S&P Global Ratings has downgraded Senegal’s long-term foreign-currency sovereign credit rating to “CC” from “CCC+”, intensifying concerns over the West African country’s ability to manage a debt crisis triggered by the discovery of billions of dollars in previously undisclosed liabilities.
The ratings agency said the government’s proposed debt treatment is likely to result in foreign-currency creditors receiving less than originally promised, either through changes to principal, interest or repayment terms.
S&P consequently considers a distressed debt exchange or default on Senegal’s foreign-currency commercial obligations to be “extremely likely.”
The agency also lowered Senegal’s local-currency rating to “CCC” from “CCC+” and maintained a negative outlook, marking another deterioration in the country’s sovereign credit profile.
Hidden Debt Deepens Fiscal Crisis
Senegal’s financial difficulties intensified following the discovery in 2024 of previously undisclosed government liabilities accumulated under the former administration.
The scale of the problem has complicated efforts by the new authorities to stabilise public finances and regain the confidence of international lenders and investors.
The previous International Monetary Fund programme was suspended after discrepancies were discovered in government debt and deficit reporting.
The debt problem has since become considerably clearer, with estimates indicating more than $10 billion in previously unknown liabilities.
The situation has increased Senegal’s borrowing costs and created significant refinancing pressure at a time when the government must continue funding infrastructure, public services and development programmes.
Moody’s also downgraded Senegal’s sovereign rating in late August, citing rising refinancing risks and limited room to reduce the debt burden.
$2.2bn IMF Programme Offers Potential Lifeline
The downgrade comes shortly after Senegalese authorities reached a staff-level agreement with the IMF on economic policies that could underpin a new 36-month Extended Credit Facility worth about $2.2 billion.
Importantly, the financing has not yet received final approval.
The agreement remains subject to IMF management and Executive Board approval, as well as corrective actions connected to the earlier misreporting of Senegal’s public finances.
The programme is designed to restore macroeconomic stability and debt sustainability, reduce fiscal and external vulnerabilities, increase social spending and support private-sector-led growth. citeturn0search0
However, restoring debt sustainability is likely to require difficult decisions about how Senegal manages its obligations to domestic and international creditors.
S&P said Senegal announced a debt treatment plan under an enhanced G20 Common Framework, with foreign-currency debt expected to be affected while CFA franc-denominated local debt is intended to remain outside the process.
Government Pushes Debt Reprofiling
Senegal’s government has sought to distinguish its approach from a conventional restructuring.
Prime Minister Ahmadou Al Aminou Lo said the country intends to reprofile debt by extending maturities and renegotiating interest rates rather than pursuing a comprehensive restructuring.
The government also faces approximately $3.5 billion in arrears that need to be addressed as part of efforts to stabilise public finances. citeturn0news25
For investors, however, the distinction will depend on the eventual terms offered to creditors.
If bondholders receive less than originally promised or are required to accept less favourable repayment terms, ratings agencies could treat the transaction as a distressed exchange.
The crisis represents a significant test for Senegal, which had previously been regarded as one of West Africa’s more stable economies.
How quickly Dakar can restore fiscal credibility, reach agreement with creditors and secure final approval for IMF support will now be central to its economic outlook.
