“On October 4, 2024, the rating agency Moody’s downgraded Senegal’s long-term sovereign rating from Ba3 to B1, citing a significant deterioration in public finances and a higher than expected level of debt. This decision reflects a budgetary situation that is much more critical than anticipated, thus plunging the country into a worrying financial dynamic,” underlined the authors of this rating.
Senegal opts for a consolidation of public finances
In other circumstances, they continue, “at the same time, Senegal is holding discussions with the International Monetary Fund (IMF) to define corrective measures. This approach comes following an audit ordered by the new president, Bassirou Diomaye Faye, who revealed that the 2023 budget deficit exceeds 10%, far from the 5% announced by the previous administration. In reaction to the revelations of this audit, the new regime “suspended the submission of a disbursement request to the IMF, initially planned for July, following the review of the fund in June. This decision reflects a desire to restore budgetary transparency and lay the foundations for sustainable consolidation of public finances.
Budgetary consolidation and monitoring
In its report, Moody’s emphasizes that “fiscal consolidation will be a long and complex process, despite a strong recovery in economic growth expected for 2025”. The rating agency also placed Senegal’s long-term rating “under review” for possible further downgrade.
In other words, according to the rating agency, “this placement under surveillance means that the situation could worsen if recovery efforts fail to reverse the current trend. The growth outlook, although promising in the long term, is not will not be enough to restore public accounts in the short term, thus accentuating the risks for the country.
With a deficit well above regional and international budgetary standards, Senegal faces a dual challenge: restoring investor confidence while restoring macroeconomic stability.
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