By Elsie Kamsiyochi
The Iran war, though fought thousands of miles from their borders, is sending painful aftershocks through crisis-scarred nations already struggling to rebuild. For people like Sanoj Weeratunge, who runs a tour company in Colombo, this was supposed to be the year Sri Lanka finally began to feel normal again.
After six long years of political upheaval, economic collapse, and the painful fallout of the pandemic, he believed 2026 would offer the first real sign of recovery. That hope evaporated quickly.
When fighting erupted in Iran—nearly 2,700 miles from Sri Lanka—the consequences were immediate. The government raised fuel prices by 35%, sending operating costs soaring. Almost overnight, Weeratunge saw business fall by nearly a third as bookings dried up and locals struggled with rising costs. “We were very hopeful this would finally be the year we reached pre-COVID levels,” he said. “But now this economic shock will affect us.”
Sri Lanka is one of several vulnerable nations—alongside Egypt and Pakistan—that analysts now fear have been thrust back toward financial instability as global energy prices surge once again. Their heavy dependence on imported oil and gas has left them painfully exposed to geopolitical shocks. Even though the Gulf has managed to hold a tenuous ceasefire this week, the damage to energy markets has already been done.
Colombo, desperate for breathing room, has reintroduced fuel subsidies and negotiated a temporary easing of conditions tied to its IMF bailout. Other nations facing similar pressures are expected to plead their case next week in Washington as the IMF and World Bank convene for their annual spring meetings.
IMF chief Kristalina Georgieva has already signaled that the Fund anticipates a surge in emergency financing requests. Early estimates suggest between $20 billion and $50 billion may be needed to stabilize economies hit hardest by the war’s ripple effects.
Former Pakistan central bank governor Reza Baqir says the crisis is striking vulnerable countries “from almost every direction.” A 40% jump in global oil prices has inflated import bills at the very moment remittances from Gulf-based workers—an essential lifeline for many families—are expected to decline. Economies already stretched thin are facing fresh pressure on exchange rates, widening current account deficits, and depleting foreign reserves.
Egypt’s currency has already plunged more than 10% since the conflict escalated. In these import-reliant economies, every dip in the local currency means more expensive fuel, food, fertilizer, and painful debt-servicing costs.
The strain is visible on the ground. In Pakistan, petrol prices have risen sharply for the second time in a matter of weeks. Schools shut down for half of March to cut costs, and government offices shifted to a four-day workweek. Ministries have been barred from purchasing new furniture or even air conditioners.
On top of domestic austerity, Islamabad is suddenly confronted with a pressing $3.5 billion repayment to the United Arab Emirates—funds it had hoped would be rolled over. Without an extension, the repayment threatens to squeeze Pakistan’s finances even further, especially as it remains tied to a $7 billion IMF program.
For Egypt, the picture is equally grim. Tourism, a major source of revenue that brought in $19 billion last year, now faces uncertainty. The Suez Canal, a vital artery of global trade and a crucial source of income, risks disruption. More than half of Egypt’s foreign-exchange reserves will be consumed by nearly $30 billion in debt repayments due this year. Moody’s reports that $8 billion in foreign investment has already exited the country since the war began.
The IMF has praised Egypt for allowing its currency to absorb the shock—letting it slide rather than artificially propping it up. But with energy import costs doubling, economists expect Cairo to be among the most active voices seeking relief at the meetings in Washington.
Across these nations, ordinary people are struggling under the weight of surging prices. In Karachi, delivery driver Maviq Hussain says simply keeping up with daily expenses has become a battle. “Everything has become expensive,” he said. “It’s difficult to manage daily expenses.”
In Sri Lanka, 37-year-old tuk-tuk driver Kelum Dissanayaka begins work before sunrise each day. Yet despite working longer hours, he has been unable to keep up with leasing payments on his vehicle for two months as fuel rationing and inflation bite into his earnings. “It’s very difficult to live,” he said.
As global institutions prepare to meet next week, economists say the stakes are high. Without coordinated support and flexible financing conditions, the risk grows that multiple countries could slip into deeper crises. As former IMF official Jeff Franks notes, “It is in no one’s interest to be rigid in the conditionality and allow these countries to fail.”
For millions of families across Sri Lanka, Egypt, and Pakistan, the hope now is not for a return to prosperity—but for relief from the relentless pressure of a conflict they had no part in starting, yet cannot escape.
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