The largest sovereign issuers in Africa have generally weathered various external shocks through 2025 and early 2026, preserving the longer-term trend of improving market sentiment. In recent years, these issuers have relied increasingly on local currency bond issuance to meet their financing needs, sometimes as a strategic decision and sometimes due to a lack of alternatives. However, refinancing risks are beginning to accumulate, reflecting the growing share of shorter-maturity domestic issuance and limited access to longer tenors in domestic markets. This chapter analyses these developments and examines the role of switch operations in managing refinancing risks. It also considers how switches can support the development of deeper and more liquid local currency bond markets.
Africa Capital Markets Report 2026
Abstract
Sovereign bond markets across Africa’s largest economies have generally remained resilient to exogenous macroeconomic and geopolitical shocks, but demand has softened. Gross borrowing totalled close to USD 500 billion between January 2025 and June 2026.
Domestic markets financed 94% of gross borrowing between Q1 2025 and Q2 2026, accounting for at least 90% each quarter. Governments have implemented or are planning a range of measures, including issuing new bond types, reforms to primary dealer frameworks and enhanced investor relations programmes. However, issuance has remained concentrated in short-term instruments.
The spreads on Eurobonds were tighter by the end of Q2 2026 compared to the start of Q1 2025, despite multiple exogenous shocks. This reflects improving market sentiment, supported by stronger macroeconomic fundamentals and ongoing institutional reforms, driving improved credit ratings.
Since early 2025, energy price shocks have had a greater impact on yields than trade-related uncertainty. The impact has been most pronounced amongst the region’s largest net energy importers.
Issuers have continued efforts to deepen and diversify their investor bases. Key measures include regulatory reforms affecting institutional investors, further capital account liberalisation, and the use of technology to broaden retail investor participation.
Average credit default swap spreads, reflecting default probability and risk premium, fell to their lowest levels since before the COVID-19 pandemic. As with credit ratings, this improvement follows several years of deterioration, as spreads rose fairly consistently from early 2020 to the end of 2024.
However, refinancing risks increased during 2025 and in the first half of 2026. By Q2 2026, 31% of bonds and Treasury bills were set to mature within one year, the highest level since Q3 2020. Meanwhile, only 44% of outstanding bonds had maturities higher than five years, the lowest level since the end of 2018.
The rise in refinancing risk partly reflects the growing importance of domestic borrowing, which is typically concentrated at shorter maturities. By the end of Q2 2026, around half of domestic marketable debt was set to mature by the end of 2029, with 40% by the end of 2027. By contrast, half of the outstanding foreign marketable debt was not scheduled to mature until 2033 or later.
Against this backdrop, switch operations can help reduce refinancing pressures. Kenya, Mauritius, Namibia and South Africa conducted more than 180 switches over the period, for a total volume of almost USD 6.9 billion, and evidence from these countries underlines the role of switches in supporting liquidity and yield curve development.
This Chapter reviews sovereign bond markets in 14 African countries between January 2025 and June 2026, focusing on local currency markets.1 These countries accounted for around 90% of African sovereign bonds outstanding in June 2026. It examines their growing reliance on domestic bond markets and the implications for financial resilience, covering primary and secondary market developments, and trends in investor bases and credit ratings. It also examines the refinancing risk associated with a growing share of domestic issuance, which is concentrated at shorter maturities, and the role of switch operations in mitigating this risk. It focuses on switches by selected African sovereigns, offering empirical evidence on their potential contribution to secondary market liquidity, and concludes with policy considerations for effective switch programmes.
4.2.1. Market structure and local currency bond market development
Developing the local currency bond market (LCBM) is a stated objective of nine out of ten debt management strategies presented in Table 4.1. To meet this objective, sovereign issuers have adopted or planned a variety of policies over recent years, congruent with their levels of capital market development, and informed by international best practices (Hashimoto et al., 2021[1]). These measures focus on debt management aspects such as the structure of the debt portfolio, primary dealership systems, secondary market liquidity, investor base diversification, or investor relations.
Many issuers are implementing policies to boost their sovereign bond market’s efficiency by improving their market-making infrastructure and stimulating greater secondary market trading. Ghana reformed its primary dealer framework, which included removing the designation from five underperforming primary dealers in the first quarter of 2025, while Mauritius planned to increase the number to boost competition (Ministry of Finance of Mauritius, 2025[2]; Ministry of Finance of Ghana, 2026[3]). In Egypt, the Financial Regulatory Authority and the Ministry of Finance are working together to “activate” the secondary market to enable better price discovery, while Kenya plans to implement a pilot market-making framework (The National Treasury and Economic Planning, 2025[4]; Ministry of Finance of Egypt, 2026[5]).
Note: The table displays only a partial list of public debt management objectives chosen to facilitate comparability across countries. While borrowing cost minimisation is not an explicit objective of the Nigerian Debt Management Office, its Medium-Term Debt Management Strategy includes meeting financing needs and payment obligations “taking into consideration the costs and risks trade-offs in the debt portfolio”.
Source: National authorities. See Annex 4.A for details.
Issuers are also looking to broaden their investor bases through more proactive investor relations and by better facilitating access to their local capital markets by foreign investors. Ghana, for instance, plans to institutionalise regular investor briefings, town hall meetings and conference calls, while Zambia has committed to targeted outreach programmes focused on domestic investors (Ministry of Finance of Ghana, 2026[3]; Ministry of Finance of Zambia, 2025[6]). In early 2026, Zambia also increased the annual limit on foreign investors’ participation in bond issuance, while pushing for the inclusion of its domestic debt into international benchmark indices for frontier markets, such as those operated by FTSE Russell and J.P. Morgan (Financial Times, 2026[7]). Similarly, Tanzania plans to broaden capital account liberalisation (Ministry of Finance of Tanzania, 2025[8]).
