Senegal’s International Bonds Plunge as IMF Mission Ends Without Lending Agreement

Senegal’s international bond markets experienced significant turbulence on Friday, November 7, 2025, as investors reacted sharply to news that the International Monetary Fund had completed a two-week mission to the West African nation without reaching agreement on a new lending program. The development represents a critical setback for the country’s efforts to restore fiscal credibility and secure international financial support following revelations of massive hidden debts that have plagued the administration of President Bassirou Diomaye Faye since he took office in April 2024.

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Bond Market Reaction Reflects Investor Anxiety

Near-term maturities experienced the most severe losses, with Senegal’s euro-denominated 2028 bond shedding 4.1 cents to bid at 80 cents on the euro, according to market data from Tradeweb. The 2033 dollar-denominated bond lost 3.7 cents to 67.46 cents on the dollar, while the 2048 debt fell 3.9% to 60.70 cents, driving yields up by 47 basis points to 11.87%. These moves represented the largest single-day declines since April 2025, underscoring the depth of investor concern about Senegal’s fiscal trajectory and its ability to service its external obligations.

The bonds later recovered somewhat, cutting losses to approximately 2 cents as some investors viewed the sell-off as creating potential buying opportunities. However, the initial market reaction demonstrated the fragile confidence that international creditors have in Senegal’s economic management following the discovery of more than $11 billion in previously unreported debts—a figure that has ballooned from initial estimates as auditors have continued to uncover hidden liabilities from the previous administration.

Historical Context of Senegal’s Debt Crisis

The current crisis has its roots in governance failures under former President Macky Sall’s administration, which systematically misreported key economic data including debt and deficit figures. When President Faye took office in April 2024 after a contentious election, one of his first acts was to order a comprehensive audit of the country’s public finances. The results, confirmed by Senegal’s Court of Auditors in February 2025, were shocking: the deficit had been understated by 5 percentage points, while total public debt had been understated by a staggering 10 percentage points.

At the end of 2023, total outstanding debt represented 99.67% of gross domestic product, compared with a previously recorded figure of 74.41%—a difference of more than 25 percentage points that represented billions of dollars in hidden obligations. The audit uncovered irregular fiscal practices, including artificially assigning revenues from one fiscal year to the previous one to mask deficits, off-balance-sheet commitments through public-private partnerships, and unreported supplier arrears that had accumulated over multiple years.

As a consequence of these revelations, the IMF froze Senegal’s previous $1.8 billion lending program in 2024. The program, which had been approved in 2023 under the Extended Credit Facility and Extended Fund Facility arrangements, was designed to help Senegal meet its protracted balance of payments needs and support fiscal consolidation. The suspension left the country without access to crucial multilateral financing at a time when it faced mounting debt service obligations and limited access to international capital markets.

IMF Mission Highlights Persistent Disagreements

A team of IMF staff led by Mission Chief Edward Gemayel spent October 22 through November 6, 2025 in Dakar conducting intensive negotiations on a potential new lending program. In a statement released late on Thursday, November 6, the Fund acknowledged that while progress had been made, significant technical and policy disagreements remained unresolved. Gemayel told journalists that talks would continue in the coming weeks and emphasized that Senegal’s authorities were taking the debt situation seriously, but noted that “we still need some more discussions. Hopefully, in the coming weeks we can reach a conclusion.”

The primary sticking points center on the realism of Senegal’s fiscal consolidation plans and growth projections. The Senegalese government’s budget for 2026 targets a deficit of 5.4% of GDP, representing a further reduction from an estimated 7.8% for 2025 and a dramatic improvement from the revised 13.4% of GDP recorded in 2024 after accounting for previously hidden expenditures. To achieve these targets, authorities are counting on an unprecedented surge in tax revenues—approximately 5% of GDP in a single year.

“The government’s target of tax revenues increasing by about 5% of GDP in one year had never happened previously,” Gemayel explained during a press briefing. The IMF’s concerns were echoed in its official statement, which noted that “the very high tax yield assumed from the announced measures poses a significant risk, underscoring the need for more conservative projections.”

Revenue Generation Strategy Raises Skepticism

Senegal’s strategy for dramatically increasing revenue centers on several initiatives, including new taxes on gambling and mobile money transfers, the phasing out of tax exemptions that have proliferated across various sectors, and improved tax administration and compliance. The government argues that Senegal’s tax-to-GDP ratio remains below regional averages and that significant revenue potential exists in the informal sector and through better enforcement mechanisms.

However, international observers and the IMF remain skeptical. Charlie Robertson, head of macro strategy at London-based FIM Partners, told Reuters that “the best-case scenario of the IMF and Senegal agreeing a deal has not happened.” He added that investors were particularly concerned by the Fund’s public expression of doubt about the government’s revenue assumptions, noting that such skepticism from the IMF typically signals deeper disagreements about policy credibility.

