By Aboubakr Barry, Managing Director of Results Associates, a financial management and governance firm in Bethesda, Maryland, United States.
Dear Mr. President,
I would like to extend my heartfelt congratulations on earning the trust and mandate of the Senegalese people. Your achievement is a point of pride not only for Senegal but for the entire African continent. In light of this significant accomplishment, I would like to share some strategic ideas to support your development agenda.
According to the World Bank’s World Development Indicators, Senegal experienced a GDP growth of $11.5 billion between 2010 and 2022, while its debt increased by $27.4 billion during the same timeframe. Alarmingly, gross capital formation rose by only $8.7 billion, representing just 32% of the debt increase.
Figure 1: A visual representation comparing total GDP (in US$), total debt (in US$), and gross capital formation (in US$) for 2010 and 2022, along with the variations observed between these two years.
Figure 2: A graphical illustration depicting the relationship between total debt (in US$) and changes in gross capital formation.
This data suggests that for every dollar added to GDP, a staggering $2.38 of debt was accrued, with only a third of this amount allocated to fixed asset investments. The IMF Country Report No. 23/250 of July 2023 notes that “between 2013 and 2019, public debt increased by 26.7 percentage points, while the additional revenues generated by economic growth were insufficient to cover the burgeoning debt incurred for public investments.” Furthermore, the Economic Intelligence Unit projects that the debt will reach $40 billion by 2028.
To assist your administration in achieving its development objectives, I propose the following five strategies:
1. Implement Administrative Reform to Concentrate Government on Core Functions: As the late Nicolas van de Walle pointed out in his influential book, African Economies and the Politics of Permanent Crisis, “Africa’s weak administrative capacities are widely recognized. While senior technocrats may possess high levels of competence, they often work within under-resourced government 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 involves maintaining security, order, and enforcing laws against theft, fraud, and violence (e.g., defense, rule of law, property rights, impartial justice), and (ii) the productive function, which stimulates long-term growth potential (e.g., education, health, energy, infrastructure, regulations).
It may be beneficial to establish a high-level independent committee to recommend effective strategies to: (i) right-size government operations by reallocating responsibilities to the private sector and NGOs where appropriate, while providing support to those affected by these changes; and (ii) enhance the capacity of the civil service to perform its core functions, including implementing a code of ethics, aligning salaries with market norms, and establishing merit-based promotion and retention practices.
While challenging choices may lie ahead, this path is essential for maintaining the government’s credibility. This is an opportune moment to act, given the political capital and support you possess. As the late Lee Kuan Yew, the architect of Singapore’s transformation into a tier-one 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 cannot be implemented effectively, and the government will lack the trust and respect of the people.”
2. Professionalize Asset Management: The IMF report identifies 41 state-owned enterprises, revealing that “the effectiveness of public investment remains low in Senegal,” hindered by poor governance and a lack of financial control. To curtail revenue losses, a professional approach to asset management is vital. Drawing inspiration from the Singapore model, the government could establish a holding company managed professionally, 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 increase revenues through:
(a) the sale of underperforming businesses,
(b) liquidation of non-essential assets for immediate cash flow and future tax revenues,
(c) maximizing income from retained assets, and
(d) preventing losses due to the disposal of undervalued assets.
To expedite this process, the government could seek technical expertise from Singapore or engage Temasek as a consultant to tailor their market-oriented practices to the Senegalese context.
3. Reassess the CFA Franc: A critical evaluation of the CFA franc—currently pegged to the euro—could help mitigate economic vulnerabilities. Disparities in economic productivity between the eurozone and Senegal could lead to an overvaluation of the currency, particularly if inflation in Senegal surpasses that of the eurozone or if the euro appreciates against the currencies of Senegal’s trading partners. An overvalued currency can make exports more expensive and imports cheaper, exacerbating debt levels and risking an economic crisis. Historical cases, such as those of Chile (1982), Argentina (1991), and Thailand (1997), demonstrate that rigid currency pegs can trigger severe economic slowdowns and banking crises when the pegged currency strengthens relative to others. In Chile’s instance, real GDP fell by 15 percent, and unemployment exceeded 25 percent, as noted by Sebastian Edwards in The Chile Project. Senegal should consider, in the medium term, adopting a flexible exchange rate regime aligned with its trading partners.
4. Emphasizing Leadership in Core Priorities: Senegal’s long-term prosperity relies heavily on attracting foreign direct investment, which hinges on two critical factors: (i) human capital development to equip citizens with the skills needed for global economic engagement, and (ii) fostering an investor-friendly and profitable business environment that generates competitive returns on investments. The IMF report identifies governance issues that have hindered the successful implementation of Senegal’s multi-year development plan (PSE) launched in 2014.
To avoid recurring obstacles, it would be prudent to form two dedicated implementation teams: one focused on enhancing human capital and the other dedicated to improving the business environment. Each team, led by a minister with private sector collaborators, should be subject to biannual reviews led by you to assess progress and address bureaucratic challenges. The Tony Blair Institute could provide valuable support in establishing this framework, 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. Establish an Independent Fiscal Oversight Authority: Ensuring transparency in public financial affairs is crucial. As the late Supreme Court Justice Louis Brandeis remarked, “Sunlight is the best disinfectant.” Creating an independent fiscal oversight authority, similar to the United Kingdom’s Office for Budget Responsibility, could provide objective assessments of government budgets, fiscal strategies, and associated risks. This body should comprise eminent independent experts serving five-year terms, with sufficient funding to provide non-binding recommendations to 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 a willingness to make difficult choices, a pragmatic vision, and a public service that is committed to its responsibilities—rooted in meritocracy and accountability for results—you will create a path for a brighter and more prosperous Senegal for your successor.
