Multilateral development banks, new developmentalism and local currency financing

Abstract

Multilateral Development Banks (MDBs) are designed to finance investments that promote global economic and social development. The objective of this paper is to discuss a key component in meeting the demand for investment in developing countries, namely the ability of MDBs to provide loans in local rather than foreign currency. To explain how these institutions fulfill this purpose, we distinguish "traditional" from "new" MDBs, discuss the problems generated from foreign currency indebtedness, and explore a way out, or an alternative explanation, based on New Developmentalism theory and the challenge of local currency financing.