2024 Public Sector Perspectives

De-Risking Emerging Market Hard Currency Debt Maryna Asipchuk Markets, Global FIC Structuring Cross-Border and Public Sector Solutions John Finnigan Global Head of Development Organizations Valentina Antill Markets, Global FIC Structuring Head of Cross-Border and Public Sector Solutions Alfredo Martinez Public Sector Group, Corporate Banking V olatile markets have brought the importance of de-risking US dollar debt into focus. While some borrowers are averse to de-risking their hard currency debt by the potentially higher funding costs of converting borrowing to local currency, this is not the only option. There are myriad options to de-risk hard currency debt. In continuation we share recent successful transactions along with ongoing opportunities withMultilateral Development Banks (MDBs) and their EMborrowers across government, SOE, local development banks or private sector. MDBs and other development finance institutions continue to represent a predominant source of funding for emerging market countries and most of it is denominated in hard currency. Typically, capital is both sourced and extended in US dollars. In good times – when exchange rates are stable and interest rate volatility is low – borrowing and lending in USD may be a viable strategy and provide cost effective financing. However, during times of greater systemic risk and sporadic global financial shocks such a strategy may expose borrowers to severe risks and losses. The devaluation of local currencies effectively increases outstanding debt in local currency terms. Citi Perspectives for the Public Sector 57 MDBs and other development finance institutions continue to represent a predominant source of funding for emerging market countries and most of it is denominated in hard currency. 56 De-Risking Emerging Market Hard Currency Debt