Since 2008, Senegal has leaned heavily on borrowing to fund infrastructure projects. But during the COVID-19 crisis<\/a> and subsequent jump in global interest rates, which made debt more expensive, costs soared as income fell. In turn, Senegal\u2019s fiscal pressures grew significantly.<\/p>\n To address its debt load, the government is now hoping to shrink the fiscal deficit \u2013 the amount by which public spending exceeds taxes coming into the public purse \u2013 from 12.6 percent of GDP in 2024 to to 5.4 percent by next year and narrowing to just 3 percent of GDP by 2027.<\/p>\n But S&P\u2019s outlook is far less rosy. The agency is forecasting a fiscal deficit of 8.1 percent of GDP next year and 6.8 percent of GDP in 2027. As such, S&P estimates that the debt-to-GDP ratio will peak at 123 percent next year, before falling slightly in 2027.<\/p>\n What has led to the current impasse with the IMF?<\/p>\n In March 2024<\/a>, Bassirou Diomaye Faye won Senegal\u2019s presidential election. He ran in place<\/a> of the disqualified opposition figure Ousmane Sonko, who had been barred from the election over a libel case involving the then-tourism minister. But after the vote, Sonko became Faye\u2019s prime minister.<\/p>\n In September 2024, the new Pastef party<\/a> government ordered an audit of the country\u2019s public finances. Senegal\u2019s court of auditors discovered that the previous administration, under President Macky Sall, had significantly understated the level of public debt.<\/p>\n The court estimated that Senegal\u2019s real debt-to-GDP ratio was closer to 100 percent, compared with the roughly 70 percent which had earlier been reported, revealing almost $7bn in undisclosed borrowing, which largely stemmed from not including the liabilities of SOEs.<\/p>\n The IMF endorsed the auditors\u2019 assessment, calling it a \u201cconscious decision\u201d by the Sall administration to mask the true extent of Senegal\u2019s debt. The IMF then suspended its $1.8bn loan package with Senegal, which it had approved in 2023.<\/p>\n IMF loan packages are typically paid over in tranches. By the time it pulled the plug on the Senegal programme, the IMF has already disbursed $700m of the full amount. The IMF\u2019s executive board must now decide whether to continue with the arrangement. If its review goes against Dakar, the board could ask the government to repay the disbursed funds.<\/p>\n If its review is favourable, the IMF could decide to keep the programme in place and release the next instalment of funding soon.<\/p>\n For context, the IMF\u2019s $1.8bn loan is equivalent to roughly half of Senegal\u2019s 2024 deficit. The upshot is that it would provide essential funds for public spending. Without it, Senegal will face a big financing shortfall.<\/p>\n On November 6, following a two-week visit to the West African nation, the IMF mission chief for Senegal, Edward Gemayel, said, \u201cWe\u2019re engaged and determined to move as fast as possible to help.\u201d<\/p>\n A few days later, Prime Minister Sonko revealed that Gemayel\u2019s team had urged Senegal to carry out a restructuring \u2013 in which old debt is swapped for new debt with longer maturities, lower interest rates, or a reduced debt stock \u2013 so the country repays less. But these arrangements generally lead to reduced public spending and slower growth.<\/p>\n Countries that default on their debt typically struggle because they are forced to cut spending to stabilise their finances, leaving less money for public services and investment. Investor confidence also tends to fall, making it harder and more expensive for governments to borrow.<\/p>\n At a meeting of Pastef officials on November 8, Sonko, who has considerable influence over economic policy, said he had rejected the IMF\u2019s proposal to restructure Senegal\u2019s debt. But his decision to reject the IMF\u2019s plan has left Dakar with few options to narrow his country\u2019s fiscal gap.<\/p>\n Looking ahead, the prime minister will have to convince the Washington-based IMF to release its paused loan by presenting a credible fiscal plan that restores Senegal\u2019s finances without resorting to a debt restructuring.<\/p>\n But Gemayel has already cautioned that the government\u2019s 2026 budget is \u201cvery ambitious\u201d, citing large tax increases. \u201cWe\u2019ve never seen this before,\u201d he said. \u201cSo, they need to be careful.\u201d<\/p>\n What has the impact of this been on Senegal\u2019s economy?<\/p>\n Sonko\u2019s decision to reject the IMF\u2019s restructuring plan has rattled investors. On Monday, November 10 \u2013 the first trading day after Sonko\u2019s cabinet meeting \u2013 Senegal\u2019s 2031-dollar bonds fell by 4 percent to $73.1. Elsewhere, its notes due in 2048 fell by 2.4 cents to $60.30.<\/p>\n \u201cThe bonds dropped as market players reacted to the IMF having requested a restructuring,\u201d said Leeuwner Esterhuysen, an Africa analyst at Oxford Economics. \u201cThere\u2019s clearly a high degree of debt distress and little prospect of IMF funding anytime soon.\u201d<\/p>\n \u201cIt seems the Fund is making a new loan contingent on Dakar accepting a restructuring,\u201d Esterhuysen told Al Jazeera. \u201cFor now, the government isn\u2019t playing ball \u2026 which will extend the stalemate,\u201d he said.<\/p>\n Another sign of market anxiety is that the cost of insurance against default \u2013 in the form of credit-default swaps \u2013 almost doubled in the days leading up to November 12, rising from 750 to 1,120 basis points, or 3.7 percentage points.<\/p>\n During a speech at a rally in Dakar on November 11, Sonko insisted, \u201cSenegal is a proud nation. We will not be treated like a failed state. Mobilising tax revenue is better than accepting a debt restructuring.\u201d<\/p>\n Since 2020, Zambia, Ghana, Ethiopia, and Chad have all been forced to restructure their debt<\/a>. But the long and drawn-out process, and accompanying economic hardship, have made debt rewrites unpalatable for other African governments.<\/p>\n![\"Faye\"](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/11\/2024-03-24T135203Z_1869916670_RC2AS6A1TV7X_RTRMADP_3_SENEGAL-ELECTION-1764257606.jpg\")
Presidential candidate Bassirou Diomaye Faye, backed by Senegalese opposition leader Ousmane Sonko, gestures after casting his vote in the presidential election at the polling station at Ndiaganiao in Mbour, Senegal, on March 24, 2024 [Abdou Karim Ndoye\/Reuters]Why hasn\u2019t the IMF reached a decision about this yet?<\/p>\n
![\"Faye](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/11\/2024-03-21T050227Z_531916148_RC2QP6ATVCBP_RTRMADP_3_SENEGAL-ELECTION-1764257756.jpg\")
An electoral billboard for the Senegalese presidential candidate Bassirou Diomaye Faye, backed by opposition leader Ousmane Sonko, in Dakar, Senegal, on March 20, 2024 [Luc Gnago\/Reuters]How has this affected the political situation in Senegal?<\/p>\n