Senegal Parliament: Investigate Total Return Swaps Controversy

• A controversy has erupted in Senegal over the use of Total Return Swaps (TRS) by the government.
• Birame Waltako Ndiaye argues that TRS are not a new form of hidden debt, but rather a tool for financing with specific modalities and risks.
• The debate centers on transparency in financial transactions, particularly regarding €650 million loan from Africa Finance Corporation and First Abu Dhabi Bank.
• A parliamentary group has requested an investigative commission to examine the government's use of TRS.

Birame Waltako Ndiaye argues that TRS allow states to obtain liquidity in exchange for the return on underlying assets, but do not constitute loans or bond issuances.

A controversy has erupted in Senegal over the use of Total Return Swaps (TRS) by the government. The debate centers on whether these financial instruments are a new form of hidden debt or simply a tool for financing. Birame Waltako Ndiaye, a vocal critic of the TRS, argues that the focus should be on the modalities of these operations, their costs, and the risks assumed by the state. He claims that TRS allow states to obtain liquidity in exchange for the return on underlying assets, but do not constitute loans or bond issuances. Instead, they use existing debt as a lever, effectively privatizing profits while socializing costs.

The controversy has been fueled by concerns over transparency in financial transactions. A parliamentary group, Takku Wallu Sénégal, has requested the creation of an investigative commission to examine the government's use of TRS. The focus is on a €650 million loan obtained from Africa Finance Corporation and First Abu Dhabi Bank. This issue was first raised in the 2026 economic and financial report annexed to the finance law. According to Cheikh Diba, Minister of Finance and Budget, this usage had been made public in that document.

The debate highlights the need for increased transparency in financial transactions, particularly when it comes to Total Return Swaps. Lawyers and compliance officers should be aware of potential regulatory scrutiny over TRS usage by African governments. The controversy also underscores the importance of parliamentary control over such financial instruments. Birame Waltako Ndiaye's argument that TRS can increase borrowing costs and expose states to additional financial risks is a key point of contention.

Lawyers and compliance officers should watch for potential regulatory scrutiny of Total Return Swaps usage by African governments, as well as the need for increased transparency in financial transactions.

Source: Original reporting via Xibaaru