December 2, 2022

Frontier Markets Weekly, October 17th 2022

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. 

If you’d like to receive this newsletter in your inbox every weekend, sign up at FrontierMarkets.co. Please also share this link with any friends or colleagues you think would enjoy it. —Dan Keeler

Africa

Fighting resumes in Ethiopia. Fierce fighting broke out in Ethiopia just days after warring sides tentatively agreed to peace talks in the spiraling Ethiopian civil war. 

The war has been underway since November 2020, and Tigrayan rebels reached a feeble truce with the Ethiopian government in March of this year. African Union-mediated peace talks intended to take place in South Africa last weekend fizzled soon after they were announced.

The war has threatened to destabilize the Horn of Africa Region, where drought and displacement have further addled the population. Recent battles between the two sides in the Ethiopian conflict have included soldiers from Sudan and Eritrea, which has backed the Ethiopian government. Somalia-based terrorist group al-Shabaab recently launched attacks within Ethiopia for the first time, the Associated Press reports.

Tigrayan residents in Addis Ababa rallied at the headquarters of the African Union on Tuesday. Photo: Amanuel Sileshi/AFP

Over 500,000 people were estimated to have died in the Tigray war before hostilities resumed in August, the Washington Post reports. Nearly three million people have been displaced, and 20 million people are in need of humanitarian assistance, according to the United Nations. —Noah Berman

Ebola spreads in Uganda. A new strain of the Ebola virus that has been spreading quickly in Uganda has arrived in the country’s capital Kampala. The so-called Sudan strain has so far proved resistant to vaccines and antiviral treatments that hindered the spread and mortality rate of previous strains of the virus.

Authorities have confirmed 20 deaths from the virus since August, but dozens of other people are suspected to have died before they could be tested. The WHO estimates a case fatality rate of 41% to 100% for the Sudan strain.

Over 500,000 people were estimated to have died in the Tigray war before hostilities resumed in August, the Washington Post reports. Nearly three million people have been displaced, and 20 million people are in need of humanitarian assistance, according to the United Nations. —Noah Berman

Ebola spreads in Uganda. A new strain of the Ebola virus that has been spreading quickly in Uganda has arrived in the country’s capital Kampala. The so-called Sudan strain has so far proved resistant to vaccines and antiviral treatments that hindered the spread and mortality rate of previous strains of the virus.

Authorities have confirmed 20 deaths from the virus since August, but dozens of other people are suspected to have died before they could be tested. The WHO estimates a case fatality rate of 41% to 100% for the Sudan strain.

Red Cross workers sanitize a house in Uganda’s Mubende district after the death of a child, thought to be from Ebola. Photo via the BBC

The recrudescent emergence of the virus has raised concerns of a public health catastrophe in Uganda and the surrounding region. Uganda’s health system has deteriorated under the weight of the Covid-19 pandemic and doctors went on strike last week to protest a lack of personal protective equipment, the BBC reports

The deadliest and most recent Ebola epidemic killed over 11,000 people across West Africa between 2014 and 2016, according to the Infectious Disease Society of America. That strain of the virus, Zaire, can be weakened by vaccines and antiviral medications. —Noah Berman

Asia

Malaysia’s parliament dissolved. Prime Minister of Malaysia Ismail Sabri Yaakob announced that he would dissolve parliament, setting the stage for general elections expected to be held in early November. Elections had been scheduled for next year.

The electoral commission will meet on October 20th to decide on a date for the contest. Voting must occur within 60 days of Parliament’s dissolution and is likely to be held before monsoon season begins in December, CNBC reports. The decision to hold elections early is the third since Ismail’s government took power in 2018.

