Frontier Markets News, March 3rd 2024

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

Event alert: I’m excited to share that I will be moderating a fireside chat with the Director of the US State Department’s Office of Ocean and Polar Affairs, Elizabeth Kim at Newday Impact’s online conference on Ocean Health this Wednesday March 6th. Elizabeth will be discussing the US government’s efforts to engage the global community in protecting the Ocean. 

The event, focused on the crucial role krill play in the ocean’s ability to sequester carbon, will also feature Philippe and Ashlan Cousteau of EarthEcho International, Millicent Pitts from Ocean Exchange, Aaron Niederhelman from, Melissa Walton, formerly at As You Sow, Philipp Stratmann of Ocean Power Technologies and Newday’s CEO Doug Heske.

You can sign up here to join this free event


Zambia achieves debt-restructuring breakthrough

China and India have signed on to a deal to restructure Zambia’s sovereign debt, President Hakaine Hichilema announced last weekend. Zambia will now resume talks with its private creditors. 

Zambia defaulted on $13 billion in external debt in 2020 after its economic struggles were exacerbated by the Covid-19 pandemic. The country has made sporadic progress on restructuring since then, but efforts has been stymied by China, the African nation’s largest bilateral creditor.

Hakainde Hichilema: Photo: Nathan Laine/Bloomberg

China and India had been the final two hold-outs among Zambia’s official creditors, impeding overall restructuring, the FT reports.

The deals will pave the way for Zambia to resume its $1.3 billion loan program with the IMF, which has stalled as the country renegotiates its debts. Zambian dollar bonds climbed sharply following the announcement, Bloomberg reports.

Ghana passes ‘draconian’ anti-gay law

Ghana’s parliament passed legislation on Wednesday to make homosexuality punishable by lengthy prison sentences. The bill also criminalized the organization of LGBTQ+ advocacy groups.

If the legislation is signed into law, it will allow the government to imprison people who identify as gay for up to three years. “Promoters” of LBGTQ+ issues and people who have gay sex would face jail terms of up to five years, the New York Times reports. Human rights group Amnesty International called the legislation among the “most draconian in Africa.”

A same-sex couple in Accra, Ghana, last month. Photo: Francis Kokoroko/Reuters

Anti-gay legislation has proliferated throughout the continent in recent years, most recently in NamibiaNigerTanzania and Uganda, where a law passed year included the death penalty for cases of “aggravated homosexuality.” The Ugandan law drew opprobrium from foreign governments and multinational companies, threatening the Ugandan economy.

Gay sex is already criminalized in Ghana. The bill now sits on President Nana Akufo-Addo’s desk. Human rights groups have urged him to reject it, but they may face an uphill battle. Akufo-Addo has said he will never legalize same-sex marriage, Le Monde reports.

Nigerian economic reforms spur unrest

Hundreds of Nigerians took to the streets this week in protest against economic policies that President Bola Tinubu says are aimed at stabilizing the economy. On Tuesday, the central bank raised interest rates by four percentage points to 22.75% in a move intended to combat soaring inflation, which has surged to a three-decade high since Tinubu ended a popular but costly fuel subsidy last summer.

Nigeria last raised rates in July 2023; its currency, the naira, has fallen to a succession of record lows since then.

Nigerian union members demonstrate against rising prices. Photo: Gift Ufuoma/BBC

While the IMF and other creditors have applauded Tinubu’s policies, local trade unions have railed against the higher cost of living, BBC reports. To assuage those concerns, Nigeria’s finance minister announced on Monday that the country would resume a program to provide 12 million households with monthly cash transfers of 25,000 naira ($16), Reuters reports. Nigeria’s monthly minimum wage is 33,000 naira ($21).


Pakistan advances Iran pipeline project

Pakistan’s cabinet approved a plan to begin construction on an 800-mile pipeline that will bring natural gas from Iran. The initial 40-mile segment will stretch from the border to the southwestern Pakistani city of Gwadar, which lies in the restive Balochistan province.

In January, Iran bombed what it called separatist militants in Balochistan, drawing retaliatory strikes from Pakistan under the same guise. 

