The third Gulf War has triggered disruptions in global energy\nsupplies, significantly affecting low-income and developing\ncountries.<\/p>\n
The closure of the Strait of Hormuz has caused an energy availability\ncrisis in various regions. This is evident in long queues for household\ngas in Nepal, reduced operational days for industries in Sri Lanka, and\nschool closures in Pakistan.<\/p>\n
The International Monetary Fund\u2019s (IMF) Managing Director, Kristalina\nGeorgieva, described the current situation as \u201cunimaginable.\u201d\nHistorically, countries with weak economies bear the heaviest burden\nwhen global energy supplies shrink.<\/p>\n
This pattern was clearly seen following Russia\u2019s invasion of Ukraine\nin 2022. While advanced European countries provided energy subsidies,\nimporting nations with limited foreign exchange reserves and fiscal\nspace faced balance of payments crises, as experienced by Sri Lanka and\nPakistan during that period.<\/p>\n
To map the potential macroeconomic crisis at present, a country\u2019s\nvulnerability is measured through two main dimensions: the level of\nexposure (dependence on energy imports and remittances from the Gulf\nregion) and financial buffers (capacity to absorb shocks).<\/p>\n
Here is the vulnerability ranking of several developing countries\nbased on those indicators:<\/p>\n
Countries with the Highest Risk: Jordan, Pakistan, and Egypt<\/p>\n
Jordan records a high level of exposure with thin financial buffers,\nalthough its diplomatic relations may enable emergency support from\nWestern and Gulf countries.<\/p>\n
Pakistan and Egypt are in extremely vulnerable positions. Pakistan\nallocates around 4% of its Gross Domestic Product (GDP) to oil and gas\nimports, with 90% of supplies coming from the Middle East.<\/p>\n
Meanwhile, Egypt spends about 3% of its GDP on energy imports, with\nnearly half sourced from the same region.<\/p>\n
Both countries also rely on remittances from workers in the Gulf\nregion, equivalent to 5-6% of GDP. Disruptions in the labour market due\nto the conflict could pressure these inflows, in turn widening the\ncurrent account deficit.<\/p>\n
The financial buffers of both countries are very limited. Pakistan\u2019s\nforeign exchange reserves are currently below the minimum level\nrecommended by the International Monetary Fund (IMF).<\/p>\n
Vulnerability in South Asia: Bangladesh and Sri Lanka<\/p>\n
Although they have medium exposure levels, Bangladesh and Sri Lanka\nface high risks due to weak financial buffers. Bangladesh\u2019s foreign\nexchange reserves are only sufficient to cover import needs for less\nthan three months.<\/p>\n
The garment sector, which is the backbone of the country\u2019s exports,\nheavily depends on imported fuel, so rising energy prices directly\nworsen the trade balance.<\/p>\n
Sri Lanka is in a similar situation. The country has only recently\nrecovered from default status in 2022 due to previous energy price\nshocks and currently still has very limited foreign exchange\nreserves.<\/p>\n
High Exposure with Better Resilience: Thailand and Nepal<\/p>\n
Some countries have high import dependence but are supported by solid\nfinancial buffers.<\/p>\n
Thailand spends around 7% of its GDP on oil and gas imports. However,\nThailand has strategic oil reserves sufficient for 100 days and foreign\nexchange reserves that can cover import needs for more than seven\nmonths.<\/p>\n
Nepal stands out due to its high dependence on remittances, where 8%\nof GDP comes from workers in the Gulf region. Although its oil reserves\nare minimal, Nepal has strong foreign currency holdings (hard currency)\nto withstand initial shocks.<\/p>\n
India\u2019s Safe Position<\/p>\n
India is assessed to be able to handle this shock well. Although it\nspends 3% of its GDP on energy imports from abroad, its financial\nbuffers are very strong. India\u2019s foreign exchange reserves are\nsufficient for seven months of imports, supported by commercial and\nofficial oil stocks for about 70 days.<\/p>\n
Additionally, Indian refineries have the capacity to process\nlow-quality crude oil, allowing the country to absorb supplies from\nRussia.<\/p>\n
India\u2019s power generation also relies more on domestic coal, thereby\nminimising the impact of rising imported gas prices on the overall\neconomy.<\/p>\n
What about Indonesia?<\/p>\n
In The Economist\u2019s analysis, Indonesia ranks 13th in the list of\nemerging market countries most exposed to the oil crisis. Indonesia\u2019s\nnet imports are very high, including from the Middle East. However,\nIndonesia also has sufficiently strong buffers compared to other\ncountries.<\/p>\n
Food Crisis Threat Looms<\/p>\n
Beyond the risks of macroeconomic crisis, this energy shock brings\nhumanitarian implications. Prices of nitrogen fertiliser, produced using\nnatural gas, have surged, directly impacting food production costs in\npoor countries.<\/p>\n
The World Food Programme (WFP) projects that the number of people\nfacing acute hunger could reach a record high in 2026 if the conflict\ncontinues.<\/p>\n
Securing import financing and stabilising currency exchange rates may\nprevent a financial crisis, but maintaining food price affordability\nwill be a particular challenge.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/list-of-most-vulnerable-developing-countries-to-oil-crisis-including-indonesia-1774101078", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }