UNDP sounds alarm ahead of Bangkok meetings

Developing countries face a triple shock from the energy crisis, El Niño and surging borrowing costs, and need urgent support from the international community, the United Nations Development Programme (UNDP) has warned. The warning came ahead of the International Monetary Fund (IMF) and World Bank annual meetings taking place in Bangkok this week.

UNDP administrator Alexander De Croo called for "solidarity and global action", according to the Guardian. "Developing countries, their hands and legs are being pulled in different directions: it's truly hard for them," he said.

'No Time to Recover' report

Ahead of the meetings, the UNDP published a report titled No Time to Recover, which lays out the risks of what it calls "compounding crises" spanning energy, climate and debt. Oil prices have been driven back above $100 a barrel in recent weeks since hostilities resumed in the Middle East, the report noted.

The report said that since the Iran war broke out earlier this year, up to 130 million of the world's poorest people have been shielded from the full impact of high prices by emergency government measures. However, it warned that many of these people are now at risk as governments run out of resources to keep cushioning their populations against soaring costs.

"What we see now is that countries are pivoting their policy and letting the price hikes flow through. They're pivoting the policy because they have no choice, because their fiscal space is completely eaten up," De Croo said. "We are witnessing a perfect storm that could throw tens if not hundreds of millions of people back into poverty."

El Niño and bond market pressures

The report also flagged what it described as the worst El Niño climate pattern in perhaps 1,000 years, which is expected to cause widespread crop failures and increase the risk of extreme weather events. At the same time, a global bond sell-off is driving up government borrowing costs for developing nations.

De Croo said the cost of bond financing for developing countries currently stands at around 9%, which he described as "really, really high". He said the situation was expected to deteriorate between now and the spring, adding that for each of the three pressures — fuel prices, El Niño and the bond markets — there was currently no sign of improvement.

Debt Justice findings reinforce warning

De Croo's warning was echoed by separate research published on Sunday by the campaign group Debt Justice, which examined the social impact of high debt servicing costs. The research found that low-income countries classified by the IMF as either in, or at risk of, debt distress have cut their education budgets by an average of 8% since 2019, alongside a 2% cut in wider public spending.

Heidi Chow, executive director of Debt Justice, said high levels of debt were having a "devastating impact" on people's access to healthcare and education. Debt Justice called for the outright cancellation of some of the most burdensome debts and an overhaul of the IMF-administered common framework for debt restructuring, with Chow saying cancellation was needed especially from the highest-interest lenders, including banks, hedge funds and oil traders.

UNDP calls for faster, coordinated action

De Croo said the UNDP did not oppose efforts to secure debt relief for the hardest-hit countries but argued that such negotiations would take many months, and instead called for more urgent measures. "We urge the international community — multilateral lenders, donors, and partners — to step up access to affordable finance so countries can sustain support for their most vulnerable households," he said.

He praised IMF managing director Kristalina Georgieva's recent call for spending restraint in developed countries in the hope of taming bond yields, but said developing countries needed their own coordinated policy response rather than being left "at the end of the line". De Croo pointed to precedents such as the G20's temporary debt repayment standstill during the Covid crisis and central bank liquidity measures, including currency swap lines used by the US Federal Reserve during past financial crises, as examples of the kind of support that could help.