Developing economies face a combined energy, climate and financing squeeze that could expose about 130 million additional people to poverty if government support gives way, the United Nations Development Programme warned in a report released October 11. The estimate is not a count of people already pushed below the poverty line. It comes from a counterfactual model that assumes the full 2026 rise in energy and food prices reaches household budgets without subsidies, price caps or transfers.

Three pressures are arriving together

UNDP's No Time to Recover report says oil prices have surged again after the July breakdown of a U.S.-Iran ceasefire, while a powerful El Niño threatens harvests and food systems into 2027. At the same time, benchmark interest rates are at multi-decade highs. The combination is especially difficult for energy-importing and debt-vulnerable countries because it raises import costs, weakens household purchasing power and makes emergency financing more expensive.

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The poverty figure measures exposure

In UNDP's central scenario, retail energy prices rise 30% and food prices 10% with no policy mitigation. Under those assumptions, about 132 million more people fall below the $6.85-a-day line than in the IMF's April baseline. The model also places 121 million more below $3.65 and 66 million more below $2.15. UNDP gives an 80 million to 200 million range for the $6.85 measure under lower and higher shock assumptions. The agency stresses that these are modeled risks if containment disappears entirely, not observed poverty increases.

Price protection is getting harder to fund

Governments have partly blocked the shock through subsidies, tax reductions, price caps and transfers. Across 130 countries, however, average retail gasoline and diesel prices have still risen 26% and 38% since the conflict began, according to the report. UNDP estimates explicit fossil-fuel subsidies could exceed $1 trillion this year at current energy prices. Fully compensating households would cost about 1.1% of developing-country GDP, while support limited to households below $6.85 a day would cost roughly 0.3%.

Debt service narrows the choices

The median developing country now spends about 9.5% of government revenue on interest, the highest share in 25 years and more than three times the median for high-income countries. Ten-year borrowing costs for a typical weak-credit country are already around 9%. That leaves governments balancing immediate relief against health, education, infrastructure and other long-term spending. Higher U.S. Treasury yields can add pressure by raising the return investors demand elsewhere, even when a country's underlying credit risk has not changed.

Country offices expect conditions to worsen

All 26 UNDP country offices surveyed in September said the worst was still ahead, and 25 expected the crisis to remain or become a higher priority over the next six months. Ten were preparing for El Niño. Independent reporting by the Guardian also highlighted the risk that fading fiscal buffers could force more of the energy and food shock onto households before the IMF and World Bank annual meetings in Bangkok.

Targeted support is the policy test

UNDP recommends temporary, targeted assistance rather than indefinite broad price suppression, backed by affordable multilateral finance for countries that cannot fund the response alone. That approach could reduce the fiscal bill, but implementation depends on governments being able to identify vulnerable households and deliver aid quickly. The report does not predict a single unavoidable outcome. It sets out the scale of exposure if policy buffers fail while energy prices, El Niño and borrowing costs remain elevated.

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