Senegal’s Debt Crisis: Impact on Youth and Public Funds
By Darius Spearman (africanelements)
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The uncovering of a substantial hidden debt in Senegal has sent shockwaves through the nation, sparking serious alarms regarding its public spending and the future prospects of its vibrant youth. Recent reports indicate that previously undisclosed debt, accumulated under Senegal’s former government, led directly to credit downgrades, significant pressure from the International Monetary Fund (IMF), and the looming certainty of higher interest payments in the years to come (eulerpool.com). This situation naturally raises deep concerns among activists who fear that an increased allocation of funds to creditors will inevitably reduce resources available for critical areas such as job creation, education, and social support in a country already struggling with high youth unemployment (eulerpool.com).
For many across the African diaspora, this narrative feels all too familiar, echoing historical patterns where economic mismanagement and external pressures disproportionately affect the most vulnerable segments of a population, particularly its young people. Understanding the roots of this crisis is essential, not simply for Senegal, but for appreciating the broader challenges faced by many developing nations striving for economic sovereignty and stability. Indeed, this crisis is not just a recent development; it has deep historical roots that reveal a recurring struggle for fiscal balance and sustainable development.
Senegal’s Enduring Debt History
Senegal’s struggle with public debt is not a new phenomenon; it represents a recurring theme in its complex economic history. The nation previously faced a severe external debt crisis that stretched between 1981 and 2000, which necessitated a staggering 13 debt rescheduling agreements with Paris Club creditors (eulerpool.com). The Paris Club is an informal group of major official creditor countries that works to find coordinated and sustainable solutions for nations experiencing payment difficulties (worldeconomics.com). This group offers debt relief through various mechanisms, including rescheduling payments or, in some cases, partially cancelling debt (worldeconomics.com).
While the early 2000s did offer a brief period of relief, thanks to initiatives such as the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI), this respite proved temporary. The HIPC Initiative, established by the IMF and World Bank in 1996, aims to make debt burdens sustainable for the poorest nations and to reduce poverty (worldeconomics.com). The MDRI, launched in 2005, provided further relief by offering 100% debt cancellation on eligible debts from specific multilateral institutions to countries that had completed the HIPC Initiative (worldeconomics.com). These initiatives collectively provided over CFAF 100 billion in debt forgiveness, freeing up resources for vital development projects (eulerpool.com). Senegal utilizes the West African CFA franc (XOF), which has a fixed exchange rate to the Euro, meaning 1 Euro equals 655.957 CFA francs. This means one US dollar is approximately 600-650 XOF, depending on the fluctuating Euro to USD rate (worldeconomics.com).
From 2006 onwards, Senegal’s public debt began a steady ascent, climbing from 20.9% of its Gross Domestic Product (GDP) in 2006 to 59.3% by 2016 (eulerpool.com). Gross Domestic Product (GDP) measures the total monetary value of all finished goods and services produced within a nation’s borders over a specific period, serving as a comprehensive indicator of economic activity and health (worldeconomics.com). This accumulation has been intrinsically linked to the country’s economic structure, which is characterized by a persistent trade deficit and a limited domestic tax base (eulerpool.com). A trade deficit occurs when a country imports more goods and services than it exports, requiring it to borrow from foreign sources to finance the shortfall (worldeconomics.com). Additionally, a limited domestic tax base, often caused by a large informal economy or widespread tax exemptions, severely restricts a government’s ability to collect enough funds internally to finance public services (worldeconomics.com).
The 1970s saw a significant increase in public sector foreign borrowing, driven by rising public sector salaries, an expanding civil service, and various subsidies (eulerpool.com). This caused external debt to surge from approximately $130 million in 1971 to nearly $1 billion by 1979 (eulerpool.com). This period culminated in a severe financial crisis in the late 1970s and early 1980s, marked by deteriorating terms of trade and large public sector deficits (eulerpool.com). Terms of trade refer to the ratio of a country’s export prices to its import prices; deteriorating terms mean a country must export more to buy the same amount of imports, effectively making it poorer (worldeconomics.com). During the 1970s, this deterioration was primarily due to sharp increases in oil prices and a decline in prices for Senegal’s agricultural exports like groundnuts, straining its balance of payments and boosting debt (worldeconomics.com). The crisis further led to increased debt service payments that profoundly strained the nation’s external financial position (eulerpool.com).
