Senegal’s debt restructuring hinges on selecting the right financial advisor

Under President Bassirou Diomaye Faye’s leadership, Senegal faces its most pressing economic challenge yet: renegotiating its national debt. Recent audits by the Cour des comptes revealed that the country’s liabilities exceed earlier estimates, forcing Dakar to navigate a tighter financial landscape than anticipated. Identifying a seasoned financial advisor to steer the technical, legal, and diplomatic aspects of this restructuring is now the critical first step before engaging with creditors.

Recalibrated debt figures reshape budget priorities

The reassessment of Senegal’s public debt—now exceeding the West African Economic and Monetary Union (UEMOA) thresholds—has altered its financial standing with international partners. The existing agreement with the International Monetary Fund (IMF) remains on hold until a revised deal is secured based on updated figures. This delay temporarily weakens Dakar’s credibility in global markets and complicates access to concessional funding.

With debt servicing consuming a growing share of tax revenues, the government’s ability to fund transformative projects under the Sénégal 2050 agenda is increasingly constrained. The dual challenge is twofold: meeting short-term obligations on eurobonds and bilateral loans while safeguarding essential investments in energy, infrastructure, and food sovereignty. Failure to restructure could further damage Senegal’s credit rating, as reflected in recent downgrades by major agencies.

The pivotal role of financial advisors in debt talks

The appointment of a financial advisory firm marks the operational launch of Senegal’s debt restructuring. Past African cases offer valuable lessons. Ghana relied on Lazard and Hogan Lovells to restructure its external debt in 2023–2024, while Zambia turned to Lazard as well. Chad and Ethiopia, meanwhile, engaged different firms under the G20’s Common Framework. These mandates required a blend of financial expertise, legal acumen, and diplomatic finesse.

For Senegal, the stakes extend beyond technicalities. The chosen advisor must engage simultaneously with eurobond holders, major bilateral creditors like China and France, and multilateral institutions. Regional banks, heavily exposed to Senegalese sovereign debt in the UMOA bond market, will also demand attention. The opaque tender process underscores the political sensitivity of the issue, particularly as Prime Minister Ousmane Sonko advocates a firm stance toward historical creditors.

Rebuilding trust with the IMF and global investors

Securing a new program with the IMF remains essential for a credible restructuring. Investors typically hesitate to participate in debt deals without a validated fiscal path from the Washington-based institution. The principle of comparability of treatment—a cornerstone of the Paris Club—will inevitably shape negotiations.

On secondary markets, Senegal’s eurobonds have traded at steep discounts for months, signaling expectations of a rescheduling or nominal haircut. While this could enable opportunistic buybacks, mobilizing the necessary liquidity is a hurdle for the state. Innovative mechanisms, such as debt-for-nature or debt-for-development swaps—piloted by Gabon and Cabo Verde—may emerge as potential tools for the incoming advisor.

Political considerations loom large. The Faye-Sonko administration built its legitimacy on promises of fiscal sovereignty and transparency. A well-executed restructuring could reinforce this narrative, while mismanagement or unfavorable terms risk fueling public discontent. The coming weeks will reveal whether Dakar can transform financial constraints into an opportunity for credibility.