Senegal’s dollar bonds rallied after the International Monetary Fund approved about $1.8 billion in loans to support the nation’s recovery and protect it from future shocks.
The note maturing in May 2033 rose for a third day to trade at 83.75 cents on the dollar, heading for one the best performances among emerging-market peers. Securities due 2048 also figured in the top 20 gainers on the Bloomberg EM Sovereign Total Return Index.
The IMF’s board on Monday approved an extended fund and credit facility of $1.51 billion over three years, as well as $324 million from its resilience and sustainability trust, to enable Senegal to deal with prolonged risks such as climate change. The West African economy will receive an immediate disbursement of about $216 million.
A confluence of external shocks largely linked to Russia’s invasion of Ukraine hindered Senegal’s post-Covid-19 recovery, strained public finances and external payment positions and increased its debt levels.
“Reducing growing debt vulnerabilities requires a steadfast implementation of the fiscal consolidation strategy anchored on commitments to reach a fiscal deficit of 3% of GDP by 2025,” the fund said, referring to gross domestic product.
The money will help boost fiscal space for the government of President Macky Sall, who spent 4% of gross domestic product last year to keep fuel and food prices under control. It also provides balance of payment support for a country that is poised to have Africa’s second-fastest growing economy this year, which is scheduled to hold presidential elections in 2024 and is recovering from recent riots.
Clashes broke out earlier this month between the police and supporters of popular opposition leader Ousmane Sonko, who was sentenced to two years in prison for “morally corrupting a youth,” which could prevent him from running in next year’s elections. The violent protests left at least 16 people dead and several stores looted and torched.
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The start of oil and gas production in the fourth quarter may accelerate Senegal’s economic expansion to 8.3% this year, the fastest in Africa after Libya’s projected growth of 17.5%, according to the IMF.
Public debt will ease to 73.1% of GDP after rising 28 percentage points from pre-pandemic levels to 75% of GDP last year, the IMF said. Inflation is expected to slow to 5%, from 9.7% in 2022.
--With assistance from Srinivasan Sivabalan and John Viljoen.
