2026 Perspectives for the Public Sector

George Asante Head of Markets, Africa Hackim Abdul Public Sector, EMEA L ocal-currency debt markets in Emerging Market and Developing Economies (EMDEs), particularly across Africa, have become crucial following successive external shocks, including volatile commodity prices and synchronized global monetary tightening. While multilateral development banks (MDBs) and development finance institutions (DFIs) remain significant sources of cost-efficient funding, providing critical capital to accelerate progress towards sustainable economic growth, structural vulnerabilities persist. Extensive reliance on hard currency (foreign-currency) commercial borrowing increases vulnerability to liquidity cycles and severe exchange-rate swings. When currency depreciation is factored in, the FX-adjusted cost of foreign-currency sovereign debt in high-risk EMDEs has regularly exceeded 15% during recent tightening cycles. 1 Strengthening domestic debt capital markets (CMD) is therefore not merely an alternative financing channel; it is the anchor of debt sustainability 2 over the economic cycle, offering better risk management by reducing currency and interest rate volatility for borrowers. As the Bank for International Settlements (BIS) observes, developed capital markets serve as the “spare tire” of the financial system, essential when other funding sources falter. Deepening Africa’s Domestic Debt Capital Markets: The Cornerstone of Sovereign Resilience 1 OECD. (2025). Supporting emerging markets and developing economies in developing their local capital markets 2 Committee on the Global Financial System. (2019). Establishing viable capital markets Citi Perspectives for the Public Sector 55