Pakistan, Bangladesh, Sri Lanka Weather New Oil Price Storm with Stronger Buffers

Pakistan, Bangladesh, and Sri Lanka are bracing for another oil shock due to the ongoing Middle East conflict. The Brent crude price is expected to hover in a $90-$110 per barrel band for the remainder of 2026, with geopolitical risks contributing to volatility.

Despite this, the three economies have stronger buffers than they did during the 2022 energy crisis. Tariff adjustments, energy pricing overhauls, and looser currency management have cushioned the impact of rising oil prices on consumer prices.

The exchange rates in these countries have remained stable, a stark contrast to 2022 when currencies weakened sharply. This is due in part to movement toward market-determined exchange rate systems under IMF arrangements.

While reserves are still thin across all three economies, they represent an improvement over 2022 when rapid drawdowns were used to prop up currencies. Worker remittances from the Gulf and Middle East have continued flowing steadily, functioning as a dependable foreign currency source.