The “improved” G20 Common Framework finally puts creditors in one room. It still leaves one of them to judge the others by rules no one else can fully see.
Last week, Senegal’s external creditors met for the first time, in a virtual session chaired by the International Monetary Fund (IMF). Creditors received an update on Senegal’s financial situation, including its economic reform program and debt-treatment strategy, and while they raised questions, they didn't actually decide anything.
That distinction, between consulting creditors and making decisions with them, will determine whether Senegal becomes the first quick success or the fifth long wait of the G20’s “improved” Common Framework, which aims to coordinate debt restructuring among creditors and lenders to help countries address unsustainable debt burdens.
Senegal announced on September 1 that it would seek debt restructuring under the Common Framework, alongside a staff-level agreement with the IMF on a proposed $2.2 billion lending program. It has since told creditors that it has filed a formal request. Official creditors have agreed to form a committee to negotiate debt relief, but it has yet to meet. Bondholders formed an ad hoc group on September 11 whose members reportedly hold about 42 percent of Senegal’s Eurobonds. The government has said it will exclude ordinary CFA franc debt, largely held across the West African Economic and Monetary Union, from the restructuring. And unlike Zambia, Ghana, and Ethiopia, Senegal is still paying its bondholders.
I have previously argued that the Common Framework’s core flaw is a collective-action problem in Mancur Olson’s sense: too many creditor classes (Paris Club governments, China, bondholders, regional and domestic lenders), each with reasons to wait for the others to act first. I proposed putting them all at one table to settle the inputs to a deal, binding the process to a public timetable and replacing the single “comparability of treatment” test with separate, pre-specified tests for official and private creditors, an idea Thomas Laryea has also recently advanced.
Senegal’s finance minister, Cheikh Diba, has promised shorter negotiations, earlier information sharing, parallel talks with each creditor class, and the IMF-hosted meeting that took place on October 6. This is real progress, but it adopts the least demanding part of the cure. Creditors now share a room, but only to exchange information, not to make decisions. Nothing has changed in how comparability of treatment is judged or how disagreements are resolved.
The problem with comparability
Comparability of treatment has a legitimate purpose: it prevents one group of creditors from free riding on relief granted by others. The problem lies in how it is applied. The Official Creditor Committee (OCC), which brings together governments that have loaned funds to the debtor country in question, determines whether a debtor’s deal with private creditors is comparable to its members’ own offer. The Paris Club publishes criteria, formulas, and examples for making that assessment. What it does not publish is how those criteria are weighted or a fully reproducible, case-specific assessment, and some benchmark terms are not public. As a result, a debtor and its bondholders cannot know in advance whether their deal will pass.
That uncertainty is costly. In Zambia, the OCC rejected the October 2023 bondholder agreement within weeks and then rejected a revised version the IMF had judged consistent with the program. A final deal came only in March 2024. In Ethiopia, an agreement reached on January 2 was rejected before the month was out; a revised agreement came only on June 28. The rulings were quick, but the renegotiations took much longer. Predictable rules would have saved both countries valuable time.
Measured by face value, official creditors have given little in recent cases. But measured properly, they have given a good deal. In Zambia, they cut interest rates to 1 percent for 14 years and extended maturities by more than a decade, a present value reduction of about 40 percent. In present value terms, a principal haircut can be replicated by a lower coupon or a longer maturity, with similar (though not identical) implications for debt service.
Senegal’s private claims are unusually varied: roughly $5 billion of Eurobonds, commercial loans, and some $1.7 billion of total return swaps backed by local securities, whose treatment is unsettled. Whether Senegal needs principal cuts, or only the “reprofiling” its government prefers, depends on debt-sustainability arithmetic that has not been published.
Continuing to make debt payments while negotiations are pending comes with a cost. Ethiopia’s default added pressure on its bondholders, though both sides ultimately made concessions. Senegal is right to protect its access to the regional market, but that means speed must come from improvement in rules.
What needs to change?
Before the OCC begins negotiations, the G20 and the IMF should push for five changes:
1. Publish the rulebook. The OCC should set out, in advance and to all creditors, how comparability will be measured in Senegal’s case (the metrics, their weights, and the discount rate), with separate tests for official and private creditors.
2. Give the clock a consequence. The OCC should issue a reasoned ruling within a fixed window. A missed deadline or a disputed ruling should be subject to a review process agreed in advance, unless deemed approval was part of the pre-agreed rules.
3. Consult without granting vetoes. Every creditor class should be consulted on the debt analysis and the perimeter before terms are offered, but none should be able to block them.
4. Let contracts fill the gap. As Lee Buchheit and Mitu Gulati have proposed, Senegal can write a cross-creditor “most favored creditor” clause into its new bonds, promising bondholders a top-up if another creditor group later receives better terms. Zambia’s 2024 bond deal included a most favored creditor clause. Such a provision would bind Senegal, not its official creditors, and would need caps and a supermajority waiver so that top-ups do not erode the relief achieved. Guaranteed long-dated bonds (Brady-style) or oil- and gas-linked instruments may help close valuation gaps, but they bring their own costs and comparability questions.
5. Treat the domestic perimeter as an analytical question rather than a decree. Excluding domestic debt protects local banks, pension funds, insurers, retail and non-resident investors. Inflation usually erodes domestic holders’ real claims and depreciation hits foreign ones. In a currency union, Senegal controls neither. Including some CFA debt makes sense only if it generates positive net relief, after factoring in the cost of recapitalizing affected institutions, without impairing regional market access. Losses would have to be assessed across the union with the regional central bank and the exchange backed by a credible backstop. Jamaica’s 2010 financed stability fund is a useful precedent.
Senegal’s President Bassirou Diomaye Faye hopes to complete the restructuring within months, and the government is targeting an agreement in principle by December. Ghana and Chad took about two years, Zambia three and a half; Ethiopia is not done after almost six. The Common Framework is adopting better procedures. What it still lacks are decisions that are transparent, timely, and contestable. Senegal, still paying, unable to devalue, and politically divided, is where that gap will cost the most. Fix this before the committee convenes, and Senegal could become the Framework’s first quick success. Leave it unresolved, and Senegal risks becoming its fifth long wait.
Claude Opus 5.5 by Anthropic was used in drafting this piece. The author reviewed, revised, and takes full responsibility for the content.
