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Africa

Counter-coup in Burkina Faso. An armed army captain appeared on Burkina Faso’s state television station on Friday to announce that Ibrahim Traore was the new leader of the country.

Friday’s actions amount to a counter-coup, supported by the military that took power in a coup in January, overthrowing the democratically-elected president. The junta lost faith in the country’s previous military leader, Paul-Henri Sandaogo Damiba, after losing ground to jihadist terrorist groups, Bloomberg reports. Gunfire and explosions were heard on Friday near army bases and the presidential palace in Ouagadougou, the country’s capital.
burkina coup oct 22
Burkina Faso’s self-declared new leader Ibrahim Traore is welcomed by supporters holding Russian flags in Ouagadougou. Photo: Vincent Bado/Reuters

In June, the junta announced that the country would transition to civilian rule beginning in March 2024. The counter-coup torpedoed the transition plan and dissolved the country’s fledgling government and constitution. Reuters reported on Sunday that Damiba had offered to resign to prevent further bloodshed.

The Sahel has become a hotbed of insurgency in recent years. Friday’s coup marks the region’s sixth in the past fifteen months. Soldiers ousted elected leaders in Mali and Guinea, while leaders in Niger and Guinea-Bissau were able to subdue recent coup attempts.
—Noah Berman

Ghana works with IMF on bailout. An IMF team arrived in Ghana this week to discuss reforms necessary for a potential lending package. Ghana requested an IMF loan in July as inflation caused the prices of food and fuel to surge.

The country’s balance-of-payments deficit, a measure that charts the difference between a country’s imports and exports, more than doubled from $935 million in March to $2.5 billion at the end of June, Reuters reports. The Ghanaian cedi has depreciated 64% since January, according to currency analytics firm XE, making imports much more expensive.
ghana oct 22
Accra, Ghana in a 2016 file photo. Photo: Luc Gnago/Reuters

Inflation in Ghana reached a record high of 33.9% in August, prompting the central bank to boost its interest rate by three percentage points to 22%—the largest increase in 22 years. The country also said it would purchase all foreign exchange proceeds from mining and oil and gas companies in a bid to increase foreign reserves.
—Noah Berman
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Asia

Pakistan’s finance minister resigns. Pakistan’s Finance Minister Miftah Ismail stepped down this week, the latest casualty of the country’s burgeoning economic crisis.

During his tenure, Ismail presided over the country’s resumption of a $1.17 billion IMF program that was paused under former prime minister Imran Khan. The country’s foreign-denominated bonds and currency had shrunk to record lows, but began to recover after the bailout was announced in August.
pakistan floods
September’s huge floods delivered a heavy blow to Pakistan’s economy. Photo: Fareed Khan/AP, via Al Jazeera

But in September, massive floods hit the South Asian country, causing an estimated $30 billion in damage and undermining the country’s economic outlook. In the week before his resignation, Ismail sought to assure investors that Pakistan would not seek debt relief from commercial or Eurobond creditors, Al Jazeera reports. The World Bank announced a commitment to provide $2 billion in aid.

Ismail was quickly replaced by Ishaq Dar, a three-time former finance minister. Dar returned to Islamabad from London, where he has been living in exile since 2017 after being charged with corruption.
—Noah Berman

Asian EMs outpace China. Frontier and emerging markets in Asia are set to outpace China’s growth, according to a new World Bank forecast. The Bank projected markets in developing East Asia and the Pacific to grow 5.3% in 2022, up from 2.1% since 2021. The bank projected China would grow 2.8%, down from 8.1% in 2021. The forecast marks the first time since 1990 that Asian frontier markets are expected to outpace their rapidly growing neighbor, according to The Street.

Since becoming the first country to emerge from the Covid-19 pandemic, the Chinese economy has suffered numerous setbacks. The country’s zero-Covid policy has caused lockdowns and inhibited consumer spending, and the Chinese real estate market has tumbled.
vietnam street oct 22
A flooded street in Ho Chi Minh City. Photo: Shutterstock

Meanwhile, a recovery in domestic demand amid relaxed Covid protocols has juiced frontier markets in the region, according to the World Bank. The bank projects Vietnam’s economic growth will surge to 7.5% this year, exceeding its 7.15% mark in the last year before the pandemic.
—Noah Berman

US signs deal with Pacific nations. The US signed a partnership agreement with 14 Pacific Island nations on Thursday that is expected to provide hundreds of millions of dollars in aid and to counter Chinese influence in the region. At the summit, the Biden administration pledged $810 million in aid over the next decade, including $130 million dedicated to funding projects that will address climate change’s effect on the region, the Washington Post reports.

