Senegal’s debt: economists seek alternative solutions to imf and world bank orthodoxies

Senegal’s public debt has, over the past year, become the primary point of contention between the government led by Ousmane Sonko and the Bretton Woods institutions. On Monday, May 11, economists from across Africa and Asia commenced discussions in Dakar, aiming to outline potential solutions to this burgeoning crisis. This initial gathering precedes a more extensive conference, scheduled for Tuesday, which the head of government is expected to attend. The stated objective is clear: to challenge the orthodox economic prescriptions championed by the International Monetary Fund (IMF) and the World Bank with heterodox expertise.

Public debt at the core of the standoff with the IMF

Following an upward revision of the debt inherited from the previous administration, the long-term viability of Senegalese public finances has fueled intense debate. The official figures were adjusted, subsequently leading to the suspension of several disbursements from the program agreed with the IMF. Dakar finds itself in a difficult position: needing to honor its international commitments while simultaneously funding the social pledges made by Pastef, the ruling party.

The forum convened this week reflects a deliberate political direction. Rather than acceding to the standard budgetary adjustments typically demanded by creditors, the executive branch is striving to build a technical and academic case for alternative options. These include orderly restructuring, extending debt maturities, and enhancing the mobilization of domestic resources – all avenues participants are expected to explore. The presence of Asian economists, hailing from nations that have navigated their own balance of payments shocks, aims to enrich a discussion still largely shaped by Western economic paradigms.

A political message conveyed 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 effectively stalled, Ousmane Sonko is sending a clear signal to financial partners. The Prime Minister, a pivotal figure in Senegal’s political shift in 2024, has made economic sovereignty a defining characteristic of his administration. His direct involvement in the conference elevates its significance beyond that of a mere academic seminar.

For the organizers, the goal is to demonstrate that viable room for maneuver exists outside conventional programs. This stance aligns with a broader trend observed across the African continent, where several governments are questioning the conditionality attached to multilateral financing. From Ghana to Zambia, and Ethiopia, recent debt restructuring experiences have generated a body of knowledge that Dakar intends to leverage. However, unlike these neighbors, Senegal is not formally in default and thus retains, albeit limited, access to regional markets.

Exploring credible alternatives to austerity measures

Fundamentally, the alternatives proposed by the assembled economists revolve around several key areas. The first concerns taxation: broadening the tax base, combating illicit financial flows, and renegotiating specific extractive contracts, particularly in the hydrocarbon sector, where production commenced in 2024. The second addresses the very architecture of the debt, with the concept of favoring instruments denominated in local currency or indexed to future revenues. The third pertains to regional coordination within the framework of the West African Economic and Monetary Union (UEMOA).

These proposals are not without potential contradictions. A firm stance towards the IMF could impact the risk premium demanded by investors, even as the Senegalese Treasury remains dependent on regular issuances in the public securities market. Furthermore, any renegotiation will inevitably require dialogue with eurobond holders, whose interests may differ from those of bilateral creditors. Practically, the government’s political latitude will hinge on its ability to articulate a sovereign discourse while simultaneously projecting financial credibility.

Beyond the announcements, the sequence of events initiated this week in Dakar will be closely watched by sub-regional capitals and rating agencies. It could herald a new phase of negotiations with lenders, or conversely, prolong a standoff whose budgetary cost continues to escalate quarterly. The forum’s conclusions are expected to be presented to the government upon completion of the proceedings.

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