Senegal’s $5bn debt revamp tests Africa’s new restructuring playbook

Senegal’s planned restructuring of nearly $5 billion in Eurobonds is emerging as a major test of whether reforms to the G20 Common Framework can accelerate Africa’s sovereign debt workouts, making them faster, more coordinated, and less disruptive.

The stakes rose sharply after S&P Global Ratings cut the Western African nation’s long-term foreign-currency sovereign rating to ‘CC’ from ‘CCC+’, its lowest level since December 2000, warning that the government’s planned debt restructuring is highly likely to result in losses for foreign-currency creditors.

The downgrade underscores the pressure facing President Bassirou Diomaye Faye’s government as it seeks to restructure the debt following the discovery of more than $11 billion in previously undisclosed government liabilities under the previous administration.

S&P said the restructuring under negotiation could leave foreign-currency creditors receiving less than they were originally contracted to receive.

“In our view, this implies that the ongoing debt renegotiation will result in foreign currency creditors receiving less than originally promised, whether through a reduction in principal, interest, or payment terms,” it said in a report on Friday

The agency added that a distressed exchange or default involving Senegal’s foreign-currency commercial debt was highly probable. “We consider a distressed exchange or default on Senegal’s foreign-currency commercial debt to be extremely likely.”

The debt revelation pushed the country’s debt burden to more than 130 percent of GDP and forced the International Monetary Fund to suspend a $1.8 billion financing programme.

The government has now reached a staff-level agreement with the IMF for a new three-year programme worth about $2.2 billion, subject to approval by the Fund’s Executive Board. The programme is designed to restore macroeconomic stability and debt sustainability while supporting private-sector-led growth.

Senegal says it will seek debt treatment under an enhanced version of the G20 Common Framework, with the government aiming for shorter timelines, earlier information-sharing and parallel discussions with different creditor groups.

Read also: S&P cuts Senegal’s rating to near 26-year low after debt restructuring

That makes the nation a test case for the revised framework after prolonged and difficult restructuring processes in Zambia, Ghana and Ethiopia.

“Senegal will really be the test case,” Martin Kessler, executive director of the Finance for Development Lab at the Paris School of Economics, told Bloomberg.

Testing a revamped debt system

The Common Framework was created in 2020 to help low-income countries restructure unsustainable debt by bringing together official bilateral creditors, including China and Paris Club members, alongside private creditors.

But its first cases exposed major weaknesses in coordination.

Zambia, Ghana and Ethiopia endured lengthy negotiations as governments, bondholders, Chinese lenders and other creditors struggled to agree on how much debt relief each creditor group should provide.

Senegal will now use an enhanced framework that the G20 has sought to improve through shorter timelines, greater transparency and earlier coordination among creditors.

The Senegalese government plans to convene an information meeting involving multilateral, bilateral and private creditors, with the IMF hosting the meeting.

The objective is to give different creditor groups access to the same information on Senegal’s debt-treatment plan and reduce the information gaps that complicated previous restructurings.

The outcome could influence how other African sovereigns approach debt distress and whether investors regard the Common Framework as a more predictable mechanism for resolving sovereign debt problems.

Faye’s fiscal repair effort

The debt restructuring comes after the government of Faye spent more than two years trying to repair public finances and restore credibility following the hidden-debt scandal.

He took office in April 2024 and inherited a fiscal position substantially weaker than previously reported. An audit found significant underreporting of fiscal deficits and public debt between 2019 and 2023. The IMF said the audit found previously undisclosed borrowing equivalent to 25.3 percentage points of GDP.

Since then, the government has made fiscal transparency and tighter public-finance management central to its economic programme.

Read also: Senegal bonds rebound after IMF agrees to $2.2bn financing package

It has strengthened debt reporting, moved to unify debt-management functions and introduced measures to improve oversight of public finances and state-owned enterprises. The IMF has described these as key corrective actions following the misreporting scandal.

The government has also sharply reduced the fiscal deficit.

