(Ecofin Agency) - Between 2019 and 2023, Senegal’s budget deficit averaged 10.4% of GDP, nearly double the initially reported 5.5%, while public debt exceeded 83% of GDP in 2023, according to the government.

Moody's downgraded Senegal’s credit rating from "Ba3" to "B1" on Friday, October 4, 2024. The new rating indicates a "high credit risk."

The downgrade is mainly due to Senegal’s worsening budget and debt situation. Government data from September shows that public debt rose to 83.7% of GDP in 2023, up from an initially projected 73.6%. This increase reflects unaccounted-for spending and underestimated borrowing. Additionally, the budget deficit averaged 10.4% of GDP from 2019 to 2023, nearly double the 5.5% previously reported by authorities.

In response, Senegal’s Finance Minister, Cheikh Diba, announced plans to implement structural reforms starting in 2025. These reforms aim to reduce the budget deficit, stabilize public debt, and meet Senegal’s commitments to the West African Economic and Monetary Union (WAEMU), the Economic Community of West African States (ECOWAS), and international partners, according to local media.

Senegal is also currently in discussions with the International Monetary Fund (IMF) to restore investor confidence and stabilize its economy. An IMF mission in Dakar last September revealed that the country’s economy slowed in the first half of 2024, with a bleak outlook for the rest of the year. The drop in public revenues, combined with rising energy subsidies and interest payments, has worsened the budget situation.

Moody’s projects the budget deficit could reach 7.5% of GDP in 2024, while the government aims to bring public debt below 70% of GDP. The rating remains "under review."