Frontier Markets Weekly, April 9th 2023

Tunisia rejects IMF ‘diktat’ | Journalists under fire in Sahel | Saudi diplomatic blitz continues | Brazil inks deal on yuan

By Dan Keeler, Ken Stibler, Noah Berman and Nojan Rostami

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Tunisia to reject IMF bailout. Tunisian President Kais Saied said he would not complywith the conditions imposed by the IMF, signaling that an agreed-upon bailout is unlikely to occur. The agreement required Tunisia to remove subsidies and hike interest rates, among other conditions.

Tunisia agreed to a $1.9 billion bailout with the IMF last October, but the deal still requires the approval of the lender’s board. Even if the bailout goes through, Tunisia’s economy would still be in dire straits, Al-Monitor reports. The country’s economic woes, including high inflation and soaring youth unemployment, have led to a flood of emigration.

Kais Saied. Photo: Dursun Aydemi/Anadolu Agency

The value of Tunisia’s bonds, which have traded in distressed territory for the past two years, plunged in the wake of the announcement. On Thursday, its dollar bonds fell to a record low of 51.38 cents on the dollar, Bloomberg reports, and its euro- and yen-denominated bonds also plummeted. 

Nigeria gets World Bank funding ahead of subsidy removal. Nigeria secured $800 million from the World Bank as it prepares to eliminate a subsidy on fuel. The country’s finance minister said on Wednesday that the money would be disbursed as cash to about a quarter of Nigerian households, Voice of America reports. 

The fuel subsidy, which the country has said will be removed in June, costs the country 400 billion naira (about $870 million) per month, Premium Times reports. Other international lenders including the IMF have urged Nigeria to eliminate the fuel subsidy.

A fuel station in Kano, northwest Nigeria. Photo: AFP via VoA

The Nigerian economy has been reeling since a cash shortage that began last October made payments difficult for the country’s primarily unbanked and cash-dependent population. Financial analysts estimate the crisis has cost the Nigerian economy 20 trillion naira (about $43 billion), Deutsche Welle reports. This week, the country’s central bank doubled the supply of bank notes.

Sahel countries crack down on media. A spate of coups in Africa’s Sahel region has prevented journalists from accurately covering the area’s many crises, according to a report published on Monday by Reporters Without Borders.

If instability and military-led crackdowns on press freedoms continue, the Sahel could become “Africa’s largest information blackout zone,” the report said.

International journalists in Mali. Photo: Sylvain Cherkaou

The report was published shortly after journalists with two French newspapers were expelled from Burkina Faso. The region, which has seen seven coups in the past three years, stretches across Africa and includes Burkina Faso, ChadMaliMauritaniaNiger and parts of Benin.

Foreign correspondents have been caught between violent armed groups and military governments who distrust and restrict foreign journalists, according to the report. More than 100 journalists have been arrested or detained in the region over the past 10 years, and five have been killed.


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Check out our podcast page for some evergreen insights from some of the smartest minds in frontier-markets investing. And if you missed last week’s fascinating discussion on Vietnam’s equity markets, now’s a great time to listen in.


Malaysia pursues Asian Monetary Fund. Malaysia is courting China to help create an Asian Monetary Fund that would rival the IMF and reduce dependence on the US dollar, Bloomberg reports.

Malaysian President Anwar Ibrahim, who also serves as finance minister, said he proposed the fund on a state visit to China last week. Since taking presidential office last November, he has sought to increase trade denominated in Chinese renminbi and Malaysian ringgit, rather than the dollar.

Anwar Ibrahim with Xi Jinping in Beijing. Photo: Rao Aimin/Xinhua/Getty Images

“There is no reason for Malaysia to continue depending on the dollar,” Anwar said to the Malaysian parliament on Tuesday. He has been pitching an Asian Monetary Fund since the 1990s, when he first served as finance minister. He also announced on Tuesday that China would invest 170 billion ringgit ($39 billion) in Malaysia’s petrochemical and automotive industries, Reuters reports. 

Dollar discontent stirred in many Southeast Asian countries last year as its surging value made imports more expensive. Many local currencies, including the ringgit and Vietnam’s dong, sank to record lows last fall.

Azerbaijan ‘foils coup.’ Authorities in Azerbaijan arrested six men on Thursday on charges of attempting to overthrow the government, Times of Israel reports. The men, who are all Azerbaijani nationals, were accused of conspiring with Iran-backed secret services.

A police officer guards an area in front of the Iranian embassy in Baku, Azerbaijan. Photo: Aziz Karimov/AP

Azerbaijani officials said that the men were planning to establish a “Shariah state in Azerbaijan through armed unrest and violent overthrow of Azerbaijan’s constitutional order,” Arab News reports. On Thursday, Azerbaijan said it would expel four Iranian diplomats over the alleged plot. 

Relations between Azerbaijan and Iran have long been strained but tensions have been rising recently. In January, Azerbaijan closed its embassy in Tehran after it was attacked by a gunman, Al Jazeera reports, and in the same month it also appointed its first-ever ambassador to Israel.

Diversifying semiconductor production benefits Southeast and South Asian economies. ThailandVietnamIndia and Cambodia have emerged as early winners as semiconductor production moves away from traditional centers such as Taiwan and China, Bloomberg reports. India saw a 34-fold increase in its semiconductor shipments to $152 million, while Cambodia’s grew by 698% to $166 million, followed by Vietnam and Thailand, which increased their US trade in the sector by 75% and 62% respectively.

Deteriorating relations between Washington and Beijing have forced each nation to rethink its supply strategies around semiconductors. Taiwan increased shipments to the US by 4.3% from last year and chips accounted for 15% of its imports.

Middle East

Saudi Arabia and Iran hold high-level meeting in China. After agreeing to a deal brokered by China to explore restoring diplomatic ties, Saudi Arabia and Iran have taken a major step towards rapprochement by holding a meeting between their foreign ministers in Beijing, Reuters reports. It was the first official high-level meeting in seven years.

Iranian Foreign Minister Hossein Amir-Abdollahian, Saudi Arabia’s Foreign Minister Prince Faisal bin Farhan Al Saud and Chinese Foreign Minister Qin Gang in Beijing. Photo: West Asia News Agency via Reuters 

Saudi Arabia and Iran also agreed to restore flights between their two countries, and committed to resuming government and private-sector visits, the Wall Street Journal reports. Iran’s President Ebrahim Raisi has also accepted an invitation from Saudi Arabia to visit the country in the coming months in what would be his first trip to the country.

The meeting is another move in a series by Saudi Arabia as it continues a diplomatic blitz to raise its profile on the world stage. Using its wealth as a foreign policy tool, Saudi Arabia assured the IMF it would provide $2 billion to Pakistan to help it avoid default, and its Public Investment Fund disclosed investments in dozens of US venture capital and buyout firms—an indication the kingdom is not looking to sever ties with the US despite its new relationship with China.

US considers freeze-for-freeze approach to nuclear negotiations with Iran. The Biden administration this week discussed a proposal with its European allies and Israel that would lift some sanctions in exchange for Iran’s freezing parts of its nuclear program, Axios reports. 

The proposal is intended as a temporary solution until a more comprehensive, long-term deal is reached. However, Iranian officials have reportedly rejected the proposal, saying they want nothing less than the protections of the 2015 agreement, and that temporary deals have not worked in the past.

Syria aims at normalization of regional ties through diplomatic push. This week, Russia hosted talks between IranTurkey and Syria aimed at normalizing Syria’s strained relationship with Turkey, AP reports. Russia urged Turkey and Syria to show “flexibility and a constructive attitude” and to try and find common ground, emphasizing that the normalization process will take time.

