In low-income countries, the share of foreign currency debt is collapsing: from 18.7% in 2019 to 7.6% in 2025. This 11-point drop does not illustrate a controlled debt reduction strategy, but rather a brutal exclusion from international financial markets.
With 52% of their bond debt maturing by 2028, these countries face an unprecedented refinancing crisis. The question goes beyond indebtedness: it interrogates the very mechanisms of development financing in a world where traditional creditors are withdrawing.
The Essentials
- Foreign currency debt of poor countries falls from 18.7% to 7.6% between 2019 and 2025 due to market exclusion
- 52% of their sovereign bonds mature by 2028, creating a refinancing crisis
- Chinese loans became net negative from 2022 onwards, reversing two decades of financing
- Multilateral institutions do not compensate for the decline in private flows, creating a structural financing deficit
Progressive Exclusion from International Markets
The spectacular decline in foreign currency debt reflects a harsh reality: low-income countries are losing access to international bond markets. Between 2019 and 2025, only 12 African countries succeeded in issuing euro-bonds, compared to 21 between 2014 and 2019, according to the OECD.
This closure has accelerated since the rise in U.S. interest rates. The average yield on African sovereign bonds exceeds 12%, compared to 6% for developed emerging economies. The yield spread with U.S. Treasury bills has now reached 900 basis points, equivalent to 2008 levels.
Ghana illustrates this exclusion. After its default on external debt in December 2022, the country no longer has access to international markets. Its foreign currency debt fell from 32% of GDP in 2019 to 18% in 2025, not by choice but due to the impossibility of refinancing. New issuances concentrate on the domestic market, in Ghanaian cedis, fueling inflationary pressures.
The Bond Refinancing Time Bomb
OECD data reveal the scale of the coming crisis: 52% of sovereign bonds issued by low-income countries mature by 2028. For sub-Saharan Africa, this rate rises to 58%. These concentrated maturities create a “refinancing wall” of $180 billion over three years.
Ethiopia faces this reality immediately. The country must refinance $1 billion in euro-bonds in December 2024, then an additional $1.2 billion in 2025. With yields reaching 25% on secondary markets, refinancing at market conditions would amount to tripling debt service.
Kenya, despite its relative stability, faces the same challenge. Its $2 billion euro-bonds mature in June 2024. The Nairobi government has already announced its intention to repurchase these bonds early, mobilizing $1.5 billion of its foreign exchange reserves. This successful operation masks a darker reality: the impossibility of refinancing at original terms.
The Historical Reversal of Chinese Flows
The collapse of Chinese loans constitutes the second pillar of this crisis. According to the Boston University Global Development Policy Center, China’s net commitments to Africa became negative in 2022 for the first time since 2000. Repayments now exceed new loans by $1.8 billion.
This reversal reflects a strategic shift in Beijing. De-dollarization is accelerating without rupture, but it is accompanied by greater selectivity in bilateral loans. The China Development Bank and the Export-Import Bank of China have reduced their commitments to Africa by 60% between 2019 and 2024.
Angola, the historical largest recipient of Chinese loans in Africa, illustrates this transition. The country received $42 billion in Chinese financing between 2000 and 2019, primarily for its oil infrastructure. In 2024, new Chinese commitments to Luanda do not exceed $800 million, focused on smaller-scale projects.
This contraction in Chinese financing coincides with the restructuring of existing debts. Of the 17 African countries in debt distress or at high risk according to the IMF, 14 are currently negotiating a rescheduling of their Chinese debt under the G20 Common Framework.
Multilateral Institutions Facing Their Limits
Multilateral development institutions struggle to compensate for this double contraction. The World Bank has indeed increased its disbursements to sub-Saharan Africa by 23% in 2024, reaching $18.2 billion. But this increase does not offset the decline in private and bilateral flows, estimated at $35 billion over the same period.
The African Development Bank (AfDB) faces the same constraints. Despite the $125 billion capital increase approved in 2019, its lending capacity remains limited by prudential ratios. In 2024, the AfDB approved $8.4 billion in new financing, 15% less than in 2019 in real terms.
This insufficiency of multilateral financing is also explained by their increasing conditionality. The IMF has tightened its access criteria for emergency financing after the defaults of Sri Lanka and Ghana. To access Fund resources, countries must now demonstrate debt sustainability over 10 years, compared to 5 years previously.
The Emergence of Domestic Financing Under Constraints
Faced with this closure of external financing, low-income countries are turning massively to their domestic markets. The share of debt in local currency has mechanically increased, rising from 81.3% to 92.4% between 2019 and 2025. This forced substitution generates new risks.
The crowding out of the domestic private sector intensifies. In Nigeria, the state now absorbs 70% of domestic bank savings, compared to 45% in 2019. Interest rates on Nigerian government bonds reach 18%, depriving local businesses of access to credit.
This dynamic is observed in the majority of African countries. In Tanzania, domestic bond issuance tripled between 2020 and 2024, pushing 5-year bond yields above 12%. The Tanzanian private sector, faced with prohibitive rates, is reducing productive investments.
India is testing the first “services first” model by relying on its developed domestic financial market. But this strategy remains inaccessible to African economies whose domestic bond markets lack depth and institutional investors.
Toward New Financing Mechanisms
This financing crisis catalyzes the emergence of alternatives. Regional development banks are strengthening their cooperation. In September 2024, the AfDB, the Asian Infrastructure Investment Bank (AIIB), and the New Development Bank (NDB) of the BRICS signed a co-financing agreement of $50 billion over five years.
IDA-21 has mobilized $100 billion—a record financial envelope to support development in the poorest countries. This reconstitution is designed not to aggravate the debt burden by offering grants and concessional financing.
Green bonds represent a promising but limited avenue. South Africa raised $2 billion through green bonds in 2024, benefiting from a 50 basis point discount compared to its conventional bonds. But this green premium remains insufficient to compensate for the general closure of markets.
Mechanisms for securitizing migrant remittances are emerging as financial innovation. Senegal successfully raised $200 million by securitizing transfers from its diaspora, guaranteed by the World Bank. This approach could become generalized: remittances to sub-Saharan Africa reach $95 billion in 2024, three times official development assistance.
The IFC develops partnerships that stimulate economic development in fragile zones, emphasizing job creation and infrastructure development. The IMF’s capacity-building activities aim to help countries increase domestic revenues and improve public finance management.
The silent crisis of poor countries’ debt reveals the exhaustion of a development financing model. Between exclusion from private markets, Chinese withdrawal, and the insufficiency of multilateral institutions, these countries face a structural financing deficit estimated at $200 billion per year by the OECD. The resolution of this crisis will determine their ability to achieve the Sustainable Development Goals by 2030.
Sources
- OECD - Global Debt Report 2026 - Sovereign Borrowing Outlook
- Boston University Global Development Policy Center - Chinese Loans to Africa Database
- World Bank - Debt Statistics
- International Monetary Fund - Debt Sustainability Framework
- African Development Bank - Annual Report 2024