A proper financialisation? New financing mechanisms for developing countries.

The article focuses on a proposed international financing mechanism using foreign exchange swaps to provide sustainable local currency lending in developing countries, particularly in sub-Saharan Africa, to support Sustainable Development Goals (SDGs). It critiques the instability caused by unregulated international capital flows and the limitations of current debt sustainability frameworks, advocating instead for a swap-based lending facility between multilateral investment banks (MIBs) and central banks that hedges foreign currency risk and fosters local financial market development. The proposal aims to deliver long-term local currency finance at competitive rates without increasing net foreign debt, addressing challenges in underdeveloped financial systems and mitigating exchange rate risks. The paper also discusses the macroeconomic and microeconomic implications of such swaps, including effects on inflation, balance of payments, and central bank independence.