Previous Quarterly Editions
Expropriation Risk: 49 52 52 52 ►Political Violence Risk:48 48 48 48 ►Terrorism Risk:35 33 33 33 ►Exchange Transfer and Trade Sanction Risk: 44 45 45 44 ►Sovereign Default Risk:74 74 82 83 ►
TREND ►
Protest intensity to date* 2022 2023 Low LowUnrest risk in 2024**Cost of living: HighAnti-austerity: Medium
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Senegal’s vulnerability to debt pressures has increased, with external debt now standing at 107% of GDP and debt service payments equal to 50% of government revenues; however, the government is taking steps to consolidate its finances, and international perceptions of the country’s risk position remain fairly sanguine.
The International Monetary Fund (IMF) rates economic prospects as favorable; the second half of 2024 is expected to bring the start of commercial gas and oil production, from the GTA offshore liquefied natural gas (LNG) project being developed by BP and the Sangomar offshore oil project that Woodside is preparing to bring onstream. Senegal has never hitherto been a significant producer of hydrocarbons, so these projects will bring a major diversification of export earnings and a significant boost to government revenues.
Real GDP growth for next year is forecast at 8.8%. Although this forecast is subject to some uncertainty, dependent both on the start dates for commercial oil and LNG shipments and on the level of world energy prices, there is no doubt that these projects will substantially bolster Senegal’s external position and debt service capacity. In any case, even non-hydrocarbons growth is forecast at a strong 6% for 2024.
A second factor also underpins international confidence about Senegal’s capacity to contain and carefully manage its debt and debt service position: the country’s long track record of conservative financial management and capable economic policymaking, a tradition that has been sustained over many years by governments of differing political colors and without serious domestic controversy or challenge.
Hence, as the country approaches what is sure to be a hard-fought and potentially tight presidential election in February to March 2024, the incumbent government does already have the resources to make the public investments and public current spending that will be necessary for its electoral pitch to voters. Moreover, the government’s presidential candidate — chosen last month by outgoing President Macky Sall — is the prime minister, Amadou Ba, whose personal political brand is sober and capable managerialism.
Against this background, the politics of debt have not been a major issue in Senegal. Although 2023 has been a year of controversy and political street violence, these issues have not been driven by short-term economics, the politics of debt, or even government decisions over spending or curbs on expenditure; however, that does not mean the economic context is irrelevant to the current political mood.
The upheaval of repeated waves of protest and subsequent crackdowns have slowed growth, even if it is still projected at a healthy 4.1% for this year. Moreover, although the inflation rate slowed to 5.7% in July, new price pressures for staples such as rice, onions and sugar are pushing the rate back up. Inflation for the year as a whole is now projected at 6.1%.
These pressures weaken the overall reputation of Sall and Ba as capable managers of the economy. Additionally, as throughout much of West Africa, youth unemployment is a huge problem, both for the less educated and for graduates — and this directly fuels their discontent and mass support for Ousmane Sonko, the charismatic populist opposition figure. While the immediate triggers for this year’s youth protests have been political, the anger of many young Senegalese is fueled by their frustrations at a lack of jobs and the fragility of scraping by on informal activities, particularly in the cities and towns where about half the population now lives.
The main candidates for next year’s presidential election are capable former ministers, with a solid technocratic understanding of the need for Senegal to maintain its reputation for capable governance and its standing as a service and business hub for West Africa. Sonko’s style is more populist. But if he is allowed to take part in the election, he too would probably align with this approach, despite his inflammatory rhetoric.
Therefore, the risk of expropriation will remain low — except in the unlikely event that a strategic foreign investor proves incapable of fulfilling its contractual development or public service obligations. In such circumstances, the government’s cancellation of a concession or other contract would probably have the tacit backing of the IMF and World Bank.
In the first-half 2023 assessment of Senegal for this index, the risk of urban political tension and violence was highlighted. Ever since the clashes between protesters and the security forces that followed Sonko’s arrest in early 2021, such unrest has become more frequent and widespread than had generally been the case over recent years. Furthermore, this year has brought several waves of street confrontation, usually triggered by the treatment of Sonko — the times when he has been arrested or tried. Already this year Sonko has been convicted of defamation and “corruption of a minor.” That case was followed by a stand-off as he sheltered in his homes. He was subsequently taken back into custody.
Sonko is hugely popular with Senegalese urban youth, who have staged repeated protests in his support. These have often devolved into riots or violent confrontations with security forces, with each side blaming the other for the violence and the deaths — which have run into double digits. Due to his convictions, Sonko currently appears to be ineligible to stand in the 2024 presidential election; success in some form of legal appeal, or a political deal to let him stand, is unlikely but cannot be totally ruled out.
Sonko’s exclusion injects new bitterness into the electoral context, but it is hard to gauge whether it will provoke fresh protests. Other opposition politicians, including former Dakar Mayor Khalifa Sall, with whom he had founded the Yewwi Askan Wi alliance, are standing in the election. This could trigger some frustration among some Sonko supporters and fresh unrest, but some may yet switch their support to Khalifa Sall or other opposition contenders such as former Prime Minister Aminata Touré or former ministers Karim Wade or Thierno Alassane Sall. The overall risk of further street clashes has probably reduced slightly, but the mood remains uncertain.
To general surprise, Macky Sall announced in July 2023 that he would not run for re-election. With both him and Sonko out of the race, the contest is open; however, a victory for Prime Minister Ba could generate wide resentment among some opposition supporters, so the risk of unrest remains.
In the Casamance region, in the south, a second faction of the local separatist rebels has joined the peace process, and the risks of localized violent clashes between the army and residual separatist elements appear to have reduced. But some risk of violence remains along the border with The Gambia, if the army tries to pursue residual separatist militants thought to be hiding in the border zone.
Right across West Africa remains a serious risk from jihadist terrorism. The Senegalese military has reinforced its deployments along the border with Mali to guard against any attempt by militants to slip into the country. Moreover, Senegal has a large expatriate Western community, and the country also attracts many Western tourists; therefore, the risk of an urban terrorist attack in Dakar or in a tourism area remains significant.
Senegal and the other seven member states of the West African Monetary and Economic Union have successfully managed the aftermath of the reforms to the management framework for their CFA franc single currency — and this remains pegged to the euro under a French state guarantee. The credibility of this exchange rate remains strong.
Senegal is a key ally of Europe and the United States and a key member of the Economic Community of West African States, with a constitutional, elected government. The risk of sanctions remains low, so long as that remains the case.
Although the start of production from the GTA gas project and the Sangomar oil field has been slightly delayed to the second half of 2024, the risk of sovereign default is relatively low, for the reasons outlined in the first section of this report.
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