The IMF mission, present in Dakar since June 6th, 2024, highlighted the need for Senegal to implement economic reforms to achieve fiscal sustainability. Edward Gemayel, head of the mission, emphasized the importance of “recovery of public finances” through a four-pronged approach:
Increase tax revenue collection to meet government budgetary goals. Reduce reliance on exemptions that burden the national budget. Gradually decrease untargeted and expensive energy subsidies. Allocate more resources to social programs supporting vulnerable populations.
The IMF criticized the current energy subsidy system, which cost the government over 1,800 billion CFA francs in the past three years. Gemayel argued for targeted subsidies, excluding organizations like the IMF and embassies that don’t require them.
Discussions between the IMF and Senegalese authorities will continue virtually to finalize a staff-level agreement on budgetary plans for 2025, Eurobond utilization, and energy sector reforms. The IMF Board of Directors will decide on Senegal’s access to approximately 230 billion CFA francs based on the final agreement.
Despite short-term challenges, Senegal’s prospects remain positive. The IMF forecasts a 7.1% growth rate in 2024, with inflation falling below 4%. These figures are projected to improve further in 2025, with growth reaching 10.1% and inflation dropping to around 2%. However, the budget deficit is expected to be 4.6% in 2024, exceeding the initial target due to debt servicing costs, increased energy subsidies, and revised growth estimates.
Implementing the IMF’s recommendations is crucial for Senegal to achieve long-term economic prosperity and manage its newfound oil wealth responsibly. The successful utilization of the recent Eurobond proceeds will also play a vital role in strengthening debt sustainability.
ODL/te/lb/abj/APA