The Government of Senegal has decided to remove subsidies in the energy sector (for electricity, oil products and butane gas) by 2025 in order to finance social projects. Currently, Senegal spends more than 4% of its annual GDP on energy subsidies. This decision will allow Senegal to save approximately XOF258bn (US$422m, of which US$163m from the electricity sector and US$259m from petroleum products). To achieve this objective, the government has decided to establish a progressive strategy in several stages.
Senegal will adjust the rise in certain energy prices and mitigate the impact of this rise on vulnerable households, starting in January 2023. The Government also plans to review the formula for determining the fuel prices and the structure of electricity tariffs, as well as the strengthening of the cash transfer system by the end of 2023. This measure will lead to an increase in electricity prices of XOF18.97/kWh (US$3.1c/kWh) for low voltage, XOF22.79/kWh (US$3.8c/kWh) for medium voltage and XOF14.31/kWh (US$2.3c/kWh) for high voltage. For diesel and premium fuel, the increase will be of XOF100/l (US$16c/l).
In 2023, electricity subsidies for the electricity sector are expected to cost Senegal XOF280bn (US$458m), while subsidies for petroleum products would cost XOF525bn (US$859m). In total, this would represent a cost of about XOF 800bn (US$1.3bn) for the country in 2023, compared to XOF750bn (US$1.2bn) in 2022. Senegal hopes to reduce energy subsidy spending to a maximum of 1% of GDP by the end of 2024, before eliminating those subsidies entirely by 2025.