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Welcome to the latest edition of Frontier Markets News. As always, I would love to hear from you at [email protected] with news ideas, feedback and anything else you find interesting. 

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By Ken Stibler, Noah Berman, Nojan Rostami and Mariel Ferragamo. Executive editor: Dan Keeler

Global Macro

EM Q2 Meta Forecast: Disorder, divergence and opportunity 

This week saw the launch of our FMN Q2 2025 meta forecast bringing together a wealth of insights from the most recent reports by a host of financial institutions, think tanks, multilaterals and investment houses. 

The full report is available only to FMN paid subscribers. If you’ve been considering supporting our mission—it’s just $10 per month or $100 for a full year—now might be the time to pull the trigger.

The Q2 report cuts through the noise of headline indices to unpack how tariff escalations, shifting trade routes, policy re-alignments and divergent growth paths are reshaping the EM landscape.

Read the Full Q2 meta forecast here.

Africa

China woos Kenya on Ruto’s state visit

Kenya’s President William Ruto went to Beijing on a five-day state visit this week, looking to deepen the strategic partnership between Kenya and China, AfricaNews reports. On the trip—Ruto’s third visit to China since taking office in 2022—the two countries leaders’ signed 20 documents and landed on a near-$1 billion agreement that includes investments in the manufacturing, agriculture and tourism sectors. 

The visit comes as US President Donald Trump’s 10% tariffs on Kenyan exports are expected to dent Kenya’s economy, and push it—along with several other African counterparts—to diversify its trading relationships, experts say. 

Kenya, which is a member of China’s Belt and Road Initiative, has seen Chinese foreign direct investment fall sharply from its 2023 high of $1.7bn. According to the National Bureau of Statistics, India is now the leading FDI partner in Kenya. US FDI in Kenya was valued at $277 million in 2022. 

World Bank aims to ramp up African equity

The International Finance Corporation, the World Bank’s private investment body, announced this week that it aims to “significantly” increase its equity stakes in Africa in the next five years to stimulate business growth, Semafor reports. 

The move underscores a strategic shift for IFC to better “support transformative development” as economies on the continent are contending with extremely high levels of debt, IFC managing director Makhtar Diop—the agency’s first African leader—said.

Africa was the target of the largest share of IFC investments last year, at a record $14.2 billion—23% higher than 2023. That reflects a four-year trend of rising investment across Africa as investments recovered from the tremors of Covid-19 pandemic and Russia’s war on Ukraine. IFC investments in Africa in 2024 were spread mostly across clean energy, digital infrastructure, agriculture, manufacturing and business development.  

Ethiopia to be BRICS bank’s next newcomer

Ethiopia is poised to become the fourth African nation to join the BRICS group’s New Development Bank, after submitting its application and receiving political support from all BRICS members, Business Insider reports. Ethiopia is already a member of the BRICS bloc as of 2024; joining the bank is one of the country’s key priorities for this year, Ethiopia’s ambassador to Brazil, this year’s rotating chair, said.  

Established in 2014, the New Development Bank (NDB) aims to finance sustainable development efforts within BRICS members. The bloc’s financial institutions are intended to help invigorate so-called South-South cooperation and reduce its members’ dependence on traditional funding sources. 

The NIB already counts Algeria, Egypt and South Africa among its members, and its expansion in Africa highlights the continent’s growing role in global economic governance and the bank’s commitment to infrastructure, energy and sustainable development projects. Once its accession is complete, Ethiopia plans to leverage its NDB resources on its agriculture, energy and industrial sectors.

Asia

Kashmir escalation threatens to set back Pakistan

Tensions between India and Pakistan have risen to their highest level in years after a terrorist attack in India-controlled Kashmir killed 26 people on Tuesday. The following day, Pakistan suspended visas for all Indian nationals, kicked out some Indian diplomats, and closed its skies to Indian planes, the BBC reports.

Indian and Pakistani soldiers briefly exchanged fire on Friday, and again on Saturday, bringing the historical rivals closer to war than they have been in decades. The two sides last fought over Kashmir in 1999.

The rapidly escalating hostilities come as Pakistan has moved to recover from a series of internal crises. The country nearly defaulted in 2023 amid soaring inflation and devastating floods. Loans from the IMF and other international organizations staved off the worst, and its stock markets have been among the world’s best performers, rising more than 60% over the past 12 months.

Bangladesh shrugs off India’s port access ban

India’s recent decision to limit neighboring Bangladesh’s access to its ports is threatening to wound its vibrant export sector, but the latter country’s government is confident the move will have little impact, Nikkei reports.  

