The finance ministry of Senegal has offered utmost reassurance to foreign investors regarding its intention to pay off all its debts while simultaneously engaging with the IMF. This is happening at a time when this West African nation is under severe pressure because of its weak economic position, as its total indebtedness stands at over 130% and unidentified liabilities of $11 billion have come to light recently.
Government dismisses debt rescheduling offers due to sovereignty fears
Prime Minister Ousmane Sonko “categorically” rejected any form of restructuring of its debts and found this strategy to be “a disgrace to Senegal” because his nation “is proud and does not need” any kind of relief to repay its debts. At a rally of his ruling party held at Independence Square in Dakar, Prime Minister Sonko criticized “hidden debts” fashioned by his predecessors but offered to pay all his nation’s debts without restructuring them.
This is particularly because one IMF mission completed its visit to Dakar without any new loan agreement being reached, outlining the struggle between Senegal’s need for its budgetary autonomy and its need for IMF intervention. Sonko was emphasizing how Senegal is a noble nation and shall never conform to any nation whose economy fails to deliver as expected, but instead takes care of all its responsibilities within its own boundaries, rather than being assisted by others internationally.
IMF suspension leads to a complex financial situation for recovery
The amount offered for borrowing is $1.8 billion for 2024 from the IMF, but is tempered for Senegal because its off-balance-sheet obligation already stands at over $11 billion now. According to IMF statistics, total public indebtedness and public sector indebtedness stand at 132 percent of its GDP as of end-2024, while its domestic arrears stand at 4 percent.
The viability of growth projections for tax revenues is also in question for the Fund’s Economic and Social Recovery Plan for Senegal for 2026 to register 31 percent growth, which is triple the growth and at least three times faster than before. The growth of tax revenues between 2019 and 2025 for Senegal is constant at no less than 10 percent each year, making it very unlikely to achieve projections by international bodies, among others.
Revenue projections face persistent implementation challenges
Actual revenue performance has trailed projections for each of the last three fiscal years by an average 8% short of projections presented in the initial Finance Bills. The 2024 position is reported to have diverged by nearly 500 billion XOF, while 2025 projections range between 300 and 400 billion XOF, short of projections within Senegal analyst Jean-Noël Roffiaen’s assessment on Senegal’s economy and its sustainability against its debts.
Market pressures mount before key financial decisions
The euro-bonds of Senegal also came under additional pressure at the secondary market, as market players were aware of two highly significant events expected to redefine the risk factor for Senegal. This is considering that Senegal’s bond auction to take place on November 14, as well as Standard & Poor’s reassessment of Senegal’s sovereign rating status, constitute highly significant market tests for investor confidence within Senegal’s government to maintain its budgetary stability without foreign intervention for support.
The strong position adopted by Senegal concerning its repayment of debts without any restructuring is informed by its efforts to maintain its sovereignty while struggling with its fiscal difficulties. While it is worth complimenting Senegal for its ability to repay its debts through the responsible management of its finances, its indebtedness and its inability to generate tax revenue pose serious risks related to sustainability. The rating and bond issuances anticipated soon will demonstrate market confidence in its management of its economic policies and capabilities.