Global debt crisis, Middle East tensions shadow IMF-World Bank Bangkok summit

Finance ministers and central bankers from across the globe are converging on Bangkok this week for the annual meetings of the International Monetary Fund and World Bank, arriving into a landscape of compounding crises that no single policy lever can fix. The gathering, held outside Washington for the first time in three years, unfolds under the weight of an eight-month-old war between the US, Israel, and Iran that has already reshaped global energy markets, sent fertilizer prices climbing, and left policymakers scrambling to manage the fallout. The absence of US Treasury Secretary Scott Bessent—who sent two senior deputies in his place to handle unspecified domestic matters—signals the fractured attention of the world's largest economy at a moment when coordinated response might matter most.

The immediate crisis is energy. When Iran closed the Strait of Hormuz in response to the conflict, it cut off roughly one-fifth of the world's oil supply. The Group of Seven nations, under pressure from President Donald Trump ahead of November elections, has already released 100 million barrels from emergency reserves. Trump has also brokered a separate deal with Russia to flood additional diesel into global markets and temporarily waived sanctions meant to punish Moscow for its invasion of Ukraine—a move that drew sharp rebuke from Ukrainian President Volodymyr Zelenskiy. Yet even as governments pump oil from their reserves, industry executives warn that accessible storage is running dangerously low, leaving markets vulnerable to further shocks. More than a billion barrels have been drawn down since the war began on February 28, and the supply cushion is thinning.

The energy shock arrives alongside other pressures that compound each other in ways that defy simple solutions. A looming "super" El Niño weather pattern could trigger as many as 450,000 heat-related deaths. Fertilizer prices have surged. Interest rates remain elevated. World Bank President Ajay Banga told Reuters that while global growth has proven more resilient than feared when the Strait closed, new pressures are building. The combination—energy costs, food prices, climate stress, and debt—creates what he called a challenge requiring careful preparation in the months ahead. IMF Managing Director Kristalina Georgieva opened the week with a blunt message: "Winter is coming."

Beneath these immediate shocks lies a structural problem that may prove harder to solve. Public debt across the world has reached its highest level since World War Two and is projected to exceed 100 percent of GDP before 2030. Advanced economies, led by the United States, carry the largest debt-to-GDP ratios, but developing countries face a more precarious position. They are losing capital to investors chasing higher returns in US markets, they lack the AI-driven productivity gains that have cushioned wealthy nations against supply shocks, and they must refinance existing debt at sharply higher interest rates. In developing countries, interest payments already consume more than 10 percent of government revenue on average. Kenya, for example, avoided a debt restructuring by cutting public spending and raising taxes, but the measures sparked significant protests, particularly among young people.

The IMF's response to this crisis—recommending fewer but deeper reforms as conditions for new lending—has alarmed advocates for developing nations. Iolanda Fresnillo, who works on debt justice for Eurodad, argues that countries already cutting expenditures to service debt will face even harsher austerity if the IMF tightens its conditionality. She warned that the Fund risks losing credibility with developing countries unless it acknowledges the severity of their situation and reforms its governance structure. There is little appetite among G20 nations for the kind of debt relief that was offered during the COVID crisis, according to diplomats who cite high debt levels and domestic political pressures as obstacles.

The Bangkok meetings also carry security dimensions that would have seemed foreign to finance officials a generation ago. Flight routes to Thailand pass through the Middle East, and recent attacks on Saudi airports have forced organizers to manage the safety of more than 10,000 travelers heading to a city of 9 million people. Three years ago, the IMF and World Bank held their last off-site meetings in Morocco, just days after Hamas killed 1,200 people in Israel and Israel's subsequent bombardment of Gaza killed more than 74,000 and devastated Palestinian cities. Finance officials at the time dismissed the attack as outside their purview. Josh Lipsky of the Atlantic Council noted that the connection between security and economics is now undeniable: the closure of the Strait of Hormuz traces directly back to decisions made three years ago. Policymakers, he argued, must become more agile in responding to geopolitical crises in a world where the old boundaries between domains no longer hold. They can no longer operate as though the world they inhabited still exists.