Many issuers, such as Egypt and South Africa, have introduced new bond types, while others, such as Mauritius and Namibia, have begun conducting or have increased their use of switch operations. These can support the deepening of domestic bond markets, enhance market liquidity, and strengthen sovereign debt resilience. The following sections examine these developments in greater detail.
4.2.2. Primary issuance
Bond markets appeared resilient in the 18 months to Q2 2026, with the 14 sovereign issuers covered issuing around USD 330 billion in 2025, and around USD 150 billion in the first half of 2026. Supply events at the more policy-sensitive short end were less well supported as both risks and volatility increased (Figure 4.1). The two months following the US tariffs announcement in April 2025 were characterised by the lowest level of borrowing, at around USD 13 billion in May and USD 15 billion in June. Borrowing increased in the subsequent months, peaking at USD 53 billion in December, before falling again following the outbreak of the Middle East conflict in February and March 2026 to levels close to those in early 2025.2
Egypt and South Africa drove aggregate borrowing trends, accounting for around 70% of monthly issuance on average. In Egypt, borrowing was driven mostly by refinancing requirements due to heavy Treausry nill (T-bill) issuance in recent years. Despite efforts to increase the maturity of issuances, progress remained limited as of the beginning of 2026. However, Egypt successfully tapped international markets in early 2025 and experienced a record inflow of foreign capital over the year, pointing to improved market confidence (International Monetary Fund, 2026[9]).3 South Africa relied on a deeper domestic market, which contributed to its resilience to global shocks, but also successfully tapped the international market in December 2025 following a credit rating upgrade (International Monetary Fund, 2026[10]).
Note: Data include only marketable debt. Panel B shows the distribution of quarterly average values.
Source: Bloomberg, LSEG and OECD calculations.
Domestic borrowing accounted for at least 90% of the total in each quarter since the beginning of 2025 and 94% over the entire period, with domestic bond markets benefiting from the issuance of new bond types that can help to ‘crowd in’ new investors (Figure 4.2, Panel A). Egypt, for instance, issued its first three-year domestic sukuk denominated in local currency (Ministry of Finance of Egypt, 2025[11]). South Africa issued its first Infrastructure and Development Finance Bond to fund national priority infrastructure projects (South African Government, 2025[12]).4 Notably, Côte d'Ivoire was the first African issuer to sell a local currency bond listed on a foreign market. Although the bond is settled in euros, it can contribute to the local currency bond market development by establishing a benchmark and encouraging foreign investors’ participation in the domestic market (Government of Côte d'Ivoire, 2025[13]).5
A high share of domestic borrowing is not always indicative of a strongly developed domestic market or of limited demand for, or access to, Eurobonds, though. Issuers typically set a target share for domestic funding over a certain time horizon, but actual borrowing patterns can differ from these targets for a range of reasons. In Kenya and Uganda, for instance, the domestic share of borrowing in the 2024/25 financial year was 7 and 26 percentage points higher than targeted, respectively (Figure 4.2, Panel B). This was mostly due to delays in external disbursements (The National Treasury and Economic Planning, 2026[14]; Ministry of Finance of Uganda, 2026[15]).6 In other cases, issuers did not tap foreign markets to help safeguard external debt sustainability. This was the case in Ghana and Zambia, where external borrowing is limited by IMF programmes. As of the end of 2025, Ghana was not expected to have full access to external markets again until 2027, whilst Zambia was not expected to return to international markets in the ‘medium term’ (International Monetary Fund, 2025[16]; International Monetary Fund, 2025[17]).
Most domestic borrowing was done via T-bill issuances, which averaged 60% of all quarterly issuance since Q1 2025. However, many issuers have the stated aim of extending the maturity of their issuance (Figure 4.2, Panel C). In Egypt, T-bills account for most domestic marketable debt. However, between 2024 and 2025, Egypt issued fewer T-bills with a 91-day maturity, and more with 273- and 364-day maturities (Ministry of Finance of Egypt, 2026[18]). Ghana has relied heavily on T-bills since 2023, given a restriction on issuing bonds with longer maturities linked to its default in late 2022. This restriction was lifted in March 2026, and Ghana issued a 7-year bond in April (Times Live, 2026[19]). Kenya and Uganda aim to decrease the share of T-bill issuance to help mitigate refinancing risk (The National Treasury and Economic Planning, 2026[14]). Conversely, Zambia plans to increase the issuance share of shorter-dated instruments to benefit from lower yields at the short end of its curve (Ministry of Finance of Zambia, 2025[6]).
Note: Panel B includes all debt instruments and refers to FY 2024/25 for Kenya and Uganda, while to 2024 for Côte d'Ivoire and Zambia. Panel C refers to gross borrowing.
Source: LSEG, Ministry of Finance of Côte d'Ivoire (2025[20]), Ministry of Finance of Uganda (2026[15]), The National Treasury and Economic Planning (2026[21]), Ministry of Finance and National Planning of Zambia (2025[22]), OECD calculations.
4.2.3. Secondary market developments
Between Q1 2025 and Q2 2026, the spreads on USD bonds issued by African sovereigns moved through a pronounced compression-then-repricing cycle. They tightened steadily through 2025 against the backdrop of monetary policy easing in advanced economies and US dollar depreciation across the year (African Development Bank Group, 2026[23]) (Figure 4.3, Panels A and B). Momentum carried into 2026, with spreads in June 2026 lower than those prevailing at the onset of the Middle East conflict in February 2026.
