these sectors have suffered from theoverall reduction of expenditures in education.

2. In primary education, the revised Plan foresees the constructionof 825 new classrooms and 325 teacher quarters. Although it will likelynot be entirely realized during the period of the second Plan,this programalone will absorb almost one third of total educational expenditures, orroughly CFA francs 1.7 billion.

3. Almost half of the total amount earmarked for secondary educationis planned to be used for the financing of four new Lycees in Dakar, Kaolak,Thies and Pikine, as part of the long term program to have a separate Lyceefor boys and girls in each province (CFA francs 527 million). The constructionof 10 new CEGs (Colleges d'Enseignement General), financed by Canada, will useanother 25% of the funds earmarked for secondary education (CFA francs300 million) whereas the remainder will be used to extend and improveexisting Lycees and CEGs.

4. CFA francs 800 million are foreseen for technical education,spread over 20-30 different projects, of which slightly less than half inagriculture.

5. Higher education concerns exclusively the University of Dakar.The construction of a polytechnical school has been postponed due to thelack of financing.

Health

The Plan includes large expenditures on hospitals in the interior,financed by foreign aid. Difficulties in financing the hospitals' currentbudgets have been encountered recently.

Housing

The original plan was revised and now includes a larger share ofexpenditures on low-income housing. Foreign aid may be forthcoming-in theform of loans on commercial terms--for middle income housing.

A-NNM IVPage 4

Water supply

1. Water supply for Dakar. This huge project can be roughly divided

in two parts. The first includes laying pipes from Dakar to near Thies(30 miles), where water resources are available for supplementing Dakar's needs

over the next 10 years; FED financing is sought for this part. The second part

includes laying pipes from Thies to the Lac de Guiers, some 130 miles fromDakar, which has apparently sufficient water to solve Dakar's problems overthe very long term. This part has doubtful economic justification, but the

Government is committed to it. Financing will be on suppliers' credit and on

German aid.

2. Water supply and sewerage projects for both Dakar and rural townshave been considerably, reduced in the revised Plan. Both the need to economizeand difficulties of implementation are the reasons.

Industry

The original plan substantially underestimated the contribution bythe Government to new industrial ventures. In the first half of the plan, theGovernment has made a sizeable effort in participating to a fertilizer plant(SIES, financed in part by IFC), a refinery, a cold storage enterprise and tothe company charged with managing the tuna complex. The tuna canning factorywhich will also be financed by the Government (likely with Soviet aid), willnot be required until the next Plan.

During the second half of the current plan, Government contributionsare envisaged for the sugar, rice and cotton mills (all likely to requireforeign financial support).

ANNEX V

PROJECTIONS: 1968 - 1972 Page 1

This Annex reviews briefly the assumptions and results of pro-jections discussed in the main text.

A) Gross Domestic Product (billion CFA francs)

1966 1968 1970 1972

Agriculture 55.8 58.6 60.0 62.4Energy and mines 4.2 3.8 4.2 4.6Industry and construction 28.2 31.1 33.6 35.5Services 78.4 81.3 83.7 86.4Government 29.6 30.9 32.3 34.0

Total 196.2 205.7 213.8 222.9

Agriculture: (1) Groundnut volume: assumed to increase by almost7 percent p.a. between 1966/67 and 1972/73 from950,000 tons to 1,410,000 tons (1,070,000 tons in1971/72), as a result of a small increase in areas,a 30 percent increase in average yields in theSATEC area and a 5 percent increase in averageyields outside the SATEC areas.

(2) Groundnut producer prices are assumed to declinefrorti CFA francs 21/kg. in 1966/67 to 18.3/kg. in1967/68 and to 17.7/kjL. in 1969.

(3) Other crops: (at constant prices):Cotton: 13,500 tons seed cotton in 1972Sugar: 20,000 tons of raw sugar in 1972Millet: 790,000 tons in 1972 based on increased

area and 40 percent increase in yieldsin the SATEC areas, 5 percent in otherareas.

Rice: 172,000 tons of paddy in 1972, includ-'ing 27,000 tons for the delta schemes.

Cassava: 172,000 tons in 1972Vegetables:. 123,000 tons in 1972Livestock: assumed to increase by 5 percent

per annum between 1966 and 1972.Other products: kept constant.

Energy and Mines: (1) energy assumed to increase slightly less thanin the past (7 percent p.a.)

(2) mining assumed to increase in line with therise in output of calcium phosphate, whichreaches a maximum of 1.2 million tons in 1968.

ANNEX VPage 2

Industry and Construction:

(1) food industries to grow as a resuit of newinvestments (see below), but oil mills at alower rate, due to decline in price of oilassumed at 10 percent. Total crushing capacityto reach about 780,000 tons (unshelled basis)in 1973.

-(2) textiles and other industries have been alsomade to depend on known investment decisionsiFor other industries, where a value of output isnot known in detail, a marginal capital: outputratio of 1.3 (net) has been used, on the basisof past relationships.

(3) construction has been estimated by using the 1963-1966 ratio of value added of this sector to fixedinvestment.

Services: (1) transport has been assumed to grow as the abovesectors.

(2) commerce has been assumed to grow in proportionto other sectors; the past relationships betweenits growth rate and the growth rate of GNP hasbeen used, differentiating between years of highand years of low groundnut crops.

(3) other services are assumed to grow as population.

Government: has been assumed to grow at 2 percent per annumin 1968 and in 1969 and at 2.5 percent thereafter.

B) Investment (billion CFA francs)

1966 1968 1970 1972

Agriculture o.48 0o80 0.90 le00Energy and mines 2.88 2.70 3.85 3.05Industry and construction 4.41 6.65 5.60 3.80Services 4.50 3.20 3.20 3.20

Private sector 12.27 13.35 13.55 11.05

French administration 0.26 0.10 - -Senegalese administration 6.22 14.00 14.70 16.20

Public sector 6.48 14.10 14.70 16.20

Grand total 18.75 27.45 28.25 27.25

AM= VPage 3

Agriculture for 1968 and 1969: the value of new agriculturalmachinery estimated in the Plan; for later years,a linear increase has been assumed.

Energy and Mines: a new power station is planned for 1969 and 1970,while in 1968 and 1969 a large investment in thereconversion of phosphate mining is expected.

Industry and const-uction: projections based on known investment projects

(See Annex III).

Services: assumed constant, at a lower level than in 1966,as output of private transportation should increasein the future at a lesser rate than in the past.

French admini- notional amount, to continue past reduction.stration:

Senegalese admin- for 1968 and 1969, data are derived from plannedistration: public expenditures, after deduction of intangible

investments; for later years, absorptive'capacityhas been assumed to increase by 5 percent per annum.

C) Merchandise Imports (billion CFA francs)

1966 1968 1970 1972

Capital goods 4.4 8.8 9.1 8.7Fuels, intermediary and raw

materials 9.5 10.3 111 1201Consumer goods, food 14.6 14.4 14.4 14.1Consumer goods, other 11.4 11.4 11.4 11.4

Total above product 39.9 44.9 46.o 46.3

Other imports 3.0 3.1 3.2 3.2

Total imports 42.9 48.0 49.2 49.5

Capital goods: the average past ratio between capital goodsimports and investments has been applied to futureinvestment.

Intermediates: the average past ratio between these imports andoutput of productive sectors has been applied tofuture output of these sectors.

ANNEX VPage 4

Consumer goods, import of rice and grains have been assumedfood: constant, since future domestic output growth

will be largely in excess of per capita incomegrowth; sugar and milk have been taken to riseat the rate of population growth, the former slow-ing down starting in 1971, due to new domesticproduction; vegetables have been assumed to riseat 6 percent per annum, or less than in the past,because of rise of local production; other foodimports to decline at the rate experienced between1962 and 1966.

Other consumer goods:assumed constant; new local production of manu-factures will rise, while per capita incomes willstagnate.

Other imports: to grow at the same rate as above products.

D) Merchandise Ebports (billion CFA francs)

1966 1968 1970 1972

Groundnuts 12.9 11.3 9.1 4.7Oil 13.2 10.7 13.1 14.3Cake 2.5 2.6 3.1 3.7

Total groundnut products 30.5 26.6 2/ 25.3 22.7

Processed Fish 1.3 1.6 2.4 3.7Aluminum phosphate 0.3 0.3 0.3 0.3Calcium phosphate 2.3 2.8 3.5 3.5Fertilizers _ - 0.3 0_4

Total above products 34.4 31.3 31.8 30.6

Other exports 10.1 10.7 11.3 12.1

Total exports 44.5 42.0 43.1 42.7

I/ including statistical adjustment

2/ including 2 billion of EEC price support.

