Togo’s Domestic Debt Costs 4x Its External Loans

Public finance

Wednesday, 23 July 2025 11:30

Togo’s Domestic Debt Costs 4x Its External Loans

(Togo First) - Togo's external debt continues to offer more favorable financing conditions than its domestic debt. According to the latest data from the Ministry of Economy and Finance, the average interest rate on external debt was 1.58% at the end of 2024. In contrast, debt contracted on the regional market carried an average rate of 6.65%.

This cost difference is explained by the nature of Togo’s external partners. The country primarily relies on multilateral lenders such as the World Bank, the International Monetary Fund, IMF, the African Development Bank, AfDB, and the West African Development Bank, BOAD. These institutions account for nearly 70% of the outstanding external debt and offer long-term, low-interest loans, often with grace periods. Bilateral creditors, including France, China, India, and Arab funds from Kuwait and Saudi Arabia, complete the portfolio. More expensive commercial loans remain marginal.

Despite this, domestic debt continues to dominate, representing nearly 58% of total outstanding debt at the end of 2024. This situation contradicts the country’s medium-term debt strategy, which aims to reverse the trend by the end of 2025, targeting 55% external debt.

One reason for this dependence on the regional market is the ease of access to financing. The Treasury can quickly raise funds through Treasury bills, BAT, but at high interest rates. As of the end of June 2025, these short-term securities were yielding 8.04%, compared to approximately 6% for longer-term bonds. According to the IMF, the average yield on Togolese government securities rose to 7.4% in 2024, up from 6.1% over the 2019-2023 period.

This structure creates strong refinancing pressure. BATs still represent 89% of the securities issued by Togo, forcing the state into frequent rollovers. Increasing reliance on external debt would help extend maturities, reduce interest charges, and improve debt sustainability. Partners appear to be fully engaged. The World Bank recently approved a $200 million package for electricity, another $300 million for agriculture, and $75 million for governance and administration. Several other projects are in the pipeline, even as the IMF oversees a nearly $400 million Extended Credit Facility, ECF, program.

Fiacre E. Kakpo

REFORMS OVERVIEW

STARTING A BUSINESS (more info)

At the fifteenth position, worldwide, and first in Africa, under the Starting a Business index of the 2020 Doing Business ranking, Togo sustains its reformative dynamics with more reforms….

ENFORCING CONTRACTS (more info)

Compared to some years ago when it was one of the lowest rankers under the Doing Business’ Enforcing Contracts indicator, Togo, leveraging many efforts to improve its business climate, was able to jump significantly on the index in the recent years... .

CONTRACT EXECUTION (more info)

Creation of special chambers of commerce for small debts • Creation of chambers of commerce at the Court of Appeal • Civil and commercial cases now handled by distinct clerks • Establishment of commercial courts in Lomé and Kara • Lawyers and bailiffs now have access to the FORSETI COMMERCIAL platform • A maximum period of 100 days was fixed to settle a commercial dispute .

TRADING ACROSS BORDERS (more info)

In comparison to previous years,Togo has significantly improved its ranking under the“Trading across borders” indicator by adopting multiple reforms that focus mainly on the digitization and reduction in delays, for import and export procedures related to import and export.

In comparison to previous years, Togo has significantly improved its ranking on the “Trading across borders” index by adopting multiple reforms that focus mainly on the digitalization and reduction in delays, for import and export procedures related to import and export.

CONSTRUCTION PERMIT (more info)

After moving from the 133rd to 127th place under the 2020 Doing Business’ construction permit index, Togo intends to reiterate this feat in the coming edition of the global ranking. To this end, it has introduced this year multiple reforms.

GETTING ELECTRICITY (more info)

Over the past two years, Togo’s ranking under the Doing Business’ Getting electricity and water indicator has increased consistently. Owing this performance to multiple reforms aimed at making it easier for businesses to access power and water, Lomé plans to introduce even more reforms this year to keep up its improvements.

REGISTERING A PROPERTY (more info)

Out of all the 'Doing Business’ indicators, Property Registration is where Togo has improved the most since 2018. Indeed, after spending years in the lowest part of this ranking, the country now seeks to beat Rwanda which is the best performer on this index in Africa. To do so, Lomé has been introducing many reforms, with the latest batch implemented this year.

PUBLIC PROCUREMENT (more info)

From professionalization to digitization, through legislative regulations, Togo’s public procurement framework is constantly being modernized. Several reforms have been implemented to improve the sector much to the benefit of the private sector, which is the focus of the National Development Plan.

PAYING TAXES AND DUTIES (more info)

To improve its business environment, Togo introduced some important reforms related to the payment of tax and duties. From the replacement of some taxes to the cancellation of others through exemptions, the country has only one objective: offer the most attractive tax framework to investors and economic operators. To achieve this, the authorities relied on digitization.