Rather than using a conventional loan, Senegal relied on total return swaps, a complex financial tool that can provide cash upfront while keeping the arrangement less visible in standard public-debt disclosures. In broad terms, Senegal pledged rights tied to government bonds in exchange for immediate funding, with lenders protected by collateral worth more than the cash advanced.

Under the AFC arrangement, Senegal could access up to €350 million, beginning with €105 million backed by €150 million worth of bonds and interest costs above a floating rate, the documents indicate. In a separate FAB deal, Senegal secured about €300 million by pledging roughly €400 million in bonds, also with additional interest costs. Both arrangements are expected to run until 2028.

The structure has raised concerns because it can create hidden liabilities and sharp repayment risks. The deals reportedly include conditions that may allow lenders to demand early repayment if Senegal’s credit ratings drop below certain thresholds, adding pressure at a time when ratings have already been downgraded. Other clauses could increase costs if Senegal runs into repayment trouble.

Senegal has previously faced scrutiny over undisclosed borrowing linked to a prior administration.

Among these were sixteen (16) African countries and one (1) South American country that have been taking massive loans from the Chinese government for several years after their respective programmes under the International Monetary Fund (IMF) and World Bank’s Highly Indebted Poor Countries initiative in 1996.

The HIPC initiative was a debt relief programme introduced to assist countries owing unmanageable debt burdens to clear their debts.

In 2005, to accelerate progress toward the  United Nations’ Sustainable Development Goals , the HIPC Initiative was supplemented by the Multilateral Debt Relief Initiative which gave countries completing the HIPC process 100 percent relief on eligible debts by the IMF, the  World Bank , and the  African Development Fund . 

In its latest annual report (2023), the U.S.-China Economic and Security Review Commission listed Ghana, Guinea, Ethiopia, Tanzania and the Democratic Republic of Congo as the top five (5) borrowers from China with $31.1 bn, $21.9 bn, $14.8 bn, $12.6 bn and $12.1 bn respectively.

The rest among the top seventeen (17) were the Republic of Congo, Mozambique, Sudan, Zambia, Bolivia, Chat, Senegal, Niger, Mali, Cameroon, Mauritania, and Sierra Leone.

The report noted that the Chinese government continues to free-ride on international efforts to alleviate distressed countries’ financial burdens by continuously lending to developing countries.

While the U.S. and other international donors including the IMF continue to assist highly indebted countries by exercising debt forgiveness, Chinese lenders continue to increase loans to the country with higher and adjustable interest rates on loans which intend to exceed rates provided by Western governments and multilateral institutions.

“China has an established pattern of lending to Heavily Indebted Poor Countries (HIPC) participants following their initial participation, with the majority of Chinese loans to Comoros, the Republic of the Congo, Côte d’Ivoire, Guinea, Liberia, and Togo occurring after these countries completed the program in the early 2010s. With the notable exception of Côte d’Ivoire, all of these countries have publicly supported China’s conduct in the South China Sea and most have supported China’s policies in Hong Kong and Xinjiang. In addition, China typically does not disclose the terms of its loans, which makes it difficult for developing borrowers to directly compare interest rates across lenders,” parts of the statement indicated.

The U.S.-China Economic and Security Review Commission was created by the United States Congress in October 2000 with the legislative mandate to monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action.

The U.S.-China Economic and Security Review Commission released its 2023 Annual Report to Congress in November.