Senegal debt rework hinges on IMF sustainability test amid $44 billion burden

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Highlights

Senegal's reported debt-to-GDP ratio soared to 130% after including state-guaranteed and SOE debt, with central government debt projected at $44 billion by end-2025.
The government seeks rapid debt treatment and raised the 2025 fiscal deficit forecast by nearly 2 percentage points to 7.6% of GDP as subsidies and debt costs rise.
France and China, Senegal's top bilateral creditors, may co-chair restructuring talks while $1.26 billion in net regional borrowing via opaque total return swaps draws IMF scrutiny on creditor seniority.

Debt burden and restructuring options

As reported by Reuters, Senegal's debt difficulties intensify after leaders in 2024 disclosed misreported obligations that pushed debt to GDP, including state-owned enterprises and government-guaranteed debt, to about 130%. Central government debt reaches 25.2 trillion CFA francs, or $44 billion, at the end of 2025, while the government says it is aiming for a debt treatment within months.

President Bassirou Diomaye Faye says the government is targeting a rapid process, even as officials avoid calling it a restructuring. National Assembly President Ousmane Sonko says a debt default would be a "disgrace", underscoring the political sensitivity around any deal that could impose investor losses.

Senegal could seek longer maturities or lower interest rates, but the scale of the burden makes it harder to rule out haircuts for creditors. The country must also clear arrears that stood at 1.956 trillion CFA francs, or $3.42 billion, as of March 2025, and Prime Minister Ahmadou Al Aminou Lo warns those unpaid obligations are weighing on economic activity.

Creditor mix and market implications

France and China are Senegal's largest bilateral creditors and are widely expected to co-chair talks on behalf of the Paris Club, although no formal announcement has been made. Their role matters because bilateral lenders often set the benchmark for relief expected from other creditors under the comparability of treatment principle.

Investors are also watching proposed changes to the IMF debt sustainability framework, which will inform the Fund's assessment of Senegal even if they do not determine it outright. This month, the government raises its deficit forecast by nearly 2 percentage points to 7.6% of GDP as energy subsidies more than triple, debt costs rise and revenues fall.

Not all creditors are likely to absorb losses equally. The IMF, World Bank and some other multilateral lenders are typically shielded, as are short-term export credit facilities, and multilateral lenders hold about 40% of external debt in 2024 while export credit accounts for another 9%.

Senegal says CFA franc-denominated debt, including retail investor bonds and regional market borrowing, is not part of the planned rework, even though that category represents roughly 30% of central government debt at the end of 2024. After IMF support freezes and access to international markets narrows, the country increases regional borrowing, including $1.26 billion in net financing by the end of 2025 through total return swaps backed by local-currency government bonds.

The IMF raises concerns about the opacity of those total return swaps, and other experts flag possible implications for creditor seniority. The Fund says the instruments count as external debt, but their treatment in any debt operation remains for Senegal and its creditors to decide, leaving investors focused on a part of the debt stock that remains largely untested in sovereign restructurings.

Our earlier coverage of Optimum Communications’ distressed-debt dispute explained how a controversial restructuring moved key cable assets beyond existing bondholders’ reach, triggering a high-stakes court fight in New York. We noted that major creditors accused Patrick Drahi of engineering the transfer while the company carries more than $20 billion in debt, highlighting how creditor hierarchies and transaction structure can shape recoveries and set precedents for future restructurings.

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