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Welcome to the latest edition of Frontier Markets News.
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Please note: Over the summer we will be publishing this newsletter bi-weekly. We'll revert to weekly issues in the autumn.
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Africa
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José Eduardo dos Santos, autocrat who led Angola, dies. José Eduardo dos Santos, a former president of Angola who brutally crushed dissent during his 38 years in power as those around him grew rich, has died, Neanda Salvaterra writes in the Wall Street Journal. Angola’s government said dos Santos died on Friday in a hospital in Barcelona, Spain, following a long illness. He was 79 years old.
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José Eduardo dos Santos sitting with his wife, Ana Paula, and daughter Isabel, behind them, at an event in Luanda, Angola, in 2012. Photo: Paulo Novais/Epa/Shutterstock
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Dos Santos presided over his country from September 1979 until September 2017, through more than two decades of civil war and into an era of unprecedented investment from multinational oil companies and China that made Angola into Africa’s second-largest producer of crude oil.
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Yet while billions of dollars flowed into Angola under dos Santos, the country’s poor scarcely benefited. About half of Angola’s more than 30 million people live in poverty, according to the World Bank, and rampant borrowing left the government with a mounting pile of debt when the price of oil crashed in dos Santos’s final years in power.
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Ethiopian ethnic violence escalates. Hundreds of civilians were killed in a massacre in Ethiopia this week, the second in the past two weeks. Prime Minister Abiy Ahmed accused the rebel group Oromo Liberation Army of carrying out the attack. The OLA denied the allegation and accused government forces of perpetrating the violence.
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“Civilians were killed en masse by the regime’s militias as security forces did nothing. The regime thinks it can just point fingers & escape accountability,” OLA spokesman Olaa Tarbii wrote on Twitter.
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A World Food Program truck carrying grain burned last month en route to Tigray in northern Ethiopia. Photo: Eduardo Soteras/AFP/Getty
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More than 300 people were killed in the massacre, bringing the total civilian death toll from the past two weeks to over 500, Al Jazeera reports. A lawmaker from Abiy’s ruling Prosperity Party railed against the government’s account of events, accusing local government officials of organizing the massacre.
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Ethiopia is in the midst of a nearly two-year civil war that has pitted government forces against rebels in the northern region of Tigray. The OLA has partnered with Tigrayan forces to carry out offensives against government forces. Meanwhile, the worst drought in four decades has raised concerns of famine and mass displacement.
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Egypt secures World Bank cash. The World Bank will provide a $500 million loan to Egypt to tame soaring prices of bread, the Bank announced last week. The aid program will be aimed at providing food to poor and vulnerable households and strengthening Egypt’s resilience to food crises, the Bank said in a statement announcing the loan.
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“This emergency operation comes at a very critical juncture when the food security of many countries is threatened by the war in Ukraine,” said Marina Wes, World Bank Country Director for Egypt, Yemen and Djibouti.
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A worker arranges freshly baked bread for sale at the Al-Monira market in Cairo, Egypt.
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Photo: Islam Safwat/Bloomberg News
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Egypt is the world’s largest importer of wheat, with 80% of imports coming from Russia and Ukraine, according to the Observatory of Economic Complexity, an MIT-based trade data firm. The government has said that it will cut imports of wheat by 500,000 tons per year, or about 10% of total imports, Bloomberg reports.
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Tunisian president continues power grab. Tunisian President Kais Saeid revealed a new draft constitution last week that would increase his powers and reduce those of the prime minister and parliament. After a public outcry, though, that argued the draft would give the president too much power, Saeid quickly revised it, issuing a new draft late on Friday evening.
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A referendum on the new constitution is scheduled for July 25, exactly one year after Saeid suspended parliament. If passed, it would cement Saeid’s executive powers, extending presidential authority to parliament and the judiciary.
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Then presidential candidate Kais Saied in Tunis on September 17, 2019. Photo: Muhammad Hamed/Reuters
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Long seen as an Arab Spring success story, the North African nation created a new constitution in 2014, establishing a mixed presidential and parliamentary system. But the country’s economy has since stagnated and unemployment remained high. Saeid has said a new constitution is necessary to save the country from political and economic crisis, the Associated Press reports.
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Critics say the draft constitution creates conditions ripe for authoritarianism, the Washington Post reports.
