Following its exclusion from eurobond markets due to recent revelations regarding 2024 budget revisions, Sénégal has strategically pivoted to the West African Economic and Monetary Union (UEMOA) public securities market as its primary funding source. Over the initial four months of the fiscal year, the Senegalese Public Treasury successfully mobilized an impressive 1311.3 billion FCFA. This substantial amount underscores the nation’s significant budgetary requirements and Dakar’s compelled reliance on regional investors. This compensatory financing strategy unfolds as rating agencies continue to exert unfavorable pressure on the country’s sovereign credit profile.
A strategic pivot to the UEMOA regional market
Sénégal’s current inability to access international markets is not a deliberate choice but a financial necessity. Heightened budgetary pressures, exacerbated by the discovery of a public debt significantly higher than figures previously disclosed by the former administration, have driven up the cost of foreign currency debt and temporarily closed the window for eurobond issuances. Lacking immediate international alternatives, the Ministry of Finance and Budget has turned to Umoa-Titres, the regional agency responsible for organizing Treasury bill and bond auctions for the Union’s eight member states.
The 1311.3 billion FCFA (approximately two billion euros) raised in just four months positions Sénégal among the most active issuers in the zone. This figure reflects a sustained issuing pace, averaging close to 330 billion FCFA monthly. Such intensity far surpasses Dakar’s historical average in this segment, indicating the Treasury’s concerted effort to offset, line by line, the funds it can no longer borrow internationally.
High cost of sovereign borrowing
This revised financing strategy comes with a notable trade-off: higher interest rates. Sub-regional banks, the primary subscribers of public securities, are now demanding increased yields to absorb Senegalese debt instruments. The perceived deterioration of sovereign risk, amplified by successive downgrades from Moody’s and Standard & Poor’s in recent months, is directly reflected in the premium requested at each auction. Consequently, Sénégal is borrowing at a higher cost than its immediate neighbors for comparable maturities.
This situation presents a dual challenge. Firstly, it escalates the burden of domestic regional debt service within an already strained national budget. Secondly, it absorbs a growing share of UEMOA’s banking liquidity, potentially leading to a crowding-out effect detrimental to other sovereign issuers and private sector financing. Nations like Côte d’Ivoire, Mali, and Burkina Faso, which also regularly solicit Umoa-Titres, face a reduced absorption capacity as a result.
Restoring credibility to regain external market access
The stakes for Dakar extend beyond simply covering 2025 maturities. Senegalese authorities are simultaneously negotiating a new program with the International Monetary Fund (FMI), a process that has been on hold since the national debt audit. Securing an agreement would be instrumental in gradually rebuilding foreign investor confidence and, eventually, reopening access to international financial markets. In the interim, the regional market serves as a vital buffer, but it cannot indefinitely replace the foreign currency flows essential for financing major infrastructure projects, particularly in the hydrocarbons and energy sectors.
The government led by President Bassirou Diomaye Faye and Prime Minister Ousmane Sonko is committed to maintaining this domestic financing trajectory while public accounts are streamlined and a credible sovereign signature is re-established. While short-term treasury needs are met, the pressure from regional rates and the escalating interest burden leave minimal room for error. The restoration of budgetary credibility remains the fundamental prerequisite for any financial normalization.
