"All these distinctions enshrine the meticulous work we do to put debt at the service of our country's development" Does Benin need to go into debt to support its development program? If so, what are the requirements for good debt? But what is the purpose of the resources mobilized through debt? How is the country now reaping laurels in terms of its debt management policy? The Minister of Economy and Finance, Romuald WADAGNI, responds to the concerns often raised by some compatriots. Read instead.

Editor: Mr. Minister, our country has just been honored again by the World Bank through its index of assessment of transparency in public debt management in countries eligible for IDA financing. What is it concretely about?

Romuald Wadagni: Indeed, last June, the World Bank published its assessment of transparency in the dissemination of debt information within the member countries of its institution that provides financial assistance to countries (IDA), a total of 76 countries.

This is an assessment that takes into account the availability, completeness and frequency of publication of debt data, as well as debt management documents. Following this evaluation, Benin had the maximum score, to make it simpler, say 20/20, for 7 of the 9 criteria evaluated; which propels it to the top of this ranking for all 76 countries evaluated at the global level. For us, this ranking is not surprising. Already in October 2019, Benin obtained recognition for the good quality of public debt management, through the 2019 Global Markets Award for "Best Sovereign Debt Manager in Sub-Saharan Africa", which was awarded to Benin on the sidelines of the Annual Meetings of the World Bank and the Monetary Fund. International. All these distinctions enshrine the meticulous work we do to put debt at the service of our country's development.

Minister, despite this performance, various comments on social networks seem to be concerned about the evolution of our country's indebtedness. What do you say?

I am attentive to the reactions of our compatriots who think so. For many, the debt refers to the image of the creditor who comes knocking on your door in the morning at 06H or the landlord who removes the roof of the tenant's room to force him either to repay or to desert the premises. But, it is important not to demonize debt. Well managed, debt is a powerful factor in development. You can have fun taking a look at the debt ratios of the major developed countries to convince yourself of this. Without debt, we would slow down our pace of growth and economic development. Let us take the example of two public servants who wish to have a house. The first makes the option of saving pure and simple. He saved almost throughout his career. He eventually built his house before his retirement. The second goes into debt and builds his house, lives there by repaying gradually.

Of these two officials, who benefited the most from the house? When it comes to debt, we must ask ourselves simple questions such as: What do we want to do with debt? What is the interest to be paid (the cost of debt)? How long is it for a refund? Is this repayment period compatible with what the money will be used to do? On what the debt is going to do, it is imperative that the debt be used to do something tangible. In the previous example, the second official used the loan to build his house. If this money had been used to celebrate the 40th anniversary of the grandfather's death, clearly it would be a very misuse of resources.

Going back to the second official, if I assume he is renting out part of the house, it is unlikely that the rents will be able to repay the money that made it possible to build the house after only one or two years. If he negotiates with his creditor a repayment period of two years, this debt would be a debt of poor quality because of the inconsistency between the repayment period and the resources generated by the rents paid. These principles of debt management are also valid at the level of a country. Benin's debt interventions are part of a global framework through our country's Debt Strategy. This Strategy sets out the objectives and targets of the Government's debt portfolio.

It supervises all debt actions. In other words, through this strategy, Benin knows exactly when to go into debt and for what purposes. The most important thing is to maintain a limit consistent with our country's current and future repayment capacity. The assessment of a country's repayment capacity is called a sustainability analysis. It is carried out before each loan. It shows whether, over the next 20 years, the country will still be able to repay all the debts contracted. Counter-analyses are also carried out by the IMF and the World Bank. To date, all analyses show that Benin's debt is sustainable.

Minister, tell us what is the real purpose of the debt raised by Benin?

Debt is used primarily for investment. Look around you and see all the infrastructure being built or under construction. At the beginning of each year, we carry out what we call the "borrowing plan" or borrowing plan in French. This document lists the projects for which we will seek funding. Over the course of the year, we simply execute this plan. We also performed another operation called "reprofiling". To caricature this operation, let's take the example of an individual who has a debt of one million (1,000,000) FCFA to be repaid within 12 months, by paying an interest rate of 10%, or 100,000 FCFA. To better support this debt, he makes the option to contract a new debt of the same amount, with another creditor who agrees to a longer repayment period (3 years) and a lower annual interest rate of 2%, or 20,000 FCFA. With this new loan, he repays the first creditor.

This new operation allows it, on the one hand, to bear less interest charges and to generate savings to be allocated to other useful expenses and, on the other hand, to have a longer repayment period. Thus, in its approach to using innovative financing mechanisms, Benin has managed to mobilize resources at an interest rate of 3.8% to be repaid in 12 years to replace an existing debt at the advent of the current Government, contracted at an interest rate of 8% and repayable only in 3 years. Through this operation, Benin emerges with an improvement in the repayment profile of its debt and an estimated saving of about 30 billion FCFA.

Benin has thus made available additional resources to finance social expenditures.

Minister, do you have a word to conclude this meeting?

Finally, I would like our compatriots to be reassured. Benin's debt is well managed. The various distinctions received over the past two years prove this sufficiently. As I said in my remarks, well managed, debt is a powerful factor in development.

However, we should not be satisfied with these glowing debt results. We will maintain rigour and transparency in debt management for even greater results.