Moody’s Ratings expects external private creditors to face larger losses than it indicated in its earlier assessment of Senegal’s planned debt restructuring, BusinessDay reported Friday, after cutting the country’s foreign-currency ratings to Ca.
The action covered Senegal’s foreign-currency senior unsecured and long-term issuer ratings, both moved down from Caa2, the outlet said. It was the fifth downgrade in a row and came less than two months after the previous cut. Moody’s shifted the outlook to stable from negative.
BusinessDay tied the worsening debt outlook to liabilities that Senegal had not previously reported; their disclosure took public debt to around 97% of gross domestic product. In September, the government announced a plan to pursue restructuring through the G20 Common Framework, which organizes debt-relief negotiations for eligible countries, the outlet reported.
The report says Senegal is in talks with the International Monetary Fund (IMF) and creditors about a sustainable debt path. A parallel concern is keeping regional borrowing channels available, BusinessDay reported.
Membership in the West African Economic and Monetary Union (WAEMU) offers some offset to those pressures, according to BusinessDay’s account of Moody’s reasoning. The agency views Senegal’s membership in the monetary union as limiting stress on currency and cross-border payments and supporting financing from regional markets. The outlet said this access also gives a buffer against worsening external liquidity as negotiations proceed.
Moody’s moved the outlook to stable because it sees a balance between restructuring risks, including possible delays, and support from Senegal’s WAEMU membership, BusinessDay reported. The union’s regional market access may help soften external funding pressure during talks, but does not resolve underlying debt challenges or ensure smooth negotiations.
BusinessDay said Moody’s Ca category denotes a sovereign facing extremely high default risk, with creditor recovery hinging on negotiation results. The settlement terms, scale of any debt relief and progress toward an IMF-supported framework will shape how the debt process unfolds overall, the outlet reported.
