However, more recently even this dynamic has become less certain when looking forward. Issuers in the CEE region (that over the past decade had largely shifted to local debt, or in EUR when needed) have ramped up their USD sovereign bond issuance since late 2022, preferring the large potential investor base and better liquidity in this market. While it is unlikely to mark a long-term trend and reverse the dynamic seen in the past decade, in the coming few years USD bond issuance will remain an active area for most EM sovereigns.
Another area of ‘de-dollarisation’ that can be observed across some emerging markets in within domestic banking systems (Figures 29 and 30). A key aim for many governments in reducing vulnerabilities to a crisis has been to reduce the share of FX loans and deposits within their banking systems, which in practice has been reducing the role of the dollar (or the euro for some EM Europe economies). Within the BRICS economies, we can observe a general downtrend in the FX share of loans within the banking system since around 2015, and a similar story for Russia, India and South Africa in terms of FX liabilities.
