How African Governments Borrow

For decades, conversations about African debt have centred on external creditors — China’s infrastructure loans, concessional loans by multilateral development banks such as the World Bank and the African Development Bank, and Eurobonds. These narratives, while important, miss a fundamental transformation reshaping public finance across the continent: African governments now borrow more from their own citizens than from the rest of the world combined.

This shift represents one of the most significant yet underappreciated changes in African economic policy over the past two decades. In joint work with Mark Manger, David Mihalyi, Niccolò Rescia, Christoph Trebesch, and Ka Lok Wong, we track over 50,000 individual government loans and securities across 54 African countries and document that domestic debt has quietly overtaken external borrowing as the primary source of sovereign financing. Our African Debt Database reveals that domestic debt markets have more than tripled in size since 2010, growing from USD 150 billion to nearly USD 500 billion today (see “Domestic Bond” and “Domestic Bill” in the graph below).

The rise of domestic borrowing tells two very different stories, depending on where you look. In countries like Tanzania, Uganda, Nigeria, and Rwanda, the expansion reflects genuine market development — governments systematically lengthening bond maturities, building investor bases, and creating functioning yield curves. These “market builders” have used domestic debt strategically, supported by credible macroeconomic frameworks and sustained GDP growth.

But elsewhere, the domestic debt boom looks less like development and more like a last resort. In Ghana and Mozambique, governments have turned to local markets not by choice but by necessity, flooding them with short-term treasury bills as external financing dried up. Ghana’s domestic debt exchange in 2022–23 — effectively a default on local bondholders — came after years of escalating reliance on domestic borrowing at unsustainable rates.

These divergent paths reveal a crucial truth: domestic debt is neither inherently good nor bad.  These divergent paths reveal a crucial truth: domestic debt is neither inherently good nor bad. It depends entirely on why governments are borrowing and what they’re building with those funds. For market builders, domestic debt provides currency-matched financing that reduces exchange rate risk. For liquidity-constrained borrowers, it becomes an expensive stopgap that amplifies rollover risk without addressing underlying fiscal fragility.

The cost difference is stark. Multilateral lenders like the World Bank charge African governments less than 1% interest on average. Chinese loans typically run 2–4%. International bonds average 6–8%. But domestic bonds regularly exceed 12%, with some countries paying over 15% to borrow in their own currency.

These nominal rates tell only part of the story. When adjusted for inflation, domestic borrowing costs reveal a pattern familiar from financial history: financial repression. Many African governments are effectively inflating away their domestic debt, imposing negative real returns on local bondholders. While this reduces the real burden on government finances, it also discourages domestic savings and can undermine the very market development governments claim to pursue.

What’s clear is that external financing options have narrowed considerably. Chinese lending to Africa, which peaked around 2016, has contracted sharply since 2021 (see graph). International bond markets have become more selective and expensive. The result: African governments collectively now repay more to external creditors than they receive in new external financing — a net outflow that forces even greater reliance on domestic markets.

This financing squeeze has practical implications that standard debt-to-GDP ratios obscure. Total annual debt service exceeded USD 100 billion in 2026, with repayment obligations remaining above USD 60 billion through 2030. This front-loaded burden is driven overwhelmingly by market-based debt — both international and domestic bonds — reflecting their higher costs and shorter maturities.

The maturity mismatch is particularly concerning. While multilateral loans average over 25 years and Chinese loans run 10–20 years, domestic bonds cluster around 8–10 years, and many countries lean heavily on treasury bills with maturities under one year. This creates a constant refinancing treadmill: governments must continually return to markets, vulnerable to sudden shifts in investor sentiment.

The expansion of domestic borrowing presents a double-edged opportunity. Growing local debt markets can strengthen financial systems, build domestic investor capacity, and provide governments with greater monetary independence. Countries that successfully borrow in their own currency reduce their vulnerability to exchange-rate shocks.

Yet the dangers are equally pronounced. Substantial domestic debt accumulation can starve the private sector of credit, create dangerous interdependencies between government solvency and banking system health, and tempt authorities toward inflation-driven debt reduction. The distinction between genuine financial development and coercive financial repression often proves narrower than policymakers acknowledge.

The African Debt Database offers another crucial insight: comprehensive debt transparency is achievable even with modest resources. A small research team successfully assembled a detailed inventory of African debt instruments by synthesising publicly available information with contemporary digital methods. This demonstrates that well-funded international organisations could readily expand such efforts with greater consistency.Improved data represents more than an academic achievement — it constitutes a foundation for effective governance. 

Improved data represents more than an academic achievement — it constitutes a foundation for effective governance. As African borrowing patterns continue evolving, reliable, detailed information becomes indispensable for constructing sound debt-sustainability assessments, nurturing domestic financial markets, and facilitating creditor coordination.