ANNE VPa ge 5

Groundnuts: (1) quantities (in '000 tons, unshelled), afterself consumption and crushing, as follows:

1968 4581969 4301970 3551971 1751972 184

(2) prices: for 1968, old f 58/long ton, c.i.f. basis(CFA francs 24,705/metric ton, f.o.b. basis);for other years, old £60/long ton, c.i.f. basis(CFA francs 25,647/metric ton, f.o.b. basis)

Oil: (1) quantities (in 1000 tons, unshelled) crushedas follows:

1968 5501969 6051970 6601971 7151972 715

(2) prices: for all years, old f 95/long ton,c.icf, basis, plus 15 percent protectionallowed for exports to Common Market countries;in CFA francs, 74,367/metric ton, c.i.f. basis,or 70,670/metric ton, f.o.b. basis.

Cake: (1) quantity taken as 36 percent of crushedgroundnuts, or past average;

(2) price: CFA francs 13,000/metric ton, f.o.b.basis.

Phosphate: calcium phosphate exports to reach fullcapacity in 1969, after reconversion works.Aluminium phosphate to remain constant.

Fertilizers: export projection by new fertilizer firm.

Other exports: to grow at the rate of output growth of manu-facturing, other than oil mills.

ANNEC VPage 6

E) Balance of Payments (billion CFA francs)

1966 1968 1970 1972

Exports, f.o.b. 44.5 42.0 43.1 42.7Imrports, c.i.f. 42.9 48.o 49.2 49 5

Trade balance 1.6 -6.o -6.1 -6.8

Non-factor services balance 2.0 2.8 3.0 2.2

Net balance of foreign trade -

and selrvices 3.6 -3.2 -3.1 -4.6

Interest, public debt -0.2 -0.2 -0.5 -0-5

Other factor income payments -2.1 -2.4 -2.6 -2.9(net)

Net factor income payments -2.33 -2.6 -3.1 -3.4

Private transfers -6.6 -6.6 -6.6 -6.6

IMigrant remittances 2.2 2.2 2.2 2.2

Public current transfers .6 5.1 .1 5.1

Total current trans_xers 1.2 0.7 0.7 0.7

Current account balance -.5- -7.3

Amortization, public debt -0.8 -0.9 -1.0 -1.4

Public capital inflow 3.7 10.0)

Net private capital movements -3.1 -4.0) 6.5 8.7

Changes in reserves -2.3 - - -(- = increase)

Non-factor services: (1) Travel: deficit kept constant at a slightlylower level than in 1966 because of largerforeign tourist expenditures in the future.

(2) Transport: increasing as a result of an8 percent rise in the internationaltraffic of railways.

(3) Government services: cor#ant at 1966 level.

Interest and Amorti- Projection of debt service charges on debt out-zation, Public Debt: standing at present, plus new debt to be in¢urred

up to 1969.

ANNEX VPage 7

Other factor income Past ratio of profits and dividents to valuepayments: added in manufacturing maintained for the future.

Current Transfers: All constant, except for public grants which,in 1966, included groundnut price support bythe EEC. In 1968, this price support is cal-culated on a new basis and is included in thevalue of exports.

Public capital inflow: Derived from development expenditure estimates,as revised to take account of likely lowerlevel of expenditures.

Changes in reserves: No change assumed, because of low increase intotal trade.

Private capital Residual.movements:

t') Savings (billion CFA francs)

1966 1970 1922

Investment 18.8 28.3 27.3

Less: net balance of foreigntrade and services 3.6 -3.1 -4.6

Gross domestic savings 22.4 52.2 22.7

Less: factor payments and currentprivate transfers -6.7 -7.5 -7.8

Gross national savings 15.7 17.7 1 9

Marginal savings rate, national L11.8 J

Marginal savings rate, domestic L_15.8L

STATISTICAL APPENDIX

LIST OF TABLES

Table No.

1 External Medium and Long Term Public Debt Outstandingincluding Undisbursed as of December 31, 1966

2 Estimated Contractual Service Payments, 1967-19813 Population: 1960-19664 Employment5 Industrial Origin of Gross Domestic Product, 1959-666 Gross Capital Formation, 1959-19667 Expenditure Account on GDP and Gross Domestic

Savings, 1961-19668 Gross National Product and Gross National

Savings: 1961-19669 Balance of Payments Estimates, 1961-1966

10 Merchandise Exports, 1959-196611 Merchandise Imports, 1959-196612 Major Export and Import Products, 1962-196613 Estimates of Gross Disbursements on Foreign Financial

Assistance, 1964-196614 Comparison Senegal-Ivory Coast on Cumulative Import

Taxes for Certain Products Manufactured in Senegal15 Agricultural Production, 1957-196616 Agricultural Production 1961-1967 and Projection

1968-197217 Groundnut Sales and Exports, 1949-196718 Groundnut Prices in Senegal, 1950-196819 Output of Selected Industrial Products, 1960-196620 Indexes of Industrial Production, 1959-196721 Analysis of Outstanding Short Term Credit, 1963-196722 Analysis of Long and Medium Term Credits as of

June 30, 1963-196723 Assets and Liabilities of Deposit Money Banks 1962-196624 Assets and Liabilities of BCEAO, Senegal, 1962-196625 Monetary Survey, 1962-196726 Current Government Revenues, 1962/63 - 1966/6727 Current Government Expenditures, 1962/63 - 1967/6828 Analysis of Current Expenditures, 1962/63 - 1966/6729 Overall Government Deficit, 1962/63 - 1966/6730 Cioanges in Treasuxr OperationBs, 1963/64 - 1966/6731 Development Program by Major Projects: 1965/66 -

1968/69, Original and Revision32 Original and Revised Development Program, Summary

by Sector, 1965/66 - 1968/6933 Actual Development Expenditures, 1965/66 - 1966/67

Table 1: SEVjAIU - .TEfWAL MEDIUM- AND LONG,-TERM /1 PUBLIC DEBT OUT-STANDING INCLUDING UNDISBUTED AS OF DECEMBER 31, 1966

Debt Repayable in Foreign Currency /2

(In thousands of U.S. dollars)

Item Debt OutstandingDecember 31, 1966

Includingundisbursed

TOTAL EXTERNAL PUBLIC DEBT /3 79,157

Publicly-issued bonds 213

Privately-placed debt -private bank credits 45

IDA credits 9,000

U.S. Government loans - A.I.D. loans 1,300

Loans from governments of otherIBRD members 61,914Loans from United Kingdom 1,400Loans from France /A 55,014Loans from Germany 5,500

Loans from U.S.S.R. 6,684

/1 Debt with an original or extended maturity of one year or more.L2, Defined to include the CFA franc which is freely convertible into

the French franc./3 Does not include $6,716,110 loan from Export-Import Bank to Air

Afrique guaranteed jointly by Ivory Coast and Senegal. The fullamount of the loan was disbursed and outstanding as of December 31,1966.

/4 Loan of $79,000 from the Compagnie du Chemin-de Fer to the Govern-ment General de l'A.O.F. includes an undetermined amount ofinterest.

Table 2: SENEGAL - ESTfliATEDCONTRACTUAL SERVICE PAY4NETS DUE IN FUTURE ONEXTERNAL MEDIUM- AND LONG-TERN PUBLIC DEBT OUTSTANDING INCLUDING

UNDISBURSED AS OF DECEMBER 31, 1966 /1

Debt Repayable in Foreign Currency 2

(In thousands of U.S. dollars)

YEAR DEBT OUTST. PAYMENTS DURING PERIOD(BEGIN OF PERIOD)

INCLUDING AMORTI-UNDISBURSED ZATION INTEREST TOTAL

1967 72,311 2,839 924 3,7631968 69,272 3,002 875 3,8771969 66,269 3,524 862 4,3861970 62,745 3,447 801 4,2481971 59,298 3,685 732 4,4161972 55,614 3,551 773 4,3241973 52,062 3,497 816 4,3241974 48,565 3,112 730 3,8421975 45,454 2,848 653 3,5011976 42,606 2,614 600 3,2141977 39,992 2,487 535 3,0211978 37,506 2,131 480 2,6111979 35,374 1,581 437 2,0181980 33,794 1,520 406 1,9261981 32,274 1,298 377 1,675

/1 Includes service on all debt listed in Table 1 except for a loanto the value of $6,684,000 from the U.S.S.R. (repayable in goods)and a loan from France to the value of $162,0CO for whichterms of repayment are not known.

