Following revelations of its 2024 budget revisions, which curtailed access to Eurobond markets, Senegal has strategically positioned the public securities market of the West African Economic and Monetary Union (UEMOA) as its primary funding source. Over the initial four months of the fiscal year, the Senegalese Public Treasury successfully raised 1311.3 billion FCFA. This substantial amount underscores the nation’s pressing need for budgetary coverage and its necessary pivot towards regional investors, a strategy implemented while sovereign credit ratings continue to face adverse pressure from rating agencies.
A strategic pivot to the regional UEMOA market
Senegal’s exclusion from international financial markets was not a deliberate choice but a consequence of prevailing economic realities. Heightened budgetary tensions, 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 alternatives, the Ministry of Finance and Budget turned to Umoa-Titres, the regional agency responsible for organizing auctions of Treasury bills and bonds for the eight member states of the Union.
The 1311.3 billion FCFA mobilized within four months, equivalent to approximately two billion euros, positions Senegal among the most active issuers in the zone. This sustained pace of issuance, averaging close to 330 billion FCFA monthly, far surpasses 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.
High costs for sovereign borrowing
This financing strategy, however, comes with a significant cost in terms of interest rates. Sub-regional banks, the primary subscribers to public securities, are now demanding higher yields to absorb Senegalese debt. 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, Senegal is borrowing at higher rates than its immediate neighbors for comparable maturities.
This situation presents a dual challenge. Firstly, it increases the burden of domestic regional debt service on an already strained national budget. Secondly, it absorbs a growing share of UEMOA’s banking liquidity, risking a crowding-out effect that could disadvantage other sovereign issuers and private sector financing. Countries like Côte d’Ivoire, Mali, and Burkina Faso, which also regularly solicit Umoa-Titres, find their available absorption capacity reduced.
Restoring credibility for international 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), which has been on hold since the debt audit. Unlocking an agreement would be a crucial step towards gradually restoring 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 for the foreign currency flows essential for financing major infrastructure projects, particularly in the hydrocarbons and energy sectors.
The government of Bassirou Diomaye Faye and Prime Minister Ousmane Sonko is committed to maintaining this domestic financing trajectory while public accounts are cleaned up and a credible sovereign signature is re-established. While short-term treasury needs are met, the 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 normalization of Senegal’s financial standing.