Key facts
- Developing countries face overlapping crises from rising energy costs, El Nino, and high borrowing costs.
- The UN Development Programme warned of a potential "domino effect" leading to financial distress for many nations.
- The strongest El Nino since 1950 is expected to increase food insecurity by 49 million people by the end of 2027.
- The war has impacted approximately 100 countries, according to UNDP Administrator Alexander De Croo.
- Governments are depleting fiscal buffers and facing rising debt levels.
- Protests and social unrest occurred in 10 countries in September due to higher energy prices.
Developing countries are grappling with a confluence of crises, including escalating energy costs, a powerful El Nino weather pattern, and significantly higher borrowing expenses, the United Nations Development Programme (UNDP) reported on Friday.
UNDP Administrator Alexander De Croo cautioned that these overlapping challenges could trigger a "domino effect," pushing numerous nations into financial distress, a situation reminiscent of the pandemic era when the G20 suspended debt payments for the poorest countries. He indicated that global policymakers are expected to address these critical issues at the upcoming annual meetings of the International Monetary Fund (IMF) and World Bank in Bangkok from October 12 to 18.
The IMF-World Bank gatherings will convene global financial leaders to deliberate on the state of the world economy, artificial intelligence, climate change, and other pressing matters. Government borrowing costs have reached multi-decade highs amid persistent inflation concerns, further exacerbated by geopolitical tensions driving up energy prices.
Simultaneously, the most potent El Nino phenomenon since 1950 is anticipated to cause widespread floods in some regions and severe droughts in others, potentially leading to food insecurity for an additional 49 million people by the end of 2027. De Croo highlighted that UNDP surveys indicate the conflict has evolved from a regional issue to a crisis affecting approximately 100 countries.
While many governments have implemented measures to shield their populations from surging oil prices, their fiscal reserves are dwindling, and debt levels are rising without immediate prospects for relief. De Croo emphasized the need for countries to prioritize support for their most vulnerable citizens. Although some nations are pursuing diversification of energy sources and adapting food systems, these efforts will require time, leaving them in a precarious position in the short term.
UNDP Chief Economist George Gray Molina observed a significant shift in September, as some governments began to pass on higher energy prices to consumers and reduce subsidies and tax relief measures that had previously helped stabilize food and energy costs. This indicates a diminished capacity for governments to manage these burdens fiscally and financially, a point Molina stressed as a critical discussion topic. He added that even middle-income countries have rapidly depleted their fiscal buffers in their attempts to mitigate rising energy prices.