Washington: The International Monetary Fund (IMF) highlighted that robust fiscal and monetary policy frameworks, along with well-developed local currency debt markets, have enhanced the resilience of emerging economies against global financial shocks.

According to Anadolu Agency, the IMF emphasized that emerging economies have managed to withstand global financial turbulence due to effective policies rather than mere luck. The IMF noted that several developing countries with solid economic fundamentals were able to issue local currency bonds, attracting new buyers even amid low interest from international investors.

The IMF further explained that improved frameworks have fostered greater confidence and trust among investors. In many emerging markets, the development of local currency bond markets has deepened, contributing to enhanced financial resilience. This development has helped mitigate currency mismatches and reduced the threat of sudden capital outflows.

However, the IMF also pointed out that developing countries with weaker policy credibility and limited domestic financial savings continue to rely on foreign currency borrowing, short-term local currency debt, or other less stable financing sources.

The IMF warned of ongoing risks, including political pressures potentially undermining hard-won credibility, depleted fiscal headroom due to recent global shocks, rising inflation expectations following the pandemic, and the possibility of rapidly deteriorating external circumstances.

Additionally, the IMF noted that the presence of fiscal rules has not always prevented debt accumulation in many emerging market economies, largely due to limited compliance with these rules.