Senegal downgraded to ’B-’ by S&P on worsening debt position

Investing.com -- S&P Global Ratings has downgraded Senegal’s long-term foreign and local currency sovereign credit ratings to ’B-’ from ’B’ while maintaining a negative outlook, citing a significant deterioration in the country’s budgetary position.

The downgrade follows an audit of government accounts that revealed Senegal’s debt-to-GDP ratio had reached 118% for 2024, the highest among all African sovereigns rated in the ’B’ category by S&P.

This represents a substantial increase from the 104% of GDP estimated in February 2024. Since October 2024, the debt added through these revisions totals nearly 8.3 trillion CFA francs (approximately $13 billion), equivalent to 41% of 2024 GDP.

S&P now expects Senegal’s government debt to remain high at 110% of GDP by year-end 2028, more than 10 percentage points higher than its May 2025 forecast.

The revised budget indicates greater financing requirements than initially anticipated, totaling 5.7 trillion CFA francs (approximately $10.2 billion or 26% of GDP). This includes a 15.8% increase in debt amortization and the government’s intention to settle arrears to the private sector, accounting for about 2% of GDP.

S&P projects a budget deficit of just under 9% of GDP for 2025, while the government targets 7.8%.

On a positive note, Senegal’s economic growth prospects remain strong, with real economic growth expected to reach approximately 8% in 2025, supported by oil and natural gas production at the Sangomar site and the Greater Tortue Ahmeyim field, along with rising gold output.

The current account deficit is projected to narrow to about 11.6% of GDP in 2025, from 20% in 2022, with the Senegalese authorities expecting it to reach 9.5% this year.

The government aims to reduce its deficit to just under 3% of GDP by 2027, in line with West African Economic and Monetary Union (WAEMU) requirements. However, S&P notes that the amended budget law for 2025 contains limited additional budgetary measures, with deficit reduction largely dependent on strong nominal economic growth.

S&P estimates that Senegal’s debt service alone will total 4,922 billion CFA francs ($8.8 billion) in 2026, significantly more than the 3.3 trillion communicated for 2025.

The rating agency believes that Senegal’s membership in WAEMU should help alleviate liquidity constraints, as several banks in the region are sizable lenders to the Senegalese authorities.

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