A new study by the International Monetary Fund (IMF) has revealed that more people are living in extreme poverty than previously estimated. The research highlights that rising food and energy prices are likely to become more common, leading to higher inflation, increased poverty, and economic instability. The study, published on Tuesday, analyzed government strategies over three decades to manage these price increases. It also introduced a new economic model that reflects the higher inflation rates experienced by the poorest households, who spend a larger share of their income on basic needs. This model found a 0.8 percentage point difference compared to standard inflation measures, suggesting that 23 million more people have fallen below the extreme poverty line between 2021 and 2024 than previously thought. Chiara Maggi, an economist at the IMF and co-leader of the study, noted that cost-of-living crises affect price stability, lower living standards, and worsen inequality. The findings are part of Chapter 2 of the World Economic Outlook, which will be released next week. The IMF had previously predicted global economic growth of 3% for 2026, a forecast made in July. While the global economy has performed better than expected amid the energy shock from the Middle East war, the IMF warned that risks remain high. The 3% growth rate is lower than the 3.5% average recorded in 2024 and 2025. The July forecast also assumed the Middle East conflict would end by mid-July, but tensions have escalated, with both Iran and the United States increasing attacks, and the war spreading to neighboring countries. The IMF recommended that targeted financial support, such as direct cash transfers, is the most effective way for countries to help vulnerable populations without distorting market prices. In contrast, measures like price controls and tax cuts could be three to six times more costly for governments, while subsidies to producers could cost up to 22 times more. In some cases, these subsidies have proven inefficient, as they can reduce the cost of goods exported, effectively subsidizing foreign consumers instead of domestic ones. Chiara Maggi explained that producer subsidies, often used by developing nations, can lead to unintended consequences, where national taxpayers fund lower prices for goods that are later sold abroad. Shantayanan Devarajan, a professor at Georgetown University and former economist at the World Bank, said developing countries are facing a severe crisis due to rising oil prices, high debt, increased borrowing costs, and the effects of an unusual El Niño weather pattern. He noted that global growth in low-income countries is at its lowest historical level, with economic expansion slowing significantly. Some countries, like Egypt and Indonesia, have started shifting away from broad subsidies toward targeted financial support. Devarajan urged nations to implement reforms to boost growth and minimize the damage caused by the ongoing conflict in the Middle East. He emphasized the importance of taking action early, saying, "You should fix your roof when the sun is shining," as waiting until a crisis erupts may be too late and face strong opposition.