UNDP says developing countries are running out of money to shield up to 130 million people from $100 oil

De Croo's warning is about the order of events. Emergency measures went in after the Iran war broke out earlier this year ^[5]. By the time the El Nino forecast and the bond sell-off arrived, much of the fiscal room had already gone on cushioning prices ^[1]. "What we see now is that countries are pivoting their policy and letting the price hikes flow through. They're pivoting the policy because they have no choice, because their fiscal space is completely eaten up," he said ^[6].

The pressure has two time horizons. De Croo expects the situation to deteriorate between now and the spring ^[10]. Of fuel prices, El Nino and the bond markets, he said: "unfortunately for each of those at the moment, we don't see any light at the end of the tunnel" ^[10]. The debt squeeze is older. By Debt Justice's figures, education budgets in debt-distressed low-income countries have been cut at four times the rate of public spending overall since 2019 ^[20]. "High levels of debt are having a devastating impact on people's access to healthcare and education," said Heidi Chow, the group's executive director ^[12].

The report's timing gives some reason to discount its numbers. The UNDP published it ahead of the IMF and World Bank annual meetings in Bangkok ^[2][3], where De Croo is pressing lenders and donors for affordable finance ^[16]. Its 130 million is an upper bound ^[5]. His own poverty estimate spans an order of magnitude: "We are witnessing a perfect storm that could throw tens if not hundreds of millions of people back into poverty," he said ^[7]. In our view that weakens the size of the warning more than its direction, because De Croo describes price pass-through as a decision governments are already taking ^[6].

The remedies on offer work at different speeds. Debt Justice wants outright cancellation of some of the most burdensome debts and an overhaul of the IMF-administered common framework for debt restructuring ^[13]. "We urgently need debt cancellation," Chow said, naming "banks, hedge funds and oil traders" among the highest-interest lenders ^[14]. The UNDP does not oppose relief for the hardest-hit countries, De Croo said, but it would take many months to negotiate ^[15]. His ask is for lenders and donors to "step up access to affordable finance so countries can sustain support for their most vulnerable households" ^[16]. Central bank liquidity, such as the Federal Reserve's currency swap lines in past crises, is one tool he named. "What would help is a certain level of liquidity," he said ^[18]. During Covid, G20 nations implemented a temporary standstill on debt repayments for developing countries ^[17]. De Croo declined to say what the specific response should be, beyond creating "time and space" for countries to make needed changes ^[19].

The choice in Bangkok is between speed and depth. On De Croo's argument, liquidity is the option that can arrive before spring, while debt relief takes many months to negotiate ^[15][10]. For companies selling into these economies, we'd expect household demand to weaken first, as fuel costs that governments had absorbed move onto consumers ^[6]. Crop-linked supply is the second exposure, because the El Nino forecast covers the same months ^[8][10].