The Minister of Economy and Finance Romuald WADAGNI made an impression last Wednesday when he took part, at the invitation of his French counterpart, in the Paris Forum on financing for development. This meeting on financing for development was organized by France and Japan (which currently holds the presidency of the G20). Its theme was: “How to ensure sustainable financing for development?” It is therefore within this framework that the Beninese Minister of Economy and Finance was invited to present to the world the proactive, prudent, responsible and innovative strategy for the management of the financing of his development program, the PAG Benin Revealed. . In front of his peers from the G20 and 20 other developing countries, the IMF, the World Bank, banks, OECD, UNCTAD academics … Minister Romuald Wadagni presented the results of President Talon’s vision and his Government for Sustainable Development of Benin. At the opening of the said meeting, Bruno Lemaire, French Minister of the Economy and Finance, Taro Aso Deputy Prime Minister in charge of Finance of Japan and Christine Lagarde Managing Director of the IMF, respectively made their introductory remarks. Then, the main panel opens on the theme: “For a virtuous financing of development”. The panel set up to share analyzes and experiences on the subject was made up of two Finance Ministers Olaf Scholz and Romuald WADAGNI respectively Finance Minister of the Federal Republic of Germany and Benin, of the Secretary General of the OECD, Angel Gurria and Axel Weber Academic and Chairman of the Board of UBS Group AG and Victor Mallet of the Financial Times. Wadagni talks about debt versus financing for development After setting the scene for the subject on the agenda, the journalist moderating the panel asks the Beninese Minister the question of how he sees the subject of debt vis-à-vis development financing as a sovereign borrower and especially in his capacity as Minister of Finance having carried out the first eurobond issue in the history of Benin. To answer, Romuald Wadagni first makes two observations. He notes with great satisfaction that there is a general awareness of the risk linked to indebtedness and compared to what has been noted in the past, all stakeholders of the international community are involved in reflections on the mechanisms and cooperation to be put in place to anticipate and better prepare the responses to be provided. Secondly, Minister Wadagni noted the emergence of a new common position on debt. According to him, all the players unanimously recognize that the debt in itself is not something bad. On this point, Romuald Wadagni made a point of highlighting three fundamentals which, according to him, must be taken into account to ensure that any debt is at the service of stable and sustainable development: the need for countries to work towards achievement of the SDGs (Sustainable Development Goals); the obligation to integrate into each investment financing, the risks linked to climate change and the assurance that the framework of financing, actions and investments are oriented towards the prevention of security risks. In short, the Minister of Finance of Benin welcomes the fact that the position faced with the increase in the debt is no longer to say that all funding must be stopped but to observe and analyze the pace of ” increase in debt to ensure that debt is intended to finance investment projects geared towards achieving the SDGs with clear consideration of security risks and those linked to climate change. Regarding specifically the point of view of the sovereign borrower vis-à-vis the debt, the Minister believes that there are three elements on which to work. The first begins with the capacity of states to mobilize own resources, internal resources (this idea was strongly supported by Ms. Christine Lagarde). Indeed, according to him, when we observe today the countries which are identified as having a high level of default risk, there is a direct correlation between the level of vulnerability risk and the level of modernization, and / or the modernity of their administrations (customs and tax administrations in particular). This means that the more you have a country where the administration is not proactive, strong, modern; the more there is a risk of going towards a debt crisis. It is therefore important to identify and implement reforms aimed at modernizing the administration, in order to secure and increase internal resources? Giving the example of Benin, Romuald Wadagni shared, with his peers and other international financing actors, several initiatives underway, aimed at modernizing the administration but also quite original initiatives on the collection of VAT and other internal resources. which made it possible to increase the ratio of tax revenue to GDP by 300 basis points in two (02) years. The second factor is budget transparency. According to the Minister, it concerns both borrowing States and lending institutions. Everyone must play the role of transparency. <<From the borrower’s point of view, it goes through clear budgetary rules to ensure (and this is what is done in Benin), that each year the increase in the debt is in the best case, lower than the level of investments. In a cycle where each year the debt grows much faster than the investments that are made, there is therefore a problem. This would be proof that such a debt is used to finance the operation and other general expenditure of the State.>>, clarifies the Minister of Finance. With regard to the diversity of lenders and the mechanisms for access to financing sometimes involving guarantees used by State companies, the Minister specifies that transparency is also needed on all contracts, all these guarantees that could be turn into heavy sheet debt. <<Transparency is also necessary on procurement in order to avoid project overbilling>>, he stressed, taking the example of a debt of one dollar intended for the construction of an infrastructure in a context where there are no clear rules of transparency in terms of procurement. The speaker concludes to this end that there can be several risks such as the procurement of the contract at an overvalued price, the poor quality of the investment because it is devoid of competition … Finally, Romuald Wadagni took an interest in proactive debt management. According to the Minister, it is the responsibility of the players to ensure the establishment of dynamic management and anticipation of default risks. On this issue, Romuald Wadagni recalled the innovative operation carried out by Benin thanks to the support of the World Bank by using its IDA lines in the form of a partial guarantee to raise new financing used to reprofile the debt so as to significantly reduce service.
