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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

Africa

Sahel states face uncertainty after formal exit from ECOWAS

Burkina Faso, Mali and Niger formally withdrew from the Economic Community of West African States (ECOWAS) this week, the BBC reports. The trio decided to leave after ECOWAS members imposed sanctions on their military governments in the wake of a wave of coups across the Sahel region. The three countries have moved closer to Russia in recent months, and announced their intention to form their own bloc, the Alliance of Sahel States.

ECOWAS has pledged to keep “doors open” to the departed countries and is not scrapping visa-free travel. Some members, such as Nigeria, have cautioned against severing ties too, warning of significant economic consequences and disruptions to the African Continental Free Trade Area (AfCFTA). Even with some ties still in place, analysts say the three countries’ departure from the regional bloc will harm their economies.

The three states’ bloc has already made progress: Ghana’s new president appointed a special envoy to the group and Togo has indicated it might want to join. The trio also intends to stay in the West African Economic and Monetary Union (WAEMU), meaning they’ll continue to use the CFA franc and participate in the common financial market.

African countries set bold electrification goals

At a two-day summit this week in Tanzania’s capital Dar es Salaam, the World Bank launched an initiative aiming to connect 300 million people across the continent to electricity by 2030. The plan is based on mobilizing at least $90 billion in capital, with about $30-40 billion from the World Bank, $10-15 billion from the African Development Bank, and the rest from private sources including businesses and philanthropies, according to RFI. 

At the same summit, Madagascar unveiled an ambitious sustainable energy strategy focused on adding 1,000 MW of capacity over the next four years, including 550 MW of renewables by 2028. President Andry Rajoelina’s goal is to reduce the country’s fossil fuel dependency, which costs Madagascar $70 million per year in subsidies. 

• Gas discoveries fuel Mauritania’s energy and economic ambitions (FT) 

Rajoelina also called on technical and financial organizations to support African countries in their transition to cleaner power. The conference saw a raft of pledges from development organizations, including $2.65 billion from the Islamic Development Bank, $1.5 billion from the Asia Infrastructure Development Bank, $1 billion from the OPEC Fund and $1 billion from Agence Française de Développement.

Asia

Bangladesh takes close look at banks ‘robbed’ by Hasina

Bangladesh has hired accounting giants EY, Deloitte and KPMG to review the alleged disappearance of $17 billion that the interim government says individuals close to ousted former prime minister Sheikh Hasina “robbed” from the country’s banks.

Bangladesh central bank Governor Ahsan Mansur told the FT this week that the country has also formed 11 teams to investigate the loss and reclaim assets purchased with money he views as stolen over the 15 years of Hasina’s tenure. An “asset quality review” by the three audit firms is already underway.

Mansur, a former IMF official, said managing directors of six of the country’s largest banks have been asked to take leaves of absence. Lawyers for those Bangladesh has begun to accuse have rejected all allegations of theft.

Kazakhstan’s oil output hits record high

Oil production in Kazakhstan reached a record daily high this week, bringing the country far past its daily output quota assigned by the OPEC+ bloc, of which it is a member.

Kazakhstan produced almost 279,000 daily metric tons of oil this week, equivalent to around two million barrels per day, Reuters reports. The surge followed the expansion by US oil giant Chevron of one of Kazakhstan’s largest oil fields. 

That investment comes as Western firms look to grow partnerships with resource-rich Kazakhstan, home to not only plentiful oil but also deposits of critical minerals. These influxes are supporting Kazakhstan’s efforts to attract $150 billion in foreign investment and double GDP by 2030.

On Tuesday, the government announced that Kazakhstan’s economy had grown 4.8% in 2024, with agriculture and the construction industry growing fastest.

Vietnam expects FTSE upgrade to emerging market status this year

Government officials and investors in Vietnam expect the country to be upgraded this year to an emerging market by index FTSE Russell, Nikkei reports. The index provider estimates an upgrade could draw an additional $6 billion in investment to Vietnam. To achieve the upgrade the country needs only to improve its handling of failed trades.

Vietnam was hoping to graduate to EM status last September after having been on an upgrade watch list since 2018. In the years since, Vietnam has emerged as a major supply chain hub, winning investment in factories from the US, China, Europe and Japan.

Japanese electronics giant Panasonic became the latest company to pour more money into Vietnam this week, announcing that it will boost production of wiring devices in the country. The company is aiming to increase production at its Vietnamese factory by 80% over the next five years, according to Nikkei. It cited the rise of competition from Chinese manufacturers as a cause for its investment.

Philippines moves to diversify economy as growth falters

The Philippines’ GDP grew 5.6% in 2024, falling short of government targets and prompting concerns that its consumption-led growth momentum is flagging, Bloomberg reports. Fourth-quarter GDP growth stalled at 5.2%, sapped by devastating typhoons that reduced agricultural output and weakened household spending, which accounts for nearly 75% of the country’s economic activity.

Business leaders and economists are pushing to diversify the economy, calling for increased investment in manufacturing, digital industries and infrastructure, Nikkei reports. The government has responded by implementing business-friendly policies and opening previously restricted sectors to foreign ownership—moves that appear to be gaining traction, with foreign direct investment inflows rising 8.2% to $7.7 billion in the first 10 months of 2024.

