Local Currency Financing - The Next Frontier for MDBs?

Tobias C. Hoschka ()
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Tobias C. Hoschka: Asian Development Bank

No 68, ADB Economics Working Paper Series from 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.

Keywords: currency mismatches; local capital markets; local currency financing; multilateral development banks; political decentralization (search for similar items in EconPapers)
JEL-codes: F34 G15 O16 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2005-04-01
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0068

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