Published on August 8, 2024
By Aboubakr Barry
Dear Mr. President,
I extend my heartfelt congratulations on winning the confidence and mandate of the Senegalese populace. Your success resonates as a point of pride not just for Senegal, but for the entire African continent. In light of this monumental achievement, I wish to share some strategic insights to support your development agenda.
According to the World Bank’s World Development Indicators, Senegal witnessed a GDP growth of $11.5 billion from 2010 to 2022, while its debt surged by $27.4 billion during the same period. Alarmingly, gross capital formation rose by a mere $8.7 billion, accounting for just 32% of the debt increase.
This data indicates that for each dollar added to GDP, an astounding $2.38 of debt was accrued, with only a third of that amount being allocated to fixed asset investments. The IMF’s country report no. 23/250 from July 2023 highlights that “Between 2013 and 2019, public debt increased by 26.7 percentage points, while the additional revenues generated from economic growth were inadequate to cover the escalating debt incurred for public investments.” Furthermore, the Economist Intelligence Unit forecasts that the debt will soar to $40 billion by 2028.
To empower your administration in achieving its developmental objectives, I propose the following five strategies:
1. Undertake Administrative Reform to Focus the Government on Its Core Functions: As noted by the late Nicolas van de Walle in his influential book, African Economies and the Politics of Permanent Crisis, “Africa’s weak administrative capacities are widely recognized. Even though top technocrats may possess high levels of competency, they often operate within underfunded governmental frameworks lacking in data collection, planning, and policy analysis capabilities.” Given the scarcity of resources and the multitude of needs, the government should focus on: i) the protective function, which includes maintaining security, order, and the enforcement of laws against theft, fraud, and violence (e.g., defense, rule of law, property rights, impartial justice), and ii) the productive function, boosting long-term growth potential (e.g., education, health, energy, infrastructure, regulations).
It may be beneficial to establish a high-level independent commission tasked with recommending effective strategies for: i) resizing government operations by reallocating responsibilities to the private sector and NGOs where appropriate, while also providing support for those impacted by these changes, and ii) strengthening the Civil Service’s capacity to carry out its essential functions, including implementing a code of ethics, aligning salaries with market standards, and establishing merit-based promotion and retention practices.
While difficult choices may arise, this course of action is crucial for maintaining the government’s credibility. Now is the opportune moment to act, given the political capital and support at your disposal. As the late Lee Kuan Yew, the architect of Singapore’s rise to a first-world economy, wrote in his book From Third World to First: The Singapore Story 1965-2000, “A country is only as strong as its civil service. Without a competent and dedicated Civil Service, policies can’t be implemented effectively, and the government will lack the trust and respect of the people.”
2. Professionalize Asset Management: The IMF’s report identifies 41 state-owned enterprises, revealing that “public investment efficiency remains low in Senegal,” hindered by poor governance and financial oversight. To mitigate revenue losses, a professional approach to asset management is essential. Drawing inspiration from Singapore’s model, the government could create a professionally administered holding company, free from political interference, to manage its assets—including state-owned enterprises and real estate—on a commercial basis. Singapore’s Temasek, established in 1974, currently manages non-financial assets worth $288 billion and contributes to the national budget. This strategy can boost revenues through:
a) divesting businesses that are not profitable,
b) liquidating non-essential assets for immediate cash flow and future tax revenue,
c) maximizing income from retained assets, and
d) preventing losses from undervalued asset disposals.
To expedite this process, the government might seek technical expertise from Singapore or engage Temasek as a consultant to adapt their market-driven practices to the Senegalese context.
3. Reassess the CFA Franc: A critical evaluation of the CFA franc—currently pegged to the euro—could help alleviate economic vulnerabilities. Disparities in economic productivity between the eurozone and Senegal can result in currency overvaluation, particularly if inflation in Senegal exceeds that of the eurozone or if the euro appreciates against the currencies of Senegal’s trading partners. An overvalued currency can render exports more expensive and imports cheaper, exacerbating debt levels and risking an economic crisis. Historical precedents such as those in Chile (1982), Thailand (1997), and Argentina (2001) reveal that rigid currency pegs can precipitate severe economic downturns and banking crises when the pegged currency strengthens relative to trading partner’s currency. In the case of Chile, real GDP contracted by 15 percent, and unemployment surpassed 25 percent, writes Sebastian Edwards in the book The Chile Project. Senegal should consider, in the medium term, adopting a flexible exchange rate regime aligned with its trading partners.
4. Leadership in Core Priorities: The long-term prosperity of Senegal heavily depends on attracting foreign direct investment, which hinges on two key factors: i) the development of human capital to equip citizens with the skills necessary for global economic engagement, and ii) fostering a pro-investor, cost-effective business climate that yields competitive returns on investment. The IMF report identifies governance issues that have impeded the successful rollout of Senegal’s multi-year development plan (PSE) initiated in 2014.
To avert similar obstacles, it would be prudent to form two specialized implementation teams: one focused on human capital enhancement and the other dedicated to improving the business environment. Each team, headed by a minister with private sector collaborators, should undergo biannual assessments led by yourself to evaluate progress and tackle bureaucratic challenges. The Tony Blair Institute could provide valuable support in establishing this framework, much akin to the strategy employed by British Prime Minister Sir Keir Starmer, as reported by The Independent on 06/07/2024: “Sue Gray, Sir Keir’s chief of staff, is responsible for overseeing implementation within No. 10.”
5. Create an Independent Fiscal Oversight Authority: Ensuring transparency in public financial matters is paramount. As the late Supreme Court Justice Louis Brandeis famously stated, “Sunlight is the best disinfectant.” Establishing an independent fiscal oversight authority, similar to the UK’s Office for Budget Responsibility, could offer objective assessments of government budgets, fiscal strategies, and associated risks. This body should comprise esteemed independent experts serving five-year terms, with adequate funding to provide non-binding recommendations to both the government and the public on a biannual basis. This initiative will not only enhance transparency but also foster constructive pressure to improve public financial management.
In conclusion, I firmly believe that with the political will to make the necessary tough decisions, a pragmatic vision, and a civil service dedicated to its unique responsibilities—anchored in meritocracy and accountability for outcomes—you will deliver a prosperous Senegal to your successor.
Mr. Barry is the Managing Director of Results Associates, a specialist firm in financial management and governance, Bethesda, Maryland, USA.