Senegal’s dollar bonds fell sharply after Moody’s downgraded its sovereign credit ratings deeper into junk status. The downgrade correlates with findings of severely weakened public finances from a court audit, which has led to investor concerns over fiscal stability. The Office of the President acknowledged rising debt levels and significant budget deficits during the previous administration.
Senegal’s dollar bonds experienced a decline following a ratings downgrade by Moody’s Investors Service. The downgrade pushed the country’s credit ratings deeper into junk territory, adversely affecting its Eurobonds, which have become some of the poorest performers in emerging markets this month. Specifically, bonds maturing in 2048 dropped by 0.7% to 68.94 cents on the dollar, with securities due 2033 and 2031 also witnessing declines of 0.8% and 0.6%, respectively.
On Friday, Moody’s downgraded Senegal’s long-term foreign-currency rating by two notches to B3, six levels below investment grade. The agency cited weakened public finances due to findings from a recent investigation by a court of auditors. Newly elected President Bassirou Diomaye Faye initiated this investigation, revealing an increasing debt burden during former President Macky Sall’s last five years in office, with government debt rising significantly.
According to Senegal’s Court of Auditors, the debt-to-GDP ratio surged from 65.6% in 2019 to a revised 99.7% in 2023. Furthermore, the budget deficit for 2023 was reported at 12.3% of GDP, significantly higher than the 4.9% previously claimed by the outgoing administration.
Moody’s expressed that the downgrade arose from the considerably weakened fiscal metrics disclosed by the audit. The magnitude and nature of the discrepancies have significantly restricted Senegal’s fiscal capacity, leading to increased funding requirements, while also highlighting previous governance issues.
Senegal’s challenging financial landscape and governance issues reflect a more significant trend in the region, with investors and creditors closely monitoring the ongoing economic developments as the government seeks to stabilize its finances and restore credibility in the market.
The downgrade of Senegal’s credit rating by Moody’s has considerably impacted the value of the country’s Eurobonds, which are already among the worst-performing in the emerging markets. The discoveries from the financial investigation indicate serious fiscal issues and governance shortcomings that may hinder economic recovery efforts. Immediate actions are necessary to address these challenges and restore investor confidence in Senegal’s economy.
Original Source: www.livemint.com
