Senegal to clear $3.5 billion arrears, opts for debt reprofiling

Senegal's Prime Minister Ahmadou Al Aminou Lo has announced that the country must clear 1.956 trillion CFA francs ($3.5 billion) in payment arrears as part of broader efforts to restore its public finances. He warned that the outstanding arrears risk stalling economic activity and could trigger job losses.

The announcement follows a staff-level agreement between Senegal and the International Monetary Fund (IMF) last week for a $2.2 billion, three-year loan package. A previous IMF programme was suspended in 2024 after the disclosure of misreported debt under the previous government.

Lo stated that Senegal will not pursue a formal debt restructuring, opting instead to reprofile its obligations. "Reprofiling involves extending maturities and renegotiating interest rates," he explained, adding that roughly 30 mining agreements are currently being renegotiated.

Senegal's Ministry of Economy and Finance said last week it had agreed to an "enhanced common framework" to restore debt sustainability, with CFA-denominated debt excluded from the reworking. However, Dakar has provided little detail on what this framework entails.

The G20 Common Framework, referenced in the announcement, was established during the pandemic to coordinate restructurings among official creditors, including Paris Club members and newer lenders such as China. While designed to speed up debt relief and ensure comparable treatment among creditors, it has faced criticism for lengthy negotiations and uncertain outcomes.

Investors often regard maturity extensions and interest rate reductions as forms of debt restructuring, as they alter the original terms of the debt, even if Senegal does not formally classify its approach as such.