The special nature of sovereign debt

When a State spends more than it collects, it finances the deficit by borrowing. Citizens present then benefit from public expenditure — infrastructure, salaries of civil servants, social benefits — without immediately paying the full cost by tax. Part of this cost is mechanically carried over to future budgets, i.e., ultimately to taxpayers who did not necessarily vote for the original expenditure.

Unlike a household, whose life horizon is over and which must, in principle, pay its debts before its disappearance, a State does not have a limited lifespan. He usually never repays all of his debt at a fixed maturity: he pays « Roll », i.e. it renews maturing securities by issuing new loans, a transaction that bond market practitioners call refinancing. This permanent refinancing capacity explains why public debt can, in theory, remain indefinitely — it has, in itself, no scheduled expiry date.

This possibility of perpetual turnover, however, does not render debt free, and this is a frequent confusion in public debate. The State must continuously pay interest due to its creditors; maintain confidence, failing which they will require a higher risk premium to continue lending; refinance each maturity without interruption; preserve a sufficiently broad and stable tax base; and, as the ultimate condition for sustainability, to maintain a productive economy capable of generating future revenues that alone enable these commitments to be fulfilled. The debt does not therefore constitute an invoice which would one day be given in full to children in the form of a single payment. Rather, it represents a Permanent obligation which reduces, or at least closely conditions, their future budgetary policy space.

Three simultaneous transfers: between periods, between social groups, between nations

The economic analysis of public debt makes it possible to distinguish three forms of transfer that are simultaneously taking place, but which the public debate too often confuses into a single indistinct phenomenon.

The first is a transfer between periods. Indebtedness makes it possible today to mobilize resources which will tomorrow be financed by higher taxes, a reduction in public expenditure, new borrowings intended to refinance the old, by inflation which erodes the real value of the debt, or by the sale of public assets. The present, by borrowing, thus acquires decision-making power over the future budget — a power that no future generation has, by construction, had the opportunity to ratify.

The second is a transfer between social groups, often overlooked by a purely macroeconomic reading. Interest on the debt is paid to holders of public bonds: affluent households with financial savings, banks, pension funds, insurance companies, central banks or foreign investors. Debt is thus simultaneously a liability for the State, a gainful asset for its creditors, a tax burden for all taxpayers, and an instrument for redistribution between holders and non-holders of financial assets. Some children will inherit bonds issued by their parents; other will mainly inherit the taxes necessary for the remuneration of the same securities. So, paradoxically, public debt can increase the inequities of heritage within a single future generation, well before weighing on this generation as a whole against previous generations.

The third is a international transfer. Where creditors are foreign, part of future national income — interest paid — permanently leaves the domestic economy. This risk is particularly acute when the debt is denominated in a currency that the borrowing country cannot issue itself: a dollar, a euro, a yen. Economists Barry Eichengreen, Ricardo Hausmann and Ugo Panizza have designated this structural situation by the now classical expression of « original sin » (original sin) : the inability of most emerging and developing economies to debt abroad in their own currency. A country that borrows in its own currency is therefore in no way in the same strategic position as a country forced to obtain dollars or euros through exports, foreign exchange reserves or new external financing. — a distinction that will directly inform, further, the comparison between the United States and Senegal.

Debt sustainability: beyond the gross figure

The nominal amount of public debt — on « billions » who make headlines — In reality little information is provided on its true sustainability. It is imperative that this amount be related to the size of the economy, the government revenue available for its use, the average cost of financing it and the currency in which it is denominated.

Economists sum up this dynamic with a simplified accounting identity, but with great explanatory power: the change in the debt-to-GDP ratio is approximately equal to the primary deficit, plus the product of the difference between the interest rate and nominal growth, multiplied by the debt-to-GDP ratio. The primary deficit means the budget deficit after excluding interest charges — This is the balance that the State would have to pay if it had no debt to repay. When the average cost of debt is below nominal economic growth — what economists note r < g —, the debt ratio can stabilize, or even decrease, almost mechanically, without any additional fiscal effort: this is precisely the configuration that Olivier Blanchard analysed in his 2019 presidential speech before the American Economic Association, where he showed that interest rates that were permanently below growth made the US debt cycle sustainable without tax increases, without this favourable configuration being guaranteed indefinitely. Blanchard — Public Debt and Low Interest Rates, American Economic Review, 2019. When, on the other hand, the interest rate exceeds growth over time — configuration r > g —, the state has to generate a primary surplus, i.e. draw more than it spends without interest, simply to prevent the debt from growing mechanically as a proportion of GDP.

The sustainability of a debt depends on a combination of factors that interact with each other: the potential growth rate of the economy, the cost and average maturity of borrowings, the proportion of debt denominated in foreign currencies, the share held by non-resident creditors — more volatile than captive domestic savings —the stability of tax revenues, the perceived credibility of economic institutions, the future pension and health commitments already entered into, the economic quality of borrowing-financed expenditure, and the overall ability of the economy to withstand external shocks. There is therefore, contrary to a common idea, no universal threshold — 60%, 90% and 100% of GDP — from which a debt would automatically become unsustainable. An identical ratio can be perfectly manageable for a state with a reserve currency and strong institutions, and quickly become dangerous for another, without these same protections.

When does debt legitimately serve future generations?

Public debt can be fully legitimate, from the point of view of intergenerational justice, when it finances an asset whose economic lifespan far exceeds that of borrowing which has made it possible: transport and energy networks that will serve decades, schools, universities and hospitals, basic scientific research, digital infrastructure, adaptation to the already committed effects of climate change, or prevention of a deep recession and a health or natural disaster whose damage, untreated, would cost future generations far more than debt itself.

