Deprived of access to Eurobond markets following the disclosure of its 2024 budget revisions, Sénégal has strategically turned to the public securities market within 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 an impressive 1311.3 billion FCFA. This substantial amount underscores the critical need for budgetary coverage and Dakar’s compelled reliance on regional investors. This compensatory financing approach unfolds amidst persistent unfavorable pressure from credit rating agencies on the nation’s sovereign creditworthiness.

Sénégal’s strategic pivot to the regional UEMOA market

Sénégal’s exclusion from international financial markets was not a choice but a necessity. Budgetary strains, exacerbated by the revelation of a significantly higher public debt than figures presented by the previous administration, have driven up the cost of foreign currency debt and temporarily closed the Eurobond issuance window. Lacking immediate alternatives, the Ministry of Finance and Budget directed its efforts towards Umoa-Titres, the regional entity responsible for orchestrating Treasury bill and bond auctions for the Union’s eight member states.

The substantial sum of 1311.3 billion FCFA, equivalent to approximately two billion euros, secured over these four months positions Sénégal among the most active issuers within the UEMOA zone. This figure reflects a remarkably sustained pace of issuance, nearing 330 billion FCFA monthly. Such intensity far exceeds Dakar’s historical average in this market segment, clearly indicating the Treasury’s concerted effort to compensate for the external borrowing avenues that are currently unavailable.

The cost of Sénégal’s sovereign debt rises

The trade-off for this financing strategy is evident in the interest rates. Sub-regional banks, acting as the primary subscribers to public securities, are now demanding higher yields to absorb Senegalese instruments. The erosion of sovereign risk perception, intensified by consecutive downgrades from Moody’s and Standard & Poor’s in recent months, directly translates into the premium requested at each auction. In practical terms, Sénégal is securing funds at a higher cost compared to its immediate neighbors for comparable maturities.

This situation presents a two-fold challenge. Firstly, it increases the burden of servicing regional domestic debt within an already strained national budget. Secondly, it absorbs a growing share of UEMOA’s banking liquidity, potentially leading to a crowding-out effect that disadvantages other sovereign issuers and private sector financing. Nations like Côte d’Ivoire, Mali, and Burkina Faso, which also regularly approach Umoa-Titres, consequently face a reduced capacity for their own absorption.

Restoring credibility to regain access to external markets

The stakes for Dakar extend beyond merely covering its 2025 financial obligations. Concurrently, Senegalese authorities are engaged in negotiations for a new program with the International Monetary Fund (FMI), which was put on hold following a debt audit. Securing such an agreement would be crucial for a gradual return of foreign investor confidence and, ultimately, the reopening of international funding channels. For now, the regional market acts as a vital buffer, though it cannot indefinitely replace the foreign currency inflows essential for financing major infrastructure projects, particularly in the hydrocarbon and energy sectors.

The strategy adopted by the government of President Bassirou Diomaye Faye and Prime Minister Ousmane Sonko involves sustaining this domestic financing trajectory while public accounts are stabilized and a credible sovereign signature is rebuilt. While short-term treasury needs are met, the upward pressure on regional interest rates and the accumulating interest burden allow for minimal error. Ultimately, restoring budgetary credibility remains the fundamental prerequisite for any financial normalization. Over these four months, the total funds raised reached 1311.3 billion FCFA.