How development organizations can save money in a world of fluctuating currencies
Attention to foreign exchange rates can create major savings and provide predictability for donors, foundations, nongovernmental organizations and government agencies that regularly send and receive money in different currencies. One organization, the Global Fund, claims to have saved tens of millions of dollars this way.
This is particularly important at a time when major political events have the potential to dramatically affect exchange rates. Last year’s Brexit vote sent the British pound into downward spiral. It had fallen almost 20 percent against the U.S. dollar and 14 percent against the euro by January 2017. In the week following the U.S. elections, the dollar strengthened but many other currencies fell.
In addition to being affected by global political events, emerging markets also experience volatility as a result of local geopolitics. The Turkish lira fell 17 percent against the dollar during 2016, for example, in part as a result of a failed coup in July and risks from the Syrian civil war on its border.
At the same time, international financial rules designed to prevent money laundering and terrorist financing, known as AML/CFT regulations, are making it more difficult for organizations to send and receive money abroad, especially to developing countries.