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Asia
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Protestors knock down top Sri Lankan brass. President Gotabaya Rajakapsa agreed to resign effective next Wednesday after facing pressure from protestors and top government officials. This weekend, Rajapaksa was asked to resign by the Speaker of Parliament as protestors stormed the president’s home. Prime Minister Ranil Wickremesingh, who took office in May, announced his own intention to resign after protestors entered his home and set it on fire.
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Protestors in Sri Lanka have succeeded in forcing the president and the prime minister to resign. Photo via NDTV
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Sri Lanka has run out of foreign exchange reserves and its fuel supply is expected to run dry imminently. Last week, negotiators in Sri Lanka failed to reach a bailout deal with a visiting IMF delegation. Sri Lanka had previously shut schools and told workers to stay home, restricting fuel supplies to essential services such as healthcare and public transport.
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Sri Lanka has received $4 billion in aid from India, but the assistance is viewed as a temporary solution. Talks with the IMF have made progress, and discussions will continue virtually towards reaching a staff-level agreement in the near term, according to an IMF statement. Though it may provide long-term relief, a staff level agreement is not expected to unlock funds that will become immediately accessible.
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Gas shortage fuels woes in Asian markets. As Europe diversifies its gas suppliers to decrease its dependence on Russia, companies are more frequently diverting liquified natural gas away from less lucrative Asian frontier markets.
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Pakistan’s state-owned gas company, for example, did not receive a single offer in a $1 billion tender that closed Thursday. It was the fourth time in the past six weeks that Pakistan, whose government has imposed hours-long blackouts to conserve fuel, has failed to complete a tender to purchase LNG. Bangladesh and Sri Lanka have also imposed electricity restrictions, and Brazil, India and China have cut LNG imports.
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An LNG tanker at Fauji oil terminal in Karachi. Photo: Asim Hafeez/Bloomberg
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The price of LNG, which usually trades at a discount to crude oil, has increased 34% since Russia invaded Ukraine in February, according to macroeconomic data firm Trading Economics. Crude oil has increased 16% over the same period of time. Europe’s LNG imports reached an all-time high in April, averaging 16.5 billion cubic feet per day, according to the US Energy Information Administration. In 2021, Europe averaged 9 Bcf/d.
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Bhutan shakes up tourism rules. As it prepares to open its borders on September 23, the small Himalayan nation of Bhutan has reconstructed its tourism industry. Visitors to the country will now be required to pay a $200 daily sustainability tax directly to the country’s government.
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The tax replaces a $65 fee that was built into a requirement to spend $250 per day on lodging, food and a mandatory tour guide. The new fee will be independent from other travel expenses.
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The Buddha Dordenma statue overlooks Thimphu Valley in Bhutan. Photo: Gilles Sabrié for The New York Times
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Proponents of the bill say it will raise government revenues and contribute to preserving Bhutan’s carbon-negative status, the New York Times reports. Critics say the reform will reduce tourism revenue as the Bhutanese economy continues to be hamstrung by the Covid pandemic. Tourism dropped to less than $20 million in 2020 from $225 million—or roughly 9% of the country’s GDP—the year before, according to the Bhutanese national newspaper Keunsel.
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Inflation relief flows through Southeast Asia. Governments in Southeast Asia have launched economic relief programs to offset inflation’s effect on the rapidly growing region. Malaysian Prime Minister Ismail Sabri Yaakob announced a $142 million aid program, where households in the lowest 40% income bracket will be eligible for payouts, South China Morning Post reports. The government previously froze increases of electricity and water fees.
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The Malaysian government will help low-income families handle rising costs of living with additional cash payments. Photo: Shutterstock via SCMP
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Neighboring Indonesia, where cooking oil prices have surged, has also implemented cash payments, targeting 20 million households and 2.5 million street vendors, Nikkei Asia reports. Thailand recently granted a three-month extension to an aid program that subsidizes cooking oil for low income households.
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The emergence of such aid programs reflects a willingness by Southeast Asian states to raise their debt to GDP ratios to reduce inflation’s impact on their populations. Last year, Thailand raised the cap on debt-to-GDP from 60% to 70%, and Malaysia raised it from 60% to 65%.
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Afghanistan’s independent media is fading away, but a few hold out. The flourishing of Afghanistan’s media industry was one of the flagship achievements of the 20 years of US-led intervention in the country. Now, less than a year since the Taliban replaced the Western-backed government, there is little of it left, and even reporting on small, peaceful gatherings of women has become a risky endeavor, Margherita Stancati reports in the WSJ.
