The Asian Development Bank has urged developing economies to reinforce their fiscal positions as higher borrowing costs, currency pressures and global uncertainty create additional risks for economic stability.

ADB President Masato Kanda said countries need stronger financial defenses to withstand external shocks. Building adequate foreign-exchange reserves and maintaining credible monetary and fiscal policies were highlighted as important safeguards.

Rising Borrowing Costs Create New Pressure

Higher bond yields are making it more expensive for governments to raise funds. For countries that already carry substantial debt, increased financing costs can put additional pressure on government budgets.

The ADB’s warning comes as several developing markets face weaker currencies and changing international investment flows. Policymakers are therefore being encouraged to strengthen their financial positions before external pressures become more severe.

Focus on Fiscal Stability

Maintaining sustainable government finances is becoming increasingly important. The ADB has emphasized better domestic resource mobilization, responsible debt management and stronger public financial management as ways to improve economic resilience.

The development bank has also stressed that governments should carefully balance support for vulnerable households with the need to protect long-term fiscal sustainability.

Global Economic Risks Remain

Developing economies are also dealing with higher energy costs and disruptions to international trade. The ADB’s latest regional outlook expects developing Asia and the Pacific to grow more slowly in 2026, with elevated energy prices and tighter financial conditions weighing on activity.

These pressures could make it harder for governments to simultaneously support economic growth, control inflation and keep public finances under control.

Regional Cooperation Could Help

ADB has called for stronger cooperation among economies across Asia and the Pacific. Greater regional connectivity and stronger trade relationships could help countries reduce vulnerability to individual external shocks.

The message from the development bank is clear: strengthening fiscal and financial buffers before a crisis emerges can give developing economies greater room to respond when conditions deteriorate.