On July 30, 2015, MIGA issued guarantees of $100.2 million covering a Euro – US dollar cross-currency swap arrangement between Citibank, Societe Generale, and Standard Chartered Bank and the government of Senegal. Senegal’s Ministry of Economy and Finance entered into the swap agreements as a hedge against currency risk exposure related to a 10-year tenor, $500 million Senegal Eurobond issued in July 2014. The MIGA guarantee covers risk against a failure by the government of Senegal to honor the obligation under the swap agreement.
The bond proceeds will be used to finance two road construction and expansion projects under the government’s 10-year multi-sector investment strategy, the “Emerging Senegal Plan.”
In 2011, MIGA issued coverage to Standard Bank for a similar swap agreement to help the government manage its exposure to volatility from currency fluctuations.
MIGA’s risk-mitigation instrument for the swap agreement reduces financing costs for the Government of Senegal by helping to manage its foreign currency exposure in relation to its obligations under the Eurobond. It also helps international banks manage their country limits in order for their subsidiaries in Senegal to continue to lend at their current levels, thereby facilitating access to credit in the local economy.
The Emerging Senegal Plan aims at increasing shared prosperity through accelerating growth and productivity, one of the pillars of the World Bank Group’s Country Partnership Framework for Senegal.
MIGA’s proposed support for the project is also aligned with the agency’s strategic priority of supporting investments into countries eligible for concessional financing from the International Development Association.