Moody’s Ratings officially lowered Senegal’s credit rating this Friday, moving it to Caa2 from the previous Caa1, while maintaining a negative outlook. This downgrade impacts the nation’s long-term foreign and local currency issuer ratings, as well as its senior unsecured foreign currency ratings. The short-term rating remains confirmed at “Not Prime.” This significant shift occurs as an International Monetary Fund (IMF) mission, present in Dakar from August 19 to September 1, engages in discussions with authorities to outline a new financial program. This dossier has been on hold since a previous disbursement program failed in early November 2025, following the government’s refusal to consider debt restructuring.
In practical terms, a Caa2 rating places Senegal within the “highly speculative” segment of credit ratings. A report from Oxford Economics dated June 4, 2026, had already underscored market sentiment on this matter: Senegalese sovereign spreads had escalated to levels comparable to those of Venezuela and Lebanon, two nations historically synonymous with default risk. This deterioration in market perception is more than just semantic. Between September and December 2025, Senegalese Eurobonds saw approximately 20% of their value evaporate, and yield spreads on international markets doubled, surging from an annual average of 800 basis points to 1,500 basis points. The Eurobond maturing in 2048 was then trading at 51 cents on the euro, representing a 49% discount, while the 2028 Eurobond, whose amortization commenced in March 2026, exhibited a discount exceeding 30%.
Technical risks and public finance pressures
From a technical risk perspective, Moody’s precisely quantifies the immense pressure on public finances. The country faces gross financing needs amounting to roughly 25% of its Gross Domestic Product (GDP). Annual principal repayments alone are estimated to be about 18% of GDP, while interest payments have climbed from 16.1% to 23.7% of state revenues between 2023 and 2026. The total public debt, encompassing public enterprises, is projected at nearly 108% of GDP. This figure should be considered alongside the IMF’s estimate of debt reaching 132% of GDP by the end of 2024, following the disclosure of a portion of “hidden debt” from the previous administration. Another tangible indicator of this strain emerged during the UEMOA regional auctions in December 2025: out of 95 billion FCFA offered, only 35 billion FCFA were successfully raised, and the weighted average yield surged by 158 basis points in a single month. This demonstrates that even the regional market, previously a safety net, is now displaying signs of saturation.
Mounting repayment obligations for Dakar
The concrete deadlines illustrate the daily implications for the state. In March 2026, Dakar was compelled to secure nearly 485 million dollars, including approximately 394 million dollars in principal, to honor a tranche of a 2.2 billion dollar Eurobond issued in 2018. This was achieved by resorting to local banks, given the challenging access to international markets. The IMF, for its part, had suspended a 1.8 billion dollar loan program due to disagreements over debt restructuring. It is precisely these recurring payment deadlines, with other Eurobonds maturing in 2026—a year identified by the World Bank as a peak repayment period for Sub-Saharan Africa—that the new Caa2 rating renders significantly more expensive to refinance.
Institutional tensions contribute to the downgrade
Moody’s also revised downward Senegal’s country ceilings, from Ba3 to B1 for local currency and from B1 to B2 for foreign currencies. The agency explicitly links its decision to ongoing institutional tensions: the dismissal of former Prime Minister Ousmane Sonko and his subsequent election as President of the National Assembly have intensified the power struggle between the executive and legislative branches. According to Moody’s, this situation heightens the risk of delays in implementing crucial budgetary measures.
Nevertheless, one factor somewhat mitigates this challenging outlook. Senegal’s continued membership in the UEMOA bloc remains a significant supportive element, according to Moody’s. The pegging of the CFA franc to the euro and the healthy level of regional foreign exchange reserves, nearing 38 billion dollars by the end of May 2026, also help to curb the risk of a currency or balance of payments crisis, even as fiscal pressures persist unabated.
This marks the third downgrade for Senegal in just over a year. Following an initial reduction from B3 to Caa1 in October 2025—a decision contested at the time by the Ministry of Finance, which deemed the agency’s assumptions “speculative, subjective, and biased”—and a similar downgrade by S&P earlier this year, the nation now enters the final phase of discussions with the IMF in a risk zone considerably more pronounced than it was a year ago.
