# **Introduction**

The global financial crisis of 2008 – 2009 was the worst the world has seen since the 1930s in both its intensity and global reach. The “emerging market” countries (EMs) were not immune: at the height of the crisis the emerging-market government bond index (EMBIG) had seen an increase in spread of over 700 basis points from its low point in June 2007, and the international capital markets were effectively closed to issuers for several months. Yet, despite the severity of the global crisis, it did not result in an emerging market sovereign debt crisis of the type that we have seen in the 1990s and early 2000s.<sup>2</sup> In this paper, we review the reasons why the impact on EMs was so very different from these earlier events, as well as the responses of debt management officials in EMs to the rapidly changing market environment they faced. In section one, the outcomes of macro-economic policy over the decade beginning 2000 are outlined and a story of significantly improved fundamentals emerges. The “virtuous circle” of strong growth, responsible fiscal management, reduced public debt and stable inflation (until the fuel and food crises) provided public debt managers with greater choice and more opportunities to more effectively manage risk in public debt portfolios. We present data on the changes in the composition of public debt over this period, showing marked reductions in currency, interest-rate and rollover risks. Combined with reduced public debt levels and increased levels of foreign-currency reserves, the public debt management strategies adopted in most emerging market countries gave them flexibility to ride out the crisis and adjust borrowing plans to cope with adverse market conditions.

In section two of the paper, the impact of the crisis on the market environment for EMs is outlined and summary data are presented on market spreads, issuance volumes, borrowing requirements, domestic bond yields and capital flows. This section also reviews the responses by debt managers to the impaired and volatile markets. In order to do this, a survey was designed, targeting initially the 24 countries listed in footnote 1 and which represent those countries with relatively more developed domestic debt markets. The survey covered four main topics: (i) borrowing requirements, to reflect the impact of the crisis on the funding gap and the channels of transmission; (ii) adjustments to the funding plan, to capture substantial revisions in the funding sources, or, in the composition of funding by currency, instrument, maturity, placement mechanism, or timing ; (iii) adjustment to debt management strategy, to reveal if the adjustments in the funding plan led to a formal revision of the debt management strategy including the

> 2 The 24 countries considered in this paper include, by region, East Asia Pacific (EAP): China, Indonesia, Malaysia, Philippines and Thailand; Europe and Central Asia (ECA): Hungary, Poland, Romania, Russia and Turkey; Latin America and the Caribbean (LAC): Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Uruguay; Middle East and North Africa (MNA): Egypt and Morocco; South Asia (SAR): India and Sri Lanka, and; Sub-Saharan Africa (SSA): Kenya, Nigeria and South Africa.

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