The International Finance Corporation (IFC) and Citi have signed a groundbreaking agreement to establish a $65 million local currency finance facility, aimed at boosting IFC’s ability to provide financing in Kenyan shillings. This initiative will support the expansion of digital infrastructure projects within Kenya.
Innovative Partnership
This facility marks a significant milestone as the first of its kind globally between IFC and Citi. It also represents Citi’s inaugural long-term local currency facility provided to a multilateral development bank. Both institutions have expressed their intention to replicate this facility for future projects not only in Kenya but across other African nations and beyond.
John Gandolfo, IFC Vice President and Treasurer of Treasury & Mobilization, highlighted the importance of this partnership. “Currency volatility and debt distress have made access to local currency financing more crucial than ever,” Gandolfo noted. He emphasized that this collaboration with Citi will enhance IFC’s capability to source local currency financing, providing effective solutions for clients and mitigating the risks associated with currency fluctuations.
Citi’s Role and Vision
Julie Monaco, Global Head of Public Sector Banking at Citi, expressed enthusiasm for the collaboration. “We are pleased to partner with the IFC to develop innovative local currency solutions,” Monaco said. She pointed out that this facility is a pioneering solution with significant potential for replication across Citi’s emerging market franchises. By working with multilateral development banks and development finance institutions, Citi aims to address currency mismatches and foreign exchange risks, which are particularly prevalent in regions like Africa. This, in turn, is expected to accelerate financing for development projects.
Addressing Currency Risks
The availability of local currency is a critical priority for businesses in emerging markets and developing economies. Companies that borrow in foreign currencies while earning revenues in local currency face the risk of increased debt burdens due to exchange rate fluctuations, which can jeopardize their financial stability.
IFC has a diverse portfolio of local currency products designed to meet these challenges, including loans, bond investments, cross-currency swaps, securitizations, guarantees, and risk-sharing facilities. From July 2023 to June 2024, IFC committed $5.9 billion in local currency financing, accounting for over 30 percent of its long-term debt commitments. Over the past decade, IFC has committed $30.2 billion across 71 local currencies.
