Alex Kuzul-Wright
What You Need to Know
Senegal is currently in a standoff with the International Monetary Fund (IMF) regarding an urgent financial rescue package needed to address significant public finance gaps. The IMF is demanding painful restructuring measures before approving aid, while Senegal’s government is resisting these demands, particularly following a recent downgrade of its credit rating to junk status.
Africa. Senegal is in a standoff with the International Monetary Fund (IMF) over an urgent rescue package needed to address a significant gap in its public finances.
The IMF wants the West African nation to undertake painful restructuring before agreeing to the bailout, while Senegal is resisting this, especially after its credit rating was downgraded to junk status.
Earlier in November, Standard & Poor’s downgraded Senegal’s rating to “CCC+” due to its weak public finances.
The agency stated, “Despite measures taken to boost growth and increase tax collection, the level of debt and the size of the interest bill keep public finances in a fragile state, particularly in the absence of a comprehensive official support program.”
Last year, the IMF suspended a $1.8 billion funding package after the government discovered about $7 billion in hidden borrowing by the previous administration.
Negotiations between Dakar and the IMF regarding new rescue terms are ongoing, but the two sides have yet to reach an agreement.
What Is the Size of Senegal’s Public Debt?
According to the latest review by Standard & Poor’s, public debt reached $42.1 billion (119% of GDP) by the end of 2024, making Senegal one of the most indebted countries in Africa. This does not include debts from state-owned enterprises, which represent an additional 9% of GDP.
Since 2008, Senegal has relied on borrowing to finance infrastructure projects. However, the COVID-19 crisis and rising global interest rates have increased the cost of debt while revenues have declined, exacerbating financial pressures.
The government hopes to reduce the fiscal deficit from 12.6% of GDP in 2024 to 5.4% next year, eventually reaching 3% by 2027.
However, Standard & Poor’s has a more pessimistic outlook, predicting a deficit of 8.1% in 2025 and 6.8% in 2027, with the debt-to-GDP ratio reaching 123% next year.
What Led to the Current Standoff with the IMF?
In March 2024, Basyro Dioumay Faye won the presidency, while opposition leader Ousmane Sonko became Prime Minister. In September, the new government ordered a financial audit that revealed the previous administration had understated the true level of debt, hiding about $7 billion in borrowing.
The Court of Auditors estimated that the debt-to-GDP ratio was closer to 100% instead of the previously announced 70%, due to the exclusion of state-owned enterprise liabilities.
The IMF supported the audit’s findings and viewed them as a deliberate decision by the administration of Macky Sall to conceal the extent of the debt, subsequently suspending the funding package it had approved in 2023.
Why Has the IMF Not Made a Decision Yet?
In November, the head of the IMF mission to Senegal, Edward Jamil, stated that they are “engaged and determined to move quickly to help.”
However, his team recommended debt restructuring by replacing it with new, lower-cost debt, which Prime Minister Ousmane Sonko rejected, arguing that it would lead to reduced public spending and slow growth.
How Has This Affected Senegal’s Economy?
Sonko’s rejection of the IMF’s plan has raised concerns among investors; Senegal’s bonds have significantly declined, and the cost of insurance against default has risen.
Analysts say the IMF requires restructuring before providing any new support, while the government is unresponsive, prolonging the crisis.
In a public speech, Sonko affirmed that “Senegal is a proud nation and will not be treated as a failed state. Revenue mobilization is better than debt restructuring.”
How Has This Affected the Political Situation in Senegal?
The Prime Minister refuses to restructure because it contradicts his electoral promises to restore national sovereignty. However, this stance places the country in a severe financial crisis and increases political tensions between him and President Faye.
Although he is Prime Minister, Sonko is seen as having the most influence in shaping policies and often acts independently of the President.
How Can Senegal Address Its Debt Problem in Other Ways?
In recent weeks, the government has imposed new taxes on tobacco, alcohol, gambling, and mobile money transfers, while also cutting spending on travel and government purchases.
However, balancing financial reform with meeting citizens’ expectations remains challenging, and any concession to the IMF may lead to public disappointment and potential social unrest.
Since 2008, Senegal has relied heavily on borrowing to fund infrastructure projects. However, the COVID-19 pandemic and rising global interest rates have increased the cost of debt while revenues have declined, exacerbating financial pressures. In 2023, the IMF suspended a $1.8 billion funding package after discovering hidden borrowing by the previous administration, leading to the current negotiations over new rescue terms.
In March 2024, a new government led by President Basyro Dioumay Faye took office, with Prime Minister Ousmane Sonko opposing the IMF’s restructuring demands. The IMF’s insistence on debt restructuring before providing new support has raised concerns among investors, as
