Frontier Markets Weekly, July 1st 2023

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

Welcome to the latest edition of Frontier Markets News. In this edition, Venezuela’s progress slows, Guyana charts its own course, fingers are pointed at the brother of Syria’s President Assad, Sierra Leone’s presidential election surprises observers, the World Bank puts a number on Nigeria’s reforms. Three South Asian nations cue up a win-win-win power sharing deal, and Saudi Arabia’s ambassador to the US shares the kingdom’s view of an integrated Middle East. And in our podcast this week, another ambassador to the US—Djibouti’s Mohamed Siad Doualeh—shares his vision for trade, cooperation and peace in the Horn of Africa.

As always, I would love to hear from you at with news ideas, feedback and anything else you find interesting. 

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Sierra Leone reelects president

Sierra Leone’s incumbent President Julius Maada Bio won reelection this week. The election, held last Saturday, pitted Bio against opposition leader Samura Kamara in a rematch of 2018’s presidential poll.

The result surprised observers who expected the vote to proceed to a runoff, which is required if neither candidate wins more than 55% of the vote. Bio won 56%, according to the county’s electoral commission, compared to Kamara’s 41%. 

As the votes were being tallied on Sunday, Kamara accused the country’s military of firing tear gas and live rounds into his party’s headquarters, Al Jazeera reports. In a tweet, Kamara called the outcome of the election “a frontal attack on our fledgling democracy” and said the results are not “credible.”

A polling station in Freetown, Sierra Leone. Photo: TJ Bade/AP

The election comes amid a worsening economic crisis in Sierra Leone. Inflation is at a two-decade high, the country’s currency is near an all-time low, and its youth unemployment rate is among the worst in West Africa. Analysts suggested neither candidate was likely to be able to solve the problems the country is facing. 

World Bank says reforms could save Nigeria $5 billion

The World Bank said recent Nigerian reforms to end a fuel subsidy and an artificial exchange rate for its currency could save the West African country $5.1 billion. The lender said Nigeria could see further savings if it ends restrictions on food imports such as sugar and flour, Reuters reports.

Newly inaugurated President Bola Tinubu announced both reforms early in June. The World Bank and other multilateral lenders have called on Nigerian officials to make the changes for years. Last year, the country spent almost $10 billion on its fuel subsidy program alone, according to the International Institute for Sustainable Development.

Nigeria’s President Bola Tinubu. Photo: Temilade Adelaja/Reuters

While the World Bank expects the reforms to stabilize the Nigerian economy in the long-term, the lender said that inflation could rise further this year. The official inflation rate rose above 22% in May, according to the country’s central bank. Last year, high inflation pushed 5 million Nigerians into poverty, Punch reports.

Podcast: Djibouti’s outsize role in geopolitics

The tiny East African nation of Djibouti plays an outsize role in tackling conflicts and crises in the Horn of Africa region. We talk to Mohamed Siad Doualeh, Djibouti’s ambassador to the US, about Djibouti’s responsibility as a peacemaker in the Horn of Africa region, and its determination to expand its role as a trade and diplomatic hub.

All of Africa will benefit if the region’s problems can be solved, Doualeh says. “Africa is losing billions of dollars a year to conflict, and it’s high time we turned that around.”

Available on Apple or wherever you get your podcasts.


South Asian countries close in on power trading deal

The governments of BangladeshIndia and Nepal are nearing an agreement that would allow Bangladesh to import Nepalese hydroelectricity via India’s power grid. Officials expect the deal to be signed by August, Nikkei reports. It follows an agreement between India and its two neighbors to share access to a high-voltage transmission cable located in India.

Image by Nikkei, source photos by AP and Reuters

Bangladesh is in the midst of its worst power crisis in a decade, Reuters reported early last month, as a shortage of foreign-currency reserves, declining currency valuation and extreme weather compound to squeeze electricity supply. Meanwhile, Nepal, which is separated from Bangladesh by a thin strip of Indian land, produces an electricity surplus during the rainy season due to abundant hydroelectricity infrastructure.

The deal could help Bangladesh and India meet renewable and energy goals and create a significant revenue stream for Nepal. “Regional cooperation and integration can help accelerate the diversification of electricity supply resources across South Asia while enabling a greater role for renewable energy resources,” World Bank vice president for infrastructure Guangzhe Chen wrote last year.