The government has stated it is exploring alternative financing mechanisms, including sukuk (Islamic bonds that comply with Sharia principles and do not carry interest) and increased borrowing from regional markets within the West African Economic and Monetary Union (WAEMU). However, these options come with their own constraints: regional markets have limited absorption capacity, and recent attempts to issue bonds in the WAEMU zone have met with tepid responses, with Senegal withdrawing a planned issuance in July 2025 after determining that investor-demanded interest rates were prohibitively high.

Growth Projections Reveal Additional Fault Lines

Beyond revenue assumptions, the IMF and Senegalese government also diverge significantly on growth expectations. Gemayel stated that the Fund expects Senegal’s economy to grow at approximately 3% in 2026, while the government’s projections peg growth at 5%—a substantial difference with major implications for debt sustainability calculations and fiscal planning.

The government’s more optimistic projections are based partly on expectations that oil and gas production will continue to accelerate. The Sangomar oil field, which began production in June 2024, exceeded initial expectations by producing 16.9 million barrels in its first year against a target of 11.7 million barrels. Production is projected to reach 34.5 million barrels in 2025 as the field ramps up to full capacity of 100,000 barrels per day by 2026.

Additionally, the Greater Tortue Ahmeyim (GTA) liquefied natural gas project—a joint venture between Senegal and Mauritania—commenced production in late 2024, shipping its first cargo in April 2025. This project is expected to produce 2.5 million tons per annum of LNG in its first phase, with plans for expansion to 5-5.5 million tons per annum in subsequent phases.

However, the IMF appears to take a more conservative view of how hydrocarbon revenues will translate into broader economic growth. While oil and gas production contributed to an extraordinary 12.1% GDP growth in the first quarter of 2025, non-oil GDP expanded by only 3.1% during the same period, weighed down by weak construction activity due to contractor arrears and lower chemical industry output. This divergence suggests that resource revenues may not be generating the anticipated spillover effects into the broader economy, and that the government’s growth projections may be overly dependent on continued expansion in the extractive sector.

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Debt Sustainability Analysis Remains Incomplete

A critical piece of technical work still outstanding is the debt sustainability analysis (DSA), which will determine the specific policy actions Senegal must undertake to secure a new IMF program. The DSA will assess whether Senegal’s debt trajectory is sustainable under various economic scenarios and policy assumptions, or whether more drastic measures—potentially including debt restructuring—will be necessary.

The IMF now estimates that at the end of 2024, total public sector debt—including state-owned enterprises and domestic arrears—stood at 132% of GDP, with domestic expenditure arrears accounting for 4% of GDP. This figure is substantially higher than the 119% of GDP (excluding state companies) that the government reported in recent budget documents, and dramatically higher than the 99.67% figure calculated for end-2023 by Senegal’s Court of Auditors.

The continuous upward revision of debt figures has eroded credibility with both the IMF and private sector investors. Rating agencies have responded accordingly: Standard & Poor’s has downgraded Senegal’s credit rating twice in six months, reflecting concerns about debt sustainability and governance. Moody’s has taken similar action, with both agencies citing the debt misreporting scandal and uncertain fiscal outlook as key factors in their decisions.

Political Dimensions and Debt Restructuring Resistance

The negotiations with the IMF are further complicated by domestic political considerations. Prime Minister Ousmane Sonko, speaking at a rally for the ruling PASTEF party on Saturday, November 9, characterized the IMF’s position on potential debt restructuring as “a disgrace” for Senegal. “What the IMF is proposing is a restructuring of this abysmal debt that Macky Sall’s party has burdened us with,” Sonko told supporters. “What we told our partners is that we don’t want a restructuring because it would be a disgrace for Senegal.”

Sonko’s comments reflect the political sensitivity around debt restructuring, which in the West African context carries significant stigma. “It would imply that Senegal is a bad student who borrowed money with the intent to steal,” he explained. “We told them that this country is a country of dignity, a country of pride, that the Senegalese people will rise to the occasion, and that the Senegalese people will take responsibility.”

However, it remains unclear whether Sonko was referring to restructuring of domestic debt, international bonds, or both. The distinction matters significantly: domestic debt restructuring would primarily affect local banks and pension funds, while international bond restructuring would trigger losses for foreign creditors and could severely limit Senegal’s future access to international capital markets.

Market observers are divided on the likely outcome. Some analysts believe the IMF will ultimately conclude that debt reprofiling—extending maturities without reducing principal or interest—may be sufficient to restore sustainability. Others argue that with debt-to-GDP ratios exceeding 130% and limited fiscal space, a more comprehensive restructuring involving principal reduction may be unavoidable, regardless of the political resistance.

Regional and International Financial Context

Senegal’s debt challenges are unfolding within a broader regional context where several West African nations face fiscal pressures. However, Senegal’s situation is complicated by its membership in the West African Economic and Monetary Union (WAEMU), which limits monetary policy independence and imposes convergence criteria including a 3% of GDP fiscal deficit target that Senegal is far from meeting.

