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Cablegate: Senegal: Sixth Consultative Group

VZCZCXRO3005
PP RUEHLMC
DE RUEHDK #2059/01 2911239
ZNR UUUUU ZZH
P 181239Z OCT 07
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC 9390
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHLMC/MCC WASHDC

UNCLAS SECTION 01 OF 03 DAKAR 002059

SIPDIS


SIPDIS

STATE FOR
AF/W, AF/EPS, EB/IFD/ODF, AFR/DP

TREASURY FOR OASIA/EBARBER


E.O.12958: N/A
TAGS: EAID EFIN PREL PGOV OTRA SG
SUBJECT: SENEGAL: SIXTH CONSULTATIVE GROUP
MEETING - Paris, October 3-4, 2007


1. SUMMARY: The sixth meeting of the Consultative Group (CG) for
Senegal was convened at the World Bank's Paris Office on October
3-4, 2007. The meeting was chaired by Madani Tall, World Bank
Director of Operations for Senegal. The 48-person Senegalese
Delegation [press reports noted more than 100 in total, including
support staff] included 18 ministers and was led by Prime Minister
Hadjibou Soumar. The meeting was attended by representatives of
Senegalese business associations and delegations from key
multilateral institutions and bilateral donors. The PM announced
that donors pledged approximately $4 billion in development
assistance supporting economic reforms and priority program for the
three-year period 2006-2010. The actual amount pledged, and the
ability of donors to fulfill those pledges, is not yet confirmed.
The amount pledged also included a substantial amount of money
already committed but not yet disbursed - a reflection of the
country's ability to absorb the aid. END SUMMARY.


2. MEETING AGENDA: The meeting agenda included the following items:


Opening Ceremony

Session 1: Assessment of the Poverty Reduction Strategy Plan (PRSP)
I ( 2003-2005)

Session 2: PRSP II and the Accelerated Growth Strategy(AGS)

Session 3: Recent developments and Strategic aspects

Session 4: Instruments for implementing the PRSP II

Session 5: Financing the PRSP II and the AGS

Session 6: Announcement of contributions


3. OPENING STATEMENTS

In his opening statement, Jean M. Chataignier, Chief of the French
Delegation focused on the following issues: the need for greater
transparency in the management of public finances, the need for
increased coordination of development assistance in line with the
Paris Declaration, the preservation of a low level of national debt,
and the establishment of an appropriate institutional framework to
monitor PRSPII and AGS implementation. He concluded his statement
by reaffirming that France's aid will target a limited number of
priority programs in line with the country's Millennium Development
Goals (MDGs).

Johannes Mueller from the IMF African Department elaborated on the
four key elements of the new program with the GOS: (a) maintaining a
prudent fiscal policy to achieve fiscal sustainability,
(b)strengthening fiscal governance and transparency, (c)
strengthening the framework for private sector development,
and (d) enhancing the role of the financial sector in providing
access to credit and capital. In his concluding remarks he stated
that the IMF Board is expected to discuss Senegal's program under
the Policy Support Instrument in early November.

Lopez Blanco, head of the European Union (EU) Delegation stressed
the need for higher and sustained economic growth to alleviate
poverty. While recognizing that Senegal is a privileged partner of
the donors, he noted that the GOS still needs to take the necessary
steps to attract private investors.

Bouri Sanhouidi, head of the UNDP delegation, called for
strengthening the dialogue between high level government officials
and development partners and reinforcing the participatory process
that was used in the context of the preparation of the PRSPII and
the AGS. He reiterated previous calls for improving governance and
establishing an appropriate institutional arrangement to monitor the
PRSPII and the AGS.

Madani Tall, the World Bank's Director of Operations for Senegal,
summarized progress made since the Fifth Consultative Group Meeting
in 2003. He stated that poverty declined by six percentage points
over the period 2001-2005. However, he noted that unemployment is
among the key challenges facing with the country. He also stressed
the need to fight against corruption and promote good governance.

