Senegal’s dollar bonds fell sharply following a downgrade by S&P Global Ratings from ‘B+’ to ‘B’. This downgrade was prompted by the government’s admission of underreported budget deficits. The outlook remains negative, posing challenges for fiscal recovery despite a planned adjustment strategy by the Senegalese government.
On March 4, 2025, Senegal’s dollar bonds experienced a notable decline, as reported by Bloomberg. This drop is attributed to S&P Global Ratings’ recent downgrade of Senegal’s sovereign credit rating, which has caused a decline in investor confidence. Specifically, 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 downgrade to a ‘B’ rating, reduced from ‘B+’, follows a disclosure by the Senegalese government that key budgetary and debt data for the last four years had been underestimated. This adjustment, precipitating a re-evaluation of fiscal data, indicated that budget deficits from 2019 to 2023 are now projected to be double the initial estimates. Consequently, S&P anticipates national debt could soar to 106% of GDP by 2024, a stark increase of 32 percentage points from earlier assessments.
To address these pressing fiscal challenges, the Senegalese government has implemented a fiscal adjustment plan aimed at enhancing public financial management and institutional controls. Notably, S&P Global Ratings predicts fiscal deficits around 6.5% of GDP from 2025 to 2028, suggesting limited fiscal flexibility for the nation going forward.
Moreover, the downgrade comes with a negative outlook due to concerns regarding Senegal’s capacity to effectively execute its fiscal strategies. S&P warned that “significant implementation risks complicate the country’s financing plans.” In response, the government has set an ambitious target to reduce the deficit to 3% of GDP by 2027, starting with a reduced deficit of 7% of GDP in its 2025 budget compared to 7.52% in 2024. These efforts rely on increased revenue through tax hikes and lowered tax exemptions.
However, S&P has expressed skepticism about the feasibility of this adjustment, citing poor budget management and persistent discrepancies between planned and actual expenditures as factors that could hinder these fiscal recovery efforts.
In conclusion, Senegal’s recent downgrade in credit rating by S&P Global Ratings has triggered a significant drop in dollar bonds, reflecting decreased investor confidence. The government’s acknowledgment of previous miscalculations in budget and debt data has led to revised projections that indicate heightened fiscal challenges. Despite efforts to implement fiscal adjustments aimed at recovery, concerns remain regarding the country’s ability to effectively manage these financial strategies.
Original Source: www.senenews.com