India had previously let Bangladesh use its ports and airports for exports, which make up 13% of Bangladesh’s GDP according to the World Bank. Earlier this month, India said it would stop providing this access to its northern neighbor, arguing that its ports had become too congested. A Bangladeshi official said that the country did not need to transship through India and that the decision would not adversely affect trade.

India and Bangladesh have been at odds recently. New Delhi has sheltered ousted Bangladeshi Prime Minister Sheikh Hasina, who is wanted at home for crimes against humanity. Meanwhile, Bangladesh has grown cozier with China while India warms to the US.

US aid cuts exacerbate impact of Myanmar earthquake

Almost a month after Myanmar suffered its worst earthquake in more than a century, foreign assistance is still slow to trickle into the country. Aid cuts now threaten to set back the wartorn nation as it fights back the scourge of preventable disease, too.

The US had earmarked $10 million for HIV and Tuberculosis treatment in Myanmar, but the funding—along with an additional $12 million for other health programs—fell victim to President Donald Trump’s gutting of USAID. Now, poor families can no longer afford treatments that previously kept such diseases at bay, Frontier Myanmar reports.

It is not just US cuts that have left Myanmar more vulnerable. The country’s ruling military junta announced earlier this month that rescue teams would need to seek permission from the regime before providing aid.

Middle East

IMF warns of rapid rise in Saudi Arabia’s debt burden

The IMF this week sharply increased its forecast for Saudi Arabia’s debt burden and deficit through 202, AGBI reports. Riyadh’s debt to GDP ratio is expected to reach 44.5% and its deficit is predicted to almost double to around 5%, a sizable shift from the 35.3% and 2.8% forecast in the IMF’s last report published in October 2024.  

The revision takes into account steep declines in oil prices, which are currently in the $60-65 range due to weakened demand expectations stemming from the US-instigated global trade war, and a demand imbalance caused in part by a surprise OPEC+ production increase in early April. Saudi Arabia is expected to push to further accelerate production at next month’s OPEC+ meeting, as it seeks to reclaim lost market share following a long period of production cuts.

• Saudi businesses turn to solar power as kingdom cuts energy subsidies (FT) 

Riyadh has been trying to lower its spending, paring back costly megaprojects and, according to a recent report from research firm Capital Economics, widening the scope of its VAT, which is already the highest in the region. 

Fund managers pounce on ‘underpriced’ Oman debt

Hedge funds have been loading up on Omani debt in anticipation of another ratings upgrade, according to participants at a Europe, Middle East and Africa-focused debt conference in London this week. Investors are betting that a second credit rating upgrade, following the lift from junk status to investment grade by S&P last September, will bring in institutional buyers and push up prices.   

At the same event, organized by Bondradar, industry professionals said GCC bonds, particularly those of Saudi Arabia, have seen an uptick in issuance with strong market demand. 

Syndicate managers reported participation by local buyers as evidence of deep domestic capital markets supporting the recent uptick in GCC sovereign bond issuance, fueled in part by a need to fill fiscal gaps opened by falling oil prices. They also highlighted that regional issuers are increasingly selling euro-denominated bonds, responding to strong demand from EU investors and continued weakness in the US dollar.

Europe

Ukraine’s debt restructuring negotiations fail

Ukraine has failed to reach an agreement to restructure $2.6 billion in GDP-linked warrants ahead of a $600 million payment due May 31, with talks breaking down between the finance ministry and a creditor committee including hedge funds VR Capital and Aurelius Capital Management, WSJ reports. The warrants, which pay investors when Ukraine’s annual growth exceeds 3%, were established in 2015 but excluded from last year’s $20 billion restructuring.

Finance minister Serhiy Marchenko argued these instruments “were designed for a world that no longer exists,” as Ukraine’s 5% growth in 2023 merely represents recovery from the invasion-caused 30% economic contraction. Ukraine offered to either swap warrants for restructured bonds or preserve them while canceling 2023-2026 payments, while creditors proposed restructuring only the May payment by accepting 25% in bonds rather than full cash. 

The IMF has warned the warrants “constitute an important risk” for debt sustainability despite its $15.5 billion bailout package, with future obligations potentially reaching $6.6 billion as Ukraine’s economy recovers. Ukraine must now decide whether to default on the May payment or continue negotiations.

Hungarian and Czech economies trade places as fiscal risks grow across the region

Czech economic growth is accelerating to a projected 0.5% quarter-on-quarter in Q1, while Hungary, which has recently emerged from recession, saw just 0.3% growth, Capital Economics said in a note to clients this week. This divergence comes as activity indicators strengthen in Czechia while Hungary shows persistent weakness, marking a notable reversal of economic fortunes between the neighboring countries.

