Senegal’s debt challenge: balancing political timelines and economic realities

Every leader eventually faces tough choices—decisions that may not please voters in the short run but are necessary for long-term stability. As former U.S. President Bill Clinton once reflected, “Sooner or later, leaders must make difficult, unpopular decisions, but they must do what is right, trusting that political winds will eventually shift in their favor.”

The tension between political timelines and effective public policy often plays out in debt management strategies. In Senegal, recent assessments reveal a pressing need to address the country’s rising public debt, which has reached critical levels. Experts agree that three key indicators must improve to restore fiscal health: the effective interest rate, the debt-to-GDP ratio, and the average weighted maturity of debt. Adjusting any of these factors could alter the repayment schedule, regardless of the method used—whether refinancing, reprofiling, or restructuring.

The International Monetary Fund has signaled that a new program for Senegal hinges on a clear strategy from the government, one that aligns with the country’s fiscal and economic constraints. While the Senegalese government prefers to avoid outright debt restructuring, opting instead for internal fiscal consolidation and refinancing, the numbers raise questions about the sustainability of this approach after nearly two years of close scrutiny.

Two years of assessment: the debt reality in numbers

From September 2024 to July 2026, Senegal conducted a thorough review of its public debt. A report commissioned by the government and published in mid-2025 revealed that by the end of 2024, the country’s debt stood at 23.7 trillion CFA francs—excluding public sector and arrears—equivalent to 118.8% of GDP.

The debt service alone consumed 4.4 trillion CFA francs in 2025, absorbing every franc of tax revenue collected. This included 3.3 trillion in principal repayments and 1.1 trillion in interest and fees. Projections for 2026 showed a similar imbalance, with 5.5 trillion CFA francs required for debt service against 5.4 trillion in expected tax revenues.

In effect, Senegal finds itself in a precarious position: every additional franc spent on operations or investment must be funded through new borrowing. Without it, the state cannot meet its debt obligations as they fall due.

Fiscal revenue growth: a slow engine for debt relief

In August 2025, the government launched the Economic and Social Recovery Plan (PRES), aiming to generate an additional 3.2 trillion CFA francs in tax revenue between 2025 and 2028. The plan includes 2.1 trillion from direct tax measures and another 1.1 trillion from indirect effects—including asset recycling of state-owned land, targeted at 1.1 trillion CFA francs.

However, by the first quarter of 2026, tax revenue stood at just 54.2 billion CFA francs. Even under optimistic assumptions, collections were projected to reach only 300 billion by year-end. These figures cast doubt on the plan’s ability to significantly alter the fiscal landscape in the short term.

Tax revenue growth depends on structural factors: GDP expansion, the size of the informal sector, digitalization in public administration, and the effectiveness of tax collection. Senegal’s fiscal potential—the maximum sustainable tax base—is estimated at 25.3% of GDP, yet the actual tax pressure was 18.9% in 2025. This leaves a 6-percentage-point gap to close over the next three to six years.

Even without new tax measures, revenue had already grown by 7% annually between 2023 and 2025—from 3.6 trillion to 4.1 trillion CFA francs. Yet, during the same period, non-hydrocarbon GDP growth averaged just 2.75%, underscoring the challenge of balancing debt service with sustainable growth.

For 2026, debt service was projected to rise to 5.5 trillion CFA francs, exceeding expected tax revenues by nearly 100 billion. Over the next three years, Senegal faces a peak in debt repayments, compounding the pressure on public finances.

Internal refinancing: a costly illusion

Refinancing is often presented as a viable solution to short-term liquidity crises. But for it to improve financial health, the new debt must cost less than the debt it replaces. If not, it merely postpones—and may worsen—a liquidity crisis. To bridge funding gaps, Senegal has increasingly relied on the West African Economic and Monetary Union (WAEMU) regional market. In 2025 alone, the state raised 4.0 trillion CFA francs through public offerings—nearly four times the 998 billion CFA francs raised in 2024.

Yet, comparing costs reveals a troubling trend. As of December 31, 2024, the effective interest rate on central government debt was 3.9%, broken down into 3.4% for foreign-currency debt and 5.3% for CFA-denominated debt. The weighted average maturity stood at 8.7 years for external debt and just 3.6 years for domestic debt. Notably, 14.3% of total debt was due within one year.

New debt raised in 2025 and 2026 came at significantly higher costs. Yields on WAEMU market bonds ranged between 6% and 7% in 2024, rising to 7% to 8% in 2026 as investors demanded higher risk premiums. Maturities also shortened, reflecting reduced appetite for longer-term exposure. Even if borrowing outside WAEMU were an option, Senegal’s sovereign risk premium has risen sharply on global markets.

In effect, the new debt is not only more expensive but also shorter-term than the debt it replaces. Some argue that switching from foreign-currency to CFA-denominated debt reduces exchange rate risk, potentially offsetting the higher cost. However, this remains unproven. CFA-denominated debt already accounts for 77% of central government debt, and the cost gap between the two—3.4% vs. 5.3%—is significant. Thus, refinancing not only fails to ease immediate fiscal constraints but actively worsens the debt trajectory.

The compounding burden of debt dynamics

In 2025, central government debt increased by 1.5 trillion CFA francs to 25.2 trillion, while the debt-to-GDP ratio improved to 112%. However, this improvement was largely driven by GDP growth fueled by the onset of oil and gas production. Without this factor, the ratio would have surged to 124%.

Three key factors shape Senegal’s debt dynamics in the short to medium term:

• Effective interest rate: The cost of debt and its rate of growth.
• GDP growth rate: The newly created wealth that enables debt servicing.
• Primary balance: The difference between government revenue and non-interest expenditure.

If the primary balance is negative—that is, if non-interest spending exceeds revenue—public funds are insufficient not only to cover interest payments but also basic operational and investment needs. The state must then borrow to finance all three: operations, interest, and investment.

A fourth, composite indicator—the stabilizing primary balance—determines whether debt can be stabilized at a target level. For Senegal, the effective primary balance in 2025 was –1.8% of GDP, while the required stabilizing balance to reach the 2024 debt target (119% of GDP) was +2.7% of GDP. The gap was even wider in 2026, with a projected stabilizing balance of +1.9% of GDP against an expected primary deficit of –0.4% of GDP.

These figures point to a high probability of a debt snowball effect in the coming years if internal fiscal measures remain the sole response.

Beyond institutional reform: the case for pragmatic debt diplomacy

Senegal has taken a significant step forward by establishing a General Directorate of Financing and Debt to centralize debt management. This institutional reform is a welcome development, but it must be complemented by pragmatic financial solutions.

To stabilize debt without triggering economic contraction, Senegal may need to renegotiate terms across all creditor classes—multilateral, bilateral, and commercial. This could include extending maturities, reducing interest rates, or even accepting nominal haircuts on certain debt tranches. Delaying such action risks not only higher fiscal costs but also crowding out private investment in domestic markets and stifling public investment through fiscal consolidation.

In the end, political considerations must not overshadow economic and financial pragmatism. Procrastination only deepens the inevitable.