Senegal is nearing its first potential default since Ethiopia in 2023, as the government unveiled a debt treatment plan under an enhanced version of the G20's Common Framework. This plan is part of a deal for a new $2.2 billion program with the International Monetary Fund. The debt treatment is expected to lead to the restructuring of nearly $5 billion in eurobonds, which bondholders interpret as a default event, triggering a sell-off of Senegal's short-dated bonds.
The discovery of billions of dollars in hidden debt two years ago, left by the previous administration, set the stage for this crisis. A Court of Auditors investigation found end-2023 debt at 99.7% of GDP, significantly higher than the reported 74.41%, implying approximately $7 billion in hidden borrowing. S&P Global Ratings estimated the undeclared debt to be around $13 billion, equivalent to a quarter of the country's economy. The debt burden is projected to reach 132.3% of GDP in 2026, with debt servicing costs expected to hit $9.7 billion this year.
The West African Development Bank (BOAD), African Export-Import Bank, Africa Finance Corp., and Ecobank Transnational Inc. are identified by Citigroup Inc. as most exposed to corporate credit risk due to Senegal's debt treatment. Moody's downgraded Senegal's sovereign rating from Caa1 to Caa2 with a negative outlook on August 28, 2026, citing pressure on public finances. Despite the restructuring, Senegal has pledged to honor its September 13 eurobond coupon payment to maintain investor confidence.
