The most indebted country in Africa meets the first major exam of 2026, the year that will define whether it solves its debt crisis.
By Jaume Portell Caño
Senegal paid 410 million euros to its bondholders last March, a move that the Government in Dakar has been working on in recent months. Since the appearance in the fall of 2024 of more than €6 billion of debt that the previous Administration, led by President Macky Sall, had not declared, this West African country has become the most indebted in Africa. The program underway with the International Monetary Fund (IMF) was canceled and since then, the Senegalese Executive has financed itself, above all, in the regional market. Currently, according to IMF data, the country’s public debt represents 132% of GDP. The current Administration, led by Bassirou Diomaye Faye, with Ousmane Sonko as Prime Minister, came to power two years ago with an economic transformation program (see MN 710, p. 9), but the debt crisis has paralyzed many of its plans.
The private market, closed
Since the cancellation of the program with the IMF, the Senegalese Government has tried to launch – without success – another program with this multilateral institution. He has done it for two reasons. The first, due to the need to achieve affordable financing at a time when payments and debt maturities are increasingly higher; the second, because the end of the IMF credit has meant that private lenders withdraw their confidence in Dakar. A good part of these lenders are those who have invested in the so-called Eurobonds, a type of public debt that offers returns of between 6% and 8% annually, and which were very popular among investors after the 2008 crisis. While European and American debt offered interest rates below 1%, some ventured to buy Senegalese debt – and other African countries – hoping for a higher return.
This asset, whose price is around $100 at the time of its issuance, is listed on markets that indicate the level of trust that the issuing state deserves. When the price falls, the market indicates that it is better to sell the debt security, recover a part of the money – plus the interest collected so far – and leave the country in question, considered high risk; When the price rises, this indicates that the country is trustworthy and can receive more loans at a reasonable interest.
The price in these markets is important for countries like Senegal, as it indicates the interest rate at which they will be able to borrow if they are going to borrow money again through Eurobonds. At the time of writing, interest rates on existing Senegalese Eurobonds are between 13% and 26% interest. De facto, it implies that the private market is closed for Senegal: an issue at these rates would mortgage the country’s future for several generations and would trigger interest expenses – which in 2026 will eat up 16% of national budget spending. The March payment is a positive step, but at the moment insufficient to change the perspective on the debt situation in Senegal.
Sonko’s bet: refinancing without bankruptcy
Last November, Senegalese Prime Minister Ousmane Sonko declared that his country would not restructure the debt and would meet all payment deadlines. In January he insisted on that idea: “Based on our analyses, we consider that our debt is sustainable and that we will be able to continue paying it as we have done for a year and a half.” So far, to deal with the situation, Senegal has borrowed from multilateral creditors, but also in the regional market of the monetary union of West African countries in CFA francs. However, the duration of these loans shows the caution that lenders have with the country. During the first two months of 2026, Senegal secured some €800 million in loans, but two-thirds of these were with a maturity of one year or less and at an interest rate of around 7%.
Not being clear about the country’s future in the medium term, regional investors – who are covering the demand for Senegalese debt – are not buying five, seven or ten years ahead. This allows Senegal to overcome problems in the very short term and by changing geography: it gets the money with which to pay the European and American investment banks that hold the Eurobonds and concentrates the risk in the West African financial system. A report published last January by the Finance for Development Lab synthesized the two possible options for Senegal: a debt restructuring with the support of the IMF, which would allow fewer social cuts to be adopted by reducing debt service payments; or pay all the outstanding debt, even if that meant harsher social cuts and forced the country to find partners who would lend it money to survive during this period. The Senegalese Government, so far, has chosen the second option, the risks of which were warned by the co-author of the report, the Senegalese economist Abdoulaye Ndiaye. The cuts applied would “harm growth” or be “counterproductive or politically unsustainable.” Throughout 2026, outstanding debt payments will be around €8.4 billion (see graph above), a different situation from that experienced in 2025, when lower payments had to be faced.
Ndiaye’s warnings soon found their translation on the streets of Dakar a few weeks later. At Cheikh Anta Diop University, hundreds of students claimed scholarships that had not been paid for a year. Youth protests in February ended with riots and the death of a student, Abdoulaye Ba. These clashes are a thermometer of the political situation in the country: the honeymoon between some of the young people and the new Government is over. For many, it was the bitterest pill of their lives. Some of the students who faced tear gas from the Police were the same ones who, a couple of years before, had gone to their villages to convince their parents to vote for the party that currently governs Senegal.
In the image above, a saleswoman offers her merchandise in front of a demonstration held in Dakar on February 21 against police violence, which claimed the life of young Abdoulaye Ba, while asking the Government to pay his student scholarship. Photograph: Patrick Meinhardt/Getty
