2025 Public Sector Perspectives

Significantly, GEMS data shows an average recovery rate of 74.7% for MDB/DFI-enabled loans in emerging markets. This is substantially higher than the 38% recovery rate for emerging market bonds (published by J.P. Morgan) and even the 70.1% recovery rate for global loans, published by Moody’s (which is skewed by the inclusion of advanced as well as developing and emerging economies). Crucially, the recovery statistics help drive home the message that investment in infrastructure and emerging markets poses less risk than assumed by current risk models, meaning commercial banks should not have to lower their risk tolerance to finance MDB/DFI-backed projects. The broader industry needs to start treating MDB/DFI-backed transactions accordingly to help unlock private sector capital for large-scale deployment. This data should help inform conversations with regulators about the reforms required to utilize these risk defeasance tools and facilitate larger-scale execution in emerging markets. The release of the GEMS recovery data can help Citi (and other financial institutions) to improve their internal risk models. Ultimately, performance data, specifically probability of default (PD) and loss- given default (LGD) data will allow commercial lenders to correct risk models to properly account for the additionality of risk defeasance products. Recognizing that there are logistical and privacy concerns around the release of such data, we believe that commercial banks will ultimately play a role in defining the real risk of these investments, helping to overcome barriers to the use of private capital in blended structures and boosting the world’s ability to meet sustainability targets. Recovery rates for contracts of private counterparts by World Bank Group country income group Income Group All Infrastructure Financials Other High 66.20% 68.30% 55.90% 67.10% Upper-middle 75.10% 80.00% 72.40% 74.70% Lower-middle 74.70% 78.10% 77.30% 73.00% Low 83.50% 92.80% 90.00% 80.30% N/A 65.20% 71.80% 55.90% 69.60% Average 74.70% 78.70% 74.10% 73.90% Standard Deviation 0.36 0.33 0.37 0.36 Recovery rates for contracts of private counterparts by 2022 World Bank Group region Geographic Region All Infrastructure Financials Other East Asia and the Pacific 69.70% 65.00% 62.90% 71.90% Europe and Central Asia 72.50% 79.10% 73.80% 70.80% Latin America and the Caribbean 71.70% 73.10% 65.40% 72.80% Middle East and North Africa 82.50% 87.90% 82.60% 81.40% South Asia 68.10% 68.90% 78.60% 63.90% Sub-Saharan Africa 83.00% 94.30% 82.10% 80.80% N/A 63.80% 70.50% 56.70% 66.90% Average 74.70% 78.70% 74.10% 73.90% Standard Deviation 0.36 0.33 0.37 0.36 Source: Gems market database Citi Perspectives for the Public Sector 11