L Defined to include the CFA franc which is freely convertible intothe French franc.

Statistical Services DivisionEconomics Department

January 11, 1968

Taole 3

POPUIATIOI: 1960-1966

A. Total PTflation ('000)

Afrmcans Non-Africans Total

1960 3,050 60 3,a102961 3,120 63 3,1831962 3,J190 59 3,2491963 3,270 56 3,3261964 3350 50 3,too1965 3.,44o 47 3,14871966 3,$21 47 3,568

Growth rate (%, p.a.) 2i.4

B. Regioi2a1,T21a~.P.,-,I Afcan PopulatiQ

Population Area (ym2) _______

Cap-Vert 555,930 550 1,011Casamance 585,928 28,350 21Diourbel 56l,4L67 33,547 17Fleuve 382,294 )4.,127 9Senegal Oriental 165,588 59,602 3Sine-Saloum 801,758 23,945 33Thies 467,675 6,6ol 71

Total 3,520 ,640 196,722 18.17

C. Urban and Rural Population (to00)

TotalPopulation Urban 1/ Rural

1961 3,183 74o0.0 2,443.01964 3,400 903.7 2,496.3

Growth rate (%, p.a.) 2.2 6.9 o.7

2/ Towns with more than 5,000 people.

Sources: Ministry of Plan and Development: A & B, Statistics Department;C, Am6nagement du Territoire "Le Peuplement du Sene'gal".

Table 4

EMPLOYMENT

A. Gainfully Employed

Annual average February1960 1961 1964 1965

Agriculture, fishing 3,411 3,144 4,101 4,o80Mining 2,230 1,619 2,635 1,521Manufacturing 12,638 12,554 17,132 15,946Construction 13,954 11,477 14,810 14,779Public utilities 2,788 2,013 2,966 3,012Banks, insurance,commerce 20,300 20,389 16,455 16,865Transport 10,522 9,505 15,770 15,919Other services 239026 22,641 12,013 12,397

lTotal 88,869 83,342 85,882 84,519

Government 45t700 v n.a. n,a. 35,142

Grand total 134;569 n.a n.a 119,661

B., Registered Unemployed 2/

1963 1966

Commerce, banks n.a. 9,166Constrvction n.a. 18;672Domestic help n.a. 3,615Other n.a. 9,113

Total 10,642 40,566 3/

1/ Includes employees of French administration,2/ As of September 30,I/ Includes 5,812 looking for first job.

Source: Ministry of Labor

Table 5

INDUSTRIAL ORIGIN OF GROSS DOMESTIC-PRODUCT, 1959-1966

(billion GFA francs, current prices)

Preliminary1959 1960 1961 1962 1963 1964 1965 1966

Agriculture 41.82 44.82 45.72 47.80 47.O0 48.69 51.89 55.b8Energy and mines 2.40 2.76 2.87 2.90 2.60 2.81 3.06 4.16Food industries 6.22 6.51 7.99 8.22 10.09 10.11 10.29 )Textile and leather 1/ 4.48 4.90 4.97 5.12 5.34 5.48 5.60 ) 23.57Other industries 4.18 4.42 4.37 4.51 4.99 4.83 5.43 )Construction 5.63 5.08 5.19 6.14 5.27 5.56 5.77 4.62Transport 7.05 6.91 6.25 6.10 6,20 7.03 7.10 7.51Commerce 41.81 41.91 47.02 50.49 53.02 54.49 55.48 58.ogOther services 2/ 12.02 12.02 12.02 12.02 12.20 12.88 12.83 12.83Government / 22.95 23.52 23.88 _gL 2 % 29.39 30.03 28.60 29.56Gross domestic product at marketprices 148.56 152.85 160.28 169.53 176.10 181.91 186.05 196.14Less: Indirect taxes 2 20.64 23.19 24.68 24.50 26.27 27.02 27.51GDP at factor cost 126.87 132.21 137.09 144.85 151.60 155.64 159.03 168.63

Growth rate (%) 4.2 3.7 5.7 4.7 2.7 2.2 6.oGrowth rate 1959-1966 (% poao) ( 4.2 )Per capita GDP (CFA francs) 42,511 43,C69 44,583 45,580 45,776 45,607 47,261Growth rate (%poa.) 1.3 2.0 2.2 0.4 -0.4 3.6Growth rate 1960-1966 (% poa.) ( 1.8 )Possible price rise 1960-1966 (% poa.)( 2. - 3.0 )

1/ Including handicrafts2/ Includixng rents of dwellings and wages paid out of households' budgets3/ Net sales of goods and services plus wages and salaries

D6tailed remarks are inserted after 'Table 8.

Table 6

GFVSS CAPITAL FORMATION, 1959-1966

(billion CFA francs) Preliminary1959 1960 1961 1962 1963 1964 1965 1966

Private sector -/ 7.57 7.88 6.99 7.70 10.73 12.25 12.02 12.27Agriculture 0.09 0.20 0.37 0.28 0.58 0.36 0.28 0.48Energy and mines 2/ 3.15 3.23 1.73 1.05 3.17 2.56 2.99 2.88Food industries 0.36 0.54 0.15 1.12 1.47 1.30 1.22 0.97Textile and leather 0.22 0.10 0.10 0.41 0.29 0.34 0.39 0.28-Other industries 0.09 0.26 0.22 0.81 0.79 1.09 0.92 2.40Construction 0.74 0.67 0.72 o.84 0.97 0.67 0.94 0.76Transport 1.17 1.17 1.88 1.67 2.01 3.43 3.78 3.00Services 0.58 0.58 0.58 0.58 0.45 1.40 0.40 0.40Coomerce 1.17 1.13 1.24 0.94 1.00 1.10 1.10 1.10

Public Sector 5.80 4.72 8.55 9.39 8.77 8.83 9.93 6.48Senegalese administration 3.54 2.49 6.93 8.31 6.81 8.41 9.67 6.22French administration 2.26 2.23 1.62 1.08 1.96 0.42 0.26 0.26

Gross fixed capital formation 13.37 12.60 15.54 17.09 19.50 21.08 21.95 18.757- i~~~~~/

Changes in stccks -0.02 n.a. n.a. 107 -0.70 +0.42 -0.02 n.a.

Gross domestic investment 13.35 n.a. n.a. n.a. 18.80 21.50 21.93 n.a.

1/ Includes enterprises in which the Government holds a minority participation.2/ Excludes expenditures on petroleum research, estimated at CFAF 3 billion a year in 1959 and 1960,

and at CFAF 2.8 billion in 1966.3/ Excludes stocks of agriculture.

Detailed ruLarks are inDorted after Table 8

Table 7EXPENDITURE ACCOUNT ON GDP AND GROSS DOMESTIC SAVINGS, 1961-1966

(billion CFA francs)

7 Preliminary1961 1962 1963 1964 1965 1966

Consumption l40o.6 150.2 160.2 160.7 168.1 173.7Gross domestic investment 15.5 1/ 17.1 1/ 18.8 21.5 21.9 18.8 1/Plus or minus trade and non--

factor services balance 4.2 2.2 -2.9 -0.3 -3.9 306

Gross domestic product,market prices 160.3 169.5 176.1 181.9 186.1 196.1

Public consumption 2/ 22.4 29.0 27.4 28.2 28.9 n.a.Private monetary cOnsumptiOn 98.8 100.5 110.7 109.9 115.8 n.a.Subsistence consumption 19.4 20.7 2-2.1 22.6 23.4 n.a.

Total consumption 140.6 150.2 160.2 160 168.1 MO.?

Public sector savings 3/ 7.4 2.3 6.5 3.4 5.8 5.0Private sector savings 4/ 12.3 17.0 9.4 17.8 12.2 17.4

Total gross domestic savings 19.7 19.3 15.9 21.2 18.3 22.4

1/ Gross fixed investment2/ Goods, services, external expenditures, wages and salaries of Senegalese administration3/ Senegalese administrations; after payment of subsidies and transfers/ Including French administration

Detailed rmonarks are imerted after Table 58

Table 8

GROSS NATIONAL PRODUCT AND GROSS NATIONAL SAVINGS: 1961-1966-(billion CFA francs)

Preliminary1961 1962 1963 1964 1965 1966

Gross domestic product, market prices 160.3 169.5 176.1 181.9 186.1 196.1

Less: net factor income payments abroad -1.5 -1.7 -2.1 -2.3 -2.2 -2.3

Less: net private transfers abroad -3.4 -3.6 -3.5 -3.9 -4 01 -404Gross national product 155.4 16h.2 170.5 175.7 17998 1 89.4Growth rate (1961-1966 (% pea.) /- - - - - - - - - 4.1 - - - - - - - - - - -/

Growth rate of GNP per capita 1961-1966 (% p.a.) /- - - - - - - - - 1.7 - - - - - - - - - /

Gross domestic savings 19.7 19.3 15.9 21.2 18.0 22.4

Less: factor payments and private transfers -4.9 -5.3 -5.6 -6.2 -6.3 -6.7

Gross national savings 14.8 14.0 10.3 15.o 11.7 15.7

Gross national savings as % of GNP 9.5 8.5 6.o 8.5 6.5 8.3

Detailed remarks are inserted on the adjacent page.

