Senegal, which is reeling under serious economic crisis, has secretly borrowed € 650 million from Africa Finance Corporation (AFC) and First Abu Dhabi Bank (FAB) in bid to avoid default. But concealing public debt and internal financial fragility from investors, partners, public opinion or regional rivals undermines the country’s credibility.
The hidden debt scandal of the West African country has been disclosed by the Financial Times. The revelation has led to the IMF freezing $1.8 Bln bailout talks, while access to international bond markets has blocked amid soaring debt service costs and exacerbating default risks.
According to experts, Senegal secured loans with newly issued domestic sovereign bonds using derivatives known as total return swaps (TRS), giving AFC and FAB privileges over other creditors.
Last May, Senegal struck a deal with AFC that allowed it to tap up to €350 Mln in financing through swaps. The West African country received an initial €105mn in return for giving AFC title to the equivalent of €150 Mln in CFA franc bonds and interest payments of 3.5 to 4 per cent over a floating rate, according to the documents.
In June, the country signed a further three-year swap with First Abu Dhabi Bank, allowing it to borrow €300 Mln by giving the UAE’ biggest bank title to the equivalent of about €400 Mln in bonds and paying a floating rate plus about 5 per cent.
The deals were struck after a state auditor confirmed in 2025 that the country had at least $7bn in hidden borrowing under the previous government, which pushed its debt to more than $40 Bln, or more than 130 per cent of GDP.
The IMF said details Senegal’s swaps have not been shared, noting the Fund would “normally expect the authorities to share financial terms for debt financing, especially in the context” of the IMF’s analysis of a country’s debt sustainability. Countries are typically required by bondholders to disclose any additional secured loans they take out.
Borrowing in the form of swaps is used by cash-strapped governments facing high borrowing costs in public debt markets to allow a hedge fund to bet against a bond as a way of getting quick cash at lower interest rates by giving lenders the rights to large amounts of their bonds.
Bank of America analysts estimated in December that Senegal may have borrowed up to $1bn using swaps in 2025, citing in this regard similar debt to French bank Société Générale.
In the event of default, some investors believe the IMF would seek to classify Senegal’s total return swaps as international debt liable to be included in any restructuring, in part to warn other countries off this high-octane form of borrowing.
