UNDP urges countries to broaden fiscal space & tax bases
The widespread consequences of global conflict are disproportionately affecting the world’s most susceptible populations, potentially driving more than 40 million individuals back into poverty, particularly in Sub-Saharan Africa and Southeast Asia. In an effort to protect citizens from escalating energy costs, countries have allocated an unparalleled $1.1 trillion to fossil fuel subsidies. However, specialists caution that this strategy jeopardizes their economic prospects by increasing national debt and redirecting essential funds from healthcare, education, and the transition to green energy. Alexander De Croo, Administrator of the United Nations Development Programme, joined CNBC Africa to explore strategies for expanding fiscal capacity and fostering robust economies.
Countries across the developing world are being compelled to make increasingly difficult choices as the global repercussions of conflict elevate energy prices and threaten to push over 40 million people back into poverty, according to the head of the United Nations Development Programme.
Speaking at the Hamburg Sustainability Conference, UNDP Administrator Achim Steiner stated that the secondary impacts of war are extending far beyond the immediate conflict zones, with the heaviest burden falling on vulnerable communities in Sub-Saharan Africa and Southeast Asia. Governments, he explained, have responded by attempting to shield households from surging living costs, but many have done so in ways that risk undermining their long-term economic stability.
“There’s a risk that more than 40 million people are being pushed back into poverty,” Steiner said, noting that many of those affected had only recently been lifted out of poverty after decades of development gains. “The impact is worldwide. It goes way beyond the region where the conflict is. It’s mostly in Sub-Saharan Africa. It’s in Southeast Asia.”
The UNDP chief highlighted a significant increase in fossil fuel subsidies as one of the clearest indicators of the pressure governments are facing. According to Steiner, these subsidies have surged by over $400 billion and now total approximately $1.1 trillion globally, as nations strive to mitigate the impact of rising energy expenses.
While such measures may provide immediate relief, Steiner cautioned that they come with a substantial long-term cost. In numerous instances, governments are either incurring additional debt or reallocating funds away from crucial development priorities such as healthcare, education, and clean energy investments.
“These are countries that are basically mortgaging their future,” he said. “Either they take on more debt — and many of those countries already are highly indebted — or they take money away from investing in healthcare, investing in education, investing in the green energy transition.”
His observations underscore growing apprehension among development institutions that emergency spending linked to global disruptions is eroding precarious fiscal positions, precisely as poorer nations encounter tighter financing conditions, slower aid flows, and heightened susceptibility to climate and geopolitical instability.
Steiner asserted that the solution is not merely to withdraw support for populations experiencing immediate hardship, but to expand what he termed countries’ “fiscal space” — effectively broadening the financial instruments available to governments so they become less reliant on debt-financed emergency measures.
This endeavor, he explained, must encompass a broader tax base, more robust domestic revenue collection, regulatory and governance reforms, and policies designed to attract foreign investment. He also pointed out that development finance should not be viewed solely through the lens of overseas aid, particularly at a time when official development assistance is diminishing.
“Public financing in overseas development assistance has decreased, but financing development is broader,” Steiner said. “It is about collecting taxes. It is about foreign investment. It is the reforms that are necessary to make that happen.”
A second critical priority, he contended, is accelerating the green transition. Beyond environmental considerations, Steiner presented renewable energy as a strategic economic safeguard against geopolitical volatility. Fossil fuel markets remain susceptible to supply disruptions and chokepoints, he noted, citing the Strait of Hormuz as a prime example of how conflict or instability can rapidly trigger price spikes. Still, he cautioned that implementing these solutions demands more than just technology or capital. Countries also require stable political systems, functional financial institutions, and the rule of law to become credible destinations for investment. Steiner emphasized that assisting nations in building these foundations is central to the UNDP’s mission.
“These things are feasible,” he said. “This is the core of what UNDP is doing — helping countries to become investable and to become investable to shield them better from the shocks that we have seen.”
The discussion also shifted to the wider condition of the global economic and political order, at a time when increasing geopolitical tensions and supply-chain vulnerabilities have spurred renewed debate over the endurance of globalization and the future of multilateral cooperation.
Steiner challenged the notion that countries can isolate themselves from global crises through withdrawal or fragmentation. He argued that modern economies are profoundly interconnected, and that instability in one region can swiftly spread across borders, impacting even wealthier nations.
“No country today can say, ‘I am that prosperous that I’m shielded,’” he said. “Crisis can come to your back door faster than you think, and it can come to any back door.”
For Steiner, this interdependence implies that solutions must also be interconnected. Whether the challenge involves conflict recovery, poverty reduction, or economic resilience, he stated that lasting stability hinges on rebuilding institutions, restoring services, and supporting post-conflict recovery long after hostilities cease.
He also offered a defense of multilateralism, even as international institutions face increasing criticism regarding their effectiveness and responsiveness. While acknowledging that global organizations should be scrutinized and challenged, Steiner said he has yet to see a
“I think as international organizations we have no problem with being tested and being challenged, but please tell me what is the better system?” he said. “For the moment I don’t see anyone who’s doing it better.”
Regarding globalization more broadly, Steiner indicated that he does not necessarily perceive a world moving towards outright deglobalization. Instead, he suggested that global trade and investment are evolving, with resilience, strategic dependence, and security concerns now holding greater significance alongside traditional comparative advantage.
This shift, he remarked, is not inherently negative — provided policymakers do not overlook the immense gains delivered by decades of cross-border trade, investment, and entrepreneurship.
“Let’s not forget the incredible growth of prosperity that we have seen over the past decades,” Steiner said. “It is through international investments, through homegrown startups, and through trade.”
His message from Hamburg was ultimately one of urgency: governments need leeway to protect vulnerable populations today, but they also require a credible pathway toward stronger public finances, cleaner energy systems, and more resilient institutions. Without that equilibrium, the short-term response to crisis could ultimately deepen the long-term development challenge.
