Senegal's Bonds Fall as Moody's Cuts Rating Further into Junk Status

AFRICAN STOCKS AND FINANCEOctober 7, 2024 at 12:43 PM UTC

TLDR

Senegal's eurobonds face continued losses post-Moody's credit rating downgrade, signaling potential downgrade watch.
Dollar bonds maturing in 2033 and 2048 experienced consecutive dips, with concerns over weak fiscal and debt positions highlighted by government audit.
Senegal's debt burden at 83.7% of GDP impacts Eurobond performance, elevating vulnerability to borrowing costs and financial shocks.

Senegal’s eurobonds extended their losses on Monday after Moody’s downgraded the country’s credit rating further into junk status and put it on watch for another potential downgrade. Dollar bonds maturing in 2033 fell for the fourth consecutive day, dipping 0.3 cents to 84.97 cents on the dollar, while 2048 notes dropped 0.4 cents to 72.77 cents.

Moody’s lowered Senegal’s long-term foreign currency ratings to B1, four steps below investment grade, citing revelations from an audit by the newly-elected government. The audit uncovered a significantly weaker fiscal and debt position under the previous administration, including a budget deficit of 10% of GDP in 2023—nearly double the 5.5% reported earlier.

Senegal’s debt burden, now estimated at 83.7% of GDP, has been a major factor in the country’s Eurobond underperformance, increasing its vulnerability to rising borrowing costs and reducing its capacity to absorb financial shocks.

Key Takeaways

Senegal's bonds have suffered after revelations of deeper fiscal challenges, with Moody's further downgrading the nation's credit rating. The elevated debt burden, combined with a larger-than-reported deficit, highlights the country's increasing vulnerability in the face of rising funding costs and diminishing financial resilience. This downgrade may heighten concerns about Senegal's ability to manage its debt sustainably.

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