(Ecofin Agency) - Although Senegal is going through a period of financial turbulence, the government’s transparency and responsiveness could prove crucial in restoring the confidence of international partners and rebuilding the foundation for sustainable growth.

Senegal’s $1.8 billion International Monetary Fund (IMF) program has been temporarily frozen due to financial imbalances, Finance Minister Cheikh Diba announced during the annual Bretton Woods meetings. Diba explained that the aid freeze follows an audit revealing significant discrepancies in previously reported budget figures.

Local media reports from October 28 indicate that the audit, initiated by the Senegalese government in September, uncovered worsening public finances. Senegal’s public debt climbed to 83.7% of GDP in 2023, well above the initially projected 73.6%. Over the last five years, the country’s average budget deficit was 10.4% of GDP, far exceeding the 5.5% previously reported under President Macky Sall’s administration.

These findings prompted Moody’s to downgrade Senegal’s credit rating from “Ba3” to “B1” earlier in October, complicating the country’s access to international funding.

Diba acknowledged the importance of this correction for financial transparency in Senegal. “We understood the importance of addressing these discrepancies after identifying major gaps in the figures provided to the IMF, which formed the basis of our relationship,” he stated. Following this, the Senegalese government has entered discussions with the IMF to restructure the aid program, aiming for a new agreement by the first quarter of 2025. As a result, payments originally scheduled for this year under the IMF funding agreement will also be suspended.

The IMF has urged Senegal to adopt strict budgetary measures to restore its financial stability. This recommendation follows an IMF assessment conducted by a team two weeks ago. Despite the current challenges, the IMF reaffirmed its commitment to working with Senegal to address its financial issues.

As Senegal grapples with significant challenges to stabilize its budget, the government is focused on regaining the trust of international creditors. The upcoming months will be critical as Senegal strives to reduce its budget deficit, projected at 7.5% of GDP this year, and aims to bring its debt down to 70% of GDP while maintaining economic stability.