Senegal’s Debt Dilemma: Navigating Short-Term Politics and Long-Term Economic Stability
Dakar — In the realm of public policy, few challenges are as intricate as reconciling the timelines of political expediency with the demands of sustainable economic governance. This tension is vividly illustrated in the current debate surrounding Senegal’s public debt management, where immediate political considerations often clash with the urgent need for structural financial reforms.
At the heart of this issue lies the theory of public choice, pioneered by economists James M. Buchanan and Gordon Tullock. This framework highlights the inherent conflict between the short-term horizons of electoral politics and the long-term vision required for effective public policy. The former often prioritizes immediate gains, while the latter demands patience and strategic foresight. This dichotomy is particularly relevant as Senegal grapples with the complexities of its growing debt burden.
Assessing the Debt Landscape: Key Indicators and Challenges
Recent evaluations of Senegal’s public debt reveal alarming trends that demand urgent attention. According to a comprehensive report released in mid-2025 by Forvis Mazars, commissioned by the government, the country’s debt stock stood at 23,666.8 billion FCFA (excluding public sector debt and arrears) by the end of 2024. This represents a staggering 118.8% of the gross domestic product (GDP), signaling a precarious financial situation.
The weight of the debt service is equally concerning. In 2025, the total debt service—comprising principal, interest, and commissions—consumed the entirety of the country’s tax revenue, amounting to 4,357.5 billion FCFA. Of this, 3,269.4 billion FCFA was allocated to principal repayments, while 1,088.1 billion FCFA covered interest and commissions. Projections for 2026 paint a similarly grim picture, with a projected debt service of 5,498 billion FCFA against expected tax revenues of 5,384.8 billion FCFA.
This means that Senegal is increasingly reliant on additional borrowing merely to meet its debt obligations, leaving little room for essential public expenditures. The situation underscores the urgent need for a sustainable debt management strategy that can restore fiscal balance without exacerbating the debt burden.
Fiscal Revenue Growth: A Limited Solution for Immediate Debt Relief
In response to these challenges, the government unveiled its Economic and Social Recovery Plan (PRES) in August 2025. The plan aims to generate an additional 3,173 billion FCFA in tax revenues between 2025 and 2028, with a target of 703.6 billion FCFA for 2026 alone. Additionally, the government is banking on 1,091 billion FCFA from the recycling of state-owned assets to bolster its fiscal position.
However, early performance indicators raise questions about the feasibility of these targets. By the end of the first quarter of 2026, tax revenues amounted to just 54.2 billion FCFA, with optimistic estimates suggesting a potential rise to 300 billion FCFA by year-end. This sluggish growth trajectory reflects deeper structural issues within the economy, including a narrow tax base, a large informal sector, and limited digitalization in tax administration.
Historical data further highlights the challenge. Between 2023 and 2025, tax revenues grew by approximately 7%, from 3,593.8 billion FCFA to 4,087.4 billion FCFA. However, this growth has been outpaced by the increasing burden of debt service, which has consistently exceeded fiscal revenues in recent years. For instance, in 2025, debt service accounted for 106.6% of tax revenues, and projections for 2026 indicate a further rise to 102%—a clear indication that relying solely on fiscal adjustments is insufficient for meaningful debt relief.
The Pitfalls of Refinancing: A Temporary Fix with Long-Term Consequences
In the absence of robust fiscal revenue growth, the government has turned to domestic refinancing as a stopgap measure. In 2025, Senegal raised 4,004 billion FCFA through public offerings on the West African Economic and Monetary Union (WAEMU) regional market, a significant increase from the 998 billion FCFA mobilized in 2024. While this has provided short-term liquidity, the costs and risks associated with refinancing are becoming increasingly apparent.
As of December 31, 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-denominated debt. The average residual maturity for domestic debt was 3.6 years, while foreign debt had a longer maturity of 8.7 years. Notably, 14.3% of the total debt was due for repayment in the short term, by the end of 2025.
The new debt instruments issued in 2025 and 2026 have come at a higher cost, with yields ranging between 6-7% in 2025 and 7-8% in 2026. This increase reflects rising risk premiums demanded by investors, as well as a shortening of maturities to mitigate perceived risks. The result is a refinancing strategy that, while providing immediate liquidity, exacerbates the long-term debt burden by locking in higher costs and shorter repayment windows.
Moreover, the domestic refinancing strategy does little to address the structural issues plaguing Senegal’s debt profile. Foreign-denominated debt, which accounts for 23% of the total debt stock, carries a 56% higher cost than domestic debt. This disparity underscores the limitations of relying solely on domestic markets for debt management, particularly when global economic conditions remain volatile.
The Domino Effect of Refinancing on Debt Dynamics
Between 2024 and 2025, Senegal’s central government debt increased by 1,531.68 billion FCFA, reaching 25,198.48 billion FCFA. While the debt-to-GDP ratio improved from 118.8% to 112%, this was primarily due to a surge in GDP growth driven by the commencement of hydrocarbon production. Without this boost, the ratio would have deteriorated to 124%, highlighting the fragility of the current fiscal position.
To better understand the trajectory of Senegal’s debt, it is essential to examine three key indicators: the effective interest rate of the debt, the GDP growth rate, and the primary balance. The primary balance, which measures the difference between government revenue and expenditure (excluding debt interest payments), provides critical insight into the country’s ability to service its debt sustainably.
In 2025, Senegal recorded a primary deficit of -401.7 billion FCFA, equivalent to -1.8% of GDP. The effective interest rate on the debt was 4.59%, significantly higher than the non-hydrocarbon GDP growth rate of 2.2%. To stabilize the debt-to-GDP ratio at 119% (the level recorded in 2024), a primary surplus of +2.7% of GDP would have been required. However, the actual primary balance fell short of this target, resulting in a further deterioration of the debt-to-GDP ratio to 124% when hydrocarbon-related GDP growth was excluded.
Projections for 2026 paint a similarly concerning picture. The primary balance is expected to remain in deficit at -246 billion FCFA, while the effective interest rate on the debt is projected to rise to 4.79%. Although non-hydrocarbon GDP growth is expected to improve to 3.2%, the required primary surplus for stabilization (+1.9% of GDP) remains out of reach. This imbalance suggests a high likelihood of a debt snowball effect in the short to medium term, particularly if current fiscal strategies remain unchanged.
Beyond Institutional Reforms: The Need for Economic Pragmatism
In response to these challenges, Senegal has established a General Directorate of Financing and Debt to centralize and streamline debt management efforts. This institutional reform is a step in the right direction, but it is not enough to address the quantitative realities of the debt crisis. Sustainable solutions will require a combination of fiscal discipline, strategic refinancing, and, in some cases, renegotiation of debt terms with creditors.
Given the constraints of the current fiscal environment, pragmatic economic solutions may include extending maturities, negotiating lower interest rates, or even considering nominal haircuts on certain debt instruments. Delaying these measures risks not only exacerbating the fiscal burden but also crowding out private sector investment and stifling public investment due to consolidation efforts.
Ultimately, the choices facing Senegal are stark. While political considerations may influence the timing and nature of reforms, they must not overshadow the imperative of long-term economic stability. The country stands at a crossroads, where decisive action today can avert a deeper crisis tomorrow. Procrastination, however, will only compound the challenges and narrow the window for a sustainable resolution.