Senegal: Debt restructuring announced after hidden debt crisis

Event

On 1 September 2026, the Senegalese authorities and the IMF reached a staff-level agreement on a 36-month IMF Extended Credit Facility of about USD 2.2 billion, under which the country will seek to restructure its public external debt through an enhanced version of the G20 Common Framework. The IMF’s final approval remains conditional on sufficient corrective action on debt management, fiscal reforms and firm financing assurances from Senegal’s creditors. The IMF will first need to finalise a Debt Sustainability Analysis on Senegal to determine how much debt relief is needed for the country to regain a sustainable debt position over time.

Impact

A state audit in 2024 revealed extensive misreporting of loans under the previous government of Macky Sall, causing the public debt stock to swell beyond 130% of GDP and plunging the West African nation into a debt crisis that led to the cancellation of the IMF programme at the time. After introducing spending cuts, tax rises and GDP rebasing, public debt projections did not fall significantly, while the government was spending about a quarter of its revenues on interest payments alone. Restructuring therefore became increasingly unavoidable given the growing risk of a chaotic default due to an unsustainable debt position amid high financing needs and scarce access to affordable financing.

The formal acceptance of external public debt restructuring to secure IMF support is a sharp shift away from the Senegalese authorities’ previous resistance to such a scenario. This ultimately led to a fierce political rift between President Faye and former Prime Minister Sonko, who was dismissed earlier this year and has since become speaker of parliament. The clash between the two political heavyweights could still derail the implementation of IMF-imposed reforms and possibly jeopardise the recovery process.

Although the perimeter and terms of the debt treatment remain unknown at this early stage, Senegal clearly intends to leave regional CFA franc-denominated public debt outside the scope. This should limit spillovers to WAEMU banks and preserve the country’s foremost remaining market-funding channel, even though the mounting costs of regional borrowing have also become a growing concern. International bondholders and bilateral official creditors are therefore likely to bear most of the debt treatment. Moreover, Senegal raised about EUR 650 million earlier this year through total return swaps using domestic bonds as collateral. As the terms were not shared with the IMF at the time, external creditors fear that these swaps might also be excluded from the restructuring. International bonds dropped sharply immediately after the restructuring announcement, indicating that markets expect creditor losses even though Senegal has not yet missed a payment on its Eurobonds.

The agreement reached on 1 September should help unlock immediate funding from multilateral lenders such as the World Bank and the African Development Bank and ease fiscal pressure, although the road to the first IMF programme disbursement remains long. A successful outcome will depend on sufficient debt relief, credible reforms and a timely agreement with private and official creditors, given that the G20 Common Framework has historically been prone to friction and delays. Senegal’s outlook will be marked by austerity measures holding back domestic growth, while the accelerating oil and gas sector will boost export revenues. Credendo classifies Senegal in medium- to long-term political risk category 6/7 and short-term political risk category 5/7, mitigated by WAEMU membership.

Analyst: Louise Van Cauwenbergh – l.vancauwenbergh@credendo.com