The US tariff announcement on 2 April 2025 proved a sharp but short-lived shock to secondary market yields. The announcement triggered an initial widening in most emerging-market spreads. Still, much of it reversed once the 90-day pause was announced, and Q2 2025 delivered overall tightening as the US dollar depreciated and pushed investors towards higher-yielding assets (Morgan Stanley, 2025[24]). Egypt was the most affected country considered here in terms of the change in local yields, but this was not primarily driven by direct trade exposure (Figure 4.3, Panel C). Egypt runs a trade deficit with the United States, so it was subject to the minimum 10% US import tariff. However, Egypt was among the African economies most vulnerable to global risk-off episodes, as foreign investors held almost 45% of outstanding T-bills in March 2025 (Central Bank of Egypt, 2025[25]). These holdings often consist of unhedged, short-term carry trade positions, making them particularly sensitive to funding conditions (AGBI, 2025[26]). The resulting market impact proved short-lived, though, cushioned by the subsequent depreciation of the US dollar and the temporary suspension of the tariff measure (Hartley and Rebucci, 2025[27]).
Note: In Panel A, data are up to June 2026. Panel B represents an average of values from Côte d'Ivoire, Egypt, Kenya, Morocco, Nigeria and South Africa. In Panel C, yields refer to the 10-year benchmark yield. The event window for tariff announcement is defined as 23 March to 11 April 2025, while the event window for the conflict in the Middle East spans 27 February to 27 March 2026.
Source: LSEG and OECD calculations.
The Middle East conflict proved more consequential for secondary markets, and it essentially split the continent by countries' oil trade balance (Figure 4.3). Following the outbreak of the conflict and the disruptions to the Strait of Hormuz, Brent crude oil peaked near USD 120 a barrel, more than 60% above pre-conflict levels. In the three weeks following 28 February, Egypt, Namibia and South Africa faced widening spreads. South Africa was the worst affected, as it is heavily dependent on imported oil and oil-related products.7 In Egypt, where T-bill issuance is the dominant domestic funding tool, real yields neared 8.5% on the eve of the conflict, but estimated outflows by foreign holders were USD 7 billion in just three weeks after, out of total foreign T-bill holdings of roughly USD 32 billion (Citi, 2026[28]). Nigeria fared better, as a net oil exporter. Higher global oil prices meant the prospect of higher foreign exchange (FX) receipts and better fiscal revenue, which caused yields to fall despite some imported fuel inflation, which led to expectations of higher policy rates (IC, 2026[29]).
Even as the conflict in the Middle East and the associated disruptions to the global energy market continued into the summer of 2026, the spreads of USD bonds were at or near the tightest levels over the period by the end of Q2 (Figure 4.3, Panel B). This was partly due to the retreat in oil prices around this time, on the expectation of a cessation of hostilities and a resumption of energy flows through the Strait of Hormuz. However, it also points to investors looking through geopolitical and short-term risks to focus on improving fundamentals; this was particularly apparent in moves in longer-dated instruments.8
Given the potential and realised volatility in the cost of foreign currency funding, some sub-Saharan African sovereigns have turned to total return swaps (TRS) and similar collateralised structures, especially when Eurobond issuance becomes prohibitively expensive. For example, Nigeria approved a TRS of USD 5 billion, the largest sovereign TRS in Africa to date (see Box 4.1).
A total return swap (TRS) is a bilateral derivative that transfers the total economic return of a reference asset to a counterparty. In the case of a sovereign issuer, TRS can function as a collateralised funding instrument by transferring the return of its own repurchased Eurobond in exchange for cash. From the issuer's perspective, TRS can provide access to hard-currency liquidity in difficult market conditions and may lower borrowing costs relative to conventional issuance, given Given that TRS often offers issuers a 150–200bp pricing advantage relative to equivalent Eurobonds (Fitch, 2026[30]).
The use of TRS raises a series of concerns, though, mostly related to the complex and opaque nature of these instruments. First, it involves borrowing on typically unfamiliar terms for a sovereign (such as daily mark-to-market, variation margin, and close-out netting), which require a solid institutional risk management infrastructure. Second, contractual terms including pricing, margin call thresholds, and termination provisions are often not publicly disclosed, limiting the ability of market participants to assess their true cost and risk. Third, it carries procyclical risks when pledged assets are the sovereign's own bonds, because collateral values weaken as credit stress rises. Thus, margin calls or early termination can generate unplanned hard currency demands when liquidity is already under pressure.
Furthermore, given the relative novelty of the use of TRS for sovereign borrowing, there is still no established practice related to their accounting classification and their treatment in the case of restructuring. For instance, Fitch Ratings treats pledged collateral as a contingent liability rather than debt, while the IMF has defined the collateral as a liability in its debt sustainability analysis of Nigeria (International Monetary Fund, 2026[31]). Moreover, in the case of sovereign restructuring, the risk appears mostly negative for conventional bondholders, given the derivative form, the limited disclosure, and the potential for debt dilution as contingent claims crystallise.
4.2.4. Investor base
A well-diversified investor base is a key factor supporting the resilience of government bond markets (Foxall and Gao, 2026[32]). Accordingly, investor base diversification is a stated debt management objective of many African sovereign issuers, including Egypt, Ghana and Kenya (Ministry of Finance of Egypt, 2026[5]; Ministry of Finance of Ghana, 2026[3]; The National Treasury and Economic Planning, 2025[33]). Issuing new types of bonds can boost diversification by ‘crowding in’ new investors. Digital technology can also improve access to government bonds, while proactive investor relations can raise awareness and improve market understanding.
