Frontier Markets Weekly, May 6th 2023

Sudan conflict spillover | Jordan gets $200m EU lifeline | Russian output slows | Ruling party wins in Paraguay

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

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Ghana to stop borrowing from central bank

Ghanaian officials signed an agreement on Monday to stop lending money from the central bank to the government. The commitment was a condition for the country to begin accessing a previously agreed-upon $3 billion bailout package from the IMF. 

The deal will become effective after disbursements from the IMF program begin, the FT reports. As part of the deal with the IMF, Ghana has introduced a series of other financial reforms, including raising taxes and tariffs.

Ghana’s central bank governor Ernest Addison. Photo: Cooper Inveen/Reuters

Ghana is restructuring $58 billion worth of debt after defaulting last December amid a burgeoning crisis that prompted the country’s central bank to lend billions of dollars to its government, Bloomberg reports. Meanwhile, inflation reached a 20-year high of 54% in December of last year. It has since cooled to 45%, but remains well above the central bank’s target of 8%.

Protests suspended in Kenya

Kenya’s opposition has suspended planned protests after reaching an agreement with the government of President William Ruto on one of their demands, Al Jazeera reports. Led by Raila Odinga, a longtime opposition figure in Kenyan politics who came second in Kenya’s presidential election last August, the protesters have been demanding electoral reforms and action against the rising cost of living.

Police in Nairobi during a March rally called by opposition leader Raila Odinga. Photo: Yasuyoshi Chiba/AFP

Odinga previously suspended the protests last month after agreeing to talks with Ruto’s government, but restarted them again days later. In a speech on Monday, Ruto said that the protesters, some of whom have alleged last year’s presidential election was fraudulent, should respect the county’s democracy.

Odinga did not specify which of the protesters’ demands had been met by the government. 

Sudan conflict threatens to spill over into surrounding countries

As the conflict in Sudan worsens, experts worry that it could become a destabilizing force in the region, the Washington Post reports. With the death toll climbing over 500, spillover effects are beginning to threaten the country’s seven neighbors, the Central African RepublicChadEgyptEritreaEthiopiaLibya and South Sudan.

Libya and Egypt have supported opposite sides of the conflict, and Egypt, Sudan and Ethiopia have a tense-water sharing agreement that could be altered by the clashes. Eritrea, which has built fragile alliances with other countries in the region during Ethiopia’s civil war, is considered especially vulnerable to disruption caused by the fighting in Sudan.

Sudanese refugees in Chad. Photo: Mahamat Ramadane/Reuters

South Sudan and Chad are both experiencing a flood of Sudanese refugees they are ill-equipped to handle, according to the International Rescue Committee. And supply disruptions to the Central African Republic, one of the world’s poorest countries, have resulted in a sharp increase in the price of basic goods, the UN says.


ASEAN+3 countries eye currency swap

JapanChina and South Korea are joining with the 10 countries of the Association of Southeast Asian Nations to negotiate a plan to expand a currency swap agreement to insulate them against nonfinancial shocks, such as natural disasters. 

The $240 billion facility is intended to support countries whose currencies crash as a result of a crisis, Nikkei reports. The agreement could also serve as a safeguard against expensive emergency loans from lenders of last resort, such as the IMF or Chinese state banks. IMF deals frequently come with low interest rates but costly conditions, and Chinese loans typically come without conditions at a high interest rate.

Severe flooding in Malaysia last year. Photo: Reuters

The effort comes as climate change exposes vulnerabilities for states in the region. In 2021, tropical storms caused hundreds of deaths in the Philippines and Indonesia, and the World Bank estimates that Vietnam is among the world’s most vulnerablecountries to climate impacts.

UN Secretary-General António Guterres strongly condemned the attack and called for those responsible to be held accountable. Human rights organization Amnesty International asked wealthy countries to suspend sales of aviation fuel to Myanmar that could be used to conduct air strikes. 

Malaysia rolls out 5G network

Malaysia will allow a second 5G network to operate within its borders, ending a period of state-run monopoly over the country’s telecommunications sector. The second network will begin rolling out when the current network reaches 80% of the country’s population, which is expected to happen by next year, Reuters reports.

The second 5G provider has not yet been decided. The US and the EU reacted with trepidation, fearing that Malaysia could choose China’s Huawei as a telecom partner, the FT reports. Malaysian officials said that they would not rule out Huawei as a bidder for the second network, South China Morning Post reports.

Malaysia’s capital Kuala Lumpur. Photo: Hasnoor Hussain/Reuters

US officials have repeatedly warned that China could use Huawei as a tool of espionage. The US has introduced several export controls against the company in recent years, but an increasing number of countries have still chosen Huawei to build their 5G networks. The Swedish telecom giant Ericsson constructed Malaysia’s current 5G network.

