Banks, insurers, and asset managers are increasingly exposed to sovereign debt as African governments face mounting repayment burdens – draining 50% of public revenues in 2024 alone. Fears are rising that some nations may pressure institutions to subscribe to more sovereign debt, at the expense of private sector financing. While governments securities have been seen as safe bets, deeper engagement in current conditions could leave industries locked in what academics call a “deadly embrace” with government – exposing them to the fallout of currency crashes and debt restructurings, as seen recently in Ghana. How should the financial sector mitigate these risks? What measures and tools are needed to support diversification away from sovereign debt to private sector investments?
Key points:
- How far can governments lean on commercial banks without tipping the system?
- To what extent should financial players diversify away from sovereign debt given the 2026 public debt outlook?
- Hedging, credit insurance & portfolio diversification: What’s the strongest risk strategy banks can build?