Senegal’s strategic pivot to UEMOA market secures substantial funding
Having lost access to international Eurobond markets following the disclosure of its 2024 budget revisions, Senegal has strategically pivoted to the West African Economic and Monetary Union (UEMOA) public securities market, making it its primary funding source. Over the first four months of the fiscal year, the Senegalese Public Treasury successfully mobilized 1311.3 billion FCFA. This significant volume underscores the nation’s substantial budgetary needs and Dakar’s necessary reliance on regional investors. This substitution strategy unfolds as credit rating agencies continue to exert unfavorable pressure on the country’s sovereign signature.
A strategic shift to the UEMOA regional market
Senegal’s exclusion from global financial markets is not a choice but a compelling necessity. Mounting budgetary pressures, exacerbated by the revelation of a public debt significantly higher than figures previously communicated under 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 tasked with organizing Treasury bill and bond auctions for the Union’s eight member states.
The 1311.3 billion FCFA raised in just 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 signals the Treasury’s concerted effort to compensate, line by line, for the external borrowing opportunities it can no longer access.
A sovereign signature at a premium
The consequence of this strategy is reflected in borrowing rates. Banks within the sub-region, the primary subscribers to public securities, now demand higher yields to absorb Senegalese paper. The deteriorating perception of sovereign risk, amplified by successive downgrades from Moody’s and Standard & Poor’s in recent months, is evident in the premium requested at each auction. In practice, Senegal is borrowing at a higher cost than its immediate neighbors for comparable maturities.
This situation presents a dual challenge. Firstly, it escalates the service of domestic regional debt within an already strained budget. Secondly, it absorbs a growing share of UEMOA’s banking liquidity, potentially creating a crowding-out effect detrimental to other sovereign issuers and private sector financing. Countries like Côte d’Ivoire, Mali, and Burkina Faso, which also regularly solicit Umoa-Titres, consequently face a reduced absorption capacity in the market.
Restoring credibility to reopen external markets
For Dakar, the stakes extend beyond merely 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 this agreement would be crucial for a gradual return of foreign investor confidence and, eventually, the reopening of international market access. In the interim, the regional market serves as a vital buffer, though it cannot indefinitely substitute the foreign currency flows essential for financing major infrastructure projects, particularly in hydrocarbons and energy.
The government of President Bassirou Diomaye Faye and Prime Minister Ousmane Sonko is committed to maintaining this domestic financing trajectory while public accounts are stabilized and a credible sovereign signature is rebuilt. While short-term treasury needs are met, the pressure on regional rates and the accumulating interest payments leave little room for error. Restoring budgetary credibility remains the fundamental condition for any normalization of Senegal’s financial standing.
