The International Monetary Fund (IMF) has raised alarm over the impact of Middle East tensions on Pacific Island economies, warning that rising fuel costs will worsen living pressures in countries already struggling with high import dependence.
IMF Asia and Pacific Director, Krishna Srinivasan told PACNEWS the region faces serious risks, particularly small island states with limited economic buffers.
“So we are very concerned about the small states in the Pacific Islands because these countries’ cost of living has been an issue even before the shock. They’re highly dependent on imports of oil, gas, and so on, so forth. But it’s diesel, kerosene, and so on. So we are very concerned.”
Srinivasan said the geographic isolation of Pacific countries makes the situation worse, with delays in global supply chains adding pressure.
“And also, what’s important to note is that even if things become more novel in terms of disruptions come down by the time the ships go from the Middle East to the Pacific Islands, it’s a long time,” he said.
He warned that limited fiscal and economic buffers leave countries exposed.
“So we are very concerned about these countries, and they have more limited buffers. So that’s something which we need to take into account,” he emphasised.
Srinivasan said the IMF stands ready to support Pacific countries through both policy advice and financing.
“And, you know, we are here to provide any kind of support that they need, whether it’s policy support or financial assistance, and so on,” he said.
IMF deputy director, Thomas Helbling said while the Pacific faces similar pressures to the wider region, its size and remoteness increase vulnerability.
“I think on the Pacific Island countries, the concerns are broadly similar to that of the region. There’s a specific element. Of course, they’re smaller, they’re further away.”
Helbling said governments need to act early to manage supply risks.
“So, besides our general recommendation of using buffers wisely, we would also encourage the countries to be proactive and think of supply chains, procuring oils and other essential supplies on a more forward-looking basis, working with partner countries,” he said.
He said policy flexibility remains important, depending on each country’s situation.
“And also then, depending on the situation in individual countries, use the policy buffers they have within their overall framework.”
The IMF comments come as global oil markets remain volatile, raising concerns about inflation, transport costs and economic stability across the Pacific, where many countries rely heavily on imported fuel for power generation, shipping and daily life.
With supply chains stretched and costs rising, the Fund said Pacific governments face immediate pressure and must act quickly, while relying on targeted support and international partnerships to manage the shock.
