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Inflation Rates and Debt: The IMF’s Warning to Senegal

The International Monetary Fund (IMF) believes that Senegal’s economy is doing well given the context. The IMF forecasts a growth rate of 4.7% in 2022. However, it draws attention to the debt level which doesn’t allow « any room for manoeuvre » in the event of external shocks.

The Senegalese economy is doing well. These are the words of the Division Head of the Africa Department of the International Monetary Fund (IMF). Edward Gemayel, who is in Senegal for the review of ongoing programs, was in front of the press. « The Senegalese economy is doing well compared to other economies in Africa. For 2022, we estimate growth at 4.7%. Although revised downwards, this growth is not bad, if we take into account the current context with Covid-19, the war in Ukraine and the rise in food prices, » said Edward Gemayel. Despite this general observation, Senegal struggles to see the improvement of these figures because of inflation. Which, according to the Bretton Woods official, « has been revised upwards. According to October data, we are at over 13%. For the year 2022, inflation is estimated at between 8 and 10%. It is believed that the situation will improve in 2023. Growth will reach 8.7%, thanks to oil and gas fields. Inflation will gradually fall to 2 to 3 percent. » With this in mind, Edward Gemayel believes that inflation will not increase the budget deficit, thanks to revenues that have exceeded forecasts. « For public finances, the government had committed to a deficit of 6.2%.

The commitment is still kept for this year. The revenue is good. They are beyond expectations this year. On the expenditure side, there have been changes. Subsidies have almost doubled compared to the amending budget law of May, when subsidies were estimated at around 300 billion, while it is believed that they should exceed 700 billion. This will represent 4% of GDP. Despite this, the deficit will be maintained. For next year, the government forecasts a deficit of 5.5%. We believe that revenues will increase by at least 100 billion for 2023, » he said.

« The debt is increasing because of the shocks Senegal is facing with Covid-19, the war in Ukraine. Debt is still sustainable, however, the room for manoeuvre to deal with new shocks has almost disappeared. The debt is currently between 75 and 77% of GDP. This is why we encourage the government to continue the gradual consolidation measures over the next few years, which are focused on improving revenues, significantly eliminating tax exemptions and restructuring expenditures, mainly at the level of subsidies, and being able to use savings in the health and education sectors, » said Edward Gemayel. Who informed that Senegal will receive by December, 135 billion from the IMF.

In addition, the head of division of the IMF’s African department has largely returned to the subsidies made by the State on energy in order to maintain its price. « Three hundred and fifty billion are planned in 2023 for the energy subsidy. We think this allocation is a bit ambitious. We see spending on subsidies at around 450 billion. However, this requires action by the government. If these measures are not taken, subsidies could more than double. This could bring the deficit to 7 or 8 percent, » Gemayel said.

By Malick GAYE / mgaye@lequotidien.sn

  • Translation by Ndey T. SOSSEH

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