Senegal has secured €650 million through financial deals that were not publicly disclosed, raising concerns among investors and global institutions. The funding was arranged through agreements with the Africa Finance Corporation and First Abu Dhabi Bank.
The details emerged from documents showing that the country did not fully share this borrowing with key institutions such as the International Monetary Fund. This lack of disclosure is important because countries are generally expected to report all major debts, especially when facing financial stress.
his development follows an earlier finding that Senegal had at least $7 billion in hidden debt from a previous administration. As a result, the country’s total debt rose above $40 billion, exceeding 130 percent of its economic output. These figures have increased concerns about Senegal’s financial transparency and stability.
At the same time, Senegal has been working to renegotiate a $1.8 billion program with the International Monetary Fund. However, incomplete disclosure of financial arrangements has made the process more difficult. The International Monetary Fund has acknowledged awareness of such deals but stated that full details were not provided.
Instead of using traditional loans, Senegal relied on financial instruments called total return swaps. These are complex agreements that are not always recorded as standard debt, making them less visible in official reports.
In these arrangements, Senegal provided lenders with rights over government bonds in exchange for immediate cash. The bonds were issued in the West African CFA franc, which is linked to the euro. The value of the bonds used was higher than the amount borrowed, giving lenders strong protection.
Under its agreement with the Africa Finance Corporation, Senegal could access up to €350 million. It initially received €105 million by offering bonds worth €150 million and agreeing to interest payments above a floating rate.
In a separate deal with the First Abu Dhabi Bank, Senegal arranged €300 million in financing by pledging bonds worth about €400 million. This deal also included additional interest costs. Both agreements are scheduled to run until 2028.
Such financial tools are increasingly used by countries facing high borrowing costs or limited access to global markets. They allow governments to raise funds quickly, but they also involve complex terms and limited transparency.
Another concern is the potential cost if Senegal defaults. The agreements include conditions that could lead to significant financial penalties. In some cases, lenders may reduce the value of pledged bonds, increasing the burden on the country.
The deals also require Senegal to maintain certain credit ratings. If ratings fall below set levels, lenders can demand early repayment. This adds pressure as the country’s credit ratings have already been downgraded.
Additionally, one agreement required Senegal to set aside €55 million to invest in projects linked to the Africa Finance Corporation, including a power plant. The country also had to recognize the lender as a preferred creditor and keep the deal confidential.
The full extent of borrowing through such swaps remains unclear. Estimates from Bank of America suggest the total could reach up to $1 billion. Documents also refer to similar debt involving Société Générale, adding to concerns about undisclosed liabilities.
These developments highlight the challenges Senegal is facing as it manages rising debt and limited access to international financial markets.
MSN
