The delicate balance between short-term political gains and long-term economic stability is vividly illustrated in Senegal’s current debt management challenges. As policymakers navigate the complexities of public finance, the tension between electoral cycles and sustainable economic policies becomes increasingly apparent.
Public choice theory, pioneered by economists James Buchanan and Gordon Tullock, provides a compelling framework for understanding this dilemma. Their insights reveal how political leaders often face conflicting imperatives: delivering immediate benefits to maintain popularity while implementing measures that yield benefits only in the long term. This dynamic is particularly relevant today as Senegal grapples with its escalating public debt.
Current debt situation and urgent challenges
Recent assessments reveal a stark reality: Senegal’s public debt has reached alarming levels. Official figures from mid-2025 indicate a total debt stock of 23.7 trillion West African CFA francs (excluding parastatal debt and arrears), representing 118.8% of GDP. The debt service burden has become particularly onerous, consuming 106.6% of tax revenues in 2025 alone.
This financial strain creates an unsustainable situation where the state must continuously borrow just to meet existing obligations. The 2026 budget projections paint an equally concerning picture, with debt service expected to reach 5.5 trillion CFA francs while tax revenues are forecasted at 5.4 trillion CFA francs. This precarious balance leaves little room for additional public spending without further increasing the debt burden.
Fiscal revenue growth: a limited solution
The government’s Economic and Social Recovery Plan (PRES) aims to generate an additional 3.2 trillion CFA francs in tax revenues between 2025 and 2028. However, early implementation results raise questions about this ambitious target. First-quarter 2026 collections amounted to just 54.2 billion CFA francs, with optimistic projections reaching only 300 billion by year-end – far below the 703.6 billion CFA francs target for 2026.
The structural limitations of Senegal’s tax system further complicate this challenge. Despite recent reforms, the country’s tax-to-GDP ratio remains at 18.9%, well below its potential of 25.3%. The persistent gap between potential and actual tax collection suggests that revenue increases alone cannot resolve the debt crisis in the short to medium term.
The refinancing illusion and its consequences
Facing these constraints, the government has increasingly turned to domestic refinancing through regional markets. While this approach provides immediate liquidity, it comes with significant drawbacks. The cost of new debt has risen sharply, with interest rates climbing from 6-7% in 2024 to 7-8% in 2026. Additionally, the average maturity of new debt has shortened, increasing refinancing risk.
These developments contradict the very purpose of refinancing, which should ideally reduce debt costs while extending repayment periods. Instead, Senegal now faces a situation where each refinancing operation increases the overall debt burden, creating what economists call a ‘debt snowball effect.’ The 2025 debt stock increased by 1.5 trillion CFA francs despite the improved debt-to-GDP ratio, which benefited from hydrocarbon sector growth rather than fiscal consolidation.
Critical indicators and future risks
Several key indicators highlight the severity of Senegal’s debt situation:
- Primary balance: The 2025 primary deficit stood at -1.8% of GDP, while the stabilizing primary balance required to maintain debt at 2024 levels was +2.7% of GDP
- Interest rate vs. growth: The effective interest rate on debt (4.59% in 2025) exceeds the non-hydrocarbon growth rate (2.2%), making debt reduction mathematically impossible without intervention
- Debt dynamics: Without hydrocarbon revenues, the debt-to-GDP ratio would have deteriorated to 124% in 2025
These figures suggest that current trends will lead to a debt spiral unless fundamental changes are made in debt management strategies.
Institutional reforms vs. economic pragmatism
Recent institutional changes, including the creation of a dedicated Debt and Financing Directorate, represent important steps toward better debt governance. However, structural reforms alone cannot address the quantitative challenges posed by Senegal’s debt burden.
To achieve sustainable debt management, policymakers must consider more comprehensive solutions:
- Negotiating with creditors to extend maturities, reduce interest rates, or implement nominal haircuts
- Exploring debt swaps with commercial terms
- Rebasing GDP calculations to reflect economic realities more accurately
Delaying these difficult decisions will only exacerbate the economic costs of the current refinancing strategy, potentially crowding out both private sector investment and essential public expenditures.
Ultimately, Senegal faces a stark choice between short-term political considerations and the long-term economic stability required for sustainable development. The current debt trajectory suggests that without decisive action, the country risks entering a cycle of increasing debt and diminishing economic prospects.
