Navigating the tightrope: Senegal’s debt dilemma between political cycles and economic reality
The delicate balance between political expediency and long-term economic sustainability is playing out vividly in Senegal’s current debt management strategy. As the country grapples with mounting fiscal pressures, the government faces a stark choice: implement unpopular but necessary reforms now or risk deeper financial distress later. This dilemma mirrors the classic tension identified by public choice theory, which highlights the clash between short-term political cycles and the longer-term imperatives of sound economic governance.
Decoding the debt crisis: figures that tell a troubling story
Official assessments, including a 2025 report by Forvis Mazars commissioned by the Senegalese government, reveal a debt landscape that demands urgent attention. By the end of 2024, the country’s public debt stood at 23,666.8 billion West African CFA francs (excluding parapublic sector debt and arrears), equivalent to 118.8% of GDP. The situation is further exacerbated by the fact that debt servicing—comprising principal, interest, and commissions—consumes 100% of tax revenues, with 4,357.5 billion francs allocated in 2025 alone.
This financial strain shows no signs of abating. Projections for 2026 indicate that debt servicing will reach 5,498 billion francs, while expected tax revenues are estimated at 5,384.8 billion francs. The stark reality is that Senegal must borrow additional funds merely to meet existing obligations, leaving little room for new investments or operational expenditures.
A fiscal balancing act: can revenue growth keep pace?
In August 2025, the government unveiled the Economic and Social Recovery Plan (PRES), aiming to generate an additional 3,173 billion francs in tax revenues between 2025 and 2028. This includes 2,111 billion francs from direct measures and 1,062 billion francs anticipated from multiplier effects. However, early 2026 data paints a sobering picture: tax receipts for the first quarter totaled just 54.2 billion francs, with optimistic forecasts capping the year’s total at 300 billion francs. Such figures raise serious questions about the feasibility of achieving these ambitious targets, particularly given structural constraints in the economy.
The Senegalese tax system faces inherent challenges, including an informal sector that accounts for a significant portion of economic activity, limited digitalization in revenue collection, and a tax-to-GDP ratio that lags behind peer nations. Despite a nominal increase in tax revenues—from 3,833 billion francs in 2024 to 4,087.4 billion in 2025—the gap between potential and actual revenue remains wide. Experts estimate that Senegal needs to bridge a 6% fiscal gap over the next 3 to 6 years to align with its economic potential.
The refinancing trap: short-term relief with long-term risks
Faced with limited access to international capital markets, the government has increasingly turned to the West African Economic and Monetary Union (UEMOA) regional market to meet financing needs. In 2025, Senegal raised 4,004 billion francs through public offerings, a fourfold increase from 2024. However, this strategy carries significant risks. The cost of new debt has risen sharply, with interest rates climbing from 6-7% in 2024 to 7-8% in 2026, reflecting heightened investor risk premiums. Additionally, the average maturity of new debt has shortened, increasing refinancing risks.
At the end of 2024, the effective interest rate on central government debt stood at 3.9%, with domestic debt carrying a higher rate of 5.3% compared to 3.4% for foreign-currency debt. The average residual maturity for domestic debt was 3.6 years, while foreign debt averaged 8.7 years. With 14.3% of total debt due within a year, the refinancing burden is immediate and substantial.
Critically, the new debt’s terms are less favorable than those of the debt it replaces, undermining any potential benefits. The government’s reliance on domestic markets also exposes it to currency risks, as 23% of the central government’s debt is denominated in foreign currencies. The 56% cost differential between domestic and foreign-currency debt further compounds the financial strain.
Debt dynamics: a snowball effect in the making
The Senegalese debt landscape is shaped by three key factors: the apparent interest rate (a measure of debt cost), GDP growth (a proxy for revenue generation), and the primary balance (the difference between revenue and non-interest expenditure). In 2025, the primary balance was a deficit of 401.7 billion francs (-1.8% of GDP), while the apparent interest rate (4.59%) outpaced non-hydrocarbon GDP growth (2.2%). To stabilize the debt-to-GDP ratio at 2024 levels (119%), a primary surplus of +2.7% of GDP would have been required—but the actual balance was deeply in deficit.
Projections for 2026 offer little respite. The primary balance is expected to remain negative at -246 billion francs, with an apparent interest rate of 4.79% and a modest improvement in GDP growth to 3.2%. The required primary surplus to stabilize debt (1.9% of GDP) remains unattainable, suggesting a likely debt spiral if current trends persist.
A call for pragmatic solutions
In response to the crisis, Senegal has established a General Directorate of Financing and Debt to centralize debt management. While this institutional reform is a step in the right direction, it alone cannot resolve the quantitative challenges posed by the debt burden. The government must adopt a more pragmatic approach, engaging with multilateral, bilateral, and commercial creditors to renegotiate terms—extending maturities, reducing interest rates, or even considering nominal haircuts on certain debt stocks.
Delaying such measures risks not only higher refinancing costs but also the crowding out of private sector investment and public investment, as fiscal consolidation tightens the budget. The choice is clear: act decisively now or face the inevitability of deeper economic distress down the road.
