Ceasefire collapse could trigger global crisis, warns World Bank chief Ajay Banga

New Delhi (The Uttam Hindu): Amid rising geopolitical tensions linked to Iran, Ajay Banga, chief of the World Bank, has warned that a breakdown of the current ceasefire could lead to a major global crisis. He stated that even if the conflict remains paused, its economic impact will continue to affect the world for a long time.

Impact on global growth

According to Banga, even if the ceasefire holds, global economic growth could decline by 0.3% to 0.4%. However, if tensions escalate again, the slowdown could deepen to nearly 1%, affecting trade, energy markets, and financial systems worldwide.

Rising inflation concerns

The crisis is also expected to increase inflationary pressure. Estimates suggest inflation may rise by 0.2% to 0.3% if stability continues, but could climb up to 0.9% in case of prolonged conflict. Developing nations may face even greater challenges, with inflation potentially reaching 6.7%.

Energy crisis risks

Countries heavily dependent on energy imports are likely to be the most affected. The World Bank is already engaging with such nations to prepare mitigation strategies. Small island economies could face severe disruptions, prompting discussions on emergency financial support.

Advice to governments

Banga urged governments to avoid short-term relief measures like unstable energy subsidies that could create long-term economic risks. He emphasized the need for diversifying energy sources to ensure stability in the future.

Nigeria as an example

He cited Nigeria as a model, where a $20 billion refinery project has strengthened energy security. The initiative has improved self-reliance and enabled fuel exports to neighboring countries. Banga highlighted the importance of investing in alternative energy sources such as nuclear, wind, solar, and hydropower to reduce dependence on traditional fuels.