Senegal Targets Regional Debt Market to Address 2025 Budget Deficit

Senegal is preparing to access the regional debt market within the West African Economic and Monetary Union (WAEMU) to finance a 2025 budget deficit estimated at 6.8% of GDP, according to official projections. This marks a shift from reliance on domestic borrowing and international aid, signaling increased fiscal strain as the country navigates a 3.7% growth rate in 2024—down from 3.9% in 2022—amid persistent inflation and external headwinds. The regional bond market, anchored by the WAEMU common treasury, offers Senegal a platform to attract long-term funding from other member states and regional investors. Instruments under consideration include fixed-rate sovereign bonds with maturities ranging from 5 to 15 years, potentially issued in CFA francs, the regional currency shared with GHA (Ghana), NGA (Nigeria), and SEY (Seychelles), though only WAEMU nations are directly involved. Market analysts note that Senegal’s increased issuance could lead to a modest rise in regional sovereign yields, particularly affecting countries with similar fiscal profiles such as Benin and Burkina Faso. The move may also impact currency dynamics, as higher debt issuance could increase demand for CFA francs in bond markets, potentially supporting exchange rate stability in the short term while raising longer-term concerns about debt sustainability. Investor sentiment in frontier and emerging market debt is expected to remain sensitive to developments in Senegal, given its status as a key economic player in West Africa. The success of the bond issuance will depend on regional investor confidence, credit ratings, and the broader macroeconomic environment across ECOWAS.