African nations accelerate reforms and seek sustainable financing amidst mounting debt risks in 2026

African governments are expected to increase reliance on multilateral lenders and press ahead with reforms in 2026 as debt distress remains a prominent risk across the continent, S&P Global Ratings said on Monday.

S&P Global’s head of national ratings and analytics for Africa, Samira Mensah, warned that debt vulnerabilities are widespread. “We have so far, according to the IMF, more than 20 countries facing a high risk of debt distress, or severe vulnerabilities,” she said. According to the International Monetary Fund, countries such as Niger are among those identified as facing high risks and need to sustain macroeconomic discipline and structural reform to secure resilient, inclusive growth.

Despite the elevated risks, international bond markets have reopened for some African issuers. Lower interest costs helped drive roughly $6 billion of eurobond sales from countries including Benin, Kenya and Ivory Coast so far this year, with more issuers expected and a planned maiden sovereign bond by the Democratic Republic of Congo in the pipeline. The rebound highlights investor appetite when yields fall, but S&P cautioned that borrowing in dollars increases sensitivity to external shocks and exchange-rate swings.

S&P Global’s research also pointed to a record year for labelled sustainable debt in Africa, with nearly $13 billion issued in 2024, though that still represents under 1% of global sustainable bond volumes. According to the report, expanding green finance, deepening capital markets and regional integration will be important to channel funding into infrastructure and energy projects that the continent needs.

At the same time, domestic debt dynamics present fresh challenges. S&P’s analysis shows rising interest burdens and shrinking foreign holdings of local-currency debt have left countries such as Kenya and South Africa exposed to tightened global financing conditions and currency pressures. The ratings agency said strengthening domestic capital markets and prudent fiscal policy will be necessary to reduce vulnerabilities.

The agency’s ratings actions last year reflected these mixed forces: seven sovereign upgrades were attributed largely to stronger growth prospects and reform momentum, while negative actions were taken where shocks or policy backsliding weakened credit metrics. S&P highlighted reform progress in Nigeria, which it rates B- with a positive outlook, and noted South Africa’s relative improvement, the country is rated BB with a positive outlook. By contrast, Mozambique sits at CCC+ with a negative outlook, and Senegal is at CCC+ with “credit watch developing”, reflecting concerns it may face default risks.

Infrastructure and energy financing remain central to the debate over how Africa will bridge development gaps. S&P Global’s institutional-strategy work shows large-scale projects in countries such as Egypt are being financed through a mix of bilateral donors, multilateral institutions and government incentives to attract private capital, while another report underlined the continent’s energy shortfall, more than 600 million people lack electricity access, and the need for innovative financing to accelerate electrification and reduce fossil-fuel dependence.

The theme of mobilising capital for sustainable growth featured prominently at the inaugural S&P Global Africa Summit in Johannesburg, co-hosted with the Arab Bank for Economic Development in Africa, where policymakers, investors and market insiders discussed ways to bolster financial markets and unlock investment across the region.

S&P said the near-term outlook remains slightly tilted to the negative, driven by concerns in specific cases such as Senegal, Mozambique and Madagascar, but noted pockets of improvement. The ratings agency urged countries to bolster resilience to external shocks, pursue credible reform plans and develop domestic markets to reduce reliance on volatile external financing.