EBRD Chief Warns Emerging Markets on Fiscal Constraints

As Middle East instability ripples through global markets, EBRD President Odile Renaud-Basso is urging governments to abandon broad economic subsidies. With fiscal space tightening and borrowing costs rising, she argues that state support must be strictly temporary and focused solely on the most vulnerable populations to avoid unsustainable debt.

The warning arrives as the London-based lender prepares for its annual meeting in Riga, held against a backdrop of persistent economic shocks ranging from the pandemic to Russia’s invasion of Ukraine. These crises have left many nations across Central Asia, Eastern Europe, and Africa grappling with elevated debt burdens. Compounding these pressures, potential fertilizer shortages and energy price volatility threaten to drive inflation even higher.

The bank is expected to downgrade its growth projections and lift inflation forecasts in its upcoming report. While the EBRD previously committed 5 billion euros to support countries impacted by the conflict, Renaud-Basso emphasizes that state budgets can no longer carry the weight of generic intervention. Instead, she advocates for a pivot toward private capital, citing growing appetite from institutional investors in the Netherlands and the Nordics. For nations seeking to fund infrastructure, energy security, and green transitions, attracting private sector participation has shifted from an option to a necessity.

Policy discussions in Riga will also center on Ukraine, particularly regarding the Chornobyl nuclear facility, following damage to its protective confinement from a Russian drone strike. Meanwhile, regarding recent market volatility in Turkey, Renaud-Basso noted a stabilization in conditions. She maintained that central banks in such volatile environments face an exceptionally difficult mandate, requiring constant vigilance to navigate the current economic landscape.