However, political events over the last few weeks have brought the country dangerously close to constitutional upheaval. It’s only thanks to an independent judiciary that we have the first round of the presidential election on 24 March.

A troubled journey

The original election was scheduled for 25 February, but incumbent Macky Sall postponed voting until December. Supporters said it was so the final candidates could be properly vetted. Critics said Sall knew his chosen successor, Amadou Ba, was weak and the delay was a crude attempt to cling to power. Either way, opposition party PASTEF was the clear winner of the debacle. It’s now in the driving seat to deliver victory.

What path could Senegal take under a PASTEF government? Some of the party’s rhetoric is certainly radical. Two plans, if implemented, would send jitters through capital markets. First, PASTEF wants to take Senegal out of the West African Economic and Monetary Union, a currency coalition more integrated than the euro. Mauritania is the only country to have abandoned the CFA Franc, in the 1970s. The consequences were severe. Inflation reached double digits. Mauritania's new currency – the ouguiya – has been devalued several times since.

Second, PASTEF wants to renegotiate oil and gas contracts and bring them under a state-controlled entity. The goal is to increase tax revenues. But Senegal, in our view, has neither the domestic institutions nor the expertise to manage these policies in-house. It would also deter foreign direct investment (FDI) at a time when Senegal needs capital. FDI stood at just over 9% of GDP in 2022.

That’s why we think the PASTEF will soften its approach after the election. The party will instead seek to improve checks and balances, something investors would welcome and award unallocated oil blocks to state-owned entities.

Political pulse

The purpose of on-the-ground research trips is to take a country’s pulse. It’s important to garner a range of opinions and form a coherent picture. Unsurprisingly, political views two weeks before an election were not hard to come by.

My conclusion? If PASTEF can muster the necessary support from coalition parties, the election will be theirs to lose. Macky Sall has ruled Senegal for 12 years. There’s a feeling of fatigue among the population, particularly the urban young. It’s not Macky Sall’s economic management of the country that has been his downfall.  Its Plan Senegal Emergent strategy successfully created a special economic zone. The expansion of extractive activities contributed 5.5% to GDP in 2022 compared with 3.4% the year before.

Rather, the perception of France’s influence on Senegalese politics and the alleged widespread corruption have derailed his presidency. His crackdown on political opponents, particularly the jailing of former PASTEF leader Ousmane Sonko on defamation charges, has further created unrest.

Economic winds

Senegal continues to run a twin deficit. Fiscal consolidation, however, remains on track. The country received the latest disbursement under the International Monetary Fund (IMF) programme in November last year. True, there’s been some recent slippage due to the slower than anticipated removal of fuel subsidies. But this was expected in the run-up to an election.

We believe a PASTEF administration will continue to focus on fiscal consolidation. Its leader, Bassirou Diomaye Faye, has a background in tax administration. New oil and gas fields are expected to come online in the latter half of 2024. This should help reduce the current and fiscal deficit that has been widening in recent years (see chart 1 below). It will also boost economic growth.

Concessional financing will remain a key source of finance. There is the potential for a eurobond issuance later in the year under the environmental, social and governance framework. This is an attempt to bolster foreign exchange reserves in line with the Central Bank of West African States’s regulations.

Current reserves only cover around two months of imports. The IMF continues to view the country at moderate risk of debt distress. Debt-to-GDP is only 57% and not a concern.

Bondholders like to see a clear path towards fiscal consolidation, prudent monetary policy and political stability. These are rarely present in frontier markets. In Senegal, political uncertainty has driven prices down six-to-nine points across the yield curve this year (see chart 2). Nonetheless, the fundamental investment story remains intact. 

A bright future

Conducting meetings in hotels and restaurants provides a degree of insight into the potential policy direction. But one can only accurately gauge the mood by spending time among the civilian population. I found Senegal’s youth, who make-up 60% of the population, fully engaged politically. And like other democracies, voting intentions are highly emotive. Senegal is overwhelmingly Muslim, but a secular political system has installed a high degree of religious tolerance.

I also met Aminata Toure, the former prime minister. She’s an impressive figure and a prominent part of the PASTEF campaign. If Senegal is to prosper, she argues, it must first revitalise the agricultural sector by introducing a ‘small business act’. Taking this first step would be crucial in transitioning the country from a net importer to a self-sufficient provider of food and energy.

Toure also said politicians must renegotiate with multilaterals like the IMF and World Bank. That wouldn’t mean ripping up existing agreements. Instead, she wants to see targeted social spending to alleviate the effects of declining real incomes. This compares with Sonko and Faye, who prefer national champions. In my view, Toure’s policies are sensible and will resonate with the electorate facing nearly 20% unemployment.

I left Dakar with Toure’s words ringing in my ears, “You go back to London and tell your bosses that Senegal is open for business’. I remain optimistic that Senegal's future remains bright, whatever path it chooses.