To pay in full, by the present tax alone, an infrastructure intended to serve for fifty years could in itself be a form of inverse injustice towards taxpayers today, since future generations will benefit just as much, if not more. This is precisely the logic that public finances refer to as « golden rule » : public borrowing can legitimately finance investment, while current operating expenses must be covered throughout the business cycle by ordinary revenue. The International Monetary Fund itself recognises that spreading the cost of productive investment between its successive beneficiaries — the generation that pays and the generations that profit — may promote intergenerational equity, provided that the social performance of the funded project effectively exceeds its cost of funding. IMF — Public Investment and Fiscal Policy, 2004.

When does debt become a mortgage on the future?

Debt becomes problematic, on the other hand, when borrowing is mainly used to finance current expenditure on a sustainable basis rather than investments, to preserve benefits acquired by the present generation without assuming the cost itself, to compensate for the chronic inefficiency of a tax administration incapable of recovering the tax that is legally due to it, to delay indefinitely a structural reform clearly necessary, to maintain widespread and poorly targeted subsidies, to finance prestige projects without demonstrable social return, to cover corruption or liabilities deliberately hidden from the supervisory bodies, or, the most dangerous of all, to pay the sole interest of an old debt without ever restoring the productive capacity of the underlying economy.

In each of these configurations, subsequent generations do not receive an asset of proportionate economic and social value in return for the financial obligation passed on to them. They inherit, more precisely, a deteriorating public balance sheet — more liabilities than corresponding assets — and a mechanically reduced political freedom, since an increasing part of their budget is already pre-empted by servicing a debt they have never discussed the opportunity.

The bias in favour of the present and the budgetary illusion

No serious analysis of public debt can be confined to the arithmetical budget alone: it must integrate the psychological and institutional mechanisms through which democratic societies come, structurally, to favour the present over the future. The benefits of a public expenditure are, by nature, immediate and visible to the elector: a road inaugurated, a subsidy received, a public service maintained. Its future cost, on the other hand, remains abstract, dispersed over millions of taxpayers and often borne long after the end of the electoral mandate of those who made the initial decision.

Debt thus allows rational, and not necessarily dishonest, politicians to distribute tangible benefits without having to announce, in the same movement, the corresponding tax which would finance them in due proportion. This dissociation between visible spending and its invisible financing produces what public finance economists call a budgetary illusion citizens can reasonably believe that a public service, subsidy or tax reduction actually costs them less than its true economic price. — because a part of the invoice was simply carried over, without the explicit mention, to the budget of their own children.

Asymmetry of representation between present and future generations

This dynamic is aggravated by an asymmetry of fundamental political representation, and probably insurmountable by construction: future generations do not vote, do not manifest and do not sit, by definition, in any Parliament. They therefore have no direct means — no ballot paper, no lobbying, no citizen mobilization — to refuse, amend or even simply discuss the financial commitments made on their behalf by the preceding generation.

This asymmetry is twofold, more immediate: young people of voting age currently participate statistically less in elections than older groups of the population, and beneficiaries of existing budgetary arrangements. — retirees, current and established tax niche holders — By their very organisational seniority, they are better structured and better represented than the still unknown beneficiaries of an investment whose results will only appear in ten or twenty years. The very structure of the public budget can thus, without any actor consciously deciding as such, systematically focus on immediate transfers, the unconditional maintenance of acquired rights, the politically most visible expenditure in the short term, to the detriment of the indefinite postponement of investments whose profits will only appear after several successive electoral mandates.

The dilemma of special advantages and the cliquet of crises

In addition to these two mechanisms, there is a third, strictly political one: almost every organised interest group willingly accepts, in the abstract, the general principle of reducing the public deficit, while vigorously resisting, in concrete terms, the removal of the specific advantage, the sectoral expenditure or the particular fiscal niche from which it benefits personally. Debt becomes, almost naturally, the political means of making temporarily compatible with conflicting collective demands: more benefits, less taxes, and no visible renunciation on the part of any organized social category.

This mechanism is further amplified by what can be called the cliquet des crises. The financial, health, energy, military or climate crises most often justify an increased use of debt: debt then plays a legitimate collective insurance role, which avoids the outright collapse of the economy in the face of an exogenous shock. The structural problem arises when the debt increases sharply at each successive crisis, without ever being significantly reduced during the periods of normal growth that separate them. It then works, very precisely, as a mechanical ratchet: a rapid and significant rise in each shock, followed by a slight, if not totally non-existent, decline once the crisis has been overcome — so that the level of debt rises, crisis after crisis, on a sustainable upward trajectory.

Debt and confidence crisis: a social as well as a financial phenomenon

A company is more likely to consent to tax when it considers, rightly or wrongly, that the resources so deducted are used efficiently and fairly by the public authorities. Fiscal opacity, proven corruption and systematically unfunded electoral promises, on the other hand, weaken this tax consent in a sustainable way, sometimes over several generations.

A real vicious circle can then settle, which could be summed up by this causal sequence: the lack of confidence in the use of public funds leads to a low level of consent to tax, which produces a chronic deficit, which increases the debt and interest attached to it, which in turn includes essential public services, which in turn reinforces the initial mistrust — And so close the loop. Thus, public debt is never a purely financial and technical phenomenon, reducible only to the tables of a Ministry of Finance: it is simultaneously, and perhaps fundamentally, a social relationship based on mutual trust between the State and its citizens, a relationship that is built or destroyed over several decades.

