Middle East war, debt crisis shadow IMF-World Bank talks in Bangkok

Finance ministers and central bankers from around the world are converging on Bangkok this week for the annual meetings of the International Monetary Fund and World Bank, but they arrive into a gathering shadowed by three converging crises: an eight-month war between Iran and an Israeli-American coalition that has triggered the largest energy supply shock in modern history, interest rates climbing steadily upward, and a global debt burden that has reached its highest level since the end of World War Two. Together, these forces are pressing down on economic growth that was already struggling to gain momentum.

The conflict in the Middle East has become impossible to separate from the financial architecture that officials are meant to discuss in Thailand. When Iran closed the Strait of Hormuz in response to the war, it cut off roughly one-fifth of the world's oil supply. Since the fighting began on February 28, more than a billion barrels of oil have been released from emergency reserves and commercial stockpiles to stabilize markets, but industry executives warn that accessible reserves are thinning. The Group of Seven nations agreed to release 100 million barrels of diesel and crude oil under pressure from President Donald Trump, who wants lower gasoline prices before November elections. Trump also announced a separate deal with Russia to supply additional diesel to global markets and temporarily waive sanctions designed to starve Moscow of revenue for its war in Ukraine—a move that drew immediate criticism from Ukrainian President Volodymyr Zelenskiy. The fragility of these arrangements means prices remain volatile and vulnerable to any further disruption.

World Bank President Ajay Banga acknowledged that global growth has held up better than feared when the initial shock hit, but he warned that pressures are building again. A convergence of shocks is now bearing down simultaneously: diesel prices have soared, fertilizer costs are climbing, and a powerful El Niño weather pattern is expected to arrive, with experts projecting it could cause 450,000 heat-related deaths. Banga emphasized that it is not any single factor but the combination of all these stresses—energy costs, food prices, debt levels, and climate effects—that creates the real danger. IMF Managing Director Kristalina Georgieva opened the meetings with a stark warning: "Winter is coming."

The debt crisis is the most structural threat. Public debt across the world has reached levels not seen since 1945 and is projected to exceed 100 percent of gross domestic product before 2030. While wealthy nations, led by the United States, carry the largest debt-to-GDP ratios in absolute terms, developing countries and low-income nations face a far more precarious situation. They are caught in a perfect storm: capital is flowing out of their markets in search of higher returns available in the United States, El Niño is disrupting agriculture and food supplies, and they lack the investment in artificial intelligence that has helped wealthy countries cushion themselves against supply shocks. Interest payments on debt already consume more than 10 percent of government revenue in developing countries on average, leaving little room for spending on schools, hospitals, or infrastructure.

The IMF is tightening the conditions it attaches to new loans, requiring fewer but deeper reforms from countries seeking assistance. This shift is alarming developing nations already under severe fiscal strain. Iolanda Fresnillo, who works on debt justice for the European Network on Debt and Development, warned that countries are already cutting public spending because debt payments are rising and because of existing IMF requirements. She pointed to Kenya, which avoided a formal debt restructuring by slashing expenditures and raising taxes, but the measures triggered significant protests, particularly among young people. Fresnillo argued that the IMF risks losing credibility if it does not acknowledge the severity of the crisis facing many developing countries. "As long as they continue with the governance structure that they have, they are becoming less and less relevant," she said.

Notably, U.S. Treasury Secretary Scott Bessent is not attending the meetings, sending two senior officials instead while he handles domestic engagements. His absence from this high-profile gathering and from a Group of 20 meeting that the United States is leading this year signals a shift in priorities and may frustrate other nations amid rising tensions over the Iran war, Ukraine's defense against Russian invasion, and the U.S. decision to impose sanctions on the International Criminal Court. The last time the IMF and World Bank held their annual meetings outside Washington was three years ago in Morocco, just days after Hamas killed 1,200 people in Israel and Israel responded with a bombardment of Gaza that killed more than 74,000 people. At that time, finance officials dismissed the attack as not being an economic issue. Three years later, the connection between national security and global finance is undeniable. Josh Lipsky, vice president of international economics at the Atlantic Council, noted that the closure of the Strait of Hormuz has direct roots in events from that earlier conflict. He argued that policymakers must become more agile and proactive in responding to geopolitical crises in an increasingly interconnected world. "They have to recognize that they don't live in the world they used to," he said.