Managing the Debt Cycle: How Local Currency Settlement Supports Emerging Markets
By Simon Huckle, Head of Emerging Market Financial Institutions
Through long-standing partnerships with international organisations, NGOs and 30 central banks, Crown Agents Bank provides a single point of entry into more than 100 markets, primarily across high potential and emerging markets, combining FX execution with disciplined last mile settlement to ensure funds arrive where they are needed.
Global debt has increased significantly over the past decade, driven in part by geopolitical tensions such as a worldwide pandemic and conflicts spanning multiple continents. Import bills have reached record highs, with global events driving up the cost of essential goods including food, fertiliser and energy. As a result, central reserves are under intense pressure. In fact, African governments are expected to repay more than $90 billion in foreign-currency debt in 2026 alone, according to a recent S&P report – a level of repayment that is over three times higher than in 2012.
As many countries remain caught in a refinancing cycle, exacerbated by structural issues including low revenues and high debt, preparation is no longer optional for financial institutions, corporates, and sovereigns alike – it is essential.
At Crown Agents Bank, we observe distinct seasonal patterns in global financial flows, reflecting the recurring nature of debt servicing. Debt repayment obligations tend to peak in Q1 and Q3 across high-potential and emerging markets, largely driven by China’s repayment cycles. Beyond these periods, repayments to other bilateral lenders occur consistently throughout the year, underscoring the continuous and cyclical demands of effective debt servicing.
Leveraging our extensive currency network, we support central banks in settling foreign debt obligations in the currency of their creditor and also utilising their local currencies where possible. This approach helps them avoid the higher costs often associated with servicing debt in hard currencies such as US dollars, particularly where exchange rate pressures are significant.
By settling payments in local currencies, central banks can ease pressure on reserves and redirect hard currency toward development and local social impact initiatives rather than costly foreign debt servicing.
