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Frontier Markets Monthly Wrap

Frontier Markets Monthly Wrap

Three positive stories from frontier markets

There has been plenty of doom and gloom surrounding the outlook for frontier economies over recent months, particularly Sri Lanka and Tunisia. But there are some places where we hold more upbeat views. Frontier economies in the Gulf will benefit from high oil prices, while manufacturing should drive strong growth in Morocco and Vietnam.

12 May 2022

Frontier Markets Monthly Wrap

Sovereign debt risks becoming more acute

Sovereign dollar bond spreads have widened significantly in several Frontiers over the past couple of months, driven largely by country-specific factors. There are reasons to be hopeful that outright sovereign defaults can be avoided in Ukraine and Ghana, at least for now. The bigger threat of near-term defaults lies in Sri Lanka and Tunisia.

3 February 2022

Frontier Markets Monthly Wrap

Where are frontier sovereign debt risks greatest?

The precipitous decline in Sri Lanka’s foreign exchange reserves means the risk of a near-term sovereign debt default is increasing. Elsewhere, Tunisia also stands out on account of its public debt problems. Fiscal challenges look severe in Ghana, Oman and Bahrain, although crunch points are a few years away.

11 November 2021
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Frontier Markets Monthly Wrap

Outlook darkens

The disbursement of Special Drawing Rights (SDRs) from the IMF later this month is a boon for some Frontier Markets that face very high borrowing costs. But beyond this, it is hard to find many positives for Frontiers. The spread of the Delta variant, coupled with extremely low vaccine coverage, is a major concern. And the slowdown in China is also likely to weigh on growth of metal producers.

Frontier Markets Monthly Wrap

Covax delays cast a dark cloud

Extended delays to vaccine supply from India to the Covax facility will keep rollout in many Frontier Markets stuck in first gear. Social distancing measures will have to stay in place for longer, holding back economic recoveries, and the risk of renewed outbreaks and new variants will persist.

Frontier Markets Monthly Wrap

SDR allocation no panacea for distressed frontiers

A fresh allocation of IMF Special Drawing Rights (SDRs), if implemented, would provide a welcome boost to the depleted foreign exchange reserves of some distressed frontier economies. But an allocation wouldn’t address underlying dire debt dynamics, notably in Ecuador, Sri Lanka, Ethiopia and Zambia.

Frontier Markets Monthly Wrap

On the “vaccine boost” to frontier economies

Frontier economies will receive only a relatively small direct economic boost from the roll-out of vaccines next year. But the indirect benefits via higher commodity prices, capital inflows and tourism spending will be more substantial. These indirect benefits should help to ease external vulnerabilities in a number of fragile frontiers.

15 December 2020

Frontier Markets Monthly Wrap

New debt relief plans face major hurdles

Zambia became the first African government to default during the current crisis and debt risks are high in several other Frontier Markets, including Ghana and Kenya. The G20’s recently-announced ‘Common Framework’ to provide debt relief is a step in the right direction, but we fear it may not gain as much traction as many hope.

23 November 2020
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