Sri Lanka to restructure $42 billion in debt

Sri Lankan officials approved a plan to restructure $42 billion in domestic debt on Thursday in a bid to secure the first disbursement from an IMF bailout.

Sri Lanka also owes an additional $42 billion to external creditors, including China, India and Japan, the FT reports. Colombo is hoping to impose a 30% haircut on bonds held by foreign investors, Deutsche Welle reports. The island nation defaulted on its debt last year, and reached a deal with the IMF in March to receive a $3 billion bailout to be disbursed over the next four years.

Sri Lanka imposed a five-day bank holiday to prevent a run on the banks. Photo: Getty Images via BBC

The restructuring measures are aimed at resolving an economic crisis that is the worst in its history. The government declared a five-day bank holiday to avoid a run on the country’s banks after announcing the restructuring, the BBC reports. The country’s banks and financial markets are set to reopen on Tuesday.

Pakistan secures IMF bailout

Pakistan reached a staff-level agreement with the IMF to unlock a $3 billion bailout on Thursday. The deal will be subject to approval by the IMF’s executive board, which is expected to decide on the program by mid-July.

Pakistan’s Prime Minister Shehbaz Sharif. Photo: Reuters

Prime Minister Shehbaz Sharif said China had helped enable Pakistan to reach agreement with the IMF, the Hindustan Times reports.

The deal had been stalled for months as Pakistan inched toward the reforms required by the lender. During that period, inflation soared and foreign reserves dwindled. To stay afloat, the country pursued unconventional policies, including the sale of part of the Karachi port to the United Arab Emirates and the purchase of discounted Russian oil in Chinese yuan.

The IMF program could help defuse an economic crisis that has driven a wave of migration out of Pakistan—and reduce the need for such unorthodox fundraising and cost-cutting. The agreement “would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead,” the IMF said in a press release.

Middle East

Saudi Arabia deepens diplomatic normalization efforts and China economic ties

Saudi Arabia this week sent a high-level delegation including six ministers and vice ministers to China’s Annual Meeting of the New Champions, the FT reports. Dubbed the “Summer Davos,” the meeting is an opportunity for Saudi Arabia to seek diversified Chinese investment beyond the historic oil and gas commitments and into consumer sectors such as internet platforms, gaming and tourism.

Also announced this week was the launch of a $320 million development project by the Saudi Development and Reconstruction Program for Yemen (SDRPY) in Yemen. The funds are earmarked for medical centers—specifically a cancer center at Hadhramout University—a new ring road motorway, enhancement of water resources, and other critical infrastructure projects.

Saudi ambassador to the US Princess Reema bint Bandar Al Saud. Photo via Jewish Insider

Saudi Arabia’s relationship with Israel was also in the spotlight after the kingdom’s ambassador to the US, Princess Reema bint Bandar Al Saud, said at a conference that Saudi Arabia wants a “thriving Israel” and a “unified, integrated, thriving Middle East,”Axios reported later in the week, though, that Saudi Arabia is still “taking a cautious approach to any public steps that could be seen as normalization with Israel.”

New alleged drug-trade links to top Assad family members emerge

A BBC investigation has revealed new evidence of direct links between the multi-billion-dollar captagon trade in the Middle East and key members of Syrian President Bashar al-Assad’s family. The BBC reports that a source within the Syrian Army has evidence that the army’s Fourth Division, led by Assad’s younger brother Maher al-Assad, is involved in brokering the sale of captagon within a drug ring involving Iran-aligned militias, drug traffickers and Lebanon’s Hezbollah.

Maher al-Assad (L) and President Bashar al-Assad (R) in 2000. Photo: AFP via BBC

Captagon is a synthetic amphetamine which is popular in the Gulf party scene, and has long been known to be trafficked from within Syria to the broader Middle East. This week, Iraqi police seized a haul of 250,000 captagon pills, while Lebanon’s security forces seized 450,000 pills allegedly bound for the Gulf.


Brussels moves to ‘bring Moldova closer’ to the EU

Moldovan political leaders have welcomed an EU decision to extend the suspension of taxes and import quotas on Moldovan exports to the bloc for an additional year. The extension is particularly significant for Moldovan producers of plums and table grapes, as exports to EU markets have been growing steadily, surpassing the existing duty-free quotas.

