Senegal’s dollar bonds declined sharply on Friday after an audit ordered by President Bassirou Diomaye Faye revealed that the nation’s debt and deficit levels were much higher than previously disclosed, according to Tradeweb data.
The recently inaugurated Faye administration attributed the discrepancies to misleading reports from the former government. The audit highlighted the challenges facing the West African nation, already struggling with slowed economic growth.
Evghenia Sleptsova, a senior economist at Oxford Economics, described the findings as “credit-negative.”
Following the news, Senegal’s bonds dropped by more than 2 cents, although they later recovered slightly, trading about 1.3 cents lower by midday, with prices between 73.01 and 85.52 cents on the dollar.
The International Monetary Fund (IMF), which is overseeing a $1.9 billion bailout package with Senegal, acknowledged the audit and is working with the government to chart a way forward.
The audit uncovered a deficit exceeding 10% at the end of 2023, contrasting with the 5% figure previously reported, according to Economy Minister Abdourahmane Sarr. Public debt was revised to an average of 76.3% of GDP, a significant increase from the previously stated 65.9%, due to underreported deficits.
The government delayed seeking IMF funds, fearing violations of bailout conditions. Abdoulaye Ndiaye, a macroeconomics professor at NYU, called for a comprehensive legal investigation, noting that this unprecedented audit exposed the need for “courageous choices.”
Despite these revelations, the Faye administration remains hopeful that oil production, which began in June, and forthcoming gas production will help stabilize public finances.