Senegal is setting ambitious fiscal goals, aiming to reduce its budget deficit to 3% of GDP by 2027. Prime Minister Ousmane Sonko revealed the government’s plan to implement significant spending cuts and improve tax collection starting in the coming year.
The country is currently facing a budget deficit exceeding 11% of GDP for 2024, a sharp contrast to the 3% deficit recorded in 2017. According to a state audit, the average fiscal gap between 2019 and 2023 was nearly double the 5.5% reported during the presidency of Macky Sall. The rising fiscal deficit has led the International Monetary Fund (IMF) to suspend $1.8 billion in loans to Senegal, underscoring the urgency for fiscal reform.
Sonko, whose party Pastef won a parliamentary majority in November elections, is focused on reducing public debt to below 70% of GDP by 2029, from approximately 80% in 2023. One of the key strategies is to boost national revenues through the exploitation of the country’s natural resources. Oil production, which started this year, along with anticipated gas revenues from the $4.8 billion Grand Tortue Ahmeyim field, operated by BP, are expected to provide a substantial financial boost.
The IMF has forecast a 9.3% expansion in Senegal’s economy in 2025, driven primarily by the country’s growing energy exports.
To achieve these fiscal goals, Sonko emphasized the need for extensive measures, including reducing public spending, enhancing tax revenue, and managing the country’s debt more sustainably. The government is also committed to curbing tax exemptions and expanding the tax base, bringing more businesses and individuals into the tax system.
Senegal has set a target of achieving 19.3% of GDP in tax revenue by 2025, significantly higher than the regional sub-Saharan African median of about 13%.
Looking to the future, Senegal plans to prioritize borrowing from traditional donors offering more concessional terms while also issuing debt in the regional market to meet the country’s financing needs and support economic development.