New Delhi: The war in West Asia hits closer to Indian shores, with a number of countries in the neighbourhood such as the Maldives, Sri Lanka, Bangladesh, and Nepal all seriously impacted due to the paucity of energy supplies and a fall in tourism.
The Maldives has seen a 20 percent drop in tourist footfall, just weeks ahead of an impending loan repayment of $500 million. Sri Lanka and Bangladesh have all imposed energy rationing guidelines, while Dhaka brought forward the holidays for Ramzan due to the shortage of resources.
Nepal has imposed rationing of cooking gas cylinders. India on Thursday announced that the supply of liquefied petroleum gas is a “matter of concern” after Israel and Iran struck at energy infrastructure across the region. Iran’s attacks on QatarEnergy’s Ras Laffan industrial complex on Wednesday damaged around 17 percent of its liquefied natural gas manufacturing capacity.
Every country in India’s neighbourhood relies on energy imports, and for the Maldives and Sri Lanka, tourism plays a key part in their ability to raise government revenue. All of which have been disturbed.
Take the Maldives as an example. The island archipelago is expected to make a full repayment of a $500 million Sukuk bond in the middle of April. The country has, in the last few years, faced a number of shocks, including the COVID-19 pandemic and a persistent shortage in foreign exchange reserves.
“The government of the Maldives has not disclosed how it is repaying the Sukuk loans. There have been discussions of refinancing. But no details have been made public. The fuel prices globally have increased. If this war continues for a while, the Maldives, which relies on energy imports, will see a hit to its foreign exchange reserves with a rise in oil prices,” Aditya Gowdara Shivamurthy, an Associate Fellow with the Observer Research Foundation (ORF), told ThePrint.
He added, “The fall in tourism at this moment may not have an impact, given that there is less than a month to repay the loan. The more important question that remains is how the government is repaying it. Is it borrowing from someone else, including private creditors?”
The US-Israel war with Iran has seen a 21 percent drop in tourist footfalls into the Maldives in the first 16 days of March in comparison to last year. In March 2026, a total of 81,188 tourists arrived in the Maldives till Monday. During the same period in 2025, a total of 102,928 tourists arrived in the island archipelago, according to the Maldivian Tourism Authority.
Malé’s foreign exchange reserves have hit $1.26 billion as of February 2026, a 53 per cent increase from the same month in the previous year. It imported an estimated $3.26 billion worth of goods in 2025, which is roughly equivalent to around a need of $270 million in foreign exchange reserves monthly.
“The Maldives remains at high risk of debt distress. Persistent foreign exchange shortages, limited financing options, and heavy near-term debt service obligations— including a US$500 million Sukuk repayment in 2026—pose significant solvency risks,” the World Bank noted in its 2025 October update on the Maldives’ challenges in 2026.
Economic fragility is not limited to the Maldives. Most nations in South Asia have seen deep financial distress since the COVID-19 pandemic and at best, have sought to recover, albeit in uneven fashions.
“South Asian nations have used band aids to solve their economic crises. The West Asian crisis is too close to home that this is no longer possible. The regime change in Sri Lanka was due to the impact of COVID, which also probably impacted the political changes in Nepal and Bangladesh to an extent,” said Shivamurthy.
He added: “I do not think that anything will be possible until they institutionalize their economic recovery.”
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Sri Lanka, Bangladesh impose rationing limits
To conserve its fuel stocks, Sri Lanka has announced that every Wednesday is a “holiday”. The four-day work week impacts its schools and universities, but not essential services. Colombo also introduced ration limits for the amount of fuel individuals can purchase in the island country. The last time such rationing was imposed was at the height of its bankruptcy in 2022.
“Colombo is in a slightly more complicated situation because of the sinking of the IRIS Dena (the Iranian naval vessel) and its neutrality in the war. It also received energy from Iran. The Sri Lankan expat community also earned revenues from the Middle East, now the question is what happens to these remittances?” Shivamurthy explained, highlighting the challenges the Dissanayake administration faces.
The last calendar year in Sri Lanka saw its citizens remit a record $8.07 billion back to the island country, a 22 per cent year-on-year growth from the previous year. These remittances aid in Sri Lanka’s overall economic growth. However, according to statistics published by the Central Bank of Sri Lanka, of the top five countries from where Sri Lankans are remitting money back home, four are in West Asia – the United Arab Emirates, Kuwait, Saudi Arabia and Qatar.
