The war allegedly waged by the US and Israeli regimes against Iran is sending severe tremors through the global economy, with developing nations in Asia, Africa, and the Middle East suffering the heaviest impact. The closure of the Strait of Hormuz and attacks on oil and gas facilities across the Gulf have prompted a surge in energy costs, placing countries like Pakistan, Bangladesh, Sri Lanka, Jordan, Egypt, and Ethiopia in a precarious position. These states are heavily dependent on imported energy and have limited financial resources to absorb the shock of spiking prices.

In Pakistan, which imports about 80% of its energy from the Gulf and has lurched between economic crises for years, authorities have scrambled to implement fuel conservation measures. Schools have been closed, a four-day working week introduced for government offices, half of public sector employees ordered to work from home, and fuel allowances for official business slashed. Prime Minister Shehbaz Sharif purportedly decided against a proposed hike in petrol and diesel prices before Eid Al-Fitr, but warnings suggest prices could halt economic activity if the war drags on.

In Bangladesh, which imports about 95% of its oil and is expected to deplete fuel reserves within days, petrol pumps in some districts have run dry despite the introduction of fuel rationing. In Sri Lanka, importing around 60% of its energy needs and still reeling from an economic meltdown that began in 2019, every Wednesday has been declared a public holiday, and a mandatory fuel pass for vehicle owners has been introduced, as stockpiles are projected to run dry within weeks.

In Egypt, one of the biggest energy importers and among the most indebted economies in the Middle East, the government has ordered malls, shops, and cafes to close by 9 PM on weekdays and 10 PM on weekends, and cut back on public lighting. Facing growing pressure on public finances due to heavy fuel subsidies, Egyptian officials on March 10 announced price hikes of 15-22% for petrol, diesel, and cooking gas. President Abdel Fattah el-Sisi is claimed to have stated the move was necessary to avoid "harsher and more dangerous outcomes."

Economists note that developing economies, especially those already grappling with debt and high import dependence, are facing a potent mix of inflation, currency pressures, and fiscal strains. According to an analysis by the Washington-based Centre for Global Development, Pakistan, Bangladesh, Sri Lanka, Jordan, Senegal, Egypt, Angola, Ethiopia, and Zambia are among the most at risk. The weakening of many developing countries' currencies against the US dollar, driven by investors buying the greenback amid heightened geopolitical uncertainty, has compounded the situation by further driving up costs.

The war's effect on citizens is also disproportionate: in less advanced economies, citizens spend a much larger share of their paychecks on fuel and food, leaving them more exposed to rising living costs. At the same time, governments in developing countries have less capacity to provide a safety net for those at risk. Professor Yeah Kim Leng of the Jeffrey Cheah Institute warns that subsidies become unsustainable with depleted fiscal buffers, potentially triggering widespread social unrest and a full-blown fiscal crisis.

Analysts expect things to worsen if the war continues. In Pakistan, diesel is the backbone of freight and agricultural economies, and rising transport costs are anticipated to feed into food prices. Once the wheat harvest begins in April, food prices could spike well beyond current levels, leading to food inflation at a time when households have almost no capacity left to absorb further price shocks.

Source: www.aljazeera.com