AfDB invests $25m in exchange fund to ease debt distress in Africa

The African Development Bank (AfDB) has approved an equityinvestment of $25 million in The Currency Exchange Fund (TCX), a developmentfinance initiative that provides long-term local currency hedging solutions inemerging and frontier markets. In a statement on Wednesday, the bank said the investmentwould boost TCX’s capital base and risk-bearing capacity, allowing it to expandaccess to hedging instruments in illiquid and less liquid African currencies. “The Bank’s investment will crowd in additional DFIs andprivate investors, reinforce Africa’s integration into global capital markets,and support sustainable growth by reducing the mismatch between the currency ofdebt and revenue for local borrowers,” the statement reads. Speaking on the investment, Ahmed Attout, AfDB’s director offinancial sector development, said the deal would help tackle one of the keysources of debt distress on the continent. “This investment in TCX marks an important milestone in theBank’s effort to deepen African capital markets and address the root causes ofdebt distress,” Attout said. “The Bank’s support to TCX will unlock local currencyfinancing for MSMEs, infrastructure and many sectors across Africa.” On his part, Ruurd Brouwer, TCX chief executive officer(CEO, welcomed AfDB’s participation, saying it would strengthen efforts toshield borrowers from foreign exchange risks. “We are thrilled to welcome African Development Bank Groupto TCX’s capital base,” Brouwer said. “It marks the start of a close partnership in protectingAfDB’s public and private sector borrowers from currency risk and promoting thedevelopment of African capital markets.” According to AfDB, TCX has hedged more than $17 billion innotional amounts since its creation in 2007, including $4 billion across 31African countries. “It is backed by investors such as FMO, InternationalFinance Corporation (IFC), European Bank for Reconstruction and Development(EBRD), European Investment Bank (EIB), and KfW,” the AfDB added. The bank said the investment aligns with its 10-yearstrategy (2024–2033) and complements other initiatives such as support forlocal currency bond issuance, partial credit guarantees and private sectorlocal currency lending.

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