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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

Interest burden on African debt surges

Interest payments on long-term debt in sub-Saharan Africa grew nearly sevenfold to $26 billion between 2010 and 2023, according to the World Bank. Regional foreign borrowing also doubled in that same time to $864 billion.  

China is one of the continent’s biggest creditors, and by far the biggest bilateral lender, overseeing about $62 billion. International institutions such as the World Bank and IMF have also lent a significant amount.

External debt now averages around 25% of GDP across the region, although several countries are facing debts much higher. Eritrea, for example, has a debt-to-GDP ratio of 210%, Vanguard reports. The Africa Exim Bank last year projected that debt levels would remain elevated “despite [an] optimistic outlook.” 

Trump puts together Africa team

US President Donald Trump has begun assembling his Africa team, sources familiar with the discussions told Semafor this week. Leading contenders for key roles include J. Peter Pham, who was special envoy for the Sahel and Great Lakes regions in Trump’s first term, to lead State Department Africa work. Joe Foltz, formerly at the House Foreign Affairs Committee, is likely to take the White House’s Africa seat at the National Security Council. 

The administration’s quick start on forming an Africa team contrasts with Trump’s first term, during which critical Africa positions in US government were left vacant for years, while the White House had a revolving door of people in Africa roles with little retention.

Trump’s incoming team will have to contend with the pending expiration of the African Growth and Opportunity Act trade agreement and the growing influence of other powers such as China and Russia in both economics and politics across the continent. Some Africa watchers are calling for additional special envoys to be appointed focusing on regions including the Horn of Africa, the Great Lakes and the Sahel, all areas embroiled in conflict.

Mozambique’s political turmoil sours into a financial crisis

Mozambique’s dollar bonds plunged to their lowest level in five years after newly appointed finance minister Carla Louveira signaled the country may restructure its public debt. Post-election protests have reportedly cost the government over $650 million in lost revenue, helping push domestic debt to nearly triple its level from five years ago. The IMF says Mozambique is now at high risk of overall debt distress.

A decision by TotalEnergies to further delay its $20 billion LNG project has further dimmed the country’s prospects, dampening hopes for near-term relief from gas revenues. The French energy company said the recent political instability had compounded delays triggered by an Islamic insurgency in 2021, pushing the production timeline beyond 2029 and leaving crucial foreign financing in limbo. 

President Daniel Chapo’s new administration faces mounting challenges as opposition leader Venancio Mondlane calls for continued demonstrations

Asia

Pakistan and Bangladesh pursue closer trade ties

Pakistan and Bangladesh are rebuilding economic ties with ambitious plans to increase bilateral trade from $700 million to $3 billion this year following the removal of Bangladeshi Prime Minister Sheikh Hasina last August, Nikkei reports. The thaw has already yielded tangible results: Bangladesh has placed orders for Pakistani rice and sugar, while a dormant maritime route between Karachi and Chittagong ports has resumed operations after 52 years. 

• High growth under Hasina was ‘fake’. (The Daily Star)

• Pakistan ‘agreed $1bn loan’ with two Middle East banks (Reuters)

The warming relations are marked by increased diplomatic exchanges and streamlined visa processes for Pakistani nationals, contrasting sharply with the previous administration’s restrictive policies.

The Federation of Pakistan Chambers of Commerce and Industry recently completed its first trade delegation visit to Bangladesh in over a decade, resulting in the formation of a Joint Business Council and discussions about a potential free trade agreement. Trade experts highlight Bangladesh’s 200-million-person market as a significant opportunity for Pakistani exports, particularly given Bangladesh’s limited industrial base beyond textiles and plastics. 

Indonesia Stock Exchange opens carbon trading to international companies

The Indonesia Stock Exchange (IDX) has opened its carbon trading platform to foreign participants this week, listing five low-carbon energy projects from state utility company PLN, Nikkei reports. Environment minister Hanif Faisol Nurofiq emphasized that emissions reduction certificates on the exchange meet high-integrity standards aligned with COP29 outcomes, with improved certification mechanisms to prevent double accounting and claims.

IDXCarbon launched in September 2023 but has seen limited activity, with only 104 companies trading 1.13 million tonnes of carbon dioxide worth 58.9 billion rupiah ($3.6 million). CEO Iman Rachman targets 750,000 additional tonnes in transaction volume by 2025, although analysts have questioned the exchange’s effectiveness, suggesting a carbon tax would better discourage high-carbon activities.

