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Send Money Abroad for Free: A Guide to Fee-Free International Transfers

2025-08-02 03:48:28 By Nolan Garcia

Money transfer operators that promise "no fees" for international money transfers usually don't charge commissions directly. Instead, they make their money by adding fees that might not be as obvious when you exchange your currency. This is commonly known as the spread in exchange rates.

It's crucial to read all the fine print when dealing with banks or money transfer services to avoid hidden fees. To help you out, we’ve looked into four of the best fee-free international transfer providers. Keep reading!

Ways to Transfer Money Internationally Without Fees

1. XE Money Transfer

XE is a well-known and reliable money transfer service. They’ve been in business for over 20 years and handle transfers for 33,000 individuals and 2,000 businesses annually. XE supports more than 60 currencies and prides itself on offering free tools and transparent rates.

XE is a great choice if you want to transfer less than $5,000 without paying high transaction fees. However, be sure to check the estimated exchange rate you'll be charged. The rate displayed on their website is the market rate, not necessarily the rate you'll get.

Pros:

The XE app is available on iOS and Android, offering interbank rates for over 100 currencies.

No fees for international money transfers.

Trusted and recognized brand in the financial sector.

Supports both personal and business transfers.

Extensive information on currency and transfers, plus a comprehensive FAQ section.

Cons:

Maximum transfer limit is US$500,000.

Interbank rates shown may differ from actual rates received.

Applies a margin when processing transfers.

Payments must be made via bank transfer; no cash or cheques. BPay is available in Australia.

Only 60 currencies available for actual transfers, despite tracking over 100.

2. TorFX

TorFX has been popular since 2004, helping companies and individuals exchange and transfer money abroad. They employ over 240 people in multiple countries including Australia, South Africa, the UK, India, the US, Spain, Portugal, and France.

TorFX is particularly helpful for frequent international transfers. They require a minimum deal size of $200 and offer competitive exchange rates for amounts over $50,000. European expats and small businesses often favor TorFX due to its cheap rates and extensive banking network.

Pros:

Quick same-day transfers available in over 30 currencies.

Personalized service with dedicated account managers, ideal for transfers over US$25,000.

Easy online quotes with no obligation.

Free deposits through online banking thanks to local bank accounts in multiple currencies.

No direct fees or commissions on international transfers.

Cons:

Transfers can sometimes be delayed due to technical or administrative issues.

Maximum transfer limit of AUD 25,000.

Currency exchange risks due to market fluctuations.

Cash or cheque payments not accepted.

Website lacks a detailed FAQ section.

3. WorldFirst

Founded in 2004, WorldFirst is known for its quick and efficient international money transfers. With offices in the US, UK, Australia, Hong Kong, and Singapore, WorldFirst recently removed all fees for sending money abroad, making it even more competitive.

WorldFirst offers better web platforms and cheaper exchange rates compared to union transfer services. They have an app that simplifies online transactions. However, their minimum payment of $2,000 may be too high for some. It's recommended for businesses or individuals making large transfers frequently.

Pros:

Competitive exchange rates for businesses.

No international fees for existing clients.

Quick and easy setup process.

Simple online payment platform.

Handy calculator for interbank rates.

Cons:

Minimum transfer of $2,000, higher than many competitors.

Actual rate may differ from displayed interbank rate; request a quote.

Only one office located in Sydney.

4. OFX

Originally known as Ozforex, OFX is the largest money transfer operator owned by Australians. The company operates entirely online, from account setup to sending money abroad. Unlike union transfer services, OFX offers highly skilled customer service despite most transactions happening online. This has driven its growth through positive reviews and referrals.

OFX excels in improving the online experience and customer service. However, a $15 fee for transfers under $10,000 might be a drawback for smaller amounts. For larger transfers, there are no fees, making it an attractive option for banks as exchange rates improve with higher payments.

Pros:

Fast setup with excellent phone support.

Competitive exchange rates.

Good 24/7 service.

No fees for transfers over AUD 10,000.

Helpful FAQ page.

Cons:

$15 fee for transfers under AUD 10,000.

Minimum transfer of AUD 250.

No credit cards, cheques, or cash accepted.

No foreign currency accounts needed.

Lacks personalized advice.

Challenges Faced in International Payments

While international transactions offer benefits, they come with two major challenges:

Regulatory Hurdles

Complex and sometimes conflicting regulatory systems, such as data privacy rules, can be tough to navigate. Legal restrictions on money transfers can be confusing, and some companies might find these steps discouraging.

Security Concerns

Fraudulent activities like data theft, unauthorized transactions, and account takeovers are risks in complex international payment systems. Platforms like Shopify implement robust security measures to combat these threats.

By understanding and navigating these challenges, businesses can effectively manage international payments and leverage global opportunities to grow and succeed.

