War and high debt to dominate IMF-World Bank meetings in Bangkok

The US-Israel war on Iran, now in its eighth month, and its inflationary impact are slated to dominate the agenda and sideline conversations during the annual meetings of the International Monetary Fund (IMF) and World Bank, held outside Washington for the first time in three years.

IMF Managing Director Kristalina Georgieva told Reuters News Agency that 18,000 people were registered to attend the meetings, 4,000 more than the last off-site meetings held in Morocco in October 2023.

Notably absent will be United States Treasury Secretary Scott Bessent, who dispatched two senior officials in his stead while he handles some “domestic engagements”, a US official said. Federal Reserve Board Chairman Kevin Warsh will attend and is slated to participate in a public event with Georgieva on October 16.

Several other finance ministers were also staying home due to domestic budget and election duties, but most central bankers would attend, Georgieva said.

Bessent’s decision to skip the high-profile gathering and a meeting of the Group of 20 (G20) major economies, which the US leads this year, may frustrate counterparts amid rising tensions over the Iran war, Ukraine’s battle against Russia’s invasion, and the US move to impose sanctions on the International Criminal Court.

The Group of Seven (G7) countries have agreed to release 100 million barrels of diesel and crude oil from emergency reserves under pressure from US President Donald Trump, who is keen to see lower petrol prices before November elections that could see his Republican Party lose control of Congress.

Trump on Friday announced a deal with Russia that would provide even more diesel to global markets and a temporary waiver of US sanctions designed to deprive Moscow of revenues for its ‌‌war on Ukraine. The move drew swift criticism from Ukrainian President Volodymyr Zelenskyy.

More than one billion barrels of oil have been released, mainly from onshore commercial inventories, since the start of the war on February 28. But industry executives say the amount of oil in storage that is accessible to the global market is running low, making the market more fragile and fuelling pressure on prices.

The IMF has signalled little change in its forecast for three percent global growth in 2026, and may edge its forecast for next year slightly higher. But some countries will see downgrades, including Ukraine, now in its fifth year of war against Russia’s invasion, and Gulf countries hit by Iranian strikes and sharply reduced energy exports.

IMF research released on Tuesday showed that sharp spikes in food and energy prices are an increasingly common source of crises that drive inflation expectations higher for longer, worsen poverty and threaten economic stability.

One headache for policymakers is the growing public debt burden that is sapping growth and adding inflationary pressures. The IMF says public debt is at the highest level since World War II and will exceed 100 percent of gross domestic product (GDP) before 2030.

Advanced economies, led by the US, have the highest debt-to-GDP ratios, but emerging markets and low-income countries are particularly vulnerable, given a perfect storm of challenges: capital outflows in search of higher US rates, weather extremes triggered by the El Nino climate phenomenon, and a lack of investment in artificial intelligence (AI), which has mitigated negative supply shocks in the US and other rich countries.

Developing countries are particularly vulnerable given high public debt levels that will have to be renegotiated at higher interest rates. Together, they face $400bn in debt payments to external creditors in 2026, and interest payments already exceed 10 percent of revenue on average.

Many lower-income countries are worried about new IMF recommendations for loan programmes that call for fewer but deeper reforms as a condition for approving lending, a change that many fear will lead to painful austerity measures.