Frontier Markets Weekly, October 1st 2023

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By Ken Stibler, Noah Berman and Nojan Rostami. Executive editor: Dan Keeler


US suspends Gabon aid

The US will withhold aid to Gabon that could be used to support the country’s newly installed military government, the State Department said on Thursday. The US will continue diplomatic and consular activities in the country.

Gabonese military officers seized power in a putsch last month, annulling the results of an election that had just been announced. Officials in Washington are weighing whether to formally determine the action as a coup, a step that would immediately halt all US assistance, AFP reports. 

Soldiers in a parade in Gabon after General Brice Oligui Nguema was inaugurated as interim president following the coup. Photo: AFP/Getty Images

Even prior to the coup, Gabon was not a major recipient of US aid. In 2021, the United States disbursed $2.5 million to the West African country. Only six countries in Africa received less US aid that year.

Nigeria’s biggest unions go on strike

The two biggest labor unions in Nigeria will begin an indefinite strike next week to protest a cost-of-living crisis made worse by the removal of a popular gasoline subsidy, Reuters reports. Unions are hoping to persuade President Bola Tinubu to reverse the reforms that are pushing costs up sharply.

Union members protesting against fuel price hikes and rising costs in Abuja, Nigeria. Photo: Abraham Achirga/Reuters

The government said the strikes would only cause further damage to an economy already reeling from double-digit inflation, a shortage of foreign currency reserves and a depreciating currency.

In recent months Tinubu has relaxed his reforms somewhat, but the unions say he has not acted fast enough, AP reports. This is the third strike in the past two months by the unions, which together represent hundreds of thousands of workers.


Sri Lanka fails IMF review

Officials from Sri Lanka failed to reach a staff-level agreement with their IMF counterparts this week, pushing back a disbursement of $330 million to the crisis-hit country. The delay could slow the country’s recovery from its worst-ever economic crisis, the effects of which are still lingering in the form of adverse health and education outcomes, according to a survey conducted by the UN Development Program. 

An IMF delegation arrived in Sri Lanka two weeks ago to conduct its first review since the lender and country agreed to a $3 billion bailout program in March. A successful review would have unlocked the funds, but while the IMF said there are signs of stabilization, a full economic recovery is not yet in sight, Nikkei reports.

A vendor at a marketplace in Colombo. Photo: AP

The lender said that release of the next tranche will depend on whether the government makes progress on paying down its debt while sustaining other economic reforms. IMF officials will not disburse the tranche until a staff-level agreement is reached, FT reports.

Biden hosts Pacific Island leaders

US President Joe Biden hosted the leaders of 18 Pacific Island countries at the White House on Monday. Talks focused heavily on combating climate change, which several Pacific countries have described as an existential threat.

At the conference, Biden announced plans to work with Congress to provide almost $200 million to “expand and deepen our cooperation in the years ahead.” Almost a quarter of the funding will be directed toward infrastructure, including an undersea cable that will enhance internet access.

Solomon Islands Prime Minister Manasseh Sogavare skipped the summit in the wake of criticisms of his government’s policies. Photo: AFP

The meeting is the second of its kind in the past year and comes as the US looks to strengthen ties with the strategically important region, where they say China is seeking to project power. Last year, the Solomon Islands made waves when it signed a security agreement with Beijing, prompting concerns that the nation could become a harbor for Chinese military activity. Solomon Islands Prime Minister Manasseh Sogavare skipped this week’s summit, sayinghe did not want to be subjected to a “lecture,” AFP reports.

Philippines cuts loose Chinese fishing barrier

The Philippine Coast Guard said on Monday it removed a Chinese barrier that had been obstructing Filipino fishing boats in the Scarborough Shoal, which is claimed by both the Philippines and China, although it lies within the Philippines’ Exclusive Economic Zone.

Divers posing as fishermen snorkeled down to the barrier and cut its anchor, Reuters reports. “The barrier posed a hazard to navigation, a clear violation of international law,” a Philippine Coast Guard official tweeted.

A photo from the Philippine Coast Guard allegedly showing a diver cutting the barrier from its moorings.

