IMF Working Papers

Navigating the Evolving Landscape of External Financing in Sub-Saharan Africa

By Adrian Alter, Khushboo Khandelwal, Thibault Lemaire, Hamza Mighri, Can Sever, Luc Tucker

July 4, 2025

Download PDF More Formats on IMF eLibrary Order a Print Copy
More formats on IMF eLibrary Order a Print Copy

Preview Citation

Format: Chicago

Adrian Alter, Khushboo Khandelwal, Thibault Lemaire, Hamza Mighri, Can Sever, and Luc Tucker. "Navigating the Evolving Landscape of External Financing in Sub-Saharan Africa", IMF Working Papers 2025, 139 (2025), accessed July 6, 2025, https://doi.org/10.5089/9798229016100.001

Export Citation

  • ProCite
  • RefWorks
  • Reference Manager
  • BibTex
  • Zotero
  • EndNote

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The landscape of external funding flows to sub-Saharan Africa (SSA) has evolved significantly over the past two decades. This paper provides an overview of the non-official external financing sources, emphasizing the trade-offs between foreign and domestic currency-denominated debt. Using data from emerging and developing economies, we assess the likelihood of issuing Eurobonds or borrowing in the syndicated loan market, focusing on the implications for SSA. We also analyze the main drivers of yields at issuance and bond spreads, along with the reliability of credit ratings and the potential existence of an "African risk premium". Our findings suggest that global factors such as the US dollar and interest rates, along with domestic characteristics, including governance and political risk, play an impotant role. Once fundamentals are considered, we find limited evidence of credit rating agencies’ bias against the region and a modest extra risk premium in normal times. As an alternative to external financing, SSA countries have been recently issuing more domestic-currency debt, reducing exchange rate risks but facing challenges in attracting foreign investors due to underdeveloped local debt markets.

Subject: Bond yields, Emerging and frontier financial markets, Financial institutions, Financial markets, Financial services, International capital markets, Loans, Securities markets, Syndicated loans, Yield curve

Keywords: Africa, Bond yields, Emerging and frontier financial markets, Global, International capital markets, Loans, Local-currency bond markets, Risk premium, Securities markets, Sovereign spreads, Sub-Saharan Africa, Syndicated loans, Syndicated loans, Yield curve

Publication Details

You May Also Be Interested In...

Global Financial Spillovers of Chinese Macroeconomic Surprises

July 4, 2025

Denmark: 2025 Article IV Consultation-Press Release; and Staff Report

July 4, 2025

Nigeria: 2025 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nigeria

July 2, 2025

Ukraine: Eighth Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for Modification of Performance Criteria, Rephasing of Access, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Alternate Executive Director for Ukraine

June 30, 2025