Treasury Priorities for Multinational Corporations - Middle East and Africa

Treasury Priorities for Multinational Corporations | 25 Access to Funding and Liquidity The financial landscape across the MEA region presents a mixed but generally optimistic outlook regarding funding and liquidity. While a substantial majority of organizations experience reasonable to good access to capital, indicating robust financial sectors and strong banking relationships in many parts of the region, some segments still faces considerable hurdles in securing funds. This suggests that while overall accessibility is favorable, conditions are far from uniform, with some markets or organizations grappling with persistent limitations, possibly linked to less developed financial infrastructures or economic pressures in certain MEA economies. Looking ahead, as MEA financial hubs advance digital asset frameworks, new avenues for 24/7 liquidity are emerging. Financial institutions like Citi are already pioneering tokenized deposits, a bank-grade form of digital money, to enable ‘always-on’ cross-border fund movements and automated liquidity management for institutional clients. Determining Capital Structure The decision of how to structure a subsidiary’s capital is profoundly influenced by a complex interplay of financial, regulatory, and risk considerations unique to the MEA region while exchange rate volatility / risk was a dominant #1 driver (20%) in the general capital structure question, when looking at specific drivers for funding and repatriation, other factors gain prominence or share the top spot. • Relative cost of local financing stands out as a primary driver, ranked #1 by 20% of respondents. InMEA, interest rates can vary dramatically, and high local borrowing costs can steer companies towards alternative funding sources like intercompany loans or equity. • Exchange rate volatility/risk also ranks highly, with 20% identifying it as the #1 driver. This reiterates the critical impact of currency instability on funding decisions. Subsidiaries operating with volatile local currencies often seek to match the currency of their assets and liabilities to mitigate FX translation and transaction risks. • Regulation considerations are a significant factor, with 15% ranking them as #1. The regulatory landscape in MEA is highly fragmented; rules regarding foreign investment, minimum capital requirements, debt-to-equity ratios, and financial reporting vary considerably, directly impacting available funding options and structures. • Tax considerations are the #1 driver for 11%. Tax implications, including corporate income tax, withholding taxes on interest and dividends, and the availability of tax treaties, play a crucial role in optimizing funding structures for overall group tax efficiency. • Convertibility and transferability risk is a key concern for 7% of organizations as their #1 driver. This risk, referring to the ability to convert local currency into hard currency and transfer funds out of the country, is a fundamental hurdle in many MEA markets. Countries with capital controls or limited hard currency reserves pose major challenges to fund repatriation and can influence funding to be more locally self-sufficient. The distribution emphasizes that while FX volatility remains a central concern, the interplay of local financing costs, regulatory requirements, and tax efficiency, coupled with the critical convertibility and transferability risks, collectively dictate optimal capital structures in the MEA region. Access to Funding Highly accessible Moderately accessible Not applicable Limited but sufficient Very limited and challenging 46% 4% 11% 12% 27%