In the first nine months of 2025, 80.8 percent of Sri Lankans departing the country for employment abroad went to West Asia, while the rest of the world accounted for the remaining 19.2 percent of departures.
The West Asian conflict comes at a critical moment in time for Colombo. Its economic recovery from its 2022 bankruptcy has been considered widely uneven, but it has put the economy on a positive growth trajectory.
“Although progress has been made, the recovery is unfinished and has not translated into widespread improvements in welfare. Real output remains below 2018 levels. Although poverty is projected to decline in 2025, it remains double the 2019 levels. Vulnerability remains high with an additional 10 percent of the population living just above the poverty line,” the World Bank noted in its Sri Lanka Development Update in October 2025.
Its estimated 4.8 per cent economic growth in the first half of 2025 was built on the back of a positive growth in the industrial sector, and strong gains in the services sector, primarily tourism. The West Asian war has upended the tourism sector. The country has sought an additional supply of energy from India.
Dhaka is facing a similar challenge in navigating the war in West Asia. In Bangladesh, the government brought forward the Ramzan holidays from 9 March, as it seeks to ration its available energy resources. India has stepped in with plans to export around 50,000 tonnes of diesel to Dhaka by April, according to reports, as the new government led by Tarique Rahman seeks to navigate its first crisis within a month of assuming power.
“The West Asian crisis, however, offers India an opportunity to step in as the first responder in times of crisis, especially with countries where ties were strained, such as Bangladesh,” Sidharth Raimedhi, a fellow at the Council for Strategic and Defense Research, told ThePrint.
India-Bangladesh ties have been strained since the ouster of former Prime Minister Sheikh Hasina in August 2024. Hasina remains in New Delhi, despite extradition requests from the previous interim administration led by Muhammad Yunus. New Delhi and Dhaka are looking at steps to stabilise ties, and the fuel exports are part of the renewal of engagement between the two countries.
Rahman assumes power after almost two years of domestic challenges within Bangladesh. The interim government moved to reform the banking system in the country, which is considered to be one of the most fragile in the region. Similarly, it has been widely reported that a pillar of exports – garments and textiles – has been facing challenges. A new government at a delicate point in Bangladesh’s economic trajectory is now forced to deal with a disrupted energy market, which could further impact Dhaka’s own recovery.
The West Asia conflict is a part of a series of crises that South Asian countries have had to grapple with in recent years, from terrorist bombings in Sri Lanka in 2019 to the COVID-19 pandemic lockdowns across the region. Popular protests led to changes in governments in Sri Lanka, Nepal, and Bangladesh in the last couple of years.
Crisis in neighbourhood & India’s role
For New Delhi, which has made it a point to step in to aid fragile economies in its neighbourhood, the West Asian war will likely see the government strike agreements with Dhaka, Colombo, and Malé to keep their economies ticking.
India has stepped in to help the Maldives stave off the worst of its economic challenges in the last couple of years. In October 2024, India announced that it will be extending twin currency swap lines worth $400 million and Rs 3,000 after Maldivian President Mohamed Muizzu made a State visit to New Delhi.
Last summer, Foreign Secretary Vikram Misri announced that most of the $400 million currency swap line had been drawn by Malé.
The sense within New Delhi is that in the case of the Maldives, it will step in the event of any economic emergency. The precedent was set for almost $4 billion in aid to Sri Lanka, after Colombo declared bankruptcy in 2022.
But India itself faces challenges in its overall goal to diversify its critical imports. China remains the largest source of merchandise goods for the Indian market, and New Delhi has sought to diversify from Beijing over the last half-decade. However, the West Asian war may see New Delhi re-pivot towards China, given the lack of resilience in supply chains in other parts of the world.
“India had to pivot away from China for urea imports in 2024, following Beijing’s restrictions on the export of this fertiliser. India chose to replace China with the Gulf countries. Now those supply chains are under stress, requiring a potential re-pivot to China by India. While the challenges between India and its neighbourhood may have minimal overlap, the architecture to diversify is complicated by the war,” said Raimedhi.
(Edited by Ajeet Tiwari)