Senegal’s dollar bonds fell after S&P Global lowered credit ratings on 28 February 2025 after reviewing the country’s fiscal and debt deficit for the 2019-2023 fiscal budgets.
Per the new ratings, Senegal’s long-term foreign and local currency sovereign credit ratings fell to ‘B’ from ‘B+’. The ‘B’ rating for short-term sovereign credit rating was also affirmed.
By Monday, March 3, 2025, the country’s Eurobond, with a maturity date in 2031, fell by 0.3% to 88.44 cents per dollar. The country’s bonds due in 2048 also fell by 0.3% to 67.17 cents per dollar.
While maintaining their new B ratings in February, S&P Global noted that the fiscal strength had been overstated by Senegal’s budget which did not take into account investments that were funded via external project loans and domestic bank loans.
The country’s debt to GDP ratings, which were previously pegged at 77% at the end of December 2024, have consequently been increased by 32% higher to 106% in S&P’s new estimate.
Why is this significant?
S&P’s Global ratings are very significant as they help show the creditworthiness of countries and businesses. This helps investors make informed choices when lending to or investing in said institutions.
With the new findings that Senegal’s budget deficit is higher than was previously reported, investor confidence in the country to repay its loans in 2031 and 2048 has reduced drastically.
Per S&P’s new findings, even new fiscal adjustments between 2025-2028 will only have a minimal 6.5% effect on the country’s current budget deficit.
The 2025-2026 budgets are further burdened by the country’s Eurobonds maturing in 2028.
The bigger picture
With these revised ratings, Senegal is between a rock and a hard place. Investor confidence in the country to repay debts has reduced. However, the country will need to borrow in order to carry out infrastructural development, as most of its revenue from tax and agricultural produce will be used to service debts.
The B rating means that the country will find it more expensive to borrow from investors, and this will reduce its general growth projections.
