Senegal bonds fall after Sonko opposes budget bills

By Diadie Ba, Anait Miridzhanian and Colleen Goko

DAKAR/JOHANNESBURG, Oct 20 (Reuters) - Senegal’s international bonds fell sharply on Tuesday after National Assembly President Ousmane Sonko said lawmakers would not back budget legislation, raising fresh doubts over how quickly the government can push ahead with its debt rework.

All of Senegal's euro- and dollar-denominated bond maturities fell more than a cent on the day, with longer-dated debt suffering the sharpest losses. The 2037 bond dropped 2.166 cents to bid at 48.931 cents on the euro, Tradeweb data showed.

Sonko remains one of Senegal’s most powerful political figures despite being fired as prime minister by President Bassirou Diomaye Faye in May. He leads the ruling PASTEF party, which controls 130 of parliament’s 165 seats, and was elected speaker with the backing of 132 lawmakers, giving him significant influence over Faye’s legislative agenda.

Without parliamentary approval of the revised budget, the government risks delaying the International Monetary Fund program that underpins its entire debt restructuring strategy.

Speaking at a news conference on Monday, Sonko criticised the government's decision to pursue debt treatment under the G20 Common Framework, saying Senegal faced a cash-flow problem rather than a need to reduce its overall debt burden.

BUDGET PLANS TO BE DISCUSSED

He also warned that lawmakers would not vote for the 2026 revised finance bill due to be discussed in parliament or the 2027 draft budget to show their opposition to the government's intention to lower fuel subsidies.

The amended 2026 budget bill paints a sharply deteriorating fiscal picture.

It cuts real GDP growth to 2.7% from roughly 5% in the original budget and widens the deficit to 7.6% of GDP from 5.4%, driven largely by a tripling of energy subsidies to 790.3 billion CFA francs ($1.36 billion) from 250 billion.

According to the 2027 draft bill, the government plans to reform energy subsidies to direct resources toward the most vulnerable populations. The goal is to reduce the total cost of energy subsidies to no more than 1% of GDP per year by 2029, the bill shows, without providing figures for the next year.

Senegal's total debt stood at 105.3% of GDP at end-2025, according to authorities. A debt audit last year revealed that public debt, including state-owned enterprises, had ballooned to roughly 112% of GDP at end-2024, nearly double a previously reported figure of about 73%.

The government reached a staff-level agreement with the IMF in early September for a $2.2 billion, 36-month Extended Credit Facility to support its reform program.

($1 = 580.5000 CFA francs)