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2025 Public Sector Perspectives

Article  •  January 10, 2025
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Welcome to Citi Perspectives for the Public Sector.

The past year marked a historic period of change, with voters in more than 60 countries – home to over half of the world’s population – casting their ballots. It was a challenging year for sitting governments: over 80% of incumbent parties experienced a decline in either seats or vote share compared to the previous election. Faced with rising prices, divisions over cultural issues, and frustration with the political status quo, voters in many countries expressed their discontent.

As we head into 2025, many governments continue to grapple with these challenges. Fiscal spending is under pressure, high debt-to-GDP ratios limit flexibility, and they must navigate a more complex global geopolitical and economic landscape. These obstacles are widening the gap toward achieving sustainable development goals. Innovative, creative solutions will be crucial to addressing them. Fortunately, public sector entities, ranging from governments and state-owned enterprises to non-governmental organizations (NGOs) and multilateral organizations, prove themselves day after day to be hugely resilient and adaptable. The public sector is often farsighted in spotting and facilitating opportunities for citizens, companies, and countries themselves, and is open-minded to enlisting the support of the private sector

This edition of Citi Perspectives for the Public Sector celebrates progress and highlights opportunities for improvement. One article explores how private capital can use the risk mitigation capabilities of multilateral development banks (MDBs) and development finance institutions (DFIs) to help drive global development. Multiple parties are working to establish MDB/DFI-backed transactions as a distinct asset class, paving the way for investors to participate in blended finance structures. 

Local currency funding is crucial for reducing risks linked to MDB hard currency lending. But, as our experts observe, in many emerging markets, limited domestic financial markets have restricted MDBs’ ability to hedge or borrow in local currencies. The search has been on for a solution. Now, leveraging our global network, we can offer a stable, long-term source of local currency funding, helping MDB clients better align with development projects. 

Following the recent COP29 meeting, we examine financial tools available to sovereigns for tackling climate change. Ambitious climate action will require increased private capital mobilization and large-scale financial market instruments. Some tools – such as sustainable and outcome bonds – are already accessible to sovereigns. Others, such as Debt-for Development swaps and carbon credit markets, could have a larger role to play. Julie Monaco Global Head of Public Sector Banking 

Learning from others is critical to making progress. A number of articles in this edition share best practices from around the world. 

Taxation is essential for funding critical public services like healthcare, education, and infrastructure while fostering economic growth. But collection is a perennial challenge. Our article highlights best practices by analyzing the factors that influence authorities’ ability to mobilize revenue. These include institutional capacity, compliance, enforcement measures, and adaptations to changes in society, such as digitalization. 

We also highlight best practices for state-owned enterprises. Where once they operated mostly within national borders, many now advance national interests globally. We examine how they can strengthen their treasury management, cash forecasting, regulatory compliance, and global payment processes and adopt tools like cash pooling and supply chain management. Establishing centralized treasury units and partnering with banks with an international footprint are key steps. 

Finally, we take a history lesson to illuminate future trends. Over 50 years since the US dollar was untethered from gold, it remains a key asset for central banks globally. Our article considers gold’s evolving role in central bank reserve management. Central banks increasingly view gold as a hedge against volatility and geopolitical risk, and this role means the yellow metal is likely to grow in significance for FX reserve diversification. 

Citi Perspectives for the Public Sector is built on our valuable client relationships. We are grateful for your insights, which help shape our coverage of your challenges and goals. As always, we welcome your feedback on our topics and your ideas for future editions.

Headshot of Julie Monaco

 

 

 

 

 

 

 

 

Citi Perspectives celebrates progress and highlights opportunities for improvement in the public sector.

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