Middle East

Commitment by Yemen’s Houthis could revive Red Sea shipping 

Yemen’s Houthis have released the crew of a seized cargo ship and reportedly committed to limiting attackson shipping in the Red Sea provided a ceasefire agreement between Israel and Hamas is fully implemented. The commitment followed the re-designation of the Houthis as a terror organization by the US shortly after the inauguration of Donald Trump as President.

If the Houthis’ commitment holds, it could provide some relief to Egypt, which reportedly lost some $7 billion in revenues in 2024 as Houthi attacks on shipping strangled traffic through the Suez Canal, a major source of income for Egypt. Egypt’s most recent balance of payments statement reports a widening deficit in part due to a 24.3% decline in income from the canal. 

Jordan sees 2.5% growth in 2025

Jordan’s senate this week approved a new budget that will inflate the country’s budget deficit, in part to counter the drag on the economy due to a drop-off in tourism caused by the war in Gaza. In its budget proposal, the government forecast GDP will grow 2.5% and inflation will stabilize at 2.2%.

The government also expects Jordan’s trade imbalance to grow, however, which could weigh on the country’s foreign reserves and fiscal position. Reserves are already under pressure from the decline in tourism, which is a crucial source of foreign currency needed for servicing Jordan’s debts.  Currently, debt service accounts for 17.5% of total government expenditure.

Europe

Risks of ‘junk’ credit rating rise as Romanian economy weakens 

Romania faces mounting pressure on its investment-grade credit rating as political turmoil and fiscal challenges converge, Reuters reports. The country’s budget deficit ballooned to 8.6% of GDP in 2024, the highest in the EU, and a government promise to reduce it to 7% in 2025 has met with skepticism from market participants given upcoming presidential elections in May and the absence of significant tax reforms.

The deteriorating fiscal position could push up the cost of borrowing for Romania, which is currently planning to raise up to €13 billion through international bonds in 2025. Yields on 10-year government bonds have already surged to two-year highs above 8%, significantly exceeding regional peers such as Hungary at 6.9%.

While the EU has approved Romania’s deficit reduction plan targeting 2.5% by 2031, investors remain concerned about the government’s ability to implement meaningful fiscal consolidation without major tax hikes, given Romania’s second-lowest tax-to-GDP ratio in the EU. The stakes are particularly high as a potential downgrade to junk status could trigger a two percentage point increase in short-term borrowing costs, according to World Bank research, further straining the country’s finances. 

Serbia looks to renewable expansion to balance oil import risks

Serbia is accelerating its transition to renewable energy, turning to France, the US and China to build renewable capacity to bolster energy security, reduce reliance on imports and align with EU climate goals, Balkan Insight reports. 

• Balkan air pollution crisis threatens public health and EU membership goals (Reuters) 

State-owned power company Elektroprivreda Srbije is planning to double its investment in wind- and hydropower, from €386 million to more than 890 million.

A key driver is the geopolitical advantage of reducing dependency on external energy supplies and polluting coal, the latter of which currently accounts for over two-thirds of the country’s electricity generation.

Latin America

Southern cone doubles down on lithium despite oversupply concerns

South America’s lithium producers are pushing ahead with ambitious expansion plans despite warnings of growing global oversupply, with Chile’s mining minister expressing confidence in continued investor interest ahead of a January 31 deadline for new drilling licenses. The strategy comes even as Chilean copper commission, Cochilco, forecasts a global surplus of 89,000 tons in 2024 and 141,000 tons in 2025.

Prices plunged almost 80% over the past year.

Bolivia is also accelerating its push to monetize the world’s largest lithium deposits, pursuing $2 billion in new projects with Russian and Chinese firms despite mounting domestic opposition.

• Chile seeks projects to extract cobalt and rare earths from mining waste (Mining.com)

The regional expansion comes amid rising geopolitical headwinds, with Cochilco specifically highlighting risks from Donald Trump’s return to the White House and potential new tariffs that could impact global growth and demand from a critical market, China. Meanwhile, emerging producers such as Zimbabwe, Mali and Argentina are intensifying competition for market share.

JP Morgan cuts Panama outlook as Trump rhetoric brings real risks

JPMorgan has downgraded its recommendation on Panama’s sovereign bonds following DonaldTrump’s renewed threats to “take back” the Panama Canal, Reuters reports. The move reflects mounting concerns over Panama’s fiscal stability, given that canal-related transfers constitute 13% of government revenues and reached a record $2.54 billion in 2023. 