GOS Prime Minister Hadjibou Soumare commended the donor community

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for proving financial support of $1.3 billion over the period
2003-2005. He noted that since 2000, Senegal has received a debt
relief package under HIPC and MDRI totaling more that $600 million.
He recognized that Senegal would not be able to achieve the 7%
growth rate needed to halve poverty by 2015. He reaffirmed the
government's commitment to establish the necessary institutional
arrangements for implementation of the AGS by the end of the year.
He stated that in order to address the country's energy
requirements, the electricity company (SENELEC) had prepared a
comprehensive investment program totaling $1.1 billion for the
period 2007-2012. Soumare committed to ensuring that that the new
procurement would be fully effective in January 2008.

4. DISCUSSIONS

The first session was devoted to a review of the PRSP I. The GOS
described the major achievements during the period which included:
(a) a 6% reduction in poverty during the period 2001 - 2005, (b) an
increase in the primary school enrolment rate from 71.6 % in 2002 to
82.5% in 2005, (c) a sharp increase in the percent of the government
budget allocated to health from 7.7% in 2003 to 9.7% in 2005, and
(d) an HIV prevalence rate of 0.7%, reputedly the lowest in
Sub-Saharan Africa. Donors raised concerns that very little poverty
reduction had occurred in rural areas and that regular annual
reviews of the PRSP had not taken place. It was agreed that much
more needed to be done in the area of agriculture and food security
to alleviate poverty in rural areas.

The second session focused on the presentation of the PRSP II and
the AGS, as the two vehicles expected to guide Senegal towards
becoming an emerging country by 2015. Issues raised by participants
included:(a)the need to put in place a complete the set of PRSPII
indicators, (b) insufficient integration of gender issues in poverty
reduction programs and activities, (c) the low level of financial
and human resource transfers to local authorities, (d) the need to
establish an enabling business environment, and (e) the need to
establish an institutional framework to coordinate and monitor
implementation of the AGS.

The third session was devoted to a review of recent developments and
strategic issues. Presentations were made on the macroeconomic
situation, the energy sector, labor market issues, and governance
issues related to large infrastructure programs. There was strong
consensus among participants that a stable macroeconomic framework
is essential for attracting foreign investment. The donors
encouraged the GOS to move quickly to implement new labor
legislation reforms needed to spur higher growth and job creation.
Development partners also expressed a desire for the government to
ensure greater transparency in the procurement, budgeting and the
execution of large infrastructure projects.

The fourth session focused on the implementation of the PRSP. The
development partners requested the GOS to provide stronger
leadership for improving aid coordination and performance with
respect to Paris Declaration objectives. Donors providing budgetary
support and the GOS agreed to sign a common framework in November
2007.

The fifth session focused on PRSP II and the AGS financial
requirements. Development partners stressed the need for a sound and
stable macroeconomic framework crucial to mobilizing both public
funds and private investment flows. They also noted that a clear
linkage between PRSPII indicators, the Priority Action Plan and the
Budget is critical for fund mobilization.

The last session was devoted to the announcement of pledges. The
donors pledged a reported CFAF 1837 billion (approximately $4
billion) in development aid to Senegal in the form of grants
supporting its Priority Action Program for the period 2006-2010.
Some 47% of this amount, approximately $1.9 billion is comprised of
commitments made under previous agreements but not yet disbursed.
This reflects limits to the country's absorptive capacity.


5. COMMENT. During the CG meeting, the GOS committed to
implementing a broad set of measures including: (1) ensuring the
effective implementation of the new procurement code by January
2008; (2) improving the dialogue between the GOS and development
partners; (3) undertaking annual reviews of the PRSP and (4) over
the coming months, the development partners will closely monitor the

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extent to which the GOS fulfills these commitments.

Senegal continues to heavily rely on public donor assistance.
According to OECD data, Senegal is among the largest recipients of
foreign aid in Africa. If Senegal is serious about wanting to
become an emergent country, it will have to develop an aggressive
reform program aimed at attracting increased private investment
flows. Many donors' actual contributions will be determined only
after Senegal concludes its new Policy Support Instrument with the
IMF. Donors will follow closely the GOS's willingness to fully
conform to that program's reform measures and reporting
requirements. The GOS delegation consisted of 48-plus persons,
requiring an estimated $400,000 GOS expenditure. This represents a
heavy burden for a government with insufficient resources to
implement a poverty reduction program and raised reasonable
questions among donors as to why the meeting had not been held in
Dakar.

Smith

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