Frontier Markets Weekly, January 16th 2023

Uganda Ebola outbreak ends | Hedge funds hamper Sri Lanka | Russia counts cost of war | Haiti’s democracy on the edge

 By Ken Stibler, Noah Berman and Dan Keeler 

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Opposition strengthens in Benin election. Benin’s President Patrice Talon coasted to reelection this week but Benin’s main opposition party had its best performance in recent years. ‘Les Democrats’ won 28 seats, Al Jazeera reports, a sizable enough figure to encourage the two leading parties to form a parliamentary alliance. 

The two Talon-allied parties, Republican Bloc and Progressive Union for Renewal, won a combined 81 seats in an election that saw a turnout of less than 40%.

Voting in Sunday’s polls. Photo: Yanick Folly/AFP

While Les Democrats will remain in the minority, their strong performance marks a significant turnaround for the party, which was effectively barred from participating in the legislative ballot during the last general election in 2019. That election was marred by deadly violence, and many of Talon’s political opponents have since been jailed or exiled.

Talon was democratically elected in 2016 with a pledge to rule for just one term, but critics say he has since concentrated power at the cost of his country’s democracy. 

Uganda’s Ebola outbreak ends. The World Health Organization (WHO) declared an end to Uganda’s Ebola outbreak on Wednesday, a victory against a variant of the disease that threatened to be the deadliest to date.

The first outbreak of the so-called Sudan strain of the virus was reported last September. In the four months since, the disease has killed 55 Ugandans of 142 confirmed cases, according to the WHO. The WHO considers an epidemic officially “over” after 42 days pass with zero confirmed or probable cases reported. The incubation period for an Ebola infection is 21 days.

An anti-Ebola advocacy van in Kampala. Photo: Abubaker Lubowa/Reuters

Ebola has periodically menaced different countries in Africa over the past several decades. The disease was first identified in 1976 in the Democratic Republic of Congo and South Sudan. The deadliest outbreak occurred between 2014-2016, when over 11,000 people died across West Africa

Egypt undergoes painful adjustments in response to deepening economic crisis.The Egyptian government is pursuing broad measures to stabilize the economy as the Arab state grapples with a foreign currency crisis, a weakening pound and rising inflation, Reuters reports. Even as a falling dollar offers a refuge for many emerging markets, Egyptian inflation has marched on, hitting 19% in November, and is expected to reach 25% by March.

A market vendor sells apples in Alexandria, Egypt. Photo: Islam Safwat/Bloomberg News

The pound fell nearly 7% against the US dollar on Wednesday, marking the third time since last March that the central bank has allowed a significant one-day drop. The fall has pushed the cost of one dollar to 27 Egyptian pounds, compared with around 16 pounds a year ago.

The government has begun taking once unthinkable steps such as privatizing military-owned enterprises, cutting food subsidies and reducing government spending. Meanwhile, the foreign exchange shortage has led the government to pause some projects heavily reliant on foreign currencies.


Malaysia seeks alliance with Indonesia to respond to EU palm oil restrictions.Leaders of Indonesia and Malaysia this week chafed at EU efforts to reduce deforestation that could affect palm oil imports. By Thursday, officials in Malaysia said they were considering a complete halt on palm oil exports to the EU, Bloomberg reports.

A palm oil plantation in Indonesia. Photo: Januar/AFP/Getty Images

The EU’s deforestation law, passed in December, bans the sale of palm oil and other deforestation-intensive products, unless importers can provide evidence that the products are not an outgrowth of deforestation. Some environmental activists have blamed the palm oil industry for the destruction of rainforests in Southeast Asia, despite Indonesia’s and Malaysia’s efforts to enforce sustainability standards, Reuters reports.

Indonesia and Malaysia are the world’s two largest producers of palm oil, together representing upwards of three quarters of global production. Both countries have raised cases about the deforestation law’s impact on palm oil with the WTO. The EU is the world’s third largest palm oil importer.

Hedge funds ‘hindering Sri Lankan debt relief.’ Since defaulting on its sovereign debt last year, Sri Lanka’s government has been scrambling to keep the country running while meeting the conditions necessary for an IMF bailout. A group of leading economists and development experts says some large hedge funds are making that difficult by taking a hard line on debt renegotiations, the Guardian reports. 

Last September, Colombo reached a staff-level agreement to obtain a $2.9 billion IMF bailout, with no money to be provided until the international lender approves the country’s debt restructuring plan. By taking a tough stance on the restructuring, private investors, such as financial institutions, could derail that agreement.

Go deeper on Sri Lanka with our podcast featuring Ruchir Desai of Asia Frontier Capital and Abhijit Kukreja of Auerbach Grayson.

Sri Lanka defaulted on $51 billion of its sovereign debt last April, spurring a political crisis that resulted in the ouster of its president and prime minister.

On Tuesday, Canada sanctioned those former leaders, the brothers Mahinda and Gotabaya Rajapaksa, accusing them of human rights violations in the country’s civil war, which ended in 2009. 

Pakistan lines up crucial finance options. Pakistan received over $10 billion in commitments from wealthy nations and international institutions to rebuild after the country was devastated by record floods. The pledges exceeded Prime Minister Shehbaz Sharif’s request for $8 billion over three years.

Floods after heavy monsoon rains in Pakistan last year. Photo: Fida Hussain/AFP/Getty Images

The Islamic Development Bank led the financing round with a $4.2 billion commitment. The World Bank pledged $2 billion, the EU said it would give $534 million, and the US announced it would provide $100 million, Bloomberg reports. Pakistan has said the flooding caused $40 billion worth of damage.

Islamabad also sought to restructure its debt commitments this week as it complies with its $1.1 billion IMF program. After a meeting this week between Sharif and Emirati President Mohammed bin Zayed Al Nahyan, a senior Pakistani official announced the UAE would roll over the existing $2 billion debt owed to Abu Dhabi and administer an additional $1 billion loan. Saudi Arabia said it was considering providing up to $11 billion to Pakistan, the WSJ reports.

Middle East

Saudi Arabia seeks to lure global miners. Saudi officials are wooing top mining companies to help exploit untapped mineral deposits in the kingdom that could be worth hundreds of billions of dollars, the Wall Street Journal’s Stephen Kalin reports.

The fourth-largest net importer of minerals globally has a small domestic mining industry despite unverified estimates putting its mineral wealth at over $1.3 trillion, including deposits of copper, zinc, phosphates, uranium and gold. The results of a new survey are expected by 2027.

Saudi Arabia hopes to reduce its reliance on fossil fuel exports. Photo: Fashionpps/Zuma Press

Saudi Arabia’s push to become a significant player in the $2 trillion global mining industry is part of an ambitious agenda launched seven years ago by de facto Saudi leader Crown Prince Mohammed bin Salman. Dubbed Vision 2030, it aims to build new industries unrelated to oil in large part by improving the country’s business climate.


Russia moves to bolster economy as the costs of war and sanctions become clearer. Strained by the rising costs of its war on Ukraine, the Russian government said that it had a $47 billion budget deficit for 2022, the second-highest since the Soviet Union’s dissolution, the New York Times reports. Russia’s revenues increased by 2.8 trillion rubles, or $40 billion, in 2022; however, $92 billion in new spending on defense and recovering imports pushed the budget deficit to 2.3% of GDP, the finance minister said during a government meeting.

Red Square in Moscow last October. Russia’s revenues grew last year but did not keep pace with spending. Photo: Nanna Heitmann for NYT

While experts predicted a swift collapse of Russia’s economy under Western sanctions, the economy performed above expectations, buoyed by high commodity prices. Commodity prices are falling, though, and the EU price cap is pushing down the price paid for Russian crude oil to $25-30 dollars a barrel lower than Brent. 

Moscow is partnering with Tehran to complete 3,300 kilometers of railways throughout Iran to provide an export channel to South Asia that can help it bypass sanctions.

Latin America

Haiti’s deepening political crisis leaves few options. Haiti was left this week without a single democratically elected official after the country’s remaining 10 senators’ terms expired. This marks the end of the last semblance of democratic order in the beleaguered Caribbean nation; with no functioning parliament and a breakdown of democratic institutions, it has become impossible to confront warring gangs that now control an estimated two-thirds of the capital, Port-au-Prince.

Protesters demanding the resignation of Prime Minister Ariel Henry in October 2022. Photo: Odelyn Joseph/AP

However, a near-term political solution from within Haiti also looks unlikely as Prime Minister Ariel Henry has failed to hold elections after multiple pledges to do so. With the lack of public security in Port-au-Prince, it is unclear whether the government would be able to hold free elections.

The humanitarian effects have been severe, with the World Food Program raising its hunger alert to the level reserved for wartime famine, with a record 4.7 million people facing acute hunger with 1.8 million experiencing malnutrition. While local activists have pushed back against proposals for foreign intervention, the political situation makes a domestic solution to Haiti’s challenges unlikely as no actor has the legitimacy or capacity to make decisions, and international players demur about the prospect of leading an armed intervention.

Coup attempt shakes Brazil, but long-term fallout remains unlikely. Brazil’s capital was recovering from a January 8th insurrection that saw thousands of ex-President Jair Bolsonaro’s supporters storm the country’s top government institutions. Rioters ransacked congress, the presidential palace and the supreme court in a well-organized effort that appeared to be designed to trigger military intervention. 

Supporters of Brazilian former President Jair Bolsonaro invade the National Congress in Brasília on 8 January. Photo: Sérgio Lima/AFP/Getty Images

Security forces regained control of the main government buildings within hours of the insurrection but there have been some accusations that complicity by the military, some politicians and parts of the business community that made the abortive coup possible. Ibaneis Rocha, the pro-Bolsonaro governor of the capitol district, was suspended from his post and a supreme court judge ordered the arrest of Brasília’s public security chief, Anderson Torres.

Brazil’s bonds fell on Monday, with the yield on dollar-denominated notes rising four basis points to 6.53%, while an ETF that tracks the MSCI Brazil Index fell as much as 2.4% during early trading before paring losses. Adriana Dupita, Latin America economist for Bloomberg, said the currency, stock prices and economic activity could all suffer if political uncertainty grows, but consultancy FrontierView says short-term unrest presents minimal risk to the country’s already-established transition of power.


China’s Belt and Road Initiative evolves amid a funding slowdown. China’s Belt and Road Initiative (BRI) has seen a slowdown in funding as megaprojects have proven economically tenuous and Beijing faces its first overseas debt crises as a lender, the WSJ’s Megha Mandavia reports. But while the BRI is facing challenges in certain regions, it is still expanding its footprint in other areas, particularly in Latin America, which offers strong economic prospects and abundant agricultural and mineral resources that are of interest to Beijing.

The Gwadar port project in Pakistan has caused China some political headaches. Photo: Liutian/Zuma Press

Despite the slowdown in funding, experts believe it is unlikely Beijing will abandon its BRI projects entirely. Michael Kugelman, director of the South Asia Institute at the Wilson Center in Washington, D.C., says that these infrastructure and connectivity projects remain critical for China’s economic interests—particularly if Beijing has any long-term plans to translate some of them into military assets for its strategic interests as well. 

Instead, what seems likely is a more discerning BRI, with a greater focus on financial returns and getting along with the locals.

What we’re reading

Nigeria elections body warns insecurity could derail February vote. (Africanews)

Mali pardons Ivorian soldiers it had sentenced to 20 years in prison. (NYT)

The Wagner wars: Malian edition. (The Africa Report)

Sudan: Start of final phase toward civilian rule an ‘important step.’ (UN News)

Somalia claims al-Shabab extremists seek talks for first time. (AP)

Kenya: Will Ruto’s plan to raise taxes and not default on debt work? (The Africa Report)

Zimbabwe and Turkey tighten ties. (Daily Sabah)

Rwandan president threatens to evict Congolese refugees. (Voice of America)

Russian ship’s secretive South Africa stop prompts US questions. (WSJ)

Thousands rally against Tunisian President Saied. (BBC

New Chinese foreign minister heads to Africa for first trip. (Al Jazeera)

Cannabis ‘addictions’ surge in Thailand after decriminalization. (Nikkei)

Indonesia to set up office of ASEAN special envoy on Myanmar. (Nikkei)

Myanmar junta chief family assets found in Thai drug raid. (Reuters)

Pakistan army chief assumes loan diplomacy role amid forex crisis. (Nikkei)

Afghans struggle to heat homes amid soaring winter fuel prices. (Radio Free Europe)

Turkey’s private sector slows in the lead-up to key elections. (FrontierView)

Russia supports UN extension of aid from Turkey to Syria’s rebel north. (AP)

US says Iran may be contributing to war crimes in Ukraine. (AP)

Crackdown on YouTubers leaves little space for dissent in Yemen. (Al Jazeera)

Five killed as Russian airstrikes hit targets across Ukraine. (CNN)

Belarus and Russia to conduct joint air force exercises. (Radio Free Europe)

NATO declines Serbia’s request to deploy troops in Kosovo. (Reuters)

Controversy erupts over ‘snap election’ proposal in Slovakia. (Balkaninsight)

Former dictator’s daughter leads race for Guatemala’s presidency. (Americas Quarterly)

Colombian guerrillas warn peace negotiations stalled. (Mercopress)

Venezuela’s government issues arrest warrant against 2015 Assembly Board. (Mercopress)

Peru protests intensify in response to violence and police repression. (El Pais)

Peru bans Bolivian politician Evo Morales amid rising tensions. (Al Jazeera)

Argentina and China formalize currency swap deal. (Reuters)

World Bank walks a tightrope as it mulls increased lending to poorest. (The Guardian)

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