The summit and aid reflect a US-led pivot toward the strategically important Pacific, where China has made inroads in recent years. In April, China and the Solomon Islands signed a security pact that Western officials fear could lead to Chinese naval presence in the region. The Solomons initially declined to sign on to the US partnership agreement, but relented after language mentioning Taiwan, the democratically self-governed island that China claims as its own, was removed from the draft, the New York Times reports.
biden pacific leaders oct 22
Biden with Pacific leaders in Washington. Photo: Kenny Holston for NY Times

The Cook Islands, Federated States of Micronesia, Fiji, French Polynesia, Nauru, New Caledonia, Palau, Papua New Guinea, Republic of the Marshall Islands, Samoa, Tonga, Tuvalu and Vanuatu also joined the partnership.
—Noah Berman

Middle East

Unrest in Iran spreads to remote, restive provinces. At least 19 people were killed in Iran on Friday during antigovernment protests in a southeastern province that is home to a restive ethnic minority, as unrest spread to remote regions of the country in a new challenge to the ruling Islamic establishment, Benoit Faucon reports in the Wall Street Journal. Antigovernment protests erupted in Zahedan, the capital of Sistan-Baluchistan, one of the largest and poorest of Iran’s 31 provinces, according to video posted on social media and local news reports. Armed men attacked local police stations in the area, state media reported, adding that at least 19 people had died, including a senior intelligence officer.
iran protest oct 22
A protest in Iran following the death of a young woman in police custody in mid-September. Photo: Zuma Press

The unrest in Sistan-Baluchistan, which had been relatively quiet as protests over the rights of women and wider state repression broke out across the country in the past two weeks, opens a new front for the government as it tries to brutally suppress the movement. There were also reports of protests in Ahvaz, the provincial capital of oil-rich Khuzestan, with some social media video showing demonstrators calling for “death to the oppressor,” cars honking and women taking off their veils.

More than 40 people have been killed, more than 500 injured and more than 1,000 arrested in a sweeping crackdown since protests broke out following the death of 22-year-old Mahsa Amini last month in police custody for allegedly violating the country’s strict Islamic dress code.

Europe

Russian military-recruitment centers attacked amid mobilization pushback. Resistance against Russia’s mobilization for its war in Ukraine took an increasingly violent turn as two recruitment centers came under attack and borders remained clogged with fighting-age men seeking to leave the country, Alan Cullison and Ann M. Simmons report in the WSJ. A Russian man opened fire at a military-recruiting station in Siberia, critically wounding its commander, hours after another man rammed a car into the entrance of a different recruitment center then set it afire with Molotov cocktails.

Monday’s violence and growing lines at the border are the latest signs that Vladimir Putin’s initiative to reinvigorate a stalling war effort in Ukraine could backfire, pushing some Russian men to choose between being called up and leaving the country. The mobilization order has also laid bare resentments in Russia’s far-flung poorer regions which have been targets of recruitment drives.
russia reservists oct 22
Reservists line up outside a recruitment office in the Siberian town of Tara. Photo: Alexey Malgavko/Reuters

The costly troop mobilization, plunging energy prices and a new round of Western sanctions are further hurting Russia’s already embattled economy and undermining the financial underpinnings of Putin’s war in Ukraine, Georgi Kantchev, Yuliya Chernova and Joe Wallace report. “Mobilization is another serious hit on the Russian economy, especially because of the increased uncertainty,” said Maxim Mironov, professor of finance at Madrid’s IE Business School. “And it happens when oil and gas revenues are beginning to dry up.”

Latin America

As Petro buries conflicts with Venezuela and armed groups, Colombian citizens take to the streets. Colombia’s President Gustavo Petro has begun delivering on his promise of “total peace,” including reestablished relations with Venezuela, decriminalization of drug crimes, and a ceasefire with dozens of armed groups. While such achievements have the potential to decrease destabilizing violence and increase regional trade, challenging economic conditions and unpopular reforms risk undermining his infant administration.

In response to proposed tax increases that seek to fund $5.6 billion in social programs, thousands protested in cities across the country. Just 50 days into Petro’s administration, the protests reflect the fundamental polarization facing the country’s first leftist president in the streets and in congress, where he relies on a heterodox coalition to pass legislation.
colombia petro oct 22
Colombia’s President Gustavo Petro. Photo: Leonardo Fernandez Viloria/Reuters

Although violent protests, as seen after the last tax reform package, are unlikely, Petro has already been forced to pare back policies like oil licensing after pressure from pro-business groups. With former president Alvaro Uribe’s Democratic Center party leading the opposition, Petro will continue to face headwinds against his efforts to reform healthcare, land rights and voting oversight.
—Ken Stibler

Paraguay requests $1 billion to remain Taiwan’s ally. As Paraguay faces increasing overtures from Beijing to switch its allegiance from Taiwan to China, the country’s president Mario Abdo Benítez made a blunt request for $1 billion in Taiwanese investment to remain allies, the FT’s Michael Stott and Kathrin Hille report. The request comes as Taiwan has been steadily losing allies across Latin America as former friends are tempted away with Chinese aid, trade and loans, giving Asunción more leverage in its relations with Taipei.
abdo paraguay oct 22
Paraguay’s now-President Mario Abdo Benitez with Taiwan’s President Tsai Ing-wen in 2018. Photo: AFP via SCMP

While Paraguay has been one of Taiwan’s most reliable allies, its economy is dependent on soybean and beef exports but it lacks access to Chinese markets because of its diplomatic stance. A study published in Foreign Policy Analysis estimated that Paraguay’s Taiwan stance had cost nearly 1% of GDP per year in lost aid and investment from 2005-14. The powerful agriculture lobby has been pushing the government to try and boost exports to its wealthy ally.