The Sall Era and Escalating Debt
Under former President Macky Sall’s administration, which lasted from 2012 to 2024, public debt continued its upward trajectory. The debt-to-GDP ratio reached 73.2% in 2021, marking a significant increase from 34.5% in 2012 (eulerpool.com). President Sall’s government implemented the “Plan Senegal Emergent (PSE),” an ambitious development strategy aimed at transforming Senegal into an emerging economy by 2035 through structural economic transformation, human capital development, and enhanced governance (eulerpool.com). The PSE’s key pillars also included human capital development, social protection, sustainable development, and improved governance (worldeconomics.com).
Specific projects under the PSE, such as the construction of the Blaise Diagne International Airport (AIBD), the new city of Diamniadio, and numerous road and energy infrastructure developments, were primary drivers of this increased borrowing (worldeconomics.com). Additionally, significant investments in the energy sector, including new power plants and the initial development phases of oil and gas fields, necessitated substantial financing, often through external loans (worldeconomics.com). While ambitious, this period of intensified development also inadvertently set the stage for the current crisis by accumulating significant debt (eulerpool.com). The pursuit of rapid development, though well-intentioned, often comes with substantial financial outlays that, if not managed transparently, can lead to unforeseen fiscal challenges down the line.
Senegal’s Public Debt-to-GDP Ratio (2006-2024)
The Unveiling of a Hidden Crisis
The current debt crisis escalated dramatically with the discovery of billions of dollars in previously hidden debt. Following his inauguration in April 2024, President Bassirou Diomaye Faye’s new government commissioned an audit that revealed the administration of former President Macky Sall had concealed approximately $7 billion in debt between 2019 and 2024 (eulerpool.com). Some estimates even place the total undisclosed debt as high as $13 billion (eulerpool.com). This revelation highlights a deliberate attempt to mislead, especially considering the severe consequences for the nation’s financial health.
The International Monetary Fund (IMF) confirmed these alarming findings, stating that the previous authorities had made a “deliberate decision to underreport the debt” to present a more favorable economic image to financial markets and to secure loans at better interest rates (eulerpool.com). The IMF is an international organization established to promote global monetary cooperation, secure financial stability, facilitate international trade, and reduce poverty worldwide (worldeconomics.com). It typically acts as a lender of last resort, providing financial assistance to countries facing balance of payments problems, often in exchange for economic reforms (worldeconomics.com). This misreporting triggered immediate repercussions: in October 2024, the IMF suspended its $1.8 billion credit facility to Senegal, which had been agreed upon in June 2023, pending corrective measures and greater transparency from the new government (eulerpool.com).
The extent of the fiscal deception became clearer as figures were revised. The Court of Auditors drastically revised Senegal’s 2023 budget deficit from the previously reported 4.9% of GDP to an astonishing 12.3% (eulerpool.com). A budget deficit occurs when a government spends more money than it brings in through taxes and other revenues during a specific period (worldeconomics.com). Moreover, the true outstanding debt at the end of 2023 was found to be 99.67% of GDP, far exceeding the 74.41% reported by the previous administration (eulerpool.com). Projections for the end of 2024 estimated the debt-to-GDP ratio to be even higher, around 111% to 120% (eulerpool.com). This alarming figure positions Senegal as potentially the second most indebted country in sub-Saharan Africa, a direct consequence of this hidden debt (eulerpool.com). A high debt-to-GDP ratio, for instance, above 77% for developing countries as per the World Bank, indicates difficulties in debt repayment, increasing default risks and borrowing costs (worldeconomics.com).
