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Investing.com -- Moody’s Ratings has downgraded Senegal’s long-term foreign and local currency issuer ratings to Caa1 from B3 while maintaining a negative outlook, the agency announced Friday.
The downgrade reflects increased risks to Senegal’s debt trajectory and liquidity position since February 2025. A recent reconciliation exercise revealed government debt estimated at 119% of GDP for 2024, significantly complicating fiscal adjustment efforts despite the benefits of West African Economic and Monetary Union (WAEMU) membership.
Senegal’s debt ratio of 581% of government revenue in 2024 far exceeds the median of 283% for B-rated sovereigns and 355% for Caa-rated peers, making it one of the highest among emerging and frontier markets globally.
The rating agency noted slower-than-expected progress on securing a new International Monetary Fund (IMF) program, leaving the government dependent on the costlier regional market to meet high financing needs. This situation has elevated liquidity risks and contributed to deteriorating debt affordability.
While Moody’s baseline scenario assumes eventual IMF support without debt restructuring, confidence in this outcome has diminished. Formal negotiations with the IMF are set to begin in mid-October, with Moody’s anticipating program agreement by mid-2026.
In the meantime, Senegal faces high gross financing needs of approximately 26% of GDP this year and in 2026. Interest payments are projected to reach around 27% of government revenue in 2026.
The government has relied heavily on the WAEMU market, issuing combined T-bills and T-bonds equivalent to 8% of GDP through end-September at rates between 6.75% and 7.75%.
Moody’s maintained the negative outlook, citing ongoing risks to government liquidity. Further delays in reaching an IMF agreement could weaken external financing support and increase reliance on the regional market, with potential absorption constraints.
The agency also lowered Senegal’s local and foreign currency country ceilings to Ba3 and B1 from Ba2 and Ba3, respectively.
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