Benin – Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

Benin’s overall and external public debt remain at moderate risk of debt distress, unchanged from the previous DSA (December 2024). All projected external debt burden indicators remain below high-risk thresholds under the baseline scenario, except for a temporary breach to the debt service-to-revenue and debt service-to-exports ratios in 2025 due to a debt management operation (DMO) for a Eurobond maturing in 2032. In 2025, Benin issued a new Eurobond for budget financing and contracted a commercial loan with a World Bank’s Policy-Based Guarantee (PBG) for a domestic and external debt DMO. Space to absorb shocks is limited, but proactive debt management allowed accommodating additional external borrowing. External debt burden indicators breach high-risk thresholds in selected stress tests, particularly for export and depreciation shocks. High debt service-to-revenue ratio leaves debt vulnerable to revenue underperformance or shifts in market sentiment that could increase rollover costs. Continued revenue mobilization efforts, a borrowing strategy that prioritizes concessional terms, active debt management, and a commitment to rebalance the debt portfolio towards more domestic debt would reduce the risk of debt distress.