Malaysia’s Prime Minister Ismail Sabri Yaakob. Photo:Yuki Iwamura/AFP

Ismail had been facing pressure from his United Malays National Organization (UMNO) party to call snap polls amid internal feuding within the ruling coalition, The Guardian reports. Meanwhile, 97-year old former Prime Minister Mahathir Mohamad announced that he would defend his seat in the upcoming snap polls, though he declined to say whether he would be prime minister if his Pejuang party is victorious.—Noah Berman

Business leaders gear up for B20. Ahead of the G20 summit in November, global business leaders will gather for a summit of their own. The summit comes as the business community attempts to weather overlapping crises of inflation and depreciating currencies at a time of heightened geopolitical and climate risk.

“We know businesses have to be in crisis mode, but we need government support as well to give us the right incentives,” Chairperson of the B20 Shinta Kadmani told Frontier Markets News. “We know that next year definitely the storm is coming heavily. We as the business community need to anticipate how next year will be worse,” she said.

Shinta Kamdani, chairwoman of B20 Indonesia 2022, at the inception meeting of the G20 subforum in January 2022. Photo via Jakarta Post

At the conference, to be held in Bali, business leaders will present policy communiques in preparation to share with the G20 counterparts. In contrast to their diplomatic peers, global businesses tend to more easily reach consensus because they share the same profit-driven objectives. —Noah Berman

Read the full interview with Chairperson of the B20 Shinta Kadmani in next weekend’s newsletter.

Middle East

Saudi Arabia spars with US over oil output. The already-frosty relationship between the US and Saudi Arabia cooled further this week, as the countries sparred over the Saudi decision to participate in OPEC+’s plan to cut oil production by two million barrels per day, The New York Times reports. The US accused the kingdom of siding politically with Russia, an OPEC+ member that stands to benefit from rising oil prices squeezing Western economies. 

President Joe Biden threatened unspecified “consequences” for Saudi Arabia.

Saudi energy minister Prince Abdulaziz bin Salman at the OPEC+ meeting last week. Photo: Christian Bruna/EPA, via Shutterstock

Saudi Arabia “totally rejected” the US claims, pointing to its UN votes condemning Russia. Experts believe Riyadh’s support for oil price hikes is motivated by a need to pay for Crown Prince Mohammed bin Salman’s expensive economic development projects. 

The move to restrict supplies could backfire on OPEC+ in the long run if unreasonably high prices clot demand. The price of oil fell to $85 per barrel on Friday from $92 earlier in the week, according to MarketWatchJack Kubinec

Embattled Iraqi parliament elects new prime minister. A year after Iraq held parliamentary elections, it is yet to form a government. Newly-appointed prime ministerMohammed Shia al-Sudani is the latest Iraqi politician to take a crack at coalition-building, Al-Jazeera reports.

Iraq’s PM-designate, Mohammed Shia al-Sudani Al-Sudani was nominated by the Iran-backed Shia Coordination Framework. Photo: Thaier al-Sudani/Reuters

The main obstacle facing Al-Sudani, a career politician with a moderate bent, is opposition from nationalist cleric Muqtada al-Sadr. Al-Sadr’s supporters stormed Iraq’s parliament in Baghdad multiple times over the summer after al-Sadr retired and his party’s legislators quit their seats, leading al-Sudani’s coalition to take power. 

Al-Sudani served in the ministry of former Iraqi president Nouri al-Maliki, a longtime political foe of al-Sadr’s. The populist al-Sadr has refused to participate in the formation of a new government. —Jack Kubinec

Latin America

Chile pumps the brakes on public spending, splitting with other LATAM economies. Chile’s leftwing government is engineering one of the world’s most dramatic reductions in public spending, pleasing investors who had been worried by President Gabriel Boric’s large-scale spending promises. In an interview with the FT’s Michael Stott, finance minister Mario Marcel laid out his plans for financial discipline as market sentiment has become increasingly sensitive to policy uncertainty and stable public finances take center stage. 

Boric’s eight-month-old government arrived with promises for additional spending on pensions, health, and education. Instead, market uncertainty following the constitutional reform efforts has led to a 24% reduction in public spending and shelving of more ambitious reforms that “could not be continued because of weakness in the economy and a lack of state resources,” Marcel told the FT.

