The government of Senegal has denied claims that it secretly borrowed €650 million to avoid a potential debt default, insisting that the transactions complied with market transparency rules.
The response followed a report by the Financial Times alleging that Senegal quietly secured the funds from the Africa Finance Corporation and First Abu Dhabi Bank through financial arrangements that gave the lenders priority over existing bondholders.
In a statement released late Tuesday, Senegal’s finance ministry said the borrowing was part of a broader strategy to diversify the country’s funding sources as it works to manage its large public debt and finance government operations.
According to the Financial Times, the government raised the funds through newly issued domestic sovereign bonds combined with derivatives known as total return swaps. These instruments allow creditors to be repaid first if a borrower defaults.
Senegalese authorities, however, said the financing deals were transparent and offered more favourable terms than borrowing on international markets.
Officials added that the loans carry an interest rate of about 7.1 percent and were arranged in accordance with financial market rules.
The deal with the Nigeria-based Africa Finance Corporation was reportedly finalised in May last year and enabled Senegal to raise up to €350 million.
In June, the country signed a separate three-year swap agreement with First Abu Dhabi Bank, allowing it to borrow an additional €300 million. Both loans are expected to mature in 2028.
Earlier this month, Senegal successfully repaid an international debt of $471 million, easing fears among economic observers that the country could face a default.
However, the West African nation continues to grapple with serious fiscal challenges. The government’s budget deficit is estimated at nearly 14 percent of gross domestic product, while public debt reached about 132 percent of national output by the end of 2024.
The current administration, which took office in April 2024, has accused the government of former president Macky Sall of concealing the true scale of the country’s financial situation during his tenure from 2012 to 2024.
An assessment by the International Monetary Fund last year confirmed that Senegalese officials made inaccurate declarations about budget deficits and public debt between 2019 and 2023.
As a result, the IMF suspended a $1.8 billion financial assistance programme that had been agreed with Senegal in 2023. The organisation said the programme would remain on hold pending additional information and reforms from the country’s new leadership.
