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Research Announcement:

Moody's - Senegal's credit profile balances benefits of WAEMU membership against high debt burden

22 October 2020

New York, October 22, 2020 --

  • Small size, low wealth and weak competitiveness weigh on economic shock absorption capacity
  • Coronavirus pandemic response will lead to a sharp increase in the fiscal deficit this year

Senegal's (Ba3 negative) credit profile balances the macroeconomic and currency stability provided by its membership of the West African Economic and Monetary Union (WAEMU) against its relatively high debt burden and low economic competitiveness, Moody's Investors Service said in an annual report today.

Pooled regional foreign-exchange reserves also provide a backstop to the balance of payments and the associated stability is crucial in mitigating the fiscal and economic effects of the coronavirus crisis.

"Senegal's high debt levels constrain the government's capacity to absorb shocks and support the development of strategic sectors," said Elisa Parisi-Capone, a Moody's Vice President - Senior Analyst and the report's co-author. "Although the coronavirus shock will lead to a spike in the debt to GDP ratio for most sovereigns, Senegal's projected debt burden exceeds that of Ba-rated peers especially when measured as percent of revenue. This continues a trend that was already exerting downward pressure on Senegal's credit profile before the shock."

Hydrocarbon prospects support the long-term credit outlook, but the costs related to the project development, as well as timing and extent of the benefits remain uncertain in light of the subdued hydrocarbon price outlook.

An increasing probability that the debt burden returns to a sustained downward path after the acute phase of the coronavirus pandemic would be positive for Senegal's sovereign rating. On the other hand, diminishing confidence that the country will be able to arrest the upward debt trajectory would likely prompt a downgrade, as would a rising probability of private-sector participation in the Debt Service Suspension Initiative (DSSI).

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Elisa Parisi-Capone
VP-Senior Analyst
Sovereign Risk Group
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Marie Diron
MD-Sovereign Risk
Sovereign Risk Group
Moody's Investors Service Ltd.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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