In June 2023, the International Monetary Fund (IMF) approved a $1.8 billion support package for Senegal, which included a $1.51 billion credit facility and a $324 million sustainability facility. The package was designed to address macroeconomic imbalances, reduce the national debt, enhance governance, promote inclusive growth, and assist with climate change initiatives.
However, recent developments have revealed that Senegal’s fiscal situation is more challenging than initially reported. A state audit uncovered that the country’s public finances were in worse shape than previously disclosed, prompting the government to adopt a liability management plan aimed at extending the maturities of its debt.
According to draft budget documents, the government is seeking to implement a “more appropriate repayment profile” that focuses on debt re-profiling with extended maturities, without renegotiating or restructuring its debt. The finance ministry emphasized that Senegal is committed to fulfilling its obligations to investors.
The audit results showed that Senegal’s debt-to-GDP ratio had exceeded 80% by the end of 2022, which was significantly higher than the 73% previously reported. Additionally, the budget deficit stood at over 10% of GDP, almost double the 5.5% deficit originally indicated during former President Macky Sall’s administration. This fiscal discrepancy led the IMF to freeze Senegal’s $1.8 billion loan earlier this year. The ongoing review by the country’s court of auditors is expected to lead to upward revisions in outstanding debt and debt service projections for 2024-2025.
To address these challenges, Senegal is planning to issue 1.5 trillion CFA francs in diaspora bonds to reduce its reliance on external funding. The government also intends to revise its mining and tax codes to optimize state revenues, particularly in the oil and gas sectors.
Despite these fiscal hurdles, Senegal’s economic outlook remains positive, with growth projected at 8.8% in 2025. This growth will be driven by the production of oil and gas, particularly from the $4.8 billion BP-operated Grand Tortue Ahmeyim field. Inflation is also expected to stabilize at an average of 1.9% in 2024, as Senegal works toward fiscal recovery and sustainable growth.