Russia’s foreign ministry in Moscow. Photo: Alexander Zemlianichenko/AP

Ambassadors of Iran, IraqSaudi Arabia and Syria held a similar meeting in Oman, as Iran lobbies for restoration of diplomatic ties between its ally Syria and its Arab neighbors. Saudi Arabia has committed to lead efforts to restore Syria’s membership in the Arab League, considered a big win for Iran and a sign of reconciliation between the two regional rivals.

TotalEnergies restarts $10 billion Iraq project as political environment stabilizes.French oil company TotalEnergies and partners, including QatarEnergy, will push ahead with over $10 billion of energy projects in Iraq that had been stalled due to political uncertainty following parliamentary elections in October 2021, the Wall Street Journal reports. 

The projects include seawater injection into oil fields to boost production, natural gas processing, and solar power generation. This investment is expected to help Iraq build out its energy infrastructure and reduce its reliance on Iranian natural gas, while also attracting Persian Gulf investors.


Ukraine and Poland strengthen an emerging ‘special relationship’ despite commercial concerns. Poland and Ukraine are forging a closer alliance, Radio Free Europe reports. The relationship was on full display this week with Ukrainian President Volodymyr Zelenskiy’s visit to Warsaw and the signing of several agreements that would aid Ukraine’s defense industry and infrastructure. 

Increasing political pressure over grain imports from Ukraine is complicating the relationship, however. Just before Zelenskiy’s visit, Poland’s agricultural minister resigned amid intensifying protests by farmers and claims that Ukraine is dumping grain on Poland’s market.

Poland’s President Andrzej Duda greets Ukrainian President Volodymyr Zelenskiy in Warsaw. Photo: Kacper Pempel/Reuters

The farmers, who have been a key supporter for the ruling Law and Justice party, claim that Ukrainian grain ends up flooding the Polish market and depressing local prices instead of passing through to other destinations, and that it is mixed with Polish grain without any quality checks.

Pro-Western economist beats longest-ruling Balkan leader in Montenegrin presidential elections. Former economy minister Jakov Milatović won over 60% of the vote in Montenegro’s presidential runoff this week, defeating the country’s long-standing incumbent, Milo Đukanović. Milatović campaigned on a pro-EU and anti-corruption platform. His victory is expected to boost his party’s chances in parliamentary elections in June. 

Although the president’s role is mostly ceremonial in Montenegro, the election result signals a substantial change in political leadership for the Balkan republic.

Jakov Milatović won around 60% of the vote. Photo: Boris Pejovic/EPA-EFE

Milatović, an Oxford-educated economist, has been part of the current coalition government, while Đukanović has held various positions of power for the past three decades. Montenegro has been mired in political instability, most notably last year when the government collapsed over a controversial agreement with the SerbianOrthodox Church.

Latin America

Brazil inks deal to conduct Chinese trade in yuan. China and Brazil have agreed to conduct their trade in their own currencies, moving away from the US dollar, AFP reports. The agreement establishes a clearing house in Brazil with the Industrial and Commercial Bank of China (ICBC) chosen to facilitate the exchange of yuan for Brazilian currency. 

China has previously signed agreements with Saudi Arabia and Russia to allow the use of the yuan in trade, and has several “clearing houses” outside mainland China, including in Chile and Argentina.

Photo via MercoPress

Experts say the deal could reduce costs, promote bilateral trade and facilitate investment. While direct transactions will reduce financial costs, and exchange rates for the yuan vary less, Brazil is unlikely to eliminate the need for dollars entirely when trading with China, as more than 90% of current foreign trade transactions in Brazil are still conducted and priced in dollars.

Taipei attempts to shore up Latin American alliances. Taiwan’s President Catherine Tsai visited Guatemala and Belize as part of her government’s effort to prevent more countries switching their allegiance to Beijing after Honduras switched its recognition from Taiwan to China last month. Beijing has been making inroads into the region, which historically has been friendly to Taipei, and is seeking to further erode the list of seven countries in the Americas that still recognize the island democracy.

