The IMF has warned that emerging markets’ limited access to Covid-19 vaccines poses a risk to global financial stability, saying shortages could exert a drag on economic recoveries in low-income countries.

“Inequitable distribution of vaccines risks exacerbating financial vulnerabilities, especially for frontier market economies,” the IMF wrote in its latest global financial stability update.

Emerging market assets have been boosted by record inflows in the first weeks of the year. But Tobias Adrian, head of the IMF’s capital markets division, said there was a risk that “virus infections get worse in emerging markets as vaccines are not rolled out as quickly”.

“What is priced in is that vaccines are not rolled out, but the possible shock is broader infections in a resurgence of the virus, with adverse macro impacts,” he said.

Emerging markets would also be vulnerable if there were a “shift in global risk appetite”, Mr Adrian said. “Investors are very ‘risk on’. Is there going to be a ‘risk off’ episode?”

Emerging market stocks have rallied almost 8 per cent so far in 2021 in dollar terms, adding to a 19 per cent surge in the final three months of 2020, according to an MSCI index tracking the asset class.

The gains come amid a red-hot start to 2021 across global asset markets, with vast government and central bank stimulus programmes combining with a surge in retail trading to boost the price of riskier assets like stocks.

The market was upset earlier in the year when some Federal Reverse officials signalled a possible wind down of the central bank’s massive $120bn-per-month asset purchase programme beginning before the end of 2021. Jay Powell, Fed chairman, has since moved to calm near-term concerns of a repeat of the “taper tantrum” that rocked emerging markets in 2013.

Mr Adrian said the risk to financial stability from potential emerging market shocks “depends on how broadly negative surprises are spread across countries”.

“What we are seeing are pockets of vulnerability . . . so we would expect that there will be certain countries and banking systems that will face difficulties, but as a whole the global economy and the (global) financial sector looks fairly resilient.”

He said countries with big exchange imbalances could find themselves particularly vulnerable, including some in south Asia and the Middle East.

Other crucial financial stability risks identified by the IMF include virus mutations and the “premature withdrawal of policy support”, Mr Adrian said.

The IMF also expressed concern that continued low interest rates could weigh on global banks’ profits and discourage them from lending.

Mr Adrian said indications so far suggest it was “more an issue of willingness” since banks report “that their capital position is fine . . . (but) they don’t like what they see in terms of borrowers’ riskiness”.