Looking at specific investor segments, holdings by insurance companies, often a natural source of demand because of their matching and cash flow requirements, have been stable for several years but heavily influenced by portfolio allocation preferences and regulations in individual countries (Figure 4.4, Panel A). In Kenya and Mauritius, insurance companies have held around 13% of all government securities in recent years. However, portfolios were more diversified in Mauritius than in Kenya (Bank of Mauritius, 2025[34]; Insurance Regulatory Authority, 2025[35]).9 In Egypt, the share of government bonds held by insurers decreased from around 16% in 2024 to 9% in 2026 against the backdrop of reforms allowing higher-risk investments (EnterpriseAM, 2025[36]). In Uganda, insurers hold around 1% of government bonds. However, in August 2025, the government approved mandatory minimum levels of allocation to government financial instruments (The Uganda Gazette, 2025[37]).10
The share of government securities held by pension funds, another traditional source of institutional demand, remained stable or increased (Figure 4.4, Panel B). In Uganda, pension funds became the largest single investor group in government securities following the issuance of the first 25-year government bond (Ministry of Finance of Uganda, 2025[38]).11 By contrast, pension funds in Mauritius hold around 10% of government bonds, with asset allocations generally tilted more towards equities (Bank of Mauritius, 2025[34]). Chapter 6 explores the predominance of government bonds in domestic investment portfolios in Botswana, Morocco, Nigeria and South Africa.
Note: See Annex 4.A for time and instrument coverage details.
Source: The National Treasury and Economic Planning (2025[33]), Ministry of Finance of Mauritius (2026[39]), Ministry of Finance of Egypt (2025[40]; 2024[41]), National Treasury of South Africa (2026[42]), Ministry of Finance of Uganda (2024[43]; 2025[38]), Ministry of Finance and National Planning of Zambia (2025[44]; 2026[45]), OECD calculations.
Retail investors can provide a stable source of funding owing to their tendency to hold bonds to maturity (Foxall and Policino, 2025[46]). However, they hold a relatively small share of government securities compared to the other investors considered here, but many issuers are adopting measures to try to increase their involvement (Figure 4.4, Panel C). Kenya has seen a significant increase in retail investment in government bonds since the introduction in 2023 of DhowCSD, its new central securities depository, with retail investors’ holdings rising to more than 6% of total outstanding government securities (see Box 4.2). A similar trend is emerging in Uganda, where the government plans to launch a mobile application that enables retail investors to buy and sell government securities directly (Ministry of Finance of Uganda, 2025[47]). Egypt, where retail holdings accounted for around 1% of government securities outstanding at the end of 2025, issued its first dedicated retail bond in March 2026 (Ministry of Finance of Egypt, 2026[48]).
The shares held by foreign investors remained stable despite macroeconomic and geopolitical headwinds (Figure 4.4, Panel D). In South Africa, the share remained at 25% in 2025, while the nominal holdings of foreign investors continued to rise (National Treasury of South Africa, 2026[42]). In Egypt, the share has declined slightly, although nominal holdings increased due to more attractive real yields and improved market confidence in 2025. Purchases were tilted towards T-bills, which can expose the issuer to greater volatility, as discussed earlier, with investors able to move in and out of these instruments more easily (International Monetary Fund, 2026[9]). In Kenya, foreign investors play a smaller role in the government bond market, holding around 5% of the total, but recent foreign currency issuances demonstrated good appetite (Reuters, 2026[49]; Reuters, 2025[50]).12
4.2.5. Credit rating, debt restructuring and default
Sovereign credit ratings across the African economies considered here turned decisively over the period, reversing the downgrade cycle that began at the onset of the COVID-19 pandemic in early 2020 (Figure 4.5, Panel A). All countries covered here, except Botswana, either had the same or a higher credit rating by the end of Q2 2026 compared to Q1 2025 (Figure 4.5, Panel B). The common drivers were fiscal consolidation with demonstrated primary surpluses, exchange-rate liberalisation that removes some FX-shortage risk, completion of debt restructurings, and liability management operations that help to smooth redemption profiles by pushing out maturity cliffs (ECA & APRM, 2026[51]). The starting point was low, however. Bonds issued by sovereigns rated high risk represented nearly 80% of bonds issued by African sovereigns rated at end-2024 (OECD, 2025[52]). Hence, most of the movement was within the single-B and CCC bands rather than towards the investment-grade threshold.
Source: LSEG and OECD calculations.
Central securities depositories (CSDs) are market infrastructures that hold securities electronically, maintain ownership records, and facilitate the safe custody, transfer, settlement, and servicing of securities transactions, supporting the integrity and efficiency of securities markets. Kenya launched its new CSD, DhowCSD, in July 2023 to modernise and digitalise the domestic government securities market. Previously, the market operated through a legacy depository system that relied on intermediaries and manual processing of primary and secondary market functions. DhowCSD was introduced to improve operational efficiency, broaden digital access to government securities and support the development of the domestic securities market.
DhowCSD facilitates the issuance, settlement, and trading of Kenyan government securities for domestic and foreign investors via website and mobile platforms. Its functionalities include an automated auction module, web-based self-service account opening and management, online bidding, auction and results processing, automated bank and mobile money payments, and real-time secondary market trading via a delivery vs payment process (The National Treasury and Economic Planning, 2025[33]). These characteristics of DhowCSD contributed to the increased participation of retail investors in Kenyan government securities and to secondary market trading. The share of retail investor holdings of government securities increased from 3.7% in June 2023 to 6.3% by June 2026 (Figure 4.6, Panel A). Government bond turnover increased from KES 665.2 billion in FY2022/23 to about KES 3 trillion in FY2025/26 (Figure 4.6, Panel B). DhowCSD has substantially contributed to this, alongside efforts to strengthen Kenya's benchmark bond programme and enhance secondary market liquidity.
