Africa

The Global Environment Facility, widely known as the GEF, plays a central role in financing environmental protection across the world. It supports developing countries in tackling climate change, biodiversity loss, land degradation, pollution, and threats to ecosystems. Since its establishment in the early 1990s, the GEF has grown as a multilateral environmental fund, supporting projects […]

A bulk carrier takes on vast loads of coal at Mtwara Port in southern Tanzania – an image that underscores the stubborn grip of fossil fuels even as global negotiators push for a Net-Zero Framework to steer shipping toward cleaner energy. Credit: Kizito Makoye Shigela/IPS

By Kizito Makoye
DAR ES SALAAM, Tanzania, Apr 16 2026 (IPS)

As global shipping braces for another round of high-stakes negotiations, a volatile mix of rising fuel costs, geopolitical tensions and deep political divisions is testing the fragile consensus around a proposed Net-Zero Framework (NZF) aimed at decarbonising one of the world’s most polluting industries.

The talks, convened under the International Maritime Organization (IMO), come at a moment of acute uncertainty. A crisis in the Strait of Hormuz has sent oil and gas prices surging, exposing vulnerabilities in global supply chains and sharpening disagreements over how fast – and how fairly – the shipping sector should transition away from fossil fuels.

Experts speaking during an online media briefing warned that what is at stake extends far beyond maritime regulation. The outcome, they said, could determine the pace of the global energy transition, the stability of fuel markets, and whether developing countries are protected or sidelined in the shift to cleaner shipping.

“The Hormuz crisis has pushed up oil and gas prices, at least in the near term,” said Tristan Smith, Professor of Energy & Transport at University College London. “Opponents of the Net Zero Framework – led by the United States and others with vested interests in LNG as a marine fuel – are effectively pushing to expand its use in shipping.”

Smith warned that such a shift could have far-reaching consequences. “If LNG prices are already high, this would introduce a major new source of demand from a sector that does not currently rely on it, forcing competition with countries that depend on gas for electricity and basic energy needs. That risks driving prices even higher, benefiting major exporters like the US and Qatar, while creating significant disadvantages for importing countries and those reliant on gas-based products such as fertilisers.”

At the heart of the debate is whether the NZF – first agreed in principle in 2025 – will be adopted as a comprehensive package combining emissions standards with a global pricing mechanism or whether it will be diluted under political pressure.

For many developing countries, the distinction is critical.

“The framework approved in 2025 was carefully designed as a package combining fuel standards and a pricing mechanism,” said Michael Mbaru, a maritime decarbonisation expert at the Office of Kenya’s Climate Special Envoy. “The pricing element is not optional – if it goes away, the whole framework goes away.”

Without that financial pillar, Mbaru cautioned, the burden of transition would fall disproportionately on poorer nations. “Without it, developing countries risk facing the costs of transition without the tools to manage them, making the system less fair and less investable.”

He added that fragmentation – where regions adopt separate rules – would further complicate matters. “Fragmentation would increase complexity and costs, especially for Africa, so we remain committed to a single global rulebook and are not willing to reopen the framework.”

The stakes are already visible on the ground. Mbaru pointed to rising fuel prices in Kenya, where recent increases in petrol and diesel costs have rippled through the economy, underscoring how vulnerable many countries remain to fossil fuel volatility.

Beyond economics, the negotiations are also shaping up as a test of multilateralism.

Last year’s IMO meeting ended in stalemate after a late intervention by the United States and its allies disrupted what had appeared to be a path toward adoption. Since then, countries have regrouped, and alliances – particularly among African nations – have strengthened.

“The US is a major disruptive factor, but this is not simply a US versus climate ambition debate,” Mbaru said. “The shipping industry itself is calling for a global framework because it needs predictability and investment certainty.”

Indeed, one of the most striking aspects of the current negotiations is the unusual alignment between regulators and industry.

“The shipping industry is very resilient, but it is constrained by uncertainty,” said Femke Spiegelenberg of the Global Maritime Forum. “We know major changes are coming, but not when or how.”

For shipowners and investors, that uncertainty translates into delayed decisions and missed opportunities. “The NZF provides the certainty and tools the industry is asking for – clear rules, a level playing field, and the ability to plan and invest,” she said. “It is designed to reduce risk and enable investment, and weakening it would increase uncertainty and undermine the transition.”

The industry’s push for regulation marks a notable shift in a sector traditionally wary of global rules. But with billions already being invested in alternative fuels such as green ammonia and methanol, companies are increasingly seeking clarity on the direction of travel.

