The International Finance Corporation and Citigroup have agreed on a 1.6 billion rand borrowing facility to expand local currency financing in South Africa, according to Reuters.
- +IFC, Citigroup launch $98m facility to cut currency risk in South Africa
The deal is aimed at helping businesses access funding in rand rather than foreign currencies, reducing the risks that come with exchange rate swings.
The deal is aimed at helping businesses access funding in rand rather than foreign currencies, reducing the risks that come with exchange rate swings. In many developing economies, companies earn revenue in local currency but often rely on loans in dollars or other hard currencies, leaving them exposed when exchange rates shift.
The new facility will allow the IFC to increase its lending in rand to private sector borrowers. It has already been used to support the Cape Water outcome-based bond issued by FirstRand Bank, marking an early example of how the funding will be deployed.
Jorge Familiar, World Bank Group vice president and treasurer, said local currency financing has become more important as global markets grow more uncertain. He noted that companies earning in domestic currency can face serious challenges when borrowing in foreign currency, making local funding a key tool for managing risk.
The agreement builds on a similar facility that the IFC and Citi launched in Kenya in 2024. Familiar described that earlier deal as a test case and said the South Africa facility shows the model can be repeated in other markets.
According to Reuters, about 30 percent of the World Bank Group’s own account lending last fiscal year was done in local currency. Over the past decade, the IFC has committed more than 33 billion dollars in local currency financing across 71 currencies, part of a broader effort to shield businesses in emerging markets from currency shocks.
