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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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Zambia requests debt relief. Zambia has requested up to $8.4 billion in debt relief, the IMF announced in a statement on Tuesday. The country and lender finalized a deal last week to unlock a $1.3 billion bailout, contingent on a restructuring of external debt.
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Zambia became Africa’s first pandemic-era default in 2020, and its external debt stood at $17.3 billion at the end of 2021, including $6 billion to China, according to the Zambian Ministry of Finance. After news of the restructuring broke, Zambia’s eurobonds due in 2024 and 2027 fell around 6.5% to a hair over 55 cents on the dollar, according to Bloomberg data.
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Copper mines play a major role in Zambia’s economy. Photo: Salim Henry/Reuters
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Zambia will be the first country to pursue debt restructuring under the Common Framework for Debt Treatment, a mechanism for low income countries to seek debt restructuring introduced by the G20 in 2020. Chad and Ethiopia have since announced intentions to use the framework for their own debt restructurings.
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Kenyan election upheld. The highest court in Kenya confirmed on Monday the results of its recent presidential election, bringing an end to a drawn-out electoral contest. President William Ruto will be inaugurated as Kenya’s 5th president on September 13, according to NTV Kenya.
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The court certified that Ruto won 50.5% of the vote, beating challenger Raila Odinga’s 48.8%, the BBC reports. In a statement posted on Twitter Monday, Odinga said “we respect the opinion of the court although we vehemently disagree with their decision today.”
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Ruto’s supporters took to the streets to celebrate the ruling. Photo: Reuters via BBC
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Despite the vote’s contentious finale, the upheaval was less violent than in previous Kenyan elections. In 2007, riots over the result killed 1,100, according to Human Rights Watch. After that violence, Ruto and exiting President Uhuru Kenyatta were brought before the International Criminal Court in the Netherlands on charges of crimes against humanity. The charges were subsequently dropped.
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Drought and extremist violence push Somalia to brink of famine. Famine will likely be declared in Somalia before the end of this year, UN humanitarian aid chief Martin Griffiths said on Monday. Some 7.1 million people, roughly half of Somalia’s population, face severe hunger, a threat that compounds daily as the country faces the worst drought in four decades, food deliveries impeded by displacement and the extremist group al-Shabab, and grain imports disrupted by Russia’s war in Ukraine.
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A medical worker checks a malnourished child in Mogadishu, Somalia. Photo: Farah Abdi Warsameh/AP
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Griffiths compared the situation in Somalia to 2011, when a famine killed 260,000 people, most of whom were children. The conditions now are worse than they were in 2011, Griffiths said, although the UN said “urgent, multi-sectoral humanitarian assistance” could still prevent a famine.
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Prior to the war, Somalia imported 90% of its wheat from Russia and Ukraine, and grain prices have skyrocketed since the invasion as grain stagnates in Ukrainian ports. Ukrainian President Volodymyr Zelenskyy announced Wednesday that tons of Ukrainian grain would be arriving in Somalia in the coming weeks, the Washington Post reports.
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Asia
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Pakistan former leader Imran Khan indicted. A court in Pakistan announced that it would indict Imran Khan on Thursday, paving the way for the latest legal challenge facing the divisive former prime minister. Khan will be charged with contempt of court relating to comments he made about the judge of a lower court.
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The charge stems from a late August speech in which Khan threatened “action” against Islamabad police officers and a judge who jailed a close Khan aide. Hearings in the contempt case began on August 31, and charges are expected to be officially leveled by September 22, Al Jazeera reports.
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Former Prime Minister Imran Khan faces a contempt charge for threatening a judge. Photo: Farooq Naeem/AFP
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Since his ouster in a vote of no confidence in April, Khan has criticized political opponents at dozens of rallies—and become a regular in Pakistani courts. In recent weeks, he has been charged with unlawful assembly and booked under the country’s anti-terrorism laws for threatening police, judiciary and state institutions, Business Standard reports.
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Thailand targets crypto. Regulators in Thailand tightened restrictions on cryptocurrency this week, throwing a wrench into the country’s ambition to become Southeast Asia’s leader in digital assets. The move comes as Thai interest in cryptocurrency weakens.
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In 2018, Thailand became the first country in the region to introduce digital asset legislation as Thai consumers flocked to the nascent industry. But the number of active crypto trading accounts has fallen to a third of its January level, Bloomberg reports, and companies with significant crypto exposure on their balance sheets have seen their shares rapidly decline. Shares of Jasmine Technology, a telecoms giant that recently began bitcoin mining, have sunk 80% since their April peak.
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The Thai Securities and Exchange Commission filed a police complaint against struggling Singapore-based crypto exchange Zipmex on Wednesday. Zipmex halted withdrawals in July amid a broad downturn in the crypto market, and has since failed to provide the SEC with transactional information, the statement alleges.
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Democratic stress test in the Solomon Islands. Prime Minister of the Solomon Islands Manasseh Sogavare plowed a constitutional amendment through parliament this week that will delay next year’s elections to 2024. Sogavare has been adamant that the delay is necessary for the Solomons to properly host the 2023 Pacific Games, a multi-sport event held every four years for athletes from Oceania.
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Sogavare has said the country does not have the infrastructure or funding to host both the games and an election, despite an Australian offer to pay for archipelago’s elections, the New York Times reports.
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Manasseh Sogavare said postponing elections “does not in any way inhibit or prohibit the right to vote.”Photo: Mark Schiefelbein/AP
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Critics have been quick to associate the delay in elections with autocratic ambition influenced by China. In April, a leaked draft of a now-signed security agreement between the Solomons and China stoked fear among Western states and opposition candidates about the state of democracy in the archipelago nation. According to the amendment, elections are to be held no later than April 2024.
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Middle East
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Iran’s nuclear capability grows as talks falter. The United Nations’ atomic agency found Iran has more than enough fuel to create a nuclear bomb, The Wall Street Journal reports. Iran’s highly enriched uranium stores increased by 30% this quarter, and the Islamic republic’s thousands of nuclear centrifuges have the capacity to produce several nuclear weapons per year.
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The Arak heavy water reactor in Iran in 2019. Tehran says it has never sought to work on nuclear weapons. Photo: Atomic Energy Organization of Iran/AP
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The US and its allies have made little progress in restoring a nuclear deal. The week after a senior official in Joe Biden’s administration told Politico talks with Iran were “not at all encouraging,” the EU foreign policy chief Joseph Borrell reported being “less confident” about closing a deal after the latest round of talks.
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The sticking point in negotiations has been Iran’s insistence on economic guarantees and the lifting of sanctions.
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Gulf states demand Netflix remove ‘offensive’ content. A group of Middle Eastern states, including Egypt, Saudi Arabia and the United Arab Emirates, have called for the streaming giant Netflix to remove shows from its platform that “contradict Islamic and societal values and principles,” The New York Times reports. The demands come from the various nations’ media regulators, which are known to blur objectionable scenes out of digital media.
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Netflix is under fire from the governments of Egypt and several Gulf countries for airing content that runs counter to their ‘societal values.’ Photo: Bing Guan/Reuters
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The move comes as Arab nations have been easing rules on traditional social values in general. But Middle Eastern governments remain largely opposed to LGBTQ lifestyles, which are increasingly moving into mainstream streaming-service content. Multiple recent Disney films including Lightyear and West Side Story were banned from airing in movie theaters across the Middle East for touching on LGBTQ topics.
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A study from Digital TV Research predicts Netflix will reach 5.4 million subscribers in the Arab world by 2027, up from 3.5 million in 2021.
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Europe
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Albania breaks relations with Iran over cyberattack. Albania became the first country to break diplomatic relations after it expelled Iran’s diplomatic staff and formally broke relations with Tehran over a large-scale cyber attack in July, the Associated Press reports. The attacks mirror those on other NATO countries, including Germany, Lithuania, the Netherlands and Belgium and on anti-Iran countries in the Gulf.
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A policeman stands guard outside the Iranian Embassy in Tirana, Albania. Photo: Franc Zhurda, AP
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The “HomeLand Justice” group claimed credit through Telegram for the ransomware attack.
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The group purportedly targeted Albania over its sheltering of about 3,000 Iranian Mujahedeen-e-Khalq (MEK) dissidents. The group is the largest Iranian opposition movement and stems from the socialist guerrilla movement that opposed the Shah and now the current Islamic regime.
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Latin America
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Chile’s failed constitutional reform forces pivot to the center. Chile’s proposed replacement for its current Pinochet-era constitution was decisively rejected by 62% of Chilean voters last Sunday, FrontierView reports. While polls had predicted the far-left influenced constitution would fail, observers were surprised at the degree of the defeat, with every single province, including the progressive Santiago metro area, voting against it.
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Chilean President Gabriel Boric has replaced five ministers after voters rejected a draft new constitution. Photo: Martin Bernetti, AFP
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With the cabinet lurching to the middle and a more-center left approach more likely going forward, Boric’s policies could begin to mirror those in Peru and now Colombia over the coming three years. In both countries, leftist presidents face staunch opposition, investor skepticism and infighting that looks likely to continue checking any revolutionary reform.
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What we’re reading
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Central African nations eye pipelines and hubs to end energy poverty. (Reuters)
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Eni buys BP’s business in Algeria to secure more African gas. (Reuters)
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Tunisian opposition to boycott December elections, decry ‘coup’. (Al Jazeera)
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Bangladesh widens net for laundered billions as forex reserves fall. (Nikkei)
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Vietnam bucks Asia’s weakening growth trend. (IMF)
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Thailand, Vietnam and Myanmar deepen Russia ties to blunt economic woes. (Nikkei)
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Myanmar faces blacklisting risk by global financial crime watchdog. (Nikkei)
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Foreign companies in Myanmar struggle with shortage of dollars. (Nikkei)
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Workers and students in Indonesia protest fuel price hike. (AP)
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Laos’ debt pressure raises specter of a China vassal state. (Nikkei)
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Kazakhstan leader seeks snap elections and cut to presidential term. (FT)
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Turkey’s Erdogan in Serbia on Balkan tour to boost mutual travel. (Radio Free Europe)
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7.6% growth in Turkey’s GDP suggests economy is overheating. (Frontier View)
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Climate migrants flee Iraq’s parched rural south, but cities offer no refuge. (The Washington Post)
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Islamic State turns to NFTs to spread terror message. (WSJ)
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Ukraine launches $400b drive for foreign investment. (FT)
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A year on, El Salvador’s bitcoin experiment is stumbling. (Reuters)
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Peru launches economic package amid worries of slowing growth. (Reuters)
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Argentina to hasten rate hike after ‘soy dollar’ FX move, source says. (Reuters)
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Argentina pledges help to ease global food and energy shortages. (FT)
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Latin America growth ‘not looking bright’ in 2023. (MercoPress)
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To preserve Amazon, indigenous groups call for debt forgiveness. (Reuters)
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