Taiwan’s President Tsai Ing-wen makes a joint statement with her Guatemalan counterpart Alejandro Giammattei in Guatemala City. Photo: Luis Echeverria/Reuters

Despite the attention and efforts to boost imports of key commodities from allies, observers believe that Paraguay could switch allegiance, if the country’s opposition wins the April 30 elections and fulfills its promise to embrace China, as demanded by its agricultural lobby.

While the ruling conservative Colorado Party candidate, Santiago Pena, has vowed to maintain recognition of Taiwan, opposition candidate Efrain Alegre, a centrist lawyer, has promised to cut ties with Taiwan and open relations with China if he wins the presidency.


IMF says China must ‘play by the rules’ in multilateral debt relief talks. The IMF this week said that China, the world’s biggest bilateral creditor to developing countries, must recognize that it needs to follow established debt restructuring rules in its dealings with struggling debtors, Bloomberg reports. China has been holding out on granting relief to Zambia as it restructures its debt under the IMF’s Common Framework program, demanding that its multilateral development banks (MDBs) and Chinese domestic creditors be included in the talks.

Fitch Ratings has warned that China’s multilateral debt relief policy potentially weakens the preferred creditor status of its MDBs. Under current arrangements, MDB status prioritizes their repayment over other creditors but excludes them from multilateral sovereign debt relief negotiations. Fitch considers any inclusion of MDBs in such talks a breach of their preferred creditor status.

What we’re reading

Tweets by Ugandan president’s son spark concern over succession question. (France24)

Ugandan forces take over east DRC town as M23 rebels leave. (AP)

Fight over corruption and DRC’s mining riches takes a turn in Washington. (NYT)

Desperate for electricity, Zimbabwe’s president invests in coal with Chinese help. (The Africa Report)

Somalia hasn’t printed new cash since 1991. Now it’s a central bank top priority. (Bloomberg)

Nigeria’s trade policy will stay protectionist following the APC’s re-election. (FrontierView)

Nigeria to build West Africa’s first solar-cell factory. (SolarQuarter)

African VC firm snags $25m from DFC for climate tech fund. (TechInAfrica)

Bangladesh urges China loan tweaks amid scrutiny of BRI bailouts. (Nikkei)

Vietnam pledges to solve ‘pain points’ for tech startups and VCs. (Nikkei)

Vietnam strikes balance between US and China via phone diplomacy. (Nikkei)

Afghan canal is a test for Taliban ties in water-stressed Central Asia. (Radio Free Europe)

Taliban bar Afghan women from working with UN. (UN News)

Malaysia ‘open to talks’ with Beijing over dispute in South China Sea. (Reuters)

Thailand election becomes a game of economic handouts and nostalgia. (Nikkei)

ASEAN startups face talent crunch despite tech layoffs. (Nikkei)

CICC plans expansion in UAE and Saudi Arabia as China’s Xi pushes Middle East ties. (Bloomberg)

Jordan’s king says Muslims have ‘duty to deter Israeli escalation’ in Jerusalem (Times of Israel)

Israeli strikes on Syria intensify, raising tensions with Iran. (AP)

British intelligence cites alcohol abuse as contributor to Russian losses in Ukraine. (Radio Free Europe)

Borissov’s GERB claims first place in tight Bulgaria election. (Balkaninsight)

Ecuadorian president okays right to bear arms and pepper spray amid security crisis. (Mercopress)

Brazil unveils ambitious new fiscal framework. (The Brazilian Report)

Peru congress dismisses impeachment motion against president. (Bloomberg)

Honduras deploys hundreds of military agents to fight crime. (Reuters)

El Salvador ‘committing systematic abuses’ in gang purge. (Al Jazeera)

Spain pitches closer EULatin America ties. (Foreign Policy)

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