S&P Placed Senegal on CreditWatch Developing, Sliced Rating to CCC+
With over 40% in debt to gross domestic product (GDP), S&P Global has lowered its long-term foreign currency sovereign credit ratings on Senegal to ‘CCC+’ from ‘B-‘ and affirmed its ‘B-‘ local currency sovereign credit rating.
The global rating agency said it lowered short-term foreign currency rating on Senegal to ‘C’ and affirmed short-term local currency rating at ‘B’.
“We placed the ratings on CreditWatch developing”, S&P said, signalling that IT could lower ratings on Senegal if the government is unable to refinance its upcoming commercial maturities on time and in full.
Also, Ratings analysts said they could also lower the rating if Senegal agreed to a transaction that is viewed as tantamount to default, including a conventional default, a liquidity crisis, debt restructuring, or a distressed exchange.
Conversely, rating upside may arise if Senegal refinances its upcoming maturities and implements a resolute budgetary consolidation, S&P added.
According to the rating note, Senegal public-sector borrowing needs for 2026 are elevated, as is the level and cost of general government debt and the starting point for the budgetary deficit, making public finances precarious.
The recently unveiled 2026 draft budget targets a 5.4% deficit, a sharp reduction from the high 12.6% of 2024. However, when combined with debt amortization totaling XOF4.3 trillion or $7.8 billion, gross financing requirements reach 26% of GDP, with about half of the debt service due to external lenders.
Ratings analysts said more conservative deficit forecast of 8.1% (including arrears) pushes this requirement even higher, to about 29%.
Compounding these challenges, the suspension of the $1.8 billion IMF program in October 2024–triggered by the revelation of widespread underreported public debt and fiscal mismanagement under the previous government–has severely limited Senegal’s access to concessional financing outside of project loans.
S&P said negotiations for a new IMF program are under way, but visibility on both the potential outcomes and associated conditions remains limited with official discussions that began in the third week of October 2025.
After acknowledging past debt misreporting, authorities swiftly pledged to cut the deficit to 3% by 2027, and so far the 2025 budget execution reports seem to align with the forecasts of a 7.8% deficit by year-end.
“In our view, this commitment has facilitated the country’s ability to finance itself, with over 70% of gross financing in 2025–XOF4 trillion ($7 billion)–realized to date, largely thanks to issuance on the regional market”.
S&P stated that this strategy carries risks, however; regional bond issuance comes at a higher cost (yield of more than 7%) and typically has shorter maturities than concessional loans.
“We see some execution risk in repeating a similar strategy of financing for 2026, relying materially on the regional market”.
Senegal efforts to sustained GDP growth and reform initiatives support fiscal consolidation efforts but precarious fiscal position limits policy flexibility, rating analysts acknowledged.
The government has revised down its 2025 GDP growth forecast to 6.8% from 8.0% previously, but hydrocarbon investments continue to underpin economic expansion. The revision is primarily due to analysts’ anticipation of a decline in public consumption and investment.
Despite this adjustment, the economy remains dynamic, driven by strong output from the Sangomar oil field (operational since June 2024) and the recent launch of the Greater Tortue Ahmeyim (GTA) gas project (December 2024).
GDP growth in the first quarter of 2025 reached 12.1%, reflecting the immediate impact of hydrocarbons, following somewhat strong 6.1% growth in 2024.
Over the medium term, ratings analysts said they expect GDP growth will settle at approximately 4.5%, supported by recent policy shifts. Senegal government has introduced a new Investment Code to improve the business environment and attract investment.
In October, the “Invest in Senegal” Forum secured $23.5 billion in investment commitments, signaling increased private sector engagement. High-profile state visits to China, Turkiye, the U.S., Saudi Arabia, the UAE, and France–along with participation in international business forums–highlight the government’s efforts to draw foreign capital, suggesting a more pragmatic approach to foreign investment than previously indicated.
Fiscal consolidation is a Senegal government priority, analysts acknowledged, stating that early signs of consolidation are materializing.
In August 2025, Prime Minister Ousmane Sonko presented the “Jubbanti Koom” Economic Recovery Plan, with a target to reduce the fiscal deficit to 3% by 2027.
The plan includes new tax measures e.g., levies on mobile money, online gaming, tobacco, and alcoholic beverages and an asset monetization strategy. The government is also focusing on institutional rationalization, with plans to merge or close redundant public agencies.
The 2026 budget law reflects these efforts, setting a deficit target of 5.4%, building on some of the tax measures laid out in the plan.
Mid-year 2025 data indicates progress toward the 7.8% deficit goal, aided by robust tax revenue and controlled spending, though growth has been slightly weaker than anticipated.
However, our assumptions for the reduced deficit for 2025 remain more pessimistic, particularly as arrears are factored into calculations. Senegal government’s GDP rebasing exercise is expected to reveal a somewhat larger economy than previously estimated.
S&P said while this will not directly boost public revenue, it could signal greater potential for tax base expansion and automatically improve key debt ratios, which could have a positive influence on current discussions between Senegal and the IMF.
Senegal’s elevated government debt burden–119% of GDP as of December 2024, excluding budgetary arrears and an additional 9% from state-related entities–makes it one of the most indebted sovereigns in the speculative-grade category.
While the government’s Vision 2050 aims to transform Senegal into a more industrialized, competitive economy with sustained growth of at least 6.25%, the severe strain on public finances constraints its ability to execute the plan.
On the country’s flexibility and performance profile, delays in securing timely concessional financing will significantly complicate Senegal’s ability to address the gross refinancing needs due in 2026
“We anticipate that fiscal consolidation will proceed more gradually than the authorities’ targets imply, leaving the gross debt-to-GDP ratio at about 122% of GDP over our forecast.
“In the 2026 budget, revenue is forecast to increase by 27% from 2025 levels and expenditure by 13%–with capital expenditure surging by 45% after a 2025 slowdown, compensated by minor reductions in current spending.
“Importantly, this outlook depends on the introduction of new taxes in emerging sectors (mobile money and gambling), where actual revenue performance remains highly uncertain.
“Additionally, while authorities have started to clear arrears to the private sector, we understand some of them are still in the process of being estimated, further weighing on our outlook.
“Against this backdrop, we forecast the deficit to remain elevated at 9.7% in 2025, easing modestly to 8.1% in 2026 and 6.8% in 2027–well above the 3.0% target for 2027–with debt to GDP peaking at about 121.5% in 2025 and stabilizing thereafter as persistent deficits offset robust GDP growth”, S&P said in the ratings note.
The rating agency added that these deficit estimates are pro forma of its arrears assumption, unlike the government’s estimate.
Senegal’s debt profile is predominantly external, raising concerns about sustainability and refinancing risks. The ancillary documents of the 2026 draft budget confirm the significant debt revision previously disclosed by authorities.
This places the public debt stock at XOF23.6 trillion ($41 billion) as of end-2024, equivalent to 119% of GDP–excluding an additional 9% of GDP attributed to state-owned enterprises. Notably, 68% of this debt is external, with 41% (XOF6.6 trillion/$11.6 billion) classified as commercial debt, nearly half of which is in Eurobonds.
Senegal’s material reliance on external commercial borrowing–amid prohibitive Eurobond yields and tighter global financial conditions–exposes the country to heightened refinancing risks and limited market access, further straining an already vulnerable fiscal environment.
While Senegal’s borrowing costs have increased in line with its revised debt stock, the high share of concessional debt and the stability of the XOF have helped keep them relatively manageable.
The debt revision has driven the interest-to-revenue ratio sharply higher to about 25% on average over our forecast period–up from 10%–14% previously.
However, it remains lower than for peers like Egypt or Nigeria and comparable to Uganda’s ratio, despite Senegal’s significantly heavier debt burden.
This is largely due to the relatively low average cost of debt, which stood at 4% in 2024 and is forecast to increase only moderately to 5%, reflecting the benefits of concessional financing and past Eurobond issuances at favourable rates.
Additionally, Senegal’s WAEMU membership ensures currency stability, with the XOF pegged to the euro, with minimal devaluation risk due to robust regional reserves covering seven months of imports and France’s guarantee of unlimited convertibility.
Senegal’s WAEMU membership is instrumental in facilitating debt repayment in both local and foreign currency. As of Oct. 29, 2025, the country has successfully executed 70% of its 2025 financing program, addressing its substantial gross financing needs (25% of GDP) primarily by tapping the regional debt market.
Indeed, 47% of the financing was secured through UMOA-Titres, while an additional 30% was raised via oversubscribed retail bond offerings.
The proceeds raised in local currency were subsequently converted into foreign currency to service external debt. This approach underscores the greater-than-expected depth of WAEMU’s regional markets, which enables Senegal to navigate its substantial external obligations with relative flexibility.
However, the reliance on the regional market and retail bond issuance to meet financing needs carries risks. Heavy reliance on regional borrowing will shorten Senegal’s debt maturity profile, as average maturities are concentrated on three- and five-year maturities, raising medium-term refinancing risks.
A larger share of domestic financing and a lower share of official borrowing would also have a negative influence on Senegal’s overall cost of total debt, as the cost of domestic borrowing has recently exceeded 7%.
“We also note that Cote d’Ivoire-based banks hold significant exposure to Senegalese debt, which could pose transmission risks to the broader regional economy. Delays in IMF negotiations could further limit financing options”.
S&P said the hydrocarbon production boom should improve the current account deficit and boost WAEMU FX reserves. Senegal has been running very elevated current account deficits in recent years, peaking at just over 20% of GDP in 2022.
Delays in hydrocarbon exports, and still-high capital goods and services imports linked to oil and gas investment projects, have weighed on Senegal’s balance of payments.
However, with the start-up of Sangomar and GTA in 2024 and the full ramp-up in 2025, ratings analysts expect the current account deficit to decrease sharply, averaging 5.3% of GDP over 2025-2028. Beyond that, making Senegal less dependent on imports is central to the Vision 2050 plan.
In that regard, mining, continued investment to improve agricultural productivity, and efforts to scale up the country’s fertilizer and cement production could therefore further reduce trade imbalances.
S&P expects FX reserves to improve on the back of receipts from Sangomar and GTA, reinforcing WAEMU reserves as a whole. S&P Revises Nigeria’s Outlook to Positive, Affirms ‘B-/B’ Ratings
