AfDB Injects $25m into TCX

The African Development Bank (AfDB) has announced a $25 million equity investment in The Currency Exchange Fund (TCX), a move aimed at expanding access to local currency financing while shielding African borrowers from the adverse effects of exchange rate volatility.

In a statement issued on Thursday, the Bank confirmed that its Board of Directors had approved the transaction, describing it as a strategic step to deepen financial stability across Africa. By strengthening TCX’s operations, AfDB positions itself as a key partner in scaling up currency hedging solutions tailored for emerging and frontier markets.

Headquartered in Amsterdam, TCX is recognized as a leading global provider of long-term local currency hedging instruments. Its services, including cross-currency swaps and foreign exchange forwards, are designed to protect borrowers in markets often overlooked by mainstream commercial financial institutions. The new capital injection from AfDB is expected to bolster TCX’s balance sheet, increase its risk-bearing capacity, and broaden its ability to provide much-needed instruments in illiquid African currencies.

AfDB underscored the urgency of this initiative, stressing that reliance on foreign currency-denominated debt remains one of the greatest financial vulnerabilities for African governments and businesses. Such debt often exposes borrowers to severe repayment challenges when local revenues fall short due to exchange rate fluctuations. The Bank said the investment would help mitigate these risks, particularly for borrowers in fragile and underserved markets, while also drawing additional private and development finance investors into Africa’s financial systems.

Ahmed Attout, Director of AfDB’s Financial Sector Development Department, described the move as a milestone in the Bank’s broader agenda to strengthen financial resilience across the continent. “This step addresses one of the root causes of debt distress and will unlock local currency financing for MSMEs, infrastructure and other critical sectors,” he noted.

Since its inception in 2007, TCX has played a critical role in managing currency risk globally, hedging over $17 billion in exposure. Of this, more than $4 billion has been dedicated to Africa across 31 countries, with around 18 percent concentrated in fragile and low-income markets. This track record underscores TCX’s role in supporting economies often deemed too risky by commercial players. AfDB’s latest investment builds on its earlier partnership with the fund, signaling renewed confidence in TCX’s model and its relevance to Africa’s economic stability.

The strengthened partnership is expected to expand hedging volumes across key sectors, including infrastructure, energy, debt management, microfinance, and SME development. By reducing exchange rate risk, TCX enables governments and private entities to plan more effectively, improve debt sustainability, and attract long-term investment.

Welcoming AfDB’s investment, TCX Chief Executive Officer Ruurd Brouwer described the development as a major boost to the fund’s mission. “We are delighted to welcome AfDB to our capital base. This partnership will protect borrowers from currency risk and strengthen African capital markets,” he said.

The move also aligns closely with AfDB’s 2024,2033 strategy, which emphasizes market deepening, financial innovation, and resilience-building. Analysts believe the collaboration between AfDB and TCX will reduce Africa’s reliance on foreign-denominated loans, shield vulnerable economies from exchange rate shocks, and foster stronger, more sustainable financial systems across the continent.