Strategic Recommendations for Senegal’s Development Agenda
Par Aboubakr Barry, Managing Director of Results Associates, a financial management and governance firm in Bethesda, Maryland, United States.
Dear Mr. President,
I extend my sincere congratulations to you for earning the trust and mandate of the Senegalese people. Your success resonates as a point of pride not only for Senegal but for the entire African continent. In light of this monumental feat, I wish to share some strategic ideas to support your development agenda.
According to the World Bank’s World Development Indicators, Senegal recorded a GDP growth of $11.5 billion between 2010 and 2022, while its debt increased by $27.4 billion during the same period. Alarmingly, gross capital formation increased by only $8.7 billion, accounting for only 32% of the increase in debt.
Figure 1: A visual representation comparing total GDP (in US$), total debt (in US$), and gross capital formation (in US$) for 2010 and 2022, as well as the variations observed between these two years.
Figure 2: A graphical illustration depicting the relationship between total debt (in US$) and changes in gross capital formation.
This data indicates that for every dollar added to GDP, an incredible $2.38 of debt was accumulated, with only a third of this amount being allocated to fixed asset investments. The IMF Country Report No. 23/250 of July 2023 highlights that “between 2013 and 2019, public debt increased by 26.7 percentage points, while the additional revenues generated by economic growth were insufficient to cover the growing debt incurred for public investments.” Furthermore, the Economic Intelligence Unit predicts that the debt will reach $40 billion by 2028.
Proposed Strategies for Sustainable Development
To help your administration achieve its development goals, I propose the following five strategies:
1. Administrative Reform to Focus Government on Core Functions
As emphasized 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 a critical challenge. It’s essential that your administration focuses on:
- Protective Functions: Maintaining security, enforcing laws, and ensuring property rights.
- Productive Functions: Stimulating long-term growth through education, health, energy, and infrastructure.
Consider establishing a high-level independent commission to recommend effective strategies to right-size government operations. This includes reallocating responsibilities to the private sector and NGOs and strengthening the civil service’s capacity to implement ethical practices, market-aligned salaries, and merit-based promotions.
2. Professionalize Asset Management
The IMF report identifies 41 state-owned enterprises, highlighting that the effectiveness of public investment is low due to poor governance. Learning from Singapore’s model, the government could create a professionally administered holding company to manage assets commercially. This strategy can lead to increased revenues through:
- Sale of unprofitable businesses.
- Liquidation of non-essential assets for immediate cash flow and future tax revenues.
- Maximizing income from retained assets.
- Preventing losses due to undervalued asset disposals.
Experts from Singapore could be engaged to adapt their practices to the Senegalese context.
3. Revaluing the CFA Franc
A critical assessment of the CFA franc, currently pegged to the euro, is necessary to mitigate economic vulnerabilities. Discrepancies in productivity could lead to currency overvaluation, affecting exports and imports. Historical examples show that rigid currency pegs can precipitate economic crises. Therefore, adopting a flexible exchange rate regime aligned with Senegal’s trading partners is recommended.
4. Leadership in Core Priorities
Senegal’s long-term prosperity depends on attracting foreign direct investment, which hinges on:
- Human capital development to equip citizens with necessary skills.
- Creating a favorable business environment for competitive returns on investments.
To improve execution, forming two dedicated teams led by ministers and collaborating with the private sector can streamline progress on these fronts.
5. Create an Independent Fiscal Oversight Authority
Transparency in public financial management is vital. Establishing an independent fiscal oversight authority akin to the UK’s Office for Budget Responsibility would provide unbiased assessments of government budgets, enhancing accountability and fostering constructive public pressure.
Benefits of Implementing These Strategies
- Increased Economic Stability: Strengthening fiscal policies can lead to more sustainable economic growth.
- Enhanced Public Trust: Transparency measures can improve government credibility.
- Attracting Investment: A professionalized asset management environment is conducive to foreign direct investment.
- Improved Human Capital: Focused human capital initiatives can prepare the workforce for global opportunities.
Case Study: Singapore’s Rise as a Global Economic Leader
Singapore’s transformation into a first-world economy exemplifies effective public management and governance reforms. By prioritizing strong civil service capabilities, professional asset management, and unquestionable fiscal oversight, Singapore achieved remarkable economic growth. These strategies led to policy effectiveness and increased investor confidence, a model Senegal can emulate.
Practical Tips for Successful Implementation
- Set Clear Goals: Define measurable objectives for each proposed strategy.
- Engage Stakeholders: Involve all relevant parties, including NGOs, private sector representatives, and civil society.
- Monitor Progress: Establish a robust monitoring system to evaluate the impact of policies regularly.
- Be Adaptable: Stay open to revising strategies in response to changing economic conditions.
In summary, implementing these recommendations will require collaboration, commitment, and courage. The strategic direction chosen will strongly influence Senegal’s path towards sustainable development and prosperity for future generations.
