Africa-Press – Eritrea. The International Monetary Fund (IMF) stated Monday that strong fiscal and monetary policy frameworks and well-developed local currency debt markets supported the resilience of emerging economies to global financial shocks.
Emerging economies have remained resilient despite global financial turbulence—thanks not just to good luck, but to good policies, the fund said in a statement.
The IMF said many developing countries with strong fundamentals were able to issue local currency bonds and, given the low interest from international buyers, found newly established buyers.
“Better frameworks also improved confidence and trust among investors. Local currency bond markets have deepened in many emerging markets, contributing to greater financial resilience. This helped reduce both currency mismatches and the risk of sudden capital outflows,” it noted.
In contrast, developing countries with weaker policy credibility and shallower pools of domestic financial savings remain reliant on foreign currency borrowing, short-term local currency debt, or less stable sources of financing.
Meanwhile, the fund cautioned that there are still risks: political pressures might erode hard-won credibility; recent global shocks have depleted fiscal headroom; the post-pandemic inflation increase has raised inflation expectations; and external circumstances can rapidly worsen.
“The presence of fiscal rules has also not prevented the buildup of debt in many emerging market economies—in large part due to limited compliance with the rules,” it added.
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