Highly Recommended

Beyond Growth: How AI Can Reshape Economies for Ecological Sustainability

Amid converging crises of climate change, biodiversity loss, and resource depletion, the urgency of reimagining our economic systems has never been greater. Artificial Intelligence offers a unique opportunity to rethink how we manage resources and align economic activities with environmental sustainability. For decades, global economic policy has been driven by the relentless pursuit of GDP growth, often at the expense of environmental and social well-being. This growth-centric model has spurred overexploitation of natural resources, driven deforestation, depleted oceans, and contributed significantly to global climate change. These issues underscore a fundamental flaw: the assumption that economic growth can continue indefinitely without hitting ecological limits.  Economic activities frequently externalize environmental costs, treating them as side effects rather than central concerns. For instance, standard agricultural practice has long prioritized short-term yield maximization, relying heavily on chemical fertilizers and monoculture cropping. While this boosts immediate output, it leads to soil degradation, water depletion, and loss of biodiversity, ultimately threatening the long-term sustainability of food production and security. Artificial Intelligence has the potential to disrupt these outdated models by supporting the transition to circular and regenerative economies. Unlike the traditional linear model of “take, make, dispose,” a circular economy seeks to minimize waste by reusing and recycling resources. AI can play a critical role in optimizing these processes—enhancing supply chains, extending product lifecycles, and reducing waste.  Imagine AI algorithms that analyze vast amounts of data to optimize supply chain logistics, reducing waste and inefficiencies. In manufacturing, AI can aid in designing products that are easier to repair, reuse, or recycle, aligning with circular economy principles. This shift not only lowers the environmental footprint but also reduces costs, providing economic incentives for businesses to adopt more sustainable practices. In agriculture,  AI can revolutionize practices through precision farming, which allows farmers to make data-driven decisions about how to manage their crops and resources. AI systems can provide real-time information on soil conditions, weather patterns, and crop needs, enabling farmers to use water and fertilizers more efficiently and reduce their environmental impact. Precision farming optimizes resource usage, directing them exactly where required, thereby bolstering food security, safeguarding natural habitats, and strengthening resilience against climate change. AI’s potential extends beyond industrial efficiency to direct environmental protection. An inspiring example is the use of AI-powered wind farms that can detect when migratory birds are passing through and temporarily shut down turbines to prevent collisions. Such innovations highlight how AI can be a force for harmonizing human activities with the natural world, advancing both renewable energy goals and biodiversity conservation. AI can also be a game-changer in reforestation and ecosystem restoration. Autonomous drones equipped with AI can plant trees in deforested areas, monitor their growth, and even identify and respond to threats such as wildfires or illegal logging. These efforts are crucial for carbon sequestration, biodiversity recovery, and the overall health of ecosystems.  Using AI to enhance the efficiency and effectiveness of reforestation can make significant strides in reversing some of the damage caused by decades of environmental neglect. AI should be deployed to support systemic changes that align economic activities with ecological limits. Take, for example, how AI can streamline the incorporation of renewable energy into national grids, balance energy demand with greater precision, and minimize waste. Harnessing predictive analytics, AI guarantees that renewable energy is accessible at the right moments and places, facilitating a seamless shift to a low-carbon economy. As we navigate the AI revolution, we are like guardians of highly intelligent toddlers—curious, rapidly growing, and absorbing information at an unprecedented rate. Just like young children, these AI systems will mature based on the values, knowledge, and principles we instill in them today. If we feed them the right data—balanced, ethical, and grounded in the principles of sustainability and equity—they can grow into powerful allies for a sustainable future. The choices we make now will echo for generations to come, determining if AI becomes a force for good that nurtures the delicate balance of our natural world.

How Can Asia Successfully Navigate New US Administration Policies?