Further exacerbating the situation, major credit rating agencies, including Moody’s and Standard & Poor’s, downgraded Senegal’s sovereign rating (eulerpool.com). A sovereign rating is an independent assessment of a country’s creditworthiness by agencies, evaluating its ability and willingness to meet financial obligations (worldeconomics.com). A credit downgrade signals an increased risk of default, making future borrowing more expensive as lenders demand higher interest rates to compensate for the heightened risk (worldeconomics.com). These downgrades complicate the government’s economic recovery efforts and will undoubtedly increase the cost of future borrowing (eulerpool.com). The specific methods of debt concealment are still emerging but often involve off-budget projects, misclassification of loans, and the use of state-owned enterprises to borrow without direct government oversight, all aimed at presenting an artificially healthy fiscal image (worldeconomics.com).
Immediate Repercussions and Austerity Measures
In response to this profound crisis, the new government, led by Prime Minister Ousmane Sonko, has embarked on a path of fiscal consolidation. Fiscal consolidation refers to government policies implemented to reduce budget deficits and slow the growth of public debt (worldeconomics.com). This strategy involves a broader set of measures designed to improve the government’s financial health, beyond simply raising taxes and cutting public spending (worldeconomics.com). Measures include raising taxes and cutting public spending to address the substantial financial shortfall (eulerpool.com). The government aims to finance its economic recovery plan primarily through domestic resources to avoid accumulating more debt (eulerpool.com). New taxes may include increases in Value Added Tax (VAT) rates, broader application of VAT, or new excise duties on goods like tobacco and alcohol (worldeconomics.com).
Furthermore, criminal investigations are underway against former officials implicated in alleged financial misconduct, including embezzlement (eulerpool.com). These investigations typically focus on allegations of illicit enrichment, misuse of public funds, opaque contracting processes, and inflated project costs, often targeting high-ranking officials responsible for managing large public sector projects and state finances (worldeconomics.com). The IMF has emphasized the need for “corrective measures” such as centralizing debt management, strengthening budgetary controls, and auditing payment arrears before a new financing program can be considered (eulerpool.com). More precisely, the IMF often demands explicit limits on government borrowing, enhanced transparency for all public debt, reforms to improve tax revenue collection, and rationalization of public expenditure through targeted subsidy reforms (worldeconomics.com).
The immediate consequence of these austerity measures, including cuts to subsidies and new taxes, is a potential surge in the cost of living (eulerpool.com). Governments frequently reduce or eliminate subsidies on essential goods like fuel, electricity, water, and basic food staples, directly increasing prices for transport, household utilities, and food (worldeconomics.com). This impacts transport fares, food prices, and basic utilities, particularly for the working class and rural poor, who are already struggling with economic hardship (eulerpool.com). For many in the diaspora, the burden of austerity on everyday citizens represents a painful sacrifice, especially when it follows revelations of high-level corruption and hidden debt.
Senegal’s Youth Not in Employment, Education, or Training (NEET) Q1 2024
Impact on Senegal’s Youth and Social Fabric
The debt crisis casts a long shadow over Senegal’s ability to invest in its human capital, particularly its youth. Activists’ concerns about squeezed funds for jobs, education, and social support are well-founded, given Senegal’s demographic realities and existing challenges (eulerpool.com). These activists are typically civil society groups, opposition figures, and ordinary citizens advocating for greater transparency, accountability, and the responsible use of public funds (worldeconomics.com). They push for policies that protect vulnerable populations from the harsh impacts of austerity (worldeconomics.com).
Senegal has a youthful population, with almost half of its inhabitants living in poverty, dimming the prospects for many children and increasing the risk of intergenerational poverty (eulerpool.com). The youth unemployment rate (ages 15-24) was 4.14% in 2024, an increase from 3.89% in 2023 (eulerpool.com). Historically, this rate averaged 3.79% between 1991 and 2024, reaching a peak of 8.05% in 2015 (eulerpool.com). A more pressing indicator is the high percentage of youth Not in Employment, Education, or Training (NEET) (eulerpool.com). NEET refers to young people, typically aged 15-24, who are unemployed and not participating in any form of education or vocational training (worldeconomics.com). In the first quarter of 2024, 34.4% of Senegalese youth aged 15–24 were classified as NEET (eulerpool.com). This issue disproportionately affects young women (43.9% in Q4 2024) and rural youth (39.8%), highlighting profound structural inequalities in access to education and economic opportunities (eulerpool.com).
