Global uncertainties: The influence of global financial organizations
In a time when the world is grappling with economic crises and global pandemics, the focus has shifted towards the critical role of Development Finance Institutions (DFIs) and Export Credit Agencies (ECAs) in supporting emerging markets. A webinar, currently underway, is shedding light on this topic, featuring senior representatives from leading International Financial Institutions (IFIs).
The webinar, aimed at helping emerging markets get back on track, is discussing commercial lending and private sector investment into these markets during economic downturns. Koffi Klousseh, Director of Project Development at Africa50, and Sarah Devine, Partner at our website US LLP, are among the speakers. Hristo Stoykov, Head of Growth Capital and Innovation Finance at the European Investment Bank, Tracey Webb, Vice President Structured Finance and Insurance at the US International Development Finance Corporation, Luke J. Lindberg, Senior Vice President of External Engagement at The Export-Import Bank of the United States, and Tony Bakels, Director of Credit, Legal and Special Operations at FMO, are also participating. Georgina Baker, Vice President at the International Finance Corporation, is another key speaker.
DFIs and ECAs are taking a longer view beyond the immediate crisis, focusing on mobilizing and de-risking finance to sustain investment in emerging markets. They are employing innovative financing mechanisms, such as local currency lending platforms and risk management tools like FX EDGE and liquidity platforms like Delta, to reduce currency risk and liquidity constraints.
During global disruptions like pandemics, DFIs and ECAs can offer countercyclical support and sustain financing flows when private investment wanes due to increased uncertainty and risk aversion. Their interventions are designed to mitigate the adverse economic impacts by supporting critical sectors and infrastructure investments that may be underfunded during crises.
ECAs complement DFIs by providing insurance and guarantees that encourage exporters and investors to engage with emerging markets despite heightened risks during crises. This support maintains trade flows and foreign direct investment, which are typically disrupted in such times, helping emerging economies remain integrated in the global market.
Moreover, DFIs and ECAs contribute to strengthening institutional frameworks and aligning stakeholders for systemic, long-term development solutions. They often facilitate multilateral cooperation among development banks, governments, and private investors, enabling more coordinated and scalable responses to financial and health crises.
The call for tripling MDB (multilateral development bank) lending by 2035 and for new coalitions reflects the growing emphasis on leveraging DFIs' and ECAs’ capacities within a larger ecosystem to address emerging market vulnerabilities.
In summary, DFIs and ECAs support emerging markets during crises by:
- Mobilizing and de-risking finance to sustain investment.
- Mitigating currency and liquidity risks with new financial instruments.
- Facilitating multistakeholder collaboration for more resilient financing models.
- Maintaining trade and investment flows via export credit guarantees.
- Enabling countercyclical fiscal and monetary policies through stable funding channels.
These roles are vital given the shrinking foreign aid budgets, increased sovereign debt burdens, and ongoing global economic uncertainties that disproportionately affect emerging economies. The webinar serves as a platform for discussing what these institutions are doing to tackle the current crisis and chart a path towards recovery for emerging markets.
[1] World Bank Group. (2020). Development Finance During COVID-19: Taking a Long View. [2] International Finance Corporation. (2020). COVID-19: Supporting Developing Countries. [3] International Monetary Fund. (2020). COVID-19 and the IMF. [4] European Investment Bank. (2020). EU Bank to Boost Support for SMEs in COVID-19 Fight.
- As global financial institutions, Development Finance Institutions (DFIs) and Export Credit Agencies (ECAs) are strategizing how to invest in businesses during economic downturns, focusing on countercyclical support to sustain finance in emerging markets.
- The role of DFIs and ECAs in the industry and finance sector extends beyond immediate crises, as they are exploring innovative mechanisms like local currency lending platforms and risk management tools to ensure resilient financing models for the long term.
