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Welcome to the latest edition of Frontier Markets News. As always, I would love to hear from you at dan@frontiermarkets.co with news ideas, feedback and anything else you find interesting.
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Africa
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Guinea announces eventual return to civilian rule. Guinea’s legislative body announced on Wednesday that the country would undergo a three-year transitional period to ween off its military junta leadership. The timeline is shorter than the previously announced 39-month transition, but still longer than the UN and many regional partners hoped for, France24 reports.
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Seventy three of the 81 members of the junta-established National Transition Council voted in favor of the three-year timeline, cementing its status. Opposition politicians have accused the council of lacking the authority to determine the timeline for transition to civilian leadership.
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Guinea junta leader Colonel Mamady Doumbouya. Photo: Cellou Binani, AFP
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The Guinean military overthrew elected President Alpha Condé in a coup last September. The Economic Community of West African States (ECOWAS) suspended Guinea—along with fellow coup states Mali and Burkina Faso—and imposed some sanctions. ECOWAS has called for a six-month transition back to civilian rule.
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Mozambique scores long-awaited IMF aid package. The IMF announced a $456 million loan to Mozambique on Tuesday, the first such aid package to the Southeastern African nation in nearly six years. Under the terms of the loan, $91 million will be available for immediate disbursement, according to a statement from the IMF. The loan will be paid out over the course of the next three years.
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The IMF froze lending to Mozambique in 2016 in the wake of a scandal over billions of dollars in concealed debt. Without access to international aid, the country defaulted on its debt and saw its currency lose a third of its value.
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The situation has improved markedly recently, with the country’s $900 million of 2031 eurobonds outperforming peers, rising 2.5% this year compared to an average decline of 16% across other emerging and frontier markets, Bloomberg reports. Only Lebanon’s debt has performed better in the same timeframe.
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Zimbabwe suspends bank lending. Following the abrupt and devastating devaluation of the Zimbabwean dollar, President Emerson Mnangagwa issued an executive order to stop banks from issuing new loans.
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Parallel market exchange rates have reached a high of 400 Zimbabwe dollars per US dollar. Inflation in Zimbabwe reached 96.4% in April, up from 72.7% in March, according to economics data firm Trading Economics.
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Economic experts in Zimbabwe have questioned the President’s decision, citing fears that a full stop of lending may cut the revenue of the country’s banks by 20-30%, threatening their survival, Business Insider reports. In an interview with the Zimbabwe Broadcasting Corporation, Harare’s central bank chief said the move was necessary to tame inflation.
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Somalia’s parliament picks former leader, Hassan Sheikh Mohamud, as president. Somalia’s lawmakers voted on Sunday to bring back a former leader, Hassan Sheikh Mohamud, and oust President Mohamed Abdullahi Mohamed, whose attempts to delay elections and remain in office beyond his term alienated the US and other Western countries, the Wall Street Journal’s Nicholas Bariyo reports. Mr. Mohamud’s election to a four-year term comes as Somalia, which sits on the tip of East Africa, faces profound threats poorly addressed by the country’s divided leaders.
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Somali lawmakers were checked by security forces as they arrived at a military base in Mogadishu to cast their votes last Sunday in the presidential election.
Photo: Farah Abdi Warsameh/Associated Press
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Al-Shabaab, the local al Qaeda affiliate, has gained ground in rural areas of Somalia and carried out devastating attacks in Mogadishu, the capital. The country is experiencing drought that has left some six million people facing acute food insecurity and 1.4 million children under the age of five with acute malnutrition, according to the United Nations.
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The security situation is so unstable that the lawmakers conducted their vote in a hangar on a fortified military base, protected by troops from the African Union. The U.S., Europe and other nations with interests in Somali stability blamed Mr. Mohamed, known widely by his nickname, Farmaajo, for stalling the elections and worsening political gridlock.
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Asia
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Familial dynasties seize top political posts in the Philippines. 36 years after his father was ousted from dictatorship, Ferdinand “Bongbong” Marcos Jr. won the office of President of the Philippines in a landslide victory Monday.
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On a ticket with Sara Duterte, the daughter of outgoing president Rodrigo Duterte, Bongbong claimed 59% of the vote share in a field of 10 candidates. His closest challenger, outgoing vice president Leni Robredo, won 29%. In the separate vice presidential contest, Sara Duterte easily coasted to office with 61% of the vote.
