An International Monetary Fund (IMF) official has said that the Fund’s mission to Senegal ended without a finalized lending program but expressed optimism that an agreement could be reached soon.
Mission Chief Edward Gemayel told journalists that discussions would continue over the coming weeks, noting that Senegal is taking serious steps to address its debt challenges after uncovering billions of dollars in previously unreported liabilities left by the former administration, Reuters reported.
“We still need some more discussions. Hopefully, in the coming weeks we can reach a conclusion,” Gemayel said.
The IMF froze Senegal’s previous $1.8 billion lending program last year after the new government revealed the hidden debts, which have since surged to over $11 billion.
According to the Fund, by the end of last year, Senegal’s total public sector debt stood at 132% of GDP, including 4% in domestic expenditure arrears.
The country is now pursuing a new lending program but also requires IMF Board approval for a crucial debt misreporting waiver.
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Gemayel explained that the IMF is working on the waiver alongside the new program, though the two may not necessarily go before the Board simultaneously.
Senegal’s current fiscal plan projects a budget deficit of 5.4% of GDP by 2026, down from 7.8% this year and 13.4% in 2024.
“While the ambition is laudable,” Gemayel noted in a statement, “the very high tax yield assumed from the announced measures poses a significant risk, underscoring the need for more conservative projections.”
Talks for the new IMF program began last month, with the Fund’s mission team arriving in Dakar on October 22.
Gemayel said there remains technical work to be done on the debt sustainability analysis, which will determine the necessary steps for Senegal to secure the program, including whether debt restructuring might be required.
“Regarding debt, Senegal intends to continue implementing conventional active debt management operations, both on domestic and external debt, in order to reduce debt-related vulnerabilities,” Senegal’s finance ministry said in a statement.
Investors remain divided on whether the IMF will recommend debt restructuring, which could lead to losses for creditors, or a re-profiling, which would extend repayment periods without altering principal or interest payments.
“They are very serious about putting in place the consolidation path, which is very aggressive in our view … That shows you how much they are determined to bring debt on a downward trajectory,” Gemayel added.
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Image Credit: Reuters
