Developing countries are simultaneously grappling with soaring energy costs, severe weather linked to El Niño, and mounting government debt expenses, the UN Development Programme has warned. Speaking ahead of International Monetary Fund and World Bank meetings in Bangkok, UNDP administrator Alexander De Croo described the situation as 'a perfect storm' that could push tens or hundreds of millions of people back into poverty.
Oil prices have climbed above $100 a barrel following renewed Middle East conflict. Since the Iran war began earlier this year, emergency government measures have protected up to 130 million of the world's poorest people from the worst price impacts. However, as government resources dwindle, many countries are ending these protections, allowing price increases to affect consumers directly, De Croo said.
The challenge worsens because developing nations face unprecedented borrowing costs. De Croo noted that government bond financing for developing countries now costs 9% annually. Simultaneously, El Niño is expected to trigger widespread crop failures and extreme weather, while global bond market turmoil continues. De Croo said conditions are expected to deteriorate through spring, with 'no light at the end of the tunnel' for any of these three issues.
Research by campaign group Debt Justice showed that low-income countries at risk of debt distress have cut education spending by an average of 8% since 2019. The UNDP called for the international community to provide affordable financing to help countries support vulnerable populations, and suggested measures such as currency swap lines used during previous financial crises.