Borrowing costs have risen across the 11 CEE countries. Yields on bonds issued by non-euro area CEE-11 countries have doubled since the end of 2021 (Figure 1) as local central banks began raising rates before the ECB and the Federal Reserve to head off currency devaluation that would exacerbate inflationary pressure.
The rise in borrowing costs has been more significant for countries with idiosyncratic pressure points, such as Hungary (downgraded by Scope Ratings to BBB/Stable Outlook from BBB+/Negative on 24 February), due to the interruption in its receipt of EU funds.
Challenges of Public Debt Management
Managing public debt in adverse economic conditions in the context of Russia’s war in Ukraine poses challenges for CEE governments. Issuing too much debt in local currency raises domestic yields, and…
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