Emerging Market Oil Exporters Feel Budget Pressure Amid Global Price Slump

A sharp decline in crude oil prices triggered by US tariff policies is putting economic pressure on emerging market oil-exporting countries, with analysts warning that budget shortfalls and increased financial stress could follow in the months ahead.

Brent crude prices dropped by more than 20% in the first week of April to a four-year low, after US President Donald Trump announced sweeping tariffs, sparking fears of a global economic slowdown and lower energy demand. Although prices have rebounded slightly to around $66 per barrel, they remain below budget projections for many oil-producing nations.

While countries that rely heavily on oil imports—such as Turkey, India, Pakistan, Morocco, and parts of Eastern Europe—may benefit from reduced energy costs, oil-exporting economies are facing significant challenges.

“Losers will be hit relatively harder than the upside seen in importing countries,” said Thomas Haugaard, a portfolio manager at Janus Henderson Investors. “Oil exports often contribute considerably to public finances, which will spill over into credit risk premiums.”

Morgan Stanley estimates that oil prices are now well below the average budgetary assumptions of $69 per barrel among key exporters. Angola and Bahrain are identified as particularly vulnerable due to limited buffers and higher debt burdens.

Angola recently had to meet a $200 million margin call on a $1 billion loan from JPMorgan, backed by the country’s sovereign bonds. The margin call followed a decline in bond values driven by the broader selloff in emerging market assets. Angola’s finance ministry confirmed the payment was made in full and on time.

The country’s heavy external debt load and reduced Eurobond market access have made its economy more exposed to oil market volatility. Yields on its dollar bonds have risen to double digits, increasing the cost of borrowing.

Nigeria, Africa’s largest crude exporter, is also feeling the pressure. The country’s popular carry trade—where investors bought local Treasury bills expecting the naira to remain stable—has lost appeal as oil revenues weaken. JPMorgan noted that Nigeria’s central bank has increased foreign exchange interventions to support the currency.

Finance Minister Wale Edun acknowledged last week that the government will need to revise its 2024 budget, which was based on an oil price of $75 per barrel.

“We are going back to the drawing board,” he said.

Oil accounts for about 90% of Nigeria’s exports and more than half of its federal revenue, making its economy particularly susceptible to swings in global oil prices.

Oil-rich Gulf nations such as Saudi Arabia and the United Arab Emirates are better positioned to weather the downturn due to stronger foreign currency reserves, lower debt levels, and more advanced efforts to diversify their economies. However, reduced oil revenue could still complicate large-scale infrastructure and economic projects.

Even for net importers, the benefits of cheaper oil may be limited. Monica Malik, chief economist at Abu Dhabi Commercial Bank, said:

“The lower oil price outlook is positive for oil importers, albeit unlikely to counterbalance the significant headwinds from the trade war and downside risks.”

Meanwhile, the US oil industry is also under stress, despite the administration’s push for “energy dominance.” Steel tariffs have raised infrastructure costs, and a potential drop in consumer demand could reduce domestic production. Industry executives have expressed concern privately but have largely avoided public criticism of Trump’s policies.

Drilling activity has already begun to slow, with US shale rig counts dropping at their fastest pace in nearly two years. Forecasts for domestic oil output growth have been revised downward by both the Energy Information Administration and investment firms like Macquarie.

Reuters, Bloomberg, and Politico contributed to this report.