(Bloomberg) -- Senegal plans to slash its budget deficit to 3% of gross domestic product by 2027 as it begins cutting government expenditure and finds ways to boost tax collections from next year, Prime Minister Ousmane Sonko said.
The nation’s finance ministry projected a budget gap of more than 11% of GDP this year while the last time the shortfall was at 3% was in 2017. A state audit this year showed the average fiscal gap for 2019-2023 was almost double the 5.5% that was reported under former President Macky Sall, prompting the International Monetary Fund to freeze $1.8 billion of loans to the West African nation.
Sonko, whose Pastef party secured a parliamentary majority in elections held in November, is keen to use the group’s dominance to take measures that will bring public debt to below 70% of GDP by 2029 from around 80% last year. Revenue from oil production that started this year, followed by gas production from the $4.8 billion BP Plc-operated Grand Tortue Ahmeyim field is expected to help the government boost revenue.
The IMF forecasts the economy to expand 9.3% next year buoyed by energy exports.
Extensive measures to cut public spending, increase tax revenue and move toward a more sustainable management of the country’s debt will help the government advance toward its goal, Sonko said. The government will also streamline tax exemptions and bring more people and companies into the tax net.
The country projects tax revenue of 19.3% of GDP in 2025, compared with the median of about 13% for sub-Saharan African.
Going forward the country will prioritize borrowing from traditional donors that come with more concessional terms, and issuing debt on the regional market, Sonko said.
Patriot Bonds
“If necessary, we will continue to issue Eurobonds and Sukuks, mainly in the form of project financing and to a certain extent, for the management of the refinancing risk of bonds or Sukuks that have matured or are about to mature,” Sonko said.
The country plans bonds and Sukuks called “Patriots” that would be open to all Senegalese, he said. It’s also considering a potential 1.5 trillion CFA-franc ($2.4 billion) domestic diaspora bond issuances, according to the draft 2025 budget.
Individuals and Senegalese companies looking to participate in the financing of “major investment works, economic sovereignty operations such as the buyout of shares in foreign companies” or state asset sales will have the possibility to do so when the opportunity comes, Sonko said.
The administration of President Bassirou Diomaye Faye that came to power in April has vowed to tackle high levels of poverty and unemployment by among others, increasing income from Senegal’s natural resources, including minerals and hydrocarbons. Earlier this year it set up a commission to oversee the review of contractual agreements with multinationals.
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