Geopolitical tensions and soaring debt to dominate IMF‑World Bank meetings in Bangkok

By Andrea Shalal

BANGKOK, Oct 11 (Reuters) – World finance chiefs will convene in Thailand this week amid a widening conflict in the Middle East, the most severe energy supply disruption on record and rising interest rates. Together, these factors create formidable challenges for an already fragile global economy.

The war between Israel and Iran, now entering its eighth month, and the resulting inflationary pressure and humanitarian hardship will dominate the agenda of the IMF and World Bank annual gatherings. The meetings are being held outside Washington for the first time in three years.

U.S. Treasury Secretary Scott Bessent will not attend; he sent two senior officials in his place while he attends to “domestic engagements,” according to a U.S. official.

His absence from both this high‑profile summit and a G20 meeting—led by the United States this year—may irritate counterparts, especially as tensions rise over the Iran conflict, Ukraine’s fight against Russia’s invasion, and recent U.S. sanctions against the International Criminal Court.

World Bank President Ajay Banga told Reuters that while global growth proved resilient after Iran’s closure of the Strait of Hormuz—which cut off roughly 20 % of world oil supplies—new pressures are emerging. Diesel and fertilizer prices are soaring, and a “super” El Niño event could cause up to 450,000 heat‑related deaths, compounding the stress.

Under pressure from President Donald Trump, who seeks lower gasoline prices ahead of November’s midterm elections, the Group of Seven has agreed to release 100 million barrels of diesel and crude from emergency stocks.

Trump announced a deal with Russia on Friday that would deliver additional diesel to global markets and temporarily waive certain U.S. sanctions meant to cut Moscow’s war financing in Ukraine. Ukrainian President Volodymyr Zelenskiy quickly condemned the move.

Since the war began on February 28, more than one billion barrels of oil have been drawn from commercial inventories, but industry executives warn that accessible storage levels are dwindling, leaving markets vulnerable and prices under pressure.

Banga said the Bank is not lowering its current growth outlook but is monitoring developments closely. “It’s not just El Niño by itself; it’s the combination… fertilizer prices, energy costs, debt—what they all add up to creates its own challenges,” he remarked. “We all need to be far more prepared for what lies ahead.”

RISING DEBT

IMF Managing Director Kristalina Georgieva reiterated a cautionary tone in her customary pre‑meeting speech, warning the audience, “Winter is coming.”

The IMF foresees little change to its 2026 global growth projection of 3 % and may modestly upgrade next year’s estimate. However, several nations face downgrades, notably Ukraine—now in its fifth year of conflict with Russia—and Gulf states impacted by Iranian strikes and reduced energy exports.

Research released by the IMF on Tuesday highlights that sharp spikes in food and energy costs are increasingly triggering crises, pushing inflation expectations higher for longer, deepening poverty and threatening economic stability.

A major concern for policymakers is the mounting public‑debt burden, which erodes growth and fuels inflation. The IMF reports that debt levels are at their highest since World War II and are projected to surpass 100 % of GDP before 2030.

Advanced economies, led by the United States, carry the heaviest debt‑to‑GDP ratios, yet emerging markets and low‑income countries are especially exposed. They confront a “perfect storm” of challenges: capital outflows chasing higher U.S. yields, El Niño‑related weather impacts, and limited investment in artificial intelligence—a factor that has cushioned supply shocks in wealthier nations.

EMERGING MARKET CONCERNS

Developing nations are especially vulnerable as high public‑debt levels must be refinanced at elevated interest rates. On average, debt service payments now consume more than 10 % of government revenues in these countries.

During the early COVID‑19 crisis, G20 leaders instituted a debt‑service suspension for the world’s poorest economies, but diplomats from G20 member states report that there is now little appetite for a repeat, citing heightened debt burdens and political resistance as greater obstacles.

Many low‑income countries are uneasy about new IMF loan‑program guidelines that emphasize fewer but deeper reforms as a condition for financing, a shift they fear could impose harsh austerity measures.

“Governments are already trimming spending because debt repayments are climbing and because of IMF conditionality,” said Iolanda Fresnillo, debt‑justice advocate for Eurodad. “We worry that the updated conditionality review will only make matters worse.”

Fresnillo cited Kenya’s experience, where cost cuts and tax hikes averted a debt restructuring but sparked sizable public protests, especially among young citizens.

The IMF, she warned, risks losing credibility unless it acknowledges the severity of the crises confronting many developing economies.

“As long as they retain the current governance structure, they will become progressively less relevant,” she added.

SECURITY AND FINANCE

Flight routes to Bangkok often transit the Middle East, creating immediate security concerns for the more than 10,000 attendees expected in Thailand’s capital. Bangkok, a city of roughly nine million people, has faced recent attacks on Saudi airports, heightening these risks.

The last off‑site IMF‑World Bank meetings, held in Morocco, occurred just days after Hamas‑led militants killed about 1,200 people in Israel, followed by Israel’s bombardment of Gaza that claimed over 74,000 lives and devastated large parts of the Palestinian territory.

Three years later, the link between national security and international finance is undeniable, even though officials at the time downplayed the economic impact of the Hamas attack, noted Josh Lipsky, Atlantic Council’s vice president for international economics.

“There have been massive global repercussions,” Lipsky observed. “The current situation with Iran and the closure of the Strait of Hormuz is directly connected to what happened three years ago.”

Policymakers must become more agile in responding to geopolitical shocks in an increasingly interconnected world, Lipsky argued. “They need to be proactive and recognize that they no longer operate in the world they once knew.”

(Reporting by Andrea Shalal; Editing by Dan Burns and Andrea Ricci)

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