Senegal’s public debt: economists seek innovative solutions beyond traditional frameworks

Senegal’s public debt has rapidly emerged as the primary point of contention between the administration of Prime Minister Ousmane Sonko and the influential Bretton Woods institutions over the past year. On Monday, May 11, economists from across Africa and Asia commenced a series of discussions in Dakar, aiming to forge alternative pathways out of the current financial quagmire. This initial gathering serves as a precursor to a more extensive conference, which the head of government is scheduled to attend this Tuesday. The stated objective is clear: to present heterodox economic expertise as a counter-narrative to the orthodox prescriptions championed by the International Monetary Fund (FMI) and the World Bank.

Public debt at the heart of the standoff with the FMI

Since the upward revision of the debt stock inherited from the previous administration, the long-term sustainability of Senegalese public finances has fueled an intense debate. The adjustment of official figures led to the freezing of several disbursements from the program agreed with the FMI. Dakar now finds itself in a challenging position: needing to honor its international commitments while simultaneously financing the ambitious social promises put forth by Pastef, the ruling party.

The forum convened this week reflects a deliberate political orientation. Rather than conforming to the standard budgetary adjustments typically requested by creditors, the executive branch is actively constructing a technical and academic framework to support alternative strategies. These include considering orderly debt restructuring, extending maturity periods, and significantly enhancing the mobilization of domestic resources. The participation of Asian economists, hailing from nations that have successfully navigated their own balance of payments crises, is intended to enrich a discussion still largely influenced by Western economic paradigms.

A strategic political message to financial partners

The timing of this event is far from coincidental. By bringing together voices critical of austerity measures just weeks after the de facto suspension of discussions with the FMI, Ousmane Sonko is signaling his intentions to financial partners. The Prime Minister, a central figure in Senegal’s political shift in 2024, has made economic sovereignty a cornerstone of his policy agenda. His direct participation in the upcoming conference elevates its significance beyond that of a mere academic seminar.

For the organizers, the core aim is to demonstrate that viable room for maneuver exists outside of conventional financial programs. This stance aligns with a broader movement observed across the African continent, where several governments are increasingly questioning the conditionality often attached to multilateral funding. Recent experiences in Ghana, Zambia, and Ethiopia, involving debt restructuring, have generated a body of literature that Dakar intends to draw upon. It is worth noting, however, that Senegal, unlike these neighbors, is not formally in default and thus maintains, albeit limited, access to regional markets.

Credible alternatives to austerity explored

Fundamentally, the alternatives put forward by the economists mobilized for this event are structured around several key pillars. The first concerns fiscal policy: broadening the tax base, intensifying the fight against illicit financial flows, and renegotiating specific extractive contracts, particularly in the hydrocarbon sector, which commenced production in 2024. The second pillar addresses the very architecture of the debt, proposing the prioritization of instruments denominated in local currency or indexed to future revenues. The third pillar emphasizes enhanced regional coordination within the framework of the West African Economic and Monetary Union (UEMOA).

These proposals are not without their inherent complexities. A firm stance towards the FMI could potentially influence the risk premium demanded by investors, even as the Senegalese Treasury remains reliant on regular issuances in the public securities market. Furthermore, any debt renegotiation will inevitably require dialogue with Eurobond holders, whose interests often diverge from those of bilateral creditors. In concrete terms, the government’s political latitude will hinge on its capacity to articulate a sovereign discourse while simultaneously conveying clear signals of financial credibility.

Beyond the immediate announcements, the sequence of events unfolding this week in Dakar will be closely scrutinized by capitals across the sub-region and by credit rating agencies. This period could either foreshadow a new cycle of negotiations with lenders or, conversely, prolong a financial standoff whose budgetary costs continue to accumulate each quarter. The conclusions of the forum are expected to be presented to the government upon the completion of its work.