Definition: Transfer risk

Category: External debt - IMF

The risk that a borrower will not be able to convert local currency into foreign exchange, and so be unable to make debt-service payments in foreign currency. 

The risk normally arises from exchange restrictions imposed by the government in the borrower’s country. 

This is a particular kind of political risk. http://ec.europa.eu/eurostat/ramon/statmanuals/files/external_debt_guide_2003_EN.pdf#page=255