IMF, World Bank Meetings Leave Developing Nations in the Dark on Debt, Fiscal Policy

BANGKOK — The IMF and World Bank closed their annual meetings here with developing countries no closer to answers on how to manage mounting debt-service costs, a spreading Middle East war, the continuing war in Ukraine and the disruptive economics of an AI boom they risk being left out of.

What they got instead was the stock prescription the global lenders always dish out: shrink fiscal deficits, accelerate structural reforms and attract more private-sector investment. The advice landed awkwardly at a moment when the spillovers driving the uncertainty originate largely in richer economies.

Kristalina Georgieva, the first IMF managing director from a developing nation — Bulgaria — said advanced economies were in fact the worst offenders on budget imbalances. Debt levels in developing countries have actually fallen in recent years, she noted, but surging bond yields in richer markets have driven up their borrowing costs. Average debt-service payments now absorb 14% of government revenue — more than double a decade ago — crowding out spending on education, healthcare and other critical areas.

Speaking on a panel on Saturday, Georgieva was candid about the limits of what the institutions can offer, particularly on AI: "We are in a place where we have many more questions than we have answers. And my alert to everybody is: Do not fall for the guys that pretend they have the answers. They are tricking you."

The Oct. 12-18 meetings drew sharp criticism from outside the institutions. Josh Lipsky, vice president of international economics at the Atlantic Council think tank, said the gathering had flunked its opportunity to come up with guidance or ways to help.

"It's hard to talk about the developing world when the advanced economies don't have their act together and are at risk of a fiscal crisis," he said, adding that political situations in many aid-recipient countries have made development aid "not a priority at the moment."

Mauricio Cardenas, Colombia's former finance minister and now a research scholar at Columbia University, said many policymakers left with a deep sense that "something really bad could happen" but no real roadmap to navigate the future. The institutions are not well prepared for the current phase, he argued: "They understand that something is going on, they bring in experts on AI. But in the end, there's no kind of specific, concrete advice on how to be prepared for something where you don't really understand how it's going to unfold."

The meeting itself underscored the geopolitical fractures complicating concerted action at both institutions. Nearly half the delegates at an IMF steering committee walked out when Russia's finance minister spoke — tensions that have roiled the lenders since Russia's 2022 invasion of Ukraine. The committee's chair, Saudi Finance Minister Mohammed al-Jadaan, was delayed after Houthi attacks on Riyadh airport forced him to travel overland to Qatar to catch a flight.

Bangkok supplied its own illustration of the pressures on the developing world: the city remains partly under water after September floods that caused almost $200 million in damage to Thailand's industrial sector.

World Bank Deputy Chief Economist Ayhan Kose said the global economy had weathered its biggest energy shock — from the US-Israeli war on Iran — better than expected, and a global recession had been avoided. But growth outlooks in both developing and advanced economies are worse than before. Growth has already fallen off in half of advanced economies, Kose said, while developing countries as a whole have slowed to about 3.6% from 4.4%.

"People are really worried because resilience today is not a guarantee for resilience tomorrow," he said. "Now they are worried about what will be the next shock, because every six months, if not every three months, there is a new shock."

Kose said the World Bank remains focused on helping developing countries prepare for advances in AI — in part by mobilising private capital, now at triple the levels of 2022 — even as it contends with sharp drops in official development aid and persistent challenges in attracting foreign investment. "The reality on the ground is the reality on the ground," he said.

Not everyone at the meetings accepted the austerity reflex. Kate Pickett, a professor at the University of York, urged policymakers to focus on more inclusive growth rather than forcing developing countries into tough structural reforms. "If inequality increases, if poverty deepens, that will increase their costs in the long term," she said. "It's not enough to describe an economy as resilient. It's only resilient for the rich and the privileged."

Data released alongside the meetings underscored the stakes. The IMF's latest World Economic Outlook, published Tuesday, puts global growth at 3.1% and inflation at 4.7%, according to Africanews. The AI boom is lifting technology-exporting economies, the report said, while developing and climate-vulnerable regions face a double hit from rising energy costs and climate disasters. With more than 60% of low-income nations in or near debt distress, delegates argued the path forward requires fiscal consolidation to service high debt and protect social safety nets, paired with aggressive investment in digital connectivity to join the tech recovery.

Wayne Henry, chairman and director general of Jamaica's Planning Institute, told Africanews that geopolitical pressures on energy prices and intensifying climate hazards were feeding strong inflationary impulses in the Caribbean — "the second most vulnerable" region. Many developing economies are being left out of upward growth revisions driven by the AI and technology boom, Henry said, and need to "infuse greater digital connectivity" to benefit from technological advances.