Press Release No. 13/393

Developing Local Currency Bond Market: A New Diagnostic Framework, Press Release No. 13/393, October 7, 2013

October 7, 2013

A new diagnostic framework (DF) to assist policymakers in developing bond markets in local currency was released today. The DF can help analyze the state and efficiency of local currency bond markets (LCBMs) and provide the basis for designing a strategy for market deepening with appropriate sequencing of policy action and delivery of associated technical assistance.

The DF is presented in a new report authored jointly by the IMF, World Bank, European Bank for Reconstruction and Development, and Organization for Economic Co-operation and Development. The report analyzes the main elements necessary to deepen domestic bond markets in emerging and developing economies.

The development of a diagnostic framework was endorsed by the G-20 in November 2011 to support the development of LCBMs in emerging markets. In the aftermath of the global financial crisis, development of LCBMs was identified as essential to: (i) increase financing options to meet emerging market needs, including for infrastructure; (ii) prevent excessive reliance on intermediation through global financial centers; (iii) help resolve global imbalances by providing savings instruments for emerging market households; and (iv) improve resilience to shocks.

The paper is the result of a collaborative effort among international financial institutions and has benefited from extensive consultation with stakeholders, including country authorities in emerging markets at various stages of deepening their local currency bond markets, such as South Africa, Turkey, and Uruguay.