The Currency Exchange Fund raises more than $200m

The Currency Exchange Fund has announced that the European Commission (EC), with the support of Kreditanstalt für Wiederaufbau (KfW), the International Finance Corporation (IFC) on behalf of the International Development Association (IDA) and Proparco have invested over $200 million in the fund.

The investments, combined with the 2019 capital increase, raise TCX’s risk bearing capacity by 67% to $1.25 billion. This aggressive growth reflects the increased demand for local currency from households, enterprises and institutions in frontier markets. It also shows the dedication of development finance institutions to remove the currency risk from cross-border lending to borrowers in developing countries. The investments come with a focus on borrowers in sub-Sharan Africa and in the European Neighborhood countries.

Ruurd Brouwer, CEO of TCX states, “The investment is a timely response from our investors to counteract the detrimental effects of the pandemic. Especially the poorest countries that lack reserves and adequate health care systems are vulnerable to this external shock. Currency depreciations put many households and other local entities that have borrowed in foreign currency at risk of default. Allowing them to borrow in their local currency instead increases financial resilience, which is needed to reduce the negative impact on economic activity and livelihoods of this crisis, and future crises.”

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