Taiwan has already sent two investment delegations to Paraguay. In response to the latest request, the Taiwanese foreign ministry defended its record of encouraging its businesses to operate in Paraguay.
—Ken Stibler

Global

World Bank chief says emerging markets at risk. Developing states face a difficult year ahead as myriad challenges intertwine to threaten their economies, World Bank Group president David Malpass said in a speech at Stanford University on Wednesday.

Food, fuel and fertilizer prices have surged since Russia invaded Ukraine, and billowing global inflation has prompted rapid rate increases by central banks. These rate increases have resulted in currency depreciation in many developing economies, making imports more expensive and compounding inflationary risk.
malpass oct 22
David Malpass. Photo: Justin Sullivan/Getty Images via Politico

Many developing economies were struggling with rising debt loads prior to the pandemic, and servicing these debts has been made more complicated by increasing prices and decreasing value of local currency. “The human consequence of these overlapping crises is catastrophic,” Malpass said.

Dimming economic prospects have led frontier markets across the globe to seek bailout financing from international lenders. Pakistan, Sri Lanka, Ghana, Benin, Argentina, Egypt, Zambia, and Bangladesh are among the states that have sought rescue packages this year, and as a consequence …

… IMF bailouts hit all-time high as inflation and rising rates shock developing economies. IMF crisis lending has hit a record high as developing economies face compounding crises of rising import bills, higher interest rates and unsustainable debt loads, the FT’s Jonathan Wheatley reports. So far the overlapping crises have forced five countries to default with nearly 20 at risk of following suit.
ft imf loan balance oct 22
IMF data shows that disbursement has risen to $140 billion in 44 programs, reaching $268 billion in total lending when including outstanding loans.

With the prospect of further tightening by global central banks, observers are concerned that rising borrowing needs might exceed the IMF’s lending capacity. A report from Boston University found that 55 developing economies face $436 billion of debt repayments between 2022 and 2028. Meanwhile, the IMF has only around $370 billion in remaining lending capacity, assuming each program stays below its quota, which does not always happen.
—Noah Berman and Ken Stibler

What we’re reading

Over a decade after 150 were killed, Guinea puts an ex-president on trial. (NYT)

Ghana to ‘engage local and foreign investors’ to speed up IMF deal. (Bloomberg)

Nigeria raises rates by 150 basis points as inflation surges. (FT)

UN report alleges Nigeria planned to purchase arms from North Korea, violating sanctions. (The Africa Report)

Congo villagers ‘unaware’ of plans to drill for oil in rainforest. (Bloomberg)

Mozambique’s Nyusi re-elected as leader of ruling party. (Bloomberg)

Africa outlier Angola cuts key rate for first time since 2019. (Bloomberg)

Total CEO says Namibia oil discovery could be a ‘giant.’ (Bloomberg)

Vietnam’s battle to climb the global value chain. (Nikkei)

Asia’s ticking debt bomb: Sri Lanka crisis sounds alarm bells across region. (Nikkei)

Sri Lanka eyes December bailout, IMF says timing hard to predict. (Nikkei)

The idyllic beach resort run by Sri Lanka’s bloated military. (FT)

Central Asia wrestles with huge influx of Russians fleeing army duty. (Radio Free Europe)

Afghan Taliban sign deal for Russian oil products, gas and wheat. (Reuters)

Saudi Arabia opens wealth fund’s books ahead of debut bond. (FT)

Saudi Crown Prince Mohammed bin Salman named prime minister. (WSJ)

Kuwait holds second election in two years amid gridlock. (AP)

Lebanon retirees scuffle with police; 2022 budget approved. (AP)

With Russia bogged down in Ukraine, Armenia is worried it's being abandoned by the Kremlin. (Radio Free Europe)

How Russia is trying to win over the global south. (The Economist)

Albania’s Quick-Fix Econ Measures Seen Encouraging Criminality. (BalkanInsight)

Slovakia energy crisis could ‘kill our economy’, premier warns. (FT)

Guyana to offer training to unskilled Venezuelan migrants. (MercoPress)

EU fears losing influence in Latin America as trade deals falter. (FT)

Latin American stocks, FX set to outperform EM peers. (Reuters)

Emerging markets face funding gaps as China scales back Belt and Road. (WSJ)
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