Published on: 2026-06-29
Source: United Nations
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June 29, 2026 Economic Development
The consequences of the conflict in the Middle East are forcing developing countries to increase spending on supporting the fossil fuel industry, thereby reducing opportunities to finance education, healthcare, and other priority areas of development. This conclusion was reached by the authors of a new report by the United Nations Development Programme (UNDP).
The report notes that low- and middle-income countries have partially managed to curb the rise in energy prices through fuel subsidies, tax breaks, and other measures.
However, such a policy requires significant budget expenditures. According to forecasts, the volume of fossil fuel subsidies, which has shown a global downward trend in recent years, will reach $1.1 trillion in 2026, assuming an average oil price of $88.6 per barrel. This is $410 billion more than in 2025.
If oil prices rise on average to $110 per barrel, the projected amount of subsidies will increase to $1.43 trillion.
Consequences of temporary measures
UNDP experts warn that measures to curb energy price growth only provide temporary relief. In the long term, they increase dependence on fossil fuels, hinder the transition to clean energy, and limit opportunities for long-term investments.
“Developing countries are doing everything possible to protect their populations from the energy crisis, but there is a high price to pay,” said UNDP Administrator Alexander De Croo. According to him, funds that could have been used to build schools, hospitals, and develop clean energy are now being spent on supporting the economy.
Growing debt burden
Almost half of the poorest countries in the world are already facing a debt crisis or are at high risk of its occurrence. Thus, in 2026, a country with a median income level among developing economies will allocate 9.53 percent of its budget revenues to interest payments on public debt. This is twice as much as ten years ago. The figure will be the highest in the last 25 years.
UNDP calls for expanding developing countries’ access to international financing and accelerating investments in renewable energy sources. According to De Croo, energy security and the transition to clean energy have now become inseparably linked tasks.
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