Africa's Running Debt
Senegal's attempt to make debt restructuring great again
As the end of the last millennium approached, the international community began to think more seriously about what the future of global development should look like. Public debt was identified as a major issue, as many low-income countries were already exceeding their debt capacity. To address this, in 1996, the IMF and World Bank launched the Heavily Indebted Poor Countries Initiative (HIPC), followed by the Multilateral Debt Relief Initiative (MDRI) in 2005. The goal was to reduce unsustainable debt burdens, with African countries accounting for most of the programs’ beneficiaries. Over $100 billion in relief was delivered, eliminating a substantial amount of beneficiaries’ sovereign debt and answering long-standing calls from activists who argued that debt service was diverting public resources away from development. More than twenty years later, however, debt distress has returned across many of Africa’s poorer economies.
To tackle this, international support stepped in once again. In April 2020, amid the economic shock caused by the COVID-19 pandemic, the G20 and Paris Club introduced the Debt Service Suspension Initiative (DSSI), temporarily deferring eligible countries’ bilateral debt-service payments. In November of the same year, the G20 established the even more ambitious Common Framework for Debt Treatments beyond the DSSI, bringing Paris Club creditors together with other major G20 lenders, including China. Yet, as 2026 draws to a close, the first Common Framework cases have exposed persistent weaknesses as negotiations drag on; meanwhile, the increasing weight of China and private creditors has made coordination more complicated. With Senegal’s debt position deteriorating and officials negotiating a new IMF program, the country is emerging as the next major test of whether the Common Framework can regain momentum and credibility.
In order to understand modern debt dynamics in low-income African countries, one must be familiar with the institutions and concepts behind them.
It’s All About Institutions
The first major institutional pillar is the World Bank–International Monetary Fund (IMF) system, created at Bretton Woods in 1944. The World Bank initially created the International Bank for Reconstruction and Development (IBRD) to finance post-war reconstruction. It then founded the International Development Association (IDA) in 1960 as the Bank’s concessional window, providing grants and long-term, low-cost financing to poorer economies. In Africa, this structure was mirrored by the African Development Bank (AfDB), founded in 1964 and its concessional arm, the African Development Fund (ADF), established in 1972. In this context, the term Low-Income Country (LIC) refers to the World Bank’s income classification for economies with an adjusted GNI per capita of $1,175 or less, currently covering 21 countries in Sub-Saharan Africa. LIC status broadly overlaps with eligibility for IDA financing, while technically also extending to some higher-income countries with access to blended financing.
Multilateral development banks (MDBs) such as the World Bank and the AfDB play a central role in development finance as a source of relatively cheap and long-term funding. They raise much of their lending capacity by issuing highly rated bonds, supported by paid-in and callable capital (funds shareholders commit if needed to stabilize finances), conservative balance sheets and their preferred creditor status (PCS), under which MDB claims are generally excluded from sovereign debt restructurings. This allows them to lend on more favorable terms and, through guarantees and co-financing structures, mobilize additional private capital. Nevertheless, the AfDB’s financing model ultimately depends on confidence that its shareholder governments will provide support in a crisis through callable capital. Because a large share of this backing comes from Western economies, any weakening of political commitment could undermine investor confidence and raise the Bank’s own funding costs.
The IMF was created with the mandate to maintain the post-war international monetary system and provide temporary financing to countries facing balance-of-payments difficulties. After the collapse of the Bretton Woods fixed-exchange-rate system, however, the Fund became increasingly involved in questions of debt sustainability due to the increased significance of the risks created by large foreign-currency debts. Its programs, which relied on conditionality, initially focused primarily on monetary and fiscal indicators, before expanding significantly to include broader structural reforms. Criticism that adjustment programs could impose excessive social costs also pushed the IMF to give greater attention to social safety nets. In 2010, the Fund reorganized its concessional lending to low-income countries under the Poverty Reduction and Growth Trust, introducing programs that many African LICs take on.
