Facing a significant financial upheaval, Senegal is poised to take a crucial step in public finance management. Dakar is reportedly set to name the American investment bank Lazard as its financial advisor to address its sovereign debt. This appointment is under close scrutiny by international investors, particularly following the discovery of substantial budgetary irregularities under the previous administration.
Over $13 billion in undisclosed debt
The true scale of the crisis came to light with the new government’s revelations: over $13 billion in public debt had remained undisclosed, representing more than a quarter of Senegal’s GDP. According to the 2019-2024 Public Debt Statistical Bulletin, the debt-to-GDP ratio surged to 128.6% by the end of 2024, a sharp increase from just 81.8% five years prior. This unsustainable trajectory immediately triggered a wave of international concern.
The International Monetary Fund, in response to these anomalies, suspended a $1.8 billion loan program. This suspension deprives the nation of a vital funding lifeline precisely when it needs to reassure markets about its capacity to meet financial obligations.
Lazard partners with a Parisian firm
The New York-based investment bank, renowned for its expertise in sovereign restructuring, will not operate in isolation. Lazard is expected to collaborate with the Parisian firm Global Sovereign Advisory (GSA) on this mandate. This Franco-American partnership will need to skillfully navigate complex negotiations with international creditors, multilateral institutions, and financial markets.
The selection process, meticulously conducted by Senegalese authorities, is nearing completion. An official announcement could materialize in the coming days, as Dakar strives to swiftly rebuild investor confidence. Senegalese bond spreads have widened in recent weeks, reflecting market apprehension regarding debt sustainability.
A new framework for financial governance
In parallel with securing external advisory, the Senegalese government has revamped its administrative framework. Authorities recently established a Directorate General of Finance and Debt, an institutional mechanism designed to bolster transparency and traceability of state financial commitments. This new directorate will work closely with Lazard to conduct a comprehensive assessment and propose viable refinancing solutions.
The challenge extends beyond mere technical restructuring; it involves restoring the fiscal credibility of a nation long considered a model of stability in West Africa. The revelation of hidden debts has shaken this reputation, presenting the new government with difficult choices: renegotiating certain contracts, extending repayment schedules, or seeking new financing under potentially more stringent terms.
Context in Senegal
Senegal, a nation of 18 million inhabitants situated at Africa’s westernmost point, has enjoyed sustained economic growth in recent years, propelled by significant infrastructure investments and the anticipated exploitation of its offshore oil and gas resources. However, this rapid development was accompanied by an accelerating debt burden, which international institutions deemed insufficiently controlled.
The capital city, Dakar, serves as the hub for the country’s economic and administrative activities. From this port city, the new government, which assumed power in April 2024, endeavors to rectify a budgetary situation it characterizes as inherited. The promised transparency in public accounts unveiled the extent of past concealments, compelling authorities to seek international expertise to resolve the impasse.
The challenges awaiting Lazard
Lazard’s mandate will be far from straightforward. The bank’s initial task involves establishing a precise inventory of the actual indebtedness, auditing all commitments undertaken by the Senegalese state. Subsequently, it must devise a refinancing strategy that allows for extended repayments without triggering a default, while simultaneously negotiating with creditors holding diverse interests: bilateral creditors, multilateral institutions, and sovereign bondholders.
Lazard will also support Dakar in its discussions with the IMF to reactivate suspended funding. Without the Fund’s backing, Senegal will face significant hurdles in accessing international markets at acceptable rates. Investors are keenly observing every signal from the authorities, and the appointment of a renowned advisor is widely interpreted as a demonstration of serious intent.
France’s perspective: an economic partner under pressure
For Paris, the Senegalese financial crisis represents a crucial test for the stability of the CFA franc zone, of which Senegal remains a member. Senegal stands as a major economic partner for France in West Africa, boasting strong commercial ties and a significant presence of French enterprises across the energy, telecommunications, and infrastructure sectors.
The involvement of the Parisian firm GSA alongside Lazard underscores the Franco-African dimension of this matter. French authorities are closely monitoring the evolving situation, acutely aware that financial instability in a country like Senegal could have regional repercussions. Other West African nations are confronting similar economic pressures, particularly those linked to rising energy costs and imported inflation.
Lazard’s official appointment is expected in the coming days. Markets anticipate concrete announcements regarding the refinancing strategy, while the Senegalese population contemplates potential consequences: budgetary adjustments, reductions in public spending, or increased taxation. The new government walks a fine line between fiscal rigor and the imperative of preserving social cohesion.
