Global markets are facing signs of a new “energy shock” that threatens to deepen the deficits in the balance sheets of oil and gas importing countries. These warnings come in light of sharp fluctuations in supply prices due to geopolitical tensions, which doubles the pressure on government books that are suffering from the consequences of inflation.
The sudden rise in energy costs threatens to raise public debt levels, as governments are forced to increase spending on fuel and electricity subsidies. This trend leads to a widening of the financial gap and a reduction in development investments, which puts decision makers before difficult choices to balance social stability and financial sustainability.
Uncertainty in supply chains also reinforces fears of a slowdown in global economic growth, especially in emerging economies that lack sufficient financial reserves to meet the rise in energy bills. Attention is turning to monetary policies and austerity measures that countries may resort to to limit the worsening of their budget deficits.
