US-Iran War Spillover Shocks Global Energy, IMF and World Bank Bangkok Annual Meetings Criticized for 'Failing to Address the Current Crisis'

Bangkok — The annual meetings of the International Monetary Fund (IMF) and the World Bank opened Monday in the Thai capital, with energy price spikes caused by the US-Iran war, mounting debt pressures on developing countries and the artificial intelligence investment boom serving as focal points of the agenda. However, as the meetings got underway, the two Washington-headquartered multilateral institutions themselves came under criticism: policy researchers pointed directly to the fact that the policy prescriptions they offered and the sense of urgency they displayed did not match the scale of the crisis being endured by their poorer member countries.

According to African news reports, the US war against Iran has already disrupted global oil and gas supplies, and Tehran's retaliatory actions against US Gulf allies have further driven up energy prices. IMF Managing Director Kristalina Georgieva said bluntly at a pre-event in Singapore last week that 'the global economy is being pulled in two opposing directions: a negative energy supply shock and a positive AI demand shock.' She also acknowledged that 'the combined impact of these two forces is extremely unevenly distributed globally.'

The IMF has issued warnings that energy-import-dependent developing countries are being hit hardest; although developed economies in Europe and the United States likewise face inflationary spillovers, they are relatively better positioned to absorb energy price increases.

It is precisely in this asymmetric landscape that the IMF's policy prescriptions have come under sharp questioning. On the one hand, the institution is calling on countries to cut subsidy spending and rebuild fiscal buffers after a series of shocks since the COVID-19 pandemic; on the other hand, critics point out that this austerity path is virtually unfeasible for low-income countries.

Kevin Gallagher, director of the Boston University Global Development Policy Center, directly attacked the two institutions for 'failing to address the current crisis.' He pointed out that the poorer member countries of the IMF and World Bank are simultaneously bearing a triple squeeze from Iran-war spillovers, Western interest rate hikes and an El Niño-aggravated climate crisis, and are in urgent need of short-term emergency liquidity and longer-term resilience financing.

A new report released by the United Nations Development Programme (UNDP) on the eve of the meetings raised further alarms. Administrator Achim Steiner warned that persistently rising oil and food prices leave households in developing countries with 'no safety margin.' He said, 'We are witnessing a perfect storm that could push tens of millions or even hundreds of millions of people back below the poverty line.' He noted that governments in developing countries are being forced to make an 'impossible' choice between 'cutting protections for the poorest populations' and 'sacrificing the entire development agenda.'

G20 finance ministers' meetings will also be held during the conferences, with surging bond yields expected to be among the key topics. Yet at this multilateral forum that should have been discussing coordinated global response, the finance representative of the world's largest economy — US Treasury Secretary Scott Bessent — will be absent. A US Treasury official explained on Friday that Bessent could not attend due to 'domestic affairs.' The backdrop to Bessent's absence is that the war launched by Washington continues to export inflationary pressure into global energy markets.

Discussions on the impact of AI on global supply chains will also be held this week. The IMF projects that investment in the AI sector will exceed the historical capital investments in the construction of railroads, power grids and global telecommunications networks. Georgieva said that whether people 'love, hate or fear' it, AI is 'rapidly becoming a key driver that determines countries' relative fortunes in the world economy'; but she also acknowledged that developing countries excluded from the AI supply chain may find it difficult to share in this dividend.

The IMF will release its latest global and regional economic outlook on Tuesday.