Senegal’s government has confirmed plans to clear public arrears totaling 1.9 trillion FCFA, equivalent to approximately $2.9 billion, before the end of the fiscal year. The announcement, delivered by a senior official from the Ministry of Economy, Finance, and Planning, prioritizes payments to small and medium-sized enterprises (SMEs) as the primary creditors. While technical details of the repayment mechanism remain under discussion, the move is unfolding amid a tightening fiscal environment in Dakar.
Public debt backlog reveals deeper liquidity crisis
The estimated arrears, equating to roughly 10% of Senegal’s projected 2024 GDP (valued at 19,000 billion FCFA), stem from unpaid state bills, delayed public contract settlements, and unresolved tax credits. Authorities have not yet disclosed the breakdown between domestic and external liabilities, the number of affected businesses, or the criteria for the initial payment wave. This lack of clarity is exacerbating uncertainties across the private sector.
Business associations, including the National Council of Employers (CNP) and the National Confederation of Senegalese Employers (CNES), have long warned of the devastating impact on local enterprises. Over 60% of some industries—particularly construction, IT services, and administrative supply chains—rely on government contracts. Since late 2023, this sector has faced a domino effect of insolvencies, layoffs, and restricted access to bank financing for suppliers.
Hidden debt audit and IMF scrutiny
The arrears issue is intertwined with a February 2025 report from Senegal’s Supreme Audit Institution, which revised upward the country’s inherited public debt by several hundred billion FCFA, uncovering previously unrecorded liabilities. This revelation prompted the International Monetary Fund to halt its ongoing program and demand a thorough audit before resuming disbursements. Negotiations for a new financial arrangement remain ongoing, with the IMF closely monitoring the resolution of domestic arrears as a critical performance benchmark—alongside wage bills and primary fiscal balance.
A well-defined repayment schedule, paired with transparent mechanisms (such as direct cash payments from treasury reserves, securitization via Treasury bonds, or tax offsets), is expected to be key to securing a new Extended Credit Facility arrangement.
Regional precedents and political stakes
Dakar is not the first West African capital to tackle this challenge. Between 2012 and 2015, Côte d’Ivoire gradually cleared approximately 800 billion FCFA in domestic arrears through a combination of direct payments and issuance of negotiable securities on the West African Monetary Union market. Benin followed a similar approach in 2019 to settle obligations to local suppliers. In both cases, the restoration of SME confidence preceded a surge in private investment.
For President Bassirou Diomaye Faye and Prime Minister Ousmane Sonko, who assumed office in April 2024 on a platform of fiscal transparency and systemic reform, the clearance initiative is both a political and economic litmus test. Meeting the year-end deadline could signal a tangible shift for the private sector, which has endured 18 months of contracting public orders and downwardly revised growth forecasts.
The funding source for the repayments remains a critical question. Despite the Treasury’s 2025 issuances of regional bonds at rates exceeding 8%, debt-financed solutions may prove unsustainable. The government’s choice—between additional borrowing, staggered payments, or tax compensation—will determine whether the announced clearance translates into immediate relief for creditor SMEs or merely postpones an already strained fiscal imbalance.
What’s at stake for Senegal’s business landscape
The success of this operation hinges on three major factors:
- Speed and transparency: Clarity on payment timelines and beneficiary selection will rebuild trust lost over prolonged delays.
- Balanced funding: Overreliance on costly debt markets could exacerbate long-term fiscal risks.
- Private sector recovery: SMEs, especially in high-dependency sectors like construction and IT, need sustained liquidity to avoid further contractions.
As the fiscal year draws closer to its end, all eyes remain on Dakar’s ability to deliver on its commitment—not just as a financial transaction, but as a test of economic credibility.
