AfDB invests $25m in Currency Exchange Fund to tackle debt risks in Africa

The African Development Bank (AfDB) has announced a $25 million equity investment in The Currency Exchange Fund (TCX), a development finance vehicle that offers long-term local currency hedging solutions in emerging and frontier markets.

In a statement on Wednesday, AfDB said the move will strengthen TCX’s capital base and risk-bearing capacity, enabling it to broaden access to hedging instruments in 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 noted.

Ahmed Attout, AfDB’s director of financial sector development, described the investment as a strategic step towards addressing one of the leading causes 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,” he said. “The Bank’s support to TCX will unlock local currency financing for MSMEs, infrastructure and many other sectors across Africa.”

TCX chief executive officer Ruurd Brouwer welcomed the partnership, saying AfDB’s entry into the fund’s capital base would enhance efforts to protect borrowers from exchange rate risks.

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“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,” Brouwer said.

Since its inception in 2007, TCX has hedged over $17 billion in notional amounts, including $4 billion across 31 African countries. Its investors include FMO, the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and KfW.

AfDB added that the investment is in line with its 10-year strategy (2024–2033) and complements other initiatives such as local currency bond issuance, partial credit guarantees, and private sector local currency lending.