Just over four weeks after the Israeli-US bombing of Iran began, sparking a broader regional conflict, the almost immediate halt to tanker traffic in the vital Persian Gulf waterway cut off shipments of oil around the world, followed by those of natural gas, coal, shipping, food and fertilizer.
“Only a small group of LDCs (least developed countries) are net energy exporters: South Sudan, Angola, Chad, Mozambique, Lao People’s Democratic Republic, Myanmar and Yemen.”said Junior Davis, Head of the Research and Policy Analysis Division for Africa, WFP and Special Programs at UNCTAD.
“The majority are net importers, including Niger, Zambia, Rwanda, Ethiopia, Tanzania, Madagascar, Togo, Sudan, Uganda, Nepal, Eritrea, Benin, Bangladesh, Cambodia and Senegal.”
Even oil exporters face pain
Highlighting the case of Angola, Mr. Davis noted that oil-exporting developing countries may only gain “limited benefits” from doing so, “because many lack domestic refining capacity and reimport refined petroleum products at higher prices”.
Neighboring Zambia faces “even greater difficulties” because it relies on imported refined fuel from the Middle East (and in particular the United Arab Emirates), as do the LDCs. “Very dependent” on fertilizers produced abroad.since the manufacturing process largely depends on natural gas (methane), – explained the UNCTAD economist.
According to the Food and Agriculture Organization of the United Nations (FAO), 17 of the world’s poorest nations need to import more than 30 percent of their grain needs.. Even more worrying is that the same number of less developed countries spend more than half of what they earn from exports just to buy food.
“The implication is that rising energy prices will quickly trickle down to food prices and amplify the risk of hunger for households,” Davis said.
Limited maneuver space
Finding quick solutions to the energy crisis will not be easy, given the high level of debt repayments burdening many of the world’s poorest nations, an issue that the UN Secretary-General has repeatedly criticized and urged the financial sector to reform, in the interests of equity, competitiveness and growth.
“Given how heavily indebted many developing countries are to foreign lenders and the public spending squeeze they have faced for years, Households will most likely have to pay more for energy, food and fertilizer and use less.. “It’s not going to be pretty.”
Against this worrying backdrop, the United Nations trade and development agency, UNCTAD, noted that 15 of the world’s least developed countries have yet to recover from the turbulent COVID years, and their economies are worse off than in 2019.
Crisis measures
- Bangladesh: Binding measures including fuel rationing and electricity restrictions (with limits on air conditioning, refrigeration and lighting) and university closures.
- Cambodia: Reduced public sector energy use, online meetings, limited government travel, temperature checks, fuel tax reduction to help consumers, and stricter monitoring of pump prices.
- Ethiopia: Frugal use of fuel is encouraged.
- Myanmar: fuel rationing, alternate driving days, mandatory remote work for civil servants.
- Lao People’s Democratic Republic: remote work and rotating shifts for civil servants, public campaigns to promote public transportation, fuel rationing, transportation restrictions, tax cuts and fuel subsidies.
- Senegal: reduced consumption attracts households and companies.