2025 Public Sector Perspectives

In addition, Citi has developed a set of key rules to help govern the loan origination and execution process from the perspective of both Citi and MDBs: Regulatory Requirements Determine lending limits, onshore entity factors and regulatory signoff as applicable 2 Demand & Supply Ensure local currency demand fromMDB, and align with Citi’s local currency availability 1 Legal & Local Requirements Develop legal framework of key T&S and country-specific requirements 4 Operational Requirements Set up operational requirements for disbursements and repayments 5 Transaction Structure Determine size, tenor, pricing, and facility type to align with borrower needs 3 Case Study: EBRD and Citi Ukraine sign a UAH revolving credit facility to support Ukrainian clients The EBRD operates in 39 countries across Europe and Asia, primarily investing in private enterprises. It has invested over €200 billion inmore than 7,000 projects to date, offering financing through loans, equity investments, and trade guarantees. 7 Typical investments average $25million, but range from$5 to $250million, across sectors like agribusiness, infrastructure, and transportation. 8 In addition to financing, the EBRD supports small andmedium-sized enterprises (SMEs) with on-the-ground advice to foster innovation and growth. It also collaborates with policymakers to create a regulatory environment that facilitates SMEs’ success. Over the past 10 years, the EBRD has been working increasingly with domestic stakeholders in its regions to improve the bank’s access to local currencies for lending (to reduce foreign exchange risk for borrowers and improve project creditworthiness) and to support the development of domestic financial markets. As of December 2023, the EBRD has signed 1,250 local currency debt facilities in 27 currencies, totaling €18.4 billion, through senior and subordinated loan facilities, and residential mortgage-backed securities. 9 The EBRD has been a strong supporter of Ukraine during the war with Russia, leading nearly 600 projects and deploying €4.5 billion since the invasion in February 2022. As Ukraine’s largest institutional investor, the EBRD plans to continue investing €1.5 to €2 billion annually in the country and is keenly focused on the reconstruction of Ukraine’s economy. 10 7 https://www.ebrd.com/home 8 https://www.ebrd.com/what-we-do/products-and-services.html 9 https://www.ebrd.com/documents/treasury/local-currency-financing-presentation-.pdf 10 https://www.ebrd.com/news/2024/ebrd-commits-new-funding-and-support-for-ukraine-at-recovery-conference.html In Ukraine, the EBRD wanted to provide local currency loans, both directly and through domestic financial intermediaries, to support existing and potential clients. Citi Ukraine, a branch of Citibank N.A. and a fully owned subsidiary, played a key role on the supply side. With over 25 years in Ukraine, Citi serves around 500 multinational firms, large Ukrainian corporations, as well as some public-sector and mid-sized clients. Citi Ukraine had an excess of hryvnia (UAH) liquidity and was nearing its limits at the National Bank of Ukraine. By making this liquidity available to the EBRD, it benefited EBRD borrowers, the Ukrainian economy, and Citi itself. To enhance access to local currency, EBRD and Citi Ukraine signed a $100 million revolving credit facility in UAH, the largest of its kind between the two institutions. The funds support local businesses affected by the war, addressing liquidity, short-termworking capital, and trade-finance needs, while minimizing currency exchange risks. Matteo Patrone, EBRDManaging Director for Eastern Europe and the Caucasus, said: “This new facility will help ensure we can continue tomeet the local-currency financing needs of Ukraine’s private-sector businesses within these levels. This is particularly essential during this time of economic uncertainty.” This collaboration between the EBRD and Citi Ukraine marked Citi’s inaugural transaction of its Local Currency Financing Solutions initiative for development finance institutions, and was a successful proof of concept. It facilitates capital mobilization in local currencies to ensure financial stability by reducing risk, aligning with responsible banking practices and empowering local borrowers to navigate their financial obligations with greater confidence. 44 Cracking the Local Currency Code: How Innovation Can Drive a Breakthrough in Development Finance