Senegal Economy

Senegal Economy

Subchapters:

  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax System

Basic data

According to cheeroutdoor.com, Senegal is the fifth largest economy in West Africa (behind Nigeria, Ghana, Ivory Coast and Cameroon). Between 2014 and 2019, Senegal achieved one of the strongest economic growths in Africa, exceeding 6% per year, but due to the corona crisis, growth fell by 0.4% in 2020. The declaration of a state of emergency and the measures associated with it mainly affected the drivers of the Senegalese economy: services ( tourism, transport) and exports. According to the IMF, the budget deficit for 2021 was 6.3% of GDP due to increased spending to fight the pandemic. The economy recovered very quickly and 2021 already showed growth of 6%. According to the latest IMF analysis from March 2022, growth is expected to be 5.7% in 2022.

But the outlook is clouded by economic sanctions against Mali and the likely impact of the war in Ukraine on economic activity. In the face of rising energy and food prices, as well as growing societal demands, maintaining fiscal discipline will be essential to maintain debt sustainability. Public debt is expected to be 67.3% of GDP in 2021. Inflation will increase slightly to 2.4% in 2022 (still below the 3% threshold set under WAEMU). The official unemployment rate is 7%, but in reality it is much higher, because the vast majority of the population conducts economic activities informally. Diaspora remittances account for up to 15% of GDP.

The priority projects of the government’s development strategy are focused on endogenous development, driven by the pursuit of food, health and pharmaceutical sovereignty, with a more dynamic domestic private sector. A major inflow of private investment is necessary to increase Senegal’s production capacity and support export growth. The government is preparing for the start of oil and gas extraction in Senegal’s coastal waters in 2023, 5 million tons of oil should be produced annually. Issues of employment, cost of living, quality of public services, supply and cost of electricity and water remain the primary concerns of Senegalese.

The primary sector continues to play an important role in the Senegalese economy (16.5% of GDP, 50-70% of the active population), but it remains dependent on external influences and is threatened by the volatility of world commodity prices. There are risks of desertification, soil erosion, limited water supplies and natural disasters. The main crops are peanuts (more than a million people cultivate them on about 2 million ha), rice, millet, corn, sorghum, cotton and tomatoes. Fishing remains a key economic area and seafood a traditional export commodity. However, there is a risk of resource depletion, competition from international fishermen, and the need for investment in the processing industry is becoming more and more urgent.

The secondary sector (25.6% of GDP) is mainly based on the mining industry (gold, phosphates, copper, chromium, nickel, iron ore, zircon). Recent discoveries of oil and gas fields are expected to increase this percentage in the near future. Senegal has been experiencing a construction boom in recent years.

The tertiary sector (57.9% of GDP, public services included 20%), dominated by telecommunications, remains strongly dominated by the informal sector.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 5.3 -0.4 6 5.7 8.2
GDP/population (USD/PPP) 3,537.60 3,503.40 3,770.00 4,020.00 4,380.0
Inflation (%) 1.8 2.6 2.2 2.4 2.5
Unemployment (%) 2.9 3.6 ON ON ON
Export of goods (billion USD) 4.1 4 5 5.2 5.7
Import of goods (billion USD) 7.2 6.9 8.1 8.2 8.7
Trade Balance (Billion USD) -3.3 -3 -3.1 -3 -2.8
Industrial production (% change) 2.2 -3.6 1.6 1.1 2
Population (millions) 16.3 16.7 17.1 17.4 17.7
Competitiveness ON ON ON ON ON
OECD export risk 05.VII 05.VII 05.VII ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -6.3
Public debt (% of GDP) 80.6
Current account balance (billion USD) -2.9
Taxes 2022
AFTER 30%
F.O 5 – 50%
VAT 18%

Senegal belongs to the HIPC (Heavily Indebted Poor Countries) list and has been striving to reduce bilateral and multilateral debt for a long time. However, the weakness of budget reserves and social safety nets, the vulnerability of the health system and the weight of the informal sector cause difficulties for public finances. The national budget deficit is holding steady at a relatively low 6.3% of GDP, public debt has risen to 80.6% of GDP due to anti-pandemic spending and public investment in infrastructure, and the current account balance is now $billion.

Efforts to achieve fiscal sustainability so far, in line with reforms supported by the IMF, have been strongly affected by the corona crisis. In April 2020, the IMF provided Senegal with emergency funds of USD 442 million (immediate liquidity for the national response plan to Covid-19, the so-called program of economic and social resilience (PRES)).

The economy and the state of public finances should start to recover from 2022, the fiscal deficit should be reduced to 2.4% of GDP from 2025. The established tax deferrals will gradually end, and from 2023 public revenues are expected to grow due to the start of oil production.

