CURRENCY RISKS OF CORPORATE DEBT IN EMERGING ECONOMIES

This paper examines the currency risks arising from foreign-currency corporate debt in emerging economies. Drawing on the “original sin” and currency-mismatch literature and on Bank for International Settlements data — dollar credit to non-banks outside the United States stood at about USD 13.7 trillion in early 2025, of which roughly USD 5.1 trillion was owed by emerging-market and developing economies — the study identifies the channels through which exchange-rate movements transmit to corporate balance sheets: the net-worth (valuation) channel, the cash-flow channel, rollover and refinancing risk under the global financial cycle, the real-investment channel, and sovereign–corporate feedback. It proposes a set of indicators for measuring firm-level currency exposure and illustrates the problem with the case of Uzbekistan, where dollar-denominated issuance (e.g., a USD 400 million corporate eurobond) coexists with soum-denominated cash flows. The paper concludes with firm-level and macroprudential risk-management measures, emphasizing the development of local-currency debt markets as the most durable mitigant.