Senegal’s national debt has rapidly emerged as the primary point of contention between Prime Minister Ousmane Sonko’s administration and the Bretton Woods institutions over the past year. On Monday, May 11, economists from African and Asian nations convened in Dakar to begin discussions aimed at outlining potential strategies to navigate this financial crisis. This initial gathering sets the stage for a more extensive conference, which the head of government is scheduled to attend this Tuesday. The stated objective is clear: to present heterodox expert opinions as a counterpoint to the conventional prescriptions advocated by the International Monetary Fund (IMF) and the World Bank.
Public debt at the heart of the standoff with the IMF
The sustainability of Senegalese public finances has fueled a tense debate ever since the upward revision of the debt inherited from the previous government. Official figures were adjusted, leading to the suspension of several disbursements from the program agreed upon with the IMF. Dakar now finds itself in a difficult position: needing to honor its international commitments while simultaneously funding the social promises of Pastef, the ruling party.
The forum organized this week underscores a deliberate political direction. Instead of simply accepting the fiscal adjustments typically demanded by creditors, the executive branch is seeking to build a technical and academic case for alternative approaches. Participants are expected to delve into various avenues, such as orderly debt restructuring, extending repayment periods, and enhancing domestic resource mobilization. The inclusion of Asian economists, hailing from countries that have previously navigated balance of payments shocks, aims to enrich a discussion still heavily influenced by Western paradigms.
A political signal sent to financial partners
The timing of this event is far from coincidental. By bringing together critics of austerity just weeks after discussions with the IMF were effectively paused, Ousmane Sonko is sending a clear message to financial partners. The Prime Minister, a pivotal figure in Senegal’s political shift of 2024, has made economic sovereignty a defining characteristic of his agenda. His direct involvement in the conference elevates its significance beyond a typical academic seminar.
For the organizers, the goal is to demonstrate that viable options exist beyond conventional financial programs. This stance aligns with a broader movement across the continent, where several governments are challenging the conditionalities attached to multilateral funding. From Ghana to Zambia and Ethiopia, recent debt restructuring experiences have contributed to a body of knowledge that Dakar intends to leverage. However, unlike these neighbors, Senegal is not formally in default and thus maintains, albeit limited, access to regional markets.
What credible alternatives to austerity?
Fundamentally, the alternatives put forth by the economists involved revolve around several key areas. The first concerns taxation: broadening the tax base, combating illicit financial flows, and renegotiating certain extractive contracts, particularly in the hydrocarbon sector, where production commenced in 2024. The second addresses the debt architecture itself, advocating for instruments denominated in local currency or indexed to future revenues. The third points to regional coordination, specifically within the framework of the West African Economic and Monetary Union (UEMOA).
These proposals are not without their complexities. A firm stance towards the IMF could potentially increase the risk premium demanded by investors, even as the Senegalese Treasury remains reliant on regular issuances in the public securities market. Moreover, any renegotiation will inevitably require dialogue with Eurobond holders, whose interests diverge from those of bilateral creditors. Practically, the government’s political flexibility will depend on its ability to articulate a sovereign discourse while simultaneously projecting financial credibility.
Beyond the immediate announcements, the sequence of events unfolding this week in Dakar will be closely observed by capitals across the sub-region and by rating agencies. It could potentially herald a new round of negotiations with lenders, or conversely, prolong a confrontation whose fiscal cost escalates each quarter. The forum’s conclusions are expected to be presented to the government upon the completion of its work.
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