Asian Perspectives on Sovereign Debt and Managing Fiscal Risks

Debt sustainability risks in developing economies have amplified in recent years in the aftermath of the coronavirus disease (COVID-19) pandemic. Fiscal support packages implemented due to the pandemic led to higher stocks of public debt, while tighter global monetary conditions in 2022 and 2023 increased the cost of financing public debt, widening fiscal deficits. Managing the inflationary effects of pandemic-related fiscal expansions, global supply chain disruptions, and the commodity price ramifications of the Russian Federation’s invasion of Ukraine created significant challenges for policy makers. These challenges were compounded by the ongoing need to address climate risks with appropriate adaptation and mitigation measures, placing further strain on the sustainability of public debt.

Asian Perspectives on Sovereign Debt and Managing Fiscal Risks highlights the role of fiscal policy as an effective tool in crisis times while also drawing insights on the implications for prudent public debt management and fiscal resilience. With a focus on Asian economies, the book provides guidance to policy makers on reducing debt vulnerabilities and maximizing the capacity of fiscal policy to respond to shocks. The discussions highlight the importance of well-coordinated fiscal and monetary policies, as well as enhancing efforts on tax revenue generation and mobilizing domestic financial resources. The book also describes fiscal framework design that incorporates risk factors, supported by adequate fiscal buffers and credible macroeconomic assumptions in conjunction with a well-anchored fiscal path. Finally, it stresses the role of accountability and transparency in fiscal governance as central to effective public debt management.