UNDP Warns Overlapping Energy, Borrowing and El Niño Shocks Threaten Developing Countries

The agency says the convergence of rising fuel costs, record El Niño weather and higher borrowing costs is eroding fiscal space and heightening risks to food supplies and public stability.

Overview

UNDP published an analysis on Friday, October 2, 2026, saying global fuel-subsidy bills could exceed $1 trillion this year as governments try to shield households from higher oil prices.
The agency warns three simultaneous shocks—higher energy costs linked to the Iran conflict, an unusually strong El Niño and rising government borrowing costs—are draining fiscal buffers that funded subsidies and tax relief.
UNDP estimates that the El Niño could push about 49 million more people into food insecurity by the end of 2027 by worsening droughts and floods that damage crops and food supplies.
Surveys of 26 UNDP country offices show most governments expect conditions to worsen and many began rolling back subsidies in September, a move already tied to protests in at least 10 countries.
Global finance leaders will confront these harms at the IMF-World Bank meetings in Bangkok on Oct. 12–18, 2026, where policymakers are expected to discuss debt, social protection and coordinated responses.