Date first published: 06/01/2026
Key sectors: all
Key risks: economic risks; business risks; political stability
Risk development
On 27 December 2025 Senegal announced it had raised CFA560bln (US$1bln) on the West African Economic and Monetary Union (WAEMU) securities market in its fourth and final bond sale of 2025. Exceeding its CFA400bln target, the sale was 40 per cent oversubscribed, underscoring the depth of West African capital markets and investor interest in Dakar’s debt despite elevated debt sustainability concerns.
Why it matters
A September 2024 government audit into the country’s finances revealed a significantly inflated debt-to-GDP ratio of 119 per cent, then raised to 132 per cent in 2025. Investor concerns followed, leading to a decline in Senegal’s dollar-denominated bonds maturing in May 2026, exacerbated by a 2024 suspension of a US$1.8bln IMF programme. Consequently, Dakar’s credit rating was downgraded to CCC+ on 14 November, while IMF talks, although increasingly positive on potential finalisation, continue to drag on.
The negative outlook corresponds to ballooning debt servicing obligations over the medium term as well as US$4.6bln of external debt service due in 2026. The immediate focus will be on Dakar’s ability to repay or refinance US$1.6bln in commercial Eurobonds by the middle of the year. Default or restructuring on these bonds will likely result in a further downgraded credit rating, which is something the government aims to avoid. Prime Minister Ousmane Sonko’s resistance to restructuring debt has been a crucial sticking point during ongoing IMF talks.
However, positive progress with the international lender may suggest that a compromise on this issue has been reached. International investors will view an IMF deal as crucial to achieving longer-term debt sustainability in Dakar, as shown by a rally in its Eurobonds following a 2 January announcement by the Ministry of Finance that it is hopeful of finalising a deal with the IMF “very soon”. Such a deal will likely involve stringent austerity, something the government can ill-afford.
Expenditure cuts could trigger political blowback and undermine President Bassirou Diomaye Faye’s socialist-leaning mandate. A Q1 2025 boost to government revenue from hydrocarbons revenues will not be sustained, while healthy growth forecasts have been trimmed back. Suggestions of widening the tax base will impact household income and likely weaken government popularity. If violent student protests between November and December 2025 in response to unpaid government stipends are a precursor of wider discontent, the government may face increasing public pressure.
Background
Former president Macky Sall’s underreporting of national debt by 40 per cent significantly increased the fiscal burden on the country and cut back government spending, mainly connected to the ‘Senegal 2050’ development agenda. A resultant reduction in international financing, following disengagement by the IMF, led to Eurobonds hitting record lows in December. This created a reliance on regional and domestic capital markets, with a sixfold increase in WAEMU bond issuances in 2025 compared to 2024.
Risk outlook
While the composition of the recently revealed debt stock is mostly known and has been channelled into productive spending, such as infrastructure, the incident will leave a stain on Senegal’s reputation as a darling of investors. However, it does make the process of repayment easily quantifiable. Combined government efforts to raise revenue through taxation and strict spending cuts will weaken public support for President Faye. This comes at a time when fractures with the influential PM Sonko deepen. Careful calibration of sovereign financing will be needed to ensure Faye’s political longevity and realise Dakar’s robust growth prospects, all while not being dictated to by the IMF to save face for Faye’s sovereigntist agenda.