Managing Foreign Exchange Rate Risk: Capacity Development for Public Debt Managers in Emerging Market and Low-Income Countries

Thordur Jonasson, Sheheryar Malik, Kay Chung and Michael Papaioannou

No 2024/167, IMF Working Papers from International Monetary Fund

Abstract: This paper presents some sound practices for foreign-currency risk management in developing countries and outlines instruments for managing sovereign debt portfolio currency exposures. Adoption of a debt management strategy with well-defined targets for foreign exchange risk is a critical element of public debt risk management. To this end, public debt managers often need to face with complex strategic and operational matters related to public debt hedging practices, including the use of derivatives. In this context, we highlight the main institutional challenges in the management of foreign exchange risk in sovereign debt portfolios and discuss the overall implementation of a foreign exchange risk-management strategy.

Keywords: exchange rate risk risk management; debt portfolio; public debt manager; currency exposure; risk-management strategy; Government debt management; Debt management; Currencies; Exchange rate risk; Foreign currency debt; Asia and Pacific; Sub-Saharan Africa; Middle East; North Africa; Central Asia; Africa (search for similar items in EconPapers)
Pages: 32
Date: 2024-08-02
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-rmg
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