Local currency

Local currencies, local capital markets and the EBRD

The EBRD is working hard to strengthen local capital markets and encourage the use of local currencies in its countries of operation to counteract major weaknesses in their transitions.

The financial crisis of a decade ago exposed two serious shortcomings in the region’s economies: excessive reliance on foreign capital and excessive use of foreign exchange borrowing.

Foreign currency lending has helped increase convergence in the region but large capital inflows have also led to overheating, macro imbalances and the systemic risk of borrowers without foreign currency income (unhedged borrowers) being unable to repay loans.

Volatility on the foreign exchange markets and the depreciation of local currencies has only made the problems suffered by transition countries during the financial crisis more acute.

The EBRD’s Local Currency and Local Capital Markets Initiative, launched in May 2010, aims to enhance the macroeconomic, regulatory and market framework to ensure long-term, sustainable and liquid local currency markets.

The EBRD’s contribution to wider efforts to expand the use of foreign currency and back local capital markets includes:

  • Local currency funding operations and technical cooperation to develop domestic market infrastructure.
  • Local currency funding, lending and debt and equity investments, notably to strengthen the local investor base (especially by supporting pension funds and the insurance sector).
  • Policy dialogue together with other International Financial Institutions (IFIs).

The EBRD first made a loan and issued bonds in a local currency (Hungarian forints) in 1994 but in the past the bulk of its lending was usually in euros or US dollars.

Local currency projects

To do business with the EBRD's Early Transition Countries Local Currency Programme, contact Christopher Clubb, Early Transition Countries Initiative Director, by email.

Local currency issuance

The EBRD's local currency issuance assists in the development of domestic capital markets in the Bank's countries of operations.