“I’m cautiously optimistic,” said Rockford Weitz of Tufts University’s Fletcher School. “When you look at global energy markets and the billions already being invested by industry, shipping is leading the transition.”

Weitz pointed to growing momentum in Europe and Asia, where major players are moving toward zero-carbon fuels. “To me, the future is clear: it is a zero-carbon shipping future, even if politics creates short-term disruption.”

Yet politics, he noted, remains a powerful force. “The Trump administration released its strategy and a February 2026 action plan, with a major focus on revitalising US shipbuilding,” he said. “When you look at the details, it should actually support this transition – and the same applies to Saudi Arabia. Instead, ideology is getting in the way of policies that align with their own economic interests, and that’s where the real opportunity lies.”

The geopolitical context is also reshaping the economic calculus of decarbonisation. Rising fossil fuel prices, triggered by conflict in the Middle East, are making alternative fuels more competitive and strengthening the business case for green shipping.

Analysts say the developments could accelerate investment in renewable energy infrastructure, particularly in regions with abundant solar and wind resources. For countries in Africa, Asia and Latin America, the NZF could unlock new opportunities for green industrialisation – if it is implemented effectively.

Still, the path forward remains uncertain.

Negotiators face three broad scenarios: a renewed push to adopt the NZF as agreed; a shift toward weaker, technical-only measures favoured by some countries; or a compromise that delays decisions while seeking a new consensus.

Each carries risks.

A weakened framework could slow the transition and deepen inequalities. A fragmented system could increase costs and complexity. And further delays could erode investor confidence at a critical moment.

For now, experts agree on one point: the window for decisive action is narrowing.

The choices made in the coming weeks, they say, will reverberate far beyond the shipping lanes – shaping global trade, energy systems and climate outcomes for decades to come.

As Mbaru put it, the stakes are both immediate and long-term: ensuring that the transition away from fossil fuels is not only ambitious but also fair.

“The framework must reduce long-term exposure to fossil fuel shocks,” he said, “while ensuring that countries with the least fiscal space are not left carrying the heaviest burden.”

IPS UN Bureau Report

 

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Credit: 279photo/iStock by Getty Images. Source: IMF

By Hippolyte Balima, Andresa Lagerborg and Evgenia Weaver
WASHINGTON DC, Apr 16 2026 (IPS)

War is again defining the global landscape. After decades of relative calm following the Cold War, the number of active conflicts has surged in recent years to levels not seen since the end of the Second World War.

Meanwhile, rising geopolitical tensions and heightened security concerns are prompting many governments to reassess their priorities and spend more on defense.

Beyond their devastating human toll, wars impose large and lasting economic costs, and pose difficult macroeconomic trade-offs, especially for those countries where the fighting is taking place.

Even without active conflicts, rising defense spending can raise economic vulnerabilities in the medium term. After the war, governments face the urgent post-conflict task of securing durable peace and sustaining recovery.

In an era of proliferating conflicts, our research in two analytical chapters of the latest World Economic Outlook highlights the deep and prolonged economic harm inflicted by war, which has particularly affected sub-Saharan Africa, Europe, and the Middle East.

We also show that rising defense spending—which can boost demand in the short term—imposes difficult budgetary trade offs that make good policy design and lasting peace more important than ever.

Economic losses

For countries where wars occur, economic activity drops sharply. On average, output in countries where fighting takes place falls by about 3 percent at the onset and continues falling for years, reaching cumulative losses of roughly 7 percent within five years.

Output losses from conflicts typically exceed those associated with financial crises or severe natural disasters. Economic scars also persist even a decade later.

Wars also tend to have significant spillover effects. Countries engaged in foreign conflicts may avoid large economic losses—partly because there is no physical destruction on their own soil.

Yet, neighboring economies or key trading partners with the country where the conflict is taking place will feel the shock. In the early years of a conflict, these countries often experience modest declines in output.

Major conflicts—those involving at least 1,000 battle-related deaths—force difficult trade-offs in economies where they occur. Government budgets deteriorate as spending shifts toward defense and debt increases, while output and tax collection collapse.

These countries may also face strains on their external balances. As imports contract sharply because of lower demand, exports decrease even more substantially, resulting in a temporary widening of the trade deficit.

Heightened uncertainty triggers capital outflows, with both foreign direct investment and portfolio flows declining. This forces wartime governments to rely more heavily on aid and, in some cases, remittances from citizens abroad to finance trade deficits.

