| Summary: | Economic disruption following Russia's invasion of Ukraine arrived during the aftershocks of the Coronavirus disease 2019 (COVID-19) pandemic, exacerbating inflation, debt, financial conditions, growth prospects, and hardship among the vulnerable, all of which translate to stress on limited fiscal space. The case of Sri Lanka illustrates how fiscal distress can trigger crisis. This note explains the cyclical and direct fiscal impacts of the current economic environment for emerging market and developing economies (EMDEs) and provides recommendations on how to respond. The analysis is synthesized in an integrated framework, complete with an accompanying dashboard tool, which policymakers can use to sort countries by available fiscal space, identify the channels through which fiscal accounts are vulnerable to stress, and benchmark individual countries against comparators. The note closes with policy design principles that balance consideration for fiscal space, inflation, protection for the vulnerable, climate objectives, and growth
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