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An unprecedented energy crisis that’s gripping some of the most densely-populated and impoverished parts of South Asia may soon worsen as more fuel suppliers avoid selling oil to these nations.
Fewer companies are offering to sell fuel to state-owned Pakistan State Oil Co, while some banks have stopped financing and facilitating payments for energy imports.
Sri Lanka is also struggling to secure fuel from its regular supplier India. Meanwhile, Bangladesh is having to schedule power cuts to preserve its fuel reserves.
Emerging markets across the world have been devastated by surging commodity prices following Russia’s invasion of Ukraine.
In oil, though the price has come off from record highs on fears over a global economic slowdown, plummeting currencies across South Asia are keeping import costs prohibitively high.
That’s pushing countries to the brink of collapse at a time when oil and energy are crucial in supporting their rebound from the crippling effects of the pandemic.
A surge in international oil and gas prices has intensified the economic crises seen in some emerging markets, especially nations that are highly dependent on energy imports with very low foreign exchange reserves, said Rajiv Biswas, APAC chief economist at S&P Global Market Intelligence. Sri Lanka’s economic situation has become desperate, while Pakistan’s situation is extremely fragile, he added.
Fuel traders said they’re hesitant to supply gasoline and fuel oil to Pakistan on concerns the recent dramatic plunge in the rupee hampers the country’s ability to make payments.
This is despite assurances from importing entities and an agreement by the International Monetary Fund to approve an extended funding facility. – Bloomberg
Online Reporter