Moody’s Downgrades Senegal Ratings, Maintains Negative Outlook
Moody’s Ratings has downgraded the Government of Senegal’s long-term foreign currency and local currency issuer and foreign currency senior unsecured ratings to Caa1 from B3 and maintained the negative outlook.
The short-term issuer ratings have been affirmed at Not Prime, the global ratings agency said in its latest update on the country.
Moody’s said the downgrade reflects increased risks to Senegal’s debt trajectory and liquidity since our February 2025 rating action.
Ratings analysts said a subsequent reconciliation exercise has led to a debt estimated at 119% of gross domestic product (GDP) for 2024, complicating the fiscal adjustment for sustainable debt reduction notwithstanding the credit benefits of West African Economic and Monetary Union (WAEMU) membership.
Meanwhile, slower-than-expected progress on a new IMF programme leaves the government reliant on the comparatively costly regional market to meet high financing needs, elevating liquidity risks and contributing to deteriorating debt affordability.
“While our baseline scenario assumes eventual IMF support under terms that do not necessitate debt restructuring, our confidence in this outcome has diminished.
“An IMF programme is crucial for unlocking concessional financing, restoring investor confidence for international market access, and mitigating liquidity risks.
“The longer this support is delayed, the higher the risk would be of a debt restructuring involving private sector creditors”, Moody’s said.
Ratings analysts said the country’s negative outlook reflects risks to government liquidity, adding that further delays in reaching agreement on an IMF programme could weaken external financing support and increase reliance on the regional market, with attendant risks of absorption constraints.
Moody’s said agreement on a programme could be made more difficult by high debt levels and social risks. Moreover, the materialisation of larger funding needs than we currently expect would further strain liquidity.
Senegal’s local and foreign currency country ceilings have been lowered to Ba3 and B1 from Ba2 and Ba3, respectively.
The local currency country ceiling is four notches above the sovereign rating to take into account the moderate footprint of the government in the economy, as well as the mitigating impact of Senegal’s WAEMU membership on external imbalances.
The foreign currency country ceiling maintains a one-notch gap to the local currency country ceiling to reflect our assessment of limited transfer and convertibility risks due to the French Treasury guarantee of the peg between the CFA franc and the euro.
The ratings rationale includes successive debt data audits and a reconciliation exercise that have revised Senegal’s debt stock upward, most recently to 119% of GDP at the central government level as of the end of 2024.
This is one of the highest ratios across emerging and frontier market sovereigns globally and stands around 12 percentage points of GDP higher than our February 2025 estimate, which built on the findings of the Senegalese Court of Auditors published in the same month.
Measured as a share of government revenue, Senegal’s 2024 debt ratio of 581% compares to medians of 283% for B-rated and 355% for Caa-rated sovereigns.
A higher debt starting point implies a more protracted fiscal adjustment path. An ambitious fiscal adjustment is targeted by the government’s medium-term budget framework and will be supported by efforts to increase revenue mobilisation, including through the adopted revision of the Tax Code and an Economic and Social Recovery Plan presented in August.
However, such consolidation will inevitably be subject to social and implementation risks and weigh on the growth performance. Fiscal execution trends in the first half of the year indicate that consolidation remains on track, albeit largely driven by capital expenditure compression and showing signs of mixed performance across revenue streams.
“We project a deficit of 7.8% of GDP this year – in line with the government’s revised budget – and 5.7% of GDP in 2026, from around 13% of GDP in 2024”, Moody’s said.
Ratings analysts forecast the central government debt burden will start declining this year but remain above 100% of GDP by the end of the decade, although an ongoing GDP rebasing exercise may affect future metrics.
Shocks from weaker growth, slower fiscal consolidation, or increased parastatal borrowing could significantly hinder debt reduction.
However, Senegal’s membership of the WAEMU remains an essential credit support that helps contain risks arising from the country’s high foreign-currency debt levels, and external vulnerabilities more broadly.
Moody’s expressed the view that a slow progress towards IMF programme increases Senegal government liquidity risks.
“While our baseline scenario continues to assume eventual IMF support under terms that do not necessitate a debt restructuring, our degree of confidence over this baseline has diminished.
“Progress on a new programme, initially expected by June by the authorities, has been slower, with formal negotiations now set to begin in mid-October.
“We anticipate the IMF Executive Board will grant a waiver for past reporting deficiencies subject to corrective actions, enabling a programme agreement by the middle of 2026”.
In the interim, Senegal’s debt affordability is deteriorating as a result of increased interest costs, while gross financing needs are high at around 26% of GDP this year and in our expectation for 2026. Ratings analysts project interest payments will reach around 27% of government revenue in 2026.
Amid constrained access to the international capital markets, the government has relied heavily on the regional WAEMU market, with the issuance of 8% of GDP in combined T-bills and T-bonds up to end-September at rates of around 6.75% – 7.75%, as well as drawing on regional public bond offerings.
While we expect this year’s financing needs to be successfully met, given steady regional demand to date and access to some alternative funding sources, Senegal is increasingly exposed to any reversal in regional investor sentiment or strains in absorptive capacity.
The nexus between banks – which account for the large majority of government asset purchases – and sovereigns is already elevated at the WAEMU level, with sovereign credit including public enterprises representing 37% of assets at the end of 2024 according to BCEAO (central bank of the WAEMU) figures.
Although not our base case, Senegal would also be exposed to any regional loosening in fiscal discipline or reduced access to external financing across the rest of the zone, placing additional demand on the regional market.
Moody’s said the negative outlook reflects risks to government liquidity. Further delays in reaching agreement on an IMF programme could weaken external financing support and increase reliance on the regional market, with associated risks of absorption constraints.
Reaching an agreement on a programme and consensus on policies for restoring debt sustainability could be complicated by the extensive fiscal consolidation needed to address high debt levels amid elevated social risks.
Moreover, the materialisation of larger funding needs than we currently expect would further strain liquidity. A more detailed and updated amortisation profile than that included in the June 2025 medium-term budget framework has not been made public to date
