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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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Mozambique nears IMF disbursement. Mozambique reached a staff-level agreement with the IMF on Monday that could lead to a $63.8 million funding package if approved by the lender’s executive board in December.
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Mozambique’s 4.6% GDP growth in the second quarter of 2022 exceeded the international lender’s expectations, but inflationary increases in food and fuel prices still pose a challenge to the southern African economy, the IMF said in a statement. Inflation rose to 12.1% in August, the highest level since September 2017.
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Maputo, Mozambique. Source: File photo
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The expected disbursement is part of a €432 million (about $456 million at the time) loan the IMF granted Mozambique in May. The agreement enabled the first IMF loan since Mozambique defaulted on its debt in January 2017.
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Court deals blow to CAR President. The top court in the Central African Republic rejected constitutional reforms on Friday that would have eliminated presidential term limits. Allies of President Faustin Archange-Touadera had proposed amendments to the Constitution in May, citing the irregularity of term limits of neighboring countries.
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Opposition parties welcomed the ruling, Reuters reports, but the decision was met with protest from parties aligned with Touadera. The court said the result cannot be appealed.
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CAR President Faustin Archange Touadera at this week’s the UN General Assembly in New York. Photo: Eduardo Munoz/Reuters
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Touadera took office in 2016 and was reelected in 2020 amid sectarian conflict, despite a 2019 peace agreement that brought a fragile end to a civil war that had engulfed the country since 2013. He is gearing up to seek a third term—currently prohibited by the country’s constitution—in 2024. Leaders in Rwanda, Republic of the Congo, Côte d’Ivoire, Burundi, Uganda, Rwanda and Guinea have all implemented reforms in recent years that make it easier for leaders to stay in power.
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Asia
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Kazakhstan's leader inches further from Russia. In a speech at the United Nations general assembly this week and in a subsequent op-ed, Kazakh President Kassym-Jomart Tokayev hinted at a shift in Kazakh-Russian relations. “There is simply no viable alternative to globalization, interdependence and the international rules-based order,” Tokayev wrote, echoing talking points often heard from the US and its allies.
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In his speech at the UN, Tokayev called for the need to respect territorial integrity and the sovereign equality of states, though he did not mention Ukraine by name.
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Kazakh President Kassym-Jomart Tokayev. Photo: Igor Kovalenko/EPA-EFE, via Politico
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Tokuyev’s recent comments indicate a desire to balance Kazakhstan’s international relationships at a time of greater Western investment, but the ties between Kazakhstan and Russia are far from frayed. Kazakhstan participated in the Russia-led St. Petersburg Economic Forum in June and attended the Shanghai Cooperation Organization summit last week. In January, Tokayev brought Russian troops into Astana to help quash political protests that threatened his power.
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Pakistan seeks debt relief. Flood-ravaged Pakistan requested immediate debt relief from rich nations on Friday. Without the aid, Prime Minister Shehbaz Sharif said “all hell will break loose,” Al Jazeera reports.
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The appeal was followed by the highest ever one-day decline in the country’s dollar denominated bonds. A 2022 dollar bond maturing in December dropped 11 cents to 81.9 cents on the dollar, while a 2031 dollar bond fell 7 cents to 40.33 cents on the dollar, according to Bloomberg.
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Shehbaz Sharif, in a brown shirt, and UN Secretary-General Antonio Guterres, left, at a school-turned-flood relief camp in Jaffarabad, Pakistan. Photo: Pakistan Prime Minister’s Office/AP via Al Jazeera
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The cost of the damage caused by the flooding is estimated by the UN to exceed $30 billion. In August, Pakistan unlocked a $1.17 billion IMF bailout, contingent on restructuring debt with creditor nations. The recent flooding and appeal for help have complicated this restructuring.
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Meanwhile, Pakistan’s foreign reserves have dropped to $8.35 billion, down from over $20 billion after the IMF bailout, the Express Tribune reports, but Finance Minister Miftah Ismail promised Pakistan would not default on its debt.
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Southeast Asia confronts inflation. Central banks across Southeast Asia continue to walk a tightrope as they try to protect their currencies and constrain surging inflation without crushing economic growth.
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Indonesia’s central bank raised rates by 50 basis points, surprising economists, who had expected a 25 point raise, Straits Times reports. The rupiah, which has declined 5% against the dollar this year, remained stable following the announcement.
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Vietnam’s dong hit a record low this week. Photo Giang Huy, VnExpress
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Thailand and Vietnam’s currencies hit decade-lows. Vietnam raised two of its policy rates by a percentage-point each, VNExpress reports. The dong hit an all-time low against the dollar this week, according to currency analytics firm XE.
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Thailand has defiantly maintained low rates in spite of the rapidly depreciating currency. This week, the baht sank to its lowest level since December 2006.
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Middle East
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Iran cracks down on protests over woman’s killing by ‘morality police.’ The death of 22 year-old Mahsa Amini at the hands of Iran’s so-called morality police sparked protests that left over 30 people dead, the Washington Post reports. Amini died in the custody of Iran’s Guidance Patrol, which is tasked with enforcing the Islamic dress code in Iran.
