A recent United Nations study has revealed that governments worldwide are running out of options to protect consumers from the surge in energy prices caused by the Iran war and other crises. The report, released by the United Nations Development Programme (UNDP), warns that the cost of fuel subsidies may exceed $1 trillion this year. As borrowing costs rise and the El Niño phenomenon intensifies, governments will find it increasingly difficult to sustain measures to mitigate the impact of rising food and energy prices.
The UNDP report highlights that the next two months will be crucial for governments that have implemented price controls, subsidies, and tax exemptions. With oil prices nearing $100 per barrel and borrowing costs soaring, governments' already strained budgets are under immense pressure. George Gray Molina, Chief Economist at the UNDP, cautioned that the outlook for the coming weeks and months remains uncertain, citing the ongoing Iran war, rising borrowing costs, and the El Niño phenomenon as key factors.
According to the UNDP analysis, which drew on data from the World Bank, International Monetary Fund, and International Energy Agency, the number of countries implementing measures to alleviate the burden has nearly doubled between April and September. The report notes that without these measures, an additional 130 million people would have fallen below the poverty line of $6.85 per day this year.
The study also found that the combined shocks are expected to peak in early 2027, exacerbated by the anticipated impact of the El Niño phenomenon this year. This could lead to floods, droughts, and increased food insecurity. The report cites examples of protests and social unrest in at least 10 countries, including Syria, Guatemala, the Philippines, France, and Portugal, which were triggered by rising energy prices in September.
A survey conducted by the UNDP in September, covering 26 offices worldwide, revealed that 25 offices expect the Middle East crisis to remain a priority or become a greater priority over the next six months. All surveyed offices believed that "the worst is yet to come." The report emphasizes that the ongoing Iran war, rising energy prices, and climate-related shocks will continue to pose significant challenges for governments and the global economy.
The UNDP warns that the triple crisis of rising food, energy, and debt costs will have far-reaching consequences for vulnerable populations. As governments struggle to respond to these challenges, the report calls for urgent action to address the root causes of these crises and mitigate their impact on the most vulnerable.
The United Nations Development Programme is working closely with governments and other stakeholders to address the humanitarian and economic impacts of these crises. As the global community prepares for the challenges ahead, the UNDP report serves as a timely reminder of the need for coordinated action to address the interconnected issues of energy security, climate change, and economic stability.
Key points
- The cost of fuel subsidies may exceed $1 trillion this year.
- The next two months will be crucial for governments implementing price controls and subsidies.
- The El Niño phenomenon is expected to intensify, leading to floods, droughts, and increased food insecurity.
