Energy, climate and debt crises threaten developing nations, UN warns

By the Editorial Team · Monday, October 12, 2026

A UNDP report warns that developing countries are simultaneously grappling with rising energy costs, an impending severe El Niño, and increasing debt burdens, threatening economic stability and poverty reduction efforts. In response, the World Bank and IMF are mobilizing financial aid and exploring debt restructuring to help vulnerable nations manage these compounded crises during the IMF and World Bank annual meetings in Bangkok.

Developing countries are facing a convergence of energy, climate, and debt crises that threaten to deepen global poverty and economic instability, according to a United Nations Development Programme (UNDP) report released ahead of the International Monetary Fund (IMF) and World Bank annual meetings in Bangkok this week.

UNDP Administrator Alexander De Croo emphasized the severe pressures on vulnerable economies, highlighting how rising oil prices, an impending intensification of the El Niño weather pattern, and climbing borrowing costs are stretching limited resources to their breaking points. “In developing countries, their hands and legs are being pulled in different directions: it’s truly hard for them,” De Croo said.

The report, titled *No Time to Recover*, warns that energy prices have surged above $100 per barrel in recent weeks following renewed hostilities in the Middle East. This increase is placing considerable strain on countries reliant on imported fuel. Although emergency government measures have temporarily shielded approximately 130 million of the world’s poorest people from the worst effects of higher energy costs since the outbreak of the Iran conflict earlier this year, funding shortages are threatening the sustainability of these subsidies.

Compounding the energy crisis, the report underscores the looming threat from what is forecast to be an exceptionally intense El Niño. The phenomenon is expected to cause widespread crop failures and exacerbate the frequency of extreme weather events, heightening risks to food security and farmer livelihoods. Simultaneously, a global sell-off in bonds has increased government borrowing costs, further limiting developing nations’ ability to finance essential public services.

World Bank President Ajay Banga revealed that the institution is in talks with 30 to 40 countries seeking crisis assistance to mitigate the effects of energy shocks and inflation related to the Middle East conflict. The bank initially mobilized $25 billion in response to the crisis and has made an additional $35 billion available by reallocating funds from previously approved projects. Banga indicated that total disbursements could reach $100 billion if conditions worsen, surpassing the $70 billion distributed during the COVID-19 pandemic.

Amid escalating debt pressures, developing countries are estimated to owe around $400 billion in external debt in 2026, with interest payments consuming about one-third of that amount. The World Bank and IMF are collaborating on measures including debt restructuring and guarantees to assist nations in refinancing costly loans, aiming to free resources for critical sectors such as education and healthcare.

These financial challenges coincide with broader geopolitical tensions as the US-Israeli coalition’s conflict with Iran enters its eighth month, disrupting global energy supplies and contributing to inflationary pressures worldwide. Despite efforts by Group of Seven nations to release 100 million barrels of oil from emergency reserves and a US-Russia agreement to enhance diesel supply through temporary sanction waivers, market analysts caution that fuel stocks remain fragile. This leaves prices vulnerable to further spikes.

IMF Managing Director Kristalina Georgieva acknowledged the precarious economic outlook, stating, “Winter is coming,” underscoring the need for coordinated global policy responses. The IMF has maintained its global growth forecast at 3% for 2026 but cautioned that several regions, including Ukraine and Gulf countries, remain susceptible to ongoing risks.

The IMF and World Bank meetings in Bangkok thus convene at a critical juncture marked by intersecting crises demanding urgent international cooperation to safeguard developing economies and prevent a reversal of recent progress in poverty reduction.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.