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IMF Tells Senegal to Keep Some of $2.2 Billion Bond for 2019


Senegal could endanger its low-risk debt rating if the West African nation doesn’t retain some of the $2.2 billion that it raised through a recent sale of Eurobonds to finance next year’s budget, according to the International Monetary Fund.

Senegal sold 1 billion euros ($1.2 billion) of notes on March 6 and a separate $1 billion tranche on the same day which lifted the nation of about 15 million people’s total debt stock by more than a fifth to $10.2 billion, according to Ecobank Transnational Inc. Senegal is in the third year of a policy-support program with the IMF under which the country invited the Washington-based lender to advise, monitor and endorse its policies.

During the program’s last review in January, the IMF maintained a “low” debt risk rating for Senegal. This month’s bond sale could place the assessment at risk, Cemile Sancak, the IMF’s country representative, said in an interview in the capital, Dakar.

The sale was “beyond the financing need that was set in the program with the IMF, including the repurchase of some past loans,” Sancak said. The IMF is in talks with the authorities to allocate some money from the Eurobond sale “to fund the 2019 budget,” she said.

Finance and Economy Minister Amadou Ba told lawmakers on Tuesday that Senegal will manage its debt well. A spokesman for the ministry declined to comment when contacted by phone.

Low Risk

Under the program with the IMF, the government’s overall net financing needs for 2018 has a ceiling of 442 billion CFA francs ($814 million) for 2018 and a forecast 339 billion CFA francs for next year, documents on the lender’s website show. While most of the proceeds of the Eurobond sale will go toward the country’s infrastructure program, it will use as much as $200 million to buy back dollar debt maturing in 2021.

Senegal remains at low risk of debt distress as the redemption of the dollar securities will reduce the country’s commitments over the “near term,” Ecobank said in an emailed note on March 9. The Eurobond sale means the country doesn’t need to borrow money on regional markets, the Lome, Togo-based lender said.

Senegal is also in the process of reassessing the size of its economy, which may see debt as a percentage of gross domestic product fall to less than 50 percent, from about 64 percent after the sale earlier this month, it said.

Spending on infrastructure will help to accelerate growth, Ecobank said. “The economy can generate proceeds to repay its debt over time,” it said. After forecast growth of 6.8 percent in 2017, Senegal will maintain an expansion rate of about 7 percent until 2022, according to the IMF.

— With assistance by Olivier Monnier, Bloomberg.

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