DhowCSD has enhanced efficiency in the interbank market by providing automated matching and settlement for repos with full transfer of collateral. Transaction volumes for horizontal repo backed by government securities as collateral rose from KES 36 billion in 2023 to KES 191 billion in the first half of 2026 (Figure 4.6, Panel C). This infrastructure facilitates the use of government securities as collateral for the interbank market and helps reduce settlement and counterparty risk associated with such transactions. DhowCSD has also facilitated greater connectivity between Kenya’s domestic government securities market and international capital markets. In June 2026, the Clearstream-Kenya Link was launched, connecting the DhowCSD with Clearstream, Deutsche Börse Group's international post-trade infrastructure. The link enables international institutional investors to access Kenyan government securities through Clearstream's omnibus account structure without the need to establish direct custody relationships in Kenya.
Source: (Central Bank of Kenya, 2026[53]; Central Bank of Kenya, 2026[54]), national authorities and OECD calculations.
In a number of countries, credit upgrades can be associated with domestic reforms and improving macroeconomic metrics. For instance, Nigeria was upgraded by Fitch in April 2025, citing ‘improved policy coherence and credibility’ and ‘greater formalisation of FX activity’. Fitch upgraded Côte d'Ivoire, citing its growth rates, political stability, and proactive debt management, including Eurobond buybacks and Samurai issuance. Meanwhile, Moody's upgraded Kenya in January 2026 on stronger external liquidity, higher FX reserves, and a buyback that pushed the next major Eurobond maturity to 2030.
Another group of upgraded countries are those that exited debt restructurings or took measures to alleviate severe liquidity pressures. Fitch raised Ghana from restricted default to B- in June 2025, citing FX reserves, a projected primary surplus, and lower interest payments compared to revenue from the 2021 peak.13 S&P upgraded Zambia from selective default to CCC+ in November 2025 after the government restructured more than 90% of its external debt (United Nations Economic Commission for Africa, 2025[55]).
Both the issuance and stock of outstanding bonds were skewed towards ratings corresponding to High risk by Q2 2026 compared to Q1 2025, despite the improving credit story (Figure 4.7, Panel A). In fact, only Tanzania’s average credit rating returned to its pre-COVID-19 pandemic level, further highlighting the credit deterioration between 2020 and the start of 2025. The Tanzanian government's engagement with international credit rating agencies has evolved considerably. Until 2023, it received only unsolicited ratings from Moody's. Since then, it has adopted a more proactive approach, recognising the strategic importance of credit rating agencies in facilitating access to international capital markets and broadening the investor base. In that year, it entered into contractual arrangements with Moody's and Fitch. Fitch assigned it a B+ in June 2023, while Moody's upgraded it to B1 in 2024, citing, among other things, a more diversified economy and exports, a stable debt burden, and limited contingent liabilities.
The improved credit outlook across Africa was accompanied by a steady compression of credit default swap (CDS) spreads, the market pricing of default risk and associated risk premia (Figure 4.7, Panel B). The drivers were the same as for the tightening in USD bond spreads: major central banks easing, US dollar depreciation, and the ratings upgrade cycle (Damodaran, 2026[56]). The April 2025 tariff shock saw a sharp spike in spreads that reversed quickly after the 90-day pause announcement. Meanwhile, the onset of the Middle East conflict had minimal impact on CDS spreads and, by the end of Q2 2026, they were trading at their lowest levels since 2019. However, such improvements came from a low base at the beginning of 2025, following five years of credit deterioration, widening US dollar and CDS spreads, as African economies struggled through the pandemic and the global monetary tightening cycle of 2022-2023.
Note: Panel A covers domestic debt. Panel B covers Côte d'Ivoire, Egypt, Gabon, Morocco, Namibia, South Africa, Tunisia. IG refers to “investment grade”, and SG refers to “speculative grade”
Source: LSEG and OECD calculations.
4.2.6. Refinancing risk
A rise in near-term refinancing risk has accompanied the volatile macroeconomic context of the last couple of years. Between 2019 and 2024, the aggregate share of debt maturing within one year declined from around 35% to 25%, with a corresponding increase in the share maturing in more than five years, which reached around 50% by the end of 2024 (Figure 4.8, Panel A). This trend reversed sharply in 2025, with the share of debt maturing within one year reaching the highest level since 2020, while the share of debt maturing in more than five years was the lowest since at least 2019.
The increase in near-term refinancing risk partly reflects greater reliance on domestic issuance, which is typically concentrated at shorter maturities.14 This shift has become more important as concessional financing, including ODA to sub-Saharan Africa, has declined in recent years, increasing financing pressures and the importance of market-based funding (OECD, 2025[52]; OECD, 2026[57]).
As of Q2 2026, around half of domestic bonds were set to mature by the end of 2029, with 40% by the end of 2027. In contrast, half of foreign bonds will not mature until 2033, with redemptions more evenly distributed across the intervening years (Figure 4.8 Panel B). Extending domestic yield curve can therefore play an important role in reducing refinancing risk. Uganda provides a recent example, issuing its debut 25-year local currency bond in 2025 (Ministry of Finance of Uganda, 2025[58]).
Against this backdrop, many sovereign issuers are adopting or planning to adopt liability management measures to smooth their redemption profile and help mitigate refinancing risk. In February 2025, for instance, Kenya conducted its first buyback of domestic bonds (The National Treasury and Economic Planning, 2025[4]). In March 2026, Mauritius adopted a programme of switch operations in its domestic bonds, focusing on maturities of 12 months or less (Bank of Mauritius, 2026[59]).15 Among issuers that have not conducted liability management operations in the last couple of years, many have included them in their medium-term debt management strategies (Ministry of Finance of Ghana, 2026[60]; International Monetary Fund, 2025[61]).
Note: Debt refers to marketable debt (i.e., bonds and T-bills).
Source: LSEG and OECD calculations.
