Moody’s Downgrades Senegal’s Credit Outlook Amid Audit Revelations

Moody’s downgraded Senegal’s credit outlook from B1 to B3 due to alarming fiscal conditions and significant financial mismanagement revealed in an audit. Prime Minister Ousmane Sonko termed the findings “catastrophic,” prompting calls for spending rationalization and a new audit. The country’s debt is now estimated at 99.7% of GDP, raising concerns about governance and the ability to manage economic shocks.

Moody’s Investors Service announced a downgrade of Senegal’s credit outlook due to the country’s deteriorating fiscal and debt conditions. This decision follows an audit revealing significant financial mismanagement, which Prime Minister Ousmane Sonko characterized as “catastrophic.” Consequently, Moody’s adjusted Senegal’s long-term issuer rating from B1 to B3, maintaining the country’s position just above a C-level rating, which indicates vulnerability to default.

The Senegalese government’s debt is currently estimated at approximately 99.7 percent of its GDP for 2023, exceeding original projections by 25 percent. This alarming figure emerged from a government audit last September. Analysts at Moody’s expressed concerns regarding Senegal’s heightened exposure to potential economic shocks due to its weakened fiscal stance, complicating efforts toward fiscal consolidation.

An audit report recently issued by Senegal’s Court of Auditors criticized the nation’s financial management practices from 2019 to 2024 and invalidated previous official financial data released under the former president, Macky Sall. Notably, the revised budget deficit for 2023 was estimated at 12.3 percent of GDP, contrary to the previously reported 4.9 percent.

Prime Minister Sonko described the audit findings as concerning, highlighting the need for immediate spending rationalization measures and the implementation of a more comprehensive audit by the end of April. In October, Moody’s had previously revised Senegal’s rating from Ba3 to B1, categorizing it as “highly speculative.”

The primary driver for the recent downgrade was the revealing nature of the financial metrics disclosed by the Court of Auditors, which illustrated serious governance deficiencies across multiple levels. These discrepancies have severely constrained Senegal’s fiscal capabilities and increased overall funding needs. The court, which operates independently, uncovered instances of what might amount to criminal financial misconduct and notable off-budget expenditures not documented in official reports. The government announced it may pursue legal action against those accountable for these governance failures.

In summary, Moody’s downgrade of Senegal reflects significant fiscal instability and troubling financial governance uncovered by a recent audit. The revised debt figures and budget deficit cast a shadow over the country’s economic health, leading to urgent calls for better financial management and potential legal actions against those responsible. As Senegal attempts to navigate this challenging fiscal landscape, it is imperative for the government to implement effective reforms.

Original Source: www.hindustantimes.com