Senegal’s government has made a decisive move to address a mounting public arrears crisis, announcing plans to settle an estimated 1.9 trillion West African CFA francs (approximately 2.9 billion euros) in unpaid bills before the end of the fiscal year. The announcement, led by a senior official from the Ministry of Economy, Finance, and Planning, prioritizes small and medium-sized enterprises (SMEs) as the primary beneficiaries of this financial reset. While the technical framework of the operation remains under development, the initiative arrives at a critical juncture for Senegal’s strained public finances.
Public arrears: a symptom of deeper fiscal distress
The staggering 1.9 trillion FCFA figure—equivalent to roughly 10% of Senegal’s projected 2024 GDP of 19 trillion FCFA—highlights years of unpaid government obligations to suppliers, delayed public contract settlements, and unresolved tax credits. Details on the breakdown between domestic and external arrears, the distribution among SMEs and large corporations, and the exact eligibility criteria for early payments have yet to be disclosed. This lack of clarity has left many stakeholders questioning the feasibility and fairness of the plan.
Business associations, including the National Council of Employers (CNP) and the National Confederation of Senegalese Employers (CNES), have long warned of the severe consequences of these unpaid debts. In sectors such as construction, IT services, and administrative supplies—where over 60% of revenue depends on public contracts—delays have triggered a wave of insolvencies, job cuts, and a sharp decline in bank lending to government suppliers. The situation has worsened over the past 18 months, with no immediate relief in sight.
From hidden debt to fiscal reckoning
The arrears crisis cannot be viewed in isolation. In February 2025, Senegal’s Audit Court released a damning report revealing hundreds of billions of FCFA in previously unrecorded public liabilities inherited from the previous administration. This disclosure prompted the International Monetary Fund (IMF) to freeze its ongoing program with Senegal, demanding a comprehensive audit before resuming financial support. Negotiations for a new IMF program remain ongoing, with the resolution of domestic arrears now a key condition for progress.
The IMF traditionally treats the clearance of domestic arrears as a structural benchmark, on par with wage bill management and primary fiscal balance. A credible repayment schedule—backed by transparent mechanisms such as direct cash payments, treasury bill issuances, or tax offsets—will be essential for securing a new Extended Credit Facility. Without these assurances, Senegal risks prolonged financial isolation and further economic stagnation.
Regional parallels and political stakes
Senegal is not the first West African nation to tackle this challenge. Côte d’Ivoire successfully cleared around 800 billion FCFA in domestic arrears between 2012 and 2015, combining direct payments with the issuance of negotiable public securities on the West African Monetary Union (WAMU) market. Benin followed a similar approach in 2019, focusing on local suppliers. In both cases, restoring SME confidence preceded a surge in private investment and economic recovery.
For Senegal’s new leadership—President Bassirou Diomaye Faye and Prime Minister Ousmane Sonko, who took office in April 2024 on a platform of fiscal transparency and reform—the arrears clearance is both a financial and political litmus test. Meeting the year-end deadline would send a powerful signal to the private sector, which has grown increasingly skeptical after 18 months of shrinking public contracts and downgraded growth forecasts.
The biggest question mark hangs over funding. Senegal’s recent treasury bill issuances on the regional market have carried interest rates exceeding 8%, raising concerns about the sustainability of additional borrowing. Policymakers must weigh the trade-offs between further debt accumulation, phased payments, and tax offsets to determine whether this arrears clearance will deliver tangible relief to struggling SMEs or merely defer an unsustainable fiscal imbalance.
