The world should be ready for an emerging market debt crisis as the global economy emerges from the coronavirus pandemic and interest rates rise, drawing capital away from vulnerable countries, the head of the IMF has warned.

In a virtual speech ahead of the IMF and World Bank spring meetings next week, Kristalina Georgieva said on Tuesday that a tightening of financial conditions could trigger “significant” capital outflows. She spoke as yields on US government bonds rose to their highest level since January 2020.

Capital outflows from emerging economies as US interest rates rise — similar to the taper tantrum of 2013 — “would pose major challenges, especially to middle-income countries with large external financing needs and elevated debt levels”, Georgieva said.