Written by Duncan Miriri
NAIROBI (Reuters) – Senegal’s dollar sovereign bonds fell on Friday after a government review revealed larger debt and deficit numbers than the previous administration announced, TradeWeb data showed.
Recently elected President Basseru Diomai Faye, who ordered the audit, blamed the previous government for publishing false figures, but highlighted the daunting task ahead for the West African country, which is already suffering from slowing economic growth.
“The announcement looks like a credit negative event,” said Evgenia Sleptsova, chief emerging markets economist at consultancy Oxford Economics.
Dollar bonds fell by more than two cents in early trading before recovering their losses, falling by about 1.3 cents between 73.01 and 85.52 cents to the dollar by 1200 GMT.
The IMF, which has a $1.9 billion bailout program with Senegal, said the government had shared the findings of the initial review and was working with them to determine appropriate next steps.
Economy Minister Abdul Rahman Sar said late Thursday evening that the review showed a deficit of more than 10% at the end of 2023, in contrast to the 5% announced by the previous government.
Meanwhile, public debt averaged 76.3% of GDP, according to the review, compared to the previously reported 65.9%, due to a higher-than-announced public deficit.
Saar said that the alarming numbers, and the fear of violating the rules of the International Monetary Fund, prevented the government from requesting funds from the International Monetary Fund that could have been disbursed in July.
Abdoulaye Ndiaye, a professor of macroeconomics and public finance at New York University’s Stern School of Business, said the unprecedented review in Senegal underscores the need for “courageous choices.”
He added: “The results are disturbing, and a comprehensive legal investigation must be conducted.”
The International Monetary Fund has already lowered Senegal’s growth forecasts for this year, warning of a wider fiscal deficit due to slowing revenue growth.
Earlier this month, Fay called early legislative elections, scheduled for November 17, to try to break the impasse over the new budget and efforts to cut government waste.
However, emerging oil production, which began in June, and gas production expected by the end of the year, could boost the government’s finances.