DAKAR, Oct 30 – Moody’s Ratings has downgraded Senegal’s foreign-currency sovereign ratings for the fifth consecutive time, pushing the West African country deeper into distressed territory and warning that external private creditors could face greater losses than previously anticipated under its planned debt restructuring.
The ratings agency lowered Senegal’s foreign-currency senior unsecured and long-term issuer ratings to Ca from Caa2, while revising the outlook to stable from negative.
The latest downgrade comes less than two months after Moody’s cut the country’s rating to Caa2. It follows the government’s September announcement that it intends to pursue a debt restructuring under the G20 Common Framework, an international mechanism designed to coordinate debt treatment for eligible countries facing unsustainable debt burdens.
Undisclosed liabilities deepen Senegal’s debt crisis
Senegal’s restructuring plans follow the government’s disclosure of previously unreported liabilities that significantly worsened its fiscal position. The revelations pushed public debt to approximately 97% of gross domestic product, raising concerns about the country’s ability to meet its financial obligations.
The government has since been engaging creditors and the International Monetary Fund (IMF) in discussions aimed at restoring debt sustainability while preserving access to regional financing markets.
Moody’s latest assessment indicates that the expected burden on external private creditors has increased. The agency warned that these creditors are likely to experience larger losses under the restructuring than it had previously anticipated.
A Ca rating places Senegal deep in speculative-grade territory and reflects the agency’s assessment of very high credit risk.
Stable outlook reflects regional financial support
Despite the downgrade, Moody’s revised Senegal’s outlook to stable from negative, citing a balance between risks surrounding the restructuring process and the country’s membership in the West African Economic and Monetary Union (WAEMU).
The agency identified potential delays to the debt restructuring as a continuing risk. However, it said WAEMU membership helps limit currency and balance-of-payments risks while maintaining Senegal’s access to regional financing markets.
The regional monetary arrangement reduces the likelihood of a sharp deterioration in external liquidity, providing some support as the government negotiates with creditors.
Debt restructuring remains central to economic recovery
Senegal’s ability to restore debt sustainability will depend on the outcome of negotiations with creditors, the terms of any restructuring and progress in its engagement with the IMF.
The latest downgrade adds to the country’s financing challenges, particularly as it seeks to manage its obligations without losing access to regional capital markets.
While the stable outlook reflects the mitigating role of WAEMU membership, Moody’s assessment underscores the scale of the debt challenges facing Senegal and the potential losses that could be imposed on private creditors through the restructuring process.
