Investors support TCX to protect the poorest against FX risks amidst COVID-19

The Currency Exchange Fund (TCX) is thrilled to announce that the European 
Commission (EC) [https://ec.europa.eu/info/index_en ], supported by KfW 
[https://www.kfw-entwicklungsbank.de/International-financing/KfW-Entwicklungsban
k/ ], the International Finance Corporation (IFC) 
[https://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_sit
e/home ] on behalf of the International Development Association (IDA) 
[https://ida.worldbank.org/ ] and Proparco [https://www.proparco.fr/en ] 
invested over USD 200 million in the Fund. 

The investments, combined with the 2019 capital increase, raise TCX's 
[https://www.tcxfund.com/tcx-investors/ ] risk bearing capacity by 65% to a 
total capital base of USD 1.25 billion. This allows the fund to support USD 30 
billion in local currency investments in frontier countries during the tenor of 
the EC investment. This aggressive growth reflects the increased demand for 
local currency from households, enterprises and institutions in frontier 
markets. It also shows the dedication of development finance institutions to 
protect their borrowers from foreign exchange risk that comes with cross-border 
lending. During the COVID crises many frontier market currencies were hit, with 
devastating results for hard currency borrowers. The investments come with a 
focus on borrowers in IDA countries, especially Sub-Sharan Africa, and in the 
European Neighborhood countries. 

TCX [https://www.tcxfund.com/products/ ] has provided currency risk protection 
throughout the crisis without disruption and the additional capital further 
strengthens the Fund's ability to provide protection in times of severe 
financial instability. 

Ruurd Brouwer, CEO of TCX [https://www.tcxfund.com/about-the-fund/ ] states:
"The investment is a timely response from our investors to counteract the 
detrimental effects of the pandemic. Especially the poorest countries that lack 
reserves and adequate health care systems are vulnerable to this external 
shock. Currency depreciations put households, enterprises and local 
institutions that have borrowed in foreign currency at risk of default. 
Allowing them to borrow in their local currency instead increases financial 
resilience and creates the stability needed to reduce the negative impact of 
this and future crises."

Background information

TCX [https://www.tcxfund.com/about-the-fund/ ] is a global development finance 
initiative which offers long-term currency protection in 100+ financial markets 
where such products are not available or poorly accessible. The Fund started 
operations in 2007 and has since then provided hedging instruments with a total 
volume of USD 8.5 billion, spread over 3500+ transactions. Today the fund has 
an exposure of over USD 5 billion in 60 frontier and emerging market 
currencies. By selling parts of this exposure to private investors it creates 
markets and gives these countries access to the international capital markets.

SOURCE: The Currency Exchange Fund