Moody’s downgraded Senegal’s outlook due to weak fiscal management and an alarming audit revealing a 99.7% public debt-to-GDP ratio. The prime minister’s report labeled the financial findings ‘catastrophic.’ Notably, the budget deficit projection for 2023 rose significantly, prompting governmental responses, including potential legal proceedings against mismanagement and future audits.
Moody’s Investors Service announced the downgrade of Senegal’s economic outlook due to concerning fiscal and debt conditions following a critical audit of government finances. The rating agency downgraded Senegal’s long-term issuer rating from B1 to B3 and issued a negative outlook, indicating heightened vulnerability to potential financial distress despite still being above default risk levels.
The central government’s debt is projected to reach 99.7% of GDP in 2023, surpassing previous estimates by 25% based on findings from a government audit, which the prime minister characterized as ‘catastrophic.’ Moody’s interprets these elevated debt levels as indicative of Senegal’s increased susceptibility to negative economic shocks and vulnerability related to fiscal management.
The recent audit report by Senegal’s Court of Audit criticized financial management from 2019 to 2024, invalidating previous data presented by the former president. For example, the revised budget deficit projection for 2023 has soared to 12.3% of GDP, a substantial increase from the 4.9% initially reported.
Prime Minister Ousmane Sonko described the audit findings as ‘particularly catastrophic and concerning,’ prompting announcements of imminent spending rationalization measures and the intent to conduct another audit by the end of April. Earlier in October, Moody’s had identified similar issues, downgrading Senegal’s credit rating to the highly speculative category of B1.
Moody’s attributed the downgrade to significantly weaker fiscal indicators revealed through the audit, stating, ‘The scale and nature of the discrepancies significantly limit Senegal’s fiscal space and contribute to elevated funding needs.’ Evidence of considerable financial mismanagement was noted, raising concerns about potential criminal activities and off-the-books expenditures that were previously unrecorded in state accounts.
In light of the audit’s findings, the government has indicated that legal actions may arise against individuals involved in the mismanagement of public funds. The emphasis is now placed on addressing ‘serious failings’ as identified by the auditors to prevent future lapses in financial governance.
This analysis outlines significant downgrades to Senegal’s economic outlook by Moody’s, influenced by troubling findings from a government audit revealing severe financial mismanagement and an unsustainable debt-to-GDP ratio. The government’s response includes potential restructuring of expenditures and forthcoming legal actions against those responsible for past governance failures. Ongoing audits are anticipated to monitor financial practices closely, as Senegal strives to stabilize its economic position.
Original Source: www.hindustantimes.com