The shoal is known for its abundant stock of fish, and is located near shipping lanes that carry $3.4 trillion in annual commerce, about one-third of annual ocean trade.

It is not yet clear how China will respond, the New York Times reports. Tensions in the South China Sea have been rising as China flexes its military might well beyond its internationally recognized territory, setting the stage for a potential showdown that US officials would like to avoid. BruneiMalaysia, and Vietnamhave each had their own conflicts with China in the region.

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Middle East

Iran and US deny holding secret nuclear talks after prisoner swap

Iran and the US have both denied reports that they are secretly negotiating a revival of the 2015 nuclear deal. Iran’s foreign ministry issued a statement via state media outlets calling the reports “sensationalism and media games,” while a US State Department spokesperson told Voice of America that no such talks were taking place, but that the US has “always said [it] is open to diplomacy with Iran” and believes diplomacy…is the best path to preventing Iran from obtaining a nuclear weapon.”

The denials follow reports by some outlets, including the Times of Israel, which cite “senior Iranian figures” who report rumors that Iran’s Ayatollah Ali Khamenei has “granted permission” for such direct talks to take place. The US reiterated last week its first position that “Iran must take de-escalatory steps if it wants to reduce tensions and create a space for diplomacy.”

The US and Iran both denied secretly discussing a revival of the 2015 nuclear deal. Photo: AP

September’s US-Iran prisoner swap was seen as such a de-escalatory step, but last week saw the US impose extensive new sanctions on Iran’s drone procurement network—which the US claims is being used to support Russia’sinvasion of Ukraine—targeting entities in the UAETurkey, and China. Meanwhile, Iran successfully launched its third satellite last week, prompting concern in the US about the escalation of Iran’s missile program.


Serbian troop buildup on Kosovo border alarms Western leaders

The White House this week expressed concern over the escalating tensionsbetween Kosovo and Serbia, particularly after a well-coordinated and planned shootout that resulted in four deaths in northern Kosovo. National Security Council spokesperson John Kirby highlighted the seriousness of the situation, including a large Serbian military deployment along the Kosovo border, which the US views as destabilizing.

NATO, acting as a peacekeeping force in Kosovo, is reinforcing its troop presence in the country in response to the recent violence.

Serbian soldiers on a military exercise near Belgrade in April. Photo: Darko Vojinovic/AP

Kosovo’s Prime Minister Albin Kurti welcomed the decision to deploy more NATO troops, citing concerns about Serbia’s military buildup along the border while US Secretary of State Antony Blinken called for immediate de-escalation.

Kosovo declared independence from Serbia in 2008, but the two nations have long-standing disputes, and tensions have flared up repeatedly in recent years.

Latin America

Bolivia’s Morales plots political comeback

Bolivia’s former President Evo Morales says he plans to run in the country’s 2025 presidential elections, citing attacks against him as the reason for his decision. This development underscores the growing divide between Morales, a prominent leftist figure in Latin America, and Bolivia’s current President Luis Arce, who was once his economy minister but is now a rival within the ruling MAS party.

Then-presidential candidate Luis Arce with former Bolivian President Evo Morales in 2020. Photo: Natacha Pisarenko/AP

Morales, who led Bolivia for nearly 14 years, left office in November 2019 amid allegations of election fraud, although he claimed to be the victim of a right-wing coup backed by the US.

Morales’ announcement prompted a sharp fall in Bolivia’s dollar bonds. Investors were already concerned about the country’s diminishing gold reserves, and the split within the ruling socialist party and accusations of corruption between the Arce and Morales camps are adding to the uncertainty in the country.

Peru tries to jolt the faltering mining sector

Peru’s Prime Minister Alberto Otarola has announced plans to establish a digital one-stop shop, aiming to streamline the mining permitting process and unlock $11 billion in key projects, Reuters reports. The move is vital for Peru, the world’s second-largest copper supplier, to reignite economic growth and reverse a decline in mining investment estimated at 18% in 2023 and 8% in 2024.