Chile’s President Gabriel Boric. Photo: Cristobal Basaure Araya/SOPA/ LightRocket/Getty Images

The current discipline reflects a broader shift toward traditional center-left fiscal prudence. The spending cuts also highlight how Chile’s traditionally technocratic leaders aim to steer the country out of the troubled waters other left-wing governments face. As BrazilColombia, and Argentina keep spending to deal with slowing growth, they risk exacerbating inflation and making their economies vulnerable to the impact of tightening global financial conditions. —Kenneth Stibler

Haiti requests international troop deployment as gangs’ grip on country tightens. Haiti’s prime minister requested international intervention by a “specialized armed force” to fight gangs that have taken control of much of the capital and frozen the economy, Reuters reports. The US, which previously rejected similar pleas to deploy troops after Haiti staggered further into crisis after the July 2021 assassination of Jovenal Moise, brushed off the request as premature.

People flee after hearing gunshots during a protest demanding the resignation of Haiti’s Prime Minister Ariel Henry. Photo: Reuters/Ralph Tedy Erol

Exacerbating the economic crisis facing Haiti is a blockade of the country’s largest fuel terminal by Haiti’s biggest gang. The lost fuel is leading to mass shortages, boosting inflation and forcing gas stations, banks, grocery stores, utilities, and hospitals to close, just as the country struggles with a cholera outbreak. 

The government has been largely ineffective against the gangs, which now control around 40% of the capital, Port-au-Prince. As the groups move to take more territory, hundreds have been killed, over 20,000 people have been forced to flee, and kidnappings have spiked.—Ken Stibler

What we’re reading

Carlyle weighs sale of Gabon oil and gas producer Assala. (FT)

Financial Action Task Force to put Congo on gray list. (Bloomberg)

Upstart party wins in Lesotho polls, must form coalition. (AP)

Zambia finance chief to Africa: Don’t wait to rework debts. (Bloomberg)

Tunisia reaches preliminary agreement on $1.9b IMF loan. (FT)

Debt stress, climate change, inflation…Will African countries weather the economic storm? (The Africa Report)

Crisis-hit Sri Lanka snaps up cheap Russian oil. (FT)

Malaysia PM dissolves parliament, paving way for election. (Nikkei)

Kyrgyzstan cancels CSTO ‘Indestructible Brotherhood’ military exercises. (The Diplomat)

Turkish journalists: ‘Censorship’ law puts media freedom on hold. (BalkanInsight)

North Korea’s provocations push tensions with the south to highest in years. (WSJ)

Putin suggests Turkey become regional ‘gas hub’ to Europe. (Nikkei)

Iranian oil workers strike, Raisi heckled as protests enter fourth week. (Radio Free Europe)

Iraq’s parliament elects a president as rockets fall on Baghdad. (Washington Post)

Israel and Lebanon reach rare deal for gas extraction and export to Europe. (WSJ)

Russia’s unhappy club: The CSTO. (Radio Free Europe)

Romania to supply power to Moldova after Ukraine bombed. (BalkanInsight)

Bucharest nine presidents say Russian bombardments in Ukraine are war crimes. (Reuters)

War-torn Ukraine needs at least $3 billion a month in 2023, IMF says. (Bloomberg)

Russian consumers are feeling less confident after turbulent September. (Morning Consult)

Hungary and Serbia agree to build pipeline to ship Russian oil to Serbia. (Reuters)

Venezuela opposition plans to take on Maduro in 2024 vote. (Bloomberg)

Peru’s embattled president faces fresh legal battle. (BBC)

Chilean lawmakers approve Trans-Pacific Partnership. (Reuters)

Argentina’s political crisis restarts with ministers leaving. (Bloomberg)

Argentines move abroad as economy deteriorates. (FT)

Tightening financial conditions are bad news for frontier markets. (FT)

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