The coronavirus pandemic and oil price collapse have made emerging markets a lightning rod for volatile capital flows, raising the question whether currency controls might creep back on the radar of some of the worst-hit countries.
Ever since the 1998 crisis, most big developing countries have accepted that the value of currencies is best determined by markets, a thesis that served them well over the years when exchange rate depreciation allowed their economies to adjust to changed circumstances.
But that wisdom has been thrown into sharp relief in recent weeks as a global market rout saw investors liquidate assets indiscriminately; almost $80 billion fled emerging stocks and bonds in February and March, according to Societe Generale data, based on figures from a set of large developing countries.
"There is some early evidence of an unprecedented collapse in global capital mobility which, if sustained, will make it tempting for countries to conserve their FX resources by imposing restrictions on capital outflows," said David Lubin, head of emerging markets economics at Citi.
That would especially be the case if governments are pressured to offer citizens full compensation for losses inflicted by lockdowns and other restrictions to prevent the coronavirus from spreading, Lubin said.
And in emerging markets (EMs), the issue of investment flows tends to be especially important, he said. "When capital inflows disappear, EMs that rely on that capital suffer big demand collapses."
The sell-off in emerging market currencies over the past four weeks has been one of the sharpest on record, matching the pace of depreciation during the 2008 global financial crisis, according to JPMorgan.
Currencies such as the Mexican peso and rouble have lost 15-20% against the dollar this month, while the South African rand and Brazilian real have fallen around 11%.
The issue of portfolio investment outflows has been compounded by a price collapse for oil and other commodities, the mainstay of many countries in Africa and Latin America. Their peers in Asia or eastern Europe are being hurt by falling goods and services exports.
The picture may take time to improve - many economists expect a global economic recession in 2020. Currency pressures have eased for the time being at least, following massive cash injections by the Federal Reserve to weaken the dollar.
The capital curbs debate shot into focus last month when Kristalina Georgieva, the new head of the International Monetary Fund, said flexible exchange rates may not be the most suitable shock absorber for developing economies under stress.
The fund is rethinking its approach to the right policy mix, she added
Many took that to mean that the fund, a rigid opponent of capital controls during past crises such as in 1998, was softening its stance, given the specific difficulties poor countries face, including low FX reserves and higher inflation levels.
The stigma attached to capital controls may have already eased a touch when Iceland and Greece resorted to them in 2008 and 2015, respectively.
Emerging markets still see capital curbs as a measure of last resort. Nigeria introduced them in late 2014 after an oil price shock devastated its economy. Argentina imposed curbs last September to conserve dwindling dollar reserves and stop a peso run.
So far in this crisis, most emerging market central banks from Brazil to Indonesia or South Africa have slashed rates to support growth. Many are also intervening in currency markets but moves are limited by the need to conserve FX reserves.
Of course there are other tools, too. Countries can raise interest rates or request financing backstops from the G20 or the IMF.
Capital curbs could be part of that toolbox, noted JPMorgan's Saad Siddiqui, though he was doubtful of their efficacy.
"Additional capital flow restrictions have not been part of the policy response so far and would be unlikely to offer medium-term relief, given the nature of the shock," he said.
Highly restrictive measures can be debilitating, choking off flows from foreign investors afraid to have funds stuck in a country with no means to repatriate. Countries also risk ejection from various equity and bond indexes.
But there are variations along the lines that might become more prevalent. Turkey half-flirted with the idea of controls when its local banks briefly stopped trading lira with their foreign counterparts in March last year.
That did cushion the lira sell-off but possibly at the cost of much investor confidence.
Simon Quijano-Evans, chief economist at Gemcorp Capital, does not expect full-blown capital controls but reckons Ankara's model could be copied, including the ramping up of short-term rates or a ban on shorting of currencies.
"If this virus crisis were to continue and you were to have massive disruption on the currency markets because of a massively stronger dollar, in that situation we have to think about everything," Quijano-Evans said.