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Assessing fiscal risks from higher interest rates in EMs

Higher bond yields will add to fiscal pressures in those EMs with particularly large public debt burdens and weak debt dynamics. Brazil, South Africa as well as Colombia and Mexico are the EMs from our analysis whose fiscal positions are the most vulnerable to a prolonged period of higher interest rates. Egypt and a number of frontiers also stand out as risks too due to the sensitivity of debt servicing costs to higher interest rates.

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