Senegal agrees to restore 'debt sustainability' in return for IMF programme

The International Monetary Fund and Senegal have reached a staff-level agreement for a $2.2 billion three-year loan package, the IMF said on Tuesday. In ‌a separate statement, Senegal's ministry of economy and finance said it had agreed to an "enhanced common framework" to restore "debt sustainability". The ministry did not disclose what measures it would take.

Senegal's bonds fell to record lows after the announcement, leaving them all below 50 cents in the dollar or ‌euro, half their original face value. Senegal's debt burden had reached 132% of gross domestic product by the end of 2024, IMF ‌figures show, after the government uncovered billions of dollars in misreported borrowing by the previous administration.

The IMF estimates misreported debt at more than $11 billion based on figures at the end of 2023. Some analysts put it closer to $13 billion, equating to more than a quarter of the country's $40 billion economy. The IMF froze a $1.8 billion lending ⁠programme after discovery ​of the misreported debt and the ⁠two sides have since been locked in drawn-out talks over a replacement scheme.

The deal announced on Tuesday requires Senegal to take "decisive corrective actions" in support of ⁠its request for a waiver related to the misreported debt, the IMF statement said, adding that this is subject to approval by the IMF management and ​board. TALKS COMPLICATED BY GOVERNMENT TENSIONS

The scale of Senegal's misreported debt dwarfs Mozambique's infamous "tuna bond" scandal, which involved about $3 billion. Talks with ⁠the IMF have been contentious. Last November former Prime Minister Ousmane Sonko said that an IMF-led restructuring of Senegal's debt would be a disgrace for the country.

President Bassirou Diomaye Faye ⁠fired ​Sonko in May, but Sonko was subsequently appointed president of the National Assembly, a post that could permit him to complicate implementation of any reforms required under a new IMF programme. The latest IMF mission began in August to hold more technical discussions on policies that ⁠could lead to a new lending arrangement, which would serve as an anchor for other investment and funding, including support from donors such ⁠as the World Bank.

At the end ⁠of last year, Senegal had more than $7 billion outstanding in international bonds - nearly a fifth of total debt. About a tenth of the total debt was in the form of export credits.