Seydou Sow: “We need to build a more contextualized and more representative rating system” September 1, 2026
For Seydou Sow, financial economist and quantitative analyst, doctoral student in public economics, the risk premium in Africa is sometimes amplified by a general perception of African risk. He therefore believes that it is necessary to build a more contextualized and more representative rating system.
Moody’s lowers Senegal’s rating to Caa2, citing in particular the situation with the IMF and the tensions between the legislature and the executive. How do you assess these factors highlighted? Are they sufficiently founded?
The downgrade of Senegal’s rating, from Caa1 to Caa2, reflects above all a growing concern regarding the State’s capacity to service its debt under current conditions. The elements highlighted by Moody’s, notably the strong refinancing pressures, the growing weight of interests, the significant financing needs and the increased dependence on the regional market, are factors which indeed deserve to be taken seriously. The problem is therefore no longer just the level of public debt, but above all the capacity to refinance it on sustainable conditions. The IMF issue is also an important factor. The prolonged absence of a new program limits Senegal’s access to concessional financing and mechanically increases its dependence on the regional market, where borrowing conditions are currently relatively expensive. In this context, the cost of servicing the debt reduces the State’s budgetary room for maneuver and can make it more difficult to finance priority expenditure and public investments. From this point of view, Moody’s analysis is based on a real economic foundation. On the other hand, regarding the tensions between the executive and the legislature, I think we need to be more nuanced. Political or institutional tension does not, in itself, constitute a risk of default. It becomes a real economic risk when it leads to a paralysis of institutions, delays budgetary reforms or prevents the State from implementing its public finance consolidation strategy. We must therefore distinguish the potential political risk from its actually observable economic consequences. I would therefore say that the economic and financial factors put forward by Moody’s are generally well-founded, but that we must avoid considering this rating as an absolute truth about the situation in Senegal. A rating agency formulates a probabilistic risk assessment. In the present case, the real issue is whether the current liquidity and refinancing difficulties can be corrected through budgetary adjustment, improved revenue mobilization and a return to more concessional financing, notably with the support of the IMF.
How do you analyze the perception of risk in Africa?
The question of risk perception in Africa is much broader than that of Senegal’s rating alone. We must distinguish real economic risk from the perception that the financial markets have of it. African economies do indeed present certain vulnerabilities: shallower financial markets, often limited tax mobilization, high exposure to external shocks and, for several countries, significant dependence on external financing. These factors can legitimately justify a risk premium. But this risk premium can sometimes be amplified by a general perception of African risk. Two countries with relatively comparable fundamentals may therefore be faced with different financing conditions. The market therefore does not only remunerate macroeconomic indicators; it also integrates the perception of institutional stability, quality of governance, availability of data and investor confidence. The case of Senegal is particularly interesting in this regard. Despite the downgrading of its rating, the country continues to access the regional market and mobilize resources. This shows that there is still investor confidence, but that confidence is now being rewarded at a much higher cost. It is therefore necessary to distinguish between access to financing and the cost of financing. A country can still find lenders while facing a significant risk premium. The rating should be considered an important indicator, but not a perfect and definitive measure of a state’s creditworthiness.
What are the solutions to have a rating system consistent with the realities of the continent?
In my opinion, the objective should not be to set up a system which would automatically award better marks to African countries. Instead, we must build a rating system that is more contextualized and more representative of African economic realities. Methodologies must better take into account the specificities of the continent’s economies and their financial markets. It would be particularly important to give more weight to the structure of the debt: the share of debt in local currency, maturities, the composition of creditors, the depth of the domestic and regional financial market, as well as the real refinancing capacity of the State. We must also better distinguish a temporary liquidity problem from a structural solvency problem. This distinction is essential, because a State can encounter refinancing difficulties without necessarily being in a situation of insolvency. The development of independent and credible African rating agencies is also an interesting avenue. It is not a question of replacing international agencies, but of creating more plurality in the analysis of sovereign risk. Regional institutions with in-depth expertise in African economies could provide a complementary reading, provided they respect high standards of independence, transparency and methodological rigor.
What other actions should be implemented?
Responsibility also lies with African states. To sustainably reduce the risk premium, it is necessary to strengthen budgetary transparency, improve the quality of public statistics, strengthen the mobilization of tax revenues, improve debt management and avoid excessive dependence on short-term financing. The best response to rating agencies ultimately remains the lasting improvement of economic fundamentals and the transparency of financial information. Basically, the current situation in Senegal must be analyzed with great lucidity. It would be excessive to consider Moody’s downgrade as completely unjustified, but it would also be simplistic to summarize the country’s situation in terms of its rating. Refinancing difficulties, the burden of debt service and the prolonged absence of a framework with the IMF constitute real concerns. But they must be assessed from a dynamic perspective, taking into account Senegal’s capacity to gradually restore its budgetary balances, improve the mobilization of its revenues and find more sustainable financing conditions. More broadly, this situation must open a debate on the way in which African risk is evaluated, perceived and remunerated by international markets. The challenge for the continent is not simply to obtain better ratings, but to have a risk assessment that is both rigorous, independent and sufficiently adapted to African economic and financial specificities.
Interview carried out by: Demba DIENG
