Credit markets analysis company S&P Global Ratings estimates that commercial long-term borrowing by the 27 African countries rated by ratings agency S&P will reach $155-billion this year, up from $140-billion in 2025.

This rise in the borrowing by these African countries is being driven by maturing debt obligations and ongoing fiscal financing requirements.

This will increase total outstanding African sovereign commercial debt to just over $1.2-trillion, or 45% of GDP, including short-term debt, by the end of the year, S&P estimates.

The relatively low dollar values of African sovereign debt also reflect the high average cost on commercial borrowing for African governments and their narrower, more specialised investor base – including smaller domestic bank and non-bank financial sectors.

Rollover requirements and the cost of this debt diverge significantly and often account for a higher proportion of GDP and fiscal revenues than the global average, it says in its 'Sovereign Debt Report 2026'.

The three larger issuers, namely Egypt, Morocco and South Africa, dominate the region owing to their larger economies, more developed financial systems and long-standing market access.

Further, the yearly average borrowing by each of the 27 rated issuers on the continent is about $1.5-billion in absolute terms, which is notably lower than that of global peers, although there are various borrowing needs and the cost of debt across the region.

This, in part, reflects the smaller size of many African economies and the larger role that concessional, or non-commercial, financing plays in their debt profiles.

S&P cautions that the Middle East war and its effects on supply chains and hydrocarbon prices pose risks to Africa's borrowing plans for this year.

“We expect the war and its implications for hydrocarbon shipping lanes, particularly the Strait of Hormuz, will begin moderating over the next few weeks, but, if the war continues beyond that, it could impair fiscal positions, inflation profiles and financing plans across Africa.

“Since most African countries rely heavily on refined fuel imports, rising prices could put additional strain on governments. This is particularly the case if central banks begin raising their policy rates to manage inflation,” says S&P Global Ratings credit analyst Benjamin Young.

Most African countries rely heavily on refined fuel imports, and rising prices could put additional strain on governments. This is particularly the case if central banks begin raising their policy rates to manage inflation. Budget deficits could widen in Angola and Egypt, which provide sizeable fuel subsidies.

Favourable external financing costs, which are at multiyear lows, provide some reprieve, as governments can refinance upcoming foreign currency maturities at lower costs, the report notes.

Meanwhile, steady macro factors should support both local and foreign currency issuance this year.

Projected growth of 4.5% across rated African sovereigns and supportive terms of trade for commodity exporters will help governments maintain fiscal balances at a similar level to 2025, averaging 3.5% of GDP, and facilitate revenue-raising efforts.

S&P expects these factors will result in issuance similar to 2025.

African sovereign borrowers also stand to benefit from a weaker dollar, because it eases imported inflation and reduces the local currency burden of external debt, it highlights.

Improving global liquidity, following tight global monetary policy in response to global inflation between April 2021 and April 2023, increases investor appetite and non-resident inflows into local currency bond markets, notably in Egypt, Nigeria, Uganda and Zambia.

This contributes to foreign exchange stabilisation and lower local currency yields.

Easier global monetary policy conditions should also facilitate access to foreign currency financing.

Spread compression enhances market access, as investors demand a smaller risk premium. This enables refinancing and liability management, which S&P expects will increase. Market access typically improves before price relief, it adds.

However, the benefits arising from those factors will remain unevenly felt. Sovereigns with sound monetary frameworks, fiscal consolidation momentum, as demonstrated by improved revenue collection, and adequate reserve buffers are better positioned to attract durable inflows.

The reversibility of portfolio flows and reliance on non-resident borrowing pose risks and increase exposure to dollar volatility.

Further, commodity price cycles significantly shape African sovereign borrowing dynamics, reinforcing the region's pro-cyclical credit profile.

For commodity exporters such as Angola, Nigeria, Zambia and Ghana, higher oil, copper or gold prices strengthen trade balances, bolster fiscal revenues and support foreign exchange reserves. They also typically lead to spread compression and improved market access.

BANKING SYSTEM DIVERSITY
However, low savings rates and shallow domestic financing capacity limit local currency borrowing in many sovereigns.

Specifically, the differences in the depth and structure of African domestic banking systems can be significant, as can the related differences in both borrowing currency composition and associated costs.

Countries with smaller banking systems account for half of rated African sovereigns, S&P says in the report.

These countries often have a greater proportion of foreign currency debt, at about 64% of total African debt, though data suggests these countries can absorb additional government issuance before sovereign concentrations reach global averages.

However, without cheaper bilateral and multilateral funding sources, most countries in this group, including Nigeria, Angola, Uganda, Zambia and Ghana, display interest-to-revenue ratios at least double the global average of about 9%.

Some countries face expensive domestic financing, largely driven by macroeconomic factors, such as currency depreciation-led inflation, which results in tight monetary policy, limited domestic demand and low fiscal revenue bases.

These conditions, combined with relatively shallow banking systems, encourage greater reliance on foreign currency borrowing, where yields are also elevated owing to the same macro and foreign exchange risks, S&P says.

Further, countries with access to concessional or multilateral funding, such as Rwanda, Madagascar, Ethiopia, the Democratic Republic of Congo, Cameroon and Cape Verde, can maintain lower borrowing costs, which highlights the heterogeneity of financing conditions across structurally similar systems.

Countries with deeper banking systems with below-average sovereign exposure often have additional potential domestic funding capacity. However, countries that have smaller banking systems with above-average sovereign exposure often also face constrained capacity and elevated concentration risk.

Consistent with these structural patterns, countries with deeper banking systems and higher domestic sovereign holdings can rely more on local currency issuance, as foreign-currency debt averages 40% of total.

“This dynamic also affects borrowing costs. Higher domestic absorption generally allows governments to issue in local currency at lower spreads, depending on inflation dynamics and monetary policy settings, while reliance on foreign-currency funding can be more expensive and subject to exchange-rate volatility,” the report says.

Meanwhile, South Africa's large domestic financial system, actively traded currency and well-developed yield curve mean it benefits from considerably more fiscal flexibility than nearly all other nations in S&P’s survey.

“We forecast South Africa's 2026 borrowing will decrease the most among African sovereigns, largely owing to its narrowing fiscal deficit and higher concessional funding. Its maturity profile remains relatively steady at just under $6-billion.”