World Bank Arm, Citi Agree Rand Facility to Curb Currency Risk

Mintesinot Nigussie

The International Finance Corporation, the private sector arm of the World Bank Group, has agreed a 1.6 billion South African rand borrowing facility with Citigroup, in a move aimed at reducing currency risk in private sector lending and expanding local currency financing in South Africa.

The arrangement forms part of a broader effort by the World Bank Group to strengthen domestic capital markets in emerging economies, where foreign currency exposure has long constrained investment and increased borrowing costs.

The facility is designed to enhance IFC’s ability to extend loans in rand, supporting companies and projects that require long-term funding without taking on dollar-denominated debt. It also adds to a growing pool of instruments used by development finance institutions to anchor local currency lending.

The latest facility builds on a similar agreement in Kenyan shillings signed in 2024, with plans to replicate the model in other emerging markets. The approach reflects a gradual shift towards deeper engagement with local debt markets as a way of improving access to finance for private sector development.

Over the past decade, IFC has committed more than 33 billion US dollars in local currency financing across 71 currencies, underscoring its role as one of the largest providers of domestic currency funding among development finance institutions.

Businesses in finance and infrastructure sectors in South Africa are expected to benefit from increased availability of local currency funding and reduced exposure to exchange rate volatility.

Overall, the agreement between IFC and Citi marks a significant step in supporting local currency financing and mitigating currency risk in South Africa’s private sector.