Cheap oil squeezes South Asia’s cash lifeline

August 4, 2016

As work in the Gulf dries up, remittances from migrant workers are slipping, depriving developing nations of revenue…

South Asian economies have been hit by the daunting problem of decrease of cash flows from the West Asian countries affected by the low oil prices, a report published in the Wall Street Journal said yesterday.

Chronically low oil prices are disrupting a critical financial lifeline across Asia and depriving economies of much-needed hard currency, the WSJ report said.

The flow of cash, or remittances, from Asian citizens working in the Gulf soared when the price of oil was high, boosting growth across the board. The billions of dollars in annual inflows paid for necessities such as schooling and health care and helped propel families into the middle class for the first time.

Now that money is disappearing, perhaps permanently, as laborers lose work in oil-driven Mideast countries. That’s adding a new threat to growth in some Asian nations and depriving them of currency inflows they need to balance their national accounts and keep their currencies from depreciating too quickly.


A barrel of Nymex crude is now trading at around $41, up from below $30 earlier this year. But prices are a long way from the peak of the boom and aren’t expected to return to previous highs soon. In February 2014, a barrel of crude cost more than $100.

Demonstrating the pressures of sustained low prices, thousands of Indian workers protested in Saudi Arabia on Saturday at being left without jobs, pay and food after they were laid off. The Indian government stepped in over the weekend to hand out food to hungry workers.

A drop-off in funds from migrant workers contributed to a crisis in Sri Lanka that forced the government to take a $1.5 billion emergency loan from the International Monetary Fund earlier this year. Falling inflows to Nepal, where transfers from overseas workers are equivalent to about 28% of annual national economic output, are undercutting the impoverished Himalayan country’s ability to rebuild from earthquakes last year.


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