2025 Public Sector Perspectives

Dustin Ling Public Sector Banking, Multilateral Development Banks John Finnigan Head of Public Sector Banking, NAM & Development Organizations Michaela Carroll Public Sector Banking, Multilateral Development Banks Cracking the Local Currency Code: How Innovation Can Drive a Breakthrough in Development Finance M ultilateral development banks (MDBs) and development finance institutions (DFIs) represent a significant source of funding for emerging market countries, providing cost efficient lending tomember countries and private sector entities within them. This funding allows MDBs and DFIs to play an important role in reducing poverty and inequality, boosting economic development, and accelerating progress towards the Sustainable Development Goals (SDGs) in these countries. However, there remains a strong need for new solutions to ensure that these institutions are maximizing their scale and impact. In April 2024, a group of leading MDBs released a joint workplan that established concrete deliverables for these institutions to address global challenges more effectively. 1 These initiatives include scaling-up financing capacity, boosting joint action on climate, catalyzing private sector investment, and more. Among these initiatives is the more effective utilization of local currency financing and hedging. In the joint workplan, the MDBs highlight the need for increased lending capacity in local currency to mitigate instability risks arising from currency fluctuations. More local currency lending would allowMDBs to scale operations and boost development in countries that require additional funding to grow and prosper. 1 https://www.iadb.org/document .cfm?id=EZIDB0000577-986313001-135 Citi Perspectives for the Public Sector 41