Inside Senegal’s race to escape its crippling debt crisis

There are only so many ways for a government to dig itself out of a debt hole. It can spend less, collect more taxes or persuade creditors to give it some breathing room.

Senegal has tried the first two. Now, after nearly two years of fighting debt restructuring, the heavily indebted West African nation is taking a different route.

On Tuesday, the International Monetary Fund (IMF) announced it has reached a staff-level agreement with the country for a new $2.2 billion programme. This came after the finance ministry said it has agreed to an “enhanced common framework” to restore debt sustainability.

If approved, the 36-month deal would mark the return of concessional financing following the “hidden debt” scandal in 2024.

Senegal lost access to its previous IMF credit facility after an audit uncovered billions of dollars in previously undisclosed borrowing. Since then, it has had to rely more heavily on domestic and regional borrowing to keep its finances afloat.

While that strategy bought time, it came at a cost. The government projects that debt repayments could absorb as much as 70% of state revenue this year. 

Now, Senegal is betting that an IMF bailout alongside debt treatment, can give it the fiscal space that spending cuts and tax revenues could not.

An overnight debt crisis

When President Bassirou Diomaye Faye took office in April 2024, Senegal was already carrying a sizeable debt burden. Official figures put the public debt stock at 74.4% of GDP at the end of 2023, well above the West African Economic and Monetary Union’s (WAEMU) 70% ceiling. The economy was hardly on the brink of collapse, but the government had little room for error after years of taping expensive loans to finance development projects. 

Faye’s new government wanted to know just how bad things were. It commissioned an audit of the public finances covering 2019 to 2023, seeking to reconcile what the previous administration had reported with what was actually sitting on the government’s books.

What it found changed the picture almost overnight.

In September 2024, the government said the budget deficit for 2023 had been more than 10% of GDP, nearly twice the previously reported figure.

A subsequent review by Senegal’s Court of Auditors put the central-government debt-to-GDP ratio at nearly 100% at the end of 2023, up from 74.4%. 

The numbers kept getting worse as the accounts were reconstructed. S&P Global Ratings put the undisclosed debt closer to $13 billion roughly a quarter of Senegal’s annual economic output and higher that the IMF’s estimates.

For creditors, this was not simply a bigger number on a spreadsheet. It meant the government they thought they were lending to had materially less capacity to repay them.

The Bretton Woods lender froze Senegal’s existing $1.8 billion programme while it assessed the misreporting. International bond markets effectively closed to the government, forcing it to turn inward to fund itself.

Investor confidence took a nosedive. Credit ratings followed. Moody’s has downgraded Senegal four times since October 2024, taking its sovereign rating from Ba3 to Caa2. 

In addition to losing access to Western debt markets, Senegal hasn’t secured new African Development Bank project approval since 2024, according to SynDev’s Camara. 

Senegal tried to cut its way out

Faced with unprecedented fiscal woes, the West African nation needed to find money, and quickly.

It started by attacking the budget deficit. Spending was tightened across government, with ministries asked to rationalise expenditure and prioritise essential programmes. By the end of 2025, the effort had helped cut the fiscal deficit to 6.4% of GDP, from 13.4% a year earlier, according to the IMF.

Some of the savings were straightforward. Dakar began cutting back on the machinery of government itself. In March 2026, it announced plans to close 19 public agencies, affecting about 1,000 jobs and saving an estimated CFAF55 billion ($98 million) over three years.

Other cuts were harder.

Energy subsidies had long been one of the government’s biggest drains. The IMF urged Senegal to phase out costly, untargeted subsidies and redirect support towards poorer households. But removing them too quickly risked raising living costs, leaving the government to balance fiscal savings against the political cost of higher prices.

Revenue was the other side of the equation. The gold-producer broadened its tax base, introducing levies on gambling and mobile-money transfers, raising taxes on tobacco and alcohol and rolling back some tax exemptions. The 2026 budget assumed these measures would lift the tax-to-GDP ratio to 23.2%, from 19.3% in 2025.

The steps were beginning to improve the fiscal picture. But they could not close the financing gap, pushing the country deeper into the regional debt market. 

Senegal also became more inventive. Between April and November 2025, it used seven Total Return Swap transactions to raise about CFAF721 billion ($1.26 billion). The government defended the arrangements as a cheaper way of bringing foreign investors into the regional market, with financing costs below the yields on its international bonds at the time.

Then there was the oil boom.

Production from the Sangomar oilfield and the Greater Tortue Ahmeyim gas project has lifted the country’s external account balances and is driving stronger economic growth. 

