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Welcome to the latest edition of Frontier Markets News. As always, I would love to hear from you at dan@frontiermarkets.co with news ideas, feedback and anything else you find interesting.  

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By Ken Stibler, Noah Berman and Nojan Rostami. Executive editor: Dan Keeler

Global Macro

Opportunity and uncertainty on the rise for frontier- and emerging-market investors

This week, we publish our first EM-Meta Forecast, a comprehensive roundup of 2025 emerging- and frontier-market investment outlook reports. The study finds a number of clear themes emerging across regions and countries.

Investors are placing ever more emphasis on positive reforms and sound fiscal management, but many countries are facing a difficult balancing act between promoting and supporting economic growth while ensuring the benefits are shared fairly across their populations. Investors’ ability to discern real opportunity from noise will be tested and the ongoing, seismic change in geopolitical relationships will keep shifting the ground beneath their feet.

There is another key factor that suffuses the report, however: uncertainty over the potential impact of Donald Trump’s presidency. Just one month into his second term, Trump has already significantly increased that uncertainty, throwing policymakers and investors across the world off balance with a blizzard of announcements, executive orders and sometimes-contradictory statements.

In assembling this week’s newsletter, we were reminded of how powerfully a Trump presidency concentrates attention on the actions of one man, to the exclusion of non-Trump-related coverage. In the coming four years we will do our best to keep a level playing field for news from all sources, as we always have done. We will not deliberately exclude any news, but will aim to provide an antidote to the inevitable polarization of news—and will maintain our commitment to providing balanced coverage.

Our first quarterly meta-report, which is available only to our paid subscribers, epitomizes that commitment. If you’d like to read the full report, please consider signing up for a paid subscription to FMN.

Africa

Ethiopia bond investors accuse IMF of overstating debt relief needs

A group of investors holding Ethiopia’s defaulted $1 billion bond have accused the IMF of overstating the financial problems the East African nation is facing, CNBC reports. The bondholders claim the multilateral has understated the potential value of exports, which surged last year after the country’s currency was devalued, implying the country will face a solvency issue that could force a write-down on the bonds rather than just a payment delay.

Ethiopia’s gold exports jumped by more than 700% last year to around $1.3 billion, while coffee exports swelled by 60% to almost $1 billion.

The bondholders, who alleged in a statement that the IMF was “artificially creating a solvency issue for Ethiopia,” rejected an offer last year that would have involved them taking an 18% “haircut” to restructure the bonds. Some observers have argued that investors should have accepted that offer as it would have still allowed them to make a profit, according to Reuters.

Currency rise helps power Kenya’s first debt decline in 20 years

Kenya has recorded its first reduction in gross public debt in two decades, with total liabilities falling 2% to 10.93 trillion shillings ($84.6 billion) by December, Bloomberg reports. The decline was driven primarily by strong appreciation of the shilling, which was the world’s best-performing currency in 2024.

• New core capital requirement to accelerate Kenyan banking sector consolidation (Fitch Ratings)

The milestone comes as President William Ruto’s administration moves to enhance macroeconomic stability, implementing stringent fiscal reforms under an IMF program. Some of his efforts have had limited results—tax receipts remain 7.5% below treasury targets, for example—but a 17% increase in diaspora remittances and exports has boosted the currency and shored up the country’s macroeconomic footing. 

Asia

Vietnam changes rules to enable Musk Starlink deal

Vietnam passed legislation on Wednesday that will clear a path for US presidential advisor Elon Musk’s company Starlink to begin offering services there, RFA reports. The company will be the first to operate in Vietnam without a domestic partner, with a Reuters source likening the agreement to an “olive branch” to Musk, who has won unprecedented influence in the White House.

The deal comes as Trump ups scrutiny of countries such as Vietnam that have trade surpluses with the US. Exports have been a major engine of the Southeast Asian country’s economic growth in recent years. But the threat of tariffs has not resulted in economic doomsaying. On Wednesday, Vietnam raised its 2025 GDP growth target to 8%, VNExpress reports.

Separately, Vietnam appeared to take a page out of Musk’s playbook this week, winning parliamentary approval on Tuesday to eliminate 20% of public-sector jobs and reduce the number of government agencies from 30 to 22. Senior officials described the move as a “revolution,” VOA reports.

US aid freeze opens door for China in Nepal

Eight years ago, officials in Nepal rankled their Chinese counterparts by accepting a $500 million grant from the US. The money was to go toward improvements to road infrastructure and the expansion of the electrical grid. 

Future financing under the arrangement has now been thrown into question by US President Donald Trump’s aid freeze, and Nepali officials say Beijing is set to benefit, the New York Times reports.

According to the Diplomat, the aid freeze has already had a significant impact in Nepal. Ram Prashad Subedi, chairperson of the NGO Federation of Nepal, said around 1,500 people had lost their jobs following the freeze announcement.

