On October 10, Moody's Ratings downgraded Senegal's credit rating from B3 to Caa1, maintaining a negative outlook. This decision, which places the country in the high-risk speculative investment category, highlights the growing economic challenges facing Senegal. But what are the practical implications of this downgrade for the Senegalese economy and its citizens? Is it as serious as it sounds?

The heart of Moody's decision is the upward revision of Senegal's debt ratio, now estimated at 119% of GDP for 2024, compared to 107% in the February forecast. This level, one of the highest among emerging countries, complicates fiscal consolidation efforts. By comparison, the median for B-rated countries is 283% of government revenue, compared to 581% for Senegal. This situation reflects an increased dependence on borrowing, particularly in the WAEMU regional market, where interest rates, ranging between 6.75% and 7.75%, are increasing the debt burden. For Senegalese citizens, this means increased pressure on public finances. Interest payments are expected to absorb 27% of government revenue in 2026, reducing room for maneuver for investments in key sectors such as education, health, and infrastructure. The compression of investment spending, already observed in the first half of 2025, risks slowing economic growth, forecast at 6.9% in 2024, but which could slow if budgetary constraints persist.

Increased liquidity risks

The slow pace of negotiations with the International Monetary Fund (IMF) for a new program, initially expected in June, is exacerbating tensions. Without this agreement, which is crucial for unlocking concessional financing and restoring investor confidence, Senegal is turning to the regional market, which is more expensive and has limited absorption capacity. Moody's points out that further delays could increase the risk of a debt restructuring involving private creditors, a scenario that would signal a higher risk of default.

For citizens, this could translate into higher utility costs or a stalling of infrastructure projects, such as roads or rural electrification, while only 74% of the population has access to electricity. Households, already facing a precarious labor market (70% of jobs without formal contracts), could see their purchasing power further erode if economic growth slows.

A serious situation, but not hopeless

Is it that serious? Yes, to the extent that the downgrade reflects growing vulnerability. The high debt ratio and gross financing needs, estimated at 26% of GDP in 2025 and 2026, expose Senegal to external shocks, such as a decline in regional investor confidence or loose fiscal discipline within the WAEMU. Moreover, past shortcomings in fiscal transparency, revealed by audits, undermine the country's credibility. However, factors mitigate this severity. Membership in the WAEMU, with the guaranteed peg of the CFA franc to the euro, limits the risks of convertibility and external imbalances.

Furthermore, the government is aiming to reduce the budget deficit to 7.8% of GDP in 2025, compared to 12.8% in 2024, thanks to tax reforms and an Economic and Social Recovery Plan. If an agreement with the IMF is reached by mid-2026, as anticipated by Moody's, this could stabilize the situation by attracting cheaper financing.