UNDP warns of mounting crisis in developing countries

Developing countries are facing growing economic pressure as higher energy prices, rising borrowing costs and worsening climate conditions converge to create overlapping crises, the United Nations Development Programme (UNDP) has warned.

UNDP Administrator Alexander De Croo said the combination of these challenges could push a large number of countries into financial distress. He made the remarks ahead of the annual meetings of the International Monetary Fund and World Bank, scheduled to take place in Bangkok from October 12 to 18.

The meetings are expected to focus on the global economy, climate change, artificial intelligence and other major international challenges. Rising government borrowing costs have added to concerns, while higher energy prices linked to the Iran war are placing additional pressure on national budgets.

The UNDP also warned that a powerful El Niño weather pattern could worsen food insecurity. The agency estimates that around 49 million additional people could face food insecurity by the end of 2027 as some regions experience severe flooding while others suffer drought.

De Croo said the impact of the war had extended well beyond the region, with UNDP assessments indicating that around 100 countries are being affected by the resulting economic pressures.

Many governments initially used subsidies, tax measures and other support programmes to protect households from rising food and energy costs. However, those measures have placed additional strain on public finances, while debt levels have continued to rise.

UNDP Chief Economist George Gray Molina said some governments began scaling back such support measures in September as their fiscal capacity weakened. He warned that even middle-income countries had rapidly used up financial reserves while attempting to shield their populations from higher energy prices.

The UNDP said developments in oil prices and bond markets over the next two months will be particularly important. It also reported that higher costs had contributed to protests and social unrest in 10 countries during September.

A UNDP survey found that 22 of 26 countries viewed the crisis as a medium or high priority. Thirteen said they were already dealing with another economic or fiscal crisis, while all 26 expected conditions to worsen before they improve.