Three trajectories, three risk exposures

Before examining each of these three economies separately, it is useful to look at them in the same comparative table, bearing in mind an essential methodological warning: the accounting boundaries used are not strictly identical between countries — Gross debt against net debt, central government against all general government —, so that the comparison highlights above all a major qualitative fact: apparently similar ratios cover financing capacities, and therefore real, very different risks.

The United States: Monetary power does not remove constraint

The United States borrows in its own currency and has, by far, the deepest and most liquid bond market in the world. The role of the dollar as an international reserve currency — the currency in which most trade and reserves of foreign central banks are freed — It gives them a truly exceptional debt capacity, without equivalent among other developed economies.

This unique capacity can, however, and this is the American paradox, indefinitely delay the necessary fiscal adjustment rather than make it superfluous. According to the projections of the Congressional Budget Office published in February 2026, the federal deficit would reach 5.8% of GDP in 2026 and 6.7% in 2036 — levels normally associated, historically, with periods of war or deep recession, and not with a phase of ordinary economic growth. Public debt would rise from 101 per cent to 120 per cent of GDP by 2036 on the same path, to 175 per cent of GDP by 2056. The net interest on the federal debt would then separately exceed the Social Security and Medicare — This means that only one budget line, debt servicing, would become more expensive than each of the two historic pillars of the US welfare state. Congressional Budget Office — The Budget and Economic Outlook: 2026 to 2036.

The US risk is therefore not, at this stage and in the foreseeable future, that of a classical insolvency in the sense that emerging markets would mean: no serious investor anticipates a default in the US Treasury. The risk is rather that of cumulative erosion, less spectacular but just as real: a gradual removal of part of private investment by the insatiable appetite of the Treasury for available savings, an increasing budgetary weight of interest which mechanically constrains other items of expenditure, an ever closer dependence on the continued goodwill of bond markets, a diminished ability to respond to a new major crisis due to the lack of available fiscal space, and increasingly sharp political conflicts over the distribution, between generations and between social categories, of adjustment that will sooner or later have to be undertaken.

France: protecting the present by mobilizing the future

At the end of 2025, French public debt stood at €3,460.5 billion, or 115.6% of gross domestic product, while the annual deficit stood at 5.1% of GDP and the net public debt. — i.e. gross debt minus liquid financial assets held by general government — At 108.4% of GDP. Insee — National general government accounts, first results 2025.

France benefits, it must be stressed with the same rigour as for the points of fragility, a diversified economy, some of the most developed tax institutions in the world and privileged access to the euro area bond market, which, despite everything, remains one of the most liquid on the planet. But this high debt is combined with structurally moderate growth for more than a decade and social commitments of considerable magnitude, inherited from a social protection model built for a demography now over.

The ageing population mechanically amplifies this budgetary tension. According to OECD projections, the OECD area as a whole has 52 people aged 65 or over per 100 people of working age, aged 20-64, by 2050 — As compared to only 33 in 2025, this represents a decline of almost 60 per cent in the population dependency ratio in a quarter of a century. OECD — Pension overview 2025.

The resulting intergenerational conflict therefore does not stem from the very existence of social protection, the legitimacy of which is not at issue in this analysis, but from a method of financing which is increasingly based on proportionately fewer future assets, since the present generation refuses simultaneously — This is the heart of the French political blockage — reduce certain existing benefits, significantly increase compulsory levies, or adapt the duration of work to the continuous increase in life expectancy. When, in this context, debt interests become an increasingly incompressible burden of the budget, the first variables sacrificed by annual arbitrations are almost invariably the maintenance of public assets, health prevention and long-term investment. — the least visible budget items in the short term, but whose absence is expensive in the medium term. The apparent improvement in the budgetary balance can thus, paradoxically, produce a Implicit debt, invisible in the Maastricht tables but very real in reality : schools degraded due to lack of work, hospitals weakened due to lack of investment, ageing infrastructure and accumulated delay in the climatic adaptation of the territory.

Senegal: debt, sovereignty and transparency

Following an in-depth audit of unreported liabilities for prior years, the International Monetary Fund revised Senegal's central government's debt from 74.4 per cent to 111 per cent of GDP by the end of 2023, and then to 118.8 per cent of GDP by the end of 2024. — a review of an exceptional scale, rarely observed from one country to another, which has immediately and sustainably altered the perception of international creditors. IMF — Mission to Senegal, August 2025.

The hidden debt is, from the point of view of intergenerational justice, a particularly aggravated form of mortgage on the future, as it combines all the harmful mechanisms already identified in this study. Citizens cannot, by definition, assess budgetary choices that have been deliberately hidden from them. Parliament and the constitutionally competent supervisory bodies — Court of Auditors, Finance Committees — However, they are deprived of information essential to the normal exercise of their mandate. The inevitable subsequent disclosure of these hidden liabilities immediately and sustainably increases the cost of financing for the State, which must now pay an additional risk premium to compensate markets for the loss of confidence in the reliability of its official statistics. And it is, in the final analysis, the next generation that inherits both the debt itself and this loss of institutional credibility, which will continue to raise the cost of any future borrowing, including for otherwise perfectly legitimate projects.

In a country where the needs for education, health, employment and infrastructure remain significant in terms of the level of development achieved, the opportunity cost of debt servicing remains high. — that is to say all that these resources could have financed from other — is particularly high, much higher, with the same level of debt, than in an economy already endowed with a stock of abundant public capital such as France or the United States.

