Senegal - Overview of economy



Throughout the latter part of the 19th century, the area that now comprises the country of Senegal, along with several other regions in West Africa, came under the colonial domination of France. As a French colony

until 1960, Senegal based its economy on the exportation of peanuts. Though the dominance of the peanut industry led to a monocultural economy, the administrative apparatus constructed by the French created a demand for a locally educated elite to occupy these positions. The national elite that developed, and which has identified with French history and culture, took control of Senegal after independence in 1960.

Though Senegal has remained dependent on its peanut exports, the economy has diversified since independence. In the late 1960s and 1970s the state contributed to economic diversification by establishing public enterprises to fuel industrial growth. By 1974 there were 87 such enterprises but the government's emphasis on industry brought bias against the agricultural sector. The state controlled the purchasing of all agricultural produce to feed the masses of people flocking from rural to urban areas in search of employment. Under this state-controlled system, peasant farmers were paid for their produce at prices lower than its real worth.

In the late 1970s, the prices paid on the international market by importers of peanuts and phosphate increased, helping to improve the situation of the peasants. Phosphate was Senegal's second most important export. The prosperity that accompanied the elevation in international prices for Senegal's major exports was short-lived, however. Deterioration in the world price of peanuts, along with an increase in world prices for oil, a resource that Senegal imported heavily, led to an economic crisis in 1978.

By the early 1980s, Senegal was undergoing a first wave of reforms of structural adjustment as a condition of receiving badly needed loans from both the International Monetary Fund (IMF) and the World Bank (WB). Structural adjustment, as the name implies, meant that Senegal was obliged to change certain "structures" within its economy, which the IMF and the WB viewed as inefficient to economic prosperity. The state was criticized for playing too great a role in the economy, creating corrupt enterprises (involving bribery in return for contracts) that drained state funding.

Many of Senegal's major exports, including peanuts, cotton, and fish, come from the agricultural sector. The modern, or non-agricultural, sector, which includes chemical industries, phosphates, petroleum refining, manufacturing, and tourism, is concentrated in Dakar and along the coastal belt. Senegal imports foods, beverages, capital goods , consumer goods , and unrefined petroleum products (such as crude oil). Because of historical ties between the 2 countries, France remains Senegal's largest trading partner.

Senegal has a huge trade deficit . In 2000 export revenue equaled US$959 million, while the costs of imports totaled US$1.3 billion. The country depends heavily on foreign assistance, which represented about 42.8 percent of the government's budget in 1994. Besides France, the European Union (EU) and Japan are major donor countries. The United States Agency for International Development (USAID) provides about US$30 million annually in assistance. Senegal has borrowed heavily, both from international financial institutions such as the WB and the IMF, and from commercial banks. In 1998 the country's debt amounted to US$3.4 billion.

Unemployment has been a long-standing economic problem for the people of Senegal. Though figures vary, several official estimates during the 1980s placed the unemployment rate between 20 and 30 percent. The CIA World Fact Book estimates that about 40 percent of all urban youth are unemployed. This situation has contributed to deep-seated urban problems such as juvenile delinquency and drug addiction.

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