A funded IMF program begins when a government approaches the Fund and negotiates a package of economic policies. Before approval, the government may be required to complete prior actions, measures considered particularly important for the program’s implementation. Once an arrangement is approved, financing is released in tranches, with disbursements tied to periodic reviews of Quantitative Performance Criteria.
In 2005, the IMF and World Bank introduced the Debt Sustainability Framework for Low-Income Countries (LIC-DSF) to reduce the risk that countries benefiting from HIPC and MDRI relief would rebuild unsustainable debt burdens. The two institutions periodically conduct Debt Sustainability Analyses (DSAs), assessing key fiscal indicators. These assessments influence IDA financing terms, IMF limits on new borrowing and the ADF’s allocation between grants and loans. They are also central to Common Framework restructurings, where the DSA helps determine how much debt relief is required. Most recently, in September 2026, the LIC-DSF underwent a major reform to better reflect the growing importance of domestic and commercial debt.
The other central institution is the Paris Club, an informal group of creditor countries —mostly Western economies—created in 1956. Since then, creditors have continued to coordinate their approach to sovereign defaults and restructurings, with the underlying objective of seeking repayment. In its early years, the prevailing view was that sovereign debt crises were primarily liquidity problems. The Classic Terms used until 1987 therefore limited themselves to rescheduling obligations during the corresponding IMF program. The Latin American debt crisis of the 1980s gradually changed this thinking, as repeated restructurings made clear that some countries faced deeper solvency problems. Paris Club terms consequently became more generous: the 1988 Toronto Terms allowed the cancellation of 33.3% of eligible non-ODA claims, followed by 50% under the London Terms and up to 67% under the Naples Terms. Under the HIPC-era Cologne Terms, creditors could cancel 90% or more of eligible debt if necessary to restore sustainability. Official Development Assistance (ODA), as defined by the OECD-DAC, refers to concessional government lending intended to promote development, while non-ODA claims include commercial obligations such as export credits. This shift toward debt sustainability coincided with Paris Club members increasingly recognizing that reducing part of an unsustainable debt burden could improve the chances of recovering the remainder while allowing creditors to retain considerable influence over the restructuring process. The Evian Approach, introduced in 2003, applied this mentality by adopting a more comprehensive, case-by-case assessment of debt sustainability.
At the same time, the past three decades have seen a transformation of creditor relations, particularly in Africa. 20th-century debt negotiations were dominated by Western governments, Japan and multilateral institutions, which held a large share of claims and could coordinate restructurings with considerable leverage. The tables have turned with the rise of China, private investors, and Middle Eastern lenders. Among DSSI-eligible countries, the share of external debt owed to Paris Club governments fell from around 28% in 2006 to 11% in 2020, while China’s share rose from roughly 2% to 18% and private eurobond financing from 3% to 11%. France, despite being the co-chair of several Common Framework Official Creditor Committees, now represents only 2% of Sub-Saharan external debt. At the time the HIPC Initiative was announced in 1996, Africa’s GDP stood at around 3.3% of the OECD’s. That ratio has since increased to 5.6% in 2026. In the long run, it is clear that advanced economies will increasingly struggle to manage economic relations on the continent on their own.
The Odd-One-Out
Debt sustainability in Africa requires applying considerations that differ from the ones we are used to when discussing debt in advanced economies. In these cases, headline debt-to-GDP ratios don’t portray the full story, as the ability to mobilize revenue and refinancing risks matter more. Many African currencies have limited foreign exchange reserves, and local capital markets are relatively shallow. External borrowing therefore often comes in dollars or euros through eurobonds, exposing governments to exchange-rate risk. Domestic borrowing is not a good alternative as it is more limited in scale and creates a sovereign-bank nexus which increases financial fragility. Rollover risk is also a major concern, as many countries borrow over short maturities knowing they will need new loans to repay existing ones. When large amounts of debt come due, gross financing needs rise, making governments increasingly dependent on lenders willing to refinance their obligations. This became particularly dangerous in 2022–23, when higher interest rates made safer assets in advanced economies more attractive, effectively closing Sub-Saharan African sovereign eurobond markets. Countries that had borrowed relatively cheaply during the 2010s suddenly found themselves unable to refinance maturing debt, or could do so only at substantially higher interest rates.