Fiscal vulnerabilities are intensifying across Central and Eastern Europe, with Romania, Hungary, Poland and Slovakia all suffering significant budget shortfalls, raising fears that elevated deficits could push up risk premia on sovereign debt, potentially creating a negative feedback loop of higher borrowing costs and worsening fiscal positions.

US protectionism adds further pressure. While the direct impact of tariffs on the region’s economies is expected to be minimal, indirect impacts including diminished business confidence and a slowdown in EU economies could prove more damaging.

Latin America

Chile pursues deeper bilateral relationships to offset tariff risks 

Chile’s President Gabriel Boric this week he would respond to growing global trade tensions not by retaliating but by deepening relationships with a broad range of partners, Reuters reports. Highlighting recent efforts such as the development of 13 bilateral agreements with Brazil, Boric called for governments across the Latin American region to accelerate progress on improving connectivity and attracting investment.

Boric highlighted the Capricorn Bioceanic Corridor—a transcontinental transport route that aims to revolutionize South American logistics and strengthen Chile’s role as a Pacific gateway—as an example of investing in deeper regional connectivity.

Chile is simultaneously courting Asian markets and is in discussions with India to strengthen its already-growing trading relationship. This multifaceted approach reflects Boric’s calculated strategy to leverage Chile’s geographic advantages and stable investment environment to create a resilient trade network that can withstand geopolitical pressures while enhancing the country’s strategic importance in hemispheric commerce.

Argentine currency strength surprises skeptics

Argentina’s peso has defied pessimistic forecasts following President Javier Milei’s currency liberalization, trading at 1,100 pesos per dollar, comfortably within the new floating band of 1,000-1,400 pesos introduced under the country’s $20 billion IMF program. 

Milei’s administration has introduced a number of measures to support the currency, including restricting peso liquidity, reopening the FX market to foreign investors, and incentivizing agricultural exports through temporary tax breaks. The president explicitly stated the central bank wouldn’t buy dollars until the peso reaches 1,000.

•  US signals willingness to offer Argentina a credit line (Bloomberg) 

Although the move has so far been successful, economists warn the peso could face headwinds later in the year, when dollar-denominated agricultural inflows typically diminish. Experts have also flagged that the appreciation relies on temporary financial flows rather than sustainable economic fundamentals, creating urgency for the government to build foreign reserves to meet a $4 billion IMF target while conditions remain favorable.

Colombia appears well positioned to weather tariffs

Colombia’s diversified economy looks better positioned than many emerging economies to survive the negative impact of global trade turmoil, consultancy Frontier View reports. According to the firm, Colombia’s key exports including crude oil, gold, refined petroleum, coffee and cut flowers should face minimal disruption thanks to tariff exemptions, lack of viable substitutes, or product inelasticity. 

While some sectors face vulnerability—notably aluminum structures, electrical transformers, bananas and coffee extracts—the most significant economic challenges for Colombia likely stem from indirect effects. Those could include a broader global slowdown dampening demand and lower oil prices reducing fiscal revenues.

What We’re Reading

DRC and Rwanda vow to agree peace plan within days (BBC)

Tanzania, Malawi and South Africa move to resolve trade fracas (MSN)

UAE firms fast-track energy investment across East Africa (The Africa Report)

France and Madagascar announce deepened economic ties as Macron visits (Le Monde)

Ghana’s Mahama launches new push to reintegrate junta-led nations into ECOWAS (NewsCentral Africa)

Ex-Credit Suisse chief Tidjane Thiam vows to fight Côte d’Ivoire electoral ban (FT)

Mauritania and Morocco to establish Mauritania’s first stock exchange (Middle East Monitor) 

South Africa scraps VAT increase in dramatic U-turn after coalition rift (FT)

Gulf investors hedge their bets with investment pivot to Asia (Fortune)

Prospects improving for Iran on potential nuclear deal (Axios)

Jordan outlaws Muslim Brotherhood group and confiscates assets (Al Jazeera)

Lebanon passes long-awaited banking secrecy law to meet IMF demands (Reuters)

UAE set to use AI to write laws in world first, expecting it to speed up lawmaking by 70% (FT)

UK lifts some sanctions on Syria (Reuters)

Syria’s new leader confirms Russia refused to hand over Bashar al-Assad after he fled to Moscow (The Insider)

Montenegro investment deal with UAE raises fears for ‘untouched’ beach (Balkan Insight)

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