Nepal said that its grant funding had been suspended for 90 days. The grant’s issuer, the US government-backed Millenium Challenge Corporation, said it would appeal the suspension.

Cook Islands-China deal draws domestic opposition

Cook Islands’ Prime Minister Mark Brown is facing domestic pushback after signing a “strategic partnership” with China. He will soon face a vote of no confidence, but no date has been set, the Australian Broadcasting Corporation reports.

Brown offered few details of the deal, but said this week that it included a $4 million grant and cooperation on trade, infrastructure and ocean mining. The agreement sparked consternation in New Zealand, which has a “free association” arrangement with the Cook Islands. The 15,000 residents of the Cook Islands hold New Zealand citizenship and passports, and New Zealand retains the ability to vet the island nation’s foreign dealings.

• Australia and Papua New Guinea to begin negotiations on new defense treaty (ABC News)

The deal is the latest example of China’s growing interest in the Pacific—and the political costs that often accompany attempts to partner with the world’s second-largest economy. The Solomon Islands’ decision to sign such a deal with Beijing, for example, drew concern in Australia and the US, which threatened military action if China set up a naval base in the island nation.

Middle East

Saudi Arabia tests role as power broker

Saudi Arabia has broken new ground in its efforts to establish itself as a world power, hosting a meeting this week between US and Russian officials to discuss ending the war in Ukraine, the New York Times reports. Riyadh has hosted meetings on Ukraine before, but this one was exceptional because it reportedly went beyond the Ukraine issue and into more general normalization and detente between the US and Russia, specifically on the restoration of bilateral political and economic relations.

Saudi Arabia is also leveraging its influence with the US government to reinforce its position as a regional leader, offering to mediate talks with Iran over its nuclear program and support for regional proxies. Riyadh also hosted representatives from the GCC, Egypt, and Jordan this week to discuss alternatives to US President Donald Trump’s controversial plan for Gaza, which involves the displacement of Gazans and a US takeover of the territory.

The GCC has strongly opposed Trump’s Gaza plan, and is expected to float a counterproposal centering on a $20 billion reconstruction and humanitarian aid initiative which would be funded by regional powers, presumably with significant Saudi involvement. However, it’s unclear how much Riyadh is willing or able to commit to such a plan, given its own cash flow problems emanating from expensive and off-schedule Vision 2030 programs.

Troop withdrawal delay could hamper Lebanon’s recovery

The fragile ceasefire in Lebanon, which is backed by US guarantees, is reportedly in jeopardy as Israel has failed to meet the deadline for full withdrawal of its troops from southern Lebanon, Al Jazeera reports. Israel has argued that Hezbollah has failed to fully withdraw from the agreed ceasefire area, which is historically a Shia stronghold in Lebanon, and has in recent days carried out airstrikes against what it says are terrorist threats. 

Failure of the ceasefire would undermine a fledgling surge in optimism around Lebanon’s economic prospects and potentially reverse a recent rally in its defaulted bonds. It could also scupper the new government’s efforts to resolve its longstanding debt crisis and recapitalize the banking system—two prerequisites for receiving some €500 million in funding promised by the EU. 

Lebanon’s government this week said it was hoping to reach a deal with the IMFthat would help it meet the EU conditions. However, concerns remain not only over the jeopardized ceasefire, but also that Hezbollah-aligned MPs in Parliament could obstruct key appointments to institutions such as the troubled Central Bank.

Europe

Baltic countries scramble to adapt to new security landscape

The governments of Latvia, Lithuania and Estonia are moving quickly to reshape their defense strategies as perceptions grow across Europe that the US will play a less significant role in the region in the future. The countries’ leaders this week all shared similar messaging of the Trump administration’s discussions with Russia over Ukraine as an “absolute victory” for Vladimir Putin. 

• Georgian protesters vow to keep fighting pivot to Russia (CNN)
• Croatia to deploy artillery to Lithuania as part of NATO battlegroup (Anadolu Agency)

Latvia’s security service, the Constitution Protection Bureau (SAB), went further, cautioning that a ‘frozen’ conflict in Ukraine could enable Russia to rebuild its military capabilities. The SAB emphasized that while Russia currently lacks the resources to challenge NATO directly, a cessation of hostilities without a comprehensive peace agreement could allow Moscow to pose a renewed threat to NATO and European nations within five years.

Market analysts are closely watching the Baltic response as a potential bellwether for broader European defense sector growth, mindful that the region’s targeted tech investment and increased defense expenditure could boost valuations.

Latin America

‘Memecoin’ scandal tarnishes Argentine president’s image

Argentine President Javier Milei’s endorsement of the $LIBRA cryptocurrency, which surged to a $4.5 billion market cap before collapsing by 94%, has triggered his administration’s most serious crisis to date, El Pais reports. The scandal has spawned over 100 lawsuits and impeachment calls from the Peronist opposition, although Milei’s coalition appears stable, with the mainstream right-wing PRO party signaling it would block any removal attempts despite expressing serious concerns about the “country’s credibility.”