One way governments have tried to manage these risks is through liability management operations (LMOs), which involve buying back existing bonds and refinancing them under more favorable terms. Countries such as Ivory Coast have been able to save millions in interest in the past two years by repurchasing their own debt and coordinating with IDA guarantees. These transactions can help smooth repayment, extend maturities and reduce borrowing costs, although they depend on continued access to international capital markets. LMOs can also help clear arrears, which are usually overdue obligations to creditors or suppliers. External arrears are particularly damaging as they can restrict access to international financing and foreign currency, which many countries depend on to pay for essential imports. However, domestic arrears can also become substantial, often arising from spending commitments made without adequate budget allocations or available funds. Arrears are particularly important because they can also restrict access to IMF financing, which is generally subject to specific conditions when “in arrears”. A case study is Zimbabwe’s longstanding external arrears, which have prevented it from accessing most official financing, requiring the government to secure financing assurances and establish a credible arrears-clearance strategy before it can regain access to IMF funding.
These financing difficulties are compounded by weak tax bases. The median Sub-Saharan African government collects tax revenue of only around 14% of GDP, half the OECD average, reflecting widespread informality, extensive exemptions and limited administrative capacity. This makes debt burdens particularly severe when measured against government revenue. By 2024, the median Sub-Saharan African country spent around 12% of government revenue on interest, compared with roughly 4% in advanced economies and Egypt notably reaching 74%. A debt-to-GDP ratio that appears manageable can therefore still drain substantial government resources. This also ties into broader issues of institutional capacity, as weak debt recording, incomplete coverage of state-owned enterprises and poorly disclosed contingent liabilities make debt-sustainability assessments less reliable. These two weaknesses can combine to create another significant risk: hidden liabilities on state-owned enterprise balance sheets that may eventually have to be assumed by the government. Considering that some countries still lack consolidated treasury accounts and rely on payment arrears and other outstanding obligations, it becomes clear why IMF programs frequently emphasize digitalization, fiscal transparency and tax-administration reform.
Reliance on commodity exports compounds these fiscal vulnerabilities. According to UNCTAD, 85% of African countries derived more than 60% of their merchandise export earnings from commodities in 2021–23. Major exports include oil, gas, cocoa, coffee and minerals, with gold particularly important across many economies. This dependence is a double-edged sword: elevated prices for many of these commodities in recent years have boosted foreign-exchange earnings and government revenues, helping sustain fiscal deficits and delay structural reforms, while leaving public finances exposed to sudden price reversals and potentially diverting resources away from other productive sectors. The issue is often highlighted in IMF program reviews and reports, where new extraction projects are specifically mentioned because of the export revenues and fiscal receipts they could generate. Mozambique is an extreme example: large offshore gas developments and LNG facilities in the north could become a major source of exports and future growth, but they require financing of around 20% of GDP. This vulnerability also extends to essential imports which require foreign currency. After an explosion destroyed Guinea’s main fuel depot in 2023, the need for fuel imports worsened the external position enough to prompt the IMF to approve emergency financing to help cover urgent balance-of-payments needs.
Demography also plays an important role in Africa’s debt sustainability. Sub-Saharan Africa’s population grew by around 2.4% in 2025, boosting aggregate GDP growth and making previously accumulated debt less significant relative to current output. However, it also means that GDP per capita grows considerably more slowly than headline figures suggest, while rapidly expanding populations require substantial public investment in schools, healthcare, infrastructure and employment opportunities. Ethiopia illustrates this as, despite GDP growth exceeding 5% for much of the past two decades, rapid population growth and a low starting income level have kept it among Africa’s poorest countries per capita. As fertility declines and the working-age share of the population rises, the region could benefit from a demographic dividend, similar to the one that helped fuel China’s economic development. Fertility rates across Sub-Saharan Africa are notably projected to continue falling, potentially dropping below replacement levels toward the end of the century, eventually bringing ageing pressures similar to those now confronting advanced economies.
