In the wake of easing back to 4.7 percent in 2022, growth in Senegal is projected to bounce back to over 5.3 percent this year, due to some extent to an emerging oil and gas industry. This makes Senegal quite possibly one of the strongest growing economies in sub-Saharan Africa.
The country is facing some challenges, including spillovers from the war in Ukraine, tighter financing conditions, and increased political instability in the region. A widening fiscal deficit and increasing government debt are two major concerns.
As per IMF, they are looking at the economic standpoint of the recently approved programs under the IMF’s Extended Fund Facility, the Extended Credit Facility and the Resilience and Sustainability Trust.
Edward Gemayel, IMF’s Mission Chief for Senegal revealed in an interview that, Senegal’s strong post-pandemic recovery has been hindered by overlapping external shocks.
Thus, growth forecasts have been revised down, inflation has soared, and the fiscal and current account deficits have widened. Public debt has also increased to over 76 percent of GDP.
The country has solid prospects however, built up by the production of oil and gas, which will give the economy a lift for the next couple of years.
Growth is projected to advance to 10.6 percent in 2024 and 7.4 percent in 2025, with non-hydrocarbon development expected to stretch around 6%, accepting reasonable macroeconomic approaches and resolute primary changes are carried out under the IMF-upheld programs.
The extra incomes from oil and gas products will be saved, in accordance with the new financial rule embraced, to guarantee public spending can be supported from now on, as the country changes to renewables.
Inflation:
Inflation hit a multi-decade high of 9.7 percent in 2022, driven largely by the surge in food prices, which account for almost half of the CPI basket in Senegal. Inflation has since eased to around 9 percent and is projected to fall to around 5 percent by year-end but could potentially increase again if commodity prices remain high.
The Senegalese authorities responded by increasing fuel and electricity subsidies—which have soared to nearly 4 percent of GDP—and by raising public sector wages by about 20 percent.
However, to contain the fiscal deficit, public investments were slashed. Looking forward, to preserve debt sustainability and to help curb inflation, important measures will need to be adopted, including streamlining tax exemptions and gradually phasing out energy subsidies while better targeting social spending to alleviate the impact of declining real incomes.
The Senegalese authorities responded by increasing fuel and electricity subsidies—which have soared to nearly 4 percent of GDP—and by raising public sector wages by about 20 percent.
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However, to contain the fiscal deficit, public investments were slashed. Looking forward, to preserve debt sustainability and to help curb inflation, important measures will need to be adopted, including streamlining tax exemptions and gradually phasing out energy subsidies while better targeting social spending to alleviate the impact of declining real incomes.
Essentially, JETP agreements aim to bridge the gap between developed and developing nations in moving towards clean energy. South Africa, Indonesia, and Vietnam are the first three countries to have signed such an agreement.
With Senegal, this partnership aims to support the country in developing a climate-resilient strategy for the energy sector, increasing the share of renewable energy, improving storage and grid stability, and creating sustainable jobs.
This agreement demonstrates Senegal’s strong commitment to accelerate the transition to clean energy, as embedded in the authorities’ NDC.
Senegal is an important pole of stability in West Africa, and the authorities have consistently demonstrated their commitment to implementing transformative reforms. As a result, Officials are encouraging all stakeholders to resolve political differences in a peaceful manner.