Peru’s Prime Minister Alberto Otarola. Photo: Sebastian Castaneda/AFP/Getty Images

The uncertainty over the sector’s prospects is being heightened by political instability, social unrest and unclear regulations, particularly related to the use of contractors and securing environmental permits.

Peru’s copper production has rebounded significantly this year, but a slowdown in investment could limit further growth just as demand for copper is growing as the world shifts away from fossil fuels.

Argentina abolishes income tax, risking hyperinflationary spiral

Economists are warning that Argentina is at risk of entering ‘hyperinflation’around its October election, the FT reports. This concern comes after the Senate moved to abolish income tax, backing a nearly $6 billion giveaway by economy minister Sergio Massa to boost voters’ income.

These measures, along with other cash handouts and subsidies, could cost up to 1.3% of GDP, potentially fueling inflation, which already reached a monthly rate of 12.4% in August.

Economists said Javier Milei’s strong performance in a primary vote in August worsened the inflation outlook. Photo: Tomas Cuesta/Getty Images

The government’s short-term financing of large-scale spending giveaways through money printing raises concerns about economic stability and could hinder Argentina’s ability to meet fiscal deficit targets and control money supply. Leading presidential candidate Javier Milei hopes to dollarize the economy, but the uncertainty around his plan might prompt people to exchange their pesos rapidly if he wins the election, further impacting inflation and economic stability.

What we’re reading

Wealthy Nigerians targeted in tax mix to curb revenue shortfall (Bloomberg)

Nigerian reform drive falters (Reuters)

Is Ethiopia on the brink of a new war? (DW)

Renewable energy champion Kenya plans Africa’s biggest wind farm (Bloomberg)

Tanzanian central bank seeks to boost forex reserves with gold-buying scheme (

Tanzania signs $1b in critical minerals deals with Australia and US (Energy Capital & Power)

UN condemns Vietnam’s crackdown on climate activists (UN)

Cambodia attracts record numbers of tourists (Pattaya Post)

Investigation: The shadowy Chinese firms that own chunks of Cambodia (BBC)

Thailand expects Tesla, Google and Microsoft to invest $5b, PM says (Reuters

Palestinian Authority welcomes first Saudi ambassador (Al Jazeera)

Oman’s oil and gas sector drives 30% GDP growth in 2022 (Al Monitor) but Q2 2023 GDP shrinks by 9.5% (Zawya)

China’s Xi hails ‘strategic partnership’ with Syria in Bashar al-Assad visit (France 24)

Kuwait’s finance ministry says cyber attack hits one of its systems (Reuters)

Iraq wants to overcome dispute with Kuwait over maritime waterway, PM says (Reuters)

IranVenezuela and Syria ink landmark oil refinery deal (

Egypt signs local-currency swap worth $1.4 billion with UAE (Bloomberg)

Talking peace in Sudan, the UAE secretly fuels the fight (NYT)

Azerbaijan officially dissolves Nagorno-Karabakh (Politico)

Slovenia tightens control of border with Croatia against migrant influx (BalkanInsight)

US offers Poland rare loan of $2 billion to modernize its military (AP)

Inflation falls below 10% in Poland for first time since Russia’s invasion of Ukraine (Notes From Poland)

Poland’s government accused of massaging price data before election (Politico)

Argentina seeks to tax lithium boom to avoid region’s resource curse (Bloomberg)

Chile President Gabriel Boric plans 3.5% spending hike and vows economic revival (Bloomberg)

Costa Rica breaks homicide record amid security coordination struggles (Insight Crime)

Chevron readies new oil drilling push in Venezuela to boost output (Reuters)

US Congress considers Venezuela economic sanctions relief (Forbes)

Colombia’s peso reinforces status as world’s best-performing currency (Bloomberg)

Ecuador’s economy grows 3.3% in second quarter (Reuters)

Paraguay president to halt Mercosur-EU talks if no deal by December (Reuters)

Jamaica ‘wants investments, not loans’ (Bloomberg)

Pimco sticks to bullish stance on emerging markets amid selloff (Bloomberg)

Dollar gains pressure emerging-market stocks and currencies (Bloomberg)

Egypt and Pakistan on FTSE stock indexes demotion watch (Reuters)

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