Senegal plans to raise 100 billion CFA francs ($180 million) through a local Islamic bond sale by year-end and is preparing to launch a benchmark international sukuk in 2026, a government source told Reuters, as the country pushes to shore up finances.

The government of the cash-strapped West African country, where Islam is the dominant religion, is grappling with billions of dollars in debt hidden by the previous administration. It is trying to diversify its funding sources as it scrambles to get its financing with the International Monetary Fund back on track.

The local market sukuk would help cover financing needs for 2025 and 2026, the source familiar with the situation said.

Meanwhile preparations for the international sukuk, with which the government hopes to raise $500 million, were in preliminary stages, the source added. The issue could feature a multilateral guarantee, the source said, providing no further detail.

Guarantees extended by multilateral lenders can help lower the borrowing costs for governments that find themselves under pressure. Senegal's yields on its international 2033 bond are currently at more than 12% - above the double digit threshold that is widely seen as making it too expensive for a government to sell debt on international capital markets.

Separately, Senegal is also looking to raise at least 300 billion CFA francs ($540 million) through a local debt sale set to launch on Thursday, the source said, confirming media reports.

This follows two bond offerings in April and July, both of which were oversubscribed, according to the finance ministry.

The IMF suspended Senegal's $1.8 billion lending programme in October 2024 after its government, then newly elected, said it had uncovered undisclosed debt now estimated at more than $11 billion.

On August 1, the government unveiled a new economic recovery plan, pledging to finance 90% of the initiative through domestic resources and avoid additional debt.

Following a visit to Senegal later in August, the IMF said Senegalese authorities had expressed their intention to seek a new IMF programme.

($1 = 554.8500 CFA francs)

(Reporting by Portia Crowe; Editing by Karin Strohecker, Robbie Corey-Boulet and Aidan Lewis)