Senegal credit rating downgraded by S&P amid default warnings

S&P Global Ratings has downgraded Senegal’s sovereign credit rating, warning that a default or distressed debt exchange on its external commercial debt is “extremely likely.” The agency lowered the long-term foreign-currency rating from CCC+ to CC and the long-term local-currency rating from CCC+ to CCC, both with a negative outlook.

The downgrade follows the discovery of billions of dollars in previously undisclosed public debt from the former administration. S&P expects that ongoing debt restructuring negotiations will result in losses for foreign-currency creditors, potentially through reduced principal, lower interest payments, or altered repayment terms.

While Senegal recently reached an agreement with the International Monetary Fund for a $2.2 billion, three-year lending programme, S&P suggests this financing may not immediately mitigate the risks surrounding external debt. The downgrade is expected to increase financing costs and restrict access to capital, as investors demand higher yields to compensate for increased risk.