The WAEMU’s common currency, the CFA franc, is pegged to the euro and backed by the French Treasury, providing exchange rate stability but constraining policy flexibility. Prime Minister Sonko has previously suggested that Senegal might consider leaving the CFA franc zone to gain monetary sovereignty, though he later clarified that any such move would need to be coordinated at the regional level rather than unilaterally.

The country’s 2025 budget financing needs are estimated at 1.195 trillion CFA francs ($2.06 billion), with the government projecting this could decline to 155 billion CFA francs by 2029 if a new IMF program is secured and fiscal reforms are successfully implemented. Without IMF support, however, Senegal faces substantial refinancing risks in 2025 and 2026, with several eurobonds reaching maturity and regional market access uncertain.

Implications for Investment and Development

The lack of an IMF agreement has significant implications beyond immediate market reactions. International financial institutions typically require IMF programs to be in place before extending their own lending, meaning Senegal’s access to concessional financing from the World Bank, African Development Bank, and bilateral donors may be constrained. The World Bank’s recent $115 million package to Senegal in June 2025 reflected this caution, with only $10 million earmarked for technical assistance and the remainder tied to measurable policy reforms.

Foreign direct investment, which had surged to $16.4 billion in stock by 2023 (primarily in the oil and gas sector), may also be affected if political and fiscal uncertainty persists. While hydrocarbon projects with long lead times and signed contracts are likely to proceed regardless, new investments in other sectors could be deterred by concerns about economic stability and policy predictability.

The fiscal pressures are also constraining the government’s ability to invest in social services and infrastructure. Construction activity has been disrupted by arrears owed to contractors, with some reports indicating unpaid bills exceeding several hundred billion CFA francs. These arrears not only hurt the construction sector but also undermine confidence in the government’s commitment to honoring its obligations.

Path Forward and Remaining Uncertainties

Despite the setback of the November mission, both the IMF and Senegalese authorities have expressed commitment to continued negotiations. The Fund’s Gemayel emphasized that “they are very serious about putting in place the consolidation path, which is very aggressive in our view. That shows you how much they are determined to bring debt on a downward trajectory.”

For Senegal to secure a new program, several conditions likely need to be met. First, authorities must demonstrate more realistic revenue projections or identify additional expenditure cuts to achieve fiscal targets. Second, the debt sustainability analysis must be completed and a credible path to reducing the debt-to-GDP ratio must be established—potentially requiring debt reprofiling or restructuring despite political resistance. Third, Senegal needs to secure a waiver from the IMF board for the debt misreporting under the previous program, without which a new program cannot proceed.

The government has announced plans to implement a zero-based budgeting approach for 2026, meaning every expenditure line would need to be justified from scratch rather than being based on previous years’ allocations. Additional measures include tighter controls on state-owned enterprise borrowing, better monitoring of public-private partnership commitments, and improved debt management systems to prevent a recurrence of the reporting failures that triggered the current crisis.

Finance ministry officials have indicated they plan to organize a call with international investors in the coming weeks to provide updates on the reform agenda and negotiations with the IMF. Such communication will be critical to maintaining whatever market access remains available and preventing further deterioration in bond prices that could trigger margin calls or force additional asset sales by institutional holders.

Conclusion: A Critical Juncture for Senegal’s Economic Future

The failure to reach an IMF agreement during the November mission represents a critical juncture for Senegal’s economic trajectory. While the country has significant long-term potential based on its oil and gas resources, educated workforce, and relatively stable democratic institutions, the debt crisis threatens to derail development progress and constrain policy options for years to come.

The sharp decline in bond prices on November 7 reflects investor concerns that go beyond immediate financing challenges. Markets are questioning whether Senegal’s political leadership has the technical capacity and political will to implement the painful reforms needed to restore fiscal sustainability, and whether the country can rebuild the credibility that was shattered by the debt misreporting scandal.

As negotiations continue in the coming weeks, much will depend on the government’s willingness to accept more conservative growth and revenue assumptions, the IMF’s flexibility in recognizing the political constraints faced by Senegalese authorities, and the ability of both parties to find common ground on a realistic debt sustainability framework. The stakes extend beyond Senegal’s borders: the outcome will send important signals to other African countries about the consequences of fiscal mismanagement and the challenges of restoring credibility once it has been lost.

For investors holding Senegalese bonds, the uncertainty creates a difficult dilemma. The potential rewards are substantial if an IMF program is agreed and oil revenues materialize as projected, but the risks of prolonged uncertainty or eventual restructuring are equally significant. Market participants will be watching closely for any signals from resumed negotiations in the coming weeks, knowing that Senegal’s financial future—and their own returns—hang in the balance.

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By: Montel Kamau

Serrari Financial Analyst

10th November, 2025