Significant challenges remain, however, as households struggle with high debt and low savings in the aftermath of the pandemic. The central bank, which has already cut rates by 75 basis points since August, is considering further monetary easing to support growth.

Middle East

EU agrees to gradually ease Syria sanctions

The EU this week said it would soon ease some sanctions on Syria, aiming to help restore stability and facilitate the returns of refugees, Reuters reports. Initially, sanctions relief would focus on Syria’s transportation and energy sectors.

France, which has taken a leading role on Syria-EU relations, also indicated that sanctions on Syria’s financial institutions could be eased. However, the US, which has the most restrictive sanctions in place, has yet to announce any relief.

Syria also reportedly asked Russia this week for the extradition of Bashar al Assad and financial reparations in exchange for allowing Russia continued access to ports and air bases in the country. The new government claims that the Assad regime had left Syria owing some $8 billion to Russia, and a further undisclosed amount to Iran, both of which have indicated they want to continue the contracts.

Middle East becomes hub for energy transition investment

The Middle East has become the second fastest growing green energy market outside of China as Saudi Arabia and UAE direct state funds toward the construction of large solar energy projects to support their economic transition away from overreliance on oil and gas exports, the FT reports. The Gulf is an especially attractive candidate for solar energy projects because of its climate and deep pool of capital.

The growth is not limited to power production, as Saudi Arabia especially has begun a push into locally mining and refining critical minerals including lithium, a key battery input, and even using national oil giant Aramco to fund and operate lithium extraction from oil fields.

The most active bidders in the region, according to the FT, are Saudi Arabia’s Acwa and UAE’s Masdar, both state-owned renewable giants bankrolled by their respective sovereign wealth funds. The rest of the Middle East reportedly remains well behind even the US and EU, as the regional market is still primarily driven by demand from Gulf giants pursuing economic diversification projects.

Iraq discovers new oilfield near Baghdad as China scoops blocks in most recent bidding rounds

Iraq this week announced a substantial new oil discovery near Baghdad that could add two billion barrels of oil to the country’s reserve, JPT reports. Bidding on the resource has not been set yet, but most recent bidding rounds have reportedly been dominated by firms from China. As much as two thirds of the country’s oil production is now from fields where Chinese investors, producers or servicers are involved.

Iraq’s energy sector is in dire need of new funding. Historic underinvestment has crimped production, which has been further hurt by the ongoing shutdown of 300,000 barrels per day of capacity at the Rumaila site after a fire.

Baghdad is also still struggling with a worsening electricity shortage, as an ongoing domestic energy crisis in Iran, which supplies around a third of Iraq’s domestic gas demand, has frozen imports, prompting increasingly disruptive load shedding practices. To that end, Iraq is partnering with local firms on producing transformers and other grid infrastructure locally.

Europe

Czech central bank considers buying bitcoin to diversify portfolio

Czech National Bank Governor Aleš Michl is advocating investing up to 5% of the bank’s €140 billion reserves in bitcoin, which would make it the first Western central bank known to hold cryptocurrency assets, the FT reports. In a proposal presented to the bank’s board on Thursday, Michl acknowledged digital assets carry “extreme volatility” risks. A CNB analysis found that adding bitcoin could have boosted annual returns by 3.5 percentage points over the past decade, but it would have doubled portfolio volatility. 

The bank’s board did not approve investing in digital assets but did agree to investigate their potential, Coin Telegraph reports.

The move comes as bitcoin gains more credibility following BlackRock’s launch of a bitcoin ETF and Donald Trump’s embrace of digital assets. Some analysts have cautioned that Trump’s support for cryptocurrencies could be fueling a speculative bubble, exposing emerging-market central banks to significant risks.

Serbian government under pressure from anti-corruption protests

Serbian Prime Minister Milos Vucevic this week resigned amid mounting public pressure over a deadly train station collapse in the town of Novi Sad, the Guardian reports. Vucevic’s resignation comes after three months of intense student-led protests following a November incident where 15 people were killed when a concrete roof collapsed at a recently renovated railway station.

President Aleksandar Vucic, who maintains a powerful grip on Serbian politics while attempting to balance ties with both Russia and the EU, has to decide within the next 10 days whether to form a new government or call snap parliamentary elections. The situation has exposed deeper concerns about governance and oversight, particularly as the collapsed structure had been renovated twice in recent years by a Chinese-led consortium, with disputes emerging over the scope of the work and construction supervision.

The protests expanded from their initial focus in Novi Sad to nationwide demonstrations including farmers and academics, reflect growing public frustration with perceived corruption and institutional failures. They have also drawn international attention, with the European Commission expressing concern about reported violence against demonstrators and highlighting corruption as an ongoing issue that could affect Serbia’s EU candidacy.

Latin America

Chile passes major pension reform

Chile’s Congress has approved a comprehensive pension reform bill, marking the most significant change to the country’s retirement framework since its inception in 1980, Bloomberg reports. The legislation, which passed with a decisive 110-38 vote in the lower house, will gradually increase employer contributions from 1.5% to 8.5% of salaries over nine years, addressing long-standing concerns about inadequate pension payouts that sparked widespread protests in 2019.

