Senegal Bond Yields Jump as Budget Standoff Threatens IMF Deal

What happened to the bonds

Senegal's dollar debt sold off as investors priced in the risk that a budget impasse could stall a $2.2 billion program with the IMF. The 2031 bond's yield jumped 109 basis points to a new high since September, and the 2033 bond's yield added 75 basis points.

Portfolio manager Philip Fielding at Fidelity International Management Ltd. said, "I have not much left to sell," and noted he had pared positions before this week. "The selloff I think is driven by the impasse over the passing of the budget and the potential that this could derail the IMF program."

Why the budgets matter for the IMF program

In September, Senegal reached a preliminary agreement with the IMF, agreeing to restructure external debt that had become unsustainable after it was revealed there were billions of dollars in liabilities that had not been disclosed. For the program to move forward, parliament must still pass a revised 2026 budget and a 2027 spending plan that embed fiscal steps settled with the Fund.

Holding a majority in parliament, deputies tied to Ousmane Sonko's Pastef party oppose elements of the plan, especially the proposed reductions in public investment. Sonko has likewise taken issue with the debt overhaul, arguing the necessary conditions are not yet in place.

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What the IMF is watching

IMF officials are closely following the parliamentary debate, spokeswoman Julie Kozack said Thursday, adding that any budget must reflect the previously agreed policies and commitments and be capable of execution within Senegal's legal and constitutional framework. The IMF also requires Senegal to finish corrective steps connected with misreporting of previously undisclosed debt and to obtain financing assurances from partners. According to the IMF, an official creditor committee has not yet been formed.

The market view and what it means for your portfolio

Sergei Strigo, who heads emerging-market fixed income at Amundi, said, "Before we get clarity on the treatment of external debt, prices will stay range-bound." The bottom line: until there is budget approval and progress on IMF conditions, expect choppy trading in Senegal's dollar bonds and a premium for certainty.

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