Senegal is intensifying efforts to enhance tax compliance as part of a broader strategy to increase domestic revenue and lessen its reliance on external financial support, including loans from the International Monetary Fund (IMF), Prime Minister Ousmane Sonko revealed.
The West African nation is currently collaborating with the IMF to address discrepancies arising from previously misreported debt and deficit figures. These irregularities led to the suspension of Senegal’s $1.8 billion financing program with the Fund, halting disbursements for over a year.
In a recent address to Senegalese nationals residing in Guinea, Sonko highlighted the critical role of tax reforms in achieving fiscal sustainability. “Robust tax reform can enable us to endure without the 250 billion CFA francs ($437.64 million) we typically receive each year from the IMF,” he said, as reported by Le Soleil newspaper.
Sonko stressed that despite the interruption in IMF funding, Senegal remains steadfast. He stated, “Our country continues to stand strong. Sustainable development is not achieved through dependence on external aid, but rather by capitalizing on our own resources, strengthening budgetary discipline, and building national resilience.”
The prime minister underscored the government’s commitment to ensuring equitable tax contributions from all Senegalese citizens. This approach aims to broaden the tax base and improve collection efficiency, thereby avoiding the need to increase tax rates.
The fallout from the revelation of Senegal’s understated debt has weighed heavily on investor confidence. According to the JPMorgan bond index, Senegalese dollar-denominated bonds have declined by 7.3% this year, contrasting sharply with an average gain of 3% among African sovereign peers during the same period.
This performance places Senegal at the bottom among African sovereign bond issuers, with losses more than four times greater than Angola, which ranks as the continent’s second worst performer with a 1.5% decline.
Facing constrained access to international financial markets, Senegal has turned to regional debt issuance to meet its financing needs. In April, the government issued a 405 billion CFA francs ($708.97 million) bond in the regional market. However, this move has drawn criticism from opposition parties, who have raised concerns about the government’s transparency in managing public debt and called for clearer disclosure of borrowing activities.
As Senegal navigates these fiscal challenges, its leadership emphasizes strengthening internal revenue mechanisms to establish a more sustainable financial path, reducing the vulnerability associated with external borrowing and enhancing long-term economic stability.