Why Emerging-Market Debt Costs Could Derail the Energy Transition
Rising sovereign borrowing costs risk delaying mining and infrastructure projects critical to decarbonisation.
By Ian Timis
Senior Natural Resources & Private Equity Executive | $3.7B+ Global M&A, Project Finance
Emerging markets stand at the centre of the energy transition. They are home to the copper, lithium, and other minerals the world desperately needs. Yet they are also weighed down by the heaviest debt loads in a generation. Rising global interest rates, weaker local currencies and constant refinancing needs have created a collision between sovereign fragility and climate ambition. Unless capital structures evolve, the transition will stumble at precisely the moment it should accelerate.
I write this as someone who has delivered more than US$3.7 billion in projects and transactions across Africa, Europe, and the Americas. From leading a US$2.4 billion gold merger at European Goldfields to structuring a US$750 million dual listing in West Africa, I have seen firsthand how quickly debt stress can undermine investor confidence and delay projects. The risks today look all too familiar.
A growing repayment wall
The IMF warns that emerging markets now face the highest real financing costs in a decade. In Africa alone, external repayments are expected to rise from around US$55 billion in 2024 to more than US$62 billion in 2025. UNCTAD estimates that developing countries spent nearly half a trillion dollars servicing debt in 2023, a record that leaves little fiscal space for infrastructure or social investment.
These numbers matter because sovereign yields feed directly into project financing. A mine in Ghana or a lithium plant in Argentina does not sit apart from its host country’s bond spreads; it is priced on top of them. When sovereign coupons remain stubbornly high, hurdle rates climb, payback periods lengthen, and good projects are shelved.
Minerals in demand, capital in retreat
The demand for transition metals is rising sharply. The International Energy Agency reports that lithium demand grew by 30 per cent last year, with copper, nickel and rare earths following the same trajectory. Yet industry behaviour tells another story. The proposed Anglo American–Teck copper deal, the largest in a decade, shows that boards prefer to buy reserves rather than spend ten years permitting and financing new projects in high-risk jurisdictions. Consolidation may deliver scale, but it also hollows out the future supply pipeline.
When sovereign stress hits operations
Zambia’s long restructuring process shows how sovereign fragility translates into project delays. Copper expansions that could have been sanctioned earlier are now slowed by macro uncertainty and power shortages. Ghana’s deal with official creditors has stabilised its finances, but until capital markets reopen, private sponsors remain cautious. In Argentina, lithium developers wrestle not just with volatile prices but with capital controls and shifting tax regimes that deter long-term investment. For investors and operators, these are not abstract risks. They are the practical realities that slow permitting, erode margins, and delay supply chains that global industries now depend upon.
Designing resilience into projects
The lesson for investors is clear: resilience must be built into every transaction. That means pairing local-currency revenues with currency-matched debt to avoid sudden value erosion. It means blending concessional and commercial capital, with DFIs and export credit agencies absorbing first-loss risk. It means tying drawdowns to permitting and social milestones so that equity is not stranded during macro shocks. And it means using windows of spread compression to pre-finance, rather than waiting for crisis moments when markets are already closed.
When I helped lead a US$250 million critical minerals raise, we structured the deal with both institutional LPs and strategic offtakes, creating a buffer against swings in price and policy. That approach is no longer a luxury; it is a necessity.
The role of Governments
Policy makers in resource-rich countries also have a role. Investors do not expect subsidies, but they do need predictability. Transparent permitting timelines, guaranteed access to power and water, and credible frameworks for foreign exchange and dividend repatriation are the basics of bankability. If these conditions are absent, capital migrates elsewhere, leaving host nations poorer and the global transition weaker.
The bigger picture
Some argue that debt stress is contained, yet history offers warnings. The Asian crisis of 1997 and the Eurozone debt turmoil of 2012 both began as “local” problems before cascading into global ones. Today, the risks are amplified by algorithmic and passive flows that can accelerate capital flight in a matter of hours.
If emerging markets cannot finance their role in the transition, the consequences will not be limited to Lusaka or Buenos Aires. Copper and lithium prices will rise, supply chains will tighten, and the cost of decarbonisation will increase globally. Inflation will persist in the sectors least able to absorb it, from energy grids to electric vehicles.
The world cannot afford to treat emerging-market debt as a footnote to climate policy. It is the hinge on which the energy transition will either succeed or falter. From my own career across four continents, I have seen how sovereign fragility crowds out infrastructure, raises capital costs, and leaves good projects stranded.
The transition requires not just technology and ambition, but credible financing frameworks in the very countries that hold the resources we all depend upon. If debt markets remain mispriced and policy frameworks unpredictable, the energy transition will become slower, costlier, and more uncertain than it needs to be.
Author Biography
Ian Timis is a senior natural resources and private equity executive with more than 20 years of leadership experience across mining, energy and infrastructure. He has delivered over US$3.7 billion in transactions and projects across Africa, Europe and the Americas, spanning the full investment cycle from exploration through financing, construction, production and exit. Ian has led landmark deals including a US$2.4 billion gold merger at European Goldfields, a US$750 million dual listing in West Africa, and a US$250 million critical minerals raise. He writes on the intersection of finance, energy transition and global resource security.
