Senegal has moved closer to full debt distress after negotiations with the International Monetary Fund collapsed, sending investor confidence tumbling and pushing the country’s borrowing costs to unprecedented levels.
Yields on Senegal’s 2031 Eurobonds surged to almost 17% after the IMF ended its recent mission to Dakar without securing a new financing programme. The spike pushed the country well beyond the 1,000-basis-point distress threshold that typically shuts governments out of international capital markets.
The surge came amid renewed scrutiny of previously undisclosed liabilities, estimated at around $7 billion, that were frozen under an older $1.8 billion IMF arrangement. Prime Minister Ousmane Sonko’s public dismissal of any debt restructuring intensified market fears, accelerating a selloff across Senegal’s sovereign bonds.
Analysts say investors have already priced in a high probability of restructuring. Mark Bohlund of REDD Intelligence noted that the country is effectively locked out of the eurobond market, adding that the country’s financing options have now narrowed sharply.
Economists warn that Senegal will need stringent fiscal adjustments to restore debt sustainability. Bloomberg Economics’ Yvonne Mhango estimates the government will have to generate a 2% primary surplus and that creditors may ultimately face haircuts to stabilise the debt trajectory.
Despite mounting pressure, some investors argue the fallout will not spread across the continent. Anthony Simond of Abrdn said Senegal’s situation is unlikely to trigger broader contagion, pointing to stronger fundamentals in several African markets.
The developments place Senegal among other vulnerable African sovereign borrowers such as Mozambique and Gabon, which have also seen borrowing costs climb sharply this year. Both countries remain under heightened investor scrutiny, reinforcing concerns about fiscal resilience among frontier economies.
With IMF talks stalled and markets tightening further, Senegal’s government faces a difficult choice between politically sensitive fiscal reforms and the escalating risk of deeper financial instability.
