Financial audit forces Senegal to reassess IMF program strategy

The $1.8 billion IMF aid program secured in 2023 is currently frozen. A restructuring of the agreement is now required, according to Finance Minister Cheikh Diba. The government is aiming for a new agreement by the first quarter of 2025 at the latest.

The Minister of Finance, Cheikh Diba, announced during the annual IMF meetings in Washington that Senegal’s program with the international institution needs to be revised following an audit that revealed a higher debt and budget deficit than previously reported.

Mr. Diba, quoted by Bloomberg, stated that the current program needs to be updated. “We are in discussions with the Fund.” The government is now aiming for a new agreement with the IMF by the first quarter of 2025 at the latest.

The government is now aiming for a new agreement with the IMF by the first quarter of 2025.

The $1.8 billion program secured from the IMF in 2023 is now “on hold,” and scheduled payment of 338 billion CFA francs this year has been postponed to 2025.

Minister Diba acknowledged, “We were aware of the consequences, but when we realized there were fundamental discrepancies between the figures reported to the Fund, which formed the basis of our relationship, we understood we had to report them.”

The budget deficit is actually over 10% of GDP, nearly double the initially reported 5.5%.

These revelations had immediate repercussions: Moody’s downgraded the country’s credit rating further into the speculative category, with a potential additional downgrade on the horizon.

Senegalese Eurobonds experienced a brief period of massive selling.

The audit, commissioned by the new president Bassirou Diomaye Faye, revealed alarming figures regarding the last five years of Macky Sall’s presidency.

The debt-to-GDP ratio at the end of 2023 exceeds 80%, compared to the previously announced 73%, according to the audit’s findings confirmed by an independent IMF review.

According to the minister, funds already disbursed will not need to be repaid: “This would have been the case if we had tried to conceal the facts and were caught. In this instance, Senegal conducted an audit and returned to the IMF with the correct figures.”

Additionally, the government has initiated a review of contracts in the natural resources sector. Mr. Diba stated, “We cannot change the rules of the game mid-play, but the state has the right to verify if the contracts complied with the mining and oil codes in effect at the time.”

This review comes as Senegal is set to become a significant producer of oil and gas.

The $4.8 billion GTA liquefied natural gas project, led by BP and Kosmos Energy, is expected to commence this year, while the Sangomar oil development, operated by Woodside Energy, has been in production since June.

These projects are anticipated to boost the country’s economic growth, projected at 6% this year and over 10% in 2025.