Rising US tariffs and other policies of the new US presidential administration could create mixed outcomes for Asian economies, emphasizing the importance of building resilience through regional integration and open trade. How will new US administration policies affect economies in Asia and the Pacific, and how should they respond?  To gain insight into these questions, ADB recently completed two studies based on different global models—one strong on macroeconomics and one strong on trade—to estimate the magnitude of likely effects.  The first study examines the impact of the US imposing aggressive policies including 60% tariffs on the People’s Republic of China (PRC) and 10% tariffs on everyone else, reduced US immigration, and expansionary US fiscal policies.  The second study focuses only on the impact of tariffs. It assumes 60% tariffs on Chinese imports and examines different tariff scenarios for the rest of the world: 10% versus 20% tariffs, tariffs across the board versus exemptions for countries with free trade agreements with the US, and equal retaliatory tariffs versus no retaliation.   What do we learn from these exercises?  First, the negative effects on the Chinese economy will be relatively modest even with 60% tariffs. The first study, using a macro model, finds that growth slows by just 0.3% per year during the four years of the new administration, and the trade model predicts much smaller impacts thanks to opportunities to redirect trade to other countries and smaller impacts on global output than in the macro study. The impacts will be even less severe if the US only imposes additional tariffs of 10% as has been recently announced, even though further review of US trade imbalances could lead to more tariff increases later in the year. One reason for the modest impacts of high US tariffs is that the importance to the Chinese economy of exports to the US (both direct and indirect) has fallen steadily, now accounting for just 3% of the country’s GDP. Evidence from President Trump’s first term shows that the PRC was able to redirect exports to other countries and that the cost of US tariffs was largely borne by US consumers and firms. Second,  the effects on other Asian economies will be mixed, with some economies even expected to grow faster thanks to new export opportunities to the US to replace goods previously exported to the US from the PRC. Opportunities from trade diversion also were evident during the first trade war between the US and the PRC, benefiting export-competitive economies such as Viet Nam.  The recent shift observed in foreign direct investment (FDI) in strategic sectors away from the PRC and toward other Asian economies, especially in Southeast Asia, is likely to be reinforced.   Despite these trends, it would be a mistake to assume that US tariffs on the PRC have zero-sum impacts that hurt the PRC and help other Asian economies. This is because in recent years the Chinese economy has become increasingly linked to other economies in the region through trade and investment despite geoeconomic fragmentation globally.  Thus,  slower Chinese growth hurts other economies by reducing demand for imports, and reduced Chinese exports to the US hurts economies that supply capital equipment and inputs to Chinese exporters, most notably the high-tech economies in East Asia including the Republic of Korea and Japan.  Also, if higher US tariffs on imports from the PRC help other Asian economies to attract more FDI and increase exports to the US, Chinese firms can still share in those benefits by increasing their outbound FDI and increasing exports of intermediate inputs to those economies. Indeed, such patterns of investment and trade have already become evident, especially in Southeast Asia. The trade study also finds that economies with trade agreements with the US will benefit if they are exempt from US tariff increases while tariffs are imposed on their competitors without such trade agreements. Most economies in the region lack trade agreements with the US and so would be negatively affected by such a differentiated policy.  Finally, economies in the region should be cautious in considering whether to respond to higher US tariffs with tariffs of their own. Higher import tariffs increase the price of imports which can contribute to inflation, make goods more expensive for domestic consumers, and increase the costs of production for producers that rely on imported intermediate inputs.   Perhaps of greater importance for Asian economies than tariffs is the impact of the new administration’s policies on US inflation and interest rates. All the announced policies—to increase tariffs, reduce immigration, and extend and perhaps increase tax cuts—are likely to be inflationary, which is expected to lead to higher US interest rates for longer periods of time. These expectations are already evident in the shift in the structure of US bond yields since the US election. Despite much progress by many Asian economies to reduce reliance on US-denominated debt, financial conditions in Asia remain quite sensitive to US interest rates and to inflation news when Fed policy is data dependent as it is now.  Higher US rates reduce the scope for Asian central banks to lower interest rates and support growth in the region. They increase debt sustainability risks for economies with high debt levels denominated in US dollars.  Given higher US interest rates, our macro model predicts that currencies in the region will depreciate relative to the dollar. However, we do not expect weaker currencies to lead to higher inflation overall because our macro model finds that the higher interest rates and trade costs associated with US policies will reduce global GDP and demand for commodities, which will lead to lower global energy and food prices. In recent years, developing economies in Asia have demonstrated tremendous resilience to large shocks associated with the pandemic, commodity prices, and geoeconomic fragmentation. This is due to sound macroeconomic management by most governments in the region. Moreover, despite global geoeconomic fragmentation, governments have maintained their commitment to open trade and investment, which has strengthened regional economic integration. This impressive track record means the region is well placed to maximize opportunities for inclusive growth and remain resilient to future shocks, including unexpected policy directions of the new US administration.

Harnessing Innovation in Peer-to-Peer Lending: A Strategic Approach for Asia's Central Banks

The exponential growth and subsequent regulation of peer-to-peer (P2P) lending in China have significant implications for financial stability and the efficacy of monetary policy. This serves as a crucial case study for economies with burgeoning fintech sectors, underscoring the necessity for a judicious balance between fostering innovation and ensuring regulatory oversight. The financial landscape is pivotal in the dissemination of monetary policy to the broader economy. The advent of financial technology (fintech) has had a profound impact on this landscape, particularly in recent years. Leveraging digitalization and big data, fintech has been instrumental in enhancing financial inclusion and facilitating more affordable credit access for individuals, entrepreneurs, startups, and SMEs. Conversely, the fintech sector could exacerbate the shift of credit intermediation from traditional banks to non-bank entities, leading to a more complex financial ecosystem. In this context, fintech introduces new risks to the financial sector, posing challenges to central banks in achieving their objectives. Within the fintech realm, P2P lending, which enables online lending and borrowing between individuals and small businesses without traditional financial intermediaries, has emerged as a prominent alternative financing mechanism. Benefiting from its digital technology leadership and a less stringent regulatory climate, China's P2P lending sector saw a surge in growth from 2014 to 2017, becoming a key player in the global non-bank finance arena. The industry's volume skyrocketed from CNY252 billion in 2014 to CNY2,804 billion by 2017, representing nearly 30% of all new bank loans. Regulatory interventions were introduced in late 2017 to mitigate P2P-related risks within the financial system, addressing areas such as cash loans, illicit financing, misuse of funds for student loans, investment speculation, and real estate downpayments. By 2019, P2P platforms had either transitioned into small loan creditors or ceased operations, effectively erasing the P2P lending market as it was known. Against this backdrop, a recent ADB Economics Working Paper delves into the impact of P2P lending on monetary policy transmission in China, utilizing a state-dependent local projection model. The study's findings indicate that the reactions of industrial output and inflation to monetary policy tightening are more pronounced and statistically significant in non-boom P2P lending markets compared to boom markets, where responses are largely insignificant. Specifically, inflation's response peaks at 0.8% following an unexpected 100 basis point monetary policy tightening in the non-boom phase, contrasting with 0.6% in the baseline scenario. Industrial production also experiences a significant decline in the non-boom phase, particularly in the initial periods. In contrast, during the boom phase of P2P lending, inflation's negative response only becomes statistically significant after 10 months, and industrial production responses are subdued, not significantly deviating from zero for most time frames. The research suggests that the evolution of P2P finance could negatively impact the effectiveness of monetary policy transmission. As P2P lending acts as an alternative external financing source, market participants are less affected by the rising costs of bank credit, diminishing the impact of contractionary monetary policy. While regulatory measures in China have helped to reduce financial risks associated with P2P lending, they may also have bolstered the effectiveness of traditional monetary policy transmission. This analysis holds important lessons for other economies with burgeoning P2P lending markets, particularly in developing nations such as India, Indonesia, Malaysia, the Republic of Korea, the Philippines, and Vietnam. Central banks in these regions must be vigilant about the potential impact on monetary policy effectiveness and financial stability. Moving forward, central banks and financial regulators must navigate a landscape that promotes the benefits of ongoing financial system innovation. The challenge lies in striking a balance between innovation and ensuring effective monetary policy transmission while mitigating financial stability risks.

