Finance officials from around the world arrive in Bangkok this week for the annual meetings of the International Monetary Fund and World Bank. They’ll face a global economy squeezed by what’s being called the biggest energy supply shock ever, rising interest rates and public debt at its highest level since World War Two. The war with Iran, now in its eighth month, is expected to dominate the agenda and push nearly everything else aside.
The Energy Shock
The figures are stark. Iran’s closure of the Strait of Hormuz cut off about 20% of the world’s oil supply. Since the war began on February 28, more than 1 billion barrels of oil have been released, mainly from onshore commercial inventories. Industry executives say accessible oil storage is running low. That leaves the market more fragile and puts further pressure on prices.
Governments have drawn on stockpiles. Under pressure from US President Donald Trump, Group of Seven countries agreed to release 100 million barrels of diesel and crude oil from emergency reserves. Trump wants lower gasoline prices before November elections that could see his Republican Party lose control of Congress. On Friday, he announced a deal with Russia to provide more diesel to global markets, along with a temporary waiver of US sanctions intended to deprive Moscow of revenue for its war on Ukraine. Ukrainian President Volodymyr Zelenskiy quickly criticised the move.
World Bank President Ajay Banga told Reuters that global growth had held up better than feared after the Strait of Hormuz closure, but pressure is building again. Soaring diesel prices, rising fertilizer prices and a looming "super" El Niño weather effect are arriving together; experts say the effect could cause 450,000 heat-related deaths. The Bank isn’t revising its global forecasts down, he said, but it’s watching closely. "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.
The Debt Problem
IMF Managing Director Kristalina Georgieva put it bluntly in her preview speech: "Winter is coming." The IMF has signalled little change to its forecast of 3% global growth in 2026. It may nudge next year’s figure up slightly, while Ukraine, now in its fifth year of war against Russia’s invasion, and Gulf countries hit by Iranian strikes are expected to see downgrades.
The fund says public debt has reached its highest level since World War Two and will exceed 100% of GDP before 2030. Advanced economies, led by the United States, carry the highest debt-to-GDP ratios. Developing countries face a different squeeze. They’ll have to renegotiate high public debt at higher interest rates, and their interest payments already average more than 10% of revenue. They’re also vulnerable to capital outflows chasing higher US rates.
Don’t expect a repeat of the early COVID-era relief. G20 leaders then announced a suspension of debt-service payments for the poorest countries, but G20 diplomats say there’s little appetite for that now. High debt and political pressures pose bigger obstacles.
Conditionality and Credibility
The IMF is reworking how it lends. New recommendations for loan programs would require fewer but deeper reforms before officials approve lending. Some lower-income countries fear the shift 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. She pointed to Kenya, which avoided debt restructuring by cutting public spending and trying to raise taxes, only to face significant protests, especially among young people.
Washington’s Absence
US Treasury Secretary Scott Bessent won’t attend. A US official said he’d sent two senior officials in his place while handling some "domestic engagements." He’s also skipping a G20 meeting, which the United States leads this year. The absence may frustrate counterparts amid tensions over the Iran war, Ukraine’s fight against Russia and the US decision to impose sanctions on the International Criminal Court.
Security poses a practical worry, too. More than 10,000 travelers are heading to Bangkok, and flight routes there often pass through the Middle East. Recent attacks on Saudi airports have raised immediate concerns.
Josh Lipsky of the Atlantic Council noted that finance officials dismissed the Hamas attack as unrelated to economics when the last off-site meetings convened in Morocco three years ago. That’s no longer the case. "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," he said. 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 Bangkok meetings put a hard question to governments and lenders alike: how much room remains to absorb shocks? Public debt has reached its highest level since World War Two and is projected to top 100% of GDP before 2030, leaving many treasuries with little cushion. Emergency stockpile releases can buy only limited time as accessible storage runs low. Developing economies already spend more than 10% of revenue on interest, and refinancing at higher rates will test them further. The disputes over IMF conditionality expose the tension between lending discipline and political tolerance for reform. From a fiscal and market standpoint, energy security and debt sustainability are now tightly linked.