Poor countries already spend more than 10% of their revenue servicing debt, and the bill is about to grow. Finance officials from around the world meet in Bangkok this week for the annual meetings of the International Monetary Fund and World Bank, against a backdrop of war with Iran, soaring energy costs and record public debt that threaten to drag already sluggish global growth lower.
These are the first meetings held outside Washington in three years. Now in its eighth month, the US-Israeli-led war with Iran has driven inflation and hardship that are expected to dominate the agenda, pushing almost everything else aside.
Who Pays for the Energy Shock
World Bank President Ajay Banga told Reuters global growth held up better than feared after Iran closed the Strait of Hormuz and cut off about 20% of the world’s oil supply. But pressure is building again. Diesel prices are soaring, fertilizer costs are rising, and a looming “super” El Niño weather effect could cause 450,000 heat-related deaths, experts say.
“The real thing is not just El Niño by itself; it’s the combination ... What’s happening to fertilizer prices? What’s happening to energy costs? What’s happening to debt?” Banga said. He added that the combination would “call upon all of us to be far more careful on what we prepare for in the coming months.”
IMF Managing Director Kristalina Georgieva offered a blunter preview of the meetings in a speech: “Winter is coming.” IMF research released on Tuesday found that sharp spikes in food and energy prices increasingly trigger crises, prolong inflation expectations, worsen poverty and threaten economic stability.
The IMF has signalled little change to its 3% global growth forecast for 2026. Some countries, however, are expected to receive downgrades, including Ukraine, now in its fifth year of war against Russia’s invasion, and Gulf countries hit by Iranian strikes and sharply reduced energy exports.
A Debt Crisis With Few Remedies
Public debt stands at its highest level since World War Two, according to the IMF, and will exceed 100% of GDP before 2030. The United States leads advanced economies in debt-to-GDP ratios. Yet emerging markets and low-income countries face the greatest exposure: capital outflows chasing higher US interest rates, the El Niño threat, and a lack of investment in AI, which has cushioned supply shocks in the United States and other wealthy nations.
Those countries will have to renegotiate high debts at higher interest rates. During the early COVID crisis, G20 leaders suspended debt-service payments for the poorest countries. This time, G20 diplomats say there’s little appetite for such a move, with high debt and political pressures creating bigger obstacles.
Many lower-income countries also worry about new IMF recommendations for loan programs that would require fewer but deeper reforms before approving lending. Some fear the change will bring painful austerity. “Countries are already cutting their expenditures because their debt payments are going high and because of the IMF conditionality,” said Iolanda Fresnillo, who works on debt justice for Eurodad. “We fear that this review of conditionality policy is just going to make things worse.”
Fresnillo cited Kenya, which avoided debt restructuring by cutting public spending and trying to raise taxes. The changes sparked significant protests, especially among young people. The IMF risks losing credibility, she said, unless it acknowledges the severity of the crisis facing many developing countries. “As long as they continue with the governance structure that they have, they are becoming less and less relevant,” she said.
Washington’s Absence
US Treasury Secretary Scott Bessent won’t attend. A US official said he sent two senior officials in his place while handling some “domestic engagements.” He’s also skipping a Group of 20 meeting, which the United States leads this year. His absence may frustrate counterparts amid rising tensions over the Iran war, Ukraine’s fight against Russia and the US move to impose sanctions on the International Criminal Court.
Meanwhile, the Group of Seven countries have agreed, under pressure from President Donald Trump, to release 100 million barrels of diesel and crude oil from emergency reserves. Trump wants lower gasoline prices before November elections that could cost his Republican Party control of Congress. On Friday, he announced a deal with Russia to supply more diesel to global markets, along with a temporary waiver of US sanctions designed to deprive Moscow of revenue for its war on Ukraine. Ukrainian President Volodymyr Zelenskiy quickly criticised the move.
More than 1 billion barrels of oil have come out of reserves since the war began on February 28, mainly from onshore commercial inventories. Industry executives say accessible storage is running low. The market is therefore more fragile, adding pressure to prices.
Security Worries and the Cost of Delay
More than 10,000 travelers are heading to Bangkok, a city of 9 million residents. Many flight routes pass through the Middle East, raising immediate security concerns after recent attacks on Saudi airports.
The previous off-site meetings took place in Morocco days after militants led by Hamas killed 1,200 people in Israel. Israel then bombarded Gaza, killing more than 74,000 people. Josh Lipsky, vice president of international economics at the Atlantic Council, said finance officials dismissed the Hamas attack at the time as unrelated to economics. The links between national security and international finance are clear now, he said. “What we’re currently experiencing with Iran and the closure of the Strait of Hormuz has a direct connection with what happened three years ago.” Policymakers, he added, “have to be proactive and they have to recognize that they don’t live in the world they used to.”
Why This Matters:
The people least responsible for this crisis are positioned to bear its worst effects. Countries already spending more than a tenth of their revenue on debt payments now face higher diesel and fertilizer prices, a potentially deadly El Niño, and stricter lending conditions that critics warn will force deeper spending cuts. Kenya’s protests show what that squeeze can look like on the ground. The US Treasury chief is skipping the G20 session, and there’s little appetite for the debt relief offered during COVID. The institutions built to coordinate a response look stretched. How the IMF and World Bank answer demands for debt relief and gentler conditions could shape whether poorer nations get help or austerity.