Climate shocks add another source of fiscal vulnerability. Many African economies remain heavily dependent on rain-fed agriculture, so droughts and floods can simultaneously weaken growth and exports while raising food-import bills and emergency spending. During the 2023–24 El Niño, Zimbabwe’s growth fell from 5.3% in 2023 to 1.7% in 2024, and the World Bank estimates that the deficit widened by an additional 0.9% of GDP because of it, underscoring how impactful climatic conditions can be on LICs. As the 2026–27 El Niño intensifies, exposed governments are again being urged to strengthen foreign-exchange buffers so they can preserve access to essential food and energy imports if harvests deteriorate. One way to mitigate these risks is through debt suspension clauses, which allow governments to temporarily defer repayments following predefined shocks, such as natural disasters or pandemics. The World Bank introduced Climate Resilient Debt Clauses (CRDCs) in 2023, but their adoption has remained limited. While governments have increasingly promoted these provisions, private creditors remain reluctant, as they reduce their control over repayment negotiations and could lead to higher borrowing costs to compensate for the additional risk. Yet these clauses could be particularly valuable for LICs, which often need immediate access to fiscal resources during crises, while negotiating repayment suspensions with bondholders can take months.
These vulnerabilities, combined with limited access to international eurobond markets, explain why concessional finance is particularly important for African LICs. In 2024, ODA amounted to almost 3% of Sub-Saharan African GDP and reached 6.4% among LICs, making USAID and other Western cuts particularly damaging. Bilateral ODA to Sub-Saharan Africa fell by 26.3% in 2025, and the OECD projects a further 11.6% decline in 2026. This forces governments to look for alternative sources of financing, such as private creditors who oppose restructuring their claims.
As traditional aid budgets shrink, debt conversion has gained attention, particularly following the 2025 Seville Conference on Financing for Development. Under a bilateral debt-for-development swap, creditors cancel part of a country's debt in exchange for the government redirecting some of the debt-service payments into a dedicated fund, which finances development projects proposed by the recipient country and agreed with the creditor. Similar arrangements include debt-for-nature, debt-for-climate and debt-for-education swaps. For example, Italy last year announced a ten-year initiative to convert around €235 million of African debt into development projects. However, these operations remain difficult to scale, as negotiations and implementation are slow, administrative costs are high, and governments often prefer greater freedom over how to spend their limited resources.
Beyond individual financing arrangements, the West African Economic and Monetary Union (WAEMU) provides an example of how regional integration can help manage these vulnerabilities. Its eight members share the CFA franc, the BCEAO as a common central bank, pooled foreign-exchange reserves and an integrated regional sovereign-debt market. This eliminates exchange-rate risk within the union and gives governments access to investors and banks across national borders. The system has also proved remarkably resilient to political instability. Burkina Faso, Mali and Niger all experienced military coups while remaining inside the monetary union, creating only limited disruption to the system.
Even with these arrangements, there remains a genuine need for development financing. Much of the continent has low-income levels and substantial gaps in infrastructure and education, meaning that well-designed investment can generate large economic returns. Political instability, fragmented markets and repeated global shocks, however, make such financing more difficult and expensive to obtain. In this environment, IMF-supported programs and policy frameworks have helped some countries navigate periods of severe adjustment, including Ghana during its debt restructuring, in Ethiopia during its recent reform program, and in Zimbabwe through its current monetary normalization. IMF programs have also gradually moved away from the strict adjustment policies of previous decades, which often deepened economic downturns, towards a more gradual approach that places greater emphasis on growth and social spending. However, this has also created a trade-off: in many cases, governments have focused on stabilizing debt rather than substantially reducing it, failing to rebuild sufficient fiscal buffers between shocks and leaving themselves vulnerable to renewed debt distress.