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Ferdinand “Bongbong” Marcos Jr. Photo: Getty Images
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Some believe Bongbong’s victory portends a slow erosion of democratic norms and institutions in the Philippines, the New York Times reports, while others see him as a scion of political royalty who will let technocrats handle the country’s day to day affairs, The Economist reports.
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“The election of Bongbong and Duterte to the two highest positions in the country proved that procedural democracy is working,” Archie Resos, a history professor at the University of Santo Thomas who has published extensively on Marcos Sr.’s foreign policy, wrote in an email to FrontierMarkets.co.
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Dollar’s ascent muddles Asian currencies. As the dollar has advanced to a two-year high, currencies in emerging and frontier Asian markets have reached multiyear lows, sparking diverse responses from local regulators and central banks.
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In India, the country’s reserve bank intervened last week in spot and forward markets to defend the rupee, and in Malaysia, some former government officials have suggested bringing back currency pegs last used during the Asian Financial Crisis of 1997. The Malysian ringgit has been one of the hardest hit currencies in Asia, declining to 4.38 ringgit per dollar this week, a decrease of 4.3% this year.
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The number of dollars a Malaysian ringgit will buy has fallen sharply. Source: Xe.com
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In Thailand, regulators will be hesitant to normalize policy until US inflation cools, the Bangkok Post reports. Long one of the most rapidly appreciating Asian currencies, the Thai baht weakened to a five year low of 34.62 baht per dollar this week. The currency has depreciated 3.4% against the dollar this year. Despite expecting an increase in import prices, Thai officials expect a decreased baht to be a “boon” to exporters.
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Sri Lanka’s PM resigns amid curfew. Challenged by fierce by protests and a rapidly worsening debt crisis, Sri Lankan Prime Minister Mahinda Rajapaksa resigned last Monday. Confrontations between anti-government protestors and police came to a head early this week, resulting in a nationwide curfew imposed just hours before Rajapaksa announced his resignation.
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Rajapaksa has been a frequent target of Columbo’s critics. Two weeks ago, Sri Lanka’s largest opposition party announced its intention to hold a vote of no-confidence intended to oust the prime minister.
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Ranil Wickremesinghe, left, taking the oath of office as prime minister before President Gotabaya Rajapaksa, right, in Colombo, Sri Lanka. Photo: Sri Lankan President Media Division via WSJ
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The brother of President Gotabaya Rajapaksa and previously himself the president of Sri Lanka, Mahinda Rajapaksa has been a leading figure in Sri Lankan politics since the country emerged from civil war in 2009. On Thursday, Gotabaya Rajapaksa appointed former prime minister and political ally Ranil Wickremesingh as Mahinda’s replacement.
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Middle East
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Lebanon votes for new government in first election since economic collapse. Lebanese voted on Sunday to choose a new government in the country’s first parliamentary election since the onset of a once-in-a-century economic collapse and since the deadly 2020 Beirut port explosion sparked widespread demands for accountability from those in power, the Wall Street Journal’s Nazih Osseiran reports.
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The stakes are high for the tiny Middle Eastern country. A new government must negotiate an urgent economic rescue package with international donors and institutions, while navigating a deeply divided political system.
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A Lebanese security woman checks a voter’s identity in Sidon, Lebanon, on Sunday. Photo: Mohammad Zaatari/Associated Press
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At the same time, the role that the Iran-backed militant and political group Hezbollah plays in the next government could determine the support Lebanon receives from the international community.
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Europe
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Investment agreements herald a stronger Greece-UAE relationship. Greece and the United Arab Emirates signed a €4 billion initiative for the UAE to invest in infrastructure, renewable energy, health care and pharmaceuticals, food and agriculture, and logistics, Al-Monitor reports. The deal was closed at the end of PM Kyriakos Mitsotakis’ third visit to Abu Dhabi this week, in another sign of a strengthening partnership between the two countries.
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Greeks also mourned the passing of the UAE's president this week, under whom economic and military relations grew rapidly.
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Last year, the countries’ official export credit agencies signed an agreement to boost bilateral trade, which led to a 76% increase. In 2020, the two states inked foreign policy and defense cooperation deals, reflecting their mutual enmity toward an expansionist Turkey.
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Latin America
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Officials blame drugs and terrorism for Paraguayan prosecutor’s assassination. Marcelo Pecci, a prosecutor who had led drug and money-laundering cases in Paraguay, was assassinated by gunmen who arrived by jet ski on a private beach in Colombia and shot him, the WSJ’s Kejal Vyas and Juan Forero report. Pecci, the No. 2 person in a unit that targeted cocaine traffickers and organized crime figures, had worked with the team that began seizing luxury vehicles, airplanes, and other property bought with hundreds of millions in narcotics profits.
