Senegal’s debt restructuring initiative has become the defining economic challenge of President Bassirou Diomaye Faye’s administration. Following an audit by the Court of Auditors that revealed a debt level exceeding previously disclosed figures, Dakar now faces a tighter financial landscape than anticipated. Identifying a financial advisor to lead this complex technical, legal, and diplomatic process is the critical first step before any negotiations with creditors can begin.
Recalibrated debt levels reshape budget priorities
The recalibration of Senegal’s public debt, combined with a debt-to-GDP ratio well above the West African Economic and Monetary Union (WAEMU) thresholds, has shifted the balance of power with financial partners. The previous agreement with the International Monetary Fund (IMF) has been suspended, pending a new deal based on consolidated figures. This delay temporarily deprives the government of a confidence signal for markets and complicates access to concessional financing.
The growing proportion of revenue allocated to debt servicing is shrinking fiscal space for the economic transformation agenda outlined in the Senegal 2050 framework. The challenge is twofold: meeting short-term obligations on eurobonds and bilateral loans while safeguarding critical investments in energy, infrastructure, and food sovereignty. Without an orderly restructuring, credit risk could escalate, as reflected by successive downgrades from major rating agencies.
The pivotal role of a financial advisor
The selection of a financial advisory firm marks the operational launch of the debt restructuring process. African precedents offer valuable lessons. Ghana relied on Lazard and Hogan Lovells to restructure its external debt in 2023 and 2024, while Zambia also turned to Lazard. Chad and Ethiopia engaged different firms under the G20 Common Framework. Each mandate required a blend of financial expertise, legal engineering, and sovereign diplomacy.
For Senegal, the stakes extend beyond technical competence. The chosen advisor must navigate simultaneous discussions with eurobond holders, bilateral creditors—including China and France—and multilateral lenders. They must also engage regional banks heavily exposed to Senegalese sovereign debt in the WAEMU bond market. The sensitivity of the selection process reflects the political stakes, particularly as Prime Minister Ousmane Sonko advocates a firm stance toward historical creditors.
Reconstructing trust with the IMF and markets
Resuming a program with the IMF remains central to any credible strategy. Without an Extended Credit Facility or equivalent instrument, negotiations with private creditors could be undermined. Investors typically require a budgetary path validated by the Bretton Woods institution before committing. The principle of comparable treatment among creditors, a cornerstone of the Paris Club, will inevitably shape discussions.
On the secondary market, Senegalese eurobonds have traded at significant discounts for months, signaling expectations of a rescheduling or nominal haircut. While this opens theoretical opportunities for opportunistic buybacks, it demands liquidity that the state cannot easily mobilize. Innovative mechanisms, such as debt-for-nature or debt-for-development swaps explored in Gabon and Cabo Verde, may emerge as viable options for the incoming advisor.
The political dimension looms large. The Diomaye-Sonko leadership built its legitimacy on promises of sovereign renewal and prudent public finance management. A well-executed restructuring could reinforce this narrative, while a technical misstep or unfavorable terms could fuel public backlash. The coming weeks will reveal whether Dakar can transform financial constraint into a catalyst for credibility.
