Page 69 - CMA Journal (Jan-Feb 2026)

O THER F EATURES

1) Macroprudential Frameworks:
Instead of solely relying on interest
rate adjustments, policymakers can
deploy macroprudential buffers such
as counter cyclical capital
requirements to absorb price shocks
without slowing growth.

2) Efficient Subsidy Reforms:
Transitioning from generalized fuel
subsidies to targeted social support
helps protect vulnerable households
while reducing fiscal stress. Effective
subsidy reform also frees up public
expenditure for social investment.

3) Inflation Indexed Safety Nets: Designing social
protection schemes that adjust automatically to cost 3) Local Currency Debt: Shifting part of sovereign
of living changes helps preserve household borrowing into local markets can reduce exposure to
purchasing power without placing undue strain on foreign exchange volatility triggered by global
government budgets. shocks.
Supply Chain Regional and Multilateral Cooperation
The turbulence reflected in the WUI highlights deeper No country can handle global uncertainty alone.
structural uncertainties in global trade. Developing Cooperation strengthens resilience:
economies can strengthen resilience through:
1) Regional Energy Agreements. Neighbors holding
1) Supply Chain Mapping and Risk Analytics: joint reserves or releasing them together can reduce
Countries should identify critical vulnerabilities in supply risks.
imports such as food, fuel, and fertilizer and diversify
suppliers to avoid systemic bottlenecks. 2) Multilateral Risk Support. Organizations like the
World Bank and IMF can provide rapid financing
2) Digital Trade Corridors: Harnessing digital during uncertainty.
platforms and data interoperability can reduce
friction in cross border trade, even when physical 3) Flexible Trade Agreements. Agreements that
routes are disrupted. adjust automatically during volatility protect market
access.
3) Smart Tariff and Non-tariff Measures: Removing
counterproductive trade bans or export restrictions Conclusion
while encouraging efficient export expansion can As 2026 unfolds, ongoing global uncertainty, reflected in
smooth market volatility.
the World Uncertainty Index and sharp swings in oil
Financial Risk Management and prices, is affecting economies worldwide. Developing
countries are feeling the strongest impact, with rising
Hedging Tools inflation, unstable currencies, and higher costs for
energy, food, and trade putting pressure on families and
In addition to policymaking, market-based tools are
businesses. These challenges are made worse by
essential:
geopolitical tensions and supply chain disruptions.
1) Commodity Hedging: Governments and large Building resilience through energy diversification,
energy users can use futures, options, and swaps to focused fiscal policies, strong financial risk management,
lock in fuel prices, reducing exposure to sudden and regional cooperation is essential for these countries
spikes. to manage shocks, support growth, and maintain
economic stability in a world where uncertainty has
2) Sovereign Stabilization Funds: Countries with
become a defining feature.
fiscal space can create funds that save resource
windfalls in good times and support public finance (This article is prepared by Dr. Maiyra Ahmed, Assistant Director,
during downturns. R&P, under the guidance of Shahid Anwar, Senior Director R&P)

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ICMA’s Chartered Management Accountant, Jan-Feb 2026