The country's climate vulnerability further reinforces this fiscal constraint. According to the World Bank report on Senegal's climate and development, without adequate adaptation, annual economic losses from climate change could reach 3-4 per cent of GDP by 2030, and up to 9.4 per cent of GDP by 2050. — an order of magnitude comparable to that of a severe recession, but repeated every year. According to the same report, more than two million additional Senegalese people could switch to poverty because of these uncompensated climate impacts. World Bank — Senegal's climate and development report. Senegal must therefore, simultaneously and without sacrificing one another, restore debt sustainability and the transparency of its public accounts, without eliminating the investments necessary for its economic development and adaptation to climate change. — a fiscal balance exercise that is much more demanding than the one faced by the advanced economies discussed above.

Why is a country seeking the International Monetary Fund?

The International Monetary Fund usually intervenes when a country fails to normally finance its external needs through ordinary market mechanisms — A situation characterized by foreign reserves which have become insufficient to cover several months of imports, a capital flight which is accelerating, a growing difficulty in refinancing the maturing debt, a persistent and unfunded external deficit, a reported banking or monetary crisis, or more simply a general loss of confidence of international creditors which results in the de facto closure of market access.

The IMF then provides temporary and conditional currencies to help the country honour its essential imports, stabilize its currency, avoid a disorderly defect with unpredictable consequences, and eventually regain normal access to private financing. The country formally requests such assistance and negotiates with the Fund's services the precise terms of a programme. But it should be noted, with all the rigour required by an honest economic analysis, that when the country's foreign exchange reserves are already exhausted and markets refuse it any new loans, its freedom of negotiation is necessarily and considerably reduced: formal legal consent coexisted with an extremely strong economic constraint, which largely explains the recurrent controversies about the real democratic legitimacy of these programmes.

IMF disbursements are generally made in successive instalments, subject to the verification of compliance with certain quantitative and structural objectives set out in the programme: a government deficit ceiling, a minimum level of foreign exchange reserves, a strict limitation on monetary creation, a tax reform or pension reform, a targeted reduction of certain subsidies, restructuring of public enterprises in deficit, or a measurable improvement in public financial governance.

Stabilization and structural adjustment: two distinct logics

It is necessary to distinguish, with the precision required by rigorous economic analysis, two logics of intervention often confused in public debate. The stabilisation seeks to correct the most immediate imbalances — the fiscal deficit, galloping inflation, an unsustainable exchange rate, foreign exchange reserves on the brink of exhaustion, short-term financing needs. Lstructural adjustmentIt is transforming the very functioning of the economy more sustainably: taxation, external trade, agriculture, the labour market, the pension system, the banking sector, public enterprises and the administration.

In the 1980s and 1990s, IMF and the World Bank frequently supported joint and complementary programmes: the IMF focused on macroeconomic stabilization and balance of payments, while the World Bank supported longer-term sectoral transformations. The underlying economic logic remains, in itself, difficult to challenge: a country that imports and spends longer than it produces must, at some point, correct this structural gap, and transitional international financing can prevent it from doing so in the most chaotic and costly way possible — a disorderly and unnegotiated defect.

The actual results of these programmes, however, are very much dependent, as the following case studies will show, on the pace and precise composition of the measures adopted. Too fast a fiscal adjustment can lead to a recession which, in turn, reduces tax revenues and, paradoxically, increases the debt-to-GDP ratio that the programme was intended to reduce. A monetary devaluation may support the competitiveness of exports, but at the same time increases the cost of imports and the cost of servicing foreign currency-denominated debt. There are thus two symmetric and equally formidable risks: not to reform, and to pass on to the following generations a crisis that has become even more serious because of the lack of timely treatment; or reform so brutally that it precisely destroys the economic and social capacities necessary for the desired recovery.

Origins and content of Senegalese programmes of the 1980s

At the end of the 1970s, Senegal suffered the combined effects of the two oil shocks, repeated Sahelian droughts, continued deterioration of terms of trade on its agricultural exports, increasing public deficits and dangerously accelerating external debt. The 1979 Stabilization Plan is followed by the Economic and Financial Recovery Plan covering the period 1980-1985. Senegal entered into an expanded agreement with the IMF in August 1980 and simultaneously sought structural adjustment financing from the World Bank. The then negotiated economic policy statement covers all public finances, credit policy, price formation, wage policy, public investment and agricultural policy. World Bank Archives — Senegal, 1980 programme.

Negotiated measures include strict control of public expenditure and wages, restrictions on recruitment into the civil service, restructuring of deficit public enterprises, reform of the national banking sector, liberalization of certain administered prices, reduction of direct public intervention in the agricultural sector, and commercial opening up and active export promotion. Agreements follow each other throughout the decade — extended mechanism, successive confirmation agreements and then facilitated structural adjustment from 1986 onwards. IMF — History of agreements with Senegal.

Results and documented limits of the Senegalese adjustment

The structural adjustment of the 1980s, it must be acknowledged, contributes to reducing certain major macroeconomic imbalances, including the country's external deficit. But this correction comes, to a significant extent documented by subsequent assessments, from the outright compression of imports and domestic demand, rather than from a productive transformation of the economy fast enough to compensate for this contraction with new growth.

In 1987, according to a World Bank assessment, external donors still provided nearly half of Senegalese public resources — a level of dependence which alone illustrates the structural limits of the adjustment undertaken. World Bank — Recent Adjustment History, Senegal. Several successive programmes are interrupted during implementation or produce only incomplete results in relation to the initial objectives. The IMF itself acknowledges in its retrospective evaluations that the 1980 and 1982 programmes have rapidly derailed, due to fiscal slippages, unforeseen external shocks — new drought, further deterioration of terms of trade — and persistent disagreements over the real adaptations needed to the Senegalese context. IMF — Adjustment and Reform in Senegal.

