Senegal: IMF suspends discussions on new program due to economic communication errors

The International Monetary Fund (IMF) announced Monday that discussions on a new financial aid program for Senegal will not begin until the government corrects misreporting of key economic data under former President Macky Sall. The announcement, reported by Reuters, comes after the IMF suspended the current $1.8 billion credit facility pending a thorough review of the country’s finances.

Last month, the Senegalese government revealed that its debt and budget deficit were significantly higher than the figures reported by the previous administration. Indeed, according to a report by the Court of Auditors, the country’s total debt represented 99.67% of gross domestic product (GDP) at the end of 2023. This figure was well above the 74.41% previously announced. This reassessment highlighted substantial discrepancies in the previous government’s reporting of economic information.

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A review of the communication errors necessary.

Edward Gemayel, IMF mission chief for Senegal, stressed that until the communication errors were corrected, discussions on a new financial aid program could not begin. However, he added that once this issue was resolved, the IMF could act “very, very quickly.” Gemayel also clarified that it was “too early to make a decision” on the issue of debt restructuring or a possible default. A hypothesis that remains open.

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Economic Reforms and Subsidy Reductions

During his interview with Reuters, Gemayel also discussed the need to implement economic reforms under the leadership of current President Bassirou Diomaye Faye. These reforms include reducing energy subsidies, a measure deemed essential to improve public finances. According to the IMF, fuel subsidies have reached an “explosive” level of 4% of GDP since the COVID-19 pandemic and must be gradually phased out. However, Gemayel clarified that these subsidies do not benefit vulnerable households, but mainly benefit the wealthiest.

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The Impact of Oil and Gas Resources

Another important aspect of the discussions was the potential impact of revenues from the exploitation of the country’s oil and gas resources. The IMF estimates that these revenues could have a “significant positive impact” on the national budget, representing an average of 1% of GDP per year over the next five years. In January 2024, the Senegalese Ministry of Energy announced that production from the Sangomar offshore oil and gas field had exceeded its targets, reaching 16.9 million barrels, well above the initial target of 11.7 million barrels.

An uncertain but essential outlook

As Senegalese authorities hope to sign a new IMF program by June 2025, the issue of adjusting economic data and correcting communication errors remains paramount. If these issues are satisfactorily resolved, the country could receive significant financial support for its economic reforms, particularly regarding subsidies and the exploitation of natural resources.

In the meantime, attention remains on the current government to see how it will manage this communication crisis and what concrete measures will be taken to ensure the transparency o

f public finances.