The result of higher oil prices is a shift in purchasing power from oil consumers to producers. Oil exporters are getting a boost to their terms of trade, leading to wider CA and fiscal surpluses. Higher energy prices will hurt several EMDEs that remain heavily dependent on petroleum imports.

We expect real GDP growth to remain around 4% in FY2021/22. Monetary policy remains accommodative. Adequate net capital inflows will offset the widening CA deficit, increasing FX reserves. We expect further fiscal consolidation supported by ongoing reforms under the IMF EFF arrangement.