Social and intergenerational consequences of adjustment

The World Bank estimated that at least 8,500 formal jobs had been lost in Senegal since 1986 solely as a result of adjustment measures: about 700 in the restructured banking sector, 800 as a result of liquidations of public enterprises deemed unsustainable, 3,800 as part of the civil service reform, and an additional 3,200 as part of the revised industrial policy. The same assessment also noted a significant reduction in teachers' salaries and the continuing fragility of social progress achieved, given the budgetary resources that remained particularly low for these priority social sectors. World Bank — Adjustment Performance in Senegal Since 1980.

In an economy where the formal sector remained structurally limited, each public or para-public employment abolished could, in reality, support the whole of an extended family network, according to logics of intra-family solidarity well documented by West African economic sociology. The effects of these job losses were thus manifested in multiple and often statistically invisible forms: a mechanical expansion of the informal economy absorbing the laid-off labour force, a general decrease in perceived occupational security, a reduction in upward social mobility for the next generation, an increased incentive to emigrate to Europe or other economic poles, and a smaller accumulation of human capital in directly affected households, due to a lack of sufficient resources to invest in children's education.

Structural adjustment has undeniably helped to clean up certain sectors of the Senegalese economy and has revealed, with some retrospective clarity, the limits of a structurally deficit public development model. But it also clearly illustrates how fiscal reform, designed with the best macroeconomic intentions, can in practice defer its real cost to education, employment and life opportunities for children in the adjusted generation. — A lesson whose scope is far beyond the Senegalese case alone, as will be confirmed by the Greek and Argentine experiences.

Greek programmes from 2010 to 2018

Following the revelation, at the end of 2009, of Greek government deficits considerably higher than previously predicted by official statistics, and the subsequent closure of access to bond markets, Greece receives in 2010 a first €110 billion financing programme, jointly provided by the euro area countries and the International Monetary Fund. Other programmes, of comparable scope, will follow until 2018.

The measures adopted include substantial increases in VAT and other indirect taxes, significant reductions in salaries and civil service staff, reductions and structural reforms in the pension system, a fundamental reform of the labour market, a comprehensive programme of privatisation of public assets, an administrative reorganization of the State and a general reduction in public expenditure. Since Greece, a member of the monetary union, cannot devalue a national currency that no longer exists, nor can it conduct a monetary policy independent of that of the European Central Bank, the adjustment of its external competitiveness must then be effected by what economists call a « internal devaluation » : a forced fall in production costs, nominal wages and domestic demand, in the absence of any possible adjustment by the exchange rate.

Restored macroeconomic balances at the cost of a depression

At the end of these programmes, the primary budget deficit and the imbalance in the external current account are strongly corrected. Greece is reforming its pension system on a long-term basis, recapitalizing its banks at risk of collapse, and remains a member of the monetary union against some of the widely debated exit forecasts.

But the initial cost of this adjustment is considerable and documented with a precision that leaves little room for doubt. Between 2008 and 2012, Greek economic production contracted by around 22%. — a magnitude comparable to that of the Great Depression of the 1930s in terms of the decline in GDP. The unemployment rate stands at approximately 27 per cent of the labour force, and that of young people under the age of 25 exceeds 60 per cent, an unprecedented level in the recent economic history of a peace-time developed country. The IMF itself acknowledges in its retrospective evaluation of the 2010 programme that Greece has adjusted mainly through recession rather than rapid productivity gains, as opposed to the initial projections of the programme. IMF — Evaluation of the Greek 2010 programme.

Between 2010 and 2013, the improvement in the primary balance adjusted for the effects of the economic cycle reached 17.3 points of GDP. — an effort to adjust the budget on an exceptional scale, rarely observed in contemporary economic history over such a brief period. The IMF itself considers that the speed of this adjustment probably contributed to a deterioration, rather than to an improvement, in the dynamics of the Greek debt ratio, as the induced recession reduced the denominator. — GDP — faster than the numerator — debt — was reduced. IMF — Evaluation of the Greek programme 2012. The institution also explicitly acknowledged, in a rather rare exercise of institutional self-criticism, that its first programme had overestimated the administrative execution capacity of the Greek state, underestimated the real depth of the recession which it was going to cause, insufficiently distributed the burden of adjustment among the various social groups, and postponed too long the necessary restructuring of the sovereign debt itself.

Cohort effects: a sustainable generation

Young Greeks who entered the labour market during the harshest years of the crisis suffered, cumulatively, prolonged unemployment and delayed entry into employment, a gradual depreciation of acquired but unused skills, long-term wages lower than those of their elders for several consecutive years, frequent downgrading from their initial level of qualification, a mechanical reduction in their future social rights due to lack of sufficient contributions, and a very strong incentive to migrate to other European countries with better prospects.

These « scar effects », according to the expression of the economic literature on labour markets, remain long after the statistical return of macroeconomic growth. A whole generation that has spent several years without a stable job does not automatically recover, once the economic situation returns favourable, the occupational and wage path that would have been his in the absence of a crisis — a phenomenon of path dependence well documented by labour economics research on other comparable historical episodes.

