UN warns of rising poverty due to war in Iran

Millions of people could fall into poverty due to rising energy costs, the impact of an intense El Niño phenomenon and rising interest rates, the director of the UN development agency warned.

International oil prices have soared since the US launched war against Iran in February and Tehran's retaliatory actions against Washington's allies in the Gulf region, which have affected oil and gas supplies.

Fiscal deficits and the debt-to-GDP (Gross Domestic Product) ratio have increased around the world since the 2008 financial crisis, while governments face a series of impacts, such as those caused by the pandemic and wars in Ukraine and the Middle East.

The director of the UNDP (United Nations Development Programme), Alexander de Croo, addressed the topic in an interview with AFP on the sidelines of the IMF (International Monetary Fund) and World Bank meetings this week in Bangkok.

"You need to fix the roof when, at the same time, your house is on fire," he told AFP.

He added that governments in developing countries did not have time to build mechanisms to cushion or resolve problems arising from previous crises and were forced to face new global challenges.

The IMF warned this week that while economic growth has weathered the energy crisis, resilience depends heavily on investment in artificial intelligence, meaning poor countries without exposure to this technology are struggling.

IMF director Kristalina Georgieva warned that "winter is coming" — a reference to the popular fantasy book series "Game of Thrones" — implying that a cataclysm is approaching if the world does not prepare for it.

De Croo said that "some countries have a well-protected house with money in the bank. Other countries have a house without a roof and no money in the bank."

"We stagger from one crisis to another, and what countries need is a little space and a little time, as well as access to finance," he said.

Not receiving a response can be devastating. The UNDP warned in a report that almost 130 million people face the risk of falling into poverty this year if increases in energy and food prices persist.

The risk is greatest in South and East Asia and sub-Saharan Africa, according to the UNDP.

Advanced economies have seen an increase in bond yields due to forecasts of high inflation and rising debt, which favors a rise in interest rates.

De Croo warned that this affects the ability of developing countries to access the capital needed to weather economic shocks.

According to the UNDP, the average developing country allocates 9.5% of government revenue to interest payments, the highest level in 25 years and more than triple that of the highest-income countries.

"It's a difficult situation to manage and takes away all scope for formulating policy," De Croo said.

The former Belgian prime minister said he intends to use the meeting in Bangkok to encourage a campaign for advanced economies and multilateral agencies to invest in economic growth, resilience and job creation in the developing world.

He added that recent cuts in international aid are impacting these countries.

The UNDP warned that more difficulties could arise due to the El Niño climate phenomenon, which is expected to be the strongest on record.

The phenomenon can cause floods, droughts and other extreme events, which would reach their peak in early 2027.

De Croo considered that private capital is needed to face the worst consequences of climate change.