Turn of the Millennium
As countries accumulated ever more external debt over the 70s and 80s, it became increasingly clear that an overhaul of public debt was necessary. In 1996, the HIPC initiative was inaugurated to trace a path towards sustainable debt. To qualify, a country had to be eligible for IDA, face an unsustainable debt burden, and establish a track record under IMF-supported programs. Meeting these conditions brought a country to the decision point, and from there the IMF and World Bank calculated the amount of relief required to bring debt indicators back within sustainable thresholds. Creditors then had to commit to providing that relief while some began granting interim relief immediately.
The Enhanced HIPC Initiative, agreed in 1999 amid mounting pressure from civil society campaigns such as Jubilee 2000, made it even more generous. To move from the decision point to the completion point, governments had to maintain satisfactory macroeconomic performance, implement agreed structural reforms and implement a Poverty Reduction Strategy Paper for at least one year. For the first time, long-term debt management became an integral part of debt restructuring. Yet participation was weak from some commercial and non-Paris Club creditors, showing early signs of fracture which would become apparent years later.
Even after HIPC relief, however, many participating countries still carried substantial debts to the multilateral institutions themselves. The response was the MDRI proposed by the G8 in 2005. The MDRI led to the cancellation of 100% of eligible claims held by the IMF, the World Bank’s IDA and the African Development Fund for countries reaching the HIPC completion point. The initiative was seen as exceptional, as multilateral institutions usually have a PCS.
The HIPC Initiative also proved more flexible and longer-lived than originally intended due to its sunset clause meant to close access after only two years to encourage immediate participation. By 2004, the IMF and World Bank had extended the clause four times and then effectively ring-fenced eligibility to countries that met the criteria in 2004, allowing them to qualify much later without opening the initiative indefinitely to new entrants. This flexibility helped adoption, with Somalia, for example, only reaching the completion point in December 2023. Sudan and Eritrea remain potentially eligible too. Paris Club creditors also frequently went beyond the formal HIPC requirements, often cancelling 100% of their remaining eligible pre-cutoff-date claims at the completion point.
The scale of the two initiatives was substantial, particularly in Africa. Thirty-one African countries benefited from HIPC and MDRI, receiving over $100 billion in debt relief. The immediate results were remarkable: among 26 African beneficiaries, average public debt fell from roughly 104% to 27% of GDP, while debt service among early HIPC participants declined from around 23% of government revenue in the late 1990s to just 9% by 2005. This freed substantial resources for development. Poverty-reducing expenditure across HIPC countries rose from 6.0% to 8.1% of GDP between 2001 and 2015, while Rwanda increased such spending by almost 50% in the four years following its 2005 completion point.
The improvement, however, gradually eroded as fiscal deficits widened and borrowing resumed. Following the 2008 financial crisis, low global interest rates opened eurobond markets to many African countries, while creditors such as China expanded lending to state-owned enterprises and large infrastructure projects, often through opaque arrangements that made public liabilities harder to track. Declines in commodity-export revenues and currency depreciations made repayment increasingly difficult, encouraging governments to refinance existing obligations through new borrowing. By 2020, public debt across Sub-Saharan Africa had reached around 58% of GDP. HIPC and MDRI were therefore highly effective at creating fiscal space, but sustaining those gains proved considerably harder. Moreover, the change in creditor composition over the past two decades made similar debt-relief programs impractical.
The 2020 Revival
The COVID-19 pandemic revived coordinated sovereign-debt intervention on a scale unseen since HIPC and MDRI. The IMF and World Bank called for an immediate moratorium on payments to create fiscal space for the pandemic response. The first response was the DSSI launched by the G20 and Paris Club in May 2020. The initiative allowed eligible IDA and UN-designated least-developed countries to request the temporary suspension of debt-service payments owed to official bilateral creditors, on the condition that funds were redirected towards social spending. Crucially, the DSSI was not about debt forgiveness, and unpaid loans would accumulate interest. The scheme was subsequently extended through December 2021. Forty-eight countries ultimately participated, suspending an estimated $12.9 billion in payments.
The DSSI exposed the central weakness of the new creditor landscape. Private creditors were encouraged to participate, but effectively none did. Multilateral institutions also remained outside the suspension, preserving their PCS while providing new financing, with the World Bank committing $44.4 billion. The experience demonstrated that suspending Paris Club claims alone could no longer resolve a sovereign-debt problem when large payments continued flowing to other creditors.