The reform represents a delicate balance between maintaining Chile’s market-driven pension system and addressing social demands. While preserving the role of private pension administrators (AFPs) that have traditionally formed the backbone of Chile’s capital markets, the bill introduces new competitive mechanisms through mandatory auctions for pension pot management. The legislation allocates 4.5% of the new employer contributions to individual savings accounts, with the remainder divided between immediate pension supplements and a fund targeting gender inequalities.

For President Gabriel Boric’s minority government, the reform marks a crucial if compromised victory in its final year. Despite falling short of Boric’s original vision for a partly state-run system, the reform is expected to strengthen Chile’s financial markets by increasing available capital. However, questions remain about the new rules’ ability to prevent future governments from making short-term decisions about pension funds, particularly following the precedent set by early withdrawals during the Covid-19 pandemic.

Global Macro

Rating momentum slows on US political and Chinese economic uncertainties

Positive rating momentum across frontier markets is expected to decline in 2025, constrained in part by uncertainty over US policies under Donald Trump and China’s economic trajectory, according to ratings firm Fitch’s latest Frontier Markets Quarterly report. While 2024 saw positive rating actions outweighing negative ones by 9:6, primarily driven by improved fiscal positions and enhanced market access, the outlook appears more cautious with only two frontier markets maintaining positive outlooks, down from four at the end of 2023.

Frontier markets had a strong year in 2024, with Ethiopia, Ghana and Zambia making strides toward emerging from default. Market access improved, too, evidenced by successful bond issuances from several frontier markets, including El Salvador’s dual $1 billion offerings and Nigeria’s $2.2 billion Eurobond placement. New IMF arrangements for Ethiopia, Pakistan and El Salvador have helped ease external financing pressures.

Challenges looming this year include the potential for sharp appreciation of the US dollar, combined with the prospect of broad-based tariffs under the Trump administration, which could particularly impact frontier markets with high foreign-currency debt exposure, such as Mozambique and Sri Lanka. Social pressures and upcoming elections may continue to impede fiscal consolidation efforts, while rising interest costs on government debt are expected to maintain pressure on public finances despite easier access to funding compared to recent years.

What We’re Reading

Nigeria’s plan to resume oil production in Niger Delta sparks criticism (FT)

Ghana’s debt restructuring ‘93% complete’ (Africanews) 

Ghana’s illegal mining crisis: environmental destruction, clashes, and calls for action (Radio France International)

Ethiopia joins Pan-African Payment and Settlement System (EBC)

Kenya eyes diaspora bond to tap into $4.9bn remittance flows (The Africa Report)

Key humanitarian hub in DRC falls to rebels supported by Rwanda (FT). 

Angola: Debt service costs to amount to USD 13.6bn in 2025 (EM Watch)

South Africa and Rwanda go head-to-head over rebel advance in DRC (BBC)

Egypt issues $2bn bond (IndexBox)

Remittance startups ride Africa’s migration wave (Semafor)

Rate chokehold on African economies is set to loosen slowly (Bloomberg)

Pakistan prepares for potential lower Chinese investment after filing of harassment complaint (Nikkei)

How Pakistan’s military is taking over its economy (FT)

Thailand expects high-speed rail to China to be ready by end of decade (The Diplomat)

TikTok to invest $4bn in Thailand for data hosting (Bloomberg)

Glencore-Indonesia eyes $1bn sustainability-linked loan (Bloomberg)

New Zealand reviews aid to China-friendly Kiribati after diplomatic snub (AP)

Philippines president offers China removal of missiles if it stops maritime aggression (Rappler)

Syria’s new Islamist rulers to roll back state with privatizations, public sector layoffs (Reuters)

Trump ups the ante on Saudi Arabia, pushing for $1trillion in FDI (Bloomberg)

Saudi Arabia’s state-owned agricultural giant to IPO in Riyadh (Zawya)

Saudi Arabia opens local real estate firms in Mecca and Medina to foreign investors (Reuters)

Al Ahli Bank of Kuwait secures landmark $1 billion global syndicated term loan facility (Zawya)

UAE conglomerate Al Habtoor Group cancels all planned investments in Lebanon (Reuters)

EU offers €30mn emergency aid to Moldova amid energy crisis (Offshore Technology)

EU debates return to Russian gas as part of Ukraine peace deal (FT)

Eastern Europe’s ailing economies tick higher in late 2024 (Bloomberg)

Egypt and Cyprus forge natural gas partnership (EnergyConnects)

US ‘has right to preemptively defend’ Panama Canal (Nikkei)

Nicaragua’s Ortega expands power as reforms win final approval (Reuters)

El Salvador’s Congress clears hurdle to speed new constitutional reforms (AP)

US-Colombia relations strained by tariff threats amid diplomatic dispute (FrontierView)

Argentina cuts key rate to 29% as peso depreciation slows (Bloomberg)

Argentina loses last-ditch US battle to block $300mn seizure (FT)

US Republicans coalesce around ultra-hawkish approach to Latin America (The Nation)

EMs braced for Trump tariffs (FT)

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