Senegal’s slower economic growth, its widening fiscal deficit and a potential delay in International Monetary Fund financing could cloud the outlook ahead of Nov. 17 parliamentary elections, analysts say.
President Bassirou Diomaye Faye, just five months into the job, set the stage for the snap vote when he dissolved the opposition-led National Assembly on Thursday.
Election planning will now clog up the calendar just as the West African nation is preparing for the next review of the $1.9 billion IMF loan that it secured last year in a bid to stabilise public finances.
“Senegal is unlikely to have its next review approved by the IMF board before December,” Barclays analyst Michael Kafe said in a note to clients.
Any delay in the disbursement of the next tranche of financing would coincide with other less than encouraging economic developments.
This year’s growth forecast has been reduced to 6.0%, the IMF said on Friday, from a forecast of 7.1% in June, after the economy expanded at a slower-than-projected pace in the first half.
“This slowdown reflects weaker activity in the mining, construction and agro-industrial sectors,” the fund said.
Analysts are keeping a close eye on the political and financial temperature in the run up to the vote.
Economic disparities were behind at least some of the grievances that brought people out onto the streets in violent protests in 2021 – though there has been no suggestion of repeated unrest this time around.
OIL, GAS HOPES
Government revenue fell significantly in the first eight months of this year, the IMF added, while expenditure remained on track.
“Consequently, the fiscal deficit widened, and amid lower-than-expected liquidity buffers, the authorities relied on costly external commercial borrowing with short maturities.”
Senegal’s dollar bonds fell marginally on Friday after the dissolution of parliament. Yields on the 2033 and 2048 maturities were steady on Tuesday trading at 85.33 cents on the dollar and 73.24 respectively.
Faye, a former tax inspector, blamed the previous parliament’s refusal to initiate a new budget law, and its push-back against a plan to abolish wasteful state bodies, for his decision to dissolve it.
He won the presidential election in March with 54% of the vote, driven by discontent among youth voters. But his Pastef party only had 26 seats in the now-dissolved 165-member parliament. It was part of a coalition that had a total of 56 lawmakers.
That could change in the November election, political risk consultancy Eurasia Group said, citing the popularity of the president’s initiatives including a national dialogue on reforming the judiciary and an ongoing financial audit, aimed at rooting out inefficiencies and wastage.
“Historically, legislative election results tend to align with those of presidential elections when held soon after,” Eurasia said.
Faye’s fortunes could also be lifted by the prospect of brighter economic times on the horizon, thanks to proceeds from its newly-tapped natural resources.
Senegal became an oil producer in June, when Australia’s Woodside Energy started production at its Sangomar oil and gas field. Gas production is also due to begin by the end of the year at the Greater Tortue Ahmeyim liquefied natural gas project, operated by BP.
“Senegal’s current administration will use these resource revenues to narrow the country’s wide external and fiscal imbalances,” Evghenia Sleptsova, an analyst at Oxford Economics, said in a research note.
