IMF: Robust Policies Key to Emerging Economies' Resilience
(MENAFN) The International Monetary Fund (IMF) highlighted on Monday that robust fiscal and monetary policy frameworks, coupled with well-established local currency debt markets, have helped emerging economies remain resilient amid global financial volatility.
Despite turbulence in international markets, many developing nations have managed to weather the storm not merely due to good fortune but as a result of sound policy decisions, the IMF stated.
The organization pointed out that countries with solid economic foundations have increasingly turned to local currency bond issuance. With international investors showing limited interest, these nations have successfully tapped new buyers in domestic markets.
"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," the IMF noted in its release.
However, countries with weaker policy credibility and limited domestic financial resources continue to rely heavily on foreign currency borrowing, short-term local debt, or less stable financing options.
While the IMF acknowledged the positive role of stronger fiscal policies, it also issued a warning: "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 IMF further observed that fiscal rules have not been enough to prevent rising debt levels in many emerging market economies, primarily due to insufficient adherence to these guidelines.
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