4.3.1. The use of switch operations as a form of liability management
Sovereign liability management operations can be divided broadly into those that change the outstanding volume of debt and those that change its profile. On the volume side, issuers can conduct buybacks, which can also serve the cash management purpose of reducing the issuer’s surplus cash holdings (OECD, 2025[62]). As discussed earlier, Kenya and Côte d'Ivoire recently conducted buybacks which were cited by credit rating agencies as a factor behind rating upgrades. On the profile side, switch operations, or switches, achieve a near-term redemption management function without a cash outlay by exchanging a bond held by an investor (i.e. source bond) for new supply of an existing or newly issued bond (i.e. destination bond).16
Switches can contribute to developing a liquid and representative yield curve, the backbone of a well-developed bond market. First, switches can support the issuance of benchmark bonds by allowing the issuer to build up individual bonds to larger outstanding sizes, which can enable greater liquidity and allow for their inclusion in certain major global indices, without incurring the cash management risk of having to redeem large outstanding bonds. Second, switches can improve the representativeness of a yield curve by reducing fragmentation across multiple bond lines. Third, once established, switches can support yield curve robustness by promoting greater secondary market liquidity.17
This section focuses on switch operations conducted by four African issuers: Kenya, Mauritius, Namibia, and South Africa.18 Namibia published the terms and conditions of its switch programme in September 2019 but has been conducting switch operations since at least the early 2000s (Bank of Namibia, 2019[63]). South Africa reintroduced its switch programme in February 2020 after suspending it in August 2019 due to market volatility driven by speculation over the timing and scale of future switch operations (National Treasury of South Africa, 2020[64]). In Kenya, the Central Bank started performing ad-hoc switches following an initial operation in June 2020 (Central Bank of Kenya, 2021[65]).19 Mauritius introduced a debt switch programme in March 2026 (Bank of Mauritius, 2026[59]).
Country practices reflect different approaches to balancing flexibility for the issuer and transparency and predictability for investors (see Table 4.2). All countries publish a switch calendar, although this is not always strictly adhered to. While Kenya, Mauritius and Namibia announce details of their switch operations some days in advance, South Africa discloses them only 60 minutes before. On pricing, all issuers fix the source bond price, and except South Africa use a multi-price format for the destination bond. This enables competitive tension that should improve pricing for the issuer, subject to demand conditions. The South African programme became more transparent and market-oriented after its reintroduction in 2020. Earlier, the issuer fixed the price of the source and destination bonds (National Treasury of South Africa, 2020[66]).20
Note: As of 15 July 2026. BoN refers to Bank of Namibia.
Source: Bank of Namibia (2019[63]), National Treasury of South Africa (2025[67]), Bank of Mauritius (2026[59]), Central Bank of Kenya (2021[65]), National Treasury of Kenya (2025[4]).
Only Namibia and South Africa, which have well-established programmes, conducted switches in 2025. South Africa conducted switch operations once a month, offering two source bonds against three destination bonds, resulting in six switches per month, except in December, when only three switches were conducted.21 Namibia conducted switch operations less regularly, bidding for one source bond and offering ten destination bonds. Kenya conducted one operation in January, March, April, and May of 2026 to switch one source bond for one destination bond. Lastly, Mauritius also offered to switch bonds one for one, but it was the only issuer that conducted such operations on multiple occasions in the same month. March and April 2026 were the only months in which all countries conducted switch operations (Figure 4.9, Panel A).
The volume of switch operations will be determined by the extent to which the issuer needs to smooth their redemption profile and increase liquidity in certain bonds, by investors’ willingness to lock in investments for a longer period, and by wider market conditions. Accordingly, the volume of the switches considered here was quite volatile, reaching almost USD 4.2 billion in total in 2025, and exceeding USD 2.7 billion in the first half of 2026 (Figure 4.9, Panel B). The total volumes are largely driven by South Africa, whose values jumped from around USD 200 million to more than USD 400 million between May 2025 and June 2025. Kenya switched more than USD 140 million in January and March 2026 but less than USD 40 million in the two following months. Analysts pointed to lower liquidity and macroeconomic uncertainty as drivers of this sudden change in demand (The Star, 2026[68]).
Source: Bank of Mauritius (2026[69]), Bank of Namibia (2026[70]), Central Bank of Kenya (2026[71]), National Treasury of South Africa (2026[72]), OECD calculations. See Annex 4.A for details.
As previously mentioned, one of the main reasons for conducting switches is to mitigate refinancing risk by extending the portfolio’s maturity, swapping bonds that will mature in the very near term for longer-dated ones (Figure 4.10). South Africa mostly switched bonds with a residual maturity between 1 and 5 years, with destination bonds that mature in more than 10 years. Mauritius targeted bonds maturing in around 2 months and was the only issuer offering destination bonds exclusively with maturities of less than 10 years.22 Kenya and Namibia mostly switched out of bonds with residual maturities between 6 and 12 months, with Kenya offering bonds with 5 year or higher maturities, and Namibia with 1 year or higher.
Note: Following market conventions, the maturity year of a three-legged bond is the maturity of the second leg.
Source: Bank of Mauritius (2026[69]), Bank of Namibia (2026[70]), Central Bank of Kenya (2026[71]), National Treasury of South Africa (Africa, 2026[72]), OECD calculations. See Annex 4.A for details.
Empirical results suggest that switches can improve liquidity in the destination bonds, although the magnitude of the impact varies considerably. The median relative bid-ask spread of destination bonds in the switches covered here is 0.4% lower in the 30 days following an operation than in the 30 days before, and 4% lower on average (Figure 4.11, Panel A). Median relative bid-ask spread is a liquidity measure computed as the bid-ask spread divided by the bid-ask midpoint, allowing for more meaningful comparisons across bonds with different prices (Sarr and Lybek, 2002[73]). Running the same analysis 500 times using randomly assigned dates (i.e. placebo test) indicates that this result is unlikely to be driven by chance, as the actual estimate is lower than 99% of the placebo results (Figure 4.11, Panel B).
