Senegalese President Bassirou Diomaye Faye’s dismissal of a government headed by a firebrand critic of the International Monetary Fund (IMF) gives fresh impetus to protracted negotiations aimed at resolving West Africa’s most \u200bpressing debt crisis.<\/p>\n
But analysts and investors cautioned that, while Prime Minister (PM) Ousmane Sonko’s Friday ouster may remove one obstacle to an IMF deal, its still unpredictable fallout presents \u200cnew complications for the stalled talks and potential risks for investors.<\/p>\n
“The removal of PM Sonko creates additional political uncertainty,” said Thalia Petousis, Portfolio Manager at Allan Gray. “There is also a chance that a newly appointed PM might be in favour of a deep debt restructuring, increasing the probability of a negative outcome for Senegalese bondholders.”<\/p>\n
Late on Monday, Faye named Ahmadou Al Aminou Lo, a seasoned Economist and former Regional Central Bank official, to replace the populist Sonko.<\/p>\n
Senegal’s \u200bforeign currency-denominated government bonds reacted on Tuesday.<\/p>\n
Investors were now pricing higher \u200bodds of a restructuring following the latest events, Morgan Stanley said on Tuesday.<\/p>\n
Petousis warned that if only foreign-currency debt was restructured while local currency debt \u2060was not, “the risks are that realised haircuts could be steeper than what is currently priced.”<\/p>\n
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