Senegal is confronting a severe public debt challenge, the most acute in its recent economic history, following a decade characterized by rapid debt accumulation, exceptionally …
Senegal is confronting a severe public debt challenge, the most acute in its recent economic history, following a decade characterized by rapid debt accumulation, exceptionally high public investment, and persistently large fiscal deficits. Without decisive and timely corrective measures, Senegal faces heightened rollover and liquidity risks, with potential spillovers across the West African Economic and Monetary Union (WAEMU).
This paper proposes an integrated three-pillar strategy anchored in an IMF-supported program and complemented by regional and multilateral platforms to restore credibility, ease near-term liquidity pressures, and preserve essential development spending.
1. Fiscal Drivers of Debt Accumulation
Fiscal data confirms that Senegal’s debt buildup over the past decade has been driven primarily by expenditure growth. As shown in Figure 1, the country’s fiscal dynamics since 2014 reveal three interlinked patterns: (i) a steady rise in public expenditure, (ii) broadly stagnant government revenue as a share of GDP, and (iii) a worsening fiscal balance that has directly fueled debt accumulation.
Figure 1. Senegal: Fiscal Trends (2014-2024)
While government revenue remained broadly stable at around 19–21 percent of GDP throughout the period, total expenditure increased significantly, rising from approximately 22–24 percent of GDP before 2019 to above 33–36 percent of GDP thereafter. This widening expenditure–revenue gap led to a transition from moderate fiscal deficits in the pre-2019 period to persistent double-digit deficits in subsequent years, reaching around –14 to –16 percent of GDP during the past three years.
The sustained reliance on debt financing to cover these imbalances translated into a steep increase in public debt, which rose from around 45 percent of GDP in 2014 to well above 120 percent of GDP by 2024. Over the same period, external public debt rose from 29 percent to 43 percent of GDP, indicating that domestic borrowing drove most of the overall debt increase.
2. The Growth–Investment Nexus: How Senegal’s Strategy Under-Delivered
Over the past decade, Senegal’s total investment as a share of GDP has risen to levels rarely observed in comparable economies. The ratio increased steadily from around 25 percent in the mid-2010s to exceptionally high levels above 45 percent in 2022–23 (Figure 2). Over the same period, real GDP growth remained volatile, suggesting that the marginal growth impact of additional investment has been uneven and time-varying. Looking ahead, the projected normalization of investment ratios reflects financing and absorptive capacity constraints, while the absence of a clear and sustained acceleration in growth underscores the importance of improving investment efficiency, productivity and project selection.
Figure 2.Senegal : Total Investment and Real GDP Growth (2015-29)
The comparison of Senegal’s growth trajectory with the performance of the two fastest growing economies in the WAEMU area, namely Benin and Côte d’Ivoire, reinforces this observed underperformance (Figure 3). Both Benin and Côte d’Ivoire recorded a stronger and more sustained post-pandemic recovery than Senegal, with real GDP growth rebounding rapidly and stabilizing at 6.5% or above during 2021-2024. Senegal’s recovery, by contrast, was more muted and uneven, with average growth below 5.5% during the same period, despite the launch of hydrocarbon production in 2024. Notably, the stronger growth outcomes in Benin and Côte d’Ivoire were achieved alongside more contained fiscal deficits and a slower pace of debt accumulation— Benin and Côte d’Ivoire limited debt increases below 60 percent of GDP— suggesting a more favorable growth–fiscal trade-off.
Figure 3. Real GDP Growth (%)
3. Rising Debt Service and Financial Stability Risks
Senegal’s debt service burden has risen sharply since 2019, diverging markedly from both its regional and income-level comparators. By 2024, its total debt service exceeds 10% of its GNI—more than double the Sub-Saharan Africa average and nearly three times that of low- and middle-income countries (Figure 4). The sharp rise in debt service reflects both the rapid accumulation of public debt over the past decade and a notable shift in the debt composition. While short‑term external debt has remained stable at about 10 percent of total external debt, the share of public and publicly guaranteed debt owed to private creditors increased significantly—from 19 percent in 2014 to 42 percent in 2024. Correspondingly, the share held by official creditors declined from 81 percent to 58 percent. Senegal’s debt vulnerabilities have been reflected in a sequence of negative sovereign rating actions. Moody’s Investors Service and S&P Global Ratings downgraded Senegal multiple times during 2024–25, citing rising debt levels, fiscal slippages, constrained financing buffers, and heightened liquidity and refinancing risks.
Figure 4. Total debt service (% of GNI)
4. An Integrated Three-Pillar Policy Response
Senegal is now at a critical inflection point, facing an unprecedented surge in public debt. In such a context, there is no single, self-contained remedy. Instead, a coherent combination of three complementary instruments, each addressing a specific dimension of the crisis—policy credibility, liquidity, and solvency—offers a pragmatic way to defuse immediate risks, restore confidence, and place public debt back on a sustainable path.
An IMF-supported program remains a cornerstone for anchoring reform momentum and unlocking concessional finance. However, the design of the program must evolve beyond traditional austerity formulas. Fiscal adjustment is unavoidable, but it must be gradual, targeted, and equitable, while protecting social spending and productive investment. Recent experiences in Africa and Asia show that overly abrupt adjustment programs can weaken the social contract, fuel political instability, and ultimately undermine macroeconomic stabilization itself. Social sustainability is therefore a critical condition for the success of the program. The foundation of policy trust must also be rooted in transparent, preventive public financial management.
Senegal’s domestic public debt is largely held by WAEMU banking institutions. A default or severe stress on this debt would trigger a banking liquidity shock, a contraction in credit to the economy, and a high risk of regional contagion. In the face of such systemic risk, central bank inaction would be more costly than intervention. It is therefore justified to establish an exceptional, temporary, and strictly circumscribed stabilization facility under the leadership of the BCEAO. This could take the form of selective secondary market operations or liquidity facilities backed by high-quality public securities. The purpose is not to finance deficits, but to avoid disorderly deleveraging and stabilize the government securities market. Beyond financial stabilization, such a mechanism would also help reduce the crowding-out effect exerted by large sovereign issuances on private-sector credit.
The objective of this pillar is to reduce immediate pressure from external debt service, particularly commercial debt, while freeing up resources for high-impact development priorities (health, education, climate). The mechanism would rely on the targeted buyback or refinancing of high-cost segments of external debt, with the support of guarantees or instruments provided by the World Bank Group. The savings generated on debt service would be channeled into a dedicated fund, subject to strict rules of governance, transparency, and audit. Similar operations have already been implemented, notably in Côte d’Ivoire, Gabon, and in Latin America (Belize, Ecuador).
Given the significant risk for both macroeconomic and financial stability, an exceptional, coordinated, and sequenced response—combining macro-fiscal adjustment, liquidity backstops, and innovative financing—is required. To maximize impact, the first two pillars, IMF-supported macroeconomic adjustment and BCEAO-facilitated domestic debt stabilization, should be implemented in tandem and serve as enabling preconditions for the success of this third pillar. Within this broader effort, the Islamic Development Bank Group has a unique and timely role to play not only as a financier, but as a trusted convenor, catalytic partner, and advocate for Islamic finance instruments that align economic resilience with social equity.
