LESSONS FROM THE FRONT LINES: WHAT CAN SENEGAL LEARN FROM ETHIOPIA’S EXPERIENCE IN DEBT RESTRUCTURING?

Ali Zafar –

There are important lessons from experiences from Ethiopia that hold relevance for Senegal,including the possibility of a positive restructuring experience with creditors and the role of smart and strategic negotiation by Ethiopian leadership.

Ethiopia’s debt restructuring strategy, informed by UNDP policy advice and analytics, showed the importance of a debt sustainability analysis (DSA) involving realistic debt service to export paths, a cap on annual debt service, and a gradual fiscal adjustment to protect social sectors.

Ethiopia reliance on a flexible currency, an independent central bank, diversification of
fundings from domestic bond financing and Gulf countries, can be a rationale for Senegal to
seek greater monetary sovereignty and ability to manage shocks and stimulate growth.

Senegal’s borrowing from the regional West African Monetary Union (WAMU) financial market borrowing may be costly and not sustainable in the long run.

This Policy brief is part of the editorial series published during the Experts meeting and International Conference organized by IDAN on Senegal’s debt Crisis (11 to 13 May,Dakar,Senegal).