A Comprehensive Guide to Currency Risk

Currency risk, also known as exchange-rate risk, pertains to the uncertainty faced by investors and businesses regarding fluctuations in the value of one currency relative to another. This type of risk is a potential source of both profit and loss for international investors or companies engaged in global operations. Institutional investors, including hedge funds, mutual funds, and multinational organizations, frequently employ various financial instruments such as foreign exchange (forex), futures contracts, options contracts, and other derivatives to manage and mitigate currency risk. Understanding Currency Risk Businesses and individuals engaged in international transactions are inherently exposed to currency risk. Hedge funds, mutual funds, and large multinational corporations utilize the forex market and derivatives like futures and options to hedge against currency fluctuations. Hedging strategies involve offsetting potential losses from currency movements. For example, a U.S. investor holding Canadian stocks will see their returns influenced by both the performance of the stocks and the exchange rate between the Canadian dollar (CAD) and the U.S. dollar (USD). If the CAD depreciates against the USD by the same amount as the stock gains, the investor's profit is effectively neutralized after accounting for trading costs. Examples of Exchange-Rate Risk U.S. investors can hedge against currency risk by investing in countries with appreciating currencies and favorable interest rates. However, inflation rates and national debt levels must be considered, as high debt often precedes inflation, potentially leading to currency depreciation. Countries with low debt-to-GDP ratios tend to have stronger currencies. For instance, the Swiss franc (CHF) is supported by Switzerland's political stability and low debt-to-GDP ratio. Similarly, the New Zealand dollar (NZD) benefits from robust agricultural and dairy exports, contributing to potential interest rate hikes. Conversely, a weakening USD, often due to lower U.S. interest rates compared to other countries, generally benefits foreign companies. Bondholders are particularly vulnerable to currency risk due to typically lower returns. Currency fluctuations can significantly impact the returns on a foreign bond index. Bonds denominated in USD provide more stable returns by eliminating currency exposure, while portfolio diversification across various regions mitigates currency risk. Investors may also find opportunities in countries like China, which pegs its currency to the USD. However, central banks could alter these pegging relationships, potentially impacting investor returns. Unique Conditions Various exchange-traded funds (ETFs) and mutual funds are designed to hedge against forex, options, and futures market volatility. Many currency-hedged funds have been established in developed and emerging markets due to the strengthening dollar. These funds typically incur higher costs compared to non-hedged funds, affecting overall returns. BlackRock's iShares, for example, offers a range of currency-hedged ETFs. As the USD depreciated in early 2016, investors reduced their holdings in these funds, leading to the closure of several currency-hedged ETFs. Risk-Free Simulation Engage in virtual trading with $100,000 in play money using our no-risk simulator. Compete against thousands of Investopedia users to hone your trading skills in a simulated environment. This experience will prepare you for success in real financial markets, allowing you to trade like a professional. Interrelated Concepts Transaction risk, arising from forex rate fluctuations before settlement, is a specific type of currency risk. Systemic risk in the market, encompassing broader financial loss potential, and investment risk, defined as the divergence of actual returns from expected outcomes, are also crucial considerations. The forex market operates as a decentralized platform for global currency exchange. A currency peg occurs when a government or central bank maintains a fixed exchange rate between its currency and another, influencing currency risk dynamics. Conclusion Effective management of currency risk is essential for international investors and businesses to safeguard their returns. By employing hedging strategies and diversifying investments, entities can mitigate the adverse effects of currency fluctuations. Understanding and navigating currency risk are fundamental to achieving financial stability and optimizing global market opportunities.

