Moody’s warns private creditors face bigger losses in Senegal debt restructuring
Key Facts
Moody’s warned that external private creditors could face greater losses than previously expected in Senegal’s planned debt restructuring, Reuters reported. The warning puts the scale of potential creditor losses at the center of discussions over the restructuring plan, as the government seeks an agreement with official lenders and bondholders. The government announced in September that it intended to seek debt restructuring under the G20 Common Framework, according to Reuters. This coincided with a proposed IMF financing programme that remains conditional on approvals and prior actions. The warning reflects rising risks for holders of private external claims as the debt plan moves into negotiations.
On 29 October, Moody’s downgraded Senegal’s long-term foreign-currency and foreign-currency senior unsecured ratings to Ca from Caa2, and changed the outlook to stable from negative, Reuters reported. It was the fifth consecutive downgrade of the country’s foreign-currency sovereign ratings. Reuters linked the downgrade to the government’s September announcement that it intended to seek debt restructuring. It also reported that the disclosure of previously unreported liabilities pushed public debt to about 97% of gross domestic product. Including debt owed by state-owned enterprises and government-guaranteed debt, debt reached about 130% of output after the liabilities were disclosed in 2024, according to the Reuters report.
Senegal is seeking a debt treatment that restores sustainability, as the authorities told the IMF in September. That month, IMF staff and the authorities reached a staff-level agreement on a proposed 36-month arrangement under the Extended Credit Facility, worth about $2.2 billion. The agreement was not final approval for the funds to be disbursed; it required approval by IMF management and the Executive Board. The fund said board approval required decisive corrective actions to support the authorities’ request for a waiver in the misreporting case, along with the necessary financing assurances from partners. The proposed programme therefore remained tied to meeting institutional and financing conditions, alongside efforts to address the debt.
Budget disputes added to the programme’s complications. Senegalese lawmakers rejected a revised budget bill on 31 October for the second time, and Reuters said the deadlock could disrupt an IMF board vote on a $2.2 billion, three-year programme the following month. The revised budget cut its forecast for real GDP growth in 2026 to 2.7% from about 5%, and widened the projected deficit to 7.6% of GDP from 5.4%. These figures show lower growth expectations and a wider deficit in the revised version, while IMF approval for the programme remained pending. It has not been established that the budget rejection prompted the government to seek debt restructuring; the authorities announced their intention to seek debt treatment in September.
The claims that may be covered by the treatment differ from CFA franc-denominated debt: Reuters reported that the government is excluding retail bonds and regional market debt from the restructuring. This debt accounted for about 30% of central government debt at the end of 2024. Regional issuance more than doubled to 2.2 trillion CFA francs in the year before Reuters’ report, then reached 2 trillion CFA francs through the end of August 2026. Multilateral institutions, including the IMF and World Bank, are also typically protected from loss-sharing; the treatment could therefore cover about half of external debt, according to the Reuters report. This breakdown provides context for estimating the warning’s impact on external private creditors, given the different treatment of creditor groups.
In negotiations, Senegal is targeting an initial agreement with official lenders and bondholders by December 2026, according to sources cited by Reuters. Talks are under way in parallel with the private sector and official creditors. The government said it would also seek a “constructive contribution” from outstanding total return swaps, worth 1 trillion CFA francs, or $1.72 billion. Reuters described these instruments as largely untested in restructuring operations. President Bassirou Diomaye Faye had said the government was targeting debt treatment within months, while the Reuters report noted that the debt burden could make avoiding investor losses difficult.