Why Europe’s support for local currency lending is crucial to stronger partnerships with the Global South
Year: 2024
Content-Type: Report
Description: The annual global financing gap for achieving the Sustainable Development Goals has surged to an estimated $4.2 trillion, which poses a critical challenge for sustainable development, particularly in low- and middle-income countries. These countries have limited fiscal space and are facing heightened economic vulnerabilities due to a large portion of their sovereign debt being denominated in foreign currencies, exposing them to severe currency risks and debt instability. Recognising this challenge, European financial institutions for development are undertaking several initiatives and exploring options to promote local currency financing and risk hedging. In this brief, the author analyse the European financial institutions efforts to enhance local currency lending and risk hedging, and call for a strategic approach that aligns with the EU’s development, economic and geostrategic interests. The EU should view local currency financing as a strategic opportunity to strengthen its relationship with countries in the Global South and foster mutually beneficial partnerships
Pages: 18 pages
Author: Karim Karaki
Categories: Economy, Finance, Publications, Risk