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Paraguayan antidrug prosecutor Marcelo Pecci, shown in an undated photo, was killed on Tuesday in Colombia. Photo: Ministerio Publico De Paraguay/Agence France-Presse/Getty Images
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The seizures were part of the country’s largest operation against drug-money laundering and implicated multiple government officials, prompting two cabinet reshuffles. The international murder of a key law enforcement official reflects how Paraguay has become a logistics center for drug smuggling and money laundering, also drawing attention to its potential role as a terrorist hub.
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Two Lebanese nationals and a Brazilian citizen were arrested and identified as suspects who had been previously arrested under Pecci’s orders. Colombia’s El Colombiano reported that the suspects are linked to the terrorist organization Hezbollah as the organization’s contacts for negotiating drugs with cartels in Bolivia, Brazil, Paraguay, and Argentina.
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Paraguayan opposition leader Efraín Alegre further complicated the story, accusing former President Horacio Cartes of involvement in the murder. Alegre also accused Cartes of being the head of one of the country’s major international crime groups.
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Facing reduced Russian patronage, Nicaragua’s leaders quietly reach out to US authorities. Shortly after Russia’s invasion of Ukraine, Laureano Ortega, the son of Nicaragua’s president Daniel Ortega, quietly approached the US State Department about sanctions relief in exchange for releasing political prisoners, NYT's Maria Abi-Habib reports. The high-level nature of the overture was seen by sources in Washington as a signal that Latin America’s pro-Russian authoritarians may be reconsidering partnerships with Putin as the Russian economy crumbles.
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President Daniel Ortega of Nicaragua with his wife and vice president, Rosario Murillo. Photo:Oswaldo Rivas/Reuters
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Nicaragua’s ruling elite had largely weathered targeted sanctions but pressure is building as the regime comes under growing financial pressure. The crisis is prompting many Nicaraguans to leave the country, with 3% of the population fleeing in the second half of 2021 alone.
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The negotiations were reportedly cut off, but the younger Ortega has been busy beyond the recently attempted rapprochement with the US, forging significant diplomatic and energy agreements with Chinese and other diplomats. He has brokered agreements to withdraw recognition of Taiwan, to establish nuclear cooperation with Russia, and to boost trade in oil products, petrochemicals, sugar, and beef with Iran.
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What we’re reading
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Senegal at the center of a struggle for influence between the US and Russia. (The Africa Report)
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Germany shifts focus of military missions in West Africa. (AP)
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UK to provide long-term finance to Rwanda to resettle asylum seekers. (FT)
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Indonesia looks to form special economic zone in South China Sea. (Nikkei)
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Malaysia palm oil exports surge as Indonesia embraces protectionist policies. (FT)
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Diplomatic snubs isolate Myanmar’s military regime. (Nikkei)
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Pakistan cracks down on netizens amid rare anti-army discourse. (Nikkei)
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Iran’s Revolutionary Guards Corps again attacks positions in Iraq’s Irbil. (Radio Free Europe)
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Turkey dials up the pressure on banks as lira slides. (FT)
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UN lambasts Lebanon’s central bank for ‘human rights violations’ (FT)
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Russia’s Economy Facing Worst Contraction Since 1994. (Bloomberg)
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Ukraine Reduced Russian Gas Flowing to Europe Through Key Pipeline. (WSJ)
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Moldova 'Fragile But Calm' Despite 'Internal' Efforts At Destabilization, Says Foreign Minister. (Radio Free Europe)
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Russia Targets Bosnia With Disinformation About Ukrainian War. (BalkanInsight)
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Serbia’s arms deals show it’s tilting away from Russia and toward China. (Foreign Policy)
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Hungary demands full exemption from Russian oil import ban. (FT)
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Hungary’s Orban threatens EU unity on Russia. (WSJ)
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Russia’s war in Ukraine sparks bomb-shelter revival in Poland. (WSJ)
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Costa Rica declares emergency in ongoing cyber attack. (AP)
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El Salvador’s president went all in on bitcoin. Then it tanked. (WSJ)
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Suspects break into Haiti court, ransack offices. (AP)
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Days of terror under Colombia’s Gulf Clan cartel. (AlJazeera)
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