While labour market reforms initiated during this period have reduced certain costs for enterprises and improved various aggregate indicators of international competitiveness, they have also promoted more flexible and less protective forms of employment, increased the average length of working hours, and increased certain wage inequalities between categories of workers. European Commission — Evaluation of labour reforms in Greece, 2010-2018. The official evaluation of the European Commission published in 2023 nevertheless considers, with hindsight, that the main macroeconomic objectives of the programmes were finally achieved: Greece regained normal access to international financial markets and corrected several major structural imbalances which threatened its participation even in the euro area. European Commission — Ex post evaluation of Greek programmes 2010-2018. An adjustment programme can therefore, this Greek case shows with almost exemplary clarity, restore measurable macroeconomic financial balances while simultaneously producing lasting social and demographic damage over at least one entire generation.

The 2001 crisis: parity sets until the breakup

In the 1990s, Argentina tied peso to the US dollar with a fixed and legally guaranteed parity — the so-called convertibility. This system reduces inflation, which was previously chronic and out of control, but gradually deprives the Argentine economy of monetary flexibility to absorb shocks, while foreign currency debt continues to rise as the country enters an increasingly deep recession at the end of the decade.

The IMF remains committed to Argentina during most of this critical period. In the run-up to the open crisis, successive programmes favour strict budgetary discipline and the maintenance of fixed parity with the dollar at all costs. But a fiscal adjustment carried out in the midst of a recession further reduces economic activity and, with it, the tax revenues supposed to finance this adjustment — A vicious circle from which the IMF's independent evaluation will draw, a posteriori, harsh conclusions. This independent assessment explicitly concludes that the strategy pursued until 2001 had a low probability of success from its inception, and that a clearer exit strategy for fixed parity should have been prepared much earlier by the Argentine authorities and the Fund itself. IMF Independent Evaluation Office — Argentina, 1991-2001.

When parity finally collapses, at the end of 2001, the country suffers simultaneously a sovereign default on its external debt, a sharp devaluation of the peso, a partial freeze on bank deposits — the infamous corralito — and a major political crisis that saw several presidents succeed within a few weeks. Argentine GDP declined by around 11 per cent in 2002 alone and by almost 20 per cent cumulatively since 1998. The unemployment rate exceeds 20 per cent of the working population. Poverty reaches about 58 per cent of the population, extreme poverty doubles in a few months, and average real household income decreases by 31 per cent. — figures that place this crisis among the fastest and most brutal social collapses in the recent economic history of a middle-income country. IMF — Argentina, social consequences of the crisis. A strong economic recovery began in 2003, favored by the competitive depreciation of the exchange rate, which boosted exports, the re-starting of domestic demand and the concomitant rise in world prices of agricultural raw materials, which Argentina exported massively. This complete sequence shows that the recovery of a crisis economy depends at least as much on the exchange rate regime adopted, the effective restructuring of the debt and the international environment at the moment, as on the only fiscal discipline advocated by the adjustment programmes.

Documented failure of the 2018 programme

In 2018, the IMF approves Argentina's largest confirmation agreement in its entire institutional history, subsequently increased to $57 billion — an unprecedented amount that alone illustrates the scale of the confidence crisis experienced by the country at that time.

The programme is based on a simultaneous tightening of fiscal and monetary policies, explicitly designed to restore the confidence of international markets in Argentine repayment capacity. But capital flight continues despite these commitments, peso continues to depreciate strongly, inflation is rising again, and real incomes of the population are decreasing significantly, especially among the poorest groups, the least protected against rising prices of basic necessities.

The ex post evaluation published by the IMF itself concludes, with a notable institutional frankness, that this 2018 programme did not restore market confidence, the fiscal and external sustainability sought, or the economic growth promised to the Argentine people. The Fund explicitly acknowledges that its strategy and conditionalities were inadequately adapted to the structural and political characteristics of Argentina — a rare institutional admission that will feed into an in-depth debate in the following years on the very design of IMF adjustment programmes. IMF — Ex post evaluation of the 2018 Argentine programme.

The institutional legacy of repeated crises

The repetition over several decades of the debt crises and the adjustment programmes accompanying them permanently weakens the confidence of Argentine citizens in a much wider set of institutions than the only public treasury: the national currency itself, which is considered structurally unstable; the banking system, whose deposits have already been frozen several times in recent history ; the State in general, perceived to be unable to meet its commitments over time; official public statistics, whose reliability has been seriously questioned on several occasions; long-term contracts, considered too risky in such an unstable environment; Finally, the international financial institutions themselves.

In the face of this cumulative and rational mistrust, Argentinian households protect themselves, in a completely comprehensible way on an individual scale, by purchasing massive foreign currencies. — the dollar, mainly —, by moving a growing share of their savings out of the formal banking system, or by systematically focusing on very short-term horizons in their economic decisions. These behaviours, which are perfectly rational from the point of view of each single household, end up collectively weakening the entire national economy, reducing the savings available for productive investment and fuelling, by their cumulative scale, the following currency crises.

The next Argentine generation thus inherits not only a financial debt to repay, but also a largely dollarised economy in its current behaviour, historically weak institutional confidence, and a very limited collective capacity to pursue long-term economic policies. — Since every government promise, even sincere, comes up against the scepticism accumulated by decades of successive crises.

From temporary budgetary cost to permanent loss of human capital

A reduction, even a temporary one, in public spending on education, health or child nutrition, which is presented as a cyclical one, can have quite irreversible effects on a generation. A child who has been out of school for several months, who is malnourished during a critical period of development, or who is deprived of essential medical care, is not only suffering from a temporary and catch-up difficulty: his cognitive abilities, his future earnings over the whole of his working life, and sometimes even those of his own unborn children, can be permanently affected, according to a mechanism of intergenerational transmission now well documented by the development economy.

