Washington, Apr.1 (SANA) The International Monetary Fund (IMF) warned Tuesday that ongoing U.S.-Israeli–Iranian conflict is intensifying economic pressures on low-income countries, pushing already fragile economies deeper into crisis.
In its latest report, the IMF said rising regional instability, alongside shifts in global policies on trade, migration and aid, is creating “unprecedented pressure” on vulnerable economies.
The Fund highlighted a growing divergence in global economic performance. While average global growth reached 4.8 percent in 2025, the figure masks widening gaps between countries advancing developmentally and others facing setbacks due to conflict and structural fragility.
Although global inflation has eased overall, the report noted that parts of the Middle East and other regions continue to experience localized tensions that are driving up living costs. At the same time, risks linked to public debt are increasing, raising concerns that some governments may turn to domestic borrowing to fund security spending at the expense of development.
The IMF also pointed to a sharp drop in external financing, with net financial flows declining by roughly one-third. Official development assistance has weakened, while funding has increasingly shifted from grants to project-based loans.
It warned that changes in global migration policies, driven by political tensions, could negatively affect remittance flows—an essential source of income for many low-income economies.
The report stressed that stronger fiscal discipline and institutional capacity, particularly in public finance and tax administration, are critical to attracting high-quality foreign direct investment. It added that traditional incentives such as tax breaks or special economic zones are unlikely to succeed without broader macroeconomic stability.
The IMF called for decisive domestic reforms to boost returns on capital and mobilize local revenues, ensuring sustainable social and development spending. It also emphasized the need for coordinated international efforts to direct limited resources toward countries most affected by conflict and fragility, reaffirming its readiness to provide technical assistance and emergency financing.
N.J/R.K
