ANALYSIS — Can Senegal's debt restructuring revamp the Common Framework?

Senegal is hoping to streamline debt restructuring process G20-led 'Common Framework' has faced widespread criticism Creditors remain sceptical issues will be easy to iron out By Marc Jones, Anait Miridzhanian and Colleen Goko LONDON/DAKAR/JOHANNESBURG, Oct 13 (Reuters) — When Senegal disclosed billions of dollars of previously unreported borrowing two years ago, investors assumed it was headed for a familiar debt crisis playbook: an IMF programme, lengthy creditor negotiations and years of uncertainty. Instead, Dakar is hoping for something more ambitious.

2 billion IMF bailout is shaping up as a test of whether sovereign debt workouts can be made faster and less disruptive. The country wants to use what it calls an "enhanced" version of the Common Framework, the G20 mechanism launched in 2020 to coordinate debt restructurings, but has faced criticismover lengthy negotiations and disputes over burden sharing. Senegal has already held initial information-sharing sessions and parallel consultations with stakeholders in an effort to prevent the years-long delays suffered by the likes of Zambia and Ghana. The effort ties into broader discussions at this week's IMF and World Bank meetings on speeding up restructurings.

World Bank President Ajay Banga has already backed Senegal's approach, while IMF chief Kristalina Georgieva called the efforts "encouraging", although it remains unclear whether all creditors will support the plan. Four African countries have gone through the Common Framework. "Senegal is the perfect opportunity to get this process right because so many other countries are on the brink but don't want to go for the Common Framework because of its issues," said Kevin Gallagher, a professor of global development policy at Boston University.

"It needs to be quicker," he added, saying that for many countries the scale of debt relief also needed to be much larger and losses more "fairly distributed" between creditors. Need For Speed Central to Senegal's plan to streamline the process are four parallel creditor committees. A presentation to investors last week seen showed that, alongside the standard groups representing bilateral lenders and bondholders, Dakar has proposed separate committees for commercial banks and regional development institutions, areas where complications have emerged for other countries.

A government source said the Paris Club of creditor nations had indicated a deal could be reached within six to nine months, possibly sooner. The Paris Club did not respond to a request for comment. And speed matters. Dakar has been trying to restore investor confidence since President Bassirou Diomaye Faye's administration revealed in 2024 that the previous government substantially understated the debt burden.

Subsequent audits pushed debt estimates to around 130% of GDP, including state-owned enterprises and government-guaranteed borrowing, triggering downgrades, a bond selloff and suspension of its IMF programme. 2 billion IMF deal is now being negotiated, but the Fund will need assurances that Senegal's problems are being comprehensively addressed before approving it. "I don't have a timeline yet for exactly when we will be able to bring the programme to our Executive Board," IMF spokesperson Julie Kozack told reporters this month. Economists say Senegal enters the process with important advantages absent in other recent restructurings.

Moody's analyst Aurelien Mali points to offshore oil and gas production, economic growth and access to regional financing markets and development bank funding. The use of West Africa's CFA franc — pegged to the euro — has helped keep inflation under control, rare for a crisis-hit nation, he added. As a result, the challenge is seen less as preventing economic collapse than restoring fiscal credibility. End The Squabbles Another sign that Senegal intends to take a different approach was the IMF's involvement in the government's investor call last week, something not seen in previous Common Framework cases.

Zambia's Finance Minister Situmbeko Musokotwane said he hoped lessons from his country's nearly four-year restructuring ordeal had been learned. If faster negotiations can also secure broad creditor participation, it would strengthen the argument that the Common Framework can become a more market-friendly instrument. "Countries that came behind us obviously have benefited from the improvements," Musokotwane told Reuters, referring to the Common Framework process. " Restructuring experts nevertheless see potential obstacles.

Dakar wants to exclude billions of dollars worth of CFA franc-denominated debt given the headache it could cause its neighbours, but that means more losses elsewhere. 3 billion it borrowed using complex derivatives known as Total Return Swaps to untangle. The IMF has also stressed that there is only one Common Framework, pushing back against references to an "enhanced" version. Veteran debt lawyer Lee Buchheit warns too that disputes among bilateral creditors can drag on for years.

Yvette Babb, an emerging market fund manager at William Blair, said it all pointed to a delicate balancing act. The government must convince the IMF and creditors that it is addressing its debt scandal, while assuring markets that a restructuring will not lead to prolonged financial isolation. "It really is going to be a big test," Babb said. net X @marcjonesrtrs)