From 4.7% in 2022 to above 5.3% in 2023, Senegal's growth is projected to pick up, in part due of a growing oil and gas industry. But the country faces many challenges, including an economic fallout from the Ukraine crisis, stricter financial regulations, and growing political upheaval in the region. Two major problems are growing fiscal imbalance and rising government debt.

The strong post-pandemic recovery of Senegal has been impeded, according to Edward Gemayel, IMF Mission Chief for Senegal. As a result, GDP predictions have been reduced, and inflation has increased, worsening the fiscal and current account deficits. Additionally, the national debt now accounts for nearly 76% of GDP.

However, the nation has bright prospects, which are supported by the production of oil and gas, which will stimulate the economy for the foreseeable future. With the assumption that the IMF-supported programs' cautious macroeconomic policies and resolute structural reforms are carried out, growth is forecast to pick up to 10.6% in 2024 and 7.4% in 2025, with non-hydrocarbon growth anticipated to reach about 6%.

“Inflation hit a multi-decade high of 9.7 percent in 2022, driven largely by the surge in food prices, which account for almost half of the CPI basket in Senegal. Inflation has since eased to around 9 percent and is projected to fall to around 5 percent by year-end but could potentially increase again if commodity prices remain high,” he disclosed during an interview.

The Senegalese government responded by raising public sector pay by almost 20% and increasing gasoline and energy subsidies, which have risen to about 4% of GDP.

However, in order to address the budget deficit, public investments were decreased. Future important actions, such as cutting tax exemptions and gradually eliminating energy subsidies while better focusing on social spending to mitigate the consequences of falling real wages, will be required to maintain debt sustainability and help contain inflation.

According to Senegal's Nationally Determined Contribution (NDC), which outlines the country's projected climate actions between 2023 and 2030, the nation will need funds equivalent to almost 7% of its GDP year until 2030 to achieve its mitigation and adaptation goals.