Senegal’s plan to restructure part of its debt is expected to have only a limited effect on commercial banks across sub-Saharan Africa, although risks could become more significant if the country eventually includes a larger portion of its domestic borrowings in the process.
S&P Global Ratings said on Thursday that most African banks have relatively small exposures to Senegal’s international debt, meaning a restructuring of the country’s foreign-currency obligations is unlikely to create widespread pressure across the region’s banking sector.
However, the ratings agency warned that Senegal’s substantial domestic debt burden remains a source of concern. If local-currency obligations are eventually brought into the restructuring, some banks could face higher credit costs and greater financial pressure.
Foreign debt at the centre of restructuring
Senegal announced in early September that it would pursue a debt treatment plan under an enhanced version of the G20 Common Framework.
The move is linked to efforts to restore the country’s debt sustainability and secure access to a new $2.2 billion financing programme from the International Monetary Fund.
The proposed restructuring is focused largely on debt denominated in foreign currencies, while obligations issued in the regional CFA franc are currently expected to remain outside the arrangement. S&P said this structure could place much of the adjustment burden on foreign commercial creditors.
Those creditors could ultimately face changes to repayment conditions, including longer maturities, reduced interest payments or reductions in the amount owed.
S&P has already lowered Senegal’s long-term foreign-currency sovereign rating to CC from CCC+, while its local-currency rating was reduced to CCC. Both ratings carry a negative outlook.
African banks have limited exposure
Despite concerns surrounding Senegal’s debt position, S&P said the direct impact on commercial banks elsewhere in sub-Saharan Africa should remain relatively contained.
The reason is that banks across the region generally have limited holdings of Senegal’s international debt. This means losses arising from a restructuring of external commercial obligations are unlikely to spread significantly through African banking systems.
The situation could be different for institutions with larger exposure to Senegal’s domestic financial market.
S&P has highlighted the country’s sizeable stock of CFA-franc debt and the possibility that excluding those obligations from the restructuring could become difficult during negotiations.
Domestic debt presents a bigger concern
Senegal’s domestic borrowing has grown significantly as the government has increasingly relied on regional markets to meet its financing needs.
That creates a potential vulnerability for banks operating within Senegal and the wider West African financial system.
If pressure from foreign creditors eventually results in a broader debt treatment that includes some local-currency obligations, domestic financial institutions could experience increased credit losses or higher funding costs.
S&P said the exclusion of CFA-franc debt faces “meaningful execution risks,” partly because external creditors could question why domestic creditors are treated differently under the restructuring process.
The issue is particularly sensitive because Senegal is part of the West African Economic and Monetary Union, which shares a common currency and financial market with several neighbouring countries.
IMF financing remains important
The debt overhaul is closely connected to Senegal’s efforts to obtain fresh support from the IMF.
The two sides reached a staff-level agreement on a 36-month programme worth approximately $2.2 billion, but final approval depends on restoring Senegal’s debt trajectory to a level considered sustainable under the Fund’s framework.
Additional financing from other international lenders and development partners is also expected to form part of the broader package.
The restructuring is therefore intended to reduce the government’s financing pressure while creating room for Senegal to regain access to more sustainable sources of funding.
Senegal’s debt problems have deeper roots
The current crisis follows the discovery of previously undisclosed public liabilities after President Bassirou Diomaye Faye’s government took office in 2024.
The International Monetary Fund subsequently revised its estimates of Senegal’s debt substantially upward and suspended an earlier $1.8 billion support programme.
The debt situation has since constrained the government’s access to financing and increased pressure on public finances. Reuters previously reported that Senegal’s debt problems prompted authorities to rely more heavily on domestic and regional borrowing markets.
S&P estimates Senegal’s debt burden at about 117% of GDP as of December 2025, before adjustments associated with GDP rebasing.
What happens next
For now, Senegal remains focused on negotiating with creditors and securing the financing needed to stabilise its public finances.
The country’s approach could allow much of the domestic CFA-franc debt to remain outside the initial restructuring, potentially limiting disruption to the regional financial system.
However, the outcome of negotiations with foreign creditors will be closely watched. Any expansion of the restructuring to domestic obligations could alter the risk assessment for Senegalese banks and other financial institutions with significant exposure to government debt.
For the broader African banking sector, S&P’s assessment suggests that Senegal’s foreign-currency debt problems are unlikely to create a major regional shock at present. The greater concern lies within Senegal itself, where the size and structure of domestic borrowing could determine how costly the debt overhaul ultimately becomes.