REMARKS ON TABLES 5-8

(A) Value added

(1) Agriculture Own consumption at the farm was re-estimated, byreference to more complete and consistent seriesof agricultural production; the Statistics Departmentestimate for 1964-1966 differs in method from that ofprevious years. Groundnut production is recorded inthe year of marketing, rather than of production.

(2) Energy and Mines Recalculated by taking account of 1962 and 1966census; also value added by petroleum research wasincluded.

(3) Textile and Leather, The value of handicraft output has been added; seriesFood Industries, before 1963, adjusted for new methodology adoptedOther Industries thereafter.

(4) Transport Re-estimate of material inputs for 1963-1966, basedon methodology used for previous years.

(5) Commerce Adjusted to take account of changes in other sectors.

(B) Gross Capital Formation

(1) Energy and Mines Adjustment for oil research (intangible assets) for1959 and 1960; results of 1962 census used for thatyear.

(2) Industry Results of 1962 census used for that year.

(3) Construction Series 1959-1963 increased, to follow the methodologyused in later years.

(4) Services For housing, reduction in Statistics Department esti-mates for 1963-1966, to avoid duplication on publicsector investments.

(C) Expenditure Account of GDP

(1) Public Consumption One of many alternative presentations; used hereand Public Savings mainly for showing trends, rather than absolute level2

(D) GNP and National Savings

(1) National Product Public current transfers as per Table 9 have beenand Savings assimilated to a capital account item and therefore

excluded from the calculation of national concepts.

Sources: "inistry of Plan and Development, Statistics Department;IBRD estimates.

Ta' ,e 9

BAIANCE OF PAYMENTS ESTIMATES, 1961-1966

-(billion CFA francs)Preliminary

1961 1962 1963 1964 1965 1966

Imports, ¢.i.f. h3,5 43.1 44.2 45.6 44.6 42.9Exports, f o.b. 39.3 38.6 34.6 38.3 38.5 445

Trade b_lance - .-2 1I47 -76 -73.3

Transport, net 1.8 1.8 2.7 2.6 2.6 2.7Travel, net -6o0 -6.3 _6.o -5.1 45.0 -4¾7Government serviceb,- net 12,6 11,2 100 9.5 4.6 4.0

Non-factor servid 5s balance 877. -T77 -T.7 2720 -5 2.0

Interest, p-iblic debt (net) 00 0o1 -0.2 -01 --0o1 -0.2Dividends and profits -L5 -106 -e9 -2.2 -2,1 -21

Net factor income paymetv -1.5 -. 7 -2.1 -2 -2.3

Private current transfers abroad -5.2 -5.6 -5.7 -6,1 -6.3 -6,6Migrant remittances 1.8 2,0 2.2 2,2 2.2 2,2Public current transfers 5.0 5.0 5.2 6.1 5.2 5.6

Current transfers balance -111 =L7 202

Current Account Balance 4. 3 1.9 -3.3 -0o. -5.0 2.5

Public cap.tal inflow 2.6 5.0 4.6 5.6 3.9 3.7Amortization on public debt 1/ -0.1 -0.3 -0.7 -o.6 -0.6 -o.8Net private capital movements and errors and

omissions n.a. n.a. -5.6 -6.5 -o.8 =-3.1Change in neserves ( - increase) n.a. n.a. 500 19 2.5 -2.3

1J Includes liquidation of assets owned by other ex-AOF countries

itO detad-s iin adjaAcent pageo

Remarks on Table 9

Services:

(1) Transport

- Railways income from Mali estimated from Project Report.- Margins on bu.nkerafrom 1959 to 1962, from National Accounts.

For 1963-1966, from tonnage sold at Dakar.- Port - cargo handled for Mali estimated at 159,000 tons in

1965 (130 CFA francs/ton).

(2) Travel

- Air and shipping fares estimated by linking their values andnumber of passengers in 1959, with number of passengers inlater years.

- Tourists visiting Senegal estimated to have remained unchanged.- Expenditures abroad of residents: numbers leaving decreasing

from 24,000 in 1961 in proportion to decrease of non-Africanpopulation - 1/2 of these assumed to spend 2 months abroad and50,000 CFAF/month; 1/2 spend 3 months and 50,000 CFAF/month.

(3) Government Services; services rendered by Senegal administration toFrench administration minus services rendered by France to Senegal.as estimated by the Statistics Department.

(4) Interest and amortization on public debt; estimated by utilizingGovernment budgets.

(5) Dividends and profits; net profits of manufacturing establishments,excluding mining and construction but including power as shown byindustrial census for 1962 and estimated for later years on thebasis of 1966 census.

(6) Private transfers abroad; estimated by recourse to 1959 evaluationof income of expatriate families, and that year's proportion ofsavings less investment in the country; estimated for later yearson the basis of the increase in total family income.

(7) Migrant remittances; estimate from a 1956 value of remittances,linked, for later years, on an estimate of total emigrants.

(8) Public current transfers - see Table 13.

Source: IBRD estimates

Table 10

MERCHANDISE EXPORTS, 1959-1966

(Billion CFA francs)

1959 1960 1961 1962 1963 1964 1965 1966

Customs Statistics 28.60 27088 30.66 30.67 27e28 30e24 31.71 36.76

Unrecorded Exports:

to Mauritania 3.65 3.67 3.66 3.65 3.5 3,5 3.5 3.5

to other UDOA 3036 2.98 3.83 3.09 2.96 2.64 2,1* 2.0

to Mali 11.85 5.90 - - 0.04 0.1 0.1 0.2

to Gambia - - - - - - - o.o6

Correction for valuation ofGroundnut Products / - - +1.16 +1.18 +0.83 +1.81 +1.10 +1094

TOTAL n.a. nOa. 39,31 38,59 34.61 38.29 38.51 44.46

Sources and footnotes - see Table 11.

* CFA francs 350 million of exports to UDOA are included in the customs statistics, bringing total exports tothose countries to,an estimated CFA francs 2.45 billion.

Table 11

MERCHANDISE IMPORTS, 1959-1966

1959 1960 1961 1962 1963 1964 1965 1966

Customs statistics 44-04 42048 38033 38.21 38,53 42039 40057 39.75

Corrections made bySenegal, readjusted _ - - +2080 +0098 +is64

Figures used by Senegal 440o4 42048 38033 38.21 41053 42039 41055 41039

-"on-recorded imports from:

UDOA 0093 1057 2.95 2052 1.6 2.0 1.52 incl.

lIaurit.a-a m 1G45 1.65 300 3.0 300 3.0 3.0 3.0

Non-recorded imports of: 3/W4heat and rice - - 2.0-' 2.0 incl. incl. incl. incl.

Tana Fish - - 0°4/ o.4 0.6 0.6 0.4 0.4 2Urrecorded imports from Mali 2C82 1.22 - 0.5 0.4 0.6 o.6 /Illicit imports from

Gambia V nsa nOa, ic8 2.0 2.0 2.2 2.5 2.5

48C5 4801 49.2 50.6 '49.6 47.9

Minus:

we-exports to Mauritania / n,a. nOa. 5.0 500 5.0 5.0 5.0 5.0

TOTAL noao noa, 43.5 43.1 44.2 45.6 44.6 42.9

S6ur-.es and foothotes: see adjacent page

Tables 10 and 11 - Footnotes

/ Difference between real prices received by-Senegal fcr shel-led groundnuts and for raw-andand refined groundnut oil and the statistical prices (mercurial) used in the exportstatisticso For the years 1963/64 through 1965/66 prices are given bY BCEAO in"L'Economie Ouest-Africaine" Noso 123 and 137, Prices for earlier years have been esti-mated, based on the French guaranteed price for ehelled grouninuts.

g/ For petroleum imports.

