• Domestic debt now accounts for the majority of public borrowing in sub-Saharan Africa
• Shift reduces exposure to currency shocks but raises costs and refinancing risks
• IMF highlights shorter debt maturities across several economies

Sub-Saharan African countries are increasingly shifting their borrowing from external creditors to domestic markets, marking a significant transformation in the region’s debt structure. In a March 2026 article in the International Monetary Fund’s flagship magazine, economists Amadou Sy and Athene Laws find that most public debt in the region is now domestically issued. This reflects a broader shift by governments toward local markets amid tighter global financial conditions and reduced access to international capital.

This shift has accelerated in recent years, particularly since 2022, as rising global interest rates and increased market volatility have constrained access to external financing, including Eurobonds. In response, governments have expanded domestic borrowing through local currency issuance, relying on domestic banks and financial markets. This approach serves both as a strategy to develop local capital markets and as a short-term response to funding constraints.

The IMF highlights several advantages of domestic borrowing. It allows governments to avoid exchange rate risks linked to foreign currency debt and reduces dependence on foreign reserves for debt servicing. Additionally, it provides insulation from abrupt changes in global investor sentiment and external financing conditions, which have previously disrupted access to international markets.

However, this transition introduces new macroeconomic risks. Domestic debt is often issued with shorter maturities, increasing rollover risks as governments must refinance debt more frequently. In some cases, such as Ghana, average maturities have dropped to less than three months, heightening exposure to interest rate fluctuations and shifts in investor demand.

Borrowing costs are also higher in domestic markets. The IMF estimates that the median interest rate on domestic debt reached 8.8% in 2024, compared to typically lower concessional rates from multilateral lenders. At the same time, debt servicing pressures are intensifying, with governments in the region allocating around one-seventh of their revenues to interest payments. This significantly constrains fiscal space for public investment.

Beyond borrowing conditions, institutions such as the Official Monetary and Financial Institutions Forum stress that debt sustainability depends on the use of funds. Investments in infrastructure, industry, and human capital can generate returns that support repayment and foster long-term growth.

Meanwhile, development partners, including the French Development Agency, note that public debt levels in sub-Saharan Africa remain elevated despite recent stabilisation, and fiscal pressures persist. Policy discussions at the regional level, including those referenced by the Atlantic Council, increasingly emphasize the need to deepen financial markets and develop coordinated approaches to managing debt vulnerabilities.

By Cynthia Ebot Takang