Despite these measures, conflicts contribute to sustained exchange rate depreciation, reserve losses, and rising inflation, underscoring how widening external imbalances amplify macroeconomic stress during wartime. Prices tend to increase at a pace higher than most of central banks’ inflation targets, prompting monetary authorities to raise interest rates.

Taken together, our findings show that major conflicts impose substantial economic costs and difficult trade-offs on economies that experience conflicts within their borders, as well as hurting other countries. And these costs extend well beyond short-term disruption, with enduring consequences for both economic potential and human well-being.

Spending trade-offs

More frequent conflicts and rising geopolitical tensions have also prompted many countries to reassess their security priorities and increase defense spending. Others plan to do so. This situation presents policymakers with a crucial question about trade-offs involved with such a boost to spending.

Our analysis looks at episodes of large buildups in defense spending in 164 countries since the Second World War. We find that these booms typically last nearly three years and increase defense spending by 2.7 percentage points of gross domestic product.

That’s broadly similar to what is required by North Atlantic Treaty Organization (NATO) members to reach the 5 percent of GDP defense spending target by 2035.

Ramping up defense spending primarily acts as a positive demand shock, boosting private consumption and investment, especially in defense-related sectors. This can raise both economic output and prices in the short term, requiring close coordination with monetary policy to temper inflationary pressures.

Overall, the aggregate effects on output of scaling up defense spending are likely modest. Increases in defense spending typically translate almost one for one into higher economic output, rather than having a bigger multiplier effect on activity.

That said, the multiplier or ripple effects of such spending vary widely depending on how outlays are sustained, financed and allocated, and how much equipment is imported.

For instance, output gains are smaller and external balances deteriorate when the stimulus is partly spent to import foreign goods, which is especially the case for arms importers. By contrast, a buildup of defense spending that prioritizes public investment in equipment and infrastructure, together with less fragmented procurement and more common standards, would expand market size, support economies of scale, strengthen industrial capacity, limit import leakages, and support long-term productivity growth.

The choice of how to finance defense spending entails critical trade-offs. Defense spending booms are mostly deficit-financed in the near-term, while higher revenues play a larger role in later years of defense spending booms and when the defense spending buildup is expected to be permanent.

The reliance on deficit financing can stimulate the economy in the short term, but strain fiscal sustainability over the medium term, particularly in countries with limited room in government budgets.

Deficits worsen by about 2.6 percentage points of GDP, and public debt increases by about 7 percentage points within three years of the start of a boom (14 percentage points in wartime). The resulting increase in public debt can crowd out private investment and offset the initial expansionary effect of defense spending.

The buildup of fiscal vulnerabilities can be mitigated by durable financing arrangements, especially when the increase in defense spending is permanent. However, raising revenues come at the cost of reducing consumption and dampening the demand boost, while re-ordering budget priorities tends to come at the expense of government spending on social protection, health, and education.

Policies for recovery

Our analysis also shows that economic recoveries from war are often slow and uneven, and crucially depend on the durability of peace. When peace is sustained, output rebounds but often remains modest relative to wartime losses. By contrast, in fragile economies where conflict flares up again, recoveries frequently stall.

These modest recoveries are driven primarily by labor, as workers are reallocated from military to civilian activities and refugees gradually return, while capital stock and productivity remain subdued.

Early macroeconomic stabilization, decisive debt restructuring, and international support—including aid and capacity development—play a central role in restoring confidence and promoting recovery. Recovery efforts are most effective when complemented by domestic reforms to rebuild institutions and state capacity, promote inclusion and security, and address the lasting human costs of conflict, including lost learning, poorer health, and diminished economic opportunities.

Importantly, effective post-war recovery requires comprehensive and well-coordinated policy packages. Such an approach is far more effective than piecemeal measures. Policies that simultaneously reduce uncertainty and rebuild the capital stock can reinforce expectations, encourage capital inflows, and facilitate the return of displaced people.

Ultimately, successful post-war recovery lays the foundation for stability, renewed hope and improved livelihoods for communities affected by conflict.

This IMF blog is based on Ch. 2 of the April 2026 World Economic Outlook, “Defense Spending: Macroeconomic Consequences and Trade-Offs,” and Ch. 3, “The Macroeconomics of Conflicts and Recovery.” For more on fragile and conflict-affected states: How Fragile States Can Gain by Strengthening Institutions and Core Capacities.

IPS UN Bureau

 

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