2026 Perspectives for the Public Sector

Jorge Ordonez Public Sector Sovereign Solutions and Advisory Chris Tynan Development Finance Amanda Helfrich Development Finance How Debt Conversions are Evolving with the Times G overnments throughout the world face reduced fiscal headroomdue to high debt burdens and competing spending priorities. This situation is most acute in the emerging markets. Mobilizing private capital is critical to overcoming this shortfall; however, unlocking it is proving to be an increasingly complex task. Enter debt-for-development conversions. While the foundational concept of exchanging debt relief for development commitments has existed since the 1980s, the mechanisms, scope, and sophistication of these instruments have undergone a profound transformation. The debt conversions executed since the 2021 “Blue Bond” in Belize stand as testament to this evolution, pushing the boundaries of applicability, financing structures, and partnership models. These sophisticated structures demand deep capital markets knowledge, specialized structuring expertise, and strategic partnerships with sovereigns, multilateral development banks (MDBs) and project implementors. Citi is uniquely well-placed as a financial partner for debt conversions, leveraging its leading debt capital markets practice with profound expertise in emerging markets and its Public Sector franchise with extensive knowledge of sovereign debt sustainability. From Bilateral Government to Government Debt Forgiveness to Commercial Debt Liability Management Structures: A Paradigm Shift The debt-for-development conversions of the 1980s and 1990s were largely characterized by bilateral debt forgiveness, where creditor nations would cancel a portion of a debtor country’s public debt in exchange for commitments to fund domestic developmental programs. While impactful in their time, these transactions were typically smaller in size, simpler in structure, and often limited in their ability to mobilize significant private capital. Citi Perspectives for the Public Sector 19