STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS: Insights from the Covid-19 pandemic and lessons for the future

The study examines how COVID-19 affected the fiscal positions and debt sustainability of MEFMI member countries, noting a sharp increase in average debt-to-GDP ratios from 63.6% in 2019 to 70.6% in 2020. It highlights the critical role of Local Currency Bond Markets (LCBMs) and international initiatives like the Debt Service Suspension Initiative (DSSI) in maintaining stability. The report identifies significant gaps in operational risk management, specifically the absence of business continuity plans in most member states, and recommends strengthening institutional capacity, technology investment, and the development of transparent debt management strategies to build future resilience.

• The COVID-19 pandemic caused a significant economic contraction in the MEFMI region, with average real GDP growth falling from 2.7% in 2019 to a contraction of 2.8% in 2020. All member countries experienced growth contractions in 2020 except for Malawi and Tanzania.
• Fiscal positions deteriorated across the region due to lower revenues and increased spending on health and rescue packages, with the average fiscal deficit widening from -4.9% of GDP in 2019 to -5.9% in 2020.
• Public debt levels accelerated sharply during the pandemic, with the average debt-to-GDP ratio for the MEFMI region rising from 63.6% in 2019 to 70.6% in 2020.
• Local Currency Bond Markets (LCBMs) were essential for financing pandemic expenditures when international capital markets were inaccessible. While domestic debt increased significantly between 2020 and 2021, the use of long-term bonds helped lengthen the average time to maturity, though this increased interest costs in shallow markets.
• The G20's Debt Service Suspension Initiative (DSSI) provided critical stability for five MEFMI countries, allowing them to postpone US$701.2 million in debt service payments between May 2020 and December 2021.
• Most MEFMI countries lack quality procedure manuals and business continuity plans for public debt management, which the study identifies as a sign of weak operational risk management and business continuity in the region.
• The pandemic increased the risk of debt distress in the region; the percentage of MEFMI countries eligible for the Poverty Reduction and Growth Trust (PRGT) classified by the IMF as at high risk of or already in debt distress rose from 33.3% in November 2019 to 55.5% two years into the pandemic.
• Operational risks increased during the pandemic as remote working and strict gathering protocols adversely affected the organization of Debt Management Offices (DMOs) and the segregation of duties.

APA

FSD Africa (n.d.). STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS: Insights from the Covid-19 pandemic and lessons for the future. https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Summary.pdf

Chicago

FSD Africa. STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS: Insights from the Covid-19 pandemic and lessons for the future. n.d. https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Summary.pdf.

Wikipedia

{{cite report |author=FSD Africa |title=STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS: Insights from the Covid-19 pandemic and lessons for the future |url=https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Summary.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fsdafricandstudy, author = {{FSD Africa}}, title = {{STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS: Insights from the Covid-19 pandemic and lessons for the future}}, institution = {FSD Africa}, url = {https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Summary.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }