Reading time: 2 minutes
Is public debt necessarily a burden passed on to future generations, or can it, on the contrary, be an instrument for economic transformation when it finances investments that can sustainably increase collective wealth?
Public debt is often presented as a burden that present generations would place on future generations. This representation contains a part of truth, but it becomes misleading when it leads to considering any debt as inherently bad.
A State may be in debt to finance current expenditure without lasting effect on its productive capacity, but it may also use borrowing to build infrastructure, improve education, strengthen the health system, develop energy, modernize transport or finance transformations that can increase future productivity.
In this second case, debt functions as an intergenerational transfer mechanism. Future generations certainly inherit repayment, but they also inherit the assets, infrastructure and productive capacity financed by this debt.
So the central question is not simply the level of debt. It concerns the quality of the expenditure financed, the cost of borrowing, the economic growth achieved in return and the capacity of the State to generate sufficient future resources to service this debt.
Debt becomes particularly dangerous when it finances recurrent deficits without economic transformation, when interest rates are lastingly above the rate of growth or when external debt exposes the country to currency fluctuations and foreign creditors' decisions.
Conversely, well-used debt can accelerate development. Systematic rejection of debt can also have a cost: inadequate infrastructure, underinvestment in education, technological backwardness and inability to finance today projects whose profits will extend over several decades.
This is particularly important for African economies. Many countries must simultaneously respond to strong population growth, develop their infrastructure and maintain the sustainability of often fragile public finances.
The real dividing line therefore contrasts less debt-debt countries to low-debt countries than States capable of turning their debt into productive capital and those that use it to temporarily reverse structural imbalances.
This episode proposes to overcome the opposition between austerity and debt. Public debt can be a burden, but it can also become a lever for the future. It all depends on what society builds with borrowed money and the wealth it transfers in return to the generations that will have to repay.