The new pipeline will transport gas to Pakistan’s port city of Gwadar. Photo: Asim Hafeez/Bloomberg

The attacks raised concerns about the pipeline deal, which the two countries signed in 2013 but that has been slow-moving since then. However, Islamabad and Tehran quickly mended ties; Pakistan now says that it needs to ramp up its energy supplies amid rapidly depleting natural resources. Imported liquified natural gas represents almost one-third of Pakistan’s total LNG supply, Bloomberg reports. 

Central Asian countries hit by latest US sanctions on Russia

The US imposed sanctions on firms in Kazakhstan and Kyrgyzstan last week, signaling an escalating effort to punish companies that help Russia evade US restrictions. 

The sanctions target two entities in Kazakhstan and one in Kyrgyzstan. They also targeted the Uzbek office of an Emirati logistics firm. The US found all four companies to be exporting goods that support Russia’s defense industry, the Diplomat reports.

Although each targeted firm represents an insignificant portion of its host country’s economy, the sanctions highlight the increasingly tricky position post-Soviet states are in. Russia remains a dominant trading partner for all of Central Asia, and with the US now going after providers of so-called dual-use items, many Central Asian exporters of goods such as electronic and telecommunication equipment could soon find themselves at heightened sanctions risk.

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Middle East

Ukraine’s Zelensky in Saudi Arabia for peace summit

Ukraine’s President Volodymyr Zelensky was in Saudi Arabia this week for talks with Crown Prince Mohammed bin Salman on ending the Russian invasion and securing the return of Ukrainian POWs, Al Jazeera reports. A joint statement says the parties agreed that “Saudi Arabia’s leadership can help find a just solution,” while a Saudi Press Agency statement says that the Crown Prince “affirm[s] the Kingdom’s keenness and support for all international endeavors and efforts aimed at resolving the Ukrainian-Russian crisis.” 

Saudi Arabia has in recent years taken on a bigger role in international politics, as the Crown Prince seeks to parlay the kingdom’s oil wealth into diplomatic clout. Last August, Saudi Arabia hosted a two-day peace summit featuring 40 countries, bringing together for the first time the USChina and India for talks on a comprehensive approach to ending the war in Ukraine.


Investor optimism fuels Turkish market surge

Turkey’s economy expanded 4.5% in 2023, pushing GDP above $1 trillion for the first time. Strong consumption, which makes up 60% of GDP, drove the growth. Financial services and construction also saw significant gains of 9% and 7.8% respectively. While economists expect more moderate growth this year, Turkish equities are surging amid high inflation and frenetic activity.

The Borsa Istanbul index has rallied 20% in dollar terms this year, with a 61% jump in tech stocks powering the world’s best performing equity market year-to-date. With inflation nearing 65%, Turkish retail investors are pouring into equities to preserve savings. Tech sector inflows hit $233 million this year compared to $841 million in outflows last year. Attractive valuations around four times forward earnings are also boosting investor appetite.

However, foreign investors have pulled back ahead of March elections, waiting for political uncertainty to clear. Analysts say this retreat presents a buying opportunity once the elections pass. With stocks cheap and earnings estimates rising, investor optimism looks likely to keep fueling Turkey’s continued economic expansion.

Latin America

Milei’s rule-by-decree runs into regional opposition

Faced with a hostile congress, Argentina’s President Javier Milei has increasingly bypassed legislators to enact radical austerity via executive decrees. Such hard-ball measures have succeeded in generating the country’s first budget surplus in over a decade, but opposition is crystalizing to his broader agenda in congress, the courts, and opposition controlled provinces. Attempts to consolidate power and withhold tax revenue have sparked an open conflict with regional governors in gas-rich Tierra del Fuego. 

Javier Milei. Photo: Anita Pouchard Serra/FT

This week a judge ruled Milei improperly withheld federal tax revenue from Chubut province, ordering reimbursement. Chubut’s governor welcomed the decision and withdrew immediate threats to halt oil/gas revenues. However, with the central government planning to appeal to the Supreme Court, governors are preparing options to block or sabotage Milei’s efforts to reduce payments to the subnational government.