S/ Extrapolated

li/ Mission estimates, based on the IMF report, "the Economy of Mauritania", December 1965-

S/ Mission estimates, based on information received from the Ministry of Finance,

Sources:

(a) B0CoE0A90. "Conjoncture Ouest-Africaine" and "Notes d'Information"

(b) Ministry of Planningo "Situation Economique du Senegal', 1965 and 1966.

"Comptes Economiques 1959-60-61-62f'.

"Bulletin Statistique et Economique Mensuel"

Table 12 EIAJOR EXPORT AND IMPORT PRODUCTS, 1962-1966(billion CFA francs)

EXPORTS

1962 1963 1964 1965 1966

Groundnuts (shelled) 11.8 8.7 9.1 9.2 12.9

Raw groundnut oil 9.4 7.1 9.4 10.7 10.8

Refined groundnut oil 1.6 2.5 2.7 2.4 2.4

Groundnut cake 2.1 1.9 2.4 2.6 2.5

Other groundnut products 1/ 1.2 o.8 1.8 1.1 1L2

Total groundnut exports 26,1 21.0 25 .4 260o 30.5

Processed fish 1.1 1.8 1.1 1.1 1.3

Calcium phosphate 1.2 1.2 2.2 2.4 2.3

Aluminium phosphate 0.2 0.1 0.2 0.3 0.3

Total above products 28.6 24..1 28.9 29.8 34.1

Total exports 38.6 34.6 38.2 38.5 44.5

IMPORTS

Food and beverages 14.5 13.6 16.4 15.2 14.6

Other consumer goods 13.2 12.5 12.8 11.4 11.4

Fuel 2.1 2.1 1.9 2.5 2.7

Raw materials 0.7 0.7 0.8 1.8 2.1

Capital goods and:.:intermediate products 10.1 10.2 11.0 10.0 9.1

Total above products 4p.6 39.1 42.9 Wo. 39.9

Total imports 43.1 44.2 45.6 44.6 42.9

1/ Correction for valuation of export prices

Sources: Ministry of Plan and Development, Statistics Department,IBRD estimates.

Table 13

ESTIMATES OF GROSS DISBURSEMENTS-ON FOREIGN FINANCIAL ASSISTANCE1964-1966

(billion CFA francs)1964 1965 1966

Financing of current expenditures (grants) 6.08 e/ 674 e 6.66

France 5.19 5,22 5.30University 1.77General technical assistance 3.00 elScientific research 0.33 0.36 0.27Railway 0.09School supplies 0.14Radio 0003

United States 0.74 -0.31 )Canada 0-03 ) 0.30 e/Germany 0.13 027 )Switzerland O002 )European Development Fund - 1.53 1006

Financing of capital expenditures (grants and loans) 5a65 3.86 3.67

France f 3,01 1.80 l.O5FAC G. 81T 0.3CCCE 0.98 Li9 0.54University 0X19 0026 0.13

C-ermany o..5o 0.07 -

United States 0.49 0jo 0.40 /United Nations 0341 0 3 0.4u European Development Fund =1 1.

Grand Total 11.73 10.60 10033

1] Partly disbursed in 19672 Excluding expenditures on multinational programs (e.g., ASECNA, OCL-IAV)e/ Partly estimated

Remarks:(1) Data differ from those reported by CECD which appear to over-estimate

lending by France.(2) Technical assistance expenditures by France are estimates for 1966,

kept constant for previous years.(3) The assistance for current purposes by European Development Fund is

the groundnut price support scheme.

Source:IBRD estimates

Table 14

COMPARISON SENEGAL-IVROY COP-ST ON CUMUIATIVE IMPORT TAXESFOR CERTAIN PRODUCTS MANUFACTURED IN SENEGAL

(Import tax as % of c.i.f. value 1/)

Senegal Ivcry Coast

Canned sardines 61.6 4307

Flour 46.5 4.0

Sugar (refined) 1406 l.o

Cotton yarn 68.3 49.5 Ivory Coast hasdomestic production.

Cotton fabric 54.5 37.9

Jute sacks and sim, 47.8 32.2 n

Knitted goods 61.5 43.7

Cotton blankets 54.7 37.8

Matches 41.0 28.2

Cement 54.7 37.9

lJ EEC origin

Source: EEC, Possibilites dfindustrialisation des Etatz,Africainset Malgache, December 1966.

Table 15

AGRICULTURAL PRODUCTION, 1957-1966

('000 metric tons)

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966

Traditional Voodstuffs

Millet 358 325 321 392 407 424 478 532 554 423

of which commercialized - (93) (96) (112) (116) (122) - - - -

Rice 72 87 79 86 84 91 106 110 122 125

of which commercialized - (17) (18) (18) (18) (19) - - - -

Corn 33 26 28 27 28 28 27 37 41 40

of which commercialized - - (9) (9) (9) (9) - - - -

Cassava 146 153 178 168 139 157 152 156 149 241

of which commercialized - - (50) (47) (39) (44) - - - -

Sweet Potatoes 23 22 32 21 16 16 15 7 6 6

of which commercialized - - (1) (1) (1) (2) - - - -

Niebes (cowpeas) - 13 14 11 15 15 14 17 14 16

Fruits 33 33 32 40 - - - -

of which commercialized - - (7) (5) (5) (6) - - _ _

Vegetables - - g5 97 92 100 - - - -

of which commercialized - (34) (34) (33) (28) (34) (33) (34) (34) (36)

Groundnuts 900 770 816 907 995 914 952 1,019 1,168 950

of which commercialized (808) (675) (718) (809) (872) (749) (7821 (839) (984) (775)

Cotton -(Allaine) - - - - - - - 0.1 0.3 1.2

Sources: M4inistry of Plan and Development, Statistics Department: "Comptes Economiques 1959", "Situation Economiques 1962

1963, 1966"; Ministry of Agriculture; IBRD esti.nmtes.

Table 16

AGRICULTURAL PRODUCTION, 1961-1967 AflD PROJECTIONS, 1968-1972

(in billion CFA francs)Actuals Proj e'ctions

1961 1962 1963 1964 1965 1966 1967 1l68 1969 1970 1971 I=77

Groundnuts 20.90 19.19 19.99 21.40 24.53 19.95 22.06 22.55 21.35 18.72 18.91 24.?2

Cotton - - - - 0.01 0.0Lj4 0.13 0.24 0.36 0.43 0.4Y 0.51

Sugar - - - - - - - 0.25 0.42

Millet 6.10 6.36 7.17 7.98 8.31 6.34 n.a. 9.57 10.44 11.01 11.85 12.52

Rice 1.51 1.64 1.91 1.97 2.20 2.25 n.a. 2.41 2.47 2.63 2.86 3.10

Cassava 1.39 1.55 1.52 1.56 1.50 2.41 n.a. 1.58 1.64 1.95 1.70 1.72

Vegetables 2.07 2.25 2.25 2.32 2.34 2.43 2.52 2.50 2.54 2.61 2.68 2.77

Livestoc'k 3-56 3.76 4.04 4.26 4.91 5.11 5.38 5.63 5.92 6.20 6.51 6.84

Groundnut stratw 2.42 2.42 2.23 2.32 2.42 2.42 3.60 3.60 3.60 2.60 2.60 4.10

Other products 2.44 2.67 2.70 2.78 2.87 2.95 n.a. 3.00 3.00 3.00 3.00 3.00

Total 40.39 39.84 41.81 44.59 49.09 43.90 n.a. 51.08 51.32 49.15 50.&5 5).90

1/ Grgindlaat production is recorded in the year of production, rather than of marketing.

Source: See Table 15.

Table 17

GROUNDNUT SALES AND EXPORTS, 1949-1967

(000 tons)

UnsheIled Exports Oil Production ExportsGroundnuts of

Crop Year Total Processed Shelled Unre-Produc- Marketed by the Oil Ground- Unre- fined Refined Groundnution 1/ Factories nuts fined Refined Oil Oil Cake

1949-50 571 429 228 141 67 10 ..

1950-51 471 342 205 96 60 101951-52 571 443 260 164 75 10 70 8 1021952-53 558 449 310 123 83 17 82 8 1191953-54 614 550 315. 187 93 18 91 4 1271954-55 464 390 330 98 82 23 80 8 1191955-56 603 539 340 172 93 26 91 12 1341956-57 763 677 360 284 89 33 87 15 11401957-58 900 808 387 346 96 38 96 16 1541958-59 770 675 344 272 97 38 97 15 1471959-60 816 718 420 246 105 39 105 13 1691960-61 907 809 442 257 106 36 106 10 1791961-62 995 872 453 297 107 46 107 15 1711962-63 914 749 470 195 103 54 103 24 1801963-64 952 782 504 198 115 57 118 31 1821964-65 1,019 839 530 217 124 50 124 32 1931965-66 1,168 984 534 318 125 60 125 33 1981966-67 950 2/ 760 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

1/ Net of losses.

