The devaluation of the CFA Franc in 1994 generated a public investment boom in Senegal. The increase in public investment was made possible thanks to an improved budgetary situation related to the reduction in real terms of the public wage bill which had been too large for some time. The rise in public investment was subsequently accompanied by a (smaller) increase in private investment due in part to the attractiveness of Senegal as a place to do business within West Africa, at least compared to other West African nations. In turn, higher public, and to some extent private, investment led to higher growth rates and substantial poverty reduction, with the share of the population living in poverty declining from 67.9 to 57.1 percent. Poverty in urban areas was reduced faster than in rural areas, as most of the investment benefited the manufacturing and services sectors. Also, a few years of poor rainfall in the second half of the 1990s coupled with an initial drop in the real prices of crops in the aftermath of the devaluation affected negatively rural incomes. As a result, while virtually all segments of the population (including the rural poor) benefited from improved standards of living in 2001 as compared to 1994, growth was not strictly speaking “pro-poor” because the growth in consumption per equivalent adult in the upper half of the distribution was larger than that observed among the poor.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
11110.
Find related papers by JEL classification: O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
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