Pakistan, Bangladesh, Sri Lanka face fresh oil shock with stronger buffers

Mettis Global reported that Pakistan, Bangladesh and Sri Lanka are under renewed strain from costlier global oil, which has risen amid the Middle East conflict. Citing a Moody's assessment, it said all three now hold larger financial cushions compared with the energy crunch of 2022. Brent crude is projected to stay mostly between $90-$110 a barrel through the rest of 2026, while geopolitical risk is likely to keep prices volatile.

Consumer prices have risen across the import-reliant region, but the effect on inflation has been noticeably milder than in 2022. The report credits cost-recovery tariff changes under IMF-linked plans, energy pricing overhauls and looser currency handling with cushioning the blow. Exchange rates have held relatively steady through the latest oil rise, unlike the sharp slides of 2022, and a shift toward market-determined regimes has reduced the chance of disorderly depreciation, while costlier energy imports keep pressure on the external position.

Reserves in Pakistan and Bangladesh have stayed broadly intact since the conflict escalated, whereas Sri Lanka's have thinned as tourism income slowed and energy bills rose. Workers' remittances, with close to half coming from Gulf and wider Middle Eastern labour markets, have kept flowing and are returning to formal banking channels. Growth forecasts were trimmed for all three, and Pakistan's FY26 outlook fell by 0.2 percentage points and FY27 by 1.0 percentage point, far milder than the 4.0 percentage point cut in FY23.