International Monetary Fund Managing Director Kristalina Georgieva said Wednesday that persistently high energy prices and public debt at its highest level since World War Two are squeezing economies. She urged governments to adopt protective fiscal and monetary measures. Her warning puts pressure on national policymakers to manage costs and debt as the IMF prepares new forecasts for its annual meetings in Bangkok next week.
Energy Costs and National Exposure
Georgieva described two forces pulling the global economy in opposite directions: a negative energy supply shock from conflicts in the Middle East and a positive demand shock from artificial intelligence, which is also fuelling inflation. “The combined impact of these two forces is highly uneven across the world,” she said. The AI boom, she added, is bypassing many countries.
Oil prices remain at $100 a barrel, Georgieva said. Impaired refining capacity has added another $100 in “crack-spread” margins per barrel for key products, including diesel. Winter heating demand is set to rise, while threats to liquefied natural gas shipping through the Strait of Hormuz continue to restrict natural gas supplies.
“Even if the war in the Gulf were to end soon, the problem of high energy prices will likely persist for some time,” Georgieva said. Brent crude oil futures point to high prices through 2027. The IMF’s July forecast assumed oil would average $89 a barrel in 2026 and $78 a barrel in 2027, with the Strait of Hormuz starting to reopen in mid-July and returning to pre-war conditions by March 2027.
The new IMF growth forecasts due during the Bangkok meetings are expected to show the biggest downgrades in economies ravaged by war. Georgieva cited Ukraine, where war has badly damaged civilian and economic infrastructure, and Gulf countries hit by Iranian strikes and sharply reduced energy exports. She didn't say whether the IMF's latest World Economic Outlook would change its overall 2026 global growth forecast, which stood at 3.0% in July. The forecast projected 3.4% growth in 2027.
Debt, Rates and Policy Choices
Higher energy prices are pushing inflation, policy rates and benchmark bond yields upward, Georgieva said. U.S., German and Japanese 10-year sovereign yields have reached their highest levels since 2007, 2009 and 1996, respectively, and continue to climb.
The IMF projects public debt will exceed 100% of GDP before 2030. Georgieva called advanced economies, led by the United States, the “worst offenders,” with debt-to-GDP ratios higher than those of emerging markets and low-income countries. Higher growth alone can no longer solve fiscal problems, she said.
“And yet we don't see decisive action in the high-debt advanced economies where the need of the hour is for credible medium-term fiscal consolidation plans,” Georgieva said. Some plans, she said, would need upfront fiscal measures to take pressure off monetary policy. Inflationary pressures also persisted because of AI investment, energy and food price shocks, tariffs, higher defense spending and increased debt-service costs. “Now may be a good time for a prudently hawkish bias in many countries' monetary policy,” she said, calling rate hikes by the U.S. Federal Reserve, the ECB and the Bank of Japan “highly appropriate.”
In a fireside chat, Georgieva said central banks must focus on price stability and communicate their resolve. “They can only do it when central banks are independent,” she said. She warned governments against pressuring central banks to ease fiscal burdens by buying debt. “I would call this monetary cowboys, running to the rescue of the fiscal agents, and my message is: please don't.”
AI Investment and Market Risk
Georgieva said AI investment as a share of GDP is likely to exceed investment in railroads, electricity grids or telecommunications infrastructure. Rising economic and financial concentration is putting pressure on AI companies to deliver productivity and earnings gains that justify high valuations. Market disappointment could become “a far-reaching shock,” she warned.
IMF research suggests AI, if developed and used well, could add half a percentage point to annual global growth. Georgieva called for regulatory guardrails to manage risks including large-scale labor market fallout, serious cyber and stability risks, and frontier models threatening to escape human control. She also urged governments to build fiscal strength, improve workforce skills, make it easier to start and wind down companies, strengthen energy security and streamline regulations.
A Deutsche Bank poll found that a large majority of wealthy investors expected Asia to be the most geopolitically stable region over the next 12 months. Investors saw rates and yields as the biggest growth risk. The article contains no migration figures or nationalist opposition statements; the policy choices it records concern debt, energy security, central-bank independence and regulation.