This led directly to the Common Framework (CF), agreed by the G20 and Paris Club in November 2020. The Framework was designed to deliver public debt restructurings to DSSI-eligible states facing deeper debt problems. For the first time, Paris Club governments would negotiate together with non-Paris Club G20 creditors such as China, India and Saudi Arabia, while the debtor would also be required to seek comparable concessions from private creditors. In practice, this attempted to extend the Paris Club principle of comparability of treatment in a context where members of the club were not the major creditors.
The process begins when a debtor formally requests treatment under the CF and normally seeks an IMF program. The country DSA determines the debt-treatment envelope needed to restore sustainability, and an Official Creditor Committee (OCC) of bilateral creditors negotiates the terms and provides financing assurances, allowing the IMF to proceed before every individual deal is finalized. The agreement is then recorded in a Memorandum of Understanding (MoU) and implemented through bilateral agreements, while the debtor seeks comparable treatment from private creditors. These final bilateral and commercial negotiations are often the slowest part of the process and can take years.
Sri Lanka became the first application of a pseudo-CF system. Sri Lanka, a middle-income country, defaulted in 2022 and fell outside the Framework's eligibility criteria. Paris Club members instead helped create an expanded OCC in 2023, including non-Paris Club creditors. Seventeen countries participated, while China negotiated separately but remained engaged with the process. Sri Lanka was significant because its creditor composition closely resembled the coordination problem the Common Framework was designed to solve. At the end of 2022, private creditors held around 40% of its external debt, while official bilateral creditors represented less than 30%, with China owning 40% of that.
Framework in the Wild
Since its creation, only four countries, all in Africa, have requested treatment under the Common Framework. Although by 2026 all four had reached agreements with their OCCs, implementation with individual bilateral and commercial creditors remains incomplete in several cases. The challenge is still convincing private creditors to restructure their claims.
Chad became the first country to request Common Framework treatment in December 2020. Its debt problem was unusual because a large share of its commercial obligations was owed to a consortium led by Glencore. The OCC was established in April, and it took another 11 months to obtain the financial assurances needed to approve the IMF program, with the final MoU signed in November 2022. Increasing oil prices also meant that debt reduction was seen as unnecessary and therefore the debt was only reprofiled. Chad's case showed how the length of negotiations can at times supersede the economic conditions which had necessitated them. It was also underestimated how a central private creditor could speed up the proceedings.
Zambia provided the first major stress test. After defaulting on eurobonds in November 2020, it requested treatment in February 2021. Yet its OCC was formed only in June 2022. Financing assurances followed in July, allowing approval of a $1.3 billion IMF program in August 2022. An agreement on the main official-creditor terms arrived in June 2023 and was formalized in an MoU that October. By then, nearly three years had passed since the default. Zambia's creditor structure reflects the reality of restructuring today, with China accounting for 76% of bilateral claims. Official creditors eventually agreed to extend maturities as far as 2043 and reduce interest rates.
The eurobond negotiations, though, revealed the Framework's most important procedural weakness. Zambia reached an agreement in principle with bondholders in October 2023, approved by the IMF, but the OCC did not deem it comparable. The deal therefore had to be renegotiated. A revised agreement was reached in March 2024, and the bond exchange was completed in June. Since then, more information has been shared between creditors to avoid these misunderstandings. By late 2025, agreements covered roughly 94% of the external debt inside Zambia's restructuring perimeter, while several bilateral agreements were still being signed during 2026.
After losing market access and suspending much of its external debt service in December 2022, Ghana also requested treatment. Its OCC was formed in May 2023 and provided financing assurances immediately, allowing the IMF to approve a $3 billion program days later. This time it only took 5 months between the financial assurances and the approval of the IMF program, half the time of the previous two cases. An agreement in principle with official creditors followed in January 2024, and the OCC MoU was agreed in June and fully signed by January 2025. The government completed its eurobond restructuring in October 2024 and by mid-2026, the process was substantially complete, with debt falling from 93% of GDP at end-2022 to 48.8% by end-2025. Ghana’s case showed substantial progress in the Framework’s speed but revealed another weak spot, which is the inability to deal with domestic debt. As it only touched external debt, significant bank and pension fund holdings had to be dealt with gradually, balancing financial fragility with government solvency.
