The African Development Bank (AfDB) has approved an equity
investment of $25 million in The Currency Exchange Fund (TCX), a development
finance initiative that provides long-term local currency hedging solutions in
emerging and frontier markets.
In a statement on Wednesday, the bank said the investment
would boost TCX’s capital base and risk-bearing capacity, allowing it to expand
access to hedging instruments in illiquid and less liquid African currencies.
“The Bank’s investment will crowd in additional DFIs and
private investors, reinforce Africa’s integration into global capital markets,
and support sustainable growth by reducing the mismatch between the currency of
debt and revenue for local borrowers,” the statement reads.
Speaking on the investment, Ahmed Attout, AfDB’s director of
financial sector development, said the deal would help tackle one of the key
sources of debt distress on the continent.
“This investment in TCX marks an important milestone in the
Bank’s effort to deepen African capital markets and address the root causes of
debt distress,” Attout said.
“The Bank’s support to TCX will unlock local currency
financing 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 to
shield borrowers from foreign exchange risks.
“We are thrilled to welcome African Development Bank Group
to TCX’s capital base,” Brouwer said.
“It marks the start of a close partnership in protecting
AfDB’s public and private sector borrowers from currency risk and promoting the
development of African capital markets.”
According to AfDB, TCX has hedged more than $17 billion in
notional amounts since its creation in 2007, including $4 billion across 31
African countries.
“It is backed by investors such as FMO, International
Finance 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-year
strategy (2024–2033) and complements other initiatives such as support for
local currency bond issuance, partial credit guarantees and private sector
local currency lending.
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