Facing restricted access to eurobonds following the disclosure of its 2024 budget revisions, Sénégal has increasingly relied on 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 raised an impressive 1311.3 billion FCFA. This substantial volume highlights both the significant demand for budgetary coverage and Dakar’s strategic pivot towards regional investors, a move necessitated by persistent unfavorable pressure from rating agencies on the nation’s sovereign credit.
Strategic pivot to the regional UEMOA market
Sénégal’s current exclusion from international financial markets is not a deliberate choice but rather a forced adaptation. Heightened budgetary pressures, exacerbated by the revelation of a public debt considerably higher than figures presented by the previous administration, have driven up the cost of foreign currency debt and temporarily closed the window for eurobond issuances. Without immediate alternatives, the Ministry of Finance and Budget 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 sustained pace of issuance, averaging close to 330 billion FCFA monthly, far exceeds Dakar’s historical average in this segment. It clearly indicates the Treasury’s efforts to compensate, line by line, for the external borrowing it can no longer secure.
Sénégal’s credit comes at a higher price
This financing strategy, however, comes with a significant trade-off: higher interest rates. Sub-regional banks, the primary subscribers to 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 sought at each auction. Consequently, Sénégal is borrowing at a higher cost compared to its immediate neighbors for comparable maturities.
This situation presents a dual challenge. Firstly, it escalates the burden of regional domestic debt service within an already strained budget. Secondly, it absorbs an increasing 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 tap Umoa-Titres, find their available absorption capacity diminishing.
Restoring credibility to re-enter external markets
For Dakar, the challenge extends beyond merely covering 2025 maturities. Senegalese authorities are simultaneously negotiating a new program with the International Monetary Fund (FMI), which has been on hold since the debt audit. A successful agreement would be crucial for gradually rebuilding foreign investor confidence and, eventually, reopening access to international markets. In the interim, the regional market serves as a vital buffer, but it cannot indefinitely substitute the foreign currency inflows essential for financing major infrastructure projects, particularly in the hydrocarbon and energy sectors.
The government led by President Bassirou Diomaye Faye and Prime Minister Ousmane Sonko is banking on this domestic financing trajectory to stabilize public accounts and re-establish credible financial standing. While short-term treasury needs are met, the upward pressure on regional rates and the escalating interest bill leave little room for error. The restoration of budgetary credibility remains the fundamental condition for any future financial normalization.
