Seven months into the Middle East crisis, developing countries are grappling with multiple pressures, including rising energy prices following the July ceasefire breakdown, the threat of a record El Niño, and global interest rates at multi-decade highs. To mitigate energy price increases, governments have incurred substantial fiscal costs, with global fossil fuel subsidies projected to surpass $1 trillion this year. However, this approach is becoming increasingly untenable.
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In 130 countries surveyed, average gasoline and diesel prices have risen by 26 and 38 percent, respectively, since the conflict began, with price hikes occurring in nearly two-thirds of these nations between June and September. These higher prices have led to protests and social unrest.
According to the UNDP, if the full impact of rising energy and food prices is transmitted, it could push an additional 130 million people below the daily poverty line of $6.85, 121 million below $3.65, and 66 million below $2.15, with the majority in developing nations. These estimates highlight potential poverty increases rather than confirmed data.
To fully compensate affected households would require approximately 1.1 percent of developing country GDP; meeting the needs of those below $6.85 would cost around 0.3 percent. However, ongoing fiscal constraints and ballooning debt service obligations are diverting resources critical for long-term development.
In a survey of 26 UNDP country offices, all expect worsening conditions; 25 anticipate sustained or heightened crisis priority, half report pre-existing economic or fiscal stress, and ten are gearing up for the impact of El Niño. The pressing policy response involves temporary, targeted support, bolstered by accessible multilateral financing and ongoing collaboration from international financial institutions and the UN.