There has been an increasing issuance of sovereign bonds in domestic currency under national laws. The Addis Agenda notes the possibility for countries voluntarily strengthening domestic legislation to reflect guiding principles for effective, timely, orderly and fair resolution of sovereign debt crises.
Since the early 1990s, many sovereigns in emerging markets have experienced a growing shift in the composition of central government debt towards debt issued under domestic jurisdiction (Figure 2). This shift can be mostly attributed to better macroeconomic policies that kept inflation in check, institutional reforms, conscious efforts to develop local bond markets and minimize foreign exchange risk in sovereign debt portfolios.
Domestic borrowing in low-income countries typically is more expensive than external borrowing - an IMF Staff Report
finds that the average nominal effective interest rate for domestic debt is around 8 percent, compared to 2 percent for external debt – but it helps to reduce currency risk and volatility.