Senegal's Debt Burden Reaches Critical Threshold
Senegal's public debt rose sharply to unsustainable levels by the end of March 2025, the finance ministry disclosed, underscoring an ongoing struggle between escalating expenditures and faltering revenue streams. Debt servicing costs soared by nearly 24 per cent during the first quarter of 2025, adding to a 44.5 per cent rise already tallied in the final quarter of 2024—bringing repayments to approximately US $1.4 billion last quarter.
Two-thirds of the debt is held by commercial banks, with the remainder reflecting accumulated arrears to suppliers and tax authorities. Although revenue collection exceeded 1 trillion CFA francs in Q1—equating to just over one‑fifth of the annual target—it remained well short of the ministry's projections, while Q1 expenditures reached 1.42 trillion CFA francs.
Donor assistance has dwindled significantly; external grants plunged by roughly 71 per cent to a mere 8 billion CFA francs, severely constraining budget flexibility. In response, the IMF has suspended its financing programme, citing the underreporting of debt and fiscal deficits—including the revelation that the 2023 debt‑to‑GDP ratio stood at around 100 per cent, far above the previously stated 74 per cent.
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This fiscal reckoning stems from a February audit commissioned by Senegal's Court of Auditors, which found a systematic understatement of deficits over a multi‑year period, raising alarms both domestically and internationally. The new government has since delayed the release of budget performance reports for Q4 2024 and Q1 2025, citing efforts to ensure accuracy following the audit's findings.
Despite pledges to bolster fiscal discipline, the authorities face an uphill task. Debt servicing exploded across the six months to March 2025, swelling to nearly US $1.8 billion—driven by steeper external interest costs and a near doubling of domestic obligations. Market confidence has wavered: Senegal's dollar‑denominated bonds are currently the poorest performers in Africa, reflecting investor unease.
The IMF mission, which visited Dakar in March, confirmed preliminary figures that central government debt stood at approximately 105.7 per cent of GDP at end‑2024, with deficits nearing 11.7 per cent—far exceeding shared regional targets. IMF head Edward Gemayel emphasised that discussions on a new financing arrangement remain stalled until misreporting issues are fully addressed, though he acknowledged oil and gas revenues from fields like Sangomar could deliver about 1 per cent of GDP in annual gains.
The government has signalled intentions to pursue subsidy reforms, particularly in the energy sector, and to improve tax compliance and transparency—moves seen as prerequisites for re‑engagement with the IMF. Credit agencies have responded accordingly: a major ratings firm lowered Senegal's outlook to 'B', and the country's sovereign spreads remain elevated.
External observers warn that heavy reliance on short‑term borrowing and fluctuating oil markets could undermine fiscal recovery. While oil and gas output offers some respite, structural reforms—in tax policy, public spending prioritisation and debt management—are essential. With such reforms taking root, Senegal may gradually steer its debt ratio toward a more sustainable path; without them, the nation risks a deeper liquidity crisis and a potential request for debt restructuring.
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