According to Senegal’s Ministry of Economy and Finance, the deficit fell from 13.4 percent of GDP in 2024 to 6.4 percent in 2025, mainly through spending rationalisation.

That consolidation has come alongside efforts to increase domestic revenue, reduce non-priority spending and improve the management of government arrears.

Under the new IMF programme, the country plans to adopt a medium-term revenue strategy in 2027 to strengthen domestic revenue mobilisation, while improving debt management, monitoring domestic arrears and oversight of state-owned enterprises.

The government is also seeking to protect vulnerable households through targeted social transfers rather than relying on broad-based subsidies, while improving the business environment and financial inclusion.

Growth story complicated by debt

Despite the fiscal crisis, Senegal’s economy has remained relatively resilient, helped by the start of oil and gas production.

Real GDP grew 6.7 percent in 2025, according to the IMF, although non-hydrocarbon growth was considerably weaker at 2.2 percent. In the first quarter of the year, non-hydrocarbon GDP growth rebounded to 4.7 percent year-on-year.

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The government is seeking to use the country’s emerging hydrocarbon sector as part of a broader strategy to diversify the economy and strengthen domestic value creation.

Its longer-term development strategy, Senegal 2050, places economic sovereignty, industrialisation, local value addition and private-sector development at the centre of the country’s economic agenda. The first phase of the plan targets stronger growth, higher domestic revenue mobilisation and greater energy self-sufficiency.

But the debt burden is limiting how much fiscal space the government has to pursue those ambitions.

Senegal’s own debt-treatment plan says reducing debt-service and refinancing pressures is necessary to free resources for public investment, clear outstanding bills to private companies and improve liquidity in the economy.

Can Senegal avoid default?

One of the most closely watched aspects of the restructuring is that Senegal plans, for now, to continue servicing its debt obligations, including a Eurobond payment due September 13.

That would distinguish it from Zambia, Ghana and Ethiopia, which stopped servicing some debts while negotiating restructuring agreements.

Whether Senegal can restructure its debt while maintaining payments to creditors will be closely watched by investors because a disorderly default could further damage the country’s already weakened market access.

S&P’s CC rating adds to that pressure, signalling the agency’s view that the restructuring is likely to leave foreign-currency creditors worse off than under their original contractual terms.

The country’s international bonds have already traded deep in distressed territory following the announcement of the IMF deal. The government therefore faces the difficult task of securing enough debt relief to restore sustainability without further undermining investor confidence.

The TRS complication

Another potentially difficult issue is Senegal’s use of Total-Return Swaps (TRS), a form of financing that has become increasingly important—and controversial—in African sovereign debt markets.

The IMF has raised concerns about such debt-like instruments, while Senegal has used TRS transactions involving institutions including First Abu Dhabi Bank and Africa Finance Corporation.

The country says CFA-franc-denominated debt will be excluded from the restructuring. It remains unclear how that exclusion will apply to TRS-related borrowing that was collateralised with local-currency government securities.

That could make Senegal an important precedent for how such instruments are treated in future sovereign restructurings.

“Those TRSes could create a lot of headaches in the restructuring talks,” Kessler said.

A test for Africa’s debt market

The stakes therefore extend beyond Senegal.

If the enhanced Common Framework can bring official and private creditors to the negotiating table earlier, improve information-sharing and produce a faster agreement, Senegal could provide evidence that the G20’s reforms have addressed some of the shortcomings exposed by previous African debt restructurings.

But if negotiations again become prolonged and complicated, the case could reinforce concerns that Africa’s sovereign debt architecture remains too slow and fragmented to deal effectively with debt crises.

For Senegal, the immediate objective is to restore debt sustainability and regain access to affordable financing.

For the G20, IMF and African policymakers, the bigger question is whether it can demonstrate that the continent’s debt-restructuring system has finally learned from Zambia, Ghana and Ethiopia.

Senegal is therefore attempting something more difficult than simply restructuring its debt. It is trying to repair its own damaged fiscal credibility while testing whether Africa’s revamped sovereign debt architecture can deliver a faster and more orderly solution than the restructurings that came before it.