Despite relatively high public spending on education, which was 6.16% of GDP in 2023 and 22.55% of total government spending, significant gaps persist (eulerpool.com). As of 2016, four out of ten children did not complete primary education, and only 37% completed a full cycle of basic education, with over 1.5 million school-age children out of formal education (eulerpool.com). In terms of social assistance, Senegal allocated 0.7% of its GDP in 2015, which was notably lower than regional and income group averages (eulerpool.com). While the government has aimed to strengthen social protection through programs like the Family Security Grant since 2013, the current fiscal tightening measures are already having a direct impact (eulerpool.com). Reports indicate that approximately half a million families have lost welfare payments following the freeze of IMF funding and subsequent government cuts (eulerpool.com). These cuts, affecting the most vulnerable, underscore the critical challenge of balancing fiscal responsibility with social equity, a dilemma often faced by Black and diaspora communities globally.
Senegal’s Public Spending on Education (2023)
The Promise of Resources and Path Forward
The Senegalese economy is projected to grow by 7.9% in 2025, primarily driven by the anticipated start of oil and gas production and a rebound in agriculture (eulerpool.com). However, non-hydrocarbon growth remains sluggish at 3.4%, indicating continued reliance on traditional sectors and the new extractive industries (eulerpool.com). The start of oil and gas production in 2025 is highly significant, anticipated to transform Senegal into a major energy producer and provide a substantial new source of government revenue through royalties, taxes, and state participation (worldeconomics.com). This influx of revenue could dramatically improve the country’s fiscal position, enhancing its ability to service and repay its substantial debt, and reducing reliance on foreign borrowing (worldeconomics.com).
The new government has committed to fiscal consolidation, aiming to sharply reduce the overall deficit from 13.4% of GDP in 2024 to 7.8% in 2025, and further to 5.4% in 2026 (eulerpool.com). This involves ambitious revenue mobilization through new taxes and continued spending discipline (eulerpool.com). However, the effective management of these newfound oil and gas revenues is crucial to avoid the “resource curse” and to ensure that the wealth benefits the nation broadly, contributing to sustainable development and debt reduction rather than exacerbating existing issues like corruption or inequality (worldeconomics.com). Transparent governance frameworks for resource management and revenue utilization are paramount, a lesson many resource-rich African nations have learned through difficult experiences.
The political climate following the uncovering of hidden debt and criminal investigations is marked by a mix of increased public scrutiny and demands for accountability (worldeconomics.com). There is likely heightened public trust in the new government, which campaigned on anti-corruption platforms, but also potential for social unrest if austerity measures are perceived as unduly burdening the populace (worldeconomics.com). The political stability will largely depend on the new government’s ability to effectively manage the economic crisis, demonstrate tangible progress in addressing corruption, and deliver on promises of improved governance and economic transparency, while also maintaining social cohesion amidst difficult economic reforms (worldeconomics.com). The future of Senegal, therefore, hangs in a delicate balance between leveraging its new natural resources and reforming its governance to ensure prosperity for all its citizens, especially its dynamic youth.
The discovery of Senegal’s hidden debt has not only plunged the country into a severe fiscal crisis but has also forced a critical re-evaluation of its economic governance. The new government’s efforts to instill transparency and implement fiscal reforms, though supported by the IMF in principle, come with the difficult trade-off of potentially reduced social spending (eulerpool.com). This situation directly threatens the future of Senegal’s youthful population, who rely on robust investments in education, job creation, and social safety nets to escape the cycle of poverty and achieve their full potential (eulerpool.com). For the African diaspora, this moment represents both a warning and an opportunity for Senegal to chart a new course toward genuine economic sovereignty and equitable development, ensuring that the nation’s wealth truly serves its people.
About the Author
Darius Spearman is a professor of Black Studies at San Diego City College, where he has been teaching for over 20 years. He is the founder of African Elements, a media platform dedicated to providing educational resources on the history and culture of the African diaspora. Through his work, Spearman aims to empower and educate by bringing historical context to contemporary issues affecting the Black community.
