Why One African Country Opted for Full Disclosure on Debt

For the past three years, the World Bank has been monitoring how transparent IDA countries are in their debt reporting practices through the Debt Reporting Heat Map. Among the 74 IDA countries, one stands out by meeting the “full disclosure” rating for every single one of the nine categories on the debt transparency Heat Map: Burkina Faso. This performance is even more remarkable considering that the country has been classified as fragile and conflict-affected (since late 2020) and has been fiscally squeezed by both the COVID-19 crisis and internal population displacement (almost 2 million since 2020).

Surging Financing Needs, Steeper Interest Rates

Since 2015, Burkina Faso has been the target of terrorist attacks that resulted in population displacements and ever-increasing security costs. Between 2015 and 2020, the government’s gross financing needs tripled, followed by an increase in borrowing to close the gap. Until 2015, Burkina Faso’s debt portfolio mainly consisted of concessional financing from bilateral creditors and multilateral development institutions. However, as borrowing needs increased, the national debt management office started turning more to the domestic and regional capital markets, which come at higher costs and shorter maturity.

A Decade of Rising Public Debt (as percentage of GDP)

“In a context of growing financing needs to meet development challenges and dwindling concessional resources, we had to explore other sources of financing, which were more available but more complex,” said Serge Toe, Head of the Public Debt Office in Burkina Faso's Ministry of Finance.

Greater Disclosure Means Lower Borrowing Costs

To expand its investors base to improve borrowing conditions, the debt management office started looking for ways to reduce information asymmetry between the country and its creditors. Global studies indicate that debt transparency directly contributes to higher credit ratings, lower borrowing costs, and foreign direct investment (FDI) inflows. Hence, the debt management office took the strategic stance to focus on debt transparency efforts and took several actions to improve public debt reporting and disclosure.  

The road ahead was challenging, as many steps needed to be taken. Although Burkina Faso was sporadically publishing a Statistical Debt Bulletin and an Annual Borrowing Plan, they were neither complete nor timely. For example, the Bulletin was missing critical information on some loans—including creditor category or loan amount. There were no statistics on fiscal risks related to the government’s contingent liabilities, such as guaranteed debt or the debt of state-owned enterprises. In addition, the Bulletin was not produced systematically and made available with a significant delay.  

The Debt Management Facility Steps In

To address these challenges, Burkina Faso decided to partner with the Debt Management Facility (DMF) with the objective of improving debt transparency under a broader World Bank Development Policy Operation. Over four months, from December 2020 to March 2021, the DMF helped Burkina Faso build the debt management office's capacity for debt reporting. “The DMF experts virtually trained officers of the debt office, analyzed collegially with them data captured in the debt recording systems, and made recommendations for enhanced debt reporting,” said Daniel Pajank, Senior Economist for Burkina Faso at the World Bank.

The first part of the work focused on improving the quality of the debt database. The second focused on improving the quality of the quarterly Statistical Debt Bulletin. The WB-Government team jointly designed a roadmap of reforms for 2021, with step-by-step instructions to publish Bulletins in line with international sound practices.

In March 2021, Burkina Faso published its first comprehensive Statistical Debt Bulletin. The new Bulletin includes information about loan guarantees related to public enterprises and public-private partnership contracts. It includes loan information with detailed data on terms and conditions. The Bulletin was also published on time, allowing the dissemination of information within three months from the data cut-off date.

The efforts to improve debt transparency and full disclosure of public debt are showing the first positive signs. Over the past two years, the country’s borrowing costs have gradually decreased for all debt instruments. The debt management office was also able to extend the maturity of bonds from five to ten years to mitigate liquidity risks and continued to produce high-quality Statistical Debt Bulletins on time. As of June 2022, Burkina Faso’s access to the regional capital markets remains strong, and its funding costs, particularly for shorter-term borrowing, are among the lowest in the region.

The World Bank's Debt Reporting Heat Map shows that Burkina Faso closed the gap in coverage and timeliness of disclosed information, meeting the “full disclosure” criteria in every single category.