Washington, DC: As top finance ministers and central bankers converge on Washington for the IMF and World Bank’s spring meetings this week, the raging Middle East war casts a long, ominous shadow.
Triggered on February 28 and escalating rapidly, this conflict — sometimes pinpointed as involving Iran — ranks as the third profound disruption to global stability since the COVID-19 crisis and Russia’s full-scale 2022 assault on Ukraine.
Surging oil prices, snarled shipping lanes, and fertilizer shortages threaten to unwind hard-fought recoveries.
IMF and World Bank officials last week unveiled grim revisions: trimmed global growth projections and elevated inflation warnings. Developing and emerging markets brace for the heaviest hits from energy spikes and supply snarls.
Pre-war optimism had buoyed hopes for growth upgrades, fuelled by economic tenacity despite U.S. President Donald Trump’s tariffs rolled out last year. The conflict’s cascade of blows now derails that trajectory.
Revised Projections Highlight Deepening Risks
World Bank estimates now show 3.65% growth for emerging markets and developing economies in 2026, revised down from 4% in October.
Extended fighting might slash it to 2.6%. Inflation forecasts climbed to 4.9% from 3%, risking 6.7% in pessimistic scenarios.
The IMF highlighted a humanitarian edge: war-induced fertilizer disruptions could doom 45 million more to acute food insecurity.
Aid ramps up for debt-burdened nations. IMF plans $20-50 billion in urgent support for low-income, energy-importing states. World Bank commits $25 billion pronto through crisis mechanisms, up to $70 billion in half a year.
Analysts push for pinpointed, short-term buffers against price pain, shunning expansive fixes that could fan flames.
“Leadership matters, and we’ve come through crises in the past,” World Bank President Ajay Banga told Reuters, nodding to prior fiscal-monetary successes. “But this is a shock to the system.”
Leaders face triage: curb inflation, sustain expansion, and forge jobs for 1.2 billion working-age youth in the developing world by 2035.
Geopolitical Rifts Stall Coordinated Action
US-China frictions and a fractured G20—under U.S. presidency, excluding South Africa while including Russia and China—thwart unified responses.
“You’re trying to operate on consensus when there’s no consensus in the world right now on anything,” observed Josh Lipsky, Atlantic Council international economics chair.
Such lender assurances aim to steady nerves: “It’s a signal to private creditors. This is not a time to flee countries that are in problematic waters. They will have support from the multilateral development banks and the international financial institutions. This is not going to be COVID. This is something that we can handle.”
Experts Demand Debt Reforms For Fragile Economies
These economies stumble in weaker shape—slimmer buffers, heftier debts, leaner reserves—warned Mary Svenstrup, former U.S. Treasury senior official at the Center for Global Development.
“We need to have this crisis be a catalyst for IMF stakeholders to really rethink how the Fund supports vulnerable countries with the recognition that we’re going to be seeing more global shocks,” she urged. “We can’t ask them to sacrifice growth and development for the sake of rebuilding buffers.”
She seeks concessional funding paired with reforms, debt easings.
Martin Muehleisen, ex-IMF strategy head at Atlantic Council, concurs: Tie fresh capital to debt-slashing blueprints, breaking the “debt cycle.”
Low- and lower-middle-income debtors doubled service costs in 2025 over pre-COVID, slashing health, education funds, said Eric Pelofsky, Rockefeller Foundation VP. Half now face or flirt with debt distress, doubled from a quarter just years ago.
“This new conflict threatens any recovery that occurred since the pandemic or the Ukraine war, and it takes countries that have basically been treading water, trying to stay away from default, and keeps them in a long-term debt-growth-investment trap,” he warned.