2/ ThRD estimate.

Source: Ministry of Commerce and Industry; BCEAO

Table 18

GROUNDNUT PRICES IN SENEGAL, 1950-1968

(Unshelled)

Producer's 1/Producer Prices (CFA francs/Kg) 1/ Marketed 2/ Money Revenue

Production (billion CFACrop Year Dakar Kaolack Ziguinchor Average (thousand tons) francs)

1950-51 18.55 .. .. 18.50 342 6.31951-52 20.00 .. .. 18.55 443 8.21952-53 20.50 .. .. 18.65 463 8.61953-54 21.00 20.00 19.50 19.95 551 11.01954-55 21.00 20.00 19.50 20.36 390 8.01955-56 22.00 21.25 20.50 20.83 539 11.01956-57 22.00 21.25 20.50 20.60 713 14.61957-58 22.00 21.25 20.50 20.47 831 17.01958-59 22.00 21.25 20.50 20.50 711 14.51959-60 22.75 22.00 21.25 21.50 744 16.01960-61 22.75 22.00 21.00 20.50 830 17.01961-62 22.75 22.00 21.25 20.50 901 18.51962-63 22.75 22.00 21.25 20.50 749 15.41963-64 22.75 22.00 21.25 20.50 798 16.41964-65 22.75 22.00 21.25 20.50 870 17.51965-66 22.75 22.00 21.25 20.50 1,011 20.71966-67 22.75 22.00 21.25 20.50 796 16.31967-68 18.40 17.97 16.59 18.00 3/ 1,000 3/ 18.0

1/ The producer prices quoted here include transportation to the marketingpoints and, for the years before the creation of the Office de Commerciali-sation Agricole, also commercial margins; as a result the producers' moneyrevenue is overstated.

2/ Including losses.

3/ IBRD estimates.

Source: BCEAO and Ministry of Commerce and Industry.

Table 19

OUTPUT OF SEIECTED INDUSTRIAL PRODUCTS, 1960-1966

Quantity Index 1960 1=0o19- 966 1961 1962 1963 1964 1965 3 1965

Mining

Calcium phosphate (ttc0 tons) 903 958 4.36 532 503 725 968 1,069Aluminum phosphate, raw ('000 tons) 135 145 132 134 119 115 128 138

Food industries

Groundnut oil, raw ('000 tons) 120 127 110 102 99 109 113 120Groundnut oil, refined ('000 tons) 58 58 94 120 138 148 152 152

Textiles and leather

Cotton yarns (tons) 330 407 125 168 180 100 92 113Cotton cloth (tons) 1,131 1,346 102 93 97 100 93 1)JJCotton blankets (tons 269 243 123 111 42 40 44 39Shoes ('000 pairs) 3,775 4,629 127 103 153 125 100 123

Other

Cement (10oo tons) 181 195 1S8 109 113 122 108 116Matches ('000 cartons) 95 105 126 96 89 83 112 124Paints and varnish (tons) 2,421 2,479 113 108 150 122 127 130Processed tobacco (tons) 1,265 1,305 96 123 96 90 99 102Soap (tons) 11,808 13,805 91 96 100 95 103 121Processed tuna (tons) 6,159 7,518 96 120 133 102 78 95

Source: Ministry of PLan and Development, Statistics Department

Table 20

IDEXES OF INDUSTRIAL PRCDUCTION, 1959-1967

six six1959 = 100 months months

1960 1961 1962 1963 1964 1965 1966 1966 g67T

Power 122 144 163 166 187 193 210 200 208

1ining 167 396 477 439 549 693 786 834 971

Construction materials 99 106 107 112 117 106 112 118 107

Cheinical industry 106 101 104 116 1g9 116 129 137 i46

Tobacco and matches 96 94 116 92 86 95 99 100 96

Oil mills 102 109 107 111 122 124 130 150 1W:

Grain, flour iGi 107 112 108 102 94 104 104 103

Steets, beverages 96 113 131 143 141 130 129 147 123

6almed food 169 163 203 225 173 132 161 147 225

Textile 113 125 122 135 134 151 190 183 226

2.eather 132 160 128 188 159 129 160 157 1:8

Cther 320 324 223 148 185 159 299 279 329

General index 117 130 132 131 139 142 160 167 173

General index, exclusive of

mining, power and oil

mills 124 130 128 124 121 118 142

Source:: Ministry of Plan and Development, Statistics Department

Table 21

ANALYSIS OF OUTSTANDING SHORT TERM CREDIT, 1963-1967

(billion CFA francs)

December 31 June 301963 1964 1965 1966 1966 1967

Agriculture, fisheries 012' 0.32 0.19 0.20 0.11 0.11Energy and mines io34 1.08 1.21 1.18 1.02 1.57Food industries 2036 2.43 2.25 2.50 4.85 5.09Textile and leather 0.39 Oe49 O.h3 0.38 0.22 0.38Other industries 0,38 o.66 0.58 0.59 0.56 0.57Construction l.33 L40 125 0.93 0o83 0.73Transport 0.71 0.73 0o86 0.o87 0M81 0.72Commerce 19.40 19.35 19.59 15.30 19.72 16.76Services o.54 0.55 0.29 0.47 0.38 0.55Total 2657 27.01 26.65 22.42 28.50 26.48

Ri.sks below CFA francs 10 million 2/ nea. 2.27 1.30 2.84 1.42 2.00 3/*!otal credit from banking system na. 29.28 27.95 25.26 29.92 28.48

of which: oil mills 1.65 1.48 1.52 1.77 3.78 4.56groundnut exports 9.27 10.18 10.16 7.63 12.39 10.22Total groundnut 10.92 I1.66 1.68 9.40 16.17 14.78

Total / excludinggroundnut 15.65 15.35 14.97 13.02 12-33 )Z.7C

Import-export trade 6.20 5037 5.28 3.92 3.53 3.29Internal trade 3,93 3,80 4.15 3.75 3.80 3.25

'/ Excludes agricultural cooperativesLI Includes statistical adjustments: Excludes statistical adjustments+I Of risks above CFA francs l0,,million

Source: BCEAO

Table 22

kNALYSIS OF LONG AND MEDIUM TERM CREDITS AS OF JUNE 30, 1963-1967

(billion CFA francs)

1963 1964 1965 1966 1967

A) Outstanding Credits

Agriculture 0.57 0.74 0.61 0.18 0.25Industry 3.67 4.19 4.35 4.50 4,50Construction 1.66 1.96 2.39 2.17 2.13Transport 0.12 0.05 o0o4 0.18 0.15Commerce o.14 0.10 eo.4 o.16 o.85Services 0015 0.35 040 0o.62 o.63Financial institutions 0.15 O.10 0.05 .. ..

Total 6,46 7.49 7e98 7.81 8.51of which, long term nOa. 17'fi 461 T5.0 5.70

B) Net Credits Extended

Agriculture 0.17 -0.13 -0.43 0.07Industry 0.52 0.16 0.15 -Construction 0.30 0.43 -0.22 -0o04Transport --0f07 -0.01 0.14 -0.03Commerce -O.O4 0.O4 0.02 0.69Services 0,20 0.05 0.22 0.01Financial institutions -0.05 -O.05 -0,05 -

Total 1f03 0.49 -0.17 0.70of which, long term n.a. .O02 0.40 0762

Source: BCEAO

Table 23

ASSETS AND LIABILITIES OF DEPOSIT MONEY BANKS, 1962-1966

(billion CFA francs, end of period)

1962 1963 1964 1965 1966

Reserves .83 .56 .65 .90 .52

Foreign assets -2.81 2.43 2.70 2.28 1.97

Claims on Government .14 .08 1.67 2.20 2.20

Claims on private sector 32.33 32.37 32479 33.19 29.50

financed by: own resources 24.48 20.90 19.23 19.02 17.71 1/

rediscounts BCEAO) 21.36 13.33 14.03 11.79) 7.85

rediscounts )foreign banks ) .11 .23 914 n.a.

