Senegal’s dollar bonds fell after S&P Global Ratings downgraded the country’s credit rating from ‘B+’ to ‘B’, indicating loss of investor confidence. The downgrade arose from the government admitting underestimated budgetary and debt figures, with forecasted deficits and debt levels now much higher than initially thought. The government plans a fiscal adjustment strategy, though significant implementation risks could hinder recovery efforts.
On March 4, 2025, Senegal’s dollar bonds experienced a notable decrease, attributed to Standard & Poor’s (S&P) Global Ratings’ downgrade of the country’s sovereign credit rating. The downgrade, from ‘B+’ to ‘B’, places the country in a challenging investment position and resulted in bonds maturing in 2031 dropping to 87.44 cents on the dollar, while those maturing in 2048 fell to 67.17 cents.
The downgrade reflects waning confidence in financial markets following the Senegalese government’s admission of underreported budgetary and debt data for the past four years. Revised figures indicate that budget deficits from 2019 to 2023 were underestimated, now projected to reach double the initial estimates, with national debt expected to reach 106% of GDP by 2024, a significant increase due to previously undisclosed loans.
In response to this fiscal crisis, the Senegalese government has outlined a fiscal adjustment plan aimed at improving public finance management and enhancing institutional controls. However, S&P forecasts ongoing fiscal deficits of approximately 6.5% of GDP from 2025 to 2028, indicating that debt levels will persist near 100% of GDP, which would constrict the country’s fiscal flexibility.
S&P Global Ratings has issued a negative outlook due to concerns surrounding Senegal’s capacity to implement its fiscal consolidation strategy effectively. The agency expressed that “significant implementation risks complicate the country’s financing plans.”
Following the Court of Auditors’ report, the Senegalese government has committed to reducing the fiscal deficit to 3% of GDP by 2027, lowering it by 8 percentage points from 2024. The proposed budget for 2025 projects a deficit decline to 7% of GDP, down from 7.52% in 2024, supported by revenue-boosting measures such as tax increases and limiting tax exemptions. Nevertheless, S&P warns that achieving such fiscal adjustments within the proposed timeline poses considerable challenges, citing persistent budget management flaws and gaps between planned and actual expenditure as key obstacles.
In summary, the significant decline in Senegal’s dollar bonds follows a downgrade from S&P Global Ratings, reflecting underlying economic challenges. The government’s acknowledgment of substantial budget deficits and debt misreporting has eroded investor confidence. While a fiscal adjustment plan aims to improve the situation, concerns remain regarding its implementation and the country’s ability to achieve fiscal targets amid existing risks.
Original Source: www.senenews.com
