IMF, World Bank Meetings Leave Developing Economies With More Questions Than Answers

BANGKOK — Last week's annual meetings of the International Monetary Fund and World Bank ended without new answers for the developing world on the questions that dominated the agenda: a spreading Middle East war, the continuing war in Ukraine, rising debt payments and the risk of an AI bubble.

Lower-income countries are once again absorbing spillovers from wealthier nations' policy choices, with rising debt-service costs, higher inflation and the threat of falling further behind in an AI-driven global economy. The advice on offer was the standard one: shrink fiscal deficits, accelerate economic reforms and attract more private investment.

IMF Managing Director Kristalina Georgieva, the first IMF chief from a developing nation, said advanced economies were in fact the worst offenders on budget imbalances. Developing countries' debt levels had fallen in recent years, she noted, but surging bond yields elsewhere have driven up their borrowing costs. Average debt-service payments in developing countries have more than doubled over the past decade to 14% of government revenue, crowding out education, healthcare and other critical areas, she said.

At a Saturday panel, Georgieva said many issues remained unresolved, especially around 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."

Josh Lipsky, vice president of international economics at the Atlantic Council think tank, said the meetings had flunked their 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. "And that's on top of political situations in many of these countries that makes development aid not a priority at the moment."

**No roadmap for what comes next**

Mauricio Cardenas, Colombia's former finance minister and a research scholar at Columbia University, said many policymakers were left with a deep sense that "something really bad could happen" but no real roadmap to navigate the future.

"The IMF and World Bank are not particularly well prepared for this new phase. They understand that something is going on, they bring in experts on AI," Cardenas said. "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."

Geopolitical tensions that have complicated the institutions' work since Russia's invasion of Ukraine in 2022 were on display in Bangkok. Nearly half the delegates at an IMF steering committee walked out when Russia's finance minister spoke. Houthi attacks on Riyadh airport delayed the arrival of the committee's head, Saudi Finance Minister Mohammed Al-Jadaan, who had to travel overland to Qatar to catch a flight.

The host city itself was a reminder of developing-country vulnerability. Bangkok was still partly under water after September floods that caused almost $200 million in damage to Thailand's industrial sector.

**Growth slows, next shock looms**

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."

Ayhan Kose, deputy chief economist at the World Bank, 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 were worse than before. Growth had already fallen off in half of advanced economies, while developing countries as a whole had slowed to around 3.6% from 4.4%.

"People are really worried because resilience today is not a guarantee for resilience tomorrow," Kose 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."

No specific initiatives were announced, Kose said, but the World Bank remains focused on helping developing countries prepare for advancements in AI, in part by mobilizing more private capital — now at triple the levels of 2022. The bank, he said, also has to contend with sharp drops in official development aid and persistent challenges in attracting foreign investment to developing countries.

"The reality on the ground is the reality on the ground," he said.