Senegal participated in the G20 Debt Service Suspension Initiative (DSSI) and received USD 139.2 million worth of deferment benefits for 2020. The G20 initiative was extended until June 2021; given the continued pressure on public finances, further savings are expected from the Senegalese government. Under the government’s medium-term development plan (Plan Sénégal Emergent), efforts are focused on macroeconomic reforms to achieve fiscal sustainability and prudent debt management. Senegal’s fiscal space has shrunk significantly with a sustained increase in public debt over the last ten (10) years, linked mainly to an increase in public investment. As resources are limited, it will be necessary to improve revenue mobilization, rationalize and better target subsidies, and re-prioritize spending to avoid large budget slippages and maintain debt sustainability. Strengthening the resilience of the economy will depend on the implementation of key structural reforms, especially those aimed at 1) accelerating the implementation of the medium-term revenue mobilization strategy; 2) put into operation a new budgetary framework governing the use of oil and gas revenues; 3) prepare a plan for the gradual abolition of energy subsidies and at the same time improve the existing mechanism for the protection of the poorest residents; 4) revise the legal framework for awarding public contracts with the aim of increasing the frequency of open and competitive tenders. 3) prepare a plan for the gradual abolition of energy subsidies and at the same time improve the existing mechanism for the protection of the poorest residents; 4) revise the legal framework for awarding public contracts with the aim of increasing the frequency of open and competitive tenders. 3) prepare a plan for the gradual abolition of energy subsidies and at the same time improve the existing mechanism for the protection of the poorest residents; 4) revise the legal framework for awarding public contracts with the aim of increasing the frequency of open and competitive tenders.

Banking system

The banking system is characterized by the significant influence of French capital, but also of owners from other countries (e.g. Morocco or the USA). Komerční banky offers traditional services related to international payments. The norms and rules of the banking sector in Senegal correspond to international standards, banks provide common international guarantees. The problem, especially for starting smaller entrepreneurs, is the low ability of banks to grant long-term and medium-term loans. On the other hand, microfinancing and loans to private individuals are developing – especially mortgages, consumer loans and loans for the purchase of a new car. However, handling routine banking operations reliably can become a problem in day-to-day operations. All actions must be carefully checked, the online banking system works very limited. Medium-term and long-term projects in the public sector are mostly financed by international organizations (World Bank, African Development Bank or EU authorities). The statutory interest rate is set at the initiative of the Minister of Finance for the duration of the calendar year. For a given year, it is equal to the average of the maximum refinancing rates applicable to BCEAO during the previous calendar year. For 2022, it was set at 4.2391% for West African Economic and Monetary Union countries.

Main banks in Senegal:

CBAO (Groupe Attijariwafa bank)
1, Place de l’Indépendance, BP 129 Dakar, Sénégal
Tel: (+221) 33 849 60 60
Web: www.cbaobank.com
E-mail: [email protected]

Citibank
2, place de l’Indépendance, BP 3391 Dakar, Sénégal
Tel: (+221) 33 849 11 11
Web: www.citibank.com/citi/global/sen.htm

Ecobank
Km 5 Avenue Cheikh Anta DIOP BP 9095 Dakar
Tel: (+221) 338 234 707
Web: https://www.ecobank.com/sn
Email: [email protected]

BICIS (Groupe BNP Paribas)
2 avenue LS Senghor, BP 392 Dakar, Sénégal
Tel: (+221) 818 04 06 06
Web: www.bicis.sn
E-mail: [email protected]

SGBS
19 avenue LS Senghor, BP 323 Dakar, Sénégal
Tel: (+221) 33 839 55 00
Web: https://societegenerale.sn/

Bank of Africa
Immeuble Elan – Route de Ngor, Zone 12, quartier des Almadies, Dakar, Sénégal
Tel: (+221) 33 865 64 44
Email: [email protected]
Web: https://www.boasenegal.com/

Western Union (more than 800 branches throughout Senegal)
In Dakar, for example, at the SGBS branch, CBAO, post office, etc.
Website: https://www.westernunion.com/sn

Tax system

Since 2000, Senegal has implemented a new, simplified tax system as part of the UEMOA integration. The goal is greater transparency of the tax system and its easier applicability. The tax system is inspired by the French model.

Following the adoption of the tax reform at the end of 2012, corporate income tax is set at 30%. For natural persons, the progressive tax rate ranging from 0 to 40% has been maintained, while the income threshold for the zero rate has been increased and at the same time the tax burden for the highest income groups has been reduced (from 50 to 40%). Value Added Tax (VAT) is levied on goods and services. The basic tax rate is 18%, with a reduced tax of 10% applied to accommodation and catering in the tourism industry and some selected products. Other consumption taxes are also applied (e.g. 40% on alcohol, 40-45% on cigarettes, etc.).

Information on the Senegalese tax system (in FJ) can be found on the website of the Senegalese Ministry of Finance: www.finances.gouv.sn chapter Services aux users. The websites of the tax directorate of the Ministry of Finance www.impotsetdomaines.gouv.sn and also www.douanes.sn are quality sources of information.

Senegal Economy