S&P sees limited contagion from Senegal’s debt restructuring in WAEMU
By the AFREEQUE newsroom, based on Seneweb
S&P Global Ratings sees limited immediate contagion from Senegal’s debt restructuring to other WAEMU states, with sufficient bank reserves to absorb the shock. It does not rule out domestic debt being included in the process, according to Seneweb.
S&P Global Ratings estimates that the immediate financial contagion from the treatment of Senegal’s debt to other WAEMU states remains limited, as residents of the zone hold a significant share of Senegal’s public debt but local-currency debt was excluded from the announced process, Seneweb reports.
The ratings agency nevertheless estimates that local-currency bonds could ultimately be included in restructuring procedures, given the weight of Senegal’s domestic debt. It says this risk could be mitigated by the policies of the BCEAO, the WAEMU central bank, which could continue to support demand for sovereign bonds.
Yields on Benin and Ivory Coast eurobonds barely changed after the Senegal announcement, while their spreads remained stable, according to S&P Global Ratings. The agency also estimates that the reduction in Senegal’s gross external financing needs could ease pressure on WAEMU’s external position and foreign-exchange reserves.
