Motivated by an unprecedented deviation from fiscal rules observed during the COVID-19 pandemic, we develop a sovereign debt model with strategic enforcement of fiscal rules. Empirically, we document that the presence of fiscal rules is statistically significantly associated with lower sovereign spreads during the COVID-19 crisis. This correlation persists even when nations deviate from the rule, suggesting that financial markets do not penalize deviations from the rule during global crises due to an expectation of post-crisis compliance. To test our hypothesis, we enhance a sovereign debt model with the possibility of deviating from the fiscal rule by imposing an exogenous cost of deviation. We show that, if there is no deviation cost during a global crisis, the model can rationalize quantitatively the sovereign spread compressing effect of fiscal rules. Overall, the findings suggest that fiscal rules can help emerging markets and developing economies signal fiscal responsibility during episodes of global financial stress, reducing borrowing costs relative to countries without fiscal rules.