Why Enhancing Natural Capital is Key for Green Growth

The role of nature in green growth cannot be ignored. Incorporating natural capital considerations into the economic growth strategies of developing countries is essential for protecting the environment. As economies grow their capital stock also grows. Capital stock is made up of physical, human, natural and social capital. Natural capital in turn is composed of renewable and non-renewable forms. The former includes the present value of services provided by forests, land, water, and air, while the latter comprises sub-soil assets such as minerals, oil, and gas. For growth to be green, the value of the environment should not decline and one measure of that is for renewable natural capital not to fall over time. A recent study conducted to compare the GDP growth of 34 countries in Asia and the Pacific from 1995 to 2018 with the change in their renewable natural capital as measured by the World Bank in its Comprehensive Wealth Approach found that 24 of the countries had experienced green growth. The 10 countries that displayed a decline were Marshall Islands, Tonga, Maldives, Fiji, Vanuatu, Kazakhstan, Malaysia, Thailand, Georgia, and Samoa. The countries with the greatest percent growth in natural capital were Uzbekistan, Cambodia, Solomon Islands, Myanmar, Viet Nam, and India. The measure of natural capital, however, does not include services provided by the atmosphere against global warming. To account for that, the value of greenhouse gas emissions (GHGs) must be debited to the change in the natural capital stock. This value is uncertain, and estimates depend on many factors including the discount rate. When an adjustment was made to the natural capital for the GHGs, fewer countries had experienced green growth. With the value of GHGs calculated using a 5% discount rate, 11 of the 34 experienced green growth. With a 2.5% discount rate, which gives a higher value to GHGs, only 3 of the 34 countries had experienced green growth. By this indicator, and account for GHGs, the best-performing countries in the region were Solomon Islands, Bhutan, Lao People’s Democratic Republic, Cambodia, Papua New Guinea, and Viet Nam. The worst performing were Marshall Islands, Turkmenistan, Tuvalu, Uzbekistan, Tonga, and Thailand. This indicator of green growth complements others, such as the GGGI Index from the Global Green Growth Institute and the Global Sustainable Competitiveness Index.  These indices are a composite of many sub-indicators at a point in time. However, they do not track growth in the way this current study does. Comparing their values with the greenness measure, a positive but weak correlation was found. The three can be considered to provide complementary information on green growth. To explain the variation in greenness across the countries analysed, an econometric analysis was carried out. Significant factors were the initial value of natural capital relative to GDP (which indicates a convergence in greenness over time); a qualitative indicator of voice and accountability of civil society, which has a negative effect on greenness of growth; and a qualitative indicator of rule of law, which has a positive effect on greenness of growth. One message that emerges from the study is that greenness needs efficient growth relative to GHG emissions as well as increasing the value of other forms of natural capital.  Phasing out of high emissions sources such as coal and replacing them with renewable energy will help reduce emissions per unit GDP, but the switch should be cost-effective to also raise aggregate output. Increasing efficiency in the use of fossil energy will also raise the greenness of growth. Other policies that promote green growth include reducing pressure on natural capital exploitation by raising agricultural productivity, and raising the returns on forest conservation through carbon and biodiversity credits.  There is also a role for the private sector to promote greenness of growth. Its role will be critical in the transition to a low-carbon future. But this will need the right incentives such as subsidies for clean energy with a potential low cost, as well as disincentives in the form of a carbon tax or similar instrument to discourage the use of fossil fuels.  There is a growing but still relatively limited role for the private sector in carbon sequestration and biodiversity conservation through markets for carbon and biodiversity credits. The role of the private sector can be further enhanced by de-risking investments in climate mitigation and adaptation. While many countries have made strides in increasing their renewable natural capital, the inclusion of greenhouse gas emissions significantly alters the landscape. Effective green growth hinges not only on enhancing natural capital but also on reducing emissions through efficient, cost-effective strategies. This blog post is based on research conducted for the June 2024 ERDI-CCSD Climate Change Seminar, where Professor Anil Markandya presented "Natural Capital & Green Growth in Asia & the Pacific." The presentation discussed how protecting natural capital as key aspect of green growth is essential through various ADB strategies, including disaster resilience, climate-smart infrastructure, and private sector development.

Five Strategic Steps to Unlock Armenia’s Data Center Potential for Economic Growth

