Senegal covertly borrowed hundreds of millions of dollars from international institutions that it has not publicly disclosed, according to documents seen by the FT.
The West African nation, which is fighting to avoid default, tapped €650mn from development lender Africa Finance Corporation and First Abu Dhabi Bank last year in borrowings that gave them privileges over existing bondholders.
Senegal secured the loans with newly issued domestic sovereign bonds using derivatives known as total return swaps, which are increasingly popular with countries close to default and which can give lenders under such deals seniority over other creditors.
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 $40bn, or over 130 per cent of GDP.
Senegal’s finance ministry and its financial adviser, Global Sovereign Advisory, did not respond to requests for comment.
Senegal is seeking to renegotiate a $1.8bn bailout with the IMF. The fund told the FT that details of Senegal’s swaps had not been shared with it.
“The IMF team is aware that Senegal has agreed to a number of total return swaps with lenders. The terms of these swaps have not been shared,” the fund said.
It added that it 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 not usually classified as a loan, although some countries using these swaps have disclosed them.
Cash-strapped governments facing high borrowing costs in public debt markets have looked to such swaps — which are commonly used in finance, for instance 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.
These bonds are typically returned at the end of the agreement. But, in the event of a default, swaps can greatly complicate a debt workout.
Last year the World Bank said the growth of collateralised sovereign borrowing such as total return swaps had become “particularly problematic”, with “insufficient” disclosure in public debt figures.
Such deals in effect make such lenders a higher priority than other creditors, “by encouraging borrowing countries to prioritise their repayment” in advance of a restructuring, it added.
Last year, Angola used a total return swap to borrow $1bn from JPMorgan by pledging almost $2bn in bonds. It extended and enlarged the deal this year, despite incurring a $200mn cash margin call.
In September, Colombia agreed a one-year total return swap with banks that tapped the equivalent of more than $9bn in Swiss francs through pledges of dollar bonds, local currency debts and US Treasuries.
Senegal’s finances have become precarious after the hidden borrowing revelations led to the IMF pausing its bailout and access to international bond markets being blocked. Africa’s most notorious hidden debt scandal remains Mozambique’s revelation of $2bn in so-called tuna bonds a decade ago.
The bonds pledged by Senegal were issued in the currency of its regional monetary union — the West African CFA franc, which is pegged to the euro — and were worth more than the value of the loans, according to the documents, which detail the total return swaps.
The country’s deal with Nigeria-based AFC, struck in May last year, allowed it to tap up to €350mn in financing through swaps. The country received an initial €105mn in return for giving AFC title to the equivalent of €150mn 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 €300mn by giving the United Arab Emirates’ biggest bank title to the equivalent of about €400mn in bonds and paying a floating rate plus about 5 per cent.
AFC did not respond to requests for comment. FAB declined to comment.
Both loans end in 2028. If Senegal defaults on its debts before then — lowering the value of the bonds that both institutions hold — it faces a considerable cash penalty to make good the swaps, with the AFC loan specifying that in such circumstances the lender “will very likely” mark its bond security to zero.
The full extent of Senegal’s total return swap borrowing is unknown. Bank of America analysts estimated in December that Senegal may have borrowed up to $1bn using swaps in 2025. The documentation for the AFC deal refers to a similar debt to French bank Société Générale, and allows AFC to demand repayment if Senegal defaults on that debt.
Société Générale declined to comment.
Bondholders say they are largely in the dark about the swaps. “We are all having to hear [about them] from prodding the finance ministry in meetings in Dakar,” said one investor, who estimated the total might be $1bn. “None of this is being publicised or something that is communicated to the market.”
AFC’s swap required Senegal to place €55mn of the cash in an account in order to buy shares in AFC and to pump funds into a power plant in Dakar it is backing.
Senegal, which has been an AFC member state since 2019, also had to formally acknowledge the development lender as a preferred creditor and keep the existence of the loan confidential, including if possible advising beforehand if it informs the IMF.
First Abu Dhabi Bank’s swap allows it to require Senegal to repay if the country loses minimum credit ratings of Caa1 at Moody’s or CCC+ at S&P Global, and the sides are unable to agree on a restructuring.
Moody’s downgraded Senegal to Caa1 in October, with a negative outlook. A month later, S&P Global cut its rating to CCC+, on a “developing” credit watch, meaning it could change it again.
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.
“In general, such total return swaps would be considered as external debt for the purpose of the fund’s debt sustainability analyses,” the IMF said. Decisions over debt “and the parameters of any such operation is for country authorities to decide”, it added.