Abstract

Latif Dramani and Ralitza Dimova

This study explores the impact of budgetary policies, aimed at an increase in aggregate investments in Senegal on employment and household incomes. The analysis is based on a computable general equilibrium framework, which allows us to capture the multi-faceted microeconomic implications of the chosen macroeconomic policies and uses very interesting recent macro and micro-level data sources. Our results indicate that policy makers in Senegal face serious dilemmas. Reliance on foreign sources of finance tends to improve the welfare of households in the short-to-medium run, but at the expense of further decreasing the international competitiveness of the economy. Drastic reduction of the role of public administration in the economy is a viable alternative that addresses these issues, but only at the expense of deterioration of the incomes of households, especially those involved in the informal sector.