The situation in the Strait of Hormuz affects 1 billion vulnerable people, UNCTAD issues a stern warning
- A report released by the United Nations Conference on Trade and Development on Wednesday indicated that the situation in the Strait of Hormuz is impacting the global energy system and could affect around 1 billion people living in vulnerable economies. Vulnerable economies refer to countries and regions highly susceptible to external shocks, including Least Developed Countries and Small Island Developing States.
- Of the 75 vulnerable economies, 65 rely on imported oil. Rising energy prices will translate into higher costs and tough choices. The report estimates that if oil prices increase by 50%, the annual oil import bill for vulnerable economies will rise by about $2.04 billion, with Least Developed Countries bearing $1.61 billion and Small Island Developing States $430 million.
- Nearly 98% of oil imports in these economies are refined petroleum products, making them directly exposed to international fuel price fluctuations. Mauritania will see its oil import cost increase by the equivalent of 7.3% of its GDP, followed by Gambia, Burkina Faso, Liberia, and Zambia. Among Small Island Developing States, Vanuatu, Maldives, Tonga, and Mauritius are expected to face the greatest economic impact.
- Seychelles imports almost all of its oil from countries around the Strait of Hormuz. Uganda, Mauritius, Tanzania, Zambia, and the Maldives also heavily rely on this region. Higher fuel costs will drive up freight and transportation expenses, raise food and essential goods prices, trigger inflationary pressures, erode household purchasing power, and could widen trade deficits, increase borrowing costs, and slow economic growth. The report warns that without sufficient support and a stable energy market, this oil price shock could deepen structural vulnerabilities and erode development gains made by many low-income countries over the past decade.
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