Senegal is cutting spending next year as it seeks to restructure its debt and secure a new financing program from the International Monetary Fund. The government aims to reduce its budget deficit to 4.7% of gross domestic product in 2027, down from a revised 7.6% this year, according to its draft budget published this week. That is below the IMF's April forecast of 5.7% of GDP for next year.
Expenditure is projected to fall 2.9% to 7.4 trillion CFA francs ($12.7 billion), while revenue is forecast to rise 2.8% to 6 trillion CFA francs. The adjustment will be driven mainly by lower capital spending and tighter expenditure controls, Citi Research said in a note to clients. The budget also targets a reduction in the primary deficit, which measures the shortfall before interest payments, to 47.7 billion CFA francs, or 0.2% of GDP from 450 billion CFA francs. It plans to reduce energy subsidies while increasing targeted support for vulnerable households.
Senegal reached a staff-level agreement with the IMF in September on a proposed $2.2 billion three-year lending program, which still requires IMF executive board clearance. IMF Managing Director Kristalina Georgieva this week expressed optimism about accelerating debt treatment under an enhanced version of the Group of 20's Common Framework. The government's goal of securing board approval by November may be difficult to achieve, given the unfinished debt audit, complex creditor negotiations and uncertainty over domestic political support, Citi said.
Parliament has yet to set a clear timetable for a budget vote, which Citi described as an important signal of the government's commitment to fiscal consolidation. Senegal must also finalize its internal debt audit and form an official creditor committee that can agree in principle to provide debt relief. The lender suspended Senegal's previous $1.8 billion funding package in 2024 after billions of dollars in unreported loans from the former government came to light.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing