After two years of fraught talks, Senegal and the IMF have reached agreement on a $2.2bn programme. The price is a debt restructuring – a step President Bassirou Diomaye Faye’s government had long refused to contemplate.
After more than two years of negotiations, at times acrimonious, Senegal and the International Monetary Fund finally reached an agreement on 1 September.
At the end of the Fund’s eighth mission since Bassirou Diomaye Faye was elected president, IMF staff and the Senegalese authorities struck a staff-level agreement paving the way for a new $2.2bn financing programme over 36 months, according to a statement from the Fund.
But there is a price. In a statement issued the same day, Senegal’s finance ministry said the country would restructure its debt under the G20’s enhanced Common Framework. It is a major concession from a government that had until now refused even to consider such a move publicly.
The IMF and the Senegalese government have agreed on the main economic policies that could underpin a new 36-month programme of about $2.2bn under the Extended Credit Facility.
The programme is meant to support reform of the public finances, improve budget transparency and put the debt back on a sustainable footing, while shielding vulnerable households.
Before the deal can go to the IMF’s executive board, however, Dakar must still take corrective measures over the misreporting linked to the disclosure of previously hidden debt. It must also secure the necessary financing assurances from its partners.
Most importantly, the Senegalese government has confirmed that it intends to restructure its debt through the G20 Common Framework in order to restore debt sustainability. The process will have to take account of the unusual make-up of Senegal’s debt.
The previous $1.8bn IMF programme was suspended in 2024 after the discovery of about $13bn in previously undeclared debt accumulated under the administration of Macky Sall – the scandal now known as Senegal’s “hidden debt” affair.
Since then, without the IMF and other major donors, Senegal has had to rely heavily on the regional market for financing.
At the end of August, Moody’s cut the country’s sovereign rating again, from Caa1 to Caa2 with a negative outlook, pointing in particular to rising refinancing needs and the government’s limited room to bring down its debt.
Talks have gathered pace in recent months, helped in part by a reshuffle of the government’s economic team. A restructuring, long rejected by the authorities, had become increasingly difficult to avoid.
The IMF agreement finally gives Dakar a route back to external financing and an anchor for rebuilding confidence among donors and investors. The programme should also unlock funding from the World Bank, the African Development Bank and other partners.
More importantly, restructuring could ease the pressure created by debt-service payments.
Under the G20 framework, Senegal will have to negotiate debt relief with its official creditors while dealing separately with private creditors. The government says it wants a settlement tailored to the structure of its liabilities.
For Dakar, that brings to an end a strategy based on pushing repayments into the future by borrowing more money. It must now negotiate with creditors to put the debt on a sustainable path.
This marks a major turning point for Bassirou Diomaye Faye.
Since taking office, his government has made the restoration of financial sovereignty – and its refusal to restructure the debt – part of its political identity. The numbers have now caught up with Dakar.
There are echoes of other African countries that have gone through the Common Framework, including Ghana, Zambia and Chad. But Senegal is different: it has not defaulted and it must deal with a far more varied group of creditors.
The question now is how much debt relief Dakar can secure – and at what economic and political cost.
The authorities have said the negotiations will cover only external debt. Debt denominated in CFA francs will therefore be excluded.
The government must also contend with a National Assembly aligned with Ousmane Sonko. For Sonko, restructuring Senegal’s debt has always been a red line. The question is how far he can, or will, stand in the way of the negotiations to come.
