Senegal denies secret €650M borrowing allegations

Senegal's Debt Management and Market Transparency

Senegal has refuted claims of secretly borrowing 650 million euros to avert a default, asserting adherence to "market transparency rules." The current government accuses the previous administration of concealing significant debt levels.

According to a report, Senegal secured 650 million euros from the Africa Finance Corporation and First Abu Dhabi Bank through borrowings that prioritized these creditors over existing bondholders. The finance ministry clarified that these transactions are part of a strategy to diversify funding sources to manage state debt and operational expenses.

The loans were facilitated using newly issued domestic sovereign bonds and total return swaps. These financial instruments ensure that creditors are prioritized for repayment in the event of a default. The transactions carry a 7.1% interest rate, deemed more favorable than international market alternatives.

Africa Finance Corporation: Concluded in May 2023, allowing Senegal to raise up to 350 million euros. First Abu Dhabi Bank: A new three-year swap signed in June 2023, enabling a 300 million euro loan. Both loans are set to conclude in 2028.

Despite economic concerns, Senegal successfully repaid an international debt of $471 million earlier this month.

Senegal is facing a budget deficit of nearly 14% of GDP and public sector debt estimated at 132% of national output by the end of 2024. The new government has accused the previous administration of misrepresenting the budgetary situation. An International Monetary Fund (IMF) team corroborated that false statements regarding budget deficits and public debt were made for the 2019–2023 period. Consequently, the IMF has suspended a $1.8-billion aid program pending further information from Senegal's authorities.

Based on reporting by Africanews.