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The experience of Waheeda Hasan, a reporter for the Afghan broadcaster Tolo News, is typical. On a recent morning she got out of the car, hid her phone in the folds of her head scarf and walked to the protest site, a busy intersection here. There, a dozen women waved colorful posters and chanted slogans calling on the Taliban to reopen secondary schools for girls and to allow women to return to work in all professions. Hasan started filming the protest on her phone.
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Monitors with different feeds in the Tolo TV broadcast control room in Kabul during the morning news. Photo: Joel Van Houdt for The Wall Street Journal
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Within minutes, Taliban security forces swarmed the area. Hasan quickly uploaded her footage and slipped away safely. A radio journalist, the only other local reporter there, was briefly detained.
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Women’s rights protests aren’t allowed, and neither is covering them. “We know the risks and restrictions we face by covering women’s rights protests,” says Hasan, 28 years old. The risks range from phones or cameras being confiscated, to being beaten or detained. “We are afraid, but we are just doing our job. It’s our daily drill.”
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Middle East
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Israel-Lebanon maritime dispute threatens gas-extraction plans. Threats from Iran-backed militant group Hezbollah could stall Israel’s plan to deliver natural gas to Europe, Israeli officials said, as Israel’s caretaker prime minister pursued help from France to defuse a crisis over its maritime border with Lebanon, Dov Lieber reports in the WSJ. The border dispute risks turning into an armed conflict after Hezbollah, the Lebanese militant and political group that has fought several conflicts with Israel, threatened to take action aimed at stopping work in the Israeli-controlled Karish gas field.
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An Energean rig at the Karish natural-gas field in the Mediterranean in early May.
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Photo: Ari Rabinovitch/Reuters
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Over the weekend, Israel’s military shot down what it said were three drones launched by the militant group toward the Karish gas rig. Hezbollah said the drones were unarmed.
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Israeli Energy Minister Karine Elharrar said gas from Karish, which could begin producing as soon as September, is destined for Europe under a deal struck last month with the European Union. The bloc is seeking new energy supplies following Russia’s invasion of Ukraine and the subsequent sanctions on Moscow.
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UAE emerges as hottest investor in renewables. The United Arab Emirates is emerging as one of the world’s biggest state financiers of clean energy, seeking to become as influential in renewables as it currently is in oil and gas, Rory Jones reports in the WSJ. Since November, when global nations agreed to accelerate emissions-cutting plans at a United Nations summit, the UAE has said it will fund development of thousands of megawatts of solar-energy projects in countries across the world.
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A large-scale solar installation near the Masdar City sustainable urban development project. Bernd Von Jutrczenka/Zuma Press
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It has committed $400 million to enable developing nations’ transition to clean energy and pledged to help supply green electricity to 100 million Africans by 2035. The Gulf state, alongside the US, also has promised to raise $4 billion to invest in technologies that would transform agriculture and food production to limit climate change.
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Emirati officials hope the bet on clean energy won’t only help diversify the country’s oil-dependent economy but increase its diplomatic clout and shift perceptions of the Gulf state. Already, the renewables arm of Emirati sovereign-wealth fund Mubadala Investment Co. has deployed more than $20 billion in clean energy projects since it began investing in renewables in 2006, outstripping other state investors or public pension funds, according to New York-based research firm Global SWF.
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High food prices shrink Eid al-Adha feasts for some Middle Eastern families. As the Middle East prepared to celebrate the Islamic festival of Eid al-Adha, many across the region said they couldn’t afford the livestock for the customary sacrifice ritual and were cutting back on the family feast because of soaring food prices, Summer Said and Chao Deng report in the Journal. “Everyone I know who used to slaughter an animal is not doing it this year,” said Attwa Mohammed, a 41-year-old teacher who lives with his wife and three children in a small town in northern Egypt.
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Eid al-Adha, which started on Friday evening, is one of Islam’s most important festivals. According to Islamic faith, it honors God’s decision to provide the prophet Abraham with a lamb to sacrifice in place of his son. Muslims around the world usually slaughter animals in celebration, sitting down for a family feast while distributing the remaining meat to the poor.
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Shopping for livestock has become more expensive, part of a broader rise in food prices across the region. Photo: Mahmoud Elkhwas/Zuma Press
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After the Covid-19 pandemic curtailed their celebrations in the past two years, many in the Arab world had been looking forward to larger gatherings of family and friends to mark the festival. Instead, some are inviting fewer guests, while others are putting cheaper food options on the table.
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Latin America
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Argentina names new economy minister as inflation crisis mounts. Argentine President Alberto Fernández appointed a little-known public servant as economy minister as his administration was facing soaring inflation and a weakening currency, which risk leading to social unrest, Ryan Dube reports in the Wall Street Journal. Silvina Batakis, an economist aligned with the ruling Peronist coalition’s far-left faction, took over the government’s top economic post on Monday, two days after the surprise resignation of Martín Guzmán, a moderate aligned with the president.
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In past interviews and messages on her Twitter account, Batakis has spoken of the importance of a robust state while lambasting the IMF, a frequent punching bag for Peronist leaders on its role in Argentina. In a message on Twitter from 2019 on poverty, the former economy minister for Buenos Aires province said, “You combat it with a state that plans and intervenes.”
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Silvina Batakis took over the top economic post after Martín Guzmán’s resignation. Photo: Argentine Ministry of Interior
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Guzmán’s decision to step down was a blow to Fernández and the more moderate wing of government aligned with him, which had looked to reduce public spending as part of Argentina’s recent deal with the IMF to refinance $44 billion in debt. Guzmán’s deputies in the ministry also resigned.
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Colombia truth commission calls for overhaul of army and US-backed war on drugs. A panel investigating atrocities during Colombia’s civil war called for overhauling the country’s armed forces and criticized the US-backed war on drugs as part of its final report, the WSJ’s Kejal Vyas reports. The country’s President-elect Gustavo Petro said he would consider the recommendations.
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The report, made public last week by a commission created as part of the government’s 2016 peace pact with Marxist rebels, offered the most comprehensive study yet of the half-century conflict that has cost some 260,000 Colombian lives and forced millions to flee the war-battered countryside.
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People awaiting the release of the Colombia’s Truth Commission report. Photo: Nathalia Angarita/Bloomberg News
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The 11-member panel urged Colombia’s government, the US’s closest regional ally, to restructure its police and army with civilian leadership, focus on regulating legalized drugs instead of military-led counternarcotics efforts, negotiate with armed groups and fulfill the state’s commitments to modernize a vast countryside and reintegrate former members of the Revolutionary Armed Forces of Colombia, or FARC, insurgency into civilian life.
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The commission, made up of academics, human-rights advocates and lawyers, recommended limiting the numbers of accused warlords and drug kingpins that are extradited to the US, saying the longstanding practice has hindered Colombian law enforcement from extracting information from criminals.
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What we’re reading
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West African leaders lift economic sanctions on Mali. (AlJazeera)
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Ghana president defends decision to appeal to IMF. (AfricaNews)
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Nigeria’s currency falls to record low as traders track central bank’s latest dollar sale. (Bloomberg)
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South Africa a step closer to joining wealthy creditors’ club. (Bloomberg)
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Laos grabs for Russian lifeline as it fights fuel shortage. (Nikkei)
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Cambodia, Vietnam top Covid recovery index as Asia fears new waves. (Nikkei)
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Marcos Jr.’s big promises to Philippines face economic reality. (Bloomberg)
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‘We can trust no one’: Marcos becomes president in the Philippines. (NY Times)
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Has Indonesia shaken its ‘fragile’ status among emerging markets? (Reuters)
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Sri Lanka president asks Russia’s Vladimir Putin for help to buy fuel. (BBC)
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Rice is saving Asia as Ukraine war drives up food prices. (WSJ)
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As NATO grows, China and Russia seek to bring Iran, Saudi Arabia into fold. (Newsweek)
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Russia tensions threaten food supplies for 4m Syrians. (WSJ)
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UAE trade provides Iran with western goods, from perfume to laptops. (WSJ)
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Iran, US nuclear-deal talks end without progress. (WSJ)
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Why is Israel headed to its fifth election in four years? (WSJ)
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Romania reopens Soviet-era rail line to aid Ukraine grain sales. (YahooNews)
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EU works to tighten Russia sanctions enforcement. (WSJ)
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In new poll, 89% of Ukrainians reject ceding land to reach peace with Russia. (WSJ)
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Estonian PM reaches agreement to regain majority in parliament. (Reuters)
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Argentina says it has China’s support to join BRICS group. (Reuters)
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