RESOLVING SENEGAL’S INDEBTEDNESS:TWO LESSONS FROM GHANA’S 2022-23 CRISIS

Dr. Isaac Abotebuno Akolgo –

The External Debt Burden: Senegal’s current government faces the burden of
servicing a $25billion external debt it inherited from former President Macky Sall in 2024

As a result, President Bassirou Diomaye Faye’s government is stuck between a
stalled $1.8billion IMF extended credit facility and a home-grown Economic and Social
Recovery Plan which aims to tighten budgetary allocations and mobilise over $8billion
domestically. Rather than imposing austerity, Senegal would be better off
restructuring its external debt. Attempting to refinance the external debt will only
prolong the country’s distress. Finally, maintaining lower budget deficits as part of the
recovery plan will limit government’s financial policy space for transformative projects.

The Dangers of Domestic Restructuring: Ghana’s Domestic Debt Exchange Program,
a domestic debt restructuring that was instituted in response to the country’s 2022-23
debt crisis produced huge socio-economic costs; from a contraction of the domestic
banking sector to inflation, currency depreciation and widespread socio-political
agitations. Senegal should draw a lesson from Ghana and avoid any domestic debt
restructuring.

Domestic Resource Control: In contrast to its economic collapse between 2022 and
2024, Ghana stabilised its economy via a gold-for-reserves program overseen by the
Ghana Gold Board (GoldBod). GoldBod has a monopoly in the sourcing, licensing,
purchasing and exportation of gold and other precious minerals in Ghana. By
controlling the minerals trade, GoldBod’s operations increased the Bank of Ghana’s
gold reserves by 62% and added $10.8billion in foreign exchange reserves in a single
year. This policy decision by President John Dramani Mahama demonstrates the
centrality of domestic resource ownership and control, a lesson that should guide
Senegal’s economic and social recovery plan.

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).