A market in Chisinau, Moldova. File photo: EPA/Dumitru Doru

The new measure will provide relief to Moldovan farmers who have lost access to Russian and Ukrainian markets. Moldova has experienced an increase in exports to the EU in recent years, with the value of exports rising from 1.8 billion euros in 2021 to 2.6 billion euros in 2022. In the first four months of 2023, however, the total value of Moldovan exports decreased by 4.8% compared to the previous year.

The EU has also put together a support package for Moldova aimed at mitigating the impact of Russia’s war on Ukraine and bringing the country closer to the EU. The package focuses on five priority areas: economic development and connectivity, reforms, energy, security, and strategic communication.

Latin America

Guyana spurns OPEC’s advances

Guyana, the world’s fastest-growing oil producer, is being courted to join OPEC, the Wall Street Journal reported. Saudi Arabia’s Energy Minister, Abdulaziz bin Salman, and OPEC’s Secretary-General, Haitham al-Ghais, have personally invited Guyana to join the cartel. However, Guyana has chosen not to accept the offer as joining would lead to restrictions on oil production.

Vice President Bharrat Jagdeo says the country’s priority is to maximize short-term production and profits, considering the expected decline in global oil demand.

A supply ship in Guyana, which is aiming to boost its oil production by one million barrels a day by 2028. Photo: Matias Delacroix/AP

For OPEC, having Guyana join its ranks would be a significant achievement. Guyana aims to increase its oil production by a million barrels a day by 2028, the same target set by OPEC’s de facto leader, Saudi Arabia. Guyana is expected to become one of the world’s largest oil producers per capita.

Venezuela’s fragile economic recovery crumbles

Venezuela’s brief economic recovery, fueled by a shift in President Nicolás Maduro’s economic policies, is fading away amid a lack of comprehensive reforms. Consumption fell by 18% in January compared to the previous year, and the economy contracted by 8.3% in the first quarter of 2023.

GDP growth is expected to be a modest 3.4% by the end of the year, much slower than the nearly 8% growth in 2022. 

Hopes for an oil bonanza following discussions with the US have evaporated and oil production remains well below the government’s projections as restrictive licenses limit the potential for increased output. The private sector is in dire need of financing, as productive sectors including agriculture and hydrocarbons struggle, while poor public services and a deficient legal framework hinder foreign investment.

Demonstrators in Caracas demanding better wages. Photo: Javier Campos/NurPhoto/Getty Images

The Venezuelan government’s implementation of a new tax on dollar transactions, followed by devaluation and inflation, has worsened the economic situation. Wages have plummeted, with many Venezuelans now earning less than $100 per month.

What we’re reading

China affords Nigeria ‘super’ target status (FT)

Ethiopia submits application to join BRICS bloc of developing nations, awaits “positive response” (Addis Standard)

Zambia’s debt deal paves way for next stage of restructuring (Fitch Ratings)

Kenya’s fiscal consolidation reduces the risk of debt distress, but the private sector will face higher tax bills (FrontierView)

Tunisia struggles to progress under cumbersome bureaucracy (Al Jazeera)

Egypt-IMF deal stalls as devaluation rides on FX supply boost (The Africa Report)

Cambodian PM Hun Sen deletes Facebook page after criticism (Nikkei)

In a first, India gifts active warship to Vietnam (Reuters)

North Korea accuses US of pushing Korean peninsula to brink of nuclear war (WSJ

ASEAN central banks have reached the end of their monetary tightening cycles (FrontierView)

Iraq’s cabinet suspends approval of major oil export expansion (Iraq Oil Report)

Russia ‘stepped up Syria airstrikes’ (The Jerusalem Post)

Lebanon considers way to fight an invasive species ruining the pine nut harvest (NPR)

Putin moves to seize control of Wagner’s global empire (WSJ)

Argentina to pay the IMF with Chinese money (Mercopress)

Progressive party stages surprise upset in Guatemala elections (Al Jazeera

How Jamaica and its prime minister are becoming a mini-superpower in the Carribean (Miami Herald)

Bolivia signs lithium production deals with Russian and Chinese companies (Mercopress)

Chile takes on mediating role in Pacific Alliance crisis (Mercopress)

Masses of migrants overwhelm Panama’s Darién Gap (WSJ

Move over, DM and EM. Here come GI, BM, SCH, SBS, NRW and SC (FT Alphaville)

Global sovereign sector outlook moves to ‘neutral’ from ‘deteriorating’ (Fitch Ratings)

Global South steps up efforts to tackle climate change (Al Jazeera)

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