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When a currency loses value, buyers need more units of it to purchase the same amount of foreign currency. That can raise the local-currency cost of imported fuel, goods, and production inputs—even if their prices in dollars or other foreign currencies have not changed. But the increase is not automatic at the pump or in household bills: exchange-rate rules, taxes, subsidies, pricing controls, firms’ decisions, and monetary policy all shape how much of the added cost reaches consumers and when.
How a weaker currency can raise fuel prices
Fuel imported from abroad is usually bought in a foreign currency or priced against an international benchmark. If the local currency depreciates, an importer must spend more local currency to obtain the funds needed for the same shipment. The cost can also rise when the world price of crude oil or refined fuel increases; those are separate effects that can occur together.
The path from import cost to a household’s pump price typically runs through several stages:
- Exchange rate and benchmark prices: the local-currency value of the foreign-currency fuel price changes with the exchange rate, while the benchmark price itself may also move.
- Import and distribution costs: shipping, insurance, refining, storage, and domestic distribution affect the cost of delivered fuel.
- Retail pricing rules: taxes, subsidies, price formulas, regulated prices, or state-owned suppliers can change the size and timing of retail adjustments.
- Household price: suppliers and retailers may pass on some, all, or none of the added cost at a given time.
Accordingly, a 10% depreciation does not mean fuel at the pump must rise by 10%. Nor can a reader simply add the percentage change in the exchange rate to the percentage change in oil prices to calculate a household inflation forecast.
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Why the pump-price effect can be delayed or muted
An IMF working paper analyzing 109 developing countries from 2000 to 2014 found that domestic fuel-price pass-through was greater when international price changes were moderate and less volatile and when retail pricing mechanisms were flexible. The authors found that depreciation and lower retail fuel prices in neighboring countries were associated with less pass-through. Their results were consistent across gasoline, diesel, and kerosene; they are findings from a specific study period, not a universal rule for every country. IMF, 2020
Governments may hold administered prices below the level implied by import costs, or adjust taxes and subsidies to cushion consumers. This can postpone or reduce the visible retail increase, but it does not erase the underlying import cost; how the cost is ultimately borne depends on the country’s fiscal and market arrangements.
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Oil-price evidence is not exchange-rate evidence
A separate IMF study using retail fuel data for 162 countries examined crude-oil-price shocks, not depreciation alone. It estimated that a one-cent-per-liter increase in crude oil prices was associated, on average, with a 1.2-cent-per-liter increase in retail gasoline at a peak reached about six months later. Estimates ranged from about 0.5 cents in Middle East and North Africa countries to two cents in advanced economies, and positive oil-price shocks had larger effects than negative shocks. These figures describe the study’s oil-price channel and should not be read as a forecast of the effect of a currency move. IMF, 2016
How depreciation reaches other imports and household expenses
Fuel is only one possible route from the exchange rate to household costs. Imported finished goods can become more expensive in local currency, and local businesses may pay more for imported materials, components, machinery, packaging, or transport inputs. If firms pass those costs on, prices can rise even for goods produced domestically.
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How broadly that happens depends on the imported share of what households buy and what local firms use, as well as firms’ pricing decisions and the inflation environment. A household’s experience therefore depends on its own spending basket: fuel and transport exposure, food and other imported goods, and the local prices of goods whose production or delivery relies on imports.
Brazil illustrates why estimates need a country and time horizon
In its 2025 Brazil Article IV report, the IMF used local projections and monthly data from January 2005 through April 2025 to estimate exchange-rate pass-through. A 10% nominal effective exchange-rate depreciation was estimated to be followed by a consumer price index (CPI) level increase of about 0.9% after 12 months and 1.2% after 24 months. Estimated food and energy price increases after 12 months were 2.5% and 4.0%, respectively. These are model estimates for Brazil over the report’s stated sample and horizons, not a general conversion rate for other countries. The report also found stronger transportation-fuel pass-through after Petrobras moved in 2016 from state-controlled pricing to a price-parity system. IMF, Brazil Article IV report, 2025
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Price-setting and monetary policy influence wider inflation
Exchange-rate pass-through can differ between border prices for imports and prices set within the domestic economy. An IMF working paper found that price stability and central-bank credibility were linked to a lower response of non-border prices to exchange-rate changes. That helps explain why similar import-cost shocks can be followed by different broader inflation patterns; it does not mean credibility can quickly remove an import bill or guarantee a particular outcome. IMF, 2016
Country-specific evidence can also be quite different from a broad rule. An IMF working paper on Sri Lanka reported low and incomplete pass-through of exchange-rate, oil-price, and import-price shocks to consumer inflation, citing administered prices, the large food share of the consumer basket, and relatively low exchange-rate persistence and volatility as relevant factors. Its estimate that external shocks explained about 25% of consumer-price inflation variation applies to that paper’s Sri Lankan analysis, not to current inflation everywhere. IMF, 2008
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Why exchange-rate regimes and policy matter
Under a floating exchange rate, depreciation can amplify the local-currency cost of internationally priced commodities for an importing country. A fixed exchange rate can buffer that particular exchange-rate channel while the peg holds, but it does not guarantee that domestic fuel prices will remain unchanged: world prices, taxes, subsidies, and regulated pricing still matter. An IMF 2026 paper also notes that defending a peg or intervening in currency markets can affect foreign-exchange reserves or foreign-currency debt. IMF, 2026
The practical distinction is between the cost implied by international prices and the price that households actually pay. A government or supplier may absorb some of the difference for a time, while a flexible pricing mechanism may transmit it more quickly. Neither a single exchange-rate figure nor a global fuel-price trend is enough to determine the outcome for an individual country.
What you need to estimate the effect in a particular country
A useful country-level estimate must separate the import-cost shock from its eventual effect on households. Compare the same period for each of the following:
- Import exposure: whether the country is a net fuel importer and how much of its consumer goods and production inputs are imported.
- Currency movement: the exchange-rate regime and the size and timing of depreciation.
- International fuel prices: benchmark crude or refined-fuel prices over that same period.
- Retail fuel policy: the adjustment formula, regulation, taxes, and subsidies that determine pump prices.
- Household exposure: fuel and energy use, the weight of imports in the consumption basket, and dependence on transport.
- Broader inflation: evidence that higher import and input costs have carried through to other prices.
- Time horizon and price measure: whether the figure concerns border import prices, pump prices, energy CPI, or headline CPI—and how long after the currency move it is measured.
For a personal budget estimate, you would also need your country’s pricing rules, the dates being compared, and your household’s spending pattern. Without those details, global or cross-country estimates cannot say how much a particular family’s monthly costs will rise.
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