Armenia's data center industry offers significant opportunities for economic growth, with strategic reforms in regulation, financing, and technological innovation playing crucial roles. Addressing infrastructure challenges and fostering public-private partnerships will help position Armenia as a regional digital hub. Armenia is poised for a digital transformation with the development of its data center industry. This sector holds promise for the country's digital economy.  Key opportunities such as regulatory considerations, financing strategies, and the need for technological advancements must be embraced to leverage this industry for economic growth and digital innovation.  Armenia's strategic location, coupled with its growing tech-savvy population and vibrant ICT ecosystem, make it a candidate for becoming a regional data hub. However, the current infrastructure and regulatory environment need improvements to attract international investments and foster local innovation. Addressing these issues is important for Armenia to unlock its potential. To overcome these challenges, five steps can be taken: Regulatory Reforms: Streamlining regulations to facilitate easier entry and operation for data center companies. Simplifying the process for obtaining necessary permits and licenses, as well as creating a more transparent and predictable regulatory framework, can create a more business-friendly environment that attracts both local and international investors. Financial Incentives: Providing financial support and incentives to attract investments in the data center sector. This could involve infrastructure support and sustainability incentives to companies that invest in building and operating data centers in Armenia. Additionally, exploring the establishment of public-private partnerships to share the financial risks and rewards of developing this critical infrastructure is essential.  Technological Upgrades: Investing in advanced technologies to enhance the efficiency and sustainability of data centers. This includes adopting energy-efficient cooling systems, utilizing renewable energy sources, and implementing cutting-edge data management and security solutions.  Staying at the forefront of technological advancements ensures that Armenia's data centers are competitive and reliable on a global scale. Public-Private Partnerships: Encouraging collaboration between the government and private sector can drive innovation and growth in Armenia’s data center industry. By leveraging the expertise and resources of both sectors, Armenia can accelerate development and build a more resilient digital economy. Successful examples of such partnerships can be seen in countries like the United Arab Emirates, Singapore, and India. Capacity Building: Developing a skilled workforce to support the data center industry through training and education programs. Offering specialized courses and certifications in data center management, cybersecurity, and related fields ensures that Armenia has the talent needed to sustain and grow its data center industry over the long term. The development of the data center industry in Armenia is not just a local issue; it has broader implications for the region.  Successful implementation of these recommendations could position Armenia as a digital hub in Central Asia, attracting international investments and fostering regional cooperation. The ongoing efforts to address these challenges are already showing promising results, with several key players expressing interest in the Armenian market. Moreover,  the growth of the data center industry in Armenia could have a positive ripple effect on other sectors of the economy. For example, the increased demand for high-speed internet and reliable power supply could spur investments in telecommunications and energy infrastructure.  Additionally, the development of data centers could create new opportunities for local MSMEs (such as construction companies, equipment suppliers, and service providers) which are important contributors to economic welfare.  Armenia has the potential to become a center for data-driven innovation and research. By attracting leading technology companies and research institutions, Armenia can foster a vibrant ecosystem of innovation that drives economic growth and improves the quality of life for its citizens. This could include initiatives such as smart city projects, digital health solutions, and advanced manufacturing technologies. Armenia has a lot of untapped captive renewables that can be harnessed to power these data centers sustainably. By leveraging its abundant solar and wind resources, Armenia can ensure that the growth of its tech sector is both environmentally friendly and economically beneficial. This approach not only mitigates the environmental impact but also positions Armenia as a leader in green technology and sustainable development.  While there are many positive aspects to consider, it is also important to address the potential environmental impact of data centers and the importance of sustainable practices in their development.  Data centers are known for their high energy consumption and carbon footprint, so it is crucial to adopt green technologies and practices to minimize their environmental impact. This includes using renewable energy sources, implementing energy-efficient cooling systems, and adopting sustainable building practices. Additionally, the role of cybersecurity in ensuring the safety and reliability of data centers is another critical area that needs attention. As data centers store and process vast amounts of sensitive information, they are prime targets for cyberattacks.  Therefore, it is essential to implement robust cybersecurity measures to protect against data breaches, hacking, and other cyber threats. This includes investing in advanced security technologies, conducting regular security audits, and providing cybersecurity training for employees. Continuous innovation and adaptation are crucial for Armenia’s data center industry. To stay competitive, data centers must adopt the latest technologies, including artificial intelligence and machine learning to enhance efficiency, security, and scalability. If Armenia successfully addresses these challenges, it could unlock significant economic benefits and position itself as a leader in the digital economy. The future of Armenia's digital landscape depends on the actions taken today, making it imperative for stakeholders to collaborate and drive the necessary changes. The development of the data center industry in Armenia presents a unique opportunity for the country to enhance its digital presence and drive economic growth. By addressing the key challenges and implementing the recommended solutions, Armenia can create a thriving data center industry that benefits not only the local economy but also the broader region.

The Influence of Political Stability on Fiscal Space Amidst Climate Risks

Climate risks have a profound impact on fiscal space, with sovereign bond yields and debt ratings serving as indicators of the financial challenges. The role of political stability and financial development in reducing these risks is pivotal, highlighting their significance for fiscal sustainability in the long run. Climate risks, encompassing the potential negative socio-economic consequences of climate change, pose considerable fiscal threats, particularly through their impact on fiscal space. For instance, a major disaster triggered by climate change could require substantial fiscal expenditures for relief and recovery efforts. Similarly, extreme heat due to global warming might lead to significant agricultural damage, prompting governments to offer subsidies to affected farmers. Broadly, public spending on climate change adaptation and mitigation stands as one of the largest fiscal demands globally. Combined with other significant fiscal demands, such as those stemming from an aging population, climate change-related fiscal expenditures pose a substantial threat to fiscal space and sustainability in the future. A recently published ADB Economics Working Paper analyzes the effect of climate risk on fiscal space across 199 countries from 1990 to 2022. We measure fiscal space using sovereign bond yields and ratings on foreign currency long-term sovereign debt. Elevated sovereign bond yields and downgraded sovereign debt ratings signal higher borrowing costs and default risks, indicating a deterioration in fiscal space. We also explore the mitigating role of political stability and financial development in climate-related fiscal risks. Specifically, we assess whether more politically stable and financially developed economies are less susceptible to these risks. Political stability is likely to reduce these risks as it increases the probability of more sustainable fiscal policies, such as a robust medium-term fiscal framework. Consequently, a more stable political environment is likely to lessen the impact of climate shocks and other shocks on fiscal sustainability. Moreover, political stability fosters more cautious, rational, and cost-effective government planning in response to potential climate shocks, helping to preserve fiscal space. Financial development is also anticipated to reduce climate-related fiscal risks. In financially developed economies, businesses and households have access to insurance and other financial instruments that protect them from the adverse effects of climate shocks. This reduces the need for substantial fiscal outlays, thereby mitigating the negative impact on fiscal space. Additionally, financial development increases the credit available to businesses and households to help them absorb the effects of potential climate shocks. Our findings reveal that a one-unit increase in climate vulnerability results in a significant one percentage point increase in bond yields in countries with high political stability risks, peaking at 2 years post the initial impact. Conversely, in countries with lower political stability risks, the response of bond yields is not statistically significant. In the case of financial development, economies with low financial development are more vulnerable to climate-related sovereign risks. Bond yields rise by approximately 0.6 percentage points for these economies, peaking at 2 years post the initial climate shock. Meanwhile, in economies with high financial development, no significant effect is observed. Overall, our empirical analysis indicates that climate vulnerability negatively affects fiscal space, with the most pronounced effects in countries most susceptible to climate change and where fiscal space is most limited. We also find that these effects are reduced in countries with more stable political environments and more developed financial markets. More specifically, our evidence shows that climate risks are associated with lower bond risk premiums and higher sovereign ratings in countries with less exposure to both external and internal conflict. Furthermore, better financial development weakens the link between climate risks and fiscal space. Financially developed countries do not experience a climate-related bond risk premium or a persistent decline in sovereign ratings due to climate vulnerability. While fiscal consolidation is crucial for mitigating the adverse effects of climate risks on fiscal space, our results suggest that political stability and financial development can also contribute. Political stability is valuable in its own right, but our analysis provides evidence of a significant additional benefit in protecting fiscal space from climate risk. Similarly, our findings reinforce the argument for governments to promote financial development further.

