This OECD paper outlines policy options to increase local currency financing, strengthen domestic capital markets, and engage local actors, with the goal of promoting long-term economic resilience and stability in emerging markets and developing economies (EMDEs). While donor-supported market solutions—such as currency hedging tools, local currency bonds, and blended finance mechanisms—show promise, they face significant limitations.
The paper proposes policy options for challenges such as structural limitations in the business models of MDBs and DFIs, underdeveloped local financial markets, and a shortage of incentives and scalable instruments to attract institutional investors.
