IMF agrees $2.2 billion three-year loan package for Senegal

Key takeaways:

• The IMF and Senegal reached a staff-level agreement for a $2.2 billion three-year loan package
• Senegal’s debt burden reached 132% of GDP by the end of 2024
• Senegal’s bonds fell to record lows following the announcement

The International Monetary Fund (IMF) and Senegal have reached a staff-level agreement for a $2.2 billion three-year loan package.

The IMF disclosed the agreement in a statement on Tuesday.

In a separate statement, Senegal’s Ministry of Economy and Finance said it had agreed to an “enhanced common framework” to restore debt sustainability, though the ministry did not disclose what specific measures it would take.

IMF Managing Director, Kristalina Georgieva, told Reuters that Senegal had maintained a “fairly good macroeconomic framework” before the disclosure of hidden debts put the country off course.

“They slipped into this undisclosed debt situation. We can work now with the commitment of the government,” Georgieva said on the sidelines of a G20 finance meeting in Asheville, North Carolina. “We can work expeditiously to bring the country to a sustainable debt and strong reform programs.”

How Senegal’s debt crisis unfolded

Senegal’s debt burden had reached 132% of gross domestic product by the end of 2024, according to IMF figures, after the government uncovered billions of dollars in misreported borrowing by the previous administration.

The IMF estimates the misreported debt at more than $11 billion based on figures at the end of 2023, though some analysts put the figure closer to $13 billion, equivalent to more than a quarter of the country’s $40 billion economy.

The scale of the misreporting dwarfs Mozambique’s “tuna bond” scandal, which involved about $3 billion.

The IMF froze a $1.8 billion lending program after discovering the misreported debt, and the two sides have since been locked in drawn-out talks over a replacement scheme.

Senegal’s bonds fell to record lows following Tuesday’s announcement, with all of them trading below 50 cents on the dollar or euro, half their original face value.

Conditions attached to the new deal

The agreement requires Senegal to take “decisive corrective actions” in support of its request for a waiver related to the misreported debt, according to the IMF statement, which added that the deal remains subject to approval by IMF management and its board.

IMF Mission Chief Mercedes Vera Martin said the reform measures aimed at avoiding a similar case should focus on better debt management and fiscal transparency. She said authorities are also working on a revised budget meant to “rationalize” spending, though she added it would not affect access to public services in the short term.

Talks with the IMF have been contentious.

Former Prime Minister Ousmane Sonko said last November that an IMF-led restructuring of Senegal’s debt would be “a disgrace” for the country. President Bassirou Diomaye Faye fired Sonko in May, but Sonko was subsequently appointed president of the National Assembly, a position that could allow him to complicate implementation of any reforms required under a new IMF program.

The latest IMF mission began in August to hold further technical discussions on policies that could lead to a new lending arrangement, one meant to serve as an anchor for other investment and funding, including support from donors such as the World Bank.

At the end of last year, Senegal had more than $7 billion outstanding in international bonds, nearly a fifth of its total debt, while export credits accounted for about a tenth of the total.