Following the ruling, Milei announced plans for a summit of governors to reach a fundamental agreement over economic policy items such as protection of private property, standardization of tax burdens, and unification of the labor market. 

Venezuela’s maligned migrants ‘bring benefits to surrounding economies’

Venezuela’s surge of immigrants across the region has created backlashes from Colombia to Chile with legal, financial, and cultural pushback mounting. However new research finds a substantial economic upside to the mass exodus, the Guardian reports. 

Migrants with a Venezuelan flag on a train in Chihuahua, Mexico. Photo: Luis Torres/EPA

The nearly 8 million migrants who have fled Venezuela are expected to lift the GDP of host countries across Latin America by 0.1-0.25% per year through 2030, according to new research by the World Bank, Inter-American Development Bank, OECD, and UNHCR.

Filling labor shortages and boosting consumer demand, Venezuelan migrants are benefiting countries such as Colombia, Peru, Chile, and Brazil. Easing access to employment would create even more opportunity for migrants to support the economies of their host countries, the researchers argue.


Analysis: Data center investment shifts to emerging markets

The boom in artificial intelligence use and investment is creating a surge of demand for data centers, the massive facilities that house and transmit the vast amounts of data needed to train and run algorithms. However, increased regulation, rising energy costs and environmental scrutiny in traditional data-center hubs are incentivizing investments in emerging markets’ burgeoning digital economies. 

FMN’s Ken Stibler runs the numbers.

What we’re reading

Chad opposition leader Yaya Dillo killed in shooting, prosecutor says (Reuters

Top Nigerian customs officers enmeshed in multi-billion naira corruption scandal (Premium Times

West African chocolate and cosmetics face price jolt from EU supply chain law (Bloomberg

Ethiopia ‘plans independent insurance regulator’ (The Africa Report

US begins push to end war between two ‘bad actors’ in Sudan (FT

Zimbabwe: IMF pushes Reserve Bank reform amid continued instability and corruption (The Africa Report

Yield hunt is back as bond spree lures risk takers to Africa (Bloomberg

ASEAN banks’ fat interest margins wane as Fed rate cuts loom (Nikkei

Asian lender ADB to raise share of climate loans to 55% by 2030 (Nikkei

China data leak spotlights cyber-spying across Southeast Asia (Nikkei

Prabowo’s $29b free lunch program ‘would bite into Indonesia’s budget’ (Nikkei

‘A major moment for tennis’: ATP agrees partnership with Saudi Arabia’s PIF (The Guardian)

Saudi Arabia hits 100-million tourist milestone (UNWTO)

Jordan arrests dozens in crackdown against drug smuggling from Syria (Al Monitor)

Iran refuses to recognize national currency’s fall in free markets (Euronews

Iran launches ‘domestically developed’ imaging satellite from Russia (Al Jazeera)

Iran exports to Russia hit high of $2b as sanctions strengthen alliance (Al Monitor)

Rival Palestinian factions Hamas and Fatah hold talks in Russia (FT)

Russian lawmakers approve use of digital assets to mask international transactions (Reuters)

Moldova: Transnistria formally asks Russia for protection (NYT

EU moves to end standoff with Poland over anti-EU policies and begins to release billions in funds (AP

Ukraine’s Zelensky calls for defence ‘co-production’ with Balkan countries (BalkanInsight

EU envoy urges faster reform in Western Balkans (Radio Free Europe

Europe awash with gas is set to rely more on Ukraine for storage (Bloomberg

TotalEnergies expected to complete first massive oil project off Suriname by year-end (Offshore Energy

Petro’s pension reform tests Colombian senate (Americas Quarterly

Paraguay’s weak rule of law ‘will torpedo Pena’s economic agenda’ (World Politics Review

Gunfire paralyzes Haiti as powerful gang leader says he will try to detain police chief, ministers (AP)

Venezuela’s sudden policy change may stem from waning support for Maduro, sources say (Reuters)

Cuba asks UN for help as food shortages worsen (BBC

Top Putin ally vows ‘comprehensive support’ to Latin American allies (Miami Herald)

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