Senegal’s dollar bonds experienced a decline after S&P Global Ratings downgraded the nation’s sovereign credit rating to ‘B’. This drop was influenced by revised budget deficits, which are now expected to be much higher than previously reported. The Senegalese government has proposed a fiscal adjustment plan to manage public finances better, but challenges in implementation could hinder these efforts.
Senegal’s dollar bonds saw a notable decline on March 4, 2025, as reported by Bloomberg. This drop follows a downgrade from S&P Global Ratings, which reduced the country’s sovereign credit rating from ‘B+’ to ‘B’, undermining investor confidence. Bonds maturing in 2031 decreased 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 fall in bond values reflects a significant loss of market trust triggered by S&P’s decision. The downgrade was prompted by the Senegalese government’s admission that budgetary and debt figures over the past four years were underestimated, leading to a drastic revision. Estimates now indicate budget deficits from 2019 to 2023 are twice as high as previously reported, with debt projected to hit 106% of GDP by 2024, a 32 percentage point increase from earlier estimates due to previously undisclosed loans.
In response to these financial challenges, the Senegalese government has implemented a fiscal adjustment plan aimed at enhancing public finance management and strengthening institutional oversight. Nevertheless, S&P Global Ratings anticipates fiscal deficits of approximately 6.5% of GDP between 2025 and 2028, sustaining debt around 100% of GDP, which would limit the country’s fiscal maneuverability.
S&P’s downgrade carries a negative outlook, highlighting concerns about Senegal’s capability to efficiently carry out its fiscal consolidation strategies. The agency voiced that “significant implementation risks complicate the country’s financing plans.”
After the Court of Auditors’ report, the Senegalese government set an ambitious goal to curb the deficit to 3% of GDP by 2027, an 8 percentage point reduction from 2024. The 2025 budget, passed in December 2024, aims to lower the deficit to 7% of GDP from 7.52% in 2024, relying on increased revenue measures such as tax hikes and reduced exemptions. However, S&P cautions that “the realization of such a significant fiscal adjustment will be difficult within the set time frame” due to poor budget management and a persistent gap between projected and actual spending, potentially hindering recovery efforts.
Senegal’s dollar bonds experienced a significant drop due to the recent downgrade in the country’s sovereign credit rating by S&P Global Ratings. This downgrade followed the government’s admissions of underreported debt figures, projecting higher fiscal deficits and debt-to-GDP ratios. Although the Senegalese government has proposed a fiscal adjustment plan targeting reduced deficits, challenges in implementation may limit prospects for recovery. S&P’s outlook emphasizes the risks involved in the proposed strategies and the need for effective fiscal management.
Original Source: www.senenews.com
