The transaction value of private infrastructure investment in low-income countries is almost entirely denominated in foreign currencies, implying a structural foreign exchange risk for investors. High-income countries have had about 80-90% of transaction value held in local currency. For lower middle-income countries, the local currency component of transaction value sharply declined from two-thirds in 2010 to less than one-third in 2019. In contrast, a reverse trend was seen for upper middle-income countries.
On a regional basis, private infrastructure transactions in Sub-Saharan Africa and Middle East North Africa are primarily denominated in foreign currencies. Conversely, North American and European transactions are largely undertaken in local currencies. The local currency component of transactions in Asia Pacific and Latin America has appreciably increased over the past decade, in line with progress in capital markets development.
