This Country Economic Memorandum (CEM)finalized as the implementation period of the PovertyReduction Strategy (PRSP) began, undertaken in a context ofother significant investigations on PRSP themes. One of themain macroeconomic variables affecting growth andcompetitiveness of the Senegalese economy, is the nominalexchange rate, which, as a member of the West AfricaEconomic and Monetary Union (WAEMU), its currency, the CFAfranc, has a fixed parity to the Euro, and its issuance isgoverned for all members, by a single central bank, wherethe nominal exchange rate is not a policy variable underSenegal's direct control. This is why the CEM does nottake up issues concerning the nominal exchange rate,however, several measures of the real exchange rate areexamined. CEM chapters on human capital include treatment ofPRSP-related issues in health and education. The chapterspresent a portrait of constraints hindering progress towardPRSP targets, and the main interrelated points, first,between health and education, and second, between the publicexpenditure system and the delivery of health and educationservices to the poorest citizens. On social protection, theCEM analyzes important topics in tax incidence and pensions.Recommendations suggest Senegal should foster cooperationbetween unions, firms, and government, so as to shift allparties' focus away from dividing rents, toward theexpansion of employment and production, creating aprofitable business environment, with long term commitmentto the marketplace, and, where the labor force is morelikely to stimulate appropriate human capital formation.This calls for improvements in the overall efficiency of theeducation system, while systems of fiscal decentralizationmust b e adequate to the delivery of social services in all regions.
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