A country need not run out of money to find itself in a debt crisis. It only has to run short of US dollars to pay for its energy.

At the recent International Monetary Fund-World Bank annual meetings in Bangkok, the IMF, which expects global economic growth of 3.1 per cent this year and 3.4 per cent the next, cautioned that energy-importing and lower-income economies face a harder road, even as those riding the artificial intelligence boom fare relatively well.

According to the World Bank’s International Debt Report, between 2022 and 2024, low- and middle-income countries paid US$741 billion more in debt repayments and interest than they received in new external financing. As buffers drain, the next energy shock could push vulnerable economies over the edge.

Past financial crises have taught policymakers to watch for failing banks and collapsing currencies. An energy shock follows a different path. It begins at the fuel terminal, not in a bank vault. By the time stress surfaces in the banking system, the damage to a country’s external position is done. The IMF has warned that rising borrowing costs and currency pressures can worsen the impact of such disruptions.

Asia is particularly vulnerable. Its net oil and gas imports amount to about 2.5 per cent of gross domestic product, and it buys 80 per cent of the liquefied natural gas (LNG) passing through the Strait of Hormuz.

That exposure does not necessarily lead to default, but rising energy costs can drain foreign exchange reserves and make debt repayments harder to manage. How hard that collision lands depends on the cushion each country holds.

India, despite being a major oil importer, held US$682 billion in reserves at end-May, enough to pay for about 11 months of imports. Indonesia, which both produces and imports energy, had a smaller financial cushion with reserves of US$146.3 billion at end-September. Vietnam is more vulnerable, with the IMF predicting its current reserves would cover only around two months of imports.

None of these countries faces an imminent sovereign debt crisis, but a prolonged rise in energy prices could test their ability to meet external obligations in very different ways. The risks become more apparent in South Asia’s smaller economies.

Bangladesh is an early warning. Its reserves were US$26.7 billion for the year ended June 30, 2025, covering just 3.8 months of imports. In May this year, the World Bank approved an additional US$350 million in financing for Bangladesh’s LNG imports. Since then, rising energy import and subsidy costs have added further pressure.

Pakistan has the narrowest margin. The IMF, which puts Pakistan’s reserves at US$21.5 billion, projects its external financing needs at US$21.2 billion for the current financial year. Sri Lanka has reserves of US$6.85 billion as of September, enough to cover about three months of imports, but has little time to strengthen its finances as its energy bill continues to rise and larger repayments on its restructured foreign debt are set to resume next year.

Seen side by side, the same oil-price rise that India can absorb could shake refinancing confidence in Bangladesh, Pakistan or Sri Lanka. Debt surveillance should reveal that difference before markets do, and three steps would help.

First, the IMF and World Bank should build a joint “energy-to-debt stress test” for vulnerable importers.

A standard exercise could model oil at US$20 a barrel above the baseline and a temporary doubling of spot LNG prices, then trace the effect on the import bill, current account, reserves, exchange rate, state-owned energy companies and foreign-currency debt service over 12 to 24 months. The aim is to pinpoint when an energy shock becomes a refinancing problem.

Second, the test should trigger faster temporary liquidity, such as from the IMF’s Rapid Financing Instrument or the World Bank’s Rapid Response Option.

Third, prevention means financing the exit. The World Bank’s Multilateral Investment Guarantee Agency already uses portfolio guarantees to support renewable generation and battery storage projects. For energy importers, verified future savings on fuel imports should carry explicit weight in concessional finance and guarantee decisions. This is not only climate investment; it is also balance-of-payments insurance.

Each step needs guardrails. Emergency liquidity should not subsidise permanently cheap fuel, so access should require transparent reserve data, disclosure of state energy companies’ liabilities, cost-reflective pricing where feasible, targeted cash support and hard sunset clauses. Broad price caps can become unaffordable and losses at state energy firms can migrate onto the public balance sheet.

A debt crisis that begins at the fuel terminal will not look like a banking collapse until late in the story. By then, the foreign exchange reserves may already be depleted. The lesson of the Bangkok meetings should be simple – stress-test the energy bill before it becomes a sovereign balance-sheet crisis.