Middle East

Iran’s president visits Syria

Iran’s President Ebrahim Raisi met Syria’s President Bashar al-Assad in Damascus on Wednesday, the first Iranian state visit to Syria since the start of the civil war, Axios reports. Iran was a key military and financial backer of Assad’s government throughout the Civil War, and this week’s visit signals continued Iranian involvement in Syria as the latter attempts to normalize relations with its Arab neighbors.

Bashar al-Assad (right) receives his Iranian counterpart, Ebrahim Raisi, at the presidential palace in Damascus on Wednesday. Photo: Iranian Presidency/AFP/Getty

Iran’s government said that Syria is entering a reconstruction and rehabilitation period, and signaled continued support by signing long-term oil supply and trade agreements.

The visit comes as the Arab League is considering readmitting Syria, and is part of a broader effort to reduce tensions between longtime rivals in the region.

Saudi Arabia to welcome LGBT tourists and expand flights with Israel

Same-sex sexual activity is still a crime in Saudi Arabia but the kingdom seems to have adopted a don’t-ask-don’t-tell style policy on welcoming LGBT tourists, CNN reports. The Saudi Tourism Authority website has updated its FAQ page with a question, “Are LGBT visitors welcome?” and a reply stating that “everyone is welcome to visit Saudi Arabia and visitors are not asked to disclose such personal details.”

Since 2021, Saudi Arabia’s heavily stylized “Visit Saudi” strategy has launched multiple ad campaigns and has more recently turned to using celebrity sponsors such as soccer star Lionel Messi to promote the kingdom.

The oasis city of Al-‘Ula is among the destinations Saudi Arabia is promoting to tourists. Photo: Alex Broadway/Velo/Getty Images

Saudi Arabia is also trying to increase the number of flights to the country and is loosening visa restrictions. This week, Saudi Arabia and Israel discussed permitting direct Hajj flights, and the possibility of a schengen-style visa for the GCC was raised at a regional conference featuring Arab tourism ministers.

EU disburses financial assistance package to Jordan

On Wednesday, the EU released the final $200 million tranche of a “macro-financial assistance package” designed to support Jordan as it addresses the local impact of regional conflicts, particularly the refugee crisis caused by the Syrian civil war.

The MFA package is one element of Jordan’s recent economic policy of renewable energy transition and household wealth transfer. This week’s final disbursement was predicated on Jordan’s successfully meeting a number of targets including smart water meter installations, renewable energy commitments and the expansion of a social assistance fund “Takaful” to reach 200,000 new households.

TotalEnergies and Iraq reach agreement on delayed $27 billion energy project

After years of delays due to political disagreements over the size of Iraq’s stake in the project, TotalEnergies and Iraq’s government expect to kick-start construction in the next two weeks after reaching an agreement, Reuters reports. Total is stumping up $27 billion to build four oil and gas extraction and refinery projects in Iraq over 25 years, with an initial investment of $10 billion.

An oil rig at the Zubair oilfield in Basra, Iraq. Photo: Essam Al-Sudani/Reuters

Iraq’s government has agreed to take a 30% stake in the project, and has made room for a supporting co-investment from QatarEnergy. The project to expand Iraq’s oil and gas capacity comes as production slumped 6% in April due to a pipeline dispute with Turkey.


Russia faces industrial decline despite dubious data

The health of Russia’s economy has been difficult to ascertain since waves of Western sanctions were met with complex policy responses and a data blackout. However, new geospatial data from the EU shows a sharp discrepancy between Russia’s rhetoric and its performance, according to the WSJ’s Josh Zumbrun.

Source: WSJ

Rather than showing an economy that has stabilized after an initial shock, environmental pollution data shows that industrial activity has declined even further as the war has continued. An analysis of the data suggests that activity across industrial regions has decreased by 6.2% in the past year, contradicting Russia’s official measure, which showed a 1.2% rise in industrial production.

Repeated clashes with EU raise risk of a Hungarian exit

Continued conflict with the EU and Prime Minister Viktor Orban’s control of the media are increasingly shaping domestic politics and raising the risks of a Hungarian exit from the Union, Bloomberg’s Zoltan Simon reports. Concerns are growing among pro-EU parties as Brexit-style campaigns have popped up across the Eastern European country, where support for the EU has fallen sharply in the past year, according to Eurobarometer polling

Hungarians had remained broadly pro-EU as Orban tightened ties with Moscow and Beijing in the early 2010s. But with the country facing a deep recession and high inflation, voters’ frustration is manifesting as support for anti-Western parties despite billions in yearly aid from Brussels.