Note: Based on 143 switches run by Kenya, Mauritius, Namibia and South Africa between January 2025 and June 2026. In Panel A, the box shows the interquartile range and the whiskers show the minimum and maximum non-outlier values. Outliers are not plotted.
Source: LSEG and OECD calculations.
Many of the African sovereign issuers analysed in this chapter are making greater use of domestic markets to meet their financing needs. This trend can make public finances more resilient to geopolitical or macroeconomic shocks by fostering a virtuous cycle of greater market liquidity, stronger investor confidence, and reduced exposure to currency fluctuations and mismatches. However, domestic bond issuance is often concentrated at shorter maturities, and so can increase near-term refinancing risk. In addition, establishing liquid benchmark securities in the domestic market can create higher cash management risks around redemptions.
Against this backdrop, liability management operations, in particular switch operations, are an important tool for smoothing near-term redemption profiles while supporting liquidity in ‘on the run’ benchmark securities and reducing fragmentation across the yield curve. These operations can also help issuers to build individual bond lines up to larger outstanding sizes, therefore supporting liquidity and even inclusion in certain global indices, without the higher cash requirement on redemption. Some African countries have already established formal switch programmes, while others continue to conduct such operations on an ad-hoc basis. Drawing on country experiences, the following are key considerations for designing and implementing effective switch operations in domestic bond markets.
Engagement with market participants can help inform the design and implementation of switch operations and broader liability management programmes. Assessing potential demand is particularly relevant given the reputational risks associated with weak participation. Sovereign issuers use a range of engagement mechanisms, including regular consultations with primary dealers, market surveys, investor roadshows and bilateral discussions with end investors.
An initial flexible approach can help issuers build experience with switch operations while maintaining transparency with market participants. Conducting operations on an ad-hoc basis can provide flexibility as issuers test processes, assess market participation and familiarise investors with the instrument. Even at this stage, clear communication on the objectives, procedures and key parameters of switch operations can provide useful guidance to market participants and reduce uncertainty.
Greater regularity and predictability may become appropriate as switch operations become more established. Issuers can gradually introduce more structured frameworks, including indicative calendars, operations at predefined and regular intervals, and published guidelines covering pricing, auction procedures, settlement arrangements and participation requirements. Such practices can support market transparency and facilitate better planning by investors.
The appropriate balance between predictability and flexibility depends on market conditions and debt management objectives. While predictable programmes can enhance transparency and market confidence, issuers may also require sufficient flexibility to respond to changing demand conditions. Approaches used to preserve flexibility include publishing a range rather than an absolute target volume for each switch operation, discretionary bid acceptance, limited calendar flexibility, and publishing detailed operational parameters (such as destination bonds) closer to the transaction date.
Regular assessment can help ensure that switch programmes remain aligned with evolving market conditions and debt management objectives. Review frameworks can combine both quantitative indicators, such as changes in average time to maturity (ATM), participation rates and bid-ask spreads with qualitative information gathered through engagement with primary dealers and end investors. Such reviews can help inform the appropriate balance between flexibility, predictability, and broader debt management objectives over time.
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Primary sovereign bond market data are based on original OECD calculations using data obtained from LSEG that provides international security-level data on new issues of sovereign bonds. The data set covers bonds issued by sovereigns in the period from 1 January 2025 to 30 June 2026 and includes both short-term and long-term debt. Short-term debt (“bills”) is defined as any security with a maturity less than or equal to 365 days but no less than 33 days, as issuances with a maturity of less than 33 days are considered to be done for cash management purposes and excluded from calculations.
Certain bonds in the dataset have been excluded in the following three cases. First, when they did not have any identifier (ISIN, RIC or CUSIP). Second, when their characteristics looked unusual and could not be confirmed by comparison with official government data. Third, among those issued by central banks, those that could be identified as not having government budget financing purposes.
A number of bonds have been subject to reopening. For these bonds, the initial data only provide the total amount (original issuance plus reopening). To retrieve the issuance amount for such reopened bonds, specific data on the outstanding amount on each reopening date for the concerned bonds have been downloaded separately from LSEG. As the reopening data only provide amounts outstanding, the outstanding amount on the previous date is subtracted from the outstanding amount on that given date, in order to obtain the issuance amount on each relevant date. These calculated issuance amounts are converted on the transaction date using USD foreign exchange data from LSEG. To ensure consistency and comparability, the same method is used for all bonds, including those which have not been subject to reopening.
Bonds in local currency are converted to USD using end-of-year foreign exchange rates for 2025 and end-of-second quarter for 2026 retrieved from LSEG.
Coverage of institutions and type of debt
In terms of institutions, unless otherwise specified, data cover debt issued by the central government. The latter covers all departments, offices, establishments and other bodies classified under general government, which are agencies or an instrument of the central authority of a country, except for separately organised social security funds or extra-budgetary funds.
In terms of instruments, unless otherwise specified, data cover marketable debt. The latter is defined as financial securities and instruments that can be bought and sold in the secondary market, while non-marketable debt is not transferable. For example, bonds and bills issued in capital markets are marketable debt; multilateral and bilateral loans from the official sector are non-marketable debt.
Gross borrowing
For a year, gross borrowing measure is equal to the net borrowing requirement during that year plus the redemptions of long-term instruments in the same year and the redemptions of short-term instruments issued in the previous year. Therefore, this indicator captures the issuances of all securities excluding those that were issued and redeemed in the same calendar year. In other words, the size of gross borrowing in the calendar year amounts to how much the debt management office needs to issue in nominal terms to fully pay back maturing debt issued in previous years, plus the net cash borrowing requirement through any issuance mechanism.
