Senegal debt management challenges amid political timeline pressures

Navigating Senegal’s Debt Crisis: The Clash Between Political Timelines and Economic Necessities

Every leader, at some point, must make tough decisions—often unpopular in the short term but essential for long-term stability. As former U.S. President Bill Clinton once noted, ‘Sooner or later, all presidents face difficult choices that may not be popular immediately, but doing what is right often leads to future political rewards.’ This wisdom resonates deeply in Senegal’s current struggle to manage its public debt, where the tension between electoral cycles and sustainable economic policies has never been more pronounced.

Introduced by economists James M. Buchanan and Gordon Tullock in 1962, the Public Choice Theory highlights the inherent conflict between short-term political timelines—driven by electoral calendars—and the longer-term requirements of effective governance. This theory is vividly illustrated in Senegal’s debt management strategy, where immediate political considerations often clash with the pragmatic need for fiscal sustainability.

Recent data on Senegal’s public debt underscores the urgency of re-evaluating its management approach. Key indicators such as the effective interest rate, debt-to-GDP ratio, and weighted average maturity must undergo significant improvements to ensure long-term viability. Adjusting any of these variables—whether through refinancing, reprofiling, or restructuring—directly impacts the existing debt schedule, regardless of the terminology used.

A Glimpse into the Debt Landscape

From September 2024 to July 2026, Senegal has been meticulously assessing its public debt figures. A report by Forvis Mazars, commissioned by the government and published in the Ministry of Economy, Finance, and Planning’s 2019-2024 Public Debt Statistical Bulletin, revealed a staggering debt stock of 23,666.8 billion CFA francs (excluding parastatal debt and arrears) by the end of 2024, equivalent to 118.8% of the GDP.

The debt service—comprising principal, interest, and commissions—consumed 4,357.5 billion CFA francs in 2025 alone, a figure that nearly matched total tax revenues of 4,087.4 billion CFA francs. Projections for 2026 paint an even grimmer picture: a debt service of 5,498 billion CFA francs against expected tax revenues of 5,384.8 billion CFA francs. This means that every additional franc spent, whether on operations or investment, must be financed through further borrowing, or risk defaulting on existing obligations.

The Fiscal Revenue Dilemma

In August 2025, the Senegalese government unveiled its Economic and Social Recovery Plan (PRES), aiming to generate an additional 3,173 billion CFA francs in tax revenues between 2025 and 2028. This includes 2,111 billion from direct measures and 1,062 billion from multiplier effects. By 2026, the goal was to collect 703.6 billion CFA francs in tax revenues, alongside 1,091 billion from the recycling of state-owned land assets.

However, early 2026 data tells a different story. Tax revenues for the first quarter amounted to just 54.2 billion CFA francs, with optimistic estimates projecting 300 billion by year-end. This casts doubt on the feasibility of PRES’s targets, especially given structural economic constraints such as GDP growth, the informal sector’s dominance, and the pace of digitalization in public administration. Senegal’s tax potential hovers around 25.3% of GDP, yet the effective tax pressure was only 18.9% in 2025, leaving a fiscal gap of 6% to bridge in the medium term.

Meanwhile, debt service in 2025 already exceeded tax revenues by 106.60%. For 2026, the projected debt service of 5,497.92 billion CFA francs further exacerbates the imbalance. The 2026 budget law anticipates a financing gap of 6,075.3 billion CFA francs, exceeding even the debt service costs. This stark comparison reveals the limitations of relying solely on tax revenue adjustments to stabilize the debt in the short to medium term.

Why Refinancing Is a Short-Term Illusion

Refinancing is often touted as a quick fix, but its effectiveness hinges on whether the new debt carries a lower cost than the debt it replaces. In Senegal’s case, the opposite is true. To offset limited access to international capital markets, the government has increasingly turned to the West African Economic and Monetary Union (WAEMU) regional market. In 2025, Senegal raised 4,004 billion CFA francs through public offerings, a fourfold increase from 2024’s 998 billion. However, the cost of this new debt is significantly higher: interest rates for 2026 range between 7% and 8%, compared to the 3.9% effective rate on central government debt as of December 2024.

The average maturity of new debt has also shortened, increasing refinancing risks. While the effective interest rate on foreign-denominated debt was 3.4%, domestically-denominated debt carried a 5.3% rate—a 56% cost differential. With 14.3% of total debt due in the short term, the refinancing strategy not only fails to alleviate immediate fiscal pressures but also worsens the debt dynamics by increasing costs and shortening maturities.

The Debt Dynamics: A Vicious Cycle

By the end of 2025, central government debt rose by 1,531.68 billion CFA francs to 25,198.48 billion, though the debt-to-GDP ratio improved to 112%—primarily due to GDP growth driven by hydrocarbon production. Without this boost, the ratio would have deteriorated to 124%. The debt trajectory over the next few years will be shaped by three critical factors:

• Effective interest rate: The cost of debt and, by extension, its growth rate.
• GDP growth rate: The new wealth generated to service the debt.
• Primary balance: The difference between state revenues and expenditures, excluding interest payments.

A negative primary balance indicates that the state’s revenues are insufficient to cover both non-interest expenditures and debt interest payments. This forces the government to borrow to finance operations, interest, and investments simultaneously. For Senegal, the primary balance in 2025 was -401.7 billion CFA francs (-1.8% of GDP), while the effective interest rate (4.59%) exceeded non-hydrocarbon GDP growth (2.2%). To stabilize debt at 119% of GDP, a primary surplus of +2.7% of GDP would have been required—far from the actual -1.8%.

Projections for 2026 are equally concerning. The primary balance is expected to be -246 billion CFA francs, with an effective interest rate of 4.79% and non-hydrocarbon growth of 3.2%. The stabilizing primary balance needed is +1.9% of GDP, yet the projected balance remains negative. This trajectory strongly suggests a snowball effect in the medium term if internal fiscal adjustments alone are pursued.

Beyond Institutional Reforms: The Need for Pragmatic Solutions

Senegal has recently established a General Directorate of Financing and Debt to centralize debt management—a significant institutional reform. While this step is commendable, it must be paired with pragmatic financial strategies. Relying solely on internal fiscal gymnastics or commercially driven refinancing will not resolve the crisis. Instead, the government should explore targeted negotiations with multilateral, bilateral, and commercial creditors to adjust repayment schedules, interest rates, or even consider nominal haircuts on certain debt stocks.

Delaying such measures risks not only escalating fiscal costs but also crowding out private investors from the domestic financial market and stifling public investment through continued fiscal consolidation. The choice between ideological posturing and economic pragmatism is stark: deferring tough decisions today only amplifies the inevitable challenges of tomorrow.