A seemingly minor and strictly accounting budget economy can thus create, without ever appearing in any public debt table, a genuine invisible social debt — a debt whose real cost, updated over a lifetime, can prove to be more lasting and heavier than the explicit financial commitment it originally sought to reduce.

The sacrificed generations of the labour market

Young people who enter the labour market precisely during a deep economic recession experience, statistically recurring from one country to another, long-term unemployment well beyond the average normal period of time, precarious jobs due to lack of available alternatives, long-term wage levels lower than those of their elderly for several consecutive years, a significant postponement of their residential autonomy due to lack of sufficient income, a significantly lower constitution of their pension rights due to minced careers as soon as they enter the labour force, and a general postponement of family formation and the birth of children.

The impact of a crisis is therefore never evenly distributed over time, contrary to the suggestion of national statistical averages calculated over a population as a whole: some specific cohorts, defined by their only date of entry into the labour market, carry a disproportionate and lasting share of adjustment, while the generations entered a few years earlier or later are relatively preserved.

The invisible shift of cost to families

In countries where public social protection remains limited — the vast majority of developing economies, including Senegal —It is the extended family itself that absorbs, as a last resort, the shock of budgetary adjustment. The loss of a single salary in the public service can thus directly affect the living conditions of several related households which were partly dependent on it. Women perform statistically more unpaid care work when public health or childcare services contract under budget cuts. Children themselves may, in the most extreme cases documented by sociological studies, be asked to work to compensate for the loss of family income.

A reduction in public expenditure can thus move, silently and without this ever appearing in any official national accounts, a significant share of its real costs to unpaid domestic work and to the informal economy. — making statistically invisible much of the social price actually paid by the population.

Emigration of skills as a valve and net loss

The scarcity of employment opportunities resulting from severe fiscal adjustment often pushes the most qualified young people, the very ones in which the country has invested the most in education, to migrate to economies with better prospects. While financial transfers from this diaspora provide valuable foreign exchange for the home country's balance of payments, the home country is losing a significant share of public and private investment in education for those now active elsewhere.

Massive emigration of this kind mechanically reduces the tax base available to finance the remaining public services, and accelerates, through a direct demographic effect, the ageing of the population which remains on the spot — a double penalty for the original economy, which loses both current and future contributors.

The democratic crisis caused by adjustment

The urgent budgetary decisions of a debt crisis sometimes give citizens the tangible feeling that their government no longer acts according to the electoral mandate entrusted to it, but according to the technical requirements formulated by external creditors, whose democratic legitimacy is, by construction, never subjected to popular vote.

When any political alternation appears, in the eyes of the electorate, to be permanently confined to the same budgetary constraints regardless of the party in power, the very legitimacy of the democratic process may be weakened. Election abstention, extreme political radicalization, or economic nationalism hostile to international institutions can then make significant progress — a phenomenon observed, to varying degrees, both in Greece and Argentina at the height of their respective crises.

The possible benefits, and too often overlooked, of a successful adjustment

A well-designed fiscal adjustment, it must be stressed with the same analytical rigour as for its risks, can nevertheless effectively protect future generations by avoiding destructive hyperinflation, by restoring access to imports essential to the economic life of the country, by preventing the outright collapse of the national banking system, by abolishing clientelistic spending without any economic justification, by sustainably improving tax revenues through better tax administration, by sanitizing the management of structurally-deficit public enterprises, by reducing the statistical risk of repeated crises in the future, and by restoring, at the end of the process, a sustainable capacity for productive investment.

Any rigorous evaluation of an adjustment programme must therefore, by methodological honesty, compare its real costs not with an ideal and purely counterfactual economic situation, but with what would likely have happened in the absence of any external financing or structural reform — a baseline scenario that, in most documented sovereign debt crises, would probably have involved disorderly default, hyperinflation or banking collapse with probably even more severe social consequences. This methodological precaution does not exempt, it must be explicitly stated, neither the national governments nor the IMF itself from their design errors documented above. It only prevents the indiscriminate attribution of a single adjustment programme to all the consequences of a crisis which, in the vast majority of the cases studied, was largely previous to it in its root causes.

Five structural failures identified in the economic literature

A comparative examination of Senegalese, Greek and Argentine cases, compared with a now abundant economic literature on IMF programmes, makes it possible to identify five recurring errors, which are not a matter of cyclical ill luck but of structural bias in the very design of adjustment programmes.

The International Monetary Fund has itself formalized this doctrinal evolution in its most recent operational guidelines, explicitly recognizing the importance of preserving a minimum base of protected social expenditure, even at the heart of a demanding fiscal adjustment. IMF — Operational Guidance on Social Spending, 2024. However, this development alone is not sufficient to correct the identified biases if the floors so fixed remain too low in absolute terms, poorly targeted at the populations actually vulnerable, or eroded in real terms by inflation that the programme itself sometimes contributes to fuelling.

The true record a nation is passing on to its children

A nation never transmits to the next generation a single figure, that of its consolidated financial debt, but a much broader and multidimensional balance sheet, which economic analysis gains to explicitly break down into several distinct forms of capital. The physical capital — roads, transport networks, energy infrastructure, housing stock. The human capital — level of public health, quality and accessibility of education, professional skills accumulated by the labour force. The natural capital — climate stability, water resources, agricultural soil quality, biodiversity preserved. The institutional capital — confidence in public speaking, effective independence of justice, effective administration. And finally the social capital — national cohesion, inter-Community solidarity, relative weakness of the inequalities likely to fuel future tensions.

