Washington, D.C. – The International Monetary Fund (IMF) has granted approval for approximately $1.8 billion in loans to Senegal, aimed at supporting the nation’s recovery efforts and safeguarding it against potential future shocks. Following an executive board meeting, the Washington-based lender announced that Senegal would receive an immediate disbursement of about $216 million.
The approved financial package includes an extended fund and credit facility totaling $1.51 billion over a three-year period. Additionally, the resilience and sustainability trust will contribute $324 million to assist Senegal in addressing prolonged risks, such as those associated with climate change.
Senegal’s post-Covid-19 recovery has been hindered by a combination of external shocks, primarily related to Russia’s invasion of Ukraine. These shocks have strained the country’s public finances, external payment positions, and led to an increase in its debt levels.
The IMF emphasized the need for a steadfast implementation of a fiscal consolidation strategy in order to reduce growing debt vulnerabilities. This strategy is anchored on commitments to achieve a fiscal deficit of 3% of gross domestic product (GDP) by the year 2025.
The approved loans will provide a boost to the fiscal space of President Macky Sall’s government. Last year, the government allocated 4% of GDP to control fuel and food prices following cost increases. The funds will also offer balance of payment support to Senegal, which is poised to become Africa’s second-fastest-growing economy this year. The country is scheduled to hold presidential elections next year and is in the process of recovering from recent riots.
Earlier this month, clashes erupted between the police and supporters of prominent opposition leader Ousmane Sonko, who received a two-year prison sentence for “morally corrupting a youth.” This sentence could potentially prevent him from participating in next year’s elections. The violent protests resulted in at least 16 casualties, as well as the looting and destruction of several stores.
According to the IMF, the start of oil and gas production in the fourth quarter could accelerate Senegal’s economic expansion to 8.3% this year, making it the fastest-growing economy in Africa after Libya, which is projected to grow at a rate of 17.5%.
The IMF also projects that Senegal’s public debt will ease to 73.1% of GDP after experiencing a 28 percentage point increase from pre-pandemic levels, reaching 75% of GDP last year. Inflation is expected to decrease to 5%, down from 9.7% in 2022.
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