Latin America

Ruling Colorado party wins Paraguayan elections

Conservative Santiago Peña won Paraguay’s election by a decisive margin, fending off challenges from the far left and right. The Colorado party won a majority in both houses of Congress to continue the party’s decades-long rule in the country, despite discontent among voters due to corruption allegations and economic woes, reports Bloomberg.

  • Amid protests, authorities uphold legitimacy of Paraguay election (Al Jazeera)

The results buck the trend of left-wing leaders coming to power across Latin America, cementing Paraguay’s status as an outlier. The win is good news for Taiwan, which had feared a change of leadership could see Paraguay switch its allegiance to China.

Santiago Peña celebrates his general election victory. Photo: Santi Carneri/Bloomberg 

Peña has inherited an economy that has eked out a moderate 1.2% growth over the past five years, constrained by the pandemic and droughts. He promised to spend more on social programs, infrastructure and housing while keeping the country’s low tax rates unchanged. One potential challenge he faces: His political mentor Horacio Cartes is under US financial sanctions for alleged corruption and ties to terrorism. 

Argentine crisis impacts Mercosur partners

Argentina’s acute economic crisis is threatening to undermine already precarious growth in the Mercosur trade bloc. Argentina is Brazil’s third-largest trade partner and a major consumer of Brazilian industrial and agricultural products. With dollars running scarce and the peso in freefall, Argentina is struggling to sustain import levels.

This week, the administration of Brazil’s President Lula de Silva moved to revive trade finance and denominate bilateral trade in both reals and pesos to ensure continued Argentine imports. The move reflects the close ties between the two economies and is an attempt to reverse the loss of an estimated $6 billion in trade between the countries over recent years, according to Brazilian treasury secretary Gabriel Galipolo.

Argentina’s president Alberto Fernandez (right) with Brazil’s President Lula. Photo via

Separately this week, Uruguayan president Lacalle Pou complained that low Argentine prices were hurting local business as Uruguayans flock across the border to make purchases.

Chile faces commodity crunch

Chilean economic activity contracted by 2.1% in March compared to the same month in 2022, according to central bank figures. The contraction was sharper than analysts expected, reflecting slowing global copper demand as China’s economic reopening has been less dynamic than expected.

The negative indicator comes on the heels of a recently proposed plan to nationalize the lithium sector that has spooked investors, with the state’s two largest lithium producers losing a collective $8.5 billion in value since the announcement. The government’s plan still lacks critical details and is likely to be diluted given congressional opposition, but commodity analysts believe it could divert miners’ attention to AustraliaArgentina and Canada.

What we’re reading

Burkina Faso leader says country wants ‘more weapons’ from North Korea (NKNews)

Heavy fighting in Khartoum as Sudan power struggle rages (Reuters)

Biden faces pressure to suspend assistance to Tunisia’s government (Middle East Eye)

South Africa allowed Russian plane under US sanctions to land (NYT)

Long-term economic growth in sub-Saharan Africa under threat (IMF)

Pakistan cracks down on food smuggling to Afghanistan (Nikkei)

Amid food insecurity, Pakistan reports record-breaking wheat harvest (Radio Free Europe)

Taliban ‘interfering’ with NGO work in Afghanistan (AP)

Bhutan has been quietly mining bitcoin for years (Forbes)

Cambodia’s Hun Sen plans power succession to son and allies’ children (Nikkei)

Myanmar’s domestic tourism rises, but foreigners still scarce (Nikkei)

Myanmar leader welcomes foreign minister of key ally China (AP)

Uzbekistan president wins referendum on extending powers (The Guardian)

Podcast: Questions grow over gold mining proceeds in Kyrgyzstan (Radio Free Europe)

Saudi Arabia and Iran to reopen embassies ‘within days’ (Reuters)

SaudiIran rapprochement visible in Sudan evacuation effort (Reuters)

Iran seizes second oil tanker in a week as tensions with US increase (Financial Times)

Syria agrees to curb drug trade in meeting with Arab ministers (Al Jazeera)

Tech VCs resort to party crashing in Middle East during downturn (Bloomberg)

EU extends tariff waiver for Ukrainian grain (NYT)

Russia’s arms exports have fallen to post Soviet low (Foreign Policy)

Ecuador’s planned $800-million debt-for-nature gets IDB guarantee (Bloomberg)

Ecuador frees cash for Galapagos conservation with $1.6 billion bond buyback (Reuters)

Ecuador armed forces ordered to tackle ‘terrorism’ (Mercopress)

Shortage of rain threatens Panama Canal crossings forcing ships to reduce their draft and cargoes (Mercopress)

US backs sale of Citgo to pay Venezuela’s debts (WSJ)

Quality of Venezuelan gas raises alarm as cars catch fire amid widespread shortages (El País)

Investment in developing nations may hit 20-year low: World Bank official (Nikkei)

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