This phenomenon of FX borrowing by unhedged financial clients has its history in many countries across the world. However, it produces specific challenges to the emerging economies without enough hedging instruments available, which still face challenging current account deficits and where FX lending is relatively widespread throughout the economy.
Moreover, some of these countries have a relatively recent history of price instability and overall financial instability. A good example in the group of such countries is Serbia. What are the major challenges of FX lending in Serbia?