Assets = Liabilities 30.49 35.44 37.81 38.57 314-19

Demand deposits 13.76 12.66 11.20 11.77 12.40

Time deposits 1.23 1.04 .87 1.04 .70

Government deposits 5.49 3.98 6.21 3.11 2.14

Foreign liabilities ., 4.11 2.90 4.79 5.20

Credit from BCEAO 7.87 11.36 13.33 14.02 11,79

Other items (net) 2.14 2.29 3.30 3.84 1.96

1/ Includes rediscounts of foreign banks

Sources: IMF, BCEAO

Table 24

ASSETS AND LIABILITIES OF BCEAO, Senegal, 1962-1966

(billion CFA francs, end of period)

1962 1963 1964 1965 1966

Foreign assets 19.28 12.49 9055 9e37 11.41

Claims on banks-rediscounts 8,07 1134 13J33 140 02 11.63

(Short-term) (7e23) (10.16) (11-85) (12.33) (9.87)

(Medium-term) (.84) (1.18) (1ih8) (1i6h) (1.76)

Assets = Liabilities 27e35 23,83 22,88 23.39 23.04

Reserve money 19.87 15.7o 16.60 15041 13.24

Governxrent deposits 6.35 8&o8 5el4 6e86 9066

(Currency held by Treasury) (.55) (.50) (.57) (.43) ))(2.93)

(Treasury investment accountK5.61) (7.22) 0(OO) (2580) )

(Government deposits) (.19) (.36) (.57) (3e93) (6.73)

Foreign liabilities 1.12 eO5 1.14 112 ol4

Sources: IMF, BCEAO

Table 25

MONETARY SURVEY, 1962-1967

(billion OFA francs, end of period)

A) West African Monetary UnionIst lst

quarter quartar1962 1963 1964 l 1965 1966 1966 1967

Net foreign assets 34h77 30.71 31.41 13.11 4157 41.21 42,06Domestic credit 60.61 64.74 79.98 80.98 79.50 85.5Lk 85.95

Claims on Government (net) -18.42 -23.83 -22,68 -20.0.4 -21.90 -26.66 -25.13Claims on Private Sector 79.03 88.57 102o66 101.02 l1o.4o l11220 1i1.o8

Money 86.18 88.58 94.30 97029 100.07 107.95 106,68Quasi-money 3.90 3.74 10.38 8.23 9114 8.34 lo.o6Other items (net) 5.30 3.13 6.71 8.57 11.86 10,46 1127

B) Senegal

Net foreign assets 15.16 10.14 8.20 5.73 8.03 4.14 5.32Domestic credit 23,08 23.19 25.65 97068 21.70 34,34 29.34

Claims on Government (net) -10,,76 -10,67 -8.92 -6.65 -8 76 -6,94 -8o31Claims on Private Sector 33,84 33,86 34.57 34.33 30,46 41.28 37605

Money 34.91 30.52 29,51 28.77 26,79 32.92 31.66Quasi-money 1.23 :104 .87 1.04 070 1.15 e57Other it,es (net) 2.10 1.77 3.47 3.60 2.24 4.41 2.43

Source: IMF

Table 26

CURRENT GOvERN1ENT REVENUES, 1962/63-1966/67

(Million CFA francs)

A c t u a 1 s

1962/63 1963/64 1964/65 1965/66 1966/67

Direct taxes 6,303 6,811 72231 8,433 8,431

of which:income taxes 4,160 4,526 4,954 5,839 5,749"forfaitaire" taxes 1,023 1,048 1,087 1,202 1,171land taxes 591 543 582 675 742

Indirect taxes 24,750 24,283 25,679 24,134 24,708

of which:import taxes 15,503 15L12L1 15 679 1435 15.94(custom duties) 807 793 606 f61 n6a.(fiscal duties) 4,990 4,338 3,853 3,538 n.a.?"forfaiti.ire" taxes) 5,676 5,973 5,234 4,986 n.a,[additional tax) 489 485 569 444 n.a0(turnover tax) 3,402 3,447 3,791 3,217 n.a,(compensatory

turnover tax) 61 63 107 109 n,a.(refining tax) - - 1,313 1,142 n.a.(statistical tax) 78 72 206 476 n.a.export taxes 3,922 3X495 3,467 3,207 2 863excise duties 3,290 3.511 4 312 4o2I8 t 25C(petroleum products) 1,937 2,016 2,693 2,629 n.a.turnover tax %,945 2,07L 21l81 2X566_ 2,397

Fees 1,070 1,096 1,102 1,192 995

Revenue from propertyand miscellaneous 1,658 1,254 1,9925 1,775 914

Contributions andreimbursements 767 462 798 291 330

Total current revenue 34,548 33,906 36,735 35,825 35,373

Total fiscal revenues 32,123 32,190 34,013 33,759 34,134

Source: Ministry of Finance

Table 27

CURRENT GOVERNNENT EXPENDITURES, 1962/63-1967/68

(million CFA francs)

BudgetA c t u a 1 s Forecasts

1962/63 1963/64 1964/65 1965/66 1966/67 1967/68

Personnel 14,037 14,118 15,361 15,974 17,140 17,668

Materials 6,215 7,072 6,395 6,205 6,140 6,374

Maintenance works 2,185 2,578 1,550 1,585 1,479 1,540

Transfers and other 6,422 7,176 8,207 8,404 7,997 9,011

Public debt andpensions 1,030 870 1,020 go9 507 1,080

Total 29,889 31,814 32,533 33,069 33,263 35,673

Source: Ministry of Finance

Table 28

ANALYSIS OF CURREI\TT EXPENDITURES, 1962/63 and 1966/67

(Million CFA francs)

AnnualComposi- Composi- Growth

1962/63 tion 1966/67 tion Rate

(%)''' ' (% ' (V

Sovereignty 1,780 6.o 2,121 6.4 4.4

Personnel 972 1,321 8.0

Materials 808 800 decline

Defense and Justice 6,214 20M8 7,067 21.2 3.3

Personnel 4,285 5,274 5',3

Materials 1,929 1,793 decline

Economic and Finance 5,218 17.5 6,l164 18.5 4.3

Personnel 3,860 4,570 4.3

Materials 1,358 1,594 4.1

Social Welfare 5,831 19.5 7,446 22.4 6.3

Personnel 4,072 5,768 9.1Materials 1,759 1,678 decline

Common Expenditures 1,283 4.3 484 1.5 decline

Personnel 835 208 decline

Materials 448 276 decline

Maintenance Works 2,185 7.3 1,478 4.4 decline

Transfers and Other 6,348 21.2 7,997 24.o

Public Debt and Pensions 1,030 3.4 506 1.6 decline

Total 29,889 100.0 33,263 100.0 2.7

Source: Ministry of Finance

Table 29

OVERALL GOVERNMENT DEFICIT, 1962/63-1966/67

(million CFA francs)

1962/63 1963/64 1964/65 1965/66 1966/67

Current revenue 34,548 33,906 36,735 35,825 35,378

Current expenditures 29,889 31,8Th 32,533 33,069 33,263

Current surplus 44,659 2,092 4,202 2,756 2,115

Developmentexpenditures 1/ 5,502 7,001 8,469 2,879 4,804

Total deficit 843 4,909 4,267 123 2,689

financed from:foreign sources 71T _ 1,151 223 169local sources - 4,000 131 - -

Change in Treasury balanceson account of budgetaryoperations -129 -909 -2,985 100 -2,520

lt Included Itr Equ.i.ment Budget,:boily by f,:'cign aid.

