## The New Face of African Debt

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**Canonical URL:** [The New Face of African Debt](https://www.imf.org/en/publications/fandd/issues/2026/03/the-new-face-of-african-debt-amadou-sy)

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## Bibliographic details
- Authors: AMADOU SY, Athene Laws
- Published: March 3, 2026

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### Trend: shift from external to domestic debt
- Sub-Saharan African governments have increasingly shifted borrowing away from external debt and toward domestic debt.
- At the turn of the millennium, governments relied heavily on external loans, particularly concessional lending in foreign currencies from bilateral and multilateral institutions.
- Strong growth and global search for yield led many countries to issue Eurobonds (dollar- or euro-denominated) before international rate shocks and tightened global financial conditions in 2022 shut many countries out of global markets.
- No countries in sub-Saharan Africa issued Eurobonds between spring 2022 and January 2024.
- Over time, countries pivoted toward borrowing in domestic markets and in local currency; as a result, most of sub-Saharan Africa’s public debt is now domestic.

### Benefits of developing domestic debt markets
- Borrowing in local currency:
  - Sidesteps exchange rate shock risk and the need to use foreign reserves for repayments.
  - Makes debt management simpler and more predictable because local laws govern debts.
  - Reduces exposure to swings in international investor sentiment and global interest rates.
- Broader macroeconomic benefits:
  - Supports monetary policy operations by expanding central banks’ tool kits.
  - Regular issuance at different maturities creates a yield curve, aiding risk pricing and financial market development.
  - Lays foundations for private sector financing, job creation, and economic growth.
- Empirical context:
  - The recent freeze in Eurobond issuance illustrates dangers of overreliance on a single financing source.

### New and evolving risks from domestic debt
- Short maturities and rollover risk:
  - Domestic debt is typically issued for much shorter periods than external loans (sometimes days or months rather than years or decades).
  - Some countries (Mauritius and Tanzania) have lengthened maturities; others have short-term borrowing due to shallow markets or high vulnerabilities.
  - Ghana, since its 2023 domestic debt restructuring, has issued only T-Bills maturing in under a year, with an average outstanding maturity of less than three months as of November 30, 2025.
  - Shorter maturities increase rollover risk when debt comes due.
- Higher apparent cost of domestic debt:
  - Domestic debt often carries interest rates higher than concessional loans and sometimes higher than market-rate Eurobonds.
  - The median country in sub-Saharan Africa issued domestic debt at an average of 8.8 percent interest in 2024.
  - Because inflation is higher in much of the region, real debt costs can vary widely and may in some cases be negative.
- Sovereign-bank nexus and financial system strain:
  - Banks in many countries hold large amounts of government debt, which can push up interest rates and crowd out private lending.
  - A loss in government creditworthiness can wipe out bank assets and trigger banking crises; banking crises can lead to bailouts, reduced private credit, capital outflows, and deeper fiscal crises.
  - Sub-Saharan Africa is seeing the sovereign-bank nexus grow faster than anywhere else in the world, driven primarily by low-income countries.
- Risks from greater foreign participation:
  - Higher nonresident ownership is associated with lower yields and greater liquidity, reducing debt-servicing costs.
  - However, foreign flows can be volatile and create “hot money” problems that cause large swings in yields and sales.
  - Policy design is complicated by lack of data on ownership.

### Policy recommendations and best practices
- Treat domestic debt market development as part of a broader economic strategy rather than a crisis stopgap.
- Maintain good debt-management practices:
  - Issue timely, accurate, and comprehensive debt statistics.
  - Communicate effectively with investors and the public to build trust.
  - Implement strong legal and regulatory frameworks and prudent debt portfolio management.
  - Adopt a clear debt sustainability strategy.
- Strengthen public financial management:
  - Empower auditors and enhance governance.
  - Improve oversight of state-owned enterprises.
  - Practice sound cash management.
  - Ensure public investment management is efficient and directs resources to growth-enhancing investments.
- Broaden and deepen domestic investor base:
  - Expand demand for government debt beyond banks to include pension funds, insurance companies, and other long-term private capital providers.
  - Allow carefully managed foreign investor participation to improve liquidity and lower yields while mitigating volatility risks.
- Strengthen financial sector regulation and supervision:
  - Reduce excessive bank holdings of sovereign debt.
  - Improve data collection on debt ownership and market activity.
- Complement market development with private sector reforms:
  - Unlock barriers to business growth and economic diversification through reforms in the business environment, education, skill development, and infrastructure.
- Preserve stable macroeconomic conditions:
  - Strong fiscal management, low and stable inflation, and sustainable debt burdens are essential preconditions for successful domestic debt market development.

### Key statistics and illustrative facts
- No Eurobond issuance by any sub-Saharan African country between spring 2022 and January 2024.
- Ghana’s average outstanding maturity of domestic debt: less than three months as of November 30, 2025.
- Median domestic debt interest rate in sub-Saharan Africa in 2024: 8.8 percent.
- A typical government in the region spends about one-seventh of its revenue on interest payments.

### Additional notes
- Authors: AMADOU SY (assistant director, IMF African Department) and ATHENE LAWS (economist, IMF African Department).
- A related podcast features Amadou Sy discussing benefits of issuing debt in local markets and in local currency.

*Source: The New Face of African Debt, F&D Magazine, AMADOU SY and ATHENE LAWS, March 2026.*

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## Content in this bundle

- **The New Face of African Debt**
  - [The New Face of African Debt (Markdown version)](/-/media/files/publications/fandd/article/2026/03/sy.pdf.md){rel="alternate" type="text/markdown"}
  - [The New Face of African Debt (PDF)](/-/media/files/publications/fandd/article/2026/03/sy.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/fandd/issues/2026/03/the-new-face-of-african-debt-amadou-sy_