DAKAR, Mar 27 – Senegal’s government has defended its use of derivatives-linked financing, saying the strategy has helped lower borrowing costs at a time when access to international markets remains constrained.
Finance Minister Cheikh Diba said the country relied on Total Return Swaps (TRS) to fund operations at yields of about 7%, significantly below the 11% to 12% rates typically seen in Eurobond markets. He added that the approach generated savings of roughly 36 billion CFA francs, equivalent to about $64 million.
According to the finance ministry, Senegal executed seven such transactions between April and November 2025. The deals have since come under scrutiny, particularly as the country works to rebuild credibility with the International Monetary Fund following earlier concerns over debt reporting.
Diba said the IMF had been informed of the existence of the swaps during routine engagements last year. However, the Fund noted that while it was aware of the transactions, detailed terms had not yet been fully disclosed and would typically be treated as external debt in its assessments.
The financing structure has also raised questions among investors after reports suggested the instruments could grant certain advantages to new creditors. The minister rejected that claim, stating that the swaps do not include preferential treatment or collateral arrangements.
He noted, however, that rising interest rates could affect the value of underlying bonds, potentially triggering additional risk coverage requirements of about 30%, though specific conditions were not outlined.
The debate comes as Senegal continues to face funding pressures. The IMF suspended disbursements under a $1.8 billion programme in 2024 following misreporting concerns, while access to Eurobond markets has since tightened, pushing the country to rely more heavily on alternative financing sources.