It transmits, symmetrically, several forms of liabilities as real as well as rarely recorded together: financial debt itself, future pension and health commitments already included in the legislation in force, infrastructure degraded due to inadequate maintenance, accumulated environmental pollution, increasing climate vulnerability, unresolved poverty and social exclusion, and widespread distrust of public institutions.

A government can thus, and this is a point of considerable analytical importance too often overlooked by public debate, artificially reduce the appearance of its financial debt by simply ceasing to maintain its existing infrastructure or invest in its youth: it then improves an isolated financial indicator, that followed by rating agencies, while simultaneously degrading, and in a much less visible way immediately, the whole of the country's real collective wealth. Conversely, additional debt may well be justified from the point of view of intergenerational justice if it finances assets whose overall social return clearly exceeds its financial cost.

The International Monetary Fund itself proposes, in its most recent work, to supplement the traditional objectives expressed in gross debt with a more comprehensive measure of the net public sector value, explicitly comparing all liabilities and all assets actually created by public action. IMF — Beyond Debt: Net Worth Fiscal Anchors, 2024. The question really relevant to the analyst, at the end of this decomposition, then becomes the following: Is the economic, social, ecological and institutional value of what we transmit really greater than the financial obligations we pass on in the same movement?

Modernised golden rule and broader public balance sheet

Public debt should be primarily reserved, according to the principles of good budgetary practice today widely shared by the economic profession, for investments whose economic lifespan exceeds that of borrowing, exceptional crises clearly identified as such, and expenditure producing explicitly intergenerational and measurable benefits. Regular current expenditure, on the other hand, should be financed from regular revenue over the entire business cycle, not only in the most favourable years.

Each national budget should also present, in a systematic and no longer optional manner, gross debt and net debt calculated according to a constant methodology, the public assets as a whole, the commitments already made in respect of pensions and health, the public guarantees granted to third parties, the liabilities of consolidated public enterprises, the quantified climatic risks to existing infrastructures, the future costs of maintenance already foreseeable, and the precise destination of the funds borrowed. — a transparency whose Senegalese experience of hidden debt, analysed above, has shown by the negative all the importance.

A systematic generational evaluation of major reforms

The most significant fiscal reforms should systematically measure their differentiated effects on children, students, young people entering the labour market, families with dependent children, middle-aged workers, current pensioners, and generations not yet born but already committed by current budgetary decisions. The OECD explicitly recommends integrating this generational perspective into the regular budget cycle of each state, and cites as examples of good practice in intergenerational sovereign wealth funds as well as budgets explicitly geared towards long-term well-being rather than to short-term indicators alone. OECD — Governance and intergenerational justice.

Progressive, socially balanced and sufficiently early adjustment

A credible and sustainable fiscal consolidation should combine several complementary levers rather than relying on a single administratively convenient instrument: a targeted reduction in the most clearly inefficient expenditure, the gradual removal of tax niches whose economic justification is no longer more demonstrated, a continuous improvement in ordinary tax recovery, a determined fight against tax evasion and fraud, a gradual adaptation of social commitments to real demographic change, targeted and priority protection of the most vulnerable households, and active support for employment and productivity rather than an undifferentiated contraction of overall public expenditure.

The brutal and full repayment of any public debt must in no way be made an absolute objective independent of economic circumstances. Excessive fiscal austerity can, as shown with particular clarity in the Greek example discussed above, destroy economic growth and ultimately aggravate, rather than reduce, the debt ratio that the adjustment was intended to correct. IMF — When Should Public Debt Be Reduced?. If a debt is clearly and sustainably unsustainable according to all the indicators available, the only structural adjustment is not enough: the losses must be explicitly distributed between the debtor country, its private creditors and, as the case may be, the official financial institutions themselves. — delaying this necessary restructuring, as the Greek precedent once again illustrates, can protect creditors in the very short term at the cost of a significantly deeper recession and even higher public debt.

Priority protection of human capital, even in times of crisis

Even at the heart of an acute budget crisis requiring immediate savings, certain items of expenditure should be explicitly protected and sanctified in the very design of the adjustment programme: child nutrition, primary health, basic education, vocational training, minimum maintenance of existing infrastructure, and climate adaptation already under way. The objectives of these programmes should also be measured in concrete real results. — actual enrolment rate, immunization coverage, physical access to care — and not only in nominal budgetary amounts, easily eroded by inflation, which is often caused, precisely, by the crisis itself.

Transparency, accountability and intergenerational funds

Intergenerational justice requires, at the strictly institutional level, a comprehensive and public register of all the debt contracted by the State, the systematic publication of the precise conditions of each loan subscribed, effective and not purely formal parliamentary control, regular independent audits carried out by genuinely autonomous bodies of the executive power, the full declaration of all the public guarantees granted, verifiable traceability of the funds borrowed to their final destination, and genuinely dissuasive sanctions in case of proven concealment — All of the specific shortcomings revealed, a posteriori, in the Senegalese hidden debt case discussed above.

Exceptional revenues from oil, gas, privatization or other non-renewable natural resources should never finance the government's current expenditure on a sustainable basis, except to reproduce, in a new form, exactly the leak mechanism analysed at the very beginning of this study. They can, on the other hand, usefully feed a macroeconomic stabilization fund, a genuine intergenerational sovereign fund like those established by Norway or Botswana, targeted debt reduction, education and public health, sustainable infrastructure, or the national energy transition. This principle is of particular relevance to Senegal at a time when the country is developing its nascent hydrocarbon resources. — A window of opportunity which, poorly managed, could as well become, as the economic history of many producing countries shows, a new source of fiscal vulnerability rather than an instrument of intergenerational justice.