IMF Warns Developing Countries Have 'No Choice' but to Cut Spending or Restructure Debt as Energy Shock Bites
The International Monetary Fund warned on Tuesday that low-income developing countries bearing the disproportionate impact of the Iran war-fuelled energy shock had "no choice" but to cut spending or face debt restructuring, a stark message delivered at the IMF-World Bank Annual Meetings in Bangkok.
Petya Koeva Brooks, the IMF's deputy director of research, told AFP on the sidelines at the Queen Sirikit National Convention Center that heavily indebted oil-importing countries were facing the worst of the energy shock and difficult choices in helping their citizens through the crisis. She said "many" low-income countries were in debt distress or close to it and should seek debt restructuring if they could not address the issue — adding that orderly, timely restructuring is better than waiting, because the costs would be higher later.
Vulnerability of the poorest
The IMF's World Economic Outlook, released Tuesday, identified low-income developing countries that are net oil importers and are not exposed to the AI investment boom as the most vulnerable. Brooks said the consumption basket in those countries is heavily weighted toward energy and food. The IMF called on countries to offer narrow, targeted subsidies and recommended governments rebuild fiscal buffers and address rising debt.
Wider outlook: growth upgraded, AI risks noted
The Fund also raised its 2026 global growth forecast, with advanced economies expected to grow 2.1% in 2026 and AI-supply-chain economies like Taiwan and South Korea posting higher figures. But the WEO flagged downside risks: in a worst-case AI-slowdown scenario, global GDP forecasts for 2028 would fall by as much as 0.4%. El Nino effects were already factored into higher food prices, including beverages and rice.
Sources: New Indian Express (AFP) — IMF says developing countries must cut spending or restructure debt
The International Monetary Fund warned on Tuesday that low-income developing countries bearing the disproportionate impact of the Iran war-fuelled energy shock had "no choice" but to cut spending or face debt restructuring, a stark message delivered at the IMF-World Bank Annual Meetings in Bangkok.
Petya Koeva Brooks, the IMF's deputy director of research, told AFP on the sidelines at the Queen Sirikit National Convention Center that heavily indebted oil-importing countries were facing the worst of the energy shock and difficult choices in helping their citizens through the crisis. She said "many" low-income countries were in debt distress or close to it and should seek debt restructuring if they could not address the issue — adding that orderly, timely restructuring is better than waiting, because the costs would be higher later.
Vulnerability of the poorest
The IMF's World Economic Outlook, released Tuesday, identified low-income developing countries that are net oil importers and are not exposed to the AI investment boom as the most vulnerable. Brooks said the consumption basket in those countries is heavily weighted toward energy and food. The IMF called on countries to offer narrow, targeted subsidies and recommended governments rebuild fiscal buffers and address rising debt.
Wider outlook: growth upgraded, AI risks noted
The Fund also raised its 2026 global growth forecast, with advanced economies expected to grow 2.1% in 2026 and AI-supply-chain economies like Taiwan and South Korea posting higher figures. But the WEO flagged downside risks: in a worst-case AI-slowdown scenario, global GDP forecasts for 2028 would fall by as much as 0.4%. El Nino effects were already factored into higher food prices, including beverages and rice.
Sources: New Indian Express (AFP) — IMF says developing countries must cut spending or restructure debt