Demystifying Crypto Assets: What You Need to Know

The concept of an Initial Coin Offering (ICO) originated from the development of crypto assets, such as digital coins and tokens, within the operational framework of blockchain technology. Much like physical currency, crypto assets are scarce and their ownership can be transferred. However, while physical coins can be exchanged face-to-face, the transfer of control for crypto assets is realized through digital means via network transmission of cryptographic keys. Essentially, a crypto asset is an entry on a distributed ledger, assigning control to a specific user identified by a private key. This private key, which functions as a secure password, allows the user to exercise exclusive rights associated with that ledger entry. Even though private keys can be exchanged physically, the actual crypto asset remains as a ledger entry, inherently bound to its local blockchain protocol. The Evolution of Crypto Assets The inception of crypto assets began with Bitcoin and its distributed ledger technology, commonly known as blockchain. Prior to the advent of digital currency, monetary systems existed in the form of centralized ledgers managed by financial intermediaries, such as bank accounts or PayPal balances. Bitcoin emerged as the pioneering digital currency system that eliminates the need for centralized intermediaries to maintain ledger integrity. The core innovation of Bitcoin and other public blockchain systems lies in their ability to maintain a reliable and immutable record of ownership without centralized control. Bitcoin's ledger is decentralized and replicated across a network of computers, known as nodes, which communicate through the Internet. When a Bitcoin holder initiates a transaction to transfer Bitcoin to another user, it is broadcasted to the network nodes. This decentralized system ensures that no single entity can alter the ledger unilaterally. Instead, economic incentives and cryptographic principles govern the consensus mechanism, ensuring that all copies of the ledger remain consistent and up-to-date. Significance of ICOs and Blockchain Technology ICOs represent a method for raising capital through the issuance of digital tokens or coins, typically in exchange for cryptocurrencies like Bitcoin or Ethereum. This fundraising model leverages the decentralized nature of blockchain technology to facilitate secure and transparent transactions. Crypto assets, which are the basis of these ICOs, serve as digital representations of value within the blockchain ecosystem. The decentralized and transparent nature of blockchain technology ensures that transactions are recorded and verified by a distributed network of nodes. This reduces the risk of fraud and enhances the security of digital asset transactions. Moreover, blockchain technology's reliance on cryptographic algorithms provides a robust framework for maintaining data integrity and privacy. Future Prospects of Crypto Assets and ICOs As the adoption of blockchain technology and crypto assets continues to grow, the potential applications and use cases are expanding. From financial services and supply chain management to digital identity verification and beyond, blockchain technology is poised to revolutionize various industries by offering enhanced security, transparency, and efficiency. In the realm of finance, the ability to tokenize assets and facilitate peer-to-peer transactions without intermediaries has significant implications for market accessibility and liquidity. Additionally, the programmable nature of smart contracts allows for the automation of complex processes, further enhancing the potential of blockchain technology. Conclusion Crypto assets and ICOs represent a transformative shift in the way value is transferred and capital is raised. Understanding the fundamentals of these technologies, including the role of distributed ledgers and cryptographic keys, is essential for navigating the evolving landscape of digital finance. As blockchain technology continues to mature, its impact on global markets and industries is expected to be profound, driving innovation and creating new opportunities for growth.

