Bangkok: Many heavily indebted developing countries have little room to avoid spending cuts despite the disproportionate impact of the Iran war’s energy shock, a senior International Monetary Fund (IMF) official said on Tuesday.

Petya Koeva Brooks, the IMF’s deputy director of research, told AFP that repeated economic shocks had increased debt while inflation was limiting governments’ ability to support households.

Speaking during the IMF’s Annual Meetings, she said the choices were particularly difficult for vulnerable oil importers, where food and energy account for a large share of household spending.

The conflict has disrupted oil and gas supplies and pushed up energy prices. Those increases are spreading to other goods, while fertiliser supplies have also been affected.

The IMF recommends narrowly targeted subsidies alongside efforts to rebuild fiscal buffers and reduce debt vulnerabilities.

Koeva Brooks said countries unable to restore debt sustainability should seek restructuring promptly. Delaying the process would increase its eventual cost, she said.

The IMF’s World Economic Outlook identified developing economies that import oil and lack exposure to the artificial intelligence investment boom as particularly vulnerable.

Growth prospects remain uneven, with technology investment supporting some economies while higher import costs weigh on others. Advanced economies were projected to grow by 2.1 percent in 2026.

Koeva Brooks said weaker AI investment could reduce output in the US and affect Asian economies through trade links. In a scenario where AI failed to deliver expected productivity gains, the IMF estimated global GDP in 2028 could be up to 0.4 percent below its forecast.

She also warned that an intense El Nino could worsen food price pressures. Some increases in rice and beverage prices were already reflected in the outlook, but further effects could exceed current estimates, she said.