The past week’s IMF-World Bank meetings (13-18 April) have left developing-country policymakers frustrated, as repeated external shocks are derailing efforts to tackle debt, reform their economies, and provide affordable food and fuel for millions of citizens.
Some officials and economists say this crisis marks a critical point and may drive countries to embrace more independent and regionally coordinated action.
According to the IMF and the World Bank, the war in Iran and the sharp rise in oil and fertiliser prices will weigh on global growth and drive inflation, even if the war ends soon.
These external shocks threaten the fiscal balances of countries recovering from previous debt defaults, such as Zambia and Sri Lanka. They are also eating into the buffers some countries built after the pandemic, the Russia-Ukraine war, and US trade tariffs upended their economies.
"It's like you got hit in the head many times. Once you got up and then you got hit again," Chayawadee Chai-anant, assistant governor of Thailand's central bank, told Reuters, referring to efforts to recover from repeated crises.
The IMF has lowered its 2026 growth forecast for emerging nations to 3.9 per cent, down from 4.2 per cent in January. These projections could worsen if the war in Iran persists.
“It’s a depressing mood, and it is also a repeated demonstration of the consequences on bystanders, where due to developments not of their own making, they have to deal with a severe economic crunch,” Reza Baqir, head of sovereign advisory services at Alvarez & Marsal, told Reuters.
In response to growing concern, the IMF and World Bank offered few new solutions, instead advising countries to “rebuild fiscal buffers once conditions stabilize and do so without delay”.
The IMF’s new fiscal affairs chief, Rodrigo Valdes, warned countries against using broad fuel subsidies to shield citizens from economic shocks, and instead advocated targeted, temporary cash transfers that do not obscure higher prices and keep demand high. At the same time, top leaders acknowledged that rising energy and food prices could fuel social unrest and outward migration.
Throughout the week, officials from Africa, Asia and Latin America discussed boosting resilience to future energy shocks by shifting resources into renewable energy and making better use of critical minerals to support growth and create jobs.
Even as leaders emphasise long-term resilience, they are under pressure to act quickly.
The World Bank forecasts that a prolonged war could push an additional 50 million people into acute food insecurity, while 10-15 million jobs could be lost in the near term alone.
“The cushion has been quite low, because it's never recovered back all the way, so it's thinner and thinner and thinner…especially for the fragile people,” Thailand’s Chai-anant told Reuters. “That's why this crisis, I think it's going to be more widespread.”
Source: commonspace.eu with Reuters