The episode threatens to undermine Milei’s carefully cultivated image as a financial expert and techno-optimist at a crucial moment for Argentina’s economic reforms. His awkward attempts to distance himself from the scandal—claiming he acted as a private citizen rather than president and comparing crypto investment to “Russian roulette”—have particularly damaged his credibility among the tech and financial sectors, which have been key supporters of his administration’s market-friendly agenda.

Javier Milei at a political rally in Buenos Aires. Photo: Tomas Cuesta/Getty Images

The timing of the crisis could hardly be worse for Argentina’s fragile financial markets, with the stock market dropping 5% as investors processed the implications. Analysts note that while few Argentines were directly impacted by the $LIBRA collapse, with most buyers reportedly from the US and Asia, the scandal risks further eroding trust in the country’s financial system just as Milei’s government attempts to negotiate with the IMF and implement controversial currency reforms. The president’s diminished political capital could also complicate his coalition’s ability to pass crucial legislation, including an electoral reform bill currently before congress.

Paraguay reforms climate sector with $500 million carbon credits bid

Paraguay has launched an ambitious carbon market overhaul, with President Santiago Peña establishing a unified national registry for all carbon projects that positions the country to capitalize on both voluntary and Paris Agreement markets. The reform mandates project registration within one year and requires voluntary market projects to contribute up to 10% of issuances to Paraguay’s national climate goals. 

Industry minister Javier Giménez highlighted the opportunity to bridge the significant price gap between voluntary markets ($3-15 per ton) and regulated markets ($40-70 per ton), while ongoing negotiations with Singapore, UAE, Switzerland, Taiwan and Finland suggest strong international interest in Paraguay’s reformed carbon credit framework. The minister is optimistic the reforms will transform the country’s existing portfolio of nature-based credits—currently estimated at 8.9 million annual credits—into a potential $300-500 million annual market, OPIS reports.

Colombian market rallies as investors bet on left-wing electoral collapse

Colombia’s stock market has surged 21% in dollar terms this year, making it one of the world’s top performers, driven by investor optimism about the potential impact of President Gustavo Petro’s mounting political troubles, Bloomberg reports.

Investors are betting that Petro’s series of missteps—including a dramatic standoff with Donald Trump over deportees, a chaotic cabinet resignation wave, and deteriorating approval ratings—will pave the way for a more market-friendly administration after the 2026 elections, echoing Argentina’s recent political pivot under Javier Milei.

Colombia’s stock market has rallied to its highest point since June 2022. Source: Bloomberg

The rally has been underpinned by deeply discounted valuations, with the Colcap index trading at just 7.9 times estimated earnings compared to 12.1 for emerging market peers. Gains have been particularly pronounced in sectors most affected by Petro’s policies, with state oil firm Ecopetrol surging by more than 30% and financial giant Bancolombia receiving multiple analyst upgrades.

What We’re Reading

Investors bullish on Nigerian assets as reforms boost confidence (Bloomberg)

DRC ‘asked Chad for military support’ to help fight rebels (Reuters)

South Africa open to nuclear project bids from Russia or Iran, minister says (Reuters)

Trump aid freeze imperils $1bn US minerals project in Africa (Bloomberg)

African leaders approve creation of financial stability fund (Reuters)

Sri Lanka’s revenue raising drive key to credit profile (Fitch Ratings)

Kazakhstan probes Ukraine after drone strikes pipeline transporting oil to Russia (The Diplomat)

Russia’s war on Ukraine fuels Kyrgyz passport boom (Radio Free Europe)

Opinion: Vietnam, Malaysia, Singapore and India stand to gain amid the trade wars (FT)

Philippine remittances hit record in 2024 on weak peso (Nikkei)

Economists call for stimulus as Thai growth falters (Nikkei)

Malaysia-EU resume trade talks (Nikkei)

Japanese government officials to meet with Afghan Taliban delegation (The Asahi Shimbun)

Iran’s government reportedly considering moving capital city from Tehran to southern coast (France24)

JP Morgan upgrades Qatar and Kuwait to developed markets index (Bloomberg)

Oman and Nepal to cooperate to boost tourism (Oman Observer)

Syria hosts first international tech conference in 50 years (Rest of World)

Saudi Arabia’s SMC plans IPO in latest healthcare offering (Bloomberg)

Saudi stock exchange rolls out new capital management system for IPOs (Zawya)

Clerics’ rule change could reshape $1tn sharia-compliant bond market (FT)

Hungary’s second city becoming EV battery hub, but locals don’t feel the benefits. (BBC)

Nicaragua introduces constitutional reform granting Ortega additional powers (Mercopress)

Peruvian current account surplus reaches 2.9% of GDP (EM Watch)

Demand grows in Bolivia for banned Starlink devices(Rest of World)

Brazil Inc places cautious bet on Argentina turnaround under Milei (Reuters)

Argentina’s Javier Milei is betting big on Vaca Muerte (The Economist)

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