While Panama’s economy is projected to grow by 5% this year, analysts warn that escalating tensions over the strategic waterway, which handles 2.5% of global seaborne trade, could trigger further sovereign rating downgrades. Fitch has already cut Panama’s credit rating to below investment grade and Moody’s is considering a similar move, which could force Panama’s ejection from key investment-grade bond indexes. 

Argentine energy surplus underpins Milei’s rewrite of trade 

A surge in oil production has helped Argentina transform itself from a net energy importer to a powerhouse exporter, with a 49% plunge in energy imports and a record $5.6 billion surplus for the sector in 2024, OilPrice reports.

The surge in domestic production, particularly from the Vaca Muerta shale basin where output has quadrupled to 400,000 bpd and is projected to hit 1 million barrels per day by 2030, has dramatically reduced Argentina’s historical dependence on foreign energy supplies and strengthened its foreign currency reserves.

• Argentina records foreign trade surplus in 2024 (Mercopress) 

Argentina’s strengthening position as a net energy exporter—the sector now accounts for 12% of total exports—alongside a dramatic improvement in its balance of trade are helping support President Javier Milei’s increasingly assertive international agenda. His government is reportedly now considering withdrawing from the Paris climate accord and exiting Mercosur if needed to secure a US trade deal.

Frontier Markets Macro

Emerging markets attempt to placate Trump

The return of Donald Trump to the White House has triggered a wave of preemptive diplomacy from emerging markets seeking to protect their economic interests. Gulf states have taken the lead, with pre-inauguration promises of investments from the UAE and Saudi Arabia’s lead-taking pledge to invest $600 billion in the US, despite domestic budget pressures from softer oil prices and competing priorities like the 2034 World Cup infrastructure needs.

The scale of the Saudi commitment, which represents more than half its GDP, demonstrates how seriously emerging-market leaders view the threat of potential economic isolation in Trump’s second term.

• Albanian PM accused of allotting island to Trump’s son-in-law to win favor (BalkanInsight)

The ripple effects of Trump’s “America first” stance are already visible in emerging- and frontier-market policy shifts. Panama’s government, responding to Trump’s inauguration speech threat to “take back” the canal, immediately launched an audit of Hong Kong-based Hutchison Ports’ operations in a clear attempt to demonstrate oversight of Chinese-linked interests.

The scramble to adjust extends beyond strong US allies, as emerging markets seek to diversify their economic relationships and create leverage. Thailand, for example, signed its first European trade agreement this week, specifically structured around products vulnerable to US tariffs.

What We’re Reading

Nigeria’s naira reforms ‘offer investors an opportunity’ (Bloomberg)

Nigeria hikes mobile phone tariffs 50% (Africanews)

Gabon’s dollar bonds rally as junta sets election date (Bloomberg)

Belgium opens criminal investigation into Apple sourcing DRC “blood minerals” (FT) 

Kenya announces plan to open visa-free travel to Africans (Africa Business Insider) 

Zambia overcomes severe drought in 2024 to boost copper output (Bloomberg)

Gulf countries pour billions into Africa investments (The Africa Report)

Angola to issue up to $2bn in eurobonds (Bloomberg)

Thailand pushes trans-ASEAN rail network to boost tourism (Nikkei)

Malaysia ties fortunes to Singapore through special economic zone (FT)

Chevron starts $48 billion Kazakh oilfield expansion (Reuters)

Investigations in Turkey raise fears of growing crackdown on dissent. (Reuters)

Abu Dhabi AI firm MGX to help bankroll Trump’s $100bn AI plan for the US (Bloomberg)

Oman tees-up IPO of state-owned shipping and logistics giant (Reuters)

Syria’s new government allegedly terminates port and naval base deals with Russia (BBC)

Saudi Arabia set to buy stake in Pakistan copper and gold mining project (FT)

Saudi Arabia faces investor doubts over big mining ambition (Bloomberg)

Syria to dismantle Assad-era socialism, says foreign minister (FT)

Poland fumes over US block on AI chips (Politico)

Bulgaria shies away from asking for final clearance to join eurozone (Euractiv) 

Trump says US will likely stop buying oil from Venezuela (Reuters)

Ecuador eyes $42bn in oil sector investments through 2029 (Reuters)

Colombia’s and Venezuela’s presidents discuss cooperation in tackling drug trafficking (Mercopress)

Paraguay’s Peña “thrilled” to be on Trump’s radar as Rubio praised country’s ties to Taiwan (Bloomberg)

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