The eurobond exchanges in Zambia and Ghana also highlight the importance of Collective Action Clauses (CACs), which have become increasingly common in international sovereign bonds. These provisions allow a qualified majority of bondholders to approve changes that bind the remaining investors, reducing the ability of holdouts to block an agreement.
Ethiopia shows how difficult the Framework becomes when debt distress coincides with conflict. It requested treatment in February 2021, but the Tigray war, suspended international support, and the absence of an IMF program delayed progress. Official creditors eventually suspended payments due in 2023–24, while Ethiopia defaulted on a eurobond in December 2023. Progress accelerated after the government launched broader reforms and secured a $3.4 billion IMF program in July 2024. Official creditors reached an agreement in principle in March 2025 and completed the MoU process by December, reducing debt service and extending maturities. A first eurobond agreement in 2026 nevertheless failed the comparability-of-treatment test, requiring a revised deal in June.
What Went Well, and Even Better Ifs
These cases have highlighted some important limitations of the Framework.
The first is time. The CF relies on sequential agreements, so a wide range of disruptions can significantly slow down the process at different stages. These delays also come at a considerable economic cost, as even the prospect of restructuring can discourage investment and restrict access to international financing. In the 2025 Paris Club annual report, parallel agreements and better communication are proposed as a potential solution to this obstacle.
The second weakness is comparability of treatment. The principle attempts to provide a more holistic restructuring, especially as bilateral debt represents a minority of claims and the measure eliminates free riding, but it is much harder to convince many different profit-driven companies to cut their claims compared to multi-trillion-dollar economies with political interest in international stability and the ability to spread the loss over millions of taxpayers.
Third, the MoU needs to be transposed to have effect. Even after a multilateral MoU is signed, every official creditor must sign a bilateral agreement with the country in order for the agreement to take effect, and this can take years. This structure does allow for a more rapid MoU, but it gives the target country the responsibility to convince every individual creditor country to sign an agreement within 12 months, placing no pressure on the creditor.
Finally, the Common Framework cannot by itself address the underlying causes of debt distress. Debt relief can create fiscal space and help prevent debt-related institutional collapse, but long-term sustainability ultimately depends on domestic policy, which cannot—and should not—be dictated by the IMF or Paris Club creditors. This inevitably creates some moral hazard, even if continued IMF surveillance and post-program engagement can help keep governments on track. Advanced economies have nevertheless continued to accept this trade-off because the costs of repeated intervention are seen as preferable to the instability that widespread debt distress could create across some of the world’s poorest countries.
Senegal Quo Vadis?
In 2023, Senegal secured a three-year IMF package combining multiple programs worth $1.8 billion. After the change of government in 2024, however, a general audit of the public finances revealed that deficits and debt accumulated during 2019–23 had been substantially understated. By October 2024, the IMF effectively froze further funding until the debt was audited. The numbers became progressively more severe as the audits advanced. The Court of Auditors reported in February 2025 that the average fiscal deficit for 2019–23 had been understated by 5.6 percentage points of GDP, while central-government debt at end-2023 was revised from 74.4% to 99.7% of GDP, including previously undisclosed loans worth 25.3% of GDP. A later estimate raised the 2023 debt figure to 111% of GDP and put central-government debt at 118.8% of GDP at end-2024. Using the broader public-sector debt perimeter, the IMF subsequently estimated total debt at around 132% of GDP at end-2024. This made the country the second most indebted on the continent behind war-torn Sudan. Since then, many reforms have been implemented to centralize debt figures and improve oversight. Membership in the WAEMU regional market has helped the country gain access to financing as international interest rates climbed, and according to the latest IMF figures, the deficit declined from 13.4% of GDP in 2024 to 6.4% in 2025. The beginning of oil production in 2024 also helped boost growth substantially, but other sectors are lagging behind significantly.
