The International Monetary Fund has warned that, without a change of course, Luxembourg's run of budget deficits will push public debt up against the 30%-of-GDP line the government has treated as a red line for years, and it is urging spending discipline, a broader tax base and a legislated debt anchor.
President Bassirou Diomaye Faye dismissed PM Ousmane Sonko and dissolved the government on 22 May 2026, fracturing the PASTEF movement that won power in 2024. The split turns on economics: Sonko resisted raising fuel prices and IMF-backed restructuring of Senegal's roughly $13bn debt, while Faye's team pushes reforms to unlock a frozen $1.8bn IMF programme. On 26 May, lawmakers made Sonko parliament speaker, creating a rival power centre as IMF talks resume.
The International Monetary Fund's 2026 Article IV mission, concluded on 7 May, projects Luxembourg's real GDP to grow 1.2% in 2026 and 1.7% in 2027, with the general government deficit remaining around 2% of GDP. Staff call for moderate fiscal tightening, broader tax bases and further pension measures, while welcoming the 2026 pension reform.