Exclusive: Senegal debt fears grow as loans are offered at low prices, according to reports
Senegal’s short-term commercial loans are being offered at huge discounts, four people in the finance industry told Reuters, raising questions about the troubled West African nation’s capacity to pay its debts.
The market is currently discussing Senegal’s euro-denominated loans that mature as early as February at or below 80 cents on the euro, according to the sources.
Consequently, the nation is more dependent on both internal debt and commercial credit.
According to two of the sources, it is uncommon for loans with such short maturities to be available at such cheap costs. They claimed that this was a reflection of worries about Senegal’s capacity to pay back its debts, including the shorter-term, smaller loans.
Senegal’s debt-to-GDP ratio is now more than 119% due to the discovery of more than $11 billion in debt that was not disclosed by a previous administration. Last year, the International Monetary Fund halted Senegal’s $1.8 billion loan program.
According to analysts and investors, the government’s growing need for funding and the lack of an IMF program make it more probable that it will need to restructure the debt.
Although negotiations for a fresh rescue loan have lasted longer than anticipated, Prime Minister Ousmane Sonko has stated that the IMF wants the government to restructure some loans, calling this “a disgrace.”
When questioned regarding trade and loan pricing, Senegal’s finance ministry claimed that all of the information was inaccurate.
Reuters was unable to determine whether sellers were receiving formal bids from other investors, and none of the sources stated that they intended to bid for the loans.
Under pressure, bond prices
In addition, the loan prices show a decline in the nation’s foreign bonds, which have fallen to all-time lows in recent weeks.
Senegal’s government bonds have seen a sharp decline in value in recent weeks. Dollar- and euro-bonds expiring in 2031 and later are bid between 54 and 61 cents, according to Tradeweb data, significantly below the 70 cent threshold below which debt is deemed distressed. In contrast, the shorter-dated 2028 euro-denominated maturity is bid at about 70 cents on the euro.
Two of the sources stated that the loans were originated by Standard Chartered (STAN.L), opens new tab, although they did not specify who presently possesses the loans.
Standard Chartered chose not to respond.
One of Africa’s leading arrangers of export credit, syndicated loans, and structured trade financing is Standard Chartered.
In Senegal, it has been active for years. It has supported the building of a bridge in the new Port of Ndayane project, which began in 2022, and an Olympic football stadium in Diamniado, which is estimated to have cost $279 million, according to media sources.
International creditors are expected to receive payments of 1,017.56 billion XOF ($1.8 billion) for commercial debt next year, according to official government documents.
