UNDP Warns Middle East Conflict Is Undermining Development in Low- and Middle-Income Countries

UNDP Warns Middle East Conflict Is Undermining Development in Low- and Middle-Income Countries
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A new report by the United Nations Development Programme (UNDP) warns that the economic fallout from the conflict in the Middle East is placing growing pressure on low- and middle-income countries, forcing many governments to divert scarce public resources away from long-term development priorities and increasing the risk of debt distress.

Released on the sidelines of the Hamburg Sustainability Conference, the UNDP report, Military Escalation in the Middle East: Cushioning the Global Shock, says rising geopolitical tensions and energy market disruptions have imposed significant fiscal costs on developing economies. According to the report, many governments have introduced fuel subsidies, price caps, tax relief, and other emergency measures to shield households and businesses from surging energy prices, reducing the funds available for investments in education, healthcare, infrastructure, and clean energy.

UNDP Administrator Alexander De Croo said the conflict’s economic aftershocks could affect hundreds of millions of people for years. Speaking at the Hamburg Sustainability Conference, he noted that governments had helped prevent up to 45 million people from falling into poverty but had done so at a substantial fiscal cost. He added that fossil fuel subsidies in developing countries are projected to reach approximately US$1.1 trillion in 2026, resources that could otherwise have supported schools, hospitals, and the transition to renewable energy.

The report also highlights worsening debt pressures, noting that nearly half of the world’s poorest countries are either already in debt distress or at high risk of entering it. UNDP estimates that the median developing economy now spends about 10% of government revenue on debt interest payments, limiting its ability to finance sustainable development and climate-related investments.

UNDP argues that the recent crisis has demonstrated the close link between energy security and the global transition to renewable energy. The report calls for stronger international cooperation to expand clean energy investment, mobilize development finance, strengthen domestic revenue systems, and reduce developing countries’ vulnerability to future geopolitical shocks.

The report was released during the third Hamburg Sustainability Conference, held on June 29–30, which brings together government leaders, international organizations, businesses, academics, and civil society representatives to promote partnerships aimed at accelerating progress toward the United Nations Sustainable Development Goals. The conference is jointly organized by UNDP, Germany’s Federal Ministry for Economic Cooperation and Development, the City of Hamburg, and the Michael Otto Foundation.