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Local Currency Financing - The Next Frontier for MDBs?

Author

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  • Hoschka, Tobias C.

    (Asian Development Bank)

Abstract

This paper surveys the issues involved in local currency financing by multilateral development banks (MDBs). While MDBs have traditionally provided financing in foreign currency to their borrowers, greater sensitivity by borrowers to potential currency mismatches, political decentralization, and the development of local capital markets have recently led MDBs to consider providing financing in local currency. While still small in comparison to MDBs' foreign currency financing, this paper argues that local currency financing will evolve into an increasingly important financing mode for MDBs. The paper addresses the key benefits and challenges, and provides an overview of the current policies and experience of the major MDBs in this rapidly growing area.

Suggested Citation

  • Hoschka, Tobias C., 2005. "Local Currency Financing - The Next Frontier for MDBs?," ADB Economics Working Paper Series 68, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0068
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    More about this item

    Keywords

    currency mismatches; local capital markets; local currency financing; multilateral development banks; political decentralization;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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