• Burkina Faso raised 40.35 billion CFA ($67 million) in a recent bond auction but had to accept high interest rates.
• Investor confidence is shaken following a government request for commercial banks to transfer 25% of public companies' term deposits to the Treasury.
• The country’s borrowing costs are rising as it struggles with a widening budget deficit and a reliance on internal resources.

On April 9, Burkina Faso was compelled to accept unusually high yields in a public debt auction, raising CFA40.35 billion ($67 million) on the regional market. This move reflects mounting market skepticism, coming just weeks after President Ibrahim Traoré directed commercial banks to transfer 25% of the term deposits (DAT) from public enterprises to the Treasury.

The pressure on banks to mobilize domestic resources for the country’s budgetary needs appears to have sent a negative signal to investors. As a result, the government paid a steep 9.54% average yield on its 364-day Treasury bond, up from 8.43% in its previous auction—an increase of over 110 basis points in just two weeks. The 3-year bond was priced at 9.38%, the 5-year at 7.23%, and the 7-year at 7.70%.

In contrast, neighboring Benin—rated more favorably by credit agencies and without recent internal tensions—raised funds at far lower rates, 6.55% for 3 years and 7.05% for 5 years. This widening gap highlights growing investor concerns over Burkina Faso’s fiscal strategy, which is increasingly leaning on exceptional measures.

“There’s clear nervousness in the markets. The government’s direct intervention in term deposits has been poorly received because it undermines confidence in the stability of the banking sector,” explained a regional asset manager. Despite the higher yields, Burkina Faso successfully secured the entire CFA40 billion it was aiming for, with a coverage rate of 110.78%. However, 75% of the funds came from local sources, signaling a gradual retreat of foreign and regional investors.

This bond issuance takes place amid a growing fiscal deficit. The International Monetary Fund (IMF) recently approved an increase in Burkina Faso’s budget deficit target to 4% of GDP, up from the previous 3%. But this flexibility is contingent on the country securing additional external financing—an increasingly difficult challenge in the current economic environment.

With over CFA103 billion in debt service obligations due in April, this bond issuance only partially covers the country’s immediate financial needs, raising concerns that pressure on borrowing costs and further reliance on public deposits could escalate.

Fiacre E. Kakpo