The Senegalese debt saga has taken on some features of the Greek disaster of a decade ago. A heavily indebted country is stuck in a currency union, the Union Economique et Monetaire Ouest Africaine (UEMOA), from which it cannot flee or escape by devaluation; it owes a fortune to the other members of the union, has little or no fiscal space to make profitable public investments (though there are many throughout West Africa), has exhausted the resources of the regional central bank, and has leaders who pretend that endless “dialogue avec les partenaires sociaux” will solve its problems (it never has and it won’t in 2026).
Against this background, Senegal has recently announced what its government, and some misguided commentators, consider to be good news in the form of an IMF program. This article argues that the good news is fake, that Senegal is insolvent, with heavy implications for the regional monetary union, and that the international organizations, chiefly the International Monetary Fund (IMF) and the World Bank (WBG), are acting irresponsibly in financing short-term solutions that only delay the inevitable.
Senegal has recently reached a staff-level agreement (known as an SLA) with the IMF to renew lending relations. The details of this agreement are unknown beyond a Fund press release, which is the usual bouillabaisse thrown together from whatever was left unsold when the markets closed. Fund mission chief Mercedes Vera Martin (Spain) declared:
“The Senegalese authorities and the IMF staff have reached a staff-level agreement that could underpin a 36-month arrangement under the Extended Credit Facility (ECF) of about US$2.2 billion … to support the authorities’ economic and financial reform program for 2026-29. The agreement remains subject to IMF Management and Executive Board approval, and it requires decisive corrective actions to support the authorities’ request for a waiver in the misreporting case prior to Executive Board approval … The IMF-supported program is expected to help catalyze financing from the World Bank, the African Development Bank, and other development partners.”
The Senegalese government simultaneously announced a vague “reprofiling” of its foreign debt. This reprofiling, known as a “Plan de Traitement de la Dette du Senegal (PTDS),” is “an initiative aimed at reducing the burden of debt repayments on the state budget and freeing up resources to finance national priorities.” The PTDS, like the Fund press release, is unsupported by any data.
The studied vagueness of the Senegal announcements has not prevented people who should know better from celebrating the SLA and the PTDS as steps forward. Ndiaye praises the “courageous decision” of the Senegalese authorities. Weidenbrug, who has surely seen worse in Argentina, praises the “important and courageous step” of the authorities toward seeking a treatment of its debt under the G20 Common Framework. While the decision is not at all “courageous” — the Senegalese have no choice — it is indeed “important,” though not in the sense that commenters think.
The proposed IMF-supported program
We know little of the proposed IMF program which is, for now, only a staff proposal to Fund management and to the Fund’s Executive Board for their approval. The proposed amount is US$2.2 billion (about 450% of Senegal’s quota in the Fund). The Fund states that the program, upon approval, will support Senegal’s economic and financial reform program for 2026-29 without stating what those reforms might be. The press release walks nervously past the tombstones of previous Fund-supported programs, notably those that allowed the Sall government (2012-2024) to steal billions of dollars and which supported decades of reforms that failed to do what the proposed new program will supposedly do.
The Fund press release claims that Senegal will take “decisive corrective actions to support the authorities’ request for a waiver in the misreporting case prior to Executive Board approval.” The Fund’s term here — “misreporting”— does not even rise to the level of “euphemism” given that the Senegalese national Cour des Comptes has already shown the extent of the crimes involved in the hidden debt saga.
Moreover, the press release reveals that Senegal has yet taken no “decisive corrective actions” about the “misreporting” and, despite the government’s laxity about the hidden debt, further confesses that the Senegalese have requested a waiver on the misreporting. It is unthinkable that the Fund mission chief would have made these admissions without clearance from her management and it is therefore certain that the waiver will be given.
The debt restructuring
The most recent public (June 2023) Senegal debt sustainability analysis (DSA) showed the composition of public debt as:
- multilateral lenders, 34% of the total;
- bilateral lenders, 18%;
- Eurobonds, 22%;
- domestic debt, 23%; and
- other external commercial debt, 3%.
Taking those shares as not having changed since mid-2023 and reading the PTDS press release at face value, we can guess that a restructuring of the country’s debt could only cover 25-43% of the total. That is, the 22% of the Eurobonds, the 3% of commercial debt, and perhaps 18% of official bilateral credits could be restructured. The latter is uncertain, given the public reticence of China, which is the largest bilateral lender.
Domestic arrears are another poorly quantified fiscal problem. Such arrears (public sector wages, fuel subsidies, transfers to state-owned enterprises, others) will add to the debt service burden and cannot easily be restructured. Prime Minister Lo noted that domestic arrears were greater than previously thought, perhaps 8-9% of GDP, and these must be paid at some point. Moreover, we do not know the status of the loan guarantees given by the Sall regime in its final year, which may constitute contingent liabilities of 8-10% of GDP; these are presumably accounted under internal debt, meaning, again, that they cannot be restructured.
The Fund’s press release expressed the hope that “The IMF-supported program is expected to help catalyze financing from the World Bank, the African Development Bank, and other development partners.” I do not believe that additional program financing (i.e., budget support) should be extended by the World Bank or by the AfDB but the urgency of Senegal’s debt service, and the irresponsibility of World Bank senior management and in the Africa Region of the Bank, probably make new loans inevitable.
Prime Minister Lo said one new important (though hardly courageous) thing in his address to the National Assembly. He confirmed — for the first time, as far as I know — that there were six open criminal investigations following the report of the Cour des Comptes.
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What next?
The Fund and the Bank are desperate to avoid a regional banking crisis like the one that preceded the 1994 devaluation of the CFA franc (CFAF) because a new crisis will destroy the CFAF, at least at its current parity to the Euro. Such a crisis would be precipitated by the restructuring of Senegal’s debts to the rest of the UEMOA and this is why, for now, those debts have been excluded from an eventual restructuring.
I expect the following attempts to deny Senegalese insolvency and to preserve the CFAF.
The Fund will quickly present a program to its Board, having had more than 30 months to invent a story about Senegal.
The Fund will present the new program to its Board in time for the Annual Meetings of the World Bank and the IMF (October 12-18, 2026) because the Fund wants to pretend that it is being tough on corruption “misreporting,” because it wants to claim a success for the Common Framework, and, again, because the prospect of a Senegalese default is making bondholders nervous.
The approved Fund package will have a large immediate disbursement, at least US$500 million, to pay Senegal’s 2026 obligations to the IMF, to the regional lenders, and to the Eurobond holders.
The approved package will give a waiver on the “misreporting,” will allow the crimes of the Sall and the Faye regimes to go unpunished, and will take no notice of the responsibility of current (and former) Fund and Bank staff in the hidden debt. I am not saying current or former staff are corrupt, but there are many people in the Bank who should have known about the hidden debt, who should know that this Fund program will only delay the inevitable, and who should be speaking more honestly to World Bank President Ajay Banga whose knowledge of Africa is, to be generous, limited.
The Fund Board document will include equivocal language about “domestic revenue mobilization and priority spending” and will set soft targets in those areas that can more or less easily be met at the time of the first program review, but which do not resolve the country’s basic insolvency.
The Fund documents will make some generous projections of oil and gas revenue — this will be necessary to make the denominator of the debt service ratios look better — which will be forgotten by the time of the program reviews.
The first Fund-supported program review will be scheduled for May or June 2027, based on end-2026 fiscal and economic data and on indicative results for Q1 2027. Delays in producing data will delay the first review but pressure from Senegal’s regional and bilateral creditors will prevail and the Fund will complete the review in mid-2027, allowing another large disbursement.
Some of any potential World Bank/AfDB budget support “catalyzed” by the Fund program will go to pay the country’s multilateral creditors (including those two banks) in 2026-29, making less money available for productive public investments.
In sum, it will take more than talking about “dialogue” and “courageous” and “plans nationaux” and “sustainability” to rescue Senegal and the UEMOA from the situation created by Macky Sall’s regime and the BCEAO, many of whose officials have migrated to the Faye regime. It will take a deep restructuring of public debt, of all forms, including haircuts on official obligations, accompanied by criminal accountability for those who trafficked in the hidden debt, and career accountability for the international officials who looked the other way as this was happening and who to this day refuse to speak honestly to senior management of the Bank and the Fund.
Editor’s Note: The opinions expressed here by the authors are their own, not those of impakter.com