In September 2026, the IMF and Senegal reached a staff-level agreement for a new program worth around $2.2 billion. The program requires prior actions focused on ensuring transparent debt accounting and financial assurances from major creditors. Then on September first, the government launched its Plan de Traitement de la Dette du Sénégal, announcing its intention to seek external debt treatment under the Common Framework. By early October, Senegal had begun discussions with official and private creditors, moving towards the formation of an OCC. Under its proposed “enhanced” Common Framework, the government aims to negotiate with creditor groups in parallel and reach agreements in principle by December 2026. However, bondholders representing $2.2 billion of its $5.2 billion in outstanding eurobonds have already warned that principal haircuts could delay the process.
Senegal’s creditor composition gives an indication of how difficult this restructuring could become. 32% of central-government debt is denominated in CFA francs, while its external debt is held approximately 38% by multilateral institutions, 42% by private creditors and 20% by bilateral lenders. China and France accounted for roughly 8% and 5% of central-government external debt, respectively. This makes private-creditor participation crucial, while substantial exposure among WAEMU banks creates regional financial risks. Senegal therefore intends to exclude CFA-franc-denominated debt from restructuring, alongside the general protection afforded to multilateral creditors through PCS. Complicating matters are approximately CFA 1 trillion ($1.7 billion) in total-return swaps (financial instruments mirroring the performance of their underlying asset), backed by CFA-franc government securities but classified as external debt because their counterparties are foreign.
As negotiations unfold, it seems that the best comparative example is Ghana, which also had significant domestic bank exposure, implying that the process could take a long time to avoid abrupt disruptions. In fact, in 2026, the IMF has warned explicitly that Senegal’s large financing requirements could amplify financial risks across the monetary union. If Senegal proceeds under the Common Framework, it would become the first WAEMU member to do so and it is also possible that market coordination could make the process less painful, but only time can tell.
The New Order
The Common Framework has gained a reputation for being slow and ineffective. After the sweeping debt-relief initiatives of the early 2000s, there was hope that a new wave of international cooperation could again restore lasting debt sustainability. Six years after its creation, however, the Framework has been applied only to a handful of countries, and its first cases have often taken years to complete. This interpretation misses the fact that the global context has changed. Financial markets are more globalized, private lenders hold a much larger share of sovereign claims, and China, India, Gulf states and other creditors have different priorities than a homogeneous group of Western governments. Seen from this perspective, the fact that strategic competitors are still willing to coordinate while private creditors accept losses on agreements still provides reasons for hope.
These changes matter because they reflect a broader transformation of the post-war economic order. For much of the twentieth century, Western economic dominance gave a relatively small group of governments and multilateral institutions disproportionate influence over development finance and sovereign-debt negotiations. Aid and concessional lending also carried greater leverage in economies with scarce foreign exchange and few alternative financing sources. Since the 1990s, the rise of Asian economies, deeper international capital markets and the growth of new official lenders have gradually weakened this system, making coordination more complex. China has become the largest bilateral creditor in many low-income countries and has used that position to push for its own agenda, clashing with US interests. These changes can seem abstract, but they matter in practice. Take Egypt, an economy worth more than $400 billion and already under severe debt pressure. A sovereign default on that scale would require coordination among many different institutions with diverging interests, but if relief were not provided, crucial energy and food imports would be disrupted, leading to grave humanitarian consequences.
Senegal is unlikely to substantially differ from previous cases, but it still shows that unlike the international fragmentation that characterized the interwar period, today’s multipolar system still has institutions that force strategic rivals to negotiate solutions together. The current question is whether that architecture can remain effective as debt pressures intensify. As borrowing costs spike around the world and economic conditions stagnate, it is easy to see how governments can quickly retreat into isolation and forfeit their international responsibilities. Senegal is another test of whether an increasingly fragmented international financial system can still promote cooperation and help the poorest continent catch up to the rest of the world.
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