(June 9): Senegal’s public finances are under pressure and failure to win fresh support from the International Monetary Fund (IMF) will harden concerns about its outlook, S&P Global Ratings warned.
“They have very high financing needs,” Zahabia Gupta, head of emerging markets credit research, said in an interview with Bloomberg Television on Tuesday. “If they don’t get an IMF programme that could raise more questions around longer-term financing.”
The company has a negative outlook on Senegal’s long-term foreign currency rating of CCC+ that signals the country is vulnerable to nonpayment of its debt obligations.
A staff mission from the Washington-based lender is scheduled to visit Dakar next week to discuss a new programme, after it suspended a previous US$1.8 billion facility in 2024 following the discovery of billions of dollars in hidden debt.
The West African nation has been effectively locked out of international capital markets since that revelation and investors have shunned its foreign currency bonds, forcing yields sharply higher as they bet it will need to restructure its debts to secure more IMF aid.
Senegalese dollar bonds extended their losses on Monday, with the yield on debt due in 2031 climbing to 24.56% — matching a record high set on May 28. The sovereign yield premium on the country’s hard currency debt has widened to more than 1,500 basis points above US Treasuries, placing it in the same company as distressed countries including Lebanon and Venezuela.
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Senegal’s financing needs are about 30% of gross domestic product, Gupta said. Its lack of access to the eurobond market has forced the country to rely on regional credit markets, with potentially risky consequences for spillovers.
S&P warned in a June 2 report that Ivory Coast could be at indirect risk from positions held by international investors via Ivorian banks in the West African Economic and Monetary Union.
“While this raises potential contagion risk, strong domestic fundamentals provide an anchor: Domestic investors hold about 73% of local debt, and bank liquidity, supported by deposits, continues to sustain demand,” it said.
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