Despite these gains, Senegal’s fiscal strain looms large. Debt payments are estimated to cost CFAF5.5 trillion ($9.7 billion) this year, almost as much as the CFAF5.4 trillion ($9.5 billion) the government expects to collect in taxes. It had raised just CFAF1.1 trillion ($1.9 billion) in the first quarter.

“The problem of them trying to go ahead without an IMF program is that it means there is not likely to be an adjustment program,” Matthew Vogel, head of global emerging markets at Marex in London, told BusinessMirror. “And so as time goes on, public finances and buffers are further reduced and could lead to lower recovery values when they finally enter a debt restructuring.”

How the debt pressures are showing up across the economy 

Unlike the classic African debt crisis, Senegal’s did not trigger a currency collapse or runaway inflation. The CFA franc remained pegged to the euro, while oil and gas exports brought in much-needed foreign exchange.

The pressure, however, showed up elsewhere.

Infrastructure was among the first casualties. Treasury cash-flow pressures have delayed payments to contractors, forcing some to adjust project timetables. Senegal’s construction industry has complained that the state is struggling to settle its bills, leaving companies waiting for money they need to keep projects and payrolls moving.

That is particularly painful for a government that still needs to invest its way out of the crisis. Capital spending fell last year and is expected to fall again in 2026, as debt payments consume more of the budget.

The squeeze is reaching workers too. Senegal’s broad unemployment rate rose to 23.3% in the fourth quarter of 2025, from 20% a year earlier. Builders are among the worst hit, with unions reporting tens of thousands of jobs lost in the industry.

Households are facing a different kind of reckoning. The government came to power promising to reduce the cost of living. Instead, fiscal consolidation has forced it to raise taxes and reconsider subsidies. Last month, petrol prices rose to CFAF990 a litre from 920 francs, while diesel increased to 755 francs from 680 francs. The government said it had already spent CFAF245 billion ($434 million) supporting fuel prices since December and could not afford to keep doing so at the same rate.

Even so, Dakar has continued to prioritise its international creditors. In March it made about $480 million in Eurobond payments, while struggling to settle other obligations at home. The logic was clear: missing a bond payment could shut Senegal out of international markets for longer.

But it illustrated the bind at the heart of the crisis. There was not enough money to meet every obligation, so the cost of keeping one promise was showing up in another part of the economy.

No easy way out

Senegal’s workaround was simple enough: borrow more and deal with the debt later. It kept the government funded, but did little to solve the underlying problem. Instead, the debt pile grew, financing became more expensive and refinancing became harder.

With more debt coming due and investors increasingly wary of lending, Dakar has eventually turned to the IMF and agreed to seek debt treatment.

There was a political story behind that reversal too.

Ousmane Sonko, once Faye’s closest ally and later his prime minister, had been among the loudest opponents of restructuring. He called it a “disgrace”, arguing that Senegal should not make citizens pay for debts accumulated by the previous government.

His alternative was to raise more money at home and avoid new borrowing. An economic recovery plan he unveiled last year aimed to finance 90% of the country’s needs from domestic resources.

Faye dismissed him as prime minister in May after months of tensions over economic policy. Three months later, Senegal had a new IMF offer after nearly two years of drawn-out talks.

Sonko’s concern about the cost of the alternative, however, was not misplaced.

Analysts expect the newly minted deal to be demanding, with tougher measures still needed to put the country’s finances on a sustainable footing.

But the case for restructuring has also become harder to ignore. Senegal is facing CFAF18.9 trillion ($33.5 billion) in principal and interest payments between 2027 and 2029. Growth is expected to slow to 2.2% this year, with higher energy costs, tighter financial conditions and elevated debt vulnerabilities weighing on the outlook.

Even the IMF announcement did little to reassure investors. Senegal’s bonds fell again on Wednesday, with all of its international bonds trading below 50 cents on the dollar.

Whether this path becomes a road to economic redemption may now depend as much on political support and investor confidence as on the financing itself.

Sonko, now president of the National Assembly, is demanding full disclosure of the IMF deal and what it will mean for the economy. His influence over parliament could matter as the government tries to push through the reforms attached to the programme.

There are questions over the restructuring itself, too. Market watchers say some domestic loans could be difficult to rework, while much of Senegal’s CFA-franc debt may remain outside the deal to avoid putting additional strain on the regional financial system.

“The key question is no longer whether Senegal will pursue debt treatment — this  is now a near-certainty,” says Fitch associate analyst Adélie Aubin, “but how it will be structured, which creditors will be affected, and what the implications will be for recovery values.”