Developing nations face triple crisis as energy, climate and debt converge

Three separate crises are converging on the world's poorest countries at once, and the international system has little time to respond. Oil prices have climbed back above $100 a barrel following renewed conflict in the Middle East. The worst El Niño weather pattern in perhaps a thousand years is bearing down, threatening widespread crop failures and extreme weather. And simultaneously, global bond markets are punishing developing nations with borrowing costs that have reached 9 percent—a rate that Alexander De Croo, administrator of the UN Development Programme, called genuinely alarming. Speaking before the International Monetary Fund and World Bank annual meetings in Bangkok, De Croo described the situation plainly: developing countries are being pulled in opposite directions at once, their fiscal capacity stretched to the breaking point.

The immediate human toll is already visible. Since the Iran war erupted earlier this year, emergency government measures have shielded roughly 130 million of the world's poorest people from the full weight of soaring energy prices. But that protection is evaporating. Governments have exhausted their fiscal space. They are now forced to let price increases flow directly to their populations—not because they want to, but because they have run out of money to absorb the shock. De Croo said the situation amounts to a perfect storm capable of pushing tens of millions, possibly hundreds of millions, back into poverty.

The debt dimension makes the squeeze even tighter. Research published by the campaign group Debt Justice shows that low-income countries classified by the International Monetary Fund as either in debt distress or at risk of it have cut education budgets by an average of 8 percent since 2019, with broader public spending down 2 percent. Healthcare and education systems are contracting precisely when populations will need them most. Heidi Chow, Debt Justice's executive director, framed the problem starkly: high debt levels are devastating access to the services that keep people alive and educated.

De Croo stressed that the outlook is darkening. For each of the three pressures—fuel prices, El Niño, and bond markets—there is no visible relief on the horizon. The situation is expected to worsen between now and spring. He called for urgent international action, not the slow machinery of debt restructuring negotiations that could take months. Instead, he urged multilateral lenders, donors, and partner nations to open access to affordable financing so developing countries can sustain support for their most vulnerable households. He pointed to precedent: during the Covid crisis, G20 nations implemented a temporary standstill on debt repayments for the poorest countries. He also suggested liquidity measures—currency swap lines and other tools central banks have deployed during past financial crises—could prevent markets from seizing up entirely.

What De Croo declined to specify was exactly what form that coordinated response should take. But he was clear about what it cannot be: developing countries cannot simply be told to wait at the end of the line. The international community needs to create what he called time and space for these nations to make necessary changes while their populations are not simultaneously drowning. The IMF and World Bank meetings in Bangkok this week will test whether that solidarity exists.