By Carlos Felipe Jaramillo and Lalita Moorty
The global economy is entering another period of heightened stress. Geopolitical tensions, policy uncertainty, climate risks, and rapid technological change are making policy decisions more complex—and consequential.
The current spike in oil prices and tightening of supplies is straining public finances, especially in developing countries, fueling inflation, widening external imbalances, and disrupting supply chains. Faced with multiplying shocks, governments are making difficult trade-offs between short-term stabilisation and long-term development.
In an environment of dwindling public resources and mounting uncertainty, the central question is how to protect the public investments that promote growth and jobs. While there are no easy answers, three overarching principles can chart a promising path forward.
Be Strategic: Protect projects that create lasting jobs
When confronted with fiscal stress, there can be a knee-jerk reaction to cut public investments, especially for long-term projects. This is not the right response. The evidence is clear: cutting capital investment in difficult times can hurt recovery, lower productivity and wages, and make countries less resilient to withstand future shocks.
It is true that fiscal pressure can become so severe that some capital spending cuts are necessary. But how this is done matters hugely. It is essential, when reprioritising, to proceed strategically and thoughtfully. That means saying yes to dropping poorly designed, low-impact projects. It also means staying the course with high-return investments that create growth and jobs and make countries more resilient to handle a changing climate.
Putting in place a robust upfront planning capacity is essential. This is an area where many countries are actively building capabilities—and where the World Bank is helping. For example, in the Philippines, Viet Nam, and Mongolia, the Bank has been advising governments how to be more strategic when appraising and selecting projects. The goal is that those that make the final cut actually deliver economic growth and employment over the long term.
Invest in clean energy and people
The stress created by the current squeeze in oil supply has reinforced a critical lesson: investing in renewable energy and clean technologies is a must for energy security, macroeconomic stability, sustained development and jobs. Countries become more resilient when they diversify energy sources that includes nuclear as it reduces exposure to energy price shocks. That means continuing to invest in the infrastructure that makes diversification possible: cleaner ways to produce energy, decentralised systems such as solar micro grids, and more reliable supply, particularly in remote and disaster-prone areas.
Investment must continue in their most valuable resource of all: Their people. That means updating education systems, so workers develop skills that enable them to transition to sectors where most of the jobs are being created. Practical AI tools are one example, from helping small farmers identify crop or livestock diseases to improving access to services. But it is broader than that. Beyond upgrading technical skills, keep investing in quality schooling, healthcare, and core social programs that build human capital.
Create fiscal space by cutting waste
Finding financial room for job-creating public investments is not just about higher taxes and debt. Managing public resources better can also create fiscal space. Globally, about one-third of public investment gets wasted due to inefficiency, and even more in lower‑income countries. While cost overruns and delays can happen even with a well-planned project, most losses can be avoided through better appraisal, selection, implementation, and maintenance. Neglecting to fund maintenance quietly drains public finances by causing those assets to deteriorate prematurely and increasing replacement costs later.
Deploying digital technologies can help in managing projects better by improving transparency, accountability, and value for money, especially during crises. Viet Nam, for instance, is moving toward digital systems that monitor outcomes, improving the government’s ability to track whether spending is delivering results. Cambodia is following a similar path.
Don’t react—act
Today’s oil price crisis is a sharp reminder that shocks will remain a defining feature of the global economy. Governments need to be prepared. Managed well, public investments in projects that promote growth and jobs create resilient economies and strengthen energy and climate security. The path forward is clear: Protect high-impact investments, invest in clean energy and people, and create fiscal space by cutting waste.
