By Ghita LAMRIKI, Director of Studies, Géraldine MERMOUX, Managing Director Associate and Lossani ZINA, Associate Director. FINACTU Group.
For the first time in history, over the period 2021-2023, Africa has spent more money on repaying its debt than on educating its children[1]. And the trend is not good: in 2024, 18% of the continent’s public revenues were used to repay debt: three times more than in 2010. No other continent reaches these levels. Behind these figures, a concrete reality: every billion paid in interest is a billion that does not finance a school, a hospital, or a road.
This burden is real. But it is not entirely justified by the economic fundamentals of African countries. A significant fraction of African debt costs is explained by excessive risk premiums, meaning structurally higher spreads than what the macroeconomic strength of many countries should dictate. However, this premium is not inevitable: it decreases when debt management improves. This is precisely what Benin has been demonstrating for the past decade, and what the rest of the continent has every interest in closely examining.
But to understand this lever, one must first start from a observation that the public debate too often overlooks: it is not so much the level of African debt that matters, but its structure and cost.
Africa is not borrowing too much, it is borrowing poorly
In 2024, the public debt of sub-Saharan Africa stabilized around 60% of GDP, a level lower than that of France (113%), Italy (135%), the United Kingdom (101%), or the United States (122%)[3]. 49 African countries out of 54 have a debt/GDP ratio lower than that of the United States[4]. African over-indebtedness is, for the most part, a myth.
What is real, however, is the poor quality of this debt, based on all the criteria that define the quality of public indebtedness: Africa does not borrow enough in the right currencies, its maturity is too short, it is subject to the trap of variable rates, and the nature of the creditors.
Ghana offers the most brutal illustration of this. As early as 2021, external debt accounted for nearly half of the total public debt, denominated in 71% dollars, and concentrated at 46% in eurobonds held by private creditors[5]. On the domestic market, the government faced a sharp rise in refinancing costs in a context of regional liquidity tensions. The result: a default in 2022 and a painful, lengthy, and costly $13 billion restructuring for the population.
The good news is that this unfavorable structure is not a geographical or economic inevitability. It reflects choices – or lack of choices – in the daily management of public debt. And that is precisely where the lever lies. Professionalizing debt management directly affects its cost, duration, and sustainability. Unlike Ghana, Benin demonstrates the virtues of perfect public debt management.
Benin’s successful bet: a decade of proactive management
Ten years ago, Benin was an invisible borrower in international markets. Its debt was almost exclusively financed by multilateral donors and short-term high-interest domestic securities. The country had neither a communication strategy with international investors, nor a regular presence in the bond markets, nor an active liability management instrument. A passive borrower profile, dependent on the conditions offered to it rather than those it was capable of negotiating. The following decade tells a different story.
Under the impetus of President Romuald WADAGNI, then Minister of Economy and Finance, the debt structure was profoundly reshaped. The share of the euro in external debt rose from 24% in 2015 to 73% in 2024, reflecting a progressive substitution of the dollar with a currency to which the FCFA is pegged, greatly reducing exchange rate risk exposure. The share of fixed-rate debt jumped from 79% to 98%, protecting the country against international rate volatility. And all this was achieved by reducing the implicit spread compared to the German Bund, which decreased from 206 to 104 basis points between 2014 and 2024[6]. Confirmation of this policy: Benin’s sovereign rating was raised to BB- by S&P in April 2024, now one of the best ratings in the Franc Zone.
On international markets, Benin is now one of the few UEMOA states (along with Côte d’Ivoire in particular) to access eurobonds. It stands out for its remarkable regularity: six issuances since 2019, and in January 2025, the symbolic status of the first African issuer of the year. In each operation, investor demand far exceeded supply, reaching up to six or seven times the amount offered.
Behind these results, a long-term strategy, attaching great importance to the quality of its execution: early redemption of expensive loans before maturity, ongoing arbitration between short and expensive domestic debt and long and concessional external debt, and deliberate choice of the euro as the borrowing currency to limit exposure to exchange rate risk linked to dollar fluctuations, with the FCFA pegged to the euro. Furthermore, Benin regularly communicates with international investors: organized roadshows, clear debt strategy, precise quarterly publications.
These pillars are all accessible, but they all require a debt management leadership capable of conceiving, implementing, and sustaining them over time.
Professionalizing debt management: a roadmap within reach
The reforms that make a difference are known, documented, and have been successfully implemented in several countries. They are based on several initiatives, including:
- establishing a debt management office with clearly separated functions (front office, middle office, back office) covering the entire debt cycle;
- formalizing a medium-term debt strategy and rigorously monitoring its implementation;
- equipping oneself with a robust information system;
- structuring a genuine investor relations, with regular and transparent communication.
None of these initiatives are very difficult, but their implementation requires a clear political will and rigorous methodological support. Côte d’Ivoire provides a recent illustration. By initiating a deep transformation of its debt management department, elevated to the rank of Directorate General of Financing within the Ministry of Finance – including organizational restructuring, tool upgrading, and skills enhancement, conducted with the support of FINACTU – the country has achieved tangible results: reduced spreads and unprecedented access to the international financial market, including ESG debt.
Debt management, the first lever of a sovereign financial policy
Benin demonstrates it: in less than ten years, a country can transform its borrower profile, not only by mastering its debt, but also and above all by learning to manage it better.
Indebtedness is a profession, and like any profession, it is learned, organized, and professionalized. And it pays off: our calculations show that Africa could save the equivalent of USD 11 billion per year if, through better debt management, it was subject to the same spreads as the rest of the developing countries[1].
But sovereign debt management is only the first step in a more integrated vision of public finances. African states that want to go further will also have to tackle the hidden costs that make up the debt of tomorrow: the unprovisioned commitments of their pension systems, the shareholder policy of deficit-ridden state-owned enterprises, and the still underutilized opportunity to create sovereign wealth funds to valorize their natural resources rather than mortgage them.
[1] Potential savings are estimated by applying a hypothetical reduction of around 60 basis points of the average financing cost to the African public debt stock. The calculation is based on an aggregate public debt outstanding of USD 1.8 trillion in 2024, implying an annual saving of around USD 10.8 billion. The assumption of a 60 basis points reduction is based on econometric estimates made by FINACTU teams on a sample of 164 sovereign eurobond issuances in Africa over the period 2001-2025, highlighting the significant effect of greater debt transparency on the reduction of sovereign spreads.
Notes
[1] UNCTAD (2025), “A World of Debt. It’s Time to Reform”
[2] IMF, World Economic Outlook
[3] Mo Ibrahim Foundation (2023), “Public Debt in Africa: Structure Is the Primary Issue, Not Volume”
[4] Debt Statistical Bulletin, Q4 2021
[5] IMF, World Economic Outlook
[6] Source: Debt Statistical Bulletin, Q4 2015 and Q4 2024. The implicit spread of the portfolio is calculated as the difference between the weighted average cost of debt and the yield of the 10-year German Bund, used as an approximation of the risk-free rate in euros. The 10-year maturity was chosen as it is the standard reference for international sovereign markets and roughly corresponds to the average maturity (ATM) of Benin’s public debt portfolio over the period considered (10.6 years at the end of 2014 and 8.9 years at the end of 2024).
