EDB Says Local Currency Share of Development Bank Lending in Eurasia Hits 30%

Annual local currency financing by multilateral development banks in Eurasia rose fivefold between 2015 and 2025, from USD 0.4 billion to USD 2.3 billion, and its share of their operations in the region climbed from 11 per cent to 30 per cent, the Eurasian Development Bank (EDB) said on 28 October.

The figures come from a new EDB analytical brief on local currency financing, presented in the bank's press release from Almaty. The brief looks at how such lending is structured, what drives and limits its growth, and how to expand it.

Kazakhstan remains the largest market by investment volume, the EDB said, while operations in local currencies have also grown rapidly in Georgia, Uzbekistan and Kyrgyzstan.

Three lenders, one channel

The EDB, the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) accounted for 85 per cent of local currency financing by development banks in the region in 2025. Over the past ten years the EDB provided the largest cumulative volume, more than USD 5 billion in equivalent terms, and its share of the regional total rose from 4 per cent to 35 per cent.

The financial sector took 54 per cent of local currency financing in 2025 and the first half of 2026. The main channel is funding to commercial banks for onlending to small and medium-sized enterprises, according to the brief.

Inflation among the barriers

Relatively high inflation and limited development of domestic financial markets are among the main barriers, the EDB said. These conditions go with short maturities, low liquidity and a shortage of long-term funding.

Kazakhstan, the largest market, illustrates the inflation backdrop. The National Bank of Kazakhstan lowered its base rate to 15.75 per cent on 23 October, with a corridor of plus or minus one percentage point. Annual inflation had declined for the twelfth consecutive month to 9.3 per cent in September, the central bank said, and it aims to return inflation to its 5 per cent target in 2028. Food inflation declined to 8.5 per cent and non-food inflation to 11.0 per cent in September, the bank said. Its next scheduled decision is due on 4 December 2026.

An old idea, now mainstream

Local currency financing has become part of the reform agenda for development banks, and the G20 has called for more of it and for the development of hedging instruments, the EDB said. The brief proposes expanding local currency bond issuance, supporting domestic financial markets, developing hedging tools and mobilising private investment in local currencies.

The idea is not new. In an April 2005 Asian Development Bank working paper, Local Currency Financing: The Next Frontier for MDBs?, economist Tobias C. Hoschka noted that borrowers' greater sensitivity to currency mismatches, political decentralisation and the development of local capital markets had led development banks to consider local currency lending, and argued that it would become an increasingly important financing mode. Two decades on, the EDB figures show it reaching almost a third of operations in the region.

What it means for business

For small and medium-sized companies in the South Caucasus and Central Asia, local currency loans remove the risk of borrowing in dollars or euros while earning in their home currency. Because more than half of this money goes to the financial sector, mainly commercial banks onlending to small and medium-sized enterprises, the terms that borrowers see depend on how much long-term local funding their banks can raise.

Georgia's appearance among the markets where local currency operations have grown rapidly is relevant for its banks and their small business clients. Development bank lines to Georgian banks continue, as CBJ reported in its piece on ADB's USD 150 million loan to Bank of Georgia. The EDB's call for more local currency bonds also fits the push for deeper capital markets between the regions, as CBJ reported on Kazakhstan and Georgia's work on mutual market access.