Senegal's debt crisis has intensified following revelations of billions in under-reported loans. Last week, the west African nation announced a 'treatment plan' for external debt alongside a draft $2.2bn IMF bailout, but Senegal's external bonds plunged. Days later, Senegal stated it will continue paying external debts, including a September 13 coupon payment.

The country has excluded domestic debt from restructuring, creating confusion over how over €1bn in total return swaps—derivatives enabling international banks to lend hard currency against domestic bond collateral—will be classified. These swaps, potentially triggering margin calls if bond values drop, complicate Senegal's funding strategy and raise execution risks. S&P Global downgraded Senegal to CC, calling default a 'virtual certainty,' while Moody's downgraded to Caa2, citing funding complexity from collateralised financing.

A key €300mn swap with First Abu Dhabi Bank (FAB) could demand repayment after S&P and Moody's cut ratings below minimum thresholds. Senegal's Ministry of Finance did not respond to inquiries, and FAB declined to comment on individual transactions.