Public debt management objectives
Public debt management objectives in Table 4.1 are extracted from the following documents:
Investor base
Investor base data presented in Figure 4.4 were extracted from official sources. Their time and instrument coverage are outlined in the table below.
Credit rating
LSEG provides rating information from three leading rating agencies: Fitch, Moody’s and S&P. For each country with rating information in the dataset, a value of 1 is assigned to the lowest credit quality rating (C or below) and 21 to the highest credit quality rating (AAA for Fitch and S&P, and Aaa for Moody’s). If ratings are available from several agencies, their average is used. There are 11 non‑investment grade categories: five from C (C to CCC+); and six from B (B- to BB+). There are ten investment grade categories: three from B (BBB- to BBB+); and seven from A (A- to AAA).
Switch operations
← 1. The 14 African countries are: Botswana, Côte d'Ivoire, Egypt, Ghana, Kenya, Mauritius, Morocco, Namibia, Nigeria, South Africa, Tanzania, Tunisia, Uganda, Zambia.
← 2. Monthly issuance was lower during the two months following the tariff announcements when looking at the aggregate data from EMDEs in Europe and in MENA, while it was higher among EMDEs in Asia (excluding China) and in Latin America and the Caribbean. Aggregate EMDEs issuance decreased in all these regions in March 2026, reaching some of the lowest levels since the beginning of 2025. However, it increased in April 2026.
← 3. Egypt’s general government primary surplus was 3.3% in 2025, but the overall fiscal deficit was 6.6%.
← 4. At the beginning of 2026, some market actors also expected Ghana to issue its first infrastructure bonds during the year (Bloomberg, 2026[82]).
← 5. Many sovereigns have also taken regulatory steps to pave the way for the issuance of sustainable bonds. Among them, in 2025, Kenya published a Sovereign Sustainability-Linked Financing Framework, while South Africa published an Integrated Sustainable Finance Framework and Zambia published a national green finance taxonomy (National Treasury of Kenya, 2026[75]; National Treasury of South Africa, 2026[80]; BIOFIN, 2025[76]). The publication of these documents is a critical step that enables the issuance of sustainable bonds.
← 6. The issuance mix is also influenced by currency fluctuations. For instance, the depreciation of the Nigerian naira contributed to lower domestic borrowing in Nigeria between 2020 and 2023 (Debt Management Office of Nigeria, 2025[77]).
← 7. All refinery feedstock is imported, and for products such as petrol and diesel, South Africa imports mostly from Bahrain, Oman, the United Arab Emirates and Saudi Arabia, with all shipments from these countries passing through the Strait (ISI CEIC, 2026[78]).
← 8. The broad decline in yields and spreads may mask significant differences in underlying fiscal pressures, which can be better gauged by considering debt levels alongside debt-servicing costs. For example, Egypt and South Africa are both estimated to have general government debt-to-GDP at around 80% in FY 2025/26. However, interest expenditure is expected to absorb around 20% of government revenues in South Africa and more than 80% in Egypt. Similarly, despite Nigeria’s relatively low federal government debt projected at around one-third of GDP in 2026, interest expenditures are projected to absorb more than half of government revenues (International Monetary Fund, 2026[79]; International Monetary Fund, 2026[31]; International Monetary Fund, 2026[81]).
← 9. Government securities accounted for around 70% of total insurers’ assets in Kenya as of the third quarter of 2025, while debt securities accounted for less than half of the assets of life insurers in Mauritius.
← 10. Such regulation is common practice globally, owing to the liquid nature of sovereign bills and bonds and the need for insurers to cover their liabilities.
← 11. For the purpose of this statistic, the other investor types are: commercial banks, offshore, Bank of Uganda, insurance companies, other financial institutions, retail, and other.
← 12. These issuances happened in October 2025 and February 2026.
← 13. Moody's followed to Caa1 in October and S&P to B- in November.
← 14. This is also a function of the relative volumes being issued in local currency compared to foreign currency. As the volume of issuance increases, average maturity will tend to shorten, as markets can more easily digest supply in the higher liquidity, lower duration maturities, typically located at the front end of the curve. It also reflects the much deeper pools of liquidity in foreign currency markets, which can more easily absorb higher duration issuance.
← 15. According to the Bank of Mauritius, the objectives of the programmes are: “a) smooth the redemption profile of Government securities and reduce the volume of debt maturing within a period of up to 12 months; b) lengthen the ATM of domestic debt; c) lower the rollover risk and ensure smoother debt service profile; d) increase liquidity in longer-dated benchmark bonds; and e) support market development by encouraging long-term investor participation” (Bank of Mauritius, 2026[59]).
← 16. Switches can benefit both issuers and investors. From the issuer's perspective, the most common reasons to conduct switch operations are to mitigate refinancing risk and to increase secondary market liquidity in the destination bond. From the investors' perspective, switches can reduce reinvestment risk and convert holdings into more liquid bonds.
← 17. To be successful, switches need a supportive broader infrastructure, including a clear legal framework, an effective cash management function, and good price transparency in the secondary market (Hashimoto et al., 2021[1]).
← 18. This subset of countries has been chosen because of the scale and data availability of their switch operations between January 2025 and June 2026.
← 19. The operation involved switching a T-bill for a bond with an effective maturity of 4.5 years.
← 20. Since its reintroduction, the programme has further evolved to strike a balance between flexibility and transparency. For instance, a cap on the allocation amount was replaced with the possibility to exceed it by 40%. Moreover, the time between the announcement of the source bonds and the auctions increased from 15 minutes to 60 minutes.
← 21. In December 2025, South Africa offered to switch on source bonds for three destination bonds.
← 22. Maturities of destination bonds ranged between 2031 and 2033.