UNDP warns of triple shock for developing countries ahead of IMF and World Bank meetings

A warning ahead of the annual meetings

Developing countries are facing a triple shock, combining the energy crisis, the El Niño phenomenon and a surge in borrowing costs. That is the warning issued by the United Nations development agency, UNDP, according to the Guardian of October 11, 2026. It is calling on the international community for urgent support.

Alexander De Croo, UNDP Administrator, was speaking ahead of the annual meetings of the International Monetary Fund (IMF) and the World Bank, which are taking place this week in Bangkok. He called for "solidarity and global action." According to him, developing countries are being pulled in several directions at once, which makes their situation "really difficult."

The "No Time to Recover" report

Ahead of these meetings, UNDP published a report titled No Time to Recover. It details the risks of what it calls "compounding crises" affecting energy, climate and debt.

According to the Guardian, oil has been pushed back above $100 a barrel in recent weeks, since hostilities resumed in the Middle East. The report says that, since the start of the war in Iran earlier this year, as many as 130 million of the world's poorest people have been shielded from the full impact of rising prices by emergency measures taken by governments.

UNDP warns, however, that many of them are now at risk, as states no longer have the resources needed to keep cushioning rising costs. Alexander De Croo says countries are changing course and letting price increases pass through, out of necessity, because their fiscal room has, in his view, been entirely exhausted. He speaks of a "perfect storm" that could push tens, or even hundreds, of millions of people back into poverty.

El Niño, bond market strains and the social impact of debt

The Guardian reports that the worst El Niño episode in perhaps 1,000 years is expected to cause widespread crop losses and increase the risk of extreme weather events. At the same time, the wave of selling on global bond markets is driving up government borrowing costs.

According to Alexander De Croo, the cost of bond financing for developing countries now stands at 9%, a level he considers "very, very high." He believes the situation could worsen further by spring and sees no relief on the horizon for any of the three factors (fuel prices, El Niño and bond markets).

The Guardian notes that these remarks echo a separate study published on Sunday by the Debt Justice organization. It shows that low-income countries classified by the IMF as being in, or at risk of, debt distress have cut their education budgets by 8% on average since 2019, and their overall public spending by 2%.

Heidi Chow, Executive Director of Debt Justice, says high debt levels are having a devastating impact on access to healthcare and education. The organization is calling for the outright cancellation of some of the heaviest debts and an overhaul of the common debt restructuring framework administered by the IMF. Heidi Chow argues for cancellation, in particular by lenders charging the highest interest rates, citing banks, hedge funds and oil traders.

Avenues raised by UNDP

Alexander De Croo says UNDP does not oppose efforts to provide debt relief for some of the most affected countries. He does, however, consider that negotiations would take many months and calls for faster action. He urges multilateral lenders, donors and partners to expand access to affordable financing so that countries can sustain support for the most vulnerable households.

He welcomed the recent call by IMF Managing Director Kristalina Georgieva for fiscal restraint in developed countries, in the hope of calming bond yields. He nonetheless believes a coordinated policy is needed for developing countries, which must not be left at the back of the line. He did not specify the response expected, but stressed the need to give them "time and space" to carry out reforms.

The Guardian recalls that, during the Covid crisis, G20 countries introduced a temporary moratorium on debt repayments by developing countries. Alexander De Croo also cites liquidity measures available to central banks, such as the currency swap lines set up by the US Federal Reserve during recent financial crises, to prevent market paralysis: "Some level of liquidity would help," he says.

The Financial Times' take

The Financial Times, in an article published October 12, 2026, refers to "ominous portents" hanging over the global economy despite resilient growth. According to work conducted for the newspaper, major economies are withstanding the Iranian shock, but concerns over rising public debt will weigh on the IMF and World Bank meetings.

Analysis

The two publications draw a contrast: according to the Financial Times, major economies are absorbing the shock, while according to UNDP, developing countries are seeing their fiscal room disappear. In both cases, debt and the cost of financing emerge as the central point of tension in the Bangkok discussions. The sources provided do not specify the decisions the IMF and the World Bank might take.