Middle East war, soaring debt threaten global growth at IMF-World Bank Bangkok talks

Finance ministers and central bankers from around the world are descending on Bangkok this week for the annual meetings of the International Monetary Fund and World Bank, but the gathering arrives under conditions of genuine economic strain. An eight-month war between the US, Israel, and Iran has disrupted roughly a fifth of the world's oil supply. Energy prices have spiked. Interest rates remain elevated. And underneath it all, public debt has climbed to levels not seen since the end of World War Two—a structural weight that is now beginning to constrain growth in countries that can least afford the burden.

The absence of US Treasury Secretary Scott Bessent from the Bangkok meetings signals something about the moment. He sent two senior deputies instead, citing domestic engagements, but the choice to skip both the IMF-World Bank sessions and a Group of 20 gathering that the United States leads this year has drawn quiet frustration from other nations. The tensions are real: the Iran war, the ongoing conflict in Ukraine, and new US sanctions on the International Criminal Court have all created friction at a time when coordinated policy responses matter most.

World Bank President Ajay Banga acknowledged to Reuters that while global growth has proven more resilient than expected when Iran closed the Strait of Hormuz—cutting off roughly one-fifth of global oil flows—new pressures are mounting. Diesel prices have climbed. Fertilizer costs are rising. A powerful El Niño weather pattern is building, and climate scientists estimate it could trigger as many as 450,000 heat-related deaths. These forces are converging. Since the war began on February 28, more than one billion barrels of oil have been released from commercial inventories and emergency reserves, including 100 million barrels that the Group of Seven agreed to deploy under pressure from President Trump, who wants lower gasoline prices ahead of November elections. Even so, accessible oil reserves are thinning, leaving markets more fragile and vulnerable to further shocks.

The deeper crisis, though, is debt. The IMF has signaled that public debt will exceed 100 percent of gross domestic product before 2030. Advanced economies, led by the United States, carry the highest debt-to-GDP ratios, but developing countries face a more acute squeeze. They are experiencing capital outflows as investors chase higher returns in US markets. They are exposed to El Niño's agricultural and health impacts. They lack the investment in artificial intelligence that has helped wealthy nations absorb supply shocks. And they must refinance existing debt at sharply higher interest rates. In developing countries, interest payments already consume more than ten percent of government revenue on average. Kenya, for instance, avoided a debt restructuring by cutting public spending and raising taxes, but those measures sparked significant protests, particularly among young people.

The IMF is now recommending loan programs that demand fewer but deeper reforms as a condition for lending. Iolanda Fresnillo, who works on debt justice for Eurodad, a European network focused on development and debt, warned that this shift will likely force countries into painful austerity measures at precisely the moment when they can least absorb them. "Countries are already cutting their expenditures because their debt payments are going high and because of the IMF conditionality," she said. "We fear that this review of conditionality policy is just going to make things worse." She added that the IMF risked losing credibility with developing nations unless it acknowledged the severity of the crisis they face.

The meetings themselves carry an unusual security dimension. Flight routes to Bangkok often pass through the Middle East, and recent attacks on Saudi airports have created immediate logistical concerns for the more than 10,000 travelers heading to Thailand's capital. Three years ago, the last off-site IMF-World Bank meetings took place 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. At that time, finance officials largely dismissed the attack as outside their purview. Today, the connection between geopolitical upheaval and economic stability is undeniable. Josh Lipsky, vice president of international economics at the Atlantic Council, noted that the closure of the Strait of Hormuz—a direct consequence of the Iran war—has reshaped global energy markets and inflation expectations in ways that demand immediate policy response. "What we're currently experiencing with Iran and the closure of the Strait of Hormuz has a direct connection with what happened three years ago," he said. Policymakers, he argued, must become more agile and proactive in an interconnected world where finance and security are no longer separate domains. The question now is whether this week's meetings will produce the kind of coordinated response the moment demands, or whether the fractures already visible in the room will widen.