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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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Ghana and Nigeria raise rates amid inflation. Ghana’s central bank this week pushed its key interest rate up by two percentage points to 19% in an effort to rein in surging prices. The sharp increase follows a 2.5 percentage point rise in March, the country’s largest-ever rate increase.
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Depreciation of the Ghanaian cedi has slowed, but the currency remains 25% lower than five months ago, AfricaNews reports.
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Ghanaian cedi banknotes. Photo: Sanogo/AFP
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Nigeria’s central bank surprised analysts by unanimously raising its benchmark interest rate for the first time in six years on Tuesday, hiking it by 1.5 percentage points to 13% to help support the naira and tame inflation, Bloomberg reports. Nigerian economic growth has slowed in each of the past three quarters, according to Nigeria’s National Bureau of Statistics.
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Gambia to prosecute former president. The Gambian government announced on Wednesday that it would prosecute Yahya Jammeh, the politician and military officer who took power in 1996 and ruled the small West African nation with an iron first until an electoral defeat forced him to leave the country in 2017.
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In 2018, the country’s government convened a Truth, Reconciliation and Reparations Commission to investigate alleged human rights violations during Jammeh’s 22 year rule. The Commission uncovered 230 people killed and 122 cases of torture, recommending prosecution for Jammeh and 69 other alleged perpetrators, the New York Times reports.
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Yahya Jammeh campaigning in the 2016 presidential race. Photo: Marco Longari/AFP
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While many Gambians doubt the government’s intention to follow through on its commitment to prosecution, Emmanuel Daniel Joof, head of Gambia’s national human rights commission, said: “We believe seriously that the government will own up, and these recommendations will be implemented,” Al Jazeera reports. Jammeh lives in exile in Equatorial Guinea, which does not have an extradition treaty with Gambia.
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Asia
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Ousted PM Khan sows discord in Pakistan. Thousands of supporters of Pakistan’s former Prime Minister Imram Khan marched on parliament on Thursday, with Khan threatening a three-million-person march if elections are not held by May 31st.
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Pakistan’s government attempted to shut down the march, but the country’s Supreme Court gave it the go ahead, Deutsche Welle reports. The government arrested 1,700 protesting Khan supporters this week after a policeman was killed by a Khan supporter at protests in Lahore, ABC News reports.
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Supporters of Khan’s Pakistan Tehreek-e-Insaf (PTI) party were on the streets of Islamabad into the early hours of Thursday morning. Photo: Reuters
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Khan was ousted by parliament last month after losing the support of some of the members of his Pakistan Tehreek-e-Insaf party as inflation ravaged the South Asian country and IMF payments stalled after Khan refused to agree to an unpopular hike in fuel prices. Islamabad came to an agreement with the IMF on Thursday to release $900 million in funding and resume payments from a $6 billion aid package signed in 2019, Reuters reports. Fuel prices will increase by 20% as part of the agreement.
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Myanmar restricts use of foreign currency. Myanmar’s central bank on Wednesday prohibited the use of foreign currencies for domestic transactions by ministries and local governments, the most recent in a series of restrictions imposed by the country’s ruling military junta to relieve pressure on the inflation-pummeled kyat.
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The law targets hotels, restaurants, souvenir shops and international schools that use the US dollar rather than the kyat, Reuters reports. The official exchange rate trades 1,850 kyat for one dollar, but a parallel black market for the dollar offers less favorable rates, The Diplomat reports. Last month, the country’s central bank announced that all foreign money held by banks or received as income had to be converted to kyats.
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Bank staff in Myanmar displaying US dollars. Photo: Reuters/Soe Zeya Tun
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Myanmar’s foreign currency reserves stood at $7.8 billion at the end of 2020, according to data from the World Bank. Myanmar’s foreign-currency-denominated debt stood at more than $11 billion in 2019, according to economics research firm Macrotrends.
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China courts Pacific island nations. As Chinese foreign minister Wang Yi prepares to meet leaders of 10 Pacific countries in Fiji next week, China has circulated a proposed plan that would broaden its influence in the region. The wide-ranging deal includes provisions for cooperation on climate change, development, police laboratories and government scholarships.
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Wang arrived in the Solomon Islands on Thursday, with trips to Kiribati, Samoa, Fiji, Tonga, Vanuatu, Papua New Guinea and East Timor on the agenda. Beijing hopes countries will sign on to the agreement as part of a joint communiqué to be published after the summit in Fiji, the Associated Press reports.
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China’s Foreign Minister Wang Yi arriving in the Solomon Islands. Photo: AP
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Some Pacific states responded to the proposal with skepticism. In a letter sent to the 21 countries in the region, President of Micronesia David Panuelo warned against signing on to the agreement, citing privacy and geopolitical concerns. China’s “development vision threatens to bring a new Cold War at best, and a World War at worst,” Panuelo wrote.
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Europe
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Russia gains ground in bid to encircle troops defending Ukraine’s east. Russian forces made fresh gains in fierce fighting in eastern Ukraine’s Donbas region on Friday, engaging in street battles in the city of Severodonetsk, as Moscow pressed its advantage in firepower on outgunned Ukrainian defenders, Vivian Salama and Yaroslav Trofimov report in the Wall Street Journal.
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- Ukraine slams idea of swapping land for peace. (WSJ)
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Ukrainian troops have withdrawn from Lyman, the latest Donbas city to fall to Russian forces in the region in recent days, Ukrainian officials said. The Russian advances, if they continue, could encircle a large grouping of Ukrainian forces fighting in the easternmost part of Ukrainian-administered Donbas, resulting in a major defeat for Kyiv.
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A damaged apartment building in Borodyanka, near Kyiv. Photo: Oleg Petrasyuk/Shutterstock/EPA
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The Biden administration is expected to announce as early as next week that it will supply Ukraine with advanced rocket systems known as MLRS batteries, US officials said on Friday. Ukrainian officials say they urgently need the longer-range multiple-launch rocket systems to hold the ground in Donbas.
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“The situation is threatening and will soon become catastrophic,” a senior Ukrainian official said on Friday.
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Latin America
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Rising rates hit VC activity in Latin America, threatening the region’s startup ecosystem. Turmoil in US equity markets and rising interest rates worldwide are reducing investors’ appetite for riskier investments across Latin America following a year in which a record $16.3 billion venture capital funding was raised—more than the total for the preceding decade combined. As in early-stage funding markets elsewhere, Latin American tech startups have been hit especially hard in valuations and cost of capital.
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The average return of the 10 biggest Brazilian tech-focused stocks has fallen 44% since the start of the year through early May, Bloomberg reports.
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Investors are pulling out of risky bets everywhere, with central banks unwinding monetary stimulus in response to runaway inflation. Volatility, illiquidity and political risk make Latin America particularly vulnerable. The consensus among investors is that Latin American startups, especially late-stage “unicorns,” will be forced to consolidate, which will favor the already well-capitalized.
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In Colombia, former leftist guerrilla leads presidential hopefuls. A former leftist guerrilla-turned-senator, Gustavo Petro, is favored to be the next president of a country he pledges to transform by phasing out oil and coal production, and ending the US-backed drug war, the Wall Street Journal’s Kejal Vyas reports. “We’ve specialized in coal, oil and cocaine, and the three are poisons that are not economically sustainable,” Mr. Petro said in an interview after a recent day of speeches in small-town plazas in which he railed against the ruling class.
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A victory for Mr. Petro would put an antiestablishment leader in power in a country that is Washington’s closest ally in the region. It also would mean nearly all of Latin America’s major countries—from Mexico to Argentina to Peru and Chile—would be led by leftist governments, some of them openly antagonistic to US interests.
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Supporters at a rally for Gustavo Petro ahead of Colombia’s presidential election. Photo: Joaquin Sarmiento/Agence France-Presse/Getty Images
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With a commanding advantage in polls ahead of Colombia’s election today, the 62-year-old Mr. Petro is pledging to move Latin America’s fourth-largest economy away from mining to a state-centric model that heavily taxes the businesses and big landowners he blames for inequality and violence. The economist says fighting climate change would be a priority, so he would focus on developing renewable-energy projects and tourism.
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Bolivia plays hardball in gas negotiations with Brazil and Argentina. Bolivia has diverted 30% of the gas it had been exporting to Brazil towards its energy-strapped neighbor Argentina. The move comes as the Bolivian energy ministry has stepped up efforts to renegotiate its contract with Brazil, claiming that the existing Petrobras contract was illegitimately signed under the previous Anz administration, which the current government maintains gained power through a coup.
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The Minister of Hydrocarbons and Energy, Franklin Molina Ortiz, said state energy company YPFB is losing money on the current deal because the gas is sold at below-market prices. Exports to Argentina fetch a higher price.
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The export tension comes as countries across the region struggle to meet demand for oil amid declining internal situations, increased demand, and continued supply chain snarls. Bolivia’s YPFB is importing 2.5 million liters of diesel from Chile to offset a current shortage of refined energy products.
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What we’re reading
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Germany is keen to pursue gas projects with Senegal, says Scholz on first African tour. (Reuters)
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Ghana’s government on high alert as terrorism spreads across West Africa. (The Africa Report)
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Rwanda accuses Congolese forces of cross-border shelling. (AP)
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AfDB pledges to help Nigeria resuscitate electronic wallet system. (TheEagle)
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Video: Military coups in Africa are giving Russia an opening. (WSJ)
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Foreign business is falling out of love with China. (WSJ)
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Indonesia’s Jokowi urges quick rollout of China-backed trade bloc. (Nikkei Asia)
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How hubris and Covid transformed Sri Lanka from ‘donor darling’ to default. (FT)
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Turkey’s Erdogan says he no longer recognizes existence of Greece’s leader. (FT)
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To cool inflation, India cuts excise on fuel, tweaks duty on raw materials. (Indian Express)
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Biden says US would intervene militarily if China invaded Taiwan. (WSJ)
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North Korea fires three missiles after Biden ends Asia trip. (WSJ)
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Taliban sign deal to hand control of Afghan airports to UAE company. (Washington Post)
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Iran-Russia friendship turns sour over gas rivalry. (Nikkei)
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Iraq’s parliament votes to criminalize all forms of normalization with Israel. (Middle East Eye)
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Jordan accuses Syria and Iran of orchestrating 'drugs war' along border. (Middle East Eye)
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Lebanon currency hits new low after vote. (AP)
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Central Europe reveals holes in tightening net of Russia sanctions. (BalkanInsight)
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Czech Republic gives Ukraine attack helicopters and repairs its vehicles. (WSJ)
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Gangs strangle Haiti’s capital as deaths, kidnappings soar. (AP)
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Tether cryptocurrency enters Latin America with Mexican peso-pegged stablecoin. (CoinDesk)
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El Salvador extends anti-gang emergency for another month. (AP)
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Argentina and Brazil will guarantee food and energy for the region. (MercoPress)
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