Senegal’s dollar bonds fell significantly following a downgrade by S&P Global Ratings, which lowered the country’s credit rating from ‘B+’ to ‘B’. This downgrade was prompted by revised budget and debt data revealing higher-than-expected deficits. The Senegalese government aims to address these issues through a fiscal adjustment plan, though challenges persist in implementation, raising concerns regarding future fiscal stability.
On March 4, 2025, Senegal’s dollar bonds experienced a notable decline following a downgrade of the nation’s sovereign credit rating by S&P Global Ratings. This adjustment marked a deterioration in investor confidence, with bonds maturing in 2031 dropping by 0.3% to 87.44 cents on the dollar and those maturing in 2048 decreasing by 0.2% to 67.17 cents on the dollar.
The downgrade, which revised Senegal’s long-term sovereign credit rating from ‘B+’ to ‘B’, was influenced by revelations from the Senegalese government regarding underestimated budgetary and debt data over the past four years. This led to significant revisions, suggesting that budget deficits from 2019 to 2023 were nearly double the initial projections, with anticipated debt soaring to 106% of GDP by 2024.
In response, the Senegalese government has introduced a fiscal adjustment plan aimed at enhancing public finance management and strengthening institutional controls. Nonetheless, S&P Global Ratings projects fiscal deficits around 6.5% of GDP between 2025 and 2028, which threatens to constrict the nation’s fiscal capacity.
Furthermore, S&P expressed concerns regarding Senegal’s ability to implement its fiscal consolidation strategy, noting “significant implementation risks complicate the country’s financing plans.” Despite the government’s ambitious goal to reduce the deficit to 3% of GDP by 2027, the agency maintains skepticism regarding the feasibility of achieving such fiscal adjustments swiftly.
The 2025 budget anticipates a deficit reduction to 7% of GDP, initiated through revenue-increasing measures such as tax hikes and diminished tax exemptions. However, S&P Global Ratings argues that achieving these financial targets may be challenging due to ineffective budget management and inconsistencies between projected and actual spending.
In conclusion, Senegal’s dollar bonds have faced a substantial decline post-rating downgrade by S&P Global Ratings. The government’s reported underestimation of fiscal data has led to significant adjustments in projected deficits and debt levels. Despite the government’s fiscal adjustment plan and ambitious targets, challenges remain in effectively executing these strategies to restore investor confidence and stabilize the financial market.
Original Source: www.senenews.com
