‘No other choice’: Poorer countries face painful spending cuts as Iran war drives up energy costs, says IMF

‘No other choice’: Poorer countries face painful spending cuts as Iran war drives up energy costs, says IMF



Finance ministers and central bankers meet in Bangkok, Thailand in October for the 2026 annual gatherings of International Monetary Fund and World Bank, with the global economy buffeted between the US-Iran war’s energy shock, rising debt pressures and the AI boom. — AFP pic


Summary

• The International Monetary Fund (IMF) has highlighted the severe challenges faced by low-income developing countries amid the energy shock driven by the Iran conflict.
• The IMF has urged these nations, particularly heavily indebted oil importers, to implement targeted subsidies, rebuild fiscal strength, and consider debt restructuring to manage rising debts and inflation.
• The IMF has also emphasized the potential risks of AI investment slowdowns and climate-related factors like El Niño impacting global economic projections.
• The IMF's World Economic Outlook underscores the vulnerability of countries not benefiting from the AI investment boom.

First Published: Tuesday, 13 Oct 2026 10:56 AM MYT


BANGKOK, Oct 13 — The International Monetary Fund warned on Tuesday that while low-income developing countries were dealing with the disproportionate impacts of the Iran war-fuelled energy shock, many had “no choice” but to cut spending or face debt restructuring.

Speaking to AFP on the sidelines of the organisation’s Annual Meetings in Bangkok, IMF deputy director of research Petya Koeva Brooks said heavily indebted oil-importing countries were facing the worst of the energy shock and had difficult choices to make in helping their citizens through the crisis.


“Unfortunately, after years of the global economy being hit (by) shock after shock, debt levels have increased quite a lot, and at the same time, inflation has become a problem,” she said.


The US war on Iran has plunged the Middle East into conflict and sent global energy prices soaring, as Tehran’s retaliatory action targeted Washington’s Gulf allies and curtailed oil and gas supplies.


Those prices have begun to bleed into other goods, with the crisis also affecting crucial fertiliser supplies.


The IMF has called on countries to offer narrow, targeted subsidies in the wake of the crisis, while also recommending that all governments work to rebuild fiscal buffers and address rising debt after years of fighting economic shocks since the pandemic.

“Our messages indeed apply to most countries, but again, the trade-offs and the choices that have to be made are much, more difficult for the most vulnerable countries,” Koeva Brooks said.


The IMF’s World Economic Outlook, released on Tuesday, identified low-income developing countries that are net oil importers and are not exposed to the ongoing artificial intelligence technology investment boom as being the most vulnerable to the shocks from the Iran war.



International Monetary Fund deputy director of research Petya Koeva Brooks speaks during a media interview at the 2026 Annual Meetings of the International Monetary Fund and the World Bank Group at the Queen Sirikit National Convention Center (QSNCC) in Bangkok on October 12, 2026. — AFP pic



“For those countries that are most vulnerable, this is where the consumption basket is heavily weighted towards energy and food, and so indeed it is much much more difficult,” she said.

“But unfortunately there is no other choice.”

The senior IMF official added that “many” low-income countries were in debt distress, or close to it, and should seek debt restructuring if they were unable to address the issue.

“Where debt is not sustainable, then resolving that debt and having orderly and timely restructuring is always better than waiting, because then the costs of restructuring down the road is going to be much higher,” she said.

‘Domino effect’

In its World Economic Outlook, the IMF raised its forecast for 2026 global growth, largely on the back of advanced economies enjoying a boost from AI-related investments and economic activity.

The world’s advanced economies were forecast to grow by 2.1 per cent in 2026, with those in the AI supply chain, such as Taiwan and South Korea, posting significantly higher figures.

Koeva Brooks told AFP that if AI investment activity were to slow, the world economy “would see a negative impact on output, not only in advanced countries like the US but again through trade linkages also in Asia”.

In the IMF’s worst-case scenario – of AI not delivering promised productivity gains – global GDP forecasts for 2028 would fall by as much as 0.4 per cent.

Climate-related risks were another key part of the World Economic Outlook this year, and Koeva Brooks told AFP that some of the effects of a particularly intense El Niño phenomenon had already been taken into account in higher prices for certain food items.

The warming phase of a natural climate cycle, El Niño raises sea temperatures in the tropical Pacific, triggering changes in weather that can increase the risk of drought and flooding, and exacerbate man-made global warming.

“We have a significant increase in beverage prices, in the prices of rice, and so on,” said Koeva Brooks.

“Of course, it could turn out that the domino effect is even bigger than what we currently have.” — AFP

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And that global bully wants the Nobel Peace Prize, being the idiot to fall for shailok-ish 'batu-api'. Clown just wants the Peace Prize for no other reason than a black man (Obama) getting one already.

Moron should be awarded the Nobel 'Negative-Economy' Prize -  what an S-Whole!