STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS

The report examines how the COVID-19 pandemic affected local currency bond markets (LCBMs) across MEFMI member countries. It finds that while the crisis increased government borrowing needs and operational risks, most countries maintained stability through fiscal, monetary, and financial policy interventions. Key findings include a general increase in the average time to maturity of domestic debt, a shift in investor behavior toward safe assets, and the use of liability management operations like rollovers and switches. The document concludes that deepening LCBMs, strengthening debt management strategies, and improving market transparency are essential for resilience against future crises.

• In sub-Saharan Africa, 16 countries were already in debt distress or at high risk of it before the pandemic, leaving them with very limited fiscal space to respond to the crisis.
• Domestic bond issuance became the primary funding source for most sub-Saharan African countries during the crisis, with the outstanding stock of domestic bonds increasing from an estimated US$34 billion in 2019 to US$73 billion in 2020.
• The average time to maturity (ATM) of domestic debt increased for eight MEFMI countries during 2020–2021, with increases ranging from 0.9 to 2.6 years, which reduced refinancing risk but increased debt costs.
• Commercial banks remained the largest holders of domestic debt in MEFMI countries, although their proportionate share declined in seven of the eight countries that reported data; Uganda saw the largest decrease at 21.5%.
• Institutional investors in Kenya, Rwanda, and Tanzania increased their demand for long-term government bonds during the pandemic as a 'flight to quality' and safety due to poor returns in stock and property markets.
• Kenya experienced the highest bond trading turnover ratio in the region at 45 per cent in 2021, with turnover rising from KSh571.6 billion in 2019 to KSh949 billion in 2021.
• Rollovers were the most frequently used liability management operation (LMO) in the region, utilized by all surveyed countries except Lesotho and Mozambique.
• Zimbabwe was the only MEFMI country to default or delay payments on domestic government debt principal or interest during the pandemic, citing liquidity constraints and rising interest rates.
• The G20's Debt Service Suspension Initiative (DSSI) helped stabilize LCBMs by reducing pressure on debt burdens; all MEFMI countries participated except Rwanda, Botswana, and Zimbabwe.

APA

FSD Africa (n.d.). STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS. https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Chapter-3.pdf

Chicago

FSD Africa. STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS. n.d. https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Chapter-3.pdf.

Wikipedia

{{cite report |author=FSD Africa |title=STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS |url=https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Chapter-3.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fsdafricandstudy, author = {{FSD Africa}}, title = {{STUDY ON MANAGING SOVEREIGN DEBT IN TIMES OF CRISIS}}, institution = {FSD Africa}, url = {https://fsdafrica.org/wp-content/uploads/2025/05/MEFMI-Report-Chapter-3.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }