IMF Visit to Weigh Hidden Debt in Senegal’s Bid for New Deal
As an International Monetary Fund mission arrives in Senegal this week, investors are watching to see whether the West African nation will inch closer to securing new funding needed to stabilize its strained public finances.
The visit will focus on concrete steps to address “recent data” issues and “to advance work toward presenting the misreporting case to the IMF’s Executive Board,” an IMF spokesman said by email.
A review of Senegal’s finances by President Bassirou Diomaye Faye’s administration last year found that the previous government misreported key financial numbers and hid $7 billion of borrowing.
The revelations led the IMF to suspend a $1.8 billion loan, while S&P Global Ratings downgraded the country’s credit rating further into junk, raising the specter of a debt crisis.
The IMF staff visit “is focused on the technical follow-up of ongoing issues,” the Ministry of Finance and Budget said in response to a request for comment. It “will be an opportunity to continue discussions initiated with the IMF” about the execution of this year’s budget, a proposed 2026 finance bill that outlines next year’s spending priorities and “planned reforms,” it said.
Anxiety about the outlook for Senegal has weighed on the nation’s debt. Dollar bonds maturing in 2033 declined for a seventh day on Tuesday, easing 0.2% to 72.77 cents on the dollar by 2:11 p.m. in London. Notes due in 2031 fell by the same margin to 80.64 cents on the dollar.
“If Senegal doesn’t secure an IMF program within the next 18 months, what starts as a liquidity crisis could quickly turn into a solvency crisis,” said Leo Morawiecki, an emerging markets analyst at Abrdn Investments.
The IMF board will review the misreporting before deciding on a waiver for the $700 million already disbursed under the suspended program and before talks on new funding start.
Finance Minister Cheikh Diba had said in February he wanted a new program in place by June. The government has since unveiled an economic recovery plan to raise 5.7 trillion CFA francs ($10.1 billion) over the next three years and cut the budget deficit to 3% of gross domestic product from 14% by 2027.
It also plans to rebase its economy, which could lift its GDP by 15% to 25%, according to Barclays Plc analyst Michael Kafe, pushing debt-to-GDP back toward or below 100%. The country estimates it stood at 119% of GDP at the end of last year.
A GDP rebasing may help bring the projections for Senegal’s external debt-to-GDP ratio below the IMF’s 55% threshold for countries with strong debt-carrying capacity in the next debt-sustainability analysis, according to Redd Intelligence’s Mark Bohlund.
While Senegal might manage without the IMF, doing so would mean more aggressive spending cuts, “which goes against the program that Faye and Sonko got elected on, so it’s a tight line to walk,” Bohlund said, referring to Prime Minister Ousmane Sonko.
The two swayed voters by promising to ease the cost of living and create opportunities for the nation’s young population, but have struggled to find the money to deliver on that pledge. Faye also promised to renegotiate better deals with oil and gas companies to reduce power costs and make Senegal less dependent on fuel imports.
Production recently began at Senegal’s first offshore oil and gas projects, and the country is trying to build the infrastructure to convert its gas into electricity.
Faye, a former tax inspector who was released from jail only days before winning the 2024 presidential election, has been careful to avoid having his plan for tax hikes and spending cuts characterized as austerity. Critics warn that sharp reductions in spending risk slowing growth and sapping the very tax revenue he’s seeking to raise.
“Debt cannot be resolved through austerity, it needs to be canceled,” Ndongo Samba Sylla, a Dakar-based economist, told VoxAfrica television. “The only way to repay it is by taking on new debt, which requires turning to the IMF. But relying on the IMF’s credit means abandoning the promises made to the Senegalese people.”
The government has ruled out a debt restructuring and said it will opt for extending maturities on some of its borrowings.