Table 30

CHANGES IN TREASURY OPERATIONS, 1963/64 - 1966/67

(Mlillion CFA francs)

1963/64 1964/65 1965/66 1966/67

Rudget deficit or surplus -909 -2,985 +100 -2,520O-ther budgetary accounts +241 -370 +423 +289Operations linked with budget +1,650 -320 +283 +50Operations of regularization -455 -902 +991 -4,008

I. Total budgetary operations +527 -4,577 +1,797 -6,189

Pension fund account -110 +593 +463 +153Investment accounts +58 +1,143 -539 +450Stabilization funds - - - +4,499*

(Groundnuts) (+3,110)Loans to public enterprises -24 -163 _Loans to local authorities - -60 - -91Loans to other institutions -1,247 -671 +121 +190Advances to public enterprises -350 +473 -554 -1,534Advances to local authorities -8 +5 - +3Advances to other institutions +2,893 -333 -110 +114Other accounts +17 +81 +47 +492

II. Total special Treasury accounts +1, 229 +1,068 -572 +4,276

D3posits of public enterprises +2,031 -66 -2,698 +2,434Deposits of local authorities - -2 +2 -Dsposits of other institutions +99 -86 +33 +5Financial operations for local

authorities +135 -144 -136 +460Other deposits +279 -105 -40 +261

III. Total deposits +2,544 -403 -2,839 +3,160

IV. Government borrowing - - +435 +52

V. Double counting, omissions +150 -394 -848 -258

Cash and inter-Treasury accounts -77 -273 +521 -571Current accounts -3,203 +26 +856 -1,639Account with French Treasury +823 -120 -641 +843Deposit at Central Bank -2,9271 +4,656 +916 -

Other accounts -25 -36 +10 +2Customs duty bills +303 -19 +365 +324

VI. Total change in Treasuryliquidity (- = increase) -43450 +4,306 +2,027 -1,0L1

Total Treasury liquidity (inbillion CFA francs, end of period) 14.6 10.3 8.3 9.4

*Appearing for the first time; an offsetting amount is shown under "Operationsof regularization"

Source: Ministry of Finance

Ps ~ ~ ~ ~ ~ ~ ~ .. 7Ž, 7Ž

_A TA E SM?6 OCtO co-4 6IA-Fddd-d Zs 1 oj. 01 s 2 ~ssaaas~Te 6 8 6 6 46 8 1; 886 .... O.. 6' 6L616 6666666 0 - 6 i66 l4Aoo0 ooo6J666 .4666..6 F II

00 00 0'A 0 44000- ~~~~~~~~~~~~~~~~~~~~~"'~ ~ ~ 'A sag

00' 040 0 004 04,-.r-4t44ao0 ogoco ~~~~~~~~~ r... 04 .c0 ~ 1 -310 .... a

I ~ ~~~~;6.......9 ~ ~~ ~~L..... .. .0' e 6 - o,ooo0.o,OCo010

a~~~~~~~~~ i

a 55 0 55553 5

j.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~R..q oooo40 c cv o.-ooooc 000 0.00 - co - .- cco 0 a61466Ict00 o 46 dd6d,.c

-o o'0~~~~~~~~~~~~'F

Table 32

ORIGINAL AND REVISED DEVELOPMENT PROGRAM, SUMMARY BY SECTOR, 1965/66-1968/69

(billion CFA francs)

Original Plan _ Revised Plan-Foreign Foreign

1965/66- 1967/68- Fi- 1965/66- 1967/68 Fi-1966/67 1968/69 Total % -.!ncng 1966/67 1968169 Total % nancing

Research and Surveys 3.)48 3e54 7.02 8.3 4.19 1.95 3,27 5.22 7.6 3.16

Agriculture 9,03 13.49 22.52 20.2 1/ 13.92 5.32 11.39 16.71 16,8 1/ 14.55Livestock 2,46 2.16 4.62 5.5 3.32 0.35 1.89 2e23 3.3 1.34Forestry 0.30 o.52 0.82 1.0 0015 0.19 0.35 0.54 0.8 0.20Fishing 2,01 1.69 3.70 4.4 2.28 056 2.04 2.60 3.8 2.26CER, CAR,ONCAD 1,09 0.55 1.64 1.9 0099 0.45 1.22 1.67 2.4 1,17Industry 0,30 1.30 1,60 1.9 0o60 2.76 1.90 4.66 6.8 3.56Tourism 0.08 0.10 0.18 0.2 - 0.17 0.18 0035 005 -Commerce 0.23 0.15 0.38 0.5 - 0,30 0095 1.25 1,8 0.95

Directly Productive Sectors 15.50 19.96 35.46 35.6 21,26 1010 19.92 30.01 36.2 24.03

Roads 4651 3c26 7.77 9.2 4.97 3.36 4.49 7,85 11.5 5043Railways 2,18 2a16 4.34 5.2 2.05 0,30 3.13 3.43 5.0 2.35Ports 1.3 1.13 2.56 300 2143 0.54 124 1.78 2.6 0.87Civil aviqtion 0.20 0.51 0.71 0,8 O,29 0.09 0.47 o056 o.8 0.37Posts and telecommunications 0.90 1.30 2.20 2.6 123 0.74 0o42 1.16 1.7 0.34Technical education 0,60 0,82 1.42 1.7 0.56 0015 o.64 0.79 12 04Infrastructure Sectors 9.82 9.18 l9o00 22,5 11053 5.18 10039 15.57 22,8 9,79

I/ Excluding, in practice, the fertilizer program

Contx.nuad on adjacent page.

Table 32 (cont'd.)

ORIGINAL AND REVISED DEVELOPMENT PROGRAM, SUMMARY BY SECTOR, 1965/66-1968/69-

(billion CFA francs)

Original Plan Revised PlanF re ign Foreign

1965/66- 1967/68- Fi- 1965/66- 1967/68- Fi-1966267 1968/69 Total % naihci 1966/67 1968/69 Total % nancing

General education 3.68 3.73 7.41 8.8 4.88 2.51 1.99 4.50 6.6 3.44Health 1.52 0.82 2.34 2e8 1.57 0.78 1.44 2.22 3.3 1.75'Housing 3079 4.18 7097 9.5 2.79 2.30 4.67 6.97 10.2 1.22Water supply and sewerage 2.72 7.84 10.56 12.5 6,90 1.89 7016 9.05 13.3 7.30

Social Sectors 12.71 16,57 28.28 33.6 16014 7.48 15.e26 22e74 33.4 13.71

OCand Total 40.51 49.25 89.76 53.12 24.71 48.84 73.54 50.69

Total, excluding short-term credits 1/ 8).25 100.0 68.27 100.0

1/ Excluding, inr practice, the fertilizer program

Source: Ministry of Plan and Development

Table 33

ACTUAL D ORWPKT ERDITURNS. 1965/66-1966/67

(willion CPA frame)

1965/66 1966/67Carry-over Courrent Current TOTAL3tuipunt from hdget Oern F1C US F3D BInt get Germn FAC US FED 1965/66-Bcdlet First Plan Tramefra Loan Assiatane Asistance Assiteace Total ludget frajufer Loan Assistance Assistance Assistance Total 1966/67

Studies 4 6 135.2 269.5 - 382.2 4.5 - 834.6 113.6 286.5 - 388.3 V 8.9 - 797.3 1,631.9Agriculture 241.5 180.9 - 81.5 - 96.9 600.8 433.1 - - 146.0 23.3 980.6 1,583.0 2,183.8Livestock 6.2 30.7 - - 26.7 - 65.6 14o.7 - - 22.2 - - 162.9 228.5ForestrY 66.2 9. - - 75.7 91.6 7.8 - 99.4 175.1FiBbing 1.4 - - - 1.4 31.6 - - - 31.6 33.0CER, CAR, O!AD 45.1 1.9 - 33.8 - 80.8 34.6 - - 0.2 - 34.8 u5.6Roads 520.8 24.1 - 452.0 - 996.9 624.7 - 3.7 32.1 - 240.2 900.7 1,897.6Ports 3.6 - - - 3.6 - - - 10.0 - 179.9 189.9 193.5Railways - _ _ - _ - - - - - - - - - -Civil aviation - - - - - - - - 87.0 - - - - - 87.0 87.0Posts and telecaicationa - - 109.6 - - 28.7 - 2.1 20D.4 140.4Technical education 22.0 _ _ 22.0 115.8 - - - - 2.2 118.0 14o.o

Genal education lO6.1 105.1 - - .10.0 127.1- - 448.3 254.9 - - 244.1 93.0 46.5 638.5 1,086.8Arts, youth, sports, intortion 220.3 3.5 - - 35.0 228.8 4- 457.6 179.9 - - 1.7 - - 181.6 639.2Health 32.2 36.5 _ 205.0 72.1 - 345.8 53.3 - - 44.5 4.6 3.5 105.9 451.7Housing, water supply, senw g 783. 2 218.9 _ 16.2 - - 1,018.3 1.090.3 - - 47.6 - - 1,137.9 2,146.2

Izalstry 14.3 - 20.0 - - 34.3 79.1 -- - 79.1 113.4Cmerce 18.2 2.8 - - - - .21.0 7.3 - - - - - 7.3 28.3Tourism 127.2 4.4 - - - - 131.6 42.9 S - 42.9 174.5

Total 2,2143.5 7535 26. 452.0 829.9 264.2 9.69 4-909-5 3.1490.0 286.5 3.7 973.0 130.0 1.1455.0 6.338.2 11.247.7

I/ Includes a CCCE loan of CPA franca 8.3 xibon for a patw plant in Tambacands.

Sorce: Ministry of FiAnce; IBRD estimtes