What’s in a word
In 2024, Senegal’s (then) new government dropped a bombshell: The previous administration had hidden more than $11 billion in debt, it said. For context, that was equivalent to one-quarter of the country’s total external debt.
That revelation had immediate consequences. The IMF froze a $1.8 billion support programme. It set off a spate of credit rating downgrades and a bond selloff.
That’s made the situation even more difficult for the government to fix. Depending on who you ask, the government is planning to either restructure or “reprofile” its debt. Neither description has left investors happy.
Meanwhile, Senegal’s next international debt payment comes due on Sunday. Whether it delivers will be closely watched. A lot is riding on the outcome.
So let’s look at what’s happening and what it means.
— Joe Kraus, Senior Policy Director, ONE Data
3 things to know
1. Debt go up. Even before the $11 billion revelation two years ago, Senegal’s external debt had ballooned. It soared from $10 billion to $47 billion in the prior decade. There were several key drivers:
A strategic decision to scale up public investment, which necessitated more borrowing.
A shift toward commercial borrowing, which tends to carry less favourable terms than concessional lending from the likes of the World Bank.
Massive state investment to build out oil and gas fields.
Subsidising food and fuel to mitigate the impacts of the pandemic and Russia’s invasion of Ukraine.
Rising interest rates thanks to a stronger US dollar.
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Unsurprisingly, Senegal’s debt-to-GDP ratio moved in tandem with rising debt levels. By 2023, it was approaching 150%, far above the regional average.
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2. A debt duck. All that debt put enormous fiscal pressure on the government. Then the other shoe dropped, in the form of a previously undisclosed $11 billion debt burden. Since then, the government has been searching for solutions. A lifeline tentatively arrived last week in the form of a 3-year, $2.2 billion IMF loan package. The deal isn’t yet official—it awaits IMF board approval—but could give the government needed breathing room. But it comes with strings attached, requiring Senegal to seek relief from creditors.
That won’t be easy, or painless. The country’s former Prime Minister Ousmane Sonko said that debt restructuring would be a “disgrace.” Last week, Finance Minister Cheikh Diba suggested that the plan was “not a restructuring in the classic sense of the term,” noting that Senegal had agreed to an “enhanced common framework” without providing specifics. The plan is to “reprofile” debt by extending maturity dates and renegotiating interest rates,” says the country’s current prime minister. Investors may very well regard that as restructuring wrapped in different packaging.
The pain won’t be felt evenly: The current plan appears to exclude debt denominated in the local currency (the CFA), placing a heavier burden on foreign financiers, particularly eurobond holders and bilateral lenders. China and France, which together hold nearly three-quarters of Senegal’s bilateral debt, could find themselves left holding the bag.
Senegal’s debt holders
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3. The road ahead looks bumpy. The country’s economic minister lowered growth expectations to 2.7% this year, down from 6.7% last year. The IMF is even more bearish, cutting its 2026 growth forecast to 2.2%. The US-Israel-Iran war has further strained Senegal’s finances. The finance minister told lawmakers in May that fuel subsidies could exceed the budgeted allocation by as much as $2 billion. Meanwhile, Senegal already spends far more on debt servicing than it does on health. Senegal’s citizens and investors have a lot at stake in how the debt crisis plays out.
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