Senegal’s government has identified over 8.16 billion in available resources for three years, between 2025 and 2028, which can be utilised without increasing the state’s debt level.
Senegal has been facing a financial crisis and has been accused of misreporting its debt. In an effort to pull the country out of its economic slump, Prime Minister Ousmane Sonko announced a new recovery plan, which will be financed 90% through domestic resources and can avoid increasing further debt.
The country is plagued with billions of dollars of hidden debts from mismanagement by the previous regime, which ultimately led to the International Monetary Fund (IMF) freezing the loan program.
Sonko said in his address that the government has identified over 4.6 trillion CFA francs ($8.16 billion) in available resources for three years, between 2025 and 2028, which can be utilised without increasing the state’s debt level. Along with shrinking public spending and expanding revenue, the plan also aims to reduce the budget deficit to 3% of GDP by 2027 from 12% in 2024.
This economic recovery program entails the merging and downsizing of state institutions and is estimated to save roughly 50 billion CFA francs. Previously untaxed sectors will no longer be exempted, with Sonko singling out online gaming and mobile money as big sectors which will soon be brought under the taxable bracket.
Along with these measures, the plan also aims to increase tobacco taxes from 70% to a whopping 100%. Visa fees will also be raised, particularly for non-African countries and African countries which require Senegalese citizens to procure visas. Visa fees alone are expected to generate 60 billion CFA.
Senegal began producing oil and gas last year, and the government has decided to renegotiate contracts in the oil and mining sectors. While this is expected to bring in 884 billion CFA francs, the renewal of telecom licenses is projected to raise roughly 200 billion CFA francs.
The government aims to ease access to land titles in order to drive investments. It has also zeroed in on imported vehicles, which are quite popular among the Senegalese diaspora and aims to increase the age limit for these vehicles, given its significant demand.
Senegal also aims to attract external partners to rejuvenate existing assets and will continue to attract investments in the domestic market. Sonko plans to use foreign currency debt to target sectors like hydrocarbons, oil, gas and mining.
In July, news broke that Senegal had raised 364 billion CFA francs ($644 million) in its second public bond offering for this year, exceeding its target of 300 billion CFA francs. This is part of the government’s financial strategy to diversify budget financing sources, strengthen the domestic capital market, and manage public debt.
Dakar’s debt levels have elicited concerns, and international bonds lost approximately a quarter of their value after the country’s $14 billion undisclosed debt came to light. However, the African country seems to be turning a corner, as the most recent offering was oversubscribed by 21.3%, indicating strong demand from both domestic and regional investors.
Investor outlook has improved in Senegal since it began producing oil and gas. The revenue generated from the bond sales will be diverted to public finance recovery, economic stimulus packages and improving debt servicing.
The Prime Minister also said that these economic reforms would help the government to better target subsidies and social programmes attuned to the needs of the country’s population.
The IMF has repeatedly called for the government to restrain energy subsidies, dubbing them inefficient and expensive. These subsidies comprised nearly 4% of the country’s GDP. IMF Mission Chief Edward Gemayel had criticised these subsidies as beneficial only for the wealthy and not the vulnerable households. He also explained that these subsidies should be phased out and replaced with cash compensation, and that these households should also be educated on why these cuts were necessary.