How geopolitics is redrawing the Global South’s economy

The 2026 Spring Meetings of the International Monetary Fund (IMF) and World Bank Group took place from April 13 to April 18 amid ongoing geopolitical tensions, persistent inflation, and slowing growth. These meetings demonstrated a reactive rather than a transformative system. At the meetings, it was acknowledged that the global economy is experiencing prolonged turbulence in the absence of robust multilateral cooperation.

The World Economic Outlook report released at the meetings appears grim. Global growth remains sluggish and uneven, with the IMF forecasting 3.1 percent growth for 2026 and 3.2 percent for 2027. The report warns that escalating geopolitical risks could further dampen the outlook. The IMF also expects global headline inflation to rise slightly in 2026 before declining again in 2027. The growth slowdown and rising inflation are expected to be particularly pronounced in emerging markets and developing economies, reflecting a deeper structural problem. The global economy is no longer dealing only with cyclical, quickly reversible shocks. Instead, it faces persistent, interconnected disruptions, including conflict-driven energy volatility, supply chain adjustments, and financial tightening.

A key aspect of the meetings was the widespread recognition that geoeconomic fragmentation has become deeply entrenched. Trade, investment, and technology exchanges are increasingly driven by geopolitical alliances rather than by cost and efficiency. Many are also severing economic ties with rivals, particularly in critical areas such as technology and energy. Consequently, global supply chains are being reshuffled to prioritise security. This shift complicates international cooperation and diminishes the effectiveness of global institutions. Such fragmentation undermines the fundamental goal of the Bretton Woods system, which has traditionally relied on consensus among major powers.

For the global economy, the implications are profound. A fragmented system is inherently less stable and more volatile. However, the developing world feels these impacts most acutely. During the meetings, the recurring concern was the tightening of external financing conditions, which constrain the policy options available to emerging economies. Rising global interest rates have increased borrowing costs, while weaker global demand has reduced export revenues. Consequently, these countries face a fragile macroeconomic situation marked by currency pressures, falling reserves, and rising debt levels.

Bangladesh exemplifies these dynamics. With high inflation, pressure on foreign exchange reserves, and low revenue mobilisation, the country has limited fiscal capacity to absorb external shocks. As the global economic outlook indicates, these constraints are likely to persist in the near future. Therefore, countries like Bangladesh need to prepare for a prolonged period of external vulnerability and limited concessional aid.

Debt distress was a key topic at the meetings. Despite commitments, global debt restructuring faces delays, coordination challenges, and limited creditor involvement. The IMF report suggests that global public debt will reach record levels, raising concerns about fiscal sustainability and financial stability. For low-income countries, rising food and energy costs, reduced aid, and climate shocks have heightened vulnerabilities. The IMF suggests that tens of billions of dollars in additional funding may be needed to support the most vulnerable economies. Nonetheless, current resources remain inadequate given the scale of the need.

In this context, the question arises: did the IMF and the World Bank make significant new commitments? The response is somewhat mixed. There were announcements of increased support. The World Bank launched new initiatives targeting climate resilience and vital services, including water security projects intended to serve large populations in vulnerable areas. However, these commitments do not meet the expectations of many developing countries. They are incremental, reflecting a cautious stance shaped by the fiscal constraints of donor countries and the intricate politics of multilateral governance. Significant breakthroughs in debt relief, extensive concessional financing, or core reforms of the international financial structure were notably absent.

IMF Managing Director Kristalina Georgieva and World Bank President Ajay Banga outlined a cautious approach centred on three key pillars: preserving macroeconomic stability, strengthening resilience to shocks, and mobilising additional funding, particularly from the private sector. The IMF promotes targeted fiscal policies, cautious monetary strategies, and structural reforms to boost productivity and competitiveness. The World Bank aims to better use its assets and attract private investment to meet development and climate goals.

These strategies are reasonable but also reveal a core limitation. Relying on market-based solutions when market conditions are worsening for developing countries is impractical. Private capital remains unpredictable and cautious, especially amid global uncertainties. Therefore, focusing on catalytic financing might not generate the necessary scale of resources.

Another key issue is the growing importance of climate in macroeconomic policy decisions. Climate change is now seen as a central factor affecting economic stability and growth, rather than merely a peripheral concern. Nonetheless, a major issue persists. The gap between climate finance commitments and the funds actually disbursed remains large. Developing countries still face substantial obstacles in securing affordable financing for adaptation and mitigation efforts, especially as climate risks increase.

The meetings highlighted how geopolitical tensions hinder consensus among countries within multilateral organisations and restrict coordinated efforts. Consequently, the global system becomes more fragmented and less effective at delivering collective solutions to global issues.

For developing countries, including Bangladesh, the message is clear but critical. External factors are expected to remain restrictive. In this case, domestic policy decisions are even more vital. Boosting revenue collection, improving expenditure efficiency, and strengthening financial sector stability are crucial for resilience. Additionally, it is important to be more active in global forums to push for reforms that serve the interests of the Global South.

Without faster debt relief, increased concessional funding, and stronger climate support, low-income countries risk falling behind and facing prolonged stagnation. The current trend suggests that the most vulnerable nations could bear a disproportionate economic burden of adjustment in a fragmented global system.

The 2026 Spring Meetings highlight a key paradox of recent times: while global challenges grow more complex and urgent, the capacity for collective action is shrinking. The IMF and World Bank remain vital institutions, yet they cannot overcome the limitations imposed by geopolitical divisions and national interests alone. The path forward requires renewed dedication to multilateralism, significant institutional reforms, and commitments from major economies to foster a more inclusive and efficient global financial system. Without these changes, future Spring Meetings may continue to identify the same issues without providing the solutions the world desperately needs.

Dr Fahmida Khatun is an economist and executive director at the Centre for Policy Dialogue (CPD).
Views expressed in this article are the author’s own. 

Views expressed in this article are the author's own. 

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