Senegal’s dollar bonds fell sharply after S&P Global Ratings downgraded the country’s credit rating from ‘B+’ to ‘B’. This downgrade, driven by the government admitting to significantly underestimated budgetary data, forecasts rising debt levels and considerable fiscal deficits in the coming years, leading to reduced investor confidence and a challenging fiscal outlook for the nation.
On March 4, 2025, Senegal’s dollar bonds experienced a notable decline following a downgrade of the country’s sovereign credit rating by S&P Global Ratings. This downgrade moved Senegal’s long-term rating from ‘B+’ to ‘B’, negatively impacting investor confidence. Consequently, bonds maturing in 2031 dropped by 0.3% to 87.44 cents on the dollar, while those maturing in 2048 fell by 0.2% to 67.17 cents on the dollar.
The downgrade was prompted by the Senegalese government’s admission that the budgetary and debt data for the past four years had been underreported, resulting in a substantial revision of financial figures. New estimates suggested that budget deficits from 2019 to 2023 will now be approximately double previous forecasts, with debt projected to reach 106% of GDP by 2024.
In response, the Senegalese authorities have presented a fiscal adjustment plan aimed at improving public financial management and enhancing institutional controls. Despite this, S&P Global Ratings expects continued fiscal deficits averaging 6.5% of GDP between 2025 and 2028, indicating limited fiscal space.
The rating agency’s downgrade also included a negative outlook, citing concerns about Senegal’s capacity to implement effective fiscal consolidation. S&P stated, “significant implementation risks complicate the country’s financing plans.”
In light of these challenges, the Senegalese government’s deficit reduction objective targets a decrease to 3% of GDP by 2027. The 2025 budget, which was adopted in December 2024, aims for an initial deficit reduction to 7% of GDP from 7.52% in 2024, reliant on tax increases and reduced exemptions. However, S&P Global Ratings noted, “the realization of such a significant fiscal adjustment will be difficult within the set time frame.”
The recent downgrade of Senegal’s credit rating by S&P Global Ratings has significantly impacted its dollar bonds, reflecting diminished investor confidence. The government faces challenges in correcting past underreporting of financial data and managing rising debt levels. Although a fiscal adjustment plan has been proposed, uncertainties remain about its successful execution and the country’s ability to stabilize its economy moving forward.
Original Source: www.senenews.com
