For years, access to international bond markets has been seen as a sign of financial progress for African economies. A first sovereign bond issuance can unlock hundreds of millions—or even billions—of dollars without the conditions typically attached to concessional financing. It also establishes pricing benchmarks for domestic companies and broadens the investor base.
Yet, behind this image of financial maturity lies a contradiction: the easier it becomes for governments to borrow, the greater the risk that they postpone difficult budgetary decisions, transforming financing needs into long-term refinancing vulnerabilities.
Published in July 2026 by the IMF’s Africa Department, the report Beyond the First Bond: Market Access and Debt Dynamics in Frontier Economies examines this shift. The study covers 92 emerging and developing economies between 1980 and 2024, including 37 countries in sub-Saharan Africa, alongside Algeria, Egypt, Morocco, and Tunisia.
With 41 countries included, Africa accounts for nearly half of the sample, although the report does not provide continent-specific aggregates or rankings.
The study distinguishes between a one-off bond issuance and genuine financial integration. Selling an international bond, the report argues, is not sufficient to establish lasting market access. Countries must also maintain a significant share of private external financing for at least five consecutive years. Economies are considered to have durable market access only after twenty years of sustained participation.
According to the report, 23 of the 92 economies studied meet that criterion. Thirty-three are classified as frontier markets—developing countries with nascent financial systems—while 36 have yet to achieve stable access.
This distinction is crucial. A country may successfully issue its first bond during a period of abundant global liquidity, only to find itself shut out of markets when repayments are due. The tightening monetary cycle that followed the pandemic illustrated this risk. Bond issuance among low-income frontier economies fell sharply after peaking in 2021, with only one issuance recorded in both 2022 and 2023.
The partial return of sub-Saharan borrowers since 2024 does not mean the pressure has disappeared. Another IMF study on external financing in sub-Saharan Africa found that yields on African bond issuances in 2024 were more than 300 basis points higher than those on comparable earlier issuances. Côte d’Ivoire, for example, raised $2.6 billion at an average spread close to 400 basis points—its most expensive issuance to date.
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Markets reward strong fundamentals before countries borrow
Entering international markets depends on two sets of factors: global conditions determine the timing, while domestic fundamentals determine which countries can seize the opportunity.
According to the IMF, low real U.S. interest rates, subdued financial volatility, and high commodity prices increase the likelihood of a first bond issuance. A one-standard-deviation increase in the real yield on U.S. ten-year Treasury bonds reduces the probability of market entry by roughly 39%.
African economies that export oil, metals, or agricultural products can temporarily benefit from improved terms of trade, which reassures investors. Per capita income, institutional quality, economic growth, and foreign-exchange reserves emerge as the strongest drivers of market access.
The report notes that improvements in governance indicators generally precede bond issuance by several years, making them a prerequisite rather than an automatic consequence of market access.
Inflation and the initial level of public debt do not appear to be statistically significant factors in the model. Investors seem more concerned with future repayment capacity than with historical debt burdens, which often remain low before market access simply because countries have limited borrowing opportunities. The risk begins once that situation changes. Apparent solvency, however, opens up borrowing capacity that may be used more quickly than government revenues grow.
Borrowing surges as constraints ease
Access to international markets profoundly alters financing structures. Among low-income frontier economies, the average share of private financing in external borrowing rises from 12.8% in the five years preceding a bond issuance to 30.8% in the subsequent five years. For other frontier economies, this figure increases from 13.85% to 34.15%. In both cases, the median increase exceeds 200%.
Bonds gradually replace traditional private loans, and reliance on bilateral creditors declines. While this broadens financing options, it also substitutes long-term concessional loans with commercial debt, which is far more sensitive to interest rates, exchange-rate movements, and investor sentiment.
According to the report, frontier economies eligible for market financing reduce their debt by roughly 10 percentage points of GDP in the five years leading up to their first issuance—a move often interpreted as a signal to investors. Once they enter the market, however, debt trajectories reverse, with public debt increasing by about 12 percentage points over the next five years, including nine points attributable to primary deficits.
Low-income frontier economies follow a slightly different path but reach the same outcome. Their debt remains broadly stable before issuance because economic growth outpaces the real cost of largely concessional borrowing. Once market access is secured, debt climbs by roughly 11 percentage points of GDP over five years, while rising interest payments erode the benefits of growth.
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Fiscal improvements fail to address the cost of debt
Public finances in sub-Saharan Africa improved in 2025. According to the IMF’s Regional Economic Outlook, published in April 2026, the median budget deficit narrowed from 3.4% of GDP in 2024 to 3% in 2025. Concurrently, median public debt declined from 57.2% to 53.1% of GDP, and Ethiopia, Ghana, and Zambia made progress in restructuring their debts.
However, lower debt ratios do not tell the whole story. The World Bank’s Africa’s Pulse report estimates that interest payments absorbed between 2.9% and 3.3% of regional GDP between 2023 and 2026. Nearly four out of five countries spend more on debt servicing than on health or education.
External debt service has more than doubled over the past decade, reaching 2% of GDP in 2024. Domestic debt service peaked at 4.7% of GDP, highlighting that relying on local markets shifts, rather than eliminates, financial risks.
The IMF estimates that the average interest rate on new domestic debt issued by the median sub-Saharan country reached 8.8% in 2024. When banks absorb large volumes of government debt, credit available to businesses shrinks, undermining the private investment that borrowing was intended to support.
Perhaps the most worrying finding concerns growth itself. The IMF report concludes that access to international markets does not deliver stronger relative economic growth during the first five years after issuance. Frontier economies even see their performance relative to the global average deteriorate slightly after issuing their first Eurobond.
While the authors stop short of establishing a direct causal link, noting that countries access markets at different stages of global economic cycles and under varying domestic conditions, the conclusion raises a crucial question for Africa: if commercial debt expands faster than productive capacity, repayments will inevitably crowd out spending on infrastructure, education, and healthcare—the very sectors borrowing was meant to support.
In 2025, the World Bank counted 23 sub-Saharan countries either in debt distress or at high risk of it, up from just eight in 2014. Since 2021, none of the countries covered by the low-income debt sustainability framework has remained in the low-risk category.
Africa’s debt challenge, therefore, is no longer simply about debt-to-GDP ratios. It is increasingly defined by debt maturity, currency exposure, borrowing costs, and the economic returns generated by the projects it finances.
A first Eurobond can enhance a country’s credibility—but it can also create an illusion of abundance.
