Faced with rising inflationary pressures and the problems surrounding the Ukrainian crisis, Republic President Macky Sall relies on subsidy levers to maintain price stability for basic necessities. According to economists, compromises are difficult to maintain if the Ukrainian crisis continues.
Senegal is unaffected by the reality of the global market. Rising oil and food prices are driving inflation in many countries around the world. Today, the crisis in Ukraine is very likely to keep prices of basic foods rising. The Senegalese economy, strongly influenced by the Covid-19 pandemic, weighs heavily on shopping carts, in addition to the magnitude of inflationary pressures associated with the Ukrainian crisis. To rescue households, the country has taken steps in response to price increases. President Macky Sall recalled his lasting concerns about the sustainable bailout of Senegalese in the face of rising basic necessities, at a ministerial meeting on February 24, 2022, on oil, rice, Decided to lower the price of sugar. “These important measures will have a total impact of about 50 billion FCfa per year, both at the level of revenue mobilization and at the budget level, for the benefit of the people,” said the Head of State.
Today, as countries seek to maintain social pressure and control prices, international organizations such as the International Monetary Fund (IMF) are pressing for reductions in subsidies for energy products. In a December 2021 report, the IMF recommended that the government ensure the transparency and effectiveness of budgetary measures to address the consequences of the Covid-19 pandemic and rising commodity prices. In Senegal, the trade deficit of goods and services in 2020 was 17.2% of GDP. In 2021, it is estimated to be 17.8%. And that of the budget is estimated to be 6.3% of GDP in 2021. To respect the means of good governance, IMF staff recommended maintaining and reducing budget shortfalls below 4.5% of GDP in 2022. By 2023, which is close to 3% of GDP.
“Limitation of state budget margin”
Economist El Hadji Mansour Samb points out that Senegal is facing import inflation and no one knows how far this can go. After the Covid-19 pandemic, economists claim the crisis will continue. “Today Russia has invaded Ukraine. Tomorrow China has the potential to attack Taiwan. In the Middle East, Iran is attacking Israel’s position. Therefore, for countries like Senegal with import inflation. , The truth of the price will apply sooner or later, “he said. However, Mr. Sambu recalls that there is two room in the state to work on price stability. He explains: “Budgets have so-called budget reserves. Whenever contingencies occur, the state uses those budget reserves to provide subsidies. States can also rely on investment spending. You can. Budgets include operating, recurring, and investment costs. Current and operating costs are so sensitive that the state uses investment costs. However, if this crisis continues, internal debt will be incurred. It can go bankrupt because if costs increase, the state will push forward with subsidies by telling suppliers that there is an emergency and need to wait. The state will postpone investment spending. And the main result is that the expected growth of 5% in 2022 will not be achieved. Growth is expected to be around 2-3%, but economists are now in 2022. The country will continue to move again as the government does not accept the rise in prices until the legislative election on March 31. “President McKee Sal risks raising prices from now until the legislative election. It doesn’t hurt, but with import inflation, the truth of the price applies, “says El Hajimansour Sambu.
“There are spirals around the state that disrupt economic forecasts.”
His colleague Meïssa Babou has a spiral around Senegal. And this situation will inevitably affect the country’s economic growth forecast. According to teachers and researchers at the Faculty of Economics and Business Administration (Faseg) at the Sheikh Anta Diop University (Ucad) in Dakar, Senegal relied on a barrel price of about US $ 75 (about 41 755 FCfa). Over US $ 100 (59,650 FCfa). “It is the state that inevitably pays the difference to maintain the price with the pump. Efforts are being made to maintain the price, but a refund is required to do so. Therefore, loss of revenue anyway. Now, how will the nation deal with the levers of good governance if we have to face new price hikes? “Meïssa Babou asks. Following the Covid-19 pandemic health crisis, Meïssa Babou revealed that inflation affected very few products. However, due to this Ukrainian crisis, products have been spared, and today we are losing almost one-third of the world’s supply. Meïssa Babou: “Inevitably, I don’t think our inflation base can support it at the risk that the country will not be able to spend all its budget and pay salaries and debt repayments. Is a situation we will experience in the coming months while waiting to consume local reserves. Economists inevitably lose revenue and distort estimated budgets when a country gives up taxes. He points out that it will be difficult for the country, and he explains: He tells the flour miller, give him a ton, and I will repay you. Cement manufacturer Tell it to sugar producers and even importers. How can a nation get a huge amount of money without affecting the macroeconomic balance? Meïssa Babou asserts that “the balance of the macro economy will inevitably be affected.” And if macroeconomic balance is affected, Meïssa Babou shows that growth forecasts can be distorted and Senegal’s debt levels can skyrocket. “Poverty will increase. The crisis in Ukraine is an unexpected event that confuses all expectations,” the economist warns.