Green Shoots for Africa

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Africa is set to benefit from new financial infrastructure that is designed to boost liquidity in its sovereign debt and attract private investment into its climate-linked bonds. Can it work for africa and beyond? For more than a decade, pockets of the fixed-income markets have been susceptible to sudden lurches that can send bond prices into free-fall, with buyers seemingly absent. The problem is especially evident in aging bonds and sparsely traded debt from developing markets. African sovereign nations—which together had originated more than $140 billion in international bonds as of 2021—now look set to become the inaugural beneficiary of a solution. The idea is essentially a recycling facility, which would enable the bonds to trade more frequently between asset owners, thereby reducing what the nations pay to carry the debt, at the same time as potentially financing Africa’s transition toward a net-zero future.