A country can appear to have a sustainable debt on paper and yet find itself in difficulty when it has to refinance its maturities. The problem doesn't always stem from the total amount of debt, but from the ability to renew maturing loans. This is what is known as refinancing risk.

This risk arises when a country relies heavily on new borrowing to repay existing debts. If a large portion of its bonds mature within a short period, the government must regularly return to the markets to raise new funds. As long as investors remain active and financing conditions remain favorable, this mechanism functions. However, if interest rates rise or confidence deteriorates, the situation can quickly become more precarious.

In several African countries, the debt structure still relies heavily on relatively short maturities. Bonds and treasury bills issued on the WAEMU regional market often have maturities ranging from one to seven years, although some states are gradually attempting to extend their maturities. This situation forces governments to refinance a significant portion of their debt almost every year.

The risk is particularly high when refinancing needs are concentrated during a period of rising interest rates or increased investor caution. A country may then be forced to borrow at a much higher cost than before. It may also have to reduce certain expenditures, postpone investments, or seek emergency financing from international institutions.

Ghana has illustrated this difficulty in recent years. Before its restructuring, the country was theoretically still able to repay its debt in the long term, but it could no longer refinance its maturities on sustainable terms. The rates demanded by investors had become too high and the maturities too short.

In the WAEMU, this issue is becoming increasingly important as debt volumes grow. Member states are issuing more and more bonds on the regional market and must refinance increasingly large amounts. If local banks reduce their purchases of government securities or if monetary conditions tighten, the pressure can quickly mount.

Extending the maturity of debt is one of the main ways to reduce this risk. The longer a country borrows, the less frequently it needs to return to the markets. However, this long-term financing is often more expensive and requires greater investor confidence.

Refinancing risk therefore remains one of the least visible weaknesses in public finances. A country can appear solvent while becoming vulnerable if too large a share of its debt has to be renewed within too short a timeframe.