How will higher bond yields shape EM fiscal risks?

EM public finances have become more vulnerable to higher interest rates in recent years. Some major EMs with underlying fiscal vulnerabilities – including Brazil, South Africa and Hungary – have benefited from a decline in bond yields this year as fiscal prospects have improved. Borrowing costs have generally increased the most in countries with fairly solid fiscal positions. The near-term fiscal risks lie in Poland, Colombia and Mexico, where yields have risen and the public finances have deteriorated or are weak.