NAIROBI, Sept 17 (Askume) – Slow economic growth, a widening fiscal deficit and potential delays in International Monetary Fund funding to Senegal could cloud the outlook ahead of parliamentary elections on Nov. 17, analysts said.
Brazilian President Basil Dimay Faye dissolved the opposition-led National Assembly on Thursday just five months after taking office, setting the stage for early voting.
Election planning will now fill the calendar as the West African country prepares for the next review of a $1.9 billion International Monetary Fund loan it received last year to stabilize public finances.
“Senegal is unlikely to receive approval from the IMF board for its next review before December,” Barclays analyst Michael Caffey said in a note to clients.
Any delay in the next financing disbursement will coincide with other, less encouraging economic developments.
The International Monetary Fund said on Friday it had lowered its growth forecast for this year to 6.0% from 7.1% in June as the economy grew slower than expected in the first half.
“This slowdown reflects weak activity in the mining, construction and agro-industrial sectors,” the fund said.
Analysts are closely monitoring the political and financial situation ahead of the voting.
Economic inequality is responsible for at least some of the discontent that brought people onto the streets in violent protests in 2021 — though there are no signs of another riot this time around.
Promising oil and gas
The IMF said government revenues fell sharply in the first eight months of the year, but spending remained on track.
“As a result, the fiscal deficit widened and authorities had to rely on expensive, short-term external commercial borrowing amid lower-than-expected liquidity buffers.”
Senegal’s dollar bonds fell on Friday after parliament was dissolved. On Tuesday, yields on bonds maturing in 2033 and 2048 were steady at 85.33 cents and 73.24 cents, respectively.
Faye, a former tax inspector, blamed the previous Congress for refusing to introduce a new budget law and opposing plans to eliminate wasteful state agencies for his decision to abolish it.
He won a presidential election in March with 54 percent of the vote, sparked by discontent among young voters. But his Bastif party had only 26 seats in the now-defunct 165-member parliament. It was part of a coalition of 56 MPs.
Political risk consultancy Eurasia Group said that could change in the November elections, citing the popularity of the president’s initiatives, which include a national dialogue on justice reform and a drive to eliminate inefficiency and waste.
“Historically, the results of legislative elections have coincided with those of presidential elections held shortly afterward,” Eurasia said.
Faye’s fortunes may also be boosted by the prospect of brighter economic times ahead, thanks to profits from newly developed natural resources.
Senegal became an oil producer in June when Australia’s Woodside Energy (WDS.AX) began production at its Sangomar oil and gas field. The Greater Tortue Ahmeim LNG project operated by BP (BP.L) will also begin producing natural gas by the end of this year .
“Senegal’s current government will likely use these resource revenues to reduce the country’s widening external and fiscal imbalances,” Yevgenia Sleptsova, an analyst at Oxford Economics, said in a research note.