Strong Institutions Shield Emerging Markets from US Monetary Shocks

The global impact of US monetary policy significantly affects capital flows and credit growth in emerging markets, highlighting the importance of macroeconomic fundamentals and institutional quality in determining resilience during different monetary cycles. The United States dollar continues to reign supreme. The dollar dominates international trade and financial transactions, and the foreign exchange reserves of central banks. As such, US monetary policy still drives global financial cycles, impacting global capital flows and credit growth. Dollar dominance ultimately limits the policy choices of financially integrated emerging markets. The global influence of US monetary policy was especially visible during the seven years of easing (2007–2014) induced by the global financial crisis and its aftermath. This was followed by 4.5 years of tightening that was kicked off by the 2013 “taper tantrum.” Subsequently, three years of easing (2019–2022), largely induced by the COVID-19 pandemic, eventually led to a major tightening beginning in February 2022 as a delayed reaction to rapidly rising inflation in the US. As US monetary policy shifts have global repercussions, capital markets in emerging economies are often vulnerable to destabilizing flight-to-quality outflows during periods of heightened uncertainty. They are also vulnerable to volatile search-for-yield inflows during periods of low returns in the US. Large inflows were observed when the Federal Reserve's massive monetary easing pushed the federal funds rate close to zero in the wake of the global financial crisis. At a broader level, these episodes placed increasing pressure on the macroeconomic outlook of emerging markets and raised their risk profile. They also impacted emerging market currencies, debt repayments, and capital flows. For instance,  2023 saw many currencies in developing Asia depreciate substantially versus the US dollar due to aggressive tightening by the Federal Reserve. A natural question that arises is why some emerging markets are more resilient and/or less vulnerable to US monetary policy cycles, an issue examined in the study The Performance of Emerging Markets During the Fed’s Easing and Tightening Cycles: A Cross-Country Resilience Analysis by Joshua Aizenman, Donghyun Park, Irfan A. Qureshi, Gazi Salah Uddin and Jamel Saadaoui. One approach is to empirically assess whether macroeconomic variables such as debt levels and institutional variables such as degree of corruption can explain an emerging market’s resilience during each cycle. The study also takes a holistic approach to measuring emerging market resilience by focusing on the bilateral exchange rate against the US dollar; exchange rate market pressure; and the country-specific Morgan Stanley Capital International Index (MSCI). In addition, the role of policy factors such as exchange rate regime type and inflation targeting were also examined. At the broadest level, the existing research finds that macroeconomic and institutional variables are indeed significantly associated with emerging market performance. Furthermore, the determinants of resilience differ during tightening versus easing cycles, and the quality of institutions matters even more during difficult times.  We found that cross-country differences in ex-ante macroeconomic fundamentals and institutional variables can help explain the differences in performance and resilience of a large cross-section of emerging markets during different US monetary cycles. These determinants differ during tightening versus easing cycles. The significance of ex-ante institutional variables increased during the monetary cycles triggered by the global financial crisis and the taper tantrum. This suggests that strong institutions matter more during difficult times. To address these issues, emerging market policymakers should understand that macroeconomic variables such as the amount of international reserves, the current account balance, and inflation are all important determinants of an emerging market’s resilience to US monetary policy swings. This reinforces the conventional wisdom that  strong fundamentals protect emerging markets in the face of large external shocks. In particular, policymakers should continue to focus on vulnerable sovereigns with large external debt obligations and economies with highly leveraged property markets and weaknesses in capital markets that are typically challenged by the changing interest rate landscape. The borrowing costs of these economies might rise if there is a sudden deterioration in global financial conditions, further worsening their fragile fundamentals. To safeguard their economies against the volatility induced by US monetary policy, emerging market policymakers must prioritize strengthening macroeconomic fundamentals and institutions. This will help ensure long-term financial stability and foster sustained economic growth amidst the challenges posed by global financial fluctuations. 

ASEAN Nations Must Capitalize on Trade, Digital Advancements, and Connectivity

Faced with a shifting global economic landscape, the Association of Southeast Asian Nations (ASEAN) can enhance economic stability and sustainable development by focusing on trade, tourism, and digital transformation. In an increasingly competitive global economy, nations are reevaluating their supply chains to mitigate risks and implementing protectionist measures to bolster domestic industries. Additionally, climate change and the contest for cutting-edge technologies, such as AI and big data, are now viewed through the lens of national security. Against this backdrop, the ASEAN bloc, comprising 10 nations, must collaborate to secure a prosperous economic future for their citizens and safeguard their national interests, with a particular emphasis on trade, digitalization, and connectivity. Trade, especially in services, is poised to play a pivotal role in ASEAN economies, encompassing finance, telecommunications, tourism, transportation, and professional services. These sectors are crucial for job creation and economic expansion. Post-pandemic, while goods trade has slowed, service trade has shown a positive trend, positioning ASEAN as a net service exporter. Tourism is a promising avenue for ASEAN, highlighting the region's appeal as a travel destination. To bolster competitiveness in tourism, ASEAN nations are expected to collaborate on infrastructure, skill development, marketing, and product innovation to boost intra-regional travel, which currently accounts for over 40% of ASEAN's international tourism, thereby enhancing regional economic resilience. The regional digital economy, including e-commerce and digital health, is projected to expand from $300 billion to nearly $1 trillion by 2030. With effective digital connectivity policies through regional cooperation, this figure could double. The Digital Economy Framework Agreement is central to this collaboration, addressing digital standards, data flows, cybersecurity, digital trade, and digital talent mobility, among other aspects of digital public infrastructure. Digital cooperation is also anticipated to yield additional benefits, such as positive environmental impacts, social cost savings of $12-30 billion, increased resilience, job creation, and improved access to education and healthcare. Lastly, both physical and institutional connectivity are essential for ASEAN's economic competitiveness, enhancing their engagement with larger Asian and global economies. Sustainable infrastructure, including renewable energy, low-carbon transport, and urban energy efficiency, is gaining momentum. By integrating this with enhanced digital cooperation and streamlined cross-border logistics and supply chains, facilitating the movement of goods, services, and people across borders will protect the environment and strengthen regional resilience. The collective approach to sustainable infrastructure is beneficial for ASEAN members committed to the Paris Agreement, with Nationally Determined Contributions aiming for net-zero CO2 emissions by 2050 and net-zero greenhouse gas emissions by 2065, to cap global temperature increases at 1.5°C. It is a strategic time for ASEAN policymakers to rethink collaboration. While economic fragmentation is evident globally, there are areas that necessitate cross-border cooperation. Economic self-reliance has grown in the region, and with pressing issues like digitalization and climate change, mismanaged interdependence could lead to costs and economic challenges. Hence, for the upcoming term of ASEAN regional cooperation until 2045, member countries should view their collective actions as a regional public good, where the benefits of enhanced trade, tourism, digitalization, and connectivity will lead to sustainable and resilient outcomes for the region's populace.