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Protests began at Amini’s funeral in western Iran before spreading around the country. The demonstrations have centered on Iran’s compulsion for women to wear hijabs, with many Iranian women taking theirs off, or even burning them, in the streets. Police fired at protesters and made mass arrests, while the government has blocked access to WhatsApp and Instagram and slowed internet service in much of the country.
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A woman burns her hijab at a protest. Source: BBC
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In a speech to the UN General Assembly just days after Amini’s death Iran’s conservative president Ebrahim Raisi, who assumed power in 2021, criticized the West for its supposed double standard on human rights. Videos posted online showed protestors chanting “death to the dictator,” referring to Iran’s conservative president Ebrahim Raisi. Amini’s death comes as the West has spent recent months negotiating a new Iranian nuclear deal, with little success.
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Latin America
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Ecuador reaches deal with China to restructure debt. Ecuadorean President Guillermo Lasso said his country had reached a deal with China to restructure $4.4 billion of outstanding debt, saving the country $1 billion from 2022 to 2025, Sara Schaefer Muñoz and Ryan Dube write in the Wall Street Journal.
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Ecuador had been seeking a deal with China since February, when Lasso traveled to Beijing to meet President Xi Jinping. Economists said a deal to roll over the debt was key for Ecuador’s government, which faced large payments to China in the coming months while also grappling with growing demands at home for more public spending, including for fuel subsidies.
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Ecuador’s President Guillermo Lasso. Photo: Martin Mejia/AP
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A failure to extend the loans, combined with a decline in the price for oil—Ecuador’s top export—would have resulted in a funding gap of $3 billion, equivalent to 43% of Ecuador’s reserves, according to a September report by the Institute of International Finance, an association of financial institutions that also serves as a think tank on emerging markets.
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Haiti’s plan to raise fuel prices sparks turmoil. The Haitian government’s plan to end $400 million in subsidies for gasoline, diesel and kerosene, doubling the price to consumers, has sparked chaos in the Caribbean country, José de Córdoba and Ingrid Arnesen report in the WSJ. Thousands of Haitians took to the streets in protest, erecting road barricades of rocks, furniture, wood, burning tires and old refrigerators.
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A man running with looted goods in Port-au-Prince amid violent protests. Photo: Ralph Tedy Erol/Reuters
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“The population cracked,” said Jean Eduver, a 52-year old truck driver in Port-au-Prince, the Haitian capital. Demonstrators across the country are calling on Prime Minister Ariel Henry to resign, saying he failed to address a spiraling economic and security crisis that has destabilized the Western Hemisphere’s poorest country since last year’s still-unsolved assassination of President Jovenel Moïse.
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Inflation is running at 29%, the worst in 10 years, according to the country’s central bank. Kidnappings and gang killings are rampant. Many Haitians are deeply disappointed that Henry has done little to move the country toward democratic elections.
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What we’re reading
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Default ‘a real possibility’ for Ghana, Fitch senior director says. (Reuters)
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Angola central bank may cut interest rate as inflation slows. (Bloomberg)
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Debt control key for shunned EMs, Kenya central banker says. (Bloomberg)
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DRC, Rwanda, Uganda: The shadow diplomacy of French intelligence. (The Africa Report)
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Outbreak of rare Ebola strain declared in Uganda. (WSJ)
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Japan to support Sri Lanka’s debt restructuring negotiations. (Nikkei)
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Bangladesh fears new Rohingya exodus from fighting in Myanmar. (Nikkei)
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Cash-strapped Pakistan struggles to keep China happy. (The Diplomat)
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Flood-hit Pakistan should suspend debt repayments, says UN policy paper. (FT)
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Chinese energy companies lobby Myanmar junta to import Russian gas. (Frontier Myanmar)
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Myanmar’s army-backed party to replace chief with general’s ally. (Nikkei)
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Emerging Asia growing faster than China for first time in 30 years. (Nikkei)
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Kurds fear ‘everything will change’ if Syria and Turkey reconcile. (Reuters)
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Turkish banks suspend Russian Mir cards amid US sanctions pressure. (FT)
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Unrest turns deadly in West Bank as Palestinian Authority’s grip loosens. (WSJ)
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Elon Musk proposes Starlink access in Iran as protests spread. (WSJ)
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Poland distributes iodine pills as fears grow over Ukraine nuclear plant. (Reuters)
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Russian mobilization prompts exodus to Serbia, Turkey. (BalkanInsight)
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Russia moves to annex occupied lands in bid to halt Ukrainian advance. (WSJ)
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Chopping down the future: Heating crisis worsens illegal logging in Balkans. (BalkanInsight)
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Thousands take part in anti-government protest in Moldova. (Reuters)
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EU set to hold back €7.5b from Hungary over rule of law violations. (FT)
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Colombian government and dissident FARC guerrillas hold preliminary peace talks. (MercoPress)
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Uruguay ranked among best places for investing in the near future. (MercoPress)
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Venezuelan security forces guilty of systemic abuse, UN report finds. (FT)
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