Senegal is facing a worrying economic situation, marked by a public debt exceeding 15,000 billion FCfa, a budget deficit exceeding 10%, a drop in tax revenues and a downward revision of the economic growth rate of 7.1%. , at 6%. These indicators raise concerns about the economic and social stability of the country, but also about the reactions of financial markets and economic partners.
ECONOMIC AND SOCIAL CONSEQUENCES
Budget deficit and debt
A budget deficit that exceeds 10% indicates that public spending far exceeds state revenue. This situation pushes the country to take on more debt to finance its development programs, resulting in an increase in public debt. Ultimately, debt service could become unsustainable, forcing Senegal to allocate a considerable part of its budget to repayment, to the detriment of social and economic investments.
Reduction in tax revenue
Declining tax revenue means the state has fewer resources to finance public services, such as health, education and infrastructure. This can lead to a deterioration in the quality of public services, mainly affecting the most vulnerable populations. In addition, the tax pressure on businesses and households could increase, reducing their ability to invest and consume, thus further slowing growth.
Downward revision of the growth rate:
The move from a growth forecast of 7.1% to 6% is a warning signal. This could lead to increased unemployment, particularly among young people, and a reduction in foreign investment. This deceleration in economic growth is often synonymous with a drop in the standard of living for a large segment of the population, accentuating social inequalities.
SHOULD WE FEAR ABOUT INVESTMENTS?
Financial market reactions
Faced with a situation of excessive debt and a significant budget deficit, international financial markets could lose confidence in Senegal’s ability to honor its commitments. This loss of confidence generally results in an increase in the interest rates charged by lenders, making access to external financing even more expensive. Ultimately, Senegal could face difficulties in raising funds on international markets or be forced to resort to expensive and unprofitable financing.
Position of economic partners
International partners, such as the IMF, World Bank and bilateral donors, could demand stricter economic reforms in return for their financial support. These reforms could include austerity policies, such as reducing public spending, increasing taxes or even structural reforms aimed at improving the management of public finances. However, such measures risk accentuating social tensions, by reducing the capacity of the State to support the most vulnerable populations.
Political strategies for the economic recovery of Senegal
To remedy this situation, the Senegalese state must put in place appropriate political strategies, focused on macroeconomic stabilization and the revival of growth.
Tax reforms and broadening of the tax base:
It is crucial to implement tax reforms to strengthen tax collection while reducing tax evasion. According to various estimates, every year, the country loses 1 to 12% of its tax revenues, due to various types of illicit financial flows. Broadening the tax base, in particular by integrating the informal sector, could generate new tax revenues, without increasing the pressure on current taxpayers.
Reduction of the budget deficit
The government should strive to rationalize its public spending, including by reassessing its priorities. Reforms must be undertaken to improve the efficiency of public spending, by focusing investments on sectors with high growth potential, such as agriculture, renewable energies and digital technology.
Promotion of private investment
The State must improve the business climate to encourage private investment, both domestic and foreign. Reforms aimed at simplifying administrative procedures, protecting property rights and ensuring a stable legal environment would be beneficial in attracting new investors.
Diversification of the economy
A long-term strategy would consist of diversifying the Senegalese economy, to reduce its dependence on sectors vulnerable to external shocks, such as the extraction of natural resources. The development of sectors such as sustainable tourism, the green economy and digital services could strengthen the resilience of the economy in the face of crises.
Debt renegotiation:
Senegal could initiate discussions with its creditors in order to reduce the burden of debt through restructuring or postponement of maturities. Solutions such as debt-climate swaps could also be considered, to convert part of the debt into investments in sustainable development projects.
In short, Senegal finds itself at a decisive crossroads in its economic history.
The accumulation of public debt, the budget deficit and the drop in tax revenues constitute major challenges, which require a strong and appropriate political response. However, with structural reforms and rigorous management of public finances, the country can emerge from this situation, while preserving its social and economic stability.
Sheikh Sene,
Economist,
ILEA/UCAD Teacher
Email : [email protected]
Related News :