Sovereigns and corporates compete for the same loans and capital: Citi

Governments are borrowing to fund development and infrastructure, said Citi’s Stephanie von Friedeburg.

A “new era” of competition for capital is emerging, one where governments and corporations increasingly compete for funding as their borrowing needs rise, said Citi.

Sovereigns are increasingly competing with private sector borrowers for a finite pool of capital to fund infrastructure, energy security, defense, and development priorities, said Stephanie von Friedeburg, global head of public sector group at Citi.

“Governments are borrowing to fund development, infrastructure and strategic priorities while the private sector is investing heavily in AI and digital infrastructure,” von Friedeburg said at the sidelines of Thailand meetings held by the International Monetary Fund (IMF) and the World Bank.

Sovereign and corporate issuers are increasingly turning to local currency funding markets such as RMB, AUD, HKD and SGD, she said.

Citi is seeing increased interest from central banks in reserve management and optimisation strategies, particularly around gold holdings.

Central banks are exploring gold-related financing and hedging strategies as part of broader reserve management objectives, von Friedeburg said.

For emerging markets, elevated debt burdens and higher borrowing costs are creating
pressure on public finances, she said.

Citi said that it is using its multi-currency funding strategies to help its clients optimise cost of capital and diversify their clients’ liquidity services. The bank also offers debt-for-development transactions and liability management exercises, it said.