2026 Perspectives for the Public Sector

Stephanie von Friedeburg Global Head of Public Sector We start by examining how geopolitical instability and advances in military technology are reshaping defense spending, with Europe and Asia investing in new systems and turning to tools such as export credit finance. While regulatory questions remain, private capital is emerging as an important partner in modernization efforts. Economic conditions are prompting institutions to reassess liquidity and risk management. Inflation, monetary tightening, and market volatility are driving treasurers to strengthen safety, diversify counterparties, and meet changing regulations. Many are turning to automation, dynamic liquidity structures, and refreshed portfolio strategies. Debt-for-development conversions are also evolving, moving beyond small bilateral arrangements toward scalable, credit-enhanced structures that can attract institutional investors. By combining multilateral guarantees with private-sector participation, they offer emerging markets a way to create fiscal space and direct resources to priority programs. A broader shift is underway in development finance as well. Donor budgets remain constrained even as global needs rise, elevating the importance of blended finance, public-private partnerships, and risk-sharing mechanisms. New opportunities in energy, infrastructure, and critical minerals demonstrate how finance is being aligned with both national strategy and humanitarian goals. With the economic outlook broadly positive, this is a timely moment to strengthen structural safeguards. State-owned enterprises often balance commercial and policy roles, which can elevate sovereign risk through losses, contingent liabilities, and foreign-exchange exposure. We look at how stronger governance, diversified funding, and tools such as commodity hedging can support more resilient balance sheets. Alongside these themes, we highlight sometimes-overlooked progress. Mission 300— led by the World Bank and African Development Bank — aims to bring electricity to 300 million people in Sub-Saharan Africa. Off-grid solutions are expanding through pay-as-you-go solar models and local-currency financing, already improving education, health, and economic opportunity for millions. Turning to Africa’s financial architecture, deeper domestic debt capital markets are essential for long-term development. Robust local-currency markets can reduce reliance on volatile external borrowing. While an “African premium” is often assumed, our analysis shows that governance and transparency are the true determinants of cost, as illustrated by examples from the West African Economic and Monetary Union and Côte d’Ivoire. Technology continues to reshape our era, and the public sector is playing a pivotal role. Digital assets are changing how governments manage payments and cross-border flows. Recent US legislation, including the GENIUS Act, represents an important step, while solutions such as Citi Token Services help bridge the transition to regulated digital money. We also examine how tokenization is transforming bond markets, with public issuers and development banks already piloting innovative structures such as Digitally Native Notes. Citi Perspectives for the Public Sector draws on insights from our global team to support progress and shared prosperity. We hope you find this edition valuable, and we welcome your feedback and ideas for future themes. Citi Perspectives for the Public Sector 5