Record climate finance and expanded crisis lending face scrutiny as developing countries struggle with rising energy costs, disaster recovery expenses and mounting debt.
World Bank Group President Ajay Banga faces mounting pressure to show that the world’s largest multilateral development lender can protect vulnerable economies from climate disasters and a deepening fossil fuel price crisis as Washington’s priorities reshape the institution’s climate agenda.
Finance ministers and central bank governors are gathering in Bangkok for the October 12-18 annual meetings of the World Bank and the International Monetary Fund (IMF). Developing countries face rising energy costs, mounting debt payments and increasingly expensive disaster recovery. The central question is whether international finance can reach the countries that need it most, quickly and on affordable terms.
Fuel crisis adds to pressure on developing economies
The Middle East conflict is disrupting energy markets, adding urgency to the talks. Banga said the Bank was in discussions with 30 to 40 countries about possible crisis assistance as higher diesel and fertiliser prices threaten to deepen economic pressures. The Bank could expand its crisis financing capacity to $100 billion if necessary, Reuters reported on October 11.
Higher fuel prices raise transport and electricity costs, fuel inflation and strain government budgets. For heavily indebted countries, the additional pressure can leave less money for healthcare, education, disaster preparedness and reconstruction.
The immediate need for reliable, affordable energy also presents a longer-term challenge. Countries dependent on imported fossil fuels remain exposed to volatile international markets, while the transition to renewable energy requires investment in electricity grids, storage and other infrastructure.
US pressure puts climate finance target in doubt
The Bank must respond to these pressures while managing the priorities of the United States, its largest shareholder. In June, it dropped its overarching target of allocating 45 per cent of its financing to projects with climate benefits following substantial US pressure, the Financial Times reported.
The decision came despite the Bank exceeding the target in the previous year, allocating $39.2 billion, or 48 per cent of its financing, to projects with climate benefits.
The change does not mean all climate-related financing has ended. The Bank says it will continue supporting climate-related development through a more country-led, results-focused approach, with greater emphasis on resilience and private-sector investment.
However, removing the overarching target raises questions about how the institution will measure progress and maintain accountability for its climate commitments. Individual institutions within the wider development finance system retain separate climate targets.
Washington has pushed for a stronger focus on conventional development priorities and private investment. Many developing countries, meanwhile, argue that climate resilience cannot be separated from economic development.
Banga must demonstrate that a country-led approach can sustain meaningful climate action while meeting development needs, rather than allowing climate priorities to recede under competing political and financial pressures.
Record climate finance faces an access test
Multilateral development banks provided a record $163 billion in climate finance in 2025, according to a joint report published on July 13. Of that amount, $103 billion went to low- and middle-income economies, including $35 billion for adaptation and $68 billion for mitigation, the Asian Development Bank said.
The figures highlight the growing role of multilateral lenders in climate action, but headline totals alone cannot establish whether vulnerable countries are receiving adequate support on affordable terms.
At the 2024 UN climate conference in Baku, countries agreed on a goal of at least $300 billion annually for developing countries by 2035, alongside efforts to scale up finance from all sources to $1.3 trillion a year.
The two goals are related but distinct. The $300 billion target concerns climate finance for developing countries, while the $1.3 trillion ambition covers a broader range of funding sources.
Governments need greater clarity on how much financing is genuinely additional, how much is provided through grants or concessional loans, how much must be repaid on commercial terms and how quickly it can be accessed.
These distinctions are particularly important for countries facing repeated disasters. Borrowing to rebuild damaged infrastructure can deepen existing debt burdens, leaving governments with fewer resources to prepare for future emergencies.
Nepal disaster exposes the cost of climate recovery
Nepal illustrates the scale of the challenge. Following catastrophic flooding on August 26, 2026, authorities reported that at least 1,455 bodies had been recovered, while 5,285 people remained missing when search and rescue operations officially ended. Reconstruction costs were estimated at $4.77 billion, according to the Associated Press.
The disaster affected nearly 33,000 people and damaged or destroyed around 7,500 homes, adding to the country’s recovery burden.
For countries facing repeated climate-related disasters, the challenge extends beyond the immediate response. Governments must fund reconstruction while maintaining essential public services and avoiding unsustainable borrowing.
Vulnerable countries have called for climate finance that is predictable, accessible and affordable, without lengthy administrative procedures that delay assistance to affected communities.
The World Bank and other multilateral lenders can help finance resilient infrastructure and recovery. Their contribution, however, should be measured not only by the amount committed but also by how quickly money reaches affected countries and whether financing terms allow them to recover without worsening their debt problems.
Private investment cannot replace public finance
The Bank has made private investment mobilisation central to its development strategy. It attracted a record $112 billion in private investment last year, alongside $123 billion from its own resources, Reuters reported on October 11. These figures cover broader investment mobilisation, not climate finance alone.
Private capital will be essential for expanding clean energy and resilient infrastructure, but it does not automatically flow to the poorest or most climate-vulnerable countries. Commercial returns, borrowing costs and perceptions of risk can discourage investment in places where the need is greatest.
Mobilised private investment is also not interchangeable with public climate finance or grants. Its development value depends on where it goes, the conditions attached and whether countries can afford to repay the financing.
Public development finance remains critical where commercial returns are uncertain, investment risks are high or communities cannot afford market-based financing.
As the Bangkok meetings proceed, Banga faces a test of whether the Bank can turn its financial capacity into tangible protection for vulnerable economies while navigating competing shareholder priorities.
For developing countries confronting climate disasters, rising energy bills and mounting debt, success will depend on whether finance arrives on time, reaches those most at risk and supports recovery and resilience without creating another cycle of unsustainable borrowing.
