Editorial: Grim outlook as Middle East conflict rages on

Energy efficiency has to be considered as a core macroeconomic adjustment tool, cautioned IMF Managing Director Kristalina Georgieva as she observed that rising global energy costs linked to geopolitical conflict are disproportionately hitting countries with limited fiscal space.

Energy-importing economies, Ghana inclusive, face a renewed policy squeeze with significant spillovers from the Middle East conflict. Consequently, growth is expected to slow to 3.1 percent in 2026 from 3.4 percent the previous year.

In a more adverse scenario, growth could drop to 2 percent – reflecting persistent supply disruptions and elevated oil prices, Ms. Georgieva said.

“All countries are affected by higher energy prices. But the negative impact is highly asymmetric, with the biggest burdens falling on countries that import energy and have limited policy space.”

The Fund’s assessment points to a narrowing set of policy options, wherein traditional responses – such as subsidies or broad tax relief – risk undermining fiscal credibility.

Even in the event of a short-lived conflict, the lag in supply chain recovery is expected to prolong the economic impact. Ms. Georgieva highlighted the structural nature of the disruption, noting that physical supply constraints are already emerging across key commodities including oil, gas and industrial inputs.

This lagged transmission is critical for economies like Ghana, where external shocks often materialise with a delay but can have more persistent inflationary and fiscal effects once they do.

Disruptions to fertiliser supply chains are already feeding into broader inflation risks, particularly in food systems. The Fund’s managing director cited a doubling of urea prices in Africa, from US$400 to US$800, as an early indicator of second-round effects.

“These are dangerous developments,” she warned. Higher fertiliser costs could translate into increased food prices if supply conditions do not normalise.

Higher input costs for farmers could undermine disinflation efforts and intensify pressure on household incomes.

The IMF reiterated that global public debt is on track to exceed 100 percent of GDP by 2029 – a level not seen since the aftermath of World War II. The cumulative effect of successive shocks has pushed debt “to dangerously high levels”.

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