As President Bassirou Diomaye Faye’s administration navigates its economic agenda, the restructuring of Senegal’s debt has emerged as the most pressing challenge on the table. Recent findings from the Court of Auditors have exposed a higher-than-reported public debt level, forcing Dakar to reassess its financial strategy under tighter constraints. Identifying a seasoned financial advisor to steer the complex technical, legal, and diplomatic negotiations now stands as the critical first step before engaging with creditors.
Recalibrated debt figures reshape budgetary priorities
The revised assessment of Senegal’s public debt stock, combined with a debt-to-GDP ratio exceeding the West African Economic and Monetary Union (WAEMU) thresholds, has shifted the dynamics in dealings with financial partners. The previously agreed program with the International Monetary Fund (IMF) remains on hold, pending a new arrangement backed by consolidated figures. This delay temporarily deprives the State of a confidence signal to global markets, complicating access to concessional financing.
Debt servicing now consumes an increasing share of tax revenues, limiting the resources available for the economic transformation agenda outlined in the Senegal 2050 framework. The dual pressure to meet short-term obligations on eurobonds and bilateral loans while maintaining critical investments in energy, infrastructure, and food sovereignty has intensified. Without a structured restructuring, credit risks could escalate, as reflected in multiple downgrades by major rating agencies.
Selecting the right financial advisor: a strategic imperative
The appointment of a financial advisory firm or specialized consultancy marks the operational starting point of the restructuring process. Regional precedents offer valuable lessons. Ghana, for instance, engaged Lazard and Hogan Lovells to oversee its external debt restructuring in 2023 and 2024. Zambia followed a similar path with Lazard, while Chad and Ethiopia sought expertise from other firms under the G20 Common Framework. Each of these engagements required a blend of financial acumen, legal expertise, and sovereign diplomacy.
For Senegal, the stakes extend beyond technical competence. The chosen advisor must navigate simultaneous negotiations with eurobond holders, bilateral creditors such as China and France, and multilateral institutions. Additionally, regional banks heavily exposed to Senegal’s sovereign debt in the WAEMU public securities market will play a role. The cautious approach to the selection process reflects the political sensitivity of the dossier, particularly amid Prime Minister Ousmane Sonko’s firm stance toward historical creditors.
Rebuilding trust with the IMF and global markets
Resuming an IMF program remains the linchpin of any credible restructuring scenario. Without a new Extended Credit Facility or equivalent instrument, securing an agreement with private creditors would be significantly weakened. Investors typically require a debt sustainability trajectory validated by the IMF before committing to restructuring terms. The principle of comparable treatment among creditors, a cornerstone of the Paris Club, will inevitably shape these discussions.
On the secondary market, Senegal’s eurobonds have traded at steep discounts for months, signaling market expectations of a rescheduling or nominal haircut. While this opens opportunities for opportunistic buybacks, such maneuvers demand liquidity that the State currently lacks. Innovative mechanisms, such as debt-for-nature or debt-for-development swaps—successfully trialed in Gabon and Cabo Verde—could be explored by the incoming advisor to alleviate pressure.
The political dimension cannot be overlooked. The Diomaye-Sonko leadership built its legitimacy on promises of sovereign autonomy and fiscal discipline. A well-executed restructuring would reinforce this narrative, while any missteps or unfavorable terms risk fueling public discontent. The coming weeks will determine whether Dakar can transform financial constraints into a catalyst for credibility.
