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03 Jun 2016
New York, June 03, 2016 -- Moody's Investor Services has today affirmed Senegal's B1
government bond and issuer ratings and maintained the positive outlook.
Senegal's short-term rating is affirmed at Not Prime.
Moody's affirmation of Senegal's B1 sovereign ratings reflects a number
of credit supports, including its history of political stability
and track record of macro-stability which its membership of the
franc Zone and West African Economic and Monetary Union (WAEMU) contributes
to. These are balanced against credit constraints, including
high and rising government debt levels, the country's low income
per capita, as well as its reliance on foreign assistance.
The positive outlook recognizes the prospect of improved creditworthiness
derived from stronger growth potential, ongoing structural reforms
and fiscal consolidation efforts.
All Senegal's country and deposit ceilings remain unchanged at Baa1.
RATIONALE FOR AFFIRMING THE B1 RATINGS
Moody's decision to affirm the B1 sovereign ratings reflects the
balance between a number of structural credit supports and credit constraints.
Senegal's membership of the WAEMU, itself part of the franc
Zone, and its long history of political stability with peaceful
government changes are key credit strengths. Membership of the
WAEMU provides macroeconomic and price stability and lowers Senegal's
external vulnerability stemming from its persistent current account deficit.
That said, the relative low wealth of the country constrains creditworthiness.
GDP per capita levels, measured in both absolute terms and on purchasing
power parity basis, are low and have shown little improvement over
the last few years despite robust GDP growth. With GDP per capita
of $2,346 in PPP terms in 2014, Senegal's wealth
levels are notably lower than the B1 median of $8,628 in
PPP terms. However, GDP will likely be revised next year
as a result of the authorities' current rebasing exercise.
Meanwhile, government debt at end-2015 was equivalent to
57% of GDP or 234% of government revenues, well above
the B1-median ratios of 49% and 229%, respectively.
While currency swaps and membership of the franc Zone, under which
the local currency is pegged against the euro, mitigate foreign
exchange risk, the high government debt stock and its increasing
trend means that the government's fiscal space to absorb potential
shocks is limited.
RATIONALE FOR MAINTAINING THE POSITIVE OUTLOOK
Notwithstanding Senegal's credit constraints, the positive
outlook recognizes the country's positive momentum in growth performance,
improving institutional strength and fiscal consolidation effort.
In 2015, which corresponds to the first full year of the implementation
of the government's reform agenda, formalized in the Plan
Sénégal Emergent (PSE), real growth accelerated to
6.5% from 4.3% in 2014 and 3.6%
in 2013. In particular, the agricultural sector's output
has been a key contributor (accounting for 2.2 percentage points
of GDP growth) to this performance.
The PSE, which is partly government-financed, was unveiled
by President Macky Sall in 2014 and aims to improve the capacity of the
economy to grow in a more inclusive manner by upgrading the country's
infrastructure, improving the business environment to foster private
investment, and providing policy support to strategic sectors.
With foreign financial assistance and improved public governance,
the PSE is designed to maximize economic benefits and minimize fiscal
The authorities' reform impetus is exhibited by Senegal's
improved ranking under international surveys that measure economic governance.
For example, Senegal improved its ranking in the 2015-2016
edition of the World Economic Forum's Global Competitiveness Report
by two places to be ranked 110 out of 140 countries. Senegal also
moved up eight places in the World Bank's Doing Business Report
of 2016. For the second year in a row, the country was included
in the top 10 reformers in the World Bank's report. Senegal
has shown progress in four key areas, notably in the energy sector,
ease of starting a business, registering property, and enforcing
contracts. Nevertheless, benefits derived from an improved
business climate such as higher levels of FDI and improved competitiveness,
typically materialize gradually.
The government slowly brought down its fiscal deficit to 4.8%
of GDP in 2015 from 6.3% in 2011. More importantly,
fiscal consolidation efforts accelerated in 2015, with the government's
primary deficit net of exogenous factors (i.e. grants and
extraordinary revenues over which it has little discretion) improving
markedly by 1 percentage point of GDP. The shift in the government's
expenditure mix toward more capital spending and less operating expenditures
is also credit positive given the former tends to have a more positive
impact on growth, spending efficiency constraints notwithstanding.
Capital expenditures have targeted infrastructure projects in the transport,
energy and mining sectors.
WHAT COULD CHANGE THE RATING UP/DOWN
Moody's would consider upgrading Senegal's ratings upon increasing
evidence that the positive momentum on growth, strengthening institutional
capacity and fiscal consolidation effort will be sufficient to deliver
a sustained reversal in the government debt trend over the medium term.
Conversely, Moody's would consider stabilizing the outlook
if improvements in economic performance prove short-lived and prospects
for reversing the upward trajectory in government debt fade.
GDP per capita (PPP basis, US$): 2,451 (2015
Actual) (also known as Per Capita Income)
Real GDP growth (% change): 6.5% (2015 Actual)
(also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 0.4%
Gen. Gov. Financial Balance/GDP: -4.8%
(2015 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: -8.2% (2015 Actual)
(also known as External Balance)
External debt/GDP: 41.5% (2015 Estimated)
Level of economic development: Low level of economic resilience
Default history: At least one default event (on bonds and/or loans)
has been recorded since 1983.
On 01 June 2016, a rating committee was called to discuss the rating
of the government of Senegal. The main points raised during the
discussion were: The issuer's economic fundamentals, including
its economic strength, the issuer's institutional strength/framework,
and issuer's governance and/or management, and the issuer's fiscal
or financial strength, including its debt profile, none of
which have materially changed.
The principal methodology used in these ratings was Sovereign Bond Ratings
published in December 2015. Please see the Ratings Methodologies
page on www.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used
in this credit rating action, if applicable.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating. For provisional
ratings, this announcement provides certain regulatory disclosures
in relation to the provisional rating assigned, and in relation
to a definitive rating that may be assigned subsequent to the final issuance
of the debt, in each case where the transaction structure and terms
have not changed prior to the assignment of the definitive rating in a
manner that would have affected the rating. For further information
please see the ratings tab on the issuer/entity page for the respective
issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
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to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's affirms Senegal's B1 ratings, maintains positive outlook
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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