Senegal’s debt management under political pressure

Balancing short-term politics with long-term economic viability

Every leader faces moments when hard choices must be made—decisions that may be unpopular in the moment but necessary for future stability. As former U.S. President Bill Clinton once reflected, ‘Soon or later, all presidents must take difficult, unpopular decisions. But given the stakes, we must do what is right, hoping that one day political winds will turn in our favor.’

The tension between political timing—shaped by electoral cycles—and economic pragmatism, which demands longer-term planning for sustainable growth, lies at the heart of Senegal’s current debt management challenge. This delicate balance is now under intense scrutiny as the nation grapples with the growing burden of its public debt.

The scale of Senegal’s debt burden

By the end of 2024, Senegal’s public debt stood at 23,666.8 billion West African CFA francs, representing 118.8% of GDP—excluding debt from public enterprises and arrears. This figure, confirmed in the 2019-2024 Public Debt Statistical Bulletin released in July 2026, reflects a worrying trend: debt servicing alone—principal, interest, and fees—consumed all tax revenue in 2025, totaling 4,357.5 billion francs CFA (3,269.4 billion for principal and 1,088.1 billion for interest and fees).

The situation is projected to worsen in 2026, with projected debt servicing of 5,498 billion francs CFA against expected tax revenues of 5,384.8 billion francs CFA. This means the State is barely able to meet its obligations, let alone fund new expenditures, without taking on additional debt.

The limits of fiscal consolidation

In August 2025, the government unveiled the Economic and Social Recovery Plan (PRES), aiming to generate an additional 3,173 billion francs CFA in tax revenue between 2025 and 2028 through new fiscal measures. The plan also targets 1,091 billion francs CFA from the recycling of state-owned land assets. However, by the end of the first quarter of 2026, only 54.2 billion francs CFA had been collected—far below even the most optimistic forecasts of 300 billion by year-end.

This gap highlights a structural reality: tax revenues are not infinitely elastic. Their growth depends on deep-rooted economic factors such as GDP growth, the size of the informal sector, digital adoption in public administration, and the effectiveness of tax collection. Senegal’s potential tax ratio—the theoretical maximum tax revenue as a share of GDP—is estimated at 25.3%, while the actual tax-to-GDP ratio was just 18.9% in 2025. Even without new taxes, the country faces a fiscal gap of 6% to bridge over the next three to six years.

Meanwhile, debt servicing over the next two to three years will continue to outpace expected tax inflows. In 2025, debt servicing already exceeded tax revenue by 6.6%. By 2026, the gap widens further, with debt servicing projected to rise by 1,000 billion francs CFA. This structural imbalance means that relying solely on fiscal consolidation—through higher tax collection—offers limited relief in the short to medium term.

Why refinancing is not a sustainable solution

The government has so far ruled out debt restructuring, opting instead for internal mechanisms such as fiscal consolidation and refinancing. However, refinancing only improves debt sustainability if the new debt is cheaper than the debt it replaces. In Senegal’s case, the opposite is true.

To meet its financing needs, Senegal has increasingly turned to the regional UEMOA market. In 2025, it raised 4,004 billion francs CFA through public debt offerings—four times the amount raised in 2024 (998 billion francs CFA). Yet, the cost of this new debt is significantly higher: interest rates on domestic debt rose from 5.3% in 2024 to between 7% and 8% in 2026, as investors demanded higher risk premiums.

At the same time, the average maturity of new debt has shortened, increasing liquidity risk. While the effective interest rate on central government debt was 3.9% at the end of 2024 (3.4% for foreign-currency debt and 5.3% for CFA-denominated debt), the new debt carries higher costs and shorter terms. This means refinancing is not only more expensive but also accelerates the debt repayment schedule, worsening the country’s financial strain.

The debt snowball effect

By the end of 2025, central government debt had risen by 1,531.68 billion francs CFA to 25,198.48 billion francs CFA, though the debt-to-GDP ratio improved slightly to 112%—thanks largely to GDP growth driven by hydrocarbon production. Without this boost, the ratio would have risen to 124%.

Three key indicators reveal the unsustainable trajectory of Senegal’s debt:

• Effective interest rate on debt: 4.59% in 2025, exceeding the non-hydrocarbon GDP growth rate of 2.2% by 2.4 percentage points.
• Primary balance: A deficit of -1.8% of GDP in 2025, meaning tax revenues were insufficient to cover non-interest expenditures.
• Stabilizing primary balance: To stabilize debt at 119% of GDP (2024 level), a primary surplus of +2.7% of GDP would have been required—but the actual balance was -1.8%.

Projections for 2026 paint a similar picture: a primary deficit of -246 billion francs CFA, an effective interest rate of 4.79%, and a stabilizing primary balance of +1.9% of GDP—far above the expected outcome. This suggests a debt snowball effect is already underway, where rising debt costs lead to higher borrowing, which in turn increases future debt obligations.

Beyond institutional reform: the need for economic pragmatism

In response to the crisis, Senegal has established a General Directorate of Financing and Debt to centralize debt management—a positive institutional step. However, this structural reform alone cannot resolve the numerical realities of the debt crisis.

To restore fiscal sustainability, Senegal must go beyond internal fiscal adjustments and explore pragmatic financial solutions—including negotiating with creditors to extend maturities, reduce interest rates, or even accept nominal haircuts on certain debt tranches. Delaying such measures risks not only higher refinancing costs but also the crowding out of private investment and reduced public spending, further constraining economic growth.

Ultimately, the choice is clear: political considerations must not override economic necessity. Failing to act decisively now will only deepen the crisis, making future solutions even more painful and costly.