By Enyichukwu Enemanna
International Monetary Fund (IMF) staffers have arrived Dakar, the capital of Senegal where they are expected to hold more talks with authorities, amidst growing conviction among investors that the West African country is likely to default on its debts, as leaders remain reluctant to restructure.
Analysts have predicted that no deal is likely to be reached in this IMF mission, with Dakar and the Fund still in disagreement over how to manage a debt load that has shut Senegal out of international capital markets and left it relying on short-term regional borrowing to finance its budget.
The standoff dates to 2024, when the administration which just came to power alleged that the previous government had under-reported the country’s actual debt profile.
This prompted the IMF to withhold a $1.8 billion programme due for disbursement.
Discussions on fresh borrowing has lingered since then. It has assumed a complex dimension following political impasse that month saw President Bassirou Diomaye Faye sack his long-time ally, Prime Minister Ousmane Sonko, who had openly kicked against debt restructuring, at the same time calling default a “disgrace.”
“They have been trying to keep their lights on by rolling over debt, but now it is a question of when rather than if,” Elina Theodorakopoulou of Manulife Investment Management said, referring to a debt restructuring.
Many investors viewed the exit of Sonko as removing a key challenger of a debt restructuring.
They said, however, that Senegal now appeared to be exploring whether guarantees from a development finance institution such as a multilateral development bank could help it secure cheaper borrowing.
“The government does still seem to be positioning itself in a muddle-through approach,” Kathryn Exum of Gramercy, whose base case also assumes Senegal defaults said.
“They would like to obtain these guarantees as part of the financing envelope,” Exum said, noting that while Senegal’s debt levels and credit rating make that difficult, it cannot be ruled out.
An IMF team began a staff-level visit on Monday. It is scheduled to meet the finance minister but not the President or the new prime minister.
While an IMF programme is expected unlock financing, talks have been faced to multiple hitches.
The Fund has more pessimistic growth figures than the government and flagged concerns over revenue targets and fiscal consolidation.
A source said the government had not taken a final decision on its debt strategy and the IMF visit was not intended to conclude a deal.
