Senegal has announced a three-year fiscal overhaul aiming to raise nearly $10 billion to address a mounting debt crisis, with measures including tax hikes, renegotiated energy deals, and reduced public spending. The plan comes as the International Monetary Fund (IMF) prepares to engage the West African nation in funding discussions next month, following investor jitters over its financial stability.
Prime Minister Ousmane Sonko outlined the strategy in Dakar on Friday, emphasizing austerity measures and domestic revenue mobilization to stabilize public finances. “Sixty-five years after independence, we must fully assume our future,” he declared, signaling a shift from reliance on foreign aid. The government targets 5.7 trillion CFA francs ($9.9 billion) through subsidy cuts, new taxes on goods and mobile money transactions, and redirecting 90% of funding needs to internal resources.
The debt crunch worsened last year when President Bassirou Diomaye Faye’s administration uncovered $7 billion in undisclosed loans from the previous government, pushing debt obligations to 119% of GDP in 2023. This revelation led the IMF to freeze a $1.8 billion loan program and triggered a S&P Global Ratings downgrade. Senegal’s 2033 Eurobonds fell to 73.98 cents on the dollar last week, reflecting market unease.
Economy Minister Abdourahmane Sarr detailed plans to slash the budget deficit to 3% by 2027 through “high-impact investments” and fiscal consolidation. A pending GDP recalculation by Senegal’s statistics agency could improve its debt-to-GDP ratio, which soared to 99.7% post-audit from an earlier 74.4% estimate. The administration aims to avoid full debt restructuring but may extend maturities to ease repayment pressures.
The IMF’s potential new support hinges on Senegal demonstrating credible fiscal reforms, including efficient spending and sustainable debt management. Analysts note the balancing act required to reassure markets without exacerbating public hardship through tax increases and reduced subsidies. As Dakar navigates these economic